Hastings Associates, Inc. v. Local 369 Bldg. Fund, Inc.

• Decision Date: 03 April 1997
• Docket Number: No. 94-P-219,94-P-219
• Citation: 42 Mass.App.Ct. 162,675 N.E.2d 403
• Parties: HASTINGS ASSOCIATES, INC. v. LOCAL 369 BUILDING FUND, INC.
• Court: Appeals Court of Massachusetts

Page 403

675 N.E.2d 403

42 Mass.App.Ct. 162

HASTINGS ASSOCIATES, INC. v. LOCAL 369 BUILDING FUND, INC.

No. 94-P-219.

Appeals Court of Massachusetts,

Norfolk.

Argued Oct. 11, 1995.

Decided Jan. 31, 1997.

Further Appellate Review Denied

April 3, 1997.

Evelyn V. Henry, Braintree, for plaintiff.

Evan T. Lawson, Boston, for defendant.

Before BROWN, GREENBERG and FLANNERY, JJ.

FLANNERY, Judge.

The plaintiff brought this action against the defendant by complaint alleging breach of a lease agreement (count II) and a violation of G.L. c. 93A, §§ 2 and 11 (count VIII). ¹ In answer to special questions, a Superior Court jury found, among other things, that the plaintiff performed its obligations under the lease agreement, that the defendant repudiated its obligations thereunder, and that the plaintiff sustained damages of $175,000. Having reserved the c. 93A claim, the trial judge made findings for the defendant. Subsequently, the judge allowed the defendant's motion for judgment notwithstanding the verdict. ² Both parties have appealed. We affirm the judgment notwithstanding the verdict, although not on the grounds relied upon by the judge. See Ezekiel v. Jones Motor Co., 374 Mass. 382, 390, 372 N.E.2d 1281 (1978); Service Publications, Inc. v. Goverman, 396 Mass. 567, 572 487 N.E.2d 520 (1986). ³ We also affirm the judgment on the c. 93A count.

In reviewing the propriety of a judgment notwithstanding the verdict, we consider facts in the record in the light most favorable to the plaintiff and to the verdict which it obtained. See Tobin v. Norwood Country Club, Inc., 422 Mass. 126, 127, 661 N.E.2d 627 (1996). From 1978 to 1982, the defendant operated a function hall business for its union membership under the name of King's Hill, located at 120 Bay State Drive in Braintree (the "premises"). The primary source of revenue for the business was the sale of alcoholic beverages, which was conducted pursuant to a club license which the defendant had obtained pursuant to G.L. c. 138, § 12. ⁴ In 1982, the defendant offered two employees, Janet Donahue, a cocktail waitress, and Edward Hastings, a bartender, the opportunity to take over the business. Pursuant to a preliminary agreement with the defendant in August, 1982, Donahue and Hastings assumed full control of the business on a trial basis, ostensibly operating pursuant to the defendant's club liquor license.

Donahue and Hastings incorporated the plaintiff for the purpose of running the business. In April, 1983, the plaintiff, as lessee, and the defendant, as lessor, entered into a fully negotiated written agreement concerning the premises for a term of seven years, beginning April 1, 1983. Pursuant to the agreement, the rent was $48,000 per year and the plaintiff agreed to pay the defendant five percent of all gross liquor receipts on sales in excess of $200,000 per year. The defendant also agreed to sell to the plaintiff for $70,000 "the trade furnishings and fixtures associated with King's Hill" as set forth in an attached schedule, and the parties agreed that the plaintiff would have exclusive use of the "King's Hill" name. ⁵

The agreement also contained a severability clause and a "renewal provision," as follows:

37. RENEWAL NEGOTIATIONS

Both parties agree to discuss renewal of this Lease at the end of five (5) years. If either party does not intend to renew this Lease, then that party shall give two (2) years written notice of its intention to the other. If the parties decide not to renew the Lease, then at the conclusion of the Lease, the LESSEE will be reimbursed for the enhanced value of King's Hill, including investment and goodwill, based upon a formula acceptable to both parties. If the parties cannot agree on a mutually acceptable formula, then a third party, acceptable to both ... [parties], will determine the formula and enhanced value of King's Hill. That formula will be binding on both parties.[ ⁶

The plaintiff operated the King's Hill business from April, 1983, through December, 1990. ⁷ During that period, the gross sales of the business increased from approximately $200,000 to a high of $640,000 in 1988, ending at $528,000 in 1990. The plaintiff applied for a public liquor license which the town of Braintree denied in June, 1983. The plaintiff's principals were told by the defendant's principal, Donald Wightman, that he had checked with the defendant's attorneys and that the plaintiff could continue to use the defendant's club license, which the plaintiff did. ⁸

In 1988, the parties commenced negotiations for renewal of the lease. These negotiations continued until 1990 and were ultimately unsuccessful. In August, 1990, the plaintiff requested reimbursement of $250,000 under the renewal provision. The defendant did not respond orally or in writing with a counterproposal, in part because Wightman felt that the plaintiff's request was outrageous and because he thought that the lease agreement had lapsed. The defendant did not make a determination in 1990 of the value of the business.

The plaintiff continued to occupy the leased premises and run the business until December, 1990. By letter to the ABCC dated December 17, 1990, counsel for the plaintiff requested that the ABCC schedule a hearing concerning the defendant's club license "to allow ... [the plaintiff] to present serious concerns about the ability of ... [the defendant] to operate under said license given its pattern of alleged deception before the ABCC and with my client." As grounds therefor, plaintiff's counsel referred to the backdating of the management agreement and the defendant's failure to reimburse the plaintiff under the renewal provision. The defendant then gave notice to the plaintiff that the defendant would not renew the lease agreement and that the lease agreement was terminated. This action followed.

At trial, each party offered the testimony of a certified public accountant on the issue of valuation. The plaintiff's expert witness testified that he interpreted "enhanced value of King's Hill, including investment and goodwill," as used in the renewal provision, to mean the value of the business as of December 31, 1990, based upon the plaintiff's total investment and a calculation of goodwill. As the basis for his opinion, the witness included the plaintiff's original investment of $70,000, its additional investment of approximately $44,000 for fixed assets, and a calculation of goodwill of $45,690, concluding that the value of the business was $160,000. The defendant's expert witness focused upon cash flow and earnings (which showed that the plaintiff lost money during each year of its operation), goodwill, and the value of other assets of the business. He gave his opinion that, as of December 31, 1990, the plaintiff's business had no value. In addition to the experts' testimony, the jury heard testimony from one of the plaintiff's principals, elicited by counsel for the defendant on recross-examination, that the plaintiff's business was worth approximately $90,000 more than plaintiff's expert's opinion of $160,000 (i.e., $250,000).

In a charge conference, the judge indicated that he was going to instruct the jury that the term "enhanced value" meant "the value over and above such value as the business had ... [when the] lease commenced." Plaintiff's counsel objected, asserting that "enhanced value" meant "whatever the increased value of the business was," i.e., the total value as enhanced or increased, and stating that she did not want the jury to get the impression that "you have to deduct out what the value was to begin with." The judge overruled the objection, essentially ruling that the agreement was unambiguous. Subsequently, in her closing argument, plaintiff's counsel urged an alternative theory of damages based upon the methodology, including gross sales, which the parties had used in establishing a value of the business prior to the lease. Consistent with the judge's ruling that "enhanced value" meant only the increase in value, plaintiff's counsel argued that the value of the business in 1990 was $250,000, that it had been worth $70,000 in 1982-1983, and thus that the jury could find that the increase in value was $180,000.

In answer to special questions, the jury found that the parties did not intend the management agreement to supersede their obligations under the lease, that the plaintiff performed its obligations under the lease, that the defendant repudiated its obligations under the lease, and that the plaintiff sustained damages of $175,000.

On the c. 93A count, the judge found that the plaintiff's initial payment of $70,000 had not been made for "the business," but rather was solely for specific fixtures and furnishings as set forth in the lease agreement. The judge found that the plaintiff did not run the King's Hill business well, that the plaintiff chronically paid its rent and income and meals taxes late, and that it lost money in each year of the lease. The judge also found that the precipitating event for termination of the renewal negotiations was plaintiff's counsel's letter to the ABCC, and that prior thereto, the plaintiff never called upon the defendant to select a third party to determine the formula for "enhanced value" under the renewal provision. The judge found that the plaintiff's expert witness was not credible, credited the testimony of the defendant's expert witness to the effect that the business was insolvent, and found that the business had no enhanced value. ⁹ Finally, the judge found that nothing that the defendant did rose to the level of a c. 93A violation.

In allowing the defendant's motion for judgment notwithstanding the verdict on the contract count, the judge concluded (1) that the renewal provision was unenforceable as an agreement to agree, (2) that it was too vague to enforce insofar as it called for payment of "enhanced value," (3) that the plaintiff never invoked so much of the renewal...