Kunelius v. Town of Stow

Decision Date09 November 2009
Docket NumberNo. 08-2393.,08-2393.
Citation588 F.3d 1
PartiesMarilyn KUNELIUS, Plaintiff, Appellant, v. TOWN OF STOW; The Trust for Public Land; Craig A. MacDonnell, in his individual capacity, Defendants, Appellees, A Partnership of Unknown Name Between Town of Stow and the Trust for Public Land, Defendant.
CourtU.S. Court of Appeals — First Circuit

Michael C. McLaughlin for appellant.

Richard A. Oetheimer, with whom Dahlia S. Fetouh and Goodwin Procter LLP, were on brief, for appellees The Trust for Public Land and Craig A. MacDonnell.

Deborah I. Ecker, with whom Deidre Brennan Regan and Brody, Hardoon, Perkins & Kesten, LLP, were on brief for appellee Town of Stow.

Before TORRUELLA, LIPEZ and HOWARD, Circuit Judges.

HOWARD, Circuit Judge.

Similar to other states, Massachusetts provides tax relief to landowners of agricultural, horticultural or forest land. When such land is converted to other uses, the Commonwealth requires landowners to compensate their respective municipalities. The compensation may be take the form of, for example, payment of a conveyance tax when the land is sold, or payment of roll-back taxes if the land otherwise ceases to qualify for preferential tax treatment. In addition to these tax features, Massachusetts law also provides that once a landowner decides to sell the land for other than agricultural, horticultural, or as relevant here, forest uses, the municipality is entitled to a right of first refusal ("ROFR"). Mass. Gen. Laws ch. 61. This ROFR provides the municipality with a 120-day period in which to meet a bona fide offer to purchase the land. The municipality thus has the right but not the obligation to preserve salutary land uses by purchasing land that the landowner desires to sell, and the landowner receives the compensation that a willing buyer in an arm's-length transaction is prepared to pay.

In this case, plaintiff-appellant Marilyn Kunelius accepted a bona fide offer to purchase a parcel of land, which included acreage that had been certified under Mass. Gen. Laws ch. 61 as forest land. Pursuant to the statute, the Town of Stow chose to exercise its ROFR. In addition, the Town assigned this right, as also permitted by the statute, to the Trust for Public Land ("TPL" or "Trust"), a nonprofit conservation organization. From the beginning, it was clear that a number of circumstances had to align in a precise constellation for the Trust and the Town to consummate the transaction. Despite potential difficulties with the transaction, the Town and TPL nevertheless went through with the assignment of the ROFR. The Trust's optimistic hopes for obtaining private philanthropy, state grants, and local zoning relief, however, were not fulfilled. As a result, the Town and the Trust failed to complete the transaction. In the interim, Kunelius's previous buyer chose to develop other land.

Conceding that it had breached its obligations under its contract with Kunelius, the Trust paid liquidated damages in the amount specified in the purchase and sale contract that had been negotiated between Kunelius and her original buyer. Kunelius, however, believing that she was entitled to significantly more, brought suit in the district court. The complaint sought several species of relief, including the invalidation of the liquidated damages clause, specific performance or full contract damages, remedies for the Town and Trust's breach of the covenant of good faith and fair dealing, relief under the business-to-business provisions of Chapter 93A, and relief under the Contracts Clause of the United States Constitution. On cross-motions for summary judgment, the district court granted summary judgment to all of the defendants: the Town, the Trust, an alleged partnership between the Town and Trust, and Trust employee Craig MacDonnell. Kunelius now appeals.

I. Background

By and large, the facts are not in dispute, but to the extent that they are, we recite them in the light most favorable to the non-moving party, here, the appellant. See Essex Ins. Co. v. BloomSouth Flooring Corp., 562 F.3d 399, 401 (1st Cir.2009); CoxCom, Inc. v. Chaffee, 536 F.3d 101, 108 (1st Cir.2008).

A. The Original Transaction

Beginning in 2001, Kunelius sought to sell her horse farm located at 142 and 144 Red Acre Road in Stow, Massachusetts. The land abuts two conservation areas, the Red Acre Woods conservation area and the Captain Sargent conservation area, and it sits atop the Town's largest aquifer. The total land area of this parcel is approximately 50.67 acres, 42.1 acres of which had been designated as forest land since 1985, pursuant to Mass. Gen. Laws ch. 61 § 2. Upon the remainder of the parcel (approximately 8.57 acres) sit a main house and a caretaker's house, as well as the accouterments of a horse farm, including a paddock, barn, and other improvements.

In mid-2002, Kunelius entered into negotiations with Cohousing Resources LLC ("Cohousing"), a consulting company based in the state of Washington that assists local communities in forming and developing co-housing projects. Co-housing projects like the one Cohousing contemplated here place an emphasis on open space and communal living. Because Cohousing requires the groups on whose behalf it undertakes development to commit to a certain threshold level of funding before Cohousing becomes involved, Cohousing's projects have a relatively high probability of coming to fruition. Through extensive negotiation and personal contact, Kunelius, her attorney and her real estate agent came to trust Cohousing and its principal representative, Chris ScottHansen. As a result, Kunelius was comfortable offering terms to Cohousing that she may not have offered to another counterparty.

Cohousing's initial offer was for a purchase price of $1.1 million, with a deposit of $50,000 to be held in escrow pending closing. In this first signed offer, the only contingency was an evaluation of the property's suitability for the eventual construction of a thirty-unit development. The offer contained a provision that permitted the seller to select from a range of remedies in the event of the buyer's breach:

Upon default by Buyer, Seller, at its sole option, may (i) retain the deposit as liquidated damages as its sole remedy, or (ii) repay the deposit to the Buyer and subsequently enforce this Agreement and pursue any and all remedies available at law or equity, including an action for specific performance and damages.

This offer was not accepted, and negotiations continued. Cohousing's next offer was for the same purchase price, but contemplated that Kunelius would provide substantial seller financing. In addition, the deposit amount was reduced to only $10,000 up front and a payment of $1,500 per month thereafter. The record suggests that the monthly payment was to replace Kunelius's horse farm income, because her customers would likely look elsewhere to board their horses. After a period for the feasibility study, Kunelius was free to make use of the deposits.

This revised offer also specifically contemplated the probability that Cohousing would file an application for relief from local zoning requirements, invoking the streamlined approval process for affordable housing set forth in Chapter 40B of the Massachusetts General Laws. See Mass. Gen. Laws ch. 40B §§ 20-23. In view of the anticipated approval process, the time for closing on this offer was approximately two years.

At Kunelius's request, this revised offer, although written to include all of her property, contemplated the possibility that "a significant portion of the undeveloped land ... not to exceed 42 acres may be encumbered by or deeded to the Town of Stow," and that this encumbrance or transfer was to occur after all 40B approvals had been made and before closing. The upshot of this feature was to allow Kunelius to receive any tax credit for the transfer or encumbrance.1 Finally, the liquidated damages provision in Cohousing's revised offer remained the same as in the prior offer.

Although Kunelius did not accept the second offer, negotiations continued, and the parties eventually reached an agreement. The terms of the contract, which was drafted by Kunelius's attorney, diverged in several ways from previous offers. The slightly increased purchase price was to be paid in the same fashion as before, with Kunelius holding a note for a portion of the price. The time for performance was set at September 26, 2003, although Cohousing had the opportunity to extend this period for a year if "the Chap. 40B approval process is proceeding forward."

Among other changes were the inclusion of at least two references to the possibility of the Town exercising its ROFR. One provision stated flatly that "[i]n the event that the Town of Stow exercises its right of first refusal pursuant to Mass. Gen. Laws ch. 61, all monies deposited hereunder shall be forthwith returned to BUYER without further recourse by either party in equity or law." Another change involved a clarification of Kunelius's right to transfer that portion of her land classified as forest land: after the 40B development was approved and the seller received all "purchase monies," the seller would transfer "all right, title, and interest in the said 42.1 acre parcel currently under [sic.] Mass. Gen. Laws ch. 61, as a charitable contribution."

For purposes of this action, however, the most important change between the prior offers and the signed contract was the clause specifying the remedies available to the seller in the event of the buyer's breach. The revised clause reads:

If BUYER shall fail to fulfill the BUYER'S agreements herein, all deposits made hereunder by the BUYER shall be retained by the SELLER as liquidated damages and this shall constitute SELLER'S sole remedy in equity and law.

Both Kunelius and Cohousing signed this agreement sometime in October of 2002.

B. The Town Assigns Its ROFR to TPL

Within days of signing her...

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