Burns & Levinson Wins Summary Judgment Motion in Important Case of First Impression in Massachusetts Land Court
Land Court Holds the Transfer of a Controlling Beneficial Interest in a Nominee Realty Trust Can Trigger a Tenant's Right of First Refusal over the Real Estate Held in the Trust
BOSTON, Nov. 3, 2017 /PRNewswire/ -- Burns & Levinson recently won a summary motion for client Goodwill Enterprises, Inc. in an important case of first impression in Massachusetts Land Court that involves nominee trusts and rights of first refusal (ROFR) over real estate in Massachusetts. On October 20, 2017, the Land Court held that the transfer of a controlling 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, which operates an auto dealership called Automall Collection in Peabody, MA, 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 his business partner Daniel Corbett, who each owned a 50% beneficial interest.
In 2011, Corbett filed for bankruptcy, but tenant Goodwill received no notice of the filing. 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 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 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 Kelly 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 court held that, even though Garland and April Realty each own 50%, each beneficiary has a controlling interest because they could "veto" each other (the trust documents did not provide for a "tiebreaker" when the beneficiaries disagreed). Thus, the Land Court held that April Realty's 50% was a controlling interest, which made it a real property right (as opposed to a personal property right). Since it was a transfer of real property, the ROFR triggered.
"This was not only a significant win for Goodwill but for any company looking for clarification in regards to their ROFR rights when land is held in a nominee trust," said Burns & Levinson partner Sara Decatur Judge. "Any party that is negotiating these types of ROFR issues in a lease contract should be aware of this case and make sure they come to an express agreement as to what will trigger the ROFR."
About the Automotive Group at Burns & Levinson LLP
For more than 20 years, Burns & Levinson's Automotive Group has been dedicated to advising and assisting hundreds of motor vehicle dealers in all aspects of their evolving business. 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, consumer disputes and real estate issues.
Burns & Levinson is a full-service law firm with over 125 lawyers in Boston, Providence, and other regional offices. Our areas of expertise include: automotive, 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.
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