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Goodwill Enterprises, Inc. v. Kavanagh

Appeals Court of Massachusetts, Suffolk

August 29, 2019

GOODWILL ENTERPRISES, INC.
v.
CATHLEEN E. KAVANAGH, trustee, [1] & another. [2]

          Heard: February 12, 2019.

         Civil action commenced in the Land Court Department on August 14, 2015.

         The case was heard by Robert B. Foster, J., on motions for summary judgment.

          Thomas S. Vangel (Matthew C. Douglass also present) for Cathleen E. Kavanagh.

          Paul Marshall Harris (Sara Decatur Judge also present) for the plaintiff.

          Present: Rubin, Sullivan, & Neyman, JJ.

          SULLIVAN, J.

         Goodwill Enterprises, Inc. (Goodwill), seeks to enforce a right of first refusal found in its lease with the nominee trust that holds title to the leased property. This appeal requires us to resolve whether the bankruptcy sale of a bankrupt beneficiary's fifty percent interest in the nominee trust triggered Goodwill's right of first refusal. Concluding that it did, we affirm the Land Court judgment entered in Goodwill's favor.

         1. Background.

         This case was decided on cross motions for summary judgment based on undisputed facts. The 218 Andover Street Peabody Realty Trust (Peabody Realty), a nominee trust, holds title to property leased by Goodwill. Pursuant to its lease, Goodwill has a right of first refusal in the event of sale of the "[p]roperty, or any part thereof." Beginning in 2009, defendant William F. Garland and Daniel P. Corbett each owned fifty percent beneficial interests in Peabody Realty. Garland has also been the sole trustee of Peabody Realty since at least 2009.

         In 2011, Corbett filed a voluntary Chapter 7 petition in bankruptcy under the United States Bankruptcy Code, at which point his beneficial interest in Peabody Realty became part of the bankruptcy estate. See 11 U.S.C. §§ 701 et seq. The Chapter 7 trustee sold Corbett's fifty percent interest to the defendant Cathleen E. Kavanagh, trustee of the April Realty Trust (April Realty). Notice of the impending sale was not provided to Goodwill in the manner specified in the lease provision setting forth the right of first refusal.[3]

         After learning that Corbett's beneficial interest in Peabody Realty had been sold, Goodwill filed this action in the Land Court seeking to enforce its right of first refusal. Goodwill also filed a motion with the United States Bankruptcy Court for the District of Massachusetts (bankruptcy court) asking that the order authorizing the sale to April Realty be modified to reflect Goodwill's right of first refusal. The bankruptcy judge concluded that the Land Court had concurrent jurisdiction over the enforceability of Goodwill's right of first refusal and abstained, noting that "State law will be dispositive of the enforceability of the right of first refusal." In re Corbett, U.S. Bankr. Ct., No. 11-13667-JNF (Bankr. D. Mass. Oct. 26, 2015) . A Land Court judge ruled that Goodwill's right of first refusal was enforceable, and April Realty appeals.

         2. Discussion.

         a. The sale of ...


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