Superior Court of Massachusetts, Suffolk, Business Litigation Session
MEMORANDUM AND ORDER DENYING MOTION TO DISMISS
COUNTERCLAIMS AND THIRD-PARTY CLAIMS
Kenneth W. Salinger, Justice of the Superior Court.
ABCD Holdings, LLC, (" Holdings") has sued Patrick
J. Hannon in part to enforce Hannon's personal guaranty
of one-half of the amount that Holdings loaned to Ware Real
Estate, LLC (" Ware") and ABC& D Recycling,
Inc. (" Recycling"). Holdings claims that Hannon is
liable under his limited guaranty to repay $109, 879.50 (half
the original loan amount) plus reasonable collection costs.
response, Hannon has asserted various counterclaims and
third-party claims alleging, in essence, that George
McLaughlin deliberately prevented Ware and Recycling from
repaying what they owed under their note by using Holdings to
take control of Ware and Recycling and then transferring
their assets and business operatings to a new entity called
Tri County Recycling, Inc. (" Tri County").
parties sued by Hannon--i.e., McLaughlin, Holdings, Ware,
Recycling, and Tri County--have moved to dismiss Hannon's
claims. They claim that Hannon's claims are all barred by
a release executed by the Chapter 7 trustee of Hannon's
bankruptcy estate. In addition, Tri County asserts that the
allegations against it do not state viable claims even if the
claims were not barred by the release.
Court concludes that these arguments are without merit. It
will therefore DENY the motion to dismiss Hannon's
counterclaims and third-party claims.
Settlement Agreement and Release
filed a petition under Chapter 11 of the United States
Bankruptcy Code on May 3, 2012. That bankruptcy case was
converted to a Chapter 7 or liquidation proceeding on January
2, 2013. The bankruptcy trustee sued Bright Horizon, LLC
(" Bright Horizon") and The McLaughlin Brothers,
P.C. (" McLaughlin Bros.") to recover various
payments Hannon had made to them.
2015 the bankruptcy trustee entered into a settlement
agreement in which George McLaughlin, Bright Horizon, and
McLaughlin Bros. agreed to pay the bankruptcy estate $45,
000. In exchange, the trustee released all claims "
whether known or unknown" that the estate or Hannon may
have against George McLaughlin, Bright Horizon, McLaughlin
Bros., or " any entity owned by any of" them. The
settlement agreement states that it is releasing such claims
" to the Trustee's full authority to waive such
asserts that he owns Holdings, Recycling, Ware, and Tri
County, and that the release executed by the bankruptcy
trustee therefore bars all of Hannon's counterclaims and
third-party claims in this action. The Court disagrees.
claims in this action all arise at least in part from alleged
acts by McLaughlin and his companies that occurred after
Hannon's bankruptcy petition was converted to a Chapter 7
proceeding in January 2013. Hannon alleges in his pleading
that McLaughlin has been in full control of Recycling and
Ware " since February 6, 2013, " and that since
that time McLaughlin has taken steps to ensure that neither
Recycling nor Ware has repaid any part of the loan to
Holdings. He further alleges that Tri County was incorporated
in May 2014, and that around that time McLaughlin terminated
the business operations of Recycling and Ware and shifted
those operations to Tri County.
correctly argues that the bankruptcy trustee had no power to
release claims that were never part of the bankruptcy estate.
See In re Ontos, 478 F.3d 427, 431 (1st Cir. 2007).
" It is axiomatic that a Chapter 7 trustee may only
release claims that he has the power to assert." In
re Pierport Dev. & Realty, Inc., 502 B.R. 819, 825
(Bankr.N.D.Ill. 2013), quoting In re Cent. Ill. Energy,
LLC, 406 B.R. 371, 373-74 (Bankr.C.D.Ill. 2008).
and the other moving parties respond by pointing out that
Hannon's bankruptcy estate included not only all claims
belonging to Hannon as of May 3, 2012, when he first filed
for bankruptcy, but also all other claims arising up until
the time when the bankruptcy case was converted to a Chapter
7 proceeding, which occurred on January 3, 2012. See 11
U.S.C. § 1115(a)(1) (property of bankruptcy estate
includes " all property of the kind specified in section
541 that the debtor acquires after the commencement of the
case but before the case is closed, dismissed, or converted
to a chase under chapter 7, 12, or 13, whichever occurs
first"); 11 U.S.C. § 541(a)(1) (bankruptcy estate
includes " all legal or equitable interests of the
debtor in property as of the commencement of the [bankruptcy]
case"); Cole v. Pulley, 18 Mass.App.Ct. 950,
951, 468 N.E.2d 652 (1984) (rescript) (for purposes of §
541(a)(1), " property" includes " all
interests of the debtor in rights of action" (quoting 4
Collier, Bankruptcy par. 541.10 (1983)).
noted above, however, Hannon's counterclaims and
third-party claims are based in large part upon alleged acts
or omissions by McLaughlin and his companies that occurred
after Hannon's bankruptcy case was converted to a Chapter
result, Hannon's claims in this action were never part of
his bankruptcy estate, and therefore could not be and ...