Opinion
14-P-0997
06-23-2015
275 WASHINGTON STREET CORP., trustee, v. HUDSON RIVER INTERNATIONAL, INC., & another.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
On appeal from a judgment, the plaintiff-appellant landlord, 275 Washington Street Corp. (landlord) argues error in orders of the Superior Court that: (1) denied its motion for prejudgment security; (2) awarded attorney's fees to the defendant-appellee Hudson River International, LLC and Laboratorio Lucas Nicolas S.L. (tenants); (3) awarded the tenants prejudgment interest on their fee award; and (4) awarded the tenants attorney's fees and costs incurred in responding to the landlord's motion for reconsideration. The tenants, in turn, request that we award them their attorney's fees and costs incurred in connection with this appeal. For the reasons that follow, we conclude that the landlord's claims lack merit and affirm the judgment of the Superior Court. We further conclude that the tenants are entitled to the attorney's fees and costs they incurred in connection with this appeal.
Background. This case has been the subject of a prior appeal, and a brief statement of the procedural history is useful. On April 13, 2006, the landlord, as trustee of the Washington Street Realty Trust (II), and the tenants entered into a twelve-year lease for commercial space at 221-275 Washington Street in downtown Boston (premises). The tenants took possession of the premises on April 16, 2006, but closed the dental office in May, 2007, and removed the dental equipment in October, 2007. The tenants continued to make base rent payments through March, 2008. On May 9, 2008, the landlord sent a letter to the tenants listing their defaults and declaring that the landlord would "avail itself of all remedies to which it [was] entitled under the [l]ease." The landlord reentered and took possession of the premises on May 19, 2008, thereby terminating the lease. In March, 2010, the landlord signed a new ten-year lease for the premises with a replacement tenant, extending beyond the April 16, 2018, termination date of the original lease at a lower rent than was agreed to under the original lease.
These background facts are drawn from the opinion in 275 Washington St. Corp. v. Hudson River Intl., LLC, 465 Mass. 16 (2013).
The lease required the tenants to occupy and use the premises as a dental office and to pay the landlord monthly rent plus a share of the operating costs and real estate taxes. Under paragraph 21(h) of the lease, if the tenants defaulted, the landlord had the right to reenter and take possession of the premises and declare the term of the lease ended. Paragraph 21(h) also included an indemnification clause, which provided that "[t]enant shall indemnify [l]andlord against all loss of rent and other payments which [l]andlord may incur by reason of such termination during the remainder of the term."
On May 29, 2008, the landlord filed suit in the Superior Court against the tenants for breach of contract seeking to recover all damages arising from the breach. Some issues were resolved by pretrial rulings. To avoid the cost of a trial concerning the remaining issues, including the amount of the rent differential between the original lease and the new lease and when that value should be assessed, the parties stipulated that judgment should enter for the landlord against the tenants in the amount of $1,092,653.36. The tenants expressly reserved their right to appeal all issues they raised in their motion for partial summary judgment. On appeal, this court affirmed the finding of liability in favor of the landlord, but vacated the judgment assessing damages and remanded the matter "for calculation of damages due to the landlord as of the time it recovered possession of the premises." 275 Washington St. Corp. v. Hudson River Intl., LLC, 81 Mass. App. Ct. 418, 428 (2012). On further appellate review, the Supreme Judicial Court affirmed that part of the judgment finding the tenant liable for breach of the lease, vacated that part of the judgment assessing damages for the period following termination of the lease, and awarding attorney's fees, and remanded the matter to the Superior Court. 275 Washington Street Corp. v. Hudson River Intl., LLC, 465 Mass. 16, 31 (2013). The court noted, in regard to its affirmance of the award of attorney's fees to the landlord, that "[t]he landlord was the prevailing party at the time of judgment, but the tenant[s] ha[ve] prevailed as to the issues on appeal." Id. at 31 n.12. It instructed that "[o]n remand, the judge shall determine whether to assess attorney's fees in accordance with [paragraph 29] in the lease, and the amount to be assessed." Ibid.
On April 6, 2010, a judge of the Superior Court allowed the plaintiff's motion for summary judgment as to liability and denied the tenants' cross-motion for summary judgment, which conceded liability for unpaid rent that became due prior to the termination of the lease, but argued that posttermination damages for lost rent were not recoverable under the lease's indemnification clause until the end of the lease term. Another judge subsequently found that the landlord was entitled to pretermination damages in the amount of $37,176.24, lost rent from the termination of the lease to September, 2010, in the amount of $449,759.92, and attorney's fees in the amount of $103,367.91.
On remand, the landlord filed a motion requesting that the tenants be ordered to post a bond in the amount of $1,267,100 as prejudgment security and that the trial court retain jurisdiction over the case until a final assessment of damages. That motion was denied; the judge determined that she had no authority to provide such relief. Instead, she ordered the immediate entry of judgment. Also, both parties filed motions for attorney's fees and costs. The judge ruled that judgment should enter for the landlord in the amount of $37,275.24, plus $19,997.50 in attorney's fees and $1,327.46 in costs. She also ruled that the tenants were entitled to attorney's fees in the amount of $277,347.50 and costs in the amount of $44,249.89 in connection with its opposition to the landlord's claim arising from the lease's indemnification clause.
The landlord subsequently filed a motion for reconsideration regarding the judge's award of attorney's fees and costs to the tenants. That motion was denied as well, and the judge awarded the tenants the attorney's fees and costs they incurred in connection with opposing the motion.
Discussion. 1. Landlord's motion for prejudgment security and to retain jurisdiction. It is the law of the case that the landlord cannot recover losses under the lease's indemnification clause until the end of the period specified in the lease. 275 Washington Street Corp., 465 Mass. at 23. In this case, the tenants' obligation to indemnify the landlord does not arise until April 16, 2018, the "end of the original lease term, when damages may be 'wholly ascertained.'" Id. at 24, quoting from Gardiner v. Parsons, 224 Mass. 347, 350 (1916). Therefore, the judge was correct in ruling that when she considered the landlord's motion to order the tenants to post a bond and retain jurisdiction, the landlord's indemnification claim was not ripe, and the court did not have jurisdiction to entertain that claim. See Woodbury v. Sparrell Print, 187 Mass. 426, 430 (1905); Boston Herald, Inc. v. Superior Ct. Dept. of the Trial Ct., 421 Mass. 502, 504 (1995).
2. Award of attorney's fees to the tenants. Preliminarily, we view the Supreme Judicial Court's analysis in this case as necessarily implying that the landlord's one-count complaint actually consisted of two distinct claims: a claim for pretermination rent and a claim for posttermination indemnification. See 275 Washington St. Corp., 465 Mass. at 31. The court's statement that "[t]he landlord was the prevailing party at the time of judgment, but the tenant[s] ha[ve] prevailed as to the issues on appeal" denotes that each party is a "prevailing party." See id. at 31 n.12. Specifically, it denotes that the landlord was the prevailing party as to its claim for pretermination rent, and that the tenants were the prevailing party as to the landlord's claim for posttermination indemnification. See ibid.
Absent language indicating a contrary intent, the term "prevailing party" in a contractual fee payment clause is to be given its commonsense meaning. In Bardon Trimount, Inc. v. Guyott, 49 Mass. App. Ct. 764, 778 (2000), we awarded a landlord its fees and costs as a "prevailing party" under a fee payment clause in a stock purchase agreement despite the fact that no judgment had been entered in its favor. Id. at 779, 781. The landlord sought fees and costs in connection with the dismissal of the action. Even though it did not necessarily "implicate the merits of the claim," we found it significant that the dismissal did "engineer a permanent defeat . . . and an award of attorney's fees under the contract reflected appropriately the fact that 'the plaintiff . . . dragged the defendant through a costly and ultimately fruitless exercise.'" Id. at 780, quoting from Anderson v. Melwani, 179 F.3d 763, 765-766 (9th Cir. 1999).
Similarly, in the present case, the landlord's indemnification claim was effectively dismissed when the Supreme Judicial Court vacated that part of the Superior Court judgment assessing damages for the period following termination of the lease. See 275 Washington Street Corp., 465 Mass. at 31. The Superior Court's award of fees and costs to the tenants thus appropriately reflects the fact that the landlord required the tenants to participate in a "costly and ultimately fruitless exercise" with regard to that claim. As in Draper v. Town Clerk of Greenfield, 384 Mass. 444, 452 (1981), the tenants are the "prevailing party" with regard to the indemnification claim because "[t]he result [it] sought by the litigation . . . was achieved;" the claim was essentially dismissed.
3. The award of prejudgment interest on the tenants' fee award. In our view, the only sensible reason for the language in the lease's fee clause that "attorneys' fees and costs shall be deemed to have accrued on the commencement of [any action brought by the tenant or landlord against the other]" was to ensure that a prevailing party receive interest on an award of attorney's fees accruing from the date of the complaint. Insofar as the landlord contends otherwise on the basis of Osborne v. Biotti, 404 Mass. 112, 116 (1989) (no statutory right to an award of prejudgment interest on an award of attorney's fees), it made a strategic decision to argue below for an award of interest at a lower rate than called for under G. L. c. 231, § 6C. We are not required to consider for the first time on appeal an argument that the tenants were not entitled to any prejudgment interest. See note 6, supra. The judge therefore did not err in ruling that the tenants are entitled to prejudgment interest on their fee award at an interest rate of twelve percent per annum pursuant to G. L. c. 231, §6C.
The landlord has not challenged the judge's award of prejudgment interest on the tenants' costs. See Osborne v. Biotti, 404 Mass. 112, 116 (1989) (prejudgment interest applies to cost awards).
As the tenants point out in their brief, in the lower court, the landlord did not take the position that an award of prejudgment interest on the remainder of the award was unlawful, but merely disputed the rate of interest that should be applied. We do not regard this opposition as sufficient to preserve for appellate review the argument that no award of prejudgment interest was warranted. "An issue not raised or argued below may not be argued for the first time on appeal." Century Fire & Marine Ins. Corp. v. Bank of New England-Bristol County, N.A., 405 Mass. 420, 421 n.2 (1989).
4. The award to the tenants of their attorney's fees and costs incurred responding to the landlord's motion for reconsideration. We conclude that the trial judge did not abuse her discretion by awarding attorney's fees and costs to the tenants in connection with their opposition to the landlord's motion to reconsider. As was the case in Audubon Hill S. Condominium Assn. v. Community Assn. Underwriters of America, Inc., 82 Mass. App. Ct. 461 (2012), it was within the trial judge's discretion to award the fees as a sanction if she concluded that the landlord's motion merely repeated prior unsuccessful arguments. Id. at 472. The record indicates that the judge was warranted in reaching such a conclusion.
5. The tenants' request for attorney's fees and costs incurred in connection with this appeal. Consistent with our ruling that the tenants were entitled to their attorney's fees and costs incurred in connection with the defense of the plaintiff's indemnification claim as a "prevailing party" under the terms of the lease's fee payment clause, we conclude that the tenants also are entitled to the attorney's fees and costs they incurred in connection with the present appeal under that clause. In accordance with the procedure described in Fabre v. Walton, 441 Mass. 9, 10-11 (2004), within fourteen days of the date of the rescript of this decision, the tenants shall file with this court and serve on the landlord a motion for determination of the amount of their appellate fees and costs, supported by affidavit and any additional supporting materials. the landlord shall have fourteen days thereafter to submit a response.
Judgment affirmed.
By the Court (Fecteau, Agnes & Sullivan, JJ.),
The panelists are listed in order of seniority. --------
Clerk Entered: June 23, 2015.