Opinion
20-P-1042
07-30-2021
Christopher MARTORELLA v. Stuart RAPP & others.
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
In this case, we apply the familiar doctrine of impossibility of performance to the circumstances of a real estate purchase that was complicated by the novel coronavirus pandemic of 2020. Although we are sympathetic to the difficulties that the plaintiff, Christopher Martorella, experienced as a result of the pandemic, we affirm the dismissal of his complaint because we conclude that his allegations do not support a finding that his performance under a real estate purchase and sale agreement was impracticable at the time the complaint was dismissed.
Background. This case concerns a house on Nantucket (property) owned by the plaintiff's wife, Laura Martorella, and defendants Jeffrey Stark and Rachel Donaldson. In 2017, Stark and Donaldson petitioned for partition of the property. A Land Court judge appointed defendant Stuart Rapp as the commissioner charged with accomplishing the partition.
In November 2019, following a failed attempt to sell the property through a real estate broker, the judge ordered Rapp to conduct a public auction of the property. The plaintiff made the winning $1,827,000 bid at the February 14, 2020 auction. The plaintiff and Rapp signed a purchase and sale agreement (P&S) that same day.
The P&S was a form real estate contract. Among other things, the P&S provided that delivery of the deed would occur "on or before 1:00 pm ET Monday, March 16, 2020 at the Law Offices of Osterville, MA, unless otherwise agreed upon in writing by the Parties hereto. The Parties hereto agree that time is of the essence of this Agreement." The P&S also stated that the plaintiff:
"acknowledges that this Agreement contains no contingencies affecting [his] obligation to perform. If the sale as contemplated herein is not consummated for any reason, except [Rapp's] inability to deliver marketable or insurable title (subject only to the matters set forth in paragraph 4), then the deposit paid by [the plaintiff] upon the execution of this Agreement shall inure to and become the property of [Rapp], and this Agreement shall be and become null and void and of no further force and effect."
Paragraph 19 of the P&S contained similar language regarding forfeiture of deposits if the plaintiff were to default. The P&S did not contain a financing contingency clause, or otherwise indicate that the plaintiff intended to obtain financing to purchase the property.
In an affidavit he filed in the Land Court, Rapp implied (without explicitly saying) that the plaintiff did not disclose that he would require financing to purchase the property. While the plaintiff contends that he always required financing to close on the property, he has not alleged that he ever disclosed that to Rapp.
The plaintiff put down two cash deposits -- one $50,000 deposit and one $132,700 deposit -- intending to finance the balance of the purchase price. For whatever reason, he did not apply for a mortgage himself. Instead, Laura Martorella and Matthew Samuelson, Sr., the plaintiff's business partner, applied to Citizen's Bank, N.A., for a loan.
Unbeknownst to the plaintiff and Rapp at the time they entered into the P&S, a global crisis was imminent. COVID-19, a novel coronavirus first detected in 2019, was silently spreading. COVID-19 would soon lead to a national state of emergency in the United States as communities struggled to "flatten the curve" and "reduce the number of cases [of COVID-19] the beleaguered health care system must treat at any one time." Committee for Pub. Counsel Servs. v. Chief Justice of the Trial Court, 484 Mass. 431, 433, aff'd as modified, 484 Mass. 1029 (2020). On March 10, 2020, the Governor of this Commonwealth declared a state of emergency in response to the threat the virus posed. Id. The Governor also "imposed strict restrictions on many aspects of everyday life, including closing business and schools and stringently restricting public and private gatherings." Id. at 434. On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic, id. at 433, and the United States followed with the declaration of a national emergency.
On March 4, 2020, the plaintiff requested a continuance of the closing date because of difficulties in obtaining financing. Rapp agreed, and the parties executed a first addendum to the P&S, which continued the closing date by seven days to March 23, 2020. They later signed a second addendum to the P&S. It postponed the closing date an additional two weeks to April 6, 2020, but, like the first addendum, it provided that all other terms of the P&S remained "in full force and effect."
On March 13, 2020, Matthew Samuelson, Sr., and Laura Martorella obtained a mortgage preapproval letter from Citizens Bank to purchase the property. On March 26, 2020, Laura Martorella became seriously ill with COVID-19-related symptoms. Her condition quickly deteriorated, requiring hospitalization. The complications from her illness rendered her incapacitated and on a ventilator for several weeks.
On March 30, 2020, Rapp contacted the plaintiff's attorney (who, at that time, represented Laura Martorella), and notified him that he was ready, willing, and able to close on the sale of the property on April 6, 2020. In response, the plaintiff requested another extension of the closing date. Rapp refused, but later offered to postpone the closing to May 5, 2020, provided that the plaintiff would agree to increase his deposit. The plaintiff declined the offer.
On April 6, 2020, with Laura Martorella still hospitalized, the plaintiff filed his verified complaint in this action, along with a motion for judicial endorsement of lis pendens. On April 17, 2020, he filed an amended verified complaint. The verified complaint sought declarations that the P&S is unenforceable and that his deposits must be returned because the pandemic rendered it impracticable to secure financing by April 6, 2020, along with related equitable relief. On May 4, 2020, Rapp responded by filing a special motion to dismiss pursuant to G. L. c. 184, § 15 (c ), on the grounds that the plaintiff's claims lacked factual and legal support because, among other things, the plaintiff could not establish that compliance with the P&S was impracticable.
On May 14, 2020, Laura Martorella's condition showed improvement and she was taken off the ventilator, though she faced a long road to full recovery. On May 18, 2020, the plaintiff filed an opposition to the special motion to dismiss in which he argued that the pandemic and his wife's illness had prevented him from securing the financing needed to purchase the property. The judge allowed the special motion to dismiss on June 1, 2020. He reasoned that the plaintiff assumed the risk that he would be unable to obtain financing when he signed a P&S with no financing contingency and that Laura Martorella's illness could not form the basis of an impracticability defense because she was not a party to the P&S. Judgment entered and this appeal followed.
Discussion. General Laws c. 184, § 15 (c ), provides "a mechanism for expedited removal of an unjustified lis pendens, including dismissal of frivolous claims supporting an approved lis pendens." McMann v. McGowan, 71 Mass. App. Ct. 513, 519 (2008), quoting Galipault v. Wash Rock Invs., LLC, 65 Mass. App. Ct. 73, 81 (2005). The plaintiff argues that the judge erred in dismissing his claims because § 15 "leaves the door open for good faith novel claims in cases of first blush." While the plaintiff chafes at having claims he believes he brought in good faith labeled "frivolous," in this context, finding a claim to be frivolous does not imply it was brought in bad faith. Instead, § 15 defines a "frivolous" claim as one that (1) "is devoid of any reasonable factual support"; or (2) "is devoid of any arguable basis in law"; or (3) "is subject to dismissal based on a valid legal defense." G. L. c. 184, § 15 (c ). Unlike a motion to dismiss for failure to state a claim under Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 (1974), a special motion to dismiss pursuant to § 15 (c ) "requires the motion judge to consider alleged facts beyond the plaintiff's initial pleading." Ferguson v. Maxim, 96 Mass. App. Ct. 385, 390 (2019). The judge considers not only the pleadings of both parties, but also any affidavits submitted to "determine whether the plaintiff's claims are devoid of a factual or legal basis." Id. The judge should grant the motion only if, after resolving all factual disputes and drawing all legal conclusions in the plaintiff's favor, the plaintiff does not have a viable claim. Id. at 393-394. We review a dismissal under § 15 (c ) to determine "whether the trial court judge ‘committed an error of law or abused his discretion in applying the standards of G. L. c. 184, § 15 (c ).’ " McMann, supra, quoting Galipault, supra at 82. Here, we discern no such error or abuse of discretion because we agree that the allegations in the plaintiff's verified pleadings and affidavit do not support a finding that his breach of the P&S was excused under the doctrine of impossibility.
The doctrine of impossibility -- often referred to, perhaps more accurately, as the doctrine of impracticability -- excuses performance of a contract where (1) an event occurring after the execution of the contract makes the contract's performance impossible or impracticable; (2) nonoccurrence of the event was a basic assumption on which the contract was made; and (3) the party who seeks to have his or her performance excused did not cause the event. See Chase Precast Corp. v. John J. Paonessa Co., 409 Mass. 371, 373 (1991), quoting Boston Plate & Window Glass Co. v. John Bowen Co., 335 Mass. 697, 700 (1957) ("where from the nature of the contract it appears that the parties must from the beginning have contemplated the continued existence of some particular specified thing as the foundation of what was to be done, then, in the absence of any warranty that the thing shall exist ... the parties shall be excused ... [when] performance becomes impossible from the accidental perishing of the thing without the fault of either party"). See also Winchester Gables, Inc. v. Host Marriott Corp., 70 Mass. App. Ct. 585, 596 (2007) (party cannot rely on impossibility it created to excuse performance of contractual obligations). "The principal question in [impossibility cases is] whether an unanticipated circumstance, the risk of which should not fairly be thrown on the promisor, has made performance vitally different from what was reasonably to be expected." Karaa v. Yim, 86 Mass. App. Ct. 714, 717-718 (2014), quoting Chase Precast Corp., supra at 374.
Here, the plaintiff argues that the judge erred in dismissing his claims because the circumstances of the COVID-19 pandemic, including his wife's severe illness, his obligation to quarantine himself as a result, and government restrictions on travel and business operations, made it impossible for him to secure financing before the P&S's closing date, thereby excusing his breach. It is undisputed that the plaintiff was not a cause of the pandemic, or of any of the specific events he alleges gave rise to his impossibility defense. Thus, to determine whether the plaintiff has a viable impossibility defense, we consider two questions. First, did the events of the pandemic render performance of the contract "impracticable" as that term has been defined in the relevant case law? Second, was the nonoccurrence of the events that form the basis of the plaintiff's defense a basic assumption on which the contract was made? In other words, were the events that occurred the type of risk that the parties did not intend to allocate -- explicitly or implicitly -- via the contract? See Chase Precast Corp., 409 Mass. at 375-376. See also Restatement (Second) of Contracts § 261 comment b (1981) ("this criterion [whether event was basic assumption] is sufficiently flexible to take account of factors that bear on a just allocation of risk").
1. Was performance of the P&S impracticable? Massachusetts recognizes the defense of impracticability not only where a contract becomes literally impossible to perform, but also where a change in circumstances drastically increases the difficulty of performance. See Mishara Constr. Co. v. Transit-Mixed Concrete Corp., 365 Mass. 122, 128 (1974). Such impracticability excuses a party's performance for so long as it remains impracticable for him to perform despite his reasonable efforts to overcome obstacles to performance. See Fauci v. Denehy, 332 Mass. 691, 696-697 (1955) (recognizing doctrine of temporary impracticability). See also Center Garment Co. v. United Refrigerator Co., 369 Mass. 633, 637 (1976) (party relying on impracticability defense must make best effort to perform contract).
Here, we conclude that Laura Martorella's illness could have rendered compliance with an April 6, 2020 closing date impracticable. The plaintiff's need to quarantine, his obligations to care for his children, and his understandable concern for his gravely ill wife all impeded his ability to travel to the Commonwealth on that date, potentially rendering it impracticable to comply with the provisions in the P&S mandating that the closing occur at Rapp's office in Osterville. The trouble with the plaintiff's position is that his wife's illness excused his performance only for so long as he was prevented from appearing for the closing. By May 18, 2020, when he filed his opposition to Rapp's special motion to dismiss, the plaintiff was no longer required to quarantine, and his wife's condition had improved enough that she was expected to make a full recovery. Despite those changed circumstances, the plaintiff's opposition -- like his verified complaint -- gave no indication that he was then prepared to tender payment for the property or that he would be ready to do so in the near future. To the contrary, the plaintiff's opposition made clear that he was not yet prepared to close because he had not secured financing.
2. Was the plaintiff's ability to obtain financing a basic assumption of the contract? Because the plaintiff relies on his difficulty in obtaining financing to excuse his performance beyond the initial crisis of his wife's illness, we must next consider whether the plaintiff's difficulty in obtaining financing is an event the nonoccurrence of which was a basic assumption on which the P&S was made. Because a fundamental purpose of contracts is to assign risk, the determination as to whether an event's nonoccurrence was a "basic assumption" of a contract depends in large part upon whether the risk of nonoccurrence is one that was explicitly or implicitly allocated via the contract. See Chase Precast Corp., 409 Mass. at 375-376. Thus, we consider the following questions in the circumstances of the parties' contractual relationship:
"Was the contingency which developed one which the parties could reasonably be thought to have foreseen as a real possibility which could affect performance? Was it one of that variety of risks which the parties were tacitly assigning to the promisor by their failure to provide for it explicitly? If it was, performance will be required. If it could not be so considered, performance is excused."
Mishara Constr. Co., 365 Mass. at 129.
Applying these principles, a number of cases have held that breaching parties are not entitled to rely on the impossibility defense where they were, or should have been, aware of a particular risk, and proceeded in the face of that risk without negotiating contract terms that might have protected against the risk. See, e.g., Baetjer v. New England Alcohol Co., 319 Mass. 592, 600-601 (1946) (where war had already been declared before contract for shipment of molasses was signed and there were already disruptions to shipping in Atlantic, defendant assumed risk of shipping disruptions due to war when it failed to include term that provided for anything other than temporary excuse of performance if shipping issues occurred); John Soley & Sons v. Jones, 208 Mass. 561, 566 (1911) (where subcontractor knew that general contract was subject to cancellation by transit commissioners if they became dissatisfied with progress, subcontractor could not rely on cancellation of general contract to create impossibility defense; "[t]he impossibility of the defendants' performance of the plaintiff's contract, if the contingency arose, could have been foreseen and provided for in the instrument"); Karaa, 86 Mass. App. Ct. at 718 (rejecting argument that renters' inability to renew visas needed to remain in United States should excuse residential lease obligations because renters were aware of risk of change in visa status when they executed lease).
Here, the plaintiff argues that the risk of a global pandemic was outside the scope of the parties' contemplation at the time the P&S was assigned, and that it thus is inequitable to place the risk of such a calamity on the plaintiff. The flaw in the plaintiff's argument, however, is that his real complaint is not that there was a global pandemic, but rather, that he was unable to obtain financing. And the question, for impracticability purposes, is whether under the contract the plaintiff assumed the financing risk. The answer to that question is yes. Prospective purchasers, as parties to a real estate contract, generally assume the risk that they will be unable to obtain financing unless they guard against that risk by bargaining for a financing contingency clause. See Christian v. Edelin, 65 Mass. App. Ct. 776, 779 (2006) ("An offer containing a mortgage contingency is not the same as a cash offer because the former is conditioned on the offering party obtaining adequate financing while the latter is unequivocal"). See also Alfeo v. Dinsmore, 68 Mass. App. Ct. 249, 253 (2007) ("Our decisions remind us that it is the buyer who is the usual proponent and primary beneficiary of a mortgage contingency clause, which serves as a safety valve when she is unable to obtain financing").
Here, the P&S contains neither a financing contingency clause, nor any indication that the plaintiff was dependent upon his wife to obtain financing. In other words, the plaintiff chose not to protect against a risk that is generally considered foreseeable and can be readily guarded against through appropriate provisions in a P&S. We will not rewrite the parties' agreement to add a provision they chose not to include. See Robbins v. Krock, 73 Mass. App. Ct. 134, 139 (2008), quoting Rogaris v. Albert, 431 Mass. 833, 835 (2000) ("It is not the role of the court to alter the parties' agreement"). See also Mount Vernon Fire Ins. Co. v. VisionAid, Inc., 477 Mass. 343, 351 (2017) (declining to "read [into insurance policy] a number of provisions that the parties did not include").
Moreover, while the plaintiff may have always intended to finance the purchase of the property through a mortgage in his wife's name, there is no suggestion that the plaintiff ever informed Rapp of that plan. The undisclosed desires of one party to the P&S are not a "basic assumption" of both parties at the time of contracting. Accordingly, neither the plaintiff's ability to obtain financing, nor his wife's ability to serve as a borrower for any loan, were basic assumptions on which the P&S was made. For that reason, the allegations in the plaintiff's pleadings and affidavits do not support a finding that performance of the P&S remained impracticable once Laura Martorella's condition began to improve and the plaintiff was no longer required to quarantine. Because the plaintiff was not prepared to tender performance after the impossibility had ceased, the doctrine of impossibility did not excuse his continued failure to perform under the P&S in late May 2020. See Fauci, 332 Mass. at 696-697. It follows that the judge did not err in dismissing his claims.
3. Attorney's fees. The plaintiff argues that the award of attorney's fees and costs incurred in the Land Court should be vacated because his amended complaint should not have been dismissed and because Rapp acted unreasonably in refusing to extend the P&S's closing date by more than three weeks. Because we affirm the dismissal of the amended complaint, we find no error in the decision to award fees and costs.
Having successfully defended the judgment on appeal, the defendants have requested and are entitled to an award of reasonable appellate attorney's fees and costs. See DeCicco v. 180 Grant St., LLC, 484 Mass. 1037, 1038 (2020). Accordingly, the defendants may file an application for appellate attorney's fees and costs within fourteen days of the date of the rescript, in accordance with the procedure set forth in Fabre v. Walton, 441 Mass. 9, 10-11 (2004). The plaintiff shall then have fourteen days within which to respond.
Judgment affirmed.
Jeffrey Stark and Rachel Donaldson.