Vancini v. Martino

179 N.E.3d 1123 (Table)

Paula VANCINI

v.Matthew MARTINO.

20-P-1044

Appeals Court of Massachusetts.

Entered: December 2, 2021.

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

The plaintiff, Paula Vancini, filed this action to dissolve a corporation she formed with the defendant, Matthew Martino. During the pendency of the action, the parties drafted and executed a settlement agreement (agreement or settlement agreement). A dispute regarding the agreement subsequently arose, and both parties filed motions to enforce the settlement agreement. Following a hearing, a Superior Court judge denied Vancini's motion, granted Martino's motion, and entered a judgment of dismissal. Vancini then filed a motion to alter or amend the judgment, pursuant to Mass. R. Civ. P. 59 (e), 365 Mass. 827 (1974). The motion was denied. Vancini now appeals from the judgment and the denial of the motion to alter or amend the judgment. We affirm.

Background. The material facts are undisputed. In 2016, the parties, in an effort to take advantage of a mayoral initiative within Somerville to promote "work-live" arrangements for artists, formed a corporation called Studio Ablisteaso, Inc., each being a fifty percent shareholder.² The sole asset of the corporation was property located at 545 McGrath Highway in Somerville (property), which was purchased by the corporation to be rented as a multiuse residential and artist workspace. Before the property could be rented, it required substantial renovations. To finance the renovations, the parties, as coborrowers in their individual capacities, obtained a home equity line of credit (HELOC) in the amount of $250,000, secured by Vancini's personal residence. Vancini also asserts that she loaned $67,208 to the company (direct loan).³

The parties’ relationship began to deteriorate over time, and in August 2019, Vancini filed a complaint for dissolution of the corporation. Several months after the action commenced, Vancini, through counsel, offered Martino a proposed settlement agreement, which, after negotiations, the parties executed on October 24, 2019. The settlement agreement provides both parties with an option to purchase the other's interest in the corporation, but it gave Martino the first right to exercise the option. The agreement, in relevant part, states:

"3. From the date of delivery by the appraiser of his/her opinion of value, [Martino] would have 60 days ... to buy out [Vancini's] equity and creditor interests ... in the corporation, time being of the essence. The buyout price would be determined as the sum of the following:

"a. One-half the value of the [p]roperty;

"b. The accrued interest, as of the end of the 60-day period, charged by Rockland Trust on the [HELOC] with Rockland Trust Co. that [Vancini] accessed as the source of funds loaned by her to the corporation (this would exclude any interest payments previously paid to [Vancini] on that obligation).

"c. Interest on all advances made by [Vancini] to the corporation from any source other than the HELOC, with such interest to be calculated as the Federal Reserve Prime Rate-minus-1. The parties work cooperatively in good faith to make such calculations. If they cannot agree, they shall jointly designate an accountant to make such calculations.

"d. One-half the average cash balance in the corporation's operating account for the month of October, 2019.

"4. The parties shall thereafter enter into and execute a purchase and sale agreement for the purchase by [Martino of Vancini's] [i]nterests. The P&S shall provide that the corporation shall pay all expenses and liabilities as they accrue, until the closing date."

Of note here, the agreement does not expressly address the parties’ obligations with respect to payment of the principal balance of the HELOC. Nor does it require that the direct loan be paid off prior to the purchase of either party's interest in the corporation.

Shortly after the agreement was executed, Martino's counsel sent an e-mail to Vancini's counsel inquiring whether Vancini would use the proceeds from the sale of her interest in the corporation to pay off the principal balance of the HELOC. Vancini's counsel responded via e-mail, confirming that, upon the buyout of Vancini's interest, she would "seasonably repay her HELOC account in the amount equal to: (a) the amount that was borrowed and (b) any interest on the borrowing charged by her HELOC lender and that is reimbursed to [Vancini] by Mr. Martino in connection with the buyout."

On March 17, 2020, pursuant to the agreement, a court-appointed appraiser delivered the appraisal of the property to the parties, thereby triggering the beginning of Martino's sixty-day buyout option. On April 3, 2020, Vancini, now represented by different counsel, sent an e-mail to Martino's counsel disputing the meaning of certain terms contained in the settlement agreement. As a result, Martino filed a motion to stay his sixty-day buyout period, as well as a motion to enforce the settlement agreement. Vancini cross-moved to enforce the agreement, primarily claiming that the HELOC principal is a corporate liability that, under the agreement, must be satisfied prior to closing. In the alternative, Vancini argued that the parties mistakenly omitted terms addressing the payment of the HELOC principal and the direct loan, and that the agreement should therefore be reformed.

Following a hearing, a Superior Court judge determined that the settlement agreement did not address the parties’ obligations with respect to the principal balance of the HELOC. Specifically, he concluded that the HELOC principal is not included in the formula for calculating the buyout price, and that the HELOC principal is not an accruing liability that must be paid prior to closing. Further, because the parties did not reach an agreement regarding the HELOC principal prior to the execution of the settlement agreement, the judge concluded that there was no basis for reformation. See Caron v. Horace Mann Ins. Co., 466 Mass. 218, 223 (2013). Thus, Martino's motion was allowed, Vancini's was denied, and a judgment of dismissal entered.

Vancini subsequently filed a motion to alter or amend the judgment, arguing that (1) the settlement agreement is not a valid contract because the terms are incomplete; (2) she did not vest authority in her counsel to impose on her all liability for the HELOC principal; (3) the term "all expenses and liabilities" is too indefinite for enforcement; and (4) there was sufficient evidence that Martino materially breached the agreement. The motion was denied. Vancini timely appealed from the judgment, as well as the denial of her motion to alter or amend the judgment.

Discussion. 1. Enforceability of settlement agreement. "A settlement agreement is a contract and its enforceability is determined by applying general contract law." Duff v. McKay, 89 Mass. App. Ct. 538, 541 (2016), quoting Sparrow v. Demonico, 461 Mass. 322, 327 (2012). An enforceable settlement agreement "requires (1) terms sufficiently complete and definite, and (2) a present intent of the parties at the time of formation to be bound by those terms."⁴ Duff, supra at 543, quoting Targus Group Int'l, Inc. v. Sherman, 76 Mass. App. Ct. 421, 428 (2010). Whether contract terms are sufficiently complete and definite is a question of law, which we review de novo. See Duff, supra at 544.

a. Completeness. Vancini argues that the terms of the settlement agreement are not sufficiently complete because the agreement does not address the manner in which the principal balance of the HELOC or the direct loan will be paid. She contends that these are material terms whose absence renders the agreement unenforceable. We disagree.

While the parties must agree on the "significant, material terms" to create an enforceable agreement, "[i]t is not required that all terms of the agreement be precisely specified." Situation Mgmt. Sys., Inc. v. Malouf, Inc., 430 Mass. 875, 878 (2000). Where a term absent from the agreement is a " ‘subsidiary matter[ ]’ that [does] not alter the essential nature of the bargain," there is an agreement that can be enforced. Duff, 89 Mass. App. Ct. at 544, quoting Rosenfield v. United States Trust Co., 290 Mass. 210, 216-217 (1935). The question "whether an absent term renders an agreement fatally indeterminate ... is to be addressed based on the status of things at the time the parties signaled that an agreement had been reached." Duff, supra. Further, "seeming indeterminacy can be resolved by reference to professional norms in the practice area." Id.

Here, we conclude that the parties’ settlement agreement is sufficiently complete and contains the material terms necessary for enforcement. The essential nature of the parties’ bargain was to sell one of the parties’ interest in the corporation to the other, and the settlement agreement spells out exactly what is necessary for that to happen. Specifically, the agreement, which was drafted by Vancini's counsel, calculates the amount that Martino must pay to Vancini to purchase her interest in the corporation by the sum of one-half of the value of the property, the accrued interest on the HELOC, the interest on any loans made by Vancini, and one-half of the average cash balance in the corporation's operating account in October 2019. By including the HELOC's interest as part of the buyout calculation, it is apparent that the parties considered the HELOC when negotiating the agreement, but excluded its principal from the buyout price. We must "construe the contract with reference to the situation of the parties when they made it and to the objects sought to be accomplished." Shea v. Bay State Gas Co., 383 Mass. 218, 223 (1981), quoting Bryne v. Gloucester, 297 Mass. 156, 158 (1937). The fact that, subsequent to the agreement, Vancini raised a dispute about whether the HELOC principal was, or should have been, included in the buyout calculation does not, on its face, render the term material to the...