COMMONWEALTH OF MASSACHUSETTS
SUPERIOR COURT CASE NO. 96-0036D
V&M MANAGEMENT, INC. and
JUDITH MORIARTY and MARIO NICOSIA,
as TRUSTEES of L&N FIRST MORTGAGE
MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANTS * MOTIONS TO DISMISS PURSUANT TO MASS. R. CIV. P. 12 (b) (9) AND 11 AND FOR SANCTIONS UNDER M.G.L. CH. 231 S 6F.
This Memorandum is submitted by the plaintiff Mourad in response to the defendant Nicosia's Motions to Dismiss and for Sanctions.1 The Motion to Dismiss relies upon the obscure Mass. Civ. P. Rule 12(b)(9) -- a rule that does not even exist in the usually similar federal rules of civil procedure. As explained below, there is no legal or factual basis for dismissal under Rule 12 (b) (9) as this case involves new facts and a new legal issue that was not and could not have been raised in any prior case.
1 Tab A to the Affidavit of Michael L. Altman indicates that proceedings against V&M Management are stayed because of its bankruptcy. Therefore, even if appropriate, sanctions could not be awarded against V&M Management. Since V & M is the principal plaintiff and Mr. Mourad is only a plaintiff as he is a guarantor on the Note, it would be very unfair to consider sanctions just against Mourad. As for the motion to dismiss, this Court also should not proceed as to V & M, as the Motions to Dismiss and For Sanctions are inextricably connected.
Secondly, the imposition of sanctions is unwarranted. Plaintiffs have advanced a meritorious claim. As we will discuss below, the Motion Judge who denied the Motion for Preliminary Injunction was plainly wrong when he did so. In fact, he should have granted the Motion, as the facts--and law--led inescapably to the conclusion that preliminary relief was required. Such relief was appropriate to prevent imminent foreclosure on a mortgage securing a note for which payment in full had been tendered and rejected on the very same day that this case was filed, January 2, 1996. Moreover, all representations were made to the court in good faith and after a reasonable investigation of the facts and law.2 A description of the good-faith basis for filing the Complaint in this case, including a detailed recitation of the thorough factual investigation that preceded all filings in this case, is set forth in the Affidavit of Michael L. Altman which has been filed with this Memorandum.
2 Numerous accusations in Defendants^ Motions and Memorandum are false and offensive. Because the accusations are made without factual basis, the only person who should be subject to sanctions is defendants^ counsel. The accusations are invariably inflammatory and unprofessional. For example, the use of the term "disingenuously" in paragraph 2 of the Motion to Dismiss;stating that opposing counsel "affirmatively attempted to mislead this Court" at p. 2 of the Motion for Sanctions; advising the Court that opposing counsel "affirmatively concealed" facts at Defendants' Memorandum p. 2; and representing that opposing counsel "offered to file an affidavit containing averments known by him to be unfounded" and make other "false statements to this Court," at Defendants' Memorandum p. 2. All of these accusations are false and are refuted at some length in the Affidavit of Michael L. Altman.
I. DEFENDANTS' MOTION TO DISMISS UNDER RULE 12(B)(9) SHOULD BE DENIED BECAUSE NEW EVENTS HAVE GIVEN RISE TO AN INDEPENDENT LEGAL THEORY
A court may not dismiss an action simply because there exists another action involving the same parties. Rather, dismissal of one of the actions is only appropriate under Rule 12(b)(9) "if the parties and issues are identical to those in the prior pending action." (Emphasis supplied.) Harvard Community Health Plan v. Zack. 33 Mass. App. Ct. 649 (1992). The issues in what defendants call the "Second Action" differ from the issues in what defendants call the "First Action." It is for this reason that dismissal under Rule 12(b)(9) is inappropriate.
Defendants ignore the significance of the fact that plaintiffs delivered a check to them on January 2, 1996 for more than $13,000. When plaintiffs paid defendants, they created a new and very important legal issue: the defense of payment. Defendants try to obscure this new legal issue by stating that the complaint of January 2, 1996, which was filed after the payment, and the complaint of September 11, 1995, which was filed before the payment, both arise out of the same "transaction." Defendants' Memorandum at page 13. However, whether the two cases arise out of the same "transaction" is irrelevant. As the Court of Appeals held in the Harvard Community Health Plan case, dismissal is appropriate only if the "issues" are identical. The fact that plaintiffs made payment creates new issues sufficient to survive a motion to dismiss under Mass. R. Civ. P. 12(b)(9).
In the Harvard Community Health Plan case, a woman had a dispute with the Harvard health plan over the scope of her children's medical coverage. An arbitrator decided that the plan was precluded from asserting a limitation on coverage under the doctrine of laches because the woman had received unlimited benefits notwithstanding the plan's written policy. The arbitrator held in favor of the woman and the Superior Court affirmed the decision. The following year, the plan informed the woman that her children's coverage would be limited. The woman returned to the judge who affirmed the arbitrator's decision to obtain an order of contempt; meanwhile, the plan initiated its own declaratory judgment action. In the declaratory judgment action, the woman filed a motion to dismiss under Mass. R. Civ. P. 12(b)(9) and the motion was denied.
The Court of Appeals upheld the denial of the motion to dismiss. The court reasoned that, after the first case was filed but before the declaratory judgment action was filed, two significant events occurred. First, a new contract year began between the woman and the plan. Second, at the beginning of the new contract year, the plan notified the woman that benefits would be limited. The court noted that these new facts gave rise to a new theory: that notice to the woman of the limitation on benefits in the new contract year could overcome the claim of laches that had been effective in the first action. Thus new facts giving rise to a new theory were sufficient to defeat a motion to dismiss under Rule 12(b)(9). In the instant case, new facts--payment on the note--give rise to a new legal theory--a defense of payment. Denial of the motion to dismiss is therefore appropriate.
Defendants' citation to Keen v. Western New England College. 23 Mass. App. Ct. 84, 86-87 (1986), is misguided.3 There, a law student brought two separate actions when his school refused to allow him to take a makeup exam, one action seeking equitable relief, the other seeking damages and attorney's fees under G.L. c. 93A. Defendants imply that plaintiffs are doing in the instant case what Keen did in his own case: bringing two separate actions concerning one set of facts. However, as indicated above, a critical new fact occurred before plaintiffs filed the Second Action. No such event occurred in Keen.
In support of their motion to dismiss, defendants stand beside the policy of judicial efficiency without acknowledging their role in interfering with that policy. As set forth more fully in the accompanying affidavit, it is plaintiffs who are interested in judicial efficiency. Counsel for plaintiffs asked counsel for defendants if they would agree to a dismissal of the first action so that the second action would be the only one between the parties. Counsel for defendants said he would only agree to such a dismissal if the dismissal were with prejudice. Affidavit of Michael L. Altman, <| 28. Clearly, defendants are only interested in judicial efficiency if it can be manipulated to suit their interests.
3 Defendants also cite one other case. Brotherhood of Railroad Trainmen v. Atlantic Coast Line Railroad Co. . 383 F.2d 225 (D.C. Cir. 1967). That case is a res nudicata case and has nothing to do with Rule 12(b)(9).
Defendants' assertions that Judge Keeton found the defense of payment to be without merit are misleading. As the Verified Complaint represents at paragraph 13, plaintiffs tendered what they alleged to be a final payment to defendants on January 2, 1996, several days after Judge Keeton made his ruling. Judge Keeton therefore could not have made a decision on the issue of whether the January 2nd tender of payment satisfied the Note. Thus, the issue of the January 2nd $13,511 payment is a new issue before the courts -- an issue that has never previously been plead in any complaint or argued to any other court.4
II. DEFENDANTS' MOTION FOR DISMISSAL AND SANCTIONS IS WITHOUT BASIS IN FACT OR LAW
In order to succeed in a motion for sanctions under Rule 11 or G.L. c. 231 §6F, a party must meet a high burden. It must not only show that frivolous claims had been made, but also that they had been made in bad faith. Robinson v. Dean Witter Reynolds. Inc.. 129 F.R.D. 15 (D. Mass. 1989) (interpreting state law);
Pottle v. School Committee of Braintree. 395 Mass. 861 (1985) (interpreting G.L. 231 §6F); Bird v. Bird. 24 Mass. App. Ct. 362 (1987) (interpreting Rule 11). In defendants' lengthy and repetitive brief, defendants failed to demonstrate that plaintiffs made frivolous claims or that they acted in bad faith.5
4 At the conclusion of the argument for dismissal, defendants attempt to bootstrap their misguided Rule 12(b)(9) motion with Mass. R. Civ. P. 11 (a). Defendants' Memorandum at p. 14. As the Affidavit of Michael L. Altman emphasizes, there is "good ground to support" the complaints in this case.
First and foremost, plaintiffs' claim that foreclosure should not proceed is meritorious and was advanced in good faith. Certainly, under the law, a foreclosure may be enjoined if payment on the mortgage has been made. Beaton v. Land Court, 367 Mass. 385 (1975). Moreover, plaintiffs present compelling evidence that they did, in fact, pay the mortgage on January 2, 1996. The affidavit of Robert F. Munro, CPA, which was previously submitted to the Court, indicates that $13,511 was due to defendants under the Note as of December 29, 1995. The annexed Affidavit of Michael L. Altaian, 5 20, states that V & M Management tendered what they alleged to be their final payment to defendants on January 2, 1996. See also Verified Complaint,
The Motion Judge erred when he denied the motion for an injunction. For some reason, the Motion Judge misread the promissory note which was the basis for the allegation of payment.6
5 Defendants state that do not seek sanctions from V&M Management, Inc. because it is in bankruptcy. The quest for sanctions against Mourad is misguided, since Mourad is merely an incidental party to this action.
6 It may be that the Motion Judge was swayed by an inflammatory letter written to him by opposing counsel -- in violation of Rule 9A -- just prior to the hearing and to which the Motion Judge referred at the beginning of the hearing. A copy of the
Defendants/ claim that plaintiffs are seeking to "muddy the waters" with a Note that is "not even at issue" is without foundation. The facts supporting the allegation that the 18 percent Note is at issue are stated at paragraphs 7 through 15 of the Affidavit of Michael L. Altman. As stated in paragraph 12 of that Affidavit, the attorney who drafted the March 29, 1985 Note, Roger Lehrberg, an attorney who now is employed by the defendant Nicosia, signed a pleading in 1986 admitting that the 18 percent Note -- the Note referred to in the Complaints in this case -- is the Note between the parties. It is the Note upon which defendants seek to foreclose. Given the overwhelming facts in support of the allegation that the 18 percent Note is the Note at issue, it is preposterous for defendants to argue that this argument is frivolous and advanced in bad faith.
Defendants also contend that plaintiffs should be sanctioned for misrepresenting facts to the court and omitting certain facts from their pleadings. Plaintiffs made no misrepresentations and there were no omissions. Defendants fail to disclose that the firm of Rubin and Rudman did not represent plaintiff until the third week of December 1995. As indicated in the accompanying
Transcript of the January 4, 1996 hearing on Plaintiff's Motion for Preliminary Injunction is attached at Tab I to the Affidavit of Michael L. Altman. The inflammatory letter accused plaintiff's counsel of deliberately misleading the court supposedly because plaintiff's complaint and motion in this case had not disclosed prior litigation between the parties. The prior litigation, however, involved different facts and issues and had no relevance to this case.
Affidavit, attorneys from Rubin and Rudman were not counsel to the plaintiffs in any other case, including the case before Judge Keeton. In the few days following the December 29 hearing before Judge Keeton, Rubin and Rudman worked quickly to analyze whether there was any basis for seeking to enjoin the looming foreclosure. One of the analyses was to determine the amount owed under the Note that was involved with the foreclosure. In doing so, and with the assistance of an accountant, it was concluded that only $13,511 was owed on the Note. Counsel therefore arranged for payment of that amount on January 2, and prepared the necessary documents to stop the foreclosure from taking place. Particularly because it was New Year's weekend and the hearing before Judge Keeton occurred the day before the long weekend, Rubin and Rudman relied reasonably on both the oral summary of the case provided by plaintiffs' prior attorney and the attorney's written affidavit attached to the Affidavit of Michael L. Altman at Tab L.
When attorneys from Rubin and Rudman addressed the Court on January 4, 1996, they were entitled to rely on the representation of plaintiffs' prior counsel of what happened in Judge Keeton's Court. Moreover, the accuracy of prior counsel's report was confirmed by the federal docket which recorded that the case had been dismissed "without prejudice." Affidavit of Michael L. Altman at Tab N. See also the Transcript of the Hearing (Tab I) at pp. 13-14. Rubin and Rudman also informed the Court that
payment of $13,511 had never been raised because that payment had only been made two days before on January 2, 1996.
Defendants offer the ridiculous argument that plaintiffs' counsel violated G.L. 231 §6F by making statements to the court about the hearings before Judge Keeton after having been put "on notice" by defense counsel that the statements were "false." The proceedings before Judge Keeton were obviously complex. Surely, an attorney should not be expected--on penalty of sanctions--to rely upon on-the-spot interpretations of events offered by an adversary when the attorney's predecessor has provided a different interpretation. See Affidavit of Michael L. Altman, W 23-27.
Finally, defendants argue that plaintiffs should be sanctioned for failing to include certain facts in their pleadings. The accusation is that prior litigation was deliberately concealed from the Court in both the Verified and Amended Complaints. The accusation ignores the fact that before the Complaint was filed defense counsel had advised plaintiff's counsel that he was going to argue to the Court that prior litigation barred another case. Affidavit of Michael L. Altman, H 16-22.
In fact, counsel for the parties had been talking and writing to each other for approximately two weeks before this case was filed. One of the topics raised by defendants' counsel was his argument that any new case involving the promissory note which was being foreclosed upon would be barred by res ludicata. Plaintiffs' counsel explained why res judicata did not apply and advised defendants' counsel that he would have to make his argument to the court.
Thus, the complaint in this case was drafted when it was understood that a very aggressive opposing attorney would argue that prior litigation barred relief. It is therefore absurd to argue that the lack of reference to prior litigation in the pleadings was part of a scheme to mislead the court.
The accusation of concealing prior litigation is offensive; it was the tactic of an aggressive lawyer asserting a "red herring" to lead the court away from the merits of the case. When the accusation of concealing prior litigation is viewed in its proper light -- as a litigation tactic -- it becomes apparent that the only one who misled the court was defendants' counsel.
Finally, the defendants argue, and cite no authority for their argument, that plaintiffs had a legal obligation to include reference to other litigation -- involving different facts and issues -- in their complaint in this case. However, no rule requires a detailed recitation of all facts, particularly facts relevant to defenses. All that is required in a complaint is "(I) a short and plain statement of the claim showing that the pleader is entitled to relief, and (2) a demand for judgment for the relief to which he deems himself entitled." Mass. R. Civ. P. 8(a). A complaint must only give fair notice of a plaintiff's claims. Ciccone v. Smithy 325 N.E.2d 292 (1975). There is no requirement that a complaint "state the relevant facts with completeness or precision." Ahern v. Warner. 16 Mass. App. Ct. 223 (1983). Given the limited role of the complaint and the fact that the defendants would be present in court to state their case, plaintiffs cannot be sanctioned for not referring to prior litigation in their complaint or in any other document.
In the name of "judicial efficiency," defendants are seeking to sweep aside a critical issue advanced by plaintiffs for the first time in this case. On January 2, 1996, plaintiffs discharged their debt to defendants by tendering more than $13,000. Defendants also would have this Court misapply Mass. R. Civ. P. 12(b)(9) to dismiss this case even though that Rule only applies to cases involving identical facts and issues. Finally, defendants seek sanctions even though plaintiffs' case presents meritorious and good faith claims. Defendants' motion to dismiss, pursuant to Rules 12(b)(9) and 11, and their motion for sanctions should therefore be denied. Moreover, since there is absolutely no factual or legal basis for either of the motions,this Court should order defendants to pay reasonable counsel fees to the plaintiffs.7
ALPHONSE MOURAD By his attorneys,
March 11, 1996
Michael L. Altman BBO# 016800, Eric S. Solowey BBO# 600316, Rubin and Rudman, 50 Rowes Wharf Boston, MA 02110 (617) 330-7000
7 The bad faith of opposing counsel is also revealed by his refusal to await the outcome in Bankruptcy Court before proceeding against one of the two plaintiffs in this case. See Affidavit of Michael L. Altman, I 29.