Heard: October 4, 2018.
action commenced in the Superior Court Department on May 23,
2017. A motion to dismiss was heard by Janet L. Sanders, J.
The Supreme Judicial Court on its own initiative transferred
the case from the Appeals Court.
Richard E. Briansky for the plaintiff.
J. Apfel for the defendant.
Timothy P. Burke & Nathaniel P. Bruhn, for Greater Boston
Real Estate Board, amicus curiae, submitted a brief.
Mertineit & Katherine E. Perrelli, for Appraisal
Institute & another, amici curiae, submitted a brief.
Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher,
& Kafker, JJ.
Eliot v. Coulter, 322 Mass. 86, 91
(1947), this court held that, where parties agree that the
fair value of a property shall be determined by an appraiser,
"the correctness of the principles and methods of
valuation adopted by [an] appraiser cannot be inquired into
by the courts, in the absence of fraud, corruption,
dishonesty or bad faith." Under this common-law rule, a
judge may not invalidate "the determination of
appraisers selected by agreement to resolve a dispute"
unless the appraisal process or decision was tainted on one
of these four grounds. Nelson v.
Maiorana, 395 Mass. 87, 89 (1985). The issue on
appeal is whether we should modify this common-law rule and
allow a judge to invalidate an appraisal intended by the
parties to provide a final, binding valuation of a property
where there is the appearance of bias, not on the part of the
individual who conducted the appraisal, but on the part of
the entity that employed the individual appraiser. We
conclude that the common-law rule established in
Eliot properly balances the need for fair valuations
with the need for finality in the appraisal process, and that
an appearance of bias alone is insufficient to invalidate an
appraisal. Because the allegations in the complaint, if
proved, do not warrant a finding of any violation of the
agreements setting forth the terms of the appraisal, or a
finding of fraud, corruption, dishonesty, or bad faith by the
individual appraiser, or a finding of breach of the implied
covenant of good faith and fair dealing by the defendant, we
affirm the Superior Court judge's order allowing the
defendant's motion to dismiss.
reviewing a motion to dismiss, we accept as true all facts
alleged in the plaintiff's verified complaint and
accompanying exhibits. See Revere v.
Massachusetts Gaming Comm'n, 476 Mass. 591, 595
(2017). The following facts are drawn from that complaint and
October 2004, the defendant, Fidelity Real Estate Company,
LLC (Fidelity), sold the Winthrop Building, a commercial
property located in Boston (property), to the plaintiff,
Buffalo-Water 1, LLC (Buffalo-Water), a subsidiary of a
national real estate company. Buffalo-Water then leased the
property back to Fidelity, and the parties entered into an
option to purchase agreement (option agreement) granting
Fidelity the option to buy the building back in the final
year of its lease. The option agreement stated that, if
Fidelity chose to exercise its option, the purchase price
would be $16, 275, 000 or ninety-five percent of the
property's fair market value, whichever is greater. The
fair market value would be determined by agreement of the
parties, or by the following appraisal process outlined in
the option agreement: (1) each party appoints an appraiser
who has at least ten years of experience appraising Greater
Boston property and is an MAI-designated member of the
Appraisal Institute or a member of the American Society of
Real Estate Counselors (or their successor organizations); (2) if
the two appointed appraisers cannot agree on the fair market
value but their appraisals fall within five percent of one
another, the fair market value shall be deemed to be the
average of the two appraisals; (3) if the difference between
the appraisals is greater than five percent, the two
appraisers shall appoint a third appraiser to decide the fair
market value. The option agreement provides that this final
valuation may not be greater than the higher or less than the
lower of the two previous appraisals.
August 2016, Fidelity exercised its right under the option
agreement to purchase the property. Fidelity and
Buffalo-Water were unable to agree upon the property's
fair market value, and each retained an independent appraiser
to determine the appropriate purchase price.
Buffalo-Water's appraiser valued the property at $36
million; Fidelity's appraiser valued it at $17
million. Because the two appraisals differed by
more than five percent, the parties agreed to retain Cushman
& Wakefield (Cushman), a real estate services company, as
a third appraiser.
outlined the terms of its appraisal services in a letter of
engagement (engagement agreement) signed by the parties and
by Robert Skinner, the Cushman professional selected to
perform the independent appraisal. On April 18, 2017, Skinner
submitted an appraisal valuing the property at $22.9 million.
The valuation was accompanied by a "Certification of
Appraisal" signed by Skinner, which stated, "We
have no present or prospective interest in the property that
is the subject of this report, ... no personal interest with
respect to the parties involved," and "no bias with
respect to the property that is the subject of this report or
to the parties involved with this assignment."
after receiving the valuation, Buffalo-Water asked Skinner to
reconsider the appraisal in light of certain "factual
errors." In response, Cushman offered to meet with
Buffalo-Water and Fidelity to discuss the appraisal. Fidelity
declined this offer to meet in a letter that noted that
neither the option agreement nor the engagement agreement
"contemplates reconsideration of the appraisal at any
time." Fidelity also stated that Buffalo-Water was
obliged under the option agreement to honor the third
appraiser's valuation and deed the property to Fidelity.
receiving Fidelity's letter, Buffalo-Water learned that
in December 2016, before Cushman was engaged to conduct the
appraisal, Fidelity had retained Cushman for a national
representation contract. Buffalo-Water communicated this
information to Fidelity, claiming that Fidelity's
preexisting relationship with Cushman created an
impermissible conflict of interest. Fidelity declined to
retain a new appraiser or to extend the closing date in light
of this alleged conflict.
following week, Buffalo-Water filed a two-count verified
complaint against Fidelity in the Superior Court. The first
count seeks a judgment declaring that the appraisal is
invalid and nonbinding; the second count alleges a breach of
the covenant of good faith and fair dealing. Fidelity moved
to dismiss the complaint for failure to state a claim upon
which relief can be granted. Mass. R. Civ. P. 12 (b) (6), 365
Mass. 754 (1974). The judge allowed Fidelity's motion and
dismissed the complaint, concluding that the facts alleged by
Buffalo-Water did "not amount to the kind of bad faith,
fraud or corruption required for a court to invalidate an
independent appraisal agreed to by the parties."
Buffalo-Water appealed, and we transferred the case to this
court on our own motion.
review the allowance of a motion to dismiss de novo.
Galiastro v. Mortgage Elec.
Registration Sys., Inc., 467 Mass. 160, 164 (2014). In
considering whether a count in a complaint survives a motion
to dismiss under Mass. R. Civ. P. 12 (b) (6), we accept as
true the factual allegations in the complaint and the
attached exhibits, draw all reasonable inferences in the
plaintiff's favor, and determine whether the allegations
"plausibly suggest" that the plaintiff is entitled
to relief on that legal claim (citation omitted) .
Id. The allegations must be more than "mere
labels and conclusions," and must "raise a right to
relief above the speculative level" (quotations and
citations omitted) . Id. at 165.
raises three arguments on appeal. First, it claims that the
judge improperly dismissed its claim for declaratory judgment
under rule 12 (b) (6) because courts are obligated to declare
the rights of the parties in every properly brought action
for declaratory relief. Second, it claims that the appraisal
should be invalidated due to Cushman's failure to
disclose its preexisting contractual relationship with
Fidelity. Third, Buffalo-Water claims that Fidelity committed
a breach of the covenant of good faith and fair dealing by
taking advantage of an appraisal process it knew to be
biased. We address each of these arguments in turn.
contends that the judge erred in dismissing its claim for
declaratory relief under G. L. c. 231A, § 1, because,
where the claim was properly brought, Buffalo-Water is
entitled to a declaration of the rights of the parties. We
hold that, where a party moves to dismiss a properly brought
declaratory judgment claim under rule 12 (b) (6) and where
the judge concludes that the facts alleged in the complaint
fail to state a claim upon which relief can be granted, the
judge has the option of ...