Bradston Associates v. County Sheriff's

• Citation: 452 Mass. 275,892 N.E.2d 732
• Decision Date: 26 August 2008
• Docket Number: SJC-10139.
• Court: United States State Supreme Judicial Court of Massachusetts
• Parties: BRADSTON ASSOCIATES, LLC v. COUNTY SHERIFF'S DEPARTMENT & another.<SMALL><SUP>1</SUP></SMALL>

892 N.E.2d 732

452 Mass. 275

BRADSTON ASSOCIATES, LLC v. COUNTY SHERIFF'S DEPARTMENT & another.¹

SJC-10139.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued May 5, 2008.

Decided August 26, 2008.

Christopher E. Mullady, Boston (Jeffrey S. Raphaelson with him) for the plaintiff.

Theodore J. Folkman, Boston, for the defendants.

Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, CORDY, & BOTSFORD, JJ.

CORDY, J.

On further appellate review, we must decide whether the failure of the auditor of the city of Boston to certify that an adequate appropriation was available to fund a lease contract entered into between Bradston Associates, LLC (Bradston), and the sheriff of Suffolk County, which was in all other respects properly executed and funded, is a sufficient ground on which to invalidate the contract. We conclude that it is not and set aside summary judgment that was entered for the sheriff.

Facts. From the summary judgment record, we glean the following undisputed facts. On August 13, 2001, after a public bidding process, the sheriff entered an agreement to lease office space (lease) from Bradston. The lease required Bradston to make improvements to the premises prior to occupancy. Those improvements were to be completed within six months of "the signing of this Lease." Bradston was to be paid $325,000 for the improvements and monthly lease payments were to begin thereafter. The lease also provided that it would "become[ ] effective only upon execution and delivery thereof by Landlord and Tenant, and upon execution of the City of Boston Standard Contract," to which the lease was to be attached.²

On August 16, 2001, shortly after the lease was signed, the then sheriff sent a written request to the mayor of Boston, along with a copy of the lease, seeking his approval as required by law. St.1998, c. 262, § 1 (c. 262).³ The sheriff also prepared a standard contract for the lease agreement. On the contract form, the total multi-year cost of the lease was listed as $6,838,580, and the source of the funding was identified as the State "grant-in-aid" provided annually to the sheriff for operations. In this case, the grant-in-aid funds identified were for fiscal year 2002.⁴ Those funds were earmarked for the sheriff in a line item of the fiscal year 2002 State budget.

The standard contract form was sent by the sheriff to Bradston for signature. Bradston signed and returned it on August 23, 2001. The sheriff then forwarded it to the auditor for preliminary review in anticipation of review and approval by the mayor, and a final award by the sheriff as the contracting authority. A senior accountant in the auditor's office reviewed the contract to confirm that there was "budget authority" for the lease, and that funds would be available through the identified source (sheriff's grant-in-aid appropriation). Having confirmed these facts, she initialed the standard contract and forwarded it on to the auditor for her signature. She signed the contract on September 20, 2001. Her signature, "[a]pproved [the contract] as to the availability of appropriation ... in the amount of $0.00." Approvals "in the amount of $0.00," were routinely done by the auditor to expedite the contracting process by enabling the contract to move to the next round of required approvals by the parties and the mayor.

Passage of the fiscal year 2002 State budget was delayed, as was the completion of the contract approval process. The budget was approved on December 1, 2001. The amount of the grant-in-aid appropriated for the sheriff in the budget was a "minimum" of $75.6 million. There is no dispute that this appropriation was sufficient and available to fund the first year of the contract. See note 4, supra. Three days later, on December 4, 2001, the mayor affixed his written approval to the sheriff's letter of August 16, 2001, requesting permission to award the lease to Bradston. Having secured the appropriation, the mayor's written approval of the lease, and the preliminary certification from the city auditor, the sheriff, through her chief financial officer signed the contract on December 12, 2001, as the "awarding authority/official." A copy of the contract was then sent to Bradston, and the original was sent back to the city auditor for final approval.

The same senior accountant in the auditor's office who conducted the preliminary review then finished processing the contract in accord with the standard procedures of the auditor's office. She confirmed that all of the required signatures had been obtained, and that the appropriation source had been sufficiently identified. On January 2, 2002, as she was authorized to do, she stamped the contract, "EXECUTED," and affixed her signature. At that point, the contract became a "formal document of the city," was kept on record as an "approved" contract, and was so recorded in the city's computer software system.

In the final processing of the contract through the auditor's office, the auditor did not change her certification from the "$0.00" amount, to the approved and funded contract amount.⁵ The sheriff and Bradston, however, understood that the contract had been approved and proceeded accordingly. Financing for the required improvements had been obtained by Bradston and work on the improvements was in progress, subject to the sheriff's direction and oversight.

On February 13, 2002, the new sheriff announced cuts to her operating budget. On February 14, 2002, the sheriff sent a notice of termination of the contract to Bradston. As grounds therefor, the sheriff contended that Bradston had violated the terms of the lease when it failed to complete the "required construction" by February 13, 2002, more than six months after the lease had been signed on August 13, 2001. Bradston responded by initiating this law suit for breach of contract, essentially contending that the lease contemplated that the six-month period was to begin when the lease became effective, which it claims was on December 12, 2001 (when the sheriff's chief financial officer signed the lease, after the appropriation had become available and the mayor had approved the award).

A judge in the Superior Court granted the sheriff's motion to dismiss, concluding that the lease was not ambiguous on this point and its termination by the sheriff was valid when the improvements were not completed in six months. In an unpublished memorandum and order pursuant to its rule 1:28, the Appeals Court reversed, concluding that the date of the "signing" intended to trigger the six-month period in the lease was uncertain in light of the various approval requirements of c. 262, including the written approval of the mayor and certification by the city auditor that an appropriation is available to fund it. Bradston Assocs. v. Cabral, 61 Mass.App.Ct. 1116, 811 N.E.2d 524 (2004). The court further ruled that "extrinsic evidence of the circumstances leading to the execution of [the lease] may be considered in resolving" this uncertainty. Consequently, it concluded that "dismissal of the complaint was premature" and remanded the matter to the Superior Court.

Following remand, discovery was taken, and the sheriff sought summary judgment, this time on the ground that the lease had not been executed because the city auditor had not properly certified that an "appropriation is available" to fund it (or cited "the statute under the authority of which the contract [was] being executed without an appropriation") as required by c. 262. The judge granted the sheriff's motion on that ground, and the Appeals Court affirmed. Bradston Assocs. v. Cabral, 70 Mass.App.Ct. 822, 877 N.E.2d 638 (2007).

Because we conclude that the contract was validly executed and binding on the parties, we reverse, order summary judgment be entered for Bradston on the question of the validity of the contract, and remand the case for further proceedings with respect to the parties' intention regarding the date when the six-month period for the completion of the improvements was to commence.

Discussion. We have stated generally that "[p]ersons dealing with a municipality must take notice of limitations ... upon the contracting power of the municipality and are bound by them and cannot recover upon contracts attempted to be made in violation of them." Marlborough v. Cybulski, Ohnemus & Assocs., 370 Mass. 157, 160, 346 N.E.2d 716 (1976), quoting Duff v. Southbridge, 325 Mass. 224, 228, 90 N.E.2d 12 (1950); Lawrence v. Falzarano, 380 Mass. 18, 24, 402 N.E.2d 1017 (1980) (Lawrence); Adalian Bros. v. Boston, 323 Mass. 629, 631, 84 N.E.2d 35 (1949). However, when a contract is entered into by a proper official, and supported by budgetary authority, the government is bound like any other contracting party. Cf. Cherokee Nation of Okla. v. Leavitt, 543 U.S. 631, 637, 642, 125 S.Ct. 1172, 161 L.Ed.2d 66 (2005) (where Congress appropriated sufficient unrestricted funds for contract, government could not, on grounds of "insufficient appropriations," avoid contractual promise).

In Lawrence, supra at 25, 402 N.E.2d 1017, we explained that, although strict compliance with a statute concerning municipal contracts is preferable, it is not required in all circumstances, and should not be required when it would frustrate the statute's purpose. In that case, we were interpreting G.L. c. 44, § 31C, regarding the award of municipal construction contracts. Its wording is similar to that of c. 262, with respect to the function of the auditor, that is, such contracts are not "deemed to have been made" until the auditor "has certified that an appropriation in the amount of such contract is available therefor." The facts in Lawrence are also similar to the case here. A contract for the renovation of a hospital was executed without the requisite auditor's certification of an available appropriation. It was nonetheless executed by the appropriate city officials, and the city council appropriated...