GENEVA FOOD CORP v. FIELDS STATION LLC (2019)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

After a jury-waived trial in the Superior Court, the plaintiff, F & A Geneva Food Corp. (Geneva), appeals from a judgment in favor of the defendant landlord, Fields Station, LLC (Fields Station), on contract claims arising from a lease of supermarket property in the Dorchester section of Boston. Fields Station is a long-time lessor of the property, which is occupied by the lessee, Geneva, as the assignee of the original lease. Geneva argues that the judge (1) erred in finding ambiguous the right of first refusal language contained in the expired lease and abused his discretion in determining that Geneva did not have the right of first refusal to acquire a new lease, and (2) erred in awarding Fields Station its attorney's fees. For the reasons explained below, we affirm.

Background. The Fields Station shopping center, located at 500 Geneva Avenue, Dorchester (Dorchester property), was originally constructed in the 1960s. In January 1965, Paul and James Cifrino, owners of the Dorchester property and trustees of the Fields Station Realty Trust (trust), which held the property, entered into a long-term lease with Supreme Fields Corner, Inc. (Supreme), for a portion of the Dorchester property to be used as a supermarket known as Supreme Market (original lease). In 1968, Supreme Markets merged with Purity Supermarkets (Purity); the merger did not include the liquor stores and laundromats owned by the Cifrino family, or the real estate on which the Supreme Markets were located. As part of the merger, Purity and the trust entered into an agreement with respect to leases (the lease) which encompassed all fifteen of the former Supreme Market locations acquired by Purity, including the Supreme Market occupying the Dorchester property. The Dorchester property lease became effective on February 1, 1968.

Around this same time, and because the trust maintained ownership of the Dorchester property on which Purity's supermarket was located, Purity (as tenant) negotiated with the trust (as landlord) an amendment to certain terms of the lease (first amendment). Specifically, the original lease was amended by replacing the language of article three with language that extended the term of the lease for a total of six successive periods of ten years each.² The amendment also inserted language granting the tenant a right of first refusal should the trust decide to sell its ownership interest in the Dorchester property.³

Purity's interest in the lease, and the interests of subsequent tenants, were assigned several times during the life of the lease. In December 2005, the trust conveyed ownership of the Dorchester property to Fields Station subject to the lease and first amendment.⁴ On March 20, 2008, the tenant then occupying the property, Capitol Food Corp. of Fields Corner (Capitol), assigned its rights in the lease to Geneva, with all of the tenant's rights flowing from the lease and subsequent amendments.⁵ At the time of the assignment, the lease was due to expire on August 31, 2015.

By letter dated May 1, 2015, Fields Station received notice from Geneva that it wished to renew the lease for an additional ten-year term. Fields Station rejected the notice as untimely, based on paragraph two of the first amendment requiring notification of the intent to renew six months prior to the date of the lease expiration (August 31). In August 2015, Fields Station received from Capitol an offer to lease the property.⁶ The newly executed lease between Fields Station and Capitol became effective as of September 1, 2015, or a date upon which Fields Station could deliver possession of the property following Geneva's departure.⁷ After reaching an agreement with Capitol, Fields Station did not offer Geneva an opportunity to enter into a new lease on the same terms as negotiated with Capitol. On August 21, 2015, Geneva initiated the underlying action in an effort to retain possession of the premises beyond its lease expiration on August 31, 2015. Geneva alleged in its complaint that it had an oral agreement with Fields Station to extend the lease.⁸

After trial, the judge found there was no written, oral, or implied extension of the lease and, thus, the lease expired by its terms on August 31, 2015.⁹ Previously on summary judgment, the judge had determined that the right of first refusal language contained in the lease was ambiguous. After trial, the evidence convinced the judge that the plain meaning of the words used as to the right of first refusal favored Fields Station's interpretation.¹⁰ Ultimately, the judge entered judgment in favor of Fields Station on the non-released counts of the complaint and counterclaim, and declared that Geneva had no right to occupy the premises; Fields Station also was awarded attorney's fees. Geneva timely appealed.

Discussion. 1. Right of first refusal. Geneva first argues on appeal that the trial judge erred as a matter of law in holding that the right of first refusal language was ambiguous. We review a judge's “interpretation of the meaning of a term in a contract” as a question of law, de novo. EventMonitor, Inc. v. Leness, 473 Mass. 540, 549 (2016).

After review of the disputed language, and the lease as a whole, we agree with Geneva to the extent that it argues that the right of first refusal language at issue is unambiguous and can be resolved as a matter of law. See Balles v. Babcock Power Inc., 476 Mass. 565, 572 (2017) (“To determine whether the language at issue is ambiguous, we look both to the contested language and to the text of the contract as a whole”). However, this does not assist Geneva, because we conclude that the contract terms support Fields Station's interpretation.

The term of the lease is governed by the agreement's express language. Specifically, the lease agreement was due to expire as of August 31, 2015, unless Geneva pursued a timely renewal. With Geneva having failed to comply with the renewal provisions, the judge properly found that the agreement did in fact expire as of that date. Geneva is left to argue that Fields Station's entering into a new lease with a third party was a disposition of a property interest that triggered the application of the right of first refusal provision. Geneva points out that the right of first refusal provision applies to “any part” of the property, and asserts that such language theoretically could be said to apply not just to a geographical portion of the property, but also to a disposition of some of the “bundle of rights” that made up Fields Station's property interests. But even if Geneva's reading “is linguistically possible,” this “does not make it a reasonable interpretation of the parties' agreement.” Merrimack College v. KPMG LLP., 88 Mass. App. Ct. 803, 806 (2016), citing Downer & Co., LLC v. STI Holding, Inc., 76 Mass. App. Ct. 786, 792-794 (2010). We are not to examine the language of each contractual phrase “taken out of context and read in isolation,” but to consider such language in the context of the contract as a whole. Downer, 76 Mass. App. Ct. at 792. Doing so, we conclude that, as a matter of law, Geneva's proffered interpretation is not a reasonable one.¹¹ Under the express language of the agreement, Fields Station's duties under the right of first refusal provision were to expire when the lease term expired, and Geneva failed to do what was required to extend the lease term.¹² “[N]otwithstanding the facial breadth of the term ‘any [part],’ ” we do not interpret the lease agreement as preventing Fields Station from leasing the property to a new party for the period after Geneva's lease has expired without first offering comparable terms to Geneva. See Merrimack College, 88 Mass. App. Ct. at 806.

2. Attorney's fees. Geneva also argues that the judge erred in awarding Fields Station its attorney's fees. This argument is without merit. As expressly provided by section ten of the fourth amendment to the lease negotiated by Geneva, Geneva was obligated to pay Fields Station's attorney's fees and costs reasonably incurred in the event that Fields Station “retain[ed] an attorney and commence[d] a legal proceeding pertaining to th[e] [l]ease ․ or [wa]s required to defend any such action or proceeding, unless the judgment or award in such legal action or proceeding ․ provide[d] otherwise.”

In arguing that the award of attorney's fees was error, Geneva does not challenge the trial judge's interpretation of section ten of the fourth amendment, but states instead that the award was unwarranted because Fields Station was improperly determined to be the prevailing party.¹³ As Geneva brought the underlying action based on the lease, and as we affirm the judgment in favor of Fields Station, we, accordingly, affirm the award of attorney's fees.

In keeping with the same provision, we award Fields Station its additional attorney's fees and costs related to this appeal. See Fabre v. Walton, 441 Mass. 9, 10 (2004). We direct counsel to file with the clerk of this court within fourteen days of the rescript of this decision a detailed and supported submission of the attorney's fees and costs sought. Geneva shall have fourteen days thereafter to respond thereto.

Judgment affirmed.

FOOTNOTES

2.   The amended language provided:“Lessee shall have the right to extend the original term of this lease for a total of six (6) successive periods of ten (10) years each. Each extension period shall be deemed a part of the term of the lease and shall be governed by the provisions thereof. Such right to extend, or further extend, as the case may be, shall be exercised by written notice to lessor at least six (6) months prior to the expiration of said original term, or said term as extended ․”

3.   The right of first refusal language read:“Lessor [the trust], for itself and its successors, hereby grants to Lessee [the tenant] a right of refusal to purchase Lessor's interest in the demised premises. Said right of refusal shall expire at the expiration or earlier termination of said lease. Prior to said date, Lessor shall not sell or transfer its interest in the demised premises or any part thereof without first offering in writing to sell or transfer the said interest, or such part thereof, to Lessee at the same price and on the same terms as shall be contained in any bona fide written offer received by Lessor.”

4.   The conveyance of the property from the trust to Fields Station was merely a formality, as both the trust and Fields Station were under identical ownership with the same manager.

5.   Purity had negotiated prior amendments to the lease in 1982 and 1985.

6.   Before it negotiated the lease with Capitol, Fields Station orally offered to enter into a new nonnegotiable lease with Geneva. Geneva did not accept, but instead counter-offered and was ready to negotiate. Fields Station contacted Capitol for the first time concerning leasing the property after it received Geneva's May 1, 2015 letter of intent to renew.

7.   The terms of the new ten-year lease between Fields Station and Capitol provided automatic extensions for four additional five-year terms, unless Capitol provided a written termination notice “not less than one year prior to the upcoming expiration date.”

8.   On December 31, 2015, Fields Station notified Geneva of an alleged default on the lease for a failure to report and pay percentage rent for the prior quarter, and to cooperate with a sales audit. Although Geneva paid the outstanding rent amount, and later delivered certain records for the audit, Fields Station disputed that such actions cured the lease default.

9.   Prior to trial, the parties reached a partial settlement agreement (settlement agreement) and dismissed by stipulation certain counts of Geneva's complaint and Fields Station's counterclaim (counts II and VII, and counts II through VII, respectively); however, they maintained their respective rights as to the non-released counts. Specifically, paragraph 3(c) of the settlement agreement preserved Fields Station's right, under section ten of the fourth amendment to the lease, to seek attorney's fees incurred in connection with this action, including any appeal of the judgment.

10.   Fields Station interpreted the words “purchase” and “price,” in referring to Fields Station's interest in the property, to mean that a tenant had the right of first refusal as to the purchase of any real estate that Fields Station might be selling, and not, as Geneva argued, a right to the favorable terms of a lease negotiated by a potentially new client.

11.   To the extent the language of the lease agreement is considered ambiguous, the judge properly considered parol evidence to resolve that ambiguity in Fields Station's favor. His findings to that effect are supported by the trial evidence.

12.   We note that if Fields Station had purported to sell all or part of the property while the lease with Geneva was in effect, any such transfer by law would have been subject to Geneva's leasehold. This adds further support to Fields Station's reading that “any part” was intended to refer to geographical portions of the property, not to the execution of new leases for the period after Geneva's lease expired.

13.   Geneva also does not argue that the award was unreasonable or that the amount was excessive.