Massachusetts Lng, Inc. v. Industrial National Leasing Corp.
| Decision Date | 01 July 1998 |
| Docket Number | 972391E |
| Citation | 1998 MBAR 154 |
| Parties | Massachusetts LNG Incorporated v. Industrial National Leasing Corporation |
| Court | Massachusetts Superior Court |
Mass L. Rptr. Cite: 8 Mass. L. Rptr. 604
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): LAURIAT
On May 6, 1997, Massachusetts LNG Incorporated ("Mass LNG") commenced the present action against Industrial National Leasing Corporation ("INLC") for declaratory relief under a written lease entered into between the parties (Count I), violation of G.L.c. 93A (Count II), and breach of the implied covenant of good faith and fair dealing (Count III). INLC filed a counterclaim for declaratory judgment under the lease (Counts I & II), unjust enrichment (Count III), breach of lease (Count IV), breach of the implied covenant of good faith and fair dealing (Counts v. & VI), violation of G.L.c. 93A (Count VII), and injunctive relief (Count VIII). The parties are now before the court on INLC's motion for partial summary judgment on Mass. LNG's complaint and Count I of INLC's counterclaim. For the following reasons, INLC's motion is allowed.
On June 1, 1972, the parties entered into a lease agreement (the "Lease") by which INLC agreed to lease to Mass. LNG two leasehold estates, which were comprised of two properties in Lynn and Salem, Massachusetts (the "Leased Properties"). Under the Lease, Mass. LNG would pay rent in fifty semiannual installments from July 1, 1972 until January 1, 1997.
Under Paragraph 6(c) of the Lease, Mass. LNG was required to cause the Leased Properties to comply with all applicable legal requirements, including any which required structural or extraordinary changes, for the use to which the Leased Properties were to be put. The use to which the Leased Properties have been put throughout the Lease has been the operation of the liquefied natural gas facilities.
Paragraph 17(f) of the Lease provided:
If the Lessee is required to make modifiúcations, alterations or additions ("Modifications") to the Leased Properties in accordance with subparagraph 6(c) and Lessee determines that the cost of such Modifications exceeds $3,000,000, then the Lessee may, upon 50 days' written notice, purchase the Leasehold Estate with respect to which such Modifications are required to be made, or both Leasehold Estates, as the case may be, at a purchase price equal to the Stipulated Loss Value [("SLV")] thereof determined, subject to the provisions of this paragraph 17, in accordance with Schedule C, and in such event this Lease all terminate with respect to such Leasehold Estate or both Leasehold Estates, as the case may be.
In calculating the SLV, Schedule C provides that
as of any Rent Payment Date an amount [shall be] determined by multiplying Lessor's Cost for the Lynn Leased Property and/or the Salem Leased Property... by the percentage specified in Schedule C-1.... 'Stipulated Loss Value' for any other date shall mean the Stipulated Loss Value for such Property or Properties as of the next succeeding Rent Payment Date... less an amount equal to interest at the rate of 8 1/4% per annum on the outstanding balance.
Schedule C-1 sets forth an SLV for the second through the fiftieth rental periods, from January 1, 1973 through January 1, 1997. Schedule C-1 does not contain an SLV for the period covering the last six months of the lease, ending June 30, 1997.
Paragraph 18(e) provides that Mass. LNG
shall have the option, from and after the twentieth Rent Payment Date hereunder, upon at least 60 days' prior written notice to Lessor, to purchase both Leasehold Estates and to terminate this Lease as of the next succeeding Rent Payment Date (the "Termination Date") occurring at least 120 days after such notice (for the purpose of this subparagraph only, the last day of this Lease shall be deemed to be a Rent Payment Date), at a purchase price equal to the greater of (i) the fair market sales value... of both Leasehold Estates or (ii) the stipulated loss values of such Leasehold Estates, both determined as of the Termination Date.
Between 1975 and 1995, Mass. LNG performed modifications, alterations, and additions to the premises which it alleges were necessary in order to comply with existing laws and regulations. Mass. LNG alleges that the total cost of these modifications exceeded three million dollars. INLC contends that many of the expenses Mass. LNG claims to have incurred were not required by law and are not properly characterized as "Modifications" under the lease. For example, in 1992, Mass. LNG spent $1,955,246.16 on the construction of a dike at the Salem Property. INLC denies that this renovation is an appropriate expense under the lease as Mass. LNG was not required by law to construct the dike. While there is a dispute as to the propriety of some expenses claimed by Mass. LNG, these facts are not material to the court's ruling on the parties' rights under the lease.
On December 31, 1996, Mass. LNG sent a letter to INLC stating "we have determined that we wish to acquire the Leasehold Estates and are hereby notifying you of our exercise of one of the options provided under the Lease[,]... that provided in subparagraph 17(f) with the purchase taking effect on June 30, 1997." On January 6, 1997, INLC responded to this letter by writing: "[INLC] wish[es] to advise you that we do not consider the purchase provision contained in [paragraph 17(f)] to be applicable to an end-of-term purchase by the lessee."
By letter dated February 24, 1997, Mass. LNG notified INLC of its intent to invoke the purchase option under Paragraph 18(e), notwithstanding Mass. LNG's belief in the validity of its exercise of the Paragraph 17(f) option. Between January 6 and April 30, 1997, the parties met several times to attempt to resolve their differences and reach an agreeable purchase price. At a meeting on April 21, 1997, INLC presented Mass. LNG with a report which appraised the premises at a value of $44,400,000.
Mass. LNG thereafter commenced this action seeking a declaration that it has "the right to acquire the Leasehold Estates on June 30, 1997 in accordance with Paragraph 17(f) of the Lease and the Notice." It also alleges that INLC's refusal to allow the purchase is a violation of G.L.c. 93A and the implied covenant of good faith and fair dealing. INLC has counterclaimed, in part, for a declaration that "Mass. LNG is not entitled to exercise the Section 17(f) purchase option."
The parties both agree that the lease speaks for itself and that it is a complete and integrated expression of their agreement. This case will thus turn on an interpretation of the contract language, particularly of Paragraph 17(f) and its relation to Schedule C and Paragraph 18(e). The interpretation of a written lease is a question of law for the court. Lexington Ins. Co. v. All Regions Chemical Labs, Inc., 419 Mass. 712, 713 (1995) (citations omitted). In interpreting such a lease the court will "so far as reasonably practicable... give a construction which will make it a rational business instrument and will effectuate what appears to have been the intention of the parties." Finn v. McNeil, 23 Mass.App.Ct. 367 372 (1987) (citations omitted). The intention of the parties is to be ascertained by considering all of the lease's provisions together, and giving the terms used a reasonable meaning in light of the facts to which they apply and the circumstances in which they are used. Wunsch v Donnelly, 302 Mass. 286, 289 (1939).
In support of its interpretation of the lease, INLC contends that the absence of an SLV in Schedule C for the end of the lease term indicates that Mass. LNG does not have the right to invoke Paragraph 17(f). Mass. LNG, conversely, argues that this omission is inconsequential and that only if the parties had specifically stated that the purchase option was limited in time would INLC's interpretation be correct. Mass. LNG argues that "the most obvious way to express the concept that the Section 17(f) rights were not in effect during the last six months of the Lease term would have been to so state in Section 17(f)."
In reconciling these divergent views, the court finds instructive the principle of expressio unius est exclusio alterius, the expression of one thing is an implied exclusion of other things. Smart v. Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 179 (1st Cir. 1995). In order to give effect to the Paragraph 17(f) purchase option, the parties agreed upon a mechanism, in Schedule C, for determining the SLV for every day between July 1, 1972 and January 1, 1997. They did not provide such a mechanism for the six month period thereafter.
Mass. LNG contends that the SLV for the end of the lease can easily be determined and has submitted a report which has calculated such an SLV. Notwithstanding the ability to calculate such a value, the court determines that its omission is determinative of the parties' intent that it not be in effect as to the Paragraph 17(f) purchase option. This was a negotiated agreement and the parties certainly could have included such a provision if they had desired.
Mass LNG also contends that the absence of an SLV for the end of the lease does not mean that the parties did not contemplate that Section 17(f) would not apply. Mass. LNG relies on Shayeb v. Holland, 321 Mass. 429 (1947), for the proposition that in the absence of a stated purchase price, the parties intend a purchase for a fair and reasonable price. Mass. LNG asserts that the court must adopt Mass. LNG's interpretation of the Schedule C SLVs in order to make the lease "a valid and enforceable undertaking rather than one of no force and effect." Finn, 23 Mass.App.Ct. at...
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