ASSET SOLUTIONS, LLC, v. JOSE M. QUINTERO & CARLOS R. CASTILLO.

In a three-count Amended Verified Complaint alleging breach of contract, fraudulent conveyance and seeking specific performance, Plaintiff Asset Solutions, LLC (ASL) alleges Defendant Jose M. Quintero (Quintero) breached the provisions of an Offer to Purchase (OTP) executed between them, with Quintero as seller and ASL as buyer. The OTP provided for the subsequent execution of a "standard form purchase and sale agreement . . ." by a date certain. Quintero's position is that he was excused from executing the P & S proffered by ASL because it contained material terms which were inconsistent with the terms of the OTP, indicating ASL's breach of the OTP. Accordingly, he was under no obligation to sign the proffered P & S, and he was free to cancel the OTP and sell the Property to an unrelated third party. He did so, selling the Property to Defendant Carlos R. Castillo (Castillo).

On May 19, 2017, the court (Vhay, J.) denied Plaintiff's motion for endorsement of a memorandum of lis pendens after hearing. Plaintiff's complaint, although verified, lacked the required recitation in its certification that "no material facts have been omitted." The complaint also failed to name Castillo as a defendant and, under G. L. c. 184, §15(b), ASL was required to name "all owners of record and any party in occupation under a written lease" as of the date of the complaint. See DeCroteau v. DeCroteau, 90 Mass. App. Ct. 903 , 906 (2016). The court gave Plaintiff time to amend its pleading.

After ASL corrected the deficiencies of its motion and filed an Amended Verified Complaint naming Castillo as a Defendant, this court approved its motion for endorsement of lis pendens, and Quintero pressed his Special Motion to Dismiss. Castillo, as newly named Defendant, also filed a Special Motion to Dismiss, joining in and incorporating Quintero's filing. A hearing was held at which all parties were heard. For the reasons stated below, Defendants' special motions to dismiss under G. L. c. 184, §15(c), are DENIED, but are considered as motions to dismiss under Mass. R. Civ. P. 12(b)(6), and are ALLOWED on that basis.

I. Standard of Review

G. L. c. 184, § 15(c) provides that a "party may . . . file a special motion to dismiss the claimant's action if that party believes that the action or claim supporting the memorandum of lis pendens is frivolous." Under G. L. c. 184 §15(c) (Lis Pendens Statute) the court must grant a special motion to dismiss if it finds:

the action or claim is frivolous because (1) it is devoid of any reasonable factual support; or (2) it is devoid of any arguable basis in law; or (3) the action or claim is subject to dismissal based on a valid legal defense such as the Statute of Frauds.

The standard of review for a special motion to dismiss is the functional equivalent of a motion dismiss under Mass. R. Civ. P. 12(b)(6), see Faneuil Investors Grp. v. Bd. of Selectmen of Dennis, 458 Mass. 1 , 2 (2010), or summary judgment if matters outside the pleadings are part of the record. In either situation, the court does not weigh evidence, assess credibility, or find facts; it only applies the law to the undisputed material facts. Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117 , 120 (1991). In viewing the factual record presented as part of the motion, the court draws "all logically permissible inferences" from the facts in favor of the non-moving party, here, Plaintiff. Willitts v. Roman Catholic Archbishop of Boston, 411 Mass. 202 , 203 (1991). If a motion is granted under G. L. c. 184 §15(c), the court must award costs and attorney's fees to the aggrieved party. McMann v. McGowan, 71 Mass. App. Ct. 513 , 519 (2008). Here, this court determines that ASL's case is not frivolous and, therefore, should not be dismissed under the stringent provisions for dismissal and sanctions set forth in G. L. c. 184, §15(c), but must nonetheless will be dismissed under Mass. R. Civ. P. 12(b)(6), which does not require the findings mandated by the Lis Pendens Statute.

Based on the record before the court, the accepts as true the following facts:

The Parties

1. Asset Solutions, LLC (ASL) is a duly organized limited liability company with a principal address of 46 Chelmsford Street in Boston.

2. Defendant Jose M. Quintero is a resident of Boston. He owned the property known as and numbered 7 Sylvia Street in Boston (Property) during the late winter and spring of 2017. The Property comprises three apartments, two of which Quintero rented to long-term tenants. He lived in the third apartment.

3. Defendant Carlos R. Castillo is a resident of Boston, and current owner of the Property, having purchased it from Quintero on May 30, 2017.

The OTP Between ASL and Quintero

4. At some point Quintero decided to put the Property on the market. He received two offers: One from ASL and one from Castillo. Quintero met with Michael Courtney, ASL's manager on March 10, 2017. During the March 10th meeting, Courtney orally offered to purchase the Property for $800,000.00.

5. Quintero requested the weekend to consider the offer, and subsequently called Courtney to say he wanted to confer with his accountant and attorney prior to accepting any offer.

6. The parties met on March 16, 2017, to execute an Offer to Purchase Real Estate (OTP), which they did. Courtney delivered Quintero a deposit check of $1,000.00, at the time of execution. The OTP set a date for the execution of a P & S.

7. Included in the OTP were specific terms regarding the tenants then living at the Property which read: "seller will introduce buyer to tenants at signing of [the Purchase and Sale] so that buyer may obtain estoppel certificates, [tenant at will agreements], and commence eviction proceedings before closing, third floor unit to be delivered vacant, property sold as is" (hereafter referred to as "OTP Tenancy Provision").

8. On March 21, 2017, ASL's attorney requested an extension of the time to execute the P & S until March 28, 2017. He advised Quintero's attorney that he had yet to see a draft of the P & S and that ASL's attorney was willing to provide the first draft to the seller.

9. Quintero's attorney agreed to the extension and advised ASL's attorney that he had not yet seen a copy of the OTP, which ASL's attorney then provided him the same day.

10. ASL's attorney sent the initial draft of the P & S to Quintero's attorney on March 27, 2017, and requested a further extension of time to March 30, 2107, at 5:00 p.m. to have the P & S executed because he had not yet talked with his client.

11. In contrast to the provisions set forth in the OTP Tenancy Provision, Paragraph 9 of the initial P & S, titled "Possession and Condition of Premises," states "full possession of said Premises free of all tenants and occupants is to be delivered at the time of the delivery of the deed[.]" (Underline added).

12. In contrast to both the OTP Tenancy Provision and Paragraph 9 of the P & S, Paragraph 57 of the Rider to the P & S provides:

[p]rior to the time for performance, and as a condition precedent to the Buyer's duty to tender the sale proceeds as set forth herein, the Seller shall produce to the Buyer for each and every tenant, a duly-executed tenant estoppel certificate, signed by each tenant, and dated within ten (10) days of the time for performance, in the form appended hereto, certifying that: the tenant is a tenant under a lease, that the tenant is a tenant at will, that the Tenant's lease is unmodified, is in full force and effect, and has not been assigned or the subject of any subletting, and that the tenant and the Landlord are not in default under such lease or tenancy with respect to any obligation thereunder, including but not limited to the payment of rent, and any duties with respect to the conditions of the premises.

13. P & S Paragraph 30 ("Additional Provisions") references the Rider and gives it priority if a provision of the Rider "conflicts in any way with any other provision of the [P & S]."

14. On March 29, 2017, Quintero's attorney told ASL's attorney that he could not meet with his client to review the P & S until the following day and requested a further extension for execution until 5:00 p.m. on March 31, 2017. The P & S was never signed.

15. On the morning of March 31, 2017, at the request of Quintero, his attorney sent an e mail to ASL's attorney cancelling the deal.

16. Quintero and Castillo entered into a purchase and sale agreement for the Property on April 21, 2017 (Castillo P & S), pursuant to which Quintero sold the Property to Castillo for a purchase price of $775,000.00, on May 3, 2017, two days after the May 1, 2017 closing date set forth in the OTP by and between Quintero and ASL.

* * * * *

A valid and enforceable contract requires an offer, acceptance of that offer, consideration, and agreement on sufficient terms laying out the rights and obligations of the parties. Situation Mgt. Sys., Inc. v. Malouf, Inc., 430 Mass. 875 , 878 (2000). ASL argues the OTP met these elements and contains all of the contract's essential terms. The OTP calls for the execution of a "Standard Form Purchase and Sale Agreement recommended by the Greater Boston Real Estate Board or any form substantially similar." ASL further claims the P & S proffered to Quintero was consistent with the OTP. It alleges Quintero breached the OTP by cancelling it and failing to timely execute the P & S.

The Tenancy Provision in the OTP: "seller will introduce buyer to tenants at signing of [the P & S] so that buyer may obtain estoppel certificates, [tenant at will] agreements and commence eviction procedures before closing, third floor unit to be delivered vacant, property sold as is" sets forth the starting point to determine whether the P & S reflects the parties' agreement or material changes it with respect to the tenancies at the Property. The proposed P & S is internally inconsistent on the tenancy issue. In Paragraph 9 of the boilerplate, it provides that the Property will be delivered free of all tenants. In contrast, under Paragraph 57 of the Rider to the P & S, vacancy is not required. Instead, it provides that it is seller's responsibility to present to buyer, "as a condition precedent to the Buyer's duty to tender the sales proceeds" executed estoppel certificates (see fact paragraph 12 above for the full text)(emphasis added). According to Paragraph 30 of the P & S, the provisions of the Rider obtain.

As an initial matter, in determining whether the writing offered (here, the P & S) represents the agreement of the parties to be bound, as set forth in the OTP, "[t]he controlling fact is the intention of the parties." McCarthy v. Tobin, 429 Mass. 84 , 87 (1999). "A failure of the parties to agree on material terms may not merely be evidence of the intent of the parties to be bound only in the future, but may prevent any rights or obligations from arising on either side for lack of a completed contract." Rosenfield v. U.S. Trust Co., 290 Mass. 210 , 216 (1935). In McCarthy, the parties agreed in a signed writing to execute "the applicable Standard FORM Purchase and Sale Agreement recommended by the Greater Boston Real Estate Board." McCarthy, 429 Mass. at 87. The Supreme Judicial Court held that Tobin, the seller, was bound by an earlier signing of the offer to purchase because the offer contained all material terms of the parties' agreement, with any departures from the standard terms being "ministerial and nonessential terms of the bargain." Id. If a preliminary writing, however, omits any mention of material terms introduced in a later writing, the new terms not contemplated by the earlier writing render it unenforceable. See Blomendale v. Imbrescia, 25 Mass. App. Ct. 144 , 147 (1987) (stating the introduction of new terms in a purchase and sale that are inconsistent with the accepted offer to purchase makes the accepted offer unenforceable, if the earlier writing contemplated no contingencies). The same concept applies here, when the P & S changes a material term that was expressly set forth in the OTP.

Here, the differences between the OTP and P & S are significant and fatal to ASL's allegation that Quintero breached the OTP by cancelling the transaction on March 31, 2017, and refusing to execute the proffered P & S. ASL had proffered a P & S that contradicted the OTP on a material and, to Quintero, important term of the sale. The OTP provided that Quintero would introduce ASL to the current tenants so that ASL could gather the necessary information and commence any eviction related processes before the closing. Quintero explains in his affidavit he expressly sought a quick sale to free him to move to Florida to care for his mother and he knew it would have been nearly impossible for him to start eviction proceedings given his time frame. He argues that given the draft P & S, which contained unacceptable terms relating to the existing tenancies, he was under no obligation to sign the document. See Lease-It Inc, v. Mass. Port Auth., 33 Mass. App. Ct. 391 , 397 (1992) ("it is well established that a material breach by one party excuses the other party from further performance under the contract. Once relieved from performance, the injured party is not liable for further damages incurred by the party in material breach.")

ASL asserts that Quintero is the party in breach of contract, arguing the "cancellation" by Quintero of the OTP was prior to the extended date requested by Quintero's attorney to execute P & S, constituting a material breach and repudiation by Quintero. This court is not persuaded by that argument and notes ASL did not bring an action to enforce the OTP. That would be a different case, perhaps with a different outcome, but it is not the case it presses here. Even without the affidavit of Quintero, there is enough in the record for this court to conclude that the proffered P & S contained changed material terms. Therefore, Quintero did not breach the OTP by canceling the transaction on the morning of the execution deadline, and was under no obligation to execute the proffered P & S. [Note 1]

As to Quintero's claim that time was of the essence, the court finds it was waived. See Church of God in Christ, Inc. v. Congregation Kehillath Jacob, 370 Mass. 828 , 832 (1996) (oral extension, acceptance of payments, and continued dealings between parties signified waiver). Emails submitted to the court show that both parties' attorneys continued to ask for and agree to extensions of the deadlines for the execution of the P & S. Counsel for Quintero requested the final deadline extension of March 31, 2017, at 5:00 p.m.

Finally, there is nothing in ASL's pleadings or on this record that supports the inference that Defendant Castillo was not a bona fide purchaser for value.

Conclusion

This court finds and rules that the Amended Verified Complaint is dismissed pursuant to Mass. R. Civ. P. 12(b)(6). The court cannot allow Defendants' special motions to dismiss under G. L. c. 184, §15(c),because allowance requires a finding that Plaintiff's claims were devoid of any reasonable factual support, devoid of any arguable basis in law, or subject to dismissal based on a valid legal defense. The court cannot make any of those findings on the record presented.

Therefore, it is hereby:

ORDERED that Defendants' special motions to dismiss under G. L. c. 184, §15(c) are DENIED, but are treated as a motion to dismiss under 12(b)(6), are ALLOWED on that basis; and it is further

ORDERED the Lis Pendens hereby is DISSOLVED, and has no further force and effect, and a judgment to that effect may be recorded with the Registry of Deeds upon payment of applicable fees.

Judgment to issue accordingly.