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Siemens Corp. v. Heidelberg Pharma AG

United States District Court, D. Massachusetts

March 27, 2018




         This is a commercial real estate dispute in which plaintiff Siemens Corporation (Siemens) seeks to recover unpaid rent and costs from defendant Heidelberg Pharma AG (known at the time of the events in question, and referred to throughout this opinion, as Wilex AG). Siemens, the tenant under a lease to an office building located in Cambridge, Massachusetts, entered into a sublease agreement with Wilex AG's wholly-owned subsidiary, Wilex Inc., for which Wilex AG provided a guaranty. Wilex Inc. subsequently ceased to exist after Wilex AG decided to sell all of its subsidiary's shares to a third entity, Nuclea Biotechnologies (Nuclea). Nuclea failed to make timely rent payments and defaulted under the lease. Under threat of a summary process eviction, Nuclea abandoned the premises. Siemens then brought this lawsuit, seeking to enforce the terms of the Wilex AG guaranty. The parties have filed cross motions for summary judgment and, for the reasons that follow, the court will ALLOW IN PART Siemens' motion for summary judgment, and will DENY Heidelberg Pharma/Wilex AG's cross-motion.


         Siemens leased the office building in question, located at 100 Acorn Park Drive in Cambridge, Massachusetts, from TBCI, LLC, as Trustee of 100 Discovery Park Realty Trust. Siemens, in turn, as sublandlord, entered into a Sublease Agreement with Wilex Inc. (the Sublease). Wilex Inc., a wholly-owned subsidiary of Wilex AG (a German oncology-focused drug development company), was formed for the sole purpose of conducting business on the leased premises. Wilex AG signed a Guaranty that it would make good all of Wilex Inc.'s obligations under the Sublease. Both the Sublease and the Guaranty were signed on or about November 17, 2010, with the Sublease term running until January 31, 2016, subject to Wilex Inc.'s unassignable right and option to extend the Sublease to February 27, 2019.

         Nuclea acquired all of the shares of Wilex Inc. on or about September 6, 2013, thus extinguishing any ownership interest that Wilex AG had in Wilex Inc. (which ceased to exist after the merger). As a result of the merger, Nuclea became the subtenant under the Siemens Sublease.

         Nuclea did not prove an ideal subtenant, falling behind on its rent payments and eventually defaulting. Although Siemens and Nuclea reached a Settlement Agreement, which included an Amendment of the Sublease, Nuclea promptly breached that agreement, causing Siemens to initiate a summary process proceeding in Cambridge District Court. There it obtained a judgment in the amount of $831, 824.38.[1] Nuclea vacated the premises on August 1, 2016, and filed for bankruptcy shortly thereafter.

         Thereafter, Siemens made a demand on Wilex AG under the Guaranty, seeking to recover the $831, 824.38 judgment, plus decommissioning costs incurred by Siemens when Nuclea failed to remove all of its property from the leased premises. Wilex AG refused to make good, and this breach of contract lawsuit followed. The court authorized the parties to take discovery, and both have now moved for summary judgment.


         Summary judgment is appropriate when the record, viewed in the light most favorable to the nonmoving party, reveals “no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A party seeking summary judgment must demonstrate to the court the absence of genuinely disputed material facts by reference to the record. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). There is no dispute as to the underlying contractual documents at issue here, and “[d]ue to the relative simplicity of the issues usually involved, suits to enforce . . . guarantees are particularly appropriate for disposition by summary judgment.” F.D.I.C. v. Villemaire, 849 F.Supp. 116, 119 (D. Mass. 1994).

         The crux of the dispute is whether Wilex AG's obligations under the Guaranty ended with the expiration of the original term of the Sublease, or whether Wilex AG is also obligated to cover the losses that Siemens incurred after Nuclea's default and up to its eviction on August 1, 2016. Wilex AG concedes that the merger of Wilex Inc. and Nuclea did not affect Wilex AG's underlying obligations under the Guaranty, and that it continued to be obligated for any non-performance and unpaid rent on the part of Nuclea, the surviving entity, for the original term of the Sublease, which expired January 31, 2016. See Def.'s Mem. in Opp'n to Pl.'s Motion for Summary Judgment, Dkt # 23, at 4.

         The operative guaranty clause provides that “Guarantor unconditionally guarantees to Sublandlord . . . Subtenant's full and punctual performance of its obligations under the sublease.” See Guaranty, Section 1, Dkt # 18, Ex. H. The Guaranty further states that the liability of Wilex AG “will not be affected by the assignment or transfer of the Sublease or sublease of all or any part of the Premises described in the Sublease by [Wilex Inc.].” Id. Section 6. Finally, the Guaranty states that it “will apply to the Sublease, any extension or renewal of the Sublease as expressly set forth therein, any obligations, indemnities and representations made by [Wilex Inc.] in the Sublease which survive the Term of the Sublease and any holdover term following the Term of the Sublease.” Id.

         As the parties agree, under the plain wording of the Guaranty, Wilex AG's obligations were not affected by the assignment of the Sublease to Nuclea; however, Wilex AG's guaranty obligations were limited to “any extension or renewal of the Sublease as expressly set forth therein . . . and any holdover term following the Term of the Sublease.” With respect to what was “set forth therein, ” the Sublease Agreement expressly provided that “the right and option to so extend the term shall be personal to the Subtenant executing the Sublease and such right and option may not be assigned or transferred to any other party or entity.” See Sublease, Section 1 (b), Dkt #18, Ex. E.

         Siemens appears to agree that, because the right to extend the Sublease was not assignable, had Nuclea and Siemens negotiated an extension of the Sublease beyond January 31, 2016, Wilex AG would be off the hook. However, Siemens contends that the Settlement Agreement and First Amendment of Lease negotiated between Siemens and Nuclea never became effective because Nuclea failed to satisfy several conditions precedent, including the delivery of a Letter of Credit and the payment of all moneys owed under the terms of the Settlement Agreement. See Pl.'s Mem. in Opp'n to Def.'s Motion for Summary Judgment, Dkt # 22, at 2-3. Because the new agreement, although contemplated, never became effective between Nuclea and Siemens, Siemens contends that Nuclea became a holdover tenant during the period of February 1, 2016 and August 1, 2016.[2] Siemens argues that because Wilex AG's obligation applied to “any holdover term following the Term of the Sublease, ” that term should be read broadly to include a holdover term of a third-party assignee or a successor in interest to the subtenancy.

         “Instruments of guaranty, like other contracts, are enforceable in accordance with their terms, and the rights of the parties must be ascertained from the terms of the guaranty instrument.” First Nat'l Bank of Boston v. Ibarra, 47 Mass.App.Ct. 660, 662-63 (1999). When interpreting a provision of a guaranty, “every phrase and clause must be presumed to have been designedly employed, and must be given meaning and effect, wherever practicable, when construed with all the other phraseology contained in the instrument, which must be considered as a ...

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