Opinion
21-P-987
12-09-2022
REEM PROPERTY, LLC v. TRANSFER FINANCIAL, LLC.
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
As the winning bidder at a real estate foreclosure sale, Reem Property, LLC (buyer) entered into a "Memorandum of Sale by Foreclosure" (contract) with Transfer Financial, LLC (seller) and put down a $10,000 deposit towards the purchase price of the property. The balance was due at closing. The contract specified that "time is of the essence." After the time for performance had passed without the deal being consummated, the buyer requested its deposit back. The seller refused. The buyer brought suit in District Court to recover the deposit. After a jury-waived trial, the judge found in favor of the buyer. The Appellate Division of the District Court affirmed the judgment, and we likewise affirm.
Background. According to the contract, closing was required to take place on or before noon on June 30, 2014, time being "of the essence." The seller's obligation was to provide good title at closing, otherwise the buyer would be entitled to return of its deposit. The buyer's obligation was to pay the balance of the purchase price at closing, otherwise forfeit the deposit.
Approximately one week before the closing, buyer's counsel contacted seller's counsel, requesting closing documents for review. On June 26 -- the Thursday before the Monday closing, seller's counsel provided the proposed closing documents by e-mail at 3:23 P.M. Within twenty minutes, buyer's counsel alerted seller's counsel to issues with the documents, and "among other things, [that] the tear sheet and the dates of publication are off." Buyer's counsel requested additional documentation to remedy the situation, including an affidavit from the newspaper. Seller's counsel assured buyer's counsel that he would obtain the required documentation. Buyer's counsel indicated that he would notify seller's counsel of the other issues with the documents as soon as possible. The following day, at 1:22 P.M. , buyer's counsel informed seller's counsel of additional errors that needed to be corrected.
A "tear sheet" is "a sheet torn from a publication." Webster's Third New International Dictionary 2347 (2002). A tear sheet is often used to prove that a certain advertisement has been published. See Weller v. United States, 369 F.2d 919, 921 (9th Cir. 1966) ; White Oak Homes, Inc. v. Community Bank & Trust, 314 Ga. App. 502, 503-504 (2012). In the context of a foreclosure sale, a tear sheet provides proof of required public notice. See G. L. c. 244, § 14 (before foreclosure under power of sale, mortgagee must publish notice in local newspaper "once in each of [three] successive weeks").
Various documents were improperly drafted for execution by an individual rather than the LLC, and there was a request for an "Eaton affidavit," in which the foreclosing mortgagee certifies its authority to foreclose by stating that it "held the [mortgage and the underlying] note or acted on behalf of the note holder at the time of the foreclosure sale." Eaton v. Federal Nat'l Mtge. Ass'n, 462 Mass. 569, 589 n.28 (2012).
Seller's counsel next communicated with buyer's counsel at 10:04 A.M. on June 30 -- the morning of the scheduled closing, at which time he provided an additional document, and indicated that he had secured other required documents and was in the process of preparing an affidavit for the newspaper. At 11:22 A.M. , buyer's counsel gave direction as to the specifics of the newspaper affidavit and told seller's counsel that he needed to "see all other docs signed too in order to close today." Five minutes later, seller's counsel provided buyer's counsel with corrected draft documents and indicated that he was still "working on" the newspaper affidavit. Twenty minutes later, after reviewing the documents, buyer's counsel responded that the corrected drafts were acceptable but that he still needed additional items "in order to close as scheduled per the memo of sale." Thirteen minutes remained.
The judge's recitation of the facts placed this e-mail communication on June 27, 2014. This is likely an error, as the e-mail communications, which the parties do not contest, reflect that the communication occurred on June 30, 2014. Additionally, the judge's further findings place additional communications within minutes of this one on June 30, 2014.
At 1:08 P.M. , seller's counsel forwarded the draft affidavit for the newspaper and stated that he was "ready to close today," suggesting a meeting at the Worcester registry of deeds. Buyer's counsel responded at 1:35 P.M. that he still had not been provided all the required documentation for review, that the time for closing had passed "per the memo of sale," and that his client "reserves all rights as this is now past the time for performance." Nevertheless, buyer's counsel stated that there was no need to meet at the registry because he could wire the money and the documents could be sent by overnight mail. Seller's counsel responded that the newspaper affidavit he had prepared was being signed and would be sent over. When asked about all the other necessary documents, seller's counsel stated that he had to pick up "revised discharges" from a mortgage holder on Cape Cod. Twelve minutes later, buyer's counsel indicated that his client requested the return of the deposit due to the seller's inability to provide good title in accordance with the memorandum of sale.
Discussion. "[A] ‘time is of the essence’ clause means that contractual deadlines will be strictly enforced" unless waiver of the clause "is demonstrated by the actions of the parties." Owen v. Kessler, 56 Mass. App. Ct. 466, 466-467 (2002), citing McCarthy v. Tobin, 429 Mass. 84, 88-89 (1999). Under Massachusetts law, "[c]ourts hold parties to deadlines they have imposed on themselves when they agree that time is of the essence." McCarthy, supra at 88. The agreed-upon "deadline is a condition subsequent, and if the condition subsequent is not met (i.e., an executed [purchase and sale] agreement), or waived, then the parties’ obligations to each other are extinguished." Owen, supra at 469. "Conditions and clauses of a contract may be waived, either expressly or by words and conduct." Id. at 470.
Waiver of a "time is of the essence" clause "requires unequivocal actions on the part of the waiving party." Perroncello v. Donahue, 64 Mass. App. Ct. 564, 568 (2005), S.C., 448 Mass. 199 (2007). "The issue of waiver is ordinarily one for the fact finder. If the facts are undisputed, however, [as here,] waiver is a question of law." McCarthy, 429 Mass. at 88 n.5. We review questions of law de novo. See Lieber v. President & Fellows of Harvard College (No. 2), 488 Mass. 816, 821 (2022).
On appeal, the seller argues that the undisputed facts establish waiver as a matter of law. First, the seller contends that the buyer made timely performance impossible by making "last minute demands" only moments before the closing. Putting aside whether the buyer's communications indeed constituted last minute demands, it was the seller's obligation to provide good title. See Flynn v. Wallace, 359 Mass. 711, 716 (1971) ("In order to put the purchaser in default, it is normally required that the vendor tender a proper conveyance on the date set for performance"). Without acceding to the buyer's requests, the seller was not in a position to provide good title. For example, due to an error in the proposed documents, the buyer required an affidavit from the newspaper to verify that proper statutory notice had been provided for the foreclosure sale. Although this was the first request made within twenty minutes of the buyer receiving the proposed closing documents, the affidavit was still being prepared on the day of the scheduled closing and a draft was not provided until after the time for closing had passed. Additionally, the seller had yet to retrieve mortgage discharges. Regardless of the buyer's specific requests, the seller was not in a position to close by noon on June 30, 2014. This was not a case of one party making the other party's performance impossible. Contrast McCarthy, 429 Mass. at 88-89 (seller's counsel voluntarily undertook to provide purchase and sale agreement but did not provide draft for buyer to review until after time for signing agreement had passed).
Next, the seller contends that the buyer's actions around the closing constituted an implicit waiver of the "time is of the essence" clause. The seller points to the buyer's approval of draft documents only moments before the deadline and the buyer's request for additional documentation after the deadline to argue that the course of dealing between the parties demonstrates that they did not consider time to be of the essence.
To the extent that buyer's counsel continued to engage with seller's counsel about a possible closing after the deadline, he did so apparently in the event that his client authorized him to extend the time for performance, but no such agreement was reached. See Owen, 56 Mass. App. Ct. at 470 ("[party's] indication that he is willing to grant an extension if one is needed is different from actually granting one").
Although the buyer had approved certain documents within minutes of the closing, buyer's counsel made clear in the very same communication that additional documents were necessary, including the newspaper affidavit, "to close as scheduled per the memo of sale." The next communication was from the seller, after the time for performance had passed, sending a draft affidavit with the promise of having it signed later in the day. Within one-half hour, buyer's counsel reminded seller's counsel that the time for performance had passed, and that the buyer "reserves all rights." Thus, in both the communication just prior to the closing deadline and the one just after, buyer's counsel was putting the seller on notice that he was specifically not waiving the "time is of the essence" clause. Contrast McCarthy, 429 Mass. at 88-89 (during ten days of postdeadline negotiations of purchase and sale agreement, seller never objected or mentioned that time for performance had passed); Church of God in Christ, Inc. v. Congregation Kehillath Jacob, 370 Mass. 828, 833-834 (1976) (seller accepted payments after deadline without objection or reservation of rights).
Finally, we reject the seller's argument that, in order to avoid waiver of the "time is of the essence" clause, the buyer had an obligation to explicitly terminate the contract at noon on June 30, 2014. There was no need for either party to assert that the contract was terminated. Once the agreed-upon deadline had passed without either party tendering performance, the only remaining contractual obligation between them was for the seller to return the buyer's deposit. See Devine v. Williams Bros., Inc. of Marshfield, 4 Mass. App. Ct. 816, 817 (1976).
The buyer's request for appellate attorney's fees, costs, and interest is denied.
Decision and order of Appellate Division affirmed.