Source: http://masscases.com/cases/app/63/63massappct96.html
Timestamp: 2019-04-24 23:57:57+00:00

Document:
Real Property, Sale, Right of first refusal, Purchase and sale agreement. Contract, Sale of real estate, Implied covenant of good faith and fair dealing, Performance and breach, Damages. Consumer Protection Act, Sale of commercial property.
CIVIL ACTION commenced in the Superior Court Department on March 2, 1998.
The case was tried before Carol S. Ball, J.
Thomas Bhisitkul (Stacey Coady with him) for the plaintiffs.
William E. Gens for Martin J. Malloy.
James R. DeGiacomo (Elizabeth A. Kowal with him) for Michael S. Lapuck & another.
purchase price of $287,500, Lapuck's offer proposed the following additional terms: (i) an initial deposit of $1,000, to be paid upon acceptance of the offer; (ii) the offer was contingent on the parties' execution of a mutually satisfactory purchase and sale agreement that, when executed, would be the agreement between the parties; (iii) an additional deposit of $13,375, to be paid upon execution of the above-described purchase and sale agreement; (iv) closing would occur within sixty days following execution of the purchase and sale agreement; and (v) the buyer's obligations were conditioned on (a) the buyer obtaining first mortgage financing for seventy-five percent of the purchase price, and (b) the buyer's satisfaction with the results of the buyer's inspections of the property. The offer further provided that the seller would provide "a current environmental report on the property that is satisfactory to Buyer and Buyer's Lender and demonstrate compliance with all Federal and Massachusetts regulations, thirty days from signing of Purchase and Sale Agreement. A copy of any previous environmental reports is to be delivered to Purchaser within five days of acceptance of this Offer."
On November 5, 1997, Frostar [Note 11] received by facsimile a copy of the Lapuck offer. Shortly thereafter, Candeloro J. Maggio, Jr., acting on behalf of Frostar, informed Malloy's attorney that he wished to match the Lapuck offer.
never received them. At the attorney's request on January 12, 1998, Maggio signed and returned by overnight mail an additional copy of the agreement. After Malloy signed the agreement his attorney sent a facsimile cover sheet to Maggio on January 20, 1998, stating that the fully signed agreement was "attached." However, the agreement did not accompany the facsimile cover sheet; Maggio telephoned Malloy's attorney to advise her of the omission, and the attorney assured him that she would deliver a copy to his New Hampshire office "right away." As of January 30, 1998, however, Maggio still had not received a fully signed copy of the agreement; in fact, Maggio did not receive a signed copy of the agreement until after he filed his complaint in the present action. Even without having received the purchase and sale agreement, however, Maggio delivered to Malloy's attorney a check for the additional deposit of $13,375 on February 18, 1998.
disclosed by the environmental report would extend to the fifth day after Frostar received the report.
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. [Note 13] When finally delivered, the environmental report raised more questions than it answered. Among other concerns, the report reflected that past occupants of the building had conducted a dry cleaning business on the property, and that a "sheen" was visible on the surface of standing water in the basement. The study did not include tests of any subsurface soil or water, and the consultants who prepared the report did not inspect portions of the building leased to tenants other than Frostar. In a series of telephone calls to Malloy's attorney, Maggio expressed various concerns with the adequacy of the report, and with the potential risks it identified. When Malloy's attorney made it clear that Malloy considered the report complete and was unwilling to furnish additional information on environmental conditions at the site, Maggio requested a two-week extension of the closing date to allow him to conduct his own further study. Malloy was unwilling to agree to an extension of the closing date.
the claim of inadequacies in the environmental report as a pretext in an unsuccessful attempt to postpone the closing.
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. [Note 15] Though the judge denied the defendants' motions for judgment notwithstanding the verdict, the judge took a somewhat different view of the evidence than the jury, declining the jury's recommendation of a finding that Malloy's actions violated G. L. c. 93A. [Note 16] We discuss the issues raised in the parties' cross appeals in turn.
refusal because it was superseded by the purchase and sale agreement the parties later entered. We agree.
"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 Bocce 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.
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.
verdict on Frostar's claim of breach of the purchase and sale agreement, the defendants contend that Malloy fully complied with his obligation under the agreement to furnish an environmental study of the property, and that the uncontroverted evidence established that Frostar did not comply with its obligations under the agreement and, in addition, failed to tender performance at the time designated in the agreement for closing. Finally, the defendants contend that the evidence compels judgment in their favor because, even if Frostar was relieved of the duty to tender performance in the circumstances, Frostar failed to establish that it was ready, willing, and able to perform its obligations under the agreement. As to breach of the implied covenant of good faith and fair dealing, the defendants argue that there is no evidence in the record to support a conclusion that Malloy acted in bad faith or with dishonest purpose, conscious wrongdoing, or ill will.
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 purpose.
395 Mass. 199 , 202 (1985), quoting from Mayer v. Boston Metropolitan Airport, Inc., 355 Mass. 344 , 354 (1969).
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 Frostar'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. [Note 23] See Vander Realty Co. v. Gabriel, 334 Mass. 267 , 271 (1956) (buyer relieved of tender where seller's failure to perform obligation precedent to buyer's obligation to purchase rendered seller unable to perform on date scheduled for closing). Compare Lafayette Place Assocs. v. Boston Redev. Authy., 427 Mass. 509 , 522-523 (1998), cert. denied, 525 U.S. 1177 (1999) (buyer not relieved of tender where parties shared responsibility under contract to obtain appraisal, and buyer failed to follow provisions of contract to resolve resulting uncertainties).
Maggio's account but unavailable to him until several months after the closing was to have occurred. In reply to the defendants' contention on appeal that the evidence did not establish that Frostar was ready, willing, and able to close, Frostar asserts simply that the jury resolved that question of fact in Frostar's favor. However, there is no basis on which we may adopt that assertion because the judge declined the defendants' request to instruct the jury that, in order to place Malloy in breach, Frostar was required to show that it was ready, willing, and able to perform. [Note 24] The refusal to give the requested instruction was error. See Kanavos v. Hancock Bank & Trust Co., 395 Mass. at 206. The requirement that a party claiming breach of contract establish its ability to perform as a condition to recovery rests on the straightforward principle that a party claiming deprivation of the benefit of a contract must show that it was in a position to obtain the benefit of the contract, but for the breach. See 9 Corbin, Contracts § 978, at 818 (interim ed. 2002). Because the jury were not properly instructed on an element essential to their verdict, a new trial is required.
damage award. [Note 25] See Canal Elec. Co. v. Westinghouse Elec. Corp., 406 Mass. 369 , 374-375 (1990). With damages eliminated, however, there is no basis for the defendants' contention that the judge abused her discretion in ordering specific performance as a remedy.
trial on those two counts. [Note 28] So much of the judgment dismissing count V of the complaint, which claimed that Malloy violated G. L. c. 93A, § 11, is affirmed.
[Note 1] Formerly known as Commercial Cold Storage Corporation.
[Note 3] As trustee of the 33 Norfolk Avenue Realty Trust.
[Note 4] 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.
[Note 5] 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. 93A.
[Note 6] 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.
[Note 7] 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.
[Note 8] 16 Howard Street is also known as 33-35 Norfolk Avenue.
[Note 9] 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.
"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."
[Note 11] 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.
[Note 12] March 1, 1998, was a Sunday; accordingly, the closing fell to the following day.
[Note 13] Malloy's attorney received the environmental report on January 28, 1998.
[Note 14] 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.
[Note 15] 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.
[Note 16] 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]."
[Note 17] In Mucci v. Brockton Bocce Club, Inc., supra at 161, we suggested in dictum the possibility that the holder of a right of first refusal might preserve his right to challenge the bona fide nature of the triggering offer, and to rescind the purchase or recover damages if the offer was not bona fide, even after proceeding with purchase of the property. We express no view on whether as a general proposition the holder of a right of first refusal may agree to modifications of terms during the negotiations of a purchase and sale agreement triggered by a third-party offer, and claim a breach of the refusal right by reason of those agreed modifications, even after closing the purchase.
[Note 18] 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.
[Note 19] 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.
[Note 20] 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 Bocce 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.
[Note 21] 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.
[Note 22] 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.
[Note 23] 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.
[Note 24] 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.
[Note 25] 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.
[Note 26] 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.
[Note 27] 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.
[Note 28] 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).

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