MALTAIS ENTERPRISES, LLC and LITTLE BROOK LOGGING, INC. v. SALT MARSH, LLC, and SALT MARSH GARDEN CENTER, INC.

Introduction

In this action, plaintiffs Maltais Enterprises, LLC and Little Brook Logging, Inc. seek specific performance of two purchase & sale (“P&S”) agreements entered into with defendants Salt Marsh LLC and Salt Marsh Garden Center Inc. on February 8, 2010. Those agreements are for the sale of defendants’ property at 190 Lincoln Avenue in Saugus and the garden center operated from that location. Money damages are also sought. Plaintiffs are owned by Richard and Faustina Maltais. Defendants are owned by the D’Angelo family.

The closing deadline for the P&S agreements has come and gone. The plaintiffs contend that the sale did not go through because the defendants found another purchaser willing to pay more and refused to complete this transaction at the agreed price. The defendants disagree. They claim that, prior to the closing date, they were always willing to close the deal and never sought another buyer. But, they say, they no longer have any obligation to sell because the deadline expired before the plaintiffs were ready, willing and able to close.

A trial was held before me, jury-waived. Based on the entirety of the evidence and my assessment of the weight, credibility, and inferences to be drawn therefrom, I find and rule that the defendants breached the P&S agreements and their covenant of good faith and fair dealing, that the plaintiffs are entitled to the property and its associated garden business at the agreed price, but that the plaintiffs did not offer sufficient proof of monetary damages caused by the D’Angelos to support any monetary award.

Facts

On February 8, 2010, Maltais Enterprises, LLC and Little Brook Logging, Inc. entered into two P&S agreements with Salt Marsh, LLC and Salt Marsh Garden Center, Inc. The plaintiffs’ attorney was Kenneth Simmons. The defendants initially were unrepresented, but began consulting attorney Marc Chapdelaine as events proceeded.

The P&S agreements were for the sale of the land, buildings and garden center at 190 Lincoln Avenue in Saugus, and developed from prior dealings between the parties. [Note 1] The agreed purchase price was $160,000.00. [Note 2]

For purposes of analysis, the most important contractual provisions are paragraphs 8 and 10 of the P&S agreement for the purchase of the property. Paragraph 8 states that the deed was to be delivered to the plaintiffs on February 26, 2010, and Paragraph 10 provided an automatic thirty day extension of the closing date if the February 26, 2010 deadline could not be met. Because March 28, 2010 was a Sunday, the automatic extension expired Monday, March 29, 2010. These dates must be understood in the context of the parties’ overall relationship, however. Both the plaintiffs and the defendants are small entities—classic “mom and pop” operations. They had been working together informally for many months—even to the extent of the plaintiffs advancing the defendants money to pay defendants’ mortgage—and, until their falling-out in late March (discussed in more detail below), they had always cooperated with each other and relied on the other’s cooperation. Deadlines and formalities were not considered important.

To finance the purchase, the plaintiffs applied for a loan from Saugus Bank (the “Bank”) in the amount of $180,000.00. [Note 3] On January 15, 2010 the plaintiffs signed the Commercial First Mortgage Commitment Letter (the “Commitment Letter”) from the Bank, which was dated December 23, 2009. Although the Commitment Letter technically expired on January 22, 2010—before the P&S agreements were even executed—the parties understood that the Commitment was in place, and the Bank willing to proceed with the loan once all conditions were satisfied, at all relevant times. The representative of the Bank working on this loan was Neil Martin, and the attorney representing the Bank in this transaction was John Morello. The loan was to be secured by a first mortgage on the Lincoln Avenue property, a third mortgage on the Maltaises’ residence at 115 Lynn Fells Parkway, and all the assets of Little Brook Logging, Inc. It was also subject to a satisfactory appraisal on 190 Lincoln Avenue.

The Bank ordered the 190 Lincoln Avenue appraisal during the week of February 14-19, 2010, and it was received and deemed satisfactory by the Bank on March 9, 2010. On March 10, 2010, however, the Bank’s attorney (Mr. Morello) discovered there were two undischarged mortgages of record encumbering the title to 115 Lynn Fells Parkway (the Maltais residence) in addition to the two mortgages the Bank had agreed it would take third position behind. These newly-discovered mortgages had, in fact, long since been paid in full, but formal discharges had not been received and recorded. They needed formally to be discharged, of record, for the Bank to be assured of its third lien status. The plaintiffs’ attorney, Mr. Simmons, immediately went to work to secure the discharges and, on March 24, 2010, informed attorney Morello (the Bank’s attorney) that a specialist lawyer, attorney Kurt Stuckel, had been hired to obtain them. Attorney Stuckel worked quickly and copies of the discharges were received from him on April 5, 2010, with the originals following via overnight shipping.

Attorney Simmons assumed that closing by March 29, 2010 (the automatic extension date set forth in the P&S agreements) would be possible regardless of whether the missing discharges were obtained by that date by putting money in escrow equivalent to their amount (both were for minor amounts). This assumption, however, proved incorrect. A March 10, 2010 email from attorney Morello’s office insisted on the discharges, and attorney Morello testified at trial that he would not have closed the transaction with only an escrow in place.

Meanwhile, there was also a title problem on the 190 Lincoln Avenue property—the property to be purchased. This was more serious, and entirely caused by the defendants. They had been sued by Engineering Alliance for an unpaid bill and, on February 5, 2010, Engineering Alliance, Inc. recorded a Writ of Attachment against the Lincoln Avenue property in the amount of $6,876.80. Instead of paying it off or attempting to negotiate a lesser amount, the defendants agreed that the plaintiffs could use the purchase proceeds to pay whatever was owed at the time of the closing. Despite this agreement, neither side immediately spoke with their attorneys about this, and neither side attempted to contact Engineering Alliance to receive either a payoff figure or make arrangements for payment of the debt. The plaintiffs could not do so because it was not their debt and they lacked sufficient knowledge to have a meaningful discussion about its payoff. [Note 4] In such circumstances, it is generally the debtor’s responsibility to make payoff inquiries and arrangements. Here, however, the debtors (the defendants) did nothing to obtain and communicate the payoff figure. [Note 5] Thus, by the scheduled closing date, neither party had obtained or provided the Bank with the payoff information necessary to have the attachment discharged. As both sides knew, the Bank would not close without that discharge.

For these reasons, both the plaintiffs and the defendants were aware that the purchase might not close by March 29. [Note 6] But this was never an issue until a meeting that occurred on March 20 between Mr. Maltais and the D’Angelos. The parties had had general discussions about the D’Angelos’ continuing employment at the garden center after its purchase by the plaintiffs, but the details had never been finalized. These details were the subject of the March 20 meeting, and the parties quickly found that their expectations were substantially different. The D’Angelos believed they would continue doing what they had done before, now for more money. But the plaintiffs (Mr. Maltais), mindful that the business had been struggling and needed fresh sources of revenue to achieve sufficient profits, intended different and expanded responsibilities. Immediately after this meeting, the defendants stopped returning the plaintiffs’ telephone calls. In frustration, on March 26, 2010 Mr. Maltais went to the garden center during business hours to speak with Frederick D’Angelo in person. Although exactly what was said is disputed, it is clear that the defendants had stopped returning Mr. Maltais’ phone calls on the advice of attorney Chapdelaine and now had no intention to move forward with the sale of the business. [Note 7] Mr. Maltais left this encounter convinced that the defendants did not intend to move forward with the sale and contacted attorney Simmons to discuss options. Mr. Simmons then emailed Frederick D’Angelo a request to have the closing deadline extended until April 9, 2010. He received no response.

On April 1, 2010, having heard nothing from the defendants, attorney Simmons called attorney Chapdelaine. Mr. Chapdelaine told Mr. Simmons that the deal would go forward only if it was renegotiated. Mr. Chapdelaine then arranged a meeting between the defendants and Raphael Tucci, a developer interested in building a day care facility at 190 Lincoln Avenue, on either April 8 or 9, 2010.

Further pertinent facts are set forth in the analysis section below.

Analysis

Specific performance is an appropriate remedy for a breach of contract claim when the buyer demonstrates that the seller materially breached the contract, and the buyer was “ready, willing, and able to perform” his obligations under the contract. Coviello v. Richardson, 76 Mass. App. Ct. 603 , 610 (2010). However, when the seller materially breaches the agreement by making clear “that he cannot or will not perform” his contractual duty to convey the premises, the buyer is under no obligation to demonstrate that “he is ready, able, and willing to perform . . . by some offer of performance,” because “the law does not require a party to tender performance if the other party has shown that he cannot or will not perform.” Leigh v. Rule, 331 Mass. 664 , 668 (1954). See also Coviello, 76 Mass. App. Ct. at 609, stating that “[a] material breach of contract by one party excuses the other party from performance . . . A repudiation of a contract is a material breach.”

The defendants’ conduct “clearly manifested a refusal” to proceed with the closing. See Coviello, 76 Mass. App. Ct. at 609–10 (stating that the seller’s repudiation “must be a definite and unequivocal manifestation of intention not to render performance”) (internal punctuation omitted); see also Leigh, 331 Mass. at 669 (in which the seller’s behavior justified concluding that the seller repudiated the contract). The defendants failed to return any of the plaintiffs’ numerous phone call attempts to move the transaction forward between March 20 and March 26, 2010, and did not respond to the March 26, 2010 email from Attorney Simmons requesting an extended closing date. This communication failure made it impossible for the plaintiffs to continue with the closing. [Note 8] Furthermore, it is no coincidence that the defendants stopped returning phone calls promptly after disagreeing with Mr. Maltais on March 20 on the content and scope of their future employment. Given this disagreement and the close proximity to the closing deadline of the ignored phone calls and email, this behavior constitutes “conduct equivalent to a refusal” and a “conclusive repudiation of the agreement.” See Leigh, 331 Mass. at 669 (in which the seller’s behavior justified the conclusion that the seller had repudiated the contract); Coviello, 76 Mass. App. Ct. at 609–10 (citing inconsistent conduct, failing to appear at the closing, and entering another agreement with a third party all as behavior evidencing a repudiation of a contract).

In addition to the defendants’ conduct prior to March 29, 2010 that shows a clear repudiation of the contract, Frederick D’Angelo’s words during his March 26, 2010 meeting with Mr. Maltais indicate an “outright rejection of the original P&S.” See Coviello, 76 Mass. App. Ct. at 611. At this meeting, Mr. D’Angelo said he would not move forward with the sale because his attorney told him the land was worth more than the agreed selling price, and the agreements needed to be renegotiated. This insistence on renegotiating the agreements was repeated on April 1, 2010 during the conversation between attorney Chapdelaine and attorney Simmons. Refusing to move forward with the closing without first renegotiating the purchase price is the equivalent of refusing to tender performance according to the terms of the original agreement, see id. at 610 (indicating that refusal to convey property under the original terms of the agreement is a repudiation of the agreement), and is exactly what the defendants did. Thus, as of March 26, 2010 the defendants had refused to perform their obligations under the P&S Agreements both implicitly through refusing to respond to phone calls and emails, and explicitly through attempts to renegotiate the purchase price. See Leigh, 331 Mass. at 669; Coviello, 76 Mass. App. Ct. at 611. In the face of this “clearly manifested . . . refusal to perform under the original P&S,” Coviello, 76 Mass. App. Ct. at 610, the defendants “obviate[d] the necessity of tender on the [plaintiffs’] behalf,” Leigh, 331 Mass. at 669.

The analysis might be different if it was clear the plaintiffs had no financing at the time of closing, and were unlikely ever to have financing. See Gentile Bros., 352 Mass. at 591 (stressing that a loan commitment is a significant factor in demonstrating an ability to perform under an agreement). That is not the case here. All parties knew that Saugus Bank had issued the plaintiffs a loan commitment to finance the transaction and would fund it fully and promptly once the loan conditions were satisfied. Two of these conditions were still outstanding as of March 29 (obtaining the mortgage discharges on the Maltais’ residence, and paying off the Engineering Alliance Writ of Attachment), but it was clear those conditions would easily and quickly be met. The Bank had already agreed to pay the Writ of Attachment out of the closing funds, and needed only a payoff statement from Engineering Alliance to confirm the final amount of the lien. Additionally, it is undisputed that the outstanding mortgages on the Maltaises’ property had already been paid, so meeting that condition was a simple matter of obtaining the missing discharges. The Bank was informed that those discharges were forthcoming, and they were received by April 6, 2010. [Note 9] This is only one week past the closing deadline in the P&S Agreements, and three days before the expiration of the proposed extended date (April 9). The delay was neither significant nor prejudicial in any way. [Note 10]

The defendants further argue that they were not required to convey because the plaintiffs had already materially breached the contract by asking for an extension. This is so, they claim, because the contract included a provision stating that “time is of the essence.” But this argument fails because a request for an extension in the circumstances of this case does not constitute a material breach of contract, even when the agreement specifies that “time is of the essence.” Coviello, 76 Mass. App. Ct. at 604, 608, 610. As the defendants’ conduct both before and after the extension request shows, the “time is of the essence” provision had been waived.

First, the defendants would have been willing to move forward with a delayed closing if the plaintiffs had been willing to renegotiate the contract price. See id. at 608 (stating that timeliness of a contract is waived when parties continue to engage in activities related to the contract after it has expired); see also Gentile Bros., 352 Mass. at 590 (finding that a contract did not terminate after the closing date passed because the parties continued to negotiate the agreement leading up to, and after, the closing date). As in Coviello and Gentile Bros., the defendants attempted to renegotiate the contract price both leading up to the closing date and after the closing date had passed, and thus effectively waived the “time is of the essence” provision in the agreements. See Gentile Bros., 352 Mass. at 590; Coviello, 76 Mass. App. Ct. at 608.

Second, it is not only the defendants’ attempts to renegotiate the contract that indicate their waiver of the “time is of the essence” provisions, but also their failure to return phone calls and take any action to obtain the payoff figure for the Writ of Attachment on their property at 190 Saugus Avenue. If time had truly been an important factor in their decision to pursue this transaction, they would have been more diligent in advancing the process, particularly in addressing the Writ of Attachment. Furthermore, not returning phone calls and emails only served to delay the closing process, rather than ensure its timeliness. [Note 11] Thus, the defendants’ conduct displayed a lack of urgency that makes their arguments about the time sensitive nature of this contract unpersuasive. Overall, the defendants’ casual approach to this transaction, and willingness to renegotiate the purchase price both immediately before and after the closing date, functionally waived the “time is of the essence” provisions. Gentile Bros., 352 Mass. at 590; Coviello, 76 Mass. App. Ct. at 608.

The defendants’ failure to return phone calls or attempt to move the process along by addressing the Writ of Attachment, coupled with their attempts to renegotiate that purchase price, also indicate a breach of the implied duty of good faith and fair dealing. In short, it is clear that after the March 20, 2010 meeting, the defendants had no intention of fulfilling their obligations under the original terms of the contracts, and conducted themselves in a manner to guarantee that the closing could not occur by the closing deadline or anytime shortly thereafter. This is similar to Gentile Bros., in which the court found that the sellers’ agent “[a]t no time . . . intend[ed] to facilitate passing title to Gentile Bros.,” and that by “not acting in good faith and . . . not intend[ing] to carry out the agreement” the sellers lost any protection afforded to them by the agreement. 352 Mass. at 589–90. Because the defendants did not intend to perform the contracts according to their original terms, and thus violated the implied covenant of good faith and fair dealing, they cannot claim protection because the agreement expired, the “time is of the essence” provisions were breached, or because the plaintiffs may not have been able to finance the transaction on the precise day specified in the agreements. See id. Thus, I find that the plaintiffs are entitled to specific performance of the two P&S Agreements entered with the defendants.

This leaves the question of damages, which are denied for lack of specificity and proof. Clearly the plaintiffs have been denied ownership of the 190 Lincoln Avenue property and garden center for over a year. The materiality of this situation, however, and the quantifiable loss suffered by the plaintiffs as a result has not been shown to the requisite degree of certainty. As noted in Lowrie v. Castle, 225 Mass. 37 (1916):

[Damages] need not be susceptible of calculation with mathematical exactness, provided there is a sufficient basis for a rational conclusion. But such damages cannot be recovered when they are remote, speculative, hypothetical, and not within the realm of reasonable certainty. The nature of the business or venture upon which the anticipated profits are claimed must be such as to support an inference of definite profits grounded upon a reasonably sure basis of facts. When the elements, upon which the claim for prospective profits rests, are numerous and shifting contingencies whose relation to the wrong complained of is problematical, and such profits are not provable with assurance as a trustworthy result of the alleged cause, then there can be no recovery. Manifest ambiguities in ascertaining what would have been the course of events in the face of complicated factors, under circumstances which never have come to pass, and inherent difficulties in calculating the amount of prospective gains, prevent the recovery of damages. Pure chances lying between the alleged wrong and the anticipated profits, dependent upon unsettled conditions, render impracticable the assertion of cause and effect.

Id. at 51-52. See also Augat, Inc. v. Aegis, Inc., 417 Mass. 484 , 488-89 (1994); BBF, Inc. v Germanium Power Devices Corp., 13 Mass. App. Ct. 166 , 176-77 (1982); Jet Spray Cooler, Inc. v. Crampton, 377 Mass. 159 , 180-81 (1979).

Here, there was no evidence that the garden center was profitable. According to the defendants, the garden center lost money every year. Beyond this, no financial information about the garden center was admitted at trial. Nor was any evidence about the garden center’s impact on the plaintiffs’ current business offered or admitted at trial. The only evidence somewhat relevant to the financial state of the garden center was a rough estimate of the money that each member of the D’Angelo family took out of the garden center each year, but no testimony was offered to suggest how the plaintiffs would approach taking money from the garden center. Presumably the plaintiffs entered this venture because they thought the garden center could be profitable for them, but it was not clear at the time of trial what changes they proposed to make to the garden center once it was under their ownership, and how they expected those changes to impact their profits. No evidence was offered about the profitability of comparable projects in the area, nor how the loss of value to the plaintiffs’ overall business (if any) was impacted by the delayed conveyance. Simply put, the evidence of monetary damage was insufficient to bring it within “the realm of reasonable certainty.” Lowrie, 225 Mass. at 51.

Conclusion

For the foregoing reasons, I find and rule that the plaintiffs are entitled to specific performance of the contracts for conveyance of the property and business at 190 Lincoln Avenue in Saugus, and that such conveyance shall take place within a reasonable time after entry of judgment. This includes time for the plaintiffs to reinstate their financing, and a reasonable time to fulfill any conditions of that financing. No monetary damages are awarded. Judgment shall enter accordingly.

SO ORDERED.

Keith C. Long, Justice

Dated: 22 April 2011