Balzotti Global Grp., LLC v. Shepherds Hill Proponents, LLC

173 N.H. 314

239 A.3d 1009

BALZOTTI GLOBAL GROUP, LLC & a.

v.SHEPHERDS HILL PROPONENTS, LLC & a.

No. 2019-0120

Supreme Court of New Hampshire.

Argued: March 4, 2020

Opinion Issued: May 27, 2020

Devine, Millimet & Branch, Professional Association, of Manchester (Matthew R. Johnson on the brief and orally), for the plaintiffs.

Bussiere & Bussiere, P.A., of Manchester (Emile R. Bussiere, Jr. on the joint brief and orally), for defendant Ernest J. Thibeault, III; Preti Flaherty, of Concord (John M. Sullivan on the joint brief and orally), for defendants Shepherds Hill Development Co., LLC and Shepherds Hill Proponents, LLC.

McLane Middleton, Professional Association, of Manchester (Jeremy T. Walker and Joseph A. Foster ), for defendant Ralph Caruso, joined in the brief of Ernest J. Thibeault, III.

Moriarty Troyer & Malloy LLC, of Braintree, Massachusetts (Thomas W. Aylesworth on the brief and orally), for defendant Shepherds Hill Homeowners Association, Inc.

HICKS, J.

The plaintiffs, Balzotti Global Group, LLC (the Global Group) and Caesar Balzotti, Sr., appeal an order of the Superior Court (Wageling, J.) dismissing their claims against the defendants, Shepherds Hill Proponents, LLC (the Proponents), Shepherds Hill Development Company, LLC (the Development Company), Shepherds Hill Homeowners Association, Inc. (the Association), Ralph Caruso, and Ernest J. Thibeault, III, on the ground that their claims are time-barred. See RSA 508:4, I (2010). We affirm.

I. Facts

The pertinent facts as found or recited by the trial court or as appear in the record follow. The Global Group is a national company owned by Balzotti's wife and son. Balzotti is its CEO and Chairman. Although he does not own the company, he plays a dominant role and oversees each project the company undertakes from planning through completion. Balzotti is a well-resourced, sophisticated businessman, with more than 30 years of experience in construction and real estate. He has completed condominium projects in many states, including Massachusetts and New Hampshire.

The instant lawsuit arises from a failed condominium development project. At some point before 1999, the Development Company obtained approval to construct 400 condominium units in Hudson. After work had begun on the project, the real estate market collapsed, and the Development Company filed for bankruptcy.

Balzotti, Caruso, and Thibeault proposed to reorganize the Development Company so that the project could be completed and creditors could be paid. Their proposal included creating the Proponents, a limited liability company in which Caruso and Thibeault would each have a 40% interest and Balzotti would have a 20% interest. In turn, the Proponents would own the Development Company.

The bankruptcy court accepted the proposal as the reorganization plan in 2000. As part of the bankruptcy plan, the Development Company issued a $714,000 promissory note to Balzotti's wife (the Note) that was guaranteed by the Proponents and Thibeault. According to the plaintiffs, the Note was interest-free if paid within five years. The plaintiffs allege that the bankruptcy plan "contemplated that [the Development Company] would fully complete the [condominium] Development Project such that it could repay the ... Note," and that "[a]s units were sold, proceeds from the sale would be used to pay down the creditors." The bankruptcy plan contemplated that all creditors, including the Note holder, would be paid in full through the development and sale of new condominium units.

On February 25, 2003, the Development Company established the Shepherds Hill Condominium by recording a declaration of condominium with the county registry of deeds. The initial declaration contemplated the construction of 100 units, with the Development Company reserving the right to construct an additional 300 units, for a maximum of 400 units. The declaration created the Association to administer the condominium complex.

The next day, the Development Company filed an amendment to the declaration, which explicitly stated that the Development Company had "until February 25, 2013 to complete conversion of Units located within the convertible land as described in the Declaration of Condominium." See RSA 356-B:3, X (2009) (defining "convertible land" as "a building site which is a portion of the common area, within which additional units and/or a limited common area may be created"), :23, III (2009) (providing that "[n]o [condominium] conversion shall occur after 5 years from the recordation of the declaration, or such shorter period of time ... as the declaration may specify, provided, however, that the time limit contained in the declaration may be extended by not more than 5 years by an amendment to the declaration").

Between February 26, 2003, and July 6, 2009, the Development Company periodically exercised its right to build new condominium units on convertible land. However, by July 6, 2009, only 274 out of the possible 400 units had been constructed.

In August 2010, Balzotti's wife issued a demand for payment on the Note to the Development Company, the Proponents, and Thibeault, asserting that they were in default. Thereafter, Balzotti, through his wife, brought involuntary bankruptcy proceedings against the Development Company, the Proponents, and Thibeault (the bankruptcy defendants). In September 2010, however, the bankruptcy court dismissed the proceedings without prejudice on the ground that, as filed, they did not comply with the bankruptcy code. The bankruptcy court found that the proceedings had been brought in bad faith, in part to pressure Thibeault to pay the Note, and ordered Balzotti to pay attorney's fees and punitive damages.

By 2011, pursuant to the original condominium declaration, the Association was governed by a board elected by the condominium unit owners. Later that year, the Development Company offered to contribute to the Association's capital account and construct certain amenities in exchange for being granted an additional five years to construct all or some of the remaining 126 condominium units. The Association declined the offer.

In response, on February 22, 2013, the Development Company recorded a "Twenty-Fourth Amendment" to the declaration in the county registry of deeds, which purported to create three "Land Only Units" from undeveloped portions of the condominium common area (the Twenty-Fourth Amendment). The Development Company recorded the Twenty-Fourth Amendment without the Association's knowledge or consent. On February 26, 2013, the Association ordered the Development Company to remove its construction equipment from the condominium complex. The Development Company declined, relying upon the Twenty-Fourth Amendment.

The Association subsequently brought a complaint for declaratory and injunctive relief against the Development Company seeking, among other things, a declaration that the Twenty-Fourth Amendment is void and unenforceable. On March 18, 2014, the trial court ruled in favor of the Association. In addition to voiding the Twenty-Fourth Amendment, the court ruled that the Development Company's right to develop convertible land into condominium units (the Development Right) expired on February 26, 2013, and that the undeveloped common land now belonged to the condominium unit owners, subject to the control of the Association. See RSA 356-B:23, III. The Development Company appealed the trial court's decision to this court.

While the appeal was pending, Balzotti orchestrated the reassignment of the Note to the Global Group. According to Thibeault, but disputed by Balzotti, the two met during the summer of 2014 to discuss the Note and the status of the Shepherds Hill condominium development. According to Thibeault, he informed Balzotti about the litigation and the pending appeal at that meeting. In April 2015, we issued an unpublished order affirming the trial court's 2014 decision. See Shepherds Hill Homeowners Association, Inc. v. Shepherds Hill Development Co., LLC, No. 2014-0306, 2015 WL 11071128 (N.H. April 2, 2015).

In February 2018, the plaintiffs sued the Development Company, the Proponents, Caruso, and Thibeault, asserting a number of claims arising out of the Development Company's loss of the Development Right. The plaintiffs also moved to attach the condominium property itself to satisfy any potential judgment. The Association intervened in the lawsuit, objecting to the attachment. In response, the plaintiffs amended their complaint to assert equitable claims against the Association. At a June 2018 hearing, the plaintiffs clarified that they sought only to attach the Development Right, not the condominium property.

Also at that hearing, the plaintiffs informed the court that they again intended to amend their complaint. According to the proposed second amended complaint, the plaintiffs allege that: (1) the Development Company, the Proponents, and Thibeault breached the Note by losing the Development Right; (2) Thibeault and Caruso breached the implied covenant of good faith and fair dealing by failing to preserve that right; and (3) the Association, which they alleged now owns the Development Right, should be equitably estopped from profiting from it.

The defendants argued in various motions that the plaintiffs’ claims are time-barred because they were brought more than three years after the Development Right was lost. See RSA 508:4, I. Invoking the "discovery rule," the plaintiffs argued that their claims are timely, in part, because Balzotti did not know and could not have reasonably discovered that the Development Right had been lost until he learned, in 2016, that we had affirmed the trial court's 2014 decision. See id. (providing that "when the injury and its causal relationship to the act or omission were not discovered and could not reasonably have been discovered at the time of the act or omission, the action shall be commenced within 3 years of the time the plaintiff discovers, or in the...