Petricca Development Ltd. Partnership v. Pioneer Development Co.

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