H1 Lincoln, Inc. v. S. Wash. St., LLC

• Citation: 179 N.E.3d 545
• Decision Date: 24 January 2022
• Docket Number: SJC-13088
• Parties: H1 LINCOLN, INC. v. SOUTH WASHINGTON STREET, LLC, & others.
• Court: United States State Supreme Judicial Court of Massachusetts

179 N.E.3d 545

H1 LINCOLN, INC.¹

v.SOUTH WASHINGTON STREET, LLC, & others.²

SJC-13088

Supreme Judicial Court of Massachusetts, Hampden.

Argued October 4, 2021.

Decided January 24, 2022.

The following submitted briefs for amici curiae:

Robert J. Cordy (Annabel Rodriguez also present) Boston, for the defendants.

John J. Egan (Michael G. McDonough also present) Springfield, for the plaintiff.

Daniel A. Ford, for Retailers Association of Massachusetts, Inc.

Michael C. Gilleran, Boston, for National Retail Tenants Association.

David J. Hatem & Patricia B. Gary, Boston, for American Council of Engineering Companies of Massachusetts & another.

Present: Budd, C.J., Gaziano, Lowy, Cypher, Kafker, Wendlandt, & Georges, JJ.

KAFKER, J.

The primary issue presented in this case is the enforceability of contractual provisions limiting liability for violations of G. L. c. 93A, § 11, which makes "unfair or deceptive act[s] or practice[s]" between businesses unlawful. We conclude that limitation of liability provisions will not be enforced to protect defendants who willfully or knowingly engage in the unfair or deceptive conduct prohibited by the statute.

The case concerns a bitter and protracted dispute over a commercial lease. The plaintiff, H1 Lincoln, Inc., doing business as Majestic Honda (Majestic), is a car dealership whose principal is James Balise. The defendants are various entities connected with Alfredo Dos Anjos -- specifically, two LLCs of which he is the principal, South Washington Street, LLC, and 849 South Washington Street, LLC (collectively, Dos Anjos LLCs or LLCs); and four realty trusts of which he is the trustee, 849 South Washington Street Realty Trust, 855 South Washington Street Realty Trust, 865 South Washington Street Realty Trust, and Cooper Avenue Realty Trust (collectively, Dos Anjos realty trusts). Majestic agreed to rent the property at issue from the Dos Anjos LLCs, with plans to develop and operate an automobile dealership facility there.

When the Dos Anjos LLCs sought to terminate the lease, Majestic commenced this action against them in the Superior Court, alleging unfair and deceptive conduct in violation of G. L. c. 93A, § 11, among other claims. Following a jury-waived trial, the judge found for Majestic on its c. 93A, § 11, claim and granted specific performance coupled with delay damages. Because the judge also found that the Dos Anjos LLCs’ violations of the statute were "willful or knowing," he doubled the damages. After Majestic encountered further obstructive behavior from the defendants in its efforts to enforce the lease agreement, it moved for additional damages, alleging renewed violations of G. L. c. 93A, § 11. The judge reopened the trial, where Majestic again prevailed and was awarded additional delay damages, which the trial judge again doubled for "willful or knowing" violations.

The defendants make two central contentions on appeal. First, they argue that in both the initial trial and the reopened trial, the trial judge erred in finding for Majestic on its c. 93A, § 11, claims, because at no time was the conduct of the defendant entities sufficient, as a matter of law, to violate the statute. Second, the defendants maintain that even if their conduct was unlawful under G. L. c. 93A, § 11, Majestic is barred from recovering delay damages because, under a limitation of liability provision in the lease, it waived its claims to be compensated "for any speculative or consequential damages."

We conclude that the defendants’ conduct -- which included fraudulent misrepresentations and pretextual contractual objections designed to string along the plaintiffs and coerce additional concessions to which the defendants were not entitled under the lease -- meets the standard for unfair or deceptive acts or practices under G. L. c. 93A, § 11. Furthermore, the unfair or deceptive conduct was done willfully, warranting the double damages awarded by the trial judge. Finally, we conclude that a limitation of liability provision provides no protection in a c. 93A, § 11, action where, as here, the violation of the statute was done willfully or knowingly.³

Background. 1. The lease agreement. On October 28, 2016, Majestic and the Dos Anjos LLCs executed a written lease by which Majestic agreed to rent two adjacent parcels at 849 and 865 South Washington Street, North Attleborough (leased premises), for an initial twenty-three year term. Near the leased premises sits another parcel owned by Dos Anjos that he leases to CarMax, a used car dealership. South Washington Street is a desirable location to situate a car dealership; indeed, it is dubbed "Auto Road" in reference to the numerous car dealerships located in the vicinity. The leased premises are zoned for the development and operation of new and used automobile dealerships.

In addition to naming the Dos Anjos LLCs as the landlords, the lease also represented that the LLCs had a "fee simple interest" in the leased premises and specifically covenanted and warranted that "no third party," other than governmental authorities, had legal rights to control the use and development of the leased premises. The lease further provided that if the LLCs’ representations, covenants, and warranties were untrue or incorrect, Majestic was entitled to remedies "at law, in equity, or under the terms of [the] Lease."

Majestic's plan for the leased premises, as expressly recognized in the lease, was to demolish the two buildings on the premises and replace them with a Honda dealership facility. The lease also provided that during an initial feasibility period, Majestic was to give the Dos Anjos LLCs notice of any planned demolition and new construction, including preliminary site plans of the proposed development. The LLCs then had the right, within fifteen days after receiving such notice, to terminate the lease if they "reasonably" objected to the planned development. However, if the LLCs did not send a written termination notice within this fifteen-day period, then their right to terminate the lease would be deemed waived.

With respect to the permitting process for Majestic's planned development, the lease provided that the Dos Anjos LLCs was obliged to "cooperate" with Majestic in obtaining any governmental permits and authorizations required to modify the leased premises for its planned uses, although any applications for zoning changes or special use permits required the LLCs’ consent. The lease further provided, however, that this consent "shall not be unreasonably withheld."

The lease included terms specifying the scope of Majestic's remedies upon default by the Dos Anjos LLCs. If the LLCs "fail[ed] to perform any nonmonetary obligation," Majestic could pursue "any and all other remedies which it may have at law and/or in equity," including "su[ing] for damages." Crucially, however, the lease also contained a limitation of liability provision that immunized the LLCs from "any speculative or consequential damages caused by the Landlord's failure to perform its obligations under [the] Lease."

2. Balise's purchase of an adjacent parcel from the Cash family. Abutting the leased premises is a parcel that was owned by the Cash family (Cash land) at the time that the lease was executed. Dos Anjos had been trying to buy the Cash land for fifteen years. In late 2016 and early 2017, both Dos Anjos and Balise negotiated with the Cash family to buy the Cash land, each separately making $800,000 offers. The Cash family accepted Balise's offer in January 2017, thus upsetting Dos Anjos's long-held design to acquire the Cash land.

3. Majestic's initial discovery of the ownership discrepancy. After the lease was executed, Majestic began the permit application process. As part of this process, it was discovered in 2016 or 2017, through a title search, that there was a discrepancy between the entities listed as landlords in the lease and the record title holders of the leased premises; while the Dos Anjos LLCs were represented in the lease as the landlords and fee simple owners of the leased premises, record title was with the Dos Anjos realty trusts. Based on Balise's experience in car dealership development, he viewed this discrepancy at the time as an issue that could be subsequently worked out as a matter of legal "clean up."

4. Majestic's site plan and Dos Anjos's decision to terminate the lease. In May 2017, Majestic submitted a concept site plan to the Dos Anjos LLCs, which indicated its intentions to demolish one of the existing buildings on the leased premises and replace it with a new building, and to renovate the other existing building. The site plan also showed an intended use of the Cash land as a facility where inventory and display vehicles would be parked. The trial judge determined that, upon reviewing this site plan, Dos Anjos became aware that Balise had acquired the Cash land.⁴

After receiving notice of Majestic's plans for demolition and construction, the Dos Anjos LLCs did not express any objection or intent to terminate the lease within fifteen days. The LLCs therefore waived their right to terminate the lease based on objections to proposed demolition or construction on the leased premises. Indeed, Dos Anjos was unresponsive to the many attempts by Balise to contact him to discuss the May 2017 site plan.

On July 25, 2017, Majestic resubmitted the site plan, accompanied by a suggestion that Dos Anjos and Balise meet to conduct a site walk and to discuss the resubmitted site plan. Dos Anjos did not respond, despite repeated suggestions by his lawyer, David Manoogian, that a site walk would be beneficial.

On July 28, 2017, Dos Anjos began to express misgivings to Manoogian about Majestic's site plan, citing as his reason concerns about having two buildings on the leased premises. Manoogian advised that this objection would not be a sufficient reason to reject the site plan, because the lease expressly recognized Majestic's intention to demolish and replace the two...