Disola Development, LLC v. JOSEPH C. MANCUSO and ROSARIO URDI

United States Court of Appeals
For the First Circuit
Nos. 01-1156
01-1158
DISOLA DEVELOPMENT, LLC,
Plaintiff, Appellee/Cross-Appellant,
v.
JOSEPH C. MANCUSO and ROSARIO URDI,
Defendants, Appellants/Cross-Appellees.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Selya, Circuit Judge,
Bownes, Senior Circuit Judge,
and Stahl, Senior Circuit Judge.
Gerald A. Phelps and Sumner D. Goldberg, with whom Bruce L.
Watson was on brief, for defendants.
Robert S. Wolfe, with whom Wolfe Associates, P.C. was on
brief, for plaintiffs.
May 13, 2002

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BOWNES, Senior Circuit Judge. In this action,
defendants-appellants Joseph Mancuso and Rosario Urdi appeal from
an award of prejudgment interest to the plaintiff-appellee Disola
Development, LLC. The district court calculated interest on the
jury's award of damages, $7,123.00, as well as on an additional sum
of $130,366.89, which represented a fund deposited in a contested
bank account. We reverse the district court's award of prejudgment
interest on the latter amount.
I. BACKGROUND
Disola was a limited liability company. The original
member-owners were Urdi, Mancuso, and Paul Kinchla. All three had
signed personal guarantees to a bank that had loaned the company
the money for its operating capital. After a time, Urdi and
Mancuso decided that they wanted to get out of their personal
guarantees, and the three principals agreed to amend the redemption
provision of the original agreement. On August 26, 1997, Disola
paid Mancuso $360,000.00 and Urdi $471,000.00 for their interest in
the property. In addition, the parties agreed that Mancuso and
Urdi were entitled to their pro rata share of the profits Disola
had earned prior to the redemption payments. Disola calculated
that Mancuso and Urdi's share of the profits was approximately
$63,430.00. Urdi and Mancuso disagreed.
When the redemption occurred, Urdi, who had been
president of Disola from its inception, was a signatory on bank

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1The court later found in favor of the defendants on Count IV.
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accounts held by Disola at the Meeting House Cooperative Bank
containing $468,000.00. Urdi made a series of withdrawals totaling
approximately $320,000.00, which he shared with Mancuso. These
withdrawals precipitated this lawsuit.
Disola's complaint set forth counts for violation of the
Racketeer Influenced and Corrupt Organizations Act (RICO) (Count
I); conversion and breach of fiduciary duty under common law (Count
II); violation of Mass. Gen. Laws ch. 156C, § 35, which regulates
limited liability companies (Count III); and violation of Mass Gen.
Laws ch. 93A (Count IV). Disola requested restitution as well as
prejudgment interest on all counts.
Approximately three months after suit was brought,
Mancuso and Urdi voluntarily returned $118,645.36 to Disola.
After a six-day trial, the case went to the jury. With
the consent of counsel, the judge submitted special questions to
the jury. The jury found in favor of the defendants as to Count I,
and in favor of the plaintiff on Counts II and III.1
As to damages, the jury was asked:
Q.3. What amount of money will reasonably
compensate Disola for any money taken, frozen
and/or distributed in violation of the amended
agreement?
The jury's answer to this question was $7,123.00.

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During deliberations, the jury submitted a written
question to the court:
Can we answer Question 3 as X amount taken or
distributed plus all of the money in the
frozen accounts?
The court stated: "Give me one total figure as asked for in
Question 3. That’s all I’m going to say."
After the jury returned its verdict, the district court
entered the following Order of Judgment:
Judgment shall be entered for the plaintiff
Disola Development, LLC and against defendants
Joseph Mancuso and Rosario Urdi in the sum of
SEVEN THOUSAND ONE HUNDRED TWENTY-THREE
DOLLARS ($7,123.00) with interest thereon at
the rate of twelve percent (12%) from
December 16, 1997 as provided by state law.
Plaintiff is also awarded its costs of action,
amounting to FOUR THOUSAND FIVE HUNDRED
THIRTY-NINE DOLLARS AND SEVENTY CENTS
($4,539.70).
The Court further orders that defendants
Joseph Mancuso and Rosario Urdi shall take all
necessary actions to give plaintiff Disola
Development, LLC exclusive control over ONE
HUNDRED THIRTY THOUSAND THREE HUNDRED SIXTY-
SIX DOLLARS AND EIGHTY-NINE CENTS
($130,366.89) on deposit at Meetinghouse Co-
operative Bank in Account No. 01-80-8023139.
Because defendants wrongfully withheld or
froze the monies in that account, interest
shall be paid thereon at the rate of twelve
percent (12%) from December 16, 1997 as
provided by state law. Because the account
earned interest in the amount of $3,916.28
since December 16, 1997, that interest shall
be deducted from the amount of interest
calculated on the account at the twelve
percent rate.

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On December 21, 2000, Urdi and Mancuso filed a Motion to
Alter Judgment, in which they requested removal of the award of
interest on the $130,366.89 held in the frozen bank account. On
December 30, 2000, the court denied the motion, stating that
"defendants wrongfully withheld the monies in that account in
breach of contract, the operating agreement, and their fiduciary
duty."
II. DISCUSSION
Mancuso and Urdi assert that the district court erred in
awarding interest on the $130,366.89 in the frozen bank account.
They contend that under Massachusetts law, interest may only be
calculated on damages, which the jury assessed at $7,123.00.
Whether the district court had the authority to award interest on
this sum is a question of law. Accordingly, our review is de novo.
Arecibo Cmty. Health Care, Inc. v. Puerto Rico, 270 F.3d 17, 22
(1st Cir. 2001).
Massachusetts statutory law provides for prejudgment
interest on damages in tort and contract actions. Mass. Gen. Laws
ch. 231, § 6B provides:
In any action in which a verdict is rendered
or a finding made or an order for judgment
made for pecuniary damages for personal
injuries to the plaintiff or for consequential
damages, or for damage to property, there
shall be added by the clerk of court to the
amount of damages interest thereon at the rate

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of twelve per cent per annum from the date of
commencement of the action . . ..
(Emphasis added.) Section 6C similarly refers to interest added
"to the amount of damages" in contract actions.
The $130,366.89 in the frozen bank account cannot be
considered damages such that chapter 231 would apply. The special
verdict form indicates that the jury designated the sum of
$7,123.00, and only that sum, as damages. Question No. 3 on the
verdict form asked:
What amount of money will reasonably
compensate Disola [the Company] for any money
taken, frozen and/or distributed in violation
of the amended agreement?
This question clearly encompasses the money in the frozen bank
account. Hence, the jury's response to this question – $7,123.00
– represents the total amount of Disola's damages. This conclusion
is buttressed by the court's response to the jury's written
question during deliberations, in which it directed the jury to
provide "one total figure as asked for in Question 3."
Disola contends that even if the $130,366.89 was not
damages, the district court still could award interest on this
amount pursuant to its equitable powers. In support of this
argument, it points out that its prayer for relief included a
request for restitution and "any such further relief as justice and
equity may require." Disola further notes that in the order of
judgment, the court stated that it was imposing prejudgment

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interest "as provided by state law." This state law, it maintains,
could refer to a decision of the highest state court rather than to
chapter 231. It cites Schwartz v. Rose, 418 Mass. 41, 47-48
(1994), as authority for the district court's equitable power to
award interest on a non-damages sum.
We need not delve into the question of whether the
district court had the equitable authority to award interest on a
sum that was not included in the damages figure. Regardless of
whether it possessed such authority, the record compels us to
conclude that the court was not acting pursuant to its equitable
jurisdiction. Rather, it awarded interest pursuant to the
Massachusetts statutes governing interest on damages awards. It
specifically cited those statutes, Mass. Gen. Laws ch. 231, §§ 6B
and 6C, and awarded interest at the twelve per cent rate prescribed
therein.
In light of our conclusion that the $130,366.89 in the
frozen account was not damages and that the court was not
purporting to exercise its equitable powers, we cannot allow the
award of prejudgment interest on this amount to stand.
Accordingly, we reverse the district court's order of judgment on
this point.
Disola filed a cross-appeal on the ground that
prejudgment interest should have been awarded on the sum of
$118,635.36, which represents the amount that Mancuso and Urdi

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voluntarily repaid on May 26, 1999. We disagree. Assuming without
deciding that the district court had the equitable power to award
interest on that sum, any such award would be within the court's
discretion. Cf. Schwartz, 418 Mass. at 48 n.7. Nothing in the
record suggests that failure to award such interest would
constitute an abuse of discretion. Accordingly, we affirm the
district court's decision not to award interest on the sum of
$118,635.36.
CONCLUSION
For the reasons set forth above, we VACATE the district
court's decision to award Disola prejudgment interest at the rate
of twelve per cent on the amount of $130,366.89. We REMAND the
matter to the district court to amend the judgment to reflect that
the money in the frozen account in the Meeting House Cooperative
Bank, including any interest earned since December 16, 1997, be
returned to the control of Disola.
As to Disola's cross-appeal, we AFFIRM the district
court's decision not to award interest on the amount of
$118,635.36.
Costs to defendant-appellants.

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