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Cianchette v. Cianchette

Superior Court of Maine, Cumberland

January 12, 2018

TUCKER CIANCHETTE, et al, Plaintiffs
v.
ERIC CIANCHETTE, et al., Defendants

          Attorneys for Plaintiffs: Timothy Norton, Esq., Graydon Stevens, Esq., Jennifer Archer, Esq., Kelly Remmel & Zimmerman

          Attorneys for Defendants: Lee Bals, Esq., Jennie Clegg, Esq., George Marcus, Esq., David Johnson, Esq., Marcus Clegg & Mistretta

          ORDER

          THOMAS D. WARREN, JUSTICE

         This case arises from an attempt by Tucker Cianchette to buy out the interests of his father and stepmother, Eric Cianchette and Peggy Cianchette, in PET LLC, a family corporation that owns the Casco Bay Ford car dealership.[1] Tucker contends that Eric and Peggy breached an agreement to sell their interests in the LLC and that, after a second purchase and sale contract was agreed, Eric and Peggy breached that agreement as well. Tucker also has asserted claims against Eric and Peggy in connection with the management of PET LLC.

         For their part, Eric and Peggy respond that they had the right to terminate the purchase agreement, that no enforceable subsequent agreement was reached, and that Tucker's other claims fail as a matter of law. Eric and Peggy have also asserted counterclaims against Tucker on their behalf and on behalf of PET LLC for alleged breaches of Tucker's obligations to the LLC.

         Before the court are (1) a motion for summary judgment by Eric, Peggy, PET LLC, and Cianchette Family LLC seeking dismissal of all of the claims asserted in the complaint filed by plaintiffs Tucker and CBF Associates LLC, (2) a motion for summary judgment by Tucker seeking dismissal of all of the counterclaims asserted by Eric, Peggy, and PET LLC, (3) two motions to strike filed by defendants, and (4) two motions to strike filed by plaintiffs.

         The court will first address the various motions to strike.

         Defendants' Motions to Strike

         Defendants are seeking to strike Tucker's November 13, 2017 affidavit and Sean Rankin's November 10, 2017 affidavit, both submitted in opposition to defendants' motion for summary judgment.

         Motions to strike are not permitted in connection with summary judgment. See M.R.Civ.P. 56(i). By its terms the rule applies to motions seeking to strike assertions, denials or qualifications in Rule 56(h) statements. In the court's view this rule should not be circumvented by instead moving to strike underlying affidavits. The court will, however, review defendants' arguments in determining whether and to what extent the court can consider the contents of Tucker's November 13, 2017 affidavit and Sean Rankin's November 10 affidavit in connection with the pending motions for summary judgment.[2]

         With respect to defendants' objections to the Rankin affidavit, some of the statements objected to are hearsay or appear to lack foundation but are nevertheless admissible not for the truth but for Rankin's state of mind and as a basis for Rankin's statements that Androscoggin Savings Bank was willing to finance Tucker's purchase because various financing contingencies had either been met or had been waived by the Bank. The court will, however, disregard Rankin's assertion as to the state of Eric and Peggy's knowledge and his assertions that Eric and Peggy seemed unwilling to close and that the sellers' counsel was unresponsive prior to the closing. The Rankin affidavit does not provide any foundation for those statements.[3]

         With respect to defendants' objections to Tucker's November 13 affidavit, the court agrees that some of his statements lack foundation or appear to be based on hearsay. However, to the extent that his statements are based on written communications that are annexed to his affidavit, the court understands that there is an agreement between the parties that all the written communications are admissible and the court will therefore consider the written communications even if Tucker's knowledge of some of those communications may be second-hand. For purposes of summary judgment, the court will disregard Tucker's statements as to his belief that Eric and Peggy never intended to sell and only rehired him as a subterfuge because those statements represent inferences on his part. However, based on the other evidence offered by plaintiffs, the court concludes that there is sufficient evidence from which a trier of fact could draw those inferences. See, e.g., Plaintiffs' November 13, 2017 Statement of Additional Material Facts submitted in opposition to defendants' motion for summary judgment ¶¶ 235-36, citing Peggy Deposition at 234-35.

         Plaintiffs' Motion to Strike

         Plaintiffs are seeking to strike the November 20, 2017 affidavit of George Marcus and a "Statement of Additional Undisputed Material Facts" appended to defendants' Reply Statement of Material Facts.

          With respect to plaintiffs' motion to strike the affidavit of George Marcus, the principle that parties should not be able to circumvent Rule 56(i) by moving to strike an underlying affidavit is equally applicable. As with defendant's motion to strike, however, the court will nevertheless review plaintiffs' arguments in determining whether and to what extent it can consider assertions in the Marcus affidavit.

         The problem with the Marcus affidavit is that the court understands that the parties had agreed that Marcus would not be a witness at the trial and accordingly there is a serious question whether defendants are entitled to rely on his affidavit as admissible evidence at the summary judgment stage. Plaintiffs are entitled to raise this issue.[4]

         There is, however, no dispute that the emails and other communications attached to the Marcus affidavit are admissible according to the parties' agreement. At least two of those are already in the summary judgment record. Exhibits S and V to Tucker's November 13, 2017 affidavit. As far as the court can tell, the only additional information in the Marcus affidavit consists of assertions with respect to telephone calls with counsel for Tucker on December 29, 2015, January 26, 2016, and January 28, 2016 and a voicemail message left for Tucker's counsel on January 27, 2016. The telephone call to Tucker's counsel on January 26 is referred to in Exhibit M to Tucker's November 13, 2017 affidavit, the content of the January 28 telephone call is set forth in Marcus Exhibit C, and the January 27 voicemail is referred to in Exhibit S to Tucker's November 13, 2017 affidavit. The court will therefore consider the Marcus exhibits and will disregard the remaining assertions in the Marcus affidavit.[5]

         Plaintiffs' motion to strike the statement of additional material facts appended to defendants' reply statement is granted. Rule 56(h)(2) provides that a party opposing summary judgment may submit a statement of additional material facts that the opponent contends raise disputed issues for trial. Rule 56 nowhere authorizes a moving party to submit additional material facts after opposition papers have been filed and the party opposing summary judgment no longer has any further opportunity to respond.

         Summary Judgment

         Summary judgment should be granted if there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. In considering a motion for summary judgment, the court is required to consider only the portions of the record referred to and the material facts set forth in the parties' Rule 56(h) statements. E.g., Mahar v. StoneWood Transport, 2003 ME 63 ¶ 8, 823 A.2d 540. The facts must be considered in the light most favorable to the non-moving party. Id. Thus, for purposes of summary judgment, any factual disputes must be resolved against the movant. Nevertheless, when the facts offered by a party in opposition to summary judgment would not, if offered at trial, be sufficient to withstand a motion for judgment as a matter of law, summary judgment should be granted. Rodrigue v. Rodrigue, 1997 ME 99 ¶ 8, 694 A.2d 924.

         The Underlying Agreements

         Central to the claims in this action are two agreements. The first is the PET LLC Agreement, appended as Exhibit A to the complaint. That agreement was formed between Peggy, Eric, and Tucker (PET stands for "Peggy Eric Tucker") as the vehicle for their purchase of the Casco Bay Ford car dealership in 2013. Eric owned a 34% interest in PET LLC, and Peggy and Tucker each owned a 33% interest. Peggy was the designated Manager of the LLC.

         The second agreement is a November 16, 2015 purchase and sale agreement for the sale of Eric and Peggy's membership interests in PET LLC to Tucker. This agreement (the "Membership P&S") is appended to the complaint as Exhibit B. If consummated, it would have transferred sole ownership of the Casco Bay Ford dealership to Tucker.

         The November 16, 2015 Membership P&S required Tucker to make a $150, 000 nonrefundable deposit by November 18, 2015 and provided in section 2.5 that the closing "shall take place on January 31, 2016." Section 2.5 further provided as follows

Notwithstanding the foregoing, provided that the Buyer has pursued completion of the contingencies contained in section 6(a) and further provided that the satisfaction of such contingencies are reasonably in progress, Buyer shall have the right to extend the Closing Date for not more than thirty (30) days by giving written notice of such extension to Sellers prior to the initial Closing Date, provided that the purchase price shall increase by $1, 000 for each calendar day the Closing does not occur after January 31, 2016.

         Section 4.5 of the Membership P&S provided that Tucker would furnish certain details of the financing for the purchase to Eric and Peggy and further stated:

If Sellers, in their sole discretion, are not satisfied that the Buyer has sufficient funding to close on this transaction, the Sellers may terminate this contract without penalty by providing Buyer with written notice of termination on or prior to December 15, 2015.

         On December 15, 2015 - the deadline set forth in section 4.5 above - Eric, Peggy, and Tucker executed an agreement titled "Purchase and Sale Contingency Agreement" that extended Eric and Peggy's right to terminate the contract pursuant to section 4.5 to January 15, 2016. A copy of the Purchase and Sale Contingency Agreement is annexed to Tucker's November 13, 2017 affidavit as Exhibit G.[6]

         Article 6 of the November 16, 2015 Membership P&S set forth certain contingencies applicable to the obligations of both Tucker as the Buyer and Eric and Peggy as the Sellers. Among other things, it provided:

Sellers' obligations under this Agreement are contingent upon Buyer having obtained from Ford Credit the release of any personal guarantees . . . given by either of the Sellers in regard to Casco Bay Ford's floor plan financing facilities and any other personal guarantees which either Seller has given in regard to PET or Casco Bay Ford to any person, including but not limited to vendors, Ford Motor Company, governmental entities, and other credit providers.

         Membership P&S section 6.2. Another provision of the agreement, section 6.3, provided that the obligations of both Buyer and Seller were contingent upon the closing of a separate agreement by which the car dealership real estate, separately owned by Cianchette Family LLC, [7] would be purchased by Tucker or his assignee. The Real Estate Purchase and Sale agreement, dated November 17, 2015 and executed by Tucker and by Eric as Manager of Cianchette Family LLC, is annexed to the complaint as Exhibit C. It also called for a closing by January 31, 2016. Tucker assigned the real estate contract to CBF Associates LLC.

         Plaintiffs' Claims for Breach of the November 16, 2015 Membership P&S Agreement and November 17 Real Estate Purchase Agreement

         Tucker claims that defendants breached the November 16 Membership P&S Agreement and the November 17 Real Estate purchase and sale agreement by failing to close even though Tucker had met or was prepared to meet all of the purchase conditions. These claims are the subject of counts I and IV of the complaint.

         Defendants' motion for summary judgment on these claims is based on the contention that Eric and Peggy had a right to terminate the agreement under sections 4.5 and 6.2 as set forth in a January 28 letter from their counsel stating that Eric and Peggy were exercising their right to terminate "effective immediately." Tucker Ex. V.

         Section 4.5

         The first issue with respect to defendants' right to terminate under section 4.5 is whether that right had been extended beyond January 15 (the deadline as extended under the December 15, 2015 Purchase and Sale Contingency Agreement referred to above). On that issue the undisputed facts demonstrate that in exchange for not exercising their right to terminate at that time, defendants' counsel sent a proposed Amendment to the Purchase and Sale Contingency Agreement extending the deadline to February 15, which was signed by Tucker and which Tucker's counsel treated as binding on Eric and Peggy as well as on Tucker. See Tucker Ex. H; Marcus Ex. D (asking for confirmation that upon receipt of the extension Eric and Peggy would not invoke section 4.5).

         Although it appears that Eric and Peggy never signed Exhibit H, the court concludes that under the circumstances it is undisputed that Tucker knew that Eric and Peggy were not merely making a proposal but were making a binding offer which, once accepted, was sufficient to modify the deadline under section 4.5. See, e.g., RDP Technologies Inc. v. Cambi AS, 800 F.Supp.2d 127, 141 (D.D.C. 2011). This is true notwithstanding the existence of a separate provision in the Membership P&S that no modifications of the agreement may be made except in a writing signed by both parties. See Granger Northern Inc. v. Cianchette, 572 A.2d 136, 139 (Me. 1990) (contract provision permitting only changes in writing may itself be subsequently modified by the parties).

         Accordingly, as of January 28 Eric and Peggy still had the right to terminate under section 4.5. In addition, the court interprets the language of section 4.5 ("If Sellers, in their sole discretion, are not satisfied that the Buyer has sufficient funding ...") as allowing Eric and Peggy to terminate based on a subjective belief that Tucker's financing was inadequate. If at all possible, contract language should be interpreted to provide that the standard in determining whether a condition has been satisfied is that of an objectively reasonable person. Restatement 2d of Contracts § 228; Pearce Associates LLC v. Perry, 2008 ME 181 ¶ 17, 960 A.2d 1166. In this instance, however, the court is constrained to find that the unambiguous language provides Eric and Peggy with a right to terminate based on a subjective belief that Tucker's financing was inadequate.[8]

         However, there is still a disputed issue for trial on Eric and Peggy's right to terminate under section 4.5. Although they were entitled to terminate based on a subjective belief that the financing was inadequate, there is a strong argument that they were required to exercise that clause in good faith. See Restatement 2d of Contracts § 228 cmt. a. Even though Maine does not generally recognize an implied duty of good faith in contract cases, none of the relevant decisions have turned on contractual provisions that allowed one party to exercise certain rights based on a subjective belief. See, e.g., Camden National Bank v. Crest Construction Inc., 2008 ME 113 ¶ 18, 952 A.2d 213; Haines v. Great Northern Paper Inc., 2002 ME 157 ¶ 15, 808 A.2d 1246.[9]

         In Diversified Foods Inc. v. First National Bank, 605 A.2d 609, 612-14 (Me. 1992), the Law Court concluded that a provision allowing the defendant banks to determine the inventory eligible for financing in their "sole discretion" did not require objective good faith. Under the UCC, subjective good faith was required, but there was no evidence that the banks had not acted for valid business reasons. 605 A.2d at 614. In First NH Banks Granite State v. Scarborough, 615 A.2d 248, 250-51 (Me. 1992), the Court noted that it had not extended the UCC's requirement of "objective good faith" beyond its statutory scope but it appeared to consider the issue of subjective good faith in noting that there was no evidence in the case that the Bank had acted "without honesty in fact."

         Where a contract provision grants one party a discretionary right to terminate for a specified reason, therefore, it follows that the right to terminate based on a subjective belief must be exercised in good faith.[10] Moreover, in other contexts Maine law recognizes that discretion can be abused and that where discretion has been granted, it must be exercised in good faith. E.g., Gay v. Gay's Supermarkets, Inc., 343 A.2d 577, 580 (Me. 1975); Wight v. Mason, 134 Me. 52, 59, 180 A. 917, 920(1935).

         Even bypassing whether a subjective good faith requirement is implicit in section 4.5, that section gave Eric and Peggy the right to terminate if they were "not satisfied that the Buyer has sufficient funding." They did not have the unilateral right to terminate for other reasons. Allowing Eric and Peggy to terminate even if they did not believe Tucker's funding was inadequate would rewrite the contract by converting section 4.5 into a right to terminate at any time for any reason. As a result, if Eric and Peggy terminated not because they were dissatisfied as to the sufficiency of Tucker's financing but for another reason entirely, they would not have been entitled to invoke section 4.5. In part, this ties back into the issue of good faith - because evidence that Eric and Peggy did not have a good faith belief that Tucker's financing was inadequate would support an inference that they improperly decided to terminate for other reasons.

         In this case, there is evidence which, construed in Tucker's favor, would allow a jury to find that termination was not based on concern about financing. The day before the termination notice was sent, counsel for Eric and Peggy informed Tucker's counsel that termination would be invoked unless Tucker agreed to amend the purchase and sale agreement in various respects. Tucker Exhibit S. The subsequent notice of termination (Tucker Ex. V) specifically references Tucker's unwillingness to accept those amendments, rather than concern about financing, as precipitating the termination notice.[11] Moreover, in the negotiations toward a subsequent agreement after the failure of the November 16, 2015 Membership P&S, there is evidence that Eric and Peggy focused exclusively on obtaining further releases and did not raise any concerns with respect to financing. See Tucker Ex. Y.

         Tucker has also offered evidence sufficient to create a disputed issue of fact on his claim that Eric and Peggy never intended to sell their membership interests and were just leading Tucker on, eventually using section 4.5 as an excuse to cancel. This follows both from certain deposition testimony, see Plaintiffs' November 13, 2017 SAMF ¶¶ 235-36, and from the entire series of events, which, construed in the light most favorable to Tucker, could be found to support an inference that Eric and Peggy never planned to sell and were using the proposed sale as a method to divest Tucker of his 33% interest in PET LLC.

         Finally, there is also evidence that Eric and Peggy did not have any basis for a good faith belief that Tucker's financing was inadequate. The summary judgment record contains evidence that prior to the termination notice, counsel for Eric and Peggy was provided with information that the SB A had approved a guarantee of Androscoggin Bank's loan to Tucker and that financing was in place. E.g., Plaintiffs' SAMF ¶¶ 93, 124, 125, 128, 136. Knowledge of counsel may be imputed to the client. Orlandella v. O'Brien, 637 A.2d 105, 106 n.1 (Me. 1994). This is certainly true when the lawyer who had received the information with respect to financing is also the lawyer who communicated the January 28 termination notice.

         As far as the court can tell, the only arguably pertinent information that was not communicated to Eric and Peggy or their counsel was that Androscoggin Bank was prepared to proceed without any subordination agreement from Ford. However, considering the facts in the light most favorable to Tucker, a jury could find that Eric and Peggy's reliance on that issue is an after-the-fact attempt to justify a termination made for other reasons, given evidence that they never attempted to make any inquiry whether the subordination issue actually presented a financing problem. Plaintiffs' November 13, 2017 SAMF ¶ 142.

         Absence of Necessary Releases

         As noted above, section 6.2 of the Membership P&S made the sale contingent on obtaining the release of personal guarantees given by Eric or Peggy to Ford Credit with respect to Casco Bay Ford floor plan facilities and any other personal guarantees given by Eric or Peggy to any other entity in connection with Casco Bay Ford. It appears to be undisputed that Eric had given a personal guarantee to Ford Credit with respect to Casco Bay Ford's floor plan facility, and the summary judgment record contains evidence that a draft release from Ford Credit was provided to defendants in December 2015. Plaintiffs' November 13, 2017 SAMF ¶ 156.

         The draft release from Ford Credit was only a release as to any future obligations that might arise from the date of the closing, not a release of obligations that might have existed prior thereto. See Defendants' October 23, 2017 SMF ¶ 23, citing Talia Ex. 5. In contrast, section 6.2 of the Membership P&S called for the release of "any personal guarantees given ... in regard to Casco Bay Ford's floor plan financing facilities" (emphasis added). The court interprets that language as calling for a complete release. However, there is evidence that prior to the closing neither Eric nor Peggy nor their counsel ever raised that issue or suggested that the draft Ford Credit release provided in December was inadequate. Plaintiffs' November 13, 2017 SAMF ¶¶ 161-62

         On January 27, 2016 counsel for Eric and Peggy informed counsel for Tucker that Eric and Peggy were prepared to terminate unless Tucker agreed to certain amendments, one of which involved releases "from Ford and Androscoggin." Tucker Exhibit S. The request for a release from Androscoggin was new. Whether the request for a release from "Ford" was intended to mean Ford Credit is uncertain. Counsel for Tucker appears to have understood that reference to mean Ford Motor Co. instead of Ford Credit, and counsel for Eric and Peggy did not disabuse him of that understanding. See Tucker Exs. T, V. There is no evidence that either Seller had given any personal guarantees to Ford Motor Co., and therefore it does not appear that a release from Ford Motor Co. was required under section 6.2 of the Membership P&S.

         The only specific basis given in Eric and Peggy's January 28 notice of termination (Tucker Ex. V) was the failure to obtain personal releases from "Ford" - again creating uncertainty as to whether Eric and Peggy were relying on something that was not a condition of the purchase and sale agreement.

         Regardless of what was stated in the notice of termination, Eric and Peggy now rely on Tucker's failure to obtain a complete release from Ford Credit. Although they are correct that the required release had not been obtained as of January 28, they are not entitled to summary judgment on that basis. This is because - contrary to the apparent assumption in the January 28 notice of termination - they had no contractual right to terminate the contract before closing based on inadequacy of releases. Only section 4.5 allowed Eric and Peggy to exercise a right of termination - if based in good faith on concerns about Tucker's financing - at any point before the closing. Section 6.2, including the requirement of a complete release from Ford Credit, was a contingency which had to be satisfied at the closing, but it did not provide for a right of early termination.

         The non-occurrence of a contract condition or contingency may discharge obligations under a contract but only "when the condition can no longer occur." Restatement 2d of Contracts § 225(2). In this case it appears that a satisfactory Ford Credit release could not have been obtained by the January 31 closing deadline. However, Tucker had the right to extend that deadline by 30 days under section 2.5 - a provision that expressly referenced obtaining releases under section 6.2. Tucker contends that he would have exercised his right to extend the closing deadline if he had been advised that the Ford Credit release was not satisfactory. Plaintiffs' November 13, 2017 SAMF ¶ 108

         There is evidence that a satisfactory Ford Credit release was later obtained. Id. ¶¶ 169-70. While there may be disputed issues of fact as to whether that release could have been obtained within the 30-day extension period, but see Tucker Ex. Y (suggesting that Ford Credit would need approximately four weeks to process a complete release of Eric's personal guarantee), the facts construed in the light most favorable to Tucker leave open the possibility that the section 6.2 contingency could have been satisfied.

         Accordingly, there are disputed issues of fact which preclude summary judgment for defendants on counts I and IV of the complaint based on either section 4.5 or section 6.2 of the Membership P&S.

         Plaintiffs' Claims for Breach of Subsequent Contract for the ...


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