Lassman v. Reilly et al

UNITED STATES BANKRUPTCY COURT
FOR THE
DISTRICT OF MASSACHUSETTS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In re
ROBERT W. FEELEY and
MARY D. FEELEY, 	Chapter 7
Debtors 	Case No. 06-13582-JNF
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
DONALD R. LASSMAN, CHAPTER 7
TRUSTEE,
Plaintiff
v. 	Adv. P. No. 07-1201
JOHN J. REILLY, JR., MICHAEL T. HULL,
AFFORDABLE FUNDING MORTGAGE
CORP., RICHARD COSTA, and
RAYMOND KOHLMAN,
Defendants
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
MEMORANDUM
I. INTRODUCTION
The matter before the Court is the First Amended Complaint (the “Complaint”) filed
by Donald R. Lassman (the “Trustee”) against John J. Reilly, Jr. (“Reilly”), Michael T. Hull
(“Hull”), Affordable Funding Mortgage Corp. (“Affordable Funding”), Richard Costa
(“Costa”), and Raymond Kohlman (“Kohlman”). 	The Court entered a default against
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Affordable Funding on December 17, 2007 and a default against Hull on January 26, 2010
as Hull failed to appear and defend himself at trial. On November 24, 2008, the Court
granted the Trustee’s Motion for Order of Dismissal with respect to his claims against
Raymond Kohlman. Accordingly, two defendants remain against whom the Trustee seeks
the following relief arising out of a so-called “foreclosure rescue” transaction: Count I:
Avoidance of Transfer - 11 U.S.C. §§ 548, 550; Count II: Avoidance of Transfer - Mass. Gen.
Laws ch. 109A, and 11 U.S.C. §§ 544 and 550; Count III: Fraud; and Count IV: Violations
of Mass. Gen. Laws ch. 93A. Through his first two causes of action, the Trustee seeks relief
against Reilly. Through his last two causes of action, the Trustee seeks relief against Reilly
and Costa.
The Court conducted a trial on January 26, 2010 at which Robert W. Feeley (the
“Debtor”or “Mr. Feeley”) (together with Mary D. Feeley, the “Debtors”) testified, as well
as Reilly, Costa, and the Trustee. Five exhibits were introduced into evidence. The issues
presented include whether the Trustee satisfied his burden of proof as to the avoidability
of the transfer of the Debtors’ property located at 174 Warren Avenue, Seekonk,
Massachusetts (the “property”) to Reilly under either state or federal law, and whether he
satisfied his burden of proof with respect to fraud and unfair and deceptive practice under
ch. 93A as to both defendants.
The Court now makes its findings of fact and conclusions of law pursuant to Fed.
R. Bankr. P. 7052.
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II. FACTS
The Debtors filed a voluntary Chapter 7 petition on October 6, 2006. Hull, a former
attorney who held himself out as a paralegal employed by Kohlman and who is suspended
from the practice of law in the Commonwealth, assisted the Debtors in preparing and filing
their Chapter 7 petition. On November 13, 2006, the Debtors filed schedules, a statement
of financial affairs and other required documents. The Debtors’ schedules, which were
introduced into evidence, revealed that, at the commencement of their case, they owned
no real estate and had no debt secured by real estate. The Debtors did list a claim secured
by a 2000 Dodge van, as well as tax debt of $57,0001 and unsecured debt totaling $61,386.11.
On Schedule I - Current Income of Individual Debtor(s), the Debtors revealed that Mr.
Feeley is self-employed as a manufacturers’ representative in the equine products industry,
that his income fluctuates seasonally, and that Mrs. Feeley is employed and also receives
a pension from Delta Airlines. 	On Schedule J-Current Expenditures of Individual
Debtor(s), the Debtors listed their rent at $1,300 per month.
The Debtors attended the meeting of creditors held pursuant to 11 U.S.C. § 341(a).
Following the meeting, Mr. Feeley contacted the Trustee and met with him to provide
further disclosures about the couple’s financial circumstances. As a result of that meeting,
the Trustee engaged special counsel, who, on May 16, 2007, commenced the litigation now
1 The Court takes judicial notice that the Massachusetts Department of Revenue
filed an unsecured priority claim in the sum of $3,374.01 and that the Internal Revenue
Service filed an unsecured nonpriority claim in the sum of $10,782.25 and an unsecured
priority claim in the sum of $71,009.84.
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before the Court on behalf of the Trustee and the Debtors’ bankruptcy estate.
In early 2006, the Debtors were experiencing severe financial difficulties. Mr. Feeley
had injured his back, and the couple had fallen behind on the payment of their mortgage,
federal and state tax obligations, monthly utility bills, and revolving credit card debts as
a result of the Debtor’s lost income. On or around February 17, 2006, the Debtors received
a notice from Option One Mortgage Corporation advising them that they were in default
because of their failure to make their December, 2005 mortgage payment and subsequent
payments in the total sum, including late charges, of $6,713.33.
In late February or early March of 2006, the Debtors met Hull, Costa and Reilly.
According to Mr. Feeley, “[a] friend of my wife’s recommended them and termed them as
‘miracle workers.’” As a result, the Debtors were receptive when Costa contacted them,
and they met several times with Costa, Hull, and Reilly at their home. Reilly was
hospitalized around this time and did not attend all of the numerous meetings that took
place to implement the “deal” that Costa orchestrated.
According to Costa, who was employed by Affordable Funding at the time and who
obtained the Debtors’ credit report, the Debtors were not qualified to refinance their home
because of their poor credit. 	Thus, Costa proposed a transaction whereby the Debtors
would convey their home to a third party, pay rent, reestablish credit and refinance the
property at the expiration of a year’s time. Mr. Feeley explained the transaction proposed
by Hull and Costa:
Mr. Hull did a lot of the talking. I can’t recall what. I wasn’t sure what his
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role was. He’s a personable guy. Mr. Costa would explain something, and
Mr. Hull would explain what he meant, whatever, and it was again a
repetition of what he said on the phone. . . . He said they have this fellow
[Reilly] they’ve worked with in the past and that they’ve done this many
times, and that this fellow had excellent credit and would buy the house
from us and we would pay him $18,000, to which I said, “You said $15,000,”
and he said, “I misspoke.”
While admitting that he understood that a fee would be payable to the person who was
going to buy the property, Mr. Feeley added:
They said we would realize a year’s rent would be in the bank [sic]. 	Mr.
Costa said, “If you - - of course, if you went to Foxwoods and blew it, you
know, you’d - - you’d be in trouble.” I took that to mean that the money
would be under our name. And he said, “You’d have a year’s rent in the
bank,” and I said, “the only thing that I want, other than that, from this
whole transaction is $10,000 to pay the IRS,” because I had been speaking to
the IRS and the [agent] had said, “See how you handle your 2005 [sic] and
we’ll talk about a payment plan.” So that’s the only thing that I said that I
wanted from the transaction, other than what he committed to, which is a
year’s rent in the bank . . . .
The Debtors understood that the money for the year’s rent and payment of the IRS
would be available from the equity in the property. Although the Debtors hoped to close
the transaction within a short period of time because they feared a foreclosure was
imminent, the closing did not take place until March 29, 2006. A variety of issues delayed
the closing, including the acquisition of appropriate insurance, an inspection of the septic
system, and Reilly’s hospitalization.
At the closing on March 29, 2006, Reilly purchased the property for $450,000 and
obtained a $405,000 mortgage, which required monthly “rent” payments from the Debtors
in the sum of approximately $3,100. The HUD-1 Settlement Statement used for the closing
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was inaccurate in numerous respects. 	It reflected settlement charges paid by Reilly of
$13,661.11, as well as other payments, including “City/town taxes 3/29/06 - 8/1/06” in
the sum of $1,327.02 and a “Final Disposal Fee” in the sum of $33.84, leaving an amount
due from Reilly of $465,021.97, less the amount of $417,100 “paid by/for borrower.” Thus,
the Settlement Statement reflected that Reilly made a cash payment of $47,921.97. In fact,
Reilly contributed none of his personal funds, and the “Cash from Buyer” came from the
Debtors.
As noted above, the gross amount due to the Debtors was $450,000 - - the sales price.
On the HUD-1 Settlement Statement, several adjustments were made to that price for
“Adjustments for items paid by seller,” i.e., the Debtors. These items included the payment
of “ City/town taxes” of $1,327.02, and a disposal fee of $33.84, which resulted in a gross
amount due to the Debtors of $451,360.86. From that sum, numerous additional deductions
were reflected on the Settlement Statement, including payment of 1) an “excess deposit”
($100.00), 2) settlement charges ($3,759.00), 3) satisfaction of the existing Option One
mortgage ($327,000.00), 4) tax liens ($16,500.00), 5) “Seller Paid Closing Cost Credit”
($12,000.00), 6) “City Taxes 11/1/05 - 5/1/06 ($2,996.46) and 7) a “Final Disposal Fee”
(130.00), ostensibly leaving the Debtors with $88,875.40.
The Settlement Charges included an $8,100.00 loan origination fee payable to
Affordable Funding, an appraisal fee of $100.00, a mortgage broker fee of $700.00 payable
to Affordable Funding, as well as $898.20 in miscellaneous fees paid to New Century
Mortgage, Reilly’s lender. Other payments in connection with the loan included interest
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from 3/29/06 through 4/1/06 in the sum of $302.91. Additionally, significant title charges
were incurred and ostensibly paid by Reilly, including a closing fee , a title examination fee,
and attorney’s fees all payable to Slade Barrett Title Company in the amounts of $255.00,
$325.00, and $600.00, respectively. 	Slade Barrett Title Company also was paid for title
insurance ($1,975.00), a courier fee ($75.00), “MLC/Tax Information” ($55.00), and a survey
fee ($75.00). 	The remaining fee included a $200.00 fee for recording the deed. 	On the
Debtors’ side of the Settlement Statement, the Statement reflects their payment of a total
of $3,759.00 in closing costs.2
In reality, the Debtors did not receive $88,875.40 from the sale of the property; they
received $2,953.43. At the closing, the Debtors signed a document captioned “Sellers [sic]
Authority to Disburse Proceeds of Sale of 174 Warren Avenue, Seekonk, Ma,” in which
they requested checks, which were dated March 28, 2006, disbursed as follows:
1) 	Mary & Robert Feeley and John Reilly 	$47,921.97
2) 	Mary & Robert Feeley and John Reilly 	$12,000.00
3) 	Mary & Robert Feeley and Robert Costa 	$ 6,000.00
4) 	The Gunnery School 	$ 2,000.00
2 The settlement charges of $3,759.00 were comprised of $550.00 for a document
preparation payable to Slade Barrett Title Company, $125.00 for a courier fee payable to
Slade Barrett Title Company, $532.00 for the recordation of a release of the Option One
mortgage, $2,052.00 for “State tax/stamps; Deed:; Mortgage” [sic], and $500.00 for a
“Water escrow.” The Court was presented with no information as to whether the
charges were reasonable or customary. Moreover, the settlement charges, while
indirectly benefitting the defendants as part of the transaction, were not paid directly to
them.
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5) 	Mary & Robert Feeley and John Reilly 	$ 8,000.00
6) 	Mary & Robert Feeley 	$ 2,953.43
The Debtors endorsed the checks in the sum of $47,921.97 and $12,000.00 to Reilly, and they
endorsed a check in the sum of $6,000.00 to Costa, resulting in direct benefit to the
defendants of $65,921.97. Additionally, Affordable Funding received a check in the sum
of $8,800.00, not $8,100.00 as set forth on the Settlement Statement, at the closing.
Although the Debtors obtained only $2,953.43 in cash from the transaction,
payments were made on their behalf which directly benefitted them, including the
payment of their mortgage to Option One ($327,000.00), the payment of a tax lien
($16,409.47), the payment of real estate taxes ($1,669.44), the payment of a water bill from
the Town of Seekonk ($463.29), the payment of the Gunnery School for their son’s tuition
($2,000), and the payment of $18,000.00 to Reilly, which he used to purchase a certificate
of deposit to facilitate the payment of his mortgage in the event the Debtors failed to pay
him sufficient “rent,” which Mr. Feeley testified was in the approximate amount of
$3,100.00, to cover his monthly mortgage obligation to New Century Mortgage Company. 3
In addition, they were able to remain in their home, although they no longer owned it.
Thus, of the $450,000 purchase price, the Debtor received funds of $368,495.63 in direct
benefit and lost $81,504.37 in equity in their home. Reilly obtained the property subject to
3 Neither the Trustee nor Reilly submitted evidence at trial as to what Reilly’s
monthly mortgage obligation was or what the Debtors paid him in “rent.” In his post-
trial brief, however, Reilly stated that the rent was $3,313.33 and that the Debtors failed
to pay the rent for ten months after the expiration of the one-year lease.
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a $405,000.00 mortgage. In addition, he obtained a total of $59,921.97 and Costa obtained
$6,000.00 from the proceeds.
At the time the Debtors entered into the March 29, 2006 transaction, they were
insolvent. The amount of their debts exceeded the value of their assets by a considerable
margin, and their income was insufficient to satisfy their monthly mortgage and other
obligations as they came due. Just prior to the March 29, 2006 closing, the Commonwealth
of Massachusetts, Department of Revenue placed a tax lien on the property in the amount
of $16,409.47. The Debtor testified as to the couple’s financial distress, and the defendants
submitted no evidence even hinting that the Debtors were solvent or were in a position to
pay their debts as they came due. Indeed, the Debtors’ circumstances were so dire that
they were receptive to the foreclosure rescue transaction presented to them by Hull, Costa,
and Reilly, who testified that he had engaged in similar transactions with Costa, who was
a family friend.
At the conclusion of the one year period, Reilly attempted to contact the Debtors
about “refinancing” the property. The Debtors, who no longer owned the property, were
unable to “refinance” or otherwise borrow funds to purchase the property back from
Reilly. Moreover, the Debtors’ Chapter 7 case was pending at the time the lease expired.
III. DISCUSSION
A. Counts I and II
Section 548 of the Bankruptcy Code provides in relevant part the following:
(a)(1) The trustee may avoid any transfer . . . of an interest of the debtor in
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property, . . . that was made . . . on or within 2 years before the date of the
filing of the petition, if the debtor voluntarily or involuntarily - - . . .
(B)(i) received less than a reasonably equivalent value in
exchange for such transfer or obligation; and
(ii)(i) was insolvent on the date that such transfer was made
or such obligation was incurred, or became insolvent as a
result of such transfer or obligation; . . .
11 U.S.C. § 548(a)(1)(B). The burden of proving a constructively fraudulent transfer under
section 548 is on the trustee. See Gouveia v. Cahillane (In re Cahillane), 408 B.R. 175, 188
(Bankr. N.D. Ind. 2009) (citing Frierdich v. Mottaz, 294 F.3d 864, 867 (7th Cir.2002)).
Under section 548(a)(1)(B), the trustee must prove the following elements: “(1) a
transfer of the debtor’s property or interest therein; (2) made within one year of the filing
of the bankruptcy petition; (3) for which the debtor received less than a reasonably
equivalent value in exchange for the transfer; and (4) either (a) the debtor was insolvent
when the transfer was made or was rendered insolvent thereby. . . .” In re Cahillane, 408
B.R. at 188-89 (citations omitted).4 Additionally, the trustee must prove each element by
a preponderance of the evidence. Id. at 189 (citing, inter alia, Frierdich v. Mottaz, 294 F.3d
at 867). See also Tomsic v. Pitocchelli (In re Tri-Star Techs. Co., Inc.), 260 B.R. 319 (Bankr. D.
Mass. 2001).
As noted by the Court in In re Tri-Star Techs. Co., Inc., “[s]ection 544(b) provides
4 Alternatively, the trustee could establish that the debtor was engaged or about
to become engaged in a business or a transaction for which its remaining property
represented unreasonably small capital; or that the debtor intended to incur debts
beyond its ability to repay them as they matured. See 11 U.S.C. § 548(a)(1)(B)(iii) and
(iv).
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another approach. It permits the estate representative to wear the mantel of any actual
unsecured creditor who could have avoided a prepetition transfer under ‘applicable
[non-bankruptcy] law.’” 260 B.R. at 323-24. 	The applicable non-bankruptcy law in
Massachusetts is the Uniform Fraudulent Transfer Act. See Mass. Gen. Laws ch. 109A,
§6(a), which provides:
A transfer made or obligation incurred by a debtor is fraudulent as to a
creditor whose claim arose before the transfer was made or the obligation
was incurred if the debtor made the transfer or incurred the obligation
without receiving a reasonably equivalent value in exchange for the transfer
or obligation and the debtor was insolvent at that time or the debtor became
insolvent as a result of the transfer or obligation.
Mass. Gen. Laws ch. 109A, § 6(a). Just as under section 548, the Trustee carries the burden
of proving each element by a preponderance of the evidence. In re Tri-Star Techs. Co., Inc.,
260 B.R. at 324 (citing Ferrari v. Barclays Business Credit, Inc. ( In re Morse Tool, Inc.), 148
B.R. 97, 131 (Bankr. D. Mass. 1992)).
While section 6(a) of the UFTA and section 548(a)(1)(B) have critical differences in
terms of the trustee’s derivative standing under the UFTA and the applicable reach back
period, those differences are not germane to a resolution of Counts I and II of the Trustee’s
complaint as the Debtors’ Schedule F establishes that one actual unsecured creditor existed
who could avoid the transfer and the Trustee commenced his action within two years of
the March 29, 2006 transfer.
Under the Bankruptcy Code, a debtor is “insolvent” when “the sum of such entity’s
debts is greater than all of [the] entity’s property, at a fair valuation . . . .” 11 U.S.C. 101(32).
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The UFTA’s definition is no different, except that a general failure by the debtor to pay its
debts as they become due provides a basis for a presumption of insolvency. In re Tri-Star
Techs. Co., Inc., 260 B.R. at 324-25 (citing Mass. Gen. Laws Ann. ch. 109A, § 3(a)-(b)). The
Court finds based upon the Debtor’s testimony and the Debtors’ schedules of assets and
liabilities that the Debtors were insolvent for purposes of both section 548(a)(1)(B) and
UFTA section 6(a).
Although the Bankruptcy Code does not contain a definition of the term “reasonably
equivalent value,” it does define “value” as “property, or satisfaction or securing of a
present or antecedent debt of the debtor, but does not include an unperformed promise to
furnish support to the debtor or to a relative of the debtor.” 11 U.S.C. § 548(d)(2)(A).
According to the court in Tri-Star,
[C]ourts 	have 	uniformly 	held 	that 	a 	reasonably 	equivalent 	value
determination should be based on all of the facts and circumstances of the
case. The Court should “compare what was given with what was received.”
And, in making this determination, both direct and indirect benefits should
be considered. It is not necessary that there be an exact exchange in order to
establish reasonably equivalent value, but the Court “must keep the
equitable purposes of the statute firmly in mind, recognizing that any
significant disparity between the value received and the obligation assumed
. . . will have significantly harmed . . . innocent creditors . . . .”
260 B.R. at 325-26 (citations omitted). 	According to the court in In re Adler, Coleman
Clearing Corp., 247 B.R. 51 (Bankr. S.D.N.Y. 1999), aff’d, 263 B.R. 406 (S.D.N.Y. 2001),
“[o]utside of the foreclosure context, reasonably equivalent value means something similar
to fair market value.” 247 B.R. at 106 (citing, inter alia, BFP v. Resolution Trust Corp., 511
U.S. 531, 545 (1994)). The court in Helms v. Roti (In re Roti), 271 B.R. 281 (Bankr. N.D. Ill.
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2002), aff’d, 2003 WL 1089363 (N.D. Ill. Mar. 11, 2003), stated:
Determination of reasonably equivalent value under § 548(a)(1)(B) is a
two-step process. The Court must first determine whether the debtor
received value, and then examine whether the value is reasonably equivalent
to what the debtor gave. The second inquiry, whether what the debtor gave
up was reasonably equivalent to what he received, is more difficult.
271 B.R. at 294-95. 	The court added: “The factors utilized to determine reasonably
equivalent value are: (1) whether the value of what was transferred is equal to the value
of what was received; (2) the market value of what was transferred and received; (3)
whether the transaction took place at an arm’s length; and (4) the good faith of the
transferee.” Id. at 295 (citations omitted).
The Debtors transferred their property, which had a fair market value of $450,000,
to Reilly for $368,495.63. Not only did Reilly obtain the down payment from the Debtors’
equity, he received a substantial fee in the sum of $12,000.00 from that equity as well.
Additionally, for putting the “deal” together, Costa received $6,000.00, and his employer
Affordable Funding received $8,800.00. Thus, the Debtors’ substantial equity, which could
have been shielded from their creditors through a properly declared homestead or
distributed to creditors, was stripped through a transaction involving the defendants which
was not arm’s length. The HUD-1 Settlement Statement, and in particular its inaccuracies,
is indicative of the intention of Costa, Hull and Affordable Funding to obfuscate the lack
of benefit to the Debtors. 	Additionally, after the transaction, the Debtors authorized
disbursements for which checks, dated March 28, 2006, had been prepared in advance, to
Reilly and Costa. Although Reilly was not a sophisticated lender and did not evince an
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intention to harm the Debtors, he did not question the propriety of acquiring the property
with no money down and receipt of the down payment, as well as a payment of $12,000,
from the Debtors’ equity.
Having found that the Trustee is entitled to avoid the transaction, section 550
permits the trustee to recover, for the benefit of the estate, the property transferred, or, if
the court so orders, the value of such property, from “the initial transferee of such transfer
[Reilly] 	or 	the 	entity 	for 	whose 	benefit 	such 	transfer 	was 	made 	[the 	remaining
defendants].” 	11 U.S.C. § 550(a)(1). 	In his Amended Complaint, the Trustee did not
specify which alternative he sought, but in his Memorandum, the Trustee clarified that he
is seeking the value of the property transferred, namely the Debtors’ equity which equaled
$81,504.37 on March 29, 2006.
B. Count III
To succeed on a claim for intentional misrepresentation, the Trustee must establish
that the defendants “‘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 his damage.’” Barrett Assocs., Inc. v.
Aronson, 346 Mass. 150, 152 (1963) (citing Kilroy v. Barron, 326 Mass. 464, 465 1950)). See
also Damon v. Sun Co., Inc., 87 F.3d 1467, 1471-72 (1st Cir. 1996).
The Court finds that the Trustee failed to sustain his burden of proof with respect
to his claim for intentional misrepresentation. In particular, he failed to present evidence
as to the Debtors’ reliance on the representations made by Reilly and Costa. The Debtor
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did not testify that he actually believed that he could “refinance” property the couple no
longer owned, particularly while the Chapter 7 case was pending when the lease expired.
Additionally, the Trustee did not address Count III in his Memorandum, a decision which
the Court construes as an abandonment of that count against Reilly and Costa.
C. Count IV
Through Count IV of his Amended Complaint, the Trustee seeks damages for
violation of Mass. Gen. Laws ch. 93A, §§ 2(a) and 9. 	In his Amended Complaint, at
paragraph 42, he alleged that he served a demand letter on the defendants at the same time
as he served the summons and original complaint, which did not contain a count under ch.
93A. 	Both Reilly and Costa denied receipt of the demand letter in the answers to the
Amended Complaint. No mention was made of the demand letter in the Joint Pretrial
Statement or at trial, and no copy was produced as an exhibit.
The court in Kerlinsky v. Fidelity & Deposit Co. of Md., 690 F.Supp. 112 (D. Mass.
1987), aff’d, 843 F.2d 1383 (1st Cir. 1988), succinctly summarized the law applicable to the
Trustee’s ch. 93A count, distinguishing between actions by the debtor and the trustee and
claims under sections 9 and 11. It stated:
The Massachusetts Consumer Protection Act makes unlawful any, “[u]nfair
or deceptive acts or practices in the conduct of any trade or commerce. . . .”
Mass. Gen. Laws ch. 93A § 2(a). There is no dispute that defendant was
conducting trade or commerce. Sections 9 and 11 of ch. 93A provide private
causes of action for violations of § 2, but for different classes of plaintiffs. A
plaintiff under § 9 is, “[a]ny person, other than a person entitled to bring
action under section eleven of this chapter . . . .” A plaintiff under § 11 is,
“[a]ny person who engages in the conduct of any trade or commerce. . . .” All
that is required for a plaintiff to fall within the ambit of § 11 is some
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transaction in a business context. Plaintiff trustee argues that because he, an
individual, brought this action, § 9 is the appropriate jurisdictional statute.
That position is untenable. Plaintiff is simply proxy for the bankrupt, and this
action clearly arose within the context of the underlying business contract
between bankrupt and defendant’s principal . . . . Section 11, and not § 9,
should be applied in this case.
690 F.Supp. at 1117 (citation omitted). If section 9 applies, which the Trustee has alleged
that it does, section 9(3) of Mass. Gen. Laws ch. 93A requires that a demand letter be mailed
at least 30 days prior to commencing an action. In Dean v. Compass Receivables Mgmt.
Corp., 148 F.Supp.2d, 116 (D. Mass. 2001), the court stated: “Attachment of the Demand
Letter to the complaint thus serves as proof of compliance with that section.” Id. at 117-18.
See Spring v. Geriatric Authority of Holyoke, 394 Mass. 274, 287 (1985) (existence of
demand letter must be alleged and proved). “An adequate demand letter is a jurisdictional
prerequisite to any claim brought under ch. 93A by a consumer plaintiff.” Manning v. State
Farm Ins. Co., 1997 Mass. App. Div. 184, 1997 WL 672056 at *2 (Mass. App. Div. Oct. 24,
1997) (citing Thorpe v. Mutual of Omaha Insurance Co., 984 F.2d 541, 544 (1st Cir. 1993)).
See also Rodi v. Southern New England School of Law, 389 F3d. 5, 19 (1st Cir. 2004) (quoting
Entrialgo v. Twin City Dodge, Inc., 368 Mass. 812, 812 (1975)); Kerlinsky, 690 F.Supp. at
1117.
In view of the foregoing, the Court finds that the Trustee has failed in his burden of
proof. He did not attach the demand letter to either his original or Amended Complaint,
and, in view of the denials of receipt of the letter by Reilly and Costa, this Court cannot find
that the letter was either sent or adequate as required by ch. 93A.
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IV. CONCLUSION
In view of the foregoing, the Court shall enter judgment against Reilly and Costa ,
jointly and severally, in the amount of $81,504.37 on Counts I and II and in favor of Reilly
and Costa and against the Trustee on Counts III and IV. 	In view of the defaults entered
against Affordable Funding and Hull, the Court shall enter judgment against them, jointly
and severally, with Reilly and Costa on Counts I, and II and in the amount of $81,504.37 on
Count III. The Court also shall award the Trustee treble damages with respect to Count IV
and thus shall enter judgment against Affordable Funding and Hull in the amount of
$244,513.11 on Count IV.
By the Court,
Joan N. Feeney
United States Bankruptcy Judge
Dated: April 13, 2010
cc: Stephen M. Sheehy, Esq., Raymond Kohlman, Esq., Richard Costa, Affordable Funding
Mortgage Corp.
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