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Amaral Enterprises LLC v. Gian

United States District Court, D. Massachusetts

June 18, 2019

AMARAL ENTERPRISES LLC, Plaintiff,
v.
CHARLES J. GIAN, et al., Defendants.

          MEMORANDUM AND ORDER ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION (DKT. NOS. 43 & 64)

          KATHERINE A. ROBERTSON U.S. MAGISTRATE JUDGE.

         I. Introduction Plaintiff Amaral Enterprises LLC (“Plaintiff”) filed this eight-count complaint against defendant Charles J. Gian in his individual, managerial, and trustee capacities, [1] challenging a special assessment imposed by the Morningside Plaza Condominium Association (“MPCA”). The genesis of this suit, and a No. of other suits filed by Plaintiff, its related entities, and Brian Amaral, Plaintiff's sole manager, was a frozen pipe that burst on February 19, 2013, in a common area of the Morningside Plaza building in Pittsfield, causing water damage to a commercial bakery operated by Bearbones, Inc., d/b/a/ Morningside Bakery, in the condominium unit owned by Plaintiff. Now before the court are Defendants' Motion for Summary Judgment (Dkt. No. 43) and Plaintiff's Motion for Preliminary Injunction (Dkt. No. 64).[2] The parties have consented to this court's jurisdiction (Dkt. No. 7). See 28 U.S.C. § 636(c); Fed.R.Civ.P. 73. For the reasons set forth below, the court will grant Defendants' motion and deny Plaintiff's motion.

         II. Background

         A. MPCA Agreement and Bylaws[3]

         The Trustees of the Morningside Plaza Nominee Trust, Charles Gian and Satrina Panetti, created the MPCA on February 14, 1990. The MPCA Agreement of Association and Bylaws submitted “the property described in said Master Deed” “to the provisions of Chapter 183A of the Massachusetts General Laws” (Agreement at 1)[4] and stated that “[t]he Condominium shall not be removed from the provisions of the Condominium Law except in compliance with the procedure therefor established in Section 19 of the Condominium Law” (Agreement, Article XIV, at 28).

         The Agreement provided for the election of a Board of Managers (“Board”) to be comprised of three representatives, consisting of Gian, an individual who would be designated by the purchaser of Unit 1, and an individual who would be designated by the purchaser of Unit 5 (Agreement 3.2 at 3-4). Meetings of the Board were to be held from “time to time” as determined by a majority of the Managers, but at least once each fiscal year. “Notice of regular meetings of the Board [were to] be given by the Clerk of the Condominium Association to each Manager by mail or telephone at least three (3) business days prior to the day named for such meeting” (Agreement 3.7 at 5). Special meetings could be called by the President with three-days' notice to each Manager that stated the time, place, and purpose of the meeting (Agreement 3.8 at 5). The Agreement permitted the appointment of a manager or managing agent who would be responsible for maintenance and operation of the common areas and facilities (Agreement 2, 3.15 at 7-8).

         The Board had - among others - the power and duty “[t]o initiate, prosecute and defend suits at all trial and appellate levels on behalf of the Condominium Association in the exercise of its power, … including the power to settle suits brought by or against the Condominium Association and the defense of suits brought against the Condominium Association involving the Common Areas and Facilities or any other matters” (Agreement 3.15.13(m) at 8). The Agreement addressed the personal liability of the Managers as follows:

No manager shall under any circumstance or in any event be held liable or accountable out of his personal assets by reason of any action taken, suffered or omitted by him in good faith while serving as Manager, … or be so liable, accountable or deprived by reason of honest errors of judgment or mistakes of fact or law, except for willful acts in bad faith.

(Agreement 3.12 at 7). The Agreement further provided that the Unit Owners, to the extent of unit ownership, would indemnify the Board of Managers and each Manager against any liability incurred by him or her or any of them in carrying out his or her duties as Manager (Agreement 3.12, 3.14 at 6, 8).

         Unit Owners were responsible for the common expenses of the condominium. The Agreement provided that assessments were to be made at least thirty (30) days before the start of the fiscal year (which was the calendar year) and were to be calculated by the Board based on an estimate of the common expenses expected to be incurred with a reasonable provision for contingencies and taking into account undistributed common profits from prior years, if any (Agreement 7.1 at 13). If the estimated budget did not cover common expenses actually incurred, then the Board could “make a supplemental assessment or assessments and render statements therefor which shall be due and payable within thirty (30) days” (Agreement 7.1 at 14). The amount charged annually to each Unit Owner was to “be a personal liability of the Unit Owner and if not paid when due shall … carry a late charge at a rate equal to eighteen percent (18%) per annum. All such charges (and the cost of collection thereof) [would] constitute a lien on the Unit of the Owner assessed pursuant to provisions of Section 6 of the Condominium law [Mass. Gen. Laws ch. 183A, § 6]” (Agreement 7.1 at 14).

         Among the common expenses identified in the Agreement were “amounts deemed appropriate by the Board for the operation, maintenance, upkeep and repair of the Common Areas and Facilities and for the activities of the Condominium Association, including but not limited to … costs of repairs, replacements and additions to the Common Areas and Facilities, including … maintenance of parking areas … [and] legal and audit expenses of the Condominium Association” (Agreement 7.1.2 at 14-15). The Agreement called for the purchase by the Board of insurance including “[f]ire with extended coverage insuring the premises, including Common Areas and Facilities and all of the Units and excluding only personal property of the Unit Owners therein, covering the interests of the Condominium, the Board and all Unit Owners” (Agreement 7.11.1 at 19-20).

         B. Additional Relevant Factual Background

         Plaintiff owns one of five condominium units in Morningside Plaza. Gian, in his capacity as a Trustee of the Morningside Plaza Nominee Trust (“MPNT”), is the owner of the legal interest in the remaining four condominium units in the building (Dkt. No. 59, ¶ 7 at 3). Plaintiff, which owns Unit 5, and Gian are Managers of MPCA (Agreement 3.3 at 4). Gian admits that, as an MPCA Manager, he may have had an obligation under the Agreement to obtain insurance for the common areas of Morningside Plaza (Gian Aff. ¶ 5 at 2). It is undisputed that Gian insured his units (Gian Aff. ¶ 7 at 2). According to Gian, he obtained insurance for the entire square footage of the building and wrongly believed that the insurance covered the building's common areas (Gian Aff. ¶¶ 6-8 at 2).

         On or around October 4, 2013, following the February 19, 2013 damage to Plaintiff's condominium unit, Plaintiff filed suit in the Superior Court Department of the Massachusetts Trial Court in Suffolk County, bringing claims under Massachusetts General Laws Ch. 183A, § 13 against, among others, Gian in his capacities as Manager of the MPCA and Trustee of the MPNT (Dkt. No. 45-5). Plaintiff sought to recover consequential damages for Gian's failure to purchase common area insurance (Dkt. No. 45-5 at 16). On March 17, 2017, this suit was dismissed with prejudice for failure to prosecute (Dkt. No. 46-9). On or around February 12, 2016, Plaintiff filed a shareholder derivative suit in the Superior Court in Berkshire County naming, among others, Gian individually and Gian in his capacities as Manager of the MPCA and Trustee of the MPNT. This Berkshire County action seeks recovery, purportedly on behalf of the condominium association, for losses arising from Gian's failure to purchase common area insurance and other MPCA losses (Dkt. No. 44-6). This suit remains pending.

         On January 19, 2017, the MPCA approved an additional or special assessment for “roof repair, parking area repair and for the legal fees incurred in the litigation in which the condominium was involved” (Gian Aff. ¶¶ 15-16, Dkt. No. 66-6). An undated document entitled “Budget for the Morningside Plaza Condominium Association” shows a $37, 000 cost for roof repair; a $23, 500 cost for parking area repair; a $136, 000 cost for “Legal Fees for Condo Litigation;” and a $20, 000 cost for “Berkshire County Condo Association Legal Fees” (Dkt. No. 66-6 at 2). The parties dispute whether Plaintiff received the notice required under the Agreement of the meeting at which the vote was taken approving the special assessment. It is undisputed that, on February 17, 2017, without conceding improper notice, defense counsel proposed to Plaintiff's counsel that the MPCA meeting be rescheduled and a new vote taken on the special assessment (Dkt. No. 45-10). Plaintiff refused the offer of another MPCA meeting (Gian Aff. ¶ 25).

         Plaintiff filed this suit on or around April 28, 2017, seeking a declaratory judgment that the portion of the special assessment charged to it - calculated by the MPCA at $80, 105.00 - was either void or assessed in bad faith to facilitate a foreclosure (Dkt. No. 1 at 1; Dkt. No. 66-6 at 2). Plaintiff alleges that Gian, individually, as a Manager of the MPCA, and as a Trustee of the MPNT, improperly caused Plaintiff to be assessed $80, 105.00 to pay a portion of the legal fees the MPCA has incurred defending against the multiple suits filed by Plaintiff arising from the February 19, 2013 incident. According to Plaintiff, the special assessment arises from Gian's failure to procure insurance for the common areas of the Morningside Plaza building in compliance with the MPCA Agreement notwithstanding that Plaintiff allegedly paid for such insurance in conjunction with its purchase of Unit 5 (Compl. at 5-6, ¶¶ 14, 18). Plaintiff alleges that at no time between October 4, 2013, when Plaintiff filed suit in Suffolk Superior Court, and February 3, 2017, when Plaintiff was notified of the special assessment, did Gian or anyone acting on his behalf notify Plaintiff of the intended special assessment (Compl. at 5, ¶ 17).

         Plaintiff's complaint seeks relief in eight counts:

• Count I seeks a declaratory judgment that Plaintiff has no obligation to pay the $80, 150.00 special assessment because Defendants' failure to obtain appropriate insurance was the “proximate cause of the overall Special Assessment and such an intervening act terminates” Plaintiff's liability (Compl. at 6, ¶ 21);
• Count II states a claim of promissory estoppel or detrimental reliance on the grounds that Defendants failed to acquire casualty insurance as promised by the Agreement and “failed to sue those persons/entities who were responsible for the lack of insurance though Defendants knew such a claim was viable” (Compl. at 6-7, ¶ 23);
• Count III states a claim that Defendants breached a contract with Plaintiff by their failure to obtain common area insurance in compliance with the Agreement, thereby excusing Plaintiff's obligation to pay the special assessment (Compl. at 7-8, ¶ 27);
• Count IV states a claim under Massachusetts General Laws ch. 93A, §§ 2 and 11 (“Chapter 93A”) for demanding payment of the Special Assessment, for collecting money for insurance that was not purchased, for denying Plaintiff access to the books and records of the MPCA, and for chilling Plaintiff's rights to petition (Compl. at 8, ¶ 29);
• Count V states a claim for breach of the implied covenant of good faith and fair dealing for the failure to purchase common area insurance for which Plaintiff allegedly paid (Compl. at 8, ¶ 31);
• Count VI states a claim for fraud for the imposition of the special assessment without proper notice to Plaintiff of the MPCA meeting (Compl. at 8-9, ¶¶ 33-35);
• Count VII states a claim for an accounting as to the basis of the special assessment charged to Plaintiff ...

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