Jerry Gaucher v. Gary E. Waterhouse, Trustee et al.

NOTICE: This speech-to-text record was generated from automated speech recognition, is likely to contain errors or inaccuracies, and should be verified against the recording provided by the Supreme Court at https://www.courts.nh.gov/our-courts/supreme-court/oral-argument/live-stream/2022.

Proceed. My name is Chris Snook and I represent the appellant Jerry Kosher, D-B-A-J-R, steak and Seafood. Uh, This case really, uh, there's just three issues and two of them involve a certain facts that happened in that one month window in 2015. The first is that the trust, uh, Gary Waterhouse and, you know, both brothers assigned all their rights in the lease and the lease termination agreement to Clems LLC, the buyer of the property and the contents within the, the greater store. Was That subject to a separate assignment Agreement of some sort? Yes. Uh, at trial, Gary Waterhouse read into the record the language of the assignment that was part of certain, I guess the bag of items they had signed and agreed to with Clems LC to effectuate the sale, which also included an agreement to cover the costs of the eviction of my client from the property. So, And because they had assigned their rights under both the lease and the lease termination agreement, it brings into question actually their ability, the trust ability to collect off for the cost of the eviction because the counterclaim that, Uh, They had brought was by the trust itself, which no longer has any rights under the lease termination agreement because they had assigned them to Clem, LLC. So to now, uh, be able to claim monetary damages from my client under an agreement they no longer have any rights to assert any claim under, just seems to narrow, but one Sort of reassign the ability to collect back to The trust. No, my understanding, and as far as the testimony that Gary Waterhouse had given, was that he had agreed to pay the cost of the eviction as part of the agreement to finally have Clem close because they had, uh, apparently the disagreement was that Clem did not want my client still as a tenant. So while he was still occupying the premises, uh, it would appear that the, the deal to allow it to go through is that he, that Gary Waler then pay to have him evicted, but not that they would receive rights back under the lease termination. That I haven't seen any evidence or testimony regarding that. And secondly, while we're on the topic of the attorney's fees, the indemnities clause within the lease termination agreement, I don't believe meets the, the standard that I must be unmistakably clear that attorney's fees were contemplated in that indemnity agreement, particularly these, the attorney's fees for my client's own eviction. The, the indemnity language in the agreement is pretty broad. It says, whereas in consideration for terminating the lease indemnifying and holding harm harmless the landlord from any and all actions claims, cost demands, expenses, fines,

liabilities and suits of any nature whatsoever, removing the equipment and cleaning the space, Gary Waterhouse and the as trustee of the Waterhouse Realty Trust, you know, will pay $20,000 to Jerry Kosher by July 1st, 2015. And it's important that the lease termination agreement was only in agreement between the trust the landlord of my client and, and my client himself. Because when the two brothers were deeded the property for no consideration shortly before their, the trust was supposed to make payment, they had removed the trust ability to ever satisfy 20 thou the $20,000 obligation because that was the only asset the trust ever had. And when the sale was effectuated to claim it was by the two brothers individually and not the trust itself. What's Your response to the argument that this was not raised below the indemnification issue? The, the indemnification in particular, it was raised in the request for findings of fact and rulings of law that was submitted, uh, at the close of evidence. And we had cited that. And, uh, the specific argument was that the, having, having to make my client pay for his own eviction because of an agreement made between the Waterhouse brothers and Clem LLC is, you know, contradicts the assignment of rights that the brothers had made to Clem LLC. And even though it doesn't appear in the trial court's order, both, uh, myself and Uh, Uh, attorney Sha and his, uh, reply memo of law both agree that there was an assignment of rights and it was clear based off of the testimony by Gary Waterhouse, the trial court just for whatever reason, did not include that in their analysis. So the trial court made a determination that the failure to pay on July 1st was not a material breach? Correct. Um, don't we owe that the trial court deference in that finding? I, I believe you do. I is within the court's discretion and, Uh, Unless it's, uh, I, I forget the exact standard, but unless it's, well, Isn't it an interpretation of a contract, which is a legal question that we can review Denovo, I understood the breach of contract to be a question of fact as determined at the trial level, but the language itself Yes. Uh, Time was not of the essence in the contract. Correct. We can agree on that. Correct. The trial court credited my client's testimony that he understood the July 1st date to be of great importance because he needed the money to then relocate his business. And that's how he understood that, that that's a hard and fast deadline. And when that didn't happen, he lost the ability to then move on to a new location And Business. And his remedy then would've been to sue the trust correct. For, for those damages. Correct. Which he belatedly did. But he engaged in some self-help before then? Yes, he did. And what was, and what was the grounds for that? What was the legal basis for that? Because the trust had voluntarily given up the only asset it owned the, the property itself to the brothers for no consideration. It had no ability to ever satisfy the $20,000. But That's not the end of the game. You can, you can pierce the terms of the trust and reach the, the two brothers rather easily, I would think, wouldn't you? I agree. Okay. I agree. And more importantly, because my client under understood the importance of the July 1st date when the payment wasn't forthcoming. It wasn't forthcoming the next day, the next day, the next day, and he was unable to move him to the new location. He felt that the co But the payment was offered with what, within two weeks? Uh, sorry. The, the, the brothers offered the $20,000 at some point in time and it wasn't, it was a matter of weeks later. Right? It was the end of the month on July 28th after they had, after the two brothers had sold the property. So, so why did the self-help continue? Well, until an eviction process was started, no one, uh, Gary Waterhouse Nors brother ever confronted my client to tell him that you can't reenter or talk to him about, It wasn't the essence of the agreement. You leave the premises in exchange for $20,000 and yes. How is Reoccupying the premises not a material breach itself as the trial court found? He had left, uh, a month earlier per the agreement and then reentered, Uh, The dates are funny, but it's somewhere's in the middle of July. Uh, which particular date or week? No one seems to remember, but he had performed his end of the bargain by moving out on June 15th as required by the lease termination agreement. And then when the payment wasn't forthcoming, the, their hi, their material material breach excuses, hi, his obligation to perform so I'm, so the acceptance Of the $20,000 payment didn't change anything? Well, it was only the $20,000, but didn't also include the, Uh, Security deposit, which even though they, they, they are separate, one arose under the lease, the other one under the lease termination agreement, my client un understood them to be one and the same. This is the money that's owed to him by, by his landlords. And they were not returning the security deposit. So he felt he did not have to, He Thereafter leave because he, he was not getting Full amount and he felt like he didn't have to pay rent either. Right. What was the monthly rent on, on the premises? Oh, I believe it was 1500. Okay. And he stayed there for five months rent free? Uh, no one made a demand for rent, either the, the Waterhouse, the brothers, the trust, the store, or even Clem, LLC. No one ever made a demand for rent. So he never paid any, and nor was it ever discussed. Can I ask you about the default judgment against Kevin Waterhouse? Yes. Um, do I understand correctly that the court issued a final default judgment against, uh, Kevin Waterhouse on February 4th, 2020, is that right? Yes. Uh, was there a damages hearing or was what was the basis for the what? $21,500 judgment? Is that an affidavit? Uh, yes, it was an affidavit of damages, which, uh, is included in the appendix. There was no, there was no objection from any of the defendants, so no hearing was scheduled and judgment was issued on the motion and the affidavit of damages, And Kevin Waterhouse at that point wasn't represented. Right. That's what was going on. I don't believe he ever, Uh, Filed an appearance or answered the, the complaint against him. So is that a final appealable order within 30 days? Within 30 days, yes. And so after 30 days, so when the court, uh, revisited the issue in July of 21, it then revised the judgment down to zero. Is that what happened? Yes. And, uh, what was the court's reasoning for that? I'll bring up, Because in the original trial order, it had just said that My client did not, or could not collect against Kevin Waterhouse, That we filed the motion for Reconsideration. And that's when the trial court found that your damages were zero. Correct. That's, that's when you restated it? I can't remember if there was actual, I was trying to find the, the, the order on the motion to reconsideration. I don't believe there was a reasoning beyond what, uh, there's no determination of damages, you know, the Right. And Kevin Woodhouse didn't sign any agreement with your client? He did not. So what was the basis for his liability? What was the theory of, of Relief? He was a co-trustee of the trust. He, he had the same ownership interest in the, uh, country store as his brother. And he, he was also part of the sale of the property to Clem. 'cause he, when the trust deeded the property over to the brothers individually, both had a 50% interest in the property and then received money from Clem afterwards. And as both being trustees of the trust, even though Gary was, I guess the point man, so to speak, for handling the trust business, he had the same powers and duties as Gary relative to being my client's landlord. He could have signed any of the documents, but he didn't. That's, that's a, an arrangement between those two brothers. But they effectively are, are the same entity as far or, you know, the same person as far as my client's concerned. But You brought a breach of contract claim and that, that that contract was the lease termination agreement? Correct. And only Gary Waterhouse signed that lease termination agreement. In fact, he signed it apparently in his personal capacity as well as the trustee. Uh, in additionally, uh, we had brought, uh, a second complaint for fraudulent conveyance that was then later consolidated into this case where Kevin was his name defendant. Okay. And he was proper, there's no issue about proper service to him? Not that I'm aware of. And, and there has never been a lawyer who's filed an appearance on his behalf through all of these proceedings, is that right? Yeah, correct. I'm, I'm not aware of him ever filing appearance and answer or anyone in on his behalf. You don't dispute the trial court's finding that when once, once your client was informed that $20,000 payment was available, he nonetheless refused to leave? Correct. And so the eviction proceeding was necessary to get him to leave Either the eviction proceeding or in my client's, uh, opinion, both the $20,000 plus his security deposit, which was contested all the way up through the, the trial where he was finally awarded the 1500 and the way where it was credited against the money. He, the trial court says he, he owed for his own eviction. But Are you saying he would've left had they tendered $21,500? I would've satisfied all obligations to him. So yes. Okay. Thank you. Attorney Snuck. Good morning. I'm Steven Schaller. I represent Waterhouse Country Stores and Waterhouse Realty Trust, and I have a little bit of an unfair advantage against Attorney Snuck since I've been involved in this case since 2015. Um, one thing we, um, one thing we can note is that the lease termination agreement was not prepared by lawyers. It was prepared by, uh, two guys working out a deal to end the lease in order for the Clems to take over that space because the Clem brothers were going to sell food at this facility and they did not want another food vendor on the property. And that was the genesis behind this agreement. And the agreement in and of itself is what terminates the actual lease. And, uh, judge Schulman took some time when he, um, when he wrote his order to outline the way the lease termination agreement, uh, was, was set out. And he noted that there were differences in the timelines that did not, uh, coincide with when the payment was due. This lease termination agreement went into effect on May 14th, and it gave Mr. Goucher two weeks to continue to operate business, presumably so that he could reduce the amount of his inventory and would have less to dispose of. And that brings you to the end of May and at the end of May for the next two weeks to lease termination agreement. As simple as it is required, Mr. Goucher to vacate, and that was the whole point of the lease termination agreement, is that Waterhouses needed him out in order for the sale to the claims to go through. Uh, as of June 15th, he was supposed to be out. There's some discrepancy in the testimony as to whether he was fully out or not fully out. Uh, we contend he wasn't fully out. Uh, but in any event, the payment wasn't due on June 15th. The payment was due on July 1st. So Judge Schulman, I think rightfully found that time was not of the essence with regard to the payment for two reasons. Number one, it doesn't say it in the agreement. And number two, the payment wasn't due when he had to vacate, it was due two weeks later. Was there an understanding that the payment was gonna going to be made after the sale of the property? So I'm getting old, uh, but this is seven years ago and I'm trying to recall, uh, specifically when the closing was. I know the closing was intended to in, to occur sometime, uh, at the beginning of July. And I know we ran into some problems, some related to Mr. Goucher, some not related to Mr. Goucher. I don't think the record bears that out. Uh, but it was pretty clear that the payment was going to come from the sale of the property. And since that didn't happen, the payment wasn't available. The pa when the property did close, I was involved in the closing. We escrowed out $20,000. The closing occurred on July 27th. I offered it, uh, to counsel for Mr. Goucher the next day. And it was turned down. Um, Mr. Goucher unilaterally declared that the termination agreement was rescinded and he unilaterally declared that the lease was revived and he moved back in and for the next five months, he ran his seafood business without paying rent, without leaving, which necessitated my office to begin an eviction action against him in the Salem District Court. And, um, I believe Justice Marconi and Justice Donovan both asked about the assignment. There was an assignment, uh, Mr. Goucher acknowledges the assignment that I think it's page 79 of the transcript and the assignment as signed the LTA, the lease termination agreement to the Clems. But there was an agreement that the, that was being done since the Clems were the property owners and the eviction action was brought in the name of the Clems. Uh, I actually brought the eviction action, but only as namesake because all the costs were being born by virtue of the agreement by Waterhouse. Um, so as a consequence, this eviction action took about five months in order to get him out. Meanwhile, he is running his business. The Clems can't use the space and, um, he's not paying rent. So I think both the Salem District Court and the Superior Court found that his remedy for the breach of the nonpayment was to sue on the LTA and not to just move back in unilaterally not pay rent and occupy the premises for five more months. Um, so The Clems would have been entitled to, um, the costs of the eviction. And that entitlement was sort of reassigned back to the trust to the Waterhouses. That's essentially correct. So we Waterhouse had to bear the cost of the eviction, but for that, the Clems would've had to bear the cost of the eviction. But part of the contract was the space, the contract between the Clems and Waterhouse was that space was supposed to be empty and was when it wasn't. We brought the eviction in the namesake of Clems, but as a consequence, we had to bear all of the costs. Uh, and we did bear the costs. This was a fairly lengthy eviction. Usually evictions don't take five or six months, and it was pretty contentious. And, uh, my ultimate fee was $6,500, which I think in a footnote, justice Schulman indicates he found to be reasonable and awarded it, uh, not, uh, justice Showman awarded it. So, um, I think Mr. Goucher just made a number of mistakes along the way, one of which was unilaterally just moving back in. He could have sued for either the security deposit or his $20,000. Uh, I think Judge Schulman correctly found that the, the essence of the agreement was to get Goucher out. Goucher admits admits that somewhere around page 15 of the transcript that he knew that the reason they were doing this was the Clems didn't want another food vendor in the spot. Is your, Is your post sale tender in the record? I'm sorry? Is Your post sale tender of the 20,000 in the record? Yeah, I don't believe that's disputed. It's, it's in there. Yeah, we offered it, we offered it the day after the closing and it was rejected. Um, what's not in the record as to why it was rejected, so I'm not gonna go into it, but it was rejected. Um, so Attorney Alala, can you tell me why nobody filed an appearance for Kevin Waterhouse? I don't represent Kevin Waterhouse. Uh, it's my understanding that he relocated, uh, he may not be in the area. Um, that's all I can tell you. I've had no contact with Kevin for A long time. Do you take any position with respect to the default? We don't take any position with respect to the default. I don't, I don't represent him. Nobody ever represented him. Uh, I believe he was served. I don't think he entered a pro se appearance. We just never heard from him. Um, and at some point through the litigation, uh, counsel for the petitioner filed to Pierce the, the corporate veil as Justice, uh, Hicks referenced. And, and, um, Gary Waterhouse ended up being, uh, represented by Rick Maloney personally. Um, I mean, another issue in the lease agreement is how was this thing signed? I mean, Gary signs it as landlord. He doesn't refer to himself as trustee. We never really raised those issues. We thought we were pretty solid in terms of the substantive approach that we were taking. Um, I think Judge Schulman correctly found that he materially breached by not moving out and then by moving back in. Um, and as a consequence, as this court is aware, under our law, when you materially breach, the non breaching party is excused from performance. And so we were excused from paying the $20,000. I think that decision, uh, was correct. I've tried other cases in front of Judge Schulman. He has an interesting way of simplifying things. If you've read, if you've read his decision, he talks about, well, the B builds a house for C and C doesn't pay him. You don't get to take the materials back and take the house down. And that's effectively what Mr. Goucher did. He just moved back in and ran his business for five months. And I think the court correctly, and the district court correctly said that wasn't his remedy. He could have sued for breach. Did Mr. Goucher ever pay rent for those five months or was there ever an effort to No. Collect damages in that sum? No, he never paid for rent. We did not sue for rent because it would be over the statutory limit of $1,500. We would've had to bring a separate action. There were other strategic reasons we didn't pursue the rent, uh, which which are not in the record, so I won't go into it. But he never paid rent. We just wanted him out. Um, which was our obligation to the, Was the security deposit lit litigated in the eviction action? No. Never brought up, Uh, in the eviction action? Yeah. Um, it might've been involved. It might've come up during settlement discussions, but I think, um, I think Goucher, Mr. Goucher's position was simply that he had the right to be there because they breached the LTA and the district court said, no, you sue for the damages. So I don't believe the, I don't believe it ever came up. I know it's come up in settlement discussions, but I won't go there. What is our standard or review or what's the appropriate standard to review for the trial court's determinations of materiality and non materiality? Yeah, it's certainly not de novo. I think you have to look at the record and make a determination as to whether the evidentiary the evidence that was presented to the lower court is sufficient to support its findings. And I think more than amply, it supports Judge Showman's findings. Unless there are other questions, I'll rest on my memo. Thank you. Thank you very Much. Counsel Case is submitted. Court's in recess. You rise.