THE JOSEPH A. CARDILLO REVOCABLE TRUST and JOSEPH A. CARDILLO v. CHARLES J. CARDILLO, as nominee for CARDILLO BROTHERS NOMINEE TRUST, CHARLES J. CARDILLO, and GILMAN WHITNEY

This complaint was filed on December 16, 2005 seeking partition by sale of certain parcels of land, with the buildings thereon, on East Street in Pittsfield. The original complaint described the subject premises as being known as and numbered 814 East Street. An amended complaint, filed February 13, 2006, added an adjacent parcel known as 798 East Street. I will refer to the two parcels together as "locus" or "the property." Record title to the property stands in the names of brothers Joseph A. Cardillo and Charles J. Cardillo, as tenants in common, even though they carried on a plumbing and heating business on the property under the name of Cardillo & Sons Plumbing and Heating, Inc. Title to the property was always held in the names of the brothers and was never held in the name of the corporation.

At some point in 2005, Charles Cardillo went out on his own and established his own business, taking several Cardillo employees and some of the corporation's tools, vehicles and equipment with him. Charles also charged approximately $20,000 in new tools to the account of the corporation for use in his new business, exacerbating a dispute which had already arisen between them. The brothers attempted to resolve the matter by themselves, such resolution to include dissolution of the corporation and sale of the property. [Note 1] Charles Cardillo stated at the time that he had found a buyer for the property willing to pay $250,000 and the brothers considered selling the property and dividing the proceeds between them. Also discussed was the possibility of Joseph purchasing the interest of Charles in the property.When the negotiations and possible sale did not materialize, Joseph Cardillo filed a complaint in Berkshire Superior Court seeking dissolution of the corporation and appointment of a receiver. Attorney Jonathan Goldsmith of Springfield was appointed by that Court as Receiver on October 6, 2005.

By agreement of the brothers, the property was controlled for a time by the receiver who restricted access thereto while he collected certain material assets of the business and stored them on-site pending distribution. After the receiver relinquished control of the property, Joseph declared that he intended to operate his new business from the building formerly occupied by the corporation, that his business intended to "lease" the premises, and that he intended to pay a rental fee of $1,085 per month. Charles did not consent to this arrangement and filed an emergency motion seeking issuance of a preliminary injunction enjoining Joseph from making use of the jointly-owned property. The parties appeared before the court for a hearing on December 27, 2005, at which time the Court declined to enter the preliminary injunction, finding that Joseph, as a co-tenant, had a right to use and possess the property provided he did not prevent his brother from doing the same.

In view of the fact that the building and the land on which it sits are small, the court then concluded that the property must be divided by sale. The court further determined that the method of partition should be by some manner of sale or conveyance of the whole, rather than by physical division. Accordingly, in a January 10, 2006 order, the court, pursuant to G.L. c. 241, § 12, appointed Jeffrey S. Brown, Esquire, of Agawam, Massachusetts, a member of the bar of the Commonwealth and disinterested person, to serve as commissioner. At that time, the court instructed Mr. Brown to conduct an investigation and prepare a report to the court. The court explained that it would review Mr. Brown's report and would then afford the parties opportunity to assent or object thereto before issuing a warrant or taking other action.

A case management conference was held on March 2, 2006. During this conference, the parties indicated that they intended to file cross Motions for Summary Judgment on the issue of specific performance regarding a prior agreement between the brothers concerning sale of the property, an agreement that had never come to fruition. Based on that and other information provided at the conference, the court instructed the Partition Commissioner to cease his investigation until further notice from the court, hoping that the brothers might still be able to resolve the matter amicably. Subsequently, all settlement negotiations broke down and the court determined it best to proceed with the partition action. Commissioner Brown was so informed and instructed to proceed with his investigation and report.

Over the next year, the parties appeared before the court several times. Among the matters in controversy were the amount of rent being paid by Joseph, discovery issues, motions seeking entry of preliminary injunctions, and complaints alleging contempt of court. By now, it had become quite apparent that the parties were unable to resolve the matter and that trial would be necessary. A pre-trial conference was held on April 5, 2007 followed by a status conference on January 30, 2008. The court made a site visit to the property and conducted a trial limited to the issue of specific performance of the prior agreement at the Berkshire County Court House in Pittsfield on April 15, 2008. The testimony was reported by certified court reporter Heather J. Davis. Three witnesses (Joseph, Charles and Receiver Goldsmith) testified and thirty-three exhibits were introduced into evidence. Both sides filed post-trial memoranda on June 9, 2008.

Based on my observations during the site visit, the testimony and evidence submitted at trial, and the reasonable inferences drawn therefrom, I find the following facts:

1. Beginning in the early 1980s, Cardillo & Sons Plumbing and Heating, Inc. operated a commercial plumbing, heating and HVAC business out of property on East Street in Pittsfield. Joseph A. Cardillo and Charles J. Cardillo, plaintiff and defendant respectively, were formerly principals and equal owners of the business. Title to the property, however, was in the names of Joseph and Charles, as tenants in common, and was never in the name of the corporation.

2. At some time in 2005, Charles Cardillo went out on his own and established his own business at another location in Pittsfield. With him he took some Cardillo employees and a large amount of tools and equipment formerly used by the corporation. He also purchased approximately $20,000 worth of new tools for his business, charging that amount to the corporation account.

3. Not surprisingly, a dispute arose between the brothers concerning ownership of the equipment and real property. The parties attempted to negotiate and resolve the matter between themselves, to no avail. At the time, Charles reported that he knew of someone willing to purchase the property for $250,000.

4. Joseph A. Cardillo filed a Verified Complaint in Berkshire Superior Court on September 9, 2005 seeking dissolution of the corporation. As a result of that action, Attorney Jonathan Goldsmith of Springfield was appointed by the Superior Court as Receiver of Cardillo & Sons Plumbing and Heating, Inc. on October 6, 2005.

5. Under the terms of the Superior Court Order, Attorney Goldsmith was "appointed Receiver of the estate, property, monies, debts and effects of the Corporation." He was authorized and directed to "collect, get in and take charge of" those items and to hold them "subject to further Order of the Court." In addition, he was authorized to employ and engage persons and firms to "maintain, preserve and repair the assets of the corporation."

6. The Order appointing Goldsmith directed Charles and Joseph to "deliver to the Received all of the properties, monies, stock and trade and effects of every kind in nature belonging to or related to the Corporation in their hands, possession or control" and restrained and enjoined them from collecting any of the debts or accounts due to the corporation or in any way encumbering or disposing of them, "except to deliver them to the hands of said Receiver."

7. Upon appointment, Attorney Goldsmith began collecting the assets of the corporation immediately. He took over the lease of the property and changed the locks. Joseph moved his business to another location in Pittsfield and Charles remained at the location to which he had moved his business earlier.

8. The Receiver ordered and directed the brothers to return to his possession at the subject premises all of the corporate vehicles and tools which had been removed. This process continued during October and November, 2005. All vehicles, including automobiles used by the spouses of the two brothers, were returned by November 7, 2005. At that point, Goldsmith noted that he had two options: either he would proceed with an auction sale and sell the corporate assets or, if he was lucky, he would see the brothers reach an agreement, at least with respect to the break up of the physical assets.

9. Attorney Goldsmith leased a locked parking lot in Pittsfield to store the returned vehicles and asked that all tools and equipment be turned over to him by November 7, 2005. This prospect, especially in regard to the return of the tools and equipment, would have resulted in a hardship to both brothers because they needed those items in the operation of their new businesses. Charles and Joseph, of course, realized that they needed the vehicles and tools in order to remain in business and were also aware that a forced sale of the items at public auction would probably bring in less than market value.

10. Because of these prospects, and also because Joseph was finding his leased quarters to be too small, the brothers entered into negotiations regarding a resolution of the issue concerning ownership of the tools and equipment, as well as Joseph's purchase of Charles' interest in the real estate on East Street. Joseph believed at the time that the value of the tools and equipment taken by Charles, and of the tools purchased by Charles on the corporation's account, far exceeded the value of the equipment which had been left for him. At about the same time, Joseph was advised that he would soon have to vacate the property he had leased for his new business.

11. The brothers thereupon attempted to resolve the matter and, with the assistance of counsel, arrived at a compromise in the form of an agreement signed by the brothers but not by the Receiver. Under this agreement, dated November 7, 2005 and containing a performance date of November 17, 2005, Charles would keep the tools he had taken when he left the family business and would also be allowed to keep the new tools he had purchased and charged to the corporation account. Joseph would keep the tools which Charles had left for him along with all the other personal property remaining at the premises. Also under their agreement, the brothers would keep their respective vehicles and Charles would sell his interest in the real estate to Joseph for a fixed sum in the amount of $125,000, one-half the amount of the sum Charles had earlier represented as the market value of the property. [Note 2] In pertinent part, the agreement provided as follows:

"JOSEPH agrees to purchase from CHARLES, and CHARLES agrees to sell and convey to JOSEPH, all of CHARLES' interest in the Properties for a total of $125,000. CHARLES agrees to execute any documentation on or before the closing that may be necessary to relinquish his rights in the real estate in order to effectuate the transfer of the Properties. Notwithstanding the foregoing, JOSEPH shall provide CHARLES with an accounting of the bank account used by the real estate trust and shall, no later than closing, remit to CHARLES one-half of the assets held in the account. The closing for the transfer of title shall be no later than Thursday, November 17, 2005 and time is of the essence of this provision. The deposit shall be forfeited by JOSEPH and shall become the sole property of CHARLES if JOSEPH defaults on his obligations under this Paragraph 3 for any reason other than environmental unsuitability of the Properties for sale and the forfeiture shall be CHARLES' sole remedy against JOSEPH in the event of default. At the closing, but not before, the Receiver shall transfer access and possession of the Properties to JOSEPH." (Emphasis added).

12. The agreement also provided, in a section entitled "Reference", that each party would sign a waiver or any other necessary documentation permitting the other to use Cardillo & Sons as a reference to the Commonwealth of Massachusetts in order that they might bid separately for state work, provided that such reference would be permitted only for work that such party was otherwise licensed to perform by the Commonwealth.

13. The agreement was executed by the two brothers and forwarded to the Receiver for review and execution. Corporate equipment and vehicles could not be released to the brothers without Superior Court approval and the Receiver's consent in any event.

14. Although the amount due to Charles pursuant to the agreement was $125,000, the net amount due, because of deductions for the mortgage and other usual closing items, was $65,307.79. A check in that amount was delivered to Charles' counsel at the law firm of Cain, Hibbard & Myers on November 10, 2005, prior to the agreed upon performance date.

15. Attorney Goldsmith, after reviewing the agreement, declined to sign it, in part because it involved sale of the real property, an item which was not within his duties as Receiver.

He also was concerned that corporation assets may not be sufficient to satisfy its accounts payable and other debts. His delay in deciding whether or not to sign the agreement caused the performance date set forth therein to pass, at which time Charles' counsel returned to Joseph's attorney the deposit check which had previously been sent to him. The brothers and their counsel nevertheless continued to discuss ways to satisfy Goldsmith's concerns and requests. A series of emails went back and forth between their respective legal counsel. Both brothers knew that they needed the specialized tools and vehicles if they were to remain in business and that having them auctioned off was not a viable option. For various reasons, the conditions to closing were not able to be met prior to November 17, 2005 and the closing did not occur, whereupon the deposit check, as noted, was returned that day by Defendant's counsel to Joseph's real estate counsel.

16. When the closing did not take place on November 17, Charles made alternate arrangements, at his expense, to replace his equipment and vehicles in order to keep his jobs going. He finally received the equipment from the Receiver on December 20, 2005. Corporate vehicles were released to him by the Receiver on January 17, 2006.

17. On November 28, 2005, the Receiver filed a motion in Berkshire Superior Court for specific authority to auction the vehicles and tools and to employ an auctioneer to accomplish that task. Goldsmith testified at trial that he was aware that the November 7 agreement had hit some snags and that he filed this motion to "push it along." He still hoped that the brothers could reach some sort of compromise because he realized that an auction sale of the vehicles and tools would probably put both Charles and Joseph out of business. Being realistic, however, he intended to auction off the property once he had authority to do so. The hearing on Goldsmith's motion was scheduled for December 2, 2005 at 2:00 P.M. at the Court House in Pittsfield.

18. Joseph did not provide or tender directly to Charles an accounting of the bank account used by the real estate trust at any time after November 7, 2005 and before December 1, 2005, as required by the agreement. Rather, Joseph told Charles that the information was in the possession of Bill Fenton, who had been acting as the corporation's accountant, and that Charles was free to go to Fenton's office to examine the account information.

19. Charles, Joseph, and their respective counsel appeared at the Superior Court House on December 2, 2005 to either complete a deal or, if necessary, object to the Receiver's motion seeking permission to auction the vehicles and tools. The parties asked Justice Daniel Ford to place the motion on a "second call" while they continued to negotiate.

12. The parties negotiated in the courthouse hallways for several hours, after which the parties agreed to carry out the November 7, 2005 deal. The Receiver agreed to release the tools and vehicles in accordance with that agreement and the parties, in turn, agreed to "lien" the vehicles, thus protecting the Receiver in case there were not sufficient funds available to him to cover any possible shortfalls. Judge Ford noted the agreement on his docket and the parties left the court house believing that a deal had been reached.

21. On January 17, 2006, Charles accepted and retained the tools and vehicles he had taken when he left the family business and the new tools he had purchased with corporate funds. He did not convey his interest in the property to Joseph and still refuses to do so. Joseph retained the vehicles, tools and equipment left for him by Charles when he left the business but has never been granted Charles' interest in the real estate. This litigation followed. The original complaint was filed by Joseph on December 16, 2005 seeking partition, with no mention of the November 7, 2005 agreement. The issue of specific performance of that alleged agreement was not raised until plaintiff filed his amended complaint on February 20, 2006.

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Charles Cardillo's principal defense to Joseph's claim for specific performance of the November 7, 2005 agreement, with its "time is of the essence" clause, is that certain contingencies were not met before the performance date of November 17, 2005. He denies Joseph's claim that the November 17 agreement was "revived" by the parties, their attorneys, and the Receiver in their discussions at the Court House on December 2, 2005.

Charles contends that any such discussions at the eleventh hour were an attempt to arrive at a new agreement. He points out that the Receiver, while party to many discussions with parties and their counsel during this dispute, was not involved in any agreement or discussions involving real property. Charles also notes that the Receiver, in his trial testimony, referred to an agreement dated "January 06", and argues that the reference to that date can only be interpreted to mean that any agreement reached on December 2, 2005 at the Court House was a new agreement, not a revival of the prior agreement. Charles also contends that the Clerk's Notice of December 2, 2005, on which Joseph relies to support his assertion of an agreement reviving the November 17 agreement, states simply that an "Interim Agreement....[had been] reached between the parties". Finally, Charles again avers that the real property was not within the Superior Court's receivership jurisdiction in any event.

Charles also points out that Joseph sought only partition of the property in his original complaint, with specific performance being only an afterthought, and argues that this fact indicates strongly that Joseph's singular intention was to gain possession of the corporate real property, with no mention or relation to the personal property which was being collected and distributed or sold by the Receiver. Simply put, Charles concludes and contends that the November 17, 2005 agreement provided for the simultaneous transfer of assets, cash and real estate on or before a certain date, time being of the essence, and that no evidence was produced to prove that the parties, at any time, agreed to extend the closing date.

Plaintiff, on the other hand, contends that Charles' arguments fail because under Massachusetts law, the controlling fact in a contract dispute is the intention of the parties.

C. Schwanbeck v. Federal-Mogul Corp., 412 Mass. 703 , 706 (1992). Joseph argues that the "clear and undisputed intent" of both he and his brother was to avoid the drastic steps whereby all of their physical assets - tools, equipment and vehicles- would be auctioned off to the highest bidder, leaving them with no ability to continue carrying out their livelihoods. As to the land, Charles had already leased a new location while Joseph, having been ousted from his temporary location, had immediate need of a new place at which to conduct his business.

The parties, after lengthy negotiations by them and their legal counsel, arrived at a resolution in early November of 2005 and reduced it to writing in an agreement dated November 7, 2005. The agreement, signed by Joseph on November 7, 2005 and by Charles on November 9, 2005, contained provisions about which brother would receive or keep certain equipment and vehicles, and provided that Charles would convey the corporate real property to Joseph for the sum of $125,000, with reductions of closing costs and the amount still due on the mortgage. The agreement, as noted, contained a "time is of the essence" clause and included a closing date of November 17, 2005. For various reasons, including the fact that the Receiver had to be involved, the sale of the property did not take place on or before November 17, the date for performance. Nor did the turning-over of certain equipment and vehicles, as called for in the agreement.

Charles contends that the agreement became null and void when the terms of the agreement were not carried out by November 17, 2005. This court does not agree, finding and ruling that the continued negotiations carried on by and between the brothers and their counsel effectively waived that stipulation. A "time is of the essence" clause is a "condition subsequent". McCarthy v. Tobin, 429 Mass. 84 (1999). Parties may waive or acquiesce to the relinquishment of a condition subsequent. McCarthy, 429 Mass., at 89. The record in the present case establishes that both Charles and Joseph continued to negotiate after the alleged condition subsequent to "craft a mutually satisfactory agreement". As stated in Church of God in Christ, Inc. v. Congregation Kehillath Jacob, 370 Mass. 828 , 834 (1976), a waiver may be effected by "words and conduct." Clearly, the evidence in this case proves that Charles, Joseph and their legal counsel continued to negotiate right up to the eleventh hour on December 2, 2005 when the Receiver was to appear before a Justice of the Superior Court seeking authority to auction off the equipment and vehicles, a step which would effectively put both brothers out of business. At that time and place, the parties finally reached an accord, and the equipment and vehicles were distributed in early January of 2006 in order that the brothers could carry on their respective businesses.

Moreover, the Court does not find credible Charles' testimony that the parties did not agree during the December 2, 2005 negotiations to convey the property. Further, I am not persuaded that the Berkshire County Court Clerk's docket entry is proof positive that the parties did not agree to revive the November 7, 2005 agreement; as the defendants' admit, that Court did not have jurisdiction over the disposition of the real estate in that proceeding and therefore had no cause to make notes pertaining to any such disposition of the land. Instead, it is clear that the parties agreed to have the receiver act in accordance with the November 7, 2005 agreement and to privately convey the property, similarly in accordance with that agreement. Accordingly, I find and rule that the November 7, 2005 agreement is currently a valid and enforceable contract.

Charles argues that Owen v. Kessler, 56 Mass. App. Ct. 466 (2002) and Perroncello v. Donohue, 64 Mass. App. Ct. 564 (2005) support his contention that "time is of the essence" clauses are strictly enforced. However, there can be no strict enforcement when the actions of a party create a waiver. Owen, 56 Mass. App. Ct., at 467. In the present case, Joseph was always ready to perform his part of the agreement. He paid the deposit at the time it was due, and agreed to a distribution of corporate assets which appears to this Court to have been more favorable to Charles than to him. Nevertheless, both brothers realized how important it was that they reach an accord, and they did so on December 2, 2005 at the Court House when they agreed to carry out the terms of the November 7 agreement. In the opinion of this Court, it would be inequitable and unjust if Charles were able to renounce the agreement, accept his share of the equipment and vehicles, and then refuse to convey his interest in the real estate to Joseph as he had previously agreed to do.

Joseph seeks specific performance of the agreement and an order that Charles be compelled to convey the subject property to Joseph for a consideration of $125,000. "It is well settled law in this Commonwealth that real property is unique and that money damages will often be inadequate to redress a deprivation of an interest in land." Greenfield County Estates Tenants Association, Inc. v. Deep, 423 Mass. 81 , 88 (1996). Specific performance is also permitted when the buyer reasonably relied on a contract and the continual assent of the selling party and the buyer's position has been changed for the worse. Hickey v. Green, 14 Mass. App. Ct. 671 (1982). Here, Joseph performed his part of the bargain, agreeing to Charles' receiving his share of the personal property. Now Charles objects to Joseph receiving, in fact purchasing, Charles' half interest in the real property at a price suggested by Charles himself. This court finds that the November 7, 2005 agreement was revived by the parties at the Berkshire County Court House on December 2, 2005, and has been partially carried out by the distribution of corporation assets by and between the parties in December of 2005 and January, 2006.

As a result, the argument that the agreement to convey the real estate is unenforceable because it violates the Statute of Frauds is not applicable. G.L. c. 259, § 1. The November 7, 2005 agreement was in writing, expressed the intent to convey the real estate, and was signed by both parties. As this agreement is still in effect, the parties are obligated to perform. Had this prior agreement not existed, the "understanding" arrived at by the parties on December 2, 2005, may not have been sufficient to obligate such conveyance.

Accordingly, I find and rule that Joseph is entitled to enforce the terms of the agreement requiring Charles to convey his interest in the subject property to him, subject only to appropriate closing adjustments for outstanding mortgage obligations, taxes, water and sewer, and other customary closing adjustments.

Judgment to enter accordingly.

Charles W. Trombly, Jr.

Justice

Dated: January 14, 2009