2018 Mass. App. Div. 26

October 20, 2017 - February 26, 2018

Appellate Division Northern District

Court Below: District Court, Lowell Division

Present: Coven, P.J., Flynn & Karstetter, JJ.

Judgment entered by Crane, J. [Note 2] in Lowell District Court.

John F. Farraher, Jr. for the plaintiff.

Jonas A. Jacobson for defendant Omega Management Group Corp.

FLYNN, J. This commercial summary process case reaches this Appellate Division for a second time. See CSHV Concord, LLC vs. Omega Mgt. Group Corp., 2016 Mass. App. Div. 78. The issue raised by the defendant, Omega Management Group Corporation ("Tenant"), in this appeal is whether a "Landlord Estoppel" in a second amendment to the parties' lease, dated September 1, 2012, is ambiguous.

Following our return of this case to the trial court, the court ruled that "[a]ll of the findings of the original trial judge will be adopted except those that relate to those issues of damages as described by the appellate division." The parties also separately stipulated and agreed to the material facts, which follow. The plaintiff, CSHV Concord, LLC ("Landlord"), is the owner of the building and property located at 296-300 Concord Road, Billerica, Massachusetts. Tenant leased Suite 340 of the building by a standard form lease dated May 3, 2006. The parties amended the lease on two subsequent dates: August 27, 2010 and September l, 2012.

Upon the commencement of the lease, Landlord provided Tenant with a conditional abatement of the first six months' rent. Section 5.1 of the lease provided, in part:

"Tenant agrees to pay the Base Rent set forth in Section 1.6 for each month of the Term, payable in advance on the first day of each month commencing with the Commencement Date, without any deduction or setoff whatsoever. . . . Notwithstanding anything to the contrary contained in this Lease, Landlord hereby abates the first six (6) consecutive monthly installments of Base Rent."

If Tenant were to default on its obligations under the lease, however, all future rent abatement would cease and all previously abated rent would become due and payable with interest. The lease provided that upon an event of default, "any remaining rent

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abatement shall cease from the date of such default, and Tenant shall immediately pay to Landlord all sums previously abated under this Lease, together with interest thereon at the interest rate set forth in Section 25.3 below, from the date such sums were abated." Landlord gave Tenant a second conditional abatement of four months' rent upon the execution of the first amendment to the lease on August 27, 2010. As with the prior abated rent, in the event of a default, all future abatement would cease and all previously abated rent would become due and payable with interest.

The lease was amended a second time on September 1, 2012. The second amended lease contained a "Landlord Estoppel," which states, in pertinent part:

"Landlord hereby certifies and acknowledges that, as of the date of the mutual execution of this Second Amendment, to Landlord's knowledge, (a) Tenant is not in default in any aspect under the Lease; and (b) there is no offset against any prior rent abatements."

In accordance with Section 24 of the lease, Tenant's failure to pay rent "within five (5) days following written notice to Tenant" of its failure to pay rent constitutes an "Event of Default." On March 27, 2013, Landlord served Tenant with the first notice of default resulting from Tenant's failure to pay rent. The notice set forth the total amount of rent due and established a cure date of April 5, 2013. Tenant did not cure by April 5, 2013 and was in default of the lease as of that date. [Note 3] Thereafter, Landlord sent Tenant a notice of termination effective April 11, 2013. Accordingly, the lease was terminated effective April 11, 2013.

Subsequent to terminating the lease, Landlord brought a summary process action against Tenant in the District Court seeking a judgment for possession and damages. Before the start of trial, Tenant paid a portion of the outstanding rent, and the parties dismissed the action without prejudice. Thereafter, Tenant made additional payments to Landlord and continued to occupy the premises.

Tenant discontinued payments to Landlord in August, 2013. Consequently, on August 14, 2013, Landlord sent a notice of default for nonpayment of rent to Tenant. When Tenant failed to cure its default, Landlord commenced this summary process action seeking damages.

The central issue at the trial was the status of the lease at the time of the alleged breach. Tenant asserted that because the lease had been "terminated" in April, 2013, Landlord had no right to pursue lease remedies arising from a default that occurred in August, 2013 -- i.e., after the lease had "terminated." The trial court found that the parties had reinstated the lease and entered judgment for possession in favor of Landlord and awarded Landlord damages in the amount of $395,730.30

On appeal, this Division concluded that there was no evidence that "Tenant had agreed to, or was even notified of, reinstatement of the Lease after its termination on April 11, 2013." As a result, this Division vacated the judgment and returned the case for a new trial. While we did not expressly address Tenant's claim that the Landlord Estoppel was ambiguous regarding abated rent, we held that "Landlord [was] entitled

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to seek all damages under the provisions of the lease agreement, including but not limited to, . . . abated rent." In doing so, we implicitly, if not expressly, ruled that the Landlord Estoppel language was not, on its face, a blanket waiver of any or all abated rent.

Upon return, the trial court issued a pretrial order precluding Landlord from "re-litigat[ing]" the issue of whether the lease had been reinstated because the Appellate Division had already resolved that issue. [Note 4] The trial court also ruled that "[a]ll of the findings of the original trial judge will be adopted except those that relate to those issues of damages as described by the appellate division."

Landlord filed a motion for summary judgment arguing that Tenant's failure to pay rent constituted a breach of the lease, that the lease was lawfully terminated effective April 11, 2013, and Landlord was entitled to damages. On September 28, 2016, the trial court allowed Landlord's motion "as to liability only for breach of lease and any tenancy under which [Tenant] held over after breach of the lease." After trial, on March 29, 2017, judgment entered in Landlord's favor in the amount of $457,889.88, of which $276,631.56 was for abated rent and interest on that rent. This appeal followed.

Tenant argues that the Landlord Estoppel, which states that as of September 1, 2012, Tenant is not in default of the lease and "there is no offset against any prior rent abatements," is ambiguous in that it was intended to amend the lease by abolishing any obligation to pay conditionally abated rent. Based on this alleged ambiguity, Tenant argues the trial court should have denied summary judgment and taken "into consideration parol evidence [at trial] so as to determine the true intentions of the Parties." [Note 5]

While this Division did not expressly discuss whether the phrase was ambiguous when it vacated the underlying judgment and returned the case for a new trial, it nevertheless held that "Landlord [was] entitled to seek all damages under the provisions of the lease agreement, including but not limited to, . . . abated rent" (emphasis added). Implicit, if not explicit, in our order is that the Landlord Estoppel is not ambiguous and does not abolish Landlord's right to recoup abated rent.

"The interpretation of an unambiguous contract is a question of law for the court, as is the initial determination of whether an ambiguity exists." Bukuras v. Mueller Group, LLC, 592 F.3d 255, 261 (1st Cir. 2010), citing Basis Tech. Corp. v. Amazon.com, Inc., 71 Mass. App. Ct. 29, 36 (2008). "Provisions are not ambiguous simply because the parties have developed different interpretations of them. Genuine ambiguity requires language susceptible of more than one meaning so that reasonably intelligent persons would differ as to which meaning is the proper one." Id. at 262, quoting Basis Tech. Corp., supra at 36-37. See Teragram Corp. v. Marketwatch.com, Inc., 444 F.3d 1, 9 (1st Cir. 2006) (applying Massachusetts law, and explaining that "[e]ven if a contract might arguably appear ambiguous from its words alone, the decision remains with the judge if the alternative reading is inherently unreasonable when placed in context"); Bank v. Thermo Elemental, Inc., 451 Mass. 638, 648 (2008).

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"[A]n agreement is to be 'construed so as to give it effect as a rational business instrument and in a manner which will effectuate the intent of the parties[;]' the parties' intent 'must be gathered from a fair construction of the contract as a whole and not by special emphasis upon any one part.'" Bukuras, supra at 262, quoting Kingstown Corp. v. Black Cat Cranberry Corp., 65 Mass. App. Ct. 154, 158 (2005). "[W]ords that are plain and free from ambiguity must be construed in their usual and ordinary sense," Cady v. Marcella, 49 Mass. App. Ct. 334, 338 (2000), quoting Ober v. National Cas. Co., 318 Mass. 27, 30 (1945), and the agreement should be read "in a reasonable and practical way, consistent with its language, background, and purpose." Cady, supra, quoting USM Corp. v. Arthur D. Little Sys., Inc., 28 Mass. App. Ct. 108, 116 (1989).

"Common sense is as much a part of contract interpretation as is the dictionary or the arsenal of cannons." Fishman v. LaSalle Nat'l Bank, 247 F.3d 300, 302 (1st Cir. 2001). "In short, words matter; but the words are to be read as elements in a practical working document and not as a crossword puzzle." Fleet Nat'l Bank v. H & D Entertainment, Inc., 96 F.3d 532, 538 (1st Cir. 1996).

Tenant's assertion that the phrase "there is no offset against any prior rent abatements" is ambiguous, in that it was meant to memorialize an amendment to the lease wherein Landlord waived its right to ever collect conditionally abated rent, must fail. A plain reading of Section 8(b) demonstrates that the Landlord Estoppel is nothing more than an affirmation that as of that particular moment in time -- September 1, 2012 -- Tenant was not in default of the lease and, therefore, Landlord had no claim to the abated rent at that time.

An "offset" is "a contrary claim or demand by which a given claim may be lessened." Black's Law Dictionary Free Online Dictionary (2d ed.), https://thelawdictionary.org/offset/ (last visited February 26, 2018). Landlord's right to collect the conditionally abated rent arose only if Tenant defaulted under the lease. In the context of the Landlord Estoppel, a fair reading of the plain language reveals that Landlord is representing that it had no claim for the abated rent as of September 1, 2012, because Tenant was not in default. Indeed, if the phrase meant what Tenant asserts -- that Landlord had forever waived its right to recover abated rent -- there would have been no need for the parties to have included the phrase, "as of the date of the mutual execution of this Second Amendment." The inclusion of that phrase, however, makes clear that the parties were simply acknowledging that there was no claim for abated rent at that point in time.

Tenant's claimed ambiguity is further refuted by the parallel Section 8(a) of the second amended lease, the so-called "Tenant Estoppel," which provides, in part:

"(a) Tenant Estoppel. Tenant hereby certifies and acknowledges that, as of the date of the mutual execution of this Second Amendment, (a) Landlord is not in default in any respect under the Lease; [and] … (c) there are no offsets against Rent."

Section 8(a) memorializes that, as of September 1, 2012, Landlord had fulfilled its obligations under the lease and, therefore, Tenant had no right to offset payment of rent, at that time. If, however, Landlord defaulted under the lease in the future, then Tenant may have a claim to hold back the payment of rent. If Tenant's interpretation of

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Section 8(b) ("there is no offset against any prior rent abatements") requires an interpretation that Landlord forever waived its right to recover abated rent in the event of Tenant's default, it would necessarily follows that Section 8(a) ("there are no offsets against Rent") must mean that Tenant was forever waiving its claim to withhold rent in the event of a Landlord's future default. Such an interpretation is unreasonable, does not comport with common sense, and diminishes Tenant's argument as to its requested interpretation.

The Landlord Estoppel language is not ambiguous, the grant of summary judgment was proper, and the consideration of abated rent in calculating damages was permissible and appropriate. Accordingly, the judgment is affirmed.


[Note 1] Anthony & Alexander Group, LLP, Customer Relationship Management Institute, LLC, Goldmine TeleServices Group, Inc., and ProSearch Services Group, Inc. Omega Management Group Corporation is the only defendant party to this appeal.

[Note 2] The Honorable Daniel C. Crane recused himself from this appeal, and did not participate in its hearing, review, or decision.

[Note 3] Tenant concedes the failure to pay rent was an event of default. See generally Ghoti Estates, Inc. v. Freda's Capri Restaurant, Inc., 332 Mass. 17, 28 (1954); Marrotto v. Naumann, 1999 Mass. App. Div. 35.

[Note 4] Landlord initially challenged the trial court's order, but later stipulated to the dismissal of its cross appeal.

[Note 5] If Landlord is entitled to recover the conditionally abated rent, Tenant concedes in its brief that the damages awarded in the second trial are correct.