Mancuso v. Kinchla

806 N.E.2d 427, 60 Mass. App. Ct. 558
CourtMassachusetts Appeals Court
DecidedMarch 3, 2004
DocketNo. 02-P-742
StatusPublished
Cited by45 cases

This text of 806 N.E.2d 427 (Mancuso v. Kinchla) is published on Counsel Stack Legal Research, covering Massachusetts Appeals Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Mancuso v. Kinchla, 806 N.E.2d 427, 60 Mass. App. Ct. 558 (Mass. Ct. App. 2004).

Opinion

Laurence, J.

Joseph Mancuso and Rosario Urdi (herein the appellants) challenge two decisions of a Superior Court judge. The first allowed the motion of Michael Kinchla to dismiss their August 20, 1999, complaint against him as barred by the doctrine of “res judicata.” The second denied their motion for leave to amend that complaint. We conclude that those rulings were legally correct and agree with Kinchla that the appellants’ arguments are without merit.

1. Background. The appellants were coowners (with Kinchla’s father) of a limited liability company, Disola Development, LLC (Disola), organized in January, 1996, to own and operate residential units. Pursuant to an “Operating Agreement,” Kinchla and Urdi were authorized to manage Disola. Kinchla obtained short-term mortgage financing, secured by Disola’s assets and the coowners’ personal guarantees. In December, 1996, Kinchla informed the appellants that Disola would not be able to make payment on the note, due in January, 1997, and that Disola was having difficulty in obtaining replacement financing because the appellants would no longer provide personal guarantees beyond two years. The loan was extended until July, 1997, but Kinchla was unable to obtain additional financing for Disola.

Concerned about imminent foreclosure, the coowners agreed, on Kinchla’s recommendation, that Kinchla would purchase or redeem the ownership interests held by the appellants. To implement this transaction, the appellants, each represented by counsel, and Kinchla negotiated and, on August 21, 1997, [560]*560executed a “Membership Interest Redemption Agreement” (redemption agreement). Through Kinchla, Disola obtained financing for the redemption (secured in part by personal guarantees of four members of Kinchla’s family) and, as of August 21, 1997, the appellants were bought out and their obligations discharged. Sometime after the redemption, the appellants managed to funnel to themselves large sums of money to which they were not entitled under the redemption agreement from several preexisting Disola accounts.

On March 4, 1999, a complaint was filed in Disola’s name in the United States District Court for the District of Massachusetts against the appellants, seeking to recover those sums as having been taken in violation of the redemption agreement and the appellants’ legal obligations to Disola. The complaint alleged Federal question jurisdiction based on violations of certain Federal statutes (including the Racketeer Influenced and Corrupt Organizations Act [RICO]), as well as State claims for common-law conversion, breach of fiduciary duty, and violation of G. L. c. 93A. The appellants denied all wrongdoing and asserted that their interests in Disola had not in fact been redeemed. They also counterclaimed, alleging that Disola, acting through its “agents,” “servants,” and “representatives,” had refused to provide them with information required to comply with the provisions of the redemption agreement and had failed to give them an accounting of Disola’s assets and finances. The only Disola “agent” or “representative” identified in the counterclaim was Kinchla, as Disola’s manager and signatory to the redemption agreement.

After the appellants had voluntarily disgorged approximately $118,000 of the disputed funds (at the strong urging of the Federal District Court judge), the case proceeded to a six-day jury trial, which ended on November 14, 2000, with a jury verdict in favor of Disola. In response to a series of special questions, the jury found that (1) there had been a “meeting of the minds” regarding the contract for redemption as set forth in the redemption agreement executed by Kinchla and the appellants; (2) the appellants had “breached” the redemption agreement; and (3) Disola was entitled to damages on account of the sums taken by the appellants in violation of the redemption [561]*561agreement. Judgment entered in favor of Disola on December 11, 2000. The appellants appealed only one aspect of that judgment, relating to an award of interest on certain moneys being held at a bank, as to which they prevailed. (The Federal District Court judge had rejected the appellants’ counterclaim prior to submitting the case to the jury, and the appellants took no appeal from that action).

Subsequent to the filing of the Federal complaint and well over a year prior to the Federal trial, the appellants commenced two separate actions against Kinchla in Norfolk Superior Court. The first was filed on July 23, 1999. It alleged that Kinchla, acting “at all times” as manager of Disola, had received and converted moneys owed the appellants under the redemption agreement and had engaged in unfair and deceptive acts and practices violative of G. L. c. 93A with respect to their rights under that agreement (including a refusal to render an accounting or pay them the moneys he had withheld). On February 1, 2000, a motion judge dismissed that complaint on the ground of the pendency of the Federal action (pursuant to Mass.R.Civ.P. 12[b][9], 365 Mass. 755 [1974]). The appellants did not appeal from that dismissal.

The second State action was filed on August 20, 1999. It alleged that Kinchla had engaged in behavior “in the course of [his] administration of [Disola]” that constituted a violation of G. L. c. 93A. Specifically, the complaint charged that Kinchla had misrepresented the imminence of the threat of mortgage foreclosure in order to precipitate the execution of the redemption agreement, had failed to provide an adequate appraisal of the appellants’ interests in Disola, and had induced them to accept inadequate consideration for the sale of their interests pursuant to that agreement.

As had also been true with respect to their first State action, the appellants did not aver in their second suit that any of their allegations were based on newly discovered evidence or information obtained subsequent to the filing of their counterclaim in the Federal action. Their pleading also made no attempt to reconcile their claims with the “representations and warranties” they had each made in the redemption agreement (with the assistance of counsel), declaring that each of them [562]*562was “fully familiar with the financial condition, business, affairs and prospects of [Disola], has made all such investigation thereof as [he] deems to be appropriate and is desirous of no further information in regard thereto.”

After Kinchla filed a motion to dismiss the second complaint pursuant to rule 12(b)(9), a second Superior Court judge ordered the appellants to file a more definite statement pursuant to Mass.R.Civ.P. 12(e), 365 Mass. 756 (1974). That statement asserted, in nonverified form and again contrary to their explicit representations in the redemption agreement, that they had executed the redemption agreement as the result of Kinchla’s coercive manipulation of Disola, particularly his false and incomplete representations to them regarding Disola’s financial condition. Kinchla responded by refiling his motion to dismiss, adding as a ground the failure of the complaint to state an actionable claim because of the applicability of the res judicata bar.

As a result of scheduling complications (including one-half dozen continuances obtained by the appellants), it was two years before anything further took place in the second State action.

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Bluebook (online)
806 N.E.2d 427, 60 Mass. App. Ct. 558, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mancuso-v-kinchla-massappct-2004.