MASSACHUSETTS LAWYER’S WEEKLY 32 M.L.W. 1823, 4/26/04

Real Property

Offer to Purchase – buyer’s Default – Deposit

Where (1) a defendant backed out of a real estate transaction after executing an offer to purchase the plaintiff’s land and (2) the plaintiff now seeks to recover his actual damages, the complaint must be dismissed because the liquidated damages provision in the offer form limits the plaintiff’s recovery to retention of the defendant’s initial $5,000.00 deposit.

“The issue on this motion to dismiss is what is the seller’s remedy where the defendant-buyer defaulted on or before the agreed extended date for paying the second deposit and signing of the purchase and sale agreement. The seller’s complaint alleges that he is entitled to recover his actual damages and that he is not limited to just keeping the original $5,000.00 deposit that the buyer paid with the offer to purchase. As a matter of law this claim cannot be sustained. . .

“. . .Even if the parties had reached an oral agreement on all the terms of the purchase and sale agreement, the expected second deposit never became part of the liquidated damages because the buyer defaulted on or before the July 8 due date for the second deposit. The seller is limited by the liquidated damages clauses to the $5,000.00 deposit because that was the only deposit that had been ‘made’ at the time of the buyer’s default.

“In this case the escrow agent properly paid the $5,000.00 to the seller following the buyer’s default. As a matter of law, the seller cannot recover on his claim for additional damages. Liquidated damages clauses such as these are enforceable under Massachusetts law. . . .The seller is not entitled to a second look to see if his actual damages turn out to be more than the agreed-upon liquidated damages. . .”

Showstead v. Holzman (Lawyers Weekly No. 12-115-04)(Hely, J.)(Norfolk Superior Court) Attorney for the defendant Eugene S. Summers of Summers & Summers .

(1)Andrade vs. Town of Mashpee (and New Seabury Corporation)

At most of the real estate closings I attend, one of the most important decisions the buyer must make is whether or not to purchase Owner’s Title Insurance. After all, hasn’t the bank attorney examined the title? Anyway, we wouldn’t be closing if there was a title problem, would we? The answer to the first question is yes, the title was examined. The answer to the second question is no, we haven’t found a title problem, so we are closing. But, it seems that what we anticipate seldom occurs; while what we least expected, generally happens (Disraeli). The very important point to remember is that some title problems may not be researchable and/or recorded at the time you close. The seed of a title problem may lie beneath the surface, only to sprout up after your closing, and reach back to a time which preceded your closing with tendrils to entangle and result in a cloud on your title. This cloud may very well defeat your ownership in the home you thought you owned. A complex title scenario unfolded over some very valuable land in Mashpee, Cape Cod. The land court case of Andrade vs. Town of Mashpee (and New Seabury Corporation) is a true story, but stranger than fiction.

BACKGROUND
1. In 1869, Alexander Barrows (Alexander) married Maria. They had 5 children and lived in the Cape Verde Islands. 2.. In approx. 1890, Alexander moved to the USA and in 1892 married Hannah. They had eight children. 3.. In 1909, Alexander Barrows purchased land in Mashpee. His deed was recorded in the Barnstable County Registry of Deeds. 4.. In 1921, Alexander died. In 1922, Hannah died. 5.. After Hannah’s death, property taxes were not paid, and in 1931, the property was conveyed by tax deed to Manuel Cadoza. 6.. Title to the property passes through various grantees ending up with New Seabury Corporation (New Seabury). 7.. In 1985, the heirs of Alexander and Hannah (2ND wife) commenced a petition to redeem the property, then in the name of New Seabury. 8.. The heirs of Alexander and Maria (1st wife) also filed a claim, asserting their right to redeem the property.

DISCUSSION

MGL ch. 60 states that “any person (or his heirs) having an interest in land taken or sold for nonpayment of taxes…may redeem (the land) by paying the amount of the tax title account of the land being redeemed,” at any time prior to the filing of a petition for foreclosure. In plain English, this means that Alexander’s heirs could get the property back by paying back taxes. What a shock for the present owner (New Seabury Corporation) which had paid a hefty sum to purchase the property.

DECISION

Since no owner of the property had filed a petition to foreclose all rights of redemption, Alexander’s heirs (whoever they may be) had the right to redeem the title to the property by paying the property taxes from the date of the first tax deed (1931) up through the date of decision. New Seabury loses! Alexander’s heirs own the land provided they pay back taxes.

LEGAL ADVICE:

The laws of property ownership are convoluted, and sometimes, full of surprises. What a shock to New Seabury to discover they did not own the property. Hopefully they purchased Owner’s Title Insurance at the time they acquired the property.

(2) Angel Valle v. William Pietrantonio

Our system of laws has roots in the old English common law, which in turn has roots and expressions in Latin, much of which originated with the Ancient Romans. We've all heard the expression 'Caveat Emptor'- let the buyer beware. 'Cave Cane' is another old expression which has not found its way in to everyday speech. Translated, it means Beware of Dog. A dog to beware of formed the basis for the case of Angel Valle v. William Pietrantonio.

BACKGROUND

1. Angel Valle (Plaintiff and dog bite victim) was a minor and brought this action with the help of his mother, Wanda Travers.
2. William Pietrantonio (Defendant, homeowner and dog owner) owned a home and a dog. William's grandson lived in the house and was friends with Angel.
3. One day Angel stopped to visit his friend (William's grandson). He entered the front yard through an open gate and rang the front door bell.
4. Faster than a speeding bullet, more powerful than a locomotive, was William's kid clipping canine who launched a surprise attack on Angel, biting his face.

What's friendship worth anyway when big money may be involved? This ain't about money. Well, we didn't believe Mo Vaughn and we certainly don't believe Angel's mother. As you may have guessed dog bite plus homeowner's insurance equals litigation.

DISCUSSION

Massachusetts has a dog bite statute which makes the homeowner strictly liable to the non- trespasser who gets bit by a misbehaving pooch. The home/dog owner has a defense if the victim is a trespasser or was in some way antagonizing the dog. In this case, William claimed that Angel was a trespasser and that he had been instructed to always call ahead if he planned to visit. Of course Angel had no recollection of the warning, in fact he testified he was a constant visitor at the home and had never been advised to call ahead. Angel cited the 1900 case of Riley v. Harris, which stated "it has been held that entry upon (another's property) at usual and reasonable hours, and in a customary manner, for any and all common purposes of life, can not be regarded as a trespass."

DECISION

Angel wins, Angel recovers damages. He was not a trespasser and was not teasing the dog.

LEGAL ADVICE

Homeowners/Dog Owners - Make sure your homeowners insurance covers your dog. Some breeds are excluded.

(3) The Chelmsford Planning Board v. Elad General Contractors

In 1910, President Teddy Roosevelt stated "Every man holds his property subject to the general right of the community to regulate its use to whatever degree the public welfare may require it." Everyone of us has an impact on the quality of our environment. The zealous overbuilding of vacant land diminishes everyone's quality of life. As the globe's population gallups upwards, faster and faster, our precious open space is constantly challenged. Zoning laws are an attempt to balance the rights of the landowner with the environmental interests of the community. In the matter of The Chelmsford Planning Board vs. Elad General Contractors, the interests of the developer clashed with the Zoning Code of the Town of Chelmsford.

BACKGROUND

1. Elad General Contractors (Elad) owned 8 acres of land with 490 feet of frontage along Riverneck Road in Chelmsford.
2. The town of Chelmsford Zoning Code required newly created house lots be at least 150 feet wide.
3. Elad submitted a subdivision plan for three lots. However lot 1 was only 120 feet wide, 30 feet short of the 150 feet requirement.
4. Elad's petition for a 30 foot variance was approved by the Town Zoning Board.
5. Rarely does one town department challenge the decision of another. This case was the rare exception as the Chelmsford Planning Board appealed the Zoning Board's approval to the superior court.

DISCUSSION

The Court pointed out that "no person has a legal right to a variance and they (variances) are to be granted sparingly." Variances may be granted only when all the statutory requirements are satisfied. Briefly, the statute requires the following:

The Zoning Board must find that owing to circumstances relating to the…shape of the land…but not affecting generally the zoning district in which (the land) is located, a literal enforcement of the (zoning code) would (result) in a substantial hardship to the (landowner), and that desirable relief may be granted without "…detriment to the public good…"

The failure to satisfy any of the above requirements is fatal to the variance petition.

The court further noted that Elad could divide the land into two house lots without the need for a variance.

DECISION

The Superior Court overruled the Zoning Board's three lot approval. Although Elad might earn more money with three lots, it was not a "hardship" to deny his request. Failing to demonstrate a hardship was fatal to the three lot proposal.

LEGAL ADVICE:

The requirements of each and every city and town zoning codes are strictly enforced and only in compelling cases are variances granted and upheld by the court. After all why try to add to overcrowding. Let's give nature a chance, she knows her business better than we do.

(4) United National Insurance Company vs. David Parish

Although we may try to "put the blame on mame," sometimes we have no one to blame but ourselves. In the Superior Court case of United National Insurance Company vs. David Parish, James Sarantiskis, the victim of an assault and battery tried to blame the property owner for injuries caused by his attackers.

BACKGROUND

1. Sarantikis was a visitor at a house owned by Parish in Lynn.
2. The property was insured by United National Insurance Company (United).
3. One evening while Sarantikis was exiting the property, he was assaulted by two men and suffered head and scalp injuries and a broken neck.
4. Sarantikis brought suit against Parish, alleging that the property was in a high crime area and that Parish was lacking security making Sarantikis vulnerable to the attack which caused his injuries.
5. Surprisingly, Parish failed to defend the suit and Sarantikis recovered a judgment for $130,000.00. Question: O-Kay, you've got a judgment for $130,000.00. What do you do with it, Parish apparently had no money? Answer: Sue Parish's property insurance company, which covered Parish for claims made for injuries occurring on the property. The Question before the Court was: What was or wasn't covered by Parish's policy? In reading the policy (which is always a good idea) it seems that there was no coverage for claims arising out of an assault and battery.

DISCUSSION

Although it was proven that (1) the property was poorly illuminated, (2) there were no security measures in place for protection of persons lawfully on the premises, (3) the property was located in a dangerous high crime area, the court considered only whether the policy was written to cover the injury suffered.

DECISION

The court stated that even though Parish's property management might be construed as negligent, his insurance policy did not cover injuries resulting from an assault and battery. Here was a case of negligence with no insurance coverage. As against the insurance company, Sarantikis loses, he'll have to chase Parish in order to collect his $130,000.00 judgment.

LEGAL ADVICE:

Maybe Sarantikis should have been more careful about who, where and when he chose to visit. Believe it or not, sometimes our injuries are the direct result of our own thoughtless behavior, you can't always "put blame on mame."

(5) Debral Realty v. Marlborough Cooperative Bank

Never play cards with a man called "Doc". Never eat at any place called "moms". Never get too close to a sleeping lion just because he isn't roaring. In the Massachusetts Appeals Court case of Debral Realty v. Marlborough Cooperative Bank, the sleeping lion was a mortgage "dragnet clause" that roared surprisingly loud.

BACKGROUND

1. The Budryks owned two income properties located on Hastings Street and West Main Street both in Marlborough.
2. In 1980, the Budryks granted a first mortgage (covering Hastings Street) to Marlborough Cooperative Bank (The Bank). The mortgage contained a standard (UH-OH) provision (called a dragnet clause) which stated that the mortgage secured payment of the Hastings Loan PLUS "the payment of all other indebtedness of the mortgagor (Budryk) to the mortgagee (The Bank) hereafter arising".
3. In 1985, Budryk granted another mortgage (covering West Main Street) (this was other indebtedness) to The Bank.
4. In 1989 Budryk granted second mortgages covering both properties to Debral Realty, Inc.
5. Unfortunately the addition of second mortgages proved too much for the Budryks, and in 1991 Debral foreclosed and purchased both properties at auction. The Marlborough Cooperative Bank mortgages were not affected by the foreclosure and remained in place. Debral was now the record owner of both properties and proceeded to make payments on the Hastings Street (Marlborough Cooperative Bank) mortgage only, allowing the West Main Street (Marlborough Cooperative Bank) mortgage to go into default. (You recall, it was the Hastings Street mortgage which contained the "dragnet clause"). Apparently Debral felt secure in the belief that as long as it paid the Hastings Street mortgage to Marlborough Cooperative Bank, it could continue to remain undisturbed as the owner of Hastings Street. Since West Main Street was unprofitable, Debral had decided not to pay that mortgage, not caring that the Marlborough Cooperative Bank could foreclose on West Main Street. Surprise! The Hastings Street mortgage had a "dragnet clause". The Bank not only commenced foreclosure on West Main Street but also on Hastings. Debral was surprised since the Hastings Street mortgage was up to date. Debral filed an action seeking a court order to stop the Hastings foreclosure.

DISCUSSION

The court reviewed the Hastings Street mortgage, more specifically, the "dragnet clause" which stated that the Hastings Street mortgage covered not only Hastings Street, but "all other indebtedness". Clearly the West Main Street mortgage was "other indebtedness".

DECISION

Debral loses. The failure to pay the West Main Street note triggered the "dragnet clause" in the Hastings Street mortgage. Even though the Hastings Street payments were up to date, the bank could foreclose.

LEGAL ADVICE

Debral was a second mortgage lender and experienced in the world of mortgages and foreclosure. It is surprising that they would overlook the Hastings mortgage "dragnet clause". That oversight resulted in the loss of a valuable property (Hastings Street) and the cost of a Superior Court trial and an Appeals Court argument. The "dragnet clause" is a sleeping lion, but watch out if it wakes up.

(6) Philip Asack v. Board of Appeals of Westwood

"All things come round to him who will but wait". In 1863, when Longfellow included this bit of philosophy in Tales of the Wayside Inn there was no such thing as a Zoning Code. In 1863, if you owned a lot of land, you had a perfect right to build on it - a house, a building, a barn, etc. But, with the 20th century came zoning, which controlled what you could build, where, and what size. The case of Philip Asack v. Board of Appeals of Westwood demonstrated that in the world of zoning, all things (don't) come round to him who waits too long.

BACKGROUND

1. In 1936, The Valinotes purchased a home, located on Lot 8 in Westwood.
2. In 1942, they purchased lot 7, an adjacent unimproved lot. At this time, lot 7 was unbuildable because the Westwood Zoning Code required buildable lots to be at least 40,000 square feet with at least 125 feet of frontage on a public way.
3. In 1970, the Valinotes obtained a variance from the Westwood Zoning Board allowing them to build on Lot 7. However they did not commence to build a home at that time.
4. In 1975, the state zoning statute was amended requiring all variances to be exercised within one year of grant, or lapse.
5. In 1988, Asack (Plaintiff) purchased both lots (lot 7 and 8).
6. In 1994, Asack refinanced, and the title exam brought up the 1970 variance.
7. Seeking to cash in on what he thought was an unbelievable stroke of good fortune, Asack applied for a building permit for Lot 7 - he was turned down by the Westwood Zoning Board and appealed to the Superior Court and on up to the Appeals Court.
   

   DISCUSSION

   The zoning code is an ever changing creature which is continually modified to meet the ever-changing demands of the ever-changing community. A long-standing zoning principle holds that "adjoining lots held in common ownership are generally considered one lot for zoning purposes." A person owning an adjacent lot "may not artificially divide the lots so as to restore old boundaries" to obtain the opportunity to build on a lot on which the right to build has long since expired. Another long standing zoning principle "precludes on owner from availing himself of a unbuildable lot" where he can combine it with his adjacent lot with the resulting combination satisfying current zoning requirements.

   Legal Advice

   Lot 7 remains unbuildable. Asack would have had a better chance for approval if he did not own the adjacent lot 8. Also militating against Asack was the 1975 statute requiring action on a variance to be exercised within one year, or lapse. Asack didn't apply for a permit until 1994 and the variance was granted in 1970. LEGAL ADVICE: Had the Valinotes (prior owners) commenced construction on Lot 7 within one year of the 1975 Statute Amendment, a home could have been constructed on Lot 7. As it turned out, by waiting too long, Lot 7 owners lost the right to build a home on Lot 7, a costly mistake.