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21-P-1054 Appeals Court
SOURCING UNLIMITED, INC.1 vs. CUMMINGS PROPERTIES, LLC.
No. 21-P-1054.
Essex. November 3, 2022. - June 7, 2023.
Present: Neyman, Desmond, & Grant, JJ.
Contract, Lease of real estate, Construction of contract, Option. Real Property, Lease, Option. Landlord and Tenant, Renewal of lease. Notice, Timeliness. Electronic Mail.
Civil action commenced in the Superior Court Department on January 24, 2017.
The case was heard by Janice W. Howe, J., on motions for summary judgment, and entry of separate and final judgment was ordered by her.
Jonathan D.H. Lamb for the defendant. Orestes G. Brown for the plaintiff.
NEYMAN, J. We consider whether electronic mail (e-mail)
communications from a tenant to its landlord constituted
effective notice to invoke a nonrenewal option to prevent
1 Doing business as Jumpsource. 2
automatic five-year renewal of a commercial lease. Although the
"notice" provision in the lease prohibited electronic notice, we
nonetheless hold that the e-mail communications constituted
effective notice where (1) it is undisputed that the landlord
received timely and unequivocal written notice of the tenant's
decision not to extend the lease; (2) the nonconformity in the
method of delivery of the notice neither was consequential nor
contravened the crux of the option provision; and (3) the option
provision at issue was not exclusive to the tenant but was a
mutual option that could be exercised by either party. Thus, we
affirm.
Background. 1. The lease. On or about April 14, 2010,
the plaintiff-tenant, Sourcing Unlimited, Inc., doing business
as Jumpsource (Jumpsource), and the defendant-landlord, Cummings
Properties, LLC (Cummings), executed a commercial lease for
office space in Beverly. The lease was extended by agreement
through November 30, 2016. Section 30 of the lease contained an
automatic extension provision stating as follows:
"AUTOMATIC FIVE-YEAR EXTENSIONS. This lease, including all terms, conditions, escalations, etc. shall be automatically extended for additional successive periods of five years each unless LESSOR or LESSEE serves written notice, either party to the other, of either party's option not to so extend this lease. The time for serving such written notice shall be not more than 12 months or less than six months prior to the expiration of the then current lease term. Time is of the essence." 3
Section 21 of the lease contained a general notice provision
that provided as follows:
"NOTICE. . . . Any notice from LESSEE to LESSOR under this lease shall be given in writing and shall be deemed duly served only when served by constable, or delivered to LESSOR by certified or registered mail, return receipt requested, postage prepaid, or by recognized courier service with a receipt therefor, addressed to LESSOR at [street address] or to the last address designated by LESSOR. No oral, facsimile or electronic notice shall have any force or effect. Time is of the essence in the service or any notice."
The parties agree that to exercise its nonrenewal option under
section 30 -- thereby preventing the lease term from
automatically extending for an additional five-year period --
Jumpsource had to provide written notice to Cummings between
December 1, 2015, and May 30, 2016 (i.e., "not more than 12
months or less than six months prior to the expiration of the
then current lease term").
2. The e-mail communications. In December of 2015, and
January of 2016, Jumpsource and Cummings discussed the
possibility of Jumpsource relocating from its then current
office space to a different unit within Cummings's portfolio and
extending its term lease, but the parties did not agree to terms
on any such relocation or extension. On January 12, 2016,
Jumpsource's vice-president of sales sent an e-mail to
Cummings's account manager stating:
"At this time [Jumpsource has] decided we are closing the office in Beverly at the end of the contract (Nov 2016). 4
We are trying to get all the employees down here to FL. Thanks for the help though!"
Cummings's account manager responded the same day, in relevant
part, as follows:
"Thanks for your message. Please note that, while Jumpsource's lease is currently scheduled to terminate on November 30, 2016, you should consult the lease for more information, as many of our leases contain extension, renewal, and/or cancellation options. Such provisions may alter the lease end date or otherwise result in the lease not terminating on the date referenced above.
"Despite your note, if there is any interest in maintaining even a much smaller one- or two-person office here at Cummings Center, please let me know, as we have some nice options in the range of 200 to 500 leasable square feet."
On April 21, 2016, Cummings sent Jumpsource a letter
notifying Jumpsource that it "does not have adequate insurance
on file" and thus was in default of the lease. The letter
further advised that Jumpsource could cure the default, that
Cummings could purchase insurance on Jumpsource's behalf, or
that Cummings could "declare the term of your occupancy ended."
Jumpsource promptly sent an e-mail to Cummings about the letter,
noting that its lease would expire on November 30, 2016, and
asking, "How do you suggest we proceed if we only need office
insurance for another 6 months or so? As you know we will not
be renewing our Cummings Center lease . . . ." Cummings
replied, in relevant part, as follows:
"[I]n accordance with the notice provisions of your lease, we are unable to accept non-renewal notices that are transmitted by email. Per Sections 21 and 30 of your 5
lease, notice must be sent within the required time period via certified mail or recognized overnight courier. . . . If you wish to terminate your lease on November 30, 2016, please deliver Cummings . . . proper notice as and when required under the lease. In the meantime, please note that all terms of your lease, including all extension, renewal, and/or cancellation options contained therein, remain in full force and effect."
On August 4, 2016, in response to an e-mail from Cummings
regarding August 2016 rent, Jumpsource sent an e-mail stating,
in part, "I'll mail a check to you here from Florida. Sorry for
the mixup [sic]. What's the move out process like? As you know
we aren't renewing our lease and the final date is November 30."
Cummings responded by e-mail as follows:
"Thanks in advance for mailing the check. I will update our accounting department.
"Regarding the currently scheduled lease termination date, as referenced in my prior emails, Section 30 of Jumpsource's lease provides that the term of the lease shall automatically extend for additional successive five- year periods, unless either party provides timely written notice as required by the lease exercising its option that the lease not so extend. Such written notice must be served by one of the methods identified in Section 21 of the lease between six and 12 months prior to the then- current lease expiration date.
"In this case, in order for the lease to terminate on November 30, 2016, written notice to preclude the automatic extension would need to have been served on or before May 30, 2016. As we never received any such written notice as required by the lease, the lease has extended through the currently scheduled termination date of November 30, 2021. Please note that all terms of your lease, including all extension, renewal, and/or cancellation options contained therein, remain in full force and effect.
"As always, feel free to contact me with any questions." 6
On November 30, 2016, Jumpsource vacated the premises.
There is no allegation that Cummings was unable to lease the
premises or was prejudiced by Jumpsource's purported violation
of the contract.
3. Prior proceedings. On January 24, 2017, Jumpsource
commenced the present action in the Superior Court seeking a
declaratory judgment that it had provided sufficient and proper
notice of its option not to renew the lease and alleging a
violation of G. L. c. 93A.2 Cummings filed an answer and
counterclaim seeking a declaratory judgment that Jumpsource
failed to provide proper legal notice in accordance with the
lease of its decision to opt out of the five-year automatic
renewal and alleging breach of contract. The parties filed
cross-motions for partial summary judgment3 and, in their joint
statement of material facts, defined the discrete issue of law
as follows: "What is the legal effect, if any, of Jumpsource's
emails to Cummings to opt out of the lease's automatic
extension, where the notice provision in the lease required
2 Cummings first filed a summary process action against Jumpsource in the District Court. That action was dismissed after the parties stipulated to Cummings's right to immediate possession of the premises. The parties then initiated the Superior Court action.
3 The parties filed a joint statement of material facts, none of which was disputed by either party. 7
adherence to specified methods of notice to the exclusion of
other modes of transmission (including electronic and oral
notice)?" A Superior Court judge ruled that the e-mail
communications from Jumpsource to Cummings constituted effective
and timely notice to opt out of the lease's automatic extension,
and thus allowed Jumpsource's motion and denied Cummings's
motion.4 Partial summary judgment entered in favor of Jumpsource
and against Cummings. At the parties' joint request, the judge
entered separate and final judgment in favor of Jumpsource.5
Cummings timely appealed.
Discussion. 1. Standard of review. a. Summary judgment.
Summary judgment is appropriate where "there are no issues of
material fact, and . . . the moving party is entitled to
judgment as a matter of law." Mass. R. Civ. P. 56 (c), as
amended, 436 Mass. 1404 (2002). "We review a decision to grant
summary judgment de novo." Boazova v. Safety Ins. Co., 462
Mass. 346, 350 (2012). "[W]here both parties have moved for
4 In her decision, the judge briefly addressed the issue of waiver, and determined that "there is no evidence Cummings waived the notice requirements of the [l]ease." Where we hold that the e-mail communications constituted effective notice of the option, we decline to reach the waiver issue.
5 The parties represented that the allowance of Jumpsource's motion for partial summary judgment effectively mooted Cummings's counterclaims for declaratory judgment and breach of contract subject to this appeal. Their joint motion indicated that only Jumpsource's claim pursuant to G. L. c. 93A would remain and that it would be stayed pending this appeal. 8
summary judgment, the evidence is viewed in the light most
favorable to the party against whom judgment [has entered]"
(citation omitted). Id. "A party seeking summary judgment may
satisfy its burden of demonstrating the absence of triable
issues by showing that the party opposing the motion has no
reasonable expectation of proving an essential element of its
case" (citation omitted). Id.
b. Contract interpretation. The parties agree that the
relevant lease provisions are unambiguous. "The interpretation
of an unambiguous written contract constitutes a ruling of law
that is subject to plenary review on appeal." President &
Fellows of Harvard College v. PECO Energy Co., 57 Mass. App. Ct.
888, 891 (2003). "Where there is no ambiguity, we construe the
words of a contract in their usual and ordinary sense"
(quotation and citation omitted). DeWolfe v. Hingham Ctr.,
Ltd., 464 Mass. 795, 803 (2013). See Shea v. Bay State Gas Co.,
383 Mass. 218, 225 (1981) (court must construe contract language
"to give it reasonable meaning wherever possible"). In
addition, "[w]hat constitutes timely notice under [a lease] is a
matter of contract interpretation and is therefore 'a matter of
law for the court.'" Pilgrim Ins. Co. v. Molard, 73 Mass. App.
Ct. 326, 331 n.8 (2008), quoting Royal-Globe Ins. Co. v. Craven,
411 Mass. 629, 632 (1992). Therefore, we likewise review this
contract interpretation dispute de novo. See Baby Furniture 9
Warehouse Store, Inc. v. Meubles D&F Ltée, 75 Mass. App. Ct. 27,
29 (2009).
2. Analysis. Cummings contends that Jumpsource's e-mail
communications constituted ineffective notice to invoke the
nonrenewal option in the lease because Massachusetts law
requires an optionee to strictly comply with the terms of an
option. Cummings argues that insofar as the lease specified
acceptable methods of notice and expressly excluded other
methods, including "electronic notice," Jumpsource did not
strictly comply with the plain terms of the lease, and thus the
notice was insufficient as a matter of law.
Jumpsource responds that the purpose of the option
provision was fulfilled because Cummings had actual notice well
within the option period that Jumpsource had exercised its
option not to renew. Jumpsource argues that our jurisprudence
makes clear that a party's timely receipt of actual notice is
generally not defeated by a nonconforming delivery method.
Although Jumpsource's view is somewhat overbroad, it has the
better argument in the present case.
We begin our analysis with the plain language of the
agreement, which states that the lease "shall be automatically
extended" for an additional five-year lease term unless either
party "serves written notice . . . of either party's option not
to so extend this lease" within a specified timeframe. This 10
provision gave both the landlord and the tenant the "option" to
cancel the automatic renewal of the lease by providing timely
written notice. Unlike many leases that contain affirmative
options to purchase property or to terminate, renew, or extend a
lease, the provision here is framed as an "option not to so
extend" the automatic renewal of the lease. See Pear v.
Davenport, 67 Mass. App. Ct. 239, 240-241 (2006) (tenant's
option to purchase); Qureshi v. Fiske Capital Mgmt., 59 Mass.
App. Ct. 463, 465-466 (2003) (option to extend); Loitherstein v.
International Business Machs. Corp., 11 Mass. App. Ct. 91, 92
(1980) (tenant's "right to terminate" ten-year lease "at the end
of the fifth year of the initial term"); Gerson Realty Inc. v.
Casaly, 2 Mass. App. Ct. 875 (1974) (tenant's option to renew
lease). Contrast Patriot Power, LLC v. New Rounder, LLC, 91
Mass. App. Ct. 175, 176 (2017) (analyzing "termination option"
providing that lease "shall be automatically extended for
additional successive Renewal Terms of one (1) year each unless
Tenant or Landlord serves written notice . . . of either party's
option not to so extend the Lease" within specified timeframe).
Despite the somewhat awkward phraseology, both parties agree
that the language is unambiguous. The parties further treat the
wording as an "option" not to renew the lease, and we treat it
as such for purposes of our analysis herein. 11
"Generally, conditions for the exercise of an option
require a more strict degree of adherence than may be the case
in provisions of a bilateral contract." Westinghouse
Broadcasting Co. v. New England Patriots Football Club, Inc., 10
Mass. App. Ct. 70, 73 (1980) (Westinghouse). We have noted that
because an optionee holds a unilateral right, there is a "lesser
inclination of courts to inquire into the materiality of a
breach of an option condition." Id. "In [such] circumstances
it may not be too much to ask that a person seeking to . . .
exercise option rights turn his corners squarely." Id. See
Trinity Realty I, LLC v. Chazumba, LLC, 77 Mass. App. Ct. 911,
912 (2010) ("Massachusetts takes a 'strict' view of options,
and . . . a tenant's noncompliance with lease terms may result
in its losing the privilege of exercising an option even if the
same noncompliance would not warrant forfeiture of the existing
tenancy"). See also Loitherstein, 11 Mass. App. Ct. at 94.
Thus, as a general rule, option provisions are strictly
construed such that we typically do not look to claims of
materiality with respect to their enforcement.
However, Massachusetts courts have recognized limitations
to the concept of strict compliance with options. In some
contexts, where a nonconformity does not contravene the crux of
an option provision, we have considered the nature and
materiality of minor deviations. This is particularly so as to 12
the method of delivery of notice. For example, in Gerson Realty
Inc., 2 Mass. App. Ct. at 875, we considered whether a tenant
had effectively exercised its option to renew a lease where the
tenant provided notice via certified mail, but the lease
required that "such notice . . . shall not be deemed to have
been duly given or served unless in writing and forwarded by
registered mail." Id. We held that the notice of renewal by
certified mail was effective because "[t]he function of a
requirement that notice be transmitted by registered mail is to
provide a means of resolving disputes as to the fact of delivery
of the notice." Id. Where the fact and timeliness of delivery
were not in dispute, the differences between the manner of
notice required and the notice provided were "of no
consequence." Id.
Similarly, in Computune, Inc. v. Tocio, 44 Mass. App. Ct.
489, 493 (1998), we held that written notice delivered by
Federal Express, instead of by certified or registered mail as
required by the lease, constituted timely and effective exercise
of a lease option. Here again, we reasoned that where the
notice to extend the lease was in writing, timely, and delivered
to the correct address, "the method by which the written notice
was delivered [did] not result in a material violation of the
lease." Id. We further recognized that, consistent with our
precedent, "[d]elivery by Federal Express, in the circumstances 13
present here, serves the same function and provides the same
proof of delivery as certified or registered mail." Id.
In Trinity Realty I, LLC, 77 Mass. App. Ct. at 911, we
analyzed an option provision requiring that the tenant "not be
in default in the performance, fulfillment or observance of any
of the terms or provisions of this lease" to exercise the option
to extend the lease term. Although the tenant "was not in full
compliance with two lease covenants when it exercised the
option," we held that the tenant's substantial compliance with
the lease terms constituted adequate performance to maintain its
rights under the lease, including its right to exercise the
option provision. Id. at 912. We further distinguished
"defaults of a significant nature" from technical violations
that do not "go to the heart of the parties' agreement." Id. at
912 & n.4.6
Finally, in Cadillac Auto Co. of Boston v. Stout, 20 Mass.
App. Ct. 906 (1985), we analyzed an option to purchase real
estate requiring, inter alia, that the option be exercised "by
6 Among the examples we provided of "defaults of a significant nature" was "the failure to exercise the option in the manner prescribed in the lease." Trinity Realty I, LLC, 77 Mass. App. Ct. at 912 n.4. As discussed infra, however, our jurisprudence has distinguished material flaws in the exercise of an option from those that are immaterial. In circumstances like the present, a nonconforming delivery method -- when timely receipt of actual notice is undisputed -- is not a default that goes "to the heart of the parties' agreement." Id. 14
notice in writing," (1) given within a defined timeframe, (2)
"specifying a date and hour for delivery of the deed," and (3)
committing to a closing within a specified period. Id. at 906,
907. Stout, the holder of the option, provided a letter that
did not specify a date and hour for delivery of the deed, and
did not in clear terms commit Stout to a closing within the
specified period. Id. at 907. Consequently, we held that the
deviations from the option provision were "not immaterial" and,
on that basis, affirmed the Land Court's determination that
Stout's letter was ineffective to exercise the option. Id.
It is clear from this line of cases that our jurisprudence
has distinguished material flaws in the exercise of an option
from "immaterial," or "inconsequential," deviations,
particularly those involving the method of delivery of notice
where neither the timeliness nor fact of delivery of notice were
disputed. See Westinghouse, 10 Mass. App. Ct. at 73-74
(comparing flaws in exercise of option such as failure to give
timely notice, failure to include purchase price, and failure to
provide written notice and cashier's check, to nonconforming
delivery method in Gerson Realty Inc., 2 Mass. App. Ct. at 875).
Such minor nonconformities as identified in Gerson have
typically not been held to render ineffective duly received
notice. See e.g., Computune, Inc., 44 Mass. App. Ct. at 493. 15
Of further note, our precedent has also recognized that the
rationale for requiring strict compliance with the exercise of
an option stems from the creation of a "unilateral" right
exclusively held by the holder of the option. See Loitherstein,
11 Mass. App. Ct. at 94 (termination option held by tenant
"created a conditional limitation on the leasehold estate; a
right which was unilateral in nature, exclusively for [tenant]'s
benefit, and thus to be strictly construed"). See also
Westinghouse, 10 Mass. App. Ct. at 73. Here, no such
exclusivity existed, as both Cummings and Jumpsource held an
option not to extend the lease. Accordingly, in the present
context where either party may exercise the option, the policy
underlying the rule of strict compliance is somewhat less
compelling.
Keeping this wealth of precedent in mind, we look to the
gravamen of the option provision in the lease, which is to
require the party exercising the option to timely inform the
other party, in writing, that it is not renewing the lease.7 It
7 We note that the option provision at section 30 of the lease required Jumpsource to serve "written notice" of its option not to extend the lease, and to do so "not more than 12 months or less than six months prior to the expiration of the then current lease term." The option provision does not otherwise define the required method of notice. Rather, the "notice" provision at section 21 of the lease is a separate stand-alone provision that applies to any and all notices to be provided by Jumpsource to Cummings under the lease. Where we construe the lease as a whole, see East Coast Aviation Corp. v. 16
is undisputed that Jumpsource did so, and Cummings does not
contest the timeliness or fact of its receipt of the unambiguous
written notice of Jumpsource's exercise of the option.8 Indeed,
despite Cummings's argument that settled law and public policy
demand, to ensure commercial certainty, that parties to a
contract be strictly held to the language they chose, Cummings
provides no persuasive argument that Jumpsource's multiple
communications within the opt-out period created any uncertainty
for Cummings. See Korey v. Sheff, 3 Mass. App. Ct. 266, 268 n.5
(1975) ("It is generally held that timely notice of intent to
exercise an option to renew is effective upon receipt of such
notice").
Cummings claims that the present case is distinguishable
from our precedent because the "notice" provision here specifies
that "[n]o oral, facsimile or electronic notice shall have any
force or effect." We disagree, as our cases have held
nonconforming notice to be effective even where the notice
provision's language provided exclusive methods of delivery.
See, e.g., Gerson Realty Inc., 2 Mass. App. Ct. at 875
Massachusetts Port Authy., 346 Mass. 699, 705 (1964), whether the details of the notice requirements are contained within the option provision or as a stand-alone provision is not dispositive.
8 Nor does Cummings contend that an e-mail message does not constitute "written" notice. 17
(nonconforming notice was effective even though lease specified
that notice "shall not be deemed to have been duly given or
served unless in writing and forwarded by registered mail"
[emphasis added]). In these circumstances, where Jumpsource
provided actual written notice of its decision not to extend the
lease within the time prescribed by the lease, the nonrenewal
option was not exclusive to Jumpsource, and there is no dispute
that Cummings received and acknowledged the e-mail notice, the
distinction proffered by Cummings does not alter the analysis or
the result we reach.
Cummings also contends that policy reasons dictate that the
parties strictly adhere to the precise terms of the option
provision. For example, Cummings posits that our holding would
enable tenants to misdirect landlords about their true
intentions as a negotiating strategy.9 Cummings further suggests
that under our holding, any notice -- whether via oral
communication or otherwise -- would invariably be sufficient to
exercise the option. We disagree. We do not intend to suggest
that any and all written communications of a party's intent to
9 We reject Cummings's claim that Jumpsource could have "changed its mind" after sending the e-mail messages expressing its intent to invoke the option and subsequently relied on the lease language to argue that its electronic communication was ineffective. Had Jumpsource done so in the present factual scenario under the same commercial lease, where the notice was clear, repeated, and acknowledged, Jumpsource would have fared no better than Cummings. 18
exercise an option would be sufficient to satisfy the terms of
that option. Likewise, we do not hold that an oral statement of
a party's intent to exercise an option would be sufficient (and
indeed it would not be so) where the contract requires the
notice to be in writing. To be clear, we hold only that on the
undisputed summary judgment record before us, the clear, timely,
unambiguous written notice provided by the tenant and received
and acknowledged by the landlord constituted effective notice to
invoke the lease nonrenewal option before us.10
The judgment dated September 17, 2021, is affirmed.
So ordered.
10In her decision allowing partial summary judgment, the judge stated that "[t]here are no blameless parties here." She further noted that Jumpsource failed to provide notice via the methods specified in the lease, "a small act that would have avoided costly litigation," while Cummings, despite having "actual notice of Jumpsource's intent to terminate the Lease . . . , covered its ears like a child unwilling to listen to a piece of unwelcome information." Although our review is de novo, we concur with the judge's assessment in this regard. Protracted and needless litigation would have been avoided through minimal reasonable conduct by either party.