Opinion
No. 98-38
Decided May 15, 2000 Filed June 14, 2000
FINDINGS OF FACT. RULINGS OF LAW AND ORDER FOR JUDGEMENT
This is dispute over a purchase and sale contract (the "Agreement") relating to a parcel of land in Brookline which was for many years the site of various gasoline service stations. Plaintiffs, (the "Buyers"), claim that the defendant, Longwood Texaco Corporation (the "Seller"), breached the Agreement by failing to perform certain contractual obligations relating to compliance with environmental laws and regulations. The Buyers seek, inter alia, damages and specific performance. They also claim damages under G.L.c. 93A from defendant Eric P. Rothenberg, ("Rothenberg") the sole director and officer of the Seller.
The Seller asserts that it used reasonable efforts to comply with its environmental obligations under the Agreement, and was excused by other provisions in the Agreement from further performance. The Seller has also asserted a counterclaim.
I. Background Facts
A. The Buyers
The Buyers, Jonathan Leffell, Richard L. Tuck and Jerome M. Tuck are all residents of Massachusetts with a regular place of business at 68 Harvard Street, Brookline Massachusetts. Jonathan Leffell, ("Leffell") is an architect by training and has for the past several years, been engaged in the business of real estate acquisition and development with Richard L. Tuck and Jerome M. Tuck. Richard L. Tuck, ("Tuck") is a licensed attorney no longer actively engaged in the practice of law. Tuck has been involved in the real estate business for over twenty years. During this time, Tuck has negotiated numerous purchase and sales agreements on behalf of himself and clients. Jerome M. Tuck, is also a licensed attorney no longer actively involved in the practice of law and has for many years been engaged in the business of real estate development and management with his brother Richard L. Tuck. The Buyers, serve as Trustees of the "Rosemont Trust" an entity which has previously developed residential real estate in the Town of Brookline.
B. The Seller
The Seller is a Massachusetts corporation, with a regular place of business at 155 Federal Street, Suite 1200, Boston, Massachusetts. The sole corporate asset of the Seller is a parcel of land known as 11 Longwood Avenue, located in the Town of Brookline (the "Premises"). Rothenberg is, and has been the president, and sole corporate officer and director of the Seller from the date of its incorporation to the present. Rothenberg is both an attorney and a licensed real estate broker. As such he has in the past, negotiated purchase and sales contracts on behalf of himself and clients.
C. Summary of the Transaction and Events
Detailed findings follow this summary.
The Premises had been the site of an operating gasoline station from approximately 1945 to 1997. Most recently an entity known as Longwood Auto Specialist, ("Longwood Auto"), operated a gasoline station known as "Mike's Texaco" on the Premises. On or about November 18, 1996, Longwood Auto conveyed the Premises to the Seller. This conveyance was in partial satisfaction of judgment obtained against Longwood Auto by Rothenberg in capacity as Trustee of the Longwood Realty Trust ('the Longwood Trust'). The Longwood Trust was the entity which owned a parcel adjoining the Premises, known as 21 Longwood Avenue ("21 Longwood"). This judgment was entered in the Middlesex Superior Court on August 1, 1994 and subsequently confirmed by a settlement agreement between the parties executed in December of 1996.
On or about March 28, 1997, the Seller advertised the Premises for sale in the New England Real Estate Journal. In early April of 1997, the Buyers on behalf of the Rosemont Trust, contacted the Seller in response to this advertisement . On April 7, 1997 the Rosemont Trust submitted an Offer to Purchase ("the Offer") to the Seller. On April 8, 1997, the Seller accepted the Offer subject to the negotiation of a purchase and sale contract. At the time of the Seller's acceptance of the Offer, a deposit in the amount of $1,000.00 was paid by the Buyers. Included within the Offer were additional provisions which indicate the Buyers' awareness that the Premises had existing environmental issues.
After an extensive negotiation, the parties entered into the Agreement on April 24, 1997. The purchase price for the Premises was $895,000.00. At the time the Agreement was executed, all parties knew the property had been the site of a gasoline station and that a release of oil or hazardous materials had occurred which required a response action under the Massachusetts Contingency Plan (MCP). A Release Tracking Number ("RTN") had previously been assigned to the property by the Department of Evironmental Protection ("the DEP"). Upon execution of the Agreement, an additional deposit of $44,000.00 was tendered by the Buyers and is currently being held in escrow by the Seller.
310 Code Mass. Regs. § 40.0000 (1999).
Paragraph 42(d) in the Agreement created an obligation on the Seller's part to file a Response Action Outcome Statement ("RAO") with the DEP by 60 days prior to the closing date. The parties set the closing date for December 5, 1997. Under the terms of Agreement, therefore, the date for filing the RAO with the DEP was October 5, 1997. The RAO was not filed on October 5, 1997. The Seller, relying on Paragraph 10 of the Agreement, subsequently notified the Buyer that it was extending the Agreement for thirty days until January 5, 1998, on the grounds that the Seller had been unable to file the RAO on time. No closing in fact took place on January 5, 1998. The parties never agreed to any further extension of the closing date.
This action was brought by the Buyers on January 8, 1998 and certain preliminary relief was negotiated by the parties and entered by the court. An Activity and Use Limitation (AUL) relating to the Premises was recorded on January 26, 1998 pursuant to the MCP. An RAO on the Premises was filed with the DEP by the Seller on March 6, 1998.
D. Summary of the Claims and Defenses
The Buyers claim that the Seller breached the Agreement by not filing the RAO by October 5, 1997, as was required by Paragraph 42(d) of the Agreement. The Seller claims that it used reasonable efforts under the circumstances to perform its environmental obligations under Paragraph 42(d) and that consequently, under Paragraphs 10, 11 and 12 of the Agreement it was relieved from any further obligation to file the RAO. The Buyers claim that Paragraphs 10, 11 and 12 do not apply to the Seller's environmental obligation under Paragraph 42. They cite Paragraph 33 of the Agreement in support of their claim that the Seller's obligation to file an RAO was absolute and unconditional.
Thus, the court must determine whether the Agreement unconditionally requires the Seller to file an RAO, or whether the Seller could comply with its contractual obligations by using reasonable efforts to do so within the time specified in the Agreement. If only reasonable efforts were required, the court must determine whether such reasonable efforts were in fact made.
Buyers have asserted the following claims in the five counts of their Amended Complaint: breach of contract (Count I); breach of a covenant of good faith and fair dealing (Count II); violations of G.L.c. 93A against Rothenberg, the sole director and officer of the Seller (Count III); a request for a declaratory judgment (Count IV); and a request for specific performance and damages (Count V).
The Seller has asserted a the following counterclaims: a request for a declaratory judgment (Count I); abuse of process-wrongful action in violation of G.L.c. 231, § 6F (Count II). and violations of G.L.c. 93A against the Buyers (Count III).
II. The Written Contract
A. The General Business Context
The Premises had been used for many years as a gasoline station. The Premises are across the street from and geologically up gradient of 21 Longwood. Rothenberg, as Trustee of the Longwood Trust, owned 21 Longwood for several years. Rothenberg had discovered and established through prior litigation that the Premises were the source of contamination at 21 Longwood and that this contamination had for many years impeded his sale of that property. Rothenberg consequently obtained a judgment against the previous owners of the Premises and created the Seller as a corporation to acquire the Premises as part of a settlement.
Rothenberg is a lawyer with extensive experience representing clients in the buying and selling of real estate. He also has experience buying and selling real estate for his own account. The Buyers are themselves experienced in the buying, selling and development of real estate. They were interested in the Premises because of its potential for development into a building with several high end condominiums.
The Buyers were informed by Rothenberg that the Premises were the site of a release of oil and hazardous materials, and that consequently, the Premises would have to be made to comply with the MCP. The subject of bringing the property into compliance with the MCP was treated in the Agreement after extensive negotiation.
B. The Structure of the Written Contract
The Agreement at issue went through eight drafts. The first draft was provided by Rothenberg who was negotiating both as an attorney in fact and an attorney at law for the Seller. The Buyers were represented by Frank Aronson, ("Aronson"), an attorney with extensive experience in negotiating and drafting real estate purchase and sale contracts.
As in most modern real estate transactions, the first draft of the Agreement was based on the Standard Form Purchase and Sales Agreement published by Greater Boston Real Estate Board, (the "GBREB Form"), with "mark ups" based upon the parties experience in negotiating such contracts in the past. The parties did not start with a printed form. The first draft, prepared on a word processor by the Seller, had numerous additions and alterations compared to the GBREB Form. As the negotiations progressed changes were made, material was added and deleted until a draft which was acceptable to both sides was agreed upon and executed.
The Agreement as executed contains fifty-three separate paragraphs, a number of which are relevant to this action. Paragraph 1, denominates the parties to the Agreement. Paragraph 2 describes the Premises. Paragraph 4, deals with the title deed. It provides, inter alia, and as will be discussed in more detail below, that title would be free from encumbrances. Paragraph 8, sets the closing date for December 5, 1997, "unless otherwise agreed in writing." This paragraph further states, "[i]t is agreed that Time is of the essence of this agreement." Paragraph 9 is one paragraph dealing with the condition of the premises at the time of the closing. Paragraph 42 is another. Paragraph 9 requires the Premises to be free of all tenants and to be in the same condition, except for the demolition described in Paragraph 47, as they were at the time of signing. Paragraph 42(d) around which the current controversy centers states the following:
Prior to closing, SELLER shall deliver the Premises to the BUYER such that the Premises pose no significant or otherwise unacceptable risk of harm to the public health, safety, welfare or the environment and that no further remedial action is required at the Premises. A Response Action Outcome and accompanying report shall be filed with the DEP no later than sixty days prior to the closing. All Response Actions and other environmental activities shall be in full compliance with the MCP ( 310 CMR 40.0000). In addition, SELLER will contemporaneously provide BUYER copies of all correspondence with the DEP;
Paragraph 42 also contains in other subparagraphs language relating to environmental representations and indemnification, as described below.
Paragraphs 10, 11 and 12 deal, respectively, with the right of the Seller to extend the time for closing for thirty days. if the condition of the Premises does not conform with all of the provisions of the Agreement; the consequences of Seller's failure at the expiration of the thirty days to make the Premises conform to the agreement; and the option of the Buyer to elect to take the Premises in the condition they are in at the expiration of the thirty days.
Paragraph 33 provides that the Buyer may inspect the Premises and bring environmental conditions to the attention of the Seller. Paragraph 33 contains the following parenthetical which is also the subject of dispute between the parties: "(the SELLER in all events being required to deliver the Premises and perform such work, in accordance with paragraph 42 hereafter)". Other provisions in the Agreement that have some bearing on its interpretation will be discussed below.
The Buyers claim that the Seller is absolutely required to comply with Paragraph 42(d) of the Agreement and that by failing to do so it is in breach of the contract. They rely on Paragraph 33 to support this argument. The Seller's position is that it is only required to use reasonable efforts to comply with Paragraphs 42(d) and that it has done so. The Seller relies on Paragraphs 10, 11 and 12 to sustain this interpretation of the Agreement.
C. General principles of contract interpretation
Under Massachusetts law, the construction of a contract is a question of law for the court. Freelander v. G. K. Realty Corp, 357 Mass. 512, 516 (1970). The basic rule of contract construction is that a court "must give effect to the parties' intention and construe the language to give it reasonable meaning wherever possible." Shea v. Bay State Gas Co., 383 Mass. 218, 224-225; See Massachusetts Turnpike Authority v. Perini Corp., 349 Mass. 448, 452 (1965); New York. N.H. H.R.R. v. Walworth Co. 340 Mass. 1, 3 (1959). Consequently, "[c]ontract interpretation is largely an individualized process with the conclusion in a particular case turning on the particular language used against the background of other indicia of the parties' intention." Starr v. Fordham, 420 Mass. 178, 190 (1995).
Certain basic principles guide the "individualized process" of contract interpretation. "Justice, common sense and the probable intention of the parties are guides to the construction of a written instrument." Shane v. Winter Hill Fed. Say. Loan Ass'n, 397 Mass. 479, 483 (1986). Courts must "construe the contract with reference to the situation of the parties when they made it and to the objects sought to be accomplished." Brynes v. Gloucester, 297 Mass. 156, 158 (1937). A contract should be construed "to give it effect as a rational business instrument and in a manner which will carry out the intention of the parties." Shane, 397 Mass. at 483. A written contract is to be interpreted as a whole and consequently "the scope of a parties obligations cannot be delineated by isolating words and interpreting them as though they stood alone." Starr, 420 Mass. at 190 (1995). Every word of a contract is to be given force so far as is practicable and "no part of the contract is to be disregarded" Id.; See also Ucello v. Cosentino, 354 Mass. 48, 51 (1968) ("The intent of the parties must be gathered from a fair construction of the contract as a whole and not by special emphasis upon any one part."). If there is an inconsistency between a clause that is general in character and one which is specific in its coverage, the specific clause will usually be held to modify the more general one. Lembo v. Waters, 1 Mass. App. Ct. 227, 233 (1973). Likewise, if there is an inconsistency between a printed provision of a contract and one inserted by the parties especially for the contract, the inserted provision should prevail over the printed one. Carigg v. Corderio, 26 Mass. App. Ct. 611, 617 (1988).
In determining the meaning of the Agreement, the court will follow the above stated principles of contract construction and look to language of the Agreement within the framework of the business context surrounding its making. Testimony concerning the parties' present interpretation of what they intended is relevant, but the weight of such evidence was assessed in view the evidence of the care with which the Agreement was drafted and the detail and structure of the Agreement itself, taken in the business context in which the Agreement was consummated.
The contract at issue was freely entered into by sophisticated business people who were represented by experienced attorneys. As noted above, all of the parties to the Agreement were familiar with real estate transactions and the at least one party on each side was himself an experienced real estate attorney. The wording used in a written contract becomes "particularly significant" when it is inserted into a witting with aid of experienced attorneys acting in full awareness of the pertinent facts after discussion with the parties. See Louis Stoicio, Inc. v. Colonial Development Corp., 369 Mass. 898, 902 (1976). The Buyers in this case were kept fully informed by their attorney of the status of the negotiations and the proposed language of the Agreement. They authorized their attorney to negotiate and they approved and adopted and executed the Agreement as finally drafted.
The reference to Rothenberg as a "party" or "owner"is for convenience and not meant to be a ruling relating to his personal ownership or liability with regard to any property.
The court, in interpreting the language of Agreement, must do so within the business context surrounding its making. The Agreement in question is a purchase and sales contract involving the conveyance of property that had been a gas station for several decades. The Seller, through Rothenberg, had informed the Buyers that Seller had acquired the Premises as a result of prior litigation relating to contamination emanating from the Premises which caused contamination of 21 Longwood previously owed by Rothenberg. The Seller and the Buyers were therefore, well aware that environmental contamination of some level existed on the Premises and that a release tracking order concerning the Premises was on file at the the DEP. Consequently, both parties knew that the Seller was required under both G.L.c. 21E and the MCP, to undertake some response actions to address the existing contamination on the property. (See below). Both parties also knew that Buyers intended to construct high-end residential condominium units on the property.
See previous footnote
D. The Parole Evidence Rule
The Buyers contend that the court should find that the Agreement is ambiguous based upon the Agreement's language, business context and the actions of parties subsequent to its making. The determination of whether a contract is ambiguous presents a question of law for the court. See Freelander, 357 Mass. at 516. A contract is ambiguous "only if it is susceptible of more than one meaning and reasonably intelligent persons would differ as to which meaning is a proper one." Bercume v. Bercume, 428 Mass. 635, 641 (1999). A contract is not ambiguous "simply because a controversy exists between parties, each favoring an interpretation contrary to the other's." Suffolk Construction Co., Inc. v. Lanco Scaffolding Co., Inc., 47 Mass. App. Ct. 726, 729 (1999).
The court, upon examining the express terms of the Agreement, finds no ambiguities in these terms nor any obscure words requiring explanation. See Hiller v. Submarine Signal Co., 325 Mass. 546, 549-550 (1950). The court also finds that there are no essential terms necessary to a determination of the rights and duties of the parties missing from the Agreement. See Fay, Spofford Thorndike, Inc. v. Massachusetts Port Authority, 7 Mass. App. Ct. 336, 342 (1979). Consequently, the court finds that the Agreement is unambiguous on its face.
The Buyers contend that even if the Agreement is unambiguous on its face, the extrinsic evidence offered at trial demonstrates that the parties' intent was imperfectly expressed in the Agreement, therefore rendering the Agreement ambiguous. It is true that the Buyers expended effort and funds to prepare to develop the property after the Agreement was executed and before the date set for closing. They argue this activity is evidence of a shared understanding that Seller was unconditionally required to deliver the Premises with a permanent solution RAO in full compliance with the MCP. In particular Buyers point to their actions in seeking a variance to permit residential development on the Premises, paying an architectural firm to prepare project plans and specifications, retaining a real estate broker to prepare marketing plans for the development and seeking bank financing for project construction.
But these facts cited by the Buyers can support not only a fair inference that the parties intended that the filing of a permanent solution RAO was an unconditional obligation of the Seller but also an inference that, at the time of the Agreement, both parties believed that the Seller could file the necessary RAO in full compliance with the MCP relatively quickly. The court is persuaded that this second inference is the more reasonable one, and that the Buyers were motivated in their post-agreement undertakings by the shared belief of the parties that the Premises could easily be closed out under the MCP. This shared intent is unambiguously expressed in the terms of the Agreement.
The language of the Agreement is entitled to great weight because the Agreement is an integrated contract. Davis v. Dawson, 15 F. Supp.2d 64, 107 (D.Mass. 1998). Paragraph 41 of the Agreement states "[t]his Agreement supercedes any prior oral or written agreements or statements between the parties. The BUYER acknowledges that this Agreement contains any and all representations upon which he is relying and that he is not relying on any representation not in this Agreement." Paragraph 27 is also an integration clause in that it states that the Agreement sets forth the entire contract between the parties. In construing integrated contracts "the words themselves remain the most important evidence of intention. . . ." Robert Industries, Inc. v. Spence, 362 Mass. 751, 755 (1973). Interpretation of an integrated writing should be directed to "the meaning of the terms of the writing in light of the circumstances, not to the meaning of the conversations of the parties in the course of their negotiations." Id.
For all of the reasons discussed above, the court finds that as matter of law that the Agreement is not ambiguous. An unambiguous agreement should be interpreted according to its plain terms. Freelander, 357 Mass. at 516.
E. The Meaning of the Agreement
Interpreting the plain terms of the Agreement within its business context, and applying the recognized Massachusetts rules and principles of contract construction, this court makes a number of findings concerning its terms and meaning.
Paragraph 10 of the Agreement relates to extension of the time for performance on the part of the Seller to perfect title, deliver possession or make the Premises conform. This paragraph is based on a standard provision contained in the GBREB Form. As noted above, the GBREB Form in fact served as the basis for the parties' negotiations of the Agreement. Paragraph 10 as contained in the Agreement however, represents a substantial modification of the paragraph as set forth in the GBREB Standard Form. In the GBREB Standard Form it is a seller's election as to whether or not to use reasonable efforts to perfect title, deliver possession or make premises conform to contractual provisions. Paragraph 10 of the Agreement, however, does not make the use of reasonable efforts optional on the Seller's part. The Seller must use reasonable efforts to make the premises conform to the provisions of the Agreement. Paragraph 10 of the Agreement by its very terms imposes a "reasonable efforts standard" on the Seller concerning its obligations to perfect title, deliver possession and make the Premises conform to the conditions called for by the Agreement as a whole.
The Paragraph in its entirety reads as follows:
Extension to Perfect Title or Make Premises Conform. If the SELLER shall be unable to give title or make conveyance, or deliver possession of the Premises, all as herein stipulated, or if at time of delivery of the deed the Premises do not conform with the provisions hereof, then the Seller shall use reasonable efforts to remove any defects in title, or to deliver possession as provided herein, or make the said Premises conform to the provisions hereof, as the case may be in which event the SELLER shall give written notice thereof to the BUYER at or before the time for performance hereunder and thereupon the time for performance hereof shall be extended for a period of up to thirty (30) days.
See Edward C. Mendler, Massachusetts Conveyancers' Handbook with Forms A: 1 (3rd ed. 1984 Supp. 1999).
Id. Paragraph 10 of the GBREB Form reads:
10. EXTENSIONS TO PERFECT TITLE OR MAKE PREMISES CONFORM. If the SELLER shall be unable to give title or make conveyance, or to deliver possession of the premises, all as herein stipulated, or if at the time of the delivery of the deed the premises do not conform with the provisions hereof, then any payments made under this agreement shall be refunded and all under obligations of the parties hereto shall cease and this agreement shall be void and without recourse to the parties hereto, unless the SELLER elects to use reasonable efforts to remove any defect in title, or to deliver possession as provided herein, or make said premises conform to the provisions hereof, as the case may be, in which event the SELLER shall give written notice thereof to the BUYER at or before the time for performance shall be extended for a period of thirty days.
The key provision Paragraph 10 is the one that imposes upon Seller the duty to use reasonable efforts "to make said Premises conform to the provisions hereof. . . ." Given this provision, Paragraph 10 does not, as suggested by the Buyers, relate only to minor title defects and the delivery of possession free of all tenants and occupants. The paragraph by its very language expressly includes title, possession and conformity of premises. A plain reading of Paragraph 10 indicates that Seller was required to use reasonable efforts to make the Premises conform to any contractual provision of the Agreement. That the Agreement requires Seller to use reasonable efforts to perform is further evidenced by the fact that the parties modified the language of the GBREB Form and made the use of reasonable efforts mandatory as opposed to optional on the Seller's part. Thus, under the expressed provisions of Paragraph 10, Seller will not have breached any of its performance obligations under the Agreement, so long as it uses "reasonable efforts" to perform.
Paragraph 42(d) clearly relates to the environmental condition of the premises and is included in the reference to making the premises conform to the provisions of the Agreement in Paragraph 10. Paragraph 42(d) constitutes the bargained for obligation of the Seller to satisfy the requirements of the MCP by filing an RAO reflecting the response actions it has taken. The language used is a description of a class A-2 or A-3 RAO "Permanent Solution" under the MCP.
See discussion infra regarding the unsuitability of a Class A-3 RAO and the fact that an A-1 RAO was not required.
The Agreement further specifically required the Seller to file the RAO with the DEP sixty days prior to the closing. The parties thus dealt with the issue of the environmental condition of the premises by obligating the Seller to file an RAO. As will be discussed below, this is the mechanism by which a contaminated property is taken out of the MCP system and the then current way to comply with the laws relating to environmental pollution of the type relevant in this case. The filing of an RAO is an obligation relating to the condition of the Premises and clearly falls within the conformity-of-premises language of Paragraph 10. The time for performance of that obligation was sixty days prior to closing.
The Buyers contend that Paragraph 42(d) imposes upon the Seller an absolute obligation under the contract to provide Buyers with a "Permanent Solution" RAO in full compliance with the MCP sixty days prior to the closing, and to conduct all environmental activities at the Premises in full compliance with the MCP, and that the "reasonable efforts" language of Paragraph 10 is not applicable. The court concludes otherwise.
The Buyers contention is not supported by the express language of the Agreement. There is nothing in the express language of Paragraph 42(d) that exempts it from the provisions of Paragraph 10 or that imposes an absolute obligation to perform on the Seller. Unless other parts of the Agreement or the context of the Agreement support such an interpretation, the reasonable efforts standard of Paragraph 10 on its face applies to the Seller's performance of their environmental obligations set forth in Paragraph 42(d). The Buyers argue that several other provisions of the Agreement support their argument that the Sellers obligation under Paragraph 42(d) is absolute.
In particular, the Buyers assert that the right to extend the closing for thirty days in order to perform, granted to the Seller under Paragraph 10, is inconsistent with the requirement of Paragraph 42(d) that an RAO be filed with the DEP sixty days before the closing. There is, however, no necessary inconsistency between these two provisions. The Seller could conceivably exercise his right to extend the closing thirty days specifically to ensure that an RAO was filed at least sixty day before the new closing date.
The Buyers argue that language in Paragraph 33 of the Agreement specifically establishes that the obligation of Sellers under Paragraph 42(d) is absolute. Paragraph 33 of the Agreement is both a Buyer's right of access clause and a limitation on the scope of the Seller's indemnification liability under Paragraph 42(e). The provision limiting Seller's post-closing liability reads as follows: "[n]otwithstanding any provision herein to the contrary, BUYER waives any claim against SELLER and will hold the SELLER harmless for any environmental conditions not known to SELLER as of Closing (said waiver shall survive the Closing)."
Paragraph 33 of the Agreement states in relevant part:
Access. The BUYER or BUYER's Agent shall have reasonable right of access to the Premises prior to the Closing Date for the purpose of inspection of the Premises including environmental inspections of a non-invasive nature. Said right of access shall be exercised only after reasonable notice to the SELLER or SELLER's Agent and in the presence of the SELLER or SELLER's Agents. If any such environmental inspections shall indicate or suggest the presence of any environmental condition. then the SELLER and BUYER shall promptly consult each other with respect thereto and the BUYER shall have the right thereafter, upon notice to the SELLER, to cause invasive inspections at BUYER's sole expense, in order to determine the extent and nature of any such condition (the SELLER in all events being required to deliver the Premise and perform such work, in accordance with Paragraph 42 hereafter). Notwithstanding any provision herein to the contrary. BUYER waives any claim against SELLER and will hold SELLER harmless, for any environmental condition not known to SELLER as of the Closing (said waiver shall survive the Closing) . . . .
Paragraph 33 grants to Buyers the right to make non-invasive environmental inspections of the Premises to determine the presence of any unknown environmental condition. The provision giving the Buyers the right to make non-invasive inspections is followed by one requiring Buyers and Seller to consult with respect to any environmental conditions discovered, and further giving Buyers the right to make invasive inspections to determine the nature and scope of any such condition. Following this latter provision is the following parenthetical: "(the SELLER in all events being required to deliver the Premises and perform such work in accordance with Paragraph 42 hereafter)." The language of the parenthetical must be construed within the context of Paragraph 33 as both a Buyer access clause and one which enabled the Seller to limit the scope of it's indemnification obligations to the Buyers. The "in all events" parenthetical needs to be read in conjunction with the language preceding it which grants Buyers the right to discover and make known to Seller any environmental conditions of which Seller is unaware.
The reasonable interpretation of all these provisions read together is that before Buyers will waive Seller's liability for unknown environmental conditions, they want to be able to inspect to discover any such conditions. The obvious purpose, in the context of Paragraph 33, of inserting the parenthetical is to ensure that Sellers would address, as part of their environmental response actions under Paragraph 42(d), any unknown environmental conditions on the Premises discovered by the Buyers prior to the closing. In other words, under Paragraph 33, Buyers have an opportunity to discover and make part of Seller's pre-closing environmental obligations any unknown conditions. The language of the parenthetical relates specifically and solely to the Seller's obligation to include, as part of their Paragraph 42(d) response actions, any environmental conditions discovered between execution of the contract and the closing. All of Seller's environmental response actions under Paragraph 42(d) are controlled by the Paragraph 10 reasonable efforts standard. The parenthetical in Paragraph 33, therefore, does not, as Buyers contend, impose an absolute performance standard on the Seller concerning environmental obligations.
The Buyers argue that it be would illogical to interpret Paragraph 33 as requiring Seller to absolutely address any unknown environmental condition discovered by Buyers prior to closing, but not to require Seller to absolutely address conditions known to the Seller prior to the Agreement. This argument is based on their premise that the obligation of the Sellers to remedy problems discovered by the Buyers is absolute. But the court does not find the that language "in all events" has such a meaning in the context of this Agreement.
The court does not construe Paragraph 33 as requiring Seller to resolve any environmental conditions discovered by Buyers regardless of how long it takes or what expense is involved. Paragraph 33 requires the Seller to include in its response action any environmental condition made known to it, whether as a result of its own efforts or as the result of inspections done by the Buyers. Its obligations under 42(d) persist regardless of who discovers any particular environmental condition "in all events." Those obligations are not re-defined by the parenthetical language and remain subject to Paragraph 10.
Paragraph 11 of the Agreement also concerns the Sellers' failure to perfect title, deliver possession or make the premises conform to contractual provisions. Although Paragraph 11 is also based on a standard provision in the GBREB Form, it has a significant difference. In the Standard Form's Paragraph 11 it is a buyer's option as to whether to void the contract if the seller is unable to perform. The Agreement's Paragraph 11 does not contain this language.
Paragraph 11 reads in its entirety:
Failure to Perfect Title or Make Premises Conform, etc. If at the expiration of the extended time the SELLER shall have failed so to remove any defects in title, deliver possession or make the Premises conform, as the case may be, all as herein agreed, or if at any time during the period of this agreement or any extension thereof, the holder of a mortgage on said Premises shall refuse to permit the insurance proceeds, if any, to be used for such purposes, then any payments made under this agreement shall be forthwith refunded and all other obligations of the parties hereto shall cease and this agreement shall be void without recourse to the parties hereto.
"See Mendler, at 487. Paragraph 11 of the GBREB Standard Form Purchase and Sale Agreement states:
FAILURE TO PERFECT TITLE OR MAKE PREMISES CONFORM, etc. If at the expiration of the extended time the SELLER shall have failed so to remove any defects in title, deliver possession or make the premises conform, as the case may be, all as herein agreed, or if at any time during the period of this agreement or any extension thereof, the holder of a mortgage on said premises shall refuse to permit insurance proceeds, if any, to be used for such purposes, then at the BUYER'S option any payments made under this agreement shall be forthwith refunded and all other obligations of all parties hereto shall cease and this agreement shall be void without recourse to the parties hereto.
Termination provisions similar to the type set out in Paragraph 11 of the Agreement have long been a part of local real estate contracts and Massachusetts courts have consistently held them to be enforceable. See McCarthy v. Mills, 26 Mass. App. Ct. 223, 228 (1988); see also Sechrest v. Safiol, 383 Mass. 568 (1981); Berry v. Narozzi, 362 Mass. 145 (1972); Lafonde v. Frame, 327 Mass. 364 (1951); Old Colony Trust Co. v. Chauncey, 214 Mass. 271 (1913). Under Massachusetts law, the ability of a seller to invoke a termination provision is dependent on whether a seller has expressly or implicitly bound itself to see that a contractual condition is performed and whether the seller is obligated to make reasonable efforts to satisfy any condition imposed by the contract. McCarthy v. Mills, 26 Mass. App. Ct. at 228-230.
If a seller has not expressly or implicitly bound itself to perform a specific condition then it is entitled to invoke the "termination clause" provided any inability to perform on the contract is without fault on the seller's part. Id. at 228-229. The seller is also required to have acted in good faith with the intent to carry out the agreement. Berry v. Nardozzi, 362 Mass. 145, 149 (1972). These factual issues are addressed below in connection with the court's finding relating to reasonable efforts to comply.
In order to give a reasonable meaning to termination provision of Paragraph 11 it must be read in conjunction with Paragraph 10 and the performance standard contained therein. The plain language of Paragraph 11 clearly means that if after an extension of the closing, Seller is still unable to perform under the terms of the Agreement, it may terminate the contract and refund all monies paid by the Buyers. Because Paragraph 11 specifically refers to performance extensions under Paragraph 10, the Seller's right to terminate the Agreement based on an inability to perform is clearly contingent on their use of reasonable efforts to perform. As discussed above, Paragraph 42(d) does not supercede the Paragraph 10 reasonable efforts standard. Consequently, 42(d) does not, as the Buyers suggest, supercede the Seller's Paragraph II right to terminate by imposing an absolute obligation standard. Further, it would be illogical for the Agreement under Paragraph II to grant the Seller a right to terminate based on an inability to perform and then later impose an absolute obligation to perform.
Paragraph 12 of the Agreement concerns the Buyers' right to elect to take title if Seller is unable to perform as required under the contract. Paragraph 12 was adopted verbatim from Paragraph 12 of the Standard Form prepared by the GBREB. It grants the Buyers the right to accept such title and/or condition of the Premises as Seller can deliver at the time of the closing. The granting of this right to the Buyers clearly contemplates the possibility that the Seller could, at the time of closing, be unable to fully perform their obligations. This is clearly consistent with the reasonable efforts standard of Paragraph 10.
Paragraph 12 reads in the pertinent part:
BUYER's Election to Accept Title. The BUYER shall have the election, at either the original or any extended time for performance, to accept such title as the SELLER can deliver to said Premises in their condition and pay therefor the purchase price without deduction, in which case the SELLER shall convey such title . . . [there follows language relating to damage of premises through fire or casualty].
Thus, the clear interpretation of Paragraphs 10, 11 and 12, when read together, is that Seller is required to use reasonable efforts to deliver to the Buyers good title and possession of the Premises in the condition called for by the Agreement as a whole. If the Seller is unable to fully perform, then, under the express terms of the Agreement, Buyers can elect to either take what Seller can convey, or both parties can walk away from the Agreement with all deposits being returned. Only if there was absolute obligation on the Seller's part to deliver the Premises in compliance with Paragraph 42(d) would Paragraphs 10, 11, and 12 be negated. As discussed above, Paragraph 42(d) does not contain such an absolute obligation.
The Buyer's maintain that the foregoing interpretation of Paragraphs 10, 11 and 12 renders Paragraph 38 of the Agreement a nullity. Paragraph 38 states as follows:
Subsequent Events. From and after the date hereof, the SELLER shall give prompt written notice to the BUYER of any notice actually received by the SELLER, or the occurrence of any event actually known to the SELLER which would, immediately or with notice or passage of time, prevent the SELLER from performing its obligations hereunder, or constitute a breach of warranty or representation. The SELLER shall promptly use reasonable efforts to correct, cure or eliminate any such item, notice or event which would prevent the SELLER from performing its obligations hereunder.
Paragraph 38 expressly requires the Seller to use "reasonable efforts to correct, cure or eliminate" any "item, notice or event" which would prevent the Seller from performing under the Agreement. Given that a reasonable effort standard is imposed on the Seller under Paragraph 38, the Court does not see how a finding that Paragraphs 10, 11 and 12 impose a reasonable efforts standard on all contractual performance renders Paragraph 38 a nullity. It also significant that the expressed language of Paragraph 38 contemplates that subsequent events might render Seller unable to perform and require the use of reasonable efforts to overcome performance obstacles. This clearly does not comport with a finding that absolute performance is required of the Seller concerning the environmental requirements of Paragraph 42(d). Again, it would be unreasonable to construe the Agreement as requiring of Seller to absolutely perform environmental obligations under Paragraph 42(d) and only require reasonable efforts on Seller's part under Paragraph 38 if subsequent events prevent performance of these environmental obligations.
E. The Agreement as a Whole Does Not Permit an AUL
In order for the Seller's efforts to perform under Paragraph 42(d) to be reasonable, such efforts must not breach other provisions of the Agreement. Paragraph 4 of the Agreement requires that the Sellers must convey to the Buyers "a good clear record and marketable title thereto, free from encumbrances. . . ." The paragraph then goes on to list five categories of encumbrances excepted from this latter provision. These exceptions include in subparagraph (e) "[e]asements, restrictions and reservations of record, if any." These types of encumbrances are excepted from the title requirements of the Agreement, so long as they were part of the Sellers' title on the "Examination Date" set forth in Paragraph 52 and were not objected to by the Buyers on or before this date.
The MCP authorizes the placement of restrictions on the permitted activities and uses of property which has been subjected to environmental contamination. These restrictions, called Activity and Use Limitations ("AUL"), are placed on a property to both prevent further contamination and exclude risks to public health and safety. The filing of an AUL is required under the MCP to achieve a site closeout through a Class A-3 RAO. An AUL imposes building and other use restrictions on property. Therefore, an AUL clearly constitutes an encumbrance on a property. See Coons v. Cartensen, 15 Mass. App. Ct. 431, 433 (1983) ("In all events, building and use restrictions are encumbrances."). When an AUL is placed on a property, a notice must be filed the Registry of Deeds.
See Mendler, at § 14:8.
Id.
Id. at § 40.1070(3).
Any AUL filed on the Premises after the execution of the agreement would constitute an encumbrance placed on the property by the Seller. Under Paragraphs 4 and 52 of the Agreement, the placement of an AUL on Premises after the "Examination Date" would make the title defective. Rothenberg in his testimony, acknowledged that the filing of AUL would be a defect in title placed on the Premises after the execution of the Agreement. Seller's creation of such defect would constitute a breach of the Agreement.
This creates a contract interpretation problem, however, in that Seller could meet its performance obligations under 42(d) by filing an A-3 RAO with the DEP which would have to include an AUL. Thus, Seller could perform under Paragraph 42(d) through the filing of an A-3 RAO, but to do so it would have to breach Paragraph 4 of the Agreement. The Agreement cannot be construed as a rational business instrument if this Court reads it as allowing the Seller to perform its environmental obligation by breaching one the primary obligations of any real estate contract, namely the conveyance of good clear record and marketable title. Thus, the filing by the Seller of an Class A-3 RAO could not constitute performance under the Agreement. Therefore, only the filing by Seller of an AI or A-2 Class RAO would enable them to perform under the Agreement. The parties stipulated that the Agreement did not require the filing of a class A-1 RAO which would amount to a clean up of the site to background levels.
III. The Reasonable Efforts Question
A. The Legal Standard
Under the terms of the Agreement, the Seller agreed to "use reasonable efforts to . . . make the premises conform to the provisions. . . ." of the Agreement as a whole. This means the Seller had to engage in activities reasonably calculated to comply with Paragraph 42(d) by "action or expenditure not disproportionate in the circumstances." Stabile v. McCarthy, 336 Mass. 399, 404 (1957). A party relying on this standard need not show that it was impossible for him to perform; he need show only that he made reasonable efforts to perform but was nevertheless unable to perform. Id.
In each case uncertainty will necessarily exist about what efforts must be employed to meet this standard, and it is a question of fact for the trier of fact to determine from the relevant facts and circumstances whether the seller used reasonable efforts not disproportionate in the circumstances. Id. For example, where no effort was made to discharge a mortgage in order to provide marketable title, the standard was not met. Widebeck v. Sullivan, 327 Mass. 429, 432-433 (1951). The Massachusetts Supreme Judicial Court was also not satisfied that a buyer had used reasonable efforts to obtain a subdivision plan acceptable to the town where the buyer did no more than encounter some difficulties in conducting percolation tests but did not prepare a subdivision plan that complied with the basic laws and regulations relating thereto and did only about half of the engineering work needed to prepare a plan for presentation for planning board approval. Stabile, 336 Mass. at 405-406; Compare Ross Roberts. Inc. v. Simon, 326 Mass. 12, 16-18 (1950) (where the efforts of a seller who was obliged to use reasonable efforts to procure the acceptance of his offer to acquire the property in question so that he could sell it to the plaintiff were held to be reasonable on disputed facts).
E. The Seller Was Required to Use Reasonable Efforts to Comply With Paragraph 42(d)
Under Paragraph 10 of the Agreement, the Seller was required to use reasonable efforts to make the condition of the premises conform to Paragraph 42(d). The parties agree Paragraph 42(d) means that the Seller must comply with the MCP by filing of a class A-2 or class A-3 RAO statement that complies with the MCP. It refers to a "Permanent Solution" as defined in 310 Code Mass. Regs. § 40.0006 as "a measure or combination of measures which will, when implemented, ensure attainment of a level of control of each identified substance of concern at a disposal site or in the surrounding environment such that no substance of concern will present a significant risk of damage to health, safety, public welfare, or the environment during any forseeable period of time." The concept of no significant risk and how risk is determined is defined and elaborated in 310 Code Mass. Regs. § 40.0900. A Class A-2 or A-3 RAO means, in the circumstances of this case that some remediation has occurred but no further remediation including investigation or monitoring is required. A Class A-1 RAO in which contamination has been reduced to background levels was not required.
A Class A-3 RAO complies Paragraph 42(d) of the Agreement, but as was previously discussed by the court this necessarily involves an Activity and Use Limitation which constitutes a use restriction and thus an encumbrance on the property. An A-3 RAO therefore, would not comply with Paragraph 10 of the contract and would not be a permitted way of satisfying Paragraph 42(d). See discussion above.
Thus, the question resulting from this analysis is what reasonable efforts were required of the Seller, not disproportionate in the circumstances in this case, to file an A-2 RAO statement within the time limits permitted by the Agreement or any extension thereof. Resolution of this question, in turn requires a determination of two issues: what were the time limits within which the RAO statement had to be completed under the Agreement; and what did the Seller have to do in order to meet the requirements of the MCP for filing a class A-2 RAO for the site in question. The court must then determine if the Seller could have met these obligations within the time limits of the Agreement by the expenditure of efforts not disproportionate in the circumstances.
C. The Time for Performance of the Seller's Environmental Obligations
The court, having determined that under the terms of the Agreement, that the Seller was required to use reasonable efforts to make the Premises conform to the environmental condition specified under Paragraph 42(d), must now resolve the dispute between the parties concerning the time of performance. The Seller contends that the closing date set forth in the Agreement was December 5, 1997, and that under the terms of Paragraph 10 Seller extended the closing date to January 5, 1998. Despite the use of reasonable efforts, the Seller argues it was unable by this closing date to deliver the Premises in conformity with Paragraph 42(d) of the Agreement through the filing of a "Permanent Solution" RAO. The Buyers maintain that the parties agreed orally to extend the January 5, 1998 closing date in order to permit the Sellers to finalize an RAO in compliance with the MCP.
The Agreement in Paragraph 8 states that the deed is to be delivered on December 5, 1997 and that "Time is of the Essence of this agreement." Massachusetts law has long recognized that such a "time is of the essence" provision is binding on the parties to a contract and will be given effect in both law and equity. Porter v. Harrington, 262 Mass. 203, 207 (1928). A time is of the essence provision, along with other contract terms specifying the mode of performance, may, however, "be varied by a subsequent oral agreement based upon a valid consideration." Cambridgeport Savings Bank v. Boersner, 413 Mass. 432, 439 (1992).
Paragraph 8 states in full:
Time of Performance; Delivery of Deed . Such deed is to be delivered at 10:00 o'clock A.M. on the 5th day of December, 1997 (hereafter the "Closing Date"), at the office of the BUYER's counsel, or BUYER's lender's counsel, unless otherwise agreed upon in writing. It is agreed that Time is of the Essence of this agreement.
The question of whether the parties to a contract have modified the time and manner of performance is one of fact. Flynn v. Wallace, 359 Mass. 711, 715 (1971). Mutual agreements to modify the time and manner of contractual performance "may be inferred from the conduct of the parties and from the attendant circumstances." Id. The court will consequently examine the course of dealings between the parties to determine if there was a mutual agreement to modify the time for performance named in the Agreement and to what date any such modification could reasonably be said to extend. See Church of God in Christ v. Congregation Kehillath Jacob, 370 Mass. 828, 832-33 (1976).
The Agreement executed by the parties clearly establishes December 5, 1997 at 10:00 o'clock A.M. as the date and time of performance. As discussed above, however, Paragraph 10 of the Agreement grants to Seller the right upon notice to the Buyers to extend the closing by thirty days in order to perfect title, deliver possession or make the Premises conform.
The evidence in the record indicates that from the time of the Agreement's execution, April 27, 1997 until early September, 1997, neither party had any belief that the closing would not occur on December 5, 1997. All of this changed, however, on September 5, 1997, when the Seller's environmental consultant FSL Associates ("FSL"), discovered 1.7 inches of "light non-aqueous phase liquid" ("LNAPL") on the watertable of the Premises. The discovery of LNAPL was the first indication to the Seller that a closing might not be able to take place as contemplated by the parties. Following the discovery of the LNAPL the parties met on September 9, 1997 and the Seller disclosed to the Buyers that significant levels of contamination had been found on the Premises. The Seller also discussed with the Buyers the potential impact the discovery of this additional contamination could have on the time frame for the environmental close-out of the Premises. During this meeting, the Buyers asked the Seller to provide them with a memorandum detailing what had been found on the Premises and the possible environmental close- out options. In the weeks following this meeting, Rothenberg and Aronson exchanged several letters regarding the condition of the Premises and Seller's ability to perform under the terms of the Agreement.
On September 11, 1997, Rothenberg, on behalf of the Seller, wrote to Aronson that because the Buyers would not accept an AUL being placed on the Premises, the Seller "may not be able to remove the premises from the MCP by December 5, 1997 plus any thirty day extension." Rothenberg then stated that "[i]n such a case you understand that your clients would either 'walk from the deal' or accept the premises in the then condition." On September 15, 1997, in a response letter, Aronson reiterated to Rothenberg that the Buyers did not want an AUL placed on the Premises and would consequently be willing to accede to as much as a four and a half month extension of the closing date. This extension, according to Aronson, would be independent of the provisions of Paragraphs 10, 11, 12 of the Agreement. Aronson also expressed to Rothenberg the Buyers' belief that such an extension would give the Seller enough time to perform "if work is pursued with all diligence."
On September 16, 1997, Rothenberg responded to Aronson by stating that Seller had no obligation to go beyond the December 5, 1997 closing date even if the Buyers were willing to do so. Rothenberg further contended that "even if such an extension were requested, it is not possible to do any cleanup in such time frame even 'if work is pursued with all diligence'." Aronson in turn responded to Rothenberg on September 17, 1997, that the Buyers strongly disagreed with the Seller's interpretation of Paragraphs 10, 11 and 12 of the Agreement. Aronson went on to state that the Seller's "outside date would be January 5, not December 5, since you would be obligated to continue all efforts during a thirty day extension. Given the relatively small size of this property and, I understand, the 'simple' nature of complete excavation, the work certainly could be done well in time."
The September 1997, correspondence between the parties relative to the time of performance concludes with Rothenberg's letter to Aronson on September 18, 1997. In this letter, Rothenberg informed Aronson that Seller could not eliminate any title issue created by the imposition of an AUL by January 4, 1998. Rothenberg also stated that the Premises will not be remediated at this point and that Seller will not provide the close-out memorandum requested by the Buyers until the Seller had decided on a definite close-out solution.
As was discussed above, Paragraph 42(d) of the Agreement required the Seller to file an RAO with the DEP sixty days prior to the December 5, 1997 closing date. This means Seller was required to file an RAO by October 5, 1997. The discussions between the parties throughout the first half of September 1997 made it clear to the Buyers that the Seller would not be able to perform this contractual obligation by that date. The evidence does not persuade the court that the Buyers, either before or after October 5, 1997, ever waived the Seller's performance of this obligation.
The next significant phase of the parties' dealings concerning the time of performance commenced on November 10, 1997. On this date Rothenberg sent a letter to the Buyers at their request, concerning the closing date set for December 5, 1997. In this letter Rothenberg stated that an RAO in satisfaction of Paragraph 42(d) was not presently available nor was it expected to be available by December 5, 1997. Rothenberg concluded his letter with the following paragraph:
Therefore, pursuant to Paragraph 10 of the Agreement, this letter is notification to you that the Seller is using reasonable efforts to make the Premises comply. The Closing Date, as provided under said Paragraph, is extended until January 5, 1998.
On behalf of the Buyers, Aronson responded on November 12, 1997. In his response, Aronson asserted that Seller's failure to commence remediation of the Premises constituted a breach of the Agreement's Paragraph 42(d). Aronson also contended that Seller was not entitled to invoke Paragraph 10 and extend the closing. This was because the Buyers did not believe that the Seller had to date used reasonable efforts to perform its contractual obligations as expressly required by Paragraph 10. In addition, Aronson also contended that Seller's could not invoke Paragraph 10 because Seller's environmental obligations under Paragraph 42(d) were absolute. Despite his insistence that Paragraph 10 could not be invoked by the Seller, Aronson indicated that the Buyers were willing "to provide reasonable appropriate extensions of the closing date for you to accomplish the remediation." Aronson closes his letter by suggesting that the parties begin the process of amending the Agreement to establish a new closing date.
Aronson's letter of November 12, 1997 provoked an immediate and somewhat heated response from Rothenberg. In a letter on November 13, 1997, Rothenberg stated that "the false accusation of breach of contract has brought to a screeching halt any semblance of a good working relationship from here on." Rothenberg then proceeded to assert an interpretation of the Agreement contrary to that held by the Buyers. Rothenberg, in his interpretation of the Agreement, asserted as follows: that the Seller under Paragraph 42(d) had no absolute obligation to remediate the Premises; that the Seller did not need to activate Paragraph 10 of the Agreement because the paragraph is self-executing; that the Seller was only obliged to use reasonable efforts to satisfy the requirements of Paragraph 10; that Seller's efforts to date had been more than reasonable; and that Paragraph 42(d) in no way overrode Paragraph 10. Rothenberg later went on to say towards the end of his letter:
. . . If you believe that the Seller is, as of this date, in default or breach of the Agreement, the Seller's position will be none other than if the property can be made to conform with the Agreement by January 5, 1998 it will be sold to your clients and not otherwise. In such case there will be no discussions of extensions. Also, I will engage in no conversations with your clients henceforth.
Both parties point to the November 1997 correspondence between Aronson and Rothenberg, and contend that closing date of the Agreement was extended until January 5, 1998. The parties disagree, however, as to the contractual basis of this extension. The Seller argues that the Agreement was extended as of right under Paragraph 10 for a period of thirty days. The Buyers maintain that Seller could not invoke Paragraph 10 for the reasons stated by Aronson. Since the Seller could not invoke Paragraph 10, the Buyers argue that the extension was the result of a mutual agreement between the parties. The Buyers contend that by mutually agreeing to extend the closing date, the parties waived the Agreement's "time is of the essence" provision. The court must therefore resolve this dispute between the parties concerning the contractual basis of any November 1997 extension of the Agreement.
As the court has discussed above, Paragraph 42(d) of the Agreement does not impose an absolute performance obligation on the Seller relative to the environmental conditions of the Premises. Consequently, the Buyers are not correct in their assertion that Paragraph 42(d) prevents the Seller from invoking the extension provisions of Paragraph 10 for purposes of bringing the Premises into environmental conformity. The Buyers are correct, however, in asserting that the Seller cannot merely invoke Paragraph 10 of the Agreement, wait thirty days, and then expect the Buyers to either take the premises as is or demand their deposit back. Seller's right to extend under Paragraph 10 is contingent on the Seller having used reasonable efforts to perform up to the time Paragraph 10 is invoked. The Seller must also continue to use reasonable efforts to perform during any Paragraph 10 extension period. As will be discussed below, the court is persuaded that up to the time of the Seller's invocation of Paragraph 10 on November 10, 1997, the Seller used reasonable efforts to deliver title, possession and make the Premises conform to the terms of the Agreement. Therefore, the closing date was extended as of right by Seller until January 5, 1998. As the extension of November 10, 1997 was as of right, there was no waiver by the parties of the "time is of the essence" provision of Paragraph 8 of the Agreement.
The final phase of the parties' dealing concerning the time of performance occurred during December 1997 and early January, 1998. On December 5, 1997, Aronson sent a letter to Rothenberg concerning the closing date and contract performance issues. At the outset of the letter, Aronson noted that the date of the letter was also the closing date pursuant to the Agreement. Aronson then stated "[t]hat closing is, as we all know, not going to take place this day or any day in the immediate future. . . ." Aronson also noted that because an RAO was not filed by the Seller at least sixty day prior to the closing, the parties would have to explore a "substantial shortening of that sixty day period once the work is done and the RAO prepared." Aronson went on to express his understanding that a draft RAO would be delivered to the Buyers at the beginning of the following week and that it would then take at least an additional two to three more weeks to complete the RAO. Given this time frame, Aronson believed that closing on January 5, 1998 was impossible. Consequently, Aronson suggested that after the draft RAO was delivered, the parties sit down to work out "appropriate adjustments to the closing schedule and discuss any modifications to the RAO." Aronson closed his December 5, 1997 letter in the following manner:
In the meantime, I would reiterate that the Agreement remains, of course, in full force and effect, with the seller continuing the process of performing the environmental work required pursuant to the Purchase and Sales Agreement and with closing to be delayed pending that. Once the information contained in the RAO has been appropriately assimilated, we can do what should be a fairly simple amendment to the Purchase and Sale Agreement.
Rothenberg replied to Aronson on December 8, 1997. In his response, Rothenberg repeated his prior assertion that Paragraph 10 of the Agreement was a selfoperating provision which on its own extended the closing date to January 5, 1998. Rothenberg also insisted that he had made no statements to the Buyers as to when the RAO would be completed and therefore took issue with Aronson's understanding as to the completion time for the RAO. Rothenberg also took issue with Aronson's statement that the Agreement remained in full force and effect, and reiterated the Seller's position that "January 5, 1998 is a deadline beyond which your clients will have no rights beyond return of their deposit." Rothenberg further contended that the Seller had "diligently and timely" performed its obligations under the Agreement and that the Buyer's claim that Seller "continue with the Agreement beyond January 5, 1998 absent an amendment, is a losing proposition."
In its clear from the tone and content of these letters that this exchange of correspondence between Rothenberg and Aronson did not result in any extension of the Agreement beyond January 5, 1998. The evidence offered at trial indicates that following this the exchange of letters, however, Tuck on behalf of the Buyers and Rothenberg had discussions concerning their mutual interest in extending the closing date. The Buyers contend that during the course of these discussions the parties orally agreed to extend beyond January 5, 1998. The court is not persuaded however, that Rothenberg and Tuck reached any oral agreement to extend the closing date. Rather, the parties, in their discussions, simply determined that it would be in their joint interest to try to negotiate a mutually acceptable extension agreement.
Following his discussions with Tuck, Rothenberg, on December 17, 1997, forwarded to the Buyers a proposed "First Amendment to the Purchase Sale Agreement". Rothenberg proposed to extend the closing date for an additional thirty days until February 4, 1998. In his proposal, Rothenberg also sought to shorten the time period for submission of the RAO to thirty days before the closing and to amend several other provisions of the Agreement. On behalf of the Buyers, Aronson responded to this proposed amendment on December 19, 1997. The Buyer's counter-proposal simply extended the closing date to the earlier of April 1, 1998 or 60 days after the filing of an RAO in compliance with the MCP, with all of the other terms of the Agreement remaining the same. In offering this counter-proposal the Buyer's clearly rejected the Seller's proposal to amend the Agreement and extend the closing date. The evidence in the record also indicates the the Seller on its part rejected the Buyer's counter-proposal. Thus, the parties, after exchanging amendment proposals, were clearly still at an impasse concerning an extension of the closing date.
See Moss v. Old Colony Trust Co., 246 Mass. 139, 148 (1923) ("It is elementary law that an offer must be accepted in the terms it was made in order to because a binding contract, and that a conditional acceptance or one that varies from the offer in any substantial respect is in effect a rejection and is the equivalent of a new proposition.").
Following this failed attempt to negotiate a mutually acceptable extension, the Seller at the end of December 1997 sought a one week extension of the closing date. The Buyers, through Aronson, responded to this requested extension in letter dated January 2, 1998. In this letter, Aronson stated that the Buyers viewed a one-week extension as "wholly inadequate" but would agree to a three week extension. Consequently, Aronson's January 2, 1998 letter contained the following offer: "[w]e are proposing and by your signature on this letter you will have agreed that whatever significance the January 5, 1998 date may have under the agreement (understanding that the parties to the agreement may have differing views of that at this time) that the date be moved back to Tuesday January 27th." The letter goes on to state in the second paragraph that "[i]f you are unwilling to go the indicated three weeks (plus one day . . .), then our firm has been authorized to take all actions that we deem appropriate as of this Monday, January 5th.". Rothenberg did not sign this letter and did not agree to extend the closing.
The court, having carefully and in some detail examined the course of dealings between the parties from September, 1997 until early January, 1998, finds that on November 10, 1997 the closing was extended as of right by the Seller until January 5, 1998. Beyond this extension by the Seller, there was, however, no mutual agreement by the parties to further extend or modify the time of performance named in the Agreement. See Church of God in Christ, 370 Mass. at 832-833 (1976). The time for performance of the parties' obligations under the Agreement, therefore, was January 5, 1998.
Under Massachusetts law, a party to a contract is not required to tender performance if the other party has shown it cannot or will not perform. Leigh v. Rule, 331 Mass. 664, 668 (1954). The evidence clearly shows that the Buyers and Seller both understood that neither intended to appear and tender performance on January 5, 1998. The court finds that through their words and actions in the period leading up to January 5, 1998, both parties engaged in "conduct equivalent to refusal" which obviated the necessity of a tender on the part of either party. Id. at 669. Neither party, therefore, had a duty to appear at the closing to tender as the "law does not insist on useless ceremonies." Id.
Pursuant to the expressed terms of Paragraph 12 of the Agreement, the Buyers on January 5, 1998 did have the right to tender performance and demand in return that the Seller convey to them such title, possession and condition of the Premises as Seller could then deliver. The Buyers however, did not want to take title to the Premises in the absence of an RAO, and therefore, they did not invoke their Paragraph 12 rights.
The failure of the Buyers to invoke Paragraph 12 made the termination provisions of Paragraph 11 operative, provided the Seller had used reasonable efforts to perform its contractual obligations throughout the period of the Agreement. If the court is persuaded that the Seller undertook such reasonable efforts and that after these reasonable efforts, Seller was unable to perform as of January 5, 1998, Paragraph 11 would become operative on that date. Consequently, as of January 5, 1998 all of the parties' obligations under the Agreement would cease and the Seller would be entitled to return the Buyer's deposit.
The Buyers contend however, that Paragraph 11 is not applicable to nor excuses the Seller's nonperformance of its environmental obligations because the Seller failed to refund the Buyers' deposits forthwith. According to the Buyers, refund of their deposits by the Seller is a condition precedent to the operation of Paragraph 11. Under Massachusetts law a condition precedent is "an event which must occur before a contract becomes effective or before an obligation to perform arises under the contract." Massachusetts Municipal Wholesale Electric Co. v. Danvers, 411 Mass. 39, 45 (1991). The court, however, does not find that the "emphatic words" generally considered necessary to create such a condition precedent are present in Paragraph 11, or that the Agreement as a whole indicates that it was the intent of the parties to create such a condition precedent. See Id. at 46-47.
IV. The Seller's Reasonable Efforts
The court thus turns to the facts relating to the efforts made by the Seller to comply with Paragraph 42(d) from the time of signing the Agreement until the time for performance. To understand whether such efforts were reasonable requires an understanding of the requirements of the MCP and an evaluation of the activities, efforts, knowledge and intentions of the Seller during this period.
See John F. Shea, Massachusetts Environmental Law, § 22.6 (Supp. 1999); and Goodwin, Proctor Hoar LLP, Massachusetts Environmental Law Handbook, § 11 (Christopher P. Davis, ed. 1999).
The MCP is the set of regulations promulgated by the DEP which implement the requirements of G.L.c. 21E and other laws relating to the release or threatened release of oil or hazardous materials into the environment. Numerous requirements of the MCP are relevant to the circumstances of this case and are briefly summarized below.
The MCP comes into play whenever there is a "release" or "threat of release" of oil or hazardous material (OHM). In general, whenever there is such a release or threat of release of OHM it must be reported to the DEP and some "response action" must be taken. Any person required to take a response action is known as a "Responsible Party" (RP), and include the owner of the property. The nature of the response required depends on the nature of both the release and the area into which OHM has been or will be released. Included as part of any response action under the MCP are the following: a preliminary assessment; interim response action measures (RAMs); a detailed scientific and engineering assessment and monitoring of the property on which the release occurred; and an investigation, assessment, description and monitoring of the "site" wherein the effects of the spill can be found or are believed to exist.
Other persons may also be responsible such as a former owner of the property at the time of the release and others not material here.
Once accurate information is developed about the nature of the release and its dispersion to surrounding areas the RP, in this case the Seller as owner of the property, must devise a method or methods of reducing to acceptable levels the risk to persons, the public and the environment. Risks may be found to be at acceptable levels by testing and evaluating both the release and the relevant area. If risks are not at an acceptable level such risks may be reduced to acceptable levels by taking steps to remediate the contamination by removal or treatment of contaminating materials, by containment, or by limiting the activities and uses to which the property is used.
The results of the investigation and testing must be written up in a formal detailed RAO and signed off on by a Licensed Site Professional (LSP), who in turn must utilize the services of other qualified persons such as hydrologists, geologists, chemical testing labs, persons licensed to remove and dispose of OHM, and a professional risk assessor. The RAO must be filed with the DEP. The filing of the RAO which has been duly certified by an LSP is the end of the response action required of the RP. The DEP does not review and sign off or approve the RAO. It is effective upon filing. The RAO is, however, subject to audit by the DEP. If any subsequent audit finds deficiencies with the RAO, the DEP may require further action by the RP and penalties may be imposed. In substance, therefore, responsibility for bringing the site of a release into compliance is that of the RP who must use the services of an LSP who in turn must review and sign off on the work of other scientific and engineering experts and health professionals.
Prior to amendments made to the MCP in 1993, the DEP took on the responsibility of reviewing and approving the RAO. The resources required to fulfill this function far exceeded the capacity of the DEP. One of the major purposes of the 1993 revisions was to transfer responsibility for supervising and approving RAO' s in all but the most serious cases to LSPs, subject to the right of the DEP to audit RAO's either at random or upon some particular criteria. Thus, the DEP has withdrawn from bringing an OHM into compliance itself and relies upon the LSP system, subject to audit.
The ultimate focus of any response action is on risk analysis. It must be shown and supported by data, analysis and expert opinion in the RAO that a condition of "No Significant Risk" (NSR) has been achieved. Methods of assessing risk are specified in the MCP. In order to assess the degree and type of risks posed by a release of OHM reliable information must be gathered about the following factors: the type of OHM released; the locations of the original release(s); the time over which the release(s) occurred; the pathways by which the OHM can or did migrate away from its original location; and whether, and to what degree, in its migration the OHM is likely to effect the public, the environment or particular persons. In particular, information must be gathered about the nature of the soils through which the OHM has or could travel; the depth and direction of flow of ground water; the presence of detectable levels of light non aqueous phase liquids (LNAPL) in the groundwater; the boundaries of the area into which OHM has migrated (known as the "disposal site"); and the nature and depth of the groundwater table in the site. It must be also established as part of any risk assessment whether there are concentrations of contaminants which exceed defined Upper Concentration Limits (UCLs) for that chemical.
After an extensive and detailed assessment of an OHM disposal site taking into consideration all of the factors outlined above, an appropriate method of risk assessment must be then selected. Risks must be assessed by accounting for potential receptors and assessing whether the risks to those receptors are "significant". The sources of continuing release must also be identified and the need for remediation must be determined. If any remediation is necessary to avoid significant risks, it must be undertaken. If significant risks can be avoided by limiting the activities and uses of the property, an AUL statement must be prepared showing how significant risks can be avoided; and the AUL must be recorded, served and otherwise published. This recording and publication of an AUL serves as notice that certain activities and uses of the property are prohibited.
B. Facts Relevant to the Response Actions Required of the Seller
At the time Rothenberg executed the Agreement on behalf of the Seller, he possessed certain information about the contamination at the Premises. This information initially came to him in connection with his attempt to sell property he owned at 21 Longwood, and from the litigation that arose out of this attempted sale (the "21 Longwood litigation"). Subsequent to that litigation he received other information in connection with the preparation and filing of an RAO for 21 Longwood.
Rothenberg's experience with the prior owners of the Premises and with the environmental situation at 21 Longwood, put him on notice of some of the issues he would have to address in order to take appropriate response actions at the Premises. Nevertheless, the MCP makes it clear that a detailed investigation, assessment and analysis is required, with the assistance of skilled and experienced experts and professionals, in order to develop the information needed to prepare an RAO which can be approved by an LSP. Thus, regardless of whatever previous notice Rothenberg received as to the potential environmental situation at Premises, independent professionals still had to investigate and analyze the Premises, with the benefit of whatever information he could give them, in order to determine the nature of the contamination and the appropriate response action.
C. Seller's Information Gained in the Sale of 21 Longwood
The release of OHM at the Premises was initially established in connection with an environmental investigation of 21 Longwood. Rothenberg had acquired 21 Longwood in 1986. A 21E assessment, that was done on 21 Longwood in May of 1987 for the purpose of financing his acquisition, indicated to Rothenberg at that time that a release of gasoline had probably occurred some several years earlier on the Premises and migrated to 21 Longwood but posed no health hazard at 21 Longwood. In 1989 Rothenberg put 21 Longwood on the market and eventually negotiated a purchase and sale contract for the sale of 21 Longwood with parties known as the Lown group. The contract required that the site comply with the then effective statutes and regulations relating to remediation of sites on which a release of OHM had occurred. The property at 21 Longwood was investigated in June 1989 in connection with the financing of the potential acquisition of the property by the Lown group, as was customary in view of the absolute liability of property owners for cleaning up sites they owned and the priority of liens for the cost of such cleanup. Constituents of gasoline were found in the groundwater at 21 Longwood. The concentrations were so intense that the workers conducting the investigation had to cease their work. The gasoline station known as "Mike's Texaco" then located on the Premises, was suspected to be the source.
Rothenburg renegotiated the purchase and sale contract with the Lown group and agreed to take all necessary steps to deliver the property in a condition such that it required no further action under the MCP. The closing, consequently was extended for a period of ten years until 1999. Under the terms of the renegotiated sales contract, if Rothenberg had not complied with the MCP by 1994 the rent paid by the Lown group would be reduced a significant amount.
Shortly after the gasoline was found in the groundwater at 21 Longwood, Rothenberg notified the DEP of the release and arranged for a "Phase I" study the 21 Longwood. This study was completed in September of 1989. Rothenberg also, through his environmental consultant, obtained waivers of the reporting requirement of the MCP as it then existed. A series of environmental site investigations of 21 Longwood were undertaken between May 1987 and November 1991. These investigations included the placement of several observation and monitoring wells at 21 Longwood. A groundwater monitoring well, B-101, was also placed at the Premises on December 13, 1990. During the drilling of this well the presence of gasoline constituents became obvious, and the DEP was notified. As a result the DEP issued a Notice of Responsibility (NOR) to "Mike's Texaco", the then owner of the Premises, under it's emergency procedures. A second NOR was issued by the DEP on July 29, 1991 and the site was assigned release tracking number (RTN) 3-3675. It was listed as a Location to Be Investigated (LTBI) on October 15, 1991 under the pre-1993 MCP. Rothenberg subsequently commenced the 21 Longwood litigation against the then owners of the Premises in 1991.
D. Seller's Information Gained from the 21 Longwood Litigation
The 21 Longwood litigation was heard in Middlesex Superior Court before Judge Whitehead in 1994. In the preparation of and prosecution of the 21 Longwood litigation, Rothenberg retained various experts to investigate and advise him about the nature of the environmental problems at both 21 Longwood and the Premises. In December of 1990 Rothenberg retained the environmental consulting firm of Haley Aldrich ("Haley Aldrich"), to assess the level of contamination at 21 Longwood and to identify the source thereof. Haley and Aldrich continued to monitor and evaluate 21 Longwood on Rothenberg behalf through at least the fall of 1996.
During the course of the 21 Longwood litigation, Haley and Aldrich and others conducted subsurface investigations on Rothenberg's behalf at 21 Longwood and at other locations adjacent to the site (including the Premises). These subsubface investigations were undertaken to determine both the geological and hydro geological characteristics of the site, and the nature and extent of the contamination. As a result of these investigations ten soil borings and associated groundwater monitoring wells were installed on the 21 Longwood property. Soil boring and monitoring wells were also installed on both the Premises and Longwood Avenue itself.
In particular, what Rothenberg sought from Haley and Aldrich was a conclusive determination as to the source of the contamination at 21 Longwood. Rothenberg believed that a leak in the piping system at "Mike's Texaco" discovered in November of 1990 was the source of the contamination.
Haley and Aldrich was initially unwilling to conclude that the pipe system leak discovered at the Premises in November of 1990 was the sole source of the contamination at 21 Longwood. On April 2, 1992, Arm Bar Joseph, Haley and Aldrich's project manager for 21 Longwood, wrote a memorandum to file in response to a letter of complaint received from Rothenberg on April 1, 1992. In his letter, Rothenberg, expressed his disappointment with Haley and Aldrich's inability to come to a conclusion as to whether or not there was a continuing source of gasoline contamination emanating from the Premises. In his memorandum to file Bar Joseph stated that he had always maintained to Rothenberg that the contamination found beneath 21 Longwood might be the result of multiple releases from various sources at the Premises that could have occurred over different periods of time. Bar Joseph also stated however, that he told Rothenberg that the piping system leak could indeed have been responsible for the contamination at 21 Longwood. Bar Joseph also stated in his memorandum that it would be possible based on lab test results for Haley and Aldrich to conclude that there was no continuing source of gasoline release at the Premises, and that the data was consistent with the claim made by the owner of "Mike's Texaco" that the piping leak had been fixed and that there was no continuing leak at the location.
In addition to the information he acquired from his principal consultants Haley and Aldrich, Rothenberg also obtained information about the Premises from the expert testimony offered at trial on his behalf. This included the expert testimony of Dr. George Hoag. At trial, Rothenberg, heard Dr. Hoag's expert testimony that groundwater contamination associated with gasoline can continue for a long period of time after an event or series of events causes the release of gasoline from the subsurface. Dr Hoag stated that this phenomena could occur because the residual saturation of gasoline in the soil is held under very strong capillary forces which can take decades to flush via the aqueous action of the groundwater. Dr. Hoag also stated his opinion that the Premises were the source of leaded gasoline contamination of 21 Longwood, and that the pipe system leak at the Premises could have been the cause of the unleaded contamination at 21 Longwood. Dr Hoag further indicated that when he referred to the "source" of contamination he was not necessarily referring to a particular event. He was referring to the fact that there was gasoline product either as a free phase liquid or a residually saturated soil that continued to be a possible source of groundwater contaminants. The court notes that Dr Hoag's opinion was consistent with that of Haley and Aldrich who had also informed Rothenberg that over time, gasoline can saturate the soil of a site and remain trapped for long periods of time, until it gradually dissipates to the groundwater.
Judge Whitehead issued a decision in the 21 Longwood litigation on August 1, 1994. Judge Whitehead found that the Premises were the source of the pollution at 21 Longwood and consequently, Rothenberg was awarded damages for recoverable response costs and other costs totaling $83,871.24. In his decision, Judge Whitehead made a number of Findings of Fact concerning the source and nature of the contamination at both 21 Longwood and the Premises. As the prevailing party, Rothenberg necessarily became aware of these findings.
Judge Whitehead found that contamination at 21 Longwood had declined since 1989 to nearly drinking water standards (OW-3) in nearly all monitoring wells and that a leak at the Premises had been repaired, thus stemming the flow of new OHM into the soils and groundwater at the Premises. However, the court noted that gasoline could continue to flow out of the soils at the Premise and cause levels of contamination to rise at 21 Longwood. This possibility, in that court's view, precluded Rothenberg from achieving a final response action outcome, "i.e. state certification that it is clean". Rothenberg v. Longwood Auto Specialist. Inc., Civil No. 914948 (Middlesex Super. Ct. August 1, 1994). The court also took the view that, even if high levels of contamination at 21 Longwood did not recur, "the plaintiff will be required to restore his property to the condition that it was in before contamination, unless he can demonstrate that such cleanup is infeasible. Such a clean-up would be feasible if undertaken in conjunction with a clean up of the contamination at Mike's Texaco [11 Longwood]". Id. The court was referring, obviously, to a cleanup to "background" standards (a Class A-1 RAO) and not to a status of NSR (either a Class A-2 or Class A-3 RAO) by this characterization of the problem.
The court also concluded that the best Rothenberg could hope for without the clean-up of the Premises was a Class C RAO which would require continuous monitoring to determine if further clean-up at the Premises were necessary. The court noted that "the potential that further clean-up would be necessary is very real". The court thus awarded a mandatory injunction for the prior owners of the Premises to remediate their property on the theory that the Premises could remain a continuing source of contamination of 21 Longwood. The injunction also required the former owners of the Premises to remediate the contamination at 21 Longwood sufficiently to allow Rothenberg to submit an RAO to the DEP. The injunction, dated August 1, 1994, specified a clean-up timetable for the Premises as follows: completion of a Phase I report and, if necessary a Phase II report in accordance with 310 Code Mass. Regs §§ 40.0834 by June 15, 1996; Phase IV work as required by 310 Code Mass. Regs §§ 40.0870 and 40.1403(5)(a) to be commenced by June 15, 1997; completion and filing of an RAO statement by June 15, 1999; and the remediation of the Premises was to be completed by June 15, 1999.
E. Seller's dealings with Haley Aldrich
As was noted above, in December of 1990, Rothenberg retained the environmental consulting firm of Haley and Aldrich. This firm monitored and evaluated 21 Longwood on Rothenberg's behalf through at least the late fall of 1996. The Buyers ask the court to carefully consider the course of Rothenberg's dealing with Haley and Aldrich in determining what Rothenberg knew about the nature and extent of the contamination at the Premises.
As part of their performance of services, Haley and Aldrich conducted environmental testing and submitted periodic reports on its work to Rothenberg. On several occasions Rothenberg complained about some of the reports Haley and Aldrich prepared and their seeming inability to reach definitive conclusions. Rothenberg also several times disputed bills sent to him by the firm. The Buyers contend that Rothenberg engaged in this conduct in order to compel Haley and Aldrich to reach the conclusions and results which he desired, even when the data obtained by Haley and Aldrich did not support these conclusions.
The court has carefully examined the trial record concerning the communications between Rothenberg and Haley and Aldrich regarding both their environmental findings and the bills for services. These communications show that Rothenberg was frustrated with Haley and Aldrich not because they would not reach the specific conclusions he desired, but rather because they seemed unable to arrive at any kind of definitive conclusions. Some of the communications also do indeed display Rothenberg's unwillingness to pay bills he did not agree with. At times Rothenberg was clearly dissatisfied with Haley and Aldrich's work and unhappy with some their bills. The weight of the evidence however, does not lead the court to concluded that in communicating his dissatisfaction and unhappiness, Rothenberg was acting in bad faith in order to force Haley and Aldrich to arrive at certain conclusions.
In 1992 the Massachusetts Legislature amended the Commonwealth's hazardous waste clean-up law G.L.c. 21E. The passage of these amendments required the DEP in 1993 to comprehensively rewrite the MCP and completely redesign the OHM clean-up program. At some point, Rothenberg became aware that changes had been made to both to G.L. 21 E and that the MCP. When Rothenberg became aware of these changes he asked Haley and Aldrich whether 21 Longwood could be closed out based on the new regulations. It is undisputed, that Haley and Aldrich told Rothenberg that 21 Longwood could not be closed out with a permanent solution RAO under the MCP until the contamination at the Premises had been remediated. It is also uncontested that at no time subsequent to this, did Haley and Aldrich ever advise Rothenberg that changes to the MCP would permit him to achieve a permanent solution RAO at 21 Longwood in the absence of a complete remediation of the Premises.
See Shea, Massachusetts Environmental Law, at § 22.6.
In November of 1996, Rothenberg came into contact with Fred Lebow, ("Lebow"), President of FSL Associates ("FSL"). Rothenberg provided Lebow with all of his then existing environmental information concerning 21 Longwood. After reviewing this material, Lebow expressed to Rothenberg his belief that 21 Longwood could be "risked out" under the MCP as amended and that consequently, a Class B permanent solution RAO could be achieve relatively quickly and at a cost of approximately $15,000. Rothenberg subsequently discharged Haley and Aldrich and retained FSL Associates as his environmental consultants for 21 Longwood.
The Buyers contend that the course of dealings between Rothenberg and Haley and Aldrich, demonstrates that Rothenberg sought to manipulate and control the firm. Further, the Buyers assert that when Haley and Aldrich would not in their professional judgment go along with Rothenberg's desire to close out 21 Longwood under the MCP, he discharged them and retained consultants he could control. The Buyers also contend that Rothenberg deliberately choose to ignore the professional advice given to him by Haley and Aldrich because it was contrary to what FSL was telling him.
The court does not so conclude. It is clear that Rothenberg did receive two conflicting opinions concerning his ability to close out 21 Longwood. Haley and Aldrich had continually advised Rothenberg that 21 Longwood could not be closed out with a permanent solution under the MCP without a remediation of the Premises. FSL, however, told him that a permanent solution close-out could be readily achieved. It is also clear that Rothenberg accepted the opinion that was more favorable to his business interests. In doing so, the court is not persuaded that he was acting in bad faith or for fraudulent purposes. The court is also not persuaded that the opinion Rothenberg received from FSL, that a Class B-RAO could be achieved, was an unreasonable one. As will be discussed below, such an RAO was if fact achieved.
The evidence shows that after Rothenberg received FSL's opinion he believed that he had been badly advised by Haley and Aldrich. Therefore, it was not unreasonable or bad faith on his part to discount the overall advice and conclusions he had received from Haley and Aldrich in favor of what FSL was telling him, particularly after a Class BRAO was quickly achieved at 21 Longwood just as FSL had indicated it could be.
F. Seller's Information Obtained from the 21 Longwood RAO
Rothenberg's principal concern regarding 21 Longwood was to satisfy the Lown group and consummate the sale of the property. The purchase and sales contract between the Longwood Trust and the Lown Group provided that Rothenberg would deliver 21 Longwood to the Lown Group with a "Permanent Solution" under the MCP. Although Judge Whitehead in his decision had posited a reduction in contamination at 21 Longwood to background levels, a "Permanent Solution" under the MCP only requires that a condition of No Significant Risk (NSR) be acheived. Thus to satisfy his contract with the Lown group, Rothenberg would have to deliver 21 Longwood such that the property posed no significant risk to the environment or to public health and safety.
The monitoring and observation wells installed at 21 Longwood and adjacent sites including the Premises, indicated that the levels of contamination were reducing. In February of 1992, for example, Haley and Aldrich collected groundwater samples from wells OW-4 and OW-6 through OW-10, on site at 21 Longwood and from B 101-OW and B 103-OW off site. There was no free floating product found in these wells. Further, a majority of the wells exhibited lower concentrations of total benzene, toluene, ethyl benzene and xylenes (BTEX) than previous samplings.
In January of 1993 Haley and Aldrich again sampled groundwater from wells OW-4 and OW-6 through OW-10 at 21 Longwood and B103-OW off site. There was no floating product detected. In general it was found that the total petroleum hydrocarbons (TPH) values in the wells were lower than those found in the February 1992 sampling. Two of the wells OW-4 and OW-9 in fact exhibited a significant reduction in the concentrations of BTEX from previous testings.
In June of 1996 the Tyree Organization Ltd., sampled four wells at 21 Longwood and three wells off site. No free phase hydrocarbons were detected in this sampling. In December of 1996, FSL collected groundwater samples from wells OW-9 and OW-b, again no free phase hydrocarbons were observed. Benzene and ethyl benzene were the only two constituents found to above the applicable OW-3 standard. However, the concentrations of both these constituents were far below the allowable Upper Concentrations Limits (UCL) under the MCP.
After analyzing the data from February 1992 through December 1996, FSL found that the levels of BTEX in the on site wells had remained relatively constant with a slight increase observed in the December 1996 sampling. FSL concluded that this slight increase resulted from the presence of a higher groundwater table in December 1996. FSL believed that the high groundwater level had caused a mobilization of the residual BTEX contamination trapped in the soil.
After Rothenberg hired FSL to conduct an environmental close-out of 21 Longwood under the MCP, FSL contracted with an LSP James O'Brien ("O'Brien")and others to further investigate 21 Longwood and determine how to close it out. FSL was able to show a condition of NSR existed at the site of 21 Longwood. FSL incorporated into its analysis and conclusion all of the environmental site evaluations conducted at 21 Longwood since 1987. Utilizing a Method 3 Risk Characterization under the provisions of the MCP, FSL determined that No Significant Chronic Non-Cancer Health Risk was associated with commercial exposures to groundwater or indoor air at 21 Longwood.
FSL also found that No Significant Excess Lifetime Cancer Risk was associated with exposure to any first floor employees with groundwater or indoor air at the site under the then current or reasonably foreseeable future site conditions. FSL also found No Significant Excess Cancer Risk would be posed to any one in the Boiler Room who would typically spend less than two hours during any work shift in that particular part of the site.
As a result of FSL's ability to "risk out" 21 Longwood, it was successful in filing a Class B-1 RAO. In doing so FSL was able to show that under new data from the observation and monitoring wells and from an air sampling conducted at 21 Longwood that a condition of NSR had been achieved without the need for remediation or further monitoring. It should be noted that the Buyers' own trial expert Dr Lawrence Feldman, ("Dr. Feldman"), had been the Lown Group's environmental consultant for the 21 Longwood transaction. Dr. Feldman accepted the validity of the environmental close out and risk assessment methods utilized by FSL at 21 Longwood and on behalf of the Lown Group, approved the RAO filed with the DEP.
The Buyers suggest that the data and analysis supporting this RAO was flawed and suspect because it was inconsistent with earlier work done at 21 Longwood by other environmental experts. The Buyers argue that the fact that 21 Longwood RAO does not in any way reference the 1994 decision by Judge Whitehead, supports an inference that in preparing this RAO, FSL was unaware of this important background information concerning the nature and extent of the contamination at 21 Longwood. The Buyers also maintain that since Rothenberg was clearly aware of Judge Whitehead's decision, it can be inferred that he withheld and failed to disclose to FSL, Judge Whitehead' s factual findings as well as the advice and testimony that Rothenberg had received from both Dr. Hoag and Haley and Aldrich in connection with the 21 Longwood litigation. The Buyers argue that Rothenberg withheld all of this information because it was inconsistent with and contradicted FSL's findings and opinions concerning 21 Longwood. Further, the Buyers contend, Rothenberg, withheld all of this information in order to improperly cause FSL to conclude that there was no continuing source of contamination migrating from the Premises to 21 Longwood, because it was necessary for FSL to make such a conclusion if a Class B-i RAO were to be achieved. The Buyers also suggest that if FSL was unaware of this important background information, it can be also inferred that the Buyer's trial expert Dr. Feldman, was unaware of this information when he approved the 21 Longwood RAO on behalf of the Lown Group.
The Buyers therefore, argue that the court should infer that both FSL and Dr. Feldman were unaware of Judge Whitehead's findings and the expert opinions of bothe Dr. Hoag and Haley and Aldrich concerning 21 Longwood. It is the Buyer's contention that if FSL and Dr. Feldman were aware of all of this information and opinion, FSL would not have assumed that the leak detected at "Mike's Texaco" was the source of the contamination at 21 Longwood, and that there was no continuing source of contamination on the Premises. The Buyers also suggest that if FSL were aware of the background information, it would have been required to have conducted a more comprehensive sampling program at 21 Longwood and would likely have confirmed that the Premises were a continuing source of contamination. Finally the Buyers assert that the withholding of this information by Rothenberg, also meant that Dr. Feldman's review and approval of the 21 Longwood RAO was based on a lack of complete information.
The court does not accept the various inferences suggested by the Buyers. It is indeed true that the 21 Longwood RAO does not specifically reference Judge Whitehead' s decision. However, the RAO does reference all of the environmental evaluations conducted on the site since 1987 including the evaluations and reports prepared by Haley and Aldrich for Rothenberg. FSL in fact cites these various technical environmental evaluations and reports to support its assumptions and conclusions concerning 21 Longwood. The court therefore, draws certain reasonable inferences from the inclusion of all of thesprior environment assessments and tests by FSL
It is reasonable to infer that FSL was fully aware of the evaluations, tests and reports of the prior environmental consultants including those of Haley and Aldrich. Therefore, FSL would not have needed to have read Judge Whitehead's opinion in order to make certain assumptions and reach conclusions regarding 21 Longwood. Also the court is not persuaded based on the multiple references in the RAO to prior data, that Rothenberg withheld any prior data or technical opinions from FSL. Further, the court does not infer that the absence of any reference to Judge Whitehead' s decision can only mean that FSL was unaware of it. The court can reasonably conclude that in an RAO, FSL would cite prior technical environmental reports and data to support its assumptions and conclusions, and not a judicial decision that was neither technical nor scientific data.
The court also infers, contrary to Buyers contention, that Dr. Feldman was aware of Judge Whitehead's decision in the 21 Longwood litigation. Dr. Feldman was the environmental consultant of the Lown Group, which apart from Rothenberg was the party most intimately concerned with the contamination at 21 Longwood. It is reasonable to infer that the Lown Group was entirely familiar with the 21 Longwood litigation and thus fully aware of Judge Whitehead's decision. The logical conclusion therefore, is that the Lown Group would have made its expert Dr. Feldman aware of Judge Whitehead's decision.
Even if the court were to infer that both FSL and Feldman were unaware of Judge Whitehead's decision, the court does not conclude that knowledge of the opinion would have changed either the assumptions or conclusion contained in the 21 Longwood RAO. This is because Judge Whitehead's findings are not clearly inconsistent with the RAO. As discussed above, Judge Whitehead found that the Premises were the source of the 21 Longwood contamination and that following the repair of a piping system leak in December of 1990, the level of contamination in nearly all the monitoring wells had declined and would soon likely reach safe levels.
Judge Whitehead's finding that 21 Longwood was not yet eligible for a final response action outcome could arguably be considered inconsistent with FSL's permanent solution close-out of 21 Longwood. It is important to note however, that this finding was made two years before FSL achieved a permanent solution close-out. During this intervening period, sampling results showed that environmental conditions at 21 Longwood were continually improving. The fact that in August 1994, Judge Whitehead found that 21 Longwood was "not yet eligible" for a final RAO is not therefore, inherently inconsistent with FSL's conclusion two year later, that 21 Longwood was in fact eligible for a final RAO, based on a continued improvement in the environmental conditions.
Judge Whitehead's finding that higher levels of contamination could still occur at 21 Longwood as gasoline continued to flow out of the contaminated soil was also not inconsistent with FSL conclusions as contained in the 21 Longwood RAO. It is important to note that Judge Whitehead did not fact find that gasoline would continue to flow out of the contaminated soil only that it could continue to do so. The 21 Longwood RAO expressly recognizes that increases in groundwater levels had in December of 1996, caused a mobilization of the residual contamination trapped in the soil but that this did not preclude a permanent solution close-out under a Class B-RAO. Thus the 21 Longwood RAO is consistent with Judge Whitehead' s finding that such a phenomena could occur at 21 Longwood.
G. Seller's Dealings with FSL
The Buyers make a general complaint that Rothenberg sought to manipulate and control FSL in control order to improperly influence FSL's decisions concerning the environmental response action undertaken at both 21 Longwood and the Premises. In particular, the Buyers contend that Rothenberg provided free legal services to FSL, and to Lebow and members of his family, as a means of influencing and controlling Lebow who in turn controlled all of the environmental decision making at both 21 Longwood and the Premises. The court, however, finds that legal services provided by Rothenberg were not in fact gratuitous as they were provided to Lebow in exchange for Lebow's not charging Rothenberg for his own individual work at both 21 Longwood and the Premises. Rothenberg and Lebow were two professionals engaged in an on-going business relationship. There is nothing uncommon or inherently fraudulent about professionals agreeing to exchange services as part of a business relationship. The court does not conclude that Rothenberg was able to manipulate or control Lebow because he was providing personal legal services on his part in exchange for personal. environmental services on Lebow's part.
The Buyers also argue that Rothenberg acted in bad faith by manipulating FSL in order to disguise the real environmental problems at 21 Longwood and the Premises so that he could dispose of these properties without elaborate remediation. The court is not persuaded by the evidence that Rothenberg at anytime manipulated or controlled the work FSL or others concerning either 21 Longwood or the Premises. The evidence in the record clearly indicates that it was in Rothenberg' s best business interest to environmentally close out both 21 Longwood and the Premises as quickly and inexpensively as possible. It is also clear that he consistently conveyed this fact to FSL. The evidence does not demonstrate however, that Rothenberg improperly influenced or controlled either FSL's decision making or the methods and means by which FSL conducted its environmental work. The net effect of any alleged manipulation or undue influence on FSL, would in fact have been to accelerate the process of filing of RAOs for both 21 Longwood and the Premises, not to delay any filings.
I. The Seller's Acquisition of the Premises
As was discussed above, Rothenberg acquired the Premises as part of the settlement agreement in the 21 Longwood litigation between himself and Longwood Auto. On November 18, 1996, Longwood Auto, conveyed the Premises by deed to the Seller. This conveyance was confirmed by a Settlement Agreement (the "Settlement") between the Trustees of Longwood Auto and Rothenberg as sole officer and director of' the Seller dated December 6, 1996. The Settlement stated that the value of the Premises at the time of the conveyance was $200,000. The Settlement further stated that the transfer of the Premises applied only to that portion of the 1994 judgement that did not qualify for reimbursement from the Massachusetts 21 J Board. The Settlement assigned the rights to any such 21 J Board reimbursements to Longwood Texaco. The Settlement also granted a lease to Longwood Auto to remain on the Premises. There was a further provision which stated that if Longwood Auto promptly vacated the Premises at the expiration of the lease and six month thereafter, there was no evidence of additional or increased contamination, then the conveyance of the property and assignment of the 21 J funds would constitute full satisfaction of the judgment in the 21 Longwood litigation.
J. The Seller's Environmetal Efforts Prior to September 1997
FSL suggested to Rothenberg that the data used for closing out 21 Longwood meant that the Premises could also be closed out expeditiously as well without elaborate remediation, because the levels of contamination were receding and deteriorating with the passage of time. The Buyers however, are critical of FSL and the Seller's failure to recognize the possibility that gasoline trapped in the soils at the Premises could continue to be released over time and prevent the filing of an RAO without remediation. FSL did not in fact fail to recognize the possibility that contamination could be trapped in the soil. As noted above, FSL expressly stated in the 21 Longwood RAO, that gasoline contamination was trapped in the soil and could be released by changes in the elevations of groundwater levels. This phenomenon had not prevented FSL from closing out 21 Longwood through a permanent solution RAO. Based on their ability to close out 21 Longwood with a permanent solution despite the presence of soil trapped contamination, it was not unreasonable for FSL to believe that a permanent solution RAO could also be achieved at the Premise despite this presence of contamination trapped in the soil.
Although Rothenberg had received advice from Haley and Aldrich that there were environmental problems at the Premises which would require remediation including possible contamination trapped in the soil, he received more optimistic advice from FSL. Regardless of his optimism, he was required to obtain the approval of an LSP in order to file an RAO. In these matters as in most matters of expert opinion, there are genuine good faith differences of opinion as to the proper technical conclusions to be drawn from data and as to how to obtain and evaluate such data.
When Rothenberg, on behalf of the Seller, placed the Premises on the market in March of 1997, he had certain information and advice that levels of contamination at the Premises had been declining. He had successfully filed a Class B-1 RAO for 21 Longwood on January 24, 1997. He had sought and obtained the advice of FSL relating to the effort that would be required to file an RAO for the Premises. Although Rothenberg had gained some familiarity with the technical issues relating to compliance with the MCP, he was not an expert qualified to make independent judgments about the feasibility of filing a class A-2 RAO for the Premises. He was entitled therefore, to rely on the advice of consultants. It is a fair and reasonable inference, which the court draws, that Rothenberg believed in good faith at the time the Agreement was executed with the Buyers on April 27, 1997, that he could close out the site at the Premises with a permanent solution by means of a Class A-2 RAO by October 5, 1997.
At the time the Seller acquired the Premises, there were numerous task confronting it in order to achieve a close out under the MCP. These tasks included the removal of various underground storage tanks and piping systems located at the Premises and the demolition of any buildings in a manner which complied with applicable laws. The Seller was also required to investigate the soils at the Premises in order to characterize the contamination in the soil as required by the MCP, and establish the location and boundaries of the plume of contamination on and off the Premises. The Seller also had to investigate the groundwater at relevant places in the plume in order to classify the groundwater as required by the MCP, and analyze the ground water through existing or new monitoring or observation wells for evidence of contamination. Lastly, the Seller had to conduct a risk assessment analysis to determine what MCP accepted methods would be used to both conduct the risk analysis and close out the site, and then prepare an RAO for filing with the DEP.
On March 7, 1997 a Release Abatement Measure (RAM) Plan was prepared and submitted to the DEP by FSL. Under this RAM numerous environmental close-out activities were conducted at the Premises. On April 8, 1997 three 6000 gallon gasoline Underground Storage Tanks (USTs) were excavated, cleaned and transported to a licensed tank yard. At the time these three USTs were removed 346 gallons of gasoline and water liquids and 74 gallons of oil liquids were pumped from the tanks. The gas station building structure (excluding the foundation), pumps, pump islands and associated piping were demolished and removed on July 1-3, 1997. At the time of this demolition, it was discovered that the roofing of the building contained asbestos. FSL also found a municipal drain catch basin near the front of the building containing visible contamination. The discovery of both the asbestos and contaminated catch basin delayed demolition of the building structure by one month. During this month period, FSL was required to do the following: file a notice with both the DEP and Massachusetts Department of Labor and Industries concerning the asbestos; retain the services of an engineering firm licensed to remove and dispose of asbestos; and retain a firm to remove the hazardous material from the catch basin. The removal of the catch basin required the excavation and removal of 56.76 tons of soil on July 31, 1997. The excavation pit then had to be backfilled with clean fill and the Premises regraded.
The Sellers in their Supplemental Request for Findings asked this court to find that these tanks were in fact removed in July 1997 and not in April of that year. The court however is persuaded that the preponderance of the evidence indicates that these particular USTs were indeed removed on April 8, 1997.
In early July of 1997, FSL also removed three additional USTs from the Premises. These tanks were a 2000 gallon fuel oil UST, a 500 gallon waste oil UST and a 100 gallon hydraulic lift oil UST. The contents of these tanks were pumped and disposed of. In addition FSL commissioned a Ground Penetrating Radar and Magnetometer Survey of the Premises to locate buried tanks, piping and other potential sources of contaminant release. FSL then filed a Phase I site assessment with the DEP on August 15, 1997, by which time the tanks had been removed; certain contaminated soils had been appropriately disposed of; the building had been demolished; and as no visible signs of contamination remained and an RAO was planned to be filed by September 1, 1997 "using a subsurface investigation and the appropriate risk assessment". Prior to the filing of the Phase I Site Assessment, there were three monitoring wells that had previously been installed on the Premises (MW-2, MW-3 and B101-0W). On August 18, 1997, FSL installed two additional monitoring wells on the Premises (MW-4 and MW-5). Following the installation of MW-4 and MW-5, FSL undertook a sampling of all of the monitoring wells at the Premises. This sampling indicated that the TPH concentration levels in several of the wells were in excess of UCL and several times in excess of the MCP's Method-1 clean-up standard for groundwater classified as GW-3. This precluded FSL from achieving a Method-1 close-out of the site under the MCP. Shortly thereafter, on or about September 5, 1997, the groundwater was again tested from various monitoring and observation wells and 1.7 inches of LNAPL was found on the watertable. The presence of LNAPL meant that the groundwater at the Premises was contaminated.
The Buyers contend that the Seller could have and indeed should have installed and sampled wells at the Premises prior to August of 1997. The Buyers argue that monitoring wells could have been installed and sampled as early as November of 1996, when the Premises were conveyed to the Seller by Longwood Auto. The Buyers further contend that if the monitoring wells had been installed and sampled in November of 1996 or even as late as April of 1997 (the time of the making of the Agreement), the Seller would have discovered the LNAPL sooner and had time to remediate the Premises by the closing date of the Agreement.
The court does not find that the Seller had any reason or duty to install monitoring wells on the Premises in November of 1996. At that time the Seller did not have even a potential buyer for the Premises. Also the Seller did not at that time have any obligation under the MCP to install monitoring wells or commence an immediate close out of the Premises. The court also accepts as reasonable FSL's decision not install monitoring wells on the Premises prior to the demolition of the building and removal of UST's, in order to avoid damage or contamination any wells. This work was not completed until after July of 1997.
Further, the court is not convinced that even if monitoring wells were installed of the Premises and sampled prior to August of 1997, that the LNAPL would have been discovered sooner. LNAPL had previously been detected at the Premises in 1992 and January of 1993. The court notes however, that LNAPL was not detected in other sampling conducted at the Premises including the first sampling done by FSL in August of 1997.
J. Seller's Environmental Efforts After the Discovery of the LNAPL
The discovery of the LNAPL on or about September 5, 1997, had an immediate and significant impact on the Seller's ability to close out the Premises with a permanent solution RAO within the time of performance specified by the Agreement. Within days of the discovery of the LNAPL, the parties met on September 9, 1997, to discuss the implications of the LNAPL on the close-out of the Premises. At this meeting the Seller informed the Buyers for the first time that it might be required to impose some type of AUL on the Premises in order to achieve a permanent solution close out with the time specified by the Agreement. The Buyers on their part asked the Seller to provide a memorandum to them outlining both the LNAPL problem and potential close-out solutions. Such a memo was never in fact provided to the Buyers by the Seller.
Rothenberg in a letter to Aronson dated September 18, 1997 stated that in his view it would be premature to provide the type of memo requested by the Buyer because the Seller had not yet determined what close options would be utilized. The court finds that this was a reasonable refusal on the Seller's part made in good faith on the Seller's part based on the uncertainty as to a solution that existed at that time. The Buyers assert however, that after they requested a memorandum concerning the LNAPL problem, the Seller received two memoranda from FSL discussing both the LNAPL and possible close out options. The court does not find that the Seller breached any duty of disclosure in not providing copies of these memoranda to the Buyers as the Seller had no contractual duty under the Agreement to provide these memoranda. Further, the refusal to provide these memoranda was not a breach of the implied covenant of good faith and fair dealings as the Buyers have made no showing that this refusal destroyed or injured the Buyer's right to receive the fruits of the Agreement. See discussion infra concerning the nature and scope of the implied covenant of good faith and fair dealings
In the two weeks following the September 9, 1997 meeting between the parties, Rothenberg and Aronson exchanged correspondence concerning both the Seller's ability to perform and the possibility of an AUL being imposed on the Premises. This correspondence has been summarized above. It is clear by the end of September, that the Seller understood that an AUL was at that time unacceptable to the Buyers. The Buyers for their apart understood that the Seller was uncertain it would be able to deliver and permanent solution close out by December 5, 1997, (the Agreement's then closing date), even with the imposition an AUL on the Premises.
After the discovery of the LNAPL the Seller asked its environmental expert FSL, what could be done to close out the Premises within the time frame called for by the Agreement. FSL informed the Seller in late October 1997, that any close out of the Premises required a resolution of the LNAPL problem. Specifically, the Seller would have to show the LNAPL presented no significant risk to the environment or to public health and safety. FSL presented the Seller with two possible options for addressing the LNAPL problem and achieving a permanent solution close out of the Premises.
The first option presented by FSL to the Seller was to attempt to achieve a Class A-3 RAO without remediation of the Premises, by imposing certain activity and use limitations on the Premises. FSL made it clear to the Seller that the achievement of a Class A-3 RAO would require a showing to the DEP, through an acceptable spatial averaging model, the continuing presence of LNAPL on the Premises constituted no significant risk given the activity and use limitations imposed. The Seller knew at the time the Class A-3 option was presented by FSL, that the imposition of AUL was not only unacceptable to the Buyers, but also constituted a breach of the Agreement's delivery of title provisions.
The second option presented to the Seller by FSL was to attempt to achieve a Class A-2 RAO, following a program of remediation to remove or significantly reduce the LNAPL. FSL suggested that the any remediation be undertaken by means of a process known as air sparging and soil vapor extraction ("air sparging"). FSL however, placed three significant caveats on Claas A-2 through remediation option. First, FSL made it clear to the Seller that its advice concerning air sparging remediation was made in the absence of any studies concerning the time, cost and effectiveness of this process relating to the Premises. Second, FSL estimated that at a minimum, it would take six months to accomplish an air sparging remediation of the Premises. Lastly, FSL's made it clear that even after a minimum of six months of air sparging it was still only a possibility that a Class A-2 RAO could be achieved. In fact FSL believed that it was more likely that not that more than six month of air sparging would be required if a Class A-2 close out were to be achieved.
Adoption of the air sparging remediation option, would also presented a contractual performance issue for the Seller. The Seller had been advised by FSL that at best it would take at a least six month to accomplish an air sparging remediation of the Premises. The Seller therefore, knew that even if the air sparging was immediately commenced in late October of 1997, it would still be unable to performance its environmental obligation by the Agreement's closing date then set for December 5, 1997. The Seller in fact knew that even if it exercised its right under the Agreement to extend the closing by thirty days, it still would be unable to perform. The Seller also knew based on FSL's professional judgment that even at the conclusion of six months of air sparging an AUL might still be required in order to close out the Premises under the MCP.
After considering the two options presented by FSL, the Seller elected not to remediate the Premises. Instead the Seller decided to try to achieve a Class A-3 RAO by the closing date of the Agreement. The court must therefore, determine if the Seller's decision not to undertake air sparging and attempt to achieve a Class A-3 RAO constituted reasonable efforts to perform its contractual obligations.
In its analysis of the reasonableness of the Seller's decision not to remediate, the court must first consider that argument advanced by the Buyers that the Seller should have commenced an air sparging remediation of the Premises at the time the Agreement was executed, namely the spring of 1997. The Buyers maintain that if the Seller had commenced air sparging in the spring of 1997, it would have been able to achieve a Class A-2 RAO by the Agreement's closing date. The court, however, finds that prior to the discovery of the LNALP in early September, 1997, the Seller had no reason to believe that there was any need to conduct air sparging on the Premises. Until the late summer of 1997, the Seller had a good faith reasonable belief that the Premises could be "risked out" under the MCP without any significant remediation. Thus, the court does not find that the Seller should have commenced air sparging on the Premises at any time prior to late October of 1997 when it was advised of this close out option by FSL.
The court must now consider whether it was reasonable for the Seller not to undertake an air sparging remediation of the Premises, after FSL advised the Seller of the possibility of conducting such remediation. At trial, the court heard significant testimony concerning the techniques involved in air sparging as well as the time, cost and effectiveness of this remediation process relative to the Premises.
In layman terms, air sparging is method by which air is injected into soil in order to get volatile contaminants to volatize into the air and thus be evaporated. The companion piece to air sparging is soil vapor extraction. This process involves the installation of wells that basically vacuum out the air that has been injected between the soil particles in order to ensure that all the air released volatiles are removed. The Buyer's environmental expert Dr. Feldman estimated that it would probably take six months to a year of an intensive sparging program to remediate the Premises. Dr. Feldman also testified that a six month to one year air sparging program at the Premises would cost somewhere between $200,000 to $300,000. Dr. Feldman also stated that a six month air sparging program would be more intensive and consequently more costly than a longer program. Dr. Dennis D'Amore, ("Dr. D'Amore"), another witness called by the Buyers, testified that in his opinion, it would require approximately one year of aggressive air sparging and soil vapor extraction remediation to reduce contamination levels on the Premises to a point where a close-out could occur. Dr. D'Amore also stated his opinion, that even after a year of aggressive air sparging, an AUL would still be needed to close out the Premises. Dr. D'Amore believed that two years of aggressive remediation would be required before close-out without an AUL could be achieved. Various members of the FSL 'team' that had been involved with Premises estimated that after six months of air sparging contaminants could have been reduced to a level that would possibly have permitted the filing of a Class A-3 RAO with an AUL.
The court after considering the evidence in the record, concerning the time, cost and ultimate effectiveness of air sparging at the Premsies, concludes that the Seller's decision in the fall of 1997 not to undertake air sparging remediation was reasonable. The court finds that there was no reasonable possibility that the commencement of air sparging by the Seller in late October of 1997, would have enabled it to perform its contractual obligations during the time available to the Seller through the exercise of reasonable efforts. The Seller's decision to undertake an effort to achieve a Class A-3 RAO with an AUL was therefore reasonable. By adopting the Class A-3 option, the Seller believed that it was more likely that it would be able to deliver this type of permanent solution close out of the Premises by the time of performance called for in the Agreement. Further the achievement of a Class A-3 RAO with an AUL would enable the Seller at the closing to at least tender performance that the Buyers could in turn take or leave. As was discussed by the court above, such partial performance by the Seller and the possible election by the Buyer to accept such performance was clearly contemplated in Paragraph 12 of the Agreement.
During the course of trial the court raised the issue of whether some form of excavation could have been undertaken at the Premises as a means of remediation. Prior to the raising of this issue by the court, neither party had actually suggested that excavation was a viable alternative. In particular, the Buyer's expert did not originally offer testimony to suggest that excavation would have been a reasonable remediation option for the Seller. In response to the court's raising the issue of excavation, the parties presented some evidence as to the feasibility of excavation as a remediaition option. The quality of this evidence was unpersuasive. The court is persuaded that excavation was not a viable remediation alternative because of the inherent uncertainties as to its cost, effectiveness and time to complete. Accordingly, the court rules that the Seller's decision not to excavation the Premises was reasonable.
Having determined that the Seller's decision to attempt a Class A-3 RAO was reasonable, the court must now determine if the Seller engaged in reasonable efforts under the circumstances to achieve such an RAO by the closing date of the Agreement. As previously discussed, FSL informed the Seller that a Class A-3 RAO close out of the Premises was contingent upon FSL's ability to demonstrate to the DEP that the presence of LNAPL at the Premises constituted no significant risk. FSL therefore, sought to show that the levels of LNAPL could be spatially averaged over all the monitoring wells at the Premises. Under DEP regulations, such spatial averaging is an accepted method of demonstrating no significant risk. FSL informed Rothenberg that if its spatial averaging of the LNAPL was accepted by the DEP, then a close-out could be achieved if it could be demonstrated that the LNAPL conditions would not worsen in the foreseeable future.
FSL and the Seller therefore, focused their efforts on resolving the LNAPL problem, by developing a spatial averaging model that would demonstrate to the DEP that no significant risk had been achieved on the Premises. In order to produce an acceptable spatial averaging model FSL had to identify on and off site monitoring wells to predict seasonal changes in groundwater levels at the Premises and then analyze and plot data to provide statistical support for an LNAPL averaging model. FSL also had to conduct sampling and testing of wells to monitor the levels of contamination.
The court notes that two of the Buyer's witnesses both experts in the environmental field, Dr. Feldman and Dr. D'Amore, disagree with the validity of the LNAPL averaging model as finally constructed by FSL. The court however, need not decide if the final model created by FSL, demonstrates that the LNAPL on the Premises poses no significant risk. The court need only determine whether in creating the model and seeking data to support spatial averaging, the Seller engaged in reasonable efforts to perform its environmental obligations. The court concludes that in attempting to demonstrate by spatial averaging that the presence of LNAPL posed no significant risk, the Seller was undertaking reasonable efforts to perform it's environmental obligations under the Agreement.
Once the Seller had undertaken its reasonable efforts to achieve a Class A-3 RAO at the Premises, it did not attempt to conceal or misrepresent to the Buyers either the course of action it had embarked on or its ability to achieve an RAO by the closing date of the Agreement. The Seller had informed the Buyer as early as September of 1997 that it was uncertain as to its ability to meet the performance deadline established under the Agreement. The Seller consistently made it clear to the Buyers after September of 1997, that it was unlikely that it would be able to perform by the closing date even after the thirty extension of this date to January 5, 1998. The Seller also consistently made it clear that an AUL was likely to be imposed, recognizing all along that the Buyer would not have to accept the Premises with an AUL attached. In fact on or about December 15, 1997, the Seller provided the Buyer with a draft AUL in attempt to gain the Buyers' acquiesce to an AUL which the Seller perceived to be limited in the scope of its restrictions.
The court finds that by the late fall of 1997, it was clear to both parties that the Seller would be unable to deliver any type of permanent solution RAO on the Premises by even the extended closing date of the Agreement. As the court has described above, in December 1997 the parties engaged in an effort to further extend the Agreement to permit performance by the Seller. In good faith both parties offered proposed amendments to extend the Agreement, which in equally good faith were in turn rejected by the other party. It was not bad faith on the part of either party that they were unwilling to accept the extension terms offered by the other. It is also not evidence of bad faith on the part of either party that they were as is sometimes the case, simply unable to agree to a mutually acceptable extension of the Agreement. The court has already found that this inability to negotiate an acceptable extension of the Agreement meant that the termination provision of Paragraph 11 became operative on January 5, 1998 and all rights and obligation of either party under the Agreement ceased.
K. Estoppel of Seller from Invoking Paragraph 11 of the Agreement
The Buyers contend that three grounds exist for the court to estop the Seller from invoking Paragraph 11 of the Agreement and excusing the nonperformance of its environmental obligations under Paragraph 42(d) of the Agreement.
The Buyers first ask the court to find that the Seller knew or should have known that the Buyers were incurring substantial expenses and acting in reliance on their understanding that Paragraph 42(d) of the Agreement was an absolute and unconditional undertaking of the Seller's, and that consequently the Seller is estopped from invoking Paragraph 11 of the Agreement.
The court has determined that the clear and unambiguous meaning of the Agreement as a whole is that the Seller was required only to use good faith reasonable efforts to perform its environmental obligations under Paragraph 42(d). If the Buyers relied on their understanding that the Seller's environmental obligations were absolute and unconditional, this reliance was unreasonable given that it is clearly contrary to the expressed terms of a written contract which the Buyers signed following extensive negotiations. The court is not therefore, prepared to find that the Seller knew or should have known that the Buyers were incurring substantial costs based on an unreasonably erroneous understanding of the Seller's environmental obligations.
The Buyers also ask the court to find that because both the Seller and Rothenberg knew or should have known that substantial potential existed for residual gasoline contamination to remain trapped in the soils of the Premises, the Seller is estopped by its acts and conduct from invoking Paragraph 11 of the Agreement to excuse the nonperformance of its environmental obligations under Paragraph 42(d).
As the court has discussed above, the Seller recognized in the 21 Longwood RAO that gasoline contaminants were trapped in the soil at that site and therefore had reason to believe that the same phenomenon could exist at the Premises. The Seller, however, in good faith, reasonably believed that as was the case with 21 Longwood, the presence of residual soil contamination would not prevent a expeditious environmental closeout of the Premises. In this good faith belief the Seller was wrong. The presence of residual gasoline contamination did prevent the Seller from achieving a permanent solution RAO within the time of called for in the Agreement despite the exertion of reasonable efforts. This however, does not mean the Seller should be estopped from invoking the termination provision of Paragraph 11. It is clear to the court that by only requiring good faith reasonable efforts on the Seller's part in fulfilling its environmental obligations, the Agreement clearly contemplates that the Seller might be unable to perform these obligations. It is equally clear that the Agreement contemplates the possible termination of the Agreement if the Seller after exerting good faith reasonable efforts is unable to fully perform. The court therefore, will not estop the Seller from invoking what was clearly contemplated in the Agreement, namely a termination of the Agreement resulting from an inability to perform despite reasonable efforts.
Lastly, the Buyers ask the court to apply the equitable principle of promissory estoppel. This principle requires performance of a promise by a promisor based on "a manifestation of intention to act . . . in a specified way, so made as to justify a promisee in understanding that a commitment has been made . . . which the promisor . . . should reasonably expect to induce action or forbearance on the part of the promissee . . . and which does induce such action or forbearance." Greenstein v. Flatley, 19 Mass. App. Ct. 351, 356-357 (1985).
In order to apply this doctrine the court must necessarily find that the Seller after promising to act in specified way in order to induce foreseeable and reasonable reliance on the part of the Buyer, failed to act as it had promised the Buyers' it would. The court has found however, that Seller only promised to use reasonable efforts to deliver to the Buyers a parcel of land that presented no significant environmental risk. In fact this is exactly what the Seller then proceeded in good faith to attempt to do. This was the only promise upon which the Buyers could reasonably have relied. The Seller in good faith performed on this promise. The Buyer cannot have reasonably relied on a promise that the Seller had never made, namely that it would absolutely and unconditionally deliver the Premises such that they posed no significant risk. This promise on the part of the Seller appears no where within the four corners of the writing which by its very terms states that it sets forth the entire contract between the parties.
L. The RAO Filed by the Seller on March 6, 1998
The Buyers contend that the RAO filed by the Seller on March 6, 1998 does not comply with the MCP for the following reasons: the RAO does not accurately define the extent of the contamination at the disposal site; the RAO does not adequately categorize the groundwater found within the disposal site; the RAO does not adequately characterize the soil at the disposal site; and that relevant and material information concerning a December 1997 sampling of certain monitoring wells was excluded from the RAO in violation of the MCP.
The court having determined that all of the parties's rights and obligation under the Agreement ended on January 6, 1998, when the Seller was unable to perform its obligations, need not decide whether the RAO ultimately filed by the Seller with the DEP two months later actually complies with the MCP. The evidence presented at trial concerning the ultimate sufficiency of the RAO under the MCP, is however, relevant to the issue of whether the quality of the work performed by FSL in preparation of the RAO prior to January 5, 1998, demonstrates a lack of good faith on the Seller's part.
The Buyers are highly critical of the work performed by FSL in the preparation of the RAO filed by the Seller. At trial the court heard extensive testimony from both the Buyer's experts and the principal members of the FSL team that prepared the RAO. The court does not accept the suggestion of the Buyers that the opinions offered by the Seller's experts were so obviously lacking in merit that Seller's motives in relying on them should be suspected. There are reasonable differences of professional opinion concerning the validity of the RAO between these two groups of witnesses. The court finds that in retaining FSL, the Seller was reasonably relying on the professional expertise and judgment of individuals experienced in the close out of environmentally contaminated sites under the MCP. While there may be reasonable differences of opinion concerning the quality of the work performed by FSL, the court is not convinced that the retention of FSL was an act of bad faith on the part of the Seller. The Seller reasonably believed that FSL possessed the experience and expertise required to conduct the site close-out and prepare an MCP compliant RAO.
The evidence offered to this court concerning the validity the RAO ultimately filed by the Seller is also relevant to the question reasonable efforts, in that the Buyers challenges to the RAO's sufficiency do show the complexities involved in trying to comply with the deadlines contained in the Agreement. The testimony presented by both parties concerning the RAO filed by the Seller, shows that a detailed understanding of a site had to be obtained to comply with the MCP. There are numerous issues involving assessment and risk characterization of that had to be understood and addressed, particularly after the seriousness of the LNAPL problem was confirmed. Consequently, the amount of investigation, data collection and analysis that had to be undertaken by the Seller to prepare an RAO in compliance with the MCP was both immense and time consuming. All of the evidence offered concerning the validity of the ultimate RAO confirms that court's view that it would have extremely difficult for the Seller to have undertaken the investigative and analytical work necessary to have completed an MCP compliant RAO given the performance deadlines imposed by the Agreement. This particular evidence also supports the court's finding that the Seller engaged in reasonable efforts to perform all of this work.
V. Buyers 93A Claims Against the Seller and Rothenberg A. The Jurisdictional Question
In order to fall within the scope G.L.c. 93A §§ 2, 11, both the Seller and Rothenberg in his individual capacity, must have been engaged in trade or commerce within the meaning of this statute. See Rousseau v. Gelinas, 24 Mass. App. Ct. 154, 158 (1987). "The term "person engaged in the conduct of any trade or commerce' was intended to refer specifically to individual acting within a business context." Id. The Massachusetts Supreme Judicial Court has recognized several factors that are relevant to the determination of the presence of a business context. See Nei v. Burley, 388 Mass. 307, 317 (1983). These factors include "the nature of the transaction, the character of the parties involved, the activities in which the parties participated and whether the transaction is motivated by business or personal reasons." Id. Relying on these factors, the Massachusetts Supreme Judicial Court held in Nie that sellers of real estate whose occupations are unrelated to real estate, who devote a small amount of their time to the property and who play only a minor role in the real estate sale fall outside of the scope of c. 93A. Id. at 3 17-318.
In this transaction however, the Seller played no such passive and insignificant role. The Premises which were the sole asset of the Seller, were the subject of the transaction. Indeed, the reason for the creation and continuance of the Seller as a corporation was to hold and manage the Premises. The Seller through its President, Rothenberg, was actively involved in every stage of the real estate transaction. The Seller was consequently acting in business context and was clearly engaged in trade or commerce within the meaning of c. 93A.
Rothenberg in his individual capacity was also clearly acting in a business context. Rothenberg is both an attorney regularly involved with the conveyance of real estate, and a licensed real estate broker. Rothenberg has in the past invested in and sold property. As President of the Seller Corporation, he was actively involved in every stage of this real estate transaction and the motivation for his involvement with the transaction was his overall business interests.
B. The Conduct Challenged by the Buyers
The Buyers contend that both the Seller and Rothenberg, breached the Agreement in order to obtain an unfair advantage over the Buyers, and with the intent of causing the Buyers to act to their detriment and coerce them into receiving less than the Agreement required. The Buyers further assert that in undertaking this course of conduct in disregard of known contractual arrangements and with the intent to secure benefits from their contractual breach, both the Seller and Rothenberg willfully and knowingly violated G.L.c. 93A, § 11, thereby entithng the Buyers to multiple damages.
There are four specific acts of conduct on the part of both the Seller and Rothenberg, which the Buyers argue are actionable under G.L.c. 93A. First, the Buyers allege that both the Seller and Rothenberg, after intentionally and knowingly taking certain positions in the 21 Longwood litigation, reversed these positions in their dealings with the Buyers concerning the sale of the Premises. Secondly, the Buyers also allege that both the Seller and Rothenberg misled the Buyers as to both the true environmental condition of the Premises and their ability to achieve an RAO. Third, the Buyers allege that the Seller and Rothenberg sough to take unfair advantage of the increased value of the Premises resulting from the Buyers actions. Lastly, the Buyers allege that the Seller and Rothenberg knowingly breached the implied covenant of good faith and fair dealing. The purpose and effect of all of this conduct, the Buyers assert was to unfairly and deceptively deprive them of the fruits of the Agreement.
C. The Legal Standard
The Massachusetts Supreme Judicial Court held that a court in deciding questions of unfairness and deception under G.L.c. 93A, "should focus on the nature of the challenged conduct and on the purpose and effect of that conduct as the crucial factors in making a G.L.c. 93A fairness determination." Massachusetts Employees Ins. Exchange, v. Propac-Mass. Inc., 420 Mass. 39, 42-43 (1995). The court will therefore, consider in turn the nature of, and the ultimate purpose and effect of the specific conduct challenged by the Buyers, to determine if any of this alleged conduct constituted unfair and deceptive practices.
D. Reversal of Positions taken in the 21 Longwood Litigation.
The first prong of the Buyer's 93A claim is contingent upon a finding by the court that both the Seller and Rothenberg knowingly and intentionally presented a position to the Middlesex Superior Court to the effect that there was a strong potential that gasoline was trapped in the soils of the Premises and that 21 Longwood could not be closed out until the contamination at the Premises was remediated, and that this position was later reversed when it was beneficial and convenient for both the Seller and Rothenberg to do so. The court is not prepared to make such a finding.
The court does find that there was a position taken by Rothenberg in the 21 Longwood litigation to the effect that gasoline could be trapped in the soil of the Premises and that remediation of the Premises would have to occur before any close-out of 21 Longwood could take place. The court does not however find that these positions were in fact later reversed by the Rothenberg acting on the Seller's behalf.
Rothenberg as Trustee of the Longwood Trust acknowledged in the 21 Longwood RAO that there was gasoline contamination from the Premises trapped in the soil at 21 Longwood, but that this phenomenon did not prevent a close-out of the site. This did not in any way represent a reversal of the position taken by Rothenberg in the 21 Longwood litigation, that gasoline contamination from the Premises could be trapped in the soil. Further, the position taken that 21 Longwood could not be closed out without remediation of the Premises was not reversed out of bad faith or with the intent to deceive, but rather based on the fact that a close-out was achieved without remediation of the Premises. The Seller and Rothenberg's in their dealings with the Buyers did not take the position that there was no gasoline contamination trapped at the soils of the Premises. Rather the Seller and Rothenberg took the position that despite the then existing environmental condition of the Premises, a permanent solution RAO could be achieved. E. Misrepresentations and Failures to Disclose by Seller and Rothenberg
The Buyer also ask the court to find that the Seller is judicially estopped from claiming that it was surprised to discover soil contamination at the Premises, in September, 1997 because in the 21 Longwood litigation, the Seller presented expert testimony on its behalf that a residual contamination trapped in the soils at the Premises could result in a continuous release over time upon interaction with the water table. "Judicial estoppel is an equitable doctrine that precludes a party from asserting a position in one legal proceeding that is contrary to a position it had previously asserted in another proceeding. . . . We have never precisely defined the specific requirements for judicial estoppel and need not do so here. It is sufficient to note that in deciding whether a party should be judicially estopped, "we will look to see whether that party is seeking to use the judicial process in an inconsistent way that courts should not tolerate." Blanchette v. School Committee of Westwood, 427 Mass. 176 (1998), quoting from East Cambridge Sav.Bank, v. Wheeler, 422 Mass. 621, 623 (1996).
The court does not find the Seller's assertion in the present action that they were surprised to find significant levels of LNAPL in the soil of the Premises in September, 1997 is an attempt to use the judicial process in an inconsistent way that should not be tolerated. Therefore, the court will not invoke the principle of judicial estoppel against the Seller in the present action.
The second prong of the Buyers' 93A claim is contingent upon a finding by the court that both the Seller and Rothenberg misled the Buyers as to both the true environmental condition of the Premises and their ability to achieve an RAO. The court upon a careful examination of all of the evidence in the trial record relating to the contact between the parties does not find that either the Seller or Rothenberg engaged in misrepresentation under Massachusetts law.
The first contact between the parties concerning this transaction was a phone conversation initiated by the Buyers in early April of 1997. The Buyers phoned the Seller in response to a classified advertisement concerning the Premises which had appeared in the New England Real Estate Journal. This initial phone conservation took place between Rothenberg on behalf of the Seller and Tuck and Leffell on behalf of the Buyers. In substance, what Rothenberg told Tuck and Leffell during this conversation was that the Premises were contaminated; that the Seller had obtained the Premises through litigation; and that the Seller was reasonably certain that any environmental problems concerning the Premises could be solved.
The court is not persuaded that Rothenberg' s statements constitute misrepresentation under Massachusetts law. "The first requirement to sustain a claim of misrepresentation is that the representation made must be false." Zimmerman v. Kent, 31 Mass. App. Ct. 72, 78 (1991). The evidence in the record clearly indicates Rothenberg's statements that the Premises were contaminated and that the Seller had acquired the Premises through litigation were statements of fact that were not false.
"A statement on which liability for misrepresentation may be based must be one of fact, not expectation, estimate, opinion or judgement . . . [a] fact is something "susceptible of knowledge'. Id. at 79. Rothenberg' s statement that the Seller was reasonably certain that the Premises' environmental problems could be solved, was not a statement of fact, but rather of opinion. At the time Rothenberg made the statement, whther the environmental conditions could be solved was not "susceptible of knowledge." The statement was not "susceptible of knowledge" until after the investigation and assessment of the Premises required under the MCP had commenced. This investigation and assessment had not commenced at the time of the statement's making.
Rothenberg's statement of opinion the Seller was reasonably certain that any environmental problems could be solved, was made in good faith based on his general knowledge of the various environmental investigations and assessment undertaken of both the Premises and 21 Longwood which indicated that environmental conditions were improving at both sites. Rothenberg's statement of opinion was also reasonable and made in good faith in that it was based on the opinion rendered to the Seller by FSL after a permanent solution RAO was successfully and expeditiously achieved at 21 Longwood.
Even if the court were to assume arguendo, that the statements made on the Seller's behalf were false statements of fact, they would still not be actionable as misrepresentation given the Warranties and Representations provisions in Paragraphs 25 and 43 of the Agreement, and the express representations made by the Seller in Paragraph 42 of the Agreement.
Paragraph 25 reads in it entirety:
Warranties and Representations. The BUYER acknowledges that the BUYER has not been influenced to enter into this transaction nor has he relied upon any warranties or representations not set forth or incorporated in this agreement, except for the following additional warranties and representations, if any, made by either the SELLER or the Broker(s): None. See also Paragraph 43.
Paragraph 43 reads in relevant part:
Representations and Warranties. In addition to any representations and warranties contained elsewhere in this Agreement, the SELLER hereby represents and warrants, the same to be true, as of the date hereof and as of the date of the delivery of the deed, that:
(a) to the best of the SELLER's knowledge and belief the SELLER has complied with, and neither the SELLER, nor the Premises, are in violation of any, applicable federal, state or local statute, ordinance, code, by-law, rule or regulation (including, without limitation any applicable building, zoning, or environmental statute, ordinance, code, by-law rule or regulation) affecting the Premises or the use thereof;
Paragraph 42 reads in pertinent part:
Environmental Representations and Indemnification: BUYER acknowledges that SELLER has informed BUYER of the following information and provides the following indemnification:
(a) that the Premises indicate the presence of gasoline constituents. The Premises have been assigned a DEP release tracking number of RTN #3-3675;
(b) The SELLER has only owned the Premises since November, 1996;
(c) The Massachusetts Department of Environmental Protection ("DEP") has a file covering the Premises and the contiguous property (see also RTN 3-2649). . .
Paragraph 25 constitutes an acknowledgment on the Buyer's part that they did not enter into the transaction on the basis of any warranties or representation outside of those contained in the Agreement. In Paragraph 42, the Buyers acknowledge that they were informed by the Seller that the Premises contain gasoline constituents, and that the Seller has made them aware of both an RTN and the existence of a DEP file on the Premises.
The language of Paragraph 43, must be read in connection with Paragraph 42. The express disclosures of environmental conditions and the duties of the seller with regard thereto are not vitiated by the general language of paragraph 43. . . .
Generally, under Massachusetts law, ". . . if the contract was fully negotiated and voluntarily signed, [then] plaintiffs may not raise as fraudulent any prior oral assertion inconsistent with a contract provision that specifically addresses the particular point at issue." Starr v. Fordham, 420 Mass. 178, 188 (1995); See also Turner v. Johnson Johnson, 809 F.2d 90, 97 (1st Cir. 1986).
The application of this rule of law is dependent upon the whether a particular case fall into one of two distinct factual frameworks. Massachusetts courts have enforced this rule where a contract has been fully and extensively negotiated and represents the parties complete and final understanding. In contrast, this rule has not been enforced in those cases where a contract contains provisions unilaterally imposed or agreed to immediately prior to the signing of a contract. See McEvoy Travel Bureau, Inc., v. Norton Co. 408 Mass. 704, 710- 713 (1990).
In the present action, the Agreement was fully negotiated by the parties with several written versions being exchanged by the parties prior to its execution. The Agreement consequently, represents the parties complete and final understanding as to the Seller's representations and warranties concerning the environmental condition of the Premises upon which the Buyer's relied. The Buyers therefore cannot now claim reasonable reliance on any oral representations concerning the Premises made by the Seller outside of the Agreement.
The court also does not accept the Buyers' contention that in their representations both before and after the execution of the Agreement, the Seller and Rothenberg failed to disclose their true knowledge concerning the contamination of the Premises. Under Massachusetts law, "[a]lthough there may be no duty upon one party to a transaction to speak for the information of the other . . . if he does speak with reference to a given point of information, voluntarily, or at the others request, he is bound to speak honestly and to divulge all material facts bearing upon the point that lie within his knowledge. Fragmentary information may be misleading . . . as active misrepresentation, and half-truths may be actionable as whole lies. . . ." Kannavos v. Annino, 356 Mass. 42, 48 (1969).
The court does not find that either the Seller or Rothenberg failed to "divulge all material facts" bearing upon their knowledge of the Premises' contamination. Nor does the court find that "fragmentary information" or "half truths' were conveyed to the Buyers by either the Seller or Rothenberg. Prior to the execution of the Agreement, the Seller through Rothenberg rendered a general opinion concerning the contamination at the Premises. As noted above, this opinion was based on a general knowledge Rothenberg had of that contamination. Upon the execution of the Agreement, the Seller through Rothenberg provided to the Buyers copies of all the documentation upon which its opinion was based. The Buyers have not demonstrated that any material documentation was withheld from them.
Following the execution of the Agreement, the Seller continued to provide updated information concerning the environmental condition of the Premises to the Buyers. Pursuant to the Agreement, the Seller provided the Buyer with copies of all documents it filed with the DEP, including the RAM statement. In addition to the disclosure of documents required by the Agreement, the Seller also provided a draft of the AUL opinion on or about December 17, 1997 and a draft of the RAO on or about December 24, 1997.
The Buyers further contend that the Seller through Rothenberg continually misled the Buyers by continually assuring them at until at least September 1997 that the Seller would be able to easily obtain and RAO close-out of the Premises. The court first notes that there is little evidence in the record concerning what assurances or representation the Seller made to the Buyers in the period between the execution of the Agreement on April 24, 1997 and the discovery of the LNAPL in early September of 1997. The court does find however, that after the execution of the Agreement through the discovery of the LNAPL, the Seller through Rothenberg continued to provided the Buyers with copies of all the documents relating to the environmental condition of the Premises. Even if the court were to assume arguendo, that the Seller prior to September of 1997, did continually reassure the Buyers that the Premises could be readily closed-out, this was not misrepresentation, as the Seller would merely have continued to convey statements of opinion and not of fact.
The Buyers point to four occasions after the discovery of the LNAPL, were they claim the Seller failed to fulfil its duty to disclose material information. The first was upon the discovery of the LNAPL in early September 1997 when the Buyers contend that the Seller failed to abide by the provisions of Paragraph 38 of the Agreement. As was discussed above, the courts finds that while the Sellers did not following the strict terms of Paragraph 38, they did promptly and effectively disclose to the Buyers the existence of an event that might negatively impact contractual performance. Thus, there was no breach of a contractual duty to disclose a subsequent event.
The Buyers also contend that the Seller failed to provide a memorandum requested by the Buyers at the September 9, 1997 meeting, detailing the scope of the LNAPL problem and possible close-out options. The court has previously found that the Seller had no contractual duty to provide such a memorandum and that this refusal to provide such a memorandum was not a breach of the implied convent of good faith and fair dealings.
The Buyers also point to the Seller's refusal to provide them with a draft of the proposed RAO until December 24, 1997, as another occasion were the Seller failed to disclose material information. The Buyers further assert that when a draft RAO was finally provided it was so incomplete that it was virtually useless to them. The court is not persuaded however, that the failure to provide a completed draft of the RAO was an attempt on the Seller's part to withhold information in bad faith. The Agreement required the Seller to provide a copy of the RAO to the Buyers contemporaneous with its filing at the DEP. Thus the Seller had no duty to provide the Buyer with a pre-filing copy of the RAO. Further, the court has discussed above the fact that after the discovery of the LNAPL, both the Seller and his environmental consultants went through a period of uncertainty as to how to address the LNAPL and close out the Premises. This uncertainty precluded the Seller from developing even an incomplete draft of the RAO until late December 1997. On December 24, 1997 therefore, the Seller provided the Buyer with all that it had at that time which was an extremely incomplete draft of a proposed RAO. At the time this draft was provided all parties understood that it was an incomplete draft which would be of little use to the Buyers. The court believes that far from being an act of bad faith, the Seller provided this incomplete draft as a good faith gesture during a period in which the parties were seeking to negotiate an extension of the Agreement.
The final occasion on which the Buyers claim the Seller failed to disclose material information, concerns the Seller's decision to impose an AUL on the Premises. The Buyers contend that the after indicating to Leffell in late September that an AUL would not be required, the Seller waited until December of 1997 to inform the Buyers that an AUL would in fact be imposed. The court however, finds that from the time of the September 9, 1997 meeting until a draft AUL was provided to the Buyers on December 17, 1997, the Seller continually made it clear to the Buyers that an AUL would most likely have to be imposed.
F. Seller and Rothenberg's Attempt to Take Unfair advantage of Buyers Actions
The Buyers also claim that both the Seller and Rothenberg violated G.L.c. 93A by trying to take unfair advantage of the Buyer's success in increasing the value of the Premises through permits and variances to construct additional square footage beyond that permitted by the applicable zoning laws in the Town of Brookline. The Buyers did indeed obtain a special permit and variance concerning the Premises from the Town Brookline on August 28, 1997, which was confirmed by an Order issued in October of 1997. The court notes that this special permit and variance was obtained by the Buyers with the support and approval of the Seller as the then owner of the Premises. The court however, does not find that after assisting the Buyers in obtaining zoning relief, either the Seller or Rothenberg deliberately breached the Agreement or otherwise destroyed the deal between the parties in order to unfairly obtain the economic benefit arising from this zoning relief. Further the court does not find that when in September of 1998, Rothenberg opposed the renewal of the Special Permit and variance sought by the Buyers he was acting in bad faith to obtain any unfair advantage at the Buyer's expense. Rather, the court finds that Rothenberg's opposition to any renewal was based on his good faith belief that the Buyers were not entitled to the extension of zoning relief for property they did not own.
The Buyer also assert that both the Seller and Rothenberg unfairly and deceptively sought to undermine and sabotage the Buyer's effort to purchase and develop the Premises. As part of this attempt to sabotage the Agreement, the Buyers point to what they consider to be an "unnecessary and invidious filing" of an AUL against the Premises after commencement of the present suit. After the extensive examination of the course of the dealings and conduct of both the Seller and Rothenberg set forth throughout this decision, the court does not find that either the Seller or Rothenberg deliberately or wilfully sought to sabotage the bargain made by the parties.
Specifically concerning the imposition of an AUL by the Seller on January 26, 1998, this event occurred after January 5, 1998 when all obligations and rights of the parties under the Agreement had terminated. Consequently, the imposition of an AUL by Seller did not undermine or sabotage the Buyer's efforts to purchase and develop the Premises as these efforts had been terminated on January 5, 1998. The filing of AUL could not damage the Buyers contractual rights in a piece of property to which they had no contractual rights.
G. Breach of the Implied Covenant of Good Faith and Fair Dealings
As the final prong of their G.L.c. 93A claim, the Buyers allege that the both Seller and Rothenberg breached the implied covenant of good faith and fair dealings. The Buyers have also brought a separate count relating to this alleged breach. The court will consider all of the Buyers' claims relating to the implied covenant of good faith and fair dealing together. The court notes that its consideration of these claims will be brief as it has already and at some length discussed all of the facts and issues relevant to the Buyers' implied covenant of good faith and fair dealings claims.
Under Massachusetts law every contract is subject to an implied covenant of good faith and fair dealing. Anthony's Pier Four, Inc. v. HBC Associates, 411 Mass. 451, 473 (1991); Warner Ins. Co. v. Commissioner of Insurance, 406 Mass. 354, 362 n. 9 (1990); Kerrigan v. Boston, 361 Mass. 24, 33 (1972). This implied covenant means "that neither party shall do anything that will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Drucker v. Roland Wm. Justras Associates, Inc., 370 Mass. 383, 385 (1976). The Buyer's argue that Seller took opportunistic advantage of them and thereby destroyed or injured their right to receive the fruits of the Agreement.
The Buyers first contend that both the Seller and Rothenberg breached the implied covenant of good faith and fair dealing by misrepresenting and failing to disclose the true environmental condition of the Premises development. As was discussed at great length above, the court does not find that at any time either the Seller or Rothenberg on the Seller's behalf made any misrepresentations as to the true environmental condition of the Premises. Nor does the court find that at any time either the Seller or Rothenberg failed to disclose any material information relating to the Premises' environmental condition.
The Buyers next contend that the Seller breached the implied covenant of good faith and fair dealings by refusing to undertake feasible efforts to remediate the groundwater contamination at the Premises, and instead insisted on a course of action designed to generate a windfall to the both the Seller and Rothenberg. The court has also at great length discussed that all the Agreement required was that the Seller undertake reasonable efforts to deliver the premises to the Buyers with a permanent solution RAO such that the Premises posed no significant environment. The court has set forth in great detail all of the various steps undertaken by the Seller which represented good faith and reasonable efforts to fulfill their contractual obligations. Consequently, the court finds no breach of the good faith and fair dealing obligation on the basis of either the Seller or Rothenberg refusal to undertake feasible remediation efforts at the Premises.
Next, the Buyers maintain that the covenant of good faith and fair dealings was breached by both the Seller and Rothenberg, knowingly causing FSL to file an RAO that does not comply with the MCP. As the court has already determined, the rights and obligations of both parties to the Agreement terminated on January 5, 1998. Consequently, the filing of a RAO whether compliant with the MCP or not, cannot constitute a breach of the covenant of good faith and fair dealing when there is no longer an Agreement to which the parties are bound and to which therefore any covenants can be implied.
The Buyers further allege that both the Seller and Rothenberg breached the implied covenant of good faith and fair dealings by improperly influencing FSL in its decisions concerning the environmental response actions to be undertaken at the Premises. The court has already found that no such improper influence was brought to bear upon any member of the FSL consulting team by either the Seller or Rothenberg.
Finally, the Buyers contend that the implied covenant of good faith and fair dealings was breached when both the Seller and Rothenberg engaged in a course of conduct which jeopardized the Buyers' planned development. As is evident by the extensiveness of its findings in this matter, the court has throughly examined the course of conduct engaged in by both the Seller and Rothenberg. The court does not find that this course of conduct jeopardized the Buyer's planned development in any actionable way.
VI. Individual Liability of Eric Rothenberg
The Buyers have assert numerous claims against Eric Rothenberg for his individual acts and conduct during the course of dealing between the parties. The court first notes that many of the Buyers' allegations and claims against Rothenberg have been analyzed and discussed in connection with the allegation and claims brought against the Seller. The court further notes that all of the claims against Rothenberg in his individual capacity are contingent upon a finding by the court that there were wilful and knowing breaches of the Agreement, misrepresentations, breaches of the implied covenant of good faith and fair dealing and acts of unfair and deceptive trade practices. As all of the foregoing discussion indicates, the court is not prepared to find that their was any breach of the Agreement or actionable conduct by either the Seller or Rothenberg in his individual capacity. The court therefore need not consider separately the Buyers claims against Rothenberg in his individual capacity.
VII. Seller's Counterclaims
The Seller has brought a three count counterclaim against the Buyers. In Count I, the Seller seeks from the court a declarations of its rights under the Agreement as well as a declaration as to the validity of that Agreement. The court has above set out at great length all of the parties' rights and obligations under the Agreement.
In Count II of its counterclaim, the Seller alleges that the claims asserted against the Seller by the Buyer, including a Contempt Complaint, constitute an abuse of process and wrongful action in violation of G.L.c. 231, § 6F.
The basis for this abuse of process claim is that the Buyers' principle intent in bringing their litigation against the Sellers was to collect damages from the Seller and/or a reduction in the purchase price for the Premises. "To constitute a cause of action for [abuse of process] it must appear that the process was used to accomplish some ulterior purpose for which it was not designed or intended, or which it was not the legitimate purpose of the particular process employed." Ladd v. Polidoro, 424 Mass. 196, 198 (1997), quoting Gabriel v. Borowy, 324 Mass. 231, 236 (1949); see also Quaranto v. Silverman 345 Mass. 423, 427 (1963). The essential elements of the tort are '(1) "process" was used; (2) for an ulterior or illegitimate purpose; (3) resulting in damage.'" Datacomm Interface, Inc. v. Computerworld, Inc., 396 Mass. 760, 775-776 (1986), quoting Jones v. Brockton Pub. Mkts., Inc., 369 Mass. 387, 389 (1975).
There is no dispute that the Buyers use of a certain process, this lawsuit, has injured the Seller, at least to the extent of causing it to incur legal fees. The court however, does not find that the Buyers brought their claims including the Contempt complaint against the Seller for any ulterior or illegitimate purpose. Rather, the court finds that the Buyers brought their litigation against the Seller to achieve equitable and other relief from the Massachusetts courts, on the basis of a good faith belief that the Seller had breached the Agreement and engaged in unfair and deceptive practices. The court therefore, does not find for the Seller on Count II of its counterclaim.
In Count III of its counterclaim the Seller asserts that the Buyers acts in both bringing this lawsuit and its ancillary motions, constitutes unfair and deceptive trade practices in violation of G.L.c. 93A. The court has found that the Buyers brought their cause of action for the legitimate purpose of seeking judicial relief, consequently, they did not engage in any unfair or deceptive practices in bringing the present action.
ORDER FOR JUDGMENT
A declaratory judgment shall issue on Count I of the Complaint and Count II of the counterclaim that the defendant, Longwood Texaco Corporation, did not breach the Agreement and has fully performed all its obligations thereunder. The plaintiffs are entitled to a return of all monies paid to the defendant under the Agreement. Judgment shall enter for the defendants, Longwood Texaco Corporation and Eric Rothenberg, on the remaining counts of the Complaint and for the plaintiffs-defendants in counterclaim on the remaining counts of the Counterclaim.
__________________ Gordon L. Doerfer Justice of the Superior Court
May 15, 2000