Commonwealth v. United Resources

1 Mass. Supp. 460
CourtMassachusetts Superior Court
DecidedSeptember 15, 1980
DocketNo. 78-4193
StatusPublished

This text of 1 Mass. Supp. 460 (Commonwealth v. United Resources) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Commonwealth v. United Resources, 1 Mass. Supp. 460 (Mass. Ct. App. 1980).

Opinion

MEMORANDUM OF DECISION ON PRE-TRIAL MOTIONS

Certain of the defendants in this case move to dismiss upon the ground that this court cannot properly exercise personal jurisdiction over them, Mass. R. Civ. P. 12(b)(2), that the complaint fails to state a claim, Mass. R. Civ. P. 12 (b)(6), and that, in any event, the action is time barred. On its part, the Commonwealth seeks a preliminary injunction to prevent the defendant Land & Leisure, Inc. (“Land & Leisure”) from distributing any money received from the Division of Florida Land Sales and Condominiums.

The defendants involved originally moved to dismiss, supporting their motion with a variety of affidavits, thus converting it into a motion for summary judgment upon these two defenses. Mass. R. Civ. P. 12(b). The Commonwealth claimed it could not meet the defense of lack of personal jurisdiction without further discovery, Mass. R. Civ. P. 56(f), and it was afforded the opportunity either to propound interrogatories to the defendants or to travel to Florida (where all the defendants reside or have [463]*463their principal place of business) to depose them. The Commonwealth proceeded by way of interrogatories and the defendants have answered certain of these interrogatories and objected to others.

"For the purposes of dealing with the pending motions, the facts have been gleaned from the affidavits supporting the original complaint and the Commonwealth’s motion for a preliminary injunction, as well as the counter affidavits filed by the defendants and their answers to interrogatories.

It appears without substantial dispute that, in 1970 and 1971, Land & Leisure, acting through agents in Massachusetts and by means of advertisements in a Massachusetts newspaper, sold Florida real estate to certain Massachusetts consumers. Land & Leisure concedes that its contacts with Massachusetts during the course of these sales' are sufficient to confer upon this court personal jurisdiction over it. It is alleged that, on or about the time of the sales, certain warranties were made that improvements to the Florida real estate sold, i.e., connecting roads, sewage, and the like, would be completed by the developer, Land & Leisure, within the next five to seven years. These allegations are strongly disputed by the defendants who make references to certain HUD land registration forms which, they contend, were signed by the Massachusetts consumers and make clear that Land & Leisure had no such obligation to develop the land.

In 1972, the defendant United Resources, Inc. (“United Resources”) assumed control of Land & Leisure. Over eighty per cent of the shares of United Resources are owned by the defendant Guy B. Bailey (“Guy”), his wife Areca Stone Bailey (“Areca”), their daughter Charlotte Babcock (“Charlotte”), and their son Guy Bailey, Jr. Guy, Areca, and Charlotte were, at the time of the acquisition of Land & Leisure by United Resources, officers and directors of United Resources and, after the acquisition, they became officers and directors of Land & Leisure as well. The defendant Brian Boyett became comptroller and vice-president of United Resources in 1973 and assumed similar duties for Land & Leisure in 1975.

1. Personal Jurisdiction. Guy, Areca, Charlotte, Boyett, and United Resources all challenge the exercise of personal jurisdiction over them by this court. Mass. R. Civ. P. 12(b)(2). They argue that, individually and collectively, they had nothing to do with Land & Leisure at the time it made the Florida land sales to Massachusetts consumers, and that the alleged breach of Warranty—which, they contend, is not actionable even if it occurred (see infra at pp. 7-10)—took place only in Florida without any such connections to Massachusetts as would subject these defendants to the personal jurisdiction of this court.

Assuming for the moment that Land & Leisure made warranties to Massachusetts consumers at the time of the Florida land sales, that these warranties have been breached, and that such breach is actionable under G.L. c. 93A, sec. 2, then United Resources is subject to the personal jurisdiction of this court. This result follows from the significant interpenetration of corporate officers of Land & Leisure by officers of United Resources, the evidence of total control of the operation of Land & Leisure by United Resources, and the evidence that the corporate organization adopted here resulted, in part, from a plan to avoid making good on the obligations of Land & Leisure. Commonwealth v. Beneficial Finance Co., 360 Mass. 188, 290 (1971) (Speigel, J.), cert. denied sub nom. Farrell v. Massachusetts, 407 U.S. 910 (1972). My Bread Baking Co. v. Cumberland Farms, 353 Mass. 614, 618-619, 621 (1968) (Cutter, J.). See Henry F. Mitchell Co. v. Fitzgerald, 353 Mass. 318, 322 (1967) (Wilkins, C.J.); New England Theatres Co. v. Olympia Theatres, 287 Mass. 485, 493; Hallett v. [464]*464Moore, 282 Mass. 380, 399 (Rugg, C.J.). See also National Labor Relations Board v. Deena Artware, Inc., 361 U.S. 398, 403 (1960); Joseph R. Foard Co. v. State of Maryland, 219 F. 827, 829 (4th Cir. 1914). In substance, there is sufficient evidence before this court to warrant further judicial inquiry concerning whether Land & Leisure has failed to fully perform its contracts with Massachusetts consumers. The contacts of Land & Leisure with Massachusetts are admitted to be sufficient to confer jurisdiction over it upon this court. Indeed, Land & Leisure could hardly deny jurisdiction. Carlson Corp. v. University of Vermont, Mass. Adv. Sh. (1980) 659, 662. The ruling that United Resources is an alter ego for Land & Leisure subjects United Resources to the jurisdiction of this court as well, even if United Resources had nothing whatsoever to do with • the commencement of the contractual relation between Land & Leisure and Massachusetts consumers. I rule that once United Resources became so involved with Land & Leisure to become its alter ego, it had the same contractual obligations, and could be subjected to the same consumer claims, as could Land & Leisure albeit, it was Land & Leisure alone which had first entered into the on-going contractual relationship. The logic of this approach is compelling. A contrary rule would, for example, permit the victor in a foreign corporate takeover to avoid any obligations tó Massachusetts consumers undertaken by the vanquished corporation through the simple expedient of dissolving that corporation after having reaped the profit of its Massachusetts sales.

The situation as respects the individual defendants is somewhat more complex. In their view they are nothing more than shareholders of a shareholder of the alleged wrongdoer, Land & Leisure. In the view of the Commonwealth, these individuals, especially Guy, are behind the' entire allegedly deceptive land sale scheme. While it is true that, notwithstanding the use of the corporate form, individual liability will attach “where the individual operated or controlled the corporation, and had knowledge of unlawful acts”. Nader v. Citron, 372 Mass.

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Cite This Page — Counsel Stack

Bluebook (online)
1 Mass. Supp. 460, Counsel Stack Legal Research, https://law.counselstack.com/opinion/commonwealth-v-united-resources-masssuperct-1980.