On October 12, 1999, the defendants, Stephen J.
After a jury-waived trial, a Superior Court judge ruled that the Proskys anticipatorily repudiated the purchase and sale agreement when Clark told K.G.M. that the Proskys had a higher offer and to calculate its liquidated damages. The judge further found that Clark’s “attempt to scuttle the deal” at closing constituted an actual breach of the implied covenant of good faith and fair dealing and, as a result, he allowed K.G.M. to choose either compensatory damages as provided by the liquidated damages provision of the purchase and sale agreement, or specific performance.
On appeal, the Proskys do not contest the finding that they
In an unpublished memorandum and order pursuant to Appeals Court rule 1:28, a panel of the Appeals Court affirmed the judgment insofar as it awarded the plaintiffs specific performance, and reversed the judgment insofar as it awarded money damages and attorney’s fees. KGM Custom Homes, Inc. v. Prosky, 81 Mass. App Ct. 1118 (2012). We granted K.G.M.’s application for further appellate review.
We conclude that the findings of the trial judge, based on the scope of the actual litigation, sufficiently established that the initial anticipatory repudiation of the agreement morphed into an actual breach by the Proskys, and not K.G.M., at the failed closing. Thus, the judge’s decision offering K.G.M. a choice of remedy was proper, and an amendment of the complaint was not necessary. We further conclude that the judge erred in awarding K.G.M. attorney’s fees incurred in litigating this suit where the liquidated damages clause of the agreement only contemplated attorney’s fees incurred in connection with the underlying transaction. Therefore, we affirm the judge’s decision except as to the awarding of attorney’s fees.
1. Background. We summarize the relevant facts as found by the trial judge in his order for judgment.
The Proskys are three siblings who, together, own a sizeable plot of land on the north side of South Worcester Street in
On or about October 12, 1999, the parties executed a purchase and sale agreement, in which the Proskys agreed to sell lots 103, 103-02, and 103-03 to K.G.M.
The agreement also contained a liquidated damages provision that specified that in the event of a breach by the Proskys, “the [Proskys] shall pay [K.G.M.], as liquidated damages, a sum of money equal to all charges and fees paid by [K.G.M.] in connection with this transaction, including but not limited to, attorney’s fees.”
After the execution of the agreement, K.G.M. began planning for its residential development, and spent several years acquiring the necessary permits. Although the zoning board of appeals of Norton (town) issued a decision in 2003 allowing sixty residential units, K.G.M. was forced to litigate an opposition to the project by the town’s board of selectmen.
In May, 2004, while K.G.M. was discussing settlement op-
Despite Clark’s statements, K.G.M. still sought to close the transaction and executed a settlement agreement with the board of selectmen.
It is undisputed that Clark never had a formal offer from any other party to purchase the property. The Proskys testified that they did not know of any other offer, and that they had no intention of backing out of the deal.
On December 21, 2004, K.G.M. filed suit against the Proskys alleging in its complaint that they had committed a breach of the implied covenant of good faith and fair dealing, and seeking specific performance of the agreed-on conveyance of the property for the price of $720,000.
During the pendency of that suit, on April 29, 2005, K.G.M. received final approval for its proposed development plan. K.G.M.’s attorney informed the Proskys that K.G.M. was “ready, willing and able to close on the purchase,” and that K.G.M. would appear for the closing on May 20, 2005, at Sousa’s office.
On May 20, 2005, K.G.M. (i.e., Mills), Joyce, Stephen Prosky, and Clark all arrived at Sousa’s office to attempt to close the transaction. Mills brought and produced a check from a $250,000 line of credit to pay his expenses, made payable to the Proskys.
Clark testified at his deposition that, at the time of the closing, he did not believe that the parties had a valid contract. At the closing, Clark, apparently acting on his own, brought a videographer with him to record the closing as a “defense strategy.” Sousa objected to the recording, and the two engaged in a heated argument over the presence of the videographer.
Clark refused to give the documents to Sousa, and instead held them up at a distance. When Sousa tried to take them, Clark again refused to turn them over for analysis. Instead, he held them up and asked Sousa if he could read them from two feet away.
The judge found that the Proskys committed a breach of the implied covenant of good faith and fair dealing when Clark told K.G.M. to calculate its liquidated damages as the Proskys intended to sell to another buyer. He further found that the breach continued at the closing, when Clark attempted to “scuttle the deal” by bringing a videographer to record the event and by refusing to let Sousa handle the closing documents. He also found that the amount owed for the property would have been $1,050,000, as the Proskys claimed, and not $720,000, as K.G.M. had contended. Because his decision raised the price to be paid to secure specific performance, the judge ruled that K.G.M. could elect either specific performance or liquidated damages.
K.G.M. elected to receive liquidated damages. On December 10, 2010, after hearing on K.G.M.’s motion to amend the judgment, the judge awarded K.G.M. $495,483.66. The amount included $375,483.66 in permitting costs and attorney’s fees incurred before the lawsuit, and $120,000 in attorney’s fees incurred by K.G.M. in the course of the litigation.
3. Discussion, a. The breach. The Proskys’ argument is predicated largely on the theory that the trial judge erred in awarding monetary damages because their only breach was anticipatory in nature.
With few exceptions, “[ojutside of the commercial law context, Massachusetts has not generally recognized the doctrine of anticipatory repudiation, which permits a party to a contract to bring an action for damages prior to the time performance is due if the other party repudiates.” Cavanagh v. Cavanagh, 33 Mass. App. Ct. 240, 243 (1992). One such exception occurs where a seller of land informs the “holder of an enforceable
The parties agree that the Proskys anticipatorily repudiated the contract in August, 2004, when Clark informed K.G.M. that the Proskys had another buyer and that K.G.M. should calculate its damages. The issue is whether the judge correctly found that the Proskys also committed an actual breach of the implied covenant of good faith and fair dealing as a consequence of their counsel’s actions at the May 20, 2005, closing, and, if so, whether the judge’s remedy, allowing K.G.M. to elect between specific performance and liquidated damages, was appropriate. We agree with the judge as to both questions.
“Every contract implies good faith and fair dealing between the parties to it.” Warner Ins. Co. v. Commissioner of Ins., 406 Mass. 354, 362 n.9 (1990), quoting Kerrigan v. Boston, 361 Mass. 24, 33 (1972). “The implied covenant of good faith and fair dealing provides ‘that neither party shall do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. . . .’ ” Anthony’s Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 471-472 (1991), quoting Drucker v. Roland Wm. Jutras Assocs., 370 Mass. 383, 385 (1976). “[T]he implied covenant exists so that the objectives of the contract may be realized.” Ayash v. Dana-Farber Cancer Inst., 443 Mass. 367, 385 (2005). See Crellin Techs., Inc. v. Equipmentlease Corp., 18 F.3d 1, 10 (1st Cir. 1994).
We discern no error in the judge’s decision based on the case as it was actually litigated, and the evidence admitted at trial, that Clark’s actions constituted an actual breach of the implied covenant of good faith and fair dealing.
In the period leading up to the closing, Clark could not be reached by K.G.M.’s attorneys, and did not provide K.G.M. with a purchase price or a description of the property to be transferred, information that was necessary to ensure that the closing took place as planned. Further, Clark’s actions at the closing were clearly designed to torpedo it. Clark brought a videographer, for no validly explained reason, and insisted that the proceedings be recorded over the objection of K.G.M. and to the surprise of Stephen Prosky. This led to an extended and heated argument between the parties. Clark also refused to allow Sousa to handle the closing documents, instead holding them up a few feet away and essentially taunting Sousa. These actions ensured that the parties would be unable to close.
We disagree with the Proskys’ contention that the closing failed only because of a disagreement over the proper interpretation of the contract language. While the parties may have disagreed over the cost, the issue could have been negotiated had Clark’s actions not ensured that the matter would not be resolved. Simply put, K.G.M. could not possibly be expected to close a deal for the purchase of land without an opportunity to review the note and mortgage prepared by the Proskys.
Accordingly, we do not see any basis to conclude that the judge’s findings were clearly erroneous, and we agree that the Proskys’ actions “virtually guaranteed that the closing would fail.” Therefore, we affirm the judge’s findings that the Proskys committed both an anticipatory and an actual breach, and turn to a discussion of his proposed remedy.
b. The proposed remedy. The Proskys argue that the judge
When a purchase and sale agreement contains a provision awarding liquidated damages in the event of a breach, that provision will be enforced so long as “at the time the agreement was made, potential damages were difficult to determine and the clause was a reasonable forecast of damages expected to occur in the event of a breach.” Kelly v. Marx, 428 Mass. 877, 878 (1999). However, “[i]t is settled by our decisions and by the great weight of authority that the right to specific performance either affirmatively or by way of injunction is not lost because the contract contains a provision for the payment of a penalty or liquidated damages in the event of a breach.” Rigs v. Sokol, 318 Mass. 337, 342-343 (1945). See Noyes v. Bragg, 220 Mass. 106, 109 (1915) (“objection that the plaintiff had an action at law to recover damages for breach of agreement does not deprive equity of its jurisdiction to compel specific performance of the contract”).
Ordinarily an aggrieved party to a contract is not entitled to both remedies. Perroncello v. Donahue, 448 Mass. 199, 204 (2007). As such, plaintiffs are commonly allowed to elect either remedy where they have been the victim of an actual breach. See id. (when purchaser of real property commits breach of contract for sale, seller may retain property and bring action for damages or request specific performance; “the retention of a deposit as liquidated damages is an alternative to specific performance, not an additional remedy”). See also Connihan v. Thompson, 111 Mass. 270, 271-272 (1873) (specific performance and damages for breach are “alternative remedies,” and plaintiff
The fact that K.G.M. did not amend its complaint to seek liquidated damages does not change our analysis. The issues of the anticipatory and actual breach of the agreement up through the failed closing were thoroughly litigated by the parties,
Simply put, where the issue was fully litigated, the Proskys could not have been surprised by the judge’s decision, and thus they were not prejudiced by K.G.M.’s failure to amend the complaint. Therefore, we hold that the judge’s resolution was not in error.
c. Attorney’s fees. The Proskys also claim that the judge erred in awarding K.G.M. $120,000 in attorney’s fees incurred in connection with the litigation of this matter. The judge found that the fees were provided for under the liquidated damages provision of the agreement. We disagree with the judge, and therefore reverse his decision.
“Our traditional and usual approach to the award of attorney’s fees for litigation has been to follow the ‘American Rule’: in the absence of statute, or court rule, we do not allow successful litigants to recover their attorney’s fees and expenses.” John T. Callahan & Sons, Inc. v. Worcester Ins. Co., 453 Mass. 447, 449 (2009). There is no statute or court rule that would provide for the awarding of attorney’s fees in this case. The parties, however, may construct their agreement to provide for the payment of attorney’s fees through clear and unambiguous language. Bournewood Hosp., Inc. v. Massachusetts Comm’n Against Discrimination, 371 Mass. 303, 312 (1976). See Penney v. First Nat’l Bank, 385 Mass. 715, 723 (1982) (attorney’s fees incurred in enforcing note recoverable when underlying note called for such recovery).
The relevant portion of the agreement states that, in the event of a breach by the Proskys, “the [Proskys] shall pay [K.G.M.], as liquidated damages, a sum of money equal to all charges and fees paid by [K.G.M.] in connection with this transaction, including but not limited to, attorney’s fees.” The language of this provision is ambiguous, at best, as to the recovery of fees incurred in the course of litigating a breach of the agreement.
On its face, the clause appears to contemplate only attorney’s fees incurred in connection with the transfer of the land, which would include the process of securing approval from the necessary authorities. Tellingly, the provision benefits only K.G.M., as there is no provision providing for the recovery of attorney’s
For the above reasons, we affirm the trial judge’s findings and decision, with the exception of its award of $120,000 in attorney’s fees to K.G.M.
So ordered.
Stephen J. Prosky, Monteiro, and Stormo are siblings, and thus we refer to them by their familial last name.
The trial judge also ruled, in favor of the defendants, that the sale price for the property was $1,050,000 as calculated based on the number of approved lots. The sale price is not contested here.
All three Prosky siblings together own assessors’ lots 103 and 103-02, which are a 44.5-acre plot of land and a thirty-three foot wide strip of land connecting lot 103 to South Worcester Street, respectively. Stormo individually owns assessors’ lots 103-01 and 103-03, which lie between South Worcester Street and Lot 103. Lot 103-01 contains a house and garage.
Gregory Mills is the president, treasurer, and (with his wife) coowner of K.G.M.
After a dispute, the trial judge found that the agreement did not include Lot 103-01. That fact is not at issue here.
The parties agreed that if the number of approved lots was thirty-five or more, the price would be $25,000 per lot. If it was between twenty-five and thirty-four lots, the price would be $22,500 per lot. If fewer than twenty-five lots were approved for residential dwellings, the price per lot would be $38,625.
Under the terms of the settlement, K.G.M. received approval to build forty-two single family homes, with eleven of the homes on a single lot, and the remaining homes constructed on separate lots.
In its complaint, K.G.M. also sought an unspecified award “in an amount sufficient to compensate [K.G.M.] for its damages”; attorney’s fees, costs, and interest; and a judgment declaring that the Proskys violated G. L. c. 93A and an award of treble damages. The claim under G. L. c. 93A was dismissed by the judge and is not before us in this appeal.
Those documents included a quitclaim deed from the Proskys to K.G.M., a quitclaim deed from Stormo to K.G.M., a promissory note to be signed by K.G.M. for the amount of $700,000, and a mortgage and collateral security agreement securing the promissory note.
At one point, Sousa shut off the electricity to the entire building in order to prevent the videotaping, which the videographer circumvented by producing a battery.
Stephen Prosky testified that he “couldn’t quite believe what was going on,” and that, once outside, he asked the videographer, “Can you explain to me what just happened?”
As the judge correctly noted, the fact that the Proskys apparently did not wish to commit a breach of the contract, and that their attorney may have done so of his own accord, is irrelevant. The Proskys authorized Peter Clark
We find no merit in the Proskys’ argument that K.G.M. committed a breach of the contract by failing to tender payment of $1,050,000. K.G.M. was only required to pay one-third of the purchase price at closing — a
The Proskys’ argument that K.G.M. was limited to specific performance because K.G.M. only established an anticipatory repudiation rather than an actual breach of the argument is disposed of by our affirmance of the judge’s finding of an actual breach.
A letter from Sousa to Clark, detailing the events of the closing as described above, was admitted in evidence at trial. Additionally, Sousa, Stephen Prosky, and Mills all testified as to what occurred at the closing.
Had the Proskys objected at trial to the admission of evidence regarding the postfiling breach of the agreement, and K.G.M.’s claim for liquidated damages, the judge could have allowed the pleadings to be amended. Mass. R. Civ. P. 15 (b), 365 Mass. 761 (1974). However, not only was the evidence of such a breach never objected to, but the Proskys took the position at trial that K.G.M. was only entitled to liquidated damages, and not specific performance.
It would be incongruous to award attorney’s fees under a liquidated damages provision for fees incurred in litigation following the plaintiff’s rejection of liquidated damages.