SHIGERU UEDA, individually and as Trustee of the SHIGERU UEDA REVOCABLE LIVING TRUST, and HISAKO UEDA, as Trustee of the HISAKO UEDA REVOCABLE LIVING TRUST v. AYOUB MEHDIZADEH and MAHIN MEHDIZADEH

Introduction

Shigeru Ueda (Shigeru) [Note 1] and Ayoub and Mahin Mehdizadeh (the Mehdizadehs) acquired the commercial property at 150-152 Main Street, Peabody, Massachusetts (property) in 1996, with Shigeru holding a 50% interest and the Mehdizadehs holding an undivided 50% interest. Shigeru later conveyed his 50% interest in equal shares to himself and his wife Hisako Ueda (Hisako), each as Trustees of the Shigeru Ueda Revocable Living Trust (Shigeru Trust) and the Hisako Ueda Revocable Living Trust (Hisako Trust). The property consisted of a commercial strip generating a stream of rental income. In 2015, the Uedas and the Mehdizadehs began discussing the sale of the property. When the Uedas became frustrated with these discussions, they filed this partition action. A receiver and commissioner was appointed who took control of the property and later sold it in March 2018, pursuant to a warrant from the court, for $2,817,500. A portion of the proceeds of the sale and other revenues have been distributed to the parties. At dispute is the Mehdizadehs' having retained all the rents from the property for a period of some years. The Uedas claim that the Mehdizadehs retained the Uedas' share of the rents as a loan to be repaid upon the sale of the property; the Mehdizadehs claim that the rents were a gift from the Uedas. This issue was tried to me, along with whether the Mehdizadehs should be held in contempt for retaining rents in violation of a court order. After trial, I find that the Uedas' share of the rents retained by the Mehdizadehs was a loan from the Uedas, not a gift, and that the Mehdizadehs are obligated to repay that loan plus interest from their share of the sales proceeds. In addition, I find that the Mehdizadehs must repay the Uedas the Uedas's share of the security deposits and last month's rents that the Mehdizadehs failed to segregate in a separate account. Finally, I find that the Mehdizadehs disobeyed the court's order and should be held in contempt. Judgment will enter ordering them to repay the rents they retained in violation of the order along with the Commissioner's fees and the Uedas' attorney's fees arising from that contempt.

Procedural History

The petitioners filed their complaint on June 16, 2017, seeking partition of the property, along with their Motion for Appointment of Receiver. On June 23, 2017, the court issued its Order on Motion for Receiver. On June 29, 2017, the court issued its Interim Order Appointing Gino Ricciardelli, Esq. as Receiver and as Partition Commissioner. The case management conference was held on July 10, 2017.

At a hearing on August 16, 2017, the Commissioner's Request to Approve Engagement of a Property Manager was approved, the Motion for Endorsement of Lis Pendens was allowed, and the court found that the subject property could not be advantageously divided. That day, the court endorsed the Memorandum of Lis Pendens and issued the Warrant to Commissioner. Also that day, the petitioners filed their Verified Complaint for Contempt (Contempt Complaint). The Summons on Complaint for Contempt was issued August 30, 2017. The hearing on the Contempt Complaint was held on September 5, 2017, at which further proceedings on the Contempt Complaint were stayed pending sale of the property.

On November 3, 2017, the Commissioner filed his Request for Approval of Purchase and Sale Agreement, which the court approved on November 10, 2017. The Commissioner's Supplemental Report regarding Sales Proceeds of 150 Main Street, Peabody, MA was filed on March 29, 2018, in which the Commissioner reported the sale of the property and set forth the net proceeds. The petitioners filed their response on April 11, 2018, and on April 12, 2018, the court issued its Order on Partial Distribution. On July 18, 2018, the Assented-to Motion to Allow Partial Distribution to Respondents was filed, and at a telephone hearing on July 26, 2018, the motion was allowed in part. On April 11, 2019, the Commissioner filed his Revised and Updated Statement of Funds on Account as of April 2, 2019.

The pretrial conference was held on May 22, 2019, at which the parties and the court agreed that the trial would be on the issues of the alleged loan to respondents and the Contempt Complaint. The trial was held on July 24, 2019. Exhibits 1-31 were admitted. Testimony was heard from Mahin Mehdizadeh a/k/a Natalie Madison. Deposition testimony of Shigeru Ueda (Shigeru Dep.) and Hisako Ueda (Hisako Dep. Vol. I,) was submitted. The Petitioners' Post-Trial Memorandum and the Respondents' Post Trial Brief were filed on August 30, 2019. Closing arguments were heard on September 11, 2019, and the case was then taken under advisement. This Decision follows.

Facts

Based on the undisputed facts, the exhibits, the testimony at trial, the deposition testimony, and my assessment of credibility, I make the following findings of fact.

1. Shigeru and Hisako have been married for more than 50 years. Shigeru was an anesthesiologist until he retired. Shigeru Dep. 7-9; Hisako Dep. Vol. I, 5.

2. Shigeru and Mahin Mehdizadeh (Mahin) [Note 2] met when they were both anesthesiologist residents at Johns Hopkins. Mahin's husband Ayoub Mehdizadeh (Ayoub) was a urologist. They became professional colleagues, and together purchased an undeveloped property in Las Cruces, New Mexico as an investment. Hisako Dep. Vol. I, 8; Shigeru Dep. 10- 11, 14-15; Mahin testimony.

3. In 1996, Shigeru and the Mehdizadehs decided to obtain an investment property that produced rental income. They sold the Las Cruces property, and Shigeru and the Mehdizadehs purchased the property on October 23, 1996. The property was initially owned with the Mehdizadehs holding an undivided 50% interest and Shigeru holding an undivided 50% interest. On December 18, 2012, Shigeru conveyed his interest in equal shares to the Shigeru Trust and the Hisako Trust, with confirmatory deeds dated June 22, 2017. Exhs. 1 ¶¶ 1-4, 2, 3, 4, 5, 6; Shigeru Dep. 13-19, 43; Mahin testimony.

4. The property was a commercial strip mall, and generated a stream of rental income. Exh. 1, 4; Shigeru Dep. 19.

5. At some time shortly before Shigeru and the Mehdizadehs purchased the property, the Mehdizadehs asked if they could retain all the rental income from the property. They explained to Shigeru that they were experiencing some financial difficulties. Shigeru agreed. Shigeru Dep. 19-21, 24.

6. Shigeru testified that he considered the Mehdizadehs' retention of his share of the rental income as a loan, to be repaid upon the sale of the property. Mahin testified that this was a gift from Shigeru. I credit Shigeru's testimony that this rental income was a loan. The loan agreement was oral; there was no writing. Shigeru Dep. 24-26, 28-29, 37-39, 50-51; Mahin testimony.

7. In 2010, Shigeru, at the urging of Hisako, told Mahin that due to a change in their financial circumstances (Shigeru had retired), the Uedas would need to start taking their share of the rental income from the property. Mahin asked to continue retaining the Uedas' share. In late 2011, Shigeru again told Mahin that the Uedas would need to start taking their share of the rents. Mahin explained that the Mehdizadehs were experiencing financial difficulties and again asked that the Mehdizadehs be allowed to retain the rents. Shigeru told Mahin that he would agree that they could retain the rents as a loan that would be repayable, upon the sale of the property. There is a dispute about who suggested an interest rate of 4%, but I find that interest was first discussed at this time. Mahin and Shigeru considered 4% to be a reasonable rate of interest, and the Mehdizadehs agreed to these terms. Hisako Dep. Vol. I, 11-13, 16-17, Vol. II 43-45, 69-71; Shigeru Dep. 30, 32-33, 37, 39-40, 54; Mahin testimony.

8. In or around late December 2011 or early January 2012, Mahin prepared a schedule showing rents retained beginning in October 2010 and the 4% interest calculated on those amounts, and sent the schedule to Shigeru. Both Shigeru and Hisako made notes on the schedule. Shigeru testified that he prepared the schedule, but I find that he was mistaken. I credit Hisako's testimony that the schedule was prepared by Mahin. It was prepared on and printed out in black and red ink from a computer, which Shigeru does not use. The original schedule was marked as an exhibit, and is folded so as to fit in an envelope, confirming that it was mailed to Shigeru. Exh. 8; Hisako Dep. Vol. I, 13-15, 45-46; Shigeru Dep. 27-28, 31-33, 35-36.

9. Further evidence that the Mehdizadehs retained the Uedas' rental share as a loan, not a gift, is that the Uedas paid state and federal taxes on their share of the rental income during their part ownership of the property, despite not having actually received such income, until the property was sold in 2018. Moreover, as the Uedas testified, and I credit, the amount of money the Mehdizadehs retained was far too large a sum to be a gift. Exh. 1 ¶ 11; Exhs. 12, 13; Hisako Dep. Vol. I, 20-25, Vol. II, 36-38, 41-42; Shigeru Dep. 38-39, 48-49.

10. Finally, in 2015, Hisako sent Mahin a loan schedule, and in November 2016, Mahin received a string of emails between Hisako and the attorney conducting the sale of the property that described the loan. I do not credit Mahin's testimony that she did not receive the emails. At no time did the Mehdizadehs, in response to this email, say to the Uedas that they believed the retention of the rents was a gift. Exhs. 18, 21; Hisako Dep. Vol. II, 13-16, 58-60; Shigeru Dep. 39-40; Mahin testimony.

11. I find, therefore, that the Mehdizadehs agreed that, beginning in October 2010, they would borrow the Uedas' 50% share of the rental income from the property at an interest rate of 4%, to be repaid upon the sale of the property. In accordance with their loan agreement, from October 2010 to July 20, 2017, the Mehdizadehs retained all net income from the property. Exh. 1 ¶ 5.

12. In or about spring 2015, the Uedas and the Mehdizadehs began to discuss selling the property. Exh. 1 ¶ 6; Hisako Dep. Vol. II, 8-9.

13. The property was initially marketed by Ahmad Tabatabai (Tabatabai), a licensed real estate broker working for Coldwell Banker, who was also the property manager and Mahin's brother. Exh. 1 ¶ 7; Hisako Dep. Vol. II, 9; Shigeru Dep. 43-44.

14. The Mehdizadehs did not cooperate in efforts to sell the property, and Tabatabai did not timely communicate with the Uedas about buyers. Eventually, Tabatabai was replaced as broker. Exhs. 1 ¶ 8, 15, 16, 19, 20, 22, 23, 24, 25, 26, 27; Hisako Dep. Vol. II, 11-13, 16-29.

15. On May 24, 2017, the Uedas by their counsel sent a demand letter to the Mehdizadehs, stating that the loan arrangement was terminated and that 50% of the net income from the property should resume being paid to the Uedas, as well as demanding return of the amount borrowed from October 2010 to the date of the demand with interest. Exhs. 1 ¶ 9, 17; Hisako Dep. Vol. II, 29-30.

16. The Mehdizadehs did not respond, and did not pay any rental income to the Uedas following the demand letter. I do not credit Mahin's testimony that Shigeru told her to disregard the demand letter. Exh. 1 ¶ 10; Hisako Dep. Vol. II, 30; Mahin testimony.

17. The court entered its Order on the Petitioners' Motion for Appointment of Receiver (Order) on June 23, 2017. The Order provided in relevant part:

Pending the appointment of a commissioner, the Mehdizadehs are ORDERED to produce to the court and the Uedas documentation of their monthly operating expenses for the [p]roperty. The Mehdizadehs are further ORDERED to hold all July rental payments and not distribute any amounts from such rental payments except for expenses related to management of the [p]roperty, including making continuing payments on the property taxes and insurance. Exh. 1 ¶¶ 12-13.

18. Between the date of the Order and July 16, 2017, a total of $31,996.49 was paid into the property's rental income account. Exh. 1 ¶ 14.

19. Between the date of the Order and July 16, 2017, Ayoub made distributions out of the rental income account in the amount of $31,500.00 (of this amount, $24,000.00 was paid to Ayoub and $7,500.00 was paid to Tabatabai). These distributions violated the Order, and compromised the ability of the Commissioner to pay property taxes as they were due. Exh. 1 ¶¶ 15-17.

20. The Commissioner incurred $1,885.00 in fees and costs related to collecting documents and other information about the property as a result of the Mehdizadehs' failure to produce such information pursuant to the Order. Exh. 1 ¶ 18.

21. The Uedas incurred $2,800.00 in attorney's fees for the preparation, filing, and prosecution of the Contempt Complaint. Exh. 31.

22. The amount of the Uedas' 50% share of the rents that the Mehdizadehs retained between November 15, 2010, and July 20, 2017, including the share that they retained in violation of the Order, is $418,211.73. The interest accrued on these amounts, at 4% per year, calculated per withdrawal, is $84,825.52. Exhs. 9, 10, 11, 14; Hisako Dep. Vol. I, 18-19, Vol. II, 5; Mahin testimony.

23. At the closing for the sale of the property, the Commissioner discovered that Tabatabai had not retained the security deposits and last month's rent of several tenants in a separate account. Rather, the Mehdizadehs had retained those amounts. The Commissioner was obligated to repay the tenants out of the proceeds of the sale. These amounts total $33,620.46. Exh. 28.

Discussion

The Commissioner has sold the property pursuant to the Warrant, and, with the court's assent, has made a partial distribution to the parties. The Commissioner is holding the remains of the proceeds pending the outcome of this trial.

At the time of the sale of the property, the Shigeru Trust and the Hisako Trust each held a 25% undivided interest in the property, and the Mehdizadehs held a 50% undivided interest. Thus, absent any adjustments, the two Trusts would each be entitled to a 25% share of the sale proceeds and the Mehdizadehs would be entitled to the remaining 50% of the proceeds. The Uedas have challenged this default distribution. They allege that the distribution of the proceeds should be adjusted to reflect three obligations of the Mehdizadehs: the alleged obligation to repay the loan of the Uedas' share of the rents, at 4% interest; the obligation to bear the entire cost of the security deposits and last month's rents that the Mehdizadehs failed to maintain in a separate account; and damages, Commissioner's fees, and attorneys' fees associated with the Contempt Complaint. I address each claim in turn.

I. Loan

Based on my factual findings above, I find that the Mehdizadehs retained the Uedas' share of the rent proceeds for the property as a loan from the Uedas, not as a gift. I further find that the terms of the loan were that the Mehdizadehs would pay interest on the retained rents at an interest rate of 4% annually beginning in October 2010, and that the loan would be due and payable upon the sale of the property and would be repaid out of the Mehdizadehs' share of the sales proceeds. The loan has not been repaid. Thus, I find that the Uedas' loan to the Mehdizadehs shall be paid to the Uedas out of the Mehdizadehs' share of the proceeds of the sale of the property.

The Uedas seek repayment only of their 50% share of the rents that the Mehdizadehs retained between November 15, 2010, and July 20, 2017, including the share that the Mehdizadehs retained in violation of the Order. That amount is $418,211.73. The interest accrued on these amounts, at 4% per year, calculated per withdrawal, is $84,825.52. The total due and owing on the loan at the time of sale is $503,037.25. The Commissioner shall be ordered to pay the Uedas $503,037.25 from the Mehdizadehs' share of the sale proceeds in satisfaction of the loan.

II. Security Deposits and Last Month's Rents

At the closing, the Commissioner was obligated to return to the tenants any amounts held for security deposits and last month's rents. It was then discovered that Tabatabai had not retained the security deposits and last month's rent of several tenants in a separate account. Rather, the Mehdizadehs had retained those amounts. The Commissioner was obligated to repay the tenants out of the proceeds of the sale. These amounts total $33,620.46. Since the Mehdizadehs retained the full amount of the repaid security deposits and last month's rents, they should bear the entire amount repaid, rather than have it divided between them and the Uedas. The distribution shall be adjusted so that the Mehdizadehs bear the entire $33,620.46 repaid to the tenants.

III. Contempt Complaint

The Contempt Complaint alleges that the Mehdizadehs should be held in contempt for disobeying the Order, and seeks damages. "Civil contempt proceedings are 'remedial and coercive,' intended to achieve compliance with the court's orders for the benefit of the complainant." Poras v. Pauling, 70 Mass. App. Ct. 535 , 539 (2007) quoting Furtado v. Furtado, 380 Mass. 137 , 141 (1980). "[I]n order to find a defendant in civil contempt there must be a clear and unequivocal command and an equally clear and undoubted disobedience." Larson v. Larson, 28 Mass. App. Ct. 338 , 340 (1990). The plaintiff must prove the defendant's contempt by clear and convincing evidence. "The clear and convincing evidence standard better describes the level of certainty that arises from a finding of 'a clear and undoubted disobedience of a clear and unequivocal command.'" In re Birchall, 454 Mass. 837 , 852–853 (2009). This standard conforms with Federal common law and "clarifies that the disobedience must be clear, but need not be beyond doubt." Id. at 853.

The Order was clear and unequivocal. It provided, in relevant part:

Pending the appointment of a commissioner, the Mehdizadehs are ORDERED to produce to the court and the Uedas documentation of their monthly operating expenses for the [p]roperty. The Mehdizadehs are further ORDERED to hold all July rental payments and not distribute any amounts from such rental payments except for expenses related to management of the [p]roperty, including making continuing payments on the property taxes and insurance.

The Uedas proved by clear and convincing evidence that the Mehdizadehs clearly and undoubtedly disobeyed the Order. Rather than hold the rents as ordered, the Mehdizadehs transferred $31,500 from the rental account--$24,000 to themselves and $7,500 to Tabatabai. Moreover, they did not produce documentation of the monthly operating expenses for the property either to the court or to the Uedas. That the Mehdizadehs may not have had an actual intent to disobey the Order is not relevant; they only, as here, need have clearly and undoubtedly disobeyed the Order. Hoort v. Hoort, 85 Mass. App. Ct. 363 , 367-368 (2014). The Mehdizadehs are hereby held in contempt of the Order.

The final question is what relief the Uedas are entitled to. "'The purpose of civil contempt proceedings is remedial,' and the formulation of the remedy is within the judge's discretion." Eldim, Inc. v. Mullen, 47 Mass. App. Ct. 125 , 129 (1999), quoting Demoulas v. Demoulas Super Markets Inc., 424 Mass. 501 , 571 (1997) (finding lost profits, reimbursement of noncompetition fees, and attorney's fees all appropriate damages as part of civil contempt proceedings). Judicial sanctions in civil contempt proceedings can be employed "to coerce the defendant into compliance with the court's order, and to compensate the complainant for losses sustained." Giannetti v. Thomas, 32 Mass. App. Ct. 960 , 961 (1992) quoting United States v. United Mine Workers, 330 U.S. 258, 303–304 (1947). "As matter of law, the awarding of attorney's fees and costs is an appropriate element of a successful civil contempt proceeding." Demoulas, 424 Mass. at 571.

First, the Uedas are entitled to have the Mehdizadehs repay the Uedas' share of the transferred rents. The Uedas' share of the $24,000 that the Mehdizadehs transferred to themselves is already accounted for in the repayment of the loan described above. The Uedas are entitled to repayment of their 50% share of the $7,500 paid to Tabatabai in violation of the Order, or $3,750. Second, the Commissioner incurred $1,885.00 in fees and costs to collect the documents and other information about the property that the Mehdizadehs' failed to produce in violation of the Order. The Uedas paid one-half of those fees and costs. The Uedas are entitled to payment from the Mehdizadehs of the Uedas' share of the fees and costs, or $942.50.

Finally, the Uedas are entitled to recover their reasonable attorney's fees and costs incurred in the bringing and prosecution of the Contempt Complaint. "The basic measure of reasonable attorney's fees is a 'fair market rate for time reasonably spent preparing and litigating a case.'" Killeen v. Westban Hotel Venture, LP, 69 Mass. App. Ct. 784 , 790 (2007), quoting Fontaine v. Ebtec Corp., 415 Mass. 309 , 326 (1993). This approach to fee calculations is known as the "lodestar" approach, and the results of the calculation "should govern unless there are special reasons to depart from them." Stratos v. Dep't of Pub. Welfare, 387 Mass. 312 , 321–322 (1982).

The fee affidavit of the Uedas' attorney, David Glod of Rich May, P.C., was marked as Exhibit 31. Attorney Glod's billing rate for this matter was $250 per hour. He has been in practice in Boston since 2009. A billing rate of $250 per hour for an attorney of his experience in this market is entirely reasonable. He spent 11.2 hours preparing and filing the Contempt Complaint, communicating with his clients, and appearing in court for hearings on the Contempt Complaint. The total amount billed for this work is $2,800, and is fair and reasonable. He also seeks to recover for the time spent preparing the fee affidavit. He spent 1.3 hours on the fee affidavit, which is reasonable, but billed that time at a new billing rate of $390 per hour. The Uedas may recover the fees for the 1.3 hours spent on the fee affidavit, but only at the $250 per hour billing rate. That amount is $325. Thus, the total amount of attorney's fees which the Uedas may recover for the Mehdizadehs' contempt is $3,125.00. This amount will be paid to the Uedas out of the Mehdizadehs' share of the sales proceeds.

Conclusion

For the foregoing reasons, I find that (a) the Mehdizadehs are obligated to repay a loan from the Uedas, with interest, in the amount of $503,037.25, to be satisfied from the Mehdizadehs' share of the sale proceeds; (b) the Mehdizadehs shall bear the entire cost of the $33,620.46 in security deposits and last month's rents repaid to tenants at the time of the sale of the property; and (c) the Mehdizadehs are held in contempt of the Order, and shall pay to the Uedas $4,692.50 in damages and $3,125.00 in attorney's fees. An order to the Commissioner shall enter directing him (i) to pay to the Shigeru Trust and the Hisako Trust $503,037.25, divided equally between the two trusts, out of the Mehdizadehs' share of the sale proceeds, (ii) to charge the entire cost of $33,620.46 in security deposits and last month's rents to the Mehdizadehs, and adjust their share and the shares of the Shigeru and Hisako Trusts accordingly, (iii) to withhold from distribution to the Mehdizadehs from their share the amount of $7,817.50, representing the damages and attorney's fees awarded under the Contempt Complaint, to be distributed when the judgment in the Contempt Complaint becomes final, and (iv) to submit to the court a proposed distribution consistent with this Order within fourteen (14) days of the date of this Order, after which the parties shall have seven (7) days to file any response.

"Under Mass. R. Civ. P. 65.3(h), since a contempt action is deemed a separate civil action from the underlying action, a separate judgment [must] enter on [a] contempt action in accordance with Mass. R. Civ. P. 58." Columbia Elec. Corp. v. Grillo, 2008 WL 6742725 (Mass. Super. Ct. BLS Oct. 20, 2008). Judgment shall enter on the Contempt Complaint in favor of the Shigeru Trust and the Hisako Trust and against the Mehdizadehs, jointly and severally, declaring the Mehdizadehs in contempt of the Order and awarding the Shigeru Trust and Hisako Trust $4,692.50 in damages and $3,750.00 in attorney's fees.

Order and Judgment Accordingly.