Zecco v. Hess Corp..
| Decision Date | 03 March 2011 |
| Docket Number | Civil Action No. 10–10319–FDS. |
| Citation | 777 F.Supp.2d 207 |
| Parties | Janice J. ZECCO, Plaintiff,v.HESS CORPORATION, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
OPINION TEXT STARTS HERE
Brian J. Buckley, Fletcher, Tilton & Whipple, Worcester, MA, for Plaintiff.Daniel V. Ward, Jane E. Willis, Ropes & Gray LLP, Boston, MA, for Defendant.
MEMORANDUM AND ORDER CERTIFYING A QUESTION OF STATE LAW TO THE SUPREME JUDICIAL COURT OF MASSACHUSETTS
This is a contract dispute concerning the validity and enforceability of an option to purchase land contained in a lease. Jurisdiction is based on diversity of citizenship. The key issue is whether the common-law rule against perpetuities applies to an option to purchase land appurtenant to a commercial lease.
In 1984, the Supreme Judicial Court held that an option in gross—that is, an option that is not annexed to a lease—is subject to the rule against perpetuities. See Certified Corp. v. GTE Products, Corp., 392 Mass. 821, 824–26, 467 N.E.2d 1336 (1984). In the same opinion, however, the court noted that an option “viewed as part of the lease ... might well be outside the scope of the rule against perpetuities.” Id. at 825 n. 5, 467 N.E.2d 1336. One Massachusetts trial court has since expressly held that an option appurtenant to a commercial lease is not subject to the common-law rule against perpetuities. See Exxon Corp. v. McManus, 7 Mass. L. Rep. 202, 1997 Mass.Super. LEXIS 386, *12–13 (Mass.Super.Ct. Mar. 11, 1997). However, the reasoning from a recent opinion of the Supreme Judicial Court calls this conclusion into question. See Bortolotti v. Hayden, 449 Mass. 193, 200, 204–06, 866 N.E.2d 882 (2007).
Pending before the Court is defendant's motion for judgment on the pleadings under Fed.R.Civ.P. 12(c). The underlying facts are largely undisputed. The outcome of the motion will most likely be determined by resolution of a question of state law, for which there is no controlling precedent from the Supreme Judicial Court. It therefore appears prudent to certify the question under the method detailed in Supreme Judicial Court Rule 1:03. See In re Hundley, 603 F.3d 95, 97 (1st Cir.2010). The following statement of facts and discussion of the relevant legal precedents furnish the background and context for the question to be certified.
I. BackgroundA. The Original Lease Term and Options to Extend
Patrick and Janice Zecco entered into a commercial real estate lease with Old Colony Petroleum Company, Inc. on October 17, 1975. (Compl. ¶ 4).1 The subject matter of the lease was a parcel of land located in Tewksbury, Massachusetts, that was to be used to sell and store gasoline. ( See Compl., Ex. A ¶¶ 1, 2).
After Patrick Zecco passed away in 2007, plaintiff Janice Zecco succeeded to his interest in the property. (Compl. ¶ 6). She now resides in Northborough, Massachusetts. (Compl. ¶ 2). Defendant Hess Corporation, which has succeeded to Old Colony's interest in the lease, is incorporated in Delaware and has its principal place of business in New York. (Compl. ¶ 5; Answer ¶ 3).
The original term of the lease was for 15 years, beginning on October 17, 1975, and ending on October 17, 1990. . The lease also granted the lessee four options to extend for successive terms of five years. (Lease ¶ 3). Paragraph 3 of the lease governs the method by which an extension could be completed. In its entirety, paragraph 3 provides:
Lessee shall have four (4) separate and individual options to extend this lease for four additional terms of five (5) years each on the same terms and conditions as during the original term except that the rental shall be reduced to One thousand two hundred fifty ($1,250.00) dollars per month during the option periods by giving Lessor at least ninety (90) days written notice of such extension prior to the expiration of the original or any extended form as the case may be, provided that if Lessor does not notify Lessee in writing not more than one hundred fifty (150) days nor less than one hundred twenty (120) days prior to the expiration of the then current term, excepting the fourth extended term of this lease, if any, that unless extended the then current term will expire at the end of such then current term, such then current term shall be extended automatically without any prerequisite act of either or both of the parties for the next succeeding extended term on the same terms and conditions as during the original term, including the aforementioned automatic extension provision, except that Lessee then shall have the right at its sole option to terminate this lease during any such automatically extended term on one hundred eighty (180) days prior written notice to Lessor.
(Lease ¶ 3).
The parties agree that this section provides for extension of the lease when the lessee furnishes the lessor with written notice at least ninety days before the date of expiration. . Hess and its lessee predecessors provided written notices of extension of the lease on May 9, 1990; June 20, 1995; May 15, 2000; and May 18, 2005, in each case more than ninety days before the lease was set to expire. (Countercl. ¶ 25). The Zeccos received each notice, but Mrs. Zecco maintains that neither she nor Mr. Zecco acknowledged to Hess receipt of the May 2005 notice of extension. . She acknowledges that either she or Mr. Zecco signed and returned Hess's written notices of extension for each of the first three terms. (Pl.'s Opp. at 13).
Mrs. Zecco contends that, under paragraph 3 of the lease, furnishing written notice was not the exclusive method for extending the lease. . The parties do not dispute that paragraph 3 contemplates an alternative method of extension, whereby the lease could automatically extend when the lessor does not provide timely notice of impending expiration of the lease. The Zeccos never notified Hess or its predecessor lessees in writing that the lease term would soon expire. (Pl.'s Opp. at 13–14).
Also at issue is paragraph 5 of the lease, which governs holdover tenancies. It provides in its entirety:
Should Lessee hold over the leased premises after the expiration of the original term hereof or of any extended term, whether extended by notice or automatically pursuant to the provisions of Paragraph 3 hereof, such holding over shall not be considered as a renewal or extension of this lease for a longer period than one (1) month unless the parties hereto have extended this lease under such circumstances by written agreement.
(Lease ¶ 5). The parties dispute whether this provision is applicable.
The parties do not appear to dispute that Hess and its predecessor lessees made all rent payments due during the original lease term and the four extended terms. If the lease was validly extended for the fourth term, it remained in effect until October 17, 2010. (Countercl. ¶ 28).
B. The Option to Purchase
The lease also contained an option for the lessee to purchase the property. Paragraph 19 of the lease, which details the terms of the option, provides in relevant part:
In consideration of the execution of this lease and rentals to be paid hereunder, Lessor hereby gives Lessee, its successors and assigns, an option to purchase the entire premises herein leased at any time after the original term of this lease for the sum of One Hundred Ninety–Five Thousand Dollars ($195,000).
(Lease ¶ 19). The remainder of the paragraph details the method by which Hess must give written notice to Mrs. Zecco that it wishes to exercise the purchase option and the method by which she must convey title to Hess. ( Id.). It also lists four conditions precedent to Hess's obligation to purchase the property after it exercises the option. ( Id.).
On December 22, 2009, Hess sent a letter to Mrs. Zecco indicating its intention to exercise the purchase option. . She responded with a letter on January 14, 2010, stating the she refused to sell the property and asserting that the purchase option was void and unenforceable. (Countercl. ¶ 31). Hess then sent a letter to Mrs. Zecco on February 15 stating the grounds on which it contends that the option is valid and enforceable. ( Id. ¶ 33). By separate letter, it scheduled a closing date of February 18 for the sale and informed Mrs. Zecco of its intention to move forward with the closing despite her refusal to sell. ( . On February 17, Mrs. Zecco sent a letter advising Hess that she would not comply with the schedule or participate in the closing. ( Id. ¶ 34). Hess alleges that its attorney was present at the location and at the appointed time for the closing on February 18, but that Mrs. Zecco did not come. ( .
C. Procedural Background
Mrs. Zecco filed this action in Worcester Superior Court on January 26, 2010. The complaint sought a declaration under Mass. Gen. Laws ch. 231A that the option to purchase was invalid, void, and unenforceable. Hess timely removed the action to this Court under 28 U.S.C. § 1441, invoking diversity jurisdiction under 28 U.S.C. § 1332. Hess then counterclaimed, seeking a declaration that the option to purchase was valid and enforceable and an order of specific performance. Plaintiff's reply to the counterclaims asserted several affirmative defenses. Hess then moved for judgment on the pleadings under Fed.R.Civ.P. 12(c).
II. Discussion
When a question of Massachusetts law may prove determinative in the case at hand and when it appears that there is no controlling precedent from the Commonwealth's highest court, this Court may certify the question to the Supreme Judicial Court. See Mass. S.J.C.R. 1:03; In re Engage, Inc., 544 F.3d 50, 52 (1st Cir.2008). A federal district court may certify a question to the SJC on its own motion, even if neither party has requested certification. See In re...
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