Sea Breeze Estates, LLC v. Jarema

• Decision Date: 15 October 2018
• Docket Number: No. 17-P-1187,17-P-1187
• Citation: 113 N.E.3d 355
• Parties: SEA BREEZE ESTATES, LLC v. John A. JAREMA, trustee,& another.
• Court: Appeals Court of Massachusetts

113 N.E.3d 355

SEA BREEZE ESTATES, LLC

v.John A. JAREMA, trustee,¹ & another.²

No. 17-P-1187

Appeals Court of Massachusetts, Suffolk..

Argued May 8, 2018

Decided October 15, 2018

Roger S. Davis, Boston, for the plaintiff.

Jennifer L. Markowski (David Traniello also present), Boston, for the defendants.

Present: Sullivan, Neyman, & Englander, JJ.

NEYMAN, J.

In this case, we consider whether a contract was modified by the parties, and whether the defendants are entitled to attorney's fees under a "prevailing party" provision of the contract. The plaintiff, Sea Breeze Estates, LLC (Sea Breeze) brought an action for breach of a purchase and sale contract (contract) in the Superior Court, alleging that the defendants terminated the contract without justification.³ The defendants, John Jarema and Alexander Bove, acting as trustees of the Jarema Family Trust (collectively, the trustees), filed various counterclaims alleging, among other things, that Sea Breeze breached the contract before termination by failing to make required monthly payments. In response to the trustees' motion for summary judgment, Sea Breeze contended that, prior to its cessation of monthly payments, the parties modified the contract and the trustees breached it as modified. A Superior Court judge disagreed and allowed, in part, the trustees' motion for summary judgment. Pursuant to § 18.10 of the contract, the judge also allowed the trustees' motion for attorney's fees and costs as the "prevailing party." We affirm.

Background. 1. The contract. In June of 2004, the parties entered into a contract for the sale of property at 187 Atlantic Street in Gloucester (property). Sea Breeze's goal was to develop a multifamily residential community on the property. Pursuant to § 2.1 of the contract, Sea Breeze agreed to purchase the property for $3,735,000 "presum[ing] and anticipat[ing]" that it would have the "opportunity for development of 44 units," and stipulating that, if it received approval to build more than forty-four units, it would pay the trustees $85,000 for each additional unit. A related provision, § 2.3(k), established that, even if Sea Breeze received approval to build fewer than forty-four units, it still "maintain[ed] the right to elect to purchase the property for the full purchase price."

Section 2.2(b) of the contract required Sea Breeze to pay the trustees $2,000 per month for a period of twenty-four months, "representing the time period anticipated for [Sea Breeze] to obtain the necessary Approvals"⁴ for the project. In the event that Sea Breeze did not obtain the necessary approvals within that allotted "Approval Period," § 2.2(c) authorized an "Extension Period"⁵ during which Sea Breeze could continue to make $2,000 monthly payments as separate consideration to keep the contract in effect. Whereas payments made during the approval period would be credited toward the final purchase price, any "Extension Payments" would not.

Two additional provisions of the contract are relevant to this case. Section 18.2 contains a so-called "merger" or "integration"⁶ clause, which states, inter alia, that the contract "represents the entire understanding of the parties," merges "[a]ll prior negotiations" into the written agreement, and "may only be amended by a writing executed by the parties." Section 18.10, captioned "Counsel Fees," entitles the "prevailing party" to recover reasonable counsel fees and costs stemming from "any litigation regarding the rights and obligations of the parties under this [c]ontract."

2. The extension period and modification proposals. Sea Breeze was unable to obtain the necessary permits and approvals within the twenty-four-month approval period, which ended in June of 2006. However, Sea Breeze continued to make the $2,000 monthly extension payments. On December 3, 2008, Michael Larkin, on behalf of Sea Breeze, wrote a letter to Bove informing him that its engineer had determined "that the property ha[d] a limited development opportunity of thirty-three (33) units," which, at $85,000 per unit, would result in a total purchase price of $2,805,000. The letter concluded by asking Bove to "respond so that this matter can be resolved." The parties communicated without progress over the next three-plus years.

On January 31, 2012, Patrick Larkin, a manager of Sea Breeze and brother of Michael Larkin,⁷ sent an electronic mail message (e-mail) to Jarema stating, "I spoke with you last week regarding your conversation with Atty. Bove. You indicated that we were all on the same page to move forward. When will we have something in writing from Atty. Bove[?]" Jarema responded to Larkin's January 31 e-mail with another e-mail stating, in relevant part, "It should be very shortly as I am scheduled to talk or see him this week." On February 1, 2012, Bove and Jarema discussed the proposed terms contained in Michael's December 3, 2008, letter. The next day, Bove sent a letter to Jarema (the Bove letter) stating that he was "willing to agree to a reduction to a total purchase price of $2,550,000" based upon thirty units at $85,000 per unit, subject to two specified conditions. First, the purchase price would "increase by $85,000 for each additional unit above thirty units." Second, the monthly extension payments would "increase from $2,000 a month to $3,000 a month, effective for the month following signing of the Addendum to the [contract]." On or about February 23, 2012, Jarema provided a copy of the Bove letter to Patrick.⁸ That same day, Patrick sent an e-mail to Jarema in which he stated, in pertinent part, "John, [w]e got your letter from Atty. Bove. ... Can we set up a meeting with all parties to finalize the adden[d]um to the P&S?" No meeting materialized, and in March of 2012, Sea Breeze, through Patrick, sent an e-mail to Jarema proposing four "options" for the trustees to "review to determine the next step forward with the project." None of the options included the terms delineated in the Bove letter. The e-mail concluded with the following sentence: "We are requesting a meeting with all parties so that these may be discussed and an option can be agreed upon by all parties." The parties never agreed upon any option.

3. Cessation of extension payments. In April of 2012, Sea Breeze stopped making monthly extension payments.⁹ On August 7, 2012, Sea Breeze demanded that the trustees sign an amendment to the contract in accordance with the terms of the Bove letter. The trustees declined. On August 16, 2012, Bove advised Sea Breeze in writing that the contract "has been terminated in all respects." On August 28, 2012, Sea Breeze responded to Bove and denied that the contract and the "obligations therein" were "extinct."

4. The litigation. Sea Breeze commenced this action against the trustees in August of 2014, alleging breach of contract, violationof the covenant of good faith and fair dealing, and seeking specific performance and an accounting. The trustees filed counterclaims alleging breach of contract, slander of title, interference with advantageous relations, violation of G. L. c. 93A, violation of the implied covenant of good faith and fair dealing, and seeking a declaratory judgment that the contract was no longer in effect.

Following a hearing on the parties' cross motions for summary judgment, the judge allowed the trustees' motion as to (a) their counterclaims for breach of contract and declaratory judgment, and (b) all of Sea Breeze's claims, but awarded no damages thereon.¹⁰ The judge also allowed Sea Breeze's motion as to the trustees' counterclaims for slander of title and violation of c. 93A.¹¹ Sea Breeze filed a motion for reconsideration, which the judge denied.

Thereafter, the parties filed cross motions for attorney's fees and costs. In a written memorandum and order, the judge awarded the trustees $70,000 in attorney's fees (out of $111,802 they had requested) and $12,126 in costs pursuant to the prevailing party provision at § 18.10 of the contract. Sea Breeze's appeal ensued.

Discussion. Sea Breeze contends that the judge erred in granting the trustees' motion for summary judgment as to the claims and counterclaims related to breach of contract. Specifically, it asserts that (1) the contract was amended as a result of the Bove letter and related communications; (2) even if the parties did not amend the contract in writing, their conduct demonstrated that they had orally agreed to modify the contract; and (3) the trustees breached the contract as modified, and thus were not entitled to summary judgment.

We review a grant of summary judgment de novo to determine whether, viewing the evidence in the light most favorable to the nonmoving party, "all material facts have been established and the moving party is entitled to judgment as a matter of law." Casseus v. Eastern Bus Co., 478 Mass. 786, 792, 89 N.E.3d 1184 (2018) (quotation omitted). "The moving party bears the burden of affirmatively demonstrating the absence of a triable issue." Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547, 550 n.6, 887 N.E.2d 244 (2008). If the moving party carries its burden, "the party opposing the motion must respond and allege specific facts establishing the existence of a genuine issue of material fact." French King Realty Inc. v. Interstate Fire & Cas. Co., 79 Mass. App. Ct. 653, 659-660, 948 N.E.2d 1244 (2011).

We begin by reviewing fundamental principles of contract law relevant to the transaction at issue. "A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty." I & R Mechanical, Inc. v. Hazelton Mfg. Co., 62 Mass. App. Ct. 452, 454, 817 N.E.2d 799 (2004), quoting from Restatement (Second) of Contracts § 1 (1981). "Contract formation requires a bargain in which there is a manifestation of mutual assent to the exchange." I & R Mechanical, Inc., supra at 454-455, 817 N.E.2d 799. This manifestation of mutual assent, otherwise...