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Elliott Enterprises, LLC v. Goodale

Court of Appeals of Connecticut

June 28, 2016

ELLIOTT ENTERPRISES, LLC
v.
GEORGETTE D. GOODALE ET AL.

          Argued November 17, 2015

         Appeal from Superior Court, judicial district of Hartford, Housing Session, Woods, J.

          Walter A. Twachtman, Jr., for the appellants (defendants).

          Andrew P. Barsom, with whom, on the brief, was Alena C. Gfeller, for the appellee (plaintiff).

          Lavine, Sheldon and Flynn, Js.

          OPINION

          LAVINE, J.

         In this summary process action, the defendant tenants, Georgette D. Goodale and Marlborough Country Bakery & Deli, Inc., [1] appeal from the judgment of the trial court in which the court found that the defendants had violated their lease agreement (lease) and granted possession of the leased premises to the plaintiff landlord, Elliott Enterprises, LLC. The trial court rendered judgment of possession in favor of the plaintiff on the ground that the defendants had failed to pay sewer charges and late fees due under the lease. On appeal, the defendants claim that the trial court erred by failing to consider that they had overpaid the plaintiff real estate taxes, which were a component of the rent pursuant to the lease, in an amount greater than what the plaintiff claimed they owed for the sewer charges and late fees.[2] The defendants also claim that the trial court erred in determining that they had failed to prove the defense of equitable nonforfeiture. We reverse the judgment of the trial court.

         The following facts and procedural history are relevant to this appeal. The plaintiff owns a shopping center in Marlborough and has rented two units of the property to the defendants since June, 2002. The defendants have operated a bakery on the premises since that time. The initial lease included an option to extend the lease term. The lease has been extended twice for five year periods, with the most recent extension due to expire in June, 2017. The lease provided that rent was due on the first of each month and that the defendants would incur a late charge of 5 percent of the amount of rent due and unpaid if they did not pay rent by the fifth of each month. Section 1 of the lease, entitled ‘‘Rent for Demised Premises, ’’ states in relevant part: ‘‘RENT . . . shall consist each month of the sum of the FIXED MINIMUM MONTHLY RENTAL[3] . . . together with the TENANTS’ pro-rata share of any INCREASES IN PROPERTY TAXES, together with any unpaid TENANTS’ UTILITIES as described in the SCHEDULE and this LEASE.’’[4] (Emphasis added.)

         Section 18 of the lease, entitled ‘‘Sewer Usage and Assessment Fees, ’’ states that ‘‘[i]n the event that during the term of this LEASE city or municipal sewers are installed in a manner so as to serve the DEMISED PREMISES, TENANTS agree to pay its prorata share of any and all sewer usage charges assessed against the LANDLORD and/or the DEMISED PREMISES.’’ In December, 2011, Marlborough installed sewers that served the demised premises. As we explain in part I of this opinion, all of the charges listed in § 1 of the lease were components of the rent, but the plaintiff billed the defendants separately for each component.

         The plaintiff claimed that the defendants had failed to pay the ‘‘fixed minimum monthly rental’’ component of the rent for April, 2013, failed to pay the sewer charges since Marlborough had installed the sewers, and failed to pay late fees that had accrued due to several instances in which the defendants did not pay the rent before the fifth day of the month. The plaintiff served the defendants with a notice to quit on April 15, 2013. On April 24, 2013, the plaintiff brought afour count action for summary process, alleging (1) nonpayment of rent, [5] (2) termination of the lease due to failure to pay sewer use charges in accordance with §§ 1d and 18 of the lease, (3) termination of the lease due to nonpayment of late fees as required by the lease, and (4) termination of the right or privilege to occupy.

         In their answer, the defendants denied that they had breached the terms of the lease by failing to pay the ‘‘fixed minimum monthly rental’’ charge, sewer use charges, or late fees due under the lease. They also denied that their right or privilege to occupy the premises had expired. They filed special defenses, alleging: (1) as to count one, that the plaintiff knowingly and intentionally miscalculated the rent due under the lease, causing the defendants to overpay the amount of the rent after the second year of the lease, and that the April, 2013 base rent and escalator were paid and accepted by the plaintiff; (2) as to count two, that the plaintiff overcharged the defendants for the sewer betterment assessment and use charges due under the lease; (3) as to count three, that the plaintiff neither billed the defendants for late fees, nor were late fees due given that the defendants have paid or overpaid the rent, that the plaintiff waived any right to the late fees, and that the plaintiff did not conduct itself in good faith and fair dealing and, as a result, should not be entitled to any late fee; (4) as to count four, that the notice to quit was improper and unjustified because the defendants have not defaulted under the lease in the payment of rent, sewer charges, or late fees; and (5) as to all counts, that the defendants acted with clean hands throughout the landlord-tenant relationship, and that the defense of equitable nonforfeiture operates in the defendants’ favor to prevent an inequitable and unjustified termination of the lease.

         The summary process action was tried over eight days between October 7, 2013 and February 24, 2014. OnSeptember8, 2014, the court issued its memorandum of decision. As to count one, the court found that the notice to quit for failure to pay the fixed monthly rental charge for April, 2013, had been served prematurely. The court thus concluded that it lacked subject matter jurisdiction over count one. As to counts two and three, the court found that the defendants had violated the lease by failing to pay the sewer use charges and late rent fees. The court concluded, as to count four, that the plaintiff had failed to establish by a preponderance of the evidence that the defendants’ right to occupy the premises should be extinguished. The court rejected all of the defendants’ special defenses, concluding that the plaintiff had properly applied the escalator clause to the yearly increase of the fixed minimum monthly rental. It also rejected the defendants’ defense of equitable nonforfeiture. Although the court found that the defendants had overpaid the real estate taxes due under the lease, it stated that it lacked jurisdiction over any monetary claims. The court concluded that the defendants had wilfully failed to pay the sewer use charges and late fees, and, thus, failed to act with clean hands. See Cumberland Farms, Inc. v. Dairy Mart, Inc., 225 Conn. 771, 778, 627 A.2d 386 (1993) (‘‘[e]quitable principles barring forfeitures may apply to summary process actions for nonpayment of rent if: (1) the tenant’s breach was not willful or grossly negligent; (2) upon eviction the tenant will suffer a loss wholly disproportionate to the injury to the landlord; and (3) the landlord’s injury is reparable’’). The court issued an equitable final stay of execution through March 31, 2015, provided that the defendants continued to make proper use and occupancy payments.

         The defendants filed a motion asking the court to articulate: (1) its interpretation of the escalator clause; (2) why it did not apply the overcharge of the real estate taxes against the amount owed for the sewer charges and late fees; (3) why it did not address the defendants’ claim that the lease provided for rent abatement pursuant to the force majeure clause; and (4) which of their specific actions constituted wilful and grossly negligent conduct in failing to pay the claimed rent. In its articulation, the court stated that it had applied the escalator clause correctly and denied the request for further articulation. The court denied the request for articulation regarding the overpayment of real estate taxes, stating that the defendants ‘‘never pleaded said defense of set-off in their answer or special defenses.’’ The court also denied the request for articulation as to the force majeure clause and the court’s finding that the defendants’ actions were wilful and grossly negligent. This appeal followed.

         After oral argument in this court, we ordered the trial court to articulate its factual findings as to: (1) the total amount of additional rent found due and unpaid from the defendants to the plaintiff, pursuant to § 18 of the lease, as additional rent for the defendants’ aliquot portion of sewer use and sewer assessment charges; (2) the total amount of any late charges found due and unpaid from the defendants to the plaintiff; and (3) the total amount that the defendants overpaid the plaintiff as additional rent for the defendants’ pro rata share of the real estate taxes. The trial court articulated that the defendants had failed to pay the sewer fees and found ‘‘the amount of $2999.60 as the total amount of additional rent found due and unpaid, as additional rent for the defendants’ aliquot portion of sewer use and ...


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