63 Mass. App. Ct. 96 | Mass. App. Ct. | 2005
In their Superior Court jury trial, the parties advanced conflicting theories to explain why plaintiff Frostar Inc. did not close on the purchase from defendant Martin J. Malloy, as trustee of the 33 Norfolk Avenue Realty Trust, of real estate located at 16 Howard Street in the Roxbury section of Boston. Frostar contended that Malloy had wrongfully withheld a promised environmental report until virtually the eve of closing, that the report when finally furnished was inadequate, and that Malloy compounded the situation by refusing in bad faith to extend the closing date for a reasonable time to allow Frostar to obtain its own, more detailed report. Malloy argued that Frostar, strapped for cash at the time of the scheduled closing, expressed concerns with the environmental report as a pretext, in an unsuccessful effort to delay the closing date until its financial circumstances improved. In answers to a series of special questions, the jury found in the plaintiffs’ favor and awarded damages. The jury also made an advisory finding that Malloy’s actions violated G. L. c. 93A; the trial judge declined the jury’s recommendation on the c. 93A count and entered judgment in Malloy’s favor.
The parties filed cross appeals: the plaintiffs appeal the judge’s finding that Malloy did not violate c. 93A and the order staying specific performance; the defendants appeal the judgment for the plaintiffs on the three counts sounding in contract,
Background. The evidence before the jury was extensive and complex; we summarize it in the light most favorable to the plaintiffs, drawing additional elements from the record as necessary in our discussion of the issues. On October 1, 1984, Frostar Corp. entered into a lease with Malloy of the premises at 16 Howard Street
In 1996, Malloy listed the property for sale with a real estate agent. On or about May 16, 1996, Frostar Inc. submitted an offer to purchase the property for $300,000, but Malloy declined the offer and the property remained on the market. On November 4, 1997, defendant Michael Lapuck, as trustee of the 1164 Washington Street Realty Trust, submitted to Malloy’s agent a written offer to purchase the property. In addition to a
On November 5, 1997, Frostar
Malloy’s attorney sent a draft purchase and sale agreement to Maggio on or about November 18, 1997, and negotiations over the form of the agreement continued through the exchange of three drafts over the next month. Maggio faxed to Malloy’s attorney a signed signature page of the third draft of the agreement on December 20, 1997. Maggio also mailed two signed copies of the agreement to Malloy’s attorney, but the attorney
As executed by the parties, the agreement provided for a closing date of March 1, 1998.
By the time Malloy signed the purchase and sale agreement on January 20, 1998, the dates specified in paragraph 5 had already passed. Moreover, as noted, Maggio had not received a copy of the agreement even then. Maggio did not receive an environmental report from Malloy until February 17, 1998, less than two weeks before the scheduled closing date but almost three weeks after Malloy’s attorney had received it.
At trial, Malloy argued that he believed Frostar had no intention of closing on the scheduled closing date; Maggio had not engaged an attorney to represent Frostar at the closing, obtained a title examination, or reviewed closing adjustments or the proposed form of deed. Similarly, Maggio had not advised Malloy’s attorney whether he (Maggio) intended to finance the purchase or to fund the purchase from his own cash resources. Maggio did not appear at the time and place scheduled for closing to tender the required purchase price. According to Malloy, Maggio (and Frostar) lacked the financial resources as of the scheduled closing date to close on the property, and employed
On March 2, 1998, the scheduled closing date (see note 12, supra), Frostar filed a complaint in the Superior Court claiming breach of contract by Malloy, seeking specific performance and damages, and requesting a preliminary injunction against sale of the property to any other party. When its request for a preliminary injunction was denied, Frostar obtained endorsement of a memorandum of lis pendens, which it recorded in the registry of deeds. Nonetheless, on March 5, 1998, Malloy entered into a purchase and sale agreement with the Lapucks, and the Lapucks closed on the purchase of the property on May 7, 1998.
Discussion. The jury found that Malloy’s actions constituted a breach of his obligations to Frostar Corp. under the right of first refusal, a breach of his obligations to Frostar Inc. under the purchase and sale agreement, and a breach of the covenant of good faith and fair dealing. The jury awarded damages to both plaintiffs in the amount of $842,500.
1. The defendants’ appeal.
a. Right of first refusal. The defendants contend that the trial judge erred in denying their motion for judgment notwithstanding the verdict on Frostar’s claim for breach of the right of first
“A right of first refusal is not an option to purchase property at a certain price, but a limitation on the owner’s ability to dispose of property without first offering the property to the holder of the right at the third party’s offering price. . . . The owner’s obligation under a right of first refusal is to provide the holder of the right seasonable disclosure of the terms of any bona fide third-party offer. ... It is the prerogative of the holder then to decide whether to purchase the property at that price.” Uno Restaurants, Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376, 382-383 (2004) (footnote and citations omitted). Upon notice of a bona fide offer to purchase, the right of first refusal ripens into an option to purchase the property at the price and otherwise on the terms stated in the offer. See Mucci v. Brockton Bocee Club, Inc., 19 Mass. App. Ct. 155, 159 (1985).
To support its contention that it holds independent rights under the right of first refusal that survived execution of the purchase and sale agreement, Frostar cites Zolner v. THN Invs., Inc., 21 Mass. App. Ct. 927 (1985), which held that an option to purchase was not superseded by a subsequent purchase and sale agreement that terminated upon failure of a condition contained in it but not in the option. Id. at 927-928. Frostar contends that, to the extent the terms of the purchase and sale agreement were less favorable to it than those contained in the Lapuck offer which triggered the right of first refusal (specifically on the subject of the seller’s obligation to furnish an environmental report), it retained its right to insist upon a purchase in strict conformity with the terms contained in the Lapuck offer despite its execution of the subsequent purchase and sale agreement.
Whatever merit there may be to Frostar’s contention that rights under a right of first refusal survive execution of a purchase and sale agreement containing terms in some measure less favorable than those contained in the triggering offer,
Frostar separately argues that Malloy breached his obligations under the right of first refusal when he agreed to sell the property to the Lapucks under a new offer submitted after March 2 passed without a close of the transaction between Frostar and Malloy. However, the offer Malloy accepted was less a new offer to purchase than a renewal of Lapuck’s earlier offer, which triggered Frostar’s exercise of its refusal right.
As matter of law, Frostar’s claim of a breach of the right of first refusal failed, and it was error to deny the defendants’ motion for judgment notwithstanding the verdict as to that claim.
b. Breach of purchase and sale agreement and of implied, covenant of good faith and fair dealing. In challenging the trial judge’s denial of their motion for judgment notwithstanding the
Frostar’s claim that Malloy breached the purchase and sale agreement centers on its assertion that the environmental study Malloy furnished did not satisfy Malloy’s obligations under the agreement on that subject. The agreement did not specify the nature and scope of the study Malloy was required to furnish; the jury accordingly could look to the circumstances of the negotiations between the parties to construe the meaning of the provision.
The jury further could have concluded, in the circumstances, where Malloy furnished the study to Frostar well after the period specified in the agreement, well after expiration of the period for the buyer’s performance of its own inspections, and so near the closing date that the buyer was without any realistic ability to resolve before the scheduled closing date the uncertainty concerning the environmental condition of the property, that Malloy had an implied obligation to grant to Frostar a reasonable extension of time (as Frostar requested) to allow Frostar to perform its own, more thorough investigation. We conclude that there was adequate support in the evidence for the jury’s conclusion that Malloy breached the purchase and sale agreement.
As to the claim of breach of the implied covenant of good faith and fair dealing, both Frostar and Malloy attempted at trial to portray the other as the party who sought for improper purpose to scuttle or delay the sale of the property, and there were facts in evidence to support either conclusion. The judge correctly recognized that resolution of that factual dispute is a quintessential jury function, and declined to accept the defendants’ arguments for judgment notwithstanding the verdict to the extent they rested on the assertion that Malloy did not act in bad faith or for an improper puipose.
Our inquiry does not end, however, with our conclusion that the evidence sufficiently supported a jury finding that Malloy failed to discharge his obligations under both the contract and the implied covenant of good faith and fair dealing. “It is the general rule ‘that when performance under a contract is concurrent, one party cannot put the other in default unless he is ready, able, and willing to perform and has manifested this by some offer of performance’ although a tender of performance is not necessary ‘if the other party has shown that he cannot or will not perform.’ ” Kanavos v. Hancock Bank & Trust Co.,
In the present case, the jury could have found that Malloy steadfastly refused to furnish Frostar with an environmental study adequate in scope to permit Frostar to assess the environmental condition of the property. Because the environmental study Malloy furnished to Frostar did not permit Frostar to assess the environmental condition of the property, and because the date on which Malloy furnished the study — coupled with the delays in delivery of a fully-signed purchase and sale agreement and Malloy’s refusal to allow Frostar an extension of time to perform its own study — frustrated Fro-star’s opportunity to obtain information independently to assess the environmental condition, we reject the defendants’ contention that Frostar’s claim is barred by its failure to tender performance on the designated closing date.
The situation is different, however, regarding the question of Frostar’s readiness and ability to close. The question of Fro-star’s (and Maggio’s) financial ability to pay the purchase price on or about the designated closing date was hotly contested at trial. For present purposes it is sufficient to observe that the evidence illustrates a sharply declining financial condition, conflicting evidence of the value of certain tangible but illiquid assets held by Maggio, and a sizable amount held in escrow for
c. Damages. Paragraph 17 of the purchase and sale agreement included a provision which stated that ‘ ‘ [n] otwithstanding anything to the contrary contained herein under no circumstances shall Buyer be entitled to recover any damages, direct, consequential, or otherwise.” Both in their motion for judgment notwithstanding the verdict and in this appeal, the defendants argue that Frostar’s express waiver of damages as a remedy bars the jury’s damage award. In an otherwise vigorous opposition, both in the Superior Court and in this appeal, Frostar offers no argument why the waiver of damages provision should not be given effect. We agree with the defendants that the express contractual provision in the purchase and sale agreement waiving damages in all circumstances precludes the jury’s
2. Frostar’s cross appeal. Finally, we discern no error in the trial judge’s ruling that Malloy’s conduct did not violate G. L. c. 93A. Frostar’s contention that the trial judge was bound by the jury’s recommendation on the c. 93A claim is simply incorrect.
3. Conclusion. So much of the judgment on count I of the complaint, which claimed a breach of the right of first refusal by the defendants, is reversed, and that claim will be dismissed. So much of the judgment on counts II and IV of the complaint, which claimed that Malloy breached the purchase and sale agreement and the implied covenant of good faith and fair dealing, respectively, is vacated, and the case is remanded for a new
So ordered.
The judge accepted the jury’s recommendation that defendants Michael S. Lapuck and Kenneth M. Lapuck, as trustees of the RFD Realty Trust, the 1164 Washington Street Realty Trust, and Royal Fire Door Company, Inc., were not liable under G. L. c. 93 A.
The judge also denied the defendants’ motions for judgment notwithstanding the verdict, to alter or amend the verdict, for remittitur, and for a new trial.
We affirm the judgment dismissing the c. 93A count against Malloy. As will be seen, only two of the three contract counts require a retrial; the claim in count I of the complaint, that Malloy breached a right of first refusal held by Frostar, shall be dismissed.
16 Howard Street is also known as 33-35 Norfolk Avenue.
As of the date of the lease, Frostar Corp. was doing business as Commercial Cold Storage — Howard Street Division, Inc. The lease provided for a term of ten years, with an option to renew for an additional ten years, and was in effect during all periods relevant to the present controversy.
Paragraph 26 of the lease provided as follows:
“Right of First Refusal to Purchase: In the event Lessor shall receive a bona fide offer to purchase the Leased Premises or any property of which it is a part during the term of this lease, and the offer of purchase shall be satisfactory to Lessor, Lessor shall give Lessee the privilege of purchasing the premises at the price and on the terms of the offer so made. This privilege shall be given by a notice sent to Lessee at the Leased Premises by certified mail, return receipt requested, requiring Lessee to accept the offer in writing and to sign a suitable Purchase and Sale Agreement for the premises within the period of fifteen (15) days after the mailing of the notice.
“The failure of the Lessee to accept the offer to purchase or sign a contract within the period provided shall nullify and void the privilege to Lessee; and Lessee [sic] shall be at liberty to sell the premises to any other person, firm, or corporation. Any subsequent sale, except to Lessee, shall be subject to this lease and any renewals or extensions thereof.”
The two named plaintiffs in the present action, Frostar Corp. and Frostar Inc., are affiliated entities; both are wholly owned by Frostar Industries, Inc., which, in turn, is wholly owned by Candeloro J. Maggio, Jr. Frostar Corp. was the lessee under the above-described lease (and the holder of the right of first refusal it created), while Frostar Inc. was purchaser under the purchase and sale agreement at the center of the present dispute, by assignment of the rights held by Frostar Corp. For convenience in this opinion, we hereinafter refer to the plaintiffs interchangeably as Frostar, except where the context requires more specific reference, or as Maggio, when he is acting on Frostar’s behalf.
March 1, 1998, was a Sunday; accordingly, the closing fell to the following day.
Malloy’s attorney received the environmental report on January 28, 1998.
Incident to the closing, the Lapucks agreed to indemnify Malloy against loss or damage resulting from Frostar’s suit, and to defend Malloy in the suit.
In ordering sale of the property to Frostar as specific performance of the purchase and sale agreement, the judge reduced the damages award by $287,500, the purchase price payable under the agreement.
In so doing, the judge expressed her view that “Maggio dragged his feet during the sale process. It appeared that he hoped to defer closing and the attendant obligation to pay a significant sum of money as long as possible, possibly due to his ongoing divorce proceedings. Maggio waited until the last moment to register every objection and then used his late expressed concerns to justify his request for an extension of time. He took all these actions knowing full well that the Malloys were in dire financial [straits].”
In Mucci v. Brockton Bocee Club, Inc., supra at 161, we suggested in dictum the possibility that the holder of a right of first refusal might preserve
We also note that paragraph 23 of the purchase and sale agreement contained a standard “merger clause,” which stated that all prior agreements and understandings of the parties with respect to the transaction were merged into the agreement.
Frostar’s contention that Lapuck’s “new” offer was materially different from the offer that triggered the right of first refusal is specious. The subsequent offer contained only minor differences from Lapuck’s original offer concerning the procedures for assessment of the environmental condition of the property, and those differences were less favorable to the buyer.
Malloy’s contention that he was free to sell the property to the Lapucks upon Frostar’s breach of its obligations under the purchase and sale agreement, see Mucci v. Brockton Bocee Club, Inc., 19 Mass. App. Ct. at 160, is at odds with the jury’s conclusion that Malloy, rather than Frostar, was the breaching party — a conclusion we have determined to be supported by the evidence.
In reply to the defendants’ suggestion that the scope of the study was defined by the limitation under the agreement that Malloy was obliged to contribute no more than $2,000 to its cost, Frostar correctly observes that the limitation was on the extent of Malloy’s contribution, and not on the total cost of the study.
Framing Frostar’s position in that manner illustrates the flaw in the defendants’ contention that Frostar’s sole right under the agreement was to terminate if it was dissatisfied with the results of any inspection. The point is that Frostar bargained for, and was entitled to receive, an environmental report sufficient to allow an informed judgment whether to terminate or to proceed — or at least a jury could so have found.
In the present case, though the parties’ agreement allowed Frostar to conduct its own inspections, the obligation to furnish an environmental study was assigned to Malloy in the first instance. As we have observed, supra, the jury could have concluded that the study Malloy furnished did not fulfil his obligations under the agreement.
In reply to the defendants’ argument on this subject, Frostar points simply to the judge’s instruction that, in order to recover for breach, Frostar “must establish [its] full and complete performance of all obligations under the contract.” The cited charge plainly does not frame for the jury the question whether Frostar was ready, willing, and able to perform its obligations under the contract.
To the extent that, in denying the defendants’ motion to set aside the damages award on that basis, the judge implicitly relied on the absence of a similar provision in the right of first refusal, our reversal of the judgment based on the right of first refusal eliminates that factor. The covenant of good faith and fair dealing is implied in the contract between the parties, viz., the purchase and sale agreement, and accordingly the parties remain subject to the waiver of damages contained in that agreement. See Uno Restaurants, Inc. v. Boston Kenmore Realty Corp., 441 Mass. at 385.
As the defendants correctly observe, Anthony’s Pier Four, Inc. v. HBC Assocs., 411 Mass. 451 (1991), does not support the plaintiffs’ assertion that the finding of a breach of the covenant of good faith and fair dealing compels a finding of a violation of G. L. c. 93A. In that case, the findings on the breach of the covenant of good faith and fair dealing were made by the trial judge in a jury-waived trial. Id. at 471-476. In the present case, the findings on the breach of the covenant of good faith and fair dealing were made by the jury, and the judge’s conclusion that the evidence was sufficient to support the jury’s verdict does not compel the judge to adopt the jury’s conclusion as her own.
In light of our determination that the judgments must be vacated pending retrial of the question whether Frostar was ready, willing, and able to perform its obligations under the purchase and sale agreement, we also conclude that the trial judge did not abuse her discretion in staying her order for specific performance pending this appeal.
Unlike the circumstances in Kanavos v. Hancock Bank & Trust Co., 395 Mass. at 206, where the retrial was limited to the question whether the plaintiff was ready, willing, and able to perform his obligations under the contract, the question of Frostar’s ability to perform in the present case is interwoven with the question of precisely what the jury considered to be Malloy’s breach. For example, as discussed above, depending on which view of the evidence the jury took, Frostar’s readiness and capacity to perform might be tested either as of March 2, 1998 (the closing date specified in the contract), or as of March 16, 1998 (the date at the end of the two-week extension Frostar requested but was refused).