Kobayashi v. Orion Ventures, Inc.

• Decision Date: 22 May 1997
• Docket Number: No. 95-P-1912,95-P-1912
• Parties: Takaji KOBAYASHI & others, trustees, 1 v. ORION VENTURES, INC. (and a companion case 2 ).
• Court: Appeals Court of Massachusetts

Page 180

678 N.E.2d 180

42 Mass.App.Ct. 492

Takaji KOBAYASHI & others, trustees, ¹ v. ORION VENTURES, INC. (and a companion case ²).

No. 95-P-1912.

Appeals Court of Massachusetts Suffolk.

Argued Dec. 5, 1996.

Decided April 18, 1997.

Further Appellate Review Denied May 22, 1997.

Michael R. Coppock, Boston (David C. Fixler with him), for Takaji Kobayashi & others.

Damian R. LaPlaca, Boston, for Orion Ventures, Inc.

Before PERRETTA, KASS and JACOBS, JJ.

KASS, Justice.

At the center of this case is the interpretation of a noncompetition clause in a lease: "Landlord will not permit the operation of any other delis in the Building during the term of this Lease." That pivotal phrase appeared in the last sentence of § 4 of a commercial lease between the trustees of Shuwa Trust, as landlord, to Orion Ventures, Inc., as tenant, for space to be used by tenant as a restaurant.

If, as counsel for landlord suggested at oral argument, this case is about "what is a deli," a purist ³ would answer that a deli is a purveyor of central European delicacies such as corned beef, pastrami, brisket, chopped liver, lox, herring, whitefish, cream cheese, sour cream, sour pickles, pickled tongue, knockwurst, potato salad, cole slaw, and borscht. Language, however, is a study in evolution, and the menu of the tenant, which initially did business as "O! Deli," offered considerably different attractions: butter croissant, tuna salad sandwiches, "Teriyaki Breast O! Chicken," yogurt, and--by way of saving grace--hot pastrami. The issue, as the O! Deli menu illuminates, is not what, as matter of law, constitutes a deli. Rather, the issue is: what did the parties mean by deli in their noncompetition clause?

A jury decided that the landlord violated the noncompetition clause and assessed damages. The Superior Court judge who presided over the trial ruled that the landlord's violation of the noncompetition clause did not constitute an unfair practice within the meaning of G.L. c. 93A. In a companion summary process case that had been consolidated for trial, the judge awarded judgment of possession to the landlord and assessed damages against the tenant. Both sides have appealed. We affirm the judgments.

These are the facts of the dispute, as the jury might have found them on the evidence most favorable to the plaintiff in each case. Following several months of negotiation, the landlord and tenant on October 28, 1987, executed a lease for 1,120 square feet on the ground floor of 265 Franklin Street in Boston. The tenant described to the landlord the sort of fast-food breakfast and lunch establishment that it proposed to operate, the importance of employees of office tenants in the same building as potential customers, and the need, therefore, for some protection from competitors dishing out similar food. That concern led to the "[no] other delis in the Building" clause.

The tenant opened for business (as O! Deli) in October, 1988. Its breakfast fare ("Morning Starters"), sold between 6 and 11 A.M., offered "Egg O! Muffin," assorted muffins, croissants, bagels, coffee, tea, and a variety of juices. Lunch business was heaviest in sandwiches and beverages. The tenant achieved a net profit of approximately $70,000 in 1989 and $65,000 in 1990. In 1991, a high vacancy rate at 265 Franklin Street and general economic decline combined to take net profits down to $10,000.

Throughout this period, Brandy Pete's, a more formal sit-down restaurant also operated off, and open to, the lobby of 265 Franklin Street. The tenant did not regard Brandy Pete's as competition because it catered to a slow-food patron. In April, 1992, Brandy Pete's subleased a portion of its space to a cart that from 6 A.M. to 3 P.M. sold pastries, muffins, scones, bagels, as well as coffee, gourmet coffees (flavored), espresso, cappuccino, and cafe latte. By mid-1992, tenant began to feel the effect of the cart's--which called itself Caffe Presto--morning competition. ⁴

Starting in March, 1993, Jay White, the principal of the tenant, proposed a variety of rent reductions to compensate for the loss of business that White thought to be caused by the Caffe Presto cart. He also asked the landlord's consent to convert the tenant's operation to a Burger King. The landlord offered no succor; rather, it reminded the tenant on May, 1993, that under the lease the base rent was rising from $4,200 per month to $4,523 per month.

The tenant was first at the bar with a complaint asking for a declaratory judgment (that under the lease it was entitled to protection from the landlord against Caffe Presto); injunctive relief against Caffe Presto; damages for breach of contract (the noncompetition clause); and unfair and deceptive practices within the meaning of G.L. c. 93A, § 11. The landlord counterclaimed that the tenant's complaint was not only manifestly without foundation in law but was an abuse of process, the tenant's ulterior and sole motive for the action being to obtain a decrease in rent under its lease. Some six months after filing its complaint, the tenant stopped paying rent. The landlord responded with a summary process action in Boston Municipal Court. The two matters were consolidated for trial in Superior Court. ⁵

1. The meaning of the noncompetition clause. The landlord's first point on appeal is that the parol evidence rule was a bar to considering testimony from White, who, it will be recalled, was the tenant's principal officer, and from the tenant's lawyer. Both were allowed to testify about what was said in negotiations about the noncompetition clause. According to the landlord the trial judge erred in allowing the jury to consider that testimony. White was allowed to testify that he presented a copy of the O! Deli menu to Ed Daley, who was negotiating for the landlord, that he told Daley he did not want competition for that kind of restaurant business in the building, and that Daley had "understood the intent of what was wanted." The tenant's lawyer testified that Daley agreed to the "concept" of prohibiting any competitor from selling items in the building similar to those sold by the tenant. That testimony was not objected to but, because the parol evidence rule is one of substantive law, Scirpo v. McMillan, 355 Mass. 657, 661, 247 N.E.2d 368 (1969), the landlord is not barred from arguing that prior conversations should not have been considered to vary the terms of an unambiguous, integrated written instrument.

The judge correctly ruled that, notwithstanding an "integration clause" in the lease ⁶ declaring that no prior oral statements were to have any effect, the lease was profoundly ambiguous about the meaning of "[n]o other delis." To that degree the instrument was not fully integrated. Evidence was needed to shed light on what the parties had in mind when they used the term "deli." See New England Fin. Resources, Inc. v. Coulouras, 30 Mass.App.Ct. 140, 146-147, 566 N.E.2d 1136 (1991). The parol evidence rule only bars the introduction of prior or contemporaneous written or oral agreements that contradict, vary, or broaden an integrated writing. Gifford v. Gifford, 354 Mass. 247, 249, 236 N.E.2d 892 (1968). Hogan v. Riemer, 35 Mass.App.Ct. 360, 364-365, 619 N.E.2d 984 (1993). Restatement (Second) of Contracts § 215 (1981). It does not bar extrinsic evidence that elucidates the meaning of an ambiguous contract term. Robert Indus., Inc. v. Spence, 362 Mass. 751, 753-754, 291 N.E.2d 407 (1973). Vezina v. Mahoney & Wright Ins. Agency, Inc., 40 Mass.App.Ct. 218, 223, 662 N.E.2d 721 (1996). Restatement (Second) of Contracts § 214(c) comment b. See also USM Corp. v. Arthur D. Little Sys., Inc., 28 Mass.App.Ct. 108, 116, 546 N.E.2d 888 (1989); Parrish v. Parrish, 30 Mass.App.Ct. 78, 86, 566 N.E.2d 103 (1991).

"Deli" was not defined in the lease; nor was it self-defining. Compare New England Fin. Resources, Inc. v. Coulouras, 30 Mass.App.Ct. at 146-147, 566 N.E.2d 1136, and Vezina v. Mahoney & Wright Ins. Agency, Inc., 40 Mass.App.Ct. at 223, 662 N.E.2d 721, with Ober v. National Cas. Co., 318 Mass. 27, 29-30, 60 N.E.2d 90 (1945), and Jefferson Ins. Co. v. Holyoke, 23 Mass.App.Ct. 472, 474-475, 503 N.E.2d 474 (1987). The tenant, whose lawyer concocted the "[n]o other delis" language, presumably had in mind an establishment that served out food of the sort on the tenant's O! Deli menu, a definition that another person, but not necessarily the landlord, might have thought a degradation of language.

The landlord complains that the evidence received on behalf of the tenant stripped the word "deli" of all meaning; it came to signify selling food in a manner, i.e., over the counter, similar to that purveyed by the tenant. Put another way, the sale of any line of food and drink that competed with the tenant's operation became a "deli." From the tenant's view that is precisely right. The answer to the landlord's protest is that, once parties use a word as chameleonic as "deli," the finder of fact--here the jury--may extract the intended meaning of "deli," for purposes of the document, from the circumstances that led to its use. The object of the inquiry was "to ascertain the meaning intended to be attached to the words by the parties who used them...." Clark v. State St. Trust Co., 270 Mass. 140, 151-152, 169 N.E. 897 (1930). See Hubert v. Melrose-Wakefield Hosp. Assn., 40 Mass.App.Ct. 172, 177, 661 N.E.2d 1347 (1996).

2. Evidentiary exclusions. a. Evidence under the doctrine of verbal completeness. The tenant, without objection from the landlord, placed in evidence several of the landlord's internal memoranda. One was from Yoshio Yamashita, a trustee of the landlord, putting to Stephen Howard, the manager of the 265 Franklin Street building, some questions about the landlord's legal position in connection with the Caffe Presto operation; the other was Howard's two-page, typewritten response to those questions. From those documents the tenant's counsel read...