and appeared to be abandoned. Id. at 139-40. Washington 1 failed to give any notice of vacating the premises. Id. at 141. As Mr. Shapiro testified, the "place had been trashed." Id. at 140. Garbage, consisting of papers and food, was all over the store. A faucet had been removed from the sink, the freezer lids had been taken off and the walk-in freezer was damaged. Id. Tile from the wall was gone and shelving was missing. The outer wall was damaged and the ceiling needed repair. Id. at 142. The HVAC unit also needed repair. Id. at 143. Washington 1 had left the store in a complete mess.
Inside Scoop reentered the premises, made repairs and reopened the store as a "Steve's" ice cream store. After an apparent misunderstanding about the appearance of a "Steve's" going out of business and the reopening of the store, Steve's Ice Cream, Inc. filed a complaint seeking injunctive relief for trademark infringement. As a result, the parties settled two months later and plaintiff removed the "Steve's" sign from the store. Id. at 145.
Thereafter, plaintiff sought to rent the premises. In March 1985, Inside Scoop sublet the premises for the remainder of the lease term to the 19th Street Deli, Inc. ("Deli") at $ 4,000 per month. Id. at 161; see also Joint Ex. 36. This was about $ 1,177.00 above the lease rent of $ 2,823.00.
By January 1987, the Deli was behind substantially in its rent to Inside Scoop. In February 1987, Mr. Chang Choi paid $ 30,000 on behalf of the Deli to repay the back rent that had accrued, and took over the Deli's sublease. Transcript Vol. I at 172, lines 17-23. By January 1988, however, Mr. Choi owed a large amount of back rent. He abandoned the premises and Inside Scoop reentered. Id. at 175-76.
On or about February 1988, the Landlord and Inside Scoop negotiated a termination of the lease. The Landlord paid $ 20,000 to the Century National Bank on behalf of plaintiff to remove liens it had on the fixtures in the store and released Inside Scoop from back rent owed in the amount of $ 32,985.43. See Joint Exs. 47 & 48. Plaintiff released any rights it had in the security deposit.
During the period after Washington 1's default, plaintiff received $ 118,050 in income from all of the sublettors, including the $ 20,000 from the Landlord. See Plaintiff's Ex. 11A. Plaintiff expended $ 113,002.61 in rent, repairs, advertising and some attorney fees.
Plaintiff filed its complaint initially on November 5, 1984, seeking recovery on the Note. Plaintiff sought judgment from defendant Washington 1, and defendants Curry and Katz, individually and as trustees of Washington 1. Only defendant Katz is before the Court at this time.
II. Conclusions of Law
A Massachusetts business trust is an unincorporated organization operating under a written instrument or declaration of trust. Trustees manage the property for the benefit and profit of persons whose legal interests are represented by transferable certificates or shares. See Mass. Gen. Laws Ann. ch. 182, § 1 (West 1987); G. Bogert, The Law of Trusts and Trustees, § 247, at 146 (rev. 2d ed. 1977); Annotation, Modern Status of the Massachusetts or Business Trust, 88 A.L.R.3d 704, 711 (1978).
A business trust differs from a conventional trust in the manner of its creation and in its purpose. While a conventional trust usually arises from a gift or grant of the settlor of the trust in order to conserve and protect the property of the trust, a business trust is created when investors pool their resources in a contractual relationship with the trustees for the purpose of making a profit. Bogert § 247, at 147; 88 A.L.R.3d at 712.
The Massachusetts business trust enjoys many of the same benefits as a corporation, without the statutory burden of actual incorporation. The business trust's origin in Massachusetts has been attributed to the fact that corporations were prohibited from developing or dealing in real estate. Bogert § 247 at 150. The business trust form was also used to avoid the payment of taxes and fees required of corporations while still securing limited liability for the members of the trust, to avoid the "blue sky" laws, or to avoid the requirements imposed on foreign corporations. Id. at 151. Many states have enacted statutes subjecting business trusts to the same requirements as corporations and the Internal Revenue Service treats business trusts as corporations for taxation purposes.
Some jurisdictions recognize the business trust form by statute. See, e.g., Ariz. Rev. Stat. Ann. §§ 10-501 to 10-509 (1977 & Supp. 1988); Fla. Stat. Ann. §§ 609.01 to. 08 (West 1977); Mass. Gen. Laws Ann. ch. 182, §§ 1-14 (West 1987); W. Va. Code §§ 47-9A-1 to -6 (1986). For a more complete compilation, see Bogert § 247 at 137 n. 98. The District of Columbia neither provides for business trusts nor makes any reference to this type of business form by statute.
Some states, due to their definition of corporation, have treated business trusts as corporations, requiring the trusts to incorporate before doing business in the state, or have held business trusts subject to the statutes regulating foreign corporations. See, e.g., Rubens v. Costello, 75 Ariz. 5, 251 P.2d 306 (1952); State ex rel. Ferguson v. United Royalty Co., 188 Kan. 443, 363 P.2d 397 (1961).
Other states have treated alleged business trusts as partnerships, applying the "control" test. If the trustees have the exclusive right to manage the business free from the control of the shareholders, and possess legal title to the property of the trust, the organization is treated as a business trust. If, however, the trustees are subject to the control of the shareholders, then the trust will be treated as a partnership. See Hecht v. Malley, 265 U.S. 144, 146, 68 L. Ed. 949, 44 S. Ct. 462 (1924); Engineering Serv. Corp. v. Longridge Inv. Co., 153 Cal. App. 2d 404, 314 P.2d 563 (1957); see also 88 A.L.R.3d at 725-26.
This Court was unable to locate decisional law in the District of Columbia that would show how business trusts would be treated in this jurisdiction. The Court will rely on Massachusetts law since that is the jurisdiction where the Declaration of Trust of Washington 1 is filed.
Plaintiff advances three theories for holding defendant Katz individually liable on the Note:
1) partnership by admission or estoppel;
2) piercing the corporate veil; and