CIVIL ACTION NO. 06-596-BLS2.Commonwealth of Massachusetts Superior Court. SUFFOLK, SS.
February 21, 2006
MEMORANDUM OF DECISION AND ORDER ON PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
E. Susan Garsh Justice of the Superior Court
Plaintiffs, Azita Bina, Babak Bina, and Beacon Hill Restaurant Group, Inc. (“BHRG”) filed this action on February 10, 2006 seeking declaratory and equitable relief and damages against the defendants, Ristorante Toscano, Inc. (“Toscano”) and Vinicio Paoli (“Paoli”). The verified complaint alleges breach of contract and breach of the covenant of good faith and fair dealing. The plaintiffs’ claims arise from an asset purchase and sale agreement entered into between Azita Bina and Babak Bina (the “Binas” or the “Buyer”) and Toscano and Paoli (the “Seller”). The subject of the purchase and sale agreement is a restaurant business operated on leased premises. Now before the court is the plaintiffs’ motion for a preliminary injunction, which seeks an order (1) enjoining the defendants from taking any steps to sell their restaurant business to any other person before this case is completely and fully adjudicated on the merits; and (2) staying the expiration of the asset purchase and sale agreement until this case is completely and fully adjudicated on the merits. A hearing on the motion for a preliminary injunction was held on February 16, 2006. The parties filed supplemental affidavits on February 17, 2006. For the reasons discussed below, the plaintiffs’ motion for a preliminary injunction is denied.
BACKGROUND
The verified complaint and affidavits reflect the following facts, which, apart from the subjective intent of the parties, do not appear to be in dispute:
BHRG is a Massachusetts corporation that was organized by the Binas on November 2, 2005 for the purpose of purchasing the assets and business of Toscano with the intent of continuing operations at the same location.
Toscano is a restaurant business. Paoli is the president and sole shareholder of Toscano. Toscano is a tenant under two commercial leases (the “Leases”) at 41-47 Charles Street, Boston. The landlord is the Charles Street Realty Trust (the “Landlord”).
The Leases expire by their terms on May 31, 2012. The Leases each contain a provision regarding assignment which states, in pertinent part, as follows:
Notwithstanding anything to the contrary contained herein, tenant shall have right to assign this lease subject to all requirements and conditions described herein, and landlord’s consent shall be required but not unreasonably withheld or delayed, provided any such proposed assignee shall be:
1. Financially viable;
2. Have high quality restaurant management expertise;
3. Sound and decent personal reputation and character.
Tenant shall provide landlord with evidence to satisfy the above requirements.
The consent by landlord to any assignment . . . shall not constitute a waiver of the necessity of such consent to any subsequent assignment or subletting. In the event of the assignment or subletting by the tenant, tenant shall remain liable for the payment of any and all rent which may become due by the terms of this lease and for performance of all covenants, agreements, and conditions on the part of the tenant to be performed hereunder.
On October 20, 2005, counsel for the Binas forwarded to Mark G. Shub (“Shub”), counsel for Toscano and Paoli, a signed letter of intent for the purchase of substantially all of the operating assets of Toscano. The letter of intent contemplated that Toscano would assign the Leases to the Buyer or their nominee and that the Buyer or their nominee would assume the responsibility as tenant under the Leases. The letter of intent made clear that it was intended solely as a basis for further discussions and that the only binding agreement would be one negotiated, executed, and delivered by the parties.
On October 20, 2005, Shub prepared for Paoli’s review a draft asset purchase and sale agreement, an assignment and assumption agreement for each of the Leaes, and a bill of sale. Paoli signed and approved the letter of intent on October 21, 2005. In his e-mail transmission on October 21, 2005, forwarding the signed letter of intent to counsel for the Binas, Shub stated that he would prepare definitive documents over the weekend and forward them for review and comment. Binas’ counsel responded by e-mail the same day, reminding Shub of the fast track required for the liquor license transfer. Counsel for the Binas referred to their “clients’ mutual desire to close this transaction as quickly as outlined.” He also said that he looked forward to receipt of the draft purchase and sale agreement and assured an expeditious review and response.
The process by which the liquor licenses were to be transferred required that approval be obtained from the Beacon Hill Civil Association. Its next meeting was scheduled for November 2, 2005.
On October 23, 2005, Shub e-mailed counsel for the Binas, for “review and comment,” an asset purchase and sale agreement, bill of sale, and an assignment and assumption agreement for each of the Leases. Shub received an e-mail receipt on October 24, 2005, indicating that his message had been read on October 24, 2005 at 8:57 AM. Each draft “Assignment and Assumption of Lease” agreement bore the heading “Exhibit 2.03.” They are identical except for the locations. The draft of Exhibit 2.03 recited that the Assignor desires to assign to Assignee “all of its right, title, and interest in and to” the Leases and the premises and that the Assignee desires to accept such assignment and “assume all of the duties and obligations of Assignor” under said Leases. The draft of Exhibit 2.03 also contains, among others, the following terms:
As of the Effective Date hereof, Assignor does hereby assign to Assignee all of its right, title, and interest in the Lease and the Premises. Assignee does hereby accept the assignment of Assignor’s interest as tenant under the Lease as of the Effective Date and assumes and agrees to perform all of the terms, convenants and conditions of the Lease accruing from and after the Effective Date. . . . .
Assignee does hereby acknowledge and agree that Assignor is being released by Landlord from its obligations under the Lease accruing from and after the Effective Date and that, subject to the mutual indemnities between Assignor and Assignee pursuant to Paragraph 2 of this Assignment, Assignee shall be solely responsible and liable for the duties and obligations of the tenant under the Lease with respect to periods from and after the Effective Date.
The effectiveness of this Assignment is contingent upon the consent of the Landlord being acknowledged (such form of Consent attached and incorporated herein). Assignor hereby agrees to use its best efforts to obtain such Consent as soon as reasonably possible.
Counsel for the Binas has submitted an affidavit confirming that he opened Shub’s e-mail containing the draft purchase and sale agreement, bill of sale, and draft assignment and assumption agreement, but states that he did not review the assignment and assumption agreements.
On October 26, 2005, counsel for the Binas sent Shub, by e-mail, suggested revisions to the asset purchase and sale agreement, adding representations and warranties and a new section dealing with a management services agreement. No change to section 2.03 or to Exhibit 2.03 was suggested or requested.
On October 27, 2005, Shub e-mailed signed copies of the Leases to counsel for the Binas, and counsel for the Binas sent an e-mail that same day acknowledging receipt. Thereafter, no change to section 2.03 or to Exhibit 2.03 was suggested or requested by Binas’ counsel.
On October 31, 2005, counsel for the Binas sought Shub’s comments on the asset purchase and sale agreement as soon as possible because of the desire to have it executed “in view of the shortness of time for arranging Buyers’ financing.” Counsel for the Binas made no comments about section 2.03 or Exhibit 2.03 in that e-mail communication.
The liquor license transfer application, signed by Paoli, contemplated a transfer to BHRG.
On November 2, 2005, Binas’ counsel forwarded redlined and clean copies of the revisions to the asset purchase and sale agreement. The communication states, “[i]f this looks OK we can attach the schedules at a later time, but would like to have this executed today.” Nothing in the draft asset purchase and sale agreement required that the schedules be executed contemporaneously with the purchase and sale agreement. Because the purchase and sale agreement was in final form, there had never been any objection from the Binas to the Exhibit 2.03 or to the bill of sale, and because the November 2, 2005 e-mail stated that the schedules would be “attached,” not “negotiated,” at a later time, Shub agreed to have counsel for the Binas instruct the Binas to deliver the documents to Paoli for execution.
At no time on or before November 3, 2005, did Shub represent to counsel for the Binas that Toscano or Paoli had already secured an agreement from the Landlord that the tenant would be relieved from liability on the Leases in the event of an assignment of the Leases. At no time on or before November 3, 2005, did counsel for the Binas propose any revisions to or object to any of the language in the Assignment and Assumption Agreements marked Exhibit 2.03 that had been forwarded to him on October 23, 2005, and he did not indicate any desire to negotiate, redraft, or modify in any way the terms of these agreements.[3] At no time on or before November 3, 2005, did Shub orally state to counsel for the Binas that a condition of Paoli’s willingness to consummate the transaction for the sale of Toscano was a release of Toscano’s liability under the Leases. Paoli also did not orally state to the Binas that Toscano’s release from liability under the Leases was a condition to his sale of the assets and business. Shub has filed an affidavit stating that had counsel for the Binas requested that Exhibit 2.03 be amended to delete the language that he is now seeking to have removed, Shub would not have agreed to the request by counsel for the Binas that Paoli execute the asset purchase and sale agreement on November 2, 2005. Counsel for the Binas has filed an affidavit stating that he had not understood that a condition to the Seller’s obligation to sell the assets and business of Toscano was the release of Toscano from all liability under the Leases by the Landlord.
On November 2, 2005, Paoli executed the asset purchase and sale agreement (“PS”). It set out the terms for the sale of the restaurant business to the Binas or the nominee designated by the Binas.
Section 2.03 of the PS provides:
Effective as of the Closing Date pursuant to the Assignment and Assumption Agreements substantially in the form of Exhibit 2.03 attached hereto and subject to the consent of the Landlord, as set forth on said Exhibit 2.03, the Seller will assign the Leases to Buyer and Buyer shall assume the obligations of tenant pursuant to the leases, a copy of which is attached hereto as Exhibit 3.10. Seller hereby agrees to obtain from the Landlord such affirmations as may be required prior to the Closing Date, with respect to the application for, and effecting transfer of, the Liquor License.
Section 3.08 of the PS provides:
No approval, consent, order or authorization of any other person not a party to this Agreement . . . is required in connection with the execution and delivery of this Agreement, except for (a) that required of the Landlord in connection with Buyer’s Assignment and Assumption of the Leases and (b) the transfer of the Liquor License, (collectively the ” Consents”).
Section 5.01 of the PS provides:
Each of the parties will use its respective best efforts to take all action and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement, including, but not limited to obtaining the consent of the Landlord to the assignment of the Leases. . . .
Section 7.01(c) of the PS states the following to be a condition precedent to the Buyer’s obligations: “[t]he Leases shall have been assigned to Buyer with the consent of Landlord.”
Section 8.01 of the Agreement states that the closing shall be held on December 1, 2005 or at such other time and place as the parties may mutually agree in writing. Pursuant to section 8.02(d) of the PS, at the closing Toscano and Paoli are to deliver “the Assignment and Assumption Agreements” with respect to the Leases with the landlord’s consent.
Section 10.05 of the PS provides, in relevant part, as follows:
[I]f any portion of this Agreement receives judicial interpretation, it is agreed that the court interpreting or construing this Agreement shall not apply a presumption that the terms of any portion of this Agreement shall be construed or interpreted against one party by reason of the rule of construction that a document is to be construed more strictly against the party who prepared the document, it being acknowledged that both parties and their agents have participated in the preparation and/or review of the Agreement and the terms and provisions of this Agreement shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Agreement or that particular provision.
Section 10.06 of the PS permits the Buyer, upon prior notice to the Seller, to assigns its rights and obligations under the PS to an affiliate of the Buyer.
Section 10.07 of the PS provides:
This writing, together with the Schedules and Exhibits hereto, embodies the entire agreement and understanding between the parties with respect to this transaction and supersedes all prior discussions, understandings and agreements concerning the matters covered hereby, other than those confidentiality provisions of that Letter of Intent that are to survive.
The Assignment and Assumption Agreements and the Leases, which were to be attached to the PS in accordance with Section 2.03, were not physically attached when the PS was executed. With respect to those exhibits, as well as several others, such as seller’s financial statements, form of bill of sale, schedule of tangible assets, schedule of contracts, and schedule of employees, there is an initialed sheet for each such exhibit attached to the PS containing the exhibit number and what it represents, e.g. “Assignment and Assumption Agreements,” but otherwise the exhibit is blank.
Paoli recalls that all of the documents relating to the transaction were presented to him for execution at the same time by Babak Bina. His recollection is not disputed by Babak Bina’s affidavit. The affidavit filed by counsel for the Binas, however, suggests that the Assignment and Assumption of Lease documents may have been presented to Paoli on November 3, 2005. Counsel for the Binas states that on or about November 3, 2005, he learned that the Landlord had requested from Paoli a formal notice of the intended sale of Toscano and, because Paoli wanted to deliver the proposed Assignment and Assumption Agreements to the Landlord immediately, counsel for the Binas directed Babak Bina to add the language “or their nominee Beacon Hill Restaurant Group” to the assignment and assumption agreements as drafted by Shub. The assignment documents presented by Babak Bina to Paoli are word-for-word identical to Exhibit 2.03 as prepared by Shub and forwarded to Counsel for the Binas along with the draft PS, except, before presenting it to Paoli, the plaintiffs added “or their nominee Beacon Hill Restaurant Group, Inc.” to the sentence, “THIS ASSIGNMENT AND ASSUMPTION OF LEASE . . . is made and entered into effective December 1, 2005 . . . by and between Ristorante Toscano, Inc. (The “Assignor”) and Azita Bina and Babak Bina (the “Assignee”)” and changed the title from “Exhibit 2.03” to “Exhibit 6.1(a).”[4]
When Paoli signed the Assignment and Assumption of Lease Agreements, he understood that all the necessary transaction documents had been agreed upon by his counsel and by counsel for the Binas. According to Paoli, at all times it was his expectation and intent that all liabilities under the Leases would be assumed by the Binas, that they would be solely responsible under the Leases, and that Toscano would have no further liability on the Leases.
Paoli sought the consent of the Landlord to the executed Assignment and Assumption of Lease for each of the Leases on November 3, 2005. The Landlord promptly acknowledged receipt and requested certain financial information. The Landlord’s response did not mention any problem with the language of the Assignment and Assumption Agreements. Meetings between the Landlord and the Binas and provision of further information to the Landlord followed. On November 28, 2005, the Landlord refused to consent to the assignment of the Leases. In refusing consent, the Landlord did not then identify the terms of the Assignment and Assumption Agreements as a reason for not consenting.
As a result of the Landlord refusing to consent to the Assignment and Assumption Agreements, the parties to the PS executed an Amendment and Extension of the Asset Purchase and Sale Agreement (the “Extension Agreement”), agreeing to extend the closing date from December 1, 2005 to March 16. The Extension Agreement recognized in a “whereas” clause that the reasons for the closing not being held by December 1, 2003 were “beyond the control of the parties.” It provided that all terms of the PS would remain in full force and effect “[e]xcept as otherwise specifically provided.” In addition to language in the Extension Agreement stating that “time is of the essence in the performance of the Purchase Agreement,” it states that “[i]n no event shall the Closing Date be extended beyond 5:00 p.m. March 16, 2006, without the written consent of the parties.”
With respect to Section 2.03 of the PS, the Extension Agreement states that “[t]he last sentence of Section 2.03 of the Purchase Agreement is hereby deleted.”[5]
Paragraph 6 of the Extension Agreement contains the following provision:
While Seller shall cooperate with Buyer to take all actions necessary to consummate and make effective the transactions contemplated by the Purchase Agreement, it is understood and agreed that the burden of obtaining Landlord’s consent to assignment of the Leases shall be undertaken solely by Buyer. In consideration of this undertaking by Buyer, Seller agrees to assign all of its right, title and interest in and to any and all choses in action and/or claims to demand specific performance or otherwise compel Landlord’s consent to the assignment of the Leases as provided in the Leases. Seller hereby agrees to execute and deliver to Buyer, upon execution and delivery of this Amendment, an Assignment of Choses in Action substantially in the form attached hereto to this Amendment as Exhibit 5.01.
Finally, the Extension Agreement releases Toscano and Paoli from any claims or cause of action “by reason of any event, occurrence, circumstances or matter of any nature which Buyer has or ever had through the date of this Amendment.”
The parties also executed an Assignment of Choses in Action, assigning to the Binas and BHRG all of the rights of Toscano and Paoli to demand specific performance or otherwise compel the Landlord to consent to the assignment of the Leases.
On December 9, 2005, armed with the Assignment of Choses in Action, the plaintiffs commenced an action against the Landlord seeking, among other things, an order compelling the Landlord to consent to the assignment of the Leases to the Binas or BHRG.[6] No action was taken on the plaintiff’s motion for a preliminary injunction, and the case was set down for a speedy bench trial on on January 5, 2006. On the morning of the scheduled trial on the issue of the unreasonableness of the Landlord’s November 28th refusal to consent to the assignments forwarded to him by Toscano, the parties chose not to go forward with the trial. This decision followed the court’s allowance of the Landlord’s motion to exclude from evidence personal guarantee offers and other information that the Binas had provided to the Landlord after November 28, 2005.
On January 5, 2006, the Landlord indicated, for the first time, that the assignment agreements that had been forwarded to him by the tenant were unacceptable because they contemplated releasing Toscano from any liability following the assignment of the Leases. The Binas state in their complaint that this was the first time that they learned that Toscano and the Landlord had not reached an agreement that would release Toscano from liability under the Lease “as had been represented in the November 3, 2005 assignment and assumption agreement.”
On January 9, 2006, counsel for the Binas e-mailed Shub a proposed draft of a revised assignment and assumption agreement. Counsel for the Binas proposed, among other things, substituting BHRG for the Binas as the named Assignee, deleting the language releasing Toscano from any continuing obligations under the Leases, and adding language acknowledging that the assignee would be bound to the Landlord for all the obligations, terms and conditions of the Leases as if the assignee had been the signatory thereon.[7] Counsel for the Binas and Shub first orally discussed the terms of the Assignment and Assumption Agreements on January 11, 2006.
On or about January, 11, 2006, the Binas provided Toscano and Paoli with a package of documents containing financial and other information and a draft assignment of the Leases that did not contain the language releasing Toscano of its obligations under the Leases (the “Package”). The Binas requested that Toscano forward the Package to the Landlord.
Toscano refused to do so on January 12, 2006 because the new proposed assignment did not contain the language releasing Toscano from liability under the Leases. The Binas sent the Package to the Landlord. On or about January 19, 2006, the Landlord notified the Binas that he would not consider the new request for assignment because it had not come from the Tenant. Thereafter, on January 19, 2006, Toscano delivered to the Landlord certain documents and communicated to the Landlord certain information that had been provided to Toscano by the Binas. Toscano did not, however, request the Landlord’s consent to assignment of the Leases or send an assignment and assumption agreement to the Landlord for his consideration.
On February 3, 2006, Toscano did request the Landlord’s consent to assignment under the Leases, but Toscano refused to enclose with that request any form of assignment and assumption agreement unless it contained the language releasing Toscano of all its obligations under the Leases. On February 7, 2006, the Landlord refused to take action on Toscano’s request on the basis that Toscano had not provided him with the assignment and assumption agreement to which the Landlord’s consent was being sought.[8]
The Binas again requested Toscano to provide the Landlord with an assignment and assumption agreement that did not contain the language releasing Toscano from continuing liability under the Leases. Toscano continues to refuse to do so.
The complaint alleges that the defendants breached the PS and Extension Agreement by refusing to consent to the assignment of the Leases under terms which are consistent with the Leases and in accordance with the terms of those agreements and to otherwise cooperate with the Binas or BHRG to secure the Landlord’s consent to the assignment of the Leases. It further alleges that, by such actions, the defendants have breached the implied covenant of good faith and fair dealing contained in those agreements.
According to the Binas, they have suffered irreparable harm and substantial damages, including the extraordinary costs and attorneys’ fees associated with due diligence and obtaining the Landlord’s consent, costs incurred in the training of new employees and employing consultants in connection with taking over Toscano and lost profits of the new restaurant that were expected to be in excess of $2,000,000 over the remaining term of the Leases.
Paoli, who is sixty-three years old, is in poor health. He suffers from arterial fibrillation, recently spent four days in the hospital receiving treatment, and has been advised, in light of his medical condition, to avoid stress and to work fewer hours. It was Paoli’s intention to move to Italy upon the conclusion of the sale on December 1, 2005; in anticipation of that sale, his wife moved to Italy where she now resides with Paoli’s children and extended family. Inventory at the restaurant has been reduced in anticipation of a sale on or before March 16, 2006. Paoli believes that his restaurant revenues have been adversely affected by the transition and that his business will suffer irreparable financial harm if the transition period is extended beyond March 16, 2006.
DISCUSSION
Under the well-established test of Packaging Industries Group
v. Cheney, 380 Mass. 609, 616-617 (1980), in determining whether to grant a preliminary injunction, this court must evaluate the moving party’s likelihood of success on the merits of their claims and the risk that the plaintiffs would suffer irreparable harm in the absence of an injunction and balance that risk against the harm, if any, which granting the injunction would inflict on the opposing party. “What matters as to each party is not the raw amount of irreparable harm the party might conceivably suffer, but rather the risk of such harm in light of the party’s chance of success on the merits. Only where the balance between these risks cuts in favor of the moving party may a preliminary injunction properly issue.” Id. at 617.
Likelihood of Success on the Merits
The plaintiffs are extremely unlikely to prevail on their request for specific performance, namely that Toscano be ordered to request the Landlord to consent to an assignment and assumption agreement that does not contain the language releasing Toscano from further liability under the Leases. Their likelihood of proving that Toscano and Paoli breached the PS and/or Extension Agreement is low under any of several potentially relevant contract principles.
The interpretation of a contract is a question of law for the court. Sarvis v. Cooper, 40 Mass. App. Ct. 471, 475 (1996). A contract is to be construed to give reasonable effect to each of its provisions. Id. “The object of the court is to construe the contract as a whole, in a reasonable and practical way, consistent with its language, background and purpose.” USMCorp. v. Arthur D. Little Systems, Inc.,
28 Mass App. Ct. 108,116 (1989).
The starting point must be the actual words chosen by the parties to express their agreement. In the PS, the parties agreed that “the Assignment and Assumption Agreements,” to be delivered at the closing were to be “substantially in the form of Exhibit 2.03 attached hereto” subject to the Landlord’s consent “as set forth on said Exhibit 2.03.” It is difficult to imagine how the parties could have expressed themselves more clearly. Of course, the parties could have, but did not, negotiate an agreement providing that the Seller would deliver at the closing “assignment and assumption agreements consented to by the Landlord,” which language may have left room for a court to require the Seller to provide the Landlord with whatever may be shown to be commercially reasonable terms generally found in such agreements. The parties could have, but did not, negotiate an agreement providing that the Seller would provide at the closing “assignment and assumption agreements, in substantially the form to be determined by the parties, consented to by the Landlord,” which language may have left room for a court to conclude that the Seller did not negotiate in good faith if it failed to agree to a form containing whatever may be shown to be commercially reasonable terms generally found in such agreements. The parties could have, but did not, negotiate an agreement providing that the “the Assignment and Assumption Agreements,” to which the Landlord was required to consent, would be “substantially in the form of Exhibit 2.03 attached hereto unless the Landlord objected to paragraph 3 of said Exhibit, in which case the Seller must promptly resubmit its request for consent to the Assignment and Assumption Agreements substantially in the form of Exhibit 2.03 after deleting paragraph 3 thereof.”
The assignment of the Leases obviously was an essential part of the transaction. Without the Landlord’s consent to assignment, there could be no sale of the business as a going concern to the plaintiffs. Section 2.03 of the PS is an essential term.
There can also be no question that the changes the Buyers wish to make to the Assignment and Assumption Agreements would result in a document that is not “substantially in the form of Exhibit 2.03.” If the Assignment and Assumption Agreements were consented to by the Landlord in the form in which they were presented, Paoli would be able to move to Italy, with no possibility of any continuing liability to the Landlord, no matter what may happen to the restaurant business in the hands of the Binas. The Tenant would be wholly released of its obligations under the Leases to remain liable, after the effective date of the assignments, both for the payment of any and all rent which may become due and for the performance of all covenants, agreements, and conditions on the part of the tenant to be performed hereunder, including maintenance of the premises, having liability insurance in force, and so on. Without the release language contained in Exhibit 2.03, the Tenant remains liable on the Leases. Indeed, the language in the Leases so providing merely reflects the common law doctrine that a lessee is not discharged from liability under a lease by a mere assignment of his interests under the lease in the absence of an agreement by the lessor to that effect.Hamlen v. Rednalloh Co., 291 Mass. 119, 122 (1935). As a general rule, a tenant continues to be liable upon the express terms of the lease after an assignment, but takes a role as surety of the assignee’s performance under the assigned lease.Net Realty Holding Trust v. Giannini, 13 Mass. App. Ct. 273, 276 (1982). The express consent of all the parties, therefore, was required to release the tenant from any continuing obligations under the Leases. A landlord certainly has the right to consent to releasing a tenant from any continuing liability under a lease.
The PS is likely to be found to have made the consent of the landlord to an assignment and assumption agreement “substantially” in the form set out on Exhibit 2.03 a condition of the closing. Apart from the language in section 2.03, section 3.08 reiterates that no consent is required except for “that required of the Landlord in connection with Buyer’s Assignment and Assumption of the Leases.”
The plaintiffs are not likely to prevail because the only best efforts that the Buyer is required by the PS to use are those that are necessary or advisable “in order to consummate and make effective the transactions contemplated by this Agreement, including but not limited to obtaining the consent of the Landlord to the assignment of the Leases. . . .” The only assignment contemplated by the PS is the one that is “substantially” in the form set out on Exhibit 2.03.
A contract is usually formed by an offer and acceptance that sets forth with sufficient certainty the material rights and obligations of the parties. To the extent that there was no meeting of the minds on an essential term, there may not be an enforceable contract and the plaintiffs would not be entitled to specific performance. However, this does not appear to be a case where the parties have reduced to writing only an “agreement to agree” that is too indefinite to be enforced.
More likely, it will be found that a contract was created and that the agreed upon terms do not support the claim that the duty to use best efforts clause has been breached by the defendants. In the very same transmission in which the draft PS was sent to counsel for the Binas for comment, so too was Exhibit 2.03. There was no need for Paoli or his counsel orally to have stated that the tenant would agree to use its best efforts only to secure the Landlord’s consent to an assignment and assumption agreement that would release it from continuing liability under the Leases because the draft PS did so by expressly incorporating Exhibit 2.03 and stating that the Assignment and Assumption Agreements “substantially in the form of Exhibit 2.03” were to be provided at closing and that these agreements were subject to the Landlord’s consent “as set forth on Exhibit 2.03.” The contention that Exhibit 2.03, as drafted, somehow implied that Paoli already had obtained the consent of the Landlord to such a release in the event that the Landlord should consent to an assignment of the Leases to the Binas is unlikely to succeed. The Binas are likely to be found to have manifested assent to the wording of Exhibit 2.03 by making certain changes to the draft asset purchase and sale agreement, but by making no request for any change to Section 2.03 or to Exhibit 2.03 at any time prior to the execution of the PS. A party to a contract cannot turn his eyes away from what he is executing and then protest that it was not what he had intended. See Markell v. Sidney B. PfeiferFoundation, Inc., 9 Mass. App. Ct. 412, 440 (1980) (“One who knowingly signs a writing that is obviously a legal document without bothering to ascertain the contents of the writing is ordinarily bound by its terms, in the same manner as if he had been fully aware of those terms, unless it can be proved that he was induced by fraud or undue influence. . . . That he does not know the terms he is agreeing to is not a mistake, but a conscious choice and a known risk”).
Although Exhibit 2.03 was not physically attached to the PS when it was executed, it is extraordinarily unlikely that anything other than Exhibit 2.03, as transmitted to counsel for the Binas by Shub, will be found to reflect what the parties agreed that this exhibit would say. The Binas themselves, either contemporaneously with the PS or within a day thereafter, handed assignment and assumption agreements to Paoli for his signature containing the very same language that they now claim they never agreed would be substantially the form of the assignment and assumption agreement to be provided to the Landlord for his consent. Both the Binas and Paoli on behalf of Toscano signed these agreements. “[T]he integrated documents barrier may be penetrated by evidence tending to show that the documents are not, in fact complete.” US Trust v. Henley WarrenManagement, Inc., 40 Mass. App. Ct. 337, 342 (1996).
To the extent that the contract may be deemed unclear because of the fact that when the PS was executed Exhibit 2.03 was not physically attached, it is unlikely that it will be construed to require the tenant to submit a form of an assignment and assumption agreement without the release language. Looking at the PS together with the previous negotiations of the parties and all the surrounding facts and circumstances, it appears likely that it will be determined that the only assignment and assumption agreement that Paoli is obligated to use his best efforts to secure the Landlord’s consent to is one that releases the tenant from any continuing obligations under the Leases. All terms must be sufficiently definite so that the nature and extent of obligations can be ascertained. But a contract is not unenforceable if, when applied to the transaction and construed in the light of the attending circumstances, the meaning can be ascertained with reasonable certainty. Simons v. American DryGinger Ale Co., Inc., 335 Mass. 521, 523-524 (1957). Cf.Massachusetts Municipal Wholesale Electric Co. v. Danvers,411 Mass. 39, 45-46 (1991) (a court looks to the parties’ intent to determine whether they have created a condition precedent and, to ascertain intent, a court considers the words used by the parties, the agreement taken as a whole, and surrounding facts and circumstances).
It may also be found that the Binas’ presentment to Paoli of a signed Assignment and Assumption Agreement for each of the Leases and his execution of these Assignment and Assumption Agreements constitutes a modification of the PS such that whatever actually was signed by the parties contemporaneously with the PS or within a day thereafter, at the Binas’ request, became the form of the Assignment and Assumption Agreement to which the “best efforts” obligation applies. Modification of a contract is a mutual agreement to change the terms of an existing contract that may be express or inferred from the conduct of the parties and the attendant circumstances. See Cambridgeport Savings Bank v.Boersner, 413 Mass. 432, 439 (1992). Here the parties chose not to attach Exhibit 2.03 and, instead of seeking the consent of the Landlord to an assignment and assumption agreement in the form of Exhibit 2.03 as contemplated by the PS, they actually executed assignment and assumption agreements. To the extent that, by such acts, the PS was modified, it is likely to be found to have been modified to provide that the Seller was obligated to use its best efforts to secure the Landlord’s consent to an assignment and assumption agreement substantially in the form that the parties executed.
The plaintiffs are not likely to prevail on their contention that the Extension Agreement modified the PS to eliminate any requirement that the Assignment and Assumption Agreements contain a release of Toscano’s continuing obligations under the Leases. The Extension Agreement explicitly references section 2.03 of the PS and amends it by deleting only the last sentence, which has nothing to do with the Assignment and Assumption Agreements. The Extension Agreement also recognizes that the Seller need only cooperate to take actions necessary to “consummate and make effective the transactions contemplated by the Purchase Agreement.” The Extension Agreement is not likely to be construed as changing what transactions are contemplated by the PS.
If the plaintiffs were mistaken as to what they had agreed upon, their mistake is not one that is likely to result in their being entitled to rewrite the PS and then obtain specific performance of the agreement as rewritten. One party’s “subjective belief does not alter the parties’ written agreement.” Owen v. Kessler, 56 Mass. App. Ct. 466, 470-471
(2002). Reformation is an appropriate remedy for an agreement containing a mistake if the mistake is mutual or was made by one party (unilateral) such that the other party knew or had reason to know of it. Nissan Automobiles of Marlborough, Inc. v.Glick, 62 Mass. App. Ct. 302, 306-307 (2004) (a party seeking recovery for a unilateral mistake must present full, clear, and decisive proof that a mistake occurred, and that the other party knew or had reason to know of the mistake). The failure of counsel for the Binas to have understood that the language in Exhibit 2.03 was essential to Paoli’s willingness to execute the PS is attributable to his own failure, not induced by the defendants, to have read the exhibit. The Binas, who signed the Assignment and Assumption Agreements and who retyped them to add a designee, do not claim not to have read them. They are unlikely to show that they construed the Assignment and Assumption Agreements as representing that the Landlord had already reached an agreement with Toscano to release Toscano from liability under the Leases in the event of an assignment or that such a construction was a reasonable one. The only arguably mistaken party is not likely to come forward with clear and decisive evidence that would indicate a likelihood of establishing that the defendants knew or had reason of know of any mistaken assumption on the part of the plaintiffs.
Plaintiffs are likely to fare no better with their argument that the tenant’s refusal to agree to an assignment and assumption agreement that does not contain the release language violates the implied covenant of good faith and fair dealing. Every contract in Massachusetts is subject to an implied covenant of good faith and fair dealing. See Anthony’s Pier Four, Inc.
v. HBC Associates, 411 Mass. 451, 473 (1991). However, it may not be “invoked to create rights and duties not otherwise provided for in the existing contractual relationship, as the purpose of the covenant is to guarantee that the parties remain faithful to the intended and agreed expectations of the parties in their performance.” Uno Restaurants, Inc. v. BostonKenmore Realty Corp., 441 Mass. 376, 385 (2004)
In sum, the plaintiffs have not shown more than a minimal likelihood of success on the merits.[9]
Irreparable Harm to the Plaintiffs
The defendants’ refusal to agree to an assumption and assignment agreement that leaves the Tenant liable under the Leases is likely to cause irreparable harm to the plaintiffs. Although it is not clear whether the Landlord would consent to a such a modified agreement and whether, if the Landlord did not, such action would be unreasonable entitling the plaintiffs to injunctive relief against the Landlord, at a minimum the failure to provide revised assumption and assignment agreements to the Landlord makes it far less likely that there will be a closing before March 16, 2006. Given the uniqueness of the business and the goodwill that is sought to be purchased and the uniqueness of the real estate that is wanted for a specified use, an award of damages is not likely to make the plaintiffs whole should they succeed on their claims. See McCarthy v. Tobin, 429 Mass. 84, 89 (1999).
Nevertheless, while money damages are an inadequate remedy, this is not a situation in which money damages cannot, to some extent, be calculable. The costs and attorneys’ fees associated with due diligence and obtaining the Landlord’s consent and the costs incurred in training new employees and employing consultants in connection with taking over Toscano can be calculated and the lost profits of the new restaurant that were expected over the remaining term of the Leases can be reasonably estimated, and indeed have been estimated, by the plaintiffs. Further, the irreparable harm is, to a large extent, self-created by virtue of the failure by counsel for the Binas to have reviewed Exhibit 2.03 prior to execution of the PS on November 2, 2005, and by virtue of the presentation by the Binas of assignment and assumption agreements to Paoli for execution on November 2 or November 3, 2005 containing the very language they now seek to excise.
Irreparable Harm to the Defendants
Enjoining the defendants from taking any steps to sell their business to anyone else before the case is “completely and full adjudicated on the merits” and staying the expiration of the PS and Extension Agreement until that time is not using equity simply to maintain the status quo. Rather, such relief would eliminate the “time is of the essence” provision in the Extension Agreement as well as the provision in that agreement that the closing date should in no event be extended beyond March 16, 2002 without the written consent of both parties. A “time is of the essence” clause means that contractual deadlines will be strictly enforced. Owen v. Kessler, 56 Mass. App. Ct. 466, 469-470
(2002). The defendants irrevocably would be deprived of the benefits of these contractual provisions agreed upon at a time when litigation, albeit between the Landlord and the buyers, already was contemplated. Paoli’s inability to rejoin his family in Italy, the potential impact of stress upon his health, and the declining restaurant revenues constitute irreparable harm likely to be suffered by the defendants should the preliminary injunction be issued.
Conclusion
Overall, I cannot conclude that the plaintiffs have a likelihood of succeeding on the merits of their claim for specific performance. Nor is the plaintiffs’ showing of irreparable harm sufficiently strong to outweigh the weakness of their showing on the likelihood of success, taking into account the harm that the injunction would cause the defendants to suffer. The balance of the equities does not favor allowing the requested injunctive relief.
ORDER
For the reasons stated, it is hereby ORDERED that the plaintiffs’ motion for preliminary injunction be and hereby isDENIED.