Nantasket Beachfront Condominiums, LLC v. Hull Redevelopment Authority , 87 Mass. App. Ct. 455 ( 2015 )

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14-P-222 Appeals Court
NANTASKET BEACHFRONT CONDOMINIUMS, LLC vs. HULL REDEVELOPMENT
AUTHORITY.
No. 14-P-222.
Plymouth. November 7, 2014. - June 5, 2015.
Present: Rapoza, C.J., Milkey, & Hanlon, JJ.
Contract, Performance and breach, Implied covenant of good faith
and fair dealing, Damages, Provision for liquidated
damages, Termination. Practice, Civil, Summary judgment,
Damages, Waiver. Redevelopment Authority. Administrative
Law, Conflict of interest. Conflict of Interest. Public
Employment, Unethical conduct. State Ethics Commission.
Waiver. Damages, Breach of contract, Liquidated damages.
Civil action commenced in the Superior Court Department on
February 8, 2012.
The case was heard by Robert C. Cosgrove, J., on motions
for summary judgment.
Brian K. Bowen for the plaintiff.
Denise A. Chicoine (Edward S. Englander with her) for the
defendant.
MILKEY, J. In 2004, plaintiff Nantasket Beachfront
Condominiums, LLC (Nantasket) and defendant Hull Redevelopment
2
Authority (authority) entered into a contract for the purchase
and development of certain land in Hull. Under that "LAND
DISPOSITION AGREEMENT" (LDA), Nantasket was to purchase the
land, construct seventy-two units of housing, and develop a new
public park. Subsequently, the proposed project encountered
robust neighborhood opposition, and this in turn led to
significant delays in the anticipated closing. Eventually, the
authority terminated the LDA and notified Nantasket that it was
retaining as liquidated damages $857,500 in deposits that
Nantasket had made. This action ensued.
In a comprehensive and thoughtful decision, a Superior
Court judge ruled in the authority's favor on summary judgment.
He concluded that Nantasket indisputably stood in breach of the
LDA, and that the authority was within its rights to terminate
the agreement and to retain the deposits. On Nantasket's
appeal, we affirm, albeit on somewhat different grounds.
Background.1 The parties execute the LDA. In order to spur
the development of twelve acres of land that it owned, the
authority in October of 2003 issued a detailed "Request for
Proposals" (RFP). According to the RFP, the property "provides
the transition between the [State-owned] . . . Nantasket Beach
1
The facts, which are largely uncontested, are drawn from
the summary judgment record. We view the facts in a light most
favorable to Nantasket, the nonmoving party. See Godfrey v.
Globe Newspaper Co., Inc., 457 Mass. 113, 118-119 (2010).
3
Reservation and a major residential area of the Town of Hull
along Nantasket Avenue." The RFP set forth a preferred
development scenario in which approximately three-quarters of
the land would be developed into "primarily passive public open
space," with the rest (approximately three acres) developed as
"residential dwelling units, or other uses, as may be acceptable
to the [authority]." In a section entitled "Site Constraints
and Issues," the RFP discussed the applicability of various
environmental and land use requirements.
Only two developers submitted proposals. One was from
Nantasket's parent company, which emphasized that, based on its
thirty years of experience in developing residential and
commercial projects, it was "well versed in overcoming a
multitude of tough regulatory issues and environmental
concerns." On July 9, 2004, Nantasket and the authority
executed the LDA, which spelled out their respective rights and
obligations in thirty-three single-spaced pages (not including
voluminous attachments).
Under the LDA, Nantasket would purchase the land for three
and one-half million dollars (subject to various potential
adjustments). Nantasket would then build seventy-two units of
housing, develop the open space, and eventually return the park
land to public ownership and control. Nantasket's specific
development plans were subject to its completing the authority's
4
design review process and obtaining -- at its expense -- all
necessary permits and other approvals (collectively termed
"Approvals") from other State and local agencies. The closing
date was set for thirty days after Nantasket obtained the
Approvals, but not later than July 9, 2006 (termed the "Outside
Closing Date"). Thus, as originally executed, the LDA
contemplated that all necessary permitting and the closing would
be completed within two years.
Deposits. Nantasket paid a $97,000 deposit to the
authority at the execution of the LDA, in addition to a $25,500
deposit it had previously paid. An additional deposit of
$122,500 was due on August 17, 2004, bringing the total deposit
due by that point to $245,000. Until the closing actually took
place, additional deposit payments of $122,500 each would be due
at the six month anniversary of the date of the LDA and the one
year anniversary, and then "Extension Deposits" of $122,500 each
would be due every three months after that. The LDA stated that
if Nantasket missed any deposit payment, this "shall constitute
a default."
Termination rights. The LDA gave each party the right to
terminate the agreement in certain situations. In the event
that Nantasket defaulted on its obligations and did not achieve
a cure of that default within thirty days of receiving written
notice from the authority, the authority could terminate the LDA
5
and retain all deposits paid.2 For its part, Nantasket could
terminate the LDA and secure a return of its deposits in three
different types of scenarios. First, Nantasket was given until
August 4, 2004, to inspect the property, and until August 16,
2004, to inspect the title. If such inspections revealed a
defect in either, then it could terminate the LDA within those
respective deadlines. Second, Nantasket could terminate the LDA
in the event that a local permitting agency prevented the
project from going forward as planned and adjustments to the
project or purchase price could not be agreed upon to
accommodate the potential loss in value (this scenario was
termed a "Local Permit Problem"). Third, if a third party
challenged the issuance of one or more of the approvals that the
project needed, Nantasket could terminate the LDA in lieu of
defending the action.
Project delays. Almost immediately, the project sparked
significant opposition from local residents. In 2004,
Jacqueline Chase, a direct abutter, cofounded a group to try to
stop it. At Chase's suggestion, the group called itself "No Way
HRA!" The project opponents used every opportunity to attempt
to derail the project. Chase herself attended seventy local
2
The thirty-day cure period could be extended if the
default could not be cured within thirty days even with the
exercise of due diligence. Nantasket has never argued that this
provision applies here.
6
board meetings on the topic. After the Hull zoning board of
appeal (ZBA) issued a special permit for the project on March
30, 2006, six project opponents filed an action in Superior
Court appealing the special permit pursuant to G. L. c. 40A,
§ 17. The lead plaintiffs in that action (zoning appeal) were
Chase and Phyllis Aucoin, another leading member of No Way HRA!.
First amendment to the LDA. Nantasket did not use the
filing of the zoning appeal as an occasion to terminate the LDA,
but instead elected to defend it. However, with it becoming
increasingly obvious that Nantasket could not obtain all
approvals by July 9, 2006 (the original Outside Closing Date),
Nantasket requested and secured an amendment to the LDA. This
amendment dated May 10, 2006, set a new closing date of forty
days after Nantasket received all approvals, but in no event
later than the earlier of: (1) ninety days after the "Appeals
Termination Date" (set as the date that the zoning appeal and
any other appeals of project approvals eventually were resolved
in Nantasket's favor),3 or (2) July 9, 2012 (the amended Outside
3
The "Appeals Termination Date" was defined in full as the
date "of the final disposition, in favor of the validity of the
Approvals, of all appeals challenging or appealing the issuance
of any Approval, including without limitation the Zoning Appeal,
including the exhausting of all further appeals or the
expiration of the time for bringing any further appeal."
7
Closing Date).4 The parties also agreed that after Nantasket
paid the additional Extension Deposits due on July 9, 2006, and
October 9, 2006 (bringing the total deposits held by the
authority to $857,500), further Extension Deposits would be
waived until the Appeals Termination Date.5
Chase and Aucoin join the authority's board. In 2007,
Chase and Aucoin ran for, and were elected to, the authority's
board. Even after that, they continued their active opposition
to the project in their personal capacity. Thus, for example,
after a Superior Court judge in 2008 ruled in Nantasket's favor
on summary judgment in the zoning appeal, Chase and Aucoin
joined in appealing that decision to this court.
Second amendment to the LDA. With the continued delays,
Nantasket requested a further extension of the Outside Closing
Date, and also requested that Chase and Aucoin recuse themselves
from participating in matters concerning the project. On August
3, 2009, by a vote of three to one (with one abstention), the
authority's board extended the Outside Closing Date to July 9,
2015. Chase voted against the extension, while Aucoin
abstained.
4
As part of the first amendment, Nantasket expressly waived
its right to terminate the LDA based on the filing of the zoning
appeal.
5
The parties also agreed to reduce the purchase price of
the land by $125,000, because of a reduction in the scope of the
project required by the special permit.
8
The end of the zoning appeal. The zoning appeal was
finally resolved on May 3, 2010, when a stipulation of dismissal
was filed in this court. This removed a significant obstacle to
the project's moving forward, but others remained. Indeed,
changes to the project that resulted from review by the State
Department of Environmental Protection pursuant to the Wetlands
Protection Act, G. L. c. 131, § 40, meant that Nantasket would
have to resubmit the project for various additional local
approvals. Meanwhile, changes to the real estate market in the
interim called into question the financial viability of the
project. In fact, as Nantasket acknowledged in a letter to the
authority dated September 10, 2010, "[t]here exists no bank
financing available for this project, and there are no equity
partners willing to invest in it."
Nantasket's efforts to renegotiate the deal. Under the
express terms of the LDA, Nantasket's inability to obtain
financing did not constitute a force majeure event excusing its
performance. In light of the new circumstances it faced,
Nantasket sought to renegotiate the terms of the original deal.
In its September 10, 2010, letter, Nantasket proposed to
construct the park improvements immediately using a portion of
the deposit funds, with the remainder of the funds to be
returned to Nantasket. Also, the housing would be developed in
phases on a more long-term basis (with the hope that the housing
9
market would improve in the interim), with Nantasket to pay a
pro rata share of the original purchase price for each phase.
The authority flatly rejected this proposal, and stated its view
that "[g]iven that there is no longer any appeal pending, the
payment of the Extension Deposits must resume." At the same
time, the authority indicated flexibility in three areas.
First, instead of insisting that the closing take place within
forty days of Nantasket's receiving the approvals,6 the authority
expressed a willingness to extend the closing until November 9,
2014. Second, the authority indicated it was open to allowing
the postclosing construction to be completed in phases (so long
as Nantasket purchased all of the property at the closing).
Third, the authority indicated that if a new agreement were
reached, it would agree to have new Extension Deposits due every
six months rather than every three.
By letter dated November 1, 2010, Nantasket countered that
it would not agree to pay any new Extension Deposits before the
closing. As to the existing deposit monies, Nantasket stated
that it needed the return of $250,000 "plus the cost of
designing and permitting the park." Nantasket also indicated
that it could only purchase all of the property at the closing
if market rate financing was available.
6
The second amendment had not modified this provision but
instead had changed only the Outside Closing Date.
10
The authority demands payment. As a result of this back
and forth, the parties remained far apart. The authority's
further response on November 19, 2010, brought them no closer.
That letter rejected Nantasket's last proposal, offered no new
proposal, and instead merely sharpened the authority's position
that Nantasket had to resume payment of the Extension Deposits.
In fact, the letter declared that Nantasket was already in
default for not making additional Extension Deposit payments of
$122,500 each on August 3, 2010, and November 3, 2010, and for
not actively pursuing the remaining approvals for the project.
According to the authority, if these problems were not cured
within thirty days, this "will leave the Authority no choice but
to declare [Nantasket] to be in default of its obligations under
the LDA [which] . . . would allow the Authority to exercise all
of its rights and remedies under Section 10.2 of the LDA,
including, without limitation, the termination of the LDA and
the retention of the deposit as liquidated damages under the
LDA."
In its response dated December 30, 2010, Nantasket
underscored its continued unwillingness to resume payment of any
additional Extension Deposits. Nantasket also stated its view
that there were outstanding title problems that the authority
had not cured and that this both excused Nantasket's failure to
pay additional Extension Deposits and provided Nantasket its own
11
basis for terminating the LDA and demanding return of the
deposits paid to date.7 The authority responded on January 11,
2011, by explaining its view that the title problems had been
cured and that Nantasket had no grounds for refusing to resume
making the Extension Deposits. It also reiterated its demand
that such sums be paid. In a short and extremely pointed letter
dated February 14, 2011, the authority once again demanded
payment.
The termination of the LDA. After the demanded additional
Extension Deposit payments were not made, the authority's board
on April 19, 2011, voted to send Nantasket a letter terminating
the LDA. Four of the five board members were present (including
Chase and Aucoin), and the vote apparently was unanimous. The
record reflects that before the vote was taken, the board's
chairman, Bartley Kelly, purported to invoke the "rule of
necessity" and that Chase and Aucoin "follow[ed]."8 No further
7
Nantasket had raised some of these title issues in a 2004
letter that was sent to the authority prior to the relevant
deadline set forth in the LDA. The letter stated a view that
the problems could be resolved and requested "an extension of
the 'Title Inspection Period' for the period of time necessary
for the parties to address these issues." It further stated
that "[i]n the event that the Authority is unable or unwilling
to address these issues then, most reluctantly, kindly consider
this written notice of termination pursuant to [the relevant
provision in the LDA]." Other of the title issues arose only
later.
8
The "rule of necessity" is a doctrine that recognizes that
in some circumstances, public officials who otherwise have an
12
explanation was given. The authority sent Nantasket a letter
formally terminating the LDA that same day.
Discussion. Nantasket's five-count complaint relies on
various overlapping contract-related theories. However,
permeating Nantasket's legal claims is its overarching
contention that the authority's actions were tainted by serious
conflicts of interests among two or three of its five board
members. In addition, Nantasket argues that the authority's
proceeding to terminate the LDA in the face of those issues
violated the covenant of good faith and fair dealing implied in
every Massachusetts contract. See Uno Restaurants, Inc. v.
Boston Kenmore Realty Corp., 441 Mass. 376, 385 (2004). We
begin with addressing these ethical considerations.
1. Ethical issues. As noted, Chase and Aucoin led the
opposition to the project, and they continued that opposition
after they joined the authority's board. Based on the
allegations they raised in the zoning appeal and the deposition
ethical duty to recuse themselves from participating in a
particular matter nevertheless may do so if necessary for the
public entity to act. See Boston Retirement Bd. v. Contributory
Retirement Appeal Bd., 441 Mass. 78, 85 (2004), citing Moran v.
School Comm. of Littleton, 317 Mass. 591, 593 (1945), and cases
cited. By letter dated July 26, 2010, town counsel had sent a
letter to the authority's board that generally explained how the
rule of necessity worked, and that cautioned that the rule
should be invoked only as a "last resort" (and then only in
accordance with certain specified procedures). The letter did
not analyze whether any members of the authority's board in fact
had a disqualifying conflict of interest.
13
of Chase taken in that case, Nantasket argues -- with
significant force -- that Chase and Aucoin had a direct and
substantial economic stake in whether this particular project
succeeded or failed. If so, then Chase and Aucoin had a
"financial interest" in the authority's consideration of the
project.9 This means that unless one of the recognized
exceptions applied, they could not participate as board members
in matters concerning the project. See G. L. c. 268A, § 19.
The judge noted that Chase and Aucoin had an "undisputed
conflict of interest." Nevertheless, he seems to have concluded
that they satisfied their ethical obligations and that they, in
any event, did not act in bad faith. With regard to their
failure to follow the procedures for invoking the rule of
necessity outlined in town counsel's letter (see note 8, supra),
the judge concluded that this did "not evidence bad faith, where
their participation in the abutter litigation and opposition to
the Project was [already] well known." Finally, he ruled that
even if the vote to terminate was taken in bad faith, this was
immaterial, because Nantasket itself was in breach of the
contract before the vote was taken and the authority therefore
had an express contractual right to terminate.
9
Whether Kelly also had a disqualifying financial interest
is less clear because the record reveals little about his
situation.
14
Although we agree with the motion judge that the ethical
issues Nantasket sought to raise ultimately do not aid its
cause, we arrive at that conclusion by a somewhat different
path. Without resolving whether his analysis of the rule of
necessity was correct, we note that the issues do not appear to
be as straightforward as he suggested. As the State Ethics
Commission (commission) has emphasized, and the authority
acknowledges, the rule of necessity is to be invoked only "as a
last resort." State Ethics Commission Advisory 05-05, at 841
(2005). Under the commission's interpretation of that rule, if
in fact there was no need for Kelly to recuse himself, then
Chase and Aucoin could not have invoked the rule because their
participation would not have been necessary to achieve a quorum
(assuming the absent member could have attended a subsequent
meeting). See Ibid.10 Thus, any premise that Chase and Aucoin
satisfied their G. L. c. 268A, obligations lies in at least some
doubt.
We also question the judge's conclusion that Nantasket's
being in default necessarily rendered any bad faith by authority
officials beside the point. To be sure, we agree that the
10
Compare Attorney Gen. v. Department of Pub. Util., 390
Mass. 208, 215-216 (1983) (approving use of rule to avoid
deadlock even where presence of a quorum was not an issue);
Boston Retirement Bd., 441 Mass. at 85 (approving use of rule
even though filling vacant board seat by the governor could have
provided a quorum).
15
authority had no obligation to renegotiate the terms of the
contract or to sit idly by once Nantasket defaulted (especially
where Nantasket conceded that it could not bring itself in
compliance due to the collapse of the housing market). At the
same time, the authority's decision to terminate the LDA was a
discretionary one, and parties to a contract cannot exercise
such discretion based on improper motives.11 See Anthony's Pier
Four, Inc. v. HBC Assocs., 411 Mass. 451, 473 (1991). It is of
course axiomatic that public officials should not be exercising
their authority to promote their own financial interests.
Our recognition of these principles creates a potential
conundrum about how to proceed. On one hand, the case law
teaches that courts are to apply a markedly strong presumption
that public officials act in good faith, and it casts a
jaundiced eye toward judicial inquiries into what really
motivated the official action.12 See, e.g., LaPointe v. License
11
Put differently, the authority's right to terminate the
LDA (based on Nantasket's breach) does not necessarily immunize
its exercise of that right from any scrutiny.
12
This is a case where the plaintiff is challenging the
motives behind otherwise valid government action; it is not one
where the government actions themselves were improper. Compare
Judge Rotenberg Educ. Center, Inc. v. Commissioner of the Dept.
of Mental Retardation (No. 1), 424 Mass. 430, 451-459 (1997).
In that vein, it cannot be said that the authority unfairly
terminated the LDA in order to put itself in a better position
than had both parties performed. Instead of receiving a total
purchase price of $3,375,000 and the housing and park
development that it desired, the authority was left with only
16
Bd. of Worcester, 389 Mass. 454, 459 (1983); Brennan v. The
Governor, 405 Mass. 390, 397-398 (1989). Such presumptions
serve to avoid interference with the democratic process.13 In
this regard, we note that the voters of Hull may have elected
Chase and Aucoin to the authority's board precisely because of
their opposition to the project. On the other hand, the
presumption that public officials act in good faith is not
irrebuttable, and there are exceptional cases where courts have
invalidated an otherwise valid public action based on proof that
the "dominant reason" the action was undertaken was an improper
one. See, e.g., Pheasant Ridge Assocs. Ltd. Partnership v.
Burlington, 399 Mass. 771, 777-780 (1987) (invalidating the
taking of land for a public park, done pursuant to a town
meeting vote, where the manifest purpose behind this was to
block low or moderate housing at the site). Nantasket argues
that because the summary judgment record allows the inference
that the board members made their decision to terminate the LDA
$857,000 as liquidated damages while having to restart the
development process from scratch in the midst of an anemic
housing market.
13
In one case, we commented that a court would not set
aside a legislative act even upon proof that all of the
affirmative votes were induced by bribery. See Knowles v. Codex
Corp., 12 Mass. App. Ct. 493, 498 (1981). The Supreme Judicial
Court has cited this dicta, although in a manner that leaves in
some doubt its own views of the principle. See Pheasant Ridge
Assocs. Ltd. Partnership v. Burlington, 399 Mass. 771, 776-778
(1987).
17
for an improper reason, the ethical issues could not be resolved
as a matter of law.
For purposes of resolving Nantasket's contract-based
claims, it is important to keep in mind that it is the authority
that was the party to the LDA, not individual board members.
Municipal redevelopment authorities are liable in contract and
tort "in the same manner as . . . private corporation[s]," and
their officers and agents are, in the same fashion as those of
private corporations, generally not personally liable in tort or
contract. G. L. c. 121B, § 13, inserted by St. 1969, c. 751,
§ 1. As the Supreme Judicial Court has held in the context of a
private corporation, individual board members' conflicts of
interest are not imputed to actions taken pursuant to a valid
vote of the board. See Estate of Moulton v. Puopolo, 467 Mass.
478, 482, 488-489 (2014) (noting that the acts of the
corporation's board by valid vote and those of the corporation
are "one and the same" even where individual board members face
conflicts of interest). Absent evidence of bad faith on the
part of the authority as a contracting entity, Nantasket cannot
be heard to claim that the termination amounted to a bad faith
breach warranting damages.
This did not leave Nantasket without a potential remedy for
any ethical breaches by individual board members. However, to
follow such remedies, Nantasket would have had to file a
18
complaint with the commission alleging violations of G. L.
c. 268A. See G. L. c. 268B, § 4(a) (governing the filing of
verified administrative complaints with the commission).
Compliance with State ethical rules is now overseen by the
commission. See Doe v. State Ethics Commn., 444 Mass. 269, 271
(2005) (referring to the commission as "the primary civil
enforcement agency for violations of the conflict of interest
law, G. L. c. 268A," and noting that the commission is
authorized "to identify and seek redress for ethics violations
by public officials in the Commonwealth"). Thus, the commission
regulates the conduct of municipal officials, provides guidance
to them, and investigates whether they have violated their
obligations under G. L. c. 268A. Doe, supra. If the commission
determines that ethical breaches "substantially influenced the
action taken by any municipality in any particular matter," the
commission may order that the municipal action be "avoid[ed],
rescind[ed] or cancel[ed]. . . upon request by said municipal
agency." Leder v. Superintendent of Schs. of Concord & Concord-
Carlisle Regional Sch. Dist., 465 Mass. 305, 311 (2013), quoting
from G. L. c. 268A, § 21(a).14 Nantasket could have raised its
14
Granted, invalidation of the municipal action is
available only when the municipal entity requests such relief.
However, the statute also authorizes alternative relief for a
party who has suffered damages from an ethical breach. If the
commission determines that a municipal official has "acted to
his economic advantage in violation of" certain sections under
19
ethical concerns with the commission,15 but did not do so.16 In
the circumstances of this case, Nantasket's failure to follow
the statutorily prescribed procedures prevents it from now
asking a court to invalidate the LDA termination vote (or to
seek damages from individual board members). See Leder, supra
at 313. Although the remedies provided for in G. L. c. 268A,
are not exclusive, the statute "contemplates a primary role for
G. L. c. 268A, it may award damages to the municipality and
restitution to injured third parties (subject to various
conditions and limitations). Leder, supra at 311 & n.10. In
the event that the commission determines that damages exceed the
amount it is authorized to order through administrative action
($25,000), the commission "may bring a civil action against the
violator to recover such damages." G. L. c. 268A, § 21(b),
inserted by St. 2009, c. 28, § 80. Municipal officials are
protected from enforcement by the commission if they rely upon a
formal opinion from municipal counsel issued pursuant to G. L.
c. 268A, § 22, so long as certain procedures are followed. See
930 Code Mass. Regs. 1.03(3) (2012).
15
The filing of a verified complaint triggers a
"preliminary inquiry" into any alleged violations. G. L.
c. 268B, § 4(a), inserted by St. 1978, c. 210, § 20. If there
is "reasonable cause for belief" that a violation has occurred,
the commission may, upon a majority vote, initiate an
adjudicatory proceeding. G. L. c. 268B, § 4(c), inserted by St.
1978, c. 210, § 20.
16
Nantasket did not raise its ethical concerns with the
commission after the 2011 termination vote. Nor did Nantasket
prior to that vote ever seek any judicial or administrative
adjudication whether the potentially conflicted board members
could participate in matters related to the project. Compare
Graham v. McGrail, 370 Mass. 133, 136-137 (1976) (concluding --
in a case that arose before the commission was created -- that a
declaratory judgment action was available for one member of a
school committee to address the application of G. L. c. 268A,
§ 19). The extent to which Nantasket could have obtained such
relief here is not before us.
20
the commission." Leahy v. Local 1526, Am. Fedn. of State,
County, & Mun. Employees, 399 Mass. 341, 378 (1987). In the
case before us, there are numerous unresolved issues surrounding
whether, and to what extent, individual board members violated
the governing statute by participating in the board's vote.
Resolution of those issues "requires the application of the
[commission's] expertise." Id. at 350. To the extent Nantasket
wanted to rely on the alleged ethical breaches to make out its
contract claim, it should have brought the issues to the
commission in the first instance.
2. Merits of Nantasket's other contract-related claims.
Stripped of this ethical overlay, resolution of Nantasket's
underlying contract claims is relatively straightforward, at
least based on the arguments that Nantasket raised.
a. Nantasket's obligation to renew the Extension Deposit
payments.17 Once the zoning appeal was dismissed, the authority
took the position that the Appeals Termination Date had been
reached (there being at that moment no pending appeals) and that
Nantasket's duty to pay additional Extension Deposits resumed
17
As noted, the authority also terminated the LDA on the
grounds that Nantasket was not diligently pursuing remaining
permit approvals. The motion judge correctly concluded that
there was a dispute of material fact regarding that issue.
Therefore, like the motion judge, we will focus on Nantasket's
compliance with the obligation to resume paying the Extension
Deposits.
21
ninety days later (August 3, 2010).18 Nantasket never argued in
the trial court, nor does it argue on appeal, that this
interpretation was incorrect.19 To the contrary, Nantasket
itself stated in its appellate brief that "[u]nder the LDA, as
then amended, additional $122,500 deposits were due every three
months beginning on August 3, 2010." Therefore, any argument
that the Appeals Termination Date did not run when the zoning
appeal was dismissed has been waived.
b. Whether Nantasket's failure to pay the Extension
Deposits was excused. It is undisputed that Nantasket did not
make the Extension Deposit payments due on August 3, 2010,
November 3, 2010, and February 3, 2011. Nantasket nevertheless
maintains that it was not in breach, because its conduct was
excused by the authority's own material breach of the contract.
See Prozinski v. Northeast Real Estate Servs., LLC, 59 Mass.
App. Ct. 599, 610 (2003). Specifically, Nantasket points to the
fact that although the authority's board approved a second
18
Strictly speaking, ninety days after the dismissal of the
zoning appeal on May 3, 2010, would have been August 1, 2010,
but the record reflects that both parties consistently treated
"ninety days" as meaning three months.
19
As noted, the term Appeals Termination Date was defined
by reference to "the final disposition . . . of all appeals
challenging or appealing the issuance of any Approval." See
note 3, supra, for full text. Even after the zoning appeal was
dismissed, various approvals remained outstanding, thus allowing
opportunities for additional appeals to be filed.
22
amendment to the LDA on August 3, 2009, it subsequently failed
to execute a formal amendment to the LDA memorializing that
vote.20 To be sure, the authority's actions in this regard lie
unexplained in the summary judgment record.21 However, also
missing is any proof that the authority's failure to execute the
second amendment played any material role in Nantasket's
unwillingness or inability to resume making the required
Extension Deposits. In fact, nowhere in the pointed exchanges
between the parties leading up to the termination of the LDA is
there any reference whatsoever to the authority's refusal to
execute a formal second amendment; the parties' discussion
instead had turned to a potential third amendment to overhaul
the original agreement. Under these circumstances, Nantasket
20
Nantasket also argues that that the authority directly
repudiated the second amendment to the LDA. Its evidence of
this is that in its letter of October 4, 2010, the authority
offered to extend the closing until November 9, 2014 (which fell
eight months before the July 9, 2015, Outside Closing Date
already approved by the board in its vote on the second
amendment). However, there is no direct conflict between the
authority's offer and the second amendment, which modified only
the Outside Closing Date, not the actual date that the closing
was supposed to take place.
21
Because Nantasket did not conduct any discovery before
the discovery deadline lapsed, it largely has itself to blame
for the relatively thin state of the summary judgment record.
The judge did not abuse his discretion in declining Nantasket's
request to extend the discovery deadline.
23
has failed to offer sufficient proof -- even for purposes of
summary judgment -- that its nonperformance was excused.22
c. Whether the parties suspended their termination rights.
Nantasket also argues that even if its own breach allowed the
authority to terminate the LDA and retain the deposit, the
authority implicitly suspended its right to do so while it was
negotiating a third amendment to the LDA. Once the authority
engaged in such negotiations, Nantasket maintains, it owed
unequivocal notice that negotiations had ended and a reasonable
time to cure any deficiencies before terminating the LDA. See,
e.g., Church of God in Christ, Inc. v. Congregation Kehillath
Jacob, 370 Mass. 828, 833-834 (1976). According to Nantasket,
such notice was critical because at the time, it had its own
right to terminate the LDA and to have all its deposits
returned.
Nantasket's arguments are not without some force. Once the
zoning appeal was dismissed, the parties did engage in some
substantive negotiations about remaking their original
22
Nantasket also argues that because Chase and Aucoin
should have recused themselves from participation, the authority
violated the contractual requirement that its execution of all
documents related to the LDA be duly authorized, valid, and
enforceable. However, on their face, the relevant documents
executed by the authority in relation to the termination of the
LDA were authorized, valid, and enforceable, and, as noted,
Nantasket has forsworn seeking to invalidate the authority's
actions based on any alleged ethical breaches by its board
members.
24
agreement, and in that context, the authority specifically
showed some flexibility about the frequency with which further
Extension Deposits would be due. In addition, Nantasket has
some argument that -- at least at the beginning of the
negotiations over a third amendment to the LDA -- it possessed
its own right to terminate the LDA, even if that argument could
not be characterized as strong.23
However, the authority's position on the resumption of the
Extension Deposits hardened over time, with the authority making
it increasingly clear that it would terminate the LDA if the
Extension Deposits were not paid as previously agreed. At least
by the authority's January 11, 2011, letter, it had taken that
issue off the table. To the extent that the authority had an
obligation to provide unequivocal notice that Nantasket was in
default and faced forfeiture of its deposit, the authority
satisfied that obligation. If Nantasket felt it still retained
its own right to terminate the LDA, this was the time to
23
In the relevant time period, no permit appeals were
pending (Nantasket having elected to defend and having
successfully defended the zoning appeal), and there does not
appear to have been a pending "Local Permit Problem" (as that
term was defined in the LDA) even though Nantasket still had to
secure some additional local approvals. Nantasket's strongest
argument appears to be that the title issues it identified had
not fully been cured. Because Nantasket did not terminate the
LDA within the relevant Title Inspection Period, its ability to
make such an argument depends on its related contention that the
authority, by its conduct, had implicitly agreed to extend that
period. Compare McCarthy v. Tobin, 429 Mass. 84, 88-89 (1999).
25
exercise it. Alternatively, Nantasket could have tried to
negotiate a standstill agreement to let negotiations continue.
It chose to pursue neither option, and cannot now be heard to
claim that the authority's actions were procedurally unfair.
d. Liquidated damages. Finally, Nantasket argues that the
authority's retaining the $857,500 as liquidated damages cannot
stand because the sum is so disproportionate to the authority's
actual damages that it amounts to an unenforceable penalty. See
NPS, LLC v. Minihane, 451 Mass. 417, 419-420 (2008). A
contractual liquidated damages provision is entitled to a
presumption of validity, especially where, as here, it was
negotiated between two sophisticated parties. The party seeking
to invalidate a liquidated damages provision bears the burden of
proving that it is unenforceable, and "we resolve reasonable
doubts in favor of the aggrieved party" (here, the authority).
Ibid. "A liquidated damages provision will usually be enforced,
provided two criteria are satisfied: first, that at the time of
contracting the actual damages flowing from a breach were
difficult to ascertain; and second, that the sum agreed on as
liquidated damages represents a 'reasonable forecast of damages
expected to occur in the event of a breach.'" Ibid., quoting
from Cummings Properties, LLC v. National Communications Corp.,
449 Mass. 490, 494 (2007).
26
At the time the parties executed the LDA, trying to
calculate the amount of damages that the authority would suffer
from a breach by Nantasket was inherently difficult, as a matter
of both theory and practice. Therefore, the first criterion of
the two-part test is easily satisfied. The difficulty in
predicting such damages makes the second prong challenging to
apply. Without attempting to demarcate the boundaries of what
forecast would be reasonable in these circumstances, we agree
with the motion judge that Nantasket has not met its burden of
showing that the liquidated damages due here (which in this
case, amounted to some twenty-five percent of the purchase price
of the land) were so disproportionate to predictable actual
damages as to amount to an illegal penalty.
Nantasket emphasizes that under the LDA, additional
Extension Deposits of $122,500 were to accrue every three
months, which allowed rapid escalation of potential liquidated
damages as any delays mounted. However, passing over the
foreseeability of such delays (especially by a developer that
sold itself as being experienced in overcoming regulatory
hurdles), we note that the authority reasonably agreed to
suspend the payment of additional Extension Deposits for over
three-and-one-half years while the zoning appeal was pending.
In fact, the last deposit payment that Nantasket ever made came
on October 9, 2006 (just three months after the originally
27
contemplated closing date). Moreover, the record makes plain
that the dominant problem that caused Nantasket to default on
its obligations was not the delay per se, but the intervening
collapse of the real estate market. In sum, Nantasket cannot
claim any substantive unfairness in the enforcement of the
liquidated damages provision to which it freely agreed.
Conclusion. For the reasons set forth above, we affirm the
judgment.
So ordered.