LLC v. LLC (2014)

Ruling on Cross Motions for Summary Judgment

Plaintiff O,R & L Commercial, LLC, a commercial real estate brokerage firm, has filed a breach of contract action against defendants, Colt Gateway, LLC, Colt Gateway/East Armory, LLC, and Colt Gateway/South Armory, LLC, concerning a commission that the plaintiff claims it earned when the defendants, in 2012, entered into a lease of a portion of their property with the Capitol Region Education Council.   The parties have filed cross motions for summary judgment concerning the interpretation of their “Exclusive Right to Lease Agreement” (the agreement).   The court presumes knowledge of the material facts, which are not in dispute.   The court adheres to summary judgment standards set out in Ramirez v. Health Net of the Northeast, Inc., 285 Conn. 1, 10–11, 938 A.2d 576 (2008).

The agreement is a two-page document.   The plaintiff argues that its entitlement to a commission stems primarily from the following language on page two of the agreement.  “Commissions are due and payable per the rate schedule above for lease renewals, extensions, enlargements, exercise of options, or new leases for the same property.   Owner's commission obligations for transactions consummated during the term of this Listing shall survive the expiration or termination of the Agreement.”   Presumably, the plaintiff believes that the lease in question is some form of “enlargement” of a previous lease for other parcels of the defendants' property or a “new [lease] for the same property.”

There are at least two difficulties with the plaintiff's interpretation.   First, this interpretation seems contrary to the rule that “[t]he individual clauses of the contract ․ cannot be construed by taking them out of context and giving them an interpretation apart from the contract of which they are a part.”  Levine v. Advest, Inc., 244 Conn. 732, 753, 714 A.2d 649 (1998).   The structure of the contract is that page one, which contains paragraphs one through eleven, addresses different subjects than page two, which is also referred to as the “reverse side” of the agreement.   Paragraph six on page one, entitled “The Commission,” begins with the language:  “You will pay Us a commission per the rate schedule on the back of this Agreement IF during the term of this Agreement ․” It then defines two specific transactions that generate a commission:  a lease entered into during the term of the agreement (paragraph 6(a)), and a lease entered into with certain registered persons within twelve months after expiration of the agreement (paragraph 6(b)).  Paragraph six concludes with the language “[y]ou agree that the O,R & L Commercial Rate Schedule, which is printed on the reverse side of this Agreement, states the full terms and conditions of the commission.”   Paragraph seven on page one, entitled “Renewals,” adds another type of transaction that generates a commission.   It states that “[y]ou also will pay Us commissions, when exercised, of purchase or other options for the same property at the commission rates set forth on the reverse side of this Agreement.”  (Emphasis added.) ¹

In contrast, page two is entitled “Commission Rates.”   Most of it addresses the rates for, computation of, and time of payment for commissions.   Its subheadings in bold are “Computation of Commissions” and “Commissions are due and payable as follows.”

Thus, as a general matter, paragraphs six and seven on page one define the type or categories of transactions that generate a commission while page two contains what paragraph six labels as the “rate schedule.”   Paragraphs six and seven begin with language to the effect of “You will pay us a commission when ․” The page two language in question does not have this sort of explanatory introduction.

The import of the plaintiff's argument runs contrary to this scheme.   The plaintiff contends that the language on page two on which it relies, quoted above, defines yet another type of transaction that generates a commission—any future lease transaction between two parties who were already subject to the agreement for the same property.   While the plaintiff's interpretation is plausible when one looks at this language in isolation, it makes less sense when one views the language in the context of a contract that defines the type of lease transactions subject to a commission on page one and the formula and details of the commission on page two.

The second problem with the plaintiff's interpretation is that it renders paragraphs six and seven on page one largely superfluous, contrary to the rule of contract interpretation that calls for every provision of a contract to have full meaning and effect.  Id. The plaintiff's view is that the phrase “lease renewals, extensions, enlargements, exercise of options, or new leases for the same property” on page two encompasses all future lease transactions between the parties concerning the same property, regardless of whether they fall within paragraph 6(b) or paragraph seven.   Under this view, page two swallows up paragraphs 6(b) and seven and makes their limitations irrelevant.   Such an interpretation is not consistent with the rules of contract construction.

The defendants' interpretation is better.   The defendants contend that the page two language on which the plaintiff relies makes clear that the rate schedule detailed elsewhere on page two will apply to all transactions defined on page one regardless of whether they are in the nature of a “renewal, extension [or] enlargement ․” Further, if the parties enter into a lease extension or renewal during the term of the agreement, the last sentence of that paragraph insures that the obligation to pay the commission survives the agreement's expiration.   Essentially, the defendants' interpretation is that the “renewal, extension [or] enlargement” language on page two implicitly includes the added phrase “as defined in paragraphs six and seven on page one.”   While arguably this interpretation makes the language in question also suffer from a lack of necessity, the language at least serves the purpose of synthesizing the entire agreement.   Although the defendants' interpretation is not foolproof, that fact is because the contract simply is poorly written and the phrase on which the plaintiff relies is superficially confusing.   Given the two choices, the court accepts the defendants' interpretation of the contract.

Therefore, the court grants the defendants' motion for summary judgment and denies the plaintiff's cross motion for summary judgment.

It is so ordered.

Carl J. Schuman

Judge, Superior Court

FOOTNOTES

FN1. There is no claim by the plaintiff that the 2012 lease in question falls within any of the categories in paragraphs six and seven..  FN1. There is no claim by the plaintiff that the 2012 lease in question falls within any of the categories in paragraphs six and seven.

Schuman, Carl J., J.