O  T  H  E  R      D  E  C  I  S  I  O  N  S  :

Balsbaugh v. Fidelity Brokerage Services, LLC, 20 Mass. L. Rep. 49, 2005
Mass. Super. LEXIS 475 (Sept. 19, 2005) (van Gestel, J.).

The Plaintiff, a homeowner, sued a bank for negligently paying checks issued by the Plaintiff jointly to a general contractor (“GC”) and subcontractors who performed services at his home. The bank honored the checks even though only the GC, and not the subcontractors, had endorsed them. Although a dispute arose between the GC and the plaintiff concerning the services performed, there was no such dispute between the plaintiff and the subcontractors (the co-payees of the checks), and the deadline for the subcontractors to file mechanic’s liens had passed. The GC’s bankruptcy petition prevented the plaintiff from recovering his damages in their entirety. The plaintiff therefore sought to recover

the balance from the bank that had negligently honored the checks.

The Court held that under the Uniform Commercial Code (G.L. c. 106, §4-103), absent bad faith of the bank (which was not alleged) the plaintiff could not recover unless he demonstrated an actual loss caused by the bank. Because the bank’s negligence was the failure to require the subcontractors’ signatures and the subcontractors did not have any claims against the Plaintiff (nor could they), the Court held that the bank was not liable. The Court rejected the Plaintiff’s argument that the damages he sought to recover – which re-hashed his claims against the GC – were caused by the bank’s negligence.

Congress Financial Corporation v. Kussell, 19 Mass. L. Rep. 607, 2005 Mass.
Super. LEXIS 356  (July 29, 2005) (van Gestel, J.).

Congress Financial sought damages allegedly caused by misrepresentations of corporate employees relating to the value of assets used to calculate loans made to the corporation. The defendants moved to dismiss the complaint. The Court, in denying the motion, re-affirmed the well-established principle that a corporate officer may be liable for the torts of the

corporation in which he directly participates. The Court also held that the contract’s provision stating that Indiana law would govern disputes between the parties did not necessarily warrant dismissal of plaintiff’s Chapter 93A claim. The Court held that a factual inquiry was required to determine whether the plaintiff’s predecessor had agreed to this provision.

Garvey v. Lemle, 2005 Mass. Super. LEXIS 336
(July 29, 2005) (van Gestel, J.).

This was a factually complex case in which the Court was asked to determine the relative owner-ship interests of four individuals in Poseidon Enterprises, Inc., which was involved in the management and ownership of the Barking Crab Restaurant in Boston.

The Court first held that Lee Kennedy was not a shareholder of Poseidon. Kennedy was not issued any shares but claimed he had become a 15% shareholder in exchange for the forgiveness of debt owed by Poseidon to a company Kennedy owned and controlled. The Court, although it acknowledged that the issuance of a stock certificate was not necessary in order to become a shareholder, rejected Kennedy’s argument for a number of reasons, including that the debt allegedly forgiven was not owed to Kennedy, but rather to a company with which he was affiliated; there was no paper evidence that the debt was forgiven; and Kennedy was never referred to as a shareholder, never

received notice of shareholder meetings, never attended a shareholder meeting and never voted as a shareholder.

The Court then held that the proportionate interests of the other three were in accordance with K-1s issued thirteen years earlier. The Court acknowledged that all parties agreed that the K-1s were not meant to be determinative, but rather “placeholders” until the parties could reach some agreement in the future. The Court nevertheless relied exclusively on the K-1s because of the absence of any evidence that the agreed ownership interests were any different than as stated in the K-1s.

After determining the ownership interest of the three individuals, the Court, in an apparent effort to stave off further litigation between them, cautioned the parties that Poseidon was a closely held corporation giving rise to fiduciary duties.