Whtr Real Estate Ltd. v. Venture Distrib.

• Decision Date: 12 April 2005
• Docket Number: No. 03-P-950.,03-P-950.
• Citation: 825 N.E.2d 105,63 Mass. App. Ct. 229
• Parties: WHTR REAL ESTATE LIMITED PARTNERSHIP<SMALL><SUP>1</SUP></SMALL> v. VENTURE DISTRIBUTING, INC.,<SMALL><SUP>2</SUP></SMALL> & another.<SMALL><SUP>3</SUP></SMALL>
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

825 N.E.2d 105

63 Mass. App. Ct. 229

WHTR REAL ESTATE LIMITED PARTNERSHIP¹ v. VENTURE DISTRIBUTING, INC.,² & another.³

No. 03-P-950.

Appeals Court of Massachusetts, Essex.

Argued October 15, 2004.

Decided April 12, 2005.

COPYRIGHT MATERIAL OMITTED

Richard C. Pedone, Boston (Victor G. Milione with him) for the plaintiff.

Kevin F. Moloney, Boston (Roger T. Manwaring with him) for the defendants.

Present: PERRETTA, DOERFER, & MILLS, JJ.

MILLS, J.

After a jury-waived trial, a Superior Court judge made findings and ruled that the defendant tenant, Venture Distributing, Inc. (the tenant), had breached its commercial lease with the plaintiff landlord, WHTR Real Estate Limited Partnership (the landlord), by failing to pay rent. The judge ordered judgment in favor of the landlord in the amount of $281,669.03, and awarded attorney's fees, in the amount of $140,000, and costs of $7,500 to the landlord. The tenant's two counterclaims, alleging that the landlord had breached the lease by unreasonably withholding consent to a sublease with a potential subtenant and that the landlord had scuttled negotiations between the tenant and potential subtenant, in violation of G.L. c. 93A, were dismissed.⁴ Both parties appeal. The tenant argues that the judge applied an incorrect legal standard in her rulings, improperly struck evidence that had been admitted de bene, and made erroneous subsidiary findings of fact. The landlord claims that the judge abused her discretion by failing to award the full sum of attorney's fees that the landlord had requested. We affirm.

1. Background. The judge made thirty-five paragraphs of careful findings, narrating the six-week course of dealing among the landlord, tenant, and a potential subtenant. The tenant leased commercial space in Woburn (the Woburn space) from the landlord. To cut costs the tenant decided to relocate and hired a broker (Levine) to find a subtenant. Levine contacted USCO Distribution Services, Inc. (USCO), which was seeking to lease new space and, on or about March 15, 1996, sent a letter of intent for a sublease of the Woburn space between the tenant and USCO, "as is." USCO did not accept the tenant's offer; instead, it made a counteroffer, with added conditions, on March 19, 1996.

The tenant did not respond to USCO's March 19, 1996, counteroffer. On March 22, 1996, the tenant's lawyer (Bennett), without addressing the conditions in the counterproposal, prepared a draft sublease and forwarded it to USCO's in-house counsel. That lease was never forwarded to USCO's executive officer (Sauder), who had primary responsibility for finding the needed new space. Also on March 22, 1996, the tenant's executive officer (Gack), without discussing with USCO its counterproposal or the proposed sublease, forwarded a copy of that sublease to the landlord with the notation: "Please examine sublease and sign consent if agreeable. Have you made any progress on 21E study? Please call me if I can be of any help."⁵

Shortly thereafter, the landlord requested that Gack furnish a financial statement on USCO, as well as other information. In response, Gack obtained a Dunn & Bradstreet report, but did not forward it to the landlord until April 12, 1996. Other information requests from the landlord to the tenant went unanswered. Throughout the time that the tenant was negotiating with USCO, USCO was actively negotiating for other space, from a different owner, in Chelmsford (the Chelmsford space). Those negotiations included a rapid and active exchange of multiple documents and drafts.

On March 26, 1996, USCO conducted a "walk-through" of the Woburn space, and thereafter USCO's Sauder prepared a list of seventeen items that "need repair/testing prior to [USCO] signing a lease." The list was sent to the tenant's broker the next day, but the tenant did not receive it until April 11, 1996. USCO and the tenant never reached agreement with respect to the listed items or several other items identified in the documents exchanged between them.

Beginning in early April, the pace of negotiations between USCO and the Chelmsford owner accelerated, and on April 15, 1996, USCO's broker informed USCO's counsel that USCO's counterproposal to the Chelmsford owner had been accepted. On April 29, 1996, USCO entered into a lease for the Chelmsford space.

Other aspects of the negotiations and communications between the landlord and tenant are narrated by the judge in her findings. Responses by the tenant to information and document requests from the landlord with respect to the proposed subtenancy were slow or nonexistent. The tenant was less than diligent in its attention to detail. The tenant never completely addressed the counterproposal items enumerated by USCO to the tenant on March 19, and the sublease prepared by the tenant was done without the necessary consultation with USCO or the landlord, or attention to other items noted by USCO as conditions to a sublease. A sublease proposed by USCO and sent to the landlord on April 17, 1996, contained several unresolved issues.

A sublease was, in any event, never executed between USCO and the tenant, and never presented to the landlord for its consent. The judge found that the tenant, not the landlord, was responsible for the failure of consummation of a sublease agreement between the tenant and USCO, and it is essentially stipulated that the landlord was never presented with a sublease for its approval.

2. The legal standard. The tenant first argues that the judge applied an incorrect legal standard when she ruled that, in the circumstances, the landlord could not be liable on the tenant's complaint unless a fully consummated sublease had been presented for the landlord's consent. The tenant, relying upon Stern's Gallery of Gifts, Inc. v. Corporate Property Investors, Inc., 176 Ga.App. 586, 337 S.E.2d 29 (1985), and Golf Mgmt. Co. v. Evening Tides Waterbeds, Inc., 213 Ill.App.3d 355, 157 Ill.Dec. 536, 572 N.E.2d 1000 (1991), argues that a landlord unreasonably withholds consent to a sublease if, as alleged here, the landlord, through its recalcitrance or interference, causes the failure of sublease negotiations or maintains a "policy" to refuse subleases, even in the absence of a consummated sublease. While the tenant acknowledges that it failed to secure a sublease agreement with USCO, it blames that failure on the landlord and argues that the judge's ruling was incomplete and that the tenant needed only to provide evidence of "a probable future business relationship from which there is a reasonable expectancy of financial benefit." Owen v. Williams, 322 Mass. 356, 362, 77 N.E.2d 318 (1948).

The judge made numerous rulings. Among them was a ruling that a landlord is not in default for failure to consent unless the tenant produces a candidate ready, willing, and able to fulfil the tenant's obligations under the sublease.⁶ The tenant has not persuaded us that the judge ruled in error.

The tenant further argues that the judge's ruling was too narrow, as it "improperly applied a legal standard that accords protection only to negotiations that virtually are complete ... [whereas] ... any negotiation or relationship which is likely to result in an economically beneficial agreement is entitled to protection." We need not determine whether the judge's ruling was too narrow. Any benefit to the tenant from an expanded rule is obviated by the judge's conclusions, amply supported by her findings, that

"[t]here is no evidence that the parties were even close to resolving the terms of the sublease, not to mention agreement that USCO would be bound by all terms of the lease. Nor is there any evidence that USCO and [the tenant] had agreed on the terms of the sublease orally and simply needed to reduce them to writing. [The tenant] argues that `the parties ultimately might have agreed that USCO would be bound to all provisions of the lease' but this matter is left to speculation. There were too many uncertainties and unresolved issues to legally bind either USCO or [the tenant]. It was incumbent on [the tenant] to secure a subtenant ready, willing, and able to perform [the tenant's] obligations under the lease. This it did not do. There never was a legally enforceable agreement between [the tenant] and USCO to which the landlord could consent."

3. Admission of de bene evidence. The tenant argues that the judge's action on the landlord's motion to strike certain testimony by witness Levine was ambiguous and thus created prejudicial error. The tenant's brief sets forth the testimony (most of which was not objected to) and the landlord's single objection to the last of a series of questions. The discussion surrounding the objection includes the judge's comment: "I am taking Mr. Nelson de bene because if he doesn't come in and testify to it, I will take your motion, allow it, and strike it. But he can testify as to what he said to Mr. Nelson at a minimum." The testimony thereafter was innocuous and hardly prejudicial to the tenant.

At the close of the trial in December, 2001, the landlord filed a motion "to strike certain de bene evidence" (emphasis original). The judge endorsed a ruling on this motion in August, 2002, "allow[ing] this motion to the extent that it refers to testimony which did not satisfy the requisite requirements for admissibility."

The tenant complains that it is impossible to know what, if any, portion of Levine's testimony about conversations with other witnesses who testified at trial the judge thought had been admitted de bene; what, if any, portion of the testimony the judge was striking; for what, if any, reasons; and what standards, if any, the judge had applied when rendering her decision. The tenant's complaints are mainly correct. However, even if the testimony of witness Levine had been erroneously considered by the judge as inadmissible, and thus improperly struck, this court reviews the judge's decision to strike evidence for...