65 N.E.3d 1217
Mass. App. Ct.2016Background
- Joseph DeCroteau is a 51% shareholder and the active manager/director of DeCroteau Corporation, which operates Gaffey Funeral Home at 43 High Street, Medford; he has no ownership interest in DBR Realty LLC (DBR), the property owner.
- Mark and Michael DeCroteau are minority shareholders of DeCroteau Corporation and the sole members of DBR.
- DeCroteau Corporation leased the property from DBR; the written lease expired in 2014 and the tenant became a tenant at will.
- In 2015 DBR listed the property for sale; Joseph filed a verified complaint seeking equitable relief (including claims of resulting/constructive trust and breach of fiduciary duty) and moved for a preliminary injunction and approval to record a memorandum of lis pendens.
- After a nonevidentiary hearing the Superior Court denied both motions; Joseph appealed interlocutorily from the denials.
- The Appeals Court affirmed: it held Joseph lacked a substantial likelihood of succeeding on claims to title or equitable ownership (so injunctive relief was not warranted) and upheld denial of lis pendens on an independent statutory ground (verified complaint lacked required certification).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Joseph is entitled to a preliminary injunction preventing DBR from marketing, transferring, or encumbering the property | Joseph claimed an equitable ownership interest (constructive/resulting trust) because he paid rent/taxes and personally managed the business; sale would harm his livelihood | Joseph lacks legal title; claims for harm to the business belong to DeCroteau Corp.; payments alone do not create trust or title | Denied — Joseph failed to show substantial likelihood of success on ownership claims; injunctive relief properly denied |
| Whether shareholder (Joseph) may litigate corporate tenant’s property rights individually | Joseph argued his personal payments and management gave him individual standing | Defendants argued claims belong to the corporation and Joseph, as shareholder, lacks standing to assert corporate claims | Held Joseph lacks standing to assert most claims on corporation’s behalf; only fiduciary-duty claim against brothers might be brought individually but not shown to support injunctive relief |
| Whether the verified complaint stated a claim of right to title so as to permit recording a lis pendens under G. L. c. 184, § 15 | Joseph argued his resulting/constructive trust allegations constitute a claim to title or equitable ownership, qualifying for lis pendens | Defendants noted the judge found lack of likelihood of success on title claims and procedural defects in the complaint | Denial on merits was error (nature of claim sufficed), but lis pendens denial affirmed on independent ground: complaint lacked statutory certification under § 15 (a material defect) |
| Whether post-purchase payments (rent/taxes) can create a resulting or constructive trust in favor of Joseph | Joseph contended his payments and work created an equitable interest | Defendants countered payments did not constitute consideration for conveyance; no fraud at transfer; corporate form not pierced | Held payments alone insufficient to create resulting or constructive trust; no basis to disregard corporate form for title purposes |
Key Cases Cited
- Packaging Indus. Group, Inc. v. Cheney, 380 Mass. 609 (standard for preliminary injunction) (discussed likelihood of success factor)
- Saulnier v. Saulnier, 328 Mass. 238 (postconveyance payments cannot create resulting trust absent contemplated consideration for conveyance)
- Meskell v. Meskell, 355 Mass. 148 (constructive trust requires fraud or breach at time of transfer)
- Eaton v. Federal Natl. Mort. Assn., 462 Mass. 569 (claims alleging resulting trust/equitable title constitute claim to title for lis pendens purposes)
- Sutherland v. Aolean Dev. Corp., 399 Mass. 36 (statutory lis pendens framework and judge’s limited discretion)
- Wolfe v. Gormally, 440 Mass. 699 (nature of claim, not merits, governs lis pendens; expedited mechanisms to remove unjustified lis pendens)
- Beaupre v. Cliff Smith & Assocs., 50 Mass. App. Ct. 480 (corporation’s claims belong to the corporation, not individual shareholder)
- Pagounis v. Pendleton, 52 Mass. App. Ct. 270 (shareholder of corporate tenant lacked standing to assert lease-related claims)
- Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578 (heightened fiduciary duty among shareholders in close corporations)
- Clair v. Clair, 464 Mass. 205 (appellate court may affirm on independent grounds)