Opinion
No. LLI CV 07 5002600S
April 16, 2010
MEMORANDUM OF DECISION
This case involves a landlord suing a former tenant. Chris Holdings, LLC (plaintiff) brought this action against Steve Katz and Alison Palmer (defendants). This non-monumental case has been presented to three different, experienced judges on about six occasions. None of their efforts to resolve this case were successful, albeit there was an announced settlement and withdrawal that was somehow vacated at the wish of the parties. The initial claim by the plaintiff, if reduced by the security deposit, was perilously close to the jurisdiction of the small claims court. Instead, after two and one-half years of court filings and time, the plaintiff now claims $78,630.22 in damages, of which, $41,744.54 are attorneys fees. (Mercifully, these fees were forgiven in the amount of $25,089 by the plaintiff's lawyer at the time of the final hearing on March 10, 2010.)
Most of the facts have been stipulated to by the parties and will now be related. The factual issues in dispute will be discussed by the court thereafter.
On August 30, 2005, the parties entered into a written lease for commercial space located in Warren, Connecticut.
The lease provided the following:
1) Its term was from September 1, 2005 until September 30, 2006, a period of thirteen months.
2) The lease provided for an option term of one year from October 1, 2006 until September 30, 2007.
3) The option term required notice to the plaintiff no earlier than 180 days but no later than 90 days prior to the expiration of the initial term.
4) The option shall not be valid and shall be of no effort if the defendant was in default under any provisions of the lease.
5) The later term in Section 4 then recited something about an "extended term."
6) The fixed "agreed base rent" was $2,000 per month.
7) The lease provided that the defendant shall pay a proportionate share of the Common Area Costs which included insurance, taxes, maintenance, repair and operation of the overall building.
8) The defendant shall pay one-twelfth of the total real estate taxes.
9) Any payments by the defendant to the plaintiff and accepted by it for any lesser amount of the rent on "Additional Rent" shall not be deemed an accord and satisfaction and leaves the plaintiff the right to receive the balance due (emphasis added) or pursue any other available remedy.
10) Any holdover by the defendant shall deem him to be a month to month tenant EXCEPT that the monthly rent shall DOUBLE. (Emphasis added.)
11) The defendant shall leave the premises clean and in good order and condition.
12) The lease also provides that if suit is brought for the recovery of rent on any "ADDITIONAL RENT" the defendants shall pay for all expenses including "REASONABLE ATTORNEYS FEES." (Emphasis added.)
13) The final clause in the lease provides that it is the complete understanding between the parties and that the "THIS LEASE" cannot be changed orally other then by a written agreement. (Emphasis supplied.)
Although the lease term expired on September 30, 2006, the defendants remained in possession until August 18, 2007. The defendant tendered rental payments to the plaintiff in the amount of $2,000 per month for the seven months following the end of the one-year written lease. No terms or options were thereafter executed in writing by the parties.
The rental amount in an unsigned lease was $2,000 per month plus the "additional rent" referred to in the original lease, presumably doubling the rent to $4,000 per month. Obviously, the defendants did not sign that retroactive lease for a number of sensible reasons. First, the lease agreement was for a period of time that had already passed. Second, the plaintiff had already accepted the rental payments of $2,000 per month for the first seven-month period of the after the fact lease. The defendants tenders another $4,000 on June 1, 2007 for May and June 2007. (The court's mathematics would show that at this point the defendants owed the plaintiff, "rent" for the eighteen days of August 2007. The latter amount is approximately $1,096.50.)
The parties have stipulated that all of these monies were accepted as RENT. (Emphasis added.) That would seem to be the end of the matter. The plaintiff argues nevertheless that the original lease is controlling and that all of its terms justify the unmodified claim of over $75,000. The court does not agree, nor does the evidence.
The culprit in this nightmarish situation is more probably the plaintiff's principal, Joseph Cicio's, remote management style. He was not directly involved in the lease activity. He had Robin Hirschfield do his billing, as she continues to do. His accounting firm, Finkle and Ross of New Jersey, which apparently did not provide the common charges numbers during the lease period, was subsequently replaced. The lack of billing by the accountants was done without the plaintiff's knowledge. He forgave that amount.
The plaintiff's testimony did not help his case. He testified that he did not recall allowing the defendants to stay on after the lease expired for $2,000 per month. He never told the defendants that the RENT of $2,000 per month was not acceptable. (The checks in that amount were tendered marked as "rent" and cashed as such.)
Overall his testimony was vague, unsure and lacking in important consistencies. It was laden with expressions such as "I don't know," "I am not sure," "I don't recall," "I don't remember," "I don't believe so," and "not to my knowledge."
His verbatim testimony, in part, in cross by the defendant's attorney is as follows:
Q The end of September, the lease expired?
A Yeah. The first year lease, but the option — they had the responsibility three months before that expiration date, to notify Chris Holdings that they were going to exercise their option or not.
Q And they didn't notify you?
A No.
Q And in October did you have any conversations with the Defendants with regard to staying on and paying rent?
A I don't remember if there was a conversation in October?
Q Well, did you have a conversation with them at some point about the Rent?
A Yes, definitely. I think it was later.
Q Was the crux of that conversation that they could stay for $2,000 a Month, base rent?
A Base rent, absolutely.
Q And in fact, although the renewal was never signed, the Defendants tendered $2,000 base rent every month. Isn't that correct?
A I don't know if that's accurate. I would have to go back and look at the sheet. I honestly don't remember.
Transcript, 3/10/10, pages 1-2.
Q So, as you sit here today, you don't have any distinct recollection which months were paid and which months were not?
A Well, the checks didn't go to me in the beginning, at all. They went to the first account firm I was working with. So, I didn't see it and unless they called me.
Q But you don't dispute if there are checks showing payments for each month?
A Oh, absolutely not.
Transcript, 3/10/10, page 3.
Q My question to you is more specific than that, Mr. Cicio. Did you ever have a conversation with the Defendants to tell them that the base rent that they were paying was incorrect?
A I don't believe so.
Transcript, 3/10/10, page 4.
Q Where did the rent checks go?
A They went to Finkle and Ross in Garden City.
Q To your knowledge were any of those checks ever returned to the Defendants?
A Not to my knowledge.
Transcript, 3/10/10, page 5.
Q Do you have any knowledge as to when the accounting firm was billing for additional rent?
A I — my understanding was that they were doing it all along.
Q Your understanding was incorrect, true?
A Right. Exactly. Yes.
Transcript, 3/10/10, page 7.
THE LAW
Clearly there was an enforceable written lease drafted by the plaintiff and signed by all of the parties. That lease expired on September 30, 2006. There is no question that a renewal of that lease was never agreed to or signed by the defendant.
The lease provided for a doubling of the rent in the event of a holdover. The court finds that the evidence demonstrates that both parties, by their actions, inactions, and in the instance of the plaintiff, the failure to communicate with its agents and employer, agreed to a new lease.
There are at least three legal theories to support the court's conclusion here. They are waiver, estoppel and a novation. Waiver was not pled.
The court finds that there was a novation here which created a month to month tenancy for $2,000 per month plus the "common charges" and that the plaintiff is equitably estopped from asserting otherwise. There is further support for the position that $2,000 per month was the accepted novation. The support comes from the plaintiffs' attorney. In a letter dated May 23, 2007, nearly eight months after the termination of the original lease, he stated the following:
Despite this clear right to charge 2 times your rent, the landlord HAS UNTIL THIS MONTH AGREED TO ACCEPT THE SAME MONTHLY RATE AS YOU PAID IN THE INITIAL TERM. However, having failed to timely make your rental payment for May, [2007] you are now advised of all of the following: 1. You have 5 days in which TO DELIVER YOUR RENT OF $2,000 WHICH WAS DUE ON MAY 1st PLUS INTEREST. (Emphasis added.)
The defendants would have received this letter dated May 23rd within a few days, say no earlier than May 24th and probably May 25th or later. The defendants remitted the requested check for $4,000 on April 29, 2009. The court finds this was in compliance with the plaintiffs' request and consistent with the court's subsequent findings of law.
"Novation may be broadly defined as a substitution of a new contract or obligation for an old one which is thereby extinguished." 15 Willington, Contracts (3d Ed. Jacger) 1965; Bushnell Plaza Development Corp. v. Fazzano, 38 Conn.Sup. 683 (1983).
recognized test for whether a later agreement between the same parties to an earlier contract constitutes a substitute contract looks to the terms of the second contract. If it contains "`terms inconsistent with the former contract, so that the two cannot stand together' it exhibits characteristics . . . indicating a substitute contract." Riverside Coal Co. v. American Coal Co., 107 Conn. 40, 45, 139 A. 276 (1927). The rent under the written lease was $540 per month. Upon its expiration, the parties agreed to monthly rent of $570. The increased rent is a term inconsistent with the rent specified in the lease. The parties' oral monthly tenancy therefore was neither an extension of the lease nor a holdover tenancy. Accordingly, the tenant's obligation to pay attorneys fees was extinguished upon the termination of the written lease.
Bushnell Plaza Development Corp. v. Fazzano, supra.
In Battalino v. VanPatten, 100 Conn.App. 155 (2007), our Appellate Court espoused our law concerning oral modification of leases, the effort of the acceptance of reduced rent and the lack of dispute about the modification.
The rent specified in a written lease may be reduced by oral agreement, at least between the original lessor and lessee, without violating the statute of frauds. Baier v. Smith, 120 Conn. 568, 572, 181 A. 618 (1935); 1 Restatement (Second), Property, Landlord and Tenant § 2.4, p. 89, illustration (4) (1977). The agreement may be proved by the lessee's offer and the lessor's acceptance without protest of the reduced payment. Baier v. Smith, supra, 572.
Here, the court found that the parties agreed orally to reduce the rent. There is no dispute that the plaintiff actually did pay a rental amount less than that prescribed in the original agreement. There is also no dispute that the defendant received the payment. Therefore, we conclude that the rental modification was valid and not subject to the statute of frauds.
In support of this position is also Union Trust Company v. Jackson, 42 Conn.App. (1996) which discusses this issue of modification/novation in the context of the statute of frauds.
A modification of a written agreement must be in writing to satisfy the statue of frauds. General Statutes § 52-550(a)(6). Since the defendants do not deny that their alleged modification is governed by the statue of frauds. The question of whether the parties had an oral contract is material, if, and only if, a trier of fact were to find that there was an oral agreement for which there was consideration, and that the defendants had partly performed that agreement.
"[A] contract is enforceable, despite the statue [of frauds], when, subsequent to the making of the contract, there has been conduct that amounts to part performance." Heyman v. CBS, Inc., 178 Conn. 215, 222, 423 A.2d 887 (1979). In other words, a trier of fact would need to determine whether there was a modification of the original agreement and the terms of that modification, in order to determine whether there was part performance by the defendants on that modification.
The court finds there was such a modification here.
The court will now examine the issues of equitable estoppel and novation in more legal details.
The doctrine of equitable estoppel is well established. "[W]here one, by his words or actions, intentionally causes another to believe in the existence of a certain state of things, and thereby induces him to act on that belief, so as injuriously to affect his previous position, he is concluded from averring a different state of things as existing at the time." Cowles v. Bacon, 21 Conn. 451, 467 (1852). "Our Supreme Court . . . stated, in the context of an equitable estoppel claim, that [t]here are two essential elements to an estoppel: the party must do or say something which is intended or calculated to induce another to believe in the existence of certain facts and to act upon that believe, and the other party, influenced thereby, must actually change his position or do something to his injury which he otherwise would not have done. Estoppel rests on the misleading conduct of one party to the prejudice of the other." LaSalle National Bank v. Freshfield Meadows, LLC, 69 Conn.App. 824, 838, 798 A.2d 445 (2002). "Broadly speaking, the essential elements of an equitable estoppel . . . as related to the party to be estopped, are: (1) conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) the intention, or at least the expectation, that such conduct shall be acted upon by, or influence, the other party or other persons; and (3) knowledge, actual or constructive, of the real facts." 28 Am.Jur.2d 640, Estoppel and Waiver § 35 (1966). (Underling added.)
Johnnycake Mountain Association v. Lana M. Oaks et al., 104 Conn.App. 194 (2007).
The following case seems quite similar to the case at hand.
Whether an option in a lease to renew has been exercised is a question of fact for the trial court, which looks to the intent of the parties as expressed in their words and deeds . . . This court will not disturb the trial court's factual findings provided the evidence supports those findings. Perrotti v. Chiodo, 21 Conn.App. 288, 290, 573 A.2d 342 (1990).
In this instance, we find no fault with the court's reasoning that although the plaintiff remained on the premises and remitted to the defendant an amount the parties mutually agreed on, the plaintiff's holdover did not constitute a renewal or extension of the lease. Cf. Warner Associates v. Logan, 50 Conn.App. 90, 96, 718 A.2d 48 (1998). Indeed, the record reveals that the lease contained an option to renew, which required the plaintiff to notify the defendant, in writing, of its intent to renew the lease within the six months prior to the expiration of the lease, that the plaintiff failed to provide such notice and that the parties did not reach an agreement creating a new lease. Thus, the court properly held that the plaintiff continued in possession of the premises as a holdover tenant after the expiration of its lease on October 31, 1997.
United Social Mental Health Services, Inc. v. Radowicz, 96 Conn.App. 34 (2006).
Further, with regard to the plaintiffs' belated reliance on the original letter it is important to note the following:
"A written contract can be modified by a subsequent parol agreement if that is the intention for the parties;" Grote v. A.C. Hine Co., 148 Conn. 283, 286, 170 A.2d 138 (1961); because the "parties to a written contract retain the power to alter or vary or discharge any of its provisions by a subsequent agreement." S.H.V.C., Inc. v. Roy, 188 Conn. 503, 512, 450 A.2d 351 (1982) (Peters, J, dissenting). It does not "make any difference that the original written contract provided that it should not subsequently be varied except by writing. This stipulation itself may be rescinded by parol and any oral variation of the writing which may be agreed upon . . ."
15 S. Williston, Contracts (3d Ed. 1972) § 1828.
New England Petroleum Corporation v. Groppo, 214 Conn. 444 (1999).
An essential element of any novation is the extinguishing of the original contract by substitution of a new one. Flagg Energy Development Corp. v. General Motors Corp., 244 Conn. 126, 145, 709 A.2d 1075 (1998); Mace v. Conde Nast Publications, Inc., 155 Conn. 680, 688, 237 A.2d 360 (1967); Ruwet Sibley Equipment Corp. v. Stebbins, 15 Conn.App. 21, 26, 542 A.2d 1171, cert. dismissed, 209 Conn. 806, 548 A.2d 437 (1988).
Novation may be broadly defined as a substitution of a new contract or obligation for an old one which is thereby extinguished. Bushnell Plaza Development Corp. v. Fazzano, supra, (App. Sess. 1983). A recognized test for whether a later agreement between the same parties to an earlier contract constitutes a substitute contract looks to the terms of the second contract. If the second contract contains terms inconsistent with the former so that the two cannot stand together, it exhibits characteristics indicating a substitute contract. Id. "[A]n essential element of any novation is the extinguishing of the original contract by substitution of a new one." Flagg Energy Development Corp. v. General Motor Corp., 244 Conn. 126, 145, 709 A.2d 1075 (1998). See also, Birarelli v. Wright, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. CV 02 0389534 (June 7, 2002, Melville, J.).
Novation is properly pleaded as a special defense. See, e.g., Union Trust v. Jackson, 42 Conn.App. 413, 416, 679 A.2d 421 (1996); Ruwet-Sibley Equipment Corp. v. Stebbins, 15 Conn.App. 21, 24, 542 A.2d 1171, cert. dismissed, 209 Conn. 806, 548 A.2d 437 (1988). Moreover, whether a novation has occurred depends on the resolution of factual questions properly left to the trier of fact. See Mace v. Conde Nast Publications, Inc., 155 Conn. 680, 688-89, 237 A.2d 360 (1967); Vumbacco v. Papallo, 102 Conn. 562, 564, 129 A.2d 525 (1925); Spicer v. Spicer, 33 Conn.App. 152, 158-59, 634 A.2d 902 (1993), cert. denied, 228 Conn. 920, 636 A.2d 850 (1994). Siebe Environmental v. Johnson Goodyear, Inc., Superior Court, judicial district of Hartford, Docket No. 585061 (October 6, 2000, Hale, J.).
Park v. Kramer, 2004 Ct.Sup. 11075 (Arnold, J.)
See also, Union Trust Company v. Lionel S. Jackson, Sr. et al., 1992 Conn.Super (Katz, J.); Federal Deposit Ins. Comp. v. Conant, 1993 Ct.Sup. 9040, 8 CSCR1060 (Lager, J.); Leonardo Industrial Properties v. Patricia Maisano, 2001 Conn.Super. (Lager, J.); Madeline Birarelli v. Gerald Wright et al., 2002 Conn.Super. (Melville, J.); Nancy Spicer v. William Spicer, 33 Conn.App. 152, (1993).
The following case sums up the findings of the court on the law and facts: Gary Ryder v. Washington Mutual Bank, F.A., 501 F.Sup.2d 311 (2007).
The court notes that a "substitute agreement" (or "substitute contract") may also be known as a "novation." . . . `substitute contract' is the designation commonly employed to cover agreements between the same parties which supersede and discharge prior contract obligations . . . Because the legal effect of "substitute contract" and a "novation" are the same, for the purposes of this analysis, the court shall use these terms interchangeably.
"[A]n essential element of any novation [or substitute contract] is the extinguishing of the original contract by substitution of a new one." Flagg Energy Dev. Corp. v. General Motors Corp., 244 Conn. 126, 145, 709 A.2d 1075 (1998). "A recognized test for whether a large agreement between the same parties to an earlier contract constitutes a substitute contract looks to the terms of the second contract. If it contains "`terms inconsistent with the former contract, so that the two cannot stand together' it exhibits characteristics . . . indicating a substitute contract." Bushnell Plaza Dev. Corp. v. Fazzano, 38 Conn.Sup. 683, 688, 460 A.2d 1311 (1983) (quoting Riverside Coal Co., 107 Conn. at 45.).
Gary Ryder v. Washington Mutual Bank F.A., supra.
Based upon all of the foregoing, the Court finds that law and evidence preclude the plaintiff from prevailing in this action. The claims and special defenses raised by the defendants are firmly supported by the law and the evidence.
The court under the totality of the circumstances of this case does not award attorneys fees as the plaintiff did not prevail and, to the extent they are based upon the original lease, the Court finds that lease and all of its terms to have been extinguished by the words, actions, and inactions of the parties.
The plaintiff also cannot prevail on its claim for clean up expenses as it proved none. It merely showed an estimate which was not shown to have been activated by an actual cleanup. Further, the defendant's testimony that the premises were left broom clean was more credible.
There is a deposit of $4,000 which the defendants have never claimed. The plaintiffs are, the Court is sure, able to utilize those funds for the August rent of $1,096.50 and the common use charges of $2,843.00.
This case was, and is, as it was described by the defendant Steve Katz "A simple rental of a studio," nothing more, nothing less.
Judgment shall enter accordingly.