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Patriot Power, LLC v. New Rounder, LLC

Appeals Court of Massachusetts, Middlesex

March 13, 2017

PATRIOT POWER, LLC[1]
v.
NEW ROUNDER, LLC, & another.[2]

          Heard: December 8, 2016.

         Civil action commenced in the Superior Court Department on March 24, 2014.

         The case was tried before Bruce R. Henry, J.

          Mark C. O'Connor (Douglas S. Denny-Brown also present) for the plaintiff.

          Robert F. Feeney for the defendants.

          Present: Kafker, C.J., Grainger, & Sullivan, JJ.

          KAFKER, C.J.

         The 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.

         On appeal, the landlord contends that the trial judge's burden of proof instruction was erroneous and prejudicial.[3] 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.

         Background.

         The 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."

         The 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.

         On 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, ...


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