COMMERCIAL FINANCIAL CONSULTING LLC v. CONQUEST CAPITAL PARTNERS LLC (2020)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

This business dispute arose out of a September 2012 contract between Commercial Financial Consulting, LLC (CFC), and Conquest Capital Partners, LLC (Conquest). CFC is owned and operated by Ralph Stone and Russell Lee. Conquest is owned and operated by Oliver Austria, among others. In October 2013, the relationship between CFC and Conquest broke down, and CFC sued Conquest and a related entity, CSLF LOC, LLC, for breach of contract. CFC also sought relief in quantum meruit. CFC later amended its complaint to name Conquest Distressed Real Estate Fund I, LLC, as an additional defendant. Conquest and its related entities (together, Conquest) answered the amended complaint and asserted counterclaims against CFC for breach of contract, unjust enrichment, breach of the covenant of good faith and fair dealing, promissory estoppel, misrepresentation, and violation of G. L. c. 93A.

While that case was pending, in 2017, Conquest Distressed Real Estate Fund I, LLC, filed a separate complaint against CFC and Stone and Lee, individually, asserting as direct claims against these defendants the same causes of action that were set forth as counterclaims in the 2013 action. Stone and Lee answered the 2017 complaint and “counterclaimed, essentially re-alleging the breach of contract and quantum meruit claims from the 2013 action.”

The two actions were consolidated, and Conquest moved for summary judgment on CFC's claims and counterclaims. A judge of the Superior Court allowed the motion with respect to the breach of contract claim and counterclaim. Over the course of two nonconsecutive days, the judge conducted a jury-waived trial on (1) CFC's claim and counterclaim for quantum meruit, and (2) Conquest's claims and counterclaims against CFC, Stone, and Lee. Stone and Austria were the only witnesses at the trial. The judge denied two motions by Conquest for involuntary dismissal pursuant to Mass. R. Civ. P. 41 (b) (2), 365 Mass. 803 (1974), and ultimately found in CFC's favor on all claims. In one written decision, the judge found that CFC was entitled to $20,000 in quantum meruit. In a second written decision, the judge ordered that Conquest's claims and counterclaims against CFC, Stone, and Lee be dismissed. A single judgment entered dismissing all of Conquest's claims and counterclaims, dismissing CFC's breach of contract claim against Conquest, and awarding CFC $20,000. Conquest appeals from the judgment, claiming error only in the quantum meruit award. We affirm.

Background. In February 2012, Austria contacted Taylor Osborn, a representative of Bank of Internet (BOFI), to discuss whether BOFI would lend Conquest Capital Partners, LLC, money to fund a yet-to-be-formed related entity called Conquest Distressed Real Estate Fund I, LLC. In March 2012, Osborn asked Austria to provide financial documents that BOFI required in order to provide credit to Conquest. In July 2012, Austria was introduced to Stone, who, together with Lee, was in the business of helping companies obtain funding. On September 27, 2012, Stone and Austria entered into an agreement whereby CFC agreed to (1) help Conquest obtain financing, both debt and equity, (2) “submit financing memorandums to equity investors as required,” and (3) conduct “due diligence.” In exchange, Conquest would pay CFC a $20,000 due diligence fee and a one percent commission on all equity financing that Conquest obtained from “investors that CFC introduce[d] to the Company.” Conquest paid CFC the $20,000 due diligence fee.

In May 2013, Lee contacted Osborn at BOFI and sent him the financial information about Conquest that Osborn had requested from Austria the year before. On June 17, 2013, BOFI sent Austria a letter of intent to extend a $10 million line of credit to Conquest, which Austria forwarded to Lee. In September 2013, Austria asked Lee to refer a New York attorney who could assist Conquest in closing the BOFI line of credit. Lee recommended an attorney the next day. Stone reviewed BOFI's loan documents at Austria's request, and made more than one dozen telephone calls in furtherance of the BOFI investment. In total, CFC expended between 100 and 150 hours. CFC did not maintain records reflecting the precise amount of time because the agreement provided for a one percent commission, rather than hourly compensation. CFC presumed that it would be paid for its work on the BOFI loan in accordance with the agreement. Conquest shared the same expectation.

In October 2013, the BOFI loan closed, and CFC sent Conquest an invoice for $80,000, representing one percent of the loan amount minus the $20,000 due diligence fee Conquest already had paid. Conquest refused to pay the invoice, claiming, among other things, that the parties did not have an enforceable contract, and that CFC was not entitled to a commission because CFC had not introduced Conquest to BOFI. On Conquest's motion for summary judgment, the judge concluded that the parties entered into an enforceable contract under which CFC was not entitled to $100,000, because there was no dispute that CFC did not introduce Conquest to BOFI. Nevertheless, the judge found after trial that, “it is clear [CFC] conducted work at Conquest's behest to facilitate the closing of that transaction,” and that “Conquest was aware that CFC expected payment” for that work. The judge found that the agreement “expressly reflects the parties' view of the value of CFC's work” in connection with the BOFI loan, “$20,000, as reflected in the agreed-to due diligence fee,” and he entered judgment in that amount.

Standard of review.³ “Upon appeal, we accept a trial judge's findings of fact unless they are ‘clearly erroneous,’ ․ and do not review questions of fact if any reasonable view of the evidence and the rational inferences to be drawn therefrom support the judge's findings.” Martin v. Simmons Props., LLC, 467 Mass. 1, 8 (2014), quoting Millennium Equity Holdings, LLC v. Mahlowitz, 456 Mass. 627, 636 (2010). “We uphold the findings of a judge who saw and heard the witnesses unless we are of the definite and firm conviction that a mistake has been made” (citation and quotations omitted). Id. Our review of the judge's conclusions of law is de novo. See Martin, supra.

Discussion. Conquest claims that the judge erred in finding that CFC performed work (1) in connection with the BOFI loan after May 2013, (2) which was outside the scope of the parties' contract. There was no error.

Stone testified that all of CFC's efforts between when the letter of intent was signed until the time the BOFI loan closed were devoted exclusively to helping Conquest secure the loan. Stone and Lee spent between 100 and 150 hours doing “whatever [Conquest and BOFI] need[ed]” in order to “get this deal done.” They reviewed loan documents at Austria's request; had more than one dozen direct telephone conversations with BOFI; and made themselves available to answer “[m]any questions, verbal, sometimes in e-mail, sometimes not, from [Austria] to us, from his partners to us.” The judge was entitled to credit Stone's testimony, which provided ample support for the challenged finding. See Mattoon v. Pittsfield, 56 Mass. App. Ct. 124, 139 (2002) (judge deciding motion for involuntary dismissal free to weigh evidence and resolve all questions of credibility, ambiguity, and contradiction).

The judge did not err in finding that CFC's services in connection with the BOFI loan fell outside the scope of the parties' contract because, by executing the agreement, CFC pledged to seek debt and equity investors for Conquest in exchange for one percent of the investment amount. CFC did not agree to seek funding for Conquest on a pro bono basis, or to make calls and referrals, answer questions, review documents, and be “available, spot on, immediately,” to give Conquest whatever it needed to get the deal done, without being compensated. CFC was not required under the agreement to submit financing memoranda to BOFI because BOFI was not an equity investor, and the “due diligence” required under the contract could not have included CFC's activities in connection with the BOFI loan, where Conquest paid the due diligence fee long before receiving the commitment from BOFI.

“[C]onsiderations of equity and morality play a large part,” 1 A. Corbin, Contracts § 19 (1963), in deciding whether a quantum meruit award is appropriate, because the underlying basis for such an award “is unjust enrichment of one party and unjust detriment to the other party.” Salamon v. Terra, 394 Mass. 857, 859 (1985). It is well settled that “[a] person who has been unjustly enriched at the expense of another is required to make restitution to the other.” Id., quoting Restatement of Restitution § 1 (1937). Here, the record is clear, and the judge found, that CFC worked to ensure that the BOFI loan closed because that is what CFC thought Conquest hired it to do. CFC assumed it would be paid for its efforts, Conquest was aware of CFC's expectation, and Conquest accepted the fruits of CFC's labor. It was not until after the loan closed and CFC requested payment that Conquest took the position that CFC was not entitled to compensation. We see no error in the judge's conclusion that a quantum meruit award was appropriate in these circumstances. See Liss v. Studeny, 450 Mass. 473, 479 (2008) (quantum meruit is equitable doctrine meant to prevent unjust enrichment of one party and unjust detriment to other party).

Judgment affirmed.

FOOTNOTES

3.   Conquest's brief does not contain a concise statement of the applicable standard of review, as required by Mass. R. A. P. 16 (a) (9) (B), as appearing in 481 Mass. 1628 (2019), which became effective before Conquest filed its brief.