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Tomey Realty Co. Inc. v. Bozzuto's, Inc.

Court of Appeals of Connecticut

October 4, 2016

TOMEY REALTY CO., INC.
v.
BOZZUTO'S, INC.

          Argued April 6, 2016

         Appeal from Superior Court, judicial district of Waterbury, Roraback, J.

          Eric M. Grant, with whom, on the brief, were Joseph P. Yamin and Melissa A. Scozzafava, for the appellant (plaintiff).

          John P. Santucci, for the appellee (defendant).

          Alvord, Keller and Pellegrino, Js.

          OPINION

          KELLER, J.

         The plaintiff in this breach of contract action, Tomey Realty Co., Inc., appeals from the judgment of the trial court granting summary judgment on the plaintiff's complaint in favor of the defendant, Bozzuto's, Inc.[1] On appeal, the plaintiff claims that the court erred in granting the defendant's motion for summary judgment because, in doing so, it ignored the operative language of the parties' integrated contractual agreement regarding the lease of commercial property and determined the amount of base rent owed under the lease, as amended, by improperly relying on a ‘‘whereas'' clause in the preamble of the lease assignment. We reverse the judgment of the trial court.

         The following procedural history and facts, which the parties do not appear to dispute, are relevant to this appeal. In August, 2007, the plaintiff entered into a ten year commercial lease agreement (lease) with its tenant, Southbury Food Center of Connecticut, Inc. (Southbury Food). In the first paragraph of section 4 of the lease, the plaintiff and Southbury Food agreed that the base rent for the first four years of the lease would be $216, 000 per year, payable in equal monthly installments of $18, 000. In the second paragraph of section 4 of the lease, the plaintiff and Southbury Food further agreed that for the fifth year of the lease, the base rent would increase, and Southbury Food would pay as annual base rent the sum of $216, 000, plus the cumulative increase in the Consumer Price Index (CPI) over the previous four year period as issued by the United States Department of Labor (fifth year cumulative rent increase).[2]

         On May 14, 2012, which was nine months into the fifth year of the lease, the plaintiff, Southbury Food, and the defendant executed a lease assignment (assignment) pursuant to which the defendant replaced South-bury Food as the plaintiff's tenant under the lease.[3] In the preamble, the assignment contained several ‘‘whereas'' clause provisions, the third of which provided as follows: ‘‘WHEREAS; the [current] annual base rent for the period [of] September 1, 2011, to August 31, 2012, is [$216, 000 (e.g., $18, 000 per month)] . . . .''[4]The assignment further provided, in paragraph 5 of the body of the document, that the plaintiff ‘‘is not in default pursuant to any [l]ease provision and [Southbury Food] is not in default of any [l]ease provision and remains current in the payment of all obligations thereunder . . . .'' A copy of the lease was attached to the assignment as exhibit A.

         Contemporaneously with the execution of the assignment, the plaintiff and the defendant also executed a lease amendment (amendment), which amended, in part, the lease originally entered into by the plaintiff and Southbury Food. At the time the amendment was executed, nine months of the fifth year of the lease had elapsed. The amendment modified the base rent calculation commencing in the sixth year of the lease as follows: ‘‘With respect to Section 4 BASE RENTAL . . . of the [l]ease, the third paragraph therein shall be deleted and replaced with the following: ‘Thereafter, the base rental for each year shall increase by 2.5% over the immediately preceding year's base rental and shall be payable in twelve equal monthly installments on the first day of each month without any prior demand, deduction or setoff whatsoever.' '' Thus, the rental increases after the fifth year of the lease would no longer track the CPI. The amendment made no other changes to section 4 of the lease and specifically provided that ‘‘[e]xcept as provided hereinabove, the remaining terms and conditions of the lease shall remain unmodified and in full force and effect.'' The amendment did not alter the fifth year cumulative rent increase set forth in the second paragraph of section 4 of the lease. It further stated, in section 1, which deleted and replaced only the third paragraph of section 4 of the lease, that the base rent for each year would increase by 2.5 percent over the immediately preceding year's base rent. When the lease and the amendment are read together, the ‘‘immediately preceding year's base rental'' refers to the base rental required to be paid in the fifth year of the lease, which includes the fifth year cumulative rent increase. A copy of the lease was attached to the amendment as exhibit A.

         As of April 1, 2015, the date on which the court issued its memorandum of decision granting the defendant's motion for summary judgment and denying the plaintiff's motion for summary judgment, the defendant had not paid to the plaintiff, as base rent, any portion of the fifth year cumulative rent increase, which the plaintiff argues became due on September 1, 2012. Instead, commencing on September 1, 2012, the beginning of the sixth year of the lease, the defendant paid an annual increase of 2.5 percent on a base rent of $216, 000.

         On March 20, 2013, the plaintiff commenced the present action against the defendant, alleging that the defendant had breached the lease due to its failure to pay any portion of the fifth year cumulative rent increase set forth in the second paragraph of section 4 of the lease, which it claimed became due and payable, in twelve equal monthly installments, on September 1, 2012.

         On September 12, 2013, the defendant filed its answer, in which it asserted the special defenses of novation, waiver, and estoppel. The defendant also filed a counterclaim alleging that the May 14, 2012 amendment constituted a novation which modified the ‘‘rent escalation clause'' to ‘‘limit increases annually to 2.5 [percent] in the event [Southbury Food] assigned its lease to the defendant.''

         On November 20, 2014, the defendant filed a motion for summary judgment. The plaintiff also filed a motion for summary judgment on November 24, 2014.[5] On January 7, 2015, the plaintiff filed an objection to the defendant's motion for summary judgment. The court heard oral argument from the parties on their motions for summary judgment on January 12, 2015.

         As stated previously, on April 1, 2015, the court issued a memorandum of decision, wherein it granted the defendant's motion for summary judgment and denied the plaintiff's motion for summary judgment.[6] In its memorandum of decision, the court stated in relevant part: ‘‘The present dispute revolves around the question of whether under the terms of the [lease, the assignment, and the amendment], [the defendant] is obligated to pay [the plaintiff the fifth year cumulative rent increase] which was provided for in [section] 4 of the [lease]. Both parties . . . moved for summary judgment claiming that they are entitled to judgment as a matter of law.

         ***

         ‘‘The [fifth year cumulative rent increase] in dispute is defined in the following language in the second paragraph of [section] 4 of the [lease]: For the fifth year of the lease [beginning September 1, 2011], [t]enant agrees to pay [l]andlord . . . base rental at the annual rental amount of [$216, 000], plus the cumulative increase in the Consumer Price Index [CPI] . . . over the previous four year period.

         ‘‘Neither the [assignment] nor the [amendment] make specific reference to the [fifth year cumulative rent increase] despite the fact that at the time these agreements were executed in May, 2012, nine monthly payments incorporating the [fifth year cumulative rent increase] would already have become due under the terms of the [lease].[7] In addition, paragraph 5 of the [assignment] recites that [Southbury Food] is not in default of any lease provision and remains current in the payment of all obligations thereunder. Those obligations are identified in the preamble of ...


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