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13-P-252                                              Appeals Court

  REALTY FINANCE HOLDINGS, LLC1 vs. KS SHIRAZ MANAGER, LLC, &
                             others.2


                             No. 13-P-252.

         Suffolk.    January 9, 2014.    -   September 5, 2014.

              Present:   Katzmann, Fecteau, & Milkey, JJ.


Contract, What constitutes, Condition precedent, Choice of law
     clause, Damages. Evidence, Parol evidence. Practice,
     Civil, Summary judgment. Damages, Breach of contract.



     Civil action commenced in the Superior Court Department on
August 21, 2008.

     The case was heard by Charles T. Spurlock, J., on a motion
for summary judgment; a hearing on the assessment of damages was
had before Carol S. Ball, J., and entry of final judgment was
ordered by her.



     1
       We use the plaintiff's name as it appears on an assented-
to motion to reflect the plaintiff's change of name in
subsequent pleadings, which was allowed by a judge in the
Superior Court on February 5, 2009. The assented-to motion also
required changes in the names of certain of the defendants, and
those changes are also reflected in our caption.
     2
       KS Shiraz Equity Partners, LLC; KS-RFC Shiraz, LLC; KS GS
Manager, LLC; KS GS Equity Partners, LLC; and KS-RFC GS, LLC.
                                                                     2


     Jeffrey P. Allen (Maria Galvagna Mesinger with him) for the
defendants.
     Paul S. Samson for the plaintiff.


    KATZMANN, J.     In this appeal, the parties dispute whether

two thirty-eight page limited liability company agreements,

negotiated and drafted with the assistance of counsel and each

containing an integration clause, should be enforced as written.

A Superior Court judge entered summary judgment for the

plaintiff, ruling that the agreements were fully integrated

contracts and that the parol evidence rule prohibited

consideration of the parties' negotiations to show that the

agreements were subject to contingencies.    A final judgment then

entered awarding damages to the plaintiff.    On appeal, the

defendants argue that it was always understood that the

agreements, though fully executed, were not to take effect until

certain financing and property acquisitions were in place and

that electronic mail message (e-mail) exchanges between the

parties raise genuine issues of material fact whether

integration was intended.    The defendants further maintain that

the plaintiff is not entitled to damages under the terms of the

agreements.   We affirm.

    1.   Facts.    We take the undisputed facts from the judge's

February 1, 2010, "Memorandum and Order on the Plaintiff's

Motion for Summary Judgment on Liability" and from the parties'
                                                                     3


statement of undisputed facts.    We also add material from the

record for purposes of background and discussion, as noted.

During the relevant events of this case, the plaintiff was a

Delaware limited liability company involved in real estate

specialty finance.3   The defendants are related Massachusetts

entities involved in real estate acquisition and management.

Kambiz Shahbazi is the principal of KS GS Manager, LLC; KS GS

Equity Partners, LLC; KS Shiraz Manager, LLC; and KS Shiraz

Equity Patners, LLC, the entities that control the daily

operations of the real estate portfolios owned by KS-RFC GS, LLC

(GS Company), and KS-RFC Shiraz, LLC (Shiraz Company)

(collectively, the defendants).     Shahbazi has a master's degree

in business from Columbia University and twenty-five years of

experience in real estate development.

     a.   The amended agreements.   On March 6, 2006, the

plaintiff and the defendants, GS Company and Shiraz Company,

entered into the limited liability company agreements (2006

agreements), pursuant to which the plaintiff acquired an equity

interest in the companies.   Subsequently, the parties set out to

restructure their relationship from equity to debt.    The

defendants agreed to pay the plaintiff's interest as a monthly


     3
       The plaintiff's president, Kenneth Witkin, described a
specialty finance company as one involved in project-based,
noncommercial banking.
                                                                   4


obligation.4   To that end, the parties set about to negotiate and

execute amended agreements.5   The process leading up to their

execution took several months, Shahbazi first submitting term

sheets to the plaintiff on November 30, 2007.   The parties were

assisted in their negotiations by their respective counsel, who

were experienced in complex real estate transactions and who

drafted the amended agreements.

     As described by the judge, "[t]he [a]mended [a]greements

are detailed, comprehensive documents that address all major

issues that arose in connection with the real estate partnership

between the plaintiff and the KS defendants."   Relevant here,

the amended agreements contain provisions requiring the


     4
       By way of background, according to Witkin, the gist of the
restructuring that Shahbazi proposed was "changing our agreement
so we are no longer his partner and he would be responsible
going forward for all leasing and all tenant improvements and we
would simply just be in the equivalent of a mezzanine loan,"
which he defined as "a loan that is subordinate to a senior
loan." The attorney negotiating the restructuring on the
defendants' behalf, Sally Michael, confirmed that under the
restructuring, the plaintiff's investment was becoming
effectively a mezzanine loan.
     5
       On April 1, 2008, KS Shiraz Manager, LLC, and KS Shiraz
Equity Partners, LLC, signed and delivered the "Amended and
Restated Limited Liability Company Agreement of KS-CBRE Shiraz,
LLC" (the amended Shiraz agreement). Also on April 1, 2008, KS
GS Manager, LLC, and KS GS Equity Partners, LLC, signed the
"Amended and Restated Limited Liability Company Agreement of KS-
CBRE GS, LLC" (the amended GS Agreement), and the "First
Amendment," which were delivered on April 11, 2008. The amended
Shiraz agreement, the GS agreement, and the first amendment are
referred to collectively as the amended agreements.
                                                                     5


defendants to make monthly distribution payments to the

plaintiff.   In addition, both the amended GS agreement and the

amended Shiraz agreement contain an integration clause, which

provides as follows:

     "Entireties; Amendments. This Agreement and its exhibits
     constitute the entire Agreement between the Members
     relative to the formation of the Company. Except as
     otherwise provided herein, no amendments to this Agreement
     shall be binding upon any member unless set forth in a
     document duly executed by such Member."

     The amended agreements also both contain a detailed

provision affording the defendants a one-time right to refinance

their primary loan, referred to as the PNC loan, upon

satisfaction of enumerated conditions.    A governing law

provision provided that Delaware law would apply in construing

the amended agreements and the obligations of the parties.6    The

first amendment set forth the addition of two properties in

Marlborough to the assets of GS Company.

     b.    Execution of the amended agreements.   From the record

we add the following.   It is undisputed that on March 12, 2008,

the plaintiff signed and delivered the amended GS agreement and

the amended Shiraz agreement to the defendants' attorney, Sally

Michael.   According to an April 2, 2008, e-mail from Michael,

the defendants signed the amended agreements, which she dated


     6
       The amended agreements also included a subordination
clause, which we set out and discuss, infra.
                                                                     6


"as of April 1, 2008."   On April 2, 2008, Michael sent the

signed signature pages to the plaintiff, but stated by

accompanying e-mail that none of the agreements would go into

effect unless she received three signed documents from the

plaintiff concerning the property acquisitions and a loan that

the defendants were pursuing with General Electric Capital

Corporation (the GE loan).     The documents requested were (1) the

signed first amendment; (2) a signed consent vote authorizing

the GE loan; and (3) a signed Patriot Act Certificate in

connection with the GE loan.    It is undisputed that the

plaintiff supplied the requested documents.     On April 11, 2008,

according to an accompanying letter, Michael delivered to the

plaintiff the "fully executed original" of the signature pages

for the amended agreements, without stating any further express

conditions.

    According to the defendants, at some point after signing

and delivering the amended agreements to the plaintiff, they

learned that the GE loan had been terminated.    The plaintiff did

not receive the payments allegedly due under the amended

agreements, and subsequently filed this action in Superior

Court.   The plaintiff's motion for summary judgment followed.

    c.   Evidence of the parties' negotiations.    In opposing the

summary judgment motion, the defendants argued that evidence of

the parties' negotiations raised an issue of fact whether the
                                                                   7


plaintiff understood and agreed that the amended agreements were

subject to two conditions:   first, that the defendants obtain

the GE loan, and second, that the defendants acquire two

properties in Marlborough.   Although those transactions are not

identified as conditions precedent in the amended agreements,

the defendants maintain that they were integral to the amended

agreements' effectiveness.   They rely on evidence of the

parties' e-mail correspondence in late March and early April,

2008, to establish the parties' understanding of the inclusion

of the two conditions in the deal.

     In particular, the defendants point to several e-mails

between Shahbazi and Paul Martin, Shahbazi's primary contact at

RFC, in which Shahbazi linked the Marlborough property

acquisitions to his ability to refinance the PNC loan through

GE, and thereby fund the restructure.   The judge took note of

the following exchange in his memorandum.   On April 7, 2008,

Martin e-mailed Shahbazi regarding delivery of the executed

amended agreements and the status of the GE loan, stating "why

you won't sign at least Shiraz unconditionally is beyond

comprehension."7   Shahbazi responded that the property


     7
       For context, we add that, according to the plaintiff,
Shahbazi was seeking to acquire the Marlborough properties for
the GS Company's portfolio, and not for the Shiraz Company's
portfolio.   Hence, the reference in Martin's e-mail is
presumably to the amended Shiraz agreement.
                                                                     8


acquisitions were necessary to obtain the GE loan, and that the

GE loan "is where I get my comfort that I would have the funds

necessary to service your approx[imately] $27mm preferred equity

in GS/Shiraz."

    The judge ruled that, under either Delaware or

Massachusetts law, the amended agreements were fully integrated

and that the parol evidence rule barred admission of the

parties' e-mail correspondence to vary the amended agreements'

terms.   The plaintiff's motion for summary judgment motion was

allowed, a final judgment entered awarding damages to the

plaintiff, and the defendants filed this appeal.

    2.   Choice of law.    As noted, the amended agreements

provided in their governing law provisions that Delaware law be

applied to "construe and enforce the 2008 agreements."

Accordingly, the plaintiff argues that Delaware law should apply

to the controversy here.    The defendants counter that the

amended agreements never took effect, hence the contract's

choice of law provision is without effect, and Massachusetts law

should apply.    Both parties assert their respective positions in

perfunctory fashion, without supporting argument or authority,

and both maintain that they should prevail under the laws of

either jurisdiction in any event.

    Massachusetts will give effect to a choice of law provision

in a contract dispute, if to do so is fair and reasonable.    See
                                                                  9


Morris v. Watsco, Inc., 385 Mass. 672, 674 (1982); Stagecoach

Transp., Inc. v. Shuttle, Inc., 50 Mass. App. Ct. 812, 817-818

(2001).   Our courts make an exception in situations where the

validity of the contract's formation is challenged, as with a

claim of precontract misrepresentation or fraud in the

inducement, in which case it is less likely that the contract's

choice of law provision will be honored.   See, e.g., Jacobson v.

Mailboxes Etc. U.S.A., Inc., 419 Mass. 572, 578 (1995);

Northeast Data Sys., Inc. v. McDonnell Douglas Computer Sys.

Co., 986 F.2d 607, 610-611 (1st Cir. 1993).

     Whether that principle applies here is a question we need

not decide, as we agree that the choice of law does not affect

the outcome.   Both jurisdictions approach the issue of

integration by considering the nature of the writing, and in

particular, whether the parties included an integration clause.

As Massachusetts cases on the topic admit to more complexity,

and in the interest of fairness and finality, we focus our

discussion there.8


     8
       Under Delaware law, an integration clause gives rise to a
rebuttable presumption that the writing contains the parties'
complete agreement. Webber v. Anderson Homes LLC, 908 A.2d 616,
620 (Del. Super. Ct. 2006). "[T]his presumption can be overcome
by a showing of fraud, bad faith, unconscionablity, negligent
omission or mistake in fact." Ibid., quoting from Kronenberg v.
Katz, 872 A.2d 568, 592 (Del. Ch. 2004). Indeed, absent
unconscionable or other extraordinary circumstances, "the
existence of such a clause in a formal written contract between
sophisticated parties" is conclusive evidence that the contract
                                                                  10


    3.   Integration.    This court recently observed that an

integration clause is evidence of integration, but is not

dispositive.   Chambers v. Gold Medal Bakery, Inc., 83 Mass. App.

Ct. 234, 243 (2013).    Generally, contracting parties are

understood to have included an integration clause in their

written agreement with the intent "to preclude the subsequent

introduction of evidence of preliminary negotiations or side

agreements."   Id. at 244, quoting from Security Watch, Inc. v.

Sentinel Sys., Inc., 176 F.3d 369, 372 (6th Cir. 1999).

However, the nature of the writing or the situation of the

parties may warrant consideration of the parties' negotiations

in order to determine whether they intended that the written

agreement, even one containing an integration clause, be fully

integrated.    See Wang Labs., Inc. v. Docktor Pet Centers, Inc.,



is the parties' complete agreement. J.A. Moore Constr. Co. v.
Sussex Assocs. Ltd. Partnership, 688 F. Supp. 982, 987 (D. Del.
1988). On the undisputed facts, the defendants have not made
the requisite showing.
     Nevertheless, the defendants argue that evidence of the
parties' negotiations was admissible to prove that the
integration clause, along with the rest of the agreement, was
not intended to take effect unless the conditions precedent were
met. However, in Aetna Ins. Co. v. Newton, 274 F. Supp. 566,
572 (D. Del. 1967), the court ruled that where the parties'
written contract contained an integration clause, the parol
evidence rule was a bar to the parties' alleged oral agreement
that a condition precedent was to be fulfilled before the
contract was to take effect. Here, under Delaware law, the
defendants' assertion of an oral condition precedent is not
sufficient to overcome the presumption in favor of the
integration clause in the parties' written agreement.
                                                                   11


12 Mass. App. Ct. 213, 219 (1981).   Whether an agreement is

fully integrated turns on the intention of the parties and "is

an issue of fact for the decision of the trial judge, entirely

preliminary to any application of the parol evidence rule."

Green v. Harvard Vanguard Med. Assocs., Inc., 79 Mass. App. Ct.

1, 9 (2011), quoting from Wang Labs., Inc. v. Docktor Pet

Centers, Inc., supra.

    The defendants argue that the prior negotiations of the

parties in this case are admissible to establish that the

amended agreements were not intended to be fully integrated.

But where, as here, sophisticated business people, represented

by counsel, have negotiated and executed a complex written

document touching on all significant aspects of their

transaction, and have included an integration clause, we need

not resort to their prior negotiations concerning the

transaction at hand "to divine the intention of the parties on

the question of integration."   USTrust v. Henley & Warren Mgmt.,

Inc., 40 Mass. App. Ct. 337, 341 (1996).   More than four months

of negotiations followed from the time Shahbazi proposed the

restructuring to the plaintiff until he executed and delivered

the amended agreements.   Had there been an omission of a

refinancing contingency, "it was the responsibility of the

borrower, which has not disclaimed having had the advice of
                                                                   12


competent counsel, to read the documents and remedy the omission

before signing off on the papers."    Id. at 342.

    Moreover, the amended agreements specifically addressed the

issue of refinancing the PNC loan and delineated the terms and

conditions for that refinancing.     The fact that the amended

agreements expressly included a one-time right to refinance the

PNC loan cuts against the notion, suggested by the defendants,

that the parties simply "didn't bother to craft such language,"

to include the GE loan contingency, because it was understood as

integral to the deal.    See, e.g., Bendetson v. Coolidge, 7 Mass.

App. Ct. 798, 802 (1979) (comparing detailed contract that

addressed specific issue raised by parties' dispute with

contracts that "failed to speak one way or the other to an

essential question raised by the subject matter of the

agreement").    Compare Wang Labs., Inc. v. Docktor Pet Centers,

Inc., 12 Mass. App. Ct. at 219-220 (failure of lease to address

equipment's performance supported judge's finding of collateral

agreement).    "Where the writing shows on its face that it is the

entire agreement of the parties and 'comprises all that is

necessary to constitute a contract, it is presumed that they

have placed the terms of their bargain in this form to prevent

misunderstanding and dispute, intending it to be a complete and

final statement of the whole transaction.'"     Bendetson v.
                                                                    13


Coolidge, supra at 802-803, quoting from Glackin v. Bennett, 226

Mass. 316, 319-332 (1917).9

     We contrast cases dealing with agreements where the form of

the writing is brief or boilerplate, or where the parties are

mismatched.   It is true that in such instances, "proof could be

received ranging beyond the writing proper" to determine whether

the parties intended full integration.    Antonellis v. Northgate

Constr. Corp., 362 Mass. 847, 849 (1973).    For example, in Wang

Labs., Inc. v. Docktor Pet Centers, Inc., 12 Mass. App. Ct. at

218, no integration was found where a lease agreement, though

containing an integration provision in fine print, consisted of

a standardized printed form.   See Antonellis v. Northgate

Constr. Corp., supra at 849-850 (no integration intended in

parties' one-page agreement and "evident design to mesh" with

contingency); Ryder v. Williams, 29 Mass. App. Ct. 146, 150

(1990) (promissory notes in unusual form found not integrated).

Also distinguishable are agreements involving parties of

dissimilar bargaining power or sophistication in the matter at

hand.    See Tilo Roofing Co. v. Pellerin, 331 Mass. 743, 745-746

     9
       The defendants also point to the first amendment, which
addresses the addition of the Marlborough properties to the GS
portfolio, as evidence that the acquisitions were intended as a
condition precedent to the deal. The language of the first
amendment does not support that view, and further provides that
the company is governed pursuant to the April 1, 2008, amended
agreement and that "all other terms and conditions of the
[amended] Agreement shall remain in full force and effect."
                                                                   14


(1954) (contract pressed on homeowner by "insistent" salesman

found to be subject to condition precedent); Green v. Harvard

Vanguard Med. Assocs., Inc., 79 Mass. App. Ct. at 9-11 (employee

claimed he signed release of his discrimination claim against

employer in exchange for oral promise of another job).10   Those

cases, in which prior negotiations were considered to determine

the parameters of the parties' agreement, do not bear on the

very different circumstances here.

     The defendants counter that, despite the presence of an

integration clause and the absence of express conditions, it was

understood that the amended agreements, upon delivery, were to

be held in escrow pending completion of the GE loan and property

acquisitions, and that the amended agreements, including the

integration clause itself, never became operative when those

transactions failed to occur.   Even were we to consider the e-

mail exchanges and construe them in the defendants' favor, the

     10
       Another situation in which we may look beyond the writing
is where the agreement is ambiguous on the issue of integration,
even in the presence of an integration clause. See, e.g.,
Holmes Realty Trust v. Granite City Storage Co., 25 Mass. App.
Ct. 272, 275-276 (1988) (despite integration clause, ambiguity
found in meaning of lease agreement where parties simultaneously
executed a second agreement dealing with improvements to leased
premises); Kobayashi v. Orion Ventures, Inc., 42 Mass. App. Ct.
492, 496 (1997). Though the defendants' brief makes a passing
reference to the principle that an ambiguous contract raises an
issue of fact, they asserted at oral argument that they were not
claiming that the integration clause gave rise to an ambiguity,
but rather that the integration clause did not take effect until
the conditions precedent were satisfied.
                                                                   15


evidence does not show that this understanding was shared by

both parties as a condition to the amended agreements'

effectiveness.   Rather, the e-mails indicate that the plaintiff

was aware that Shahbazi was attempting to obtain the GE loan and

acquire the Marlborough properties, and cooperated in that

effort, but "that anticipation was never made a part of the

agreement reflecting the contract between them."   Winchester

Gables, Inc. v. Host Marriott Corp., 70 Mass. App. Ct. 585, 593

(2007).

    While the defendants may have intended that the executed

amended agreements not take effect upon delivery, it is well-

established that "[t]he unexpressed intent of one party cannot

control the legal effect" of the parties' written agreement and

explicit integration clause.   Winchester Gables, Inc. v. Host

Marriott Corp., supra, quoting from Quirk v. Smith, 268 Mass.

536, 543 (1920).   Whatever the defendants may have hoped, the

communications fail to raise a question of fact as to whether

the plaintiff understood and agreed to hold the fully executed

amended agreements in escrow once they were delivered, without

express conditions, on April 11, 2008.

    Based on the foregoing, the defendants' conclusory

assertion that it was understood that the amended agreements

were not to take effect until the certain oral contingencies

were met does not create an issue of fact concerning
                                                                     16


integration.   The judge properly ruled that the amended

agreements were fully integrated, and as such, properly declined

to consider parol evidence to contradict their plain terms.        "A

judge uses summary judgment for the purpose for which it was

intended when, as in this case, a party seeks to alter what the

agreement provides by saying, in effect, 'that was not what we

meant at all.'"     USTrust v. Henley & Warren Mgmt., Inc., 40

Mass. App. Ct. at 343.

    4.   Damages.     Following the entry of summary judgment, a

second judge awarded the plaintiff damages in the amount due in

accordance with the amended agreements.    The defendants maintain

that pursuant to the amended agreements' subordination clause.

no damages are owed.     The subordination clause appearing in the

amended agreements provided as follows:

    "Subordination. All payments due to the Members pursuant
    to this Agreement shall be fully subordinate to any
    payments due under any Approved Loan, but payments of the
    Required Distributions to the Preferred Member shall be
    permitted in the absence of the declaration of a continuing
    event of default by the subject Lender under the new first
    mortgage loan by the Lender thereunder, unless such payment
    would result in a required debt service payment not being
    made to the Lender when due as a result of insufficient net
    Operating Income. Any payments due pursuant to this
    Agreement shall be paid only after periodic payments of the
    principal and interest and all other payments under all
    Approved Loans have been made as required pursuant to the
    terms thereof."

    As defined in the amended agreements, the "preferred

member" refers to the plaintiff, and the "required distribution"
                                                                   17


refers to the mandatory monthly payments the defendants were to

make to the plaintiff.   We reject the defendants' argument that

because they were in default of the PNC loan, the above language

relieved them of the obligation to pay the plaintiff.    Even

assuming, without deciding, that "the new first mortgage loan"

refers to the PNC loan,11 "payments of required distributions to

the preferred member" must be read in the context of the

immediately preceding phrase, "all payments due to members

pursuant to this agreement shall be fully subordinated."     It is

clear, from the subordination clause read as a whole, that it

merely sets forth the priority of the defendants' obligations

and does not excuse or extinguish them in the event of the

defendants' default on the primary loan.   There is no reasonable

interpretation of the subordination clause that would relieve

the defendants of their obligations to the plaintiff.

                                    Judgment affirmed.




     11
       As the plaintiff points out, the phrase "new first
mortgage loan" is employed elsewhere in the amended agreements
to refer to the defendants' one-time right to refinance the PNC
loan and utilized similar subordination language in the event
the defendants refinanced with a new lender.
