NECG v. UNHK LLC (2012)

MEMORANDUM OF DECISION RE MOTION FOR IMMEDIATE POSSESSION

INTRODUCTION

This action is one of thirty-four consolidated cases involving leases of property that are operated by independent dealers as service stations.   The plaintiffs, Getty Properties Corp. (Getty), NECG Holdings Corp. (NECG), and CCO, Inc. have filed a summary process proceeding against the defendant as one of the thirty-four consolidated actions before this court.   Each of the defendants in the consolidated actions were originally tenants to a sub lease with Green Valley Oil. As a result of a bankruptcy action involving Green Valley Oil, the plaintiffs became the owners of the various commercial properties and entered into agreements for the use and occupancy of the property with various operators of the service stations.   The plaintiff established a fee for use and occupancy which was to be paid on a monthly basis in accordance with an agreement dated August 22, 2012.   The plaintiff contends that the defendant UNHK, LLC has breached the agreement and failed to timely pay the rental fee for the month of October 2012.   It seeks immediate possession of the property.   The defendant contends that it made the payment for the month of October 2012 and that the timeliness argument is premature because of the lack of notice, thus the motion for immediate possession should be denied.

DISCUSSION

The defendant UNHK, LLC operates a service station with a small store at 208 Foxon Road in Branford, Connecticut.   The plaintiff contends that UNHK, LLC has failed to make payments for use and occupancy as agreed in the Escrow Agreement between Getty Properties et al. and the defendant dated August 22, 2012.   In particular, the defendant offered the testimony of Mr. Rashid Khan as to the payments made and his operation of this station.   Mr. Khan contends that the payment was made to the plaintiff within the period of time set forth in Paragraph 7 of the Escrow Agreement.   Mr. Khan recognized the postage date of the check sent as October 22, 2012.   No one contends that the defendant did not issue a check but the plaintiff contends that the payment was made after the time period allowed within the Escrow Agreement.   The agreement states:  “If any Defendant fails to send (a) the Make–Up checks within fifteen (15) days after the execution of this agreement, or (b) the Monthly check within fifteen (15) days after the first day of the applicable month, Plaintiffs' counsel shall notify Defendant's counsel of such missed payment.   If such Defendant fails to make payment within two business days of such notification, Plaintiff may file a motion for judgment of immediate possession of the station occupied by the defaulting Defendant.”

The testimony and evidence of this action clearly supports a position that the defendant did not pay the escrow amount within fifteen days after the first of the month for the month of October 2012.   However, the defendant testified that the check was paid to the plaintiff within the two-business-day period after the fifteen-day period and in the alternative the defendant contends this motion for immediate possession is premature because the plaintiff has failed to demonstrate notice pursuant to the Escrow Agreement.   The testimony of Mr. Khan supports his ongoing payments within the time period permitted by the Agreement with the exception of the payment at issue.   He has been in business at this location for thirteen years.   He continues to struggle with the business but it is his only means of support for his family.

As to the two-day period there is a disagreement as to manner of calculating the two days.   The defendant contends that he became aware of the failure to pay on Thursday, October 18, 2012.   However, the defendant denies that there was proper notice pursuant to the Agreement as to the intent to evict.   Thereafter the check was mailed on Monday October 22, 2012.   The plaintiff contends this did not satisfy the two-day limit.   If the calculation involves the two days being Friday and Monday the defendant has satisfied the terms of the Agreement.   However, if one of the terminal days is included as part of the calculation of time, the time would be beyond the two-day window.   In this regard, the court inquired of the parties as to the method of calculating the two days.   Neither party could define specifically and each had a different method.   The Agreement does not contain a clear description except to state two business days.

Recently in Midland Funding, LLC v. Garrett, Superior Court, J.D. Bridgeport at Fairfield, FST CV 6011332 (Tierney, J. December 23, 2011) [53 Conn. L. Rptr. 161], the court reviewed the methods of counting the days for purposes of legal notice issues.   It recognized that there are four ways of counting days:  (1) Count no terminal days (beginning day or ending day);  (2) Count only one terminal day;  (3) Count both terminal days;  and (4) Using one of the above methods but count only business days.   The type of counting is determined by statute, Practice Book rule and the language surrounding the mention of days in statutes, regulations, rules, contract and case law.   In viewing each of the ways of counting, the court finds no language that supports any of the methods.   Therefore, the court adopts the most common form of counting days which excludes one terminal day and includes the other terminal day which is the method as set forth in Austin, Nichols & Co., Inc. v. Gilman, 100 Conn. 81, 84 (1923).   This is based upon English common law and is the method of counting unless another method is established by the statute, the party's contract, regulations, practice book rule of some other established practice or custom.   The court states:  “Unless settled practice or established custom, or the intention of the parties, or the terms of a statute, have included in the computation the date or act of accrual, it is to be excluded from the computation.   This is not only our established rule, but the rule established by modern authority, applicable to all kinds of instruments, to statutes, and to rules and orders of court.  Austin Nichols & Co., Inc. v. Gilman, supra, 100 Conn. 84.   In utilizing this computation, there is one terminal date that is not counted in the calculation.   However, it is not just counting the days excluding one but the calculation will also consider only business days because of the language of the Agreement.   Therefore, in the calculation of the days with the elimination from the business days of one terminal day, the court does not find that the operator failed to timely pay the rent.

In addition to the calculation above, the defendant contends that the pursuant to an equitable argument the court can determine that the plaintiff's motion for immediate possession should not be granted.   The plaintiff argues that equity doctrines are not a consideration.   The seminal case addressing the question as to whether the court can determine equitable issues in a motion for possession for non-payment of rent is Fellows v. Martin, 217 Conn. 57, 584 A.2d 458 (1991).   The court stated:  “Equity abhors ․ a forfeiture.   It is well settled that equity will relieve against the forfeiture of a lease for non-payment of rent.   This ancient principle allows relief because ‘[i]n reason, in conscience, in natural equity, there is no ground to say because a man has stipulated for a penalty in case of his omission to do a particular act (the real object of the parties being the performance of the act), that if he omits to do the act he shall suffer an enormous loss wholly disproportionate to the injury to the other party.”   The ‘penalty’ is the forfeiture of the leasehold, imposed for ‘omission to do a particular act,’ that is, to pay rent;  if the payment may be secured without a forfeiture, equity will not permit a forfeiture.”  Fellows v. Martin, supra, 217 Conn at 76.   The court has articulated a two-part test for assessing claims for equitable relief:  (1) whether in the absence of equitable relief, one party will suffer a loss wholly disproportionate to the other party;  and (2) whether the injury to the other party is reparable.   Following the case law as to whether there is equitable relief, Fellows further enunciated four factors to considering all the claims for equitable relief in a summary process action.   The first factor stated in Fellows is whether the loss to be suffered by the tenant, if evicted, is disproportionate to the loss to the landlord if the tenant is not evicted.   This requires the identifying and balancing of the hardships of each party.   Only if the balance of hardships tips decidedly in favor of the tenant should equitable relief be considered.   Here, the tenant will lose a business that he has been engaged in for thirteen years.   As to this factor, the testimony demonstrated that this business supports the family of the operator and without it he would not be able to adequately support them.   The landlord has been made whole in so far as it received the rent, albeit late, and has not shown any prejudice as a result.   In weighing the loss of the ability to support yourself and your family with the inconvenience to the plaintiff who has been made whole by the payment, the facts weigh heavily in favor of the defendant.   Therefore, the defendant has satisfied this first factor.

The second factor is whether the injury to the other party is reparable.   “[T]he equitable doctrine against forfeitures presupposes that the landlord's injury is reparable—that is, the landlord's injury can be remedied by money instead of forfeiture of the tenancy.”  Fellows v. Martin, supra, 217 Conn. 69.   The Fellows court specifically noted this is appropriate by the payment of money such as was the remedy in this case where Mr. Khan had failed to pay only one month's rent which was rectified by payment in one lump sum to the landlord.   The plaintiff is not arguing that there is additional damage or they never received the rent proceeds.   In viewing the amount of damages, they are minimal and have not caused specific harm to the landlord other than inconvenience.   The plaintiff is not contending that there is any arrearage because the only issue is the sending of the check on October 22, 2012 instead of October 1, 2012.   The second factor is favorable to the defendant.

The third factor is the reason for the nonpayment and the extent to which the tenant is “culpable.”   Although the courts have not consistently considered the relevancy of culpability in a non-payment action, it has been considered for purposes of the equitable analysis.   In this factor, the court evaluates whether the tenant's breach was wilful or grossly negligent, on the one hand, or the product of mere neglect, on the other.  Thompson v. Coe, 96 Conn. 655 (1921).   The defendant bears some responsibility here because he did not make his rent payment until sometime after the first of the month.   The tenant testified that he did not have the funds before the fifteenth day but realized his obligation and was attempting to get the funds to pay the use and occupancy.   He testified that he was confronted with an increase in costs and this made the operation of the business more difficult.   There was never an intention to ignore payment but he did not have sufficient funds to make this payment on time.   His testimony demonstrated that he has made regular payments on a monthly basis for years and has not ignored his obligation, but he had choices to make to pay various expenses and the funds were not readily available.   Although there may be an argument that his decision to pay at a later date was neglectful, it was not shown to be willful or deliberate on the part of the operator.   This tenant has a history of consistently making payments on time.   It is only in the month of October that the tenant had difficulty with the payment.   However, it was clear from his testimony that his intentions were not a willful or deliberate attempt to refrain from making his use and occupancy payment.   He had every intent to pay the rent and was delayed only because of financial difficulties.   Mr. Khan stands ready, willing and able to pay the use and occupancy fees and has made the payment.   Therefore, the delay is not seen as an act of bad faith that would prevent the application of equitable relief.

The fourth factor identified by the courts is the extent to which the tenant has demonstrated good faith in curing the default.  “[T]he conduct of the plaintiff after he was informed of the non-payment is conclusive of the good faith of the plaintiff ․ and his desire to avoid forfeiture.”  Thompson v. Coe, supra, 96 Conn. 659.   As noted above, the defendant has not ignored the payment and it has been made as well as the months thereafter.   The court had the opportunity to evaluate the defendant as he testified and was able to observe his demeanor and determine his credibility.   He has been in business for a number of years before the difficulties with the former owner and the numerous suppliers.   He operates this business as the support for his family and as he stated he has no other means of support.   He is committed to keeping the business operational and that includes the payment of use and occupancy as well as addressing the difficult economic times for a gasoline operation.   There is nothing in the testimony or evidence provided by the plaintiff that would lead the court to believe the defendant is not acting in good faith.   He has demonstrated that he acted in good faith in the curing of any potential default.

Based solely upon the facts and testimony of the instant action, it is appropriate to grant equitable relief pursuant to the holding in Fellows v. Martin, supra, 217 Conn. 57.

Based upon the above, the motion for possession is denied.

THE COURT

Brazzel–Massaro, J.

Brazzel–Massaro, Barbara, J.