United States Court of Appeals
For the First Circuit
No. 04-2227
PROSPECT HILL ACQUISITION, LLC,
Plaintiff, Appellant,
v.
TYCO ELECTRONICS CORPORATION,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Joseph L. Tauro, U.S. District Judge]
Before
Boudin, Chief Judge,
Campbell, Senior Circuit Judge,
and Gertner,* U.S. District Judge.
Thomas N. O’Connor with whom Alan J. Langton II and Quigley,
O’Connor and Carnathan LLC were on brief for appellant.
Ben T. Clements with whom Clements & Clements, LLP was on
brief for appellee.
July 8, 2005
*
Of the District of Massachusetts, sitting by designation.
GERTNER, U.S. District Judge. This appeal arises from the
district court’s order granting summary judgment to Defendant-
Appellee Tyco Electronics Corporation (“Tyco”) and denying summary
judgment to Plaintiff-Appellant Prospect Hill Acquisition, LLC
(“Prospect Hill”). Prospect Hill brings this action against Tyco
for occupancy charges arising from an alleged holdover tenancy.
The primary issue on appeal is the proper interpretation of the
surrender clause contained in the Lease signed by the parties.
Finding no error, we affirm the district court’s ruling.
I. Background
Prospect Hill is a Delaware limited liability company. It was
formed to own and operate a commercial building at 140 Fourth
Avenue in Waltham, MA (“Premises”). Tyco is a Pennsylvania
corporation that purchased the Premises in 1999 and sold it to
Prospect Hill pursuant to a Purchase and Sale Agreement (“P&S”)
dated November 16, 2001. The closing for the sale of the Premises
took place on November 30, 2001, the same day that Prospect Hill
leased the Premises back to Tyco pursuant to a written Lease. The
Lease term commenced on that date and expired on June 21, 2002.
The P&S provided for a “Due Diligence Period” prior to the
closing, during which Prospect Hill was “to conduct [ ] surveys,
reviews, analyses, and inspections of the environmental condition
of the Premises.” The P&S contained no environmental warranties
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and provided that Prospect Hill was purchasing the Premises “as
is”:
Buyer acknowledges receipt of that certain inspection
report dated September 11, 2001 by New England Inspection
Service, Inc., and agrees that Buyer is acquiring the
Premises strictly on an “as is”, “where is” and “with all
defects” basis and without representation, express,
implied or statutory, of any kind, including, without
limitation, representation or warranty as to title,
condition (structural, mechanical, environmental or
otherwise), construction, development, income, compliance
with law, habitability, tenancies, merchantability, or
fitness for any purpose, all of which are hereby
disclaimed and which Buyer hereby waives; provided,
however, that the Premises shall be in substantially the
same condition that they are in as of the date of this
Agreement, reasonable wear and tear and, subject to
Article 13, damage by casualty and takings by eminent
domain excepted. . . .
This provision is noteworthy because prior to the November 30,
2001 closing, Prospect Hill knew that metal plating operations --
which involved the regular use of hazardous materials, including
cyanide compounds -- had been conducted on the Premises since 1975.
On November 28, 2001, Prospect Hill’s environmental consultant,
Haley & Aldrich (“Haley”), provided an Oversight Expert Review of
the Premises, in which it was advised that “[m]etal plating and
machining have constituted a majority of the site manufacturing
operations since the 1970s”; that cyanide was among the “industrial
waste streams” generated at the site; and that “[m]anual plating is
conducted in” an area of the building in which “recessed concrete
floors are used to accommodate spilling from the plating
operations.” Tyco itself had conducted these operations on the
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Premises since 1999, and Prospect Hill plainly understood that Tyco
would continue its metal plating operations into the Lease term.
The Lease also contained a number of provisions that are worth
reproducing in full. First, it contained a surrender clause at
Art. XIV, § 1:
At the expiration or prior termination of the Term of
this Lease, except as hereinafter specifically provided,
Tenant shall surrender the Demised Premises in the same
condition as existed on the Commencement Date [of the
Lease], reasonable wear and tear and damage by fire or
other casualty excepted. Notwithstanding the foregoing,
at the expiration or prior termination of the Term of
this Lease, Tenant shall (i) remove its furniture and
office equipment from the Demised Premises and its
manufacturing equipment from that portion of the Demised
Premises in which Tenant’s manufacturing operations are
currently located; (ii) steam clean floors, walls, and
other exposed surfaces and dispose of residues in
accordance with applicable law in the portion of the
Demised Premises in which Tenant’s wastewater treatment
equipment and manufacturing operations are currently
located; (iii) leave all remaining wiring in compliance
with the National Electrical Code; and (iv) remove from
the Demised Premises any and all equipment, ducts,
fixtures, materials or other property that are or might
be contaminated, hazardous and/or subject to regulation
by any Environmental Laws; and Tenant shall repair any
damage to the Demised Premises caused by such removal
(but excluding the replacement of any ducts or items of
a similar nature removed as aforesaid) to the extent the
aggregate cost of such repair is reasonably estimated by
Landlord to exceed $10,000.
Second, it contained a holdover tenant provision at Art. XXIV:
If the Tenant remains in the Demised Premises beyond the
expiration of this Lease . . . the Tenant shall be a
tenant at sufferance only and shall pay during such
period of holdover . . . an amount pro rated on a daily
basis equal to three (3) times the Annual Base Rent . .
. as of the expiration of the Term, plus any charges for
additional rent hereunder, and Taxes and operating costs,
if any, due for such period of holdover.
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Third, it contained an integration clause at Art. XXV, § 6:
[The Lease] constitutes the entire and only agreement
between the parties relating specifically to this matter
and no oral statements or representations or prior
written matters not contained in the Lease shall have any
force and effect. No subsequent amendments, changes, or
additions to the Lease shall be binding upon [Prospect
Hill] or [Tyco] unless reduced to writing and duly
executed by [Prospect Hill] and [Tyco]. . . .
Fourth, it contained an “as is” clause at Art. II, § 2:
[Tyco] acknowledges that [Tyco] owned and occupied the
Building prior to the sale of the Building to [Prospect
Hill] by [Tyco] on [November 30, 2001]. As a result,
[Tyco] is thoroughly familiar with the condition of the
Building and agrees that it is leasing the Demised
Premises “as is”, with all faults, with no
representations or warranties by [Prospect Hill] . . . .
On March 29, 2002, three months before the end of the Lease
term, Prospect Hill’s property manager Spaulding & Slye Colliers
(“Spaulding”) sent a “yield-up” letter to Tyco “to clarify
[Prospect Hill’s] expectations of the surrender requirements as
noted in the Lease.” On April 12, 2002, Tyco responded in writing,
outlining the procedures it would follow for the clean up of the
Premises. Spaulding replied on May 13, 2002, requesting a number
of additions to Tyco’s plan. None concerned the concrete floor in
the area of the building where the plating and wastewater treatment
operations were located. On May 20, 2002, Haley requested that
Tyco test for the presence of cyanide in that concrete floor. Tyco
agreed, even though it believed that it was not required to do so
under the Lease.
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On June 18, 2002, Spaulding and Tyco representatives met to
conduct a final inspection of the Premises. At that time, all Tyco
personnel had vacated the area.2 All Tyco equipment and property
had been removed and Tyco had completed the steam cleaning of the
floors required by Art. XIV, § 1(ii) of the Lease. Because Tyco
believed that all of the work contemplated by the yield-up letter
had been completed, it attempted to return the keys to the Premises
to Spaulding. Spaulding refused to accept the keys until the issue
of the concrete floor was resolved.
On July 8, 2002, Spaulding forwarded an invoice to Tyco for
$156,000, representing the accrued occupancy charges pursuant to
the holdover provisions in the Lease. On July 15, 2002, Tyco wrote
to Prospect Hill regarding the concrete floor, insisting that it
had complied with its obligation under the Lease to steam clean the
floor and had also complied with Prospect Hill’s request to test
for cyanide. While these tests revealed cyanide traces in some
areas of the concrete, Tyco indicated that it was not aware of any
regulatory requirement that would oblige Prospect Hill to remove
the concrete floor. However, it noted that “if in the future
[Prospect Hill] were to demolish the building, the concrete that
has cyanide residues would have to be treated as hazardous waste
and disposed of according to state and federal regulations.”
2
In April 2002, Tyco ceased operating its plating business at
the Premises and moved its operations to another Tyco facility in
Norwood, MA.
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On July 23, 2002, Prospect Hill made a written demand that
Tyco remove the concrete floor from the Premises and further
demanded that Tyco submit to Haley “the analytical data and
proposed removal plan for review and approval” before beginning its
work. Though it continued to maintain that it was under no
obligation to do so, Tyco agreed to remove the concrete floor. On
July 25, 2002, Tyco submitted a proposal for removal to Haley. On
August 12, 2002, Haley and Prospect Hill approved Tyco’s
submission.
Before Tyco’s environmental consultant could begin work,
Prospect Hill was obliged to remove asbestos and lead-containing
materials from the Premises, which both parties agreed was Prospect
Hill’s responsibility. Haley completed this work on September 13,
2002. Tyco’s consultant began work on the next business day,
September 16, 2002, and completed it on September 27, 2002. Tyco
spent approximately $300,000 on the removal.
Based on its belief that Tyco did not fulfill its surrender
obligations until October 1, 2002, Prospect Hill demanded that Tyco
pay holdover rent charges for the period from June 21, 2002,
through October 1, 2002, totaling $423,568.79 plus taxes and
operating costs. When Tyco refused, Prospect Hill filed the
instant complaint. The parties then filed cross-motions for
summary judgment. On August 10, 2004, the district court issued an
order and memorandum denying Prospect Hill’s motion and granting
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Tyco’s. See Prospect Hill Acquisition, LLC v. Tyco Electronics
Corp., 328 F. Supp. 2d 179 (D. Mass. 2004).
II. Discussion
A. Standard of Review
The district court granted summary judgment based on its
finding that the Lease was clear and unambiguous, a finding that we
review de novo. See McAdams v. Massachusetts Mut. Life Ins. Co.,
391 F.3d 287, 298 (1st Cir. 2004) (standard of review for summary
judgment is de novo); Principal Mut. Life Ins. Co. v. Racal-
Datacom, Inc., 233 F.3d 1, 3 (1st Cir. 2000) (absent a situation
where the factfinder has turned to extrinsic evidence to resolve a
dispute about the contract’s terms, contract interpretation is
subject to de novo review).
B. Contract Interpretation
The parties agree that the interpretation of the Lease is
governed by Massachusetts law. McAdams, 391 F.3d at 298 n.5 (where
parties in diversity case agree that Massachusetts law should apply
to all claims, it is applied without further inquiry). They
further agree that its language is clear and unambiguous, obviating
the need to consider extrinsic evidence. See id. at 298. They
disagree, however, as to the meaning of that language and in
particular, the Lease’s surrender clause.
Prospect Hill’s primary argument on appeal is that the
district court erred in interpreting subsection (iv) of the Lease’s
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surrender clause to apply only to moveable materials and property.
Under the district court’s interpretation, subsection (iv) could
not have applied to the concrete floor, and Tyco had no obligation
to remove it. As the district court explained:
Although the language of [subsection (iv)] does not
expressly define or limit the types of “materials or
other property” that Tyco had to remove from the facility
if “contaminated, hazardous and/or subject to
regulation,” this court believes that the cyanide-
contaminated floor did not constitute “materials or other
property.” The lease uses the phrase “materials or other
property” in a context (“equipment, ducts, fixtures,
materials or other property”) that makes it clear that
the phrase refers only to moveable materials and moveable
property. Hence, real property, such as the facility’s
concrete floor, cannot constitute “materials or other
property.”
328 F. Supp. 2d at 184-85. And because Tyco had no obligation to
remove the concrete floor, it did not breach the lease and become
a holdover tenant. Id. at 185.
Prospect Hill argues that this construction of the contract’s
terms was in error. First, it contests the district court’s
reasoning that the phrase “equipment, ducts, fixtures, materials or
other property” denotes moveable property. Fixtures are defined
both by the Uniform Commercial Code and Black’s Law Dictionary as
immoveable. U.C.C. § 9-102(a)(41) (“‘Fixtures’ means goods that
have become so related to particular real property that an interest
in them arises under real property law.”); Black’s Law Dictionary
669 (8th ed. 1999) (“Personal property that is attached to land or
a building and that is regarded as an irremovable part of the real
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property, such as a fireplace built into a home.”).3 Second,
Prospect Hill asserts that the phrase “any and all . . . materials
or other property” is sufficiently broad and all encompassing as to
cover even the concrete floor. Whatever the legal connotation of
“fixtures,” it argues, the plain meaning of this language
buttresses its claim. See 116 Commonwealth Condominium Trust v.
Aetna Cas. & Surety Co., 433 Mass. 373, 376 (2001) (contract terms
to be construed in their usual and ordinary sense).
Tyco responds that the district court correctly interpreted
the contract’s terms. First, it contends that the surrender clause
explicitly distinguishes between the materials or property to be
removed at the expiration of the Lease on the one hand and the land
and building on the other. The surrender clause requires Tyco to
“remove from the Demised Premises any and all . . . materials or
other property. . . .” (emphasis added). Art. I, § 1 defines the
“Demised Premises” as the land “together with the building thereon
. . . .” Thus, the materials or other property to be removed are
distinct from the land and building. Second, Tyco asserts that the
phrase “equipment, ducts, fixtures, materials or other property”
connotes moveable objects, as the district court found. As a
practical matter, ducts and fixtures, like equipment and other
moveable property and materials -- but unlike floors and walls --
3
Prospect Hill notes that, had the parties wished to use a
term denoting movability, they could have used the term “trade
fixtures.” See Black’s Law Dictionary at 669.
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can be removed without altering the basic structure of the Premises
itself.
Tyco has the stronger argument. In context, the phrase
“equipment, ducts, fixtures, materials or other property” denotes
moveable objects, notwithstanding Prospect Hill’s arguments about
the definition of the term “fixture.” While fixtures may include
equipment or objects that are attached to the building, such as
machinery installed in place, it is unreasonable to extend the term
to cover components of the structure itself. Tyco’s contention
that the term “Demised Premises” -- from which contaminated
materials are to be removed -- includes both the land and the
building is especially persuasive. We agree with the district
court that the phrase “equipment, ducts, fixtures, materials or
other property” should not be construed so broadly as to include
the concrete floor. Because Tyco had no obligation to remove the
concrete floor under the surrender clause, it was not in breach of
the Lease and did not become a holdover tenant when it failed to
remove the concrete floor prior to the expiration of the Lease.
We likewise reject Prospect Hill’s argument that the cyanide
itself, as distinct from the concrete floor, was “material” that
Tyco was obligated to remove. First, this interpretation of the
surrender clause is contrary to Prospect Hill’s own course of
conduct. Prospect Hill conceded that Tyco had no obligation to
remove asbestos and lead -- both hazardous contaminants -- that
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were embedded in various parts of the building. Second, Prospect
Hill’s argument is undermined by the plain language of the Lease.
The surrender clause calls for the removal from the Demised
Premises of any and all equipment, ducts, fixtures and “materials
or other property that are or might be contaminated . . . .” The
Lease thus distinguishes between the materials to be removed and
the contaminants embedded in them.
Finally, it should be noted that if we were to accept Prospect
Hill’s argument, Tyco would be held liable for contamination that
accrued over the course of nearly three decades, including that
which occurred before its ownership of the Premises. The idea that
Tyco –- Prospect Hill’s tenant for a mere seven months -- should be
held responsible for contamination caused over that period of time
makes no sense.
Accordingly, we find that Tyco was not obligated by the terms
of the Lease to remove the concrete floor from the Premises. And
because Tyco had fulfilled its surrender obligations by the
expiration of the Lease term, it was not a holdover tenant.4
4
The fact that Tyco’s environmental consultant was on the
Premises until October 1, 2002, does not disturb that conclusion.
Prospect Hill demanded that Tyco remove the concrete floor, though
it had no authority to do so. Tyco acceded to that request at
considerable expense, despite its belief that the demand was
unreasonable. Tyco should not be penalized for its compliance.
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III. Conclusion
Because we find that Tyco fulfilled its obligations under the
Lease’s surrender clause and was not a holdover tenant, the
district court’s order granting summary judgment to Tyco and
denying summary judgment to Prospect Hill is
Affirmed.
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