United States District Court, D. Massachusetts
A.J. PROPERTIES, LLC, Plaintiff,
STANLEY BLACK & DECKER, INC., Defendant.
MEMORANDUM AND ORDER ON RENEWED CROSS-MOTIONS FOR SUMMARY JUDGMENT
F. DENNIS SAYLOR, IV, District Judge.
This dispute concerns an $800, 000 performance bond issued for the environmental remediation of a contaminated parcel of land in Worcester, Massachusetts. Plaintiff A.J. Properties, LLC alleges that defendant Stanley Black & Decker, Inc. wrongfully collected payment under the bond after Stanley had assigned its rights to those proceeds to a third party, the Wyman-Gordon Company. As the assignee of Wyman-Gordon with respect to various agreements concerning the remediation of the property, A.J. Properties contends that it is entitled to the proceeds of the performance bond and has filed suit against Stanley for, among other things, conversion, breach of contract, and various equitable claims.
The Court previously entered partial summary judgment for Stanley as to the breach of contract claims and partial summary judgment for A.J. Properties as to its claim that it was entitled to the proceeds of the performance bond. It reached that determination by applying the rule of law that "the assignment of a debt carries with it every remedy or security that is incidental to the subject matter of the assignment and could have been used or made available to the assignor." Quaranto v. Silverman, 345 Mass. 423, 426-27 (1963). Upon Stanley's motion for an interlocutory appeal, the Court instead stayed the litigation and certified a question to the Supreme Judicial Court concerning the applicability of the Quaranto rule to the particular facts of this case.
In response to the certified question, the SJC held:
Where a mortgage and a surety agreement secured an obligation, and both the mortgagor and the surety committed a breach of that obligation prior to a written assignment of the mortgage, the assignee does not necessarily acquire the right against the surety's receiver for the surety's breach of its obligation.
A.J. Properties, LLC v. Stanley Black & Decker, Inc., 469 Mass. 581, 592 (2014). The SJC further held that "[i]f parties wish to assign such a cause of action, they may do so by manifesting their intent to do so, but, absent an express indication, assignment of such a cause of action will not be implied by an assignment of the mortgage and the obligations it secures." Id.
After the SJC's ruling, the parties filed renewed cross-motions for summary judgment. For the following reasons, the Court's February 4, 2013 summary judgment order will be vacated, the motion of A.J. Properties will be denied, and the motion of Stanley will be granted.
The following undisputed facts, which are more fully detailed in the Court's February 4, 2013 summary judgment order, are provided only for summary purposes.
A. Factual Background
In 1995, Stanley became aware of soil and groundwater contamination on its property located at 149 Washington Street in Worcester, Massachusetts ("the 149 property"). That contamination extended to an adjacent property owned by Wyman-Gordon. In 1997, facing continuing liability for the contamination pursuant to Mass. Gen. Laws ch. 21E, § 5(a), Stanley entered into an agreement with Vargo & Associates Environmental Consulting Corporation to remediate both properties. Stanley agreed to pay Vargo $400, 000 to perform the remediation, and to sell its property to Vargo for one dollar. Vargo agreed to deliver a performance bond in the amount of $800, 000 to secure its remediation, to deliver an indemnity agreement promising to complete the remediation and to hold Stanley harmless for future liabilities, and to grant Stanley a mortgage on the property. The 1997 mortgage was to "secure all obligations" of Vargo to Stanley under the indemnity agreement, mortgage, and "all other agreements between" Stanley and Vargo, including any "indebtedness, obligations and liabilities" under "instruments... executed or delivered in conjunction (with the purchase and sale agreement or the indemnity agreement)." In January 1998, Vargo obtained a performance bond to fulfill the final condition for closing on the sale. The surety on the performance bond was the United Capitol Insurance Company.
Around August 2000, Vargo suspended remediation operations and, in early 2001, abandoned the property. After learning that Vargo's principal had filed for bankruptcy, Stanley contacted United Capitol in February 2002 to demand that it, as the surety on the bond, complete the remediation of the 149 property and the Wyman-Gordon property. Earlier that month, however, United Capitol had ceased operation, and liquidation proceedings had begun. In October 2002, Stanley filed a proof of claim under the bond with United Capitol's receiver in the amount of $800, 000.
In December 2002, Stanley entered into a settlement agreement with Wyman-Gordon to retain a different contractor to remediate the still-contaminated parts of the properties and to assign Wyman-Gordon the 1997 mortgage and the obligations secured by the mortgage at a future date. In February 2003, Vargo's creditors foreclosed on the 149 property, and A.J. Properties purchased the right to acquire the property at the foreclosure sale.
In March 2003, after it reached the settlement with Stanley but before it had been assigned the mortgage, Wyman-Gordon and A.J. Properties entered into an option agreement. That agreement provided that, at any time at least one year after the agreement, and at A.J. Properties' option, Wyman-Gordon would assign it the 1997 mortgage on a portion of the 149 property, along with "all rights that Wyman-Gordon has to the obligations and debts which the  mortgage secures."
In May 2003, Stanley assigned the 1997 mortgage to Wyman-Gordon pursuant to their 2002 settlement agreement. In December 2007, A.J. Properties exercised its option to purchase the 1997 mortgage from Wyman-Gordon. Wyman-Gordon executed an assignment granting A.J. Properties the 1997 mortgage "and all claims secured thereby." In December 2010, Stanley received payment from United Capitol's receiver in the amount of $659, 000 as settlement of its claim for the breached performance bond.
B. Procedural Background
After learning that Stanley received payment from United Capitol's receiver, A.J. Properties commenced this lawsuit in Worcester Superior Court on April 27, 2011. The amended complaint alleges that Stanley wrongfully obtained payment from United Capitol's receiver and that A.J. Properties had been assigned the right to recover all funds paid to Stanley by the receiver in settlement of Stanley's claim pursuant to the performance bond. The amended complaint alleges claims for conversion (Count One); unjust enrichment (Count Two); money had and received (Count Three); constructive trust (Count Four); breach of contract (Count Five); breach of the covenant of good faith and fair dealing (Count Six); and violation of Mass. Gen. Laws ch. 93A, § 11 (Count Seven). A.J. Properties also seeks a declaration of the rights of the parties and damages in the amount paid by United Capitol to Stanley to settle Stanley's claim under the bond ($659, 000), with interests, fees, and costs (Counts Eight and Nine).
On February 4, 2013, the Court issued an order in which it determined that A.J. Properties had indeed been assigned Stanley's interest in the proceeds of the performance bond and was thus entitled to the money Stanley had recovered from United Capitol. It reached that determination by applying the rule of law that "the assignment of a debt carries with it every remedy or security that is incidental to the subject matter of the assignment and could have been used or made available to the assignor." Quaranto, 345 Mass. at 426-27. The Court concluded that "United Capitol's joint and several liability under the bond is a remedy incidental to [Vargo's] duty to pay that was available to Stanley before it assigned that obligation; thus, the assignment of [Vargo's] duty carried with it that of its surety." (February 4, 2013 Order at 15).
On February 19, 2013, Stanley moved for an interlocutory appeal, arguing that the Quaranto rule did not apply. Upon consideration of that motion, the Court determined that an interlocutory appeal to the First Circuit was not the appropriate vehicle for the determination of the contested issue, which was a matter of Massachusetts state law. Instead, the Court suggested certifying the question to the Supreme Judicial Court pursuant to Mass. S.J.C. Rule 1:03. On April 8, ...