Cygilant, Inc. v. 31-43 Nagog Park, LLC.

99 Mass.App.Ct. 1120

167 N.E.3d 909 (Table)

CYGILANT, INC.

v.31-43 NAGOG PARK, LLC.

20-P-214

Appeals Court of Massachusetts.

Entered: April 21, 2021.

MEMORANDUM AND ORDER PURSUANT TO RULE 23.0

Cygilant, Inc. ("Cygilant") leased commercial space at an office park in Acton. Approximately two years before its lease term ended, Cygilant decided it would be better served by an office in Boston, and attempted to abandon the premises in Acton. The landlord, 31-43 Nagog Park, LLC ("Nagog"), declared Cygilant in breach of the lease, and sought damages. Years of litigation followed. On summary judgment, a Superior Court judge (motion judge) ruled that Cygilant had indeed defaulted on the lease. That left damages as the main issue for trial, which was a bench trial in which the parties waived detailed findings of fact and conclusions of law.

The bulk of Nagog's claimed damages arose under a lease provision that entitled it to contractual damages in the form of "accelerated rent." In effect, Nagog immediately was entitled to recover the net present value of all of the rent still owed by Cygilant, minus an offset for value of the remaining leasehold (set as the net present value of the fair rental value of the premises over the remaining lease term). Throughout most of the litigation, Nagog refused to acknowledge the offset. Shortly before trial, it took the position that the value of the offset was zero.

Ultimately, the trial judge, apparently rejecting Nagog's proof of its accelerated-rent damages, awarded nothing for accelerated rent.² The judge did award Nagog approximately $18,000 in other contractual damages, and well over $200,000 in attorney's fees and costs, pursuant to the lease. Both sides appealed.

In its appeal, Nagog argues that the trial judge erred by failing to award it accelerated-rent damages. In its cross appeal, Cygilant argues that the motion judge erred in ruling that it breached the lease as a matter of law, and that the trial judge erred in awarding Nagog such a large amount of attorney's fees despite the small damages award. We affirm the judgment in its entirety.

Background. We briefly summarize the history of this dispute, reserving certain details for future discussion.

Cygilant is in the business of providing digital security services. In 2005, it leased premises located in an office park at 31-43 Nagog Park in Acton, Massachusetts to establish an office. Nagog did not yet own the building.

The lease was extended and the leased premises expanded several times. By the beginning of 2015, Cygilant was leasing approximately 10,000 square feet (the "premises") at a monthly base rent of seventeen dollars per square foot. The rent was set to increase annually until the lease terminated in September 2017. The latest lease amendment provided Cygilant the option to pay a fee and terminate early. That option expired on May 31, 2014. Any other early surrender of the premises required the landlord's agreement.

In late 2014, Nagog bought the building from National Development. Around the same time, Cygilant decided to move the office to Boston. Cygilant hired an agent who made some unsuccessful attempts to sublet the premises.

Within a few months after Cygilant informed Nagog of the planned move, relations between the parties broke down. In April of 2015, Cygilant vacated the premises. Shortly thereafter, Richard D. Vetstein, then counsel for Cygilant, sent Nagog a letter ("the Vetstein letter") notifying Nagog that Cygilant had vacated the premises and indicating that Cygilant intended to stop paying rent at the end of May. The letter also purported to exercise the early-termination option (notwithstanding the fact that that option expressly had expired) and declared that Cygilant had surrendered the premises. Nine days later, Nagog responded with a letter, termed a "Notice of Default," terminating the lease and demanding that Cygilant pay contract damages of around $450,000.

In May of 2015, Cygilant brought an action to have its and Nagog's rights and remedies judicially declared; as the motion judge put it, Cygilant "beat[ ] its landlord to the courthouse," Nagog brought counterclaims, and the litigation thereafter dragged on for years. In the meantime, beginning in fall of 2016, Nagog successfully relet portions of the premises to new tenants who eventually occupied the entire premises. Nagog earned approximately $65,000 net of costs from reletting the premises through the end of Cygilant's lease term. The new tenants paid a nominal base rent of $16.50-16.75 per square foot, although Nagog made certain lease concessions, such as months of free rent.

In March of 2018, Nagog won a ruling at summary judgment that Cygilant's abandonment of the premises amounted to a default. Well over a year later, Nagog and Cygilant tried the case. Pursuant to Superior Court Rule 20(2)(h), Nagog and Cygilant waived detailed findings of fact and rulings of law. See Motsis v. Min's Supermarket, Inc., 96 Mass. App. Ct. 371, 379 n.20 (2019).

After trial, the trial judge awarded Nagog $18,772.81 in past-due rent, utilities, and re-letting costs, but zero dollars in accelerated-rent damages. Pursuant to another lease provision, the judge also awarded Nagog $231,791.56 in attorney's fees and costs. Finally, she awarded Cygilant a $47,984.50 credit for its remaining security deposit. This cross appeal followed.

Discussion. The cross appeals implicate various questions of jurisdiction, liability, damages, and fees. We take the issues in that order.

1. The status of the cross appeal. At the point that Cygilant attempted to file its "principal and response brief," this court notified Cygilant that it had not paid a separate docketing fee, and that the cross appeal therefore had not been docketed. See Mass. R. A. P. 10 (a) (1) (A), as appearing in 481 Mass. 1618 (2019). Cygilant then moved to docket its cross appeal late, but a single justice of this court denied it leave to do so. It appears undisputed that the failure to pay the docketing fee was a simple oversight on Cygilant's part, and that Cygilant's error has not materially delayed the litigation or otherwise prejudiced Nagog. See Mailer v. Mailer, 387 Mass. 401, 406 (1982). Cygilant asks that we overrule the single justice or otherwise reach the cross appeal under Mass. R. A. P. 3 (a), as appearing in 481 Mass. 1603 (2019).

We pass over this issue. Regardless of whether Cygilant's cross appeal is properly before us, none of Cygilant's appellate arguments succeed. Cf. Matter of M.S., 99 Mass. App. Ct. 247, 250 (2021).

2. Default. Nagog was only entitled to terminate the lease and pursue damages if Cygilant in fact defaulted on the lease. On Nagog's motion for summary judgement, the motion judge concluded that Cygilant had defaulted on the lease as a matter of law based on Cygilant's attempted early surrender of the premises.

Now, on appeal, Cygilant presents only one reason that its conduct in abandoning the premises and sending the Vetstein letter did not result in a default.³ Specifically, Cygilant contends that if its conduct amounted to a default, Nagog was obliged to give Cygilant notice and an opportunity to cure.⁴ However, the motion judge already observed in a memorandum on Cygilant's motion for reconsideration that "Cygilant did not raise this argument in its extensive summary judgment papers." This argument is therefore waived. Carey v. New England Organ Bank, 446 Mass. 270, 285 (2006), quoting Century Fire & Marine Ins. Corp. v. Bank of New England-Bristol Cty., N.A., 405 Mass. 420, 421 n.2 (1989) ("An issue not raised or argued below may not be argued for the first time on appeal").

3. Accelerated-rent damages. Nagog appeals the trial judge's decision to award zero dollars in accelerated-rent damages. The applicable standard of review is a significant hurdle in Nagog's path. Because the parties waived jury trial, detailed findings of fact, and detailed conclusions of law, we must uphold the trial judge's decision if "anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn in favor of" that decision. Motsis, 96 Mass. App. Ct. at 380.⁵

Nagog terminated the lease and sought accelerated-rent damages under section 17(a) of the lease. That provision required Cygilant to pay "accelerated rent," or as the lease puts it, "(A) the [present value of the] total Rent that Tenant would have been required to pay for the remainder of the Term ... minus (B) the then present fair rental value of the Premises for such period [("fair-value offset")] ..." (emphasis added). In other words, Nagog was immediately entitled to the present value of what Cygilant owed for the remaining lease term, minus an offset for the present value of what Nagog could fairly be expected to recoup by reletting the premises.

Section 17(a) contrasts with an alternate remedial provision built into the lease: section 17(b). Under section 17(b), Nagog could reclaim the premises without terminating the lease, and then recover damages in the amount of rent owed in the future, "diminished by any net sums thereafter received by Landlord through reletting the Premises during such period." Thus, where section 17(a) entitled Cygilant to an immediate offset based on the fair value of the premises, regardless of Nagog's mitigation efforts, section 17(b) entitled Cygilant to an eventual offset based on the success of the landlord's mitigation efforts.⁶ Nagog never invoked section 17(b) prior to filing suit or in the trial court. In fact, in the 2015 notice-of-default letter, Nagog explicitly disclaimed reliance on section 17(b).⁷

Because Nagog sought accelerated-rent damages under section 17(a), the fair-value offset was a key component of Nagog's affirmative case for damages. Nagog, therefore, had to prove the value of the fair value offset "with reasonable certainty," as with any component of any damages calculation. See, e.g., Coady v....