United States Court of Appeals
For the First Circuit
No. 99-1538
PETRICCA DEVELOPMENT LIMITED PARTNERSHIP
AND BERKSHIRE CONCRETE CORPORATION,
Plaintiffs, Appellants,
v.
PIONEER DEVELOPMENT COMPANY,
TAMARACK INVESTORS CO., INC. AND
PIONEER BERKSHIRE CROSSING COMPANY,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Frank H. Freedman, Senior U.S. District Judge]
Before
Torruella, Chief Judge,
Cyr, Senior Circuit Judge,
and Stahl, Circuit Judge.
John W. Gahan III, with whom Laurie Alexander-Krom and Roche,
Carens & DeGiacomo, P.C. were on brief for Appellants.
Robert J. Muldoon, Jr., with whom Margaret H. Paget and Sherin and
Lodgen LLP were on brief for Appellees.
June 9, 2000
CYR, Senior Circuit Judge. Petricca Development Limited
Partnership and Berkshire Concrete Corporation (collectively:
“Petricca”) appeal from various district court orders which dismissed
their claims against defendant-appellee Pioneer Development Company
(“Pioneer”) for breach of fiduciary duty and unfair or deceptive trade
practices allegedly arising out of Pioneer’s unilateral abandonment of
a planned real estate venture with Petricca. We affirm the district
court judgment.
I
BACKGROUND
In June 1992, Petricca and Tamarack Investors Company, Inc.,
a business entity controlled by Pioneer, entered into a written
agreement which granted Pioneer a renewable one-year option to purchase
two parcels of land which Petricca owned in Pittsfield, Massachusetts,
upon which Pioneer planned to develop a WalMart shopping center. The
agreement provided that (1) Pioneer would pay Petricca $11,300 per
month in option fees; (2) “In the event [Pioneer] does not exercise its
Option . . . , th[e] Agreement shall expire and terminate and neither
party shall have any liability to the other under or pursuant to this
Agreement[,]”; and (3) “In the event [Pioneer] exercises its Option,
th[e] Agreement shall . . . become a contract for the purchase and sale
of the [land] . . . on the terms and conditions hereinafter set forth.”
Were Pioneer to breach the agreement, Petricca's "sole and exclusive
3
remedy [would be to] terminate th[e] Agreement, in which case neither
party [would] have any further liability or obligation to the other .
. . ." The agreement also contained the following integration clause:
“This agreement constitutes the sole and entire agreement between [the
parties].”
Further, the agreement afforded Petricca an option to
participate in a joint venture with Pioneer to develop the shopping
center. The “basic terms” of any such joint venture were described in
Exhibit C, as follows: “This letter is intended to be a memorandum of
understanding which shall serve as the basis for a more detailed
partnership agreement based on the following terms[.]” Under the
option, Petricca had thirty days within which to decide whether to join
Pioneer in the joint venture, at which time Pioneer would be entitled
to reimbursement for all option fees previously paid. Thereafter, a
new partnership — Pioneer/Petricca Associates — would be formed, and
“upon the closing of a construction loan,” Petricca would transfer the
land title to the new partnership. Pioneer would pay the purchase
price to Petricca, whereupon Pioneer would acquire a 32.5% ownership
interest in the new partnership. Pioneer expressly retained sole
responsibility for obtaining the legal right to build, as well as for
the actual construction, the legal representation of the partnership,
and the shopping center management. Finally, Exhibit C, which included
substantial handwritten corrections and insertions, identified itself
4
as “the outline for preparation of a formal agreement to govern our
business relationship.”
In July 1992, Petricca afforded Pioneer due notice that it
intended to participate in the joint venture. On October 7, Pioneer
and Petricca executed an addendum to their June option agreement,
noting that “Petricca exercised its option” to participate in the joint
venture. The October 7 addendum replaced the original Exhibit C, in
their June option contract, with a new Exhibit C which announced at the
outset: “This letter agreement shall serve as a record of our mutual
understanding regarding the terms of our joint venture arrangement as
described in paragraph 13 of the [June option agreement].” The new
Exhibit C further provided that “the transactions will be concluded in
accordance with the Outline of Structure for Pioneer/Petricca
Associates, a copy of which is attached hereto and incorporated by
reference.”
The referenced outline set forth the following terms: First,
Pioneer and a straw partner would form a general partnership — Tamarack
Plaza Company — to handle the right-to-build development stage which
would precede the construction phase. Pioneer would assign its June
option contract rights to Tamarack Plaza Company, and amend the June
contract to reflect the joint venture arrangement with Petricca.
Second, Pioneer would pay the new partnership for all costs of
development, necessary personnel and expertise, and would retain sole
5
discretion to discontinue development ”at any time and for any reason.”
Upon any such discontinuation, Petricca would reimburse Pioneer for
32.5% of its development costs. Id. The Outline further provided that
“[u]pon exercise of [Pioneer’s] Option to purchase any portion of the
Land, Petricca will be admitted as a partner of Tamarack Plaza Company,
the straw partner will withdraw as a partner, and the partnership will
change its name to Pioneer/Petricca Associates.” Finally, the October
7 addendum stated: “Except as amended by this [addendum], the [June]
Option Agreement, including without limitation, Petricca’s exercise of
its option to participate in the joint venture, shall remain in full
force and effect.”
On October 9, 1992, Pioneer notified the designated escrow
agent that Pioneer and Petricca had “elected to participate in a joint
venture,” and requested reimbursement for the $22,600 in option fees
Pioneer had paid Petricca to date. In December 1992, Pioneer filed
rezoning petitions with the city council, as required before a shopping
facility could be constructed on the Petricca land. In March 1993,
however, Pioneer failed to gain city council approval for its rezoning
petitions. During April 1993, unbeknownst to Petricca, Pioneer
negotiated an option to purchase another property approximately one
mile from the Petricca parcels, then requested the city council to
suspend further action on the pending zoning applications relating to
the Petricca parcels.
6
In May 1993, Pioneer informed Petricca that the failure to
obtain zoning approval rendered their joint venture impossible of
performance, and that the zoning applications were being withdrawn.
When Pioneer proposed to pay option fees for the October 1992 — May
1993 period, Petricca rejected the proposal. Eventually, Pioneer
developed the WalMart facility at the other site.
In due course, Petricca brought the present action against
Pioneer, demanding, inter alia, (1) a declaratory judgment that the
parties had commenced their joint venture as early as July or October
1992 (Count 1); (2) damages and costs for Pioneer’s breach, as a joint
venturer, of its fiduciary duty of good faith and loyalty to Petricca
in negotiating to purchase the alternate site for the shopping center
without Petricca’s knowledge (Count 2); and (3) treble damages for
Pioneer’s willful violation of the "unfair or deceptive trade
practices" provisions of Mass. Gen. Laws Ann. ch. 93A (Count 5).1
Pioneer successfully moved to dismiss Count 5 pursuant to Federal Rule
of Civil Procedure 12(b)(6) on the ground that Chapter 93A is
inapplicable to incipient business relationships between joint
venturers.
Thereafter, Pioneer successfully moved for summary judgment
on Counts 1 and 2. The district court ruled that the June option
1
Petricca voluntarily dismissed Counts 3 and 4, respectively
alleging breach of contract and deceit.
7
contract and its October addendum were unambiguous in precluding any
joint venture unless and until Pioneer had exercised its option to
purchase the Petricca land, a condition precedent which was never
satisfied. Petricca Dev. Ltd. Partnership v. Pioneer Dev. Co., 40 F.
Supp.2d 49 (D. Mass. 1999). On appeal, Petricca challenges both the
Rule 12(b)(6) dismissal of Count 5 and the summary judgment rulings
relating to Counts 1 and 2.
8
II
DISCUSSION
A. The Breach of Fiduciary Duty Claim
Petricca first contends that the district court erroneously
determined that the June contract and October addendum unambiguously
demonstrated a mutual intention that the joint venture not be
established until such time as Pioneer opted to purchase the Petricca
land. Instead, Petricca insists that these documents, as well as other
evidence, generate a trialworthy issue as to whether the parties
intended that the joint venture relationship arise in July 1992, at the
time Petricca exercised its option to participate in the joint venture.
Since joint venturers unquestionably owe one another a generalized duty
of good faith and utmost loyalty, see Zimmerman v. Bogoff, 524 N.E.2d
849, 855 (Mass. 1988); Cardullo v. Landau, 105 N.E.2d 843, 845 (Mass.
1952), Petricca suggests that Pioneer breached its duty by unilaterally
aborting its efforts to gain city council approval of the rezoning
required to enable development of the Petricca land, and instead
surreptitiously negotiating an alternate land deal.2
2
Summary judgment rulings are reviewed de novo, with all
reasonable inferences drawn against the moving party, in order
to determine whether there is a genuine issue of material fact
or the moving party is entitled to judgment as a matter of law.
See Randlett v. Shalala, 118 F.3d 857, 861 (1st Cir. 1997).
9
Under Massachusetts law, the existence of a joint venture is
entirely dependent upon the parties’ intent, which may turn on many
factors:
(1) an agreement by the parties manifesting their
intention to associate for joint profit not
amounting to a partnership or a corporation; (2)
a contribution of money, property, effort,
knowledge, skill, or other assets to a common
undertaking; (3) a joint property interest in
all or parts of the subject matter of the
venture; (4) a right to participate in the
control or management of the enterprise; (5) an
expectation of profit; (6) a right to share in
profits; (7) an express or implied duty to share
in losses; and (8) a limitation to a single
undertaking (or possibly a small number of
enterprises).
Shain Inv. Co. v. Cohen, 443 N.E.2d 126, 130 (Mass. App. Ct. 1982)
(citing 2 Samuel Williston, Contracts § 318, at 555-56, § 318A, at 563-
65, 574, 579 (3d ed. 1959)).3 Where the contract language is
unambiguous, its purport may be determined as a matter of law. See
Lawrence-Lynch Corp. v. Department of Envtl. Mgt., 467 N.E.2d 838, 840
(Mass. 1984); see also Rey v. Lafferty, 990 F.2d 1379, 1384 (1st Cir.
1993) (construing Massachusetts law).
Although our review is plenary, the trial court’s analysis
of the summary judgment record in the instant case is so cogent and
3Although Massachusetts partnerships and joint ventures share many
of these same attributes, a “business relationship . . . limited in
scope to the acquisition and development of [a single] property . . .
is better termed a ‘joint venture’ than a partnership.” Loft v.
Lapidus, 936 F.2d 633, 637 n.6 (1st Cir. 1991) (citing Gurney v.
Cumberland Farms, Inc., 550 N.E.2d 127, 133 (Mass. 1990)).
10
comprehensive that any extended exegesis would be superfluous. See
Petricca Dev. Ltd. Partnership, 40 F. Supp.2d at 49. The essential
issue in this case is not whether the parties intended a joint venture
— for surely they did — but when they intended that the joint venture
commence. Notwithstanding an utter absence of support in the contract
language, Petricca insists that a joint venture came into existence on
July 1992, the date it notified Pioneer of its election to participate
in a joint venture, or at the very latest on October 7, 1992, the date
the contract addendum was executed.
Under the eight Shain criteria, see supra, it is clear that
these parties contemplated that their post-election business
relationship should consist in at least two discrete stages. First,
during the right-to-build development stage, Pioneer had the unilateral
right, as well as the sole discretion, to discontinue its development
efforts at any time and for any reason. Pioneer and its straw partner
would form a partnership called Tamarack Plaza Company to undertake its
preparatory mission. Plainly, unless and until the Petricca land could
be rezoned, Pioneer would not be able to develop the shopping facility,
nor would it have any financial incentive to exercise its option to
purchase the land as originally zoned.4
4Frequently, joint ventures of this variety are anticipatory in
nature. Cf., e.g., HDA Parking Developers, Inc. v. Mount Vernon Hosp.,
Inc., 687 N.Y.S.2d 663, 664 (App. Div.)(affirming summary judgment for
defendant hospital where parties had “only memorialized their intent to
form, in the future, a joint venture” to operate a parking garage once
11
Second, after the right-to-build stage had been successfully
completed, the contract provided that Pioneer was to purchase the
Petricca land. Only then would Petricca replace the straw partner as
a copartner in the Tamarack Plaza Company, and the partnership name
would change to Pioneer/Petricca Associates.
As the district court aptly noted, this temporal demarcation
unambiguously indicates that the joint venture was not to commence
until Pioneer exercised its option to purchase the Petricca land.
During the earlier, development stage, Petricca had no meaningful
control over any aspect of the business operations, which remained
entirely in the hands of Tamarack Plaza Company. See Judge v.
Gallagher, 461 N.E.2d 261, 264 (Mass. App. Ct.) (noting that right to
control normally is “essential element” of joint venture), review
denied, 465 N.E.2d 261 (Mass. 1984); Shain Inv. Co., 443 N.E.2d at
126; cf. Klose v. Wood Valley Racquet Club, Inc., 975 P.2d 1218, 1224
(Kan. 1999) (requiring that “joint venturer have an equal right of
control over the instrumentality” (emphasis added)). By contrast, in
the cases cited by Petricca the complainant possessed at least some
control. See, e.g., Shain Inv. Co., 443 N.E.2d at 131 (noting that
contract made party “more than a spectator in the enterprise” by
the developer leased the garage from the City; “the hospital [properly]
opted out of the anticipated joint venture . . . when it became
apparent that this joint venture could never be formed due to the
City’s refusal to . . . lease the garage to a joint venture involving
a developer”), appeal denied, 697 N.Y.S.2d 562 (1999).
12
affording him a “role in the decision making process”); see also
Zimmerman, 524 N.E.2d at 854 (noting that party “did ‘control . . . the
purse strings of the enterprise’” (citation omitted)). Moreover, even
if Pioneer were to breach the contract, Petricca's "sole and exclusive
remedy [would be to] terminate th[e] Agreement, in which case neither
party [would] have any further liability or obligation to the other .
. . ."
Of course, since Pioneer never exercised its option to
purchase the Petricca land, Petricca could not be said to have made any
“contribution of money, property, effort, knowledge, skill, or other
assets.” Shain Inv. Co., 443 N.E.2d at 130. Nor could Pioneer and
Petricca have acquired “a joint property interest in all or parts of
the subject matter of the venture [viz., the Petricca parcels].” Id.
Petricca instead argues that Pioneer’s simple option to
purchase the Petricca land constituted a sufficient “joint property
interest” to satisfy the third Shain criterion. Petricca cites no
authority for its novel proposition, however, nor have we found any.
Rather, Pioneer’s options to purchase are more aptly analogized to
contractual rights which may be converted into property interests at
the election of the optionee. See, e.g., LDA Acquisition v. Flag
Wharf, Inc. (In re Competrol Acquisition Partnership), 203 B.R. 914,
917 (Bankr. D. Del. 1996) (“As a general rule of Massachusetts law, the
granting of an option to purchase property does not convey a property
13
interest in the subject of the option.”) (citing New England Trust Co.
v. Spaulding, 38 N.E.2d 672, 676 (Mass. 1941)); Webber Lumber & Supply
Co. v. Trucklease Corp. (In re Webber Lumber & Supply Co.), 134 B.R.
76, 78-79 (Bankr. D. Mass. 1991).5
Petricca can muster only a few tenuous challenges to the
sturdy rationale adopted by the district court. For instance, it notes
that the October addendum says that “Petricca exercised its option,”
and by using the past tense suggests that the joint venture already
existed. On the contrary, the quoted language simply described an
historical event: Petricca’s July 1992 election. Neither the June
contract nor the October addendum defined Petricca’s election as an
event which would actuate a joint venture.
Petricca also claims that the October addendum arguably
employed more emphatic language and assumed a more final form than the
language in the June contract (which, for example, contained many
handwritten additions and strikeouts) by describing the terms of the
joint venture. Its argument begs the question, however, since there is
no serious dispute that the parties anticipated that a joint venture
5Moreover, even if the option contract were deemed to have
conveyed a real property interest to Pioneer, the mere fact that two
parties hold “joint property . . . does not of itself establish a
partnership.” Mass. Gen. Laws Ann. ch. 108A, § 7(2) (emphasis added).
See Loft, 936 F.2d at 637 n.6 (noting that laws governing partnerships
normally apply to joint ventures as well); Edgerly v. Equitable Life
Assur. Soc’y of the U.S., 191 N.E. 415, 417 (Mass. 1934) (“A joint
adventure . . . resembles in many respects a partnership.”).
14
would be created; instead, the dispute concerns only the timing of its
creation. Whatever their differences, both Exhibits C — the one in the
June contract and the one in the October addendum — make very clear
that the Petricca-Pioneer business relationship could not meet the
Shain criteria until Pioneer exercised its option to purchase the
Petricca land and Pioneer/Petricca Associates had been formed.
With the same mission in mind, Petricca points to certain
extra-contractual evidence, such as internal memoranda generated by
Pioneer in 1992 referencing Petricca as Pioneer’s “partner” and
describing “a meeting of the minds on the basic business deal.”
Assuming arguendo that the integration clause in the June option
contract contemplated consideration of such evidence, see Shain Inv.
Co., 443 N.E.2d at 132 (noting that “under the parol evidence rule the
writing will control if it is an integrated agreement”); Bendetson v.
Coolidge, 390 N.E.2d 1124, 1126-27 (Mass. App. Ct. 1979) (same); see
also Rey, 990 F.2d at 1385 (“[P]arol evidence may not be used to
‘create ambiguity where none otherwise exists.’” (citation omitted)),
none of the evidence even remotely contradicts the contract or its
addendum on the pivotal timing issue. Similarly, the referenced
statements in the Pioneer memoranda strike us as little more than
casual prolepses.
Petricca points also to the fact that Pioneer — just two days
after the execution of the October 1992 addendum — asked the escrow
15
agent to reimburse it for the $22,600 in option fees previously paid to
Petricca. Petricca argues that reimbursement was due under the
contract “specifically because the parties had become joint venturers.”
On the contrary, the contract permitted reimbursement only “[i]f
Petricca elect[ed] to participate in the joint venture.” Exhibit C
(emphasis added).
Further, Petricca argues that the exercise of Pioneer’s
option to purchase the Petricca land could not have been a condition
precedent to the creation of their joint venture because Massachusetts
law mandates that contracts expressly and emphatically identify any
such conditions. See Massachusetts Mun. Wholesale Elec. Co. v. Town of
Danvers, 577 N.E.2d 283, 288 (Mass. 1991). Its argument
mischaracterizes Massachusetts law, however, since “emphatic or precise
words are not absolutely necessary to create a condition [precedent] .
. . [which] may nonetheless be found to exist if the intent of the
parties to create one is clearly manifested in the contract as a
whole.” Id. (emphasis added). As already explained, supra, the
integrated contract itself clearly demonstrates that the Pioneer-
Petricca relationship, during the preliminary right-to-build phase, did
not meet muster under any pertinent Shain criterion. Accordingly, the
summary judgment ruling must be upheld.
B. Chapter 93A Claim
16
Finally, Petricca argues that the district court committed
reversible error by dismissing, pursuant to Federal Rule of Civil
Procedure 12(b)(6), the claim that Pioneer violated the Massachusetts
unfair or deceptive trade practices statute by abandoning the joint
venture. See Mass. Gen. Laws Ann. 93A, § 11 (“Any person who engages
in the conduct of any trade or commerce and who suffers any loss of
money or property, real or personal, as a result of the use or
employment by another person who engages in any trade or commerce of an
unfair method of competition or an unfair or deceptive act or practice
declared unlawful by section two . . . may bring an action in the
superior court . . . for damages . . . .”).6 Petricca concedes, as it
must, that Chapter 93A generally is applicable only to business
dealings “between discrete, independent business entities,” not to
“disputes between parties in the same [joint] venture,” as the latter
are not regarded as having arisen in “trade or commerce.” Szalla v.
Locke, 657 N.E.2d 1267, 1269 (Mass. 1995) (citing cases). See Linkage
Corp. v. Trustees of Boston Univ., 679 N.E.2d 191, 207 n.33 (Mass.
6We review the Rule 12(b)(6) dismissal de novo, accepting
the factual allegations in the complaint as true and drawing all
reasonable inferences in the plaintiff’s favor. See Tompkins v.
United Healthcare of N.E., Inc., 203 F.3d 90, 93 (1st Cir.
2000).
17
1997); see also Ansin v. River Oaks Furniture, Inc., 105 F.3d 745, 760
(1st Cir. 1997).7
Petricca attempts to distinguish Szalla on the ground that
Pioneer and Petricca unquestionably remained two distinct business
entities for at least the first thirty days of their contractual
relationship, whereas the parties in Szalla had asserted from the
outset an intent to enter into a joint venture. Even assuming arguendo
that Petricca might have retained Chapter 93A protection for the
initial thirty-day period, however, all actions undertaken by Pioneer
which allegedly violated Chapter 93 occurred after Petricca voluntarily
elected to participate in a joint venture in July 1992, during which
time Pioneer filed rezoning applications and negotiated the alternate
land deal. During that period, even if no joint venture had yet been
formed, the parties unquestionably negotiated the details of their
future joint venture.
Indeed, the Szalla court itself rejected the very distinction
now advanced by Petricca:
The plaintiff claims that some of the
misrepresentations occurred prior to the
formation of their association and therefore it
7
Thus, the authority most prominently relied upon by
Petricca, see NASCO, Inc. v. Public Storage, Inc., 29 F.3d 28
(1st Cir. 1994), is inapposite, since (1) it dealt with
negotiations for an outright sale of property between two
independent business entities which had expressed no intention
to enter into a joint venture, see id. at 29-30, and (2) NASCO
predated the Szalla decision.
18
was an “arms-length transaction.” The
plaintiff’s argument is unavailing because the
prior events occurred in the course of developing
their mutual association which culminated in an
agreement and an exchange of property and
services. The association between the plaintiff
and the defendant in the interests of forming a
business venture together is not the kind of
commercial transaction regulated by the statute.
Szalla, 657 N.E.2d at 1270 (emphasis added). The highlighted sentence
in the above quote completely undermines the Petricca claim. That is
to say, by its July 1992 election and its negotiation of the terms of
a joint venture, Petricca forfeited any Chapter 93A protection, without
regard to whether its election would have culminated in the formation
of a joint venture.
III
CONCLUSION
Accordingly, the judgment of the district court is affirmed,
with costs to appellees. SO ORDERED.
19