Michael v. Miles

741 F.Supp.2d 296

Michael and Kathleen THOMPSON, Plaintiffs,

v.Michael MILES and Nancy Cloud, Defendants.

No. CV–10–234–B–W.

United States District Court, D. Maine.

Sept. 27, 2010.

Damon M. Seligson, Dinicola, Seligson & Upton, LLP, Boston, MA, A. Robert Ruesch, Verrill Dana LLP, Portland, ME, for Plaintiffs.Christopher R. Largay, Joseph M. Pickering, Largay Law Offices, P.A., Bangor, ME, Joseph G. Abromovitz, Law Office of Joseph Abromovitz, Dedham, MA, for Defendants.

ORDER ON DEFENDANTS' MOTION TO DISMISS

JOHN A. WOODCOCK, JR., Chief Judge.I. STATEMENT OF FACTS

On October 14, 2008, Michael and Kathleen Thompson (Plaintiffs), Massachusetts residents, purchased Seascape, a seaside luxury home in Bar Harbor, Maine for $2,910,000 from Michael Miles and Nancy Cloud (Defendants), Maine residents.¹ Compl. ¶ 3, 15–18. The Plaintiffs claim that after they took possession of Seascape, they “uncovered numerous and extensive problems with the home, none of which were able to be detected on a home inspection that is typically associated with a residential property conveyance.” Id. ¶ 5. They allege that they have been required to spend “in excess of $1 million addressing the problems, all of which are directly and proximately attributable to the Defendants.” Id. ¶ 6. They assert that “it is highly likely that the Plaintiffs will have to spend an additional $1 million, if not more, for additional repairs and construction necessary to address the various issues and problems that the Defendants either neglected to perform when they developed the home and/or which they were aware of but speciously failed to disclose to the Plaintiffs.” Id. ¶ 7. The Thompsons seek damages against the Defendants for breach of contract, breach of implied covenant of good faith and fair dealing, fraud, negligent misrepresentation, promissory estoppel, and violation of the Maine Unfair Trade Practices Act (MUTPA). Id. ¶¶ 82–118.

On July 6, 2010, the Defendants moved to dismiss the Complaint. Mot. to Dismiss (Docket # 12) ( Defs.' Mot.). On July 27, 2010, the Plaintiffs filed their opposition to the motion to dismiss. Pls.' Opp'n to Defs.' Mot. to Dismiss (Docket # 14) (Pls.' Opp'n). On August 10, 2010, the Defendants replied to the Plaintiffs' opposition. Pls.' Resp. to Defs.' Opp'n to Mot. to Dismiss (Docket # 16) (Defs.' Reply).

II. DISCUSSIONA. Motion to Dismiss

Rule 12(b)(6) provides, in part:

Every defense to a claim for relief in any pleading ... must be asserted in the responsive pleading if one is required. But a party may assert the following defenses by motion: ... (6) failure to state a claim upon which relief can be granted....

Fed. R. Civ. P. 12(b)(6). “In ruling on a motion to dismiss [under Rule 12(b)(6) ] a court must accept as true all the factual allegations in the complaint and construe all reasonable inferences in favor of the plaintiffs.” Alternative Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 33 (1st Cir.2001) (citing Beddall v. State St. Bank & Trust Co., 137 F.3d 12, 16 (1st Cir.1998). A defendant is entitled to dismissal “only if it ‘appears to a certainty that the plaintiff would be unable to recover under any set of facts.’ ” State St. Bank & Trust Co. v. Denman Tire Corp., 240 F.3d 83, 87 (1st Cir.2001) (quoting Roma Constr. Co. v. aRusso, 96 F.3d 566, 569 (1st Cir.1996)); see also Nethersole v. Bulger, 287 F.3d 15, 18 (1st Cir.2002)).

Ordinarily, when a court reviews a motion to dismiss, it may not take into account documents outside the complaint. Alternative Energy, 267 F.3d at 33. An exception exists, however, for “documents the authenticity of which are not disputed by the parties; for official public records; for documents central to plaintiffs' claim; or for documents sufficiently referred to in the complaint.” Id.; Beddall, 137 F.3d at 16–17. Here, Plaintiffs attached a number of documents to the Complaint, “the authenticity of which are not disputed by the parties” and which are “central to the plaintiffs' claim.” Alternative Energy, 267 F.3d at 33. The Defendants have not disputed the authenticity of the documents, and have referred to them throughout their filings. In accordance with the Alternative Energy exception, the Court has considered the documents attached to the Complaint in ruling on the motion to dismiss.²

B. Count I—Breach of Contract

1. The Defendants' Contentions

Count I alleges that the Defendants breached the Purchase and Sale Agreement and that the Plaintiffs sustained damages as a result. Compl. ¶¶ 82–84. The Defendants observe that the Purchase and Sale Agreement contains a “standard integration clause” in which the parties acknowledge that “[a]ny representations, statements and agreements are not valid unless contained herein. This Agreement completely expresses the obligations of the parties.” Defs.' Mot. at 2. The Defendants also point out that the August 4, 2008 contract provided for an inspection of the property, that an inspection was performed, that the parties amended the Purchase and Sale Agreement on September 8, 2008, lowering the price by $190,000 to reflect necessary repairs, and that the Plaintiffs expressly agreed to purchase the residence “as is.” Id. at 2–3. Further, the Defendants say that Maine recognizes the doctrine of “merger by deed,” which provides that once a deed is accepted, “it becomes the final statement of the agreement between the parties and nullifies all the provisions of the purchase-and-sale agreement.” Id. at 3 (quoting Bryan v. Breyer, 665 A.2d 1020, 1022 (Me.1995)).

2. The Plaintiffs' Response

The Plaintiffs respond that in order to proceed under Maine law, they need only establish the elements of a breach of contract cause of action. Pls.' Opp'n. at 2. They claim the

issue at bar is whether there has been a breach of the Agreement based on the Defendants' intentional failure to disclose material facts about the defective manner in which they constructed the property, and whether the Defendants can thereafter hide behind an ‘as is' provision contained in the document that was executed after the Agreement that serves to reduce the purchase price based on the need to replace all of the windows in the house due to negligence on the part of the Defendants.

Id. at 2. They argue that the Purchase and Sale Agreement does not contain an “as is” provision concerning the real property and point to paragraph 4 of the Purchase and Sale Agreement that specifies certain personal property that they accepted in an “ ‘as is' condition with no warranties.” Id. They point to the Purchase and Sale Agreement that provides in paragraph 3 that “all mechanical components of fixtures will be operational at the time of closing, except: N/A.” Id. at 3. Since they allege in their Complaint that the furnace in the guest house did not work properly, they claim that they should be allowed to prove this breach at trial. Id. They discount the warranty exclusion and merger by deed doctrine and assert that they “can still state a claim for breach of contract.” Id.

3. Defendants' Reply

The Defendants reply that the Plaintiffs' response is “incorrect on multiple levels.” Defs.' Reply at 2. They contend that whether the Defendants intentionally misled the Plaintiffs is an issue for the fraud claim, not the breach of contract claim. Id. Regarding the Plaintiffs' claim that warranties in the Purchase and Sale Agreement survived the closing, the Defendants observe that in fact no representations or warranties were made in the contract and the Agreement expressly provided that “[a]ny representations, statements, and agreements are not valid unless contained herein.” Id. at 2–3.

The Defendants urge the Court to reject the assertion that the Amendment to the Purchase and Sale Agreement was not part of the contract, since the Amendment “specifically states that it is an amendment to the agreement dated August 4, 2008 between the parties.” Id. at 3. The Amendment, the Defendants note, expressly provides that the parties agreed the purchase price should be reduced by $190,000—“the improvements on the property to be sold ‘as is.’ ” Id. They also contend that the Plaintiffs seem to be restricting their breach of contract claim to the furnace, and the furnace fits within the definition of an “improvement, so the Plaintiffs took the furnace ‘as is.’ ” Id.

Regarding the doctrine of merger by deed, the Defendants acknowledge that in Wimmer v. Down East Props., Inc., 406 A.2d 88, 91 (Me.1979), the Maine Supreme Judicial Court distinguished between agreements part of and agreements collateral to the undertaking to convey property. Thus, in Wimmer, an agreement to construct a house was deemed collateral to a promise to convey the premises and the merger by deed doctrine was inapplicable. Id. Here, Defendants claim, Seascape was not under construction, the house had been standing for five years, and the furnace was not collateral to the conveyance. Defs.' Reply at 4–5. Thus, they say the doctrine of merger by deed applies.

4. Discussion: Count I: Breach of Contract

a. Merger By Deed

In Bryan v. Breyer, the Maine Supreme Judicial Court defined the doctrine of merger by deed as providing that “once a ... deed is accepted, it becomes the final statement of the agreement between the parties and nullifies all provisions of the purchase-and-sale agreement.” 665 A.2d 1020, 1022 (Me.1995) (citation omitted). At the same time, the Maine Law Court has clarified that “[c]ollateral agreements in a purchase and sale contract do not merge into the deed.” Waterville Indus., Inc. v. Finance Auth. of Me., 2000 ME 138 ¶ 16, 758 A.2d 986, 990; Wimmer, 406 A.2d at 91. An agreement is collateral if it is not “connected with the title, possession, quantity, or emblements of the land.” ³ Id. (citation omitted). One court described a collateral agreement as calling for “acts by the seller which go beyond merely conveying clear title and placing the purchaser in possession of the property.” Amer....