LLC v. LLC (2010)

MEMORANDUM OF DECISION

The plaintiff, C & R Realty, LLC (C & R), commenced this action in two counts:  one count in breach of contract based on a commercial real estate lease against the defendant, Joe Ribeiro Bail Bonds, LLC (Ribeiro LLC), and a second count based on a guaranty agreement against the defendant, Joseph Ribeiro, by summons and complaint dated June 5, 2009.   The defendants filed answers together with special defenses and a counterclaim alleging breach of contract on the part of the plaintiff and claiming damages.   This matter went to trial commencing on November 24, 2010.

FACTS

The court makes the following findings of fact.   C & R is a limited liability company whose members are Roger LaGratta and his wife, Constance LaGratta.   C & R owns property known as 362 Main Street, Danbury, which consists of mixed commercial and residential uses.   The property is located at the northwest corner of the intersection of Main Street and Franklin Street.   The first floor is commercial with one storefront facing Main Street and two additional storefronts facing Franklin Street on the south side of the building.   A second floor houses three residential apartments.   The second floor covers all of the first floor except for the first thirteen feet on the side facing Main Street.   The roof section covering the first thirteen feet of the first floor facing Main Street is a roof with a very shallow, almost flat, pitch.   On the north side of the building an exterior wooden staircase leads to the second floor apartments.   The building is over two hundred years old.

Roger and Constance LaGratta acquired the property in 1980 as an investment and held title in their individual names until transferring title to C & R. At all relevant times herein C & R was the record title owner.   When the LaGrattas acquired title, the storefront facing Main Street and known as 362 Main Street was occupied by an establishment known as Horn's Variety Store and run by a gentleman named Caesar.   Caesar and Horn's Variety Store remained a loyal tenant of the LaGrattas and subsequently C & R for the next twenty-eight years until his oral month-to-month tenancy was terminated by C & R in February 2009 to make way for Ribeiro LLC. On January 29, 2009, C & R entered into a written commercial lease for the storefront space known as 362 Main Street with Ribeiro LLC for a term of two years commencing March 1, 2009, with a personal guaranty of the lease by Ribeiro.

The events leading up to the consummation of the lease agreement began in December 2008 at a chance meeting in a local Danbury diner between Roger LaGratta and Ribeiro through some mutual acquaintances.   Ribeiro was looking for a location to move his bail bonds business near the new Danbury police station and mentioned that to LaGratta.   LaGratta told Ribeiro that in fact he owned property directly across the street from the police station which Caesar and Horn's Variety currently occupied.   LaGratta told Ribeiro that he expected the premises could become available and invited him to call him if he wished to pursue it further.   Two days later Ribeiro called and began discussions.   LaGratta inquired as to what Ribeiro would expect to pay for rent.   Currently Caesar was paying $900 per month and was having difficulty consistently meeting that obligation.   Ribeiro indicated that he would be willing to pay more than twice what Caesar was currently paying.   The two reached an agreement in principle for a monthly rental of $1,900 with a $900 discount for the first month.   LaGratta warned Ribeiro not to go to the store or talk to Caesar until he had an opportunity to notify Caesar that he was terminating his lease.

Ribeiro subsequently signed the lease on behalf of Ribeiro LLC and the personal guaranty without ever having inspected the premises or having set foot in the store.   The written lease and guaranty were prepared by LaGratta's attorney.   Ribeiro paid the first month's rent and a security deposit of $1,900 at the time the lease and guaranty were signed.   In mid-February 2009, Ribeiro opened the local newspaper one day to read that Horn's Variety Store was going out of business and Ribeiro's bail bonds business was moving into the Horn's storefront location.   Since Ribeiro knew Caesar through the local community he immediately went to see Caesar and attempt to smooth over any hard feelings.   After their meeting, Ribeiro went so far as to have a dumpster delivered to the site early for Caesar's use in cleaning out his store.   After Caesar vacated the premises, Ribeiro had some difficulty in getting possession of the keys and after several failed attempts in early March resorted to having a locksmith open the doors and install new locks.

Ribeiro immediately put his son, Joseph Ribeiro, Jr., to work getting the premises ready for his bail bonds business.   It was Ribeiro's intention to remove leftover shelving and debris from the old Horn's variety store, remove broken floor tiles and any damaged floor down to the subfloor, install new tiles in the existing drop ceiling, install new ceiling lights and electrical work, repair any damaged sheetrock, paint and install carpet.   Prior to Ribeiro commencing any work, LaGratta applied for and obtained a waiver of site plan requirements from the planning and zoning department of the city of Danbury to permit a change of use from retail to business.   Ribeiro did not obtain a building permit for the work, mistakenly believing one was not necessary given the limited extent of the work he intended to undertake.   Over the course of the next two weeks, Ribeiro, Jr., removed the shelving, the ceiling tiles and the floor tiles.   He also removed the rusted awning in front of the storefront and rusted architectural accents along the fascia for fear that they were in danger of falling off.   During this time, Ribeiro and LaGratta met on an almost daily basis at the premises to monitor progress.   As the work progressed, Ribeiro would describe what he intended to have Ribeiro, Jr., do next and LaGratta would give his assent.

In mid-March, Leo Null, the Danbury building official, prompted by a complaint filed by a competitor of Ribeiro's bail bonds business, came to the premises to inspect the nature and scope of the work being undertaken by Ribeiro.   In the process of removing shelving along the north wall, the top of the masonry cellar wall along with some of the wooden framing had been exposed.   Null observed serious structural damage in that the entire sill plate, along with portions of the wall framing studs themselves, were rotten as the result of years of water infiltration from the exterior wooden staircase and deck.   In addition, the masonry wall itself had deteriorated to such an extent that Null was able to break the crumbling masonry apart with nothing but a key.   Null also observed deflection or sagging of the floor.   Null immediately issued a stop work order and directed Ribeiro, Jr., to open up sections of the flooring and north wall so he could further observe the extent of the structural damage.   A meeting was called for later that afternoon.   Among those in attendance were Null, Ribeiro, LaGratta, Ribeiro, Jr., Ribeiro's attorney and the fire marshal.   For the first time sufficient debris and material had been removed from the premises that Ribeiro was able to see the entire floor sloping toward the rear of the premises.   Null had Ribeiro, Jr., open more sections of the north wall and floor.   At this point it was now apparent that the north wall had fallen off the foundation toward the outside of the building and was leaning inward.   This wall which supported the exterior wooden staircase to the second floor was in danger of collapse.   Exposing the floor joists revealed sagging beams that did not meet current building code standards.

In an attempt to continue moving forward, LaGratta requested that Ribeiro, Jr., prepare estimates for the work necessary to repair the structural damage.   Over the course of the next several weeks or month as Null and Ribeiro, Jr., continued to explore the nature and extent of the structural repairs required to bring the premises up to code, Ribeiro and LaGratta began a course of discussions over how the repairs would be accomplished and paid for.   It was Ribeiro's position that, as landlord, the repairs were the responsibility of C & R, but he indicated a willingness to compromise and contribute toward the cost.   LaGratta, on behalf of C & R, once he saw the scope of the problem, took the position that he would pay for none of the repairs.   As discussions progressed he would seem to indicate a willingness to pay for the repairs if Ribeiro would offer some contribution but in the next conversation would withdraw his offer.   This process continued for at least the next month.   As April rolled around, LaGratta indicated that he would discount the month's rent and accept payment of $1,000 in satisfaction because the premises were not habitable.   Ribeiro agreed and tendered the amount.   Toward the end of April, Ribeiro and LaGratta were at an impasse.   Ribeiro formally notified LaGratta that because of C & R's failure to live up to its obligations to undertake the structural repairs, Ribeiro LLC was unable to enjoy use and occupancy of the premises and was therefore formally abandoning the premises.   With that, Ribeiro formally surrendered the keys to LaGratta.

During the trial of this matter, both Ribeiro and LaGratta professed that neither had a clue as to the serious structural problems of the building at the time the lease was entered into or before work was commenced exposing the problems.   Each also expressed their beliefs that the other neither knew nor had reason to know of the serious structural problems of the building at the time the lease was entered into or before work was commenced.   As to who was responsible for the structural repairs, LaGratta clearly articulated his position to the court.   He testified that he believed that because the structural disrepair of the building only came to light as the result of Ribeiro's activities in cleaning up the premises and making it suitable for his offices, Ribeiro must pay for all necessary repairs.   LaGratta surmised, perhaps wistfully so, that if Ribeiro had never moved in and started renovating the premises and Caesar had stayed for the next ten years or more, no one would have ever known of the problems and life would have gone on as normal.   LaGratta stated repeatedly and emphatically that because Ribeiro “exposed it” he was “responsible for all of it.”

After Ribeiro surrendered the premises, LaGratta engaged High Quality Builders, LLC to commence work on the structural repairs.   The nature and extent of the structural problems were so severe that LaGratta had to engage an architectural and engineering firm to draw up plans.   Work formally started in July 2009 and finished by March 2010.   By March 1, 2010, C & R had a new tenant for the premises.   Over the course of the eight months of work the premises were almost entirely reconstructed from the inside out.   New footings were poured in the cellar.   As temporary walls were constructed to support the building above, additional new footings and concrete walls were poured for the north foundation wall and the foundation walls under the front windows.   A new concrete wall was poured along the inside of the first thirteen feet of the south cellar wall to “sister up” and support the weakened original masonry wall.   Alex Leite of High Quality Builders, LLC testified that the building got “pretty much a new foundation.”   The entire north wall of the first floor was replaced.   New floor joists were installed underneath the entire first floor along with steel beams.   Leite testified that he “reframed the entire building.”   The ceiling was unsafe and had to be replaced.   The building required a new roof.   All new windows were installed.   The interior was completely refinished with flooring, ceiling, sheetrock, bathroom, heating and air conditioning, electrical and lighting.   All new smoke alarms and fire safety equipment were installed.   Leite testified that it was impossible to undertake the structural repairs without entirely gutting the interior and systems of the building.

Ultimately, C & R spent $169,420.16 to bring its two-hundred-year-old, structurally unsound and crumbling edifice, in danger of imminent collapse, up to code as a completely reconstructed new/old building.   Of this sum, C & R claims $163,759.94 to be the responsibility of Ribeiro LLC and Ribeiro, conceding the sum of $5,660.22 to be for repairs of other parts of the building clearly outside of and remote from the demised premises.   C & R also claims damages in the nature of lost rent for the period of time that the premises were off the rental market from May 1, 2009 through February 28, 2010, ten months at $1,900 per month, a total of $19,000.

On its counterclaim, Ribeiro LLC claims damages of the amount of the security deposit paid in the amount of $1,900 together with costs which it incurred in cleaning out the building and toward renovation work it commenced.   Ribeiro LLC introduced no evidence during the trial as to what those costs of cleanup and renovation might be.   Ribeiro has made no claim for the rent paid for the months of March and April 2009.

DISCUSSION

I

The resolution of this matter turns entirely on the issue of what the rights and obligations of the parties to this commercial lease were once the nature and extent of the structural damage to the premises was discovered.   For that we look to the written lease agreement.  “[A] lease is a contract, and, therefore, it is subject to the same rules of construction as other contracts ․ The standard of review for the interpretation of a contract is well established.   Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact ․ [when] there is definitive contract language, the determination of what the parties intended by their ․ commitments is a question of law ․” (Citation omitted;  internal quotation marks omitted.)  Bristol v. Ocean State Job Lot Stores of Connecticut, Inc., 284 Conn. 1, 7, 931 A.2d 837 (2007);  Romanezak v. Avalonbay Communities, Inc., 122 Conn.App. 499, 507, 988 A.2d 272 (2010).

The lease in question contains provisions which speak to both the obligations of the landlord as well as the tenant with regard to maintenance and repairs.   (Exhibit 78.)   The court finds the lease agreement to be clear and unambiguous.   With regard to the tenant the lease provides the following provisions:  “Throughout said term Tenant shall take good care of the demised premises, fixtures and appurtenances and all alterations, additions and improvements to the same;  make all repairs and replacements in and about the same necessary to preserve them in good order and condition ․” The lease addendum provides the following additional provisions regarding the obligations of the tenant:  “The Tenant acknowledges that it is accepting the premises in an as is condition and that it shall be responsible for all alterations and repairs it wishes to perform.   The Tenant acknowledges that it shall be responsible for the removal of any personalty and trade fixtures left by the previous tenant.”

These provisions address the tenant's obligation to keep the premises in a reasonable state of repair, to inspect and acknowledge the premises as acceptable for tenant's use and to be responsible for all alterations which the tenant requires.   These provisions do not absolve the landlord of its responsibilities set forth in other provisions of the lease.

The following provisions of the lease set forth the obligations of the landlord regarding repairs to the premises:  “Landlord will keep in repair the structural exterior of the Demised Premises ․ provided that the damage thereto shall not have been caused by negligence or act of Tenant, in which event Tenant shall be responsible therefore.”   In addition, the lease sets forth the rights and obligations of the parties in the event of damage which renders the demised premises untenantable:  “And it is further agreed between the parties to these presents, that in case the building or buildings erected on the premises hereby leased shall be partially damaged by fire or otherwise, the same shall be repaired as speedily as possible at the expense of the said Landlord;  that in case the damage shall be so extensive as to render the building or demised premises untenantable the rent shall cease until such time as the building shall be put in complete repair ․” (Emphasis added.)

The court finds this last provision to be controlling as to the facts of this case.   The premises were clearly damaged to such an extent that they were rendered untenantable.   There is no requirement that such damage have resulted suddenly or violently.   In this case, the damage resulted from years of water infiltration and neglect, but the result was devastating and rendered the demised premises untenantable.

Once the nature and the extent of the structural damage were revealed, it became the obligation of the landlord to make the necessary repairs and it suspended the obligation of the tenant to pay rent.   There is nothing in the lease which absolved the landlord from its obligations simply because the act of the tenant in making the repairs and alterations which it was entitled and obligated to do lead to the discovery of the structural damage.   LaGratta's intransigence on this issue could not have been made clearer to this court than by his own testimony.   The court finds the plaintiff in breach of the lease agreement.

II

After the damage had been discovered, Ribeiro continued to work with LaGratta in good faith, even agreeing to pay rent, albeit a reduced amount, for the month of April.   By late April it became apparent to Ribeiro that LaGratta had no intention of fulfilling his obligations.  “An anticipatory breach of contract occurs when the breaching party repudiates his duty before the time for performance has arrived ․ Its effect is to allow the nonbreaching party to discharge his remaining duties of performance, and to initiate an action without having to await the time for performance ․ The manifestation of intent not to render the agreed upon performance may be either verbal or nonverbal ․ and is largely a factual determination in each instance.   (Citations omitted;  internal quotation marks omitted.)  Pullman, Comley, Bradley & Reeves v. Tuck-It-Away, Bridgeport, Inc., 28 Conn.App. 460, 465, 611 A.2d 435, cert. denied, 223 Conn. 926, 614 A.2d 825 (1992).   The Restatement (Second) of Contracts § 254(1) states that [a] party's duty to pay damages for total breach by repudiation is discharged if it appears after the breach that there would have been a total failure by the injured party to perform his return promise.   2 Restatement (Second), Contracts § 254, p. 290 (1981).”  (Internal quotation marks omitted.)  Land Group, Inc. v. Palmieri, 123 Conn.App. 84, 92, 1 A.3d 234 (2010).   The court finds Ribeiro justified in considering LaGratta's conduct on behalf of C & R to be a breach of the lease agreement and finds Ribeiro LLC discharged of its remaining duties of performance under the agreement.

III

Ribeiro LLC requested damages in its counterclaim against C & R for breach of the lease agreement.   However Ribeiro LLC offered no evidence of damages at the trial.   Ribeiro LLC is apparently not even requesting a refund of the rent paid for April 2009 after the premises were found to be untenantable.   Ribeiro LLC merely seeks a refund of its $1,900 security deposit.

CONCLUSION

For the foregoing reasons, the court enters judgment on the plaintiff's complaint in favor of the defendants, and enters judgment on the defendants' counterclaim in favor of the defendants in the amount of $1,900 against the plaintiff.

Michael G. Maronich, Judge

Maronich, Michael G., J.