» Braintree Property Associates, LP v. Marzouki, et al. (Lawyers Weekly No. 09-038-17)

Braintree Property Associates, LP v. Marzouki, et al. (Lawyers Weekly No. 09-038-17)

COMMONWEALTH OF MASSACHUSETTS
NORFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 15-00144
BRAINTREE PROPERTY ASSOCIATES, LP
vs.
FRANCO MARZOUKI, DR. WU, LLC, D.B.A EMACK & BOLIOS
AND ROBERT ROOK
and
FRANCO MARZOUKI, CROSS-CLAIM PLAINTIFF, vs. ROBERT ROOK, CROSS-CLAIM DEFENDANT
MEMORANDUM OF DECISION AND ORDER ON
CROSS-MOTIONS FOR SUMMARY JUDGMENT
This action arises out of a lease agreement between the property owner, plaintiff, Braintree Property Associates, LP (“Braintree”), the lease holder, defendant Dr. Wu, LLC, d/b/a Emack & Bolios (“Wu”), for which Robert Rook is the sole owner and manager. Defendants Rook and Franco Marzouki guaranteed Wu’s obligations to Braintree. There is no dispute that Wu breached its lease by vacating the property it leased from Braintree before its lease was up. Plaintiff moves for summary judgment on its claims against Wu, Rook and Marzouki. All defendants oppose. Wu and Rook cross-move for summary judgment against Braintree, improbably claiming that Braintree is entitled to no lost rent at all under the terms of Braintree’s own Lease, which Braintree opposes. Marzouki moves for summary judgment on his cross-claim for indemnification from Rook, which Rook opposes.
The issue at the core of this case is a straight-forward dispute about the measure of damages arising from Wu’s undisputed breach of its lease with Braintree. Based on the lease
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and the undisputed facts, in consideration of the parties’ memoranda of law and oral arguments, and for the reasons that follow, plaintiff’s motion for summary judgment is ALLOWED. Wu’s cross-motion for summary judgment is DENIED.
For other reasons, Marzuki’s motion for summary judgment on his cross-claim against Rook is DENIED.
FACTS
In reviewing a motion for summary judgment, the Court views the evidence in the light most favorable to the non-moving party and draws all reasonable inferences in his favor. Jupin v. Kask, 447 Mass. 141, 143 (2006), citing Coveney v. President & Trustees of the College of the Holy Cross, 388 Mass. 16, 17 (1983).
Braintree operates the South Shore Plaza, a shopping mall in Braintree. Rook is the sole owner and manager of Wu, which does business as Emack & Bolios, an ice cream seller.
On or about July 25, 2011, Wu, as tenant, entered into a lease (“Lease”) with Braintree for commercial space at the South Shore Plaza. The lease had a five-year term and required Wu to pay rent and fees. The lease term was to commence May 1, 2011 and end May 1, 2016.
On or about July 25, 2011, defendants Marzouki and Rook each executed a joint and several guaranty of Wu’s lease obligations.
Beginning in June, 2014, Wu stopped paying rent, and did not pay any rent thereafter. Neither Rook nor Marzouki made good on the rent Wu failed to pay to Braintree. On October 22, 2014, Wu ceased business, and on October 30, 2014, vacated the premises.
Braintree sent a demand letter to Wu dated November 26, 2014, which was copied to Marzouki and Rook and guarantors. That letter did not terminate the Lease but demanded all rental payments due under it, discounted to present value as permitted under the Lease and as
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reflected in a spreadsheet enclosed with the letter. The alleged damages totaled $ 126,773.55. The letter stated that Braintree “will assume the debt is valid unless the undersigned receives notice from Tenant within thirty (30) days after its receipt of this letter that Tenant disputes the validity of the debt, or any portion thereof,” in which event “the undersigned will obtain verification of the debt and mail a copy of such verification to the Tenant, upon request by the Tenant” but that “[i]f the total sum is not paid within thirty (30) days from the date of this letter, the undersigned will attempt to obtain a judgment” against Wu. In response, Wu did not pay the rent demanded. Instead, Wu wrote back by letter dated December 5, 2014 and claimed that the debt was disputed and demanded verification of it and noted that Braintree’s letter did not terminate the Lease. Braintree did not respond, but filed suit.
The Lease stated that Wu would be in default if it abandoned or vacated the Premises, as it did. Lease, §18.1(f). Among Braintree’s remedies were to collect the full rent due, terminate the Lease by giving such notice to Wu or re-enter and take possession of the Premises. If Braintree re-entered or took possession of the premises, Braintree could terminate the lease and demand that Wu pay all of the rent due under the Lease immediately or it could allow the Lease to continue and deduct from the rent owed any rent Braintree was able to collect on re-letting on an ongoing basis:
If Landlord re-enters the Premises … or if it takes possession pursuant to legal proceedings or otherwise, it may either terminate this Lease, but Tenant shall remain liable for all obligations arising during the balance of the original stated term as hereafter provided as if this Lease had remained in full force and effect, or it may, from time to time, without terminating this Lease, make such alternations and repairs as it deems advisable to relet the Premises, and relet the Premises … for such term … and at such rentals and upon other terms and conditions as Landlord in its sole discretion deems advisable; upon each such reletting all rental received by Landlord therefrom shall be applied, first, to any indebtedness other than rent due hereunder from Tenant to Landlord; second, to pay any costs and expenses of reletting, including broker’s and attorney’s fees and costs of
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alterations and repairs; third, to rent due hereunder, and the residue, if any, shall be held by Landlord and applied in payment of future rent as it becomes due hereunder.
If rental received from such reletting during any month are less than that to be paid during that month by Tenant hereunder, Tenant shall immediately pay any such deficiency to Landlord.
See §18.1.
Braintree eventually re-let the Premises on or about November, 2015, and the replacement tenant began paying rent in or about December 2015. Wu made no payments of any difference between the rent Wu owed and rent Braintree collected. Neither did Rook or Marzouki.
Under the Lease, a re-letting of the Premises was not a termination of the Lease in the absence of written notice. Id. (“No re-entry of taking possession of the Premises by landlord shall be construed as election to terminate this Lease unless a written notice of such termination is given by Landlord.”). Braintree gave no written notice of termination. Even where the Lease was not terminated but Braintree “takes action” because of Wu’s breach, Braintree could, as a remedy in addition to others it had, demand prospective damages according to a formula included in the Lease:
Notwithstanding any such reletting without termination, Landlord may at any time terminate this Lease for any prior breach or default. If Landlord terminates this Lease for any breach, or otherwise takes action on account of Tenant’s breach or default hereunder, in addition to any other remedies it may have, it may recover from Tenant all damages incurred by reason of such breach or default, including … an amount equal to the difference between the Minimum Rent1 and all items of additional rents reserved hereunder for the period which would otherwise would have constituted the balance of the Lease Term and the present rental value of the Premises for such period, both discounted in accordance with accepted financial practices to the then present worth … all of which shall immediately be due and payable from tenant to Landlord. In determining the rental value
1 Minimum Rent is defined in Sections 1.1(f) and 4.1 as the rent due under the lease for each year for the five-year period of the leasehold, with adjustments not relevant here.
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of the Premises, the rental realized by any reletting, if such reletting is accomplished by Landlord within a reasonable time after the termination of the Lease, shall be deemed prima facie to be the rental value, but if Landlord shall not undertake to relet or having undertaken to relet, has not accomplished reletting, then it will be conclusively presumed that the Minimum Rent and all items of additional rent reserved under this Lease represent the rental value of the Premises for the purposes herein (in which event the Landlord may recover from the Tenant, the full total of all Minimum Rent and all items of additional rent due hereunder, discounted to present value as hereinbefore provided). Landlord shall, however, account to Tenant for the Minimum Rent and additional rent received from persons using or occupying the Premises during the period representing that which would have constituted the balance of the Lease Term, but only at the end of said period, and only if Tenant shall have paid to Landlord its damages as provided herein, and only to the extent of sums received from Tenant as Landlord’s damages, Tenant waiving any claim to any surplus.
Section 18.2.
DISCUSSION
Under Mass. R. Civ. P. 56(c), either the plaintiffs or the defendants will be entitled to summary judgment if they can show that no dispute exists as to any material fact and they are entitled to judgment as a matter of law. Cassesso v. Commissioner of Corr., 390 Mass. 419, 422 (1983). Either party may satisfy its burden of demonstrating the absence of triable issues by submitting affirmative evidence demonstrating entitlement to relief (or the opposing party’s lack of entitlement), or by demonstrating that the opposing party has no reasonable expectation of proving an essential element of their case. Flesner v. Tech. Comm. Corp., 410 Mass. 805, 809 (1991). If one party establishes the absence of a triable issue, the other party must demonstrate, through admissible evidence, an issue of material fact to defeat summary judgment. Godbout v. Cousens, 396 Mass. 254, 261 (1985).
Braintree is correct that the undisputed facts show that each of the defendants breached their agreements – Wu by vacating the premises and not making good on the rent, and Marzouki
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and Rook for not stepping in and making Wu’s payments to Braintree on Wu’s behalf pursuant to their guaranty.
As to Braintree’s damages, Wu’s claim that there is a material dispute as to the extent of Braintree’s mitigation efforts is meritless. While a landlord is generally required to mitigate damages by taking reasonable steps to find another tenant, Krasne v. Tedeschi & Grasso, 436 Mass. 103, 109 (2002), commercial parties can agree otherwise, and here, the lease did not obligate Braintree to mitigate at all. The Lease says this in two places. In §18.1, the Lease states that “[i]n determining the rental value of the Premises, the rental realized by any reletting, if such reletting is accomplished by Landlord within a reasonable time after the termination of the Lease, shall be deemed prima facie to be the rental value, but if Landlord shall not undertake to relet or having undertaken to relet, has not accomplished reletting, then it will be conclusively presumed that the Minimum Rent and all items of additional rent reserved under this Lease represent the rental value of the Premises for the purposes herein (in which event the Landlord may recover from the Tenant, the full total of all Minimum Rent and all items of additional rent due hereunder, discounted to present value as hereinbefore provided”). Id. (emphasis added). It says it again in §18.2 – “Tenant waives and releases any claim arising out of or related to the payment of percentage of rent by any successor tenant in the Premises, to whom Landlord may relet the Premises, but nothing contained herein shall obligate Landlord to relet if Tenant shall default hereunder.” Id. (emphasis added). Since Wu expressly agreed that Braintree had no obligation to mitigate it damages arising from Wu’s breach, Wu cannot create a material issue about Braintree’s level of mitigation.
In the same vein, the argument advanced by Wu and Rook that under the Lease, the calculation set forth in Braintree’s own Lease means that Braintree is entitled to zero damages is
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nonsensical. While the Lease provides alternative methods of calculating damages, it consistently and clearly entitles Braintree to the full value of the rental payment due from Wu. The parties dispute how one of those methods was to work – the provision in §18.2 which is to be used to calculate the present value of future rent payments in the event Wu did not pay them as required – but the Court concludes that it need not consider this issue at all, as it is irrelevant to this dispute. The mechanism outlined in §18.2 was designed to reduce Braintree’s future expected damages to a present value, which Wu was required to pay immediately, prior to the expiration of the Lease in May, 2016. The undisputed facts show that Wu paid nothing after it vacated the premises, and the Lease terminated in May, 2016, under its terms. At this point, then, there is no need to calculate the present value of expected damages; Braintree’s damages are all historical, they can and should be calculated mathematically.
Since Braintree did not terminate the Lease, the Lease sets as the minimum rent Braintree is to recover each month as the amount Wu agreed to pay. Braintree’s damages can be calculated as a simple subtraction of the minimum rent the Lease required Wu to pay from any amount Braintree actually received, with any surplus going to Braintree, as per the terms of the Lease. In addition, the Lease permits Braintree to recover attorney’s fees and costs under §18.2. Braintree is also entitled to statutory interest.
Wu’s motion for summary judgment – that Braintree violated Chapter 93A by failing to validate its debt as suggested in the November 26, 2014 letter – is meritless. Wu waived any notice requirements in the Lease. See Lease, §18.1 (describing the landlord’s remedies in the event of default, “without grace period, demand or notice (the same being waived by Tenant”)); §18.2 (“Except as otherwise specifically required by this Lease, Tenant waives any and all
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statutory and legal notice requirements”). It thus cannot bring a Chapter 93A claim for Braintree’s failing to follow-up on a notice to which Wu was not entitled.
Marzouki’s claim for summary judgment against Rook for indemnity is denied, and emphatically so. No such claim is valid under the terms of Marzouki’s Guaranty. “The liability of the defendants as guarantors is to be ascertained from the terms of the written contract construed according to the usual rules of interpretation read in connection with the subject matter, the relations of the parties to the transaction, and the well understood usages of business.” Schneider v. Armour & Co., 323 Mass. 28, 30 (1948) (citation omitted). In the guaranty, Marzouki and Rook “jointly and severally, do hereby absolutely and unconditionally guarantee to Landlord, its successors and assigns, the full and prompt payment when due, of all rents, charges and additional sums coming due under said Lease” as well as all attorney’s fees and expenses incurred by Braintree. It added that “[t]his Guaranty shall be an absolute and unconditional guaranty and shall remain in full force and effect as to Guarantors during the demised term of said Lease, any renewal or extension thereof, and thereafter so long as any liability remains due and payable even though the demised term or any renewal or extension thereof shall have expired.” In short, Marzouki and Rook promised they would both stand behind Wu if Wu defaulted. Marzouki cannot escape that responsibility by asserting that Rook undertook to indemnify him, which would violate the guaranty he signed.
Accordingly, Wu, Marzouki and Rook are jointly and severally liable for the total damages incurred by Braintree. See 275 Washington St. Corp. v. Hudson River Int’l, LLC, 465 Mass. 16, 30 (2013) (“[w]hen one guarantees the contract of another, the guarantor is bound by the terms of the contract guaranteed. … [and] [h]is obligations are co-extensive of the principal obligor”) (citation omitted).
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CONCLUSION
For the foregoing reasons, plaintiff’s motion for summary judgment is ALLOWED. Wu’s cross-motion for summary judgment is DENIED. Marzuki’s motion for summary judgment on his cross-claim against Rook is DENIED.
Plaintiff shall submit a calculation of damages, along with evidence of attorney’s fees and statutory interest, within ten days of this Order.
______________________________
Michael D. Ricciuti
Justice of the Superior Court
Date: September 26, 2017