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HomeMy WebLinkAboutBruce Poor Determination (Received with Minutes of Dec. 12, 2006) NANTUCKET LAND BANK COMMISSION 22 Broad Street Nantucket, Massachusetts, 02554 DECISION AND DETERMINATION In the matters of: I. Bruce H. Poor ("Poor"), pursuant to Notice of Assessment dated August 23, 2006, regarding Premises at 3A Winn Street, Nantucket, Massachusetts ("Lot 4R"); II. Bruce A. Issadore and John Englert ("Issadore/Englert") and Thomas M. Sobol and Meredith L. Sobol (the "Sobols"), tenants in common, pursuant to Notice of Assessment dated August 23,2006, regarding Premises at 45 Vestal Street, Nantucket, Massachusetts (Tax Map 41 Parcel 591) ("Lot 2"); and III. Hedgeburv Lane, LLC, landlord ("Hedgebury") and Harold B. Murphy and Lauren C. Murphy, Trustees ofECD Realty Trust, tenant ("Murphy"), pursuant to Notice of Assessment dated August 23, 2006, regarding Premises consists often (10) subdivision lots collectively bounded by Madaket Road, Winn Street and Vestal Street Extension, Nantucket, Massachusetts (Tax Map 41 Various Parcels) (the "Subdivision"). FACTS 1. Pursuant to the requirements of the 1983 Acts and Resolves of the Massachusetts General Court, Chapter 669, as amended (the "Act"), Section 14(a), the Nantucket Islands Land Bank Commission (the "Land Bank") hereby enters this determination and decision, after a hearing held 4:00 P.M., Tuesday, November 14, 2006, and continued to 4:00 P.M., Tuesday, November 28,2006, at the Land Bank Meeting Room, 22 Broad Street, Nantucket. The three referenced matters were heard together, since they involve related parties and a single subdivision. This determination and decision is based upon the Commission's record in these matters, including evidence and documents provided at the hearing. 2. Hedgebury Lane, LLC ("Hedgebury") is a Massachusetts Limited Liability Company, which was originally formed August 27,2003, with Bruce H. Poor ("Poor"), Manager. At its formation, the members of Hedgebury were 50% Michael C. Emerson ("Emerson") and 50% Poor and his wife Gloria Grimshaw ("Grimshaw"). (See Exhibits 1 and 3.) 1 was included in the assessment regarding the Unreported Transfer. Sobols were included in the assessment regarding Transfer No. 26977 as tenants in common. 13. By counsel's letter dated September 7, 2006, all parties requested a hearing regarding the assessments. By agreement of the parties, the hearing was deferred to November 14,2006, in order to allow for an exchange of questions and information and to accommodate the schedules of all concerned. (See Exhibits 49,66,68,69, and 75.) At the hearing on November 14, 2006, it became apparent that Hedgebury wished to file additional exhibits, so the parties agreed to continue the hearing to November 28,2006. (See Exhibit 81.) 14. Prior to the hearing, Hedgebury had filed one set of income tax returns, being the 2005 initial return. The federal return is filed on IRS Form 1065, Return of Partnership Income. (See Exhibit 76). Consequently, Hedgebury is a partnership for purposes of applying the Land Bank Act and Regulations. 15. At the time of Transfer No. 26947, Poor was a 25% Member of Hedgebury. He remained so after completion of the transfer, with no alteration of his membership share. There were no contemporaneous pro rata transfers by Hedgebury to other members. (See Exhibit 77.) 16. At the time of Transfer No. 26977, neither Issadore nor Englert was a Member of Hedgebury. (See Exhibits 33.16 and Exhibit 77.) 17. At the hearing, the following exhibits were made a part of the Commission's official record without objection by Poor, Issadore/Englert, Sobols, Hedgebury, or Michael, and are incorporated herein by reference: Exhibit 1, Certificate of Organization for Limited Liability Company Hedgebury Lane LLC filed August 27, 2003, with the Secretary of the Commonwealth of Massachusetts by Bruce H. Poor, Manager; Exhibit 2, Certificate of Organization for Limited Liability Company EKIA LLC filed August 28,2003, with the Secretary of the Commonwealth of Massachusetts by Bruce A. Issadore, Manager; Exhibit 3. Transfer Documents Record No. 23411 including Form A, Form B, Schedule of Beneficial Interests for Hedgebury Lane LLC, Certificate of Organization for Limited Liability Company Hedgebury Lane LLC filed August 27,2003, with the Secretary of the Commonwealth of Massachusetts, and deed from to Michael W.C. Emerson, Bruce H. Poor and Gloria Grimshaw to Hedgebury Lane LLC recorded at the Nantucket Registry on September 5, 2003, as Book 845, Page 254; Exhibit 4 Mortgage from Hedgebury Lane LLC executed by Bruce H. Poor as Manager to Bruce A. Issadore in the amount of$180,000 recorded at the Nantucket Registry on September 5,2003, as Book 845, Page 257; Exhibit 5, Transfer Documents Record No. 23536 including Form A, Form B, and deed from Bruce H. Poor and Gloria Grimshaw to Colosi, LLC recorded at the Nantucket Registry on October 3,2003, as Book 851, Page 26; 3 Exhibit 20, Partial Release (Lot 2) recorded at the Nantucket Registry on May 15,2006, as Book 1021, Page 281, of BankNorth mortgage from Hedgebury Lane LLC recorded as Book 872, Page 54 (Exhibit 9); Exhibit 21, Partial Release (Lot 4R) recorded at the Nantucket Registry on May 23,2006, as Book 1023, Page 86, of BankNorth mortgage from Hedgebury Lane LLC recorded as Book 872, Page 54 (Exhibit 9); Exhibit 22, Correspondence from Valerie Swett, Esq. dated June 27, 2006, to David Arons, Esq. and Keith Yankow, Esq.; Exhibit 23, Email string including (i) correspondence from David Arons dated July 20,2006, (1:57 PM) to Valerie Swett and (ii) correspondence from Valerie Swett dated July 31, 2006, (3: 12 PM) to David Arons; Exhibit 24, Email string including (i) correspondence from David Arons dated August 1,2006, (2:11 PM) to Valerie Swett; and (ii) correspondence from Valerie Swett dated August 3,2006, (2:50 PM) to David Arons; Exhibit 25, Correspondence from David L. Arons, Esq. dated August 9,2006, to Valerie Swett, Esq.; Exhibit 26, Email correspondence from Valerie Swett dated August 10,2006, (5:15 PM) to David Arons; Exhibit 27, Transfer Documents Record No. 27236 including Form A and deed from Bruce A. Issadore and John J. Englert to Thomas M. Sobol and Meredith L. Sobol recorded August 18, 2006, as Book 1036, Page 254; Exhibit 28, Transfer Documents Record No. 27237 including Form A and Notice of Lease from Thomas M. Sobol, Meredith L. Sobol, Bruce A. Issadore and John J. Englert to Bruce A. Issadore and John J. Englert recorded August 18,2006, as Book 1036, Page 277; Exhibit 29, Mortgage from Bruce A. Issadore and John J. Englert to TD BankNorth, N.A. in the amount of $800,000 recorded at the Nantucket Registry on August 18,2006, as Book 1036, Page 282; Exhibit 30, Transfer Documents Record No. 27238 including Form A and Notice of Lease from Thomas M. Sobol, Meredith L. Sobol, Bruce A. Issadore and Thomas M. Sobol and Meredith L. Sobol recorded August 18,2006, as Book 1036, Page 256; Exhibit 31, Mortgage from Thomas M. Sobol and Meredith L. Sobol to Countrywide Home Loans, Inc. in the amount of $1,300,000 recorded at the Nantucket Registry on August 18, 2006, as Book 1036, Page 261; Exhibit 32, Email correspondence from David Arons dated September 7,2006 (2:28 PM) transmitting email dated August 21,2006, (3:32 PM) to Valerie Swett (Attachments omitted as they duplicate Exhibit 33 enclosures.); Exhibit 33, Correspondence from David L. Arons, Esq. dated August 21,2006, to Valerie Swett, Esq. with these enclosures: Exhibit 33.1. Operating Agreement for Colossi LLC dated June 11,2002, executed by Gloria Grimshaw and Bruce H. Poor, Members and Bruce H. Poor, Manager, with attached Schedule A, membership interests in Colosi LLC; 5 Exhibit 33.18. Settlement Statement dated May 9,2006, from law office of Glidden & Glidden, P.C. for the conveyance of Lot 2 to John J. Englert and Bruce A. Issadore; Exhibit 34. Notice of Assessment from the Nantucket Islands Land Bank Commission dated August 23, 2006 / Unreported transfer of control when Andrew Kaye was added as manager, to Hedgebury Lane, LLC, and Harold B. Murphy and Lauren C. Murphy, Trustees ofECD Realty Trust and attached cover letter from Kenneth W. Holdgate, Jr., Chairman, Nantucket Islands Land Bank Commission; Exhibit 35. Notice of Assessment from the Nantucket Islands Land Bank Commission dated August 23, 2006/ No. 26947, to Bruce H. Poor and attached cover letter from Kenneth W. Holdgate, Jr., Chairman, Nantucket Islands Land Bank Commission; Exhibit 36. Notice of Assessment from the Nantucket Islands Land Bank Commission dated August 23, 2006/ No. 26977, to Bruce Issadore, John J. Englert, Thomas M. Sobol and Meredith L. Sobol, tenants in common, and attached cover letter from Kenneth W. Holdgate, Jr., Chairman, Nantucket Islands Land Bank Commission; Exhibit 37. Notice of Lien from the Nantucket Islands Land Bank by members of the Nantucket Land Bank Commission dated August 22, 2006, to Hedgebury Lane LLC and Harold B. Murphy and Lauren C. Murphy, Trustees ofECD Realty Trust.. recorded at the Nantucket Registry as Book 1037, Page 150, on August 23, 2006; Exhibit 38. Notice of Lien from the Nantucket Islands Land Bank by members of the Nantucket Land Bank Commission dated August 22, 2006, to Bruce H. Poor, recorded at the Nantucket Registry as Book 1037, Page 151, on August 23, 2006; Exhibit 39. Notice of Lien from the Nantucket Islands Land Bank by members of the Nantucket Land Bank Commission dated August 22, 2006, to Bruce A. Issadore, John J. Englert, Thomas M. Sobol and Meredith L. Sobol, tenants in common, recorded at the Nantucket Registry as Book 1037, Page 152, on August 23,2006; Exhibit 40. Correspondence from Keith M. Yankow, Esq. dated September 1, 2006, to Valerie Swett, Esq.; Exhibit 41. Correspondence from Richard J. Glidden, Esq. dated September 5, 2006, to Kenneth E. Holdgate, Jr., Chairman, Nantucket Islands Land Bank Commission; Exhibit 42. Correspondence from Valerie Swett, Esq. dated September 6,2006, to David Arons, Esq., Keith Yankow, Esq., and Richard J. Glidden, Esq.; Exhibit 43. Email string including (i) correspondence from Valerie Swett to Richard Glidden, Keith Yankow, and David Arons dated September 6,2006 (12:48 PM), (ii) correspondence from Keith Yankow dated September 6,2006 (2:48 PM) to Valerie Swett, (iii) correspondence from Valerie Swett dated September 7, 2006 (11:42 AM) to Keith Yankow, (iv) correspondence from Keith Yankow dated September 7,2006 (12:17 PM) to Valerie Swett, and (v) correspondence from Valerie Swett dated September 7, 2006 (1:47 PM) to Keith Yankow; Exhibit 44. Email correspondence from Valerie Swett dated September 7, 2006 (1 :29 PM) to Dave Arons; 7 Exhibit 60. Email string including (i) correspondence from Valerie Swett dated September 29,2006 (12:43 PM) to Keith Yankow without attached second draft of the escrow agreement and compared copies and (ii) correspondence from Keith M. Yankow dated October 3,2006 (11:21 AM) to Valerie Swett with attached letter from Keith M. Yankow to Valerie Swett, Esq.; Exhibit 61. Email correspondence from Valerie Swett dated October 3,2006 (12:13 PM) to Keith Yankow; Exhibit 62. Email correspondence from Valerie Swett dated October 3, 2006 (12:40 PM) to Patricia Halsted and Jeff Stetena with attachments; Exhibit 63. Email correspondence from JeffStetina dated October 3, 2006 (12:28 PM) to Valerie Swett; Exhibit 64. Email correspondence from JeffStetina dated October 3,2006 (1:16 PM) to Valerie Swett; Exhibit 65. Correspondence from Richard 1. Glidden dated October 4, 2006,to Valerie Swett, Esq. with these enclosures: Exhibit 65.1. Memo of Richard J. Glidden, Glidden & Glidden, P.C., dated October 3,2006; Exhibit 65.2. Statement of Thomas Sobol and Meredith Sobol regarding Nantucket Islands Land Bank Transfer No. 26977 dated September 18, 2006; Exhibit 65.3. Correspondence from Anne Remian, Lee Real Estate, dated September 12,2006, to Eric Savetsky; Exhibit 65.4. Offer to Purchase Real Estate from Meredeth and Tom Sobol dated August 8, 2005; Exhibit 65.5. Copy of Sobol Check No. 3101 for $5,000 payable to Jordan Real Estate dated August 10,2005; Exhibit 65.6. Massachusetts Mandatory License-Consumer Relationship Disclosure dated August 8, 2005; Exhibit 66. Email correspondence from Valerie Swett dated October 6,2006 (12:25 PM) to Richard Glidden; Exhibit 67. Hand delivered correspondence from Keith M. Yankow, Esq. dated October 5,2006, to Craig Hunter, Nantucket Land Bank, with attached signature page of the Escrow Agreement between the Nantucket Islands Land Bank and Hedgebury Lane LLC; Exhibit 68. Email correspondence from Valerie Swett dated October 6, 2006 (1:43 PM) to David Arons, Keith Yankow, and Richard Glidden; Exhibit 69, Correspondence from David L. Arons dated October 10, 2006, to Craig Hunter; Exhibit 70, Email correspondence from David Arons dated October 10,2006 (12:24 PM) to Valerie Swett, Keith Yankow, Richard J. Glidden, Esq.; 9 Exhibit 85. Email correspondence from David Arons to Valerie Swett dated November 27,2006 (3:51 PM) with these attachments: Exhibit 85.1 Uniform Residential Appraisal Report (Fannie Mae Form 1004) for Issadore/Englert's portion of 45 Vestal Street (Lot 2B) dated March 29, 2006, prepared by Sara Fuller, Baywest Appraisal Group, placing a value of $1.65 million on Lot 2B for borrowers Bruce Issadore and John Englert; Exhibit 85.2. Document entitled "Withdrawal ofEKIA LLC" signed by Bruce Issadore and John Englert as managers ofEKIA, LLC, dated November 21,2006, purporting to remove EKIA, LLC as a member of Hedgebury Lane, LLC, effective May 4, 2006; Exhibit 86. Hedgebury Lane LLC 2006 Annual Report filed September 29, 2006, with the Secretary of the Commonwealth of Massachusetts by Bruce H. Poor, showing Bruce H. Poor and Andrew Kaye as Managers; Exhibit 87. Document entitled "Approval of Withdrawal" signed by Bruce H. Poor as manager of Hedgebury Lane LLC, dated November 2006, purporting to approve the withdrawal ofEKIA LLC as a member of Hedgebury Lane, LLC, effective May 4, 2006; Exhibit 88. Hedgebury Lane LLC and Partners Chart of Transactions and Exemptions dated November 28, 2006, presented by Bruce Issadore at the November 28, 2006, portion of the hearing. 18. Poor, Issadore/Englert, Sobols, Hedgebury and Murphys have failed to discharge the Land Bank fees assessed in the Notices of Assessment in the total amounts of$71,164.86, 71,164.86, and 190,272.00, respectively, plus penalty and interest running from the respective dates of transfer. FINDINGS Based on the record before the Commission and the hearing, the Commission finds as follows: Matter I (Transfer No. 26947) Poor claimed that Transfer No. 26947 was exempt from a Land Bank fee pursuant to the "D" Exemption, which is created by Section 12( d) of the Act, which in turn provides: Transfer to the trustees of a trust in exchange for a beneficial interest received by the seller in such trust; distributions by the trustees of a trust to the beneficiaries of such trust. As stated, the "D" Exemption applies only to transactions where one party is a "trust". Neither party to Transfer 26947 is a trust. Therefore Exemption "D" on its face and by its plain terms is not applicable to the transfer. During the hearing, representatives of Poor, as well as Poor himself in affidavit form (Exhibit 79) asserted that Transfer No. 26947 should nonetheless be exempt from the Land Bank 11 admitted as Exhibit 82 was performed in connection with the purchase money mortgage obtained by Poor for the Transfer No. 26947 transaction. It values Lot 4R at $2,400,000 at the time of the transfer. Therefore, the Land Bank fee due on account of Transfer No. 26947 should be recalculated using this value. We find pursuant to Section 13(b) of the Act that Poor's failure to pay the fee due on account of the Transfer No. 26947 was due to fraud with intent to defeat or evade the fee imposed by the Act, and therefore the statutory penalty should be applied. At the time of filing the transfer, the "D" Exemption was claimed, which on its face clearly could not apply to the transfer. Throughout the assessment and hearing process Poor continued to insist that the transfer is not subject to a fee, notwithstanding the fact that it indisputably was purchased for value. We find that the arguments made against payment were plainly refuted by the terms of the statute and the relevant documents, that the parties were well aware that the fee was due under the statute, and that there was no good faith basis for assertions that the transfer was not subject to the fee. Matter II (Transfer No. 26977) IssadorelEnglert claimed that Transfer No. 26977 was exempt from a Land Bank fee pursuant to the "]" Exemption, which has been set forth above in pertinent part. At the hearing, no evidence was provided indicating that either Issadore or Englert was at any time a member of Hedgebury. At the time of the transfer each was a 30% member ofEKIA, which previously had been a 50% member of Hedgebury. However, effective May 4, 2006, EKIA ceased to be a member of Hedgebury (Exhibits 85.2 and 87), five days before Transfer No. 26977 on May 9, 2006. Consequently EKIA was not a member of Hedgebury on the relevant date and neither Issadore nor Englert could be considered as members of Hedge bury through the unasserted theory that they had "beneficial" membership through EKIA's membership. (See Exhibits 33.16 and Exhibit 77.) Moreover, as already found with regard to Transfer No. 26947, no evidence was provided to the effect that Hedgebury has been dissolved or is the subject of a duly-adopted plan of dissolution. On the contrary, the testimony indicated that Hedgebury is an on-going entity. (See, e.g. Exhibit 85.2 and 87). Some of the testimony can be interpreted to assert that Transfer No. 26977 occurred pursuant to a plan of partial dissolution. This argument is completely without merit since neither Issadore nor Englert was a member or the holder of a beneficial interest in Hedgebury. Reference is again made to Exhibit 83.2, which, as already found, is only an agreement among three individuals, being Poor, Issadore and Englert. Exhibit 83.2 is an agreement regarding the terms under which the three parties would purchase lots from Hedgebury. Transfer No. 26977 was one of the purchases contemplated. It closed with purchase money financing and payment of substantial consideration for a partial release of the Hedgebury mortgage. The original assessment of a Land Bank fee on account of Transfer No. 26977 (Exhibit 36) was based on an estimated value for the property transferred by doubling the price for which 13 To the extent not otherwise subject to payment of a fee pursuant to section ten, and notwithstanding the exemptions set forth in paragraphs (i) and (j) [of section twelve], unless otherwise exempted pursuant to said section twelve excluding said paragraphs (i) and (j), there shall be paid a fee equal to two per cent of the fair market value of real property interests held in the name of a partnership or otherwise owned by a partnership upon the change in composition of such partnership either in one transaction or a series of related transactions which change in composition results in a transfer of capital interests in excess of fifty per cent of the total capital interests within such partnership or results in a transfer of the ownership rights to profit interests within such partnership in excess of fifty per cent of the total profit interests within such partnerships. (Bracketed material inserted for clarity.) The pertinent parts of the Regulations include the following: Section 2.03(8)(b): With respect to a Partnership, unless otherwise exempted, there shall be a Fee due under Section lOA of the Act upon either of two events affecting a Partnership owning any Real Property Interest in real property situated in the County of Nantucket held in the name of or otherwise owned by the Partnership: (i) A Fee is due upon the change in composition of the Partnership, occurring either in one transaction or a series of related transactions, which results in a transfer of control such that capital interests in excess of fifty per cent (50%) of the total capital interests within such Partnership are shifted from one partner or controlling group to another partner or controlling group; or (ii) A Fee is due upon a change in composition of the Partnership, occurring either in one transaction or a series of related transactions, which results in a transfer of control such that the ownership rights to profit interests within such Partnership in excess of fifty per cent (50%) of the total profit interests within such Partnership are shifted from one partner or controlling group to another partner or controlling group. Section 2.04(1): Pursuant to Section 2.03, Paragraphs 8 and 9 of these Rules and Regulations, non-deed transfers of interests in a . . . Partnership, or a trust holding any Real Property Interest in real property situated in the County of Nantucket are subject to the Fee, unless otherwise exempted or non-applicable pursuant to Sections 12 or lOA of the Act. The Unreported Transfer involved transferring exactly fifty (50%) percent of the capital and profit interests of Hedge bury from Poor and Emerson to EKIA. As such, the Unreported Transfer is within the definition of a "not applicable" transfer pursuant to Section lOA of the Act. 15 . . "not applicable" exemption from the Land Bank fee and to memorialize the identity of the members of Hedge bury after completion of each transfer. Upon Land Bank staff determining that such filings are complete, Land Bank staff shall instruct Land Bank counsel to release to Hedgebury all sums being held in escrow to secure payment of any fee which may have been determined to be due on account of the Unreported Transfer (See Exhibit 72.) The escrow fund will be released only after completion of the filings, after satisfaction of all conditions described in the escrow agreement (including running of all applicable appeals periods), and such other conditions as Land Bank counsel may impose in the Land Bank's best interest. Poor, Issadore, Englert, Sobols, Hedgebury and Murphys each have the rights set forth in the Act, for further proceedings in connection with this Decision and Determination. WITNESS our hands and seals this Ith day of December, 2006. NANTUCKET ISLANDS LAND BANK By Its Commission: DWLIB 206617vl 1141/00 17 3. On January 24,2004, a Certificate of Amendment for Hedgebury was filed with the Massachusetts Secretary of State indicating that Andrew Kaye ("Kaye") had been added as a second Manager. The addition of Kaye as Manager coincided with the addition ofEKIA, LLC ("EKIA") as a 50% member of Hedgebury and the reduction of Emerson's and Poor/Grimshaw's membership interests to 25% each. This transfer ("Unreported Transfer") was not reported to the Land Bank and is the subject of Matter III. (At an undetermined date, Grimshaw ceased to be a member of Hedgebury and thereafter Poor owned their interest alone.) (See Exhibits 6, 33.2, 33.4, and 77) 4. EKIA is a Massachusetts Limited Liability Company originally formed on August 28, 2003. At all relevant times, the Manager ofEKIA is/was Bruce A. Issadore ("Issadore") and the members are Issadore (30%), John Englert ("Englert") (30%), Kaye (30%) and David Arons ("Arons")(10%). (See Exhibits 2 and 33.16.) 5. As of February 4,2004, the record owner of the Subdivision, Lot 4R and Lot 2 was Hedgebury, by virtue of deeds recorded in Nantucket Registry of Deeds Book 845 Page 254, Book 872 Page 49, and Book 872 Page 52. (See Exhibits 3, 5, 8, and 9.) 6. On or about June 25, 2005, Hedgebury conveyed a long term lease to Harold B. Murphy and Lauren C. Murphy, Trustees ofECD Realty Trust ("Murphy") regarding one lot within the Subdivision. A Land Bank fee was paid on this transfer. (See Exhibit 11.) 7. On April 28, 2006, Hedgebury conveyed Lot 4R to Poor by deed recorded in Book 1019 Page 216. This transfer ("Transfer No. 26947") was reported as exempt under Exemption D, and is the subject of Matter I. (See Exhibit 13.) 8. Contemporaneous with Transfer No. 26947, Poor closed a purchase money mortgage for $1,350,000, recorded in Book 1019 Page 220, $1,200,000 of which was applied to pay a portion of Hedgebury's mortgage obligation. (See Exhibits 17,21, and 33.17.) 9. On May 9, 2006, Hedgebury conveyed Lot 2 to Issadore/Englert by deed recorded in Book 1021 Page 15. This transfer ("Transfer No. 26977") was reported as exempt under Exemption J, and is the subject of Matter II. (See Exhibit 18.) 10. Contemporaneous with Transfer 26977, Issadore/Englert closed a purchase money mortgage for $800,000, recorded in Book 1021 Page 17, all of which was applied to pay a portion of Hedgebury's mortgage obligation. (See Exhibits 19,20, and 33.18.) 11. On August 18,2006, Issadore/Englert conveyed a one-half interest as tenants in common to Thomas M. Sobol and Meredith L. Sobol (the "Sobols") by deed recorded in Book 1036 Page 254. A Land Bank fee was paid on this transfer. (See Exhibit 27.) 12. On August 23,2006, fees were assessed regarding the Unreported Transfer as a transfer of control of a corporation or partnership, regarding Transfer No. 26947 as a non-exempt sale for value, and regarding Transfer No. 26977 as a non-exempt sale for value. As a tenant, Murphy 2 Exhibit 6, Certificate of Amendment for Limited Liability Company Hedgebury Lane LLC filed January 29,2004, with the Secretary of the Commonwealth of Massachusetts, by Bruce H. Poor, Manager, naming Andrew Kaye as an additional Manager and authorized signatory; Exhibit 7, Transfer Documents Record No. 24022 including Form A, Form B, Schedule A to Operating Agreement of Hedgebury Lane LLC, and deed from Colosi, LLC to Hedgebury Lane LLC recorded at the Nantucket Registry on February 4, 2004, as Book 872, Page 49; Exhibit 8, Transfer Documents Record No. 24023 including Form A, Form B, Schedule A to Operating Agreement of Hedgebury Lane LLC, and deed from Michael W.C. Emerson to Hedgebury Lane LLC recorded at the Nantucket Registry on February 4,2004, as Book 872, Page 52; Exhibit 9, Mortgage from Hedgebury Lane LLC, executed by its Manager, Andrew Kaye, to BankNorth in the amount of $4,747,000 recorded at the Nantucket Registry on February 4,2004, as Book 872, Page 54; Exhibit 10, Discharge recorded at the Nantucket Registry on February 18,2004, as Book 875, Page 1 of mortgage from Hedgebury Lane LLC executed by Bruce H. Poor as Manager to Bruce A. Issadore in the amount of$180,000 recorded at the Nantucket Registry on September 5,2003, as Book 845, Page 257; Exhibit 11. Transfer Documents Record No. 25913 including Form A, Form B, and Notice of Lease dated June 25, 2005, from Hedgebury Lane LLC to ECD Realty Trust executed by Andrew S. Kaye as Manager, Hedgebury Lane LLC, and Harold B. Murphy and Lauren C. Murphy as Trustees ofECD Realty Trust; Exhibit 12, Certificate of Appointment of Trustee for Hedgebury Lane Homeowners Association, appointment of Andrew Kaye as a Trustee, by Andrew Kaye, as Manager of Hedgebury Lane LLC, recorded at the Nantucket Registry on April 28, 2006, as Book 1019, Page 220; Exhibit 13, Transfer Documents Record No. 26947 including Form A, Form B, and deed from Hedgebury Lane LLC to Bruce H. Poor for Lot 4R recorded April 28, 2006, as Book 1019, Page 216; Exhibit 14, Correspondence from the Nantucket Islands Land Bank dated May 29,2006, to Keith M. Yankow, Esq., legal representative for Bruce H. Poor; Exhibit 15, Correspondence from Keith M. Yankow, Esq. dated June 1,2006, to the Nantucket Islands Land Bank with attached schedule of Ownership of Hedgebury Lane LLC; Exhibit 16, Correspondence from Nantucket Islands Land Bank dated June 16,2006, to Keith M. Yankow; Exhibit 17, Mortgage from Bruce H. Poor to Washington Mutual Bank, FAin the amount of $1 ,350,000 recorded at the Nantucket Registry on April 28, 2006, as Book 1019, Page 220; Exhibit 18, Transfer Documents Record No. 26977 including Form A, Form B, and deed from Hedgebury Lane LLC to Bruce A. Issadore and John J. Englert for Lot 2 recorded at the Nantucket Registry May 9, 2006, as Book 1021, Page 15; Exhibit 19. Mortgage from Bruce A. Issadore and John 1. Englert to TD BankNorth, N.A. in the amount of $800,000 recorded at the Nantucket Registry on May 9, 2006, as Book 1021, Page 17; 4 Exhibit 33.2. Letter of Understanding between Michael W.C. Emerson, Bruce H. Poor, John J. Englert, Andrew Kaye, Bruce A. Issadore, and David L. Arons, executed by "Original Owners" Michael W.C. Emerson on June 2, 2003, and Bruce H. Poor on May 28, 2003, and "Purchasers" John J. Englert, Andrew Kaye, Bruce A. Issadore and David L. Arons on June 3, 2003; Exhibit 33.3. Operating Agreement for Hedgebury Lane LLC executed by Gloria Grimshaw, Bruce H. Poor and Michael W.C. Emerson, Members and Bruce H. Poor, Manager, dated August 27,2003, with attached Schedule A, membership interests in Hedgebury Lane LLC, executed by Bruce H. Poor and Gloria Grimshaw on September 5, 2003; Exhibit 33.4. First Amended Schedule of Beneficial Interests for Hedgebury Lane LLC executed by Gloria Grimshaw, Michael W.C. Emerson, Bruce H. Poor, and John 1. Englert, Manager for EKIA LLC, on January 27, 2004, with attached Ownership Statement of Hedgebury Lane LLC; Exhibit 33.5. Non-Revolving Development Line of Credit Note dated January 30, 2004, in the amount of$1,117,000 executed by Andrew Kaye, Manager, Hedgebury Lane, LLC; Exhibit 33.6. Revolving Construction Line of Credit Note dated January 30, 2004, in the amount of $3,630,000 executed by Andrew Kaye, Manager, Hedgebury Lane, LLC; Exhibit 33.7. Mortgage and Security Agreement dated January 30, 2004, executed by Andrew Kaye, Manager, Hedgebury Lane, LLC; Exhibit 33.8. Lessor's Assignment of Leases and Rents as Collateral Security dated January 30, 2004, executed by Andrew Kaye, Manager, Hedgebury Lane, LLC; Exhibit 33.9. UCC Financing Statement for Massachusetts Secretary of State; Exhibit 33.10. Assignment of Interest in Licenses, Permits and Agreements dated January 30, 2004, executed by Andrew Kaye, Manager, Hedgebury Lane, LLC; Exhibit 33.11. Development and Construction Loan Agreement dated January 30, 2004, executed by Andrew Kaye, Manager, Hedgebury Lane, LLC; Exhibit 33.12. Unlimited Guaranty of Bruce A. Issadore to BankNorth, N.A. dated January 30, 2004; Exhibit 33.13. Unlimited Guaranty of David L. Arons to BankNorth, N.A. dated January 30,2004; Exhibit 33.14. Unlimited Guaranty of Andrew Kaye to BankNorth, N.A. dated January 30, 2004; Exhibit 33.15. Unlimited Guaranty 00000 J. Englert to BankNorth, N.A. dated January 30, 2004; Exhibit 33.16. Operating Agreement for EKIA LLC executed by Bruce A. Issadore, John 1. Englert, Andrew Kaye, and David L. Arons, Members and Bruce A. Issadore and John J. Englert, Managers, dated August 27,2003, with attached Schedule A, membership interests in EKIA Lane LLC, executed by Bruce A. Issadore, John 1. Englert, Andrew Kaye, and David L. Arons; Exhibit 33.17. Settlement Statement dated April 28, 2006, from the Office of Keith M. Yankow, Esq. for the conveyance of Lot 4R to Bruce H. Poor; 6 Exhibit 45, Email string including (i) correspondence from David Arons dated September 7,2006 (2:28 PM) to Valerie Swett and (ii) correspondence from Valerie Swett dated September 7,2006 (2:53 PM) to David Arons; Exhibit 46, Correspondence from David L. Arons, Esq. dated September 7,2006 to Kenneth W. Ho1dgate, Jr., Chairman, Nantucket Islands Land Bank Commission; Exhibit 47, Correspondence from Valerie Swett, Esq. dated September 11, 2006, to Richard J. Glidden, Esq.; Exhibit 48, Correspondence from Anne Remian, Lee Real Estate, dated September 12, 2006, to Eric Savetsky; Exhibit 49, Correspondence from Valerie Swett, Esq. dated September 13, 2006, to David Arons, Esq., Keith Yankow, Esq., and Richard J. Glidden, Esq.; Exhibit 50, Email string including (i) correspondence from Keith Yankow to Valerie Swett dated September 13,2006 (2:07 PM) and (ii) correspondence from Valerie Swett to Keith Yankow dated September 13,2006 (2:46 PM); Exhibit 51. Email correspondence from Valerie Swett to Keith Yankow dated September 14, 2006 (12:36 PM); Exhibit 52, Emai1 string including (i) correspondence from Valerie Swett to Keith Yankow dated September 18,2006 (5:51 PM) and (ii) correspondence from Keith Yankow to Valerie Swett dated September 18,2006 (6:09 PM); Exhibit 53, Memo from Keith Yankow dated September 19,2006 to Valerie Swett; Exhibit 54, Email correspondence from Valerie Swett dated September 19,2006 (12:44 PM) to Keith Yankow; Exhibit 55, Emai1 correspondence from Valerie Swett, Esq. dated September 20,2006 (1:06 PM) to David Arons, Keith Yankow, and Richard J. Glidden, with attached draft escrow agreement; Exhibit 56, Correspondence from Keith M. Yankow, Esq. dated September 22, 2006, to Valerie Swett, Esq.; Exhibit 57, Email correspondence from Valerie Swett dated September 22,2006 (5:44 PM) to Keith Yankow, Dave Arons, and Richard Glidden with attached second draft of the escrow agreement and compared copies; Exhibit 58, Email string including (i) correspondence from Bruce A. Issadore, Esq. dated September 25, 2006 (3:02 PM) to Valerie Swett and (ii) correspondence from Valerie Swett dated September 25,2006 (3:37 PM) to Bruce Issadore, 'bai@isalaw.com'; Exhibit 59, Email string including (i) correspondence from Valerie Swett dated September 25,2006 (3:57 PM) to Bruce Issadore, 'bai@isalaw.com' and (ii) correspondence from Bruce A. Issadore, Esq. dated September 25,2006 (4:24 PM) to Valerie Swett; 8 Exhibit 71. Correspondence from Valerie Swett, Esq. dated October 11,2006, to Keith M. Yankow, Esq. with enclosed counterpart escrow agreement; Exhibit 72, Escrow Agreement dated September 26, 2006, between Hedgebury Lane, LLC, Nantucket Islands Land Bank and Deutsch Williams Brooks DeRensis & Holland, P.C. (Escrow Agent); Exhibit 73, Correspondence from Valerie Swett, Esq. dated October 11,2006, to Martin Jeffrey Stetina, Esq. with attached release of lien executed by the Land Bank Commission; Exhibit 74, Nantucket Islands Land Bank Release of Lien dated September 26,2006, to Hedgebury Lane, LLC recorded at the Nantucket Registry on October 12,2006, as Book 1044, Page 56; Exhibit 75, Correspondence from Valerie Swett, Esq. dated October 17,2006, to David Arons, Esq.; Exhibit 76, Correspondence from David Arons to Valerie Swett dated November 2,2006, with enclosed 2005 income tax return for Hedgebury Lane LLC (IRS Form 1065); Exhibit 77, Table Summarizing Hedgebury Lane LLC members from time to time as shown by the foregoing exhibits, as compiled by Valerie Swett; Exhibit 78, IRS Form W-9 dated September 26, 2006, provided by Hedgebury Lane LLC in connection with the escrow fund held by Deutsch Williams Brooks DeRensis & Holland, P.C.; Exhibit 79, Affidavit of Bruce H. Poor dated November 13,2006, provided by Keith M. Yankow, Esq. at the hearing held on November 14,2006; Exhibit 80, Sketch plan oflots numbered 1 through 12 bordering Winn Street, Vestal Street and Madaket Road provided by Bruce A. Issadore, Esq. at the hearing held on November 14,2006; Exhibit 81. Email correspondence from Valerie Swett dated November 15,2006 (8:38 AM) to David Arons, Keith Yankow, and Richard Glidden; Exhibit 82, Email correspondence from Keith Yankow to Valerie Swett dated November 16, 2006 (12:53 PM) transmitting Uniform Residential Appraisal Report (Fannie Mae Form 1004) for 3A Winn Street dated AprilS, 2006, prepared by Steve Backus, Backus Appraisals LLC, placing a value of $2.4 million on Lot 4R for borrower Bruce Poor; Exhibit 83, Correspondence from David L. Arons dated November 21,2006, to Valerie Swett, Esq. with these enclosures: Exhibit 83.1. Certified mail receipt dated September 28,2006, to IRS, Cincinnati, OH, North Waltham Branch cash register sales receipt dated September 28, 2006, and certified mail return receipt received by the United States Treasury on October 3, 2006; Exhibit 83.2 Agreement between Bruce Poor, Bruce Issadore, and Jack Englert dated April 14, 2006, regarding purchase of certain lots from Hedgebury Lane, LLC; Exhibit 84, Email correspondence from David Arons dated November 21,2006 (5:29 PM) to Valerie Swett with attached IRS Notice of Employer Identification Number to Hedgebury Lane LLC dated February 4,2004, indicating that a partnership income tax return (IRS Form 1065) is due April 15, 2004, for the 2003 tax year. 10 fee because the lot was transferred as a distribution to a member of the Hedgebury LLC, without reference to a specific section of the statute. Accepting solely for purposes of argument that the lot was so transferred, the only possibly applicable exemption is Exemption "J", which by its terms applies to a partnership. The "I" Exemption is created by Section 120) of the Act, as amended by St. 2002, c. 370, sec. 4, which provides: , . .[T]ransfers made to a partner of a partnership or to a member of a limited liability company in dissolution of the partnership or limited liability company; provided, however, that such transfer shall be exempt only in the event that. . .(ii) with respect to a partnership or limited liability company, the transferee had prior to the transfer rights to capital interests in excess of 50 per cent of the total capital interests within the partnership or limited liability company or had rights to profit interests within the partnership or limited liability company in excess of 50 per cent of the total profit interests within the partnership or limited liability company. Under Section 4.13 of the Land Bank Rules and Regulations effective July 1, 2002, as amended, (the "Regulations"), the "I" Exemption can apply to either a full dissolution or a partial dissolution of a limited liability company. At the hearing, no evidence was provided indicating that Hedgebury has been dissolved or is the subject of a duly-adopted plan of dissolution. On the contrary, the testimony indicated that Hedgebury is an on-going entity. (See, e.g. Exhibit 85.2 and 87). Although some of the testimony could be generously interpreted to mean that Transfer No. 26947 occurred pursuant to a plan of partial dissolution, we find that in fact there was insufficient evidence of any such plan. It was argued that the agreement introduced as Exhibit 83.2 was such a plan. We reject this view. Exhibit 83.2 is by its plain terms only an agreement among three individuals, being Poor, Issadore and Englert. Hedgebury is not a party, and Poor is the only member of Hedgebury who is a signatory to the agreement. Rather than being a plan of partial dissolution, Exhibit 83.2 is an agreement regarding the terms under which the three individual parties would purchase lots from Hedgebury. Transfer No. 26947 was clearly closed as a purchase, complete with purchase money financing and payment of substantial consideration for a partial release of the Hedgebury mortgage. Even if Transfer No. 26947 were part of a plan of partial dissolution (which it was not), the "I" Exemption would not apply, because Poor owned a 25% membership interest in Hedgebury both before and after the transfer. As such, the transfer did not satisfy the requirement of Section l2(j) that the transfer involve distribution to a member having interests exceeding 50%. The original assessment of a Land Bank fee on account of Transfer No. 26947 (Exhibit 35) was based on an estimated value for the property transferred. This was done because the deed did not state a price and the Town of Nantucket Assessor valued vacant land only, whereas the property was improved with a house at the time of Transfer No. 26947. The appraisal 12 the Sobols purchased one ofthe two houses on Lot 2. During the hearing Issadore provided the appraisal admitted as Exhibit 85.1 which was performed in connection with the mortgage obtained by IssadorelEnglert for their house and half of the Lot 2 ("Lot 2B") when they conveyed to the Sobols. It values Lot 2B at $1,650,000 at the time of the transfer. The Sobols purchased a long term lease of the other portion of Lot 2 ("Lot 2A") on August 18, 2006, for an arms' length price of$1,779,121.50 (Exhibit 27). Therefore, the Land Bank fee due on account of Transfer No. 26977 should be recalculated using the sum of the Sobols' purchase price and the appraisal, for a total value of $3,429,121.50. The Sobols have objected to the assessment and resulting lien on account of Transfer No. 26977 (Exhibits 36 and 39.) being imposed on their interest in Lot 2. As basis for their objection, they assert that when they purchased their interest they were without knowledge regarding the status of Hedgebury or the Land Bank investigation pending with respect to Transfer No. 26977. In support of their position, through Attorney Richard Glidden they supplied Exhibits 65 and 65.1 through 65.6. We accept the Sobols' representations made under pains and penalties of perjury. Therefore, at the time oftheir purchase on August 18,2006, the Sobols had no actual knowledge that a Land Bank fee was due on account of Transfer No. 26977, and the notice of lien was recorded August 23, 2006, so they could not have received notice via an examination of the Registry of Deeds records. Consequently, the assessment and lien on account of Transfer No. 26977 should be revised to remove the Sobols and their property interest from liability for the fee due. We find pursuant to Section 13(b) of the Act that IssadorelEnglert's failure to pay the fee due on account of the Transfer No. 26977 was due to fraud with'intent to defeat or evade the fee imposed by the Act, and therefore the statutory penalty should be applied. At the time of filing the transfer, the "J" Exemption was claimed, which on its face clearly could not apply to the transfer because neither Issadore nor Englert was a member of Hedge bury. Throughout the assessment and hearing process Issadore and Englert continued to insist that the transfer is not subject to a fee, notwithstanding the fact that it was purchased for value. (The value consisted of the mortgage proceeds paid against Hegebury's mortgage plus the profit interest or developer's fee being paid by Hedgebury to Issadore/Englert as to which testimony was given during the hearing.). We find that the arguments made against payment were plainly refuted by the terms of the statute and the relevant documents, that the parties were well aware that the fee was due, and that there was no good faith basis for assertions that the transfer was not subject to the fee. Matter III (Unreported Transfer) Had the Unreported Transfer been reported to the Land Bank, it would have been properly reported as exempt from Land Bank fee because it was consistent with the definition of "not applicable" for partnerships. (Hedgebury files a partnership tax return (Exhibit 76) and therefore is treated as a partnership for the purposes of the Act.) The pertinent portions of the Act are: Partnership portions of Section lOA: 14 Hedgebury and EKIA failed to report the Unreported Transfer as required by Section 10 of the Act. They also failed to report the subsequent withdrawal by EKIA from membership in Hedgebury described in Exhibits 85.2 and 87 (the "Withdrawal"), again violating the requirements of the Act Section 10. DETERMINA nON ACCORDINGLY, the Commission hereby determines as follows regarding each of the matters: Matter I (Transfer No. 26947) Transfer No. 26947 is hereby determined to be a non-exempt transfer. The Land Bank fee assessed August 23, 2006 (Exhibit 35) is hereby revised to set the fee at 2% of $2.4 million, for a total fee of $48,000. A fraud penalty of $48,000 is assessed. Interest shall run from the date of transfer, being April 28, 2006. We reserve the right to hereafter revise said assessments in the best interests of the Land Bank. Matter II (Transfer No. 26977) Transfer No. 26977 is hereby determined to be a non-exempt transfer. The Land Bank fee assessed August 23,2006 (Exhibit 36) is hereby revised to set the fee at 2% of $3,429,121.50, for a total fee of $68,582.44. A fraud penalty of $68,582.44 is assessed. Interest shall run from the date of transfer, being May 9,2006. The Sobols are hereby released from any personal responsibility for payment of the Land Bank fee, penalties or interest due on account of Transfer No. 26977. Land Bank staff are instructed to revise the Notice of Lien recorded in Nantucket Registry of Deeds Book 1037 Page 152 (Exhibit 39) to remove the references to Sobols and their one half interest in Lot 2 as tenants in common with Issadore/Englert. We reserve the right to hereafter revise said assessments in the best interests of the Land Bank. Matter III (Unreported Transfer) Subject to compliance with the conditions hereafter stated, the Land Bank fee assessed August 23,2006, on account of the Unreported Transfer (Exhibit 34) is hereby revoked due to the exempt nature ofthe Unreported Transfer. As a condition precedent to said revocation, Hedgebury and EKIA are instructed to file Land Bank Forms A and B for both the Unreported Transfer and the Withdrawal. Such filings shall include appropriate and sufficient supporting documents to establish the applicability of the 16