Shapiro v. Grinspoon

• Decision Date: 21 July 1989
• Docket Number: No. 88-P-688,88-P-688
• Citation: 27 Mass.App.Ct. 596,541 N.E.2d 359
• Parties: Karen Lee SHAPIRO, administratrix, 1 , 2 v. Harold GRINSPOON et al. 3
• Court: Appeals Court of Massachusetts

Page 359

541 N.E.2d 359

27 Mass.App.Ct. 596

Karen Lee SHAPIRO, administratrix, ¹, ² v. Harold GRINSPOON et al. ³

No. 88-P-688.

Appeals Court of Massachusetts,

Hampden.

Argued March 13, 1989.

Decided July 21, 1989.

Edgar L. Kelley, North Andover, for plaintiffs.

Frederick S. Pillsbury, Springfield, for defendants.

Before BROWN, DREBEN and WARNER, JJ.

WARNER, Justice.

This appeal concerns the plaintiffs' ⁴ attempt to secure the return of a deposit made by them in an unsuccessful commercial real estate transaction. The questions presented are whether the plaintiffs had the right to terminate a purchase and sale agreement and, if not, whether a liquidated damages clause in the contract is enforceable. After a bench trial in the Superior Court, a judge ruled against the plaintiffs on both issues.

We draw the essential facts, which are not challenged on appeal, ⁵ from the judge's memorandum of decision. In the late summer of 1985, the parties began negotiations for the purchase by the plaintiffs of an apartment complex in Agawam owned by The Regency Park. The plaintiffs were made aware that Metropolitan Life Insurance Company (Metropolitan) held a $6,500,000 mortgage on the property, which would mature on October 1, 1994, and which did not allow for prepayment until October 1, 1990. The defendants began discussions with Metropolitan about the amount of a prepayment penalty; the defendants offered $400,000, but it then appeared that Metropolitan would demand more. The plaintiffs were kept informed of the discussions with Metropolitan but not of the details.

On October 30, 1985, the parties executed a letter of intent which detailed the essential terms of the transaction, including those with respect to the prepayment of the Metropolitan mortgage, which were later to be included in a purchase and sale agreement. The plaintiffs paid in escrow a deposit of $50,000.

On December 16, 1985, representatives of Metropolitan met with the defendants and rejected the prepayment offer of $400,000. Agreement was reached on a figure of $625,000, subject to approval by higher authorities of Metropolitan.

The purchase and sale agreement was executed by the parties on December 23, 1985, and provided for a purchase price of $16,500,000, a closing date of February 14, 1986, and the plaintiffs' right to extend that date for a period of 45 days, on 14 days' notice and a nonrefundable payment of $100,000. The plaintiffs deposited in escrow an additional $450,000. On the matter of the prepayment of the Metropolitan mortgage, the agreement provided in relevant part:

9. Seller's Present Mortgage. Buyer acknowledges that Seller's present mortgagee, Metropolitan Life Insurance Company ("Metropolitan"), has imposed upon Seller a prohibition against the early payment of the present mortgage. Both Seller and Buyer agree that they shall pay a maximum of Two Hundred Thousand ($200,000) Dollars each to Metropolitan in order to obtain a discharge of the mortgage on payment of the outstanding principal and accrued interest by Seller at the time of the Closing. In the event that Metropolitan shall refuse to accept such payment, or agree to a payoff of its mortgage with a maximum prepayment penalty of $400,000 or less, then either party shall have the right to terminate this Agreement in which event the deposits hereunder and all interest accrued thereon ... shall be refunded to the Buyer and the parties shall have no further obligations to each other.... In the event that Metropolitan shall require a payment less than $400,000, each party shall be liable for one-half ( 1/2) thereof. At its option Seller may elect to increase the purchase price to be paid by Buyer by the amount of the prepayment penalty otherwise payable by Buyer hereunder, in which event Buyer shall not also be obligated to pay such penalty. (Emphasis supplied.)

Although precision of date is lacking (because the evidence did not give foundation), the judge found that, when the purchase and sale agreement was executed, the defendants had not informed the plaintiffs that the $400,000 prepayment penalty was unacceptable to Metropolitan. The plaintiffs had not been told that an agreement on the figure of $625,000 had been made, subject to final approval by Metropolitan. In early January of 1986, the defendants told the plaintiff Shapiro that the prepayment penalty would likely be $625,000 and requested that the plaintiffs consider paying one-half of that amount. There followed during the next two to three weeks further discussions between the defendants and Shapiro about the prepayment. During this time the plaintiffs neither rejected nor accepted the defendants' request to share equally in the payment of $625,000 to Metropolitan; "Shapiro skirted the issue."

On January 28, 1986, Metropolitan sent a letter to the defendants approving the $625,000 figure. The plaintiffs were informed of the authorization on January 31, 1986. At the plaintiffs' request, the defendants, on February 4, 1986, sent to the plaintiffs copies of the Metropolitan letter and of the note and mortgage. In an accompanying letter to Shapiro, received on February 5 or 6, the defendants said: "Since the demand by Metropolitan exceeds the $400,000 provided in our contract and since your maximum obligation under the contract is $200,000, we have elected to assume the difference. However, we are still hopeful that you would be willing to share equally the excess of the Metropolitan request as was discussed with [an associate of Shapiro's] last week."

By letter of February 7, 1986, the plaintiffs' counsel wrote to the defendants that "my client does hereby elect to exercise his right under paragraph 9 of the Purchase and Sale Agreement to terminate said Purchase and Sale Agreement and does hereby request return of his deposit." In response, the defendants advised the plaintiffs that the closing would be held as scheduled on February 14, and that the deposit would not be returned.

Shapiro then attempted to "revitalize" the proposed transaction, but the plaintiff Regan "wanted out"; ⁶ Shapiro was unable to find another partner. On February 14, 1986, the defendants attended the scheduled closing and were ready, willing and able fully to perform their obligations under the purchase and sale agreement. The plaintiffs failed to appear.

The defendants shortly later entered into a new arrangement with another buyer, on terms which will be discussed below. A letter of intent was executed on March 26, 1986, a purchase and sale agreement was signed on April 26, 1986, and the transaction was consummated on June 26, 1986.

In the meantime, Regan had obtained financing and in mid-April the plaintiffs informed the defendants that the plaintiffs were then ready to perform. The defendants later told the plaintiffs that the property was no longer available.

The Plaintiffs' Attempted Termination of the Purchase and

Sale Agreement.

The judge correctly concluded that the plaintiffs' attempted termination of the purchase and sale agreement on the ground that Metropolitan called for payment of more than $400,000 as a prepayment penalty was ineffective. He reasoned that, while a literal reading supported the plaintiffs' position, the purpose of the termination provisions of paragraph 9 of the agreement was to ensure that neither of the parties would be obligated to pay in excess of $200,000 toward the prepayment. The aim of the contribution provision was not to limit the amount of money paid to Metropolitan regardless of the source of payment. The latter interpretation would, the judge said, conflict with common sense and the plain intent of the parties. The construction which the judge adopted, and which we approve, " 'is the one which appears to be in accord with justice and common sense and the probable intention of the parties. It [interprets the Agreement] as a business transaction entered into by practical men ⁷] to accomplish an honest and straightforward end.' " Keating v. Stadium Management Corp., 24 Mass.App.Ct. 246, 252, 508 N.E.2d 121 (1987), quoting from Clark v. State St. Trust Co., 270 Mass. 140, 153, 169 N.E. 897 (1930). See Shea v. Bay State Gas Co., 383 Mass. 218, 223, 418 N.E.2d 597 (1981). See also deFreitas v. Cote, 342 Mass. 474, 477, 174 N.E.2d 371 (1961); Bossi v. Whalen, 19 Mass.App.Ct. 966, 967, 473 N.E.2d 1167 (1985); Tremouliaris v. Pina, 23 Mass.App.Ct. 722, 727, 505 N.E.2d 225 (1987). As the defendants assumed the obligation for the payment of the excess penalty, the plaintiffs' refusal to perform was inexcusable.

The plaintiffs contend that they were entitled to terminate the agreement because of the defendants' fraud and misrepresentation in the failure promptly to inform the plaintiffs of the increased prepayment penalty demand by Metropolitan. In an oblique argument, the plaintiffs say that the defendants' failure to disclose somehow affected the plaintiffs' option to extend the closing date for 45 days. It is enough to say that no theory of fraud or misrepresentation such as the plaintiffs argue was pleaded, and the judge's findings and conclusions make clear that no such issue was tried to him. The plaintiffs did not move that the judge amend the findings or make additional findings. See Mass.R.Civ.P. 52(b), 365 Mass. 817 (1974). We will not consider the question, as it was not adequately put before the Superior Court judge. See Bernard v. Cameron & Colby Co., 397 Mass. 320, 323, 491 N.E.2d 604 (1986); Gerber v. Ty-Data, Inc., 5 Mass.App.Ct. 898, 898-899, 370 N.E.2d 445 (1977); Matthews v. School Comm. of Bedford, 22 Mass.App.Ct. 374, 379, 494 N.E.2d 38 (1986). Cf. J.C. Hillary's v. Massachusetts Commn. Against Discrimination, 27 Mass.App.Ct. 204, 205-206, 536 N.E.2d 1104 (1989).

Moreover, there is no merit to the plaintiffs' claim. Paragraph 9 of the agreement unequivocally limits the plaintiffs' contribution to the prepayment penalty to $200,000. As the judge found, the...