Opinion
No. 14–P–1938.
07-26-2016
Richard ARONOVITZ & another v. Madlyn A. FAFARD & another, trustees.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
This case arises out of a commercial lease entered into on October 5, 1983, between the plaintiff, Richard Aronovitz, and the defendants' predecessor-in-interest, Howard Fafard (Fafard).
We refer to the defendants as the trustees.
Background. A full recitation of the facts and procedural history of this long-running dispute can be found in our previous opinion, Aronovitz v. Fafard, 78 Mass.App.Ct. 1 (2010) (Aronovitz I ), where we held that the doctrine of res judicata had been incorrectly applied to bar claims. We accordingly vacated the previous judgment for Aronovitz and remanded “on the limited issue whether the trustees [or their predecessor] breached the lease by not honoring Aronovitz's attempted exercise of the option to purchase.” Id. at 10.
On remand, after a bench trial, a Superior Court judge concluded that Fafard (1) had not breached the lease when he did not honor Aronovitz's attempted exercise of the purchase option, but (2) had breached the lease when he terminated it for Aronovitz's failure to pay real estate taxes. The judge awarded Aronovitz $18,267 in damages: $5,267 for real estate taxes, $5,000 for an option to purchase, and $8,000 for construction of an access road. Judgment entered awarding Aronovitz $18,267 in damages plus interest from the date of the breach (September 22, 1984) and costs. The trustees filed a motion to alter or amend the judgment, which was allowed in part and denied in part. In the memorandum on that motion, the judge concluded: (1) interest on the real estate taxes should be calculated from the date that Aronowitz made that payment (November 26, 1984); and (2) interest on the option and access road should be calculated from the date of the commencement of the action. An amended judgment entered. As the amended judgment contained a typographical error, it was vacated and a second amended judgment entered. The parties have cross-appealed from that judgment.
Discussion. 1. Purchase option. The judge concluded that Fafard did not breach the lease when he did not honor Aronovitz's attempt to exercise the purchase option. This conclusion followed from the judge's finding that Aronovitz's option rights had terminated months before he attempted to exercise them. The operative portion of the purchase option for the purpose of this appeal provides that prior to exercising the option, Aronovitz was to notify Fafard in writing “on or before the last day of the sixth month from the Commencement Date (as defined in the Lease) [May 31, 1984].... Provided, however, that said notification time shall be extended during the demised term until such time as the sign [on Route 9] is constructed.” We agree with the judge that the proviso failed to anticipate (or provide for) the possibility that construction of the sign might prove impossible.
We review de novo the judge's determination that the contract was missing a term. See Diamond Crystal Brands, Inc. v. Backleaf, LLC, 60 Mass.App.Ct. 502, 504–505 (2004). Although “[c]ontracts that are free from ambiguity must be interpreted according to their plain terms,” Suffolk Constr. Co. v. Lanco Scaffolding Co., 47 Mass.App.Ct. 726, 729 (1999), “the scope of a party's obligations cannot be delineated by isolating words and interpreting them as though they stood alone. Not only must due weight be accorded to the immediate context, but no part of the contract is to be disregarded,” Starr v. Fordham, 420 Mass. 178, 190 (1995) (citation and quotation omitted). We agree with the judge that the language of the option, especially the phrase “until such time,” assumed that the sign on Route 9 would be constructed at some point during the term of the lease. No portion of the purchase option's language anticipated the possibility that construction of the sign might prove impossible for reasons outside the parties' control. Whether this was because the parties failed to foresee this possibility or because they failed to express their expectations, the option was missing a term. See Restatement (Second) of Contracts § 204 comment b (1981) (Omission of essential term occurs when “[t]he parties to an agreement ... entirely fail to foresee the situation which later arises and gives rise to a dispute.... Or they ... have expectations but fail to manifest them, either because the expectation rests on an assumption which is unconscious or only partly conscious, or because the situation seems to be unimportant or unlikely”).
The Westborough zoning board of appeals did not approve the sign, despite Fafard's efforts to secure approval. The judge's finding that the construction of the sign was not feasible is not clearly erroneous.
When a contract is missing a term, it is “the task of the trial judge to fill in the missing term in accordance with the intent of the parties.” Diamond, supra at 506. We uphold a determination as to the parties' intent unless clearly erroneous. See ibid. Here, the judge found that the intent of the parties in allowing the option period to extend beyond the first six months of the lease “until such time as the sign ... is constructed” was to “allow [Aronovitz] to assess the profitability of the pharmacy both before and after the sign was constructed prior to making a decision on whether to purchase the Premises.” In accordance with the parties' intent, the judge found that Aronovitz's option rights terminated on July 16, 1984, thirty days after “it became clear the sign would not be built. .[and] the reason d'[ê]tre for the option extension period ceased to exist.”
The judge's determination of the parties' intent was not clearly erroneous, and designating July 16, 1984, as the last day on which Aronovitz could exercise his option rights was reasonable. See Restatement (Second) of Contracts § 204 (1981) (“When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court”). See also Plymouth Port, Inc. v. Smith, 26 Mass.App.Ct. 572, 575 (1988) (“What is a reasonable period of time depends on the nature of the contract, the probable intention of the parties, and the attendant circumstances”). The date designated by the judge, July 16, 1984, was thirty days after Fafard's property manager sent Aronovitz a letter informing him that the sign on Route 9 would not be built. Furthermore, as the trial judge found, “[b]y mid-June 1984, Aronovitz had been in operation for over seven months and knew the viability of the [pharmacy] without a sign. He had the necessary information, therefore, to assess the future profitability of the enterprise accordingly.” It is undisputed that Aronovitz did not attempt to exercise the purchase option on or before July 16, 1984. Therefore, Fafard did not breach the lease when he rejected Aronovitz's untimely attempt to exercise the option.
2. Taxes. The trial judge concluded that Aronovitz was not required to pay real estate taxes under the lease, and that therefore Fafard breached the lease when he terminated it based on Aronovitz's refusal to pay those taxes. On appeal, the trustees argue that the judge exceeded the scope of this court's remand order in Aronovitz I when she decided whether Fafard's notice to terminate constituted a breach of the lease. We disagree. It is true, as the trustees point out, that we remanded the case “for trial on the limited issue whether the trustees (or Fafard) breached the lease by not honoring Aronovitz's attempted exercise of the option to purchase.” Aronovitz I, 78 Mass.App.Ct. at 10. However, this sentence was incomplete in that it did not address the consequences of our conclusion (as stated in the opinion) that the earlier judge had erroneously given “preclusive effect to the ruling by another Superior Court judge in the summary process action that Aronovitz was not required to pay real estate taxes.” Id. at 8. The judge was correct in her reading of our opinion as a whole that the tax issue remained open after Aronovitz I, and that she should decide it on remand. See Levy v. Reardon, 47 Mass.App.Ct. 912, 912 (1999) (finding remand judge did not impermissibly enlarge the scope of a remand order where the judge did not “deviate[ ] substantially from the letter or spirit of the remand order,” but rather “follow[ed] the reasoning and conclusions that under[lay] the order of remand”).
The trustees also argue that even if it was within her power to decide the issue, the judge erred in doing so because the trustees cannot be liable because of the preclusive effect of the bankruptcy case. To the contrary, in Aronovitz I, we ruled that Fafard's bankruptcy proceedings were entitled to no preclusive effect in this case. Aronovitz I, supra at 5. Furthermore, as we stated in Aronovitz I, if the trustees or Fafard breached the lease, a damage award for Aronovitz and against the trustees “shall stand.” Id. at 10. Our previous rulings in this regard are the law of the case. See Vittands v. Sudduth, 49 Mass.App.Ct. 401, 413 n. 19 (2000) (“The ‘law of the case’ doctrine reflects the reluctance of a second judge to rule differently from the first judge on a case, issue, or question of fact or law once decided by final judgment or on appeal”). See also King v. Driscoll, 424 Mass. 1, 7–8 (1996), quoting from Peterson v. Hopson, 306 Mass. 597, 599 (1940) (“The ‘law of the case’ doctrine reflects this court's reluctance ‘to reconsider questions decided upon an earlier appeal in the same case” ’).
Similarly, the trustees' arguments that they cannot be held liable for Fafard's breach as they were not parties to the lease, and that Fafard's bankruptcy extinguished any debt Fafard owed Aronovitz were rejected in Aronovitz I and those rulings are the law of the case.
3. Damages. The initial judgment awarded Aronovitz $18,267, plus interest calculated from September 22, 1984, the date of Fafard's breach. This award reflected (1) $5,267 in real estate taxes Aronovitz paid Fafard under protest, (2) $5,000 Aronovitz paid as a deposit for the option, and (3) $8,000 he paid toward the construction of an access road to the pharmacy. The judge ruled in her memorandum on the trustees' motion to alter or amend the judgment that the $5,000 option deposit and $8,000 payment for the road were terms of the option agreement, not the lease, and that interest should run from the date Aronovitz commenced this action, June 23, 2003. See G.L. c. 231, § 6C. She also ruled that interest on the real estate taxes ($5,267) was to be calculated from November 26, 1984, the day on which Aronovitz made the real estate tax payment to Fafard. We review the judge's interpretation of the lease, option, and purchase and sale agreement de novo. See Matthews v. Planning Bd. of Brewster, 72 Mass.App.Ct. 456, 462 (2008).
On appeal, Aronovitz argues that the judge erred when she ordered that the interest on the portion of the damage award based on the option deposit and road payment be calculated from the commencement of the action. Aronovitz is correct as to the option deposit. Section 3(D)(3) of the lease reads: “If [Aronovitz] does not exercise option to purchase [Fafard] will return $5,000 Deposit to [Aronovitz].” This is the only term in the lease, option, or purchase and sale agreement requiring the return of the deposit. The $5,000 portion of the damage award is therefore necessarily based on the lease, and accordingly, the interest on this portion of the award should be calculated from the date of the breach. See G.L. c. 231, § 6C ; Bank v. Thermo Elemental, Inc., 451 Mass. 638, 662 (2008) (quotation omitted) (“An award of prejudgment interest is made so that a person wrongfully deprived of the use of money is made whole for his loss”).
Aronovitz's view is not correct, however, regarding the interest on the road payment portion of the damage award. In fact, the trustees are correct when they argue that not only should the interest not be calculated on the $8,000 from the date of the breach, but Aronovitz is not entitled to this portion of the award at all. The term governing the financing of the access road is located in the purchase and sale agreement, and it states that the $8,000 paid by Aronovitz toward the road would only be reimbursed “[i]f, after four years from passing date, the access road remains in place.” This term creates a condition precedent: the existence of the road four years after the “passing” of the property from Fafard to Aronovitz. That transfer never occurred; therefore, the obligations attached to the condition—that Fafard reimburse Aronovitz the $8,000—never became enforceable. See Massachusetts Mun. Wholesale Elec. Co. v. Danvers, 411 Mass. 39, 45 (1991) (citations omitted) (“A condition precedent defines an event which must occur before a contract becomes effective or before an obligation to perform arises under the contract. If the condition is not fulfilled, the contract, or the obligations attached to the condition, may not be enforced”).
Conclusion. So much of paragraph 1 of the second amended judgment that provides “interest from 11/26/84 to 4/22/14 in the sum of $18,595.00” is vacated and shall be replaced by a provision awarding interest calculated from November 26, 1984. So much of paragraph 2 of the second amended judgment that provides “the sum of $13,000.00 (5,000.00 deposit and $8,000.00 payment for construction of the access road) with interest from 6/23/03 to 4/22/14 in the sum of $16,907.98” is vacated and shall be replaced by a provision awarding damages in the amount of $5,000 with interest calculated from September 22, 1984. The case is remanded to the Superior Court for further proceedings consistent with this memorandum and order.
So ordered.