Uno Restaurants, Inc. v. Boston Kenmore Realty Corporation
| Decision Date | 01 December 2003 |
| Citation | 805 NE 2d 957,441 Mass. 376 |
| Parties | UNO RESTAURANTS, INC. v. BOSTON KENMORE REALTY CORPORATION. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, SOSMAN, & CORDY, JJ.
Kevin T. Peters for the plaintiff.
Paul Killeen (Pamela R. O'Brien with him) for the defendant.
The central issue in this case is whether the covenant of good faith and fair dealing requires the owner of a building comprised of condominium units, only one of which is subject to a right of first refusal, to ensure that an offer by a third party to purchase the entire building is allocated such that the amount offered for the unit subject to the right of first refusal does not exceed its proportionate value of the entire building. We conclude that, in the circumstances of this case, it does not.
Uno Restaurants, Inc. (Uno), commenced a civil action seeking to enjoin the sale to Coles Holdings, Ltd. (Coles), of a commercial condominium unit, which Uno leased from Boston Kenmore Realty Corporation (Boston Kenmore) subject to Uno's right of first refusal. Uno's motion for temporary injunctive relief was denied. It proceeded to trial against Boston Kenmore, seeking damages on common-law counts alleging breach of its right of first refusal and breach of the implied covenant of good faith and fair dealing, and on one count alleging a violation of G. L. c. 93A. A jury returned a special verdict on the common-law counts, finding that (1) Coles's offer was not "bona fide, that is, made in good faith"; (2) Boston Kenmore did not "breach the contractual obligations it owed to [Uno] under the [l]ease by failing to allow Uno a right of first refusal when an offer was made by [Coles] to purchase [the unit]"; (3) Boston Kenmore "violate[d] the covenant of good faith and fair dealing under the lease by failing to allow [Uno] a right of first refusal when an offer was made by [Coles] to purchase [the unit]"; and (4) Uno sustained damages of $350,000. The judge reserved the G. L. c. 93A count to himself and determined that there was no violation. He found that there was no collusion between Boston Kenmore and Coles and that the two transactions between them, one for the sale of the unit leased by Uno, and the other for the sale of the other units in the building, were arm's-length transactions that were not linked.
Boston Kenmore appealed from the judgment on the count alleging a breach of the covenant of good faith and fair dealing. Uno appealed from the judgment on the G. L. c. 93A count. On appeal, Boston Kenmore claims error in the denial of its motion for a directed verdict, Mass. R. Civ. P. 50 (a), 365 Mass. 814 (1974), and its motions for judgment notwithstanding the verdict, or alternatively, for a new trial, Mass. R. Civ. P. 50 (b), as amended, 428 Mass. 1402 (1998). It also claims that the judge erred by (1) instructing the jury they could consider Coles's intent in rendering their verdict; (2) failing to instruct the jury that they should only consider the purchase and sale agreement for the unit leased by Uno and not the separate purchase and sale agreement for the remaining units in the building; and (3) failing to instruct the jury correctly on the issue of damages.
In its cross appeal Uno claims that the judge erred by (1) failing to admit evidence of Coles's initial offer to purchase the entire building, rejected by Boston Kenmore; and (2) applying a requirement of wilfulness to Uno's claim of simple damages under G. L. c. 93A. We granted Boston Kenmore's application for direct appellate review. We order entry of judgment for Boston Kenmore on the count alleging a breach of the covenant of good faith and fair dealing, and therefore need not consider Boston Kenmore's challenges to the jury instructions. We affirm the judgment for Boston Kenmore on the count alleging a G. L. c. 93A violation.
1. Facts. The evidence, illuminated most favorably for the plaintiff, see Tosti v. Ayik, 394 Mass. 482, 494 (1985), would support the following findings on the count alleging a breach of the covenant of good faith and fair dealing. In 1977, Boston Kenmore acquired the Buckminster Hotel building at 645 Beacon Street in Boston's Kenmore Square for $350,000. In February, 1984, Boston Kenmore entered into a lease with Hamiltonian Company, Inc., Uno's predecessor in interest, for approximately 11,200 square feet of the first floor and the basement of the hotel for use as a restaurant and lounge. The lease provided at art. 1.6 that Hamiltonian would pay "as additional rent . . . 9.3[%]" of any increase in real estate taxes on the hotel above the amount assessed for fiscal year 1984.1 Article 10.5 of the lease created a right of first refusal, and states in relevant part:
(Emphasis added.)
According to the trial testimony of a witness for Uno, the parties to the original lease had a parol understanding2 that if Boston Kenmore "set" the price at which the entire hotel condominium were to be marketed, then the price of the unit designated as the leased premises would be "set" at 9.3 per cent of that figure.
On December 26, 1986, Boston Kenmore converted the hotel into 133 residential and commercial condominium units by recording a master deed pursuant to G. L. c. 183A, § 8, with the Suffolk County registry of deeds. At all material times Boston Kenmore retained ownership of all the condominium units. The leased premises had been designated as unit 103, consisting of 12,159 square feet, or 15.9%, of the area of the entire building. In September, 1987, Hamiltonian assigned, with Boston Kenmore's consent, its interest in the lease to Uno. In 1995, facing extreme financial problems, Boston Kenmore offered to sell unit 103 to Uno for $1.5 million. Uno declined.
In early February, 1997, Boston Kenmore received an unsolicited offer from Coles to buy the entire building at 645 Beacon Street for $8 million. Other than the offer to sell the leased premises to Uno, described above, Boston Kenmore had made no attempt to sell any of the units. Coles's offer was presented through Shlomo Salomon, a real estate broker and nephew of Edmund Shamsi, Boston Kenmore's president. Salomon had not been engaged in any ongoing business relationship with Shamsi or Boston Kenmore, although he had brokered a sale of another property sold by Shamsi to Coles. Shamsi rejected the offer, indicating that Coles would have to make two separate offers, one for unit 103 and the other for the balance of the building.
Coles responded with an offer of $2.8 million for unit 103, and an offer of $5.2 million for the other units in the building. Shamsi indicated that the offer of $2.8 million for unit 103 was acceptable, but said he wanted $15 million for the entire building. They eventually executed two purchase and sale agreements in late February: one for $2.8 million for unit 103; and the other for $11.2 million for the remaining 132 units in the building. The purchase and sale agreement for the 132 units stated that if the "time for performance" for the purchase of unit 103 was delayed, then the "time for performance" for Coles to purchase the 132 remaining units would be similarly delayed.
There was no evidence that Shamsi influenced the allocation of the $14 million between the two purchase and sale agreements. The allocation was left entirely to Coles. There was no evidence of any collusion between Boston Kenmore and Coles to defeat or frustrate Uno's right of first refusal. There was no evidence that any of the officers or directors of Boston Kenmore was in any sense connected to Coles or its owners.
After the purchase and sale agreements with Coles had been fully executed, but before the date of closing, Boston Kenmore retained a real estate appraiser to furnish an appraisal of unit 103. The appraiser opined that the fair market value of unit 103 was between $2.23 million and $2.8 million. The purchase and sale agreements had been negotiated on behalf of Coles by Ming Chou Slomiak, who did not rely on any appraisal of the property. She testified that she had calculated the value of unit 103 by considering the advantages of its location, Kenmore Square, and multiplying its square foot value, $280 in her view, by her belief that its area was approximately 10,000 square feet. Her valuation of the remaining units was based on their poor condition and the fact that in the aggregate they generated slightly more than one-half as much gross revenue as Uno's operations in unit 103. Moreover, because Coles would be paying cash for all the units, she was not concerned about the cost of borrowing and focused primarily on the advantageous location of the building.
Boston Kenmore gave Uno written notice of Coles's offer to purchase unit 103, and reminded Uno that it had thirty days to exercise its right of first refusal under art. 10.5 of the lease. It also forwarded to Uno a copy of the purchase and sale agreement. Uno responded in writing, purporting to exercise its right of first refusal by offering to pay $1,390,200...
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