LLC v. Argyle Capital Management Corporation (2011)

MEMORANDUM OF DECISION

The plaintiff, Pan Handle Realty, LLC (“Pan Handle”), is a Connecticut Limited Liability Company which constructed a luxury home located at 4 Pan Handle Lane, Westport, Connecticut.   The plaintiff attempted to sell the home for a purchase price of nearly $6 million and that price was subsequently lowered.   The attempts to sell the home were unsuccessful.

The defendant, Robert Olins, expressed an interest in renting the property and filed an application listing a rent of $12,000 per month.   A draft lease was prepared which the defendant Olins forwarded to his attorney in New York.

On January 17, 2009 the defendant Olins met with a representative of the plaintiff, discussed the draft, made some hand written changes on the document, and signed a document entitled “House Lease.”   The rent was in the amount of $138,000 for a lease period running from January 26, 2009 to a termination date of January 18, 2010.   The reduction from the $12,000 a month rent to $138,000 was made in view of the fact that the entire rent for the year was in fact prepaid.   The check provided by the defendant Olins was drawn on the account of the defendant Argyle Capital Management Corporation, a company in which the defendant Olins was a sole shareholder and which at the time of trial had been inactive in recent years.   The lease also provided that certain minor modifications be performed by the plaintiff which was in fact done.   The lease also provided that the furnishings in the house would be removed by the plaintiff.   The house had been furnished or “staged” by the plaintiff's realtor so as to enhance the luxury home to be more attractive to perspective purchasers.   The furniture was in fact removed by the plaintiff.   The rental check provided by the defendant Olins was dated January 26 and was deposited by the plaintiff in its account on that date.   However the check was not honored because the defendant Olins had issued a stop payment order.   A few days later the plaintiff received a letter from the attorney for Mr. Olins stating that defendant Olins is unable to pursue any further interest in the property.   The plaintiff claims damages in the amount of the rental payments of $138,000 plus interest, plus attorneys fees as provided for in the lease agreement, as well as the sum of $8,000 which are for utility payments which the defendant Olins was obligated to pay.   The defendant claims that no valid contract was agreed to and the plaintiff failed to mitigate its damages.

A lease is simply a contract and subject to the same rules of construction and interpretation as other contracts.  19 Perry Street, LLC v. Unionville Water Company, 294 Conn. 611, 622 (2010).  “To form a valid and binding contract in Connecticut, there must be a mutual understanding of the terms that are definite and certain between the parties ․ To constitute and offer and acceptance sufficient to create an enforceable contract, each must be found to have been based on an identical understanding by the parties ․ If the minds of the parties have not truly met no enforceable contract exists.   An agreement must be definite and certain as to the terms and requirements ․ So long as any essential matters are left open for further consideration the contract is not complete, ․ A contract requires a clear and definite promise.”  Geary v. Wentworth Laboratories, Inc., 60 Conn.App. 622, 627 (2000).

At a meeting of January 17, the defendant Olins and the representative of the plaintiff went into a separate building leaving other people in the main house.   When the parties returned some handwritten changes had been made to the lease agreement and both parties had signed the document.   The defendant Olins had also provided the check representing the prepayment for rent rather than the installments.   By that time, the defendant Olins had had the opportunity to provide a copy of the draft of the lease to his attorney in New York and the fact that the defendant Olins expected that a clean copy would be prepared does not diminish the fact that he signed the agreement and provided a check in payment of the rent.   The defendant Olins also claims that the security deposit of $24,000 and the check for insurance had not yet been provided by the defendant Olins does not diminish the fact that there was a meeting of minds as to the essential terms of the agreement and the keys to the property were available to the defendant Olins.   The Court therefore finds that the lease agreement was a valid and binding contract which the defendant Olins has breached.

“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 naturally flow from such breach.”   Rokalor, Inc. v. Connecticut Eating Enterprises, Inc., (citations omitted) 18 Conn.App. 384, 389, (1989).   Accordingly the Court finds that the plaintiff is entitled to recover as damages against the defendant Olins the sum of $138,000 plus interest, plus $8,000 in utility fees paid by the plaintiff and attorneys fees as provided for in the agreement.

The plaintiff does have the burden to make reasonable efforts to mitigate its damages.  Vespoli v. Pagliarulo, 212 Conn. 1, 3 (1989);  Danpar Associates v. Summervilie Mills Sales Room, Inc., 182 Conn. 444, 446 (1980).   The plaintiff who was claiming damages for a breach of a lease is under a duty to mitigate its damages which requires it to make reasonable efforts to minimize the damages which includes taking steps to relet the premises.   Rokalor v. Connecticut Eating Enterprises, supra at 390.   The defendant however bears the burden of proving that the plaintiff failed to exercise reasonable care to mitigate its damages.  Lynch v. Granby Holdings, Inc., 37 Conn.App. 846, 850 (1995) appeal dismissed 235 Conn. 941 (1996).   The defendant asserts that he's demonstrated his burden of proving the failure to mitigate damages by virtue of the fact that after the defendant failed to carry through his obligations under the lease, the property was advertised for a higher rent than the defendant had agreed to pay.   However prior to the execution of the lease the defendant had furnished the property (i.e., staged) and all the furnishings were removed prior to the date of the beginning of the lease.   However, those furnishings were provided by the real estate broker and were not available after the furnishings had been removed.   Accordingly the plaintiff expended the sum of $80,000 to restage the property to attempt to re-lease the property.   There is no evidence that the plaintiff was not responsive to perspective lessees as indicated by the response made by a friend of the defendant who was inquiring about leasing the property even though he had no intention of doing so.   The defendant has failed to sustain his burden of demonstrating that the plaintiff failed to take reasonable steps to mitigate its damages.

The claim against Argyle Capital Management Corporation are based upon the actions of Mr. Olins.   There is no evidence that Argyle Capital Management Corporation owed any obligation or debt to the plaintiff and accordingly judgment is entered in favor of that defendant.

The lease also calls for attorneys fees, pursuant to the agreement of the parties.   A hearing will be held on Monday, June 13, 2011 at 10:00 a.m. in Courtroom 6D to resolve the issues of attorneys fees and interest.   The effect of this decision is not operative until the Court makes its rulings after that hearing.

RUSH, J.T.R.

Rush, William B., J.T.R.