Northeast Management Group, Inc. v. Daniel F. Moriarity et al. (2011)

MEMORANDUM OF DECISION

This is an action wherein damages are sought based on claims of breach of a commercial lease for non-payment of rent and unauthorized alterations.   The plaintiff, Northeast Management Group, Inc. (“Northeast”), commenced this action against the defendants, Daniel Moriarty, Judy Moriarty, and Summit Exterior Works, LLC (“Summit”) by summons and complaint on January 12, 2010.   The plaintiff thereafter filed an amended complaint on February 26, 2010, and second amended complaint on September 15, 2010.   The plaintiff's complaint contains six counts:  counts one and three allege breach of contract based on a commercial real estate lease, counts two and four contain claims of unjust enrichment, count five is based upon a CUTPA claim, and count six asserts a claim for breach of implied covenant of good faith and fair dealing.   On April 21, 2010, the defendants filed answers together with four special defenses:  first, that all improvements done under the lease were done with the plaintiff's permission and consent;  second, that upon termination of the tenancy, the plaintiff examined the premises and deemed it to be in good and acceptable condition;  third, the improvements were typical leasehold improvements consisting of the construction of offices and were not unique to the premises;  and fourth, that the plaintiff's claim is barred by the doctrine of payment.   The plaintiff on June 22, 2010, filed a reply denying all of the defendants' special defenses.

The plaintiff claims breach of contract and unjust enrichment for unpaid rent from May 2009 through September 2009.   The defendants agree that rent is owed for May 2009 to August 2009, but claim that they gave a key to a plaintiffs representative at the beginning of September and do not owe rent for September 2009.   The plaintiff alleged that the defendants vacated the premises on or about September 9, 2009.   As a result of the alleged material breach of the lease, the plaintiff claims that the defendants owe the plaintiff a sum of $8,050 for unpaid rent of five months, exclusive of interest and late fees.   Whereas the defendants state they owe $6,440 for four months of rent.

The plaintiff further alleges that it has sustained damages as a result of a material breach of the lease and that the defendants were unjustly enriched due to the defendant making unauthorized alterations to the premises.   The plaintiff still further alleges that the defendants committed unfair and deceptive trade practices in the course of their trade or commerce pursuant to General Statues §§ 42–110a et seq.   And, finally, the plaintiff alleges that the defendants breached the implied covenant of good faith and fair dealing.

The defendants counter that the plaintiff knew about the planned alterations to make a warehouse-like space into a two-story office.   The defendants claim that the plaintiff and his representatives knew about the alterations and never complained about it.   Initially, the plaintiff sought damages which included $5,825 for the cost of removing the office structure.   However, the plaintiff thereafter decided to finish work on the structure at a cost of $4,475.04

In summary, the plaintiff is seeking $8,050 for unpaid rent and $4,475.04 for the cost of completing the structure minus the security deposit in the amount of $3,120.   The net amount of the plaintiff's alleged damages are $9,405.04.   In addition, the plaintiff seeks consequential and incidental damages;  interest;  punitive damages under General Statutes § 42–110;  cost of collection;  attorneys fees;  and such other and further relief as the Court deems necessary and proper.

The matter went to trial on October 7, 2010.   The parties were thereafter ordered to file post-trial memoranda detailing damages and proposed findings of fact.   The plaintiff filed its memorandum on October 14, 2010, and the defendants filed its on October 20, 2010.

FINDINGS OF FACT

After hearing the testimony and weighing the evidence, the court finds that the following facts, relevant to the Court's order, were either admitted in the pleadings or proven at trial by a fair preponderance of the evidence.   Further findings of fact will be discussed where appropriate.

Northeast owns a commercial building located at 196 Terminal Lane, New Haven, Connecticut (“Terminal Lane”).   Northeast entered into a lease with Summit for 2,500 square feet in Terminal Lane, Unit 1–F in exchange for rent payable in the monthly amount of $1,560.   The security deposit was $3,120.

The parties entered into a lease as of July 1, 2005.   From July 1, 2005 to June 30, 2007, the rent was paid in the amount of $1,560 per month.   As of July 1, 2007, the rent increased to $1,610 per month pursuant to the terms of the lease.   The defendants paid the monthly rent until May 2009.   The defendants did not pay rent from May to August 2009.   The defendants vacated the premises during September 2009.   Under the terms of the lease, if the defendants desired to make alterations to the premises, they first needed to obtain the consent of the plaintiff.   The defendants made alterations to the premises so that the defendants could use the space for an office.   The brother of an officer of the plaintiff corporation brother saw the alterations to the premises as they were being constructed, and the court assumes informed the plaintiff.   The plaintiff was aware of the completed alteration to the leasehold in May 2008, but took no action at that time against the defendants.   Other tenants of the plaintiff had also made alterations.   The alterations by the defendants were not unique to the premises or business of the defendants.   The defendants alterations to the leasehold premises were impliedly authorized.

DISCUSSION

I. Breach of Contract

The essential elements for a cause of action based on breach of contract are:  (1) agreement formation, (2) performance by one party, (3) breach of the agreement by the other party, (4) direct and proximate cause, and (5) damages.  McCann Real Equities Series XXII, LLC v. David McDermott Chevrolet, Inc., 93 Conn.App. 486, 503–04, 890 A.2d 140, cert. denied, 277 Conn. 928, 895 A.2d 7 (2006).  “[A] breach of contract claim ․ requires proof by a preponderance of the evidence.”  Foley v. Huntington Co., 42 Conn.App. 712, 732 n.7, 682 A.2d 1026, cert. denied, 239 Conn. 931, 683 A.2d 397 (1996).

“A lease is nothing more than a contract ․ Thus, as in any other contract action the measure of damages is that the award should place the injured party in the same position as he would have been in had the contract been fully performed ․ As a consequence, the unpaid rent, while not recoverable as such, may be used by the court in computing the losses suffered by the plaintiff by reason of the defendant's breach of contract of lease.   The plaintiff would be entitled to recover the damages which would naturally follow from such a breach ․ [I]n an action for breach of a lease, the amount of rent agreed to by the parties is a proper measure of damages.”  (Citations omitted;  internal quotation marks omitted.)  Rokalor v. Connecticut Eating Enterprises, 18 Conn.App. 384, 388–90, 558 A.2d 265 (1989).

The plaintiff has proven its breach of contract claim due to nonpayment of rent for the Terminal Lane leasehold commercial lease by a preponderance of the evidence.   The court has found that the defendants failed to pay monthly installments of rent due on the lease from May 2009 to August 2009.   The defendants further retained possession of the premises during the month of September 2009.   Thus, the defendants owe the plaintiffs for five months of rent based upon its breach of contract.

II. Unjust Enrichment

“Unjust enrichment applies wherever justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract ․ A right of recovery under the doctrine of unjust enrichment is essentially equitable, its basis being that in a given situation it is contrary to equity and good conscience for one to retain a benefit which has come to him at the expense of another ․ Plaintiffs seeking recovery for unjust enrichment must prove (1) that the defendants were benefitted, (2) that the defendants unjustly did not pay the plaintiffs for the benefits, and (3) that the failure of payment was to the plaintiffs' detriment.”  (Internal quotation marks omitted.)  Vertex, Inc. v. Waterbury, 278 Conn. 557, 573, 898 A.2d 178 (2006).  “Unjust enrichment applies when justice requires compensation to be given for property or services rendered under a contract, and no remedy is available by an action on the contract.”   Bolmer v. Kocet, 6 Conn.App. 595, 612, 507 A.2d 129 (1986).   Thus, an action which seeks damages for unjust enrichment is allowable as an alternative basis for recovery in the event of a failure to prove a breach of contract claim.   See id.

The plaintiff has failed to prove it is entitled to damages on the basis of its unjust enrichment claim.   The plaintiff has adequate remedy available on the contract in enforcing its rights for nonpayment of rent as the court has found that contract was breached.   Further, based upon the court's finding of implied consent to the defendants' making of alterations to the leasehold, neither equity or justice requires a finding of unjust enrichment for the alterations made by the defendants to the leasehold premises.

III. CUTPA

“It is well settled that in determining whether [an act or] practice violates CUTPA [Connecticut courts] have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when [an act or] practice is unfair ․” (Internal quotation marks omitted.)  Normand Josef Enterprise, Inc. v. Connecticut National Bank, 230 Conn. 486, 522, 646 A.2d 1289 (1994).  “Connecticut courts, when determining whether a practice violates CUTPA, will consider (1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness;  (2) whether it is immoral, unethical, oppressive, or unscrupulous;  (3) whether it causes substantial injury to consumers (or competitors or other businessmen) ․ Thus, a violation of CUTPA may be established by showing either an actual deceptive practice ․ or a practice amounting to a violation of public policy.”  (Internal quotation marks omitted.)  De La Concha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 433–34, 849 A.2d 382 (2004).  “[W]hether a practice is unfair and thus violates CUTPA is an issue of fact.”  (Internal quotation marks omitted.)   Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 22, 938 A.2d 576 (2008).

Moreover, “not every contractual breach rises to the level of a CUTPA violation.”  Hudson United Bank v. Cinnamon Ridge Corp., 81 Conn.App. 557, 571, 845 A.2d 417 (2004);  see also Calandro v. Allstate Ins. Co., 63 Conn.App. 602, 617, 778 A.2d 212 (not every misrepresentation rises to level of CUTPA violation).  “[A]bsent substantial aggravating circumstances, [a] simple breach of contract is insufficient to establish [a] claim under CUTPA.”   Lydall v. Ruschmeyer, 282 Conn. 209, 248, 919 A.2d 421 (2007).   Generally, “the aggravating factors present [must] constitute more than a failure to deliver on a promise.”  Greene v. Orsini, 50 Conn.Sup. 312, 315, 926 A.2d 708 (2007).

The plaintiff has not met its burden to show that the defendants' actions constitute a CUTPA violation.   This matter is at its crux a straightforward commercial lease dispute based upon a simple breach of contract.   There was no factual showing that the plaintiff's actions met any of the criteria of the cigarette rule, such as being offensive to public policy or unscrupulous behavior by the defendants, or that there were any other aggravating circumstances present in the circumstances surrounding the breach of the commercial lease.

IV. Breach of Implied Covenant of Good Faith and Fair Dealing

“[A] commercial lease ․ impose[s] a duty of good faith and fair dealing on the landlord and tenant.”   McKee Realty, LLP v. Fawns Plus III, LLC, Superior Court, judicial district of Hartford, Docket No. 134356 (January 9, 2006, Bentivegna, J.).  “[The] duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship ․ In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement ․ The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term ․ To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith ․ Whether a party has acted in bad faith is a question of fact ․” (Citations omitted;  internal quotation marks omitted.)  Renaissance Management Co, Inc. v. Connecticut Housing Finance Auth., 281 Conn. 227, 240, 915 A.2d 290 (2007).   Our Supreme Court has recognized “bad faith” as “the opposite of good faith, generally implying a design to mislead or to deceive another ․ [B]ad faith is not simply bad judgment or negligence, but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity ․ it contemplates a state of mind affirmatively operating with furtive design or ill will.”  Buckman v. People Express, Inc., 205 Conn. 166, 171, 530 A.2d 596 (1987).

The plaintiff has not proven its claim for breach of implied duty of good faith and fair dealing claim.   The court has found no factual basis in the evidence put forth by the plaintiff to show that the defendants acted in bad faith in its failures in the contractual relationship with the plaintiff.

ORDER

Based on the foregoing, the court finds the following and judgment shall enter as set forth:

The plaintiff has proven its breach of contract claim for non-payment of rent by a fair preponderance of the evidence.   The defendants did not pay rent from May to August 2009.   The defendants vacated the premises during September 2009.   The defendants owe five months of rent in the amount of $8,050.

The plaintiff has not proven its unjust enrichment claims or its breach of contract claim relating to the alterations to building.   The defendants made alterations which were impliedly authorized.   However, there was a problem with the railing of the alteration for which the court finds the amount of $300 to be appropriately owed.

The plaintiff has not proven its CUTPA claim or its claim of breach of implied duty of good faith and fair dealing.

The defendants have proven their first and third special defense, but have failed to prove their second and fourth special defense.

After deducting the security deposit of $3,120, the court determines that the defendants owe the plaintiff damages in the total amount of $5,230.   There are no punitive damages, attorneys fees or prejudgment interest.

BY THE COURT

Richard E. Burke, Judge

Burke, Richard E., J.