United States District Court, D. Massachusetts
ROBERT G. YASI, Plaintiff,
M/V HORIZON'S EDGE et al., Defendants.
MEMORANDUM AND ORDER
DENISE J. CASPER, District Judge.
Plaintiff Robert G. Yasi ("Plaintiff") has filed this lawsuit against Defendants M/V Horizon's Edge ("the Vessel") and Horizon's Edge Excursions, LLC ("HEE") seeking to foreclose on three promissory notes secured by mortgages on the Vessel. D. 1. HEE, David E. Groom, Jane Walker McKinney Trust 1973 ("JWMT") and 40 East Partnership, LLP, ("40 East") (collectively the "Claimants") have also submitted claims as mortgagees of the Vessel. D. 13; D. 15; D. 18; D. 26. Plaintiff has moved for summary judgment. D. 68. For the reasons stated below, the Court ALLOWS the motion.
II. Standard of Review
The Court grants summary judgment where there is no genuine dispute as to any material fact and the undisputed facts demonstrate that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). "A fact is material if it carries with it the potential to affect the outcome of the suit under applicable law." Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d 46, 52 (1st Cir. 2000). The movant bears the burden of demonstrating the absence of a genuine issue of material fact. Carmona v. Toledo, 215 F.3d 124, 132 (1st Cir. 2000); see Celotex v. Catrett, 477 U.S. 317, 323 (1986). If the movant meets its burden, the nonmoving party may not rest on the allegations or denials in its pleadings, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986), but must come forward with specific admissible facts showing that there is a genuine issue for trial. Borges ex rel. S.M.B.W. v. Serrano-Isern, 605 F.3d 1, 5 (1st Cir. 2010). The Court "view[s] the record in the light most favorable to the nonmovant, drawing reasonable inferences in his favor." Noonan v. Staples, Inc., 556 F.3d 20, 25 (1st Cir. 2009).
III. Factual Background
HEE was formed by five individuals, David Zion, Thomas Groom, Paul Yasi, John Yasi, and Daniel Carnevale (collectively the "Founding Members"). At all relevant times, HEE owned the Vessel, an excursion boat used for casino cruises. D. 70, Plaintiff's Statement of Material Facts ("PSMF") ¶ 7. The Founding Members also formed Horizon's Edge Casino Cruises ("HECC"), a management company that chartered the Vessel from HEE. Id . ¶ 1; D. 86, Claimants' Response to Plaintiff's Statement of Facts ("CRPSF") ¶ 8.
The Founding Members sought investments in the HEE from family members. Investors purchased shares in HEE for $120, 000 each. D. 86, Claimants' Statement of Material Facts ("CSMF") at 9. Such investments made up 70% of the value of HEE, and the other 30% of HEE was owned by the Founding Members. Id . Plaintiff, brother of the Founding Members Paul and John Yasi, purchased six and a half shares of HEE. D. 70, PSMF ¶ 5; D. 86, CRPSF ¶ 6. Plaintiff's funds for this investment came from his winnings from the California lottery. D. 70, PSMF ¶ 5. Claimant David Groom purchased one share. D. 86, CRPSF ¶ 6.
On March 31, 2004, Plaintiff loaned HEE $500, 000. D. 86, CRPSF ¶ 11. On April 1, 2004, HEE executed a Promissory Note secured by a Second Preferred Ship Mortgage for the Vessel for the $500, 000 loan. D. 70, PSMF ¶¶ 12-13. The First Preferred Ship's Mortgage ahead of Plaintiff's Second Preferred Ship Mortgage was held by Key Equipment Finance, Inc. ("Key Bank"). Id . ¶ 14. In the spring of 2005, Key Bank "called its loan" because HEE was unable to meet Key Bank's capital requirements. D. 86, CSMF at 9. HEE subsequently paid off Key Bank's mortgage. D. 70-1 at 14.
With Key Bank's funding withdrawn, HEE reached out to Plaintiff and David Groom for $1.6 million in financial assistance. D. 86, CSMF at 10. On April 5, 2005, HEE executed $800, 000 Promissory Notes (drafted by Paul Yasi) to both Plaintiff and 40 East. D. 70, PSMF ¶ 16; D. 86, CSMF at 10. Both of these notes were secured with Preferred Ship Mortgages on the Vessel, which were recorded on December 22, 2005. D. 70, PSMF ¶ 17.
In 2005, there was disagreement among the Founding Members as to how HEE should proceed: Thomas Groom and David Zion wanted to expand casino cruise operations in Florida while Paul Yasi and John Yasi wanted to keep the business in Massachusetts. D. 70, PSMF ¶ 18. Thomas Groom, Andrew Triantafillou, David Groom and David Zion established T.A.D.D., LLC ("TADD"), a new entity that raised $2, 000, 000 to buy out membership interests in HEE. D. 86, CRPSF ¶¶ 21-22. Thomas Groom testified that the Yasi family and their friends wanted to be bought out of HEE, but TADD did not have enough money to buy out all of their shares. D. 86-5 at 3-4. Some HEE investors did not receive buyout offers from TADD. Id. at 5.
On September 8, 2005, TADD purchased 18.41 HEE shares held by Plaintiff's brothers Paul, John and Peter, Plaintiff's mother Beatrice, Plaintiff's sister Bonnie and several other members. D. 86, CSMF at 10. These shares were sold to TADD for $108, 000 per share. Id. at 11. Plaintiff's brothers also signed release agreements with HEE and HECC and received management fees ranging from $30, 332 (for Peter Yasi) to $106, 167 (for Paul and John Yasi). Id. at 10. TADD purchased 3.5 of Plaintiff's 6.5 shares, but declined to purchase his three remaining shares. Id. at 11. Following the buyout of Plaintiff's brothers, Claimant David Groom became a managing member of HECC in November 2005. D. 86, CRPSF ¶ 25.
On September 9, 2005, Plaintiff and HEE executed an Agreement to Extend Note and Purchase Stock, D. 70-9 at 26, whereby Plaintiff agreed to extend the terms of his two promissory notes to HEE by twelve months and HEE agreed to purchase Plaintiff's remaining three shares in HEE for a total of $360, 000 on April 8, 2007 at Plaintiff's option. The agreement required Plaintiff to give 60 days' notice and to deliver his stock certificates to HEE if he elected to exercise his option. Id . Plaintiff neither returned his stock certificates to HEE nor gave the required notice that he intended to sell his stock. D. 86, CSMF at 11; D. 86, CRPSF ¶¶ 27-29.
On March 1, 2007, HEE executed a $360, 000 Promissory Note to purchase Plaintiff's stock. D. 70, PSMF ¶¶ 27-28. This note was secured with a Preferred Ship Mortgage dated May 8, 2007. Id . ¶ 29. At this time, the combined value of the mortgages on record on the Vessel was $2.36 million. D. 70-11 at 2-4. (The fair market value of the Vessel as of April 2008 was $7.3 million. D. 87-2 at 7). On March 1, 2007, HEE and Plaintiff executed an Allonge to the $500, 000 Promissory Note extending payments to March 1, 2009. D. 70, PSMF ¶ ...