BOSTON, Sept. 5, 2019 /PRNewswire/ -- Burns & Levinson has won a Massachusetts Appeals Court decision upholding its October 2017 summary judgment win in Massachusetts Land Court for client Goodwill Enterprises, Inc., which operates an auto dealership called Automall Collection in Peabody, MA. This important case involves nominee trusts and rights of first refusal (ROFR) over real estate in Massachusetts. On August 29, 2019, the Appeals Court affirmed the Land Court's ruling that the sale of a beneficial interest in a nominee realty trust, which are often used to hold real estate in the Commonwealth, can trigger a tenant's ROFR over the real estate held in the trust.
The lawsuit was brought by Goodwill Enterprises after the company discovered that a beneficial interest in the real property it leases and uses for its dealership was sold without its knowledge despite the ROFR in Goodwill's lease. The landlord, 218 Andover Street Peabody Realty Trust (Realty Trust), was a nominee trust with two beneficiaries, William Garland and Daniel Corbett, who each owned a 50% beneficial interest.
In 2011, Corbett filed for bankruptcy. In the bankruptcy proceeding, Corbett's 50% beneficial interest in the Realty Trust was sold in 2012 by the bankruptcy trustee in a sealed bid auction to April Realty Trust – a trust controlled by Brian Kelly of Kelly Automotive (Goodwill's neighbor), who in 2010 had tried to negotiate the purchase of the land with Corbett, but failed because Garland didn't want to sell. Goodwill received no notice of the auction or sale. Three years later, in April 2015, Goodwill learned for the first time that April Realty had purchased Corbett's interest in the trust.
A Burns & Levinson team, led by partners Paul Marshall Harris and Sara Decatur Judge from the firm's Automotive Group, investigated on behalf of Goodwill, and discovered the sale of the beneficial interest in the Bankruptcy Court. In 2015, Burns & Levinson filed suit in Land Court seeking to allow Goodwill to purchase Corbett's 50% interest pursuant to the ROFR for the same $250,250 price that April Realty paid. A separate motion was filed in the Bankruptcy Court seeking an order that the "final sale" order approving the sale to April Realty did not preclude Goodwill from exercising its ROFR.
The Land Court granted Goodwill's motion and held that its ROFR was triggered when the Bankruptcy Trustee accepted the bid for the sale of Corbett's beneficial interest. The Appeals Court affirmed this holding, recognizing that Corbett, as the beneficiary of a nominee trust was properly treated as an owner of his percentage interest in the real property. The Appeals Court held that the fact Corbett's beneficial interest was sold in a bankruptcy proceeding did not invalidate the ROFR. The Appeals Court focused on the unambiguous terms of the lease, which did not expressly exclude bankruptcy sales from triggering the ROFR. The Appeals Court held that where the parties to the lease did not exempt bankruptcy sales from Goodwill's ROFR, the bankruptcy sale triggered the ROFR.
"We are thrilled that the Appeals Court has affirmed our long and hard-fought win for Goodwill. This is a victory not only for our client, but for any company looking for clarification regarding their ROFR rights when land is held in a nominee trust," said Decatur Judge. "If a company is negotiating these types of ROFR issues in a lease contract, they need to be aware of this decision and make sure they come to an express agreement as to what will or will not trigger the ROFR."
About the Automotive Group at Burns & Levinson LLP
Burns & Levinson's Automotive Group has advised and assisted hundreds of motor vehicle dealers in all aspects of their evolving business for over 20 years. Our experienced attorneys represent some of the largest automotive groups in the country, as well as smaller dealer groups consisting of one or two stores. The Automotive Group assists dealers with buy sells, factory disputes, employment disputes, consumer disputes and real estate issues.
We provide high-level, client-centric and results-oriented legal services to our regional, national and international clients. We are a full-service law firm with over 125 lawyers in Boston, Providence and other regional offices. Our areas of expertise include: business/finance, business litigation, divorce/family law, venture capital/emerging companies, employment, estate planning, government investigations, intellectual property, M&A/private equity, probate/trust litigation, and real estate. We partner with our clients to solve their business and personal legal issues in a collaborative, creative and cost-effective way. For more information, visit Burns & Levinson at www.burnslev.com.
SOURCE Burns & Levinson