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Sea Breeze Estates, LLC v. Jarema

Appeals Court of Massachusetts, Suffolk

October 15, 2018

JOHN A. JAREMA, trustee, [1] & another. [2]

          Heard: May 8, 2018.

         Civil action commenced in the Superior Court Department on August 19, 2014. The case was heard by Robert L. Ullmann, J., on motions for summary judgment, and motions for attorney's fees and costs were heard by him.

          Roger S. Davis for the plaintiff.

          Jennifer L. Markowski (David Traniello also present) for the defendants.

          Present: Sullivan, Neyman, & Englander, JJ.

          NEYMAN, J.

         In this case, we consider whether a contract was modified by the parties, and whether the defendants are entitled to attorney's fees under a "prevailing party" provision of the contract. The plaintiff, Sea Breeze Estates, LLC (Sea Breeze) brought an action for breach of a purchase and sale contract (contract) in the Superior Court, alleging that the defendants terminated the contract without justification.[3] The defendants, John Jarema and Alexander Bove, acting as trustees of the Jarema Family Trust (collectively, the trustees), filed various counterclaims alleging, among other things, that Sea Breeze breached the contract before termination by failing to make required monthly payments. In response to the trustees' motion for summary judgment, Sea Breeze contended that, prior to its cessation of monthly payments, the parties modified the contract and the trustees breached it as modified. A Superior Court judge disagreed and allowed, in part, the trustees' motion for summary judgment. Pursuant to § 18.10 of the contract, the judge also allowed the trustees' motion for attorney's fees and costs as the "prevailing party." We affirm.


         1. The contract.

         In June of 2004, the parties entered into a contract for the sale of property at 187 Atlantic Street in Gloucester (property). Sea Breeze's goal was to develop a multifamily residential community on the property. Pursuant to § 2.1 of the contract, Sea Breeze agreed to purchase the property for $3, 735, 000 "presum[ing] and anticipat[ing]" that it would have the "opportunity for development of 44 units," and stipulating that, if it received approval to build more than forty-four units, it would pay the trustees $85, 000 for each additional unit. A related provision, § 2.3(k), established that, even if Sea Breeze received approval to build fewer than forty-four units, it still "maintain[ed] the right to elect to purchase the property for the full purchase price."

         Section 2.2(b) of the contract required Sea Breeze to pay the trustees $2, 000 per month for a period of twenty-four months, "representing the time period anticipated for [Sea Breeze] to obtain the necessary Approvals"[4] for the project. In the event that Sea Breeze did not obtain the necessary approvals within that allotted "Approval Period," § 2.2(c) authorized an "Extension Period"[5] during which Sea Breeze could continue to make $2, 000 monthly payments as separate consideration to keep the contract in effect. Whereas payments made during the approval period would be credited toward the final purchase price, any "Extension Payments" would not.

         Two additional provisions of the contract are relevant to this case. Section 18.2 contains a so-called "merger" or "integration"[6] clause, which states, inter alia, that the contract "represents the entire understanding of the parties," merges "[a]11 prior negotiations" into the written agreement, and "may only be amended by a writing executed by the parties." Section 18.10, captioned "Counsel Fees," entitles the "prevailing party" to recover reasonable counsel fees and costs stemming from "any litigation regarding the rights and obligations of the parties under this [c]ontract."

         2. The extension period and modification proposals.

         Sea Breeze was unable to obtain the necessary permits and approvals within the twenty-four-month approval period, which ended in June of 2006. However, Sea Breeze continued to make the $2, 000 monthly extension payments. On December 3, 2008, Michael Larkin, on behalf of Sea Breeze, wrote a letter to Bove informing him that its engineer had determined "that the property ha[d] a limited development opportunity of thirty-three (33) units," which, at $85, 000 per unit, would result in a total purchase price of $2, 805, 000. The letter concluded by asking Bove to "respond so that this matter can be resolved." The parties communicated without progress over the next three-plus years.

         On January 31, 2012, Patrick Larkin, a manager of Sea Breeze and brother of Michael Larkin, [7] sent an electronic mail message (e-mail) to Jarema stating, "I spoke with you last week regarding your conversation with Atty. Bove. You indicated that we were all on the same page to move forward. When will we have something in writing from Atty. Bove[?]" Jarema responded to Larkin's January 31 e-mail with another e-mail stating, in relevant part, "It should be very shortly as I am scheduled to talk or see him this week." On February 1, 2012, Bove and Jarema discussed the proposed terms contained in Michael's December 3, 2008, letter. The next day, Bove sent a letter to Jarema (the Bove letter) stating that he was "willing to agree to a reduction to a total purchase price of $2, 550, 000" based upon thirty units at $85, 000 per unit, subject to two specified conditions. First, the purchase price would "increase by $85, 000 for each additional unit above thirty units." Second, the monthly extension payments would "increase from $2, 000 a month to $3, 000 a month, effective for the month following signing of the Addendum to the [contract]." On or about February 23, 2012, Jarema provided a copy of the Bove letter to Patrick.[8] That same day, Patrick sent an e-mail to Jarema in which he stated, in pertinent part, "John, [w]e got your letter from Atty. Bove. . . . Can we set up a meeting with all parties to finalize the adden[d]um to the P&S?" No meeting materialized, and in March of 2012, Sea Breeze, through Patrick, sent an e-mail to Jarema proposing four "options" for the trustees to "review to determine the next step forward with the project." None of the options included the terms delineated in the Bove letter. The e-mail concluded with the following sentence: "We are requesting a meeting with all parties so that these may be discussed and an option can be agreed upon by all parties." The parties never agreed upon any option.

         3. Cessation of extension payments.

         In April of 2012, Sea Breeze stopped making monthly extension payments.[9] On August 7, 2012, Sea Breeze demanded that the trustees sign an amendment to the contract in accordance with the terms of the Bove letter. The trustees declined. On August 16, 2012, Bove advised Sea Breeze in writing that the contract "has been terminated in all respects." On August 28, 2012, Sea Breeze responded to Bove and denied that the contract and the "obligations therein" were "extinct."

         4. Th ...

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