UB LP v. The Athlete's Foot of Stamford, Inc. et al. (2013)

MEMORANDUM OF DECISION

The Plaintiff's complaint consists of three counts:  the first two counts against the defendant, The Athlete's Foot of Stamford, Inc., and count three against the individual defendant, Ronald Rosenfeld.

This Court finds in favor of the plaintiff on counts one and two inasmuch as the defendant, The Athlete's Foot of Stamford, Inc. (hereinafter referred to as Athlete's Foot), did not appear at trial, and did not contest the complaint.   The Court orders damages in favor of the plaintiff, UB Stamford LP, against said defendant in the amount of $76,333.71.

The remaining sole issue is whether defendant Rosenfeld is liable for lease payments owing to the landlord before and/or after the underlying lease expired on January 31, 2010.   This Court finds that on June 11, 2009, the defendant Rosenfeld (hereafter referred to as Rosenfeld), entered into a guarantee which stated that he would pay any unpaid rents of the existing lease between the original tenant (Athlete's Foot) and the landlord (UB Stamford).   The Court finds that when the lease expired on January 31, 2010, said defendant remained in possession of the leased premises, and remained in possession until February 14, 2011, at which time it surrendered possession.   The Athlete's Foot failed to pay rent in the past, or all of the rent for that time period.   The plaintiff's claim amounted to $76,333.71 in damages from Rosenfeld is liable for rents accruing after the lease expired on January 31, 2010.   The arguments submitted by the landlord are as follows:  (1) the landlord conditioned and allowed Athlete's Foot continued occupancy on the guarantee provided by Rosenfeld;  the guarantee according to its terms ran until the date the tenant surrendered possession giving the premises back to the landlord (“surrender date”).   The Plaintiff puts forth the case law primarily in Sponzo v. Gooden, Superior Court, Judicial District of Hartford–New Britain (January 31, 1995, DiPentima, J.) (13 Conn. L. Rptr. 469).

Rosenfeld argues that he is not liable for any rents accruing after the lease expired, being January 31, 2010.   He argues based on the following factors:  first, the guaranty was limited to the period provided in the second amendment of the lease, from February 1, 2009, to January 31, 2010.

The Court should find that although the guarantee was a continuing one:  as to the guarantor's obligations extending beyond January 31, 2010, the guaranty was limited to actual agreements or extensions entered into by The Athlete's Foot and UB Stamford.   Thus the guarantor claims because Athlete's Foot was in possession as a holdover tenant or as a tenant in sufferance, the guarantor (Rosenfeld) would not be obligated for the unpaid amount(s).

The pertinent sections of the guaranty (signed by Rosenfeld) specified, “It is further agreed that the liability of Guarantor hereunder shall be a continuing one and shall extend to any and all agreements that may be given in extension, amendment, modification, renewal or assignment of the present lease by Tenant.”   Tenant is not in breach of any provisions under the Lease on the date Tenant vacates the premises and surrenders the premises to the landlord, relinquishing all rights to possession (surrender date) ․ Tenant pays on time, in the manner set forth in the lease, all items of Minimum Rent and Additional Rent which have accrued under the Lease through the surrender date ․ In the event Tenant fails to comply with the requirements of [this paragraph 13] any limitation of Guarantor's obligations under this Paragraph 13 shall be void.”

“Our Connecticut Supreme Court previously stated ․ in discussing continuing guaranties ․ Precedents do not help much in the construction of such instruments ․ That observation is as true now as it was then.   The interpretation of continuing guaranties, as of other contracts, is principally a question of fact to be determined by the trier of facts ․ Even a continuing guaranty that is, in terms unlimited as to duration, impose liability upon a guarantor only for such a period of time as is reasonable in light of all of the circumstances of the particular case.  “The finding of [a] trial court with respect to the intent of the contracting parties regarding the scope of their contractual commitment [under a continuing guaranty] is, like any other finding of fact, subject only to limited review on appeal.”  Monroe Ready Mix v. Westcor Development, 183 Conn. 348, 350–52, 439 A.2d 362 (1981).

As noted, the plaintiff relies on Sponzo v. Gordon, supra, 13 Conn. L. Rptr. 469.   In that case (Sponzo ), the court analyzed a guaranty clause, which provided;  1) “This guaranty shall be a continuing guaranty, and the liability hereunder shall be in no way affected or diminished by reason of any extension of time that may be granted by the lessor to the lessee.”  Id. 470.

The Sponzo case held:

While the Court has been unable to find any Supreme or Appellate case law in discussing a continuing guaranty in the context of a lease, there are cases discussing it in other commercial contracts.   Since a lease is a contract, and since in this case we are dealing with a commercial lease, it is appropriate for the Court to rely on such authority for interpreting this continued guaranty ․ As with other contract provisions, the interpretation of a continuing guaranty is principally a question of fact as to the intention of the parties ․ A continuing guaranty is one where the parties intended “a future course of dealing during an indefinite period or it is intended to cover a series of transactions or a succession of credits, or if its purpose is to give to the principal debtor a standing credit to be used by him from time to time.”  Associated Catalog Merchandisers, Inc. v. Chagnon, 210 Conn. 734, 742 (1989)[, states that in the instant case,] by the language of the guaranty, the parties intended that the guaranty continues through “any extension of time that may be granted by the lessor to the lessee.”   It is clear to this trier that the parties intended the guaranty to continue throughout the tenancy of [the tenant] at the subject premises.

The defendant Rosenfeld (hereafter referred to as the guarantor) testified that he ran the store in the Ridgeway Shopping Center, and acted as the managing partner until departing on September 14, 2010.   He personally negotiated the reduction in the lease rent.   Also, he signed checks to the landlord.   In fact, when he left the store he was aware of a large arrearage.   He also testified that he signed the lease and the guaranty of his own free will.  “․ Further, our court has stated:  ․ [an] offer for a continuing guaranty is ordinarily effective until revoked by the guarantor or extinguished by some rule of law.”  Associated Catalog, supra, 210 Conn. 742.   There was no testimony or evidence that the defendant guarantor revoked the guaranty.   Thus, this Court finds the guaranty signed by the defendant Rosenfeld continued throughout the holdover tenancy.

The circumstances in this case indicate that the contracting parties to the guaranty, Rosenfeld and UB Stamford, intended to pay the rents that accrued up to, and after the January 31, 2010 lease expiration.   As stated earlier, Rosenfeld, in addition to being Athlete's Foot's guarantor, was a part owner of its business and he personally negotiated the second amendment to the lease;  he also managed day to day operations of the store beyond the January 31, 2010 lease expiration and was responsible for writing the rental checks to UB Stamford.   Similarly, the guarantor in Sponzo was president of the tenant entity.

In conclusion, and in accordance with Associated Catalog, supra, 210 Conn. 742–43, the period of time for which the holdover tenancy lasted in the present case is reasonable in light of all the circumstances.   The holdover tenancy existed approximately twelve (12) months, from January 31, 2010 to February 2011.   In fact, the guaranty was in effect for approximately twelve months prior to January 31, 2010.   It appears reasonable that a continuing guaranty to extend beyond the expiration of a lease for a period of time as long as the period for which the guaranty existed prior to the expiration of the lease.

Based on the Court's findings, judgment may enter in favor of the plaintiff against defendant guarantor, Rosenfeld for the sum of $77,000.00, plus the costs of suit.   If the plaintiff intends to seek attorneys fees, it can submit an affidavit of these fees for the Court's consideration.

Grogins, JTR

Grogins, Jack L., J.T.R.