KIMBALL v. FDF REALTY LLP (2020)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

In this commercial lease dispute, a Superior Court judge entered judgment for the plaintiff tenant on claims of breach of contract, negligent misrepresentation, and unfair and deceptive business practice pursuant to G. L. c. 93A, after a jury-waived trial.² In a comprehensive written decision, the judge awarded damages of $80,329.56, and attorney's fees in the amount of $99,147.90. On appeal, the defendant argues that the judge's subsidiary findings of fact and ultimate conclusions of law were clearly erroneous. We affirm.

Discussion. We accept the judge's factual findings unless they are clearly erroneous. Makrigiannis v. Nintendo of Am., Inc., 442 Mass. 675, 677 (2004). “A finding is ‘clearly erroneous’ only when, ‘although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed.’ ” Demoulas v. Demoulas Super Mkts., Inc., 424 Mass. 501, 509 (1997), quoting Building Inspector of Lancaster v. Sanderson, 372 Mass. 157, 160 (1977). “Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous” (citations omitted). Pehoviak v. Deutsche Bank Nat'l Trust Co., 85 Mass. App. Ct. 56, 65 (2014). In applying this standard, “due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses.” Mass. R. Civ. P. 52 (a), as amended, 423 Mass. 1402 (1996). “We are not bound, however, by the judge's conclusions of law, and we must ensure that the judge's ultimate findings and conclusions are consistent with relevant legal standards.” Demoulas, supra at 510.

1. Breach of contract. Paragraph 1(a) of the lease agreement provided that “Landlord leases to Tenant and Tenant leases from Landlord a premises containing approximately 5,200 [leaseable/usable] square feet of sales, office and storage area.” Paragraph 6(a) provided that the defendant agreed to maintain in good order the sprinkler system serving the premises. Whether there was a material breach of those provisions of the lease is a question of fact. DiPietro v. Sipex Corp., 69 Mass. App. Ct. 29, 38 (2007). The judge concluded that “[t]he Defendant breached its lease with the Plaintiff by leasing space that was not legally usable or leasable.” We discern no error in this conclusion where the evidence established that, at the time the parties entered into the lease agreement, the 1,200 square foot rear storage area of the premises did not comply with the fire code and, consequently, could not be used by the plaintiff. The judge's finding that the storage space “could not be used because it did not have sprinklers installed” was supported by the testimony of the Hadley fire chief and does not appear to be contested. Indeed, the defendant stipulated that “[n]o fire protection system has ever been installed in the storage areas.” For these reasons, the judge's finding that the defendant did not meet its obligation under the lease agreement to provide “5,200 [leaseable/usable] square feet of sales, office and storage space” was not clearly erroneous.³

2. Negligent misrepresentation. “To sustain a claim of misrepresentation, a plaintiff must show a false statement of a material fact made to induce the plaintiff to act, together with reliance on the false statement by the plaintiff to the plaintiff's detriment.” Zimmerman v. Kent, 31 Mass. App. Ct. 72, 77 (1991). On appeal, the defendant argues that it had no reason to know, and did not know, of any outstanding violation of the fire code at the premises when it entered into the lease agreement. Therefore, according to the defendant, it did not misrepresent the amount of usable space available at the premises. The argument is unavailing.

There was ample support for the judge's finding that the defendant or its agents received a notice of violation of the fire code in 2009. See DeVaux v. American Home Assur. Co., 387 Mass. 814, 818 (1983) (knowledge of agent imputed to principal). The judge drew this reasonable inference, in part, from evidence that defendant's counsel acknowledged in his response to the 2016 demand letter that in 2009, the defendant received “communication” from the town of Hadley regarding the fire protection system at the premises and subsequently hired a fire protection expert who reported, in part, that he was “very concerned with the addition in the rear of this building. It should have sprinkler installed.”⁴ It is undisputed that this was never done. Even assuming, without deciding, that the defendant did not know that its representation in the lease regarding “5,200 [leaseable/usable] square feet” was false, knowledge that a representation was false is not required if a “modicum of diligence” would have revealed its falsity. Zimmerman, 31 Mass. App. Ct. at 81. Here, with a modicum of diligence, the defendant should have discovered that the rear storage area of the premises could not be used unless a sprinkler system was installed. Accordingly, we discern no error in the judge's conclusion that the defendant negligently misrepresented the amount of usable space in the premises.

3. Chapter 93A. General Laws c. 93A, § 11, provides a cause of action for any business injured by the unfair or deceptive act or practice of another business. “[A] negligent misrepresentation of fact, the truth of which is reasonably capable of ascertainment, is an unfair and deceptive act or practice within the meaning of [G. L.] c. 93A.” Glickman v. Brown, 21 Mass. App. Ct. 229, 235 (1985). For the reasons discussed supra, we discern no error in the judge's conclusion that the defendant violated c. 93A by marketing the rear storage space as usable when it knew, or should have known, that it was not.

4. Counterclaim. The defendant counterclaimed that the plaintiff committed a breach of the lease agreement by failing to make rental payments from April 2016 forward. The judge entered judgment for the plaintiff, reasoning that the defendant's conduct constructively evicted the plaintiff who was therefore justified in treating the lease as terminated. A tenant may raise constructive eviction as a defense to an action to recover rent. Wesson v. Leone Enters. Inc., 437 Mass. 708, 713 (2002). A constructive eviction is an act by the landlord “of a permanent character,” which has the effect of depriving the tenant of the enjoyment of the premises. Id. at 714. “[A] landlord's failure to provide a service that is essential to the use and enjoyment of the demised premises may qualify as a constructive eviction.” Id. Here, the judge found that the plaintiff met his burden of establishing constructive eviction because “an adequate system of automatic sprinklers” was essential to the plaintiff's use of the space for his business. This conclusion was well supported by the evidence and was not clearly erroneous.

5. Damages. Lost profits are recoverable as damages in a breach of contract action if proved with reasonable certainty. Brewster Wallcovering Co. v. Blue Mountain Wallcoverings, Inc., 68 Mass. App. Ct. 582, 609 (2007). The defendant argues that the judge's award of $35,000 in damages for lost profits was “purely speculative based upon [the plaintiff's] business practice and auctions in general.” We disagree. “The likelihood of prospective profits may be proved by an established earnings record.” Matsushita Elec. Corp. v. Sonus Corp., 362 Mass. 246, 264 (1972). Here the evidence showed that the gross receipts of the plaintiff's auction business decreased from $680,087.92 in 2015, to $334,945.47 in 2016. The plaintiff, an auctioneer with forty years' experience in the business, testified that as a result of his inability to use the premises, his profits were reduced from between $80,000 and $110,000 in 2015 to $30,000 in 2016. This evidence, which the judge credited, was a sufficient basis for his ultimate conclusion that the plaintiff suffered lost profit damages of $35,000.

6. Attorney's fees. Having prevailed at trial, the plaintiff was entitled to recover attorney's fees and costs pursuant to the lease agreement and G. L. c. 93A, § 11. After considering detailed posttrial pleadings and affidavits addressing (1) the nature of the case and the issues presented, (2) the time and labor required, (3) the amount of damages involved, (4) the result obtained, (5) the experience, reputation, and ability of the attorneys, and (6) the hourly rates charged by other attorneys in the same area, the judge entered an award of attorney's fees for the plaintiff in the amount of $99,147.90, approximately $4,000 less than the plaintiff's request. Mindful that the trial judge was in the best position to assess those factors, and that an award of reasonable attorney's fees is largely a matter of discretion, see Linthicum v. Archambault, 379 Mass. 381, 388 (1979), we see no reason to disturb the judge's award.

The plaintiff has requested reasonable attorney's fees and costs related to this appeal. The plaintiff may submit an application for fees and costs, with supporting documentation, within ten days of the date of this decision. Fabre v. Walton, 441 Mass. 9, 10-11 (2004). The defendant will be afforded ten days thereafter to respond.⁵

Judgment affirmed.

FOOTNOTES

2.   Judgment also entered for the plaintiff on the defendant's counterclaim for breach of contract. Judgment entered for the defendant on the plaintiff's claim of deceit.

3.   We are not persuaded by the defendant's argument that it was not given an opportunity to cure by installing a sprinkler system. Pursuant to paragraph 18(a) of the lease agreement, the defendant had thirty days to cure after notice of its failure to perform under the lease agreement. The judge's finding that such notice was given on February 22, 2016, was supported by the evidence. While the notice may have caused the defendant to discuss the possibility of installing a sprinkler system in the rear storage area, it is undisputed that the installation never occurred.

4.   The defendant relies heavily on the February 24, 2010, letter from fire protection engineer Allan Cameron which states that Rocky's Ace Hardware and Art Moderne Gallery (the prior tenant at the premises) “meets all applicable codes and regulations for the proposed use and occupancy.” While the letter supports the defendant's claim that it was unaware of an outstanding fire code violation at the premises, Cameron testified that the letter did not relate to the rear storage space of the premises. After considering all of the evidence, the judge concluded that the defendant or its agents knew or reasonably should have known that the rear storage space of the premises was in violation of the fire code. Based on our review of the record, that finding was not clearly erroneous.

5.   Other points raised by the defendant, but not discussed in this opinion, have not been overlooked. We find nothing in them that requires further discussion. Commonwealth v. Domanski, 332 Mass. 66, 78 (1954).