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COMMONWEALTH OF MASSACHUSETTS Appeals Court 02-P-1213 Joseph A. SARO, vs . James P. CARNEY & others. [1] Robert J. Roughsedge for Joseph A. Saro. Peter J. Pingitore (John R. Chayrigues with him) for Carco Autobody, Inc.; Boston Car Body Shop, Inc.; and Boston Car Company, Inc. A. Neil Hartzell (David J. Hatem with him) for C. Michael Malm; and Davis, Malm & D'Agostine, P.C. MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
This case involves a business dispute between two former partners and a claim by the minority partner of a wrongful freeze-out as a result of a merger of the partnership with another entity. In 1993, the plaintiff, Joseph Saro, and Defendant James P. Carney, incorporated Carco Autobody, Inc. (Carco). Carney was to contribute capital, while Saro was to generate business and utilize his prior experience in the autobody repair industry. Two years later, in 1995, divisiveness ensued between Saro and Carney; ultimately, Carney terminated Saro's employment for allegedly unethical and illegal conduct. This termination, and the subsequent merger of the partnership, triggered two pieces of litigation. The first action (Carco I) is not the subject of this appeal, but provides relevant background. In Carco I, Carco (through Carney) sought a declaratory judgment that Saro was not entitled to shareholder status. [2] Saro counterclaimed for wrongful termination, breach of fiduciary duty, and other related claims. The trial in Carco I was bifurcated. In the jury-waived portion of the trial, the judge found that Saro retained his twenty percent interest as a shareholder of Carco. [3] On the employment claim, a jury found that Saro's employment had been improperly terminated and awarded damages of $4,908. At one point in Carco I, Saro sought to amend his counterclaim to allege his freeze-out from the partnership. The amendment motion was denied. Thereafter, on September 19, 2001, Saro brought the second action (Carco II), which is the subject of this appeal. The Carco II complaint alleges, in essence, that the various defendants breached their fiduciary duties by failing to disclose that a proposed merger of the Carco partnership with the Boston Car Body Shop, Inc. (BCBS) would result in Saro's freeze-out, and that the law firm defendants had conflicts of interest in connection with the transaction and the nondisclosure. In Carco II, a Superior Court judge granted summary judgment to the defendants on all counts on the basis that the claims were time-barred. In a crystal-clear analysis of the facts, the judge determined that the statute of limitations had begun to run on January 5, 1997, the date on which there is no dispute that Saro received documentation (including notices mailed by the law firm defendants) concerning the merger. Accordingly, the judge determined that, as of that date, Saro was adequately informed and knew, or should have known, that his interest in the Carco partnership would be extinguished as a result of the merger with BCBS, thereby commencing the running of the limitations period. The complaint filed in Carco II on September 19, 2001, was therefore barred by the statute of limitations. With the Superior Court judge's comprehensive and thoughtful analysis as backdrop, and after conducting an independent review of the record, we affirm the entry of summary judgment. See Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120 (1991). A shareholder action for breach of fiduciary duty sounds in tort and, therefore, must be brought within three years after the cause of action accrues. G.L. c. 260, § 2A. See Demoulas v. Demoulas Super Markets, Inc., 424 Mass. 501, 517 (1997). In this case, the judge correctly determined that the limitations period began to run when Saro received sufficient information concerning the merger in transactional documents. Specifically, the judge determined that the limitations period began to run on January 5, 1997, when Saro received a mailing from Carco which included, among other things, a "NOTICE TO STOCKHOLDERS OF EFFECTIVENESS OF APPROVED ACTION," that stated as follows: [4] "Notice is hereby given that the Agreement of Merger between Carco Autobody, Inc. ("Carco") and Boston Car Body Shop, Inc. ("BCBS") providing for the merger of Carco into BCBS (the "Merger"), was approved at the special meeting of stockholders of Carco held on December 31, 1996. The Merger became effective as of January 2, 1997." [5] Thus, from this date, it was clear that Saro was aware that the merger had been approved by Carco's board of directors and that the merger would result in the elimination of Saro's shares in Carco. In these respects, as the judge ruled, this case is controlled by Houle v. Low, 407 Mass. 810, 813 (1990) ( "The defendants' alleged breach of fiduciary duty occurred when they voted not to invite [the plaintiff] to participate [in the new business venture] and gave him notice of such rejection. The cause of action for this breach of fiduciary duty arose, if at all, at that time"). In an attempt to circumvent the statute of limitations, Saro asserts that the defendants fraudulently concealed that the purpose of the merger was a freeze- out and that, as a result, Saro did not have actual notice of his potential claims for breach of fiduciary duty. The claim of fraudulent concealment is not supportable. The transactional documents referred to, supra, were clear on their face and belie that there was hidden information that would toll the running of the limitations period. We have reviewed the other related claims asserted by Saro and determine them to be without merit. Judgment affirmed . [1] Carco Autobody, Inc.; Boston Car Body Shop, Inc. (BCBS); Boston Car Company, Inc.; C. Michael Malm; and Davis, Malm & D'Agostine, P.C. [2] In this first action, Carco Autobody, Inc., et al. vs. Joseph A. Saro, et al., Suffolk Superior Court No. 95-5771G, the complaint alleged, among other things, that Saro was not competent to manage the Carco autobody repair shop, had failed to contribute the equipment, crew, and customer base as originally agreed, and that Saro's operation of the Carco shop involved automobile insurance fraud. [3] The record indicates that Saro's interest in Carco as a stockholder was later determined to be twenty percent of $90,000, i.e., the value that BCBS, the surviving corporation, was to pay in exchange for all of the capital stock of Carco held either of record or beneficially by Carco stockholders on the effective date of the merger. [4] There had been a prior letter to Saro dated December 9, 1996, which included (1) a notice of a special meeting of the stockholders of Carco to be held on December 31, 1996; (2) a copy of an independent appraisal (which stated the fair market value of all of the capital stock of Carco as approximately $86,000); and (3) a merger agreement which specifically stated Carco will be merged into BCBS, with BCBS as the surviving corporation. The judge found, however, that the December 9 letter was not mailed to Saro's correct address. That mailing address was later corrected and there is no dispute that Saro had received the pertinent transactional documents as of January 5, 1997. [5] At the time of the merger, Carco had not realized any profit from operations and was unable to pay its current obligations as due. |