Court Opinion

ID: 198962
Source: CourtListenerOpinion
Date Created: 2011-02-07 04:21:42+00
Date Added: 2024-06-11T17:26:56.575787
License: Public Domain

214 F.3d 216 (1st Cir. 2000)
PETRICCA DEVELOPMENT LIMITED PARTNERSHIP AND BERKSHIRE CONCRETE CORPORATION, Plaintiffs, Appellants,v.PIONEER DEVELOPMENT COMPANY, TAMARACK INVESTORS CO., INC. AND PIONEER BERKSHIRE CROSSING COMPANY, Defendants, Appellees. No. 99-1538
United States Court of Appeals  For the First Circuit
Heard Dec. 9, 1999.Decided June 9, 2000

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Frank H. Freedman, Senior U.S. District Judge.[Copyrighted Material Omitted]
John W. Gahan III, with whom Laurie Alexander-Krom and Roche,  Carens & DeGiacomo, P.C. were on brief for Appellants.
Robert J. Muldoon, Jr., with whom Margaret H. Paget and Sherin  and Lodgen LLP were on brief for Appellees.
Before: Torruella, Chief Judge, Cyr, Senior Circuit Judge, and Stahl, Circuit Judge.
CYR, Senior Circuit Judge.

1
Petricca Development Limited  Partnership and Berkshire Concrete Corporation (collectively:  "Petricca") appeal from various district court orders which  dismissed their claims against defendant-appellee Pioneer Development Company ("Pioneer") for breach of fiduciary duty and unfair or  deceptive trade practices allegedly arising out of Pioneer's  unilateral abandonment of a planned real estate venture with  Petricca.  We affirm the district court judgment.

2
* BACKGROUND

3
In June 1992, Petricca and Tamarack Investors Company,  Inc., a business entity controlled by Pioneer, entered into a  written agreement which granted Pioneer a renewable one-year option  to purchase two parcels of land which Petricca owned in Pittsfield,  Massachusetts, upon which Pioneer planned to develop a WalMart  shopping center.  The agreement provided that (1) Pioneer would pay  Petricca $11,300 per month in option fees; (2) "In the event  [Pioneer] does not exercise its Option . . . , th[e] Agreement  shall expire and terminate and neither party shall have any  liability to the other under or pursuant to this Agreement[,]"; and  (3) "In the event [Pioneer] exercises its Option, th[e] Agreement  shall . . . become a contract for the purchase and sale of the  [land] . . . on the terms and conditions hereinafter set forth." Were Pioneer to breach the agreement, Petricca's "sole and  exclusive remedy [would be to] terminate th[e] Agreement, in which  case neither party [would] have any further liability or obligation  to the other . . . ."  The agreement also contained the following  integration clause:  "This agreement constitutes the sole and  entire agreement between [the parties]."

4
Further, the agreement afforded Petricca an option to  participate in a joint venture with Pioneer to develop the shopping  center.  The "basic terms" of any such joint venture were described  in Exhibit C, as follows:  "This letter is intended to be a  memorandum of understanding which shall serve as the basis for a  more detailed partnership agreement based on the following  terms[.]"  Under the option, Petricca had thirty days within which  to decide whether to join Pioneer in the joint venture, at which  time Pioneer would be entitled to reimbursement for all option fees  previously paid.  Thereafter, a new partnership -- Pioneer/Petricca  Associates -- would be formed, and "upon the closing of a construction loan," Petricca would transfer the land title to the new  partnership.  Pioneer would pay the purchase price to Petricca,  whereupon Pioneer would acquire a 32.5% ownership interest in the  new partnership.  Pioneer expressly retained sole responsibility  for obtaining the legal right to build, as well as for the actual  construction, the legal representation of the partnership, and the  shopping center management.  Finally, Exhibit C, which included  substantial handwritten corrections and insertions, identified  itself as "the outline for preparation of a formal agreement to  govern our business relationship."

5
In July 1992, Petricca afforded Pioneer due notice that  it intended to participate in the joint venture.  On October 7,  Pioneer and Petricca executed an addendum to their June option  agreement, noting that "Petricca exercised its option" to participate in the joint venture.  The October 7addendum replaced the  original Exhibit C, in their June option contract, with a new  Exhibit C which announced at the outset:  "This letter agreement  shall serve as a record of our mutual understanding regarding the  terms of our joint venture arrangement as described in paragraph 13  of the [June option agreement]."  The new Exhibit C further  provided that "the transactions will be concluded in accordance  with the Outline of Structure for Pioneer/Petricca Associates, a  copy of which is attached hereto and incorporated by reference."

6
The referenced outline set forth the following terms: First, Pioneer and a straw partner would form a general partnership  -- Tamarack Plaza Company -- to handle the right-to-build development  stage which would precede the construction phase.  Pioneer would  assign its June option contract rights to Tamarack Plaza Company,  and amend the June contract to reflect the joint venture arrangement with Petricca.  Second, Pioneer would pay the new partnership  for all costs of development, necessary personnel and expertise,  and would retain sole discretion to discontinue development "at any  time and for any reason."  Upon any such discontinuation, Petricca  would reimburse Pioneer for 32.5% of its development costs.  Id. The Outline further provided that "[u]pon exercise of [Pioneer's]  Option to purchase any portion of the Land, Petricca will be  admitted as a partner of Tamarack Plaza Company, the straw partner  will withdraw as a partner, and the partnership will change its  name to Pioneer/Petricca Associates."  Finally, the October 7  addendum stated:  "Except as amended by this [addendum], the [June]  Option Agreement, including without limitation, Petricca's exercise  of its option to participate in the joint venture, shall remain in  full force and effect."

7
On October 9, 1992, Pioneer notified the designated  escrow agent that Pioneer and Petricca had "elected to participate  in a joint venture," and requested reimbursement for the $22,600 in  option fees Pioneer had paid Petricca to date.  In December 1992,  Pioneer filed rezoning petitions with the city council, as required  before a shopping facility could be constructed on the Petricca  land.  In March 1993, however, Pioneer failed to gain city council  approval for its rezoning petitions.  During April 1993, unbeknownst to Petricca, Pioneer negotiated an option to purchase  another property approximately one mile from the Petricca parcels,  then requested the city council to suspend further action on the  pending zoning applications relating to the Petricca parcels.

8
In May 1993, Pioneer informed Petricca that the failure  to obtain zoning approval rendered their joint venture impossible  of performance, and that the zoning applications were being  withdrawn.  When Pioneer proposed to pay option fees for the  October 1992 -- May 1993 period, Petricca rejected the proposal. Eventually, Pioneer developed the WalMart facility at the other  site.

9
In due course, Petricca brought the present action  against Pioneer, demanding, inter alia, (1) a declaratory judgment  that the parties had commenced their joint venture as early as July  or October 1992 (Count 1); (2) damages and costs for Pioneer's  breach, as a joint venturer, of its fiduciary duty of good faith  and loyalty to Petricca in negotiating to purchase the alternate  site for the shopping center without Petricca's knowledge (Count  2); and (3) treble damages for Pioneer's willful violation of the  "unfair or deceptive trade practices" provisions of Mass. Gen. Laws  Ann. ch. 93A (Count 5).1  Pioneer successfully moved to dismiss  Count 5 pursuant to Federal Rule of Civil Procedure 12(b)(6) on the  ground that Chapter 93A is inapplicable to incipient business  relationships between joint venturers.

10
Thereafter, Pioneer successfully moved for summary  judgment on Counts 1 and 2.  The district court ruled that the June  option contract and its October addendum were unambiguous in  precluding any joint venture unless and until Pioneer had exercised  its option to purchase the Petricca land, a condition precedent  which was never satisfied.  Petricca Dev. Ltd. Partnership v. Pioneer Dev. Co., 40 F. Supp.2d 49 (D. Mass. 1999).  On appeal,  Petricca challenges both the Rule 12(b)(6) dismissal of Count 5 and  the summary judgment rulings relating to Counts 1 and 2.

II
DISCUSSION
A. The Breach of Fiduciary Duty Claim

11
Petricca first contends that the district court erroneously determined that the June contract and October addendum  unambiguously demonstrated a mutual intention that the joint  venture not be established until such time as Pioneer opted to  purchase the Petricca land.  Instead, Petricca insists that these  documents, as well as other evidence, generate a trialworthy issue  as to whether the parties intended that the joint venture relationship arise in July 1992, at the time Petricca exercised its option  to participate in the joint venture.  Since joint venturers  unquestionably owe one another a generalized duty of good faith and  utmost loyalty, see Zimmerman v. Bogoff, 524 N.E.2d 849, 855 (Mass.  1988); Cardullo v. Landau, 105 N.E.2d 843, 845 (Mass. 1952),  Petricca suggests that Pioneer breached its duty by unilaterally  aborting its efforts to gain city council approval of the rezoning  required to enable development of the Petricca land, and instead  surreptitiously negotiating an alternate land deal.2

12
Under Massachusetts law, the existence of a joint venture  is entirely dependent upon the parties' intent, which may turn on  many factors:

13
(1) an agreement by the parties manifesting  their intention to associate for joint profit  not amounting to a partnership or a corporation;  (2) a contribution of money, property,  effort, knowledge, skill, or other assets to a  common undertaking;  (3) a joint property  interest in all or parts of the subject matter  of the venture;  (4) a right to participate in  the control or management of the enterprise; (5) an expectation of profit; (6) a right to  share in profits;  (7) an express or implied  duty to share in losses;  and (8) a limitation  to a single undertaking (or possibly a small  number of enterprises).

14
Shain Inv. Co. v. Cohen, 443 N.E.2d 126, 130 (Mass. App. Ct. 1982)  (citing 2 Samuel Williston, Contracts § 318, at 555-56, § 318A, at  563-65, 574, 579 (3d ed. 1959)).3  Where the contract language is  unambiguous, its purport may be determined as a matter of law.  SeeLawrence-Lynch Corp. v. Department of Envtl. Mgt., 467 N.E.2d 838,  840 (Mass. 1984); see also Rey v. Lafferty, 990 F.2d 1379, 1384  (1st Cir. 1993) (construing Massachusetts law).

15
Although our review is plenary, the trial court's  analysis of the summary judgment record in the instant case is so  cogent and comprehensive that any extended exegesis would be  superfluous.  See PetriccaDev. Ltd. Partnership, 40 F. Supp.2d at  49.   The essential issue in this case is not whether the parties  intended a joint venture -- for surely they did -- but when they  intended that the joint venture commence.  Notwithstanding an utter  absence of support in the contract language, Petricca insists that  a joint venture came into existence on July 1992, the date it  notified Pioneer of its election to participate in a joint venture,  or at the very latest on October 7, 1992, the date the contract  addendum was executed.

16
Under the eight Shain criteria, see supra, it is clear  that these parties contemplated that their post-election business  relationship should consist in at least two discrete stages. First, during the right-to-build development stage, Pioneer had the  unilateral right, as well as the sole discretion, to discontinue  its development efforts at any time and for any reason.  Pioneer  and its straw partner would form a partnership called Tamarack  Plaza Company to undertake its preparatory mission.  Plainly,  unless and until the Petricca land could be rezoned, Pioneer would  not be able to develop the shopping facility, nor would it have any  financial incentive to exercise its option to purchase the land as  originally zoned.4

17
Second, after the right-to-build stage had been successfully completed, the contract provided that Pioneer was to purchase  the Petricca land.  Only then would Petricca replace the straw  partner as a copartner in the Tamarack Plaza Company, and the  partnership name would change to Pioneer/Petricca Associates.

18
As the district court aptly noted, this temporal  demarcation unambiguously indicates that the joint venture was not  to commence until Pioneer exercised its option to purchase the  Petricca land.  During the earlier, development stage, Petricca had  no meaningful control over any aspect of the business operations,  which remained entirely in the hands of Tamarack Plaza Company. See Judge v. Gallagher, 461 N.E.2d 261, 264 (Mass. App. Ct.)  (noting that right to control normally is "essential element" of  joint venture), review denied, 465 N.E.2d 261 (Mass. 1984); Shain  Inv.  Co., 443 N.E.2d at 126; cf. Klose v. Wood Valley Racquet  Club, Inc., 975 P.2d 1218, 1224 (Kan. 1999) (requiring that "joint  venturer have an equal right of control over the instrumentality"  (emphasis added)).  By contrast, in the cases cited by Petricca the  complainant possessed at least some control.  See, e.g., Shain Inv.  Co., 443 N.E.2d at 131 (noting that contract made party "more than  a spectator in the enterprise" by affording him a "role in the  decision making process"); see also Zimmerman, 524 N.E.2d at 854  (noting that party "did 'control . . . the purse strings of the  enterprise'" (citation omitted)).  Moreover, even if Pioneer were  to breach the contract, Petricca's "sole and exclusive remedy  [would be to] terminate th[e] Agreement, in which case neither  party [would] have any further liability or obligation to the other  . . . ."

19
Of course, since Pioneer never exercised its option to  purchase the Petricca land, Petricca could not be said to have made  any "contribution of money, property, effort, knowledge, skill, or  other assets."  Shain Inv. Co., 443 N.E.2d at 130.  Nor could  Pioneer and Petricca have acquired "a joint property interest in  all or parts ofthe subject matter of the venture [viz., the  Petricca parcels]."  Id.

20
Petricca instead argues that Pioneer's simple option to  purchase the Petricca land constituted a sufficient "joint property  interest" to satisfy the third Shain criterion.  Petricca cites no  authority for its novel proposition, however, nor have we found  any.  Rather, Pioneer's options to purchase are more aptly  analogized to contractual rights which may be converted into  property interests at the election of the optionee.  See, e.g., LDA  Acquisition v. Flag Wharf, Inc. (In re Competrol Acquisition  Partnership), 203 B.R. 914, 917 (Bankr. D. Del. 1996) ("As a  general rule of Massachusetts law, the granting of an option to  purchase property does not convey a property interest in the  subject of the option.") (citing New England Trust Co. v. Spaulding, 38 N.E.2d 672, 676 (Mass. 1941)); Webber Lumber & Supply  Co. v. Trucklease Corp. (In re Webber Lumber & Supply Co.), 134  B.R. 76, 78-79 (Bankr. D. Mass. 1991).5

21
Petricca can muster only a few tenuous challenges to the  sturdy rationale adopted by the district court.  For instance, it  notes that the October addendum says that "Petricca exercised its  option," and by using the past tense suggests that the joint  venture already existed.  On the contrary, the quoted language  simply described an historical event:  Petricca's July 1992  election.  Neither the June contract nor the October addendum  defined Petricca's election as an event which would actuate a joint  venture.

22
Petricca also claims that the October addendum arguably  employed more emphatic language and assumed a more final form than  the language in the June contract (which, for example, contained  many handwritten additions and strikeouts) by describing the terms  of the joint venture.  Its argument begs the question, however,  since there is no serious dispute that the parties anticipated that  a joint venture would be created; instead, the dispute concerns  only the timing of its creation.  Whatever their differences, both  Exhibits C -- the one in the June contract and the one in the  October addendum -- make very clear that the Petricca-Pioneer  business relationship could not meet the Shain criteria until  Pioneer exercised its option to purchase the Petricca land and  Pioneer/Petricca Associates had been formed.

23
With the same mission in mind, Petricca points to certain  extra-contractual evidence, such as internal memoranda generated by  Pioneer in 1992 referencing Petricca as Pioneer's "partner" and  describing "a meeting of the minds on the basic business deal." Assuming arguendo that the integration clause in the June option  contract contemplated consideration of such evidence, see Shain  Inv. Co., 443 N.E.2d at 132 (noting that "under the parol evidence  rule the writing will control if it is an integrated agreement"); Bendetson v. Coolidge, 390 N.E.2d 1124, 1126-27 (Mass. App. Ct.  1979) (same); see also Rey, 990 F.2d at 1385 ("[P]arol evidence may  not be used to 'create ambiguity where none otherwise exists.'"  (citation omitted)), none of the evidence even remotely contradicts  the contract or its addendum on the pivotal timing issue. Similarly, the referenced statements in the Pioneer memoranda  strike us as little more than casual prolepses.

24
Petricca points also to the fact that Pioneer--just two  days after the execution of the October 1992 addendum--asked the  escrow agent to reimburse it for the $22,600 in option fees  previously paid toPetricca.  Petricca argues that reimbursement  was due under the contract "specifically because the parties had  become joint venturers."  On the contrary, the contract permitted  reimbursement only "[i]f Petricca elect[ed] to participate in the  joint venture." Exhibit C (emphasis added).

25
Further, Petricca argues that the exercise of Pioneer's  option to purchase the Petricca land could not have been a  condition precedent to the creation of their joint venture because  Massachusetts law mandates that contracts expressly and emphatically identify any such conditions.  See Massachusetts Mun.  Wholesale Elec. Co. v. Town of Danvers, 577 N.E.2d 283, 288 (Mass.  1991).  Its argument mischaracterizes Massachusetts law, however,  since "emphatic or precise words are not absolutely necessary to  create a condition [precedent] . . . [which] may nonetheless be  found to exist if the intent of the parties to create one is clearly manifested in the contract as a whole."  Id. (emphasis  added).  As already explained, supra, the integrated contract  itself clearly demonstrates that the Pioneer-Petricca relationship,  during the preliminary right-to-build phase, did not meet muster  under any pertinent Shain criterion.  Accordingly, the summary  judgment ruling must be upheld.

B. Chapter 93A Claim

26
Finally, Petricca argues that the district court  committed reversible error by dismissing, pursuant to Federal Rule  of Civil Procedure 12(b)(6), the claim that Pioneer violated the  Massachusetts unfair or deceptive trade practices statute by  abandoning the joint venture.  See Mass. Gen. Laws Ann. 93A, § 11  ("Any person who engages in the conduct of any trade or commerce  and who suffers any loss of money or property, real or personal, as  a result of the use or employment by another person who engages in  any trade or commerce of an unfair method of competition or an  unfair or deceptive act or practice declared unlawful by section  two . . . may bring an action in the superior court . . . for  damages . . . .").6  Petricca concedes, as it must, that Chapter  93A generally is applicable only to business dealings "between  discrete, independent business entities," not to "disputes between  parties in the same [joint] venture," as the latter are not  regarded as having arisen in "trade or commerce."  Szalla v. Locke,  657 N.E.2d 1267, 1269 (Mass. 1995) (citing cases).  See Linkage  Corp. v. Trustees of Boston Univ., 679 N.E.2d 191, 207 n.33 (Mass.  1997); see also Ansin v. River Oaks Furniture, Inc., 105 F.3d 745,  760 (1st Cir. 1997).7

27
Petricca attempts to distinguish Szalla on the ground  that Pioneer and Petricca unquestionably remained two distinct  business entities for at least the first thirty days of their  contractual relationship, whereas the parties in Szalla had  asserted from the outset an intent to enter into a joint venture. Even assuming arguendo that Petricca might have retained Chapter  93A protection for the initial thirty-day period, however, all  actions undertaken by Pioneer which allegedly violated Chapter 93  occurred after Petricca voluntarily elected to participate in a  joint venture in July 1992, during which time Pioneer filed  rezoning applications and negotiated the alternate land deal. During that period, even if no joint venture hadyet been formed,  the parties unquestionably negotiated the details of their future  joint venture.

28
Indeed, the Szalla court itself rejected the very  distinction now advanced by Petricca:

29
The plaintiff claims that some of the misrepresentations occurred prior to the formation  of their association and therefore it was an  "arms-length transaction."  The plaintiff's  argument is unavailing because the prior  events occurred in the course of developing  their mutual association which culminated in  an agreement and an exchange of property and  services.  The association between the plaintiff and the defendant in the interests of  forming a business venture together is not the  kind of commercial transaction regulated by  the statute.

30
Szalla, 657 N.E.2d at 1270 (emphasis added).  The highlighted  sentence in the above quote completely undermines the Petricca  claim.  That is to say, by its July 1992 election and its negotiation of the terms of a joint venture, Petricca forfeited any  Chapter 93A protection, without regard to whether its election  would have culminated in the formation of a joint venture.

III
CONCLUSION

31
Accordingly, the judgment of the district court is  affirmed, with costs to appellees.  SO ORDERED.

Notes:

1
 Petricca voluntarily dismissed Counts 3 and 4, respectively  alleging breach of contract and deceit.

2
 Summary judgment rulings are reviewed de novo, with all  reasonable inferences drawn against the moving party, in order to  determine whether there is a genuine issue of material fact or the  moving party is entitled to judgment as a matter of law.  See Randlett v. Shalala, 118 F.3d 857, 861 (1st Cir. 1997).

3
 Although Massachusetts partnerships and joint ventures share  many of these same attributes, a "business relationship . . .  limited in scope to the acquisition and development of [a single]  property . . . is better termed a 'joint venture' than a partnership."  Loft v. Lapidus, 936 F.2d 633, 637 n.6 (1st Cir. 1991)  (citing Gurney v. Cumberland Farms, Inc., 550 N.E.2d 127, 133  (Mass. 1990)).

4
 Frequently, joint ventures of this variety are anticipatory  in nature.  Cf., e.g., HDA Parking Developers, Inc. v. Mount Vernon  Hosp., Inc., 687 N.Y.S.2d 663, 664 (App. Div.)(affirming summary  judgment for defendant hospital where parties had "only memorialized their intent to form, in the future, a joint venture" to  operate a parking garage once the developer leased the garage from  the City; "the hospital [properly] opted out of the anticipated  joint venture . . . when it became apparent that this joint venture  could never be formed due to the City's refusal to . . . lease the  garage to a joint venture involving a developer"), appeal denied,  697 N.Y.S.2d 562 (1999).

5
 Moreover, even if the option contract were deemed to have  conveyed a real property interest to Pioneer, the mere fact that  two parties hold "joint property . . . does not of itself establish  a partnership."  Mass. Gen. Laws Ann. ch. 108A, § 7(2) (emphasis  added).  See Loft, 936 F.2d at 637 n.6 (noting that laws governing  partnerships normally apply to joint ventures as well); Edgerly v. Equitable Life Assur. Soc'y of the U.S., 191 N.E. 415, 417 (Mass.  1934) ("A joint adventure . . . resembles in many respects a  partnership.").

6
  We review the Rule 12(b)(6) dismissal de novo, accepting the  factual allegations in the complaint as true and drawing all  reasonable inferences in the plaintiff's favor.  See Tompkins v. United Healthcare of N.E., Inc., 203 F.3d 90, 93 (1st Cir. 2000).

7
  Thus, the authority most prominently relied upon by Petricca, see NASCO, Inc. v. Public Storage, Inc., 29 F.3d 28 (1st Cir.  1994), is inapposite, since (1) it dealt with negotiations for an  outright sale of property between two independent business entities  which had expressed no intention to enter into a joint venture, seeid. at 29-30, and (2) NASCO predated the Szalla decision.