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Greenberg v. Barros

Superior Court of Massachusetts, Suffolk, Business Litigation Session

September 8, 2017

Mark Greenberg et al. [1]
v.
Manuel C. Barros

          MEMORANDUM OF DECISION AND ORDER ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

          Edward P. Leibensperger, Justice

         Plaintiffs, Mark Greenberg and Michael LaPierre, bring this action requesting this Court to declare that they are the owners of 80% of the member interests of 31 Tozer Road, LLC (" Tozer" ). Defendant, Manuel C. Barros (" Barros" ), opposes the requested declaration and, by his counterclaims, asks for a declaration that Tozer is prohibited under Federal bankruptcy law from issuing membership interests to Plaintiffs. This matter is before the Court on plaintiffs' motion for summary. For the reasons set forth below, Plaintiffs' request for summary judgment is ALLOWED IN PART AND DENIED IN PART.

         BACKGROUND

         The material facts established by the parties' Rule 9A statement and supporting materials are as follows.

         On December 10, 2010, the parties entered into a Security Purchase Agreement (SPA), a contractual document primarily concerning Plaintiffs' investment in Barros's tennis club. The signatories included not only the parties, but also Tozer, which owned and leased the tennis club property, and Bass River Tennis Corporation (" BRTC" ), which ran the operation of the tennis club. Barros signed the SPA in his individual capacity and in his capacities as manager of Tozer and president of BRTC. The immediate effect of the SPA was that the debts owed by BRTC to Plaintiffs were converted into 80% equity interests in BRTC. Immediately before the SPA, Barros owned 100% of the shares of BRTC. After the SPA became effective. Barros' shares in BRTC constituted 20% of the ownership of BRTC.

         At the time of the SPA, Barros was the sole member and manager of Tozer. Section 4.1(e) of the SPA granted " [e]ach Purchaser [a defined term meaning Greenberg, LaPierre and Barros] . . . an option [" the Option" ] to purchase, at nominal price of $1 for each Purchaser, such equity interests in Tozer, LLC, which corresponds to the percentage of ownership (on an outstanding basis) held by the Purchasers in [BRTC] at the time of the exercise of the Option exercisable for a period of ninety (90) days from the date that all Carve Out Liens have been removed."

         The SPA identified three liens existing on Tozer's real estate that were not released at the time of the SPA. These liens were designated as the " Carve Out Liens." On November 9, 2016, the Beverly Mortgage, the last of the Carve Out Liens, was removed. After the removal of the last Carve Out Lien, Plaintiffs, on December 22, 2016, exercised the Option given to them in § 4.1(e) of the SPA. They sent notice to Barros and tendered the $1 Option price. At that time, Greenberg owned 47% and LaPierre owned 33% of the shares of BRTC. Thus, pursuant to the Option, Plaintiffs claim an 80% equity interest in Tozer.

         On November 10, 2016, one day after the last Carve Out Lien was removed, Tozer filed a Chapter 11 petition in the U.S. Bankruptcy Court. Plaintiffs moved to dismiss the case, or in the alternative, for a determination that the automatic stay imposed by 11 U.S.C. § 362(a) did not apply to the exercise of the § 4.1(e) Option.

         On December 21, 2016, the Bankruptcy Court ruled that " the automatic stay does not apply to prevent the Purchasers (as defined in the SPA) from exercising their rights under Article IV, Section 4.1(e) of the SPA." The Bankruptcy Court concluded that " it is in the best interests of [Tozer] and its creditors to obtain a judicial determination in state court of the Purchasers' rights under the SPA and the various parties' equity interests in [Tozer]. Pursuant to 11 U.S.C. Section 305(a), the Court abstains from interpreting Section 4.1(e) of the SPA and from determining the parties' dispute with respect to membership interests in [Tozer]." The Bankruptcy Court also denied Plaintiff's motion to dismiss the bankruptcy, holding that Plaintiffs failed to show that the filing of bankruptcy was an abuse of the bankruptcy process. Barros initiated an appeal of the Order of the Bankruptcy Court lifting the automatic stay to the U.S. District Court for the District of Massachusetts. The appeal is pending without decision at this date.

         Plaintiffs commenced this action requesting a declaratory judgment to the effect that " they are the rightful owners of 80% of the membership interests of Tozer, and that Greenberg owns 47% and LaPierre owns 33%." Complaint, p. 7. Barros contends that it is Tozer, not him, who must issue member interests to Plaintiffs. Accordingly, he argues that any action by Tozer should be automatically stayed by the pending bankruptcy proceedings and, thus, the ruling by the Bankruptcy Court was error. Barros, in his counterclaim, asserts bankruptcy defenses. Plaintiffs move for summary judgment on their request for a declaration, and the dismissal of Barros's defenses and counterclaims for declaratory judgment.

         ANALYSIS

          Summary judgment is appropriate where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Mass.R.Civ.P. 56(c), Cassesso v. Commissioner of Corr., 390 Mass. 419, 422, 456 N.E.2d 1123 (1983). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue and that the summary judgment record entitles the moving party to judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14, 16-17, 532 N.E.2d 1211 (1989). Once the moving party establishes the absence of a triable issue, the party opposing the motion must respond with evidence of specific facts establishing the existence of a genuine dispute. Pederson, 404 Mass. at 17. In the present case, there are no disputes of material facts. The parties seek an interpretation of their obligations under the SPA, as a matter of law.

         Jurisdiction

         Barros raises, as a threshold matter, whether this court has jurisdiction to decide the ownership issue with respect to Tozer while Tozer's bankruptcy proceeding is pending in the U.S. District Court and Bankruptcy Court. Barros, nevertheless, requests a declaratory judgment in his counterclaims regarding the effect of Tozer's bankruptcy filing on the obligations of the parties under the SPA. The short answer to Barros's contentions is that the Bankruptcy Court explicitly referred the dispute regarding the parties' ownership interests in Tozer to the state court. The Bankruptcy Court lifted the automatic stay in order for this court to proceed. Barros must now make his arguments regarding any error in the Bankruptcy Court's Order to the U.S. District Court. Likewise, Barros must ...


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