LLC v. LLC (2010)

MEMORANDUM OF DECISION

Plaintiff, Cedar Mountain, LLC, brings this action to collect various sums of money due under a written commercial lease of manufacturing premises by the plaintiff to the defendant, D & M Machine Screw Products, LLC.

Defendant, D & M Screw Machine Products, LLC, answered the complaint, together with special defenses and a counterclaim which alleges damages incurred resulting from plaintiff's acts or omissions during the tenancy.

The factual and procedural history of this action as determined by the court follows:

The plaintiff was in possession of several acres of land improved with a manufacturing building, which was leased to the defendants to operate a screw machine business on the premises.

When the parties entered into the lease of the premises, it was being advertised for sale as suitable for commercial or industrial use with a “For Sale” sign posted on the premises.   The defendant was aware that the sale of the premises would terminate the lease as the lease provided that the defendant would have six months to vacate the premises after the premises were sold.   Partially because of this provision in the lease, the rental was a nominal $10 per month, plus the payment, inter alia, for taxes, insurance, utilities and upkeep of the building, etc.   Furthermore, the plaintiff's managing partner, Charles Lowe, was a real estate agent and was actively seeking to sell the leased premises.   He actively encouraged and participated in the defendant's search for other quarters for the defendant's machine shop business, in anticipation of the eventual sale of the leased premises and the termination of the defendant's lease.

During the period of the lease, a fire occurred damaging the 400 amp electrical system.   The defendant could not operate its business for several weeks, until the electrical power was restored.   The plaintiff took over the repair and cost of reinstalling the electrical power.   To that end, the plaintiff had the electrical power provider, CL & P, evaluate the electrical requirements of the leased premises.   The CL & P reviewed the past power use and determined that defendant's electrical power needs would be satisfied with a 200 amp, three-phase service, rather than the previous service of 400 amp, three-phase service.   The defendant disagreed with this assessment by CL & P, insisting that a 400 amp service should be reinstalled, because the reduced usage of electrical power was an aberration resulting from a weak economy and that a business rebound would require the 400 amp service.   Nonetheless, the plaintiff who was paying for the repairs chose to go along with CL & P's assessment of the electrical need as being 200 amps and had it installed.

It turned out that the defendant's prediction of the need for a 400 amp service was more accurate and, subsequently, the defendant required the additional electrical power that 400 amps would provide.   Therefore, the plaintiff had it installed.

Although the plaintiff contends that the lease provided for repairs, including the fire damage to the electrical system, was the responsibility of the defendant and it (the plaintiff) should be reimbursed for the cost of those electrical repairs.   However, the court finds that it also served plaintiff's purpose to have an active paying tenant in the building.   The court also finds that the plaintiff voluntarily took over the electrical repairs responsibility from the defendant and paid for the repairs and decided what electrical repairs were required, consistent with his main purpose to sell the premises.   The defendant wanted the electrical power supply to be at 400 amps, the same as available prior to the fire.   The plaintiff refused and had the 200 amp service installed.   However, subsequently, the defendant's business did improve and the 200 amp power proved insufficient.   The plaintiff, after much pressure from the defendant, increased the electrical power to the prior level of 400 amps.

Further, during the early stages of the lease, the plaintiff advised the defendant to be prepared to move from the premises at any time, since the premises were actively being marketed for sale.   He offered his services as a real estate broker and accompanied the defendant in a search for a building suitable for defendant's business.   He also suggested financing arrangements for the move.

At that time, the plaintiff had a prospective buyer for the property.   However, a sale did not materialize.   Thereafter, the plaintiff did not continue to press the defendant to find manufacturing space elsewhere.   However, the defendant, knowing that the property was for sale, kept looking for space into which it could move.   Eventually, a building was found and the defendant moved out of the plaintiff's premises, while the lease was still in effect and the premises were still for sale without a buyer.

The plaintiff brought this action seeking money damages from the defendant for the balance of the period of the lease.

The defendant, inter alia, claims in a special defense that the plaintiff is estopped from claiming damages, since it, through its principal member, Charles Lowe, participated in and misled the defendant to believe that by prematurely vacating the premises, the lease would not be breached and the defendant would have six (6) months to vacate the premises.

The court finds that the plaintiff initiated and actively participated with the defendant in searching for an alternative site for the defendant to move to, when it appeared that the premises might be sold.   Its member, Charles Lowe, a real estate agent, offered his services to the defendant without a commission, since a sale of the premises would be highly beneficial to him as a principal member of the plaintiff LLC.

On the other hand, the defendant vacated the premises without the approval of the plaintiff, as specified in the lease, without notifying the plaintiff, until after the move was carried out and without giving the plaintiff an opportunity to mitigate its losses by immediately seeking another tenant.

The plaintiff, however, always professed to have a buyer ready to purchase the property and the building would be razed right after the defendant vacated the premises.

The defendant, despite the financially favorable terms of the lease, complained to the plaintiff that the uncertainty of the period of the term of the lease resulting from a sale of the premises, the inability to expand the business, the difficulties being raised by the plaintiff's environmental clean-up being carried out by the plaintiff on the premises, were harmful to his business.

A. The Court Finds the Complete Tenor of the Lease and the Plaintiff's Actions

The complete tenor of the lease and plaintiff's actions during the life of the lease was directed by the plaintiff toward the sale of the premises, while at the same time keeping the building occupied to minimize the expenses associated with the maintenance of the premises during the marketing period.

Although the operational plans of the plaintiff worked to his advantage for the most part, it was based upon the assumption that the sale of the property would occur during the lease period and that the defendant's business would not grow substantially, which would interfere with the plaintiff's marketing concept that the building and business in it were inconsequential and would not be a problem to remove them when a sale occurred.

However, problems arose.   An electrical fire occurred, environmental land issues arose, defendant's business increased and issues arose between landlord and tenant.   Also, the plaintiff had no firm prospect for sale of the property.   The defendant, who previously had shown no inclination to heed plaintiff's suggestions for moving out of the building, began to make claims that plaintiff's actions in limiting building and parking space use because of environmental concerns resulted in the defendant's determination that its business growth was not feasible in a building scheduled for demolition.   Additionally, environmental issues being handled by the plaintiff as part of the sale marketing plan interfered with the defendant's business use of the premises.   Thus, the defendant vacated the premises prior to the end of the lease.

Nonetheless, the court finds that the defendant breached the lease by vacating the premises, in violation of the lease terms, to plaintiff's damage.

However, the defendant's special defense addresses Charles Lowe's actions in behalf of the plaintiff of suggesting and actively participating with the defendant in a search for another building for the defendant to move to.   These actions occurred during the early portion of the lease, when the plaintiff viewed the prospect for the sale of the premises bright.   The plaintiff, at that time, suggested that the defendant find another business site to move to and that no breach of the lease would be involved.   However, the defendant was not enthusiastic about moving at that time.   Subsequently, when its business improved and there was a need for additional space, the defendant reversed his position and went searching for another site on its own and, finding one, vacated the plaintiff's premises.

The defendant contends that the plaintiff orally offered to waive the terms of the lease provision in the lease upon the defendant's early termination of occupancy.   The court, however, finds that waiver by the plaintiff was conditional upon the sale of the premises which had not occurred at the time the defendant vacated the premises.

Furthermore, at the defendant's insistence, the plaintiff had reinstated the electrical power service from 200 amps to 400 amps to accommodate the defendant's improving business and to return the electrical power to the level that preceded the fire.

On the other hand, the plaintiff adversely affected the defendant's efficient use of the premises by having a “For Sale” sign posted on the premises and by having environmental work done on the premises.

Although these negative actions by the plaintiff did not rise to the level of breaching the lease by the plaintiff, it did result in damage to the defendant's business and led it to adopt the plaintiff's earlier suggestions that the defendant seek other tenancy.

To summarize, the defendant entered into the lease herein, because it permitted the start of a business and space in which to operate it.   The defendant knew that the lease also had some serious flaws, one of which was the lease could be terminated at any time by the plaintiff/lessor, leaving the defendant/lessee only six months to vacate the premises.

The plaintiff entered into the lease primarily to take care of the expenses associated with the premises, while the property was marketed for sale.   But the plaintiff erred in its estimate of the length of time it would take to sell the property and also, that the lessee might have problems, including expansion of the defendant's business, which would require expenditures by the plaintiff that were inconsistent with the plaintiff's marketing of the premises.

The result was that the defendant was trying to expand its business, but was limited by the terms of the lease.   Eventually, the defendant vacated the premises, even though approximately two years of the lease remained before it would terminate.

Further, that the negative actions of the plaintiff damaged the defendant in lost productivity resulting from the plaintiff's installation of the reduced electrical power supply for the period after the installation of the 200 amp service by the plaintiff, until its replacement with the 400 amp service.

The court, therefore, finds that each party's actions resulted in damage to the other party as indicated herein.   That although the court finds these damages for the respective party, the court does not award interest on those damages to either party.

The court, having heard the parties, their evidence and witnesses, determines that the defendant breached the lease of the parties when it vacated the premises prior to the termination date of the lease.

That the plaintiff suffered damages from the breach of the lease by the defendant.

That the damages resulting from the defendant's breach of the lease is loss of rent of $240 plus unpaid taxes of $60,126.26 and insurance premiums of $2,111.21.   These amount to $62,477.47.

That the defendant also suffered damage as a result of the plaintiff's actions that were detrimental to the defendant's operation and the expansion of its business, when the plaintiff voluntarily assumed the responsibility for repairs to the electrical power system and installed an electrical power supply that was less than provided before the occurrence of the fire on the premises.   This reduction in the power supply kept the defendant from operating its machines as needed.   At the defendant's demand, the plaintiff eventually re-installed the power supply to the prior level of the electrical power delivered to the premises.

The period of reduced power damaged the defendant in the reasonable sum of $31,980.

Therefore, the court finds for the plaintiff on its complaint in the sum of $62,477.47;  and for the defendant on its counterclaim in the sum of $31,980, as a credit towards plaintiff's damages, without costs to each party.

Therefore, judgment may enter for the plaintiff in the sum of $30,497.47 on its complaint, after a credit for the defendant in the sum of $31,980, per its counterclaim, without costs to each party.

Kremski, J.T.R.

Kremski, Julius J., J.T.R.