Brennan v. Ferreira ( 2023 )

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22-P-9 Appeals Court
LINDA BRENNAN vs. THOMAS F. FERREIRA & others.1
No. 22-P-9.
Bristol. November 14, 2022. – February 17, 2023.
Present: Green, C.J., Vuono, & Brennan, JJ.
Damages, Interest. Interest. Practice, Civil, Interest.
Corporation, Stockholder's derivative suit.
Civil action commenced in the Superior Court Department on
April 25, 2013.
The case was heard by Thomas F. Maguire, Jr., J.
Samuel M. Pollack for the plaintiff.
Richard M. Bennett for the defendants.
GREEN, C.J. In this appeal from a judgment of the Superior
Court, the plaintiff, Linda Brennan, contends that the trial
judge erred in refusing her request for statutory prejudgment
interest on damages awarded to her. We agree that the judge
1 Barbara J. Ferreira, Land Locker, Inc., and F & B
Rubberized, Inc.
2
should have awarded statutory prejudgment interest, and vacate
the judgment.2
Background. We summarize the facts found by the trial
judge following a jury-waived trial (which the parties do not
dispute on appeal), together with certain other undisputed
background facts appearing in the record.
Beginning in the early 1970s, Brennan and her then husband
were in business with the defendants Thomas F. Ferreira and
Barbara J. Ferreira. Each couple owned fifty percent of the
stock of two corporations: (1) F & B Enterprises, Inc. (F & B
Enterprises), and (2) Land Locker, Inc. (Land Locker), which
owned the property on which F & B Enterprises operated. As time
went on, the couples decided to separate their business
interests. In 1995, the Brennans transferred their stock in
both F & B Enterprises and Land Locker to each corporation in
exchange for an agreement (stock purchase agreement) by each
corporation to make future payments.3
In 2000, F & B Enterprises filed for bankruptcy and was
liquidated and dissolved, without fully compensating Brennan.
Land Locker also failed to pay Brennan as agreed. Meanwhile,
2 We also agree with Brennan that the judge made a
computational error in determining the amount of damages.
3 Sometime thereafter, Brennan acquired her husband's
interest in the stock purchase agreements through the couple's
divorce.
3
following the bankruptcy of F & B Enterprises, the Ferreiras
formed a new corporation, the defendant F & B Rubberized, Inc.
(Rubberized), which began to operate its business on Land
Locker's property without paying rent.
In 2006, Brennan brought an action against the Ferreiras
and Land Locker, claiming that they were in breach of the stock
purchase agreements. A judgment entered in favor of Brennan,
who was given the choice either to receive money damages or to
reclaim fifty percent of the stock of Land Locker. Brennan
opted for the latter choice, and reclaimed her share of Land
Locker stock in March 2009. However, the Ferreiras remained in
control of Land Locker, continued to operate Rubberized on Land
Locker's property without paying rent, and failed to make any
distributions to Brennan.4
In 2013, Brennan commenced the present action, which
included a derivative claim on behalf of Land Locker.5 At
Brennan's request, a receiver was appointed to liquidate Land
4 Land Locker also owned some residential rental properties,
and the Ferreiras collected rents from those tenants without
depositing the money into a Land Locker bank account.
5 In addition to the derivative claim, Brennan asserted
eight other claims. Only two of Brennan's claims went to trial:
her derivative claim and a claim for breach of fiduciary duty.
Brennan's appeal focuses on her derivative claim. While she
argues that she was also entitled to statutory prejudgment
interest on the damages awarded on her breach of fiduciary duty
claim, those damages were not distinct from the damages on her
derivative claim, and we need not reach the question.
4
Locker's assets. In May 2017, the receiver issued his final
accounting. After payment of certain tax liabilities, Land
Locker had a liquidation account balance of $427,782.50. The
receiver disbursed an advance of $200,000 from the liquidation
account to Brennan, and deposited the remainder with the court
pending the outcome of the case. Also in May 2017, the
derivative claim was tried before a Superior Court judge, who
ruled in Brennan's favor. The judge found that the Ferreiras
owed Land Locker $523,831.50, derived from $628,831.50 in unpaid
rent, less two credits totaling $105,000.6 The judge accordingly
awarded Brennan fifty percent of $523,831.50, reflecting her
fifty percent interest in Land Locker, but then applied against
that amount the $200,000 previously distributed to Brennan from
the liquidation account.7
Discussion. 1. Prejudgment interest. We first consider
Brennan's claim that she was entitled to statutory prejudgment
interest on the damages awarded on her derivative claim.8 Citing
6 One credit, for $80,000, reflected the amount the
Ferreiras spent maintaining and repairing Land Locker's
property. The other credit, for $25,000, reflected the amount
the court ordered the Ferreiras to pay in back rent to fund the
receivership.
7 The judge also awarded Brennan $121,205.16 in attorney's
fees and receiver's fees, and that award is not in dispute.
8 Prejudgment interest is authorized at the rate of twelve
percent per annum (i) for tort claims, see G. L. c. 231, § 6B;
(ii) for contract claims where the contract rate has not been
5
International Bhd. of Elec. Workers Local No. 129 Benefit Fund
v. Tucci, 476 Mass. 553, 557 (2017), and Merola v. Exergen
Corp., 423 Mass. 461, 464 (1996), the judge declined to award
statutory prejudgment interest on the basis that a derivative
suit is based in equity and that, therefore, the litigation did
not result in damages.9
At the outset, we observe that damages provide
"compensation for loss." Governo Law Firm LLC v. Bergeron, 487
Mass. 188, 199 (2021), quoting 3 D.B. Dobbs, Law of Remedies
§ 12.1(1), at 9 (2d ed. 1993). Not all forms of monetary relief
are compensatory and, accordingly, not all monetary awards are
considered damages. Governo Law Firm LLC, supra. "A monetary
award based on disgorgement of profits, for example, is measured
by the defendant's gain, rather than by the plaintiff's loss,"
and would not be considered damages. Id.
established, see G. L. c. 231, § 6C; and (iii) "[i]n any other
action in which damages are awarded, but in which interest on
said damages is not otherwise provided by law," G. L. c. 231,
§ 6H.
9 The judge also stated that the Ferreiras paid $80,000 in
repairs that was credited against the unpaid rent, see note 4,
supra, and that because "[t]he evidence before the court [did]
not allow the court to determine when the [Ferreiras] paid that
money . . . the court was unable to compute a fair amount of
interest on rents that should have been, but were not, paid to
Land Locker." At oral argument, counsel for Brennan represented
that the full $80,000 credit could be applied at the
commencement of the running of the statutory prejudgment
interest. On remand, that is how the credit shall be applied.
6
The question concerning Brennan's monetary award, and
whether it constituted damages, arises from the fact that, prior
to the merger of law and equity, "distinct complaints at law and
in equity were required depending on the relief sought."
Aggregate Indus.-Northeast Region, Inc. v. Hugo Key & Sons,
Inc., 90 Mass. App. Ct. 146, 151 n.7 (2016). In general terms,
a plaintiff could obtain damages through an action at law or
could obtain other relief through an action in equity, but only
if the recovery of damages was inadequate. See H.J. Alperin,
Summary of Basic Law § 10:11 (5th ed. 2017). See also J.R.
Nolan & L.J. Sartorio, Equitable Remedies § 1.3 (3d ed. 2007).
In this historical context, shareholder derivative actions were
devised in equity so shareholders could obtain an array of
remedies to protect against "the misfeasance and malfeasance of
'faithless directors and managers.'" International Bhd. of
Elec. Workers Local No. 129 Benefit Fund, 476 Mass. at 557,
quoting Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 95
(1991).
However, the procedures for bringing actions at law and in
equity have long since merged, and a plaintiff may now "seek
legal and equitable relief simultaneously." Reporter's Notes to
Mass. R. Civ. P. 2, Massachusetts Rules of Court, at 3 (Thomson
Reuters 2022). In light of the merger of law and equity,
7
nothing prevented Brennan from seeking damages through a
derivative claim; indeed, that is precisely what she did.
In substance, Brennan alleged that Rubberized owed rent to
Land Locker that the Ferreiras improperly withheld. Whether
viewed as a quasi contract claim based on Rubberized's receipt
of a benefit or as a tort claim based on the Ferreiras' breach
of a fiduciary duty, the relief that Brennan requested was
compensation for lost income in the form of unpaid rent. See,
e.g., HRPT Advisors, Inc. v. MacDonald, Levine, Jenkins & Co.,
43 Mass. App. Ct. 613, 627-628 (1997) (damages may include
amounts for unpaid rent). Moreover, the form of the action as a
derivative suit derived solely from the fact that, due to her
partial, noncontrolling interest in Land Locker, Brennan was
required to assert her claim for unpaid rent by means of that
procedural vehicle; had Brennan held control of Land Locker,
Land Locker could have pursued the claim for unpaid rent
directly as a garden variety contract (or quasi contract) claim.
The mere fact that the vehicle to pursue an award of damages is
based in equity, rather than law, does not mean that the
resulting loss recovery does not constitute damages, to which
statutory prejudgment applies; indeed, it is settled that claims
for damages based in quantum meruit or unjust enrichment, both
based in equity, are eligible for statutory prejudgment
interest. See Zabin v. Picciotto, 73 Mass. App. Ct. 141, 155-
8
156 (2008) (quantum meruit). See also, e.g., Suominen v.
Goodman Indus. Equities Mgt. Group, LLC, 78 Mass. App. Ct. 723,
728 n.5 (2011) (unjust enrichment). Accordingly, the monetary
relief awarded to Brennan through her derivative claim
constituted damages, and she was entitled to statutory
prejudgment interest on those damages, running from the
commencement of the action.10
2. Calculation of damages. We likewise agree with Brennan
that the judge made a mathematical error in his calculation of
damages. Through this action, Brennan sought her share of two
pools of money: (1) Land Locker's liquidated assets and (2)
Land Locker's net damages on Brennan's derivative claim for
unpaid rent. The claim for unpaid rent was not included within
the receiver's final accounting of Land Locker's liquidated
assets. However, instead of awarding Brennan her share of both
pools of money, the judge awarded Brennan her fifty percent
share of Land Locker's damages on the claim for unpaid rent
10Under G. L. c. 231, §§ 6B and 6H, the interest begins to
run from the commencement of the action. Under G. L. c. 231,
§ 6C, the interest begins to run from the breach or demand or,
if the date of the breach or demand has not been established,
from the commencement of the action. As Brennan does not argue
that G. L. c. 231, § 6C, specifically, applies, the interest
shall begin to run from the commencement of the action. We also
note that statutory prejudgment interest applies only to that
portion of the award that is based on Brennan's derivative claim
for unpaid rent, and not on her share of the Land Locker
liquidation proceeds.
9
only, and then subtracted from that amount Brennan's $200,000
advance from the liquidation account.11 We conclude that Brennan
was entitled to fifty percent of Land Locker's liquidated assets
(i.e., $427,782.50), and fifty percent of Land Locker's net
damages on Brennan's derivative claim for unpaid rent (i.e.,
$523,831.50), less the $200,000 previously advanced from the
liquidation account.12
Conclusion. The judgment is vacated, and the matter is
remanded for the recalculation of damages and entry of a new
judgment consistent with this opinion.
So ordered.
11The Ferreiras argue, generally, that the judge had broad
equitable powers to determine damages, but the Ferreiras do not
offer any reasoned basis why Brennan was not entitled to her
share of both pools of money.
12As noted earlier, Brennan is also entitled to $121,205.16
in attorney's fees and receiver's fees that are not in dispute.
See note 7, supra.