Elliott Enterprises, LLC v. Goodale

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ELLIOTT ENTERPRISES, LLC v. GEORGETTE
D. GOODALE ET AL.
(AC 37174)
Lavine, Sheldon and Flynn, Js.
Argued November 17, 2015—officially released June 28, 2016
(Appeal from Superior Court, judicial district of
Hartford, Housing Session, Woods, J.)
Walter A. Twachtman, Jr., for the appellants
(defendants).
Andrew P. Barsom, with whom, on the brief, was
Alena C. Gfeller, for the appellee (plaintiff).
Opinion
LAVINE, J. In this summary process action, the defen-
dant tenants, Georgette D. Goodale and Marlborough
Country Bakery & Deli, Inc.,1 appeal from the judgment
of the trial court in which the court found that the
defendants had violated their lease agreement (lease)
and granted possession of the leased premises to the
plaintiff landlord, Elliott Enterprises, LLC. The trial
court rendered judgment of possession in favor of the
plaintiff on the ground that the defendants had failed
to pay sewer charges and late fees due under the lease.
On appeal, the defendants claim that the trial court
erred by failing to consider that they had overpaid the
plaintiff real estate taxes, which were a component of
the rent pursuant to the lease, in an amount greater
than what the plaintiff claimed they owed for the sewer
charges and late fees.2 The defendants also claim that
the trial court erred in determining that they had failed
to prove the defense of equitable nonforfeiture. We
reverse the judgment of the trial court.
The following facts and procedural history are rele-
vant to this appeal. The plaintiff owns a shopping center
in Marlborough and has rented two units of the property
to the defendants since June, 2002. The defendants have
operated a bakery on the premises since that time. The
initial lease included an option to extend the lease term.
The lease has been extended twice for five year periods,
with the most recent extension due to expire in June,
2017. The lease provided that rent was due on the first
of each month and that the defendants would incur a
late charge of 5 percent of the amount of rent due and
unpaid if they did not pay rent by the fifth of each
month. Section 1 of the lease, entitled ‘‘Rent for
Demised Premises,’’ states in relevant part: ‘‘RENT . . .
shall consist each month of the sum of the FIXED
MINIMUM MONTHLY RENTAL3 . . . together with the
TENANTS’ pro-rata share of any INCREASES IN PROP-
ERTY TAXES, together with any unpaid TENANTS’
UTILITIES as described in the SCHEDULE and this
LEASE.’’4 (Emphasis added.)
Section 18 of the lease, entitled ‘‘Sewer Usage and
Assessment Fees,’’ states that ‘‘[i]n the event that during
the term of this LEASE city or municipal sewers are
installed in a manner so as to serve the DEMISED
PREMISES, TENANTS agree to pay its prorata share
of any and all sewer usage charges assessed against
the LANDLORD and/or the DEMISED PREMISES.’’ In
December, 2011, Marlborough installed sewers that
served the demised premises. As we explain in part I
of this opinion, all of the charges listed in § 1 of the
lease were components of the rent, but the plaintiff
billed the defendants separately for each component.
The plaintiff claimed that the defendants had failed
to pay the ‘‘fixed minimum monthly rental’’ component
of the rent for April, 2013, failed to pay the sewer
charges since Marlborough had installed the sewers,
and failed to pay late fees that had accrued due to
several instances in which the defendants did not pay
the rent before the fifth day of the month. The plaintiff
served the defendants with a notice to quit on April 15,
2013. On April 24, 2013, the plaintiff brought a four count
action for summary process, alleging (1) nonpayment of
rent,5 (2) termination of the lease due to failure to pay
sewer use charges in accordance with §§ 1d and 18 of
the lease, (3) termination of the lease due to nonpay-
ment of late fees as required by the lease, and (4) termi-
nation of the right or privilege to occupy.
In their answer, the defendants denied that they had
breached the terms of the lease by failing to pay the
‘‘fixed minimum monthly rental’’ charge, sewer use
charges, or late fees due under the lease. They also
denied that their right or privilege to occupy the prem-
ises had expired. They filed special defenses, alleging:
(1) as to count one, that the plaintiff knowingly and
intentionally miscalculated the rent due under the lease,
causing the defendants to overpay the amount of the
rent after the second year of the lease, and that the April,
2013 base rent and escalator were paid and accepted
by the plaintiff; (2) as to count two, that the plaintiff
overcharged the defendants for the sewer betterment
assessment and use charges due under the lease; (3)
as to count three, that the plaintiff neither billed the
defendants for late fees, nor were late fees due given
that the defendants have paid or overpaid the rent, that
the plaintiff waived any right to the late fees, and that
the plaintiff did not conduct itself in good faith and fair
dealing and, as a result, should not be entitled to any
late fee; (4) as to count four, that the notice to quit was
improper and unjustified because the defendants have
not defaulted under the lease in the payment of rent,
sewer charges, or late fees; and (5) as to all counts,
that the defendants acted with clean hands throughout
the landlord-tenant relationship, and that the defense
of equitable nonforfeiture operates in the defendants’
favor to prevent an inequitable and unjustified termina-
tion of the lease.
The summary process action was tried over eight
days between October 7, 2013 and February 24, 2014.
On September 8, 2014, the court issued its memorandum
of decision. As to count one, the court found that the
notice to quit for failure to pay the fixed monthly rental
charge for April, 2013, had been served prematurely.
The court thus concluded that it lacked subject matter
jurisdiction over count one. As to counts two and three,
the court found that the defendants had violated the
lease by failing to pay the sewer use charges and late
rent fees. The court concluded, as to count four, that
the plaintiff had failed to establish by a preponderance
of the evidence that the defendants’ right to occupy the
premises should be extinguished. The court rejected
all of the defendants’ special defenses, concluding that
the plaintiff had properly applied the escalator clause
to the yearly increase of the fixed minimum monthly
rental. It also rejected the defendants’ defense of equita-
ble nonforfeiture. Although the court found that the
defendants had overpaid the real estate taxes due under
the lease, it stated that it lacked jurisdiction over any
monetary claims. The court concluded that the defen-
dants had wilfully failed to pay the sewer use charges
and late fees, and, thus, failed to act with clean hands.
See Cumberland Farms, Inc. v. Dairy Mart, Inc., 225
Conn. 771, 778, 627 A.2d 386 (1993) (‘‘[e]quitable princi-
ples barring forfeitures may apply to summary process
actions for nonpayment of rent if: (1) the tenant’s
breach was not willful or grossly negligent; (2) upon
eviction the tenant will suffer a loss wholly dispropor-
tionate to the injury to the landlord; and (3) the land-
lord’s injury is reparable’’). The court issued an
equitable final stay of execution through March 31, 2015,
provided that the defendants continued to make proper
use and occupancy payments.
The defendants filed a motion asking the court to
articulate: (1) its interpretation of the escalator clause;
(2) why it did not apply the overcharge of the real estate
taxes against the amount owed for the sewer charges
and late fees; (3) why it did not address the defendants’
claim that the lease provided for rent abatement pursu-
ant to the force majeure clause; and (4) which of their
specific actions constituted wilful and grossly negligent
conduct in failing to pay the claimed rent. In its articula-
tion, the court stated that it had applied the escalator
clause correctly and denied the request for further artic-
ulation. The court denied the request for articulation
regarding the overpayment of real estate taxes, stating
that the defendants ‘‘never pleaded said defense of set-
off in their answer or special defenses.’’ The court also
denied the request for articulation as to the force
majeure clause and the court’s finding that the defen-
dants’ actions were wilful and grossly negligent. This
appeal followed.
After oral argument in this court, we ordered the trial
court to articulate its factual findings as to: (1) the total
amount of additional rent found due and unpaid from
the defendants to the plaintiff, pursuant to § 18 of the
lease, as additional rent for the defendants’ aliquot por-
tion of sewer use and sewer assessment charges; (2)
the total amount of any late charges found due and
unpaid from the defendants to the plaintiff; and (3) the
total amount that the defendants overpaid the plaintiff
as additional rent for the defendants’ pro rata share of
the real estate taxes. The trial court articulated that the
defendants had failed to pay the sewer fees and found
‘‘the amount of $2999.60 as the total amount of addi-
tional rent found due and unpaid, as additional rent for
the defendants’ aliquot portion of sewer use and sewer
assessment charges.’’ The court also articulated that
the defendants had failed to pay $942.43 in late fees.
Notably, the court determined that the defendants had
overpaid the real estate taxes by $15,329.53.6
I
Prior to addressing the defendants’ claim that the
court erred in failing to consider that they had overpaid
the real estate taxes as rent, we set forth the applicable
standard of review and legal principles. Whether the
trial court properly found that the defendants breached
the lease by failing to tender rent is a question of fact.
‘‘Factual findings are subject to a clearly erroneous
standard of review. . . . A finding of fact is clearly
erroneous when there is no evidence in the record to
support it . . . or when although there is evidence to
support it, the reviewing court on the entire evidence
is left with the definite and firm conviction that a mis-
take has been committed. . . . In order to prevail in a
summary process action alleging nonpayment of rent,
a landlord must show that the tenant failed to tender
rent prior to the service of the notice to quit.’’ (Citations
omitted; internal quotation marks omitted.) 19 Perry
Street, LLC v. Unionville Water Co., 294 Conn. 611, 626,
987 A.2d 1009 (2010).
‘‘In construing a written lease . . . three elementary
principles must be [considered]: (1) The intention of
the parties is controlling and must be gathered from the
language of the lease in the light of the circumstances
surrounding the parties at the execution of the instru-
ment; (2) the language must be given its ordinary mean-
ing unless a technical or special meaning is clearly
intended; [and] (3) the lease must be construed as a
whole and in such a manner as to give effect to every
provision, if reasonably possible. . . . Where the lan-
guage of a written lease is unambiguous, our review of
the trial court’s interpretation of the lease agreement
involves a question of law subject to plenary review.’’
(Citation omitted; footnote omitted; internal quotation
marks omitted.) Firstlight Hydro Generating Co. v.
First Black Ink, LLC, 143 Conn. App. 635, 640, 70 A.3d
174, cert. denied, 310 Conn. 913, 76 A.3d 639 (2013).
Our resolution of this issue turns on the definition
of rent under the terms of the lease. The plaintiff and the
trial court treated rent as the ‘‘fixed minimum monthly
rental’’ pursuant to § 1a of the lease. Under the plain
language of the lease, however, rent consists of multiple
components, including the ‘‘fixed minimum monthly
rental,’’ the defendants’ pro rata share of real estate
taxes, and the applicable utility charges. This definition
of rent, as comprised of multiple components, comports
with the statutory definition of rent in General Statutes
§ 47a-1 (h), which provides that rent encompasses ‘‘all
periodic payments to be made to the landlord under
the rental agreement.’’
Recognizing that under the subject lease, rent con-
sisted of multiple components, we conclude that the
trial court inaccurately calculated the amount the plain-
tiff was due and the amount the defendants paid as
rent. The trial court failed to recognize that the defen-
dants had overpaid the rent. The trial court rendered
judgment of possession in favor of the plaintiff because
it found that the defendants wilfully had failed to pay
the sewer charges, which are a component of the rent
under the lease. This led to the conclusion that the
defendants had failed to pay rent due under the lease.
Looking at nonpayment of each component of the rent
in this piecemeal manner, however, fails to take into
account the fact that, under the lease, the real estate
taxes are also a component of the rent. The net result
is that the court found that the defendants violated the
lease by failing to pay the sewer charges as a component
of the rent, despite the defendants having actually over-
paid the rent by $12,329.93.7 On the basis of our review
of the record, we conclude that the trial court erred by
not considering the overpayment of the real estate taxes
as a component of the rent in concluding that the defen-
dants had failed to pay the sewer charges.8 In other
words, the court should have considered the total
amount of rent the defendants paid, not what they owed
for each component of the rent.
II
We next consider the defendants’ claim that the trial
court erroneously rejected their special defense of equi-
table nonforfeiture, which was based on their overpay-
ment of the real estate taxes. The trial court rejected
the defense of equitable nonforfeiture because it found
that the defendants were wilful and grossly negligent
by failing to pay the late fees and sewer charges.
The following additional facts are relevant to this
claim. The trial court found that the defendants had
violated the lease by wilfully failing to pay the late fees
and rendered judgment of possession in favor of the
plaintiff. The late fees, however, are not rent under the
lease but, rather, were a charge for the defendants’
failure to tender rent prior to the fifth of the month.
The trial court found that the defendants had paid rent
late and incurred late fees for the months of March,
April, and July, 2012, and March, 2013. The late fees
assessed on the basis of the rent due at the time of the
late payments totaled $942.43.
The following standard of review and legal principles
are applicable to this claim. ‘‘The doctrine of equitable
nonforfeiture is a defense implicating the right of pos-
session that may be raised in a summary process pro-
ceeding, and is based on the principle that [e]quity
abhors . . . a forfeiture.’’ (Internal quotation marks
omitted.) Connecticut Light & Power Co. v. Lighthouse
Landings, Inc., 279 Conn. 90, 106 n.15, 900 A.2d 1242
(2006). ‘‘Equitable principles barring forfeitures may
apply to summary process actions for nonpayment of
rent if: (1) the tenant’s breach was not [wilful] or grossly
negligent; (2) upon eviction the tenant will suffer a loss
wholly disproportionate to the injury to the landlord;
and (3) the landlord’s injury is reparable. . . . More-
over, [t]he doctrine against forfeitures applies to a fail-
ure to pay rent in full when that failure is accompanied
by a good faith intent to comply with the lease or a good
faith dispute over the meaning of a lease.’’ (Citation
omitted; emphasis added; internal quotation marks
omitted.) 19 Perry Street, LLC v. Unionville Water Co.,
supra, 294 Conn. 630.
‘‘In reviewing claims of error in the trial court’s exer-
cise of discretion in matters of equity, we give great
weight to the trial court’s decision. . . . [E]very rea-
sonable presumption should be given in favor of its
correctness. . . . The ultimate issue is whether the
court could reasonably conclude as it did. . . . Our
practice in this [s]tate has been to give a liberal interpre-
tation to equitable rules in working out, as far as possi-
ble, a just result. . . . Although we ordinarily are
reluctant to interfere with a trial court’s equitable dis-
cretion . . . we will reverse where we find that a trial
court acting as a court of equity could not reasonably
have concluded as it did . . . or to prevent abuse or
injustice.’’ (Citations omitted; internal quotation marks
omitted.) PIC Associates, LLC v. Greenwich Place GL
Acquisition, LLC, 128 Conn. App. 151, 155–56, 17 A.3d
93 (2011).
In the present case, the defendants raised the defense
of equitable nonforfeiture in the trial court and specifi-
cally asserted that they had overpaid portions of the
rent as a defense to the plaintiff’s three counts of non-
payment of charges due under the lease. The special
defense of equitable nonforfeiture was thus properly
raised. In regard to the court’s finding that the defen-
dants were wilful and grossly negligent, the defendants
raised as special defenses that they did not owe money
for the charges alleged in counts two and three because
they had overpaid all amounts due under the lease. The
court erred in its determination that the defendants
failed to prove the first prong of equitable nonforfeiture,
that is, that the defendants’ breach of the lease was not
wilful or grossly negligent. The record shows that the
defendants had a good faith dispute about the terms of
the lease and payments due, as the defendants have
overpaid the plaintiff by $11,387.50 due to the plaintiff’s
erroneous calculation of the pro rata share of the real
estate taxes that it billed them. We therefore disagree
that the defendants failed to prove that their breach
was not wilful or grossly negligent. The trial court failed
to consider the second and third prongs of equitable
nonforfeiture, whether the tenant will suffer a loss
wholly disproportionate to the injury to the landlord,
and whether the landlord’s injury is reparable. Pursuant
to the court’s factual finding that the defendants over-
paid the plaintiff by $11,387.50, it is clear that the final
two prongs are satisfied as well. Under the present
circumstances, we conclude that the eviction of the
defendants is wholly disproportionate to the plaintiff’s
injury and that any injury the plaintiff suffered from
the defendants’ failure to pay the late fees and sewer
charges was remedied by their substantial overpayment
of the real estate taxes. We thus conclude that the
trial court abused its discretion by rejecting the special
defense of equitable nonforfeiture.
The judgment is reversed and the case is remanded
with direction to render judgment for the defendants.
In this opinion the other judges concurred.
1
Goodale is the president and principal stock holder of Marlborough
Country Bakery & Deli, Inc.
2
The defendants additionally claim that the trial court erred by not
addressing their claim for rent abatement pursuant to a force majeure clause
in the lease. The defendants also assert that the trial court erred in not
considering their claim that the plaintiff erroneously applied the escalator
clause that allowed the plaintiff annually to raise the fixed minimum monthly
component of the rent, resulting in their being overcharged in an amount
that exceeded the plaintiff’s claim for sewer charges and late fees. Because
our resolution of the claims addressed in this opinion is dispositive of this
appeal, we need not address the defendants’ additional arguments.
3
The schedule stated that the ‘‘fixed minimum monthly rental’’ was $3150
beginning in June, 2002. This amount increased annually pursuant to the
escalator clause in the lease.
4
Section 1 of the lease further states: ‘‘Rent shall consist of:
‘‘1a. FIXED MINIMUM MONTHLY RENTAL
The amount of the FIXED MINIMUM MONTHLY RENTAL shall be the
amount specified in the SCHEDULE.
1b. TENANTS’ SHARE OF CHANGED MONTHLY EXPENSES
The amount of the TENANTS’ SHARE OF CHANGED MONTHLY
EXPENSES shall be the dollar amount of the percentage increase set forth
in the SCHEDULE as the ESCALATOR. This amount shall be cumulative
from year to year.
1c. TENANTS’ PRORATA SHARE OF REAL ESTATE PROPERTY TAXES
The TENANTS’ PRO-RATA SHARE OF REAL ESTATE PROPERTY TAXES
shall be the amount of any real property taxes, attributable to the TENANTS’
occupancy of the DEMISED PREMISES based upon the ratio of the total
square footage occupied by the TENANTS to the total square footage of the
SUBJECT PREMISES and personal property taxes for all personal property
within, appurtenant to or servicing the DEMISED PREMISES. TENANTS
agree to pay this amount, in month installments as RENT.
1d. TENANTS’ UTILITY AND MAINTENANCE CHARGES
TENANTS shall pay for any utility services to the DEMISED PREMISES,
including but not limited to, telephone, electricity, natural or propane gas,
cable television, trash pickup, servicing grease traps if applicable, or septic
tanks, if applicable, or for like services to the DEMISED PREMISES directly
to such provider. . . .’’
5
Count one specifically alleged that the defendants had failed to pay the
fixed monthly rental component of the rent for April, 2013.
6
The overpayment of the real estate taxes resulted from a discrepancy
in the assessment of the square footage of the demised premises and the
plaza as a whole. In its articulation, the court found that the defendants
were charged for their pro rata share of the real estate taxes on an assessment
of 2610 square feet of a total of 30,148 square feet in the plaza. The court
determined that, pursuant to the lease, the defendants should have paid
their pro rata share for 2400 square feet of a total of 37,347 square feet in
the plaza as listed in the town assessor’s records. Although the rent was to
be paid in monthly installments pursuant to the lease, the record reflects
that the plaintiff billed the defendants semiannually for their pro rata share
of the real estate taxes.
7
This amount reflects the overpayment of the real estate taxes after
subtracting what the defendants owed for the sewer charges, as both figures
were components of the rent. We note that the late fees are not a component
of the rent, but, rather, a separate contractually agreed upon charge for the
defendants’ failure to tender rent by the date specified in the lease. See
Grunsell v. Saaf, Superior Court, judicial district of Fairfield, Docket No.
CV-00-0338514-S (January 29, 2002) (defendant entitled to recover late fees
under terms of parties’ lease). We consider the trial court’s conclusion that
the defendants violated the terms of the lease because they failed to pay
the late fees in part II of this opinion.
8
The trial court stated in its memorandum of decision regarding the
defendants’ motion for articulation that it declined to consider the defen-
dants’ overpayment of the rent because the defendants did not plead the
defense of setoff in their answer or special defenses. We do not believe a
setoff needed to be pleaded, however, because the amount the defendants
claim that they overpaid arises out of the lease, which is the subject of the
complaint, rather than an independent transaction. See Savings Bank of
New London v. Santaniello, 130 Conn. 206, 210, 33 A.2d 126 (1943) (‘‘A
counterclaim arises out of the same transaction described in the complaint.
A set-off is independent thereof.’’). A counterclaim ordinarily does need to
be pleaded as a special defense; see Practice Book § 10-54; however, the
plaintiff still bore the burden of demonstrating that the defendants had failed
to pay rent due under the lease. The record reflects that the plaintiff failed
to meet that burden, as the court found that the defendants substantially
overpaid the real estate taxes, which were due as rent under the lease.