text:
    J. Ralph COLE v. Alan E. LEWIS & another
    17-P-1010
    Appeals Court of Massachusetts.
    Entered: September 7, 2018.
    MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

      The Kensington Investment Company.

   The plaintiff, J. Ralph Cole, commenced this civil action, alleging, inter alia, that the defendants Alan E. Lewis and The Kensington Investment Company (KIC) breached the incentive compensation provision of an employment agreement by refusing to provide him with (count I) ten percent of Lewis's equity interest in a commercial real estate venture in the area of downtown Boston long referred to as the "Combat Zone" (Combat Zone project) and (count II) twenty percent of the appreciation of the value of Lewis's equity interest (appreciation amount) in a redeveloped piece of commercial real estate at 93-97 Massachusetts Avenue in Boston (Mass. Ave. property). Following a multiday trial, a jury found for Cole on count II, but not count I. The trial judge then incorporated the jury's findings into a final judgment, dated February 8, 2017, wherein he further declared, with respect to count II and the Mass. Ave. property, that (1) the appreciation amount was to be calculated based on the difference between the "initial value" of Lewis's equity interest taken from immediately before redevelopment and a "comparison value" at the time of the payment to Cole, (2) the amount due to Cole was to be reduced by the net amount of cash Lewis had invested in the property, plus interest (cash investment), and (3) if the parties were unable to agree on the amount of the cash investment, it was to be determined through binding arbitration, as stipulated by the parties during trial. The parties have now filed cross appeals.

For his part, Cole first argues that the judge erred by failing to provide a certain instruction to the jury, thereby necessitating a new trial on count I, the Combat Zone project claim. He further argues that the judge erred, and ignored the unambiguous language of the employment agreement, in allowing Lewis to deduct his cash investment from the appreciation amount due in connection with the Mass. Ave. property. Finally, he maintains the stipulation the parties reached during trial regarding arbitration was not as limited in scope as the judge provided for in the final judgment. Lewis and KIC, in turn, argue that the "comparison value" that should be used to calculate the appreciation amount is not the value of Lewis's equity interest at the time of the payment to Cole, but at the time Cole's employment was terminated (for a second time) in 2013.

We conclude that, while the employment agreement is, in many respects, far from a model of clarity, the provision regarding the appreciation amount due to Cole in connection with the Mass. Ave. property is unambiguous insofar as it requires that the amount to be calculated is based on the difference between the value of Lewis's interest immediately before and after redevelopment and does not allow for the deduction of Lewis's cash investment. We further conclude that the parties intended by their stipulation to submit the calculation of the appreciation amount to binding arbitration before an agreed-upon qualified accountant, assuming, of course, that the parties could not agree on that amount.

Background. The facts developed at trial, and which are material to the issues on appeal, are, in most respects, not in dispute.

1. 1997 employment agreement. In 1997, Lewis hired Cole to serve as president of KIC, an entity Lewis had formed to hold his family's real estate and other assets. The parties formalized their agreement in a written contract, dated September 1, 1997 (1997 agreement). Cole's "principal duty" as president was to develop the Combat Zone project, located on a block in downtown Boston, bounded by Washington, Boylston, and LaGrange Streets, but he was also expected to oversee the redevelopment of other properties in the greater Boston area owned by Lewis and his family. According to the 1997 agreement, the term of Cole's employment would continue until terminated by either party, at any time, and for any reason. The 1997 agreement granted Cole an annual salary of $200,000. He was also eligible to earn or receive several types of "incentive compensation," which were detailed in the lengthy and, at times, disjointed section 8 of the 1997 agreement.

a. Incentive compensation. i. Combat Zone project. The first type of incentive compensation related to Cole's duties regarding the Combat Zone project and entitled him, upon the achievement of certain identified goals, to earn a cash bonus and a percentage of Lewis's limited partnership interest in the project. Specifically, section 8 provided, in pertinent part:

"A principal duty of [Cole] will be to deal with the property in which [Lewis] has a financial interest in the Combat Zone, so-called .... The Combat Zone Properties are owned by two limited partnerships .... The duties of [Cole] with respect to the Combat Zone Properties will include, without limitation, the following:
"(a) Arranging for stabilization and/or an extension of the existing mortgage debt on the Combat Zone Properties during calendar year 1997 owed to Abraham Gossman and/or an entity owned or controlled by him and mortgage debt owed to the Federal Deposit Insurance Corporation. In addition, [Cole] will be expected to negotiate with USTrust so as to separate the debt obligations to USTrust relating to the Combat Zone Properties so that the obligations to that bank of [Lewis] and Stuart Pratt are separated so as not to be cross defaulted or cross collateralized. In addition, [Cole] will be obliged to negotiate payment of outstanding real estate taxes, interest and penalties thereon with respect to the Combat Zone Properties and establish an agreement, to the extent obtainable, for future years with respect to real estate taxes for those properties.
"(b) [Cole] shall communicate with the City of Boston and the Boston Redevelopment Authority for establishment of a Master Plan for development of the properties .... These duties will also include, without limitation, completion of site assemblage and/or site control arrangements for the following sites as may be included in the Master Plan referred to above:
"(1) The Glass Slipper Site - 15 LaGrange Street;
"(2) The China Trade Building located at 651 Washington Street;
"(3) The BRA Out Parcel located on 19 LaGrange Street;
"(4) Air rights above ... 679 Washington Street ....
"These duties will also include negotiation with a joint venture equity partner and/or major anchor tenants ...; and completion of permitting and obtaining zoning and construction approvals under the City of Boston's expedited 'Article 80' large project review process; and obtaining construction financing, closing and initiation of project development.
"(c) Accomplishment of the objectives referred to in Section 8(a) during calendar year 1997, to the satisfaction of [Lewis] will enable [Cole] to qualify for incentive compensation for September 1, 1997 through December 31, 1997, of up to $16,667, the amount to be determined by [Lewis] in his discretion.
"In addition, upon timely achievement of the goals referred to in Section 8(b), [Cole] will be entitled to receive 10% of the limited partnership interest currently owned by [Lewis] in the two foregoing partnerships (the "Lewis Partnership Interests" ), plus eligibility for up to an additional 10% of the Lewis Partnership Interests as determined by [Lewis] in his discretion. It is understood that 'timely' achievement of the foregoing goals does not mean achievement of said goals during calendar year 1997." (Emphases added.)

In this action, Cole claims, in count I, to have earned the nondiscretionary ten percent of Lewis's limited partnership interest in the Combat Zone project. As noted above, however, the jury disagreed.

ii. Future properties. The second type of incentive compensation identified in section 8 entitled Cole "to a 20% equity participation as a limited partner, (or nonvoting member or equity participant ), if the form of entity is other than a limited partnership, in all commercial real estate projects in which [Lewis] may invest subsequent to this date during the term of employment" (emphasis added). While Cole has not asserted a claim under this portion of section 8, it is noteworthy that the potential incentive compensation at issue relative to such "future properties" took the form of an equity interest.

iii. Existing properties. Finally, section 8 provided Cole with the opportunity to receive incentive compensation in connection with the appreciation in value of Lewis's equity interest in "Existing Properties" that had undergone significant redevelopment. Specifically, section 8 contained the following paragraphs, which we refer to as the "appreciation amount paragraphs":

"In the event that an Existing Property is redeveloped so as to make a significant change from the use of said property that existed immediately preceding the development activities, then [Cole] will be entitled to 20% of the appreciation in value of the interest of Lewis in such project in excess of the value of the equity of Lewis in said project immediately preceding the development activities.
"For this purpose, the value of a property shall be five times the average Net Operating Cash Flow of the property for the two full calendar years immediately preceding the development activities. 'Net Operating Cash Flow' shall mean the cash receipts from rent and escalation payments received from such property, less all cash expenditures paid in connection with the ownership and operation of the property (non-cash items to be excluded such as depreciation and amortization) but before debt service and income taxes. Extraordinary items, including but not limited to, insurance proceeds, taking awards, amounts received in litigation other than for rent or escalation payments are to be excluded from Net Operating Cash Flow (collectively 'Extraordinary Items').
"By way of illustration and not limitation, if the value of a property before development activities using the above formula is $2,000,000 and the amount of mortgage debt is $500,000, then in the event of development activities at said property, [Cole] will be entitled to 20% of the appreciation in the value of the interest of Lewis in the applicable property above $1,500,000." (Emphases added.)

The Mass. Ave. property qualified as an "Existing Property." In this action, Cole claims, in count II, that he was entitled to twenty percent of the appreciation amount realized from the redevelopment of that property. As noted above, the jury agreed.

2. First termination of employment. In the first half of 2006, Lewis terminated Cole's employment. At that time, Lewis also put the Combat Zone project on hold, indefinitely. Both actions were precipitated by an increase in the anticipated construction cost for the project, from $103 million to $146 million. The cost increase rendered the project financially unfeasible and, in Lewis's mind, reflected poorly on both Cole's communication and financial skills. As of that time, it is undisputed that (1) Cole had achieved some, but not all, of the section 8(b) milestones required to earn the incentive compensation related to the Combat Zone project, and (2) the Mass. Ave. property had yet to be redeveloped, the prerequisite for any incentive compensation related to that Existing Property. Nonetheless, Cole maintained that his right to earn or receive both types of incentive compensation survived the termination of his employment because the 1997 agreement provided "that the rights and obligations of the parties under this Agreement shall continue following termination, except for the payment of salary, expenses and benefits, and the accrual of vacation time." Ultimately, the jury, in response to two special questions, agreed with Cole and found that he and Lewis intended at the time they entered into the 1997 agreement for those incentive compensation "rights" to survive termination of employment. Lewis and KIC have not appealed from those findings.

3. Redevelopment of Mass. Ave. property. In 2007, approximately one year after the termination of his employment, Cole became a consultant to another Lewis-related entity, focusing on the redevelopment of the Mass. Ave. property, a project he had first worked on in 2004 or 2005. Three years later, in 2010, he returned to KIC as a full-time employee, with a new title, executive vice president of special projects, and under a new agreement (2010 agreement). At that time, he not only continued working on the Mass. Ave. property redevelopment, but also on the Combat Zone project. Whatever rights Cole continued to have under the 1997 agreement were not superseded by the 2010 agreement or the consulting agreements.

In 2012, construction commenced on the Mass. Ave. property, with the existing structure being stripped to its steel frame and then rebuilt. Around the same time, a new tenant, an "upscale" furniture retailer, agreed to lease the entire redeveloped building. The certificate of occupancy for the property, now known as 375 Newbury Street, thereafter issued on July 10, 2014. The jury found that the redevelopment resulted in a significant change in the use of the Mass. Ave. property, such that Cole was entitled under the 1997 agreement to twenty percent of the appreciation in the value of Lewis's interest therein. Lewis and KIC have not appealed from that finding, though, as noted above, they have challenged the "comparison value" the judge included in the final judgment as part of the formula for calculating that appreciation amount.

4. Development of Combat Zone project. According to the terms of the 1997 agreement, Cole was required to achieve the goals set forth in section 8(b) in a "timely" manner to earn the incentive compensation related to the Combat Zone project. The agreement, however, did not define "timely." Lewis testified that he told Cole that he expected the goals to be achieved in two to four years. Cole did not dispute that testimony, though he testified that Lewis never suggested prior to the 2006 termination of Cole's employment that the project was moving too slowly. By the time of the 2006 termination of his employment, several of the section 8(b) goals had been achieved under Cole's leadership: communication with the city of Boston and the Boston Redevelopment Authority (BRA) had resulted in the establishment of a master plan for development of a residential condominium and apartment tower on the property; the various parcels on which the tower would be built had been purchased and otherwise assembled into one lot; and the necessary permitting and zoning and construction approvals had been secured under the BRA's expedited "Article 80" large project review process. However, two goals had yet to be achieved: securing construction financing and a joint venture equity partner.

By the time Cole was rehired by KIC in 2010, the Combat Zone project had been revived and modified. While Cole would proceed to work on the project again, the exact nature and extent of his involvement was disputed at trial. According to Lewis and multiple other witnesses, Cole no longer served as the developer for the project, as he had prior to the 2006 termination of his employment. While Cole had proven skills when it came to interfacing with the BRA and community to secure the necessary permitting and approvals, he did not possess the design, construction, finance, and operational skills needed to lead the development of such a large-scale commercial real estate project. As such, KIC partnered with an outside firm, National Development (ND), to take over as the developer and spearhead efforts to secure construction financing and a joint venture equity partner. ND also brought in another firm, Holiday Fenoglio Fowler (HFF), with specific expertise in arranging financing for such projects. Led by those two firms, construction financing was secured and a joint venture partner was found. While Cole, like others at KIC, assisted in that process, his primary role was to work with the BRA and local community to again secure the necessary permits and approvals for the revived project; Lewis and others acknowledged that Cole successfully fulfilled that role. Cole, meanwhile, did not deny the involvement of ND, HFF, and the other KIC executives. However, he maintained that they were all part of a "team" and that, in some respects, he served as the "quarterback" of that team. In either event, construction on the Combat Zone project, which had become known as The Kensington Tower project, commenced in September of 2011, and the certificate of use and occupancy was thereafter issued on October 1, 2013.

5. Second termination of employment. In 2007 and 2010, Lewis had made two personal loans to Cole, in the principal amounts of $185,000 and $855,038.98, respectively. By 2013, the loans were long overdue and Lewis had been urging Cole to address them for some time, but without success. On June 21, 2013, therefore, Lewis informed Cole that, until he addressed payment of the loans, he could no longer work for KIC. Then, over the ensuing July 4 weekend, Lewis found Cole alone in KIC's offices. The following Monday, July 8, 2013, therefore, Lewis terminated Cole's employment altogether, for a second time. Three weeks later, Cole commenced this action. In response, Lewis countersued on the loans.

Analysis. 1. Missing jury instruction. Cole first argues that he is entitled to a new trial on count I, his claim for incentive compensation in connection with the Combat Zone project, because the judge improperly refused to instruct the jury, in substance, that one party (i.e., Lewis) could not avoid performance of his promise to the other (i.e., Cole) based on the nonoccurrence of a condition precedent (i.e., achievement of all the section 8[b] goals), where he himself had hindered or prevented its occurrence. The argument, however, fails for two reasons.

First, while Cole did submit a written request for such an instruction as part of a larger instruction on the issue of the timeliness of performance, he did not object at either the charge conference, when it was clear that the instruction was not among those the judge proposed to give, or the conclusion of the charge, after the instruction was not provided. In fact, the first time Cole objected was two weeks after final judgment entered, in a motion for new trial. The objection, therefore, was not preserved and has been waived. See Muzzy v. Cahillane Motors, Inc., 434 Mass. 409, 416 (2001) (party may not assign as error failure to give instruction unless he or she both objects before jury retires to deliberate and states distinctly objection and grounds of objection); Mass.R.Civ.P. 51(b), 365 Mass. 816 (1974).

Second, as the judge suggested in his order denying Cole's motion for a new trial, there was no evidence that Lewis hindered or prevented Cole from achieving the section 8(b) goals necessary to earn incentive compensation in connection with the Combat Zone project. In fact, the theory Cole pursued at trial was that he had achieved those goals and earned the right to ten percent of Lewis's equity interest in the project. Even if the objection arguably had been preserved, therefore, we would not conclude that the judge erred in refusing to provide the instruction.

2. Calculation of the Mass. Ave. property appreciation amount. Both Cole and Lewis have raised issues with respect to the formula the judge established in the final judgment for calculating the appreciation amount due to Cole in connection with the Mass. Ave. property. We address those issues in logical order.

a. Deduction of Lewis's cash investment. Cole argues that the judge ignored the plain language of section 8 when he ordered in the final judgment that "[t]he sum otherwise due Cole for his [twenty percent] interest in the appreciation amount shall be reduced by the amount of [Lewis's cash investment] in the Mass. Ave. property, with interest accrued at the rate of [six percent] per annum from the date of each cash investment, less any cash distributed to Lewis in respect of the Mass. Ave. Property." We agree.

The interpretation of the 1997 agreement, including the determination of ambiguity, is a question of law for the court, subject on appeal to de novo review. See, e.g., Balles v. Babcock Power, Inc., 476 Mass. 565, 571 (2017). The rules of interpretation are familiar. We "accord no deference to a party's interpretation of a contract but, rather, will focus on the language of the instrument to effectuate its terms." Id. at 571 n.12.

"The words of a contract must be considered in the context of the entire contract rather than in isolation. When the words of a contract are clear, they must be construed in their usual and ordinary sense, and we do not admit parol evidence to create an ambiguity when the plain language is unambiguous.... [E]xtrinsic evidence may be admitted when a contract is ambiguous on its face or as applied to the subject matter. The initial ambiguity must exist, however. Furthermore, extrinsic evidence cannot be used to contradict or change the written terms, but only to remove or to explain the existing uncertainty or ambiguity."

General Convention of the New Jerusalem in the United States of America, Inc. v. MacKenzie, 449 Mass. 832, 835-836 (2007) (citations omitted). See Bank v. Thermo Elemental Inc., 451 Mass. 638, 648 (2008) ("To answer the ambiguity question, the court must first examine the language of the contract by itself, independent of extrinsic evidence concerning the drafting history or the intention of the parties"). "[A]n ambiguity is not created simply because a controversy exists between the parties, each favoring an interpretation contrary to the other." Boazova v. Safety Ins. Co., 462 Mass. 346, 351 (2012), quoting from Citation Ins. Co. v. Gomez, 426 Mass. 379, 381 (1998). "Language is ambiguous where the phraseology can support a reasonable difference of opinion as to the meaning of the words employed and the obligations undertaken." Ferri v. Powell-Ferri, 476 Mass. 651, 654 (2017) (quotation omitted).

In section 8 of the 1997 agreement, the following paragraphs, which we refer to as the "cash investment paragraphs," follow immediately after the appreciation amount paragraphs:

"While [Cole] will not be obliged to make any cash investment in the Combat Zone Properties or other real estate investments in which he is entitled to participate under this Agreement, all monies invested by Lewis, directly or indirectly, whether as equity or debt, prior to or subsequent to the date of this Agreement, will be repaid in full before any distribution to [Cole] on a sale, refinancing or other distribution of an Extraordinary Item.
"All cash invested by Lewis, whether as equity or debt, will bear interest at the rate of 6% per annum. Interest will be paid annually before any distribution to [Cole].
"In the event that [Cole] is entitled to a distribution from more than one property under the terms of this Agreement, losses from one or more properties may be set off against amounts to be distributed as to other properties.
"By way of illustration and not limitation, in the event that Lewis makes a commercial real estate investment subsequent to the date of this Agreement of $200,000 with a first mortgage of $800,000, [Cole] will be entitled to a 20% interest as a limited partner, or equity participant, provided that on the sale or refinancing of said project, the $200,000 invested by Lewis, together with any unpaid interest at the rate of 6%, will be paid in full before any distribution to [Cole]. If Lewis has a 50% interest in the project before [Cole]'s participation, then [Cole] will receive a 10% interest, i.e. 20% of the interest of Lewis." (Emphases added.)

Based, at least in part, on these paragraphs, the judge felt obligated to order the deduction of Lewis's cash investment in the Mass. Ave. property, plus interest, from any amount due to Cole for the appreciation amount. It is apparent from the plain language of the agreement, however, that the cash investment paragraphs have no application to the calculation of the appreciation amount.

The cash investment paragraphs open with reference to Cole's "participation" in "real estate investments." They then go on to discuss the deduction of Lewis's cash investments, plus interest, before any "distributions" to Cole, be it annually or upon a sale, refinancing, etc. It is clear from this language that it applies when Cole's right to incentive compensation takes the form of an equity interest. Indeed, the cash investment paragraphs make reference to two types of incentive compensation, in connection with the Combat Zone project and future properties, both of which, as noted above, would take the form of an equity interest, according to the plain language of the agreement. In contrast, the plain language of the appreciation amount paragraphs calls for compensation in the form of a "percentage" of the "value" of Lewis's equity interest, not the formation of an equity interest itself. In other words, the appreciation amount paragraphs provide for the payment of a dollar figure, which represents twenty percent of the difference between the value of Lewis's equity interest in the Existing Property before and after the redevelopment, with those values being calculated using the formula provided. The cash investment paragraphs, therefore, are not applicable to the appreciation amount.

This interpretation is reinforced by the illustrations provided in section 8 in both the cash investment paragraphs and appreciation amount paragraphs. The illustration in the cash investment paragraphs specifically references and requires the deduction of Lewis's cash investment, plus interest at the rate of six percent, before any distribution to Cole in connection with his twenty percent equity interest in a future property. In contrast, the illustration in the appreciation amount paragraphs makes no reference whatsoever to any such deduction. Instead, it simply provides that "if the value of a property before development activities using the [specified] formula is $2,000,000 and the amount of mortgage debt is $500,000, then in the event of development activities at said property, [Cole] will be entitled to 20% of the appreciation in the value of the interest of Lewis in the applicable property above $1,500,000." The illustration, like the balance of the appreciation amount paragraphs, is unambiguous. The provision, therefore, must be enforced according to its terms.

To that end, we strike so much of the final judgment as provides, with respect to count II, that the "sum otherwise due Cole for his 20% interest in the Appreciation Amount shall be reduced by the amount of cash invested by Lewis in the Mass. Ave. Property, with interest accrued at the rate of 6% per annum from the date of each cash investment, less any cash distributed to Lewis in respect of the Mass. Ave. Property (the Cash Investment)."

b. The "comparison value." The judge further provided in the final judgment that in "calculating the Appreciation Amount, the initial value is the Lewis value in the Mass. Ave. Property immediately before its redevelopment and the comparison value is the Lewis value at the time that Cole receives payment for his 20% interest in the Appreciation Amount." Lewis argues, however, that the comparison value should be the value of his interest at the time Cole's employment with KIC terminated for a second time, on July 8, 2013, not the time Cole receives payment for his twenty percent of the appreciation amount. We disagree, although we do conclude that the comparison value established in the final judgment is inconsistent with the plain language of the appreciation amount paragraphs.

Lewis's argument is predicated upon yet another portion of section 8, which provides, in part, that in "the event that [Cole] owns any interest in real estate investments pursuant to this agreement, upon termination of his employment for any reason, all of such interests will be sold by him free and clear of liens to Lewis, or the ownership entity designated by Lewis" (emphasis added). In effect, Lewis argues that Cole would have been required to sell any interest he had acquired in the Mass. Ave. property back to Lewis when he was terminated in 2013, and, thus, the comparison value should be taken at that time. As discussed above, however, the incentive compensation owed to Cole in connection with count II and the Mass. Ave. property redevelopment is not an equity or ownership interest. The provision of section 8 that Lewis relies on, therefore, is wholly inapplicable.

The comparison value established by the judge -- the value of Lewis's interest at the time the payment of Cole's twenty percent interest is made -- also is predicated upon the faulty assumption that the incentive compensation owed to Cole in connection with the Mass. Ave. property redevelopment is an equity or ownership interest. Again, we must interpret "the contract as a whole, in a reasonable and practical way, consistent with its language, background, and purpose," Gross v. Prudential Ins. Co. of America, 48 Mass. App. Ct. 115, 119 (1999) (quotation omitted), and give preference to an interpretation that gives a reasonable meaning to every provision. See Metropolitan Property & Cas. Ins. Co. v. Fitchburg Mut. Ins. Co., 58 Mass. App. Ct. 818, 822-823 (2003). When so viewed, the language of the appreciation amount paragraphs provides that, just as the initial value is the value of Lewis's interest in the Mass. Ave. property immediately preceding the redevelopment activities, the comparison value should be the value of Lewis's interest immediately following completion of those activities, which, based on the issuance of the use and occupancy permit, occurred on July 10, 2014. And, just as the initial value of the "property shall be five times the average Net Operating Cash Flow[ ] of the property for the two full calendar years immediately preceding the development activities," the comparison value should be based on five times the average Net Operating Cash Flow of the property for the two full calendar years immediately following completion of the development activities.

c. Arbitration. The sole issue that remains, therefore, is how Cole's twenty percent interest in the appreciation amount is to be calculated. This need not detain us long. For his part, Lewis suggests that he only stipulated to submitting the calculation of his cash investment to arbitration, but, while that was the focus of some of the discussions between the judge and counsel, we do not view the stipulation the parties reached so narrowly. Those discussions took place in the larger context of how the amount due to Cole would be calculated if the jury determined that he was entitled to incentive compensation in connection with either the Combat Zone project and/or the Mass. Ave. property. Accordingly, as per the stipulation of the parties, Cole's interest, including, without limitation, calculation of the initial and comparison values, shall be determined by binding arbitration before a qualified accountant agreed to by both parties, assuming, of course, that the parties cannot reach agreement on the amount due to Cole on their own.

Conclusion. The final judgment dated February 8, 2017, is modified by striking the second, third, and fourth sentences of the paragraph concerning count II, and inserting in their place the following:

"In calculating the Appreciation Amount, the initial value is the Lewis value in the Mass. Ave. Property immediately before its redevelopment and the comparison value is the Lewis value immediately after its redevelopment on July 10, 2014. The initial value of the property shall be five times the average Net Operating Cash Flow, as that phrase is defined in the Employment Agreement dated September 1, 1997, of the property for the two full calendar years immediately preceding the development activities. The comparison value should be five times the average Net Operating Cash Flow, again, as that phrase is defined in the Employment Agreement dated September 1, 1997, of the property for the two full calendar years immediately following completion of the development activities on July 10, 2014. If the parties are unable to agree on the amount of Cole's interest, including, without limitation, calculation of the initial and comparison values, it shall be determined by binding arbitration before a qualified accountant agreed to by both parties."

As so modified, the final judgment is affirmed.

So ordered.

Affirmed

      In his complaint, Cole also asserted claims for quantum meruit, fraud, unfair and deceptive trade practices (G. L. c. 93A), estoppel, tortious interference with contractual relations, and breach of the covenant of good faith and fair dealing, which were dismissed on summary judgment. He has not appealed from those rulings.

      Under section 8, Cole had no equity participation rights in any future properties to the extent that they were occupied by one or more of the several travel-related businesses owned by Lewis and his family. However, he was entitled to an equity interest in any portion of such a future property that was held for occupancy by third parties other than those travel-related entities.

      Lewis and KIC moved for summary judgment on counts I and II, arguing that any such incentive compensation constituted "benefits," which, according to the plain language of the 1997 agreement, did not survive the termination of Cole's employment. The summary judgment judge, however, concluded that the agreement was ambiguous in that regard and that Cole's and Lewis's intent would have to be resolved by a jury. Lewis and KIC have not appealed from that ruling.

      The changes, which were made for purposes of improving the economic viability of the project, included moving the on-site parking from underground to above ground and eliminating the condominiums in favor of 100 percent market rate apartments.

      Thus, Cole's employment was terminated before either the Mass. Ave. property redevelopment or Combat Zone project were completed.

      Lewis secured summary judgment on both of his counterclaims. The trial judge issued a "Final Judgment on Counterclaims," also dated February 8, 2017, by which time Cole owed $396,708.89 plus ongoing interest at the rate of eighteen percent per annum on the 2007 loan, and $1,767,255.21 with ongoing interest at the rate of fifteen percent, compounded annually, on the 2010 loan. Cole has not appealed from that final judgment.

      For this proposition, Cole cited Lobosco v. Donovan, 30 Mass. App. Ct. 53, 56 (1991), and Restatement (Second) of Contracts § 245 comment a, illustration 1 (1981).

      If there had been any evidence that Lewis hindered or prevented him from achieving the section 8(b) goals, Cole could have argued that to the jury, with or without an accompanying jury instruction. He did not do that.

      Taken literally, the judge's order that "[t]he sum due Cole for his 20% interest in the Appreciation Amount shall be reduced by the amount of cash invested by Lewis in the Mass. Ave. Property" (emphasis added) would seem to have the potential to result in Cole never receiving any amount. Accordingly, even if the cash investment were to be deducted (which it is not), it certainly would not come out of the sum due to Cole for his interest.

      Lewis's argument is also illogical given that when Cole's employment was terminated in 2013, it was his employment under the 2010 agreement that was terminated, not that under the 1997 agreement. And, of course, Cole had yet to become entitled to incentive compensation related to the Mass. Ave. property redevelopment when his employment under the 1997 agreement was terminated in 2006.

      The 1997 agreement defined "Net Operating Cash Flow" as follows:
      " 'Net Operating Cash Flow' shall mean the cash receipts from rent and escalation payments received from such property, less all cash expenditures paid in connection with the ownership and operation of the property, (non-cash items to be excluded such as depreciation and amortization) but before debt service and income taxes. Extraordinary items, including but not limited to, insurance proceeds, taking awards, amounts received in litigation other than for rent or escalation payments are to be excluded from Net Operating Cash Flow (collectively 'Extraordinary Items')."


source: Caselaw Access Project

license: Public Domain

text:
    FRAN AND DIANE'S, LLC v. 331 LAFAYETTE, LLC.
    17-P-735
    Appeals Court of Massachusetts.
    Entered: September 7, 2018
    MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
   Fran and Diane's, LLC (F & D) operated a restaurant out of a building that was purchased by 331 Lafayette, LLC (Lafayette). Disputes arose as to whether F & D was a tenant under an enforceable lease or whether F & D was a tenant at will. Litigation ensued between F & D and both Lafayette and its predecessor in title, Lee Family Enterprises, LLC (Lee). A summary process action resulted in a District Court judgment rejecting F & D's claim to be a tenant under an enforceable lease and granting possession to Lafayette. That decision was appealed to the Appellate Division of the District Court which ultimately reversed and remanded for a trial on the issue of whether Lafayette's predecessor had waived the formalities associated with extending the lease. Meanwhile, F & D commenced this action in the Superior Court alleging breach of contract, among other claims, against Lafayette and Lee. During the course of the litigation, F & D filed an ex parte motion for a memorandum of lis pendens, which was allowed. Thereafter, Lafayette filed a special motion to dismiss the complaint pursuant to G. L. c. 184, § 15, to dissolve the memorandum of lis pendens, and to impose sanctions. This appeal flows from the denial of that motion.

The parties have apprised us that the Superior Court litigation and appeals from the summary process action in the District Court continued and many issues have been resolved, rendering most of Lafayette's appeal moot. Indeed, F & D voluntarily removed the lis pendens, and it is no longer an issue. At oral argument, Lafayette asserted that the only live issue before this court is its appeal from the denial of its request for sanctions for alleged misstatements made in F & D's ex parte motion for a lis pendens. Accordingly, we confine our discussion to that narrow issue.

Pursuant to G. L. c. 231, § 6F, the court shall award reasonable counsel fees and other costs incurred in defending a claim that the judge has specifically found was "wholly insubstantial, frivolous and not advanced in good faith." Here, of course, the Superior Court judge denied the special motion to dismiss and also indicated she would dissolve the lis pendens only if Lafayette otherwise protected F & D by providing a bond in the amount of $750,000. Clearly, the judge determined that the memorandum of lis pendens or equivalent security for F & D was warranted, and the motion was not wholly insubstantial, frivolous, or advanced in bad faith. To the extent Lafayette argues that the motion did not need to be brought ex parte, it cites no authority to support imposing sanctions for that reason alone.

The decision whether to impose sanctions pursuant to Mass.R.Civ.P. 11, as amended, 456 Mass. 1401 (2010), is within the sound discretion of the judge, and we review for abuse of that discretion. Millennium Equity Holdings, LLC v. Mahlowitz, 456 Mass. 627, 650-651 (2010). In support of its motion, Lafayette asserted that in pursuing an ex parte motion for a memorandum of lis pendens, F & D falsely represented to the judge that Lafayette planned to transfer the property at issue. Lafayette, however, points to no affidavit or other evidence demonstrating that F & D's assertion was false. It relies only on counsel's assertions extrapolating knowledge it asserts counsel for F & D should have acquired from its representation of another client. We discern no abuse of discretion in the judge's rejection of this argument.

Lafayette also points to the fact that the judge found at the hearing that F & D should have told the judge at the ex parte hearing that the District Court judge had granted possession to Lafayette, that the failure to do so was a material omission, and that it was improper. It contends for that reason, the judge should have imposed sanctions. We note, however, that the transcript reflects that the judge also noted that counsel for Lafayette had failed to inform the District Court judge that the Superior Court had issued a lis pendens before obtaining an execution from the District Court. While bad behavior on both sides does not excuse material omissions, it does explain the judge's exercise of discretion in declining to sanction counsel. Moreover, the judge conducted an evidentiary hearing and was satisfied that the District Court judge's decision likely would be overturned. The judge reasonably could have concluded that the attorney's omission turned out to have no material impact on the decision to issue the ex parte order. In these circumstance, we cannot say the judge abused her considerable discretion in declining to impose sanctions. Strikingly, Lafayette cites no authority for the imposition of sanctions on facts such as these.

So much of the order dated December 1, 2016, as denies the request for sanctions is affirmed. The remaining aspects of the appeal from that order are dismissed as moot.

      The record suggests the property was to be refinanced, which could have affected the priority of any judgment granted to F & D.


text:
    COMMONWEALTH v. Carlos HENAO.
    17-P-106
    Appeals Court of Massachusetts.
    Entered: September 6, 2018
    MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
   A jury convicted the defendant, Carlos Henao, of one count of indecent assault and battery, see G. L. c. 265, § 13H, and two counts of aggravated rape of a child, see G. L. c. 265, § 23. On appeal, he contends that the judge made the following errors: (1) limiting inquiry into the victim's allegedly sexual relationship with a man named Jamie Restrepo in violation of the confrontation clause and due process; (2) denying the defendant's motion for the victim's therapy records in violation of due process; (3) admitting a photograph (photo) of the victim when she was only eight years old; (4) allowing the Commonwealth's experts to testify to matters in the jury's ken; and (5) allowing the Commonwealth's experts to bolster their testimony on direct examination with treatises. We affirm.

Discussion. 1. Inquiry into the victim's relationship. The defendant asserts that Restrepo's termination of his sexual relationship with the victim, at the victim's mother's insistence, provided a powerful motive for the victim to fabricate the allegations of rape against the defendant, who was married to the victim's mother. As a result, he claims, the judge erred in precluding him from "show[ing] the sexual nature of the [victim's] relationship [with Restrepo] and thus [giving] weight to the [victim's] motive to lie." We disagree.

In order to protect a victim of sexual assault from irrelevant character assassination, inquiry into a victim's sexual history is generally prohibited. See G. L. c. 233, § 21B. General Laws c. 233, § 21B, inserted by St. 1977, c. 110, commonly known as the rape shield statute provides that "[e]vidence of specific instances of a victim's sexual conduct ... shall not be admissible except evidence of the victim's sexual conduct with the defendant or evidence of recent conduct of the victim alleged to be the cause of any physical feature, characteristic, or condition of the victim." This statutory limitation on the admissibility of an alleged victim's sexual history must be balanced against a "defendant's constitutional right to present evidence that might lead the jury to find that a Commonwealth witness is lying or otherwise unreliable." Commonwealth v. Polk, 462 Mass. 23, 38 (2012). However, "the scope of cross-examination, including to what extent the accuracy, veracity, and credibility of a witness may be tested, rests largely in the sound discretion of the judge, not subject to revision unless prejudice is shown to a party by reason of too narrow restriction or too great breadth of inquiry." Commonwealth v. Gagnon, 408 Mass. 185, 192 (1990), quoting from Commonwealth v. Underwood, 358 Mass. 506, 513 (1970).

Here, the judge did not foreclose all cross-examination into the victim's relationship with Restrepo. Defense counsel was permitted to elicit that the victim harbored "feelings" for Restrepo and was in "a romantic relationship with him." The victim acknowledged that she had been dating Restrepo for "over a year" before her mother forced an end to the relationship and, furthermore, that she did not accuse the defendant of rape until after her relationship with Restrepo ended. This testimony went to the heart of the defendant's fabrication defense without having to delve into the victim's sexual history. In these circumstances, we conclude that the judge struck a fair balance between the defendant's right to cross-examine the victim and the prohibition against inquiry into the victim's sexual history. There was no error.

As to his claim that Restrepo's statement to the police should have been admitted as being against his penal interest, there likewise was no error. Although Restrepo was unavailable, the defendant failed to sufficiently corroborate Restrepo's statement. See Commonwealth v. Tague, 434 Mass. 510, 516 (2001). Even assuming that the defendant had sufficiently corroborated Restrepo's statement, it was irrelevant and would have been barred by the rape shield statute.

2. Motion for therapy records. We are similarly unpersuaded that the denial of the defendant's motion for the victim's therapy records violated due process. Upon learning that the victim's therapist inquired with the Commonwealth about coming to court "in support of [the victim] when she testified," the defendant moved to obtain copies of the victim's therapy records. See G. L. c. 112, § 135B. These records are privileged, and to pierce that statutory privilege "[a] defendant must first comply with the threshold requirements of Mass.R.Crim.P. 17(a)(2), as elucidated in [ Commonwealth v.] Lampron, [441 Mass. 265, 269 (2004) ]." Commonwealth v. Sealy, 467 Mass. 617, 627 (2014). Under this protocol, a defendant must show "that the documents are evidentiary and relevant." Ibid., quoting from Lampron, supra. "We review a judge's ruling on rule 17(a)(2) motions for abuse of discretion." Commonwealth v. Jones, 478 Mass. 65, 68-69 (2017).

Here, the defendant asserts, without more, merely that the records must include references to the abuse and rapes because the victim began therapy after lodging the rape accusations and the therapist showed an interest in appearing in court. The defendant's assumption is purely speculative. Testifying in court for the first time would be difficult for anyone, especially a young individual in therapy. The therapist's presence in support of her patient, the victim, speaks only to the victim's anxiety over testifying and nothing about the content of the testimony or the therapy sessions. We discern no abuse of discretion.

3. Photo of the victim. The defendant also challenges the admission, over objection, of the victim's photo from when she was eight years old. "The admissibility of photographic evidence is left to the discretion of the trial judge." Commonwealth v. Tassinari, 466 Mass. 340, 349 (2013), quoting from Commonwealth v. Waters, 399 Mass. 708, 715 (1987). "It is a 'rare instance[ ] in which the probative value of [such] evidence is [so] overwhelmed by its inflammatory potential' that a reversal would be warranted," Commonwealth v. Bradshaw, 385 Mass. 244, 270 (1982), quoting from Commonwealth v. Repoza, 382 Mass. 119, 128 (1980).

Here, there is no indication that the photo prejudicially inflamed the jury. The prosecutor's mention of the photo during her closing argument was fleeting and without objection. In addition, the judge properly instructed the jury not to convict based on sympathy generated by the photo, see Commonwealth v. Hernandez, 473 Mass. 379, 392 (2015) (juries are "presumed to follow instructions"), and the jury acquitted the defendant of one count of aggravated rape of a child. We discern no error.

4. Expert testimony. We also are not persuaded by the defendant's contention that the Commonwealth's experts testified to issues within the ken of the jury. A pediatrician testified about how one would commonly see no signs of physical abuse in sexual assault cases. This testimony pertaining to the physiology of sexual assault cases is proper expert testimony. See Commonwealth v. Scesny, 472 Mass. 185, 194-195 (2015) (criminologist could testify about whether semen deposits would typically appear on female's underwear if she pulled them up after having sexual intercourse with male). The psychologist's testimony, regarding why young sex assault victims often delay reporting, was also outside the jury's purview and properly admitted. See Commonwealth v. Federico, 425 Mass. 844, 847-848 (1997), quoting from Commonwealth v. Colin C., 419 Mass. 54, 60 (1994) ("behavioral and emotional characteristics common to [sexually abused children] ... are 'beyond the jury's common knowledge and may aid them in reaching a decision' "). There was no error.

5. Experts' mention of treatises. We are also not convinced by the defendant's contention that the Commonwealth's experts on direct examination improperly bolstered their testimony by mentioning key treatises in their fields. Although treatises may not be admitted to "bolster direct examination," Brusard v. O'Toole, 429 Mass. 597, 601 n.5 (1999), quoting from Commonwealth v. Sneed, 413 Mass. 387, 395 n.6 (1992), here, neither of the experts offered the content of treatises as evidence. Contrast Federico v. Ford Motor Co., 67 Mass. App. Ct. 454, 458-459 (2006) (statements read into the record from admissible treatises were properly admitted). Each expert made one limited reference to an article written or study performed by others, and there was no objection. Accordingly, we see no error creating a substantial risk of a miscarriage of justice.

Judgments affirmed.

      The Commonwealth filed a nolle prosequi on a second count of indecent assault and battery, and the jury acquitted the defendant of a third count of aggravated rape of a child.

      The victim alleged that the defendant first began sexually assaulting her when she was eight years old and they lived outside of the United States; here, the defendant was not prosecuted for any of those alleged acts.

      At the beginning of her direct examination, when asked about the research that she has done, including in the "area of suspected child sexual abuse," the psychologist briefly testified without objection.


text:
    Christine G. MCNAMARA v. Brian J. MCNAMARA.
    17-P-100
    Appeals Court of Massachusetts.
    Entered: September 5, 2018
    MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
   These cross appeals involve the modification of the child support provisions contained in a separation agreement entered into between former spouses, Brian J. McNamara (husband) and Christine G. McNamara (wife). The husband challenges the portion of a judgment (modification judgment) of the Probate and Family Court dated September 30, 2016, requiring him to pay monthly child support of $5,000 to the wife. The wife, in turn, challenges the omission of a retroactive child support award in the modification judgment. We affirm the award of child support and attorney's fees in the judgment, but remand for further findings as to whether retroactive child support is appropriate, and if found appropriate, the amount of retroactive child support.

Background. After almost twenty-two years of marriage, the parties divorced in May of 2012, pursuant to a judgment of divorce (divorce judgment) incorporating their separation agreement. The separation agreement required the husband to pay alimony of $6,000 per month, along with one hundred percent of the college-related expenses for the parties' three children (aged seventeen, fifteen, and eleven at the time of divorce). The separation agreement further provided that "[i]f alimony terminates while the children are not emancipated then [the husband] shall pay child support to [the wife] in accordance with the ... child support guidelines." At the time of the divorce, the wife was not earning any income, and the husband reported earnings from his role as owner and manager of a corporation (corporation). The husband's support obligations under the separation agreement were based on an annual income of $225,000.

In April of 2015, the wife filed a complaint for modification seeking to establish a child support order on the basis that the husband's income had increased since the divorce. A two-day trial was held before a judge of the Probate and Family Court, commencing in March of 2016 and concluding in June of 2016. The central disputed issue at the trial was the amount of the husband's 2015 income. The husband alleged that he had earned a total of $551,633, comprised primarily of his salary and shareholder distributions from the corporation. However, the wife contended that the husband had received over $500,000 in additional income from the corporation through what the husband called "the 5500 account" that he used to pay for various personal expenses. The husband claimed the 5500 account was not income; rather, it was a loan from the corporation that he was required to repay with one percent interest. At the conclusion of the trial, the wife requested, among other things, monthly child support of $10,000 to commence retroactively as of May 1, 2015.

A modification judgment entered, dated September 30, 2016, requiring the husband to pay child support to the wife in the amount of $5,000 per month. The judge rejected the husband's claim that the 5500 account (having a total balance of $551,972) was a loan, instead treating it as income and finding the husband's total 2015 compensation from the corporation to be $1,001,360. The judge concluded that the significant increase in the husband's income since the divorce (from $2,885 per week in 2012, to $19,257 per week in 2015) had resulted in "a substantial discrepancy between the lifestyles of the parties" warranting child support. The judge did not address the wife's request for retroactive child support in the modification judgment. The present cross appeals followed.

Discussion. "In reviewing a modification judgment, we examine whether the factual and legal bases for the decision are in error, or whether the judge otherwise abused his discretion." Flor v. Flor, 92 Mass. App. Ct. 360, 363 (2017), citing Pierce v. Pierce, 455 Mass. 286, 293 (2009). See Wasson v. Wasson, 81 Mass. App. Ct. 574, 576 (2012) (modification of child support reviewed for an abuse of discretion). The husband principally argues that the judge (1) erred in treating the 5500 account as income, and (2) improperly modified child support without finding a change in the children's needs or considering the parties' separation agreement. The wife primarily contends that the judge erred in failing to award retroactive child support. We address the parties' arguments in turn.

1. The husband's income. Child support is governed by G. L. c. 208, § 28, and the Massachusetts Child Support Guidelines (guidelines). Croak v. Bergeron, 67 Mass. App. Ct. 750, 754 (2006). "The guidelines and our case law leave the definition of income flexible, and the judge's discretion in its determination broad." M.C. v. T.K., 463 Mass. 226, 240 (2012), quoting from Casey v. Casey, 79 Mass. App. Ct. 623, 634 (2011). Pursuant to the 2013 guidelines, income is defined as "gross income from whatever source," including "income derived from businesses/partnerships" and "perquisites or in-kind compensation to the extent that they represent a regular source of income." Child Support Guidelines § I-A (2013). The husband argues it was an abuse of discretion for the judge to treat the 5500 account as income, rather than a loan, for purposes of child support. We disagree.

The judge found that the husband has "very significant control" over the corporation as its "sole officer" and "[ninety percent] shareholder." The judge also found that the husband routinely used the 5500 account to pay for personal expenses. Although the husband claims that he either had to repay those expenses with interest or take a reduction in his capital interest in the corporation, the judge found that the husband lacked credibility regarding the alleged loan -- a finding that is supported by the record and "is close to immune from reversal on appeal except on the most compelling of showings." Johnston v. Johnston, 38 Mass. App. Ct. 531, 536 (1995). Indeed, the judge found the husband's overall credibility to be "unreliable" with respect to his finances. The judge found the husband's financial statements to be "misleading," "false," and "incomplete" in several regards. See M.C. v. T.K., supra at 240 ("The imputation of income is appropriate where a party has made vague, misleading, or untruthful entries on a financial statement"). The judge found that the husband had "deliberately withheld, for as long as possible, the economic benefit he received from [the corporation] in 2015." Under such circumstances, "the judge was entitled not only to regard [the husband] as an evasive witness, but [also] to draw inferences adverse to him from the uncertainties surrounding his financial affairs." Crowe v. Fong, 45 Mass. App. Ct. 673, 679 (1998). As there is nothing in the record that would compel us to disturb the judge's assessment of the husband's credibility, we discern no error in the decision to treat the 5500 account as income available to the husband for purposes of child support.

2. Modification of child support. Child support may be modified upon "a material and substantial change" in circumstances since the entry of the prior judgment. Brooks v. Piela, 61 Mass. App. Ct. 731, 734 (2004), quoting from G. L. c. 208, § 28. The change may be in the parties' respective life-styles or financial resources, or in the needs of the children. Brooks v. Piela, supra at 734-735, and cases cited. Moreover, "[t]o the extent possible, and consistent with common sense and justice, the modified judgment should take into account the earlier, expressed desires of the parties" as set forth in their separation agreement. Katzman v. Healy, 77 Mass. App. Ct. 589, 598 (2010), quoting from Bercume v. Bercume, 428 Mass. 635, 644 (1999). The husband contends that the modification of child support was improper here as there was no evidence of a material change in the children's needs, and the judge failed to give appropriate deference to the parties' separation agreement. We disagree.

The relevant material change in circumstances found by the judge was the "substantial discrepancy between the lifestyles of the parties" brought about by the husband's increased income. The judge was permitted to consider, "as a component of the children's needs," the husband's increased financial resources and resulting improved "standard of living." Brooks v. Piela, supra at 732. This is because " 'children's needs are to be defined, at least in part, by their parents' standard of living and ... children are entitled to participate in the noncustodial parent's higher standard of living when available resources permit,' ... in furtherance of the principle that such support should 'provide the standard of living the child would have enjoyed had the family been intact.' " Smith v. Edelman, 68 Mass. App. Ct. 549, 554 (2007), quoting from Brooks v. Piela, supra at 737. The judge found that, since the divorce, the husband has enjoyed a "lavish lifestyle," while the wife has "struggled to maintain the family home." The judge also found that, despite the wife's efforts to mitigate her financial difficulties, including obtaining employment and "downsiz[ing] in order to maintain a stable home for the children," her ability "to provide for [the] children ... is eclipsed by the monies expended by [the husband]." Indeed, the parties' financial statements reveal stark differences in their respective household spending, with the husband reporting weekly expenses more than three times those of the wife. See M.C. v. T.K., 463 Mass. at 234 n.11 ("[S]tandard of living, as the concept is used in the guidelines, may be closely linked to household spending"). Thus, contrary to the husband's assertion, there is ample support for the judge's finding of a material disparity in the parties' respective lifestyles, and it was within the judge's discretion to weigh that factor more heavily than others. See Brooks v. Piela, 61 Mass. App. Ct. at 734-735.

We are likewise unpersuaded by the husband's argument that the judge failed to give appropriate deference to the parties' separation agreement. "The interpretation of the separation agreement is a question of law, and is therefore 'afforded plenary review.' " Colorio v. Marx, 72 Mass. App. Ct. 382, 386 (2008) (quotation omitted). Pursuant to the separation agreement, the husband is obligated to pay for the children's college expenses, and "if alimony terminates while the children are not emancipated," the husband "shall pay child support."

The separation agreement does not, as the husband contends, expressly preclude child support under all circumstances other than the termination of alimony, nor do we think such an interpretation is reasonable. See Merrimack College v. KPMG LLP, 88 Mass. App. Ct. 803, 806 (2016) ("The fact that [a party's] preferred reading is linguistically possible does not make it a reasonable interpretation of the parties' agreement").

Moreover, the husband's support obligations under the separation agreement are based on an annual income of $225,000, and the judge found the husband's income to be more than four times that amount at the modification trial. There is no indication that the parties anticipated such a substantial increase in the husband's future income when agreeing to make no provision for child support payments from husband to wife in the separation agreement. See Mandel v. Mandel, 74 Mass. App. Ct. 348, 355 (2009) (A separation agreement must be interpreted "in accord with justice and common sense and the probable intention of the parties" [quotation omitted] ).

Even if the parties had anticipated such an increase, which we do not suggest, their agreement was but one of several factors for the judge to weigh when deciding whether and in what amount child support was appropriate. See Croak v. Bergeron, 67 Mass. App. Ct. at 755 ("[A] judge is to consider the totality of the parties' circumstances in determining their support obligations" [quotation omitted] ). Ultimately, it was within the judge's discretion "to determine whether and to what extent [the children's] needs [were] unmet by [the] existing order." Cooper v. Cooper, 62 Mass. App. Ct. 130, 137 (2004).

In light of the husband's significant income and the substantial disparity in the parties' lifestyles, we cannot say the amount of child support ordered by the judge was unreasonable or an abuse of discretion. See id. at 135 (Where the "noncustodial parent's very substantial income ... permits him ... to enjoy a highly elevated standard of living ... the dispute focuses on what constitutes a reasonable award").

3. Retroactive child support. "Whether to give retroactive effect to a modification order is a decision within the discretion of the judge." Boulter-Hedley v. Boulter, 429 Mass. 808, 809-810 (1999), citing Department of Rev. v. Foss, 45 Mass. App. Ct. 452, 460 (1998). In considering retroactivity of child support, "judges should be guided by the policies behind the child support system ... [, namely,] caring for the best interests of children and ... ensuring that the taxpayers are secondary to the parents in meeting the financial needs of children." Boulter-Hedley v. Boulter, supra at 812-813. Here the judge made no finding as to retroactive child support. Accordingly, the matter must be remanded for further findings as to whether retroactive child support is appropriate in this case, and if found appropriate, the amount of such retroactive child support.

Conclusion. The award of child support and attorney's fees in the judgment dated September 30, 2016, is affirmed, and the matter is remanded for further proceedings consistent with this memorandum and order.

So ordered.

Affirmed and remanded.

      The wife also claims that the judge's failure to award her expert witness fees was an abuse of discretion; however, her request for such fees, contained in a single line of her proposed judgment and unsupported by any argument, let alone affidavit documenting the amount of those fees, was insufficient to preserve this argument for appeal. See Sugarman v. Board of Registration in Med., 422 Mass. 338, 347 (1996) (One-page conclusory argument without citation to authority made to agency was insufficient to preserve argument for judicial review).

      The separation agreement was incorporated into the divorce judgment and did not merge, except for the provisions regarding child support, which did merge.

      The separation agreement had other provisions requiring the parties to share child related expenses, such as extracurricular activities and camps.

      At the time of the divorce, the husband was the sole officer and shareholder of the corporation. Following the divorce, the husband brought on four "partners" who collectively acquired a ten percent interest in the corporation. At the time of trial, the husband was the corporation's sole officer and a ninety-percent shareholder.

      The husband further argues that treating the 5500 account as income for purposes of child support amounted to inequitable "double dipping." See Croak v. Bergeron, 67 Mass. App. Ct. 750, 758-759 (2006), quoting from Champion v. Champion, 54 Mass. App. Ct. 215, 219 (2002) (" '[D]ouble dipping' ... occurs when property is awarded to one spouse in an equitable distribution of marital assets and is then also considered as a source of income for purposes of imposing support obligations"). As the husband failed to raise this issue below, it is waived on appeal. See Carey v. New England Organ Bank, 446 Mass. 270, 285 (2006).

      On the first day of trial, the husband testified that he had asked his partners to deem a portion of the 5500 account balance (approximately $135,000) a loan. However, on the second day of trial, the husband testified that his partners had agreed to deem the entire balance ($551,972) a loan, and he had signed a promissory note to that effect. However, no promissory note was entered into evidence, nor was one even proffered by the husband at the trial. The husband further testified that 2015 was the first year in which the 5500 account had been deemed a loan, rather than a distribution to the husband.

      The judge found that the husband failed to disclose, on two financial statements, substantial shareholder distributions that he had already received from the corporation. The judge further found that the husband reported numerous personal expenses on his financial statements that had been paid for by the corporation, and "testified falsely" that he had personally paid for many of the children's expenses, which were later revealed to have been paid for by the corporation.

      The guidelines are predicated on several principles, including "to meet the child's survival needs in the first instance, but to the extent either parent enjoys a higher standard of living, to entitle the child to enjoy that higher standard." Child Support Guidelines, principles (2013).

      The judge found that the husband provides the children with "cars, trips, expensive clothing and accessories, vacations, jewelry, football tickets, and it appears anything [else] that the children desire. He can afford these items because the gross economic benefit he receives from [the corporation] is $80,000 [per] month." The judge found that the husband used his [corporation] income to pay for "substantial luxuries" for himself and his girl friend, including multiple vacations, two designer watches totaling $9,350, a $25,500 condominium rental for the ski season, $265,919 in renovations to their new home, and $34,299 for vehicle-related expenses (including the purchase of a vintage Jaguar).

      "In cases where combined available income is over $250,000, the guidelines should be applied on the first $250,000," and "the Court should consider the award of support at the $250,000 level as the minimum presumptive order. The child support obligation for the portion of combined available income that exceeds $250,000 shall be in the discretion of the Court." Child Support Guidelines § II-C (2013).


text:
    Camillo LEOMBRUNO v. Howard E. LOWRE, Jr., & another.
    17-P-935
    Appeals Court of Massachusetts.
    Entered: September 5, 2018
    MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

      Joanne E. Lowre.

   The parties own two noncontiguous parcels in Arlington as tenants in common. The petitioner, Camillo Leombruno, sought partition. A Probate Court judge divided the property by awarding the more valuable parcel to the respondents, Howard and Joanne Lowre, with a monetary payment to Leombruno to make up the difference in value. Leombruno argues that the judge erred by relying on jointly submitted appraisals to determine the value of the property, and, instead, should have ordered a public or private sale. We affirm.

Background. Leombruno and Howard Lowre are long-time business partners who own an automobile repair shop called Arlington Auto Body, Inc. (AAB). Together with Lowre's spouse, they own the real estate located at 14 Dudley Court and 4 Dudley Place in Arlington as tenants in common -- with Leombruno holding an undivided fifty percent interest in both parcels and the Lowres owning the other undivided fifty percent interest. Leombruno and Lowre's business, AAB, occupies 14 Dudley Court (hereinafter, the AAB lot). An Enterprise Rent-A-Car occupies the property at 4 Dudley Place (hereinafter, the Enterprise lot).

Leombruno was eighty-three years old at the time of trial, living in Florida, and diagnosed with dementia. He retired from daily operation of AAB in 2003 or 2004. Leombruno's son, Ronald Leombruno (Ronald), has pursued the instant litigation on behalf of his father under a durable power of attorney. Ronald has worked at AAB his entire adult life.

Leombruno (through Ronald) filed his petition for partition in January, 2016, alleging that physical division of the property is impossible and seeking a sale of both lots. In his petition, Leombruno requested appointment of a commissioner with instructions to sell the property for no less than $750,000.

Before trial, Leombruno moved in limine to preclude evidence concerning AAB, arguing that ownership and operation of the parties' business was irrelevant to the primary question before the court -- whether the property could be advantageously divided or must be partitioned by sale. The judge resolved that motion by allowing limited testimony about the business. At the hearing conducted on this motion, the parties informed the judge that there was no dispute that the two parcels were each owned by the parties as tenants in common, that the more valuable parcel was the one where the automobile repair shop was located, that the repair shop was a tenant of the two owners, and that the respondent wanted to continue working the automobile repair shop while the petitioner's son wanted to bid on it. However, at the motion hearing, the counsel for the petitioner made it clear that the major reason the petition for partition was filed was the lack of agreement as to the value of the two parcels, and the concern that without a sale of the properties the petitioner would not obtain fair value for his interest in the two parcels. In response, the court suggested that the parties obtain appraisals of the two lots. Counsel for Leombruno noted that he had been trying to hire an appraiser "for over a year and they [the respondents] have refused." Counsel for the Lowres responded by indicating that they too were interested in obtaining appraisals. After the parties conferred, Leombruno agreed that the parties would share the cost of one set of appraisals. The appraisals were submitted at trial, and showed the AAB lot was worth $890,000 while the Enterprise lot was worth $310,000.

Leombruno's counsel stipulated "to the appraised value for the purposes of this trial." Although he argued that the valuation was low, apart from Ronald's testimony suggesting that he and/or his father had previously made the Lowres a higher offer for the AAB lot, Leombruno submitted no other evidence of value. After trial, the judge entered a judgment, finding that the property could be advantageously divided by awarding the AAB lot to the Lowres and the Enterprise lot to Leombruno, with a monetary payment to Leombruno in the amount of $220,000. According to the judge, "the forced sale of both properties, while it might result in a bidding war between the parties might also result in a third party purchasing the [AAB lot] raising the potential specter of the business being evicted from the property. The result of such a scenario would certainly be to the pecuniary disadvantage of each of the parties."

Leombruno filed a motion to alter or amend the judgment, seeking in the alternative either sale of the AAB lot to the highest bidder or an award of the AAB lot to himself. The judge denied that motion. On the Lowres' motion, the judge revised the judgment to change the sum that must be paid to Leombruno from $220,000 to $210,000 -- precisely half of the difference between the appraised value of the AAB lot (less an outstanding mortgage) and the appraised value of the Enterprise lot. This appeal followed.

Discussion. Three questions are presented, which we address in turn. First, was the judge's determination to advantageously divide the property error where he awarded the AAB lot to the Lowres and the Enterprise lot to Leombruno? Second, did the judge err in using the parties' stipulated appraisals to determine the value of the property and the amount of owelty to be paid to Leombruno? Third, did the judge err by failing to follow the formal procedure of the partition statute?

1. Advantageous division. In a partition action, a court must determine "by a preponderance of the whole evidence that the land cannot be advantageously divided before ordering a sale." Delta Materials Corp. v. Bagdon, 33 Mass. App. Ct. 333, 338 (1992). "A sale is not simply an equally available alternative to a physical division; it may be ordered only after the court determines, upon careful findings, that advantageous division cannot be made." Ibid. See G. L. c. 241, § 31 (commissioners may be ordered to sell land "which cannot be divided advantageously"). The determination whether land should be divided or sold is "a question of fact to be decided by the trial judge upon all evidence." Clough v. Cromwell, 254 Mass. 132, 136 (1925).

Notably, in cases involving multiple noncontiguous lots, the court may divide the property by awarding intact lots to the various parties, rather than by physically dividing each lot by metes and bounds. See Hagar v. Wiswall, 10 Pick. 152, 152-153 (1830) ; Delta Materials, 33 Mass. App. Ct. at 337, quoting from Thompson, Real Property § 1823, at 291-292 (1979). See also G. L. c. 241, § 14.

"At bottom, the purpose of partition proceedings is to balance the rights and equities of the parties concerning the property at issue." Gonzalez v. Pierce-Williams, 68 Mass. App. Ct. 785, 787 (2007). The manner of division must be "just and equitable." Delta Materials, 33 Mass. App. Ct. at 337.

Here, the parties agreed that neither the AAB lot nor the Enterprise lot should be physically divided to create new, smaller lots. Thus, the only options available to the judge were to order one or both of the lots sold, and/or to order one or both of the lots set off with any necessary payment of owelty made to the party receiving less value. See G. L. c. 241, § 14. Leombruno argues that it was improper for the judge to consider any information about AAB in determining which of the parties should obtain the AAB lot. In the absence of such evidence, he claims, there was no principled basis upon which to determine who should get the favored parcel, and thus, the land could not be advantageously divided.

We disagree. "The difficulty and complexity of a just and equitable division do not alone justify resort to a sale." Delta Materials, 33 Mass. App. Ct. at 339. "A judge contemplating division may take into account 'the de facto condition of the premises,' together with any potential damage to the profitability of the land." Id. at 338, quoting from Clough, 250 Mass. at 332-333. The considerations involved "have reference mainly to the physical conditions of the land to be divided, but the advantage or disadvantage generally must be pecuniary." Delta Materials, 33 Mass. App. Ct. at 338. Here, the evidence showed the AAB lot was improved with a building most suitable for use as an autobody shop. Additionally, the judge expressly found there was a risk that if the AAB lot were sold to a third party, AAB (which has no lease) could be evicted, to the detriment of all. There was no clear error in the judge's fact finding. In these circumstances, where Leombruno had long since retired but Lowre expressed an intention to continue the business in its present location, and occupation of the AAB lot by the parties' business was in the continued pecuniary interests of all, the judge properly found the land could be advantageously divided in the manner specified.

2. Value. Leombruno's sole claim of harm is found in the allegation that he would have obtained either the AAB parcel or a higher cash payment through a sale. The judge recognized this possibility, stating in his judgment that a forced sale "might result in a bidding war between [the parties]." The problem with Leombruno's position, however, is twofold.

First, as explained above, property should be partitioned by sale only where advantageous physical division is unavailable. See Delta Materials, 33 Mass. App. Ct. at 337 ("Division in kind is the primary and favored method of partition"). The judge properly ordered the parties to obtain evidence of the value of the property before determining a precise manner of division. See Morgan, 67 Mass. App. Ct. at 21 ; Delta Materials, 33 Mass. App. Ct. at 338-339. Once value was established, there was no impediment to dividing the land by set off as described in G. L. c. 241, § 14 -- which was the preferred option. Since establishing value is necessary to the advantageous division of land, see Morgan, 67 Mass. App. Ct. at 21, requiring a sale to establish value, as the petitioner contended, would read out of the statute its clear edict that division of land is preferable to sale -- and would, essentially, require at least an attempted sale in every case. G. L. c. 241, § 31.

Second, and perhaps more importantly, Leombruno agreed to the joint engagement of an appraiser and stipulated to the valuations that resulted. Even if we accept Leombruno's view that the judge ordered the parties to obtain appraisals, the judge did not require them to do so jointly. Instead, Leombruno was free at all times to offer his own evidence of the property's value -- but he did not do so.

Once the judge had decided that the property should be partitioned by awarding one lot to each party rather than by sale, it was then well within bounds for the judge to use the stipulated values as the yardstick for awarding owelty. See Nichols v. Nichols, 181 Mass. 490, 492 (1902) ("By taking part without objection in the method adopted by the commissioners for the purpose of ascertaining the sum to be paid as owelty, the appellant lost any right to object which he might otherwise have had").

3. The partition procedure. Finally, Leombruno argues the judge committed reversible error by failing to follow the procedure set forth in the partition statute. General Laws c. 241, § 10, states in no uncertain terms that once a judge has found that a petitioner "is entitled to have partition for the share claimed or for any less share," the court "shall make the interlocutory decree that partition be made, and therein determine the persons to whom and the proportions in which the shares shall be set off" (emphasis supplied). G. L. c. 241, § 10. The statute's use of the word "interlocutory" is misleading. The decree is final, and appealable as of right. Delta Materials, 33 Mass. App. Ct. at 333 n.2. The statute further provides that "[i]f the court determines the petitioner entitled to partition, it shall thereupon appoint one or more disinterested commissioners and issue a warrant to them to make partition" (emphasis supplied). G. L. c. 241, § 12. The responsibility to decide whether the property should be divided or sold, however, belongs to the judge. See Platts v. Wronski, 15 Mass. App. Ct. 30, 34 (1982).

If a commissioner is appointed, under c. 241, § 16, the court thereafter holds a hearing to "accept and confirm" the commissioner's report, but "the sole questions which arise at the final decree stage are whether the actions of the commissioners have been tainted by irregularity and whether they have divided the locus according to the requirements of the 'interlocutory' decree." Asker v. Asker, 8 Mass. App. Ct. 634, 637 (1979). If the property is partitioned by sale, the operative instrument transferring title is the commissioner's deed. Cowden v. Cutting, 339 Mass. 164, 169-170 (1959). Where partition is by division, the court's decree confirming the commissioner's act "operates to transfer the property." Cowden, 339 Mass. at 170. See G. L. c. 241, § 16.

Although the judge did not issue an interlocutory decree and did not appoint a commissioner, the deviation from the terms of the statute did not result in any prejudice to the petitioner. Leombruno has not alleged any harm flowing from the judge's failure to observe these formalities. His true quarrel is with the substantive result as to issues that were well within the judge's authority to determine. See Platts, 15 Mass. App. Ct. at 34. Moreover, Leombruno does not explain how the court or the parties would have benefited from the assistance of a commissioner, or precisely what function a warrant appointing a commissioner would have instructed him or her to perform. His argument is circular -- a commissioner was necessary because a sale should have been ordered. Having already rejected the argument that a sale was required, however, the argument is unavailing. ,

Revised judgment affirmed.

      The trial judge wrote that Leombruno and Lowre have a "long term business association which eventually evolved into a partnership ...." It appears, however, that AAB is organized as a corporation. In any event, unlike in our recent decision in Sullivan v. Lawlis, 93 Mass. App. Ct. 409 (2018), there is no claim here that the subject real estate is held by a partnership. See Webber v. Rosenberg, 318 Mass. 768, 769 (1945) (partnership property not subject to partition).

      The power of attorney under which Ronald acts is reproduced in the record and includes a provision empowering Ronald to pursue claims and litigation. Neither the trial judge nor the Lowres have questioned Ronald's standing to appear and litigate on behalf of his father.

      In March, 2016, Leombruno moved for appointment of a commissioner. We agree with the Lowres that this motion was properly denied as premature because the court had not yet determined Leombruno was entitled to partition. See Hershman-Tcherepnin v. Tcherepnin, 452 Mass. 77, 79 (2008). See also G. L. c. 241, § 10.

      "The sum of money ordered to be paid in order to equalize a disproportionate division of property is sometimes termed 'owelty.' " Delta Materials Corp. v. Bagdon, 33 Mass. App. Ct. 333, 338 n.7 (1992).

      AAB does not have a lease.

      Leombruno suggested in his posttrial motion that the judge could order a private sale to the highest bidder as between the parties, or could order a sale on the open market with both parties having a right of first refusal. See G. L. c. 241, § 31.

      The calculation is as follows: The $890,000 value of the AAB lot minus the mortgage of $160,000, minus the $310,000 value of the Enterprise lot, equals $420,000. That sum divided by two is $210,000.

      At bottom, Leombruno's argument reduces to the notion that the property had to be sold because the parties and/or Ronald were willing to pay more for the AAB land than the stipulated appraisal showed it to be worth. Our decision in Morgan v. Jozus, 67 Mass. App. Ct. 17 (2006), indicates that, generally, the value of land should be maximized for the benefit of the owners in a partition action. Id. at 20-21, 23. Morgan also stands for the proposition that in order to set off land to one party, a determination must be made as to its value, which may necessitate an evidentiary hearing. See id. at 21. See also Delta Materials, 33 Mass. App. Ct. at 338-339. Here, however, the judge did precisely what Morgan requires. As discussed infra, he determined the value of the property based on evidence submitted in an evidentiary hearing. That the evidence was in the form of a joint stipulation did not require the judge to disregard it. Moreover, Morgan does not require the court to "test out the market" by ordering a sale in every partition case. See id. at 23.

      Leombruno's counsel's stipulation at trial was accompanied by the vague caveat that the stipulation was "for the purposes of this trial." Whatever its intended meaning, this language was insufficient to alert the judge that Leombruno was challenging the appraised values or somehow limiting the purpose of the stipulation.

      We note, however, this court has said that once a judge determines land may be divided in a scheme involving physical division of one or more of the parcels, "a commissioner may be appointed pursuant to G. L. c. 241, § 12, to assist the court in making partition" (emphasis supplied). Delta Materials, 33 Mass. App. Ct. at 339-340.

      We are aware of the proviso that land may be set off to one or more parties upon payment of such money as "the commissioners award to make the partition just and equal." G. L. c. 241, § 14. We do not believe, however, that this section of the statute strips the court of authority to make its own determination as to the amount of owelty where the parties have stipulated as to the value of the subject land.

      This case is distinguishable from Chiminiello v. Chiminiello, 8 Mass. App. Ct. 806 (1979), where a "judgment" concluding that the petitioner was entitled to partition but failing to appoint a commissioner was held to be interlocutory and the resulting appeal was dismissed. Id. at 808. Here, the judgment decreed (implicitly) that Leombruno was entitled to partition (which was not contested) and also resolved substantively the manner of partition at the same time. It was a final judgment and appealable as of right.

      We note that, in acting as he did, the judge expressed concern that appointing a commissioner would involve unnecessary cost to the parties. See G. L. c. 241, § 22. For example, in this case, a commissioner might have engaged the services of his own appraisers at a considerable expense in addition to his own expenses.

      The defendants request attorneys' fees and costs in connection with this appeal. As we do not find the plaintiff's appeal without merit, we do not entertain the request.