Court Opinion

ID: 814307
Source: CourtListenerOpinion
Date Created: 2012-12-26 18:29:57+00
Date Added: 2024-06-11T18:00:51.621944
License: Public Domain

United States Court of Appeals
                      For the First Circuit

No. 12-1187

               GARY J. BACHORZ; CARMELO A. SCUDERI,

                      Plaintiffs, Appellees,

                                v.

                     SHAUNICE MILLER-FORSLUND,
            Executrix of the Estate of Nairn L. Miller,

                       Defendant, Appellant.

           APPEAL FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF MASSACHUSETTS

           [Hon. Michael A. Ponsor, U.S. District Judge]

                              Before

                    Howard, Ripple,* and Selya,
                          Circuit Judges.

     James Kossuth, with whom David H. Rich was on brief, for
appellant.
     Mark J. Albano for appellees.

                         December 26, 2012

     *
         Of the Seventh Circuit, sitting by designation.
             RIPPLE,    Circuit     Judge.       In      February   1996,

Mr. Gary Bachorz and Mr. Carmelo Scuderi (the “plaintiffs”) entered

into a fifteen-year lease, which included a purchase option, with

Mr. Nairn Miller.       The plaintiffs instituted this action against

Miller’s successor in interest,1 Ms. Shauna Miller-Forslund, when

she refused to allow the plaintiffs to exercise the purchase option

on the ground that they were in default on their obligations under

the lease. The district court granted summary judgment in favor of

the plaintiffs and ordered specific performance of the purchase

option.2     It determined that Miller had waived a provision which

prohibited the plaintiffs from subleasing without prior written

permission and that all alleged defaults were “inconsequential and

immaterial.”     Bachorz v. Miller-Forslund, 812 F. Supp. 2d 83, 94

(D. Mass. 2011).

             Ms. Miller-Forslund appeals. She contends that there was

no waiver, that the plaintiffs were in material breach and that

their attempt to exercise the option was therefore invalid.             We

conclude that     the   district   court   was correct   and   affirm   its

judgment.3

     1
           Mr. Miller died in January 2007.
     2
        The district court’s jurisdiction was predicated on 28
U.S.C. § 1332. The plaintiffs are citizens of Massachusetts and
Mr. Miller was a citizen of either Idaho or Florida when he died.
     3
           Our jurisdiction is predicated on 28 U.S.C. § 1291.

                                     2
                                        I

                                  BACKGROUND

A.   Facts

               The plaintiffs are the owners and operators of Berkshire

Auto & Truck, Inc. (“Berkshire Auto”), an auto-repair business,

which they started in 1985.        In 1995 or early 1996, the plaintiffs

approached Miller about the possibility of purchasing his property

located at 850 Berkshire Avenue (the “premises”) for Berkshire

Auto’s new location.       Miller was amenable to the sale, but wanted

to avoid paying capital gains tax on the property.                The parties

therefore settled on a fifteen-year lease with a purchase option.

The lease was executed on February 12, 1996, and began on March 1,

1996.       The purchase option, contained in Article XVII, subsection

17.01, is as follows:

                    The Tenants shall have an option to
               purchase the [premises] for the sum of One
               Hundred Seventy-Five Thousand ($175,000.00)
               Dollars to be exercised during the term of
               this lease by instrument in writing directed
               to the Landlord at its designated address
               provided that the Tenants shall not then be in
               default in the payment of rent or any of the
               other terms and conditions hereof.[4]

Article      IV,   subsection   4.03    allowed    the   plaintiffs   to     make

alterations or improvements with Miller’s written consent.                 Under

Article      VI,   subsection   6.01,   prior     written   consent   also    was

required for any sublease or assignment.            However, any sublease or

        4
            R.29-1 at 7.

                                        3
assignment would not alter the overall rental obligation of the

plaintiffs under the lease.5 Article VII, subsection 7.02 required

the plaintiffs to “comply with all of the requirements of all

county, municipal, state, federal and other applicable governmental

authorities” and “faithfully observe in the use of the premises all

municipal and county ordinances and state and federal statutes.”6

Article XIV, subsection 14.01 provided that waiver of any breach,

covenant or condition, or acceptance of rent subsequent to a

breach, was not a waiver of the lease term and that any waiver had

to be in writing.      Subsection 14.03 required any amendment to the

agreement to be in writing.

            Miller’s duties under the agreement included a provision

in   Article   IV,    subsection   4.04   that   he   “warrant[]   the   good

condition and repair of the roof of the premises for a period of

ten (10) years . . . and agree[] to be responsible for any

necessary repairs thereto.”7 The plaintiffs specifically requested

this provision because an inspection had revealed that “the roof

      5
        Article II, subsection 2.01 provided for reduced payments
during the first six months, creating an “unpaid rent” deficit.
The lease further provided that this “unpaid rent” would be
satisfied by increased payments for the following three years. Any
rent received from sublessees during those three years was to be
applied to accelerate the payment of this “unpaid rent.” Id. at 1.
      6
          Id. at 3.
      7
          Id. at 2.

                                     4
had several issues” and “needed work.”8   Mr. Bachorz testified that

he may not have entered into the lease had Miller not agreed to

warrant the good condition of the roof. Mr. Bachorz believed that,

in ten years, Berkshire Auto would be financially able to take over

responsibilities for the roof.

           The plaintiffs leased the premises in their own name and

immediately began subleasing it to Berkshire Auto, although the

record does not indicate whether this arrangement included a formal

written sublease.   The lease did not provide explicitly that the

plaintiffs would sublease the premises to Berkshire Auto, and the

plaintiffs did not obtain written permission for that arrangement.

Miller himself also continued to maintain an office on the premises

until 2002; however, the lease contained no provision contemplating

that Miller would continue to occupy part of the premises.9

           Mr. Bachorz testified that, after signing the lease,

Miller encouraged the plaintiffs to find subtenants to assist in

paying rent and thus utilize the entire building.     At some point

between 1996 and early 2002, the plaintiffs allowed an individual

to operate a discount dog food business on the premises in exchange

     8
         R.32-3 at 5, 23.
     9
        Ms. Miller-Forslund suggests that the lease provided for
Miller’s continued presence on the property.       Appellant’s Br.
22-23. The most colorable mention of a sublease to Miller in the
lease is a provision that reads: “Each such monthly payment shall
be payable on or before the first day of each month, in advance, at
the office of the Landlord or at such other place designated by
Landlord.” R.29-1 at 1.

                                 5
for a portion of his sales revenue.             In February 2002, the

plaintiffs allowed another business, Berkshire RV Rentals, to

operate on the premises without paying rent. Mr. Bachorz testified

that, although he did not obtain express oral or written consent to

sublet to the dog food business, Miller knew about the arrangement

because he walked past displays of dog food every day when he came

to his office on the premises.   Mr. Bachorz testified that, when he

approached Miller about subletting to Berkshire RV Rentals in early

2002, Miller said it was a “good idea” and agreed to vacate his

office to make room for the new subtenant.10       Berkshire RV Rentals

occupied space on the premises for three or four months.                From

February 2006 until at least the date of the district court’s

ruling in September 2011, the plaintiffs sublet two offices on the

premises to Tri-Lift, a forklift company, for $500 per month.            As

with the other subtenants, there was no written lease, just a

month-to-month   oral   agreement.       The   parties   agree   that   the

plaintiffs did not notify or obtain permission from Miller or

Ms. Miller-Forslund prior to subleasing to Tri-Lift.

           The roof of the premises leaked at least once every year

from the commencement of the lease until 2002.               Mr. Bachorz

testified that the leaky roof caused property damage including a

shorted-out radio and alarm system, and the plaintiffs had to hang

plastic from the ceiling to channel the incoming water.            In May

     10
          R.32-3 at 8-9.

                                     6
2002, the plaintiffs’ attorney notified Miller in writing that the

roof was leaking yet again, had caused property damage and was

sagging.     A professional estimated that it would cost over $15,000

to repair the roof properly.      The letter noted that Miller’s prior

attempts to repair the roof had failed and demanded that he comply

with the lease term requiring him to repair it properly.                   Miller

responded by letter saying that replacing the roof was not an

option.      He stated that the plaintiffs owed him $90 in late fees

and, in a post-script, noted that the plaintiffs were in default

for subletting a portion of the premises without prior written

consent.      Mr. Bachorz testified that, when he spoke with Miller

after the letter exchange, Miller said that he would not pay for a

new roof and told the plaintiffs, “‘You guys should pay for the

roof because you’re going to own the building.’”11               In response to

interrogatories, the plaintiffs stated that Miller agreed to waive

any default as to subtenants.       “He said . . . words to the effect

that ‘The place will be yours soon.               I don’t want to pay anything

else for maintenance.      If you pay for the roof, I will not raise

any issue about present [or] future subtenants.’”12                      In their

depositions, both plaintiffs also testified that Miller told them

that, if they paid for the roof, he would not worry about the lack

of   prior    written   consent   for       the    subtenants.     Mr.    Bachorz

      11
           Id. at 24.
      12
           R.32-5 at 2.

                                        7
specifically testified that this oral agreement included past and

future subtenants.     The plaintiffs replaced the roof at their own

expense   in   2004;   Mr.   Bachorz       testified   that    the   delay   was

“probably” because they could not afford the repair in 2002.13                In

addition to replacing the roof, the plaintiffs made other changes

to the property over the course of the lease; Mr. Bachorz testified

that Miller verbally approved their efforts and told them that they

were “doing a good job.”14

           Mr. Miller died on January 17, 2007, and his daughter,

Shaunice Miller-Forslund, became executrix of his estate. On April

29, 2009, Ms. Miller-Forslund’s attorney sent a letter informing

the plaintiffs that they were in default for failing to pay late

fees, subleasing the premises without prior written consent and

failing to resubmit rental payments when two checks designated as

“mortgage” were refused.        The letter stated that these defaults

precluded the plaintiffs from exercising the purchase option.                 On

May 28, 2009, the plaintiffs sent Ms. Miller-Forslund a written

notice    of   their   intent    to        exercise    the    option.        When

Ms. Miller-Forslund refused to sell, the plaintiffs sued, demanding

specific performance or damages of $550,000 plus costs and fees.

     13
          R.32-3 at 13.
     14
          Id. at 26.

                                       8
B.   District Court Proceedings

           During    proceedings         in         the   district      court,

Ms. Miller-Forslund alleged that the plaintiffs were in violation

of various lease terms, including making improvements without prior

written   consent,   subleasing    without          written   permission    and

violating municipal ordinances.         The district court nevertheless

granted   the   plaintiffs’   request         for     specific   performance,

determining that the May 2009 letter was a valid exercise of the

option because any breach of the sublease provision had been waived

by Miller during the roof replacement negotiations, and in any

event,    all   defaults   cited    by        Ms.     Miller-Forslund      were

“inconsequential and immaterial.”        Bachorz, 812 F. Supp. 2d at 94.

                                   II

                              DISCUSSION

                                   A.

           We first address whether Miller waived the requirement

that the plaintiffs obtain written permission before subleasing any

portion of the premises.   Ms. Miller-Forslund maintains that there

was no waiver because the agreement required all waivers to be in

writing, and the record does not show conclusively that Miller

waived the requirement through his words or actions.

           We begin our evaluation of these arguments with an

examination of the relevant general principles related to waiver

                                   9
and modification.15        Whether a party has waived a right under a

contract is usually a question of fact, but the issue may be

resolved    on   summary    judgment    when    “the   evidence   is   clear,

unequivocal and undisputed.”           Metro. Transit Auth. v. Ry. Exp.

Agency, Inc., 84 N.E.2d 26, 28 (Mass. 1949); see also Fed. R. Civ.

P. 56(a) (“The court shall grant summary judgment if the movant

shows that there is no genuine dispute as to any material fact and

the movant is entitled to judgment as a matter of law.”).

            Waiver of a contractual right “may occur by an express

and affirmative act, or may be inferred by a party’s conduct, where

the conduct is ‘consistent with and indicative of an intent to

relinquish voluntarily a particular right [such] that no other

reasonable explanation of [the] conduct is possible.’”            KACT, Inc.

v. Rubin, 819 N.E.2d 610, 616 (Mass. App. Ct. 2004) (alterations in

original) (quoting Attorney Gen. v. Indus. Nat’l Bank of R.I., 404

N.E.2d 1215, 1218 n.4 (Mass. 1980)); see also Dynamic Mach. Works,

Inc. v. Mach. & Elec. Consultants, Inc., 831 N.E.2d 875, 880 (Mass.

2005) (noting that waiver may be express or “inferred from a

party’s    conduct   and    the   surrounding    circumstances”    (internal

quotation marks omitted)).         If waiver is to be inferred from a

party’s conduct, the conduct at issue must be “clear, decisive and

unequivocal.”     Glynn v. City of Gloucester, 401 N.E.2d 886, 892

     15
        The parties are in agreement that the law of Massachusetts
controls the merits of their dispute.

                                       10
(Mass. App. Ct. 1980); see also Paterson-Leitch Co. v. Mass. Mun.

Wholesale Elec. Co., 840 F.2d 985, 992 (1st Cir. 1988).   The waiver

must be clear, particularly when it involves a condition for

exercising an option contained in a lease agreement. Massachusetts

law takes a strict view of options.    “[A] waiver of the conditions

with respect to the tenancy will not be a waiver of the conditions

for the option unless the lessor makes a separate waiver of those

conditions.”     Pear v. Davenport, 853 N.E.2d 206, 209 (Mass. App.

Ct. 2006).    Thus, a landlord who by his conduct waives a provision

requiring the timely payment of rent, does not waive necessarily

that requirement for purposes of a provision requiring compliance

with lease terms as a precondition to the exercise of an option.

See id. at 210.

             As to a writing requirement, a contractual provision

requiring modifications or waivers to be in writing does not

prevent the parties from making such changes orally or through

their conduct.    Indeed, it is well settled Massachusetts law that

parties, through their words or conduct, may modify a contract

despite a provision requiring modifications to be in writing.   See

Cambridgeport Sav. Bank v. Boersner, 597 N.E.2d 1017, 1022 (Mass.

1992) (“[A] provision that an agreement may not be amended orally

but only by a written instrument does not necessarily bar oral

modification of the contract.    Mutual agreement on modification of

the requirement of a writing may . . . be inferred from the conduct

                                  11
of the parties and from the attendant circumstances of the instant

case.” (second alteration in original) (internal quotation marks

omitted)); First Pa. Mortg. Trust v. Dorchester Sav. Bank, 481

N.E.2d 1132, 1138-39 (Mass. 1985) (holding that the “clear terms”

of   the     original   agreement     requiring    written     consent   for

modification did not nullify a subsequent oral modification).

Parties may waive orally provisions requiring modifications to be

in writing.     See, e.g., Parks v. Johnson, 703 N.E.2d 728, 728-29

(Mass. App. Ct. 1998) (holding that a party to a construction

contract impliedly waived, through words and conduct, a provision

requiring changes to be in writing). Parties also may waive orally

a provision requiring all waivers to be in writing.            See Clifford

Shoe Co. v. United Shoe Mach. Corp., 8 N.E.2d 161, 167 (Mass. 1937)

(noting that a “clause in the lease requiring waiver of any

provisions to be in writing . . . may be modified orally”).16

             Applying these principles to the present case, we agree

that the record supports the district court’s determination that

clear,     decisive   conduct   and   statements   establish   that   Miller

effectively waived the provision requiring the plaintiffs to obtain

     16
        See also 13 Samuel Williston & Richard A. Lord, A Treatise
on the Law of Contracts § 39:36 (4th ed. 2000) (“[T]he nonwaiver
clause itself, like any other term of the contract, is subject to
waiver by agreement or conduct during performance.”); 8 Catherine
M.A. McCauliff, Corbin on Contracts § 40.13 (Joseph M. Perillo,
ed., revised ed. 1999) (“[A]n express provision in a written
contract that no rescission or variation is valid unless it too is
in writing will not invalidate a subsequent oral agreement to the
contrary.”).

                                      12
written consent before subleasing the premises.                It is undisputed

that, in May 2002, the plaintiffs retained an attorney to send

Miller written notice that he was in breach of his agreement to

maintain the roof in good condition and be responsible for any

repairs.      Miller   responded   by       having   his   attorney   send   the

plaintiffs written notice disputing their allegations and alleging

that the plaintiffs were in breach of lease terms including the

requirement    that    they   obtain   Miller’s      written    consent   before

subleasing the premises. The record indicates that the parties met

informally to discuss their relative positions, and Miller told the

plaintiffs that, if they would pay to replace the roof (thus

releasing Miller from his contractual obligation under Article IV,

subsection 4.04), he would not seek to enforce the provision

requiring prior written permission for subtenants, whether past or

future (thus releasing the plaintiffs from their obligation under

Article VI, subsection 6.01).            During this discussion, Miller

explained that he did not want to invest in a new roof because the

plaintiffs would be the eventual owners of the property.                     In

response to interrogatories, the plaintiffs indicated that Miller

said “words to the effect that ‘The place will be yours soon.                 I

don’t want to pay anything else for maintenance.                If you pay for

the roof, I will not raise any issue about present [or] future

                                       13
subtenants.’”17     After this conversation there were no further

disputes about subtenants or the leaky roof, and the plaintiffs

replaced the roof at their own expense in 2004 at a cost of

$22,400.

            The parties’ words and conduct clearly evince a mutual

agreement to waive permanently the provisions related to roof

maintenance and subtenants.        The only evidence in the record shows

that Miller said that he would waive the provision for future

subtenants if the plaintiffs accepted responsibility for the roof.

The   plaintiffs’      decision    to   replace      the   roof     at   their   own

considerable expense “is consistent with and indicative of,” KACT,

819 N.E.2d at 616, their acceptance of Miller’s proposal. That the

waiver applied to the purchase option is also clear from the

context of the conversation--Miller wanted to be excused from his

responsibility    to    maintain    the      roof    because   he    expected    the

plaintiffs to exercise the option.                  This “clear, decisive and

unequivocal” waiver released the plaintiffs from any obligation to

obtain Miller’s prior written permission and failure to obtain

permission was not a breach.18

      17
           R.32-5 at 2.
      18
         Our decision in Sunoco, Inc. v. Makol, 372 F.3d 31 (1st
Cir. 2004), is not contrary. Sunoco involved a tenant who breached
an assignment clause. According to the record, absent that breach,
the clause may have resulted in the lessor receiving a significant
portion of the rent paid by the subtenant. Id. at 38-39. Unlike
the present case, there was no evidence that the landlord waived
                                                    (continued...)

                                        14
            Ms. Miller-Forslund does not offer any contrary evidence

but   instead   argues   that   we   should   disregard   the   plaintiffs’

testimony because it conflicts with the complaint’s allegation that

the plaintiffs decided to replace the roof due to Miller’s breach

and with the complaint’s request for reimbursement for the cost of

the roof.19     The testimony and complaint do not conflict.           The

evidence shows that the alleged breach of Miller’s obligation to

maintain the roof in good condition prompted the plaintiffs to

confront Miller, which in turn led to the oral agreement and the

plaintiffs’ decision to replace the roof at their own considerable

expense.    It is not surprising that the plaintiffs did not include

all these details in the complaint because a “short and plain

statement” is all that the rules require.          Fed. R. Civ. P. 8(a).

In addition, the request for reimbursement for replacing the roof

is best read as an alternative theory for relief in the event that

the court denied specific performance, and is entirely permissible

under Rule 8(d).20   See Rodriguez-Suris v. Montesinos, 123 F.3d 10,

20 (1st Cir. 1997). Because the uncontradicted evidence shows that

      18
      (...continued)
the provision, id. at 36, and we were not asked to determine
whether the breach was material or insignificant.
      19
           Appellant’s Br. 18.
      20
          We note that the district court’s purchase price
calculation did not credit the plaintiffs for having paid to
replace the roof. See Bachorz v. Miller-Forslund, 840 F. Supp. 2d
419   (D.   Mass.   2012);  Bachorz   v.   Miller-Forslund,   No.
3:09-cv-30132-MAP (D. Mass. Dec. 6, 2011).

                                     15
Miller     agreed   to   waive   forever    the    provision   requiring    the

plaintiffs to obtain written permission prior to subleasing the

premises, the plaintiffs’ failure to obtain permission was not a

breach of the lease agreement and did not prevent the valid

exercise of the option to purchase.

                                       B.

             Ms.    Miller-Forslund     additionally      argues     that   the

plaintiffs breached Article VII, subsection 7.02, which requires

them to comply with state and municipal laws.21            She contends that

the   plaintiffs     breached    the   provision    by   violating   municipal

ordinances in the following ways:             performing work without a

permit, failing to plant shrubs as a buffer between pavement and a

tree belt, failing to pay excise tax and applying for a permit as

property owners even though they were only tenants.22           She contends

that compliance with these municipal ordinances “‘go[es] to the

      21
          Ms. Miller-Forslund also alludes to back rent or
late-payment fees. The district court did not consider the issue
of back rent or late payments because Ms. Miller-Forslund did not
address these alleged defaults in her summary judgment brief.
Bachorz, 812 F. Supp. 2d at 87 n.4. Examination of that document
supports the district court’s decision.
      22
        Appellant’s Br. 9, 33. Ms. Miller-Forslund argued to the
district court that the plaintiffs were in breach for making
improvements to the property without written permission; her brief
on appeal notes this fact, but does not argue that it precludes
exercise of the option.

                                       16
heart of the parties’ agreement.’”23

            The district court noted that Ms. Miller-Forslund had

failed to present evidence of how the alleged violations harmed her

or Miller and held that she was attempting to seize on trivial

violations in order to avoid her obligation to sell the property.24

We agree with the district court.

            Massachusetts takes a strict view of options.           Trinity

Realty I, LLC v. Chazumba, LLC, 931 N.E.2d 510, 512 (Mass. App. Ct.

2010).     However, it also recognizes that a party’s substantial

compliance may be sufficient, as a matter of law, to maintain its

right to exercise an option.        Id.    Thus, “minor,” “immaterial” or

“inconsequential” breaches, which do not prejudice the lessor, will

not prevent a lessee from exercising an option. Id. Otherwise, an

“option would be virtually meaningless, as [the lessor] could seize

on any number of trivial, technical violations of the lease in

order to avoid it.”    Id. at 513.

            Here, there is no evidence suggesting that the alleged

violations of municipal ordinances prejudiced Ms. Miller-Forslund

or her predecessor, significantly affected her rights under the

contract    or   otherwise   went   “to    the   heart   of   the   parties’

agreement.”      Id. at 513 n.4.          The district court noted that

     23
        Id. at 33 (quoting Trinity Realty I, LLC v. Chazumba, LLC,
931 N.E.2d 510, 513 n.4 (Mass. App. Ct. 2010)).
     24
           See Bachorz, 812 F. Supp. 2d at 94.

                                     17
Ms. Miller-Forslund did not say how the alleged violations caused

any harm to her or her predecessor in interest and she does not

argue otherwise on appeal.25    Without any evidence suggesting that

the municipal violations were “significant or prejudicial” or went

“to the heart” of the lease agreement, id. at 512, 513 n.4, summary

judgment in favor of the plaintiffs was entirely proper.

                               Conclusion

          For the foregoing reasons, we affirm the district court’s

order of specific performance of the purchase option.

          AFFIRMED

     25
        When confronted during oral argument, counsel acknowledged
that the municipal ordinance violations were “perhaps” trivial
defaults.

                                   18