CATALDO v. MEROLA (2020)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

In this appeal, the defendant contends that genuine issues of material fact precluded summary judgment in favor of the plaintiff on her fraud and conversion claims.² We agree that there is a genuine dispute as to whether the plaintiff invested $100,000 (as the plaintiff claims), or only $90,000 (as the defendant concedes), but otherwise reject the defendant's arguments.

We review a ruling on cross motions for summary judgment de novo, taking the factual record in the light most favorable to the losing party, in this case the defendant. See Galenski v. Erving, 471 Mass. 305, 307 (2015). Our task is to determine whether “all material facts have been established and the moving party is entitled to judgment as a matter of law.” Id. See Mass. R. Civ. P. 56 (c), as amended, 436 Mass. 1404 (2002). “[T]hat some facts are in dispute will not necessarily defeat a motion for summary judgment. The point is that the disputed issue of fact must be material.” Hudson v. Commissioner of Correction, 431 Mass. 1, 5 (2000), quoting Beatty v. NP Corp., 31 Mass. App. Ct. 606, 607 (1991).

Whether a fact is material depends on the particular cause of action. Here, the claims are conversion and fraud. “The elements of conversion may be established by a showing that one person exercised dominion over the personal property of another, without right, and thereby deprived the rightful owner of its use and enjoyment. Money may be the subject of conversion. There is no requirement that the one converting property be shown to have had the intent to deprive permanently the rightful owner of its use and enjoyment, as in stealing.” (Citations omitted.) Matter of Hilson, 448 Mass. 603, 611 (2007). As to fraud, “the plaintiff must prove ‘that the defendant made a false representation of a material fact with knowledge of its falsity for the purpose of inducing the plaintiff to act thereon, and that the plaintiff relied upon the representation as true and acted upon it to [her] damage.’ ” Danca v. Taunton Sav. Bank, 385 Mass. 1, 8 (1982), quoting Barret Assocs. v. Aronson, 346 Mass. 150, 152 (1963).

Taken in the required light, the summary judgment record showed the following. The plaintiff and defendant are cousins. The defendant was the sole manager of Metropolitan Capital Income Fund I, LLC. (Met Cap I) from 2008 through to 2016. In that capacity, he worked to accept funds from investors that would in turn be used to make loans to “to corporate and individual borrowers/guarantors, to research and evaluate borrower loan quality and collateral, to structure and make loans in the form of promissory notes payable to Met Cap I [and to an affiliated entity Metropolitan Capital LLC], to collect principal and interest on loans originated by those entities, engage counsel to pursue legal action if necessary to secure collection and/or judgments, and to comply with all applicable laws in doing so.” The plaintiff understood that the defendant was in the investment business, and he agreed to assist her with investing her money. The defendant told her -- as he told all his investors -- “that the use of investor funds would be used exclusively for making commercial loans and management compensation.”

On November 12, 2013, the plaintiff gave the defendant a bank check in the amount of $31,000 payable to Met Cap I, and the sum of $9,000 in cash. On December 5, 2013, the plaintiff gave the plaintiff a certified bank check in the amount of $50,000 payable to Met Cap I.³ The defendant does not dispute that these funds were given to him for investment purposes, that they were not personal loans, and that they were not intended to pay for his personal expenses. Nor does the defendant dispute that he failed to return the funds when the plaintiff demanded them.⁴

Although the defendant avers that neither Met Cap I nor the affiliated company made loans to him or his family, and that there was no intermingling of funds, he does not dispute the accuracy of the bank account records submitted by the plaintiff. Those records are for the Met Cap I account, and cover the period November 1, 2013, through March 31, 2014 (the period encompassing the plaintiff's investments). Among other things, they show that the plaintiff's two bank checks were deposited in the account, but that the $9,000 cash payment was not. The statements also show that the funds were used for many noninvestment purposes, including buying gasoline, shopping at clothing stores, eating at restaurants, shopping at food and liquor stores, car loan payments, airline travel, a Netflix subscription, cable costs, and veterinary expenses. These types of expenses were made out of the account throughout the period, including when the defendant told the plaintiff that her funds “would be used exclusively for making commercial loans and management compensation.”

Although it is true that a $50,000 wire transfer was made to an entity called Laundrylist.com, Inc. (Laundrylist), a few days after the plaintiff made her $50,000 investment, and that a return wire of $52,678.50 was made from Laundrylist the following month -- and these facts give rise to a reasonable inference that a corporate loan was made and repaid -- this was not sufficient to defeat summary judgment. As noted above, the defendant does not dispute that he represented that the plaintiff's funds would be used exclusively for investment purposes and executive compensation, and he failed to offer any admissible evidence that any of the other payments made out of the account were for either of those purposes.

For these reasons, the judge properly entered summary judgment in favor of the plaintiff with respect to the $90,000 the defendant does not dispute the plaintiff invested with him. However, summary judgment should not have entered with respect to the $10,000 cash amount the plaintiff claims to have invested but for which there is no documentary corroboration and the defendant denies was made.

Accordingly, we vacate so much of the judgment as awarded the plaintiff the $10,000 that remains in dispute.⁵ The judgment is otherwise affirmed, and the matter is remanded for further proceedings consistent with this memorandum and order.

So ordered.

affirmed in part; vacated in part and remanded

FOOTNOTES

2.   A claim for conversion was dismissed earlier in the action and is not the subject of this appeal.

3.   The defendant disputes that the plaintiff invested a further $10,000 in cash at a later date.

4.   At some point, the defendant paid the plaintiff $4,000, which he said represented interest on her investment.

5.   As a result of our reduction of the judgment, interest should be recalculated.