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Kirin Produce Co., Inc. v. Lun Fat Produce, Inc., et al. (Lawyers Weekly No. 12-013-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV03338-BLS2
____________________
KIRIN PRODUCE CO., INC.
v.
LUN FAT PRODUCE, INC. and PETER TAM, AS TRUSTEE OF TAM REALTY TRUST
and
RICHARD Q. CHEN, Intervenor
____________________
MEMORANDUM AND ORDER ALLOWING MOTIONS TO DISMISS
Kirin Produce Co., Inc., alleges that it contracted with Lun Fat Produce, Inc., and its owner Peter Tam to purchase Lun Fat’s assets and to lease for three years and then purchase the property where Lun Fat is located. Kirin asserts that Tam and Lun Fat refused to carry out their alleged contractual obligations to Kirin, and that Tam instead agreed to sell all shares of Lun Fat stock and the property in question to Richard Chen. Kirin seeks specific performance of its alleged contract, a declaratory judgment that Lun Fat and Tam entered into an enforceable agreement with Kirin, liquidated damages for breach contract, and compensatory and punitive damages under G.L. c. 93A, § 11. Mr. Chen intervened to protect his interests, prompting Kirin to seek declaratory relief against him as well.
Defendants have moved to dismiss all claims under Mass. R. Civ. P. 12(b)(6). Tam and Lun Fat argues that the facts alleged in the complaint make clear that they never entered into any enforceable contract with Kirin, and thus Kirin has not stated any claim upon which relief can be granted. Chen joins in Tam’s arguments.
The Court will ALLOW the motions to dismiss because Kirin has not alleged facts plausibly suggesting that Kirin, Tam, and Lun Fat entered into a contractual agreement that satisfies the Statute of Frauds. To the contrary, the detailed allegations in the amended complaint make clear that Kirin never entered into an enforceable agreement with Mr. Tam and Lun Fat. Since there is an actual controversy among the parties and Kirin has standing to bring this action, the Court will order that judgment enter declaring that Kirin and Defendants did not enter into an enforceable contract and dismissing all other claims with prejudice.
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1. Legal Standard. To survive a motion to dismiss under Rule 12(b)(6), a complaint must allege facts that “plausibly suggest” the plaintiff has a viable claim. Lopez v. Commonwealth, 463 Mass. 696, 701 (2012), quoting Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007). “Conclusory allegations” that a defendant has acted illegally are not enough; judges must disregard such assertions and “focus on whether the factual allegations plausibly suggest an entitlement to relief.” Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 473 Mass. 336, 339 (2015), quoting Curtis v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011).
When deciding a motion to dismiss under Rule 12(b)(6), a judge must “accept as true the facts alleged in the … complaint”—or that are apparent from documents attached to, referenced in, or otherwise relied upon in framing the complaint1—“as well as any favorable inferences that reasonably can be drawn from them.” Partanen v. Gallagher, 475 Mass. 632, 635 (2016), quoting Galiastro v. Mortgage Elec. Registration Sys., Inc., 467 Mass. 160, 164 (2014).
But where a “complaint sets out with clarity and precision the detailed factual allegations [that] the plaintiff contends entitle him to relief,” dismissal is appropriate “if [those] allegations ‘clearly demonstrate that plaintiff does not have a claim.’ ” Fabrizio v. City of Quincy, 9 Mass. App. Ct. 733, 734 (1980), quoting 5 Wright & Miller, Federal Practice and Procedure: Civil § 1357 at 604 (1969); accord Harvard Crimson, Inc. v. President and Fellows of Harvard Coll., 445 Mass. 745, 748 (2006).
2. Contract Claims. To state a viable claim to enforce a contract, or to obtain damages for alleged breach of contract, a plaintiff’s complaint must allege facts plausibly suggesting that the parties entered into a binding contract. “Except in circumstances not relevant here, ‘the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.’ ” Kirkpatrick v. Boston Mut. Life Ins. Co., 393 Mass. 640, 652 (1985),
1 See Melia v. Zenhire, Inc., 462 Mass. 164, 166 (2012) (documents attached to the complaint); Johnston v. Box, 453 Mass. 569, 581 n.19 (2009) (documents referenced in complaint) (dictum); Golchin v. Liberty Mut. Ins. Co., 460 Mass. 222, 224 (2011) (documents used in framing complaint).
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quoting Restatement (Second) of Contracts § 17 (1981). “[T]he element of agreement or mutual assent is often referred to as a ‘meeting of the minds.’ ” I & R Mech., Inc. v. Hazelton Mfg. Co., 62 Mass. App. Ct. 452, 455 (2004), quoting Restatement (Second) of Contracts § 17 comment c (1981). “The manifestation of mutual assent between contracting parties generally consists of an offer by one and the acceptance of it by the other.” Id.; accord Restatement (Second) of Contracts § 22(1) (1981).
Kirin’s amended complaint alleges the following facts. Kirin and Lun Fat both sell produce on a wholesale and retail basis. In May 2015 these companies began to discuss the possibility of Kirin purchasing Lun Fat’s business assets as well as the property where Lun Fat is located, which is owned by the Tam Realty Trust (the “Trust Property”). The negotiations went nowhere for fifteen months. In August 2016 Kirin learned that a group of investors from New York had expressed interest in buying Lun Fat and the Trust Property. This prompted Kirin to make a series of three proposals regarding terms under which it would be willing to buy Lun Fat’s assets, to lease the Trust Property for three years, and to purchase the Trust Property at the end of that three-year period. Kirin laid out the terms of these proposals in spreadsheets that it sent to Peter Tam on August 22, September 7, and September 12, 2016. Several days later (September 15), a lawyer for Mr. Tam and Lun Fat (Ted Wong) responded in an email specifying nine terms in Kirin’s most recent proposal that Tam wanted to change. The next day (September 16) Kirin replied by email, stating that it was “OK” with five of the proposed changes, and proposing new terms with respect to the other four items.2 Two days later (September 18) Kirin’s principals had dinner with Tam. That evening Mr. Tam made an oral offer to sell Lun Fat and the Trust Property if Kirin would agree to all nine of the terms outlined in Mr. Wong’s September 15 email. Several days later (September 23) Mr. Wong sent an email stating that Mr. Tam is still “NOT ready to accept the latest Offer on the table,” and further explaining Tam’s position with
2 Although the September 16 email by Kirin was not attached to the complaint, Kirin stated at oral argument that it had no opposition to the Court considering that email in deciding the motion to dismiss. The Court then allowed Defendants’ motion to submit a copy of the September 16 email. Kirin attached the other emails and attachments at issue here to its amended complaint.
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respect to the four issues as to which the parties were still negotiating and that Wong had addressed in his prior email. The next day (September 24) Mr. Chan sent an email stating that Kirin “accepted” all nine of the terms that Lun Fat had proposed in Mr. Wong’s September 15 email, and also stating that Kirin wanted to add a new “item #10” that would revise the liquidated damage terms previously listed in Kirin’s spreadsheet.
The first three proposals by Kirin (on August 22, September 7, and September 22) were not offers capable of being accepted by Lun Fat and Mr. Tam. All three of the spreadsheets proposing Kirin’s terms of a possible deal stated that they were “Draft Only, Subject to Confirmation, Verification & Change by both Seller & Buyer.” The term sheets also stated that “All dates, $ $ and Terms are estimated ONLY, to be finalized by both parties!! Subject to change[.]” Since Kirin made clear in all three of these proposals that it had no “present intention to be bound” by the terms it had outlined, these proposals were insufficient “to create an enforceable contract.” See Lambert v. Fleet Nat. Bank, 449 Mass. 119, 123 (2007), quoting Situation Mgt. Sys. Inc. v. Malouf, Inc., 430 Mass. 875, 878 (2000).
The September 15 email from Lun Fat’s lawyer does not appear to express any intent to be bound either. This email identifies nine specific items in the last term sheet from Kirin that Mr. Tam would “like to change.” But nothing in the email clearly states that Tam was offering to sell Lun Fat and the Trust Property if Kirin would accept those changes.
Even if the September 15 email could be construed as an offer to sell Lun Fat and the Trust Property, Kirin rejected that offer. In its email response the next day, Kirin stated that five of the terms proposed by Lun Fat and Mr. Tam were “OK,” but proposed alternative versions of the other four terms. Since Kirin proposed to further revise the terms of the deal “in more than trifling detail,” its response was a counter offer, not an acceptance of Defendant’s alleged offer. Tull v. Mister Donut Development Corp., 7 Mass. App. Ct. 626, 631 (1979); accord, e.g., Bank of United States v. Thomson & Kelly Co., 290 Mass. 224, 228 (1935) (“An acceptance which varies substantially from the offer does not make a binding agreement.”). “Under fundamental principles of contract law, a counteroffer operates as a rejection of the
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original offer.” Uno Restaurants, Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376, 388 n.6 (2004). And “an offer once rejected cannot thereafter be revived by an attempted acceptance thereof.” Peretz v. Watson, 3 Mass. App. Ct. 727, 727 (1975) (rescript).
Kirin alleges that during a conversation on September 18 Mr. Tam said “that he would definitely sell the package if Kirin agreed to all of the terms in Mr. Wong’s email.” This allegation plausibly suggests that Mr. Tam made an oral offer to sell Lun Fat’s assets, and to lease and then sell the Trust Property, on the terms as proposed in Kirin’s September 12 term sheet and then revised in Mr. Wong’s responsive email.
Kirin’s alleged acceptance of this purported oral offer was ineffective as a matter of law because the proposed deal was subject to the Statute of Frauds. See generally Bibi v. Courville, 357 Mass. 782 (1970) (rescript) (contract subject to statute of frauds is unenforceable if allegedly formed when defendant made oral offer that was accepted in writing by plaintiff). The portion of the alleged contract that involves the lease and sale of land to Kirin would be subject to the statute of frauds and thus would only be enforceable if it were properly memorialized in a writing signed by Mr. Tam or his authorized agent. See G.L. c. 259, § 1; First Nat. Bank of Boston v. Fairhaven Amusement Co., 347 Mass. 243, 245 (1964) (“leasehold [is] an interest in land and subject to the statute of frauds”); Cellucci v. Sun Oil Co., 2 Mass. App. Ct. 722, 727 (1974) (sale of land). The rest of the contract, concerning the sale of Lun Fat’s business, would not be subject to the statute of frauds if it stood alone because it could have been performed within one year (since the last term sheet distributed in September 2016 called for the “business sale closing” to take place “around 2/15/2017”) and would not implicate any other provision of the statute. But, under the circumstances alleged in the complaint, the sale of Lun Fat’s business was inseparable from the lease and sale of the Trust Property and thus the entire contract was subject to the statute of frauds. See Sarkisian v. Teele, 201 Mass. 596, 608 (1901) (contract to sell all assets of a going business enterprise, including full possession of leased premises, was subject to statute of frauds; “the stipulation for the plaintiff’s assumption of the lease of the store for the remainder
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of the term cannot be separated from the sale of the merchandise and business, of which it evidently formed an essential part, and the contract, being entire, was within the statute”); McMullen v. Riley, 72 Mass. 500 (1856) (contract to lease store for a year and purchase fixtures was subject to statute of frauds; since parties “made no agreement … for the fixtures except with a view to the lease,” contract was indivisible).
The further email sent by Mr. Wong on behalf of Mr. Tam on September 23 is a writing, but it does not satisfy the requirements of the Statute of Frauds. Wong did not say in this email that Tam was offering to sell Lun Fat and the Trust Property. To the contrary, the email states instead that Tam was not prepared to accept Kirin’s “latest Offer,” and goes on to explain why. This email can only be understood as conveying a binding offer if read in the context of Mr. Tam’s alleged oral statements on September 18. But that is not enough to satisfy the statutory requirements. To satisfy the statute of frauds, a “writing must incorporate the promise that the plaintiff seeks to enforce.” Harrington v. Fall River Housing Auth., 27 Mass. App. Ct. 301, 306 (1989). Since the September 23 email from Mr. Wong does not “contain all the provisions of the oral contract with which the plaintiff is seeking to charge the defendant,” this writing does not satisfy the statute of frauds and the alleged contract cannot be enforced. See A.B.C. Auto Parts, Inc. v. Moran, 359 Mass. 327, 329 (1971); see also, e.g., Lampasona v. Capriotti, 296 Mass. 34, 38 (1936) (“a contract partly oral does not meet the requirement of writing under the statute of frauds”).
In sum, since the detailed facts alleged in the amended complaint show that the parties never entered into any enforceable contract, Kirin cannot seek specific performance or monetary damages for breach of contract. Nor may it assert a claim for breach of the implied covenant of good faith and fair dealing, because “this covenant pertains to bad faith in the performance of a contract, not in its execution.” Sheehy v. Lipton Indus., Inc., 24 Mass. App. Ct. 188, 194 n.6 (1987). The Court will therefore dismiss Kirin’s various claims for breach of contract.
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3. Declaratory Judgment Claim. Although Kirin does not have a viable claim for breach of contract, that does not mean that its claim for declaratory judgment should be dismissed. Instead, since Kirin has standing and there is an actual controversy between the parties regarding whether Kirin entered into an enforceable contract with Lun Fat and the Tam Realty Trust, the Court is obligated to declare the rights of the parties. See, e.g., Attorney General v. Kenco Optics, Inc., 369 Mass. 412, 418 (1976); Gennari v. City of Revere, 23 Mass. App. Ct. 979 (1987) (rescript).
4. Claim under G.L. c. 93A. Finally, since Kirin’s claim under c. 93A is based solely on and thus “is wholly derivative of” its claims for breach of contract, and Kirin has not alleged facts plausibly suggesting that Defendants ever entered into an enforceable contract with Kirin, the proposed claim under c. 93A would necessarily be futile as well. See Pembroke Country Club, Inc. v. Regency Savings Bank, F.S.B., 62 Mass. App. Ct. 34, 40-41 (2004) (ordering judgment in favor of defendant); accord, e.g., Macoviak v. Chase Home Mortgage Corp., 40 Mass. App. Ct. 755, 760, rev. denied, 423 Mass. 1109 (1996) (c. 93A claim “necessarily fail[s]” where it “is solely based upon … underlying claim for common law” tort, and that tort claim fails as a matter of law).
ORDER
The motions by Defendants to dismiss this action are both ALLOWED. Final judgment shall enter: (1) declaring that Kirin never entered into an enforceable contract with Lun Fat Produce, Inc., or Peter Tam, as Trustee of the Tam Realty Trust, and therefore has no right to challenge any agreement between those defendants and Richard Q. Chen; and (2) dismissing with prejudice Plaintiff’s claims for specific performance, for breach of express and implied contractual obligations, and under G.L. c. 93A.
February 6, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - March 2, 2017 at 4:33 am

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