LLC v. Accommodations Unlimited, Inc. et al. (2013)

MEMORANDUM OF DECISION

This commercial lease matter was tried to the court on September 20, 2013.   Pursuant to an agreed briefing schedule, briefs were subsequently filed, the second and last of which was the plaintiff's post-trial memorandum, dated October 18, 2013.   After consideration of the evidence, the parties' arguments, and their written submissions, the court issues this memorandum of decision.

I

Background

At trial, the plaintiff/lessor, Union Square Southbury, LLC, presented the testimony of Marc Katz, a member thereof, and various exhibits.   The defense called no witnesses.   The only evidence presented by the defense was a copy of the plaintiff's responses to interrogatories.   See defendants' Exhibit A. The court finds the following facts and credits the following evidence.

Based on a commercial lease of premises located in the Union Square Shopping Center, 385 Main Street South, Southbury, Connecticut, Building 1, Units 102–104 (plus basement space) (premises), the plaintiff seeks to recover rental arrearage, and other contractual damages, including remedial costs, as well as attorneys fees.   See plaintiff's Exhibit 1 (Lease).   In February 2010, Accommodations Unlimited, Inc. (Accommodations), a defendant, assumed the lease, which provides for a term ending on May 31, 2015.   See plaintiff's Exhibit 2. Accommodations used the premises to operate a business which sold medical supplies.

A November 2010 modification agreement provided for a new rent schedule, with modified annual rates of minimum rent.   See plaintiff's Exhibit 5, page 2. The defendants Todd and Craig Schuck signed a guaranty of payment and performance.¹  See plaintiff's Exhibit 4 (Guaranty).

Section 20.05 of the Lease, page 14, provides that “Tenant agrees to pay, as additional rent, all attorneys fees and other expenses incurred by Landlord in enforcing any of Tenant's obligations under this Lease.”   Similarly, the Guaranty, paragraph 11, provides, “The Guarantor will pay all costs and expenses, including, without limitation, reasonable attorneys fees and disbursements, incurred by Landlord in any litigation brought to enforce this Guaranty.”

Beginning in September 2011 and continuing through trial, Accommodations failed to pay rent.   A summary process action ensued, resulting in a stipulated agreement for Accommodations to vacate the premises by March 1, 2012.   See plaintiffs' Exhibit 6. After plaintiff obtained an execution (see plaintiff's Exhibit 7), Accommodations vacated the premises on March 14, 2012.

No new tenant has occupied the premises or signed a new lease for the premises since Accommodations left.   The plaintiff has attempted to relet the premises by placing signs at the location, and by placing listings on websites, including that of its broker, MGRE Co., LLC;  Co–Star;  and Loop–Net.   See plaintiff's Exhibit 8. Eleven units at the 385 Main Street South location have signed leases or were renewed within six months before trial.   The rental rates range from $21.00 to $33.00 per square foot.   See plaintiff's Exhibit 9. The plaintiff has offered to rent the premises to new tenants, at the lower end of that scale, for $23.00 per square foot.   At the time of trial, the plaintiff was negotiating with a potential tenant, St. Mary's Hospital.   In addition, through a national retail brokerage, the plaintiff also has offered to sell the entire shopping center.

For the period September 1, 2011 through March 31, 2012, Accommodations owes $46,608.74 in base rent and late charges.   Rent due for the balance of the lease term amounts to $243,618.40.   See plaintiff's Exhibit 12 (damages calculations).

Costs were incurred in order to attempt to relet the premises, including removal of interior walls and items left behind, in the total amount of $2,860.82.   See plaintiff's Exhibit 11.   Through March 31, 2013, attorneys fees and costs in the amount of $22,157.64 were incurred.   Except for the statutory argument made by the defendants, based on General Statutes § 47a–7(a)(7), which the court discusses below, the defendants do not dispute the plaintiff's claim for attorneys fees.

The court discusses the evidence further below.

II

Discussion

“In a case tried before a court, the trial judge is the sole arbiter of the credibility of the witnesses and the weight to be given specific testimony.”   (Internal quotation marks omitted.)  Gianetti v. Norwalk Hospital, 304 Conn. 754, 780, 43 A.3d 567 (2012).  “A trier of fact is free to reject testimony even if it is uncontradicted ․ and is equally free to reject part of the testimony of a witness even if other parts have been found credible.”   (Internal quotation marks omitted.)  Torosyan v. Boehringer Ingelheim Pharmaceuticals, Inc., 234 Conn. 1, 12, 662 A.2d 89 (1995).  “[T]he credibility of witnesses, the findings of fact and the drawing of inferences are all within the province of the trier of fact.”  (Internal quotation marks omitted.)   Keeney v. Buccino, 92 Conn.App. 496, 513, 885 A.2d 1239 (2005).

A

Damages

“The plaintiff has the burden of proving the extent of the damages suffered ․ Although the plaintiff need not provide such proof with [m]athematical exactitude ․ the plaintiff must nevertheless provide sufficient evidence for the trier to make a fair and reasonable estimate ․ [T]he determination of damages is a matter for the trier of fact ․” (Internal quotation marks omitted.)  Naples v. Keystone Bldg. and Development Corp., 295 Conn. 214, 224–25, 990 A.2d 326 (2010).

General Statutes § 47a–11c provides, in relevant part:  “If a landlord terminates a residential or commercial tenancy on the grounds that the tenant committed a breach of the rental agreement and the landlord brings an action for damages for the breach, such damages shall include the amount of rent agreed to by the parties but unpaid by the tenant.   The landlord shall be obligated to mitigate damages.”

“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.”  (Internal quotation marks omitted.)  Pan Handle Realty, LLC v. Olins, 140 Conn.App. 556, 569, 59 A.3d 842 (2013).

1. Mitigation of Damages

In their special defense (# 104), the defendants contend that any damages should be reduced or eliminated because of the plaintiff's failure to mitigate its damages.   They assert that the plaintiff failed to rent or attempt to rent the premises at a reasonable fair market value.

“When the landlord elects to terminate the tenancy ․ the action is one for breach of contract ․ and, when the tenancy is terminated, the landlord is obliged to mitigate his damages.”  (Citation omitted.)  K & R Realty Associates v. Gagnon, 33 Conn.App. 815, 819, 639 A.2d 524 (1994).  “The duty to mitigate damages [does] not require the plaintiff to sacrifice any substantial right of its own;  ․ or to exalt the interests of the tenant above its own ․ It [is] required to make reasonable efforts to minimize damages.   What constitutes a reasonable effort under the circumstances of a particular case is a question of fact for the trier.”  (Citations omitted.)  Danpar Associates v. Somersville Mills Sales Room, Inc., 182 Conn. 444, 446, 438 A.2d 708 (1980).

“[T]he breaching party bears the burden of proving that the nonbreaching party has failed to mitigate damages.”  Murtha v. City of Hartford, 303 Conn. 1, 17 n.5, 35 A.3d 177 (2011).

The Lease provides, in Section 20.01, page 13, that “Landlord shall use its best efforts to mitigate tenant's damages and relet the Premises.”   Section 33.09, page 18, provides that Connecticut law governs the interpretation and enforcement of the Lease.

In Connecticut, “best efforts” has been used interchangeably with the term “reasonable efforts.”   See Feinberg v. Berglewicz, 32 Conn.App. 857, 859–62, 632 A.2d 709 (1993).   There, the plaintiff alleged that a zoning condition was not met because the defendants did not use their best efforts to secure a mortgage for a purchase.   See id., 859.   The court stated that “if the plaintiff established that the defendants failed to make reasonable efforts to obtain the zoning condition, the failure of the condition precedent would not have excused the defendants' performance.   The trial court concluded, however, that the plaintiff did not produce evidence to show that the defendants failed to use their best efforts to obtain the special exception.”  (Emphasis added.)  Id., 861.   The Appellate Court then summarized the defendants' efforts to satisfy the zoning special condition and concluded that the evidence thereof allowed the trial court to conclude that the plaintiff had not produced evidence to show that the defendants failed to use their best efforts.   See id.   The court found that the defendants had made “reasonable efforts to satisfy the zoning condition ․” Id., 862.   The Appellate Court reiterated that this evidence established that the plaintiffs did not show a failure to use “best efforts.”  Id. Likewise, such reasonable efforts belied the plaintiff's claim of bad faith.   See id.

This understanding of “best efforts” is consistent also with decisional law in the Second Circuit, applying New York law, where “cases suggest that a ‘best efforts' clause imposes at least an obligation to act with good faith in light of one's own capabilities ․ The term [‘best efforts'] requires that [a party] pursue all reasonable methods for satisfying the necessary contingencies.”   (Citations omitted;  internal quotation marks omitted.)  Cruz v. Fxdirectdealer, LLC (FXDD), 720 F.3d 115, 124 (2d Cir.2013).   Best efforts requires a party to perform “as well as the average prudent comparable [party].”  (Internal quotation marks omitted.)  Bloor v. Falstaff Brewing Corp., 601 F.2d 609, 613 n.7 (2d Cir.1979).

Under Connecticut law, “[r]easonable efforts means doing everything reasonable, not everything possible ․” (Internal quotation marks omitted.)   In re Samantha C., 268 Conn. 614, 632, 847 A.2d 883 (2004).

The defendant argues that the plaintiff has not established that the rate at which it has offered to rent the premises to prospective tenants is commercially reasonable, claiming that the plaintiff never examined the rental values of other properties.   In oral argument, defense counsel contended that other steps to rent the premises could have been undertaken.  “In making a determination of fair rental value, the court looks for guidance to the testimony of experts, but must ultimately make its own determination on the basis of all the circumstances bearing on value.”  Fernandes v. Rodriguez, 90 Conn.App. 601, 621, 879 A.2d 897, cert. denied, 275 Conn. 927, 883 A.2d 1243 (2005), cert. denied, 547 U.S. 1027, 126 S.Ct. 1585, 164 L.Ed.2d 312 (2006).

Here, as discussed above, it was the defendants' burden to prove that the plaintiff failed to mitigate its damages.   The defendants provided no witness to establish that the rate at which the plaintiff has offered to rent the premises is not commercially reasonable.   The argument of counsel is not evidence.  “[R]epresentations of the [defendants'] counsel are not ‘evidence’ and certainly not ‘proof.’  “ Cologne v. Westfarms Associates, 197 Conn. 141, 153, 496 A.2d 476 (1985).  “Statements or comments made by attorneys in the course of ․ argument are not facts in evidence, and may not properly be considered ․” State v. Duntz, 223 Conn. 207, 236, 613 A.2d 224 (1992).

In addition, the court credits the testimony presented by the plaintiff, that the rental rate at which it has offered to rent the premises to another tenant is commercially reasonable.   Katz testified that he was familiar with what other lessors were doing in the area where the shopping center is located.   The rate proposed is at the lower end of the scale at which other units within the shopping center currently are rented.   Also, the steps taken by the plaintiff to rent the space, including listings and signage, are reasonable under the circumstances.   The court finds that the defendants have not met their burden to prove their special defense of failure to mitigate damages.

2. Measure of Damages

The defendants also argue that it would amount to speculation to award damages to the plaintiff for the duration of the lease term, since it is unclear if the premises will be rented to another tenant.   In its proposed judgment, the plaintiff proposes that the requested award of contractual damages be automatically reduced by any amount hereafter received by the plaintiff, on or before May 31, 2015, from the lease of the premises;  and, if the premises are sold prior to that date, contractual damages be due and calculated through the date of sale only.

“Although damages often are not susceptible of exact pecuniary computation and must be left largely to the sound judgment of the trier ․ this situation does not invalidate a damage award as long as the evidence afforded a basis for a reasonable estimate by the [trier] of that amount ․ Mathematical exactitude in the proof of damages is often impossible, but the plaintiff must nevertheless provide sufficient evidence for the trier to make a fair and reasonable estimate ․” (Citations omitted;  internal quotation marks omitted.)  24 Leggett Street Limited Partnership v. Beacon Industries, 239 Conn. 284, 309, 685 A.2d 305 (1996).

“Although a plaintiff has the evidentiary burden of proving its damages at the time of trial ․ there is no additional requirement that the plaintiff must satisfy this evidentiary burden prior to the expiration of the applicable limitations period.”  (Citation omitted;  footnote omitted.)  Id., 310.   Here, the agreed upon terms of the Lease, as modified, which provide for rent to be paid through May 31, 2015, provide sufficient evidence for the trier to make a fair and reasonable estimate and 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 is entitled to recover the damages naturally following from the breach.   See Pan Handle Realty, LLC v. Olins, supra, 140 Conn.App. 569.   In entering judgment, the court below accounts for the possibilities that, before May 31, 2015, the premises may be rented or the shopping center may be sold.

The plaintiff has proved that Accommodations is liable, as follows:  (1) lease arrearage (base rent plus late charges), $46,608.74;  (2) rent due for balance of the lease term, $243,618.40 (contractual damages);  and (3) costs of cleanup and removal, $2,860.82, for a subtotal of $293,087.96.   Credits due in the amount of $9,000 (including security deposit and work credits) reduce to this sum to $284,087.96.   See plaintiff's Exhibits 5 (page 2), and 12.

In paragraph 1, the Guaranty provides that the Guarantor guarantees the payment of rent and all other amounts due under the Lease.   In paragraph 2, the Guaranty provides that, in the event that the Tenant fails to perform, the Guarantor “shall pay, reimburse and indemnify the Landlord for any and all damages, costs, expenses, losses and other liabilities arising or resulting from the failure of the Tenant to perform the same.”   Paragraph 3 provides that the Guaranty is unconditional.   See plaintiff's Exhibit 4.

Accordingly, defendant Todd Schuck, as Guarantor, is liable for the above sum as well.

B

Attorneys Fees

Citing General Statutes § 47a–4(a)(7), the defendants contend that the plaintiff is not entitled to an award of attorneys fees in excess of fifteen percent of any judgment.  General Statutes § 47a–4(a)(7) states, “A rental agreement shall not provide that the tenant:  ․ agrees to pay the landlord's attorneys fees in excess of fifteen per cent of any judgment against the tenant in any action in which money damages are awarded ․”

Chapter 830 of the General Statutes, entitled “Rights and Responsibilities of Landlord and Tenant,” General Statutes §§ 47a–1 through 47a–20e, is generally inapplicable to commercial tenancies.  “[I]n accordance with the definitions set forth in chapter 830 that relate solely to dwellings;  see General Statutes § 47a–1 ․ this chapter generally applies only to residential tenancies.”  (Footnotes omitted.)  A & M Towing & Recovery, Inc. v. Guay, 282 Conn. 434, 442–43, 923 A.2d 628 (2007).   In discussing two provisions which were added in 1997, §§ 47a–4b and 47a–11c, which do apply to commercial tenancies, the Supreme Court noted, “The legislature never has changed ․ the definitional section of chapter 830, which clearly defines the terms used throughout the chapter, such as ‘landlord,’ ‘tenant,’ ‘rental agreement,’ ‘dwelling unit’ and ‘premises,’ in relation to residential premises ․ Accordingly, we do not infer ․ that the legislature intended to alter the existing scheme to extend to commercial premises all of the rights and obligations imposed in chapter 830 ․” (Citation omitted.)   Id., 443 n.6.

“The fact that the legislature only used the term ‘commercial’ in those two provisions and nowhere else in the chapter cannot go unnoticed ․ [When] a statute, with reference to one subject contains a given provision, the omission of such provision from a similar statute concerning a related subject ․ is significant to show that a different intention existed ․ Furthermore, in 1997, the legislature did not amend any of the other provisions in chapter 830 so as to make them applicable to commercial tenancies, and, more importantly, it did not amend the statutory definitions provided in § 47a–1.”  (Citation omitted;  internal quotation marks omitted.)  Vidiaki, LLC v. Just Breakfast & Things!!!    LLC, 133 Conn.App. 1, 13, 33 A.3d 848 (2012).

Accordingly, the court concludes that § 47a–4(a)(7)'s limitation on the recovery of attorneys fees, which is part of chapter 830, and which does not refer to commercial tenancies, is not applicable thereto.   In accordance with the Lease and Guaranty, the court awards reasonable attorneys fees and costs in the amount of $22,157.64.   See plaintiffs' Exhibit 13.

CONCLUSION

Based on the foregoing reasons, judgment may enter for the plaintiff, and against the defendants, Accommodations Unlimited, Inc., and Todd Schuck, jointly and severally, in the amount of $306,245.60 ($284,087.96 plus $22,157.64).

The amount awarded for contractual damages, defined above on page 9, shall automatically be reduced by any amount received by the plaintiff, on or before May 31, 2015, from the lease of the premises located at 385 Main Street South, Building I, Units 102–104, Southbury, Connecticut;  and if the premises are sold prior to May 31, 2015, contractual damages will be due and calculated through the date of sale only.

It is so ordered.

BY THE COURT

ROBERT B. SHAPIRO

JUDGE OF THE SUPERIOR COURT

FOOTNOTES

FN1. This action was withdrawn as to defendant Craig Schuck only on July 9, 2013.   See # 122.   For ease of reference, the court refers below to Accommodations and Todd Schuck as the defendants..  FN1. This action was withdrawn as to defendant Craig Schuck only on July 9, 2013.   See # 122.   For ease of reference, the court refers below to Accommodations and Todd Schuck as the defendants.

Shapiro, Robert B., J.