Court Opinion

ID: 9951539
Source: CourtListenerOpinion
Date Created: 2024-03-18 14:07:31.467309+00
Date Added: 2024-06-11T14:41:41.494299
License: Public Domain

NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule
23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28,
as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties
and, therefore, may not fully address the facts of the case or the panel's
decisional rationale. Moreover, such decisions are not circulated to the entire
court and, therefore, represent only the views of the panel that decided the case.
A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25,
2008, may be cited for its persuasive value but, because of the limitations noted
above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260
n.4 (2008).

                       COMMONWEALTH OF MASSACHUSETTS

                                 APPEALS COURT

                                                  22-P-1038

                                 NICOLA VARANO

                                       vs.

               PDJM LAND TRUST, LLC, trustee, 1 & others. 2

               MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

        Defendant PDJM, LLC (PDJM or lessor) timely appeals from a

 final judgment that (1) entered in favor of commercial tenant

 Nicola Varano (Varano or lessee) on Varano's complaint seeking

 declaratory relief from impending eviction and (2) dismissed

 PDJM's competing counterclaim seeking summary process

 termination of the tenancy and eviction. 3           On appeal, PDJM argues

 that Varano's chronic failures to timely pay rent, to address

 certain maintenance issues at the premises, and to respond to a

 letter from PDJM's insurance agent were "not insignificant" and

 1   Of 417-419 Hanover Street Realty Trust.

 2 PDJM, LLC; and Filippo E. Frattaroli, individually and as
 manager of PDJM Land Trust, LLC, and PDJM, LLC.

 3 PDJM, LLC is the only defendant that has pursued an appeal.
 All other claims and counterclaims have been waived.
were in fact material breaches of the lease.     PDJM further

contends that given Varano's intentional and willful breaches of

the lease, equity may not be invoked to protect Varano from

forfeiture, and therefore, the lease's default clauses should be

enforced.     We affirm.

     Background.    We summarize the facts from the Superior Court

judge's findings, reserving some facts for later discussion.

     1.     The parties and the operative lease provisions.   An

experienced restauranteur, Varano owns and operates a restaurant

called Nico Ristorante (Nico) at 417 Hanover Street in the north

end of Boston (property or premises).     Nico has been operating

at that location since 2008 and currently possesses the space

pursuant to a lease, signed by Varano as lessee, that began on

January 1, 2015.     The lease has a ten-year term with an option

to extend for another ten-year term, and was assigned to PDJM,

as lessor, after PDJM purchased the property in late 2016.

Filippo E. Frattaroli, the manager of PDJM, has owned and

operated a restaurant called Ristorante Lucia next door to Nico

for many years with his wife, Anna Frattaroli, 4 and their

children.

4 Although Filippo and Anna share a last name, we shall refer to
Anna Frattaroli hereinafter as Frattaroli, as none of our other
statements in this decision pertain to Filippo. Anna manages
PDJM's properties and serves as its point person for all
communications with PDJM's tenants. Rosanna Scrivo, Nico's

                                   2
     The lease, as interpreted by the judge and not challenged

on appeal, requires Varano to pay rent on or before the first

day of the month for which rent is due.   Among other remedial

provisions for not so paying rent, the lease contains two

default clauses, section 19 and section 1(m)(i) of Rider A,

which outline the circumstances in which breach or breaches by

the lessee will entitle the lessor to terminate the tenancy.

The lease also contains a provision, section 25, that authorizes

the lessor to assess a financial penalty against the lessee for

untimely rent payments.   Finally, the lease contains a number of

provisions, including sections 11 and (1)(e) and 1(o) of Rider

A, that detail Varano's obligations to (1) maintain the premises

in good condition; (2) promptly, on receipt of written notice

from the lessor concerning condition problems, take reasonable

corrective action; and (3) fully comply "with all Applicable

Laws," defined by the lease to include "any requirements of

[PDJM's] insurance underwriters."

     2.   The breaches alleged and the notice to quit.   On

January 9, 2017, Frattaroli sent an e-mail message to Scrivo,

notifying her that PDJM's accountant had not yet received Nico's

January rent, which was "due on the first of the month."

Frattaroli further stated, "[W]e are asking tenants to mail the

bookkeeper, is Varano's designated agent for all lease-related
issues and is responsible for the day-to-day operations at Nico.

                                 3
rent at least one week earlier than they had been doing."

Despite this request, Scrivo continued to pay the rent after the

first of the month for every month but one from December 2016,

when PDJM assumed the lease, through the date of the notice to

quit and termination of the lease (notice to quit) on August 15,

2018.   During that period, Frattaroli sent Scrivo no fewer than

fifteen separate written communications notifying her of Nico's

past due rent.   On most occasions, Scrivo remitted the overdue

rent promptly after receiving the notices.

     In addition to the rent-payment issues, between mid 2017

and 2018, PDJM raised concerns about Varano's use and

maintenance of the restaurant premises.   On June 21, 2017, Peter

R. Nobile Insurance Agency, Inc. (Nobile) issued a notice to

Nico summarizing the results of a site inspection conducted by

PDJM's insurer, Vermont Mutual Insurance Company.   In the

letter, Nobile identified six premises-maintenance issues in

need of correction, including, as herein relevant, (1) the

disorderly storage of equipment and supplies in the basement and

the courtyard areas, and the improper storage of items too close

to boilers, water heaters, and electrical panels; and (2) an

unsealed vent opening in the chimney servicing the boilers and

water heaters.   Nobile cautioned that failure to address the

issues within a roughly one-month timeframe risked cancellation

of PDJM's insurance on the property.

                                 4
     In response to a more formal letter from PDJM's attorney

threatening eviction and a "Final Letter" from Nobile demanding

written confirmation of remediation, Scrivo sent an e-mail

message to Nobile explaining that Nico had recently been the

subject of a full site inspection by the city of Boston (city)

inspectional services department (ISD) and attaching a copy of

the certificate of inspection, which signified that the

restaurant was compliant with the State's building code, among

other codes.   Notwithstanding Frattaroli's demand, conveyed by

Nobile, that Scrivo address each of the issues identified by

Nobile on an item-by-item basis and supply documentary proof

that each had been rectified as required, no detailed response

in the form demanded by Frattaroli was forthcoming.

     On July 2, 2018, Walter Blair Adams, a code consultant

expert hired by PDJM, conducted a private inspection of Nico.

Adams documented ongoing compliance problems at Nico, including

the disorderly and improper storage of items and supplies and

the vent opening in the chimney that remained unsealed.   On the

day after the private inspection, PDJM's attorney hand delivered

to Varano a notice of default for nonpayment of rent that

assessed late charges and demanded payment of all arrearages.

On August 15, 2018, PDJM's attorney served Varano with the

notice to quit, invoking (1) Varano's prior default and

continuing failure to pay timely rent on multiple occasions as

                                 5
an automatic event of default arising under section 1(m)(i) of

Rider A (from two or more late payments in 2018), and (2) the

failure, despite notice, to make repairs.      The notice informed

Varano that his lease was terminated and that PDJM would

initiate eviction proceedings if Nico did not vacate and

surrender the premises by August 31, 2018.      At the time, the

rent was paid in full.      Varano responded by filing this action.

     3.   The judge's decision.     Following the trial, the judge

issued a comprehensive fifty-page decision in favor of Varano on

his declaratory judgment count and on PDJM's counterclaim for

possession.   The judge first found that Varano committed three

breaches of the lease:      (1) the "persistent" failure to pay

timely rent; (2) the chronic, disorderly and improper storage of

supplies and other items in the basement and the courtyard

areas; and (3) the failure in a timely fashion to seal the vent

opening in the chimney. 5    Next, applying both the traditional

test of materiality under Massachusetts contract law, see G4S

Tech. LLC v. Massachusetts Tech. Park Corp., 479 Mass. 721, 732-

734 (2018), and cases cited, as well as the more detailed factors

bearing on the issue relied on by this court in DiBella v.

5 The judge concluded that the other use and maintenance problems
cited in the notice to quit to justify eviction were either
nonexistent or addressed in a reasonable time by Varano, and
thus, did not constitute actionable lease violations. PDJM has
not challenged that determination on appeal.

                                    6
Fiumara, 63 Mass. App. Ct. 640, 646-647 & n.7 (2005), the judge

determined that the breaches were "neither material nor

sufficiently significant and substantial to warrant enforcement

of the [lease]'s [d]efault clauses."     The judge rejected PDJM's

contention that as a matter of Massachusetts law the persistent

late payment of rent constituted a material breach of a

commercial lease.    Finally, the judge provided a second basis

for his decision, ruling that even if Varano had committed more

breaches than found and those breaches could be deemed

"sufficiently significant and non-trivial to allow for

enforcement of the [l]ease's [d]efault clauses," he would grant

equitable relief to Varano to avoid working a "seriously unfair

forfeiture."   See Nautican Realty Co. v. Nantucket Shipyard,

Inc., 28 Mass. App. Ct. 902, 904 (1989) ("equity does not favor

forfeiture of leases").

     Discussion.    1.   The standards of review.   In reviewing the

decision of a judge following a bench trial, "we accept [the

judge's] findings of fact as true unless they are clearly

erroneous, but we scrutinize without deference the legal

standard which the judge applied to the facts."     Wells Fargo

Bank, N.A. v. Sutton, 103 Mass. App. Ct. 148, 154-155 (2023),

quoting Cambridge St. Realty, LLC v. Stewart, 481 Mass. 121, 123

(2018).   See Mass. R. Civ. P. 52 (a), as amended, 423 Mass. 1402

(1996).   "A trial judge's finding is clearly erroneous only

                                   7
when, although there is evidence to support it, the reviewing

court on the entire evidence is left with the definite and firm

conviction that a mistake has been committed" (quotation and

citation omitted).    H1 Lincoln, Inc. v. South Washington St.,

LLC, 489 Mass. 1, 13 (2022).    "We examine the judge's imposition

of equitable remedies under an abuse of discretion standard."

Demoulas v. Demoulas, 428 Mass. 555, 589 (1998).

     2.   The untimely payment of rent.   PDJM argues that the

judge erred in finding that Varano's habitual late payment of

rent in breach of the lease was immaterial and not "sufficiently

significant and substantial" to justify the termination of the

lease.    While we agree with PDJM that the chronic late payment

of rent was not "insignificant," any error by the judge was

inconsequential since we conclude the judge did not err by

finding that Varano's actions did not amount to a material

breach, and further, that equity strongly disfavored forfeiture. 6

6 There is some uncertainty whether the judge concluded that the
late rent payments were "insignificant" or "not insignificant"
breaches of the lease (i.e., the midlevel type of breach
discussed in DiBella, 63 Mass. App. Ct. at 644-645). Although
the judge did not explicitly categorize the breaches for late
payment as "insignificant," the parties inferred that he
concluded as much from his decision. Even if the judge
concluded that one or more of Varano's breaches were
"insignificant and trivial," nothing turns on that fact. The
result would be the same, as insignificant breaches could never
lead to lease termination, see id. at 644 (if breach is
insignificant, courts will not permit termination even if, as
here, there is default clause in lease), and the judge elected
to use his broad equitable powers to preserve the tenancy.

                                  8
See DiBella, 63 Mass. App. Ct. at 648-649 (tenant's demolition

of shed in violation of "important" alteration clause not

material but also "not trivial or insignificant"; default

clauses do not always control where "strong equitable

considerations" are present).

     "A breach of a contract is a material breach when it

involves 'an essential and inducing feature of the contract.'"

EventMonitor, Inc. v. Leness, 473 Mass. 540, 546 (2016), quoting

Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 470

(1991).   "Essential and inducing features of a contract are

provisions that are 'so serious and so intimately connected with

the substance of the contract[ ]' that a failure to uphold the

provision would justify the other party walking away from the

contract and no longer being bound by it."   G4S Tech. LLC, 479

Mass. at 734, quoting Bucholz v. Green Bros., 272 Mass. 49, 52

(1930), S.C., 290 Mass. 350 (1935).   See id. (failure to make

monthly payments to painter as agreed was material breach

because payments were "essential and inducing feature" of

contract); Lease-It, Inc. v. Massachusetts Port Auth., 33 Mass.

App. Ct. 391, 396 (1992) (plaintiff's intentional nonpayment of

monthly concession and rental fees was material breach of

agreement); Aerostatic Eng'g Corp. v. Szczawinski, 1 Mass. App.

Ct. 141, 145 (1973) (defendant's failure to pay large part of

sum owed was "substantial breach going to the root of the

                                 9
contract thus entitling the plaintiff to terminate").   The

question whether a party has committed a material breach

ordinarily is one of fact for the fact finder.   See

EventMonitor, Inc., supra.

     Here, the judge's ultimate finding that Varano's late

payments were not material breaches was amply supported by his

subsidiary findings and not clearly erroneous.   Applying the

first DiBella factor and the similar common-law test of

materiality, the judge concluded that PDJM had "in no meaningful

sense been deprived of an 'essential and inducing feature' of

its contract with Varano."   See DiBella, 63 Mass. App. Ct. at

646-647 & n.7.   As the judge reasonably found, consistent with

the testimony of Joseph Bisognano, III, and Varano, the "core

bargain struck between the parties . . . was for a restaurant

tenant to occupy commercial space . . . [in exchange for] a

stipulated monthly rent over an extended period of years" –- and

not for the lessor to receive such rents by a particular date. 7

7 PDJM was not involved in the negotiation of the operative lease
at its inception. Bisognano, principal of NE 417 LLC, the
company that negotiated the operative lease with Varano and sold
the property to PDJM, testified that, while he read the lease to
require that rent be paid on or before the first of each month,
the prevailing practice in commercial real estate circles is to
allow for a thirty-day grace period before treating a late-
paying tenant as being in default. Bisognano further testified
that he gave Varano a thirty-day grace period in which to make
his rent payments. Varano and Scrivo testified that they had an
understanding with their previous two landlords that the monthly

                                10
PDJM received all rent payments to which it was entitled under

the lease; and though late, Varano's payments were never more

than a matter of weeks late, and most often they were only days

late.   Thus, Varano's breaches did not deprive PDJM of the

principal benefit of its bargain.    At bottom, the degree of

breach by Varano is fundamentally different than the complete

nonpayment of wages or large amounts due under contracts

involved in cases for which contract termination was permitted. 8

See, e.g., Bucholz, 272 Mass. at 52; Aerostatic Eng'g Corp., 1

Mass. App. Ct. at 144-145.

     Moreover, PDJM, a "substantial real estate concern," did

not show that it was harmed by the untimely rent payments.      On

this point, the judge found that PDJM's abilities to make its

mortgage payments to its lenders and "to otherwise conduct its

financial affairs in a business-like manner" were not impaired.

rent could be paid at any time during the month for which the
rent was due.

8 PDJM contends that the "artificial" distinction between failing
to pay rent and failing to timely pay rent is one without
meaning, but we disagree. Here, the "essential and inducing
feature" of the lease for PDJM was the receipt of monthly rent
over a period of ten years, and PDJM received all rent to which
it was entitled for the period in question. Additionally, the
rent delays were mostly modest and the judge found that they
never caused PDJM to fall behind on its own financial
obligations. Had Varano failed altogether to pay rent, PDJM's
ability to receive the principal benefit of the bargain and to
meet its financial obligations would look meaningfully
different.

                                11
To the extent that PDJM takes issue with the judge's rejection

of Frattaroli's testimony about PDJM's alleged need of Varano's

rent to pay the mortgage and other expenses, the judge was in

"the best position to judge the weight and credibility of the

evidence" (citation omitted).    Demoulas v. Demoulas Super Mkts.,

Inc., 424 Mass. 501, 510 (1997).

     The judge also found that all four remaining DiBella

factors weighed in Varano's favor and against a finding of

materiality and significance.    First, through the lease's late

charge provision, PDJM can "adequately compensate[]" itself for

the part of the benefit of which it may have been deprived by

Varano. 9   Second, if Varano's tenancy were terminated, he would

suffer a "severe" forfeiture that is disproportionate to his

lease violations.    Not only would Varano lose approximately

$500,000 in premises improvements he made, a substantial sum for

a small establishment like Nico, but he would also likely be

9 As the judge noted, "the only discernible loss suffered by PDJM
on account of Varano's tardy rent remittances is the time-value
of money." As noted above, section 25 of the lease authorizes
PDJM, after a ten-day grace period, to assess a "stiff" late
charge of one and one-half percent of the amount of rent due for
each month or portion thereof during which the rent remains
unpaid. As the judge found, many of Varano's late payments fell
within the ten-day grace period, and most others were untimely
"by so few days as to make the assessment of late charges
trivial and evidently not worth the bother." PDJM availed
itself of this remedy only once during the twenty-one month
period between PDJM's assumption of the lease and issuance of
the notice to quit. From PDJM's single assessment of late fees,
the judge inferred that the rent delays were "insignificant."

                                 12
forced to relocate outside of the north end.    As the judge

further found, "summary eviction of Nico from its prime location

on Hanover Street would erode the branding and diner good will

it has developed over the course of its 14-year history at this

venue . . . [and] could well put this restaurant out of business

altogether."    Thus, the potential impact of such a forfeiture

threatened Nico's very existence, far exceeded the gravity of

Varano's lease violations, and "militat[ed] strongly against

treating such breaches as sufficiently significant to justify

eviction."    Contrast DiBella, 63 Mass. App. Ct. at 648 (judge's

finding that benefit lost by landlord was "vastly

disproportionate" to proposed forfeiture was not clearly

erroneous).    As for the third DiBella factor, the likelihood

that Varano will cure his performance failures, the judge found

that "the scale tilts slightly in favor of Varano and against

PDJM."   Although disorderly storage and late rent payments were

"recurring" practices and there was evidence that Varano

continued to make late payments intermittently even after the

notice to quit, at the time of trial, the judge was unaware of

any lease violations that required a cure. 10   Finally, nothing in

10Following the trial, PDJM now has an additional remedy at its
disposal for late rent payments: the ability to ask a court to
hold Varano in contempt for violating the trial judge's order to
pay the rent on or before the first of the month for which rent
is due. Varano offered to subject himself to contempt for any
future violations.

                                 13
Varano's behavior "fail[ed] to comport with standards of good

faith and fair dealing."   PDJM has not challenged, let alone

shown, that any of these findings is clearly erroneous.

     We disagree with PDJM's contention that chronic late

payment of rent is necessarily a material breach of the lease

under Massachusetts law.   While the persistent late payment of

rent by a tenant could amount to a material breach of a lease

even after factoring in equitable considerations, in the

circumstances of this case, the judge was not required to find a

material breach by Varano.

     3.   The alleged failure to respond to the Nobile letter and

to correct code violations.   On appeal, PDJM argues that the

judge erred by concluding that Varano's intentional failure to

respond to the Nobile letter and his "indisputabl[e]" failure to

correct the "substantial" code violations were insignificant and

trivial breaches of the lease.   This argument fails for the

reason, if no other, that it mischaracterizes the judge's

findings.

     Here, the judge found that Varano's "occasional premises

maintenance lapses" were not "willful" or "purposeful in

intent," but rather "transitory, [and] rectified promptly in

whole or substantial part . . . when brought to [Varano's]

attention"; that Scrivo believed all six items referenced in the

Nobile letter were rectified, at least to the greatest extent

                                 14
circumstances allowed; and that Varano reasonably responded to

the compliance issues raised in the Nobile letter.   The judge

further found that "these [premises-related] transgressions

visited no adverse operational consequences, and imposed no

economic burdens, on PDJM.   Nico was never cited by a government

authority for a code infraction; never failed to pass ISD

inspection; and was never forced to close or suspend operations

for any reason."   Indeed, addressing Varano's overall

maintenance of the premises and PDJM's claim that Varano

deserved to be evicted for his "lapses," the judge found

"striking" that the evidence established only a handful of

claimed violations.   These findings were all well supported.

     As PDJM's own expert acknowledged, given the hundreds of

compliance requirements to which restaurants are subject,

"periodic code infractions of the type exhibited by Nico are to

be expected" and "[a]t any given moment, virtually all

restaurants will transgress applicable requirements of a

building code, and Nico was no exception."   See Kaplan v. Flynn,

255 Mass. 127, 130 (1926) (lease covenant to keep premises in

good repair must be assessed "with reference to the use the

premises were to be put to and the business to be carried on").

                                15
Finally, we note PDJM never lost its insurance because of any

premises maintenance issues. 11

     Moreover, contrary to PDJM's assertion, Varano did in fact

respond to Nobile.    In response to Nobile's second, "Final

Request" letter, Scrivo sent an e-mail message to Nobile,

informing it that Nico had recently passed a full ISD inspection

and attaching a copy of a recent certificate of inspection. 12

Nobile seemed satisfied with Scrivo's response, and PDJM does

not explain how Varano's failure to respond in the precise

format requested by Nobile violated any provisions of the lease.

Thus, we fail to see any breach, let alone a material one.

     4.   The anti-forfeiture doctrine.   We discern no abuse of

discretion in the judge's exercise of his equitable powers as an

independent ground to support his ruling in favor of Varano and

against PDJM on its counterclaim for eviction.    See Demoulas,

428 Mass. at 589.    On appeal, PDJM argues that Varano was not

entitled to relief under the "anti-forfeiture doctrine" due to

his intentional, willful, and "bad faith" breaches of the lease.

11To the extent that PDJM argues that the judge erred by
requiring it to show actual harm from the premises-maintenance
violations, the question whether a lessor will suffer loss is a
relevant factor in assessing the materiality of the lease
violations and the appropriateness of forfeiture. See DiBella,
63 Mass. App. Ct. at 646 n.7, and authorities cited.

12As PDJM's expert conceded, "an ISD [c]ertificate ordinarily
attests to a restaurant's compliance with all city requirements
in the areas of fire safety, health and cleanliness."

                                  16
Like the previous argument, this argument is unavailing because

it is based on a view of the evidence the judge did not take.

     In any event, even if the judge had found that Varano

committed willful violations, which he did not, a finding that a

tenant violated the lease by willfully and intentionally failing

to pay rent would not preclude equitable relief.   See Howard D.

Johnson Co. v. Madigan, 361 Mass. 454, 456-457 (1972), quoting

Eno Sys., Inc. v. Eno, 311 Mass. 334, 338 (1942) ("Relief

against forfeiture has been granted although a lessee has failed

to pay rent at the times and in the manner designated by the

                               17
lease and even if such failure has been wilful and

intentional"). 13,14

                                       Judgment affirmed.

                                       By the Court (Milkey, Walsh &
                                         Smyth, JJ. 15),

                                       Assistant Clerk

Entered:    March 18, 2024.

13To the extent that PDJM argues that Varano is unable to take
advantage of this rule in equity in light of his failure to make
PDJM whole by paying interest, late charges, and attorney's
fees, see Gordon v. Richardson, 185 Mass. 492, 492 (1904), it
did not raise this argument in the trial court and in fact
raises it for the first time in its reply brief. The argument
is thus not properly before us, and we do not address it. See
Katz, Nannis & Solomon, P.C. v. Levine, 473 Mass. 784, 795 n.15
(2016).

14Varano's request for costs in connection with this appeal is
denied.

15   The panelists are listed in order of seniority.

                                  18