LLC v. Goodhall's, Inc. (2013)

MEMORANDUM OF DECISION

The plaintiffs, David Caron Chrysler Motors, LLC, and David A. Caron, sue the defendants, Goodhall's, Inc., Goodhall's Garage, Inc. and Lucille Goodhall, executrix of the estate of Wallace Goodhall, Jr., to recover damages for breach of a lease of real property located at 2 Mashapaug Road, Union, Connecticut.   This case was previously tried to the bench, Klaczak, J.T.R., who rendered judgment for the defendants based on a finding that the assignment of the lease to the LLC by a former tenant was invalid because the landlord, Goodhall's, Inc., never consented in writing to that assignment as required by Article IV of that lease, which lease was dated June 20, 1996.   The Appellate Court affirmed that judgment, David Caron Chrysler Motors, LLC v. Goodhall's, Inc., 122 Conn.App. 149 (2010).   Our Supreme Court, however, reversed that decision and held that the nonconsensual assignment was voidable but that the landlord had never timely acted to void it, David Caron Chrysler Motors, LLC v. Goodhall's, Inc., 304 Conn. 738 (2012).

In reaching that conclusion, the Supreme Court ruled that the assignment to the LLC was effective and the lease was enforceable by the LLC against Goodhall's, Inc. Id., 750.  “Unless and until Goodhall's exercised such option [to terminate the lease], the binding rights and obligations contained in the lease passed to David Caron Chrysler Motors, LLC.” Id., 752.   The high court remanded the case for “further proceedings to determine the rights and liabilities of the parties pursuant to the original lease.”  Id., 753 (emphasis added).   Consequently, at retrial, this court had to regard the legal efficacy of the lease as a proven fact.   On May 7, 2013, the court received evidence on the remaining issues, namely whether the plaintiffs have proven that terms of the lease were breached and, if so, what damages flowed from the breach.

The parties agreed that all exhibits admitted into evidence at the previous trial were deemed admitted as full exhibits at the retrial.   Also, the parties allowed the transcripts of witnesses' testimony at the first trial to be considered as testimony at the retrial, with the exception of the former testimony of David Caron and Michael Roy. After consideration of the evidence, the court makes the following findings of fact and rulings of law.

Preliminarily, the landlord under the lease in question was Goodhall's, Inc. No provision of the lease guaranteed performance by any other entity.   In fact, Article XXIX, § 29.02 limits the tenant's recourse in order to satisfy a money judgment for violation of the lease to collection against the demised premises.   Therefore, the only party that can be liable for breach of the lease is Goodhall's, Inc., the owner of the real property.   It should be noted that the plaintiffs' complaint lacks any claim for tortious conduct.   Judgment enters for Goodhall's Garage, Inc. and the executrix, and this decision will subsequently refer to the remaining defendant as “Goodhall's.”

For many years, Wallace Goodhall, Jr., now deceased, ran a service station at the demised premises, which comprised around five acres.   Eventually, Goodhall's acquired the land upon which the garage business operated as Goodhall's Garage, Inc. The commercial activity engaged in was the sale of gasoline and diesel fuels, repair of heavy trucks, the towing of large vehicles, a parking area at which truckers could rest, and a Chrysler car dealership with a separate repair shop for Chrysler vehicles.   The business flourished and maintained a good reputation in all these endeavors.

Interstate 84 was constructed nearby, and a state of Connecticut weighing station was built adjacent to the highway just south of the Connecticut–Massachusetts border.   The aspect of the business catering to heavy trucks and buses, as well as fuel sales, operated around the clock.

Unfortunately, in 1990, Wallace Goodhall's health deteriorated prompting him to sell Goodhall's and the business thereon to his nephew, Albert Goodhall, Jr., familiarly known as Andy. Andy lacked his uncle's business acumen and management skills.   After Andy became delinquent on a loan which was used to finance his acquisition of the business, Wallace bought it back.

Early in Andy's tenure, in 1994, the then Connecticut Department of Environmental Protection (DEP) cited Goodhall's for contamination of ground water, and the DEP classified the property as an “establishment.”

When specified commercial activity was conducted on land in the past or when pollution is detected, the DEP labels a property as an establishment.   Anytime an establishment ownership is transferred, a “Form III” must be filed.   That form is used to compel the owner to address any environmental issues to the satisfaction of the department.

During November 1991, the DEP conducted tests on the property which led to findings of pollution on December 7, 1992.   On February 23, 1993, the DEP formally notified Andy Goodhall of those findings.

On February 2, 1994, the DEP ordered Goodhall's to submit a study and plan to abate and remediate the gasoline contamination of ground water which the DEP determined had occurred.   The DEP identified, as the source of this gasoline, leakage from the fuel pumps located in front of the garage structure rather than a problem with the diesel storage tanks to the rear of that building.

In June 1994, a review of the plan submitted to DEP revealed new environmental concerns at the property.   The DEP issued additional requirements, and Goodhall's retained a new environmental consulting firm.   An updated proposal for remediation was submitted to DEP in July 1995.

On June 20, 1996, Wallace Goodhall sold the garage business, viz, Goodhall's Garage, Inc., to Jerry Yost and his partner, Joanne Constance.   That sale was financed, in part, with a promissory note running from the partnership to Wallace Goodhall.   No new Form III was filed, and it is unknown whether one was required because the realty was not transferred, just the garage business.   Also, on that date, Goodhall's entered into the lease with Yost which is the subject of this lawsuit.   The lease had a five-year term and included a five-year option to purchase the real estate.

The lease also included the following addendum:

Tenant shall not be responsible for any environmental condition, noncompliance with any environmental laws or any costs to remediate or cure the condition, problem or violation that existed prior to the commencement of this Lease.

Landlord warrants and represents that the premises are fit for and habitable for occupancy and use of premises as motor vehicle and truck sales and services business together with ancillary businesses including a service station excluding the operation of a body shop.

Yost was mostly interested in the car dealership, and he neglected the truck towing and repair side of the business.   He eliminated the overnight hours for all activity except towing.   Usage of Interstate 84 by large trucks predominates at night, so closure of the facility during that peak time greatly reduced this source of income at the site.   Also, a disparity in fuel prices between Connecticut and Massachusetts favored Massachusetts purchases.   New truck stops for heavy vehicles using Interstate 84 opened in Willington, Connecticut, and Sturbridge, Massachusetts.   The Sturbridge site is quite close to 2 Mashapaug Road in Union, and that new installation afforded greater amenities for truckers, including shower facilities and a full-size restaurant.

Every witness with knowledge of Yost opined that he acted unscrupulously in his dealings with them and with others.   The loss of reputation caused by Yost and the extrinsic factors recited above caused the garage business at the site to suffer.   Revenues plummeted, and Yost missed both rent and loan payments.

Goodhall's brought a summary process action to evict Yost. On May 23, 1997, Constance conveyed her partnership interest to Yost. Yost's creditors cut off credit or demanded high interest rates.   Chrysler Corporation sought to sever its relationship with Yost's car dealership.   Yost could not replenish inventory nor generate positive cash flow.

In the fall of 1997, David Caron entered the picture.   He infused Yost's business with considerable sums of money because, in his estimation, the proximity to the weighing station gave the premises great potential for success.   Despite knowledge of Yost's delinquencies on the note and rent, the environmental problems being supervised by DEP, the dismal performance of the garage business while under Yost's control, and the absence of written consent by the landlord, Caron bought Yost's interests through a two-step process.   At that time, Yost still owed Goodhall's $150,000 on the promissory note.

Caron was eager to purchase the real estate.   However, he and Goodhall's could never agree to terms.   An unsurmountable sticking point was whether Goodhall's was responsible for the cost of replacing diesel fuel tanks and high velocity diesel pumps located at the rear of the facility.   This controversy lies at the heart of the plaintiffs' claims against Goodhall's.

It should be noted that December 22, 1998, was a federal deadline for the evacuation and removal of outdated, underground fuel storage tanks.   The diesel storage tanks at the rear of the garage building at 2 Mashapaug Road fell within the dictates of this deadline.

On December 7, 2000, DEP initiated a civil suit against the parties to this litigation and others, to compel compliance with outstanding environmental orders pertaining to 2 Mashapaug Road, including proper removal of the outdated storage tanks.   Wallace Goodhall died while that suit was pending disposition.   A first, stipulated judgment entered among the parties and DEP on December 20, 2002.   The stipulation required the defendants in the present case to prepare and submit a remediation plan to DEP. DEP approved such a submission on April 16, 2003.   A second, stipulated judgment entered on December 15, 2003, and a third, and final, stipulated judgment entered in May of 2004.

On February 27, 2004, DEP also agreed to a stipulated judgment involving the plaintiffs in this case.   That agreement obligated the plaintiffs to pay a $15,000 judgment, which sum was paid, see Rocque v. Goodhall's Garage, Inc., Superior Court, C.L.D. Tolland, X07–CV01–0078479.

In 1998, before the DEP litigation described above began, Goodhall's had retained consulting services to design a plan to remove the outdated tanks.   Eventually, Goodhall's engaged a qualified contractor to excavate and remove the tanks in accordance with that plan.   Goodhall's also contracted with a qualified reclamation company to treat and dispose of the contaminated soil.   The excavator obtained the requisite permits to pull the tanks and remove the surrounding soil.

When the excavator went to the site to commence the work, Caron denied access to that contractor and prevented removal of the tanks and earth.   Caron refused to allow such activity until the defendants would agree to pay for installation of new tanks to replace the defunct ones.   Caron thwarted access to the tanks by parking heavy equipment over the area to be excavated.

Disappointed by the inability to purchase 2 Mashapaug Road, discouraged by the lingering environmental issues, and disillusioned by Yost's broken promises, Caron sold the Chrysler dealership rights to Ed Bolles Enterprises, Inc. on June 9, 2000.   Eleven days later, the plaintiffs and Goodhall's agreed to terminate the June 2, 1996 lease, and the eviction action was withdrawn.   The parties to this agreement expressly reserved their rights to pursue other legal claims against each other.   The plaintiffs also liquidated the towing and repair equipment through auction sales.

The plaintiffs argue that the failure of Goodhall's to remediate the environmental problems caused them to lose the ability to sell diesel fuel using the high velocity pumps needed to fill large trucks and other heavy equipment.   Because diesel fuel sales diminished, fewer customers would patronize the garage for repairs or other services ancillary to trucking activity, such as parking space rentals.   The plaintiffs also contend that repayment of the $15,000 paid to DEP in the enforcement action and $16,000 in attorneys fees and costs arising from that action is owed by Goodhall's under the lease.

Except for the $15,000 judgment paid to DEP, the court rejects the plaintiffs' claims for damages.   It is well established that the plaintiffs have the burden of proving the amount of damages which flowed from the breach of contract.   That amount may be proven by proffering sufficient credible evidence from which the court may fairly estimate such damages with reasonable certainty, Milford Bank v. Phoenix Contracting Group, Inc., 143 Conn.App. 519, 524–25 (2013).   Damages for breach of contract “are ordinarily based on the injured party's expectation interest and are intended to give him the benefit of the bargain by awarding a sum of money that will, to the extent possible, put him in as good a position as he would have been in had the contract been performed,” Little Mountain Enterprises, Inc. v. Groom, 141 Conn.App. 804, 809 (2013).  “Such damages, moreover, are to be determined at the time of the breach,” Id. The injured party has a reasonable duty to mitigate any damages, Id.

In the present matter, the court concludes that, while Goodhall's bore responsibility under the lease to remove the obsolete, diesel storage tanks, it had no obligation to replace those tanks with new ones.   The pertinent lease provision relied upon by the plaintiffs is set forth in the addendum quoted above.   The first paragraph of that addendum merely relieves the tenant of any responsibility to the landlord which might otherwise be imposed by other lease clauses with respect to environmental problems or conditions which predate the June 20, 1996 lease.

In the second paragraph of the addendum the landlord warrants that the property on June 20, 1996, was suitable for occupancy and activities related to motor vehicle sales and services.   The court construes this contractual duty to require Goodhall's to remove the old storage tanks and to excavate and dispose of any surrounding soil contamination.   As recounted earlier, Goodhall's engaged qualified professionals to perform these tasks on its behalf.   It was Caron who prevented the execution of this duty because he felt that Goodhall's ought to bear the cost of procuring and installing new tanks as well.   No provision of the lease supports that contention.

Article IV allocates “sole and exclusive responsibility” for all “improvements, construction, repairs or installation” to the tenant.   Also, Article X states that the “[t]enant shall be responsible for all repairs and replacement to the Demised Premises ․” (emphasis added).   While Goodhall's had to remedy preexisting pollution at the site, it was the plaintiffs who assumed the cost of installing new equipment under the lease.   Thus, Goodhall's did not violate the terms of that lease by declining to pay for the purchase and installation of new tanks.

Finally, Article XXI, § 21.02 absolves the landlord from liability to the tenant “by reason of any inconvenience, annoyance, interruption or injury to business arising from Landlord's making any repairs or changes which Landlord is required or permitted by the Lease, or required by law, to make in or to any portion of the Demised Premises, or in or to the fixtures, equipment or appurtenances of the Demised Premises,” (emphases added).   The parties that negotiated the lease were experienced businessmen of equal bargaining power free to include any provisions which they desired.   Yost and Goodhall's chose to place the risk of revenue losses attributable to the activity mandated by law on the tenant even though that disruptive activity might be required by the lease or law to be performed by the landlord.   Under these circumstances, the plaintiffs cannot recover any damages for disruption of business and loss of projected profits based on the failure of Goodhall's to install new storage tanks.

In addition, the plaintiffs have failed to prove any such losses were caused by the inability to pump diesel fuel.   Rather, the allure of cheaper fuel and more hospitable accommodations in the Sturbridge truck stop, the bad reputation created by Yost's mismanagement, and the plaintiff's inability to reach on accord regarding purchase of the land were the causative factors which suppressed success.   The court finds that Caron's confidence in his superior business skills was overly optimistic and that no breach of the lease by Goodhall's caused his rescue efforts to fail.

The court does find, however, that Goodhall's warranted the suitability of the premises for the motor vehicle sales and service and fuel sales as of June 20, 1996, in the lease with Yost which he later assigned to the plaintiffs.   On that date the property had buried beneath the surface outdated storage tanks which were slated for removal as well as the contamination which had to be properly excavated and treated for disposal.   Had the property truly been “suitable,” the DEP judgment against the plaintiffs for $15,000 would never have been imposed.   The court enters judgment for the plaintiff against Goodhall's, Inc. for $15,000 plus costs to be taxed by the clerk.   The court awards no attorneys fees for the DEP action because the lease is silent regarding such an award in the event of breach by the landlord.

Sferrazza, S.J.

Sferrazza, Samuel J., S.J.