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Karaa v. Yim

Appeals Court of Massachusetts, Middlesex

December 5, 2014

Shoreh Karaa & another [1]
v.
Kuk Yim & others. [2]

Argued October 8, 2014.

Civil action commenced in the Superior Court Department on September 30, 2011.

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The case was heard by Kathe M. Tuttman, J.

Edward A. Broderick for the plaintiffs.

Wei Jia, for the defendants, submitted a brief.

Present: Kafker, Trainor, & Milkey, JJ.

OPINION

[20 N.E.3d 946] Kafker, J.

The primary issue presented in this landlord-tenant case is the proper application of the security deposit provisions in G. L. c. 186, § 15B. The residential property was owned by Shoreh Karaa and Fadi Karaa (collectively, the Karaas), and rented by China Real Estate Development Investment & Trust Fund Corporation (CREDIT), Kuk Yim, and Chiung Fong (collectively, the tenants). After a bench trial, the Superior Court judge found that the tenants had breached their lease with the Karaas, and that the tenants' obligations under the lease were not excused under the doctrine of frustration of purpose. The judge also found that the Karaas were not liable for alleged violations of G. L. c. 186, § 15B, stemming from their mishandling of the tenants' security deposit. The judge further determined that the Karaas had not committed fraud or breached the covenant of quiet enjoyment, that they properly had mitigated their damages, and that they were not liable for alleged violations of G. L. c. 93A. The trial judge did find, however, that the Karaas were liable under G. L. c. 186, § 15B(2)( a ), for their failure to pay interest on the tenants' last month's rent. On appeal, the tenants take issue with the trial judge's holdings in favor of the Karaas. We affirm.

Background.

In March, 2010, the Karaas placed their home located at 83 Spring Valley Road in Belmont (property) up for rent at $4,500 per month through listings on the Internet site " Craigslist" and with a real estate agent. On May 10, 2010, the tenants and the Karaas entered into a written lease agreement for the property at a reduced rent of $4,300 per month, with a starting date of June 16, 2010. The lease was for one year and fifteen days. The lessees initially listed on the lease were CREDIT and Yim, as the lease was signed by Yim both in her personal capacity and in her capacity as chief financial officer for CREDIT. Subsequently, a new cover page to the lease was substituted, listing Yim and Fong as lessees. This change was made to allow their children to attend school in Belmont.

At the time Yim signed the lease, the tenants gave the Karaas a check for $8,600, which included $4,300 for a security deposit and $4,300 for the last month's rent. Shoreh[3] requested a tax identification or Social Security number so that she could open an

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escrow account to deposit the funds, and the tenants responded that they would provide the number at a later date. Shoreh deposited the check into her own interest-bearing account the same day the lease was signed. Over the course of the tenancy, the tenants never provided the Karaas a tax identification or Social Security number. Though the Karaas previously had leased other properties and knew that they were required to segregate [20 N.E.3d 947] the security deposit from their personal account and to provide the tenants with a receipt in compliance with G. L. c. 186, § 15B, they did not do so.

In August of 2010, Fong and Yim, and their children, traveled to China. They intended to return to Belmont later that month, but due to complications with their visas, they were unable to reenter the United States. The tenants paid rent for August, September, and October.[4] On October 26, 2010, Yim sent the Karaas an electronic mail message (e-mail) stating that, because the visa applications for herself and the three children had been rejected, they would not be able to return to the United States, and that the tenants therefore would be terminating the lease. She stated that the Karaas should apply the tenants' earlier check of $8,600 to cover the November rent and as " compensation" for the termination of the lease. Yim further stated that Fong would be returning to the United States around November 15 and would arrange for the move and any necessary paperwork.

In early December, the Karaas posted the house for rent on Craigslist and with a real estate agent. Because of their past experience leasing other properties, the Karaas were aware that it likely would be more difficult to lease the property during the winter months. They eventually relet the house for $4,200 per month beginning April 1, 2011. On September 30, 2011, the Karaas brought a two-count complaint against the tenants for breach of contract and breach of the implied covenant of good faith and fair dealing. Prior to litigation, the Karaas sent the tenants a check, dated September 25, 2011, for $4,604.88 for " security deposit return." [5] The Karaas did not pay the tenants any interest on the last month's rent.

In response, Yim brought counterclaims alleging that the Karaas breached the lease by failing to deliver the entire property, did not comply with the statutory requirements of the security

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deposit statute and the last month's rent statute, and engaged in unfair and deceptive practices in violation of G. L. c. 93A. Yim additionally claimed that her purpose in entering the lease, i.e., to allow her children to attend school in Belmont, was frustrated by circumstances beyond her control, the rejection of their visa applications. Lastly, Yim claimed the Karaas failed to mitigate their damages subsequent to the breach.

After a jury-waived trial, the judge found for the Karaas, awarding them $19,861,[6] plus statutory interest of $5,106.23, and attorney's fees in the amount of $24,098.70.[7] The judge included an offset of $189 for trebled interest on Yim's last month's rent deposit,[8] though [20 N.E.3d 948] the judge otherwise dismissed the counterclaims.

Discussion.

1. The tenants' obligations under the lease. ...


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