Heard: December 8, 2016.
action commenced in the Superior Court Department on March
case was tried before Bruce R. Henry, J.
C. O'Connor (Douglas S. Denny-Brown also present) for the
F. Feeney for the defendants.
Present: Kafker, C.J., Grainger, & Sullivan, JJ.
issue presented in this declaratory judgment and breach of
contract action is which party bears the burden of proof at
trial regarding the exercise of a termination option in a
lease. The plaintiff, Patriot Power, LLC, doing business as
MandaShan Enterprises, was the landlord in a commercial
lease; the defendant New Rounder, LLC, was the tenant, and
the defendant Concord Music Group, Inc., was the guarantor
(we refer to the defendants collectively as tenant). The
lease provided that it would automatically renew each year
unless either party timely notified the other that it wished
to exercise a termination option in the lease. In the instant
case, the landlord filed a complaint seeking a declaratory
judgment that the tenant had not effectively terminated the
lease, and asking for one year's rent plus consequential
damages. The tenant answered and counterclaimed, seeking a
declaratory judgment that it had properly notified the
landlord of its intention to terminate. The landlord sought a
pretrial ruling that the tenant had the burden of proof at
trial on the issue of whether it sent a lease termination
letter before the nonrenewal deadline. A judge denied the
motion, ruling that as the "moving party, " the
landlord bore the burden to prove it did not receive the
termination letter on time. At trial, a different judge
instructed the jury in accordance with the pretrial ruling.
The landlord objected to this instruction. The jury returned
a verdict in favor of the tenant.
appeal, the landlord contends that the trial judge's
burden of proof instruction was erroneous and
prejudicial. We conclude that the tenant had the
burden to prove it fulfilled the termination option
requirements outlined in the lease, as this was a condition
imposed on the party seeking to end the contractual
obligation. Because the jury instruction regarding the burden
of proof was erroneous and prejudicial, we reverse.
following facts are undisputed. On April 1, 2010, the tenant
executed a lease with the landlord's predecessor in
interest for commercial office and warehouse space in
Burlington. On December 31, 2012, the parties executed an
amendment to the original lease (first amendment). Section
1.4 of the first amendment states:
"This Lease, including all covenants, terms, conditions
contained herein, shall be automatically extended for
additional successive Renewal Terms of one (1) year each
unless Tenant or Landlord serves written notice, either party
to the other, of either party's option not to so extend
the Lease. The time for service of such written notice shall
not be more than twelve (12) months or less than six (6)
months prior to the expiration of then-current lease period.
Time is of the essence."
original lease also included a provision stating that any
notices to either the landlord or the tenant "shall be
in writing and shall be sent by registered or certified mail
or by a recognized overnight courier who maintains delivery
records, postage prepaid, " and that "[a]11 such
notices shall be effective when received or, if delivery is
refused, upon first refusal." As the lease was set to
renew automatically on March 31, 2014, either party would
have had to notify the other by September 30, 2013, if it
intended to terminate.
September 17, 2013, the tenant sent a postage prepaid package
via Federal Express (package or Federal Express package) to
the landlord's address. The landlord received the package
on September 18, 2013. Both parties agree that the package
contained a "Subordination Non-Disturbance and
Attachment Agreement" and a "Tenant Estoppel
Certificate" (collectively referred to as the
refinancing documents), as well as a transmittal letter
referencing the refinancing documents (transmittal letter).
However, the parties dispute whether the package also
contained a signed letter, dated September 16, 2013, ...