No. 98-0527Commonwealth of Massachusetts Superior Court CIVIL ACTION WORCESTER, SS.
December 8, 1998
MEMORANDUM OF DECISION AND ORDER ON DEFENDANT’S MOTION TO DISMISS OR, IN THE ALTERNATIVE, MOTION FOR SUMMARY JUDGMENT
TOOMEY, JUSTICE.
This matter arises out of a claim instituted by plaintiffs, Tyson H. Brady, Sr. and Diedre A. Brady (collectively “the Bradys”), against defendant, Curtis Universal Joint Company, Inc. (“Curtis”), for failure to honor a guaranty executed by the parties, breach of contract and violations of G.L. 93A. Curtis now requests that this Court dismiss the Bradys’ action for failure to state a claim or, in the alternative, grant Curtis summary judgment.[2] For the following reasons, Curtis’s motion is DENIED.
BACKGROUND
In 1991, the Bradys, who owned a machine shop business in East Douglas, Massachusetts named Danlyn Machine Co., Inc. (“Old Danlyn”), contracted with Curtis to sell the assets of Old Danlyn. The parties structured the transaction as an asset sale, but it also included the sale of the real estate on which the business was operated (“the East Douglas property”) and included employment agreements, covenants not to compete and a bonus pool. At the time of the closing, Curtis formed a new corporation, Danlyn Machine Co., Inc. (“New Danlyn”), a wholly owned subsidiary of Curtis.
As part of the Final Purchase and Sale Agreement, Curtis agreed to assume all the obligations of Old Danlyn. Included among the obligations was a loan the Bradys had obtained from the Small Business Administration (“SBA”). The Bradys had secured that loan with a personal guarantee and a second mortgage on their residence. Having learned of the sale agreement, the SBA agreed that Curtis could assume Old Danlyn’s loan. However, the SBA also required that the Bradys remain in place, as “existing guarantors,” on the Old Danlyn loan. In addition, the SBA insisted that Curtis provide its own corporate guaranty for Old Danlyn’s obligations. In response to these requirements, Curtis provided the Bradys with a Guaranty that it would faithfully perform all of its obligations set forth in the Final Purchase and Sale Agreement, to wit, assume all Old Danlyn’s debts and liabilities.[3] Curtis’s Guaranty was secured by a mortgage to the Bradys on Curtis’s property at 4 Birnie Avenue in Springfield, Massachusetts (“the Springfield Mortgage”).[4]
Pursuant to the Final Purchase and Sale Agreement, Mr. Brady began working for New Danlyn, however, on April 15, 1992, the parties’ terminated their working relationship. Mr. Brady, New Danlyn and Curtis executed a General Release and Agreement (“General Release”) which, among other things, terminated the effect of those documents described in the Final Purchase and Sale Agreement, i.e. the employment contract, non-compete agreement and bonus pool. In addition, the General Release required Mr. Brady to discharge the mortgages on the East Douglas and Springfield properties simultaneously with Curtis’s discharge of the SBA mortgage on the Bradys’ residence.
Curtis’s discharge of the SBA mortgage was, according to the terms of the General Release, to be conducted in conformity with the guidelines set forth in a subsequent provision of the General Release. That provision recited that New Danlyn would undertake efforts to have the SBA mortgage released from the Bradys’ personal residence. Furthermore, the parties agreed that the General Release would apply to all “unknown and unanticipated events or incidents and damages resulting from the employment of [Mr. Brady] by [New Danlyn] as well as those now disclosed.”
In 1993, Curtis made some efforts to obtain a release of the SBA mortgage on the Bradys’ property. Its efforts were, however, unsuccessful. When Curtis’s attorney attempted to negotiate the release of the personal mortgage on the Bradys’ home, the SBA viewed the personal mortgage and Curtis’s corporate guaranty as separate transactions. Accordingly, the SBA refused to release the mortgage on the Bradys’ residence.
In May of 1993, New Danlyn ceased operations. In March, 1994, the East Douglas property, on which New Danlyn had operated, was sold. Soon after, Mr. Brady released the mortgage on the East Douglas property, notwithstanding that the SBA mortgage remained encumbering his personal property.
In December 1994, the SBA notified the Bradys that the Old Danlyn note had an outstanding balance. In response, the Bradys requested that Curtis honor its February, 1991 Guaranty favoring the Bradys. The Bradys discovered that the SBA had released Curtis from its corporate guarantee of the loan to Old Danlyn in exchange for a payment of $22,500.00. That release left the Brady’s exposed to an SBA claim of more than $100,000 and the possible foreclosure of the mortgage on their home. Curtis refused to honor the Guaranty, claiming that its release agreement with the SBA absolved it of any responsibility to the Bradys. On May 12, 1997, the Bradys refinanced their home in order to pay the amount due to the SBA on the Old Danlyn note.
In March, 1998, the Bradys instituted suit against Curtis for failing to honor the Guaranty, breach of contract and violations of G.L. 93A. Simultaneously, the Bradys commenced proceedings to foreclose on Curtis’s Springfield property. Curtis initiated a separate action in the Hampden Superior Court to seek a preliminary injunction to enjoin that foreclosure. The Court, Doerfer, J, issued an order prohibiting the Bradys from foreclosing on the property unless and until they are successful on their claims in the suit presently before this Court.
DISCUSSION
Summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Cassesso v. Commissioner of Correction, 390 Mass. 550, 553 (1976). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue and of establishing “that the summary judgment record entitled the moving party to judgment as a matter of law.” Pederson v. Time, Inc., 404 Mass. 14, 17 (1989). A party moving for summary judgment who does not bear the burden of proof at trial must demonstrate the absence of a triable issue either by submitting affirmative evidence negating an essential element of the nonmoving party’s case or by showing that the nonmoving party is unlikely to submit proof of that element at trial. Flesner v. Technical Communications Corp., 410 Mass. 808, 809 (1992); Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991). The nonmoving party then must respond by articulating facts which establish the existence of a genuine issue of material fact. Pederson, 404 Mass. at 17. At bar, Curtis suggests that there are no such triable issues with respect to its having been relieved of its obligations under the Guaranty.
All claims in this case depend upon whether or not the General Release discharged Curtis’s obligations under the Guaranty executed by Curtis in the Brady’s favor. But, the language of the General Release demonstrates that genuine issues of material fact exist with respect to whether or not the General Release did indeed relieve Curtis of its commitments imposed by the Guaranty. For example, Paragraph 3(a) of the General Release provides that “[t]he mortgages on the Springfield property and the East Douglas property will be discharged simultaneously with the discharge of the SBA mortgage on [Mr. Brady’s] residence as set forth in Paragraph 4D hereof” while Paragraph 4D recites that:
[Curtis] shall undertake efforts to have the mortgage held by the U.S. Small Business Administration released from [Mr. Brady’s] personal residence. As this aspect of the transaction is beyond the sole control of the parties to this Agreement, effectuating such a release is not required by this Agreement. The mortgages held by [Mr. Brady] and Mrs. Brady on the Springfield property and by [Mr. Brady] on the East Douglas property and the security interest held by [Mr. Brady] will be discharged by [Mr. Brady] and Mrs. Brady simultaneously with the discharge of the U.S. Small Business Administration mortgage.
The directives of the two paragraphs demonstrate the ambiguity concerning the obligations undertaken by the parties. In one instance, Paragraph 3(a) of the agreement requires Curtis to discharge the SBA mortgage and, in another, Paragraph 4D recites that Curtis must only use its best efforts to effectuate a discharge. That ambiguity creates a genuine issue of material fact.
Curtis dedicates much of its brief to discussing the language of the General Release found in the first paragraph of the section entitled “General Mutual Release.” That section expresses that Mr. Brady does “release, and forever discharge [Curtis] . . . from any and all past, present or future claims . . . and causes of action, . . . arising from any act or occurrence up to the present time and particularly with respect to the subject matter of the Documents.” Curtis relies upon that language to argue that Mr. Brady released his right to enforce the Guaranty and bring causes of action based on it. However, genuine issues of material fact exist regarding whether or not a waiver by Brady of his right to sue was, in the circumstances, intended by the parties to the General Release.
Finally, the General Release asserts that Mr. Brady released Curtis from any obligations incurred “with respect to the subject matter of the Documents.” The term “documents” is defined in the Background section of the General Release as those writings “described in the Final Purchase and Sale Agreement.” The Final Purchase and Sale Agreement contains writings dealing with, among other things, the employment contract and covenant not to compete, but the Agreement contains no reference to the Guaranty. That omission suggests a genuine issue of material fact as to the reach of the discharge contemplated by the General Release.[5]
Because it is unclear, for all the aforestated reasons, whether or not the General Release discharged Curtis’s obligations under the Guaranty, genuine issues of material fact remain and, consequently, summary judgment is not appropriate.
ORDER
It is hereby ORDERED that defendant’s motion for summary judgment is DENIED.
_____________________________ Daniel F. Toomey Justice of the Superior Court
DATE: December, 1998