Balzotti Global Group, LLC & a. v. Shepherds Hill Proponents, LLC & a. ( 2020 )

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Rockingham
No. 2019-0120
BALZOTTI GLOBAL GROUP, LLC & a.
v.
SHEPHERDS HILL PROPONENTS, LLC & a.
Argued: March 4, 2020
Opinion Issued: May 27, 2020
Devine, Millimet & Branch, Professional Association, of Manchester
(Matthew R. Johnson on the brief and orally), for the plaintiffs.
Bussiere & Bussiere, P.A., of Manchester (Emile R. Bussiere, Jr. on the
joint brief and orally), for defendant Ernest J. Thibeault, III; Preti Flaherty, of
Concord (John M. Sullivan on the joint brief and orally), for defendants
Shepherds Hill Development Co., LLC and Shepherds Hill Proponents, LLC.
McLane Middleton, Professional Association, of Manchester (Jeremy T.
Walker and Joseph A. Foster), for defendant Ralph Caruso, joined in the brief
of Ernest J. Thibeault, III.
Moriarty Troyer & Malloy LLC, of Braintree, Massachusetts (Thomas W.
Aylesworth on the brief and orally), for defendant Shepherds Hill Homeowners
Association, Inc.
HICKS, J. The plaintiffs, Balzotti Global Group, LLC (the Global Group)
and Caesar Balzotti, Sr., appeal an order of the Superior Court (Wageling, J.)
dismissing their claims against the defendants, Shepherds Hill Proponents,
LLC (the Proponents), Shepherds Hill Development Company, LLC (the
Development Company), Shepherds Hill Homeowners Association, Inc. (the
Association), Ralph Caruso, and Ernest J. Thibeault, III, on the ground that
their claims are time-barred. See RSA 508:4, I (2010). We affirm.
I. Facts
The pertinent facts as found or recited by the trial court or as appear in
the record follow. The Global Group is a national company owned by Balzotti’s
wife and son. Balzotti is its CEO and Chairman. Although he does not own
the company, he plays a dominant role and oversees each project the company
undertakes from planning through completion. Balzotti is a well-resourced,
sophisticated businessman, with more than 30 years of experience in
construction and real estate. He has completed condominium projects in many
states, including Massachusetts and New Hampshire.
The instant lawsuit arises from a failed condominium development
project. At some point before 1999, the Development Company obtained
approval to construct 400 condominium units in Hudson. After work had
begun on the project, the real estate market collapsed, and the Development
Company filed for bankruptcy.
Balzotti, Caruso, and Thibeault proposed to reorganize the Development
Company so that the project could be completed and creditors could be paid.
Their proposal included creating the Proponents, a limited liability company in
which Caruso and Thibeault would each have a 40% interest and Balzotti
would have a 20% interest. In turn, the Proponents would own the
Development Company.
The bankruptcy court accepted the proposal as the reorganization plan
in 2000. As part of the bankruptcy plan, the Development Company issued a
$714,000 promissory note to Balzotti’s wife (the Note) that was guaranteed by
the Proponents and Thibeault. According to the plaintiffs, the Note was
interest-free if paid within five years. The plaintiffs allege that the bankruptcy
plan “contemplated that [the Development Company] would fully complete the
[condominium] Development Project such that it could repay the . . . Note,” and
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that “[a]s units were sold, proceeds from the sale would be used to pay down
the creditors.” The bankruptcy plan contemplated that all creditors, including
the Note holder, would be paid in full through the development and sale of new
condominium units.
On February 25, 2003, the Development Company established the
Shepherds Hill Condominium by recording a declaration of condominium with
the county registry of deeds. The initial declaration contemplated the
construction of 100 units, with the Development Company reserving the right
to construct an additional 300 units, for a maximum of 400 units. The
declaration created the Association to administer the condominium complex.
The next day, the Development Company filed an amendment to the
declaration, which explicitly stated that the Development Company had “until
February 25, 2013 to complete conversion of Units located within the
convertible land as described in the Declaration of Condominium.” See RSA
356-B:3, X (2009) (defining “convertible land” as “a building site which is a
portion of the common area, within which additional units and/or a limited
common area may be created”), :23, III (2009) (providing that “[n]o
[condominium] conversion shall occur after 5 years from the recordation of the
declaration, or such shorter period of time . . . as the declaration may specify,
provided, however, that the time limit contained in the declaration may be
extended by not more than 5 years by an amendment to the declaration”).
Between February 26, 2003, and July 6, 2009, the Development
Company periodically exercised its right to build new condominium units on
convertible land. However, by July 6, 2009, only 274 out of the possible 400
units had been constructed.
In August 2010, Balzotti’s wife issued a demand for payment on the Note
to the Development Company, the Proponents, and Thibeault, asserting that
they were in default. Thereafter, Balzotti, through his wife, brought
involuntary bankruptcy proceedings against the Development Company, the
Proponents, and Thibeault (the bankruptcy defendants). In September 2010,
however, the bankruptcy court dismissed the proceedings without prejudice on
the ground that, as filed, they did not comply with the bankruptcy code. The
bankruptcy court found that the proceedings had been brought in bad faith, in
part to pressure Thibeault to pay the Note, and ordered Balzotti to pay
attorney’s fees and punitive damages.
By 2011, pursuant to the original condominium declaration, the
Association was governed by a board elected by the condominium unit owners.
Later that year, the Development Company offered to contribute to the
Association’s capital account and construct certain amenities in exchange for
being granted an additional five years to construct all or some of the remaining
126 condominium units. The Association declined the offer.
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In response, on February 22, 2013, the Development Company recorded
a “Twenty-Fourth Amendment” to the declaration in the county registry of
deeds, which purported to create three “Land Only Units” from undeveloped
portions of the condominium common area (the Twenty-Fourth Amendment).
The Development Company recorded the Twenty-Fourth Amendment without
the Association’s knowledge or consent. On February 26, 2013, the
Association ordered the Development Company to remove its construction
equipment from the condominium complex. The Development Company
declined, relying upon the Twenty-Fourth Amendment.
The Association subsequently brought a complaint for declaratory and
injunctive relief against the Development Company seeking, among other
things, a declaration that the Twenty-Fourth Amendment is void and
unenforceable. On March 18, 2014, the trial court ruled in favor of the
Association. In addition to voiding the Twenty-Fourth Amendment, the court
ruled that the Development Company’s right to develop convertible land into
condominium units (the Development Right) expired on February 26, 2013,
and that the undeveloped common land now belonged to the condominium
unit owners, subject to the control of the Association. See RSA 356-B:23, III.
The Development Company appealed the trial court’s decision to this court.
While the appeal was pending, Balzotti orchestrated the reassignment of
the Note to the Global Group. According to Thibeault, but disputed by Balzotti,
the two met during the summer of 2014 to discuss the Note and the status of
the Shepherds Hill condominium development. According to Thibeault, he
informed Balzotti about the litigation and the pending appeal at that meeting.
In April 2015, we issued an unpublished order affirming the trial court’s 2014
decision. See Shepherds Hill Homeowners Association, Inc. v. Shepherds Hill
Development Co., LLC, No. 2014-0306, 2015 WL 11071128 (N.H. April 2,
2015).
In February 2018, the plaintiffs sued the Development Company, the
Proponents, Caruso, and Thibeault, asserting a number of claims arising out of
the Development Company’s loss of the Development Right. The plaintiffs also
moved to attach the condominium property itself to satisfy any potential
judgment. The Association intervened in the lawsuit, objecting to the
attachment. In response, the plaintiffs amended their complaint to assert
equitable claims against the Association. At a June 2018 hearing, the plaintiffs
clarified that they sought only to attach the Development Right, not the
condominium property.
Also at that hearing, the plaintiffs informed the court that they again
intended to amend their complaint. According to the proposed second
amended complaint, the plaintiffs allege that: (1) the Development Company,
the Proponents, and Thibeault breached the Note by losing the Development
Right; (2) Thibeault and Caruso breached the implied covenant of good faith
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and fair dealing by failing to preserve that right; and (3) the Association, which
they alleged now owns the Development Right, should be equitably estopped
from profiting from it.
The defendants argued in various motions that the plaintiffs’ claims are
time-barred because they were brought more than three years after the
Development Right was lost. See RSA 508:4, I. Invoking the “discovery rule,”
the plaintiffs argued that their claims are timely, in part, because Balzotti did
not know and could not have reasonably discovered that the Development
Right had been lost until he learned, in 2016, that we had affirmed the trial
court’s 2014 decision. See id. (providing that “when the injury and its causal
relationship to the act or omission were not discovered and could not
reasonably have been discovered at the time of the act or omission, the action
shall be commenced within 3 years of the time the plaintiff discovers, or in the
exercise of reasonable diligence should have discovered, the injury and its
causal relationship to the act or omission complained of”).
The trial court held an evidentiary hearing “to determine when Balzotti
knew or should have known about the loss of the development rights.”
Following the hearing, the trial court ruled that Balzotti knew, or reasonably
should have known, that the Development Company had lost the Development
Right either by February 2013, when, by operation of statute, the right was
lost, see RSA 356-B:23, III, or by the summer of 2014, when, the court found,
Thibeault informed Balzotti about the trial court’s 2014 decision. Therefore,
the plaintiffs’ claims brought in February 2018 were time-barred. See RSA
508:4, I. The plaintiffs unsuccessfully moved for reconsideration, and this
appeal followed.
II. Analysis
In reviewing a trial court decision rendered after an evidentiary hearing,
“we uphold the trial court’s factual findings and rulings unless they lack
evidentiary support or are legally erroneous.” O’Malley v. Little, 170 N.H. 272,
275 (2017) (quotation omitted). “We do not decide whether we would have
ruled differently than the trial court, but rather, whether a reasonable person
could have reached the same decision as the trial court based upon the same
evidence.” Id. (quotation omitted). “Thus, we defer to the trial court’s
judgment on such issues as resolving conflicts in the testimony, measuring the
credibility of witnesses, and determining the weight to be given evidence.” Id.(quotation omitted). Nevertheless, we review the trial court’s application of the
law to the facts and its legal rulings de novo. See id.A. Judicial Estoppel
The plaintiffs argue that the bankruptcy defendants are barred by the
doctrine of judicial estoppel from asserting the statute of limitations as an
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affirmative defense. “The doctrine of judicial estoppel generally prevents a
party from prevailing in one phase of a case on an argument and then relying
on a contradictory argument to prevail in another phase.” Cohoon v. IDM
Software, 153 N.H. 1, 4 (2005) (quotation omitted). Three factors “typically
inform the decision whether to apply the doctrine in a particular case”: (1)
“whether the party’s later position is clearly inconsistent with its earlier
position”; (2) “whether the party has succeeded in persuading a court to accept
that party’s earlier position”; and (3) “whether the party seeking to assert an
inconsistent position would derive an unfair advantage or impose an unfair
detriment on the opposing party if not estopped.” Id. (quotations omitted).
The plaintiffs contend that the bankruptcy defendants are judicially
estopped from raising a statute of limitations defense to the plaintiffs’ 2018
claims because, in the 2010 bankruptcy proceedings, the defendants “argued
no payments were due on the Note yet, which meant they could not be in
breach, and no statute of limitations had begun to run.” Given that the
bankruptcy proceedings took place at least three years before the defendants
assert the statute of limitations began to run, and that the bankruptcy court
dismissed the bankruptcy proceedings on procedural grounds, we are not
persuaded by the plaintiffs’ judicial estoppel argument.
B. Discovery Rule
The plaintiffs next challenge the trial court’s determination that the
discovery rule does not save their claims. RSA 508:4, I, codifies the common
law discovery rule. Dobe v. Comm’r, N.H. Dep’t of Health & Human Services,
147 N.H. 458, 461 (2002). It provides that all personal actions, except those
for slander and libel, must be brought within three years of the act or omission
complained of “except that when the injury and its causal relationship to the
act or omission were not discovered and could not reasonably have been
discovered at the time of the act or omission,” then the action must be
commenced within three years of “the time the plaintiff discovers, or in the
exercise of reasonable diligence should have discovered, the injury and its
causal relationship to the act or omission complained of.” RSA 508:4, I. Once
a defendant has established that the statute of limitations would bar an action,
the plaintiff has the burden of raising and proving that the discovery rule is
applicable to an action that would otherwise be barred by the statute of
limitations. Dobe, 147 N.H. at 461.
According to RSA 508:4, I, the three-year limitations period does not
begin to run until two prongs are satisfied: first, a plaintiff must know or
reasonably should have known that it has been injured; and second, a plaintiff
must know or reasonably should have known that its injury was proximately
caused by conduct of the defendant. See Beane v. Dana S. Beane & Co., 160
N.H. 708, 713 (2010). To obtain the benefit of the discovery rule and overcome
the defendant’s statute of limitations defense, the plaintiff must prove that at
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least one prong was not yet satisfied at a time within three years of the
plaintiff’s commencement of the action. See id. Thus, the discovery rule does
not apply unless the plaintiff proves that the plaintiff did not discover, and
could not reasonably have discovered, either the alleged injury or its causal
connection to the defendant’s alleged wrongful act or omission. See id.The rule “is not intended to toll the statute of limitations until the full
extent of the plaintiff’s injury has manifested itself.” Furbush v. McKittrick,
149 N.H. 426, 431 (2003). “Rather, that the plaintiff could reasonably discern
that he suffered some harm caused by the defendant’s conduct is sufficient to
render the discovery rule inapplicable.” Id.; see Dobe, 147 N.H. at 461.
“Further, a plaintiff need not be certain of this causal connection; the
possibility that it existed will suffice to obviate the protections of the discovery
rule.” Beane, 160 N.H. at 713.
“Whether the plaintiff exercised reasonable diligence in discovering the
causal connection between the injury and the defendant’s alleged act or
omission is a question of fact.” Kelleher v. Marvin Lumber & Cedar Co., 152
N.H. 813, 825 (2005). Moreover, whether to apply the discovery rule is “an
issue . . . that is equitable in nature.” Keshishian v. CMC Radiologists, 142
N.H. 168, 179 (1997). We review a trial court’s decision to grant equitable relief
for an unsustainable exercise of discretion. Benoit v. Cerasaro, 169 N.H. 10,
19 (2016). In doing so, we determine whether the record establishes an
objective basis sufficient to sustain the discretionary judgment made. Id. at
20. The party asserting that a ruling denying equitable relief is unsustainable
must demonstrate that the ruling was unreasonable or untenable to the
prejudice of his case. See id.
Crediting the allegations in the plaintiffs’ proposed second amended
complaint, the trial court determined that the injury or damage at issue is the
plaintiffs’ inability to collect on the Note through the sale of new condominium
units, and that the acts or omissions complained of concern the Development
Company’s loss of the Development Right, the failure of Thibeault and Caruso
to safeguard it, and the possibility that the Association would wrongfully profit
from it. For ease of reference, we refer to those acts and omissions, collectively,
as the loss of the Development Right.
The trial court found that, in February 2013, Balzotti knew, or
reasonably should have known, that the Development Right had been lost
because: (1) it interpreted RSA 356-B:23, III to provide that a developer has no
more than 10 years to convert convertible land into condominium units; and
(2) the first amendment to the declaration, filed on February 26, 2003,
expressly stated that the Development Company’s right to convert convertible
land expired on February 25, 2013.
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The plaintiffs argue that Balzotti could not have known that the
Development Right had been lost because, had he conducted a title search in
February 2013, he would have discovered the Twenty-Fourth Amendment. The
plaintiffs contend that the Twenty-Fourth Amendment, filed on February 22,
2013, would have led Balzotti reasonably to believe that the Development
Company had timely exercised the Development Right, not lost it.
We need not address the plaintiffs’ arguments concerning the effect of
the amendments, because even if we were to agree with them regarding the
effect of the Twenty-Fourth Amendment, notwithstanding Balzotti’s admission
at trial that he did not conduct a title search before May 2015, they would not
prevail. As soon as Balzotti was aware of the trial court’s adverse decision in
March 2014, he knew, or reasonably should have known, of the injury (the
inability to collect on the Note through the sale of new condominium units), the
acts or omissions complained of (the loss of the Development Right), and the
causal connection between the two. See Draper v. Brennan, 142 N.H. 780,
782, 787 (1998) (concluding, in a legal malpractice case, that the trial court’s
adverse decision on the plaintiff’s motion to enforce a settlement agreement
should have alerted him to a potential connection between his harm and his
lawyer’s alleged error in drafting the agreement).
Here, the trial court found, and the record supports its finding, that
Balzotti learned of the trial court’s March 2014 decision when he met with
Thibeault in the summer of 2014. Although Balzotti testified that he did not
meet with Thibeault and learn about the trial court’s decision until March or
April 2015, the trial court specifically found Thibeault more credible than
Balzotti on this point. The trial court was entitled to credit Thibeault’s account
over Balzotti’s, and we defer to its credibility determinations. See O’Malley, 170
N.H. at 275. Although the plaintiffs argue that Balzotti’s account was
corroborated, and Thibeault’s was not corroborated, we cannot say as a matter
of law that the trial court erred by crediting Thibeault over Balzotti.
The plaintiffs argue that, even if Balzotti knew of the March 2014
decision that summer, that knowledge was insufficient to trigger the running of
the statute of limitations. The plaintiffs contend that, regardless of when
Balzotti learned of the trial court decision, the statute of limitations could not
have started to run until that decision became final when we upheld it on
appeal. Only then, they argue, could Balzotti have known that the
Development Right had truly been lost.
However, for the discovery rule to apply, it was not necessary for the full
extent of Balzotti’s alleged harm to have manifested itself. See Furbush, 149
N.H. at 431. Rather, for the purposes of the discovery rule, it was sufficient
that Balzotti could “reasonably discern that he suffered some harm caused by
the [defendants’] conduct.” Id. As soon as Balzotti learned of the trial court’s
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order, he should have been able to “reasonably discern” that he suffered “some
harm” as a result of the defendants’ conduct. Id.
Nor was it necessary for Balzotti to be certain of the causal connection
between his harm and the defendants’ acts and omissions (the loss of the
Development Right). See Pichowicz v. Watson Ins. Agency, 146 N.H. 166, 168
(2001). The possibility of that causal connection sufficed. See id.; see also
Dobe, 147 N.H. at 461; Draper, 142 N.H. at 786.
Thus, as soon as Balzotti learned of the trial court’s decision, he should
have been aware of his harm, of the defendants’ acts or omissions, and of the
causal relationship between the two. Accordingly, we disagree with the
plaintiffs that the statute of limitations was tolled until the appellate process
was complete and the superior court’s 2014 decision became final. See Draper,
142 N.H. at 787.
Therefore, even if Balzotti could not have reasonably known in February
2013 that the Development Right had been lost, the evidence supports the trial
court’s finding that he reasonably should have known that it was lost by the
summer of 2014. We, therefore, uphold that finding, and hold that the
plaintiffs’ 2018 claims, filed more than three years later, are time-barred.
In light of our decision, we need not address the plaintiffs’ assertions
regarding the trial court’s finding that Balzotti acted unreasonably by relying
upon Thibeault for information about the development project and its related
finding that Balzotti failed to exercise reasonable diligence. Because we need
not address the trial court’s finding that Balzotti did not exercise reasonable
diligence, we also need not address the plaintiffs’ arguments that the trial court
erroneously admitted or failed to admit certain evidence relevant to that finding
or that it impermissibly expanded the scope of the evidentiary hearing so as to
admit such evidence.
The plaintiffs argue that their equitable claims against the Association
are not time-barred. They assert that the Association is the successor to the
Development Company’s obligations to pay the Note pursuant to the
bankruptcy plan and contend that the statute of limitations has not yet run on
their claims against the Association “because it is unclear whether the
Association will or will not comply with the terms of [that plan].” However, as
the Association correctly observes, the plaintiffs fail to explain how the
Association could possibly become the successor to the Development
Company’s obligations to pay the Note under the bankruptcy plan. Under
these circumstances, we consider the plaintiffs’ argument insufficiently
developed for our review. See State v. Blackmer, 149 N.H. 47, 49 (2003).
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C. Admission of Certain Evidence
The plaintiffs next contend that the trial court unsustainably exercised
its discretion by admitting a timeline of events into evidence. The trial court
found, based upon Balzotti’s testimony during voir dire, that his son had
created the timeline to help Balzotti remember dates when testifying. The
plaintiffs objected to the timeline’s admission on the ground that it constituted
attorney work product because it had been prepared at counsel’s request. The
trial court disagreed, finding that the timeline was merely “a recitation of facts”
prepared by Balzotti’s son and did not contain “the opinion of [the plaintiffs’
attorney] in any way.”
We review the trial court’s decision to admit the timeline into evidence
under our unsustainable exercise of discretion standard. See Yoder v. Town of
Middleton, 152 N.H. 363, 368 (2005). To prevail under this standard, the
plaintiffs must demonstrate that the trial court’s ruling was clearly untenable
or unreasonable to the prejudice of their case. See id.“At its core, the work-product doctrine shelters the mental processes of
the attorney, providing a privileged area within which he can analyze and
prepare his client’s case.” State v. Zwicker, 151 N.H. 179, 191 (2004)
(quotation omitted). “We have defined work product as the result of an
attorney’s activities when those activities have been conducted with a view to
pending or anticipated litigation.” Id. (quotation omitted). For the work
product doctrine to apply, “[t]he lawyer’s work must have formed an essential
step in the procurement of the data which the opponent seeks, and he must
have performed duties normally attended to by attorneys.” Id. (quotation
omitted).
We find no error in the trial court’s determination that the timeline does
not constitute attorney work product. “[P]urely factual information,” such as
the dates and events listed in the timeline, “do not fall within the ambit of the
[work product] doctrine.” Id.The plaintiffs also imply that the timeline is a confidential attorney-client
privileged communication, and argue that the timeline’s admission and
resulting cross-examination constituted an “impertinent intrusion in
legitimately private matters,” and “created undue confusion which far
outweighed any probative value.” We decline to address those arguments
either because they were not preserved for our review, see Bean v. Red Oak
Prop. Mgmt., 151 N.H. 248, 250 (2004), or because they are insufficiently
developed to warrant appellate review, see Kilnwood on Kanasatka Condo. Unit
Assoc. v. Smith, 163 N.H. 751, 753 (2012).
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For all of the above reasons, therefore, we affirm the trial court’s
decision.
Affirmed.
BASSETT, HANTZ MARCONI, and DONOVAN, JJ., concurred.
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