Vintage Rockland Realty Trust v. Smiths Medical ASD, Inc.
Judge Rya W. Zobel: Memorandum of Decision entered granting 38 Motion for Summary Judgment on all counts. (Urso, Lisa)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 16-11959-RWZ
VINTAGE ROCKLAND REALTY TRUST
SMITHS MEDICAL ASD, INC.
MEMORANDUM OF DECISION
February 14, 2018
Massachusetts plaintiff Vintage Rockland Realty Trust brings the instant action in
diversity against its former tenant, Minnesota defendant Smiths Medical ASD, Inc. The
commercial lease agreement between the parties dates to May 2005, and was
extended four times before expiring in April 2016. See Docket # 40-5 (Lease and
amendments, hereafter “Lease”). Vintage sold the property to a third-party buyer in
October 2016 for $3.7 million, see Docket # 43 (Consolidated Statement of Material
Facts, hereafter “SOF”), at ¶¶ 16–17, but was dissatisfied with the condition in which
Smiths left the property when it vacated. It claims injury in two areas1 — unauthorized
interior alterations and a damaged parking lot— under four causes of action: breach of
contract (Count I); breach of the covenant of good faith and fair dealing (Count II);
violations of Massachusetts General Laws chapter 93A, §§ 2 and 11 (Count III); and
The com plaint also claim s dam ages as to glass replacem ent for clouded windows, but the
parties agreed at the m otion hearing on Novem ber 9, 2017, to settle that claim .
negligence (Count IV). Before me is defendant’s motion for summary judgment on all
I summarize the relevant facts in the light most favorable to plaintiff, the non-
moving party. See Planadeball v. Wyndham Vacation Resorts, Inc., 793 F.3d 169, 172
(1st Cir. 2015).
Plaintiff is a trust that had been organized for the purpose of owning the subject
property. It has three trustees, but is operated by one, Joseph Gallo. Id. Defendant
leased the property, 45,580 square footage located at 160 Weymouth Street in
Rockland, Massachusetts (“the Property”), for use in its manufacture of medical
devices. At the time of the original lease, the Property was a mix of office and
At all times during defendant’s tenancy, the Lease prohibited defendant from
making structural changes and from making non-structural changes without plaintiff’s
written consent. It also required defendant to “maintain the leased premises in good
condition, reasonable wear and tear, damage by fire and other casualty only excepted .
. .The LESSEE shall not permit the leased premises to be overloaded, damaged,
stripped, or defaced, nor suffer any waste.” Lease at 4, ¶ 11A, as amended by
paragraph 3 of Addendum A, id. at 8.
It is undisputed that defendant nonetheless made significant alterations to the
Property during the course of its tenancy and has produced no evidence of consent for
those alterations. See Docket # 54-1, at ¶¶ 45–48, 50. Building permits filed with the
Town of Rockland and identifying Smiths as the client include plans for new structural
walls and ceilings, the addition of lab and sprinkler equipment, the removal of existing
rooms, and the installation of rooftop HVAC equipment. Asked to anticipate the cost of
putting the Property “back into a state ready to hand over to the land lord,” defendant’s
site coordinator Dennis Sullivan observed, “There has been much work done to the
facility over the years in regards to walls being put up and taken down, electrical
additions, and the entire second floor being redone.” Docket # 50, at 6–7 (email
response, dated February 18, 2015, to defendant’s “Director of Operations
Transformation”) ; see id. at 5 (notes of defendant’s in-house counsel Shoua Xiong,
dated January 22, 2015, describing “significant alterations” to Rockland facility); see
also Docket # 40-3, at 22. The parties agree that these alterations occurred during the
effective period of the Lease but disagree as to whether written consent was required.
As the expiration of the Lease approached, Gallo made multiple attempts to
address the alterations with Smiths. See Docket # 50, at 8–9 (July 22, 2015 email from
Gallo to defendant stating, “there is also the question of returning the building to it's [sic]
original state. we [sic] need to discuss this as well.”); Docket # 51, at 14 (August 11,
2015 email from Gallo to Xiong stating, “I do need to speak to Dennis [Sullivan] in
regards to returning the condition of the property to its original status and repairs of the
windows, which need attention asap.”). Defendant initially appeared amenable, see,
e.g., Docket # 50, at 8 (July 23, 2015 email from Xiong to Gallo responding, “With
respect to returning the building to its original state, we'd greatly appreciate it if you
could do a walk-through of the building with Ricco [Feudo, Facilities Supervisor]
sometime next week and identify any modifications you'd like us to make so that we can
get the work underway as soon as possible."), but ultimately disavowed responsibility
under the Lease. Docket # 51, at 23.
The Parking Lot
In addition to the unauthorized alterations, plaintiff complains of the condition in
which defendant left the Property’s parking lot. The parties agree that the parking lot
had not been replaced since its 1985 installation and sustained extensive damage
during the historic snowfall of 2013–2014. Defendant had asked in 2013 that the lot be
resurfaced, and plaintiff included in the final Lease addendum a provision that it would
finance the resurfacing if defendant renewed the Lease. The Lease required defendant
to perform maintenance and repairs but ascribed responsibility for capital expenditures
other than those expressly included in the Lease to plaintiff. Although the parties now
disagree as to whether the lot resurfacing resulted from defendant’s failure of
maintenance or was appropriately plaintiff’s capital expenditure, neither ultimately bore
the cost, as described below.
Sale of the Property to Third-Party Buyer
When it became apparent that defendant would not renew the Lease, plaintiff
engaged the brokerage services of James Rader, as owner of Rader Properties, to
secure a new tenant. Although Rader identified prospective tenants, none were
interested in leasing the Property in its present condition, and plaintiff concluded that
the cost of restoration was prohibitive. Plaintiff ultimately negotiated a sale with a
Rader-owned entity called 160 Weymouth LLC (“Buyer”).
The Addendum to the Purchase and Sale Agreement dated August 4, 2016,
includes the following language:
55. Acknowledgment of Purchase Price Adjustment. Buyer and Seller
agree that the purchase price of the premises has been adjusted to
reflect an estimated repair or replacement cost of the parking lot in the
amount of $200,000.00 and demolition of existing leasehold
improvements in the amount of $200,000.00. $3,700,000.00 is the
agreed upon sale price.
The Offer to Purchase similarly quantifies the Purchase Price as below:
Gross Purchase Price
Deduct parking lot replacement
Deduct deferred maintenance & demo expenses
Net Purchase Price to be paid by Buyer all
cash at closing. In no event shall Buyer be
obligated to pay more than the Net Purchase
After closing on the Property in October 2016, Buyer spent about $140,000 to
resurface the parking lot. Buyer also spent about $25,000 on demolition work, and
anticipates that additional demolition will be necessary to render rentable the onethird of the Property that remains vacant.
While the sale of the Property was still pending, plaintiff brought this action in
state court, alleging essentially that defendant’s breaches of the Lease resulted in
damages and/or diminished the value of the Property. Defendant removed the case
to federal court on September 29, 2016, and now moves for summary judgment on all
Summary judgment is appropriate when the moving party “shows that there is
no genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). “An issue is ‘genuine’ for purposes of summary
judgment if ‘the evidence is such that a reasonable jury could return a verdict for the
nonmoving party,’ and a ‘material fact’ is one which ‘might affect the outcome of the
suit under the governing law.’” Poulis-Minott v. Smith, 388 F.3d 354, 363 (1st Cir.
2004) (quoting Hayes v. Douglas Dynamics, Inc., 8 F.3d 88, 90 (1st Cir. 1993)). In
determining whether a genuine issue of material fact exists, “a court must view the
evidence ‘in the light most favorable to the opposing party.’” Tolan v. Cotton, 134 S.
Ct. 1861, 1866 (2014) (per curiam) (quoting Adickes v. S.H. Kress & Co., 398 U.S.
144, 157 (1970)).
Measure of Damages
It is axiomatic in a breach of contract case like this one that the injured party is
limited to damages based on its actual loss caused by the breach. Restatement
(Second) of Contracts § 347 (1981). See Christensen v. Kingston Sch. Comm., 360
F. Supp. 2d 212, 226 (D. Mass. 2005) (quoting John Hetherington & Sons, Ltd. v.
William Firth Co., 95 N.E. 961, 964 (Mass. 1911) (“The fundamental principle of law
upon which damages for breach of contract are assessed is that the injured party
shall be placed in the same position he would have been in, if the contract had been
performed, so far as loss can be ascertained to have followed as a natural
consequence and to have been within the contemplation of reasonable men as a
probable result of the breach, and so far as compensation therefor in money can be
computed by rational methods upon a firm basis of facts.”)).2
“It is clear that the standard for measuring damage to realty in Massachusetts
is diminution in market value or the cost of curing the injury, whichever is less.”
In re Malden Mills Indus., Inc., 303 B.R. 688, 699 (B.A.P. 1st Cir. 2004). “If the injury
to real property is permanent, the measure of damages is the difference in the fair
market value of the injured premises before and after the injury. If the injury is
reasonably curable by repairs, the expense of repairs, if less than the diminished
market value, is the measure of recovery. However, Massachusetts courts have not
expressly defined the concept of permanent injury to realty. As a result, most courts
applying the diminution in fair market value test use repair costs as either the
Since both parties assum e Massachusetts law applies in this diversity case, that will be
the governing law. See Magarian v. Hawkins, 321 F.3d 235, 238 n.4 (1st Cir. 2003) (“W hile a federal
court sitting in diversity m ust apply the forum state’s choice-of-law rules, . . . the court m ay accept the
parties’ agreem ent as to the choice of law without independent analysis of the governing rules.” (citations
measure of damages or as evidence of the extent of the diminution.” (citations
omitted). Id. at 698. I construe the injury as permanent where, as here, a sale has
been effected, and accordingly weigh repair costs only insofar as they demonstrate
diminution in value.
Although cost of repairs may be used as evidence of the extent of diminution in
value, “[w]here the facts indicate that cost of repairs is unrelated to lessors’ actual
damage, the rule is not applied.” Bowes v. Saks & Co., 397 F.2d 113, 116 (7th Cir.
1968) (citation omitted); see Hopkins v. American Pneumatic Service Co., 80 N.E.2d
624 (Mass. 1907) (“The cost of restoration of the property to its former condition does
not necessarily furnish a true criterion for determining damages.”).
Where diminution in value is the measure of damages, real estate experts may
establish fair market value by a variety of methods. Mass. Port Auth. v. Sciaba Const.
Corp., 766 N.E.2d 118, 124 n.5 (Mass. App. Ct. 2002). “Even though in some
circumstances a court may permit an owner to testify as to his or her property's value,
the scope of that proof is far more limited than that which would come from a qualified
expert such as an appraiser. Even when an owner testifies about value of the
owner's property, the testimony must be based on more than surmise, speculation
and general impressions; the testimony must come from an owner particularly familiar
with the property to testify as to its value with helpful factual specificity.” Sullivan v.
Leonard, No. 295802 (GHP), 2007 WL 2916464, at *5 (Mass. Land Ct. Oct. 9, 2007).
Breach of Contract (Count I)
The parties agreed at the motion hearing on November 9, 2017, that because
the property has sold, diminution in value is the appropriate measure of damages, but
they part ways as to evidence thereof. In support of its argument that it would have
achieved a higher purchase price for the property had defendant not breached,
plaintiff points to three main pieces of evidence: (1) the estimated cost of repairs,
citing to bids for the interior restoration and parking lot resurfacing, see Docket # 41,
at 18; Docket # 53; (2) buyer’s opinion that the condition of the parking lot and interior
build-outs hampered efforts to market the Property and reduced the final purchase
price, see Docket # 41, at 19; Docket # 40-8, at 28:1–7, 61:3–62:11; and (3) Gallo’s
testimony that he reduced the price of the Property by $400,000, his estimate of the
cost of repairs. Id. at 20; Docket # 52, ¶¶ 18–19.
Defendant maintains that plaintiff’s claims must fail because plaintiff sold the
Property for $3.7 million without incurring any restoration costs, and has thus
sustained no damages. Docket # 39, at 11. Pointing to its expert appraisal of the
property at $3.4 million at the time it vacated in July 2015, defendant contends that
plaintiff has created no genuine issue of fact that it suffered harm as a result of any
breach. See id.; see also SOF ¶ 34.
I consider in turn each of plaintiff’s pieces of evidence beginning with the bids
submitted estimating the cost of repairs. Plaintiff cites both to the bid of Tarbox
Construction and to that of the property management company hired by defendant for
the period after it vacated but before the expiration of the Lease. As to the former,
Tarbox estimated that the interior restoration would cost $369,150, exclusive of
parking lot resurfacing estimated at an additional $202,190. Defendant’s property
management company estimated $116,828.99 for the interior restoration, and an
additional $175,000 for the parking lot.3 Plaintiff has introduced no evidence,
however, illustrating the relationship between the cost of repairs and the Property’s
value. As other courts have noted, “[t]his relationship (if any) is shaky indeed.
Restoring property to its pre-injury condition may eliminate the depreciation in its fair
market value which results from the injury. It by no means follows, however, that the
cost of repairing the property will coincide with the amount of depreciation caused by
the injury.” Williams-Bowman Rubber Co. v. Indus. Maint., Welding and Mach. Co.,
Defendant denies having solicited this bid and expressed frustration that its property
m anager appeared to be acting at plaintiff’s behest.
Inc., 677 F. Supp. 539, 543 (N.D. Ill. 1987); see Trinity Church v. John Hancock Mut.
Life Ins. Co., 502 N.E.2d 532, 536 (Mass. 1987) (“Not only must the cost of
replacement or reconstruction be reasonable, the replacement or reconstruction itself
must be reasonably necessary in light of the damage inflicted by a particular
defendant.”); see also Bowes, 397 F.2d at 117 (barring recovery of restoration costs
for lessors who sold property without showing that lessee’s conduct caused any
In the analogous Bowes case, plaintiff lessors rented several floors of a
Chicago building to defendant retailer lessee Saks. Id. at 115. Saks also occupied
an adjacent building across an alley from plaintiffs’ building, and had constructed a
pedestrian bridge between the two. Id. It was required under the lease to remove the
bridge and restore doors and wall partitions before the expiration of the lease, but
defendant failed to do so. Id. Plaintiffs nonetheless sold the building, incurred no
restoration costs, and made no showing that defendant’s breach reduced the
purchase price. Id. at 117. Relying on the “fundamental rule that contract damages
are supposed to compensate a loss and not provide a windfall,” the court held that
damages for lessee’s failure to perform a restoration of no value to lessors could not
be recovered. Id. at 119. See 349 W. Ontario Bldg. Corp. v. Palmer Truck Leasing
Co., 317 N.E.2d 740, 748 (Ill. App. Ct.1974) (broker’s testimony that due to condition
of the building it was worth $60,000 less than it would have been in good repair
described only a general condition, not the diminution in value which resulted from
sublessees' breach). The same analysis applies here.
Plaintiff maintains, however, that the buyer’s testimony that he or prospective
tenants would have paid more for better maintained property is probative of
diminution in value. Asked whether defendant’s interior build-out and conversion to
lab and office space adversely impacted the marketability of the Property, the buyer—
who had also served as plaintiff’s broker— responded, “Most tenants don’t have a
vision of what it could look like . . . So I would say for most tenants though, the
envisioning what it could look like, it was a challenge with all of the rooms and office
build-out in the warehouse. Most of the tenants that came looking at the building were
looking for warehouse, not office space.” Docket # 40-8, at 60–62. He believed that
the condition of the parking lot also had an adverse impact, and ultimately spent
$140,000 to have it resurfaced.
But plaintiff confronts the same causation problem with the buyer’s testimony
as with evidence on cost of repairs above. The buyer’s testimony does not amount to
evidence that the purchase price was diminished, and the plaintiff thus harmed, by
defendant’s purported breach. Rather, buyer states that the $3.7 million purchase
price reflected no reduction negotiated due either to interior alterations or to the
parking lot. See id. at 9–12 (“Q. When you acquired the property for 3.7 million
dollars you weren’t getting a discount because of, for example, parking lot
replacement or demolition of existing leasehold improvements; is that correct? . . . A.
Correct, correct.”). In contrast, buyer did specifically request a purchase price credit
for failing HVAC units whose repair he anticipated would cost about $7,500. Id. at 36.
Cf. 349 W. Ontario Bldg. Corp., 317 N.E.2d at 748 (that buyer considered building’s
condition when making purchase offer is insufficient to establish that sublessee’s
breach reduced the sale price by a specific dollar amount).
Finally, plaintiff highlights the price adjustment at paragraph 55 of the
Addendum to the Purchase and Sale Agreement as evidence that it was forced to
accept $400,000 less than the Property could have commanded, had defendant’s
interior alterations and neglect of the parking lot not diminished the value. Gallo
concedes having included the price adjustment paragraph for the purposes of this
lawsuit. And although he contends that the original asking price for the Property was
$4.2 million, plaintiff offers neither a listing corroborating that fact nor a market
analysis supporting that value. Buyer’s subsequent ability to obtain a $4.6 million
mortgage on the Property, has no bearing on its fair market value at the time of sale,
and even less on what the fair market value would have been absent any purported
breaches. Gallo’s statement that the Property was sold “on a distress basis and at a
price which I do not believe reflected the true value of the property,” Docket # 52, at ¶
18, is insufficient to create a dispute of fact as to diminution in value. See Correia v.
New Bedford Redev. Auth., 377 N.E. 2d 909, 913 (Mass. 1978) (analyzing testimony
of real estate experts on multiple approaches to the issue of fair market value); see
also Sullivan, No. 295802 (GHP), 2007 WL 2916464, at *5.
At bottom, plaintiff has not shown that the Property would have been more
valuable absent the alterations merely because they would have cost money to
remove. The record is undeveloped as to what about the Property’s “as-is” condition
deterred prospective tenants, and as to what actual damage plaintiff thereby incurred.
Plaintiff points to no otherwise comparable properties commanding a higher sale price
for want of such alterations and has submitted no expert report to refute defendant’s
appraisal. Because plaintiff has thus adduced no evidence of damages which a
reasonable jury could attribute to defendant, defendant is entitled to summary
judgment on Count I.
Additional Claims (Counts II, III, and IV)
Plaintiff further alleges breach of the covenant of good faith and fair dealing
(Count II), violations of Massachusetts General Laws chapter 93A (Count III), and
negligence (Count IV). Because each ancillary claim contains a damages predicate,
however, none can survive summary judgment. See, e.g., Ayash v. Dana-Farber
Cancer Inst., 822 N.E.2d 667, 684 (Mass. 2005) (“The concept of good faith and fair
dealing in any one context is shaped by the nature of the contractual relationship from
which the implied covenant derives. The scope of the covenant is only as broad as
the contract that governs the particular relationship.”); Walsh v. TelTech Sys., Inc.,
821 F.3d 155, 159 (1st Cir. 2016) (“Under Chapter 93A, an act or practice is unfair if it
falls ‘within at least the penumbra of some common-law, statutory, or other
established concept of unfairness’; ‘is immoral, unethical, oppressive, or
unscrupulous’; and ‘causes substantial injury to consumers’” or competitors) (quoting
PMP Assocs., Inc. v. Globe Newspaper Co., 321 N.E.2d 915, 918 (Mass. 1975));
Jupin v. Kask, 849 N.E.2d 829, 834–35 (Mass. 2006) (“To prevail on a negligence
claim, a plaintiff must prove that the defendant owed the plaintiff a duty of reasonable
care, that the defendant breached this duty, that damage resulted, and that there was
a causal relation between the breach of the duty and the damage.”).
The defendant’s Motion for Summary Judgment (Docket # 38) is ALLOWED on
_____February 14, 2018 ____
_________/s/Rya W. Zobel_______
RYA W . ZOBEL
SENIOR UNITED STATE DISTRICT JUDGE
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?