Opinion
MICV2013-01909-H
04-24-2014
The Camera Company v. Commonwealth of Massachusetts et al
MEMORANDUM AND ORDER ON DEFENDANT'S AND DEFENDANT-IN-COUNTERCLAIM'S CROSS MOTIONS FOR SUMMARY JUDGMENT
Robert B. Gordon, Justice of the Superior Court.
This case arises out of the Commonwealth of Massachusetts' taking by eminent domain of a certain land owned by Worcester Road Realty Company, LLC (" Worcester Road"). Plaintiff The Camera Company, Inc. (" The Camera Company") is the lessee of the land, a portion of which has been taken by the government, and is seeking in Count III of its Complaint to be granted an apportioned share of the Commonwealth's just compensation award pursuant to G.L.c. 79. Section 24. Worcester Road has moved for summary judgment against this claim, asserting that the parties agreed in their Lease that, in lieu of a statutory apportionment of the just compensation award, The Camera Company's sole recourse in the event of a partial taking was to seek a rent abatement through arbitration. The Camera Company, in turn, has cross moved for summary judgment against Worcester Road's declaratory judgment action in Count II of its Counterclaims, in which Worcester Road seeks a declaration that The Camera Company has no statutory entitlement to any part of the Commonwealth's taking award under G.L.c. 79 because the terms of the parties' Lease impliedly foreclose such a remedy. These cross motions thus present the same substantive legal question, and the undisputed facts relevant to the parties' competing positions render the claims well suited to summary disposition.
FACTUAL BACKGROUND
Worcester Road is the owner of a parcel of property known as 154 Worcester Road (Route 9) in Natick, Massachusetts (the " Property"). The Property is the subject of a long-term ground lease (the " Lease") in which Worcester Road and The Camera Company are Lessor and Lessee, respectively. Originally executed in October 1974, the Lease called for the Lessee to construct at its own expense a commercial building on the Property. That structure, and any improvements thereto, thereby became the property of Worcester Road and would not be removed by The Camera Company at the termination of the Lease. The Lease requires the Lessee to pay rent to the Lessor pursuant to a formula providing for periodic increases during the rental term. The Lease additionally requires the Lessee to pay all taxes and assessments on the Property, to perform necessary maintenance and repairs, and to carry insurance for liability and property damage as well.
The Lease contains in Section 12 provisions that address the consequences of a total or partial taking of the Property by eminent domain. For a total taking, the Lease states:
Should the entire demised premises, together with all the improvements thereon be taken with the power of eminent domain, or proceedings similar thereto, at any time during the term hereof or any subsequent renewal term, this lease shall cease and come to an end as of the date of taking; and rent and taxes shall be prorated as of the date of entry under such taking and any adjustment of moneys due to or from either party to the other shall be paid.
For a partial taking of the Property, the Lease provides as follows:
In the event of a partial taking this lease shall not terminate but Lessee may request that the rent be reduced for the balance of the term (calculated from the date of entry under the taking). Should the parties fail to agree within ninety (90) days after the final determination of the award by adjustment or litigation, the amount of such reduction if any shall be fixed by arbitration in accordance with the statutes and law of the State of Massachusetts in such case made and provided. In determining the amount of such reduction, if any, the arbitrators shall take into consideration, among other elements, the gross and net rental value of the demised premises before and after the taking, and the availability of any remaining land comprising a vacant portion of the demised premises upon which, in the exercise of sound business judgment, additional buildings might be constructed. The cost of arbitration shall be borne by the parties in equal shares.
On October 9, 2012, the Commonwealth of Massachusetts recorded a partial taking of the Property (then being subleased to TD Bank Ameritrade). The portion of the leased premises so taken were the fee to 3, 184 square feet of the Property (not including the building erected thereon), as well as a temporary construction easement over an additional 3, 271 square feet of the Property. In consideration of this taking, and in accordance with G.L.c. 79, Sec. 8A, the Commonwealth made a " pro tanto payment" of $100,715.60 to Worcester Road. Worcester Road and The Camera Company subsequently entered into an escrow agreement, pursuant to which the pro tanto award was deposited into an interest-bearing account pending resolution of the present litigation.
The adequacy of this payment is the subject of separate claims in this action that are not affected by the present cross motions for summary judgment.
In April 2012, TD Bank Ameritrade vacated the Property it was occupying; and, by reason of the taking and the continuing construction easement, The Camera Company was thereafter unable to sublease the remaining portion of the leased premises. Accordingly, on March 20, 2013, The Camera Company wrote to Worcester Road and requested " a total reduction of all rents" on account of " the amount of land being taken permanently and the amount of land being taken for up to five years for construction." Having paid the rent due to Worcester Road through March 2013, The Camera Company suspended further rent payments as of April 2013.Although the parties dispute whether Worcester Road ever responded to The Camera Company's March 20, 2013 requested rent abatement, two related and more material facts are not disputed. First, the parties never agreed to a financial resolution regarding the effect of the Commonwealth's partial taking of the Property by eminent domain. And second, The Camera Company never demanded arbitration (per Section 12 of the Lease) in connection with the rent reduction to which Worcester Road did not assent.
DISCUSSION
Presented for decision is the question of whether the Commonwealth's partial taking of the Property in this case entitles The Camera Company to a share of the pro tanto compensation award made by the Commonwealth in consideration thereof. The Camera Company maintains in its Complaint that the terms of G.L.c. 79, Sec. 24 dictate that it receive an apportioned share of this award. Worcester Road counters that, the parties having provided for an arbitrable rent abatement as the remedy for an eminent domain taking under the terms of their Lease, Chapter 79 rights to an apportioned share of the Commonwealth's just compensation award must be deemed waived. Chapter 79, Section 24 undeniably codifies the constitutional principle that, if a leasehold interest is diminished in whole or in part by a government taking of the leased property through eminent domain, the affected tenant is entitled to a share of the property owner's resulting compensation from the government. See Mills v. Samuels , 230 Mass. 1, 3, 118 N.E. 861 (1918). See also Silberman v. United States , 131 F.2d 715, 717 (1st Cir. 1942) (lessee has right to just compensation for damage to leasehold interest). It is equally undeniable, however, that parties to a lease may by agreement prescribe the financial consequences of a taking, and allocate such consequences among themselves outside of the operations of Chapter 79. If so intended , such an arrangement would at once fulfill the core aspirations of Chapter 79 ( viz. , just compensation for all parties with a property interest adversely affected by a taking), and at the same time obviate the need for litigation under the statute by providing for a private liquidated remedy that would by implication be deemed exclusive. See, e.g., Proprietors of Locks & Canals v. Commonwealth , 341 Mass. 631, 635, 171 N.E.2d 146 (1965) (when parties have modified terms of lease to apply in event of taking, court is called upon to construe lease as the vehicle for providing remedy to affected tenant: the court's concern is " not what might have been recovered by [the lessee] under c. 79 apart from the modifying contract contained in the lease"). The fundamental issue to be resolved in this case, therefore, is whether, as a matter of law, the Lease must be deemed to reflect an intention to make rent abatement (the amount of which to be determined in arbitration if the parties cannot agree on same) the exclusive compensatory remedy for a partial taking that impairs the Lessee's tenancy. Construing this instrument according to conventional tenets of contract interpretation, the Court concludes that it must. In Section 12 of their Lease, the parties provided that, in the event of a partial taking of the Property, The Camera Company would have the right to seek a rent reduction through arbitration. Such a rent reduction would obviously compensate this lessee for the diminished value of its continuing tenancy, consistent with the objectives of Chapter 79. The Camera Company, however, emphasizes that the Lease contains no provisions explicitly waiving the rights conferred by Chapter 79; nor does Section 12 state in terms that its rent reduction remedy constitutes the exclusive recourse availing to the Lessee in the event of a partial taking. These points are noted, but are ultimately not dispositive in the present case. The parties plainly intended something in Section 12 of their Lease, and the most natural construction of this provision is that it was meant to define the compensation The Camera Company would receive in the event of a partial taking of the Property that diminished its leasehold. This inference certainly follows from the expressio unis principle, by which parties to a contract who explicitly provide for one remedy may be deemed to have excluded others that are not so provided for in their agreement. Although the Court recognizes that this inference is not compulsory, see Finkelstein v. Sneierson , 273 Mass. 424, 173 N.E. 703 (1930), in the present case it is the only reasonable way to divine the parties' intent. See, e.g., Ianelle v. Fire Commissioner of Boston , 331 Mass. 250, 252-53, 118 N.E.2d 757 (1954) (observing that the maxim of " expressio unius est exclusio alterius" . . . is " an aid in [contract] construction where other clearer indications are lacking"). To accept The Camera Company's contrary argument, the Court would need to conclude that Section 12 was included in the Lease with the intent of providing the Lessee affected by a taking with both a contractual remedy (rent reduction) and a statutory remedy (compensation under Chapter 79). Such an intention seems implausible. After all, a commercial tenant affected by a partial taking that sees its rent correspondingly abated has, in effect, been provided with fair compensation for its loss--namely, the financial cost of paying rent for a lesser tenancy than the one to which it agreed. Allowing this lessee to seek statutory compensation for this same commercial loss would render the rent reduction terms of Section 12 unnecessary and superfluous, a construction of the contract disfavored at law. See, e.g., Lexington Ins. Co. v. All Regions Chem Labs, inc. , 419 Mass. 712, 713, 647 N.E.2d 399 (1995); Starr v. Fordham , 420 Mass. 178, 190, 648 N.E.2d 1261 (1995). At the same time, interpreting the Lease as affording the Lessee both the right to reduce its rent to the Lessor and to share in its compensation award under Chapter 79 plainly invites double-recovery for the same pecuniary injury. This, too, represents a kind of lease construction typically abjured by our courts. See, e.g., Frost v. Porter Leasing Corp. , 386 Mass. 425, 428, 436 N.E.2d 387 (1982) (contracts should be interpreted to avoid " unwarranted windfall" and " [d]uplicative recovery").
The same holds true in the context of a total taking, where the termination of the Lease and the resulting forgiveness of the rent otherwise due there under holds the Lessee financially harmless from the consequences of the taking by restoring it to the position it would have occupied had the Property not been rented at all.
The Court discerns no failure in fairness or common sense, and no undeserved windfall, in allowing Worcester Road to retain the Commonwealth's compensation award in its entirety. After all, Worcester Road has already agreed to permit The Camera Company to abate its rent in consideration of the partial taking. This diminution in rental revenue represents a financial loss from the taking for which compensation to the Lessor is properly due. Indeed, allowing the Lessee to share in the Commonwealth's pro tanto payment would necessarily deprive Worcester Road of a portion of its make-whole remedy, as lost rent from The Camera Company represents a material component of the Lessor's loss. By the same token, the fact that, in a partial taking, the Lessee remains obligated to pay taxes and assessments on the Property does not render the remedy afforded by rent abatement inadequate. Plaintiff argues this point repeatedly. Section 3(b) of the Lease, however, by its terms, requires the Lessee " to pay . . . when due . . . all real estate taxes [and] assessments . . . accruing from the ownership or operation of the demised premises . . ." To the extent that the Lessor's ownership of the Property, or the Lessee's operation of it, is diminished by reason of a partial government taking, the taxes and assessments " due" from such ownership or operation will correspondingly reduce. There is no resulting unfairness.
That the parties did not intend for The Camera Company to be able to seek both a rent reduction and an apportioned share of Worcester Road's taking compensation from the Commonwealth is further suggested in the language requiring the parties to commit their rent-related dispute to arbitration " within ninety (90) days after the final determination of the award by adjustment or litigation [under Chapter 79] . . ." This sequencing of The Camera Company's contractual remedy--to follow the Chapter 79 disposition--would make little logical sense if the Lessee had a concurrent right to pursue Chapter 79 remedies of its own. A number of Massachusetts decisions lend support to this reading of the interplay between the remedial provisions of the Lease and the statutory rights conferred by Chapter 79, Section 24. In Newman v. Commonwealth , 336 Mass. 444, 146 N.E.2d 485 (1957), for example, Shell (the lessee) rented a commercial property for its gas station that became subject to a partial taking. The lease in place provided that, if any portion of the rental property were taken by eminent domain, Shell could terminate the lease by giving 90 days' notice and paying $20,000 to the lessor. Shell terminated the lease in accordance with its 90-day notice provision, but nevertheless sought to intervene in the lessor's takings action in order to pursue a Chapter 79 damages remedy. Id. at 444. The SJC rejected this claim, holding that Shell had limited itself to the contractual remedy set forth in its lease. Id.
Although Newman did involve a termination of the subject lease, a point The Camera Company stresses, this fact did not drive the fundamental reasoning of the decision that the Court here embraces. Namely, the terms of the lease, irrespective of whether they entailed a termination of the rental relationship, embodied an election of remedies by the lessee that could not be disregarded through allowance of simultaneous just compensation claims.
The decision in Goodyear Shoe Machinery Co. v. Boston Terminal Co. , 176 Mass. 115, 57 N.E. 214 (1900), reinforces this interpretation. The Goodyear Court held that when a lease provides explicitly that it will terminate upon a total taking of the subject property, such language extinguishes any right the lessee would otherwise have to share in a just compensation award. Inasmuch as a total taking always terminates a lease in the property as a matter of law, the inclusion of such language in the lease itself was held to reflect an intent to foreclose damages sharing in the compensation award. Another other construction would render the language meaningless surplusage. Id. at 116-17. Applying this reasoning to the case at bar produces a similar conclusion--that is, by including a rent abatement remedy in the text of their Lease as the means of mitigating the consequences of a partial taking, the parties intended to foreclose The Camera Company from pursuing just compensation under Chapter 79 for the same predicate loss. The two principal decisions cited by The Camera Company as authority for its contrary position do not persuade the Court. In Universal Container Corp. v. City of Cambridge , 361 Mass. 58, 278 N.E.2d 727 (1972), the Court approved the lessee's right to a just compensation remedy precisely because the lease itself so provided. The lease stated in pertinent part:
If the premises shall be taken for public use, the lease shall terminate at the election of the Lessor, and if he shall not so elect, a just proportion of the rent shall be suspended or abated. Notwithstanding any provision herein to the contrary, the Lessee shall in all events be entitled to damages to its leasehold.Id. at 60 (emphasis added). Relying on this clear language--which finds no parallel in the present case--the SJC held that the lessee " was not limited to recourse against the lessor, but had an independent claim against the city." Id. The case is thus consistent with the position of Worcester Road that the survival of a statutory compensation remedy turns on the parties' language in their lease. When the lease expressly so provides, the statutory claim will avail. When the lease provides only for a contractual rent abatement, that remedy will be deemed exclusive.
Indeed, the parties' inclusion of the " Notwithstanding" clause prior to the text preserving the lessee's right to share in a compensation award (despite the abatement of rent) would appear to reflect a recognition that a lessee who receives a rent reduction has no concurrent right to share in a compensation remedy addressed to the same taking. The clause would, after all, be meaningless and unnecessary unless, absent the language to follow, the lessee would otherwise have no right to a share of the compensation remedy.
In U.S. v. 3. 5 Acres of Land , 57 F.Supp. 548 (D.Mass. 1944), the court likewise confronted a lease whose terms dictated the disposition of a taken property lessee's right to share in a just compensation award. The lease at issue provided that, in the event of a taking, the lease shall terminate at the election of the lessor; " or, if the lessor shall not so elect then a just proportion of the rent herein before reserved . . . shall be suspended or abated until the demised premises or in case of such taking, what remain thereof shall have been put by the lessor in proper condition for use of occupancy." Id. at 548-49. The government took the leased property by eminent domain, and the lessor terminated the lease. When the lessee thereafter sought a share of the just compensation award, the District Court rejected the claim. The court relied upon the principle articulated in Goodyear that termination of a lease following a taking extinguishes the right of a lessee to share in the taking's compensation award, and did not even address the effect of an alternately applicable rent abatement provision that never came into play because the lease was in fact terminated. Id. at 549. In either event, however, the implication of the decision appears to be that, whether a taking is partial or total, the corresponding forgiveness of the lessee's obligation to pay all or a portion of the otherwise due rent represents the full measure of its remedial rights. It is difficult to see how the court's decision in 3.5 Acres of Land supports the position advanced by The Camera Company in this case. As a final point, the Court is struck by the curious result that comes to pass from The Camera Company's insistence that Chapter 79 damages remain available to an affected tenant in the context of a partial taking where the lease has already provided a rent abatement remedy. If that were the case, then tenants affected by a partial taking would enjoy substantially greater rights than tenants affected by a total taking. They would receive what the Court regards as a second recovery, whereas tenants who experience a total taking would receive nothing. To construe a single lease instrument as providing for such dramatically disparate results is counter-intuitive. The Camera Company argues in response that this result follows from the fact that, in a total taking, the parties' lease terminates as a matter of law; whereas, in a partial taking, the lease continues. The logic of this argument, however, eludes the Court. In a total taking, the tenant is left with nothing to lease, and accordingly sees its rent abated altogether. By the same token, in a partial taking, the tenant is left with a portion of the property that it continues to lease, and on this basis receives a proportional reduction in its rent. In either instance, rent abatement represents the lessee's exclusive remedy under the lease; and the fact that the lease has terminated in one but not the other is relevant only to the degree of rent abatement that will avail to the tenant. The notion that a total taking will yield the affected tenant no remedy beyond the abatement of rent, while a partial taking provides the same tenant with both rent abatement and statutory damages under Chapter 79, has no logical appeal--especially in light of the fact that a tenant impacted by a total taking has, by definition, suffered the more serious harm at the hands of the government. The Court is not prepared to embrace so illogical a construction of the lease or the law.
CONCLUSION AND ORDER
In accordance with the foregoing discussion, The Camera Company's exclusive remedy for the partial taking of the Property at the center of its Complaint arises under the rent abatement provisions of Section 12 of the Lease. Summary judgment will, therefore, be ALLOWED in favor of Worcester Road as to Count III of the Complaint, and will be DENIED as to Count II of The Camera Company's Counterclaims. SO ORDERED.