PREVITE v. JIANFENG HE (2019)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

This dispute concerns the fate of two payments, a deposit and a building permit fee, that the defendant, Jianfeng He, doing business as The Yihe Group (Yihe), paid as buyer under a real estate purchase and sale agreement (agreement). The plaintiffs, Domenic Previte and Patricia Previte, as trustees of the 262 Monsignor O'Brien Highway Realty Trust (trustees), were the sellers. The issue regarding the deposit was disposed of via summary judgment in favor of the trustees.⁵ The building permit issue was tried to a jury. The jury found for Yihe on Yihe's counterclaim for conversion, unjust enrichment, and money had and received. The trustees' motion for judgment notwithstanding the verdict was denied. Final judgment entered on February 27, 2018. The parties have filed cross appeals. We reverse the portion of the judgment related to the counterclaim of conversion, but otherwise affirm the judgment.

Background. The pertinent facts are essentially undisputed. We describe the language of the agreement in some detail, however, as the structure of the agreement undergirds each party's arguments.

1. Agreement and amendments. On August 29, 2012, the trustees entered into the agreement with Yihe to sell the property located at 262 Monsignor O'Brien Highway in Cambridge (property) to Yihe for $ 6.3 million. Section 2.1 of the agreement stated that the sale was

“contingent upon approval of development of 50 market rate multifamily housing units on the terms and specifications of the Purchaser, and all other applicable contingencies as set forth herein ․ on the Property ․, [and the] Purchase Price shall be due and payable on the Closing Date in accordance with the terms hereof.”

The agreement required Yihe to wire a deposit of $ 295,000 to a third-party broker.⁶ The closing was set to occur upon the earlier to occur of thirty days after all project approvals were issued or April 30, 2013.

The agreement also set out a timeline that defined the parties' rights and obligations prior to any closing. The due diligence period ran from August 29, 2012 to October 31, 2012, affording Yihe the opportunity to conduct environmental tests and title surveys on the property. The permitting period ran from August 29, 2012 to December 31, 2012, during which Yihe was required to “diligently and in good faith pursue and obtain [necessary permits] at its sole cost and expense.”

Pursuant to § 3.1 of the agreement, if Yihe did not terminate the agreement by October 31, 2012, the last day of the due diligence period, Yihe's deposit became nonrefundable unless the trustees defaulted or the provisions of § 3.2 of the agreement were applicable. Section 3.2.1 provided:

“In the event that Purchaser is unable to secure Project Approvals after diligent efforts to obtain the same on or before the Outside Approvals Date,[7] Purchaser, in its sole discretion, shall have the right to terminate this Agreement by written notice to Seller on or before the Outside Approvals Date and the Deposit shall be forthwith refunded to Purchaser.”8

By mutual agreement, a number of subsequent amendments to the agreement extended the length of both the due diligence period and the permitting period. As pertinent here, the third amendment (amendment three) extended the end of the permitting period to May 31, 2013 and gave Yihe an option to further extend the deadline to August 1, 2013 by increasing its deposit by $ 75,000. The deadline could be further extended to February 28, 2014 if Yihe increased its deposit by an additional $ 25,000.⁹ As a result, amendment three pushed the closing date to the earlier to occur of thirty days after all project approvals were issued or March 31, 2014. Amendment three also inserted a new sentence to § 3.2 stating that “[t]he Deposit shall be deemed non-refundable upon issuance of all Approvals.”

2. Failure to close and procedural history. Yihe opted to extend the permitting period to August 1, 2013 and deposited the required additional $ 75,000. However, on August 1, 2013, Yihe had neither obtained the requisite permits nor provided the trustees with written notice of termination in accord with § 3.2 of the agreement. Some six months after the permitting period ended, and less than three weeks before the scheduled closing date of March 31, 2014, Yihe was still pursuing a building permit for the property. Yihe paid the inspectional services department of Cambridge (permitting office) $ 220,290 as a building permit fee on March 11, 2014. However, as Yihe waited for the building permit to issue, the closing date of March 31, 2014 came and went.

On May 12, 2014, because the closing never occurred, the trustees sent Yihe a letter of default. Yihe responded to the letter with an offer to restructure the agreement with a lower purchase price. Yihe also refused to allow the third-party broker to release the deposit of $ 375,000 to the trustees. The trustees then filed the underlying action against Yihe requesting a declaratory judgment, pursuant to G. L. c. 231A, that they were entitled to the deposit, and asserting claims of breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of G. L. c. 93A.

Both Yihe and the trustees moved for summary judgment. Because Yihe never obtained the necessary permit approvals, it argued that the contingency language in § 2.1 of the agreement made the deposit refundable. A judge of the Superior Court ultimately granted summary judgment to the trustees, reasoning that there was no genuine issue of material fact as to the proper interpretation of the agreement.

While the issue surrounding the deposit was being litigated, the trustees applied for a building permit of their own for the property. In response to the trustees' application, the permitting office informed them that Yihe was seeking to obtain a refund of its building permit fee, but that Yihe would not receive the refund because the fee “stays with the property” and the permitting office had already done considerable review on Yihe's submitted plans. The permitting office then instructed the trustees “word for word” on how to write a letter to the permitting office that would credit Yihe's permit fee to the trustees' own building permit application. The trustees sent the letter to the permitting office the following day. Later, when Yihe formally requested a refund of the building permit fee, the permitting office denied the request on the ground that the funds had already been transferred to the trustees' current application. As a result, on January 27, 2016, under the theories of conversion, unjust enrichment, money had and received, and a violation of G. L. c. 93A, Yihe filed a counterclaim for the value of the building permit.¹⁰

After a jury trial on Yihe's counterclaim, the jury found the trustees not liable on the c. 93A claim but liable on the claims of conversion, unjust enrichment, and money had and received. The trustees' motion for judgment notwithstanding the verdict was denied.¹¹ Final judgment then entered awarding the $ 375,000 deposit to the trustees and the full value of the $ 220,290 building permit to Yihe. Both parties appeal.

Discussion. 1. Deposit. We review a grant of summary judgment de novo, to determine “whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law.” Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120 (1991). Mass. R. Civ. P. 56 (c), as amended, 436 Mass. 1404 (2002). The interpretation of a written contract is a question of law. Allstate Ins. Co. v. Bearce, 412 Mass. 442, 446-447 (1992). We “construe the contract as a whole, in a reasonable and practical way, consistent with its language, background, and purpose.” USM Corp. v. Arthur D. Little Sys., Inc., 28 Mass. App. Ct. 108, 116 (1989).

Here, we conclude that there was no genuine issue of material fact that, under the agreement's terms, Yihe's deposit was nonrefundable. The deposit became nonrefundable once the due diligence period lapsed unless the trustees were in default or § 3.2 of the agreement, describing the permitting period, applied. There is no evidence that the trustees were in default under the agreement,¹² and § 3.2 offers no safe haven. In order to have the deposit returned, § 3.2 (as amended by amendment three), required that Yihe terminate the agreement before August 1, 2013, the first extension date of the permitting period. This Yihe did not do.

If Yihe's reading of the agreement were correct, it would negate the need for numerous sections of the agreement and contravene the clear intent of the parties. By the mutual agreement of the parties, the agreement was amended multiple times in order to extend the due diligence and permitting periods -- time periods that Yihe's suggested reading would render moot. Instead, the due diligence and permitting period sections are reasonably and practically read as part of “the terms hereof” referenced in § 2.1 that guides the parties toward closing. See Bray v. Hickman, 263 Mass. 409, 412 (1928) (“So far as reasonably practicable [the contract] should be given a construction which will make it a rational business instrument and will effectuate what appears to have been the intention of the parties”). Because Yihe failed to give written notice before the end of the permitting period, the deposit was nonrefundable, and we see no error.

2. Permit fee. The trustees assert various challenges to the jury's determination that they were liable on the count of conversion, unjust enrichment, and money had and received. They argue that the jury verdict on each count was against the weight of the evidence, that the judge erred in denying their motion for judgment notwithstanding the verdict, and that the judgment should be reversed.

“The denial of a motion for directed verdict or a motion for judgment notwithstanding the verdict both present questions of law reviewed under the same standard used by the trial judge.” O'Brien v. Pearson, 449 Mass. 377, 383 (2007). We consider the evidence “in the light most favorable to the nonmoving party and disregard that favorable to the moving party.” Id. We “evaluate whether ‘anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be made in favor of the [nonmovant]’ ” (citation omitted). Id.

a. Conversion. “To be liable for conversion, a defendant must wrongfully ‘exercise dominion or control over the personal property of’ the plaintiff” (citation omitted). Weiler v. PortfolioScope, Inc., 469 Mass. 75, 87 (2014). “Money may be the subject of conversion.” Matter of Hilson, 448 Mass. 603, 611 (2007). For a conversion claim, “[i]t is incumbent on a plaintiff in such action to prove a right of immediate possession of the property at the date of the writ.” MacNeil v. Hazelton, 306 Mass. 366, 367 (1940).

Viewing the evidence in the light most favorable to Yihe, Yihe did not establish a right to immediate possession of the permit funds. Rather, Yihe only had a right to seek a refund. The evidence showed that the permitting office, and not the trustees, retained total discretion to grant a full or partial refund. Because of this discretion, Yihe had no right to immediate possession of the funds on the date the counterclaim was filed. Thus, the evidence did not establish the elements of conversion, and judgment should have entered for the trustees on this count.

2. Remaining counts. Notwithstanding our decision on the conversion count, we affirm the verdicts on the counts of unjust enrichment and money had and received. Unjust enrichment occurs when the defendant retains “money or property of another against the fundamental principles of justice or equity and good conscience” (citation omitted). Santagate v. Tower, 64 Mass. App. Ct. 324, 329 (2005). Money had and received “is broad and includes all money received by the defendant which in equity and good conscience belongs to the plaintiff” (citation omitted). Suffolk Constr. Co. v. Benchmark Mechanical Sys., Inc., 475 Mass. 150, 156 (2016).

Here, there was sufficient proof to establish by a preponderance of evidence that the trustees unjustly retained the benefit from Yihe's building permit fee. The trustees admitted that the funds were not rightfully theirs. The trustees also had knowledge that Yihe was in the process of seeking a refund from the permitting office at the time. Yihe held the right to pursue a refund until the trustees succeeded in having the funds applied to its permit application. Viewed in the light most favorable to Yihe, a reasonable jury could find that the trustees were unjustly enriched by those actions.¹³ The jury verdicts on these two counts were supported by a preponderance of the evidence.

Conclusion. The portion of the final judgment entered on February 27, 2018, in favor of Yihe on the count for conversion is reversed, and judgment shall enter for the trustees on that count of the counterclaim. The judgment is otherwise affirmed.

So ordered.

Reversed in part; affirmed in part

FOOTNOTES

5.   A judge of the Superior Court initially awarded the deposit to Yihe but that decision was reversed after the trustees filed a motion for reconsideration.

6.   Yihe had already paid a $ 5,000 deposit to bind its offer to purchase.

7.   The outside approvals date is a reference to the deadline of the permitting period.

8.   This portion of § 3.2 of the agreement was deleted and replaced by identical language in amendment three, discussed infra.

9.   Amendment three also added a clause that required Yihe to provide written notice to the trustees when the issuance of the building permit was imminent. Upon receiving notice, the trustees would stop operating the car wash on the property and immediately seek a demolition permit on Yihe's behalf.

10.   Yihe's counterclaim is not provided in the record.

11.   Prior to the jury verdict, the trustees filed a motion for a directed verdict, which was denied.

12.   Yihe argues that the trustees were in default because they were still operating a car-washing business at the property on the closing date, and were thus unable to uphold their obligations at closing. Amendment three, however, required Yihe to give written notice to the trustees before their business would need to cease operation. This written notice was never provided.

13.   Unlike conversion, unjust enrichment and money had and received do not require that Yihe have a right to the money or property at the time of the complaint. See Santagate, 64 Mass. App. Ct. at 330-333 (unjust enrichment claim lies for money paid to unrelated third party).