Southhaven Associates, LLC v. McMerlin, LLC ( 2015 )

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SOUTHHAVEN ASSOCIATES, LLC v.
MCMERLIN, LLC, ET AL.
(AC 35834)
Sheldon, Keller and Schaller, Js.
Argued December 4, 2014—officially released August 4, 2015
(Appeal from Superior Court, judicial district of
Waterbury, Housing Session, Zemetis, J.)
Francis G. Linn, self-represented, the appellant
(defendant).
Craig S. Taschner, for the appellee (plaintiff).
Opinion
SCHALLER, J. The defendant Francis G. Linn, guaran-
tor of a commercial lease agreement, appeals from the
judgment of the trial court in favor of the plaintiff land-
lord, Southhaven Associates, LLC, in this action brought
against the defendant tenant and the defendant guaran-
tors of the lease.1 On appeal, the defendant claims that
the court erred in its factual findings with regard to his
special defense of failure to mitigate damages and in
its calculation of damages. We affirm the judgment of
the trial court.
The plaintiff brought this action against its tenant,
McMerlin, LLC (McMerlin), and against Shane McMur-
ray and the defendant, the guarantors of a commercial
lease agreement between the plaintiff and McMerlin.
The complaint alleged theories of recovery based on
breach of lease and guarantees, quantum meruit, prom-
issory estoppel, and unjust enrichment. The defendants
filed special defenses asserting, inter alia, failure to
mitigate damages.2 At the start of the trial, the parties
filed a stipulation of facts setting forth the basic contro-
versy between them. In its memorandum of decision,
the court found additional facts relevant to the resolu-
tion of the parties’ claims. The following facts, there-
fore, are based on the stipulation of the parties and the
facts found by the court.
The plaintiff and McMerlin, a limited liability com-
pany solely owned by McMurray, entered into a written
lease agreement dated June, 2007. Pursuant to the lease,
the plaintiff was to provide McMerlin with certain rental
property for use as a liquor store in a shopping plaza
located at 100 Main Street North in Southbury.3 The
lease was for a term of ten years. On or about June
27, 2007, McMurray personally guaranteed the lease
pursuant to a signed lease guarantee. Also on that date,
the defendant, a secured creditor of and consultant for
McMurray, personally guaranteed the lease pursuant to
a signed lease guarantee.4
Pursuant to the lease, the plaintiff leased the subject
premises to McMerlin for a base minimum, monthly
rent of $5635.50 for the first two years of the lease, plus
a certain proportionate share of the operating expenses,
taxes, and merchant dues. For the first year under the
lease, the monthly amount due for rent and all other
charges was $7233.80. McMerlin paid that amount from
August, 2007 until March, 2008, when it ceased paying
the monthly charges and other rent due under the lease.
The plaintiff served a notice to quit on McMerlin on
October 22, 2008, and, thereafter, initiated a summary
process action against McMerlin. McMerlin vacated and
surrendered the premises to the plaintiff on October
28, 2008.5 The defendant and McMurray failed to fulfill
their obligations under their guarantees. The plaintiff
then initiated the present action to recover damages
for, inter alia, breach of lease and guarantees.
Following the evidentiary portion of the trial, the
court found in favor of the plaintiff on its breach of
lease and guarantees claim and rendered judgment
against the defendants, jointly and severally, in the
amount of $433,430.90, plus reasonable attorney’s fees
and expenses. Having found the existence of a contract
in count one, the court rendered judgment in favor of
the defendants on the remaining counts, all of which
were based on quasi contractual theories of recovery.6
The defendants then filed the present appeal, arguing
that the court erred in its factual findings regarding the
special defense of failure to mitigate damages and in its
calculation of damages. The appeal was subsequently
dismissed as to McMerlin and McMurray, leaving the
defendant as the sole appellant in this matter.
I
The defendant first claims that the court erred in its
factual determinations regarding his special defense of
failure to mitigate damages. We disagree.
‘‘Connecticut law is clear that [i]n an action for rent
due, a lessor of commercial property is generally under
no obligation to mitigate his damages after the lessee
fails to pay rent. . . . Such an obligation arises only if
the lessor manifests an intent to terminate the tenancy
either by taking an unequivocal act showing this intent
or by bringing an action for damages based on the
tenant’s breach of contract. . . . The duty to mitigate
damages [does] not require the plaintiff [landlord] to
sacrifice any substantial right of its own . . . or to
exalt the interests of the tenant above its own. . . . It
[is] required to make reasonable efforts to minimize
damages. What constitutes a reasonable effort under
the circumstances of a particular case is a question of
fact for the trier.’’ (Citations omitted; internal quotation
marks omitted.) Brennan Associates v. OBGYN Spe-
cialty Group., P.C., 127 Conn. App. 746, 754, 15 A.3d
1094, cert. denied, 301 Conn. 917, 21 A.3d 463 (2011).
‘‘[W]here the factual basis of the court’s decision is
challenged we must determine whether the facts set
out in the memorandum of decision are supported by
the evidence or whether, in light of the evidence and
the pleadings in the whole record, those facts are clearly
erroneous.’’ (Internal quotation marks omitted.) Ray
Weiner, LLC v. Connery, 146 Conn. App. 1, 9, 75 A.3d
771 (2013). ‘‘A finding of fact is clearly erroneous when
there is no evidence in the record to support it . . .
or when although there is evidence to support it, the
reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been
committed.’’ (Internal quotation marks omitted.) Mead-
owbrook Center, Inc. v. Buchman, 149 Conn. App. 177,
185, 90 A.3d 219 (2014).
The court in the present case first considered the
defendants’ claim that the plaintiff failed to mitigate
damages prior to the termination of the lease. In this
regard, Christopher Gatto, the manager of the plaintiff,
testified that, prior to the termination of the defendant’s
lease, the defendant explained that he could no longer
fund the business and had relocated out of state. At that
point, the plaintiff decided to seek qualified substitute
tenants. The court heard testimony that the plaintiff
and Paul Moeller engaged in negotiations regarding the
subject premises from July, 2008 until October 15, 2008,
when the negotiations terminated. The court found,
however, that Moeller ‘‘had many problems with the
existing lease between the plaintiff and the defendants.
Moeller would not accept an assignment of that lease.7
Nonetheless, the plaintiff . . . sought to negotiate with
Moeller to create a new lease. Ultimately, Moeller testi-
fied that under no circumstances would he personally
guarantee the performance of the lease, but proposed
instead that the sole tenant would be [a limited liability
company] with little or no assets. Under the circum-
stances, the [plaintiff] had every right to reject such an
unreasonable proposal.’’ (Footnote added.)
Our review of the evidence in the record supports
the court’s finding regarding the transaction between
the plaintiff and Moeller. Contrary to the defendant’s
claim, the record indicates that the plaintiff attempted
to negotiate with Moeller. Moeller, however, would not
agree to an assignment of the existing lease and would
not personally guarantee the lease. We, therefore, do
not conclude that the court’s factual finding in this
regard was clearly erroneous.
The court next considered the defendant’s claim that
the plaintiff failed to mitigate damages following the
termination of the lease. In support of this claim, the
defendant presented evidence from several witnesses
to support his claim that the plaintiff refused to negoti-
ate with potential tenants. John Nejaime, one of the
potential tenants, testified that he learned about the
availability of the subject premises in November, 2008,
and had only one telephone conversation with Gatto,
before deciding to pursue other options. Wayne Duris,
another potential tenant, testified that in the late spring
of 2009, he considered the premises for use as a liquor
store. This transaction, however, was never completed
as there were ‘‘too many obstacles’’ and there was no
agreement regarding the price of the defendant’s
business.8
The plaintiff presented evidence to establish that it
had taken steps to lease the premises to another tenant
following the termination of the lease. Specifically,
Jason Wuchiski of Rhys, LLC, previously GVA Williams,
the exclusive leasing agent for the plaintiff, testified
about his efforts to lease the premises for the plaintiff.
He described the standard marketing package that was
distributed to potential tenants and the initial negotia-
tions with prospective tenants, including GameStop,
BevMax and other liquor stores, and a nail salon. Wuchi-
ski also testified about efforts to increase the frontage
to make the premises more marketable. Gatto testified
regarding efforts of GVA Williams and Wuchiski to lease
all of the premises in the shopping plaza9 and about
prospective tenants, including several nail salons and
GameStop. On the basis of this evidence, the court
found that ‘‘[t]he defendants directed a number of
potential purchasers of their business to the [plaintiff]
to determine whether those potential purchasers of
McMerlin . . . could qualify as suitable tenants in the
plaintiff’s mall. None of the potential purchasers and/
or prospective lessees was willing or able to reach
agreement with the [plaintiff] on the same terms as the
defendants had reached agreement with the [plaintiff].
. . . In sum, the court finds that voluminous testimony
[of several witnesses] established that the [plaintiff] did
consistently make reasonable efforts to mitigate the
defendants’ damages by making reasonable efforts to
[lease] the subject property before and after the defen-
dant McMerlin defaulted on its contractual obli-
gations.’’10
‘‘It is well established that it is within the province
of the trial court, when sitting as the fact finder, to
weigh the evidence presented and determine the credi-
bility and effect to be given the evidence. . . . Credibil-
ity must be assessed . . . not by reading the cold
printed record, but by observing firsthand the witness’
conduct, demeanor and attitude. . . . [The] fact finder
is best able to judge the credibility of the witnesses
and to draw necessary inferences therefrom.’’ (Internal
quotation marks omitted.) Wyatt Energy, Inc. v. Motiva
Enterprises, LLC, 308 Conn. 719, 737, 66 A.3d 848
(2013). On the basis of our review of the record, and
with deference to the court’s factual findings, we do
not conclude that the court’s finding with regard to
the defendant’s claim of failure to mitigate damages
following the termination of the lease was clearly erro-
neous.11 Accordingly, the defendant cannot prevail on
his claim.
II
The defendant next claims that the court erred in
its calculation of damages. Specifically, the defendant
argues that because the lease was terminated on or
about November, 2008, he should not be held liable for
rent after that time. We conclude, however, that the
court properly calculated the damages due to the
plaintiff.
We first note that the trial court ‘‘has broad discretion
in determining damages. . . . The determination of
damages involves a question of fact that will not be
overturned unless it is clearly erroneous. . . . When,
however, a damages award is challenged on the basis
of a question of law, our review [of that question] is
plenary.’’ (Citation omitted; internal quotation marks
omitted.) Landry v. Spitz, 102 Conn. App. 34, 49–50,
925 A.2d 334 (2007); see also K & R Realty Associates
v. Gagnon, 33 Conn. App. 815, 820, 639 A.2d 524 (1994).
‘‘[W]hen the lessee breaches a lease for commercial
property, the lessor has two options: (1) to terminate
the tenancy; or (2) to refuse to accept the surrender.
. . . Where the landlord elects to continue the tenancy,
he may sue to recover the rent due under the terms of
the lease. Under this course of action, the landlord is
under no duty to mitigate damages. . . . When the
landlord elects to terminate the tenancy, however, the
action is one for breach of contract . . . and, when
the tenancy is terminated, the landlord is obliged to
mitigate his damages. . . . The general rule for the
measure of damages in contract is that the award should
place the injured party in the same position as he would
have been in had the contract been performed.’’ (Cita-
tion omitted; internal quotation marks omitted.) Bren-
nan Associates v. OBGYN Specialty Group, P.C., supra,
127 Conn. App. 754.
In the present case, it is undisputed that the plaintiff
served a notice to quit on McMerlin on October 22,
2008. Service of the notice to quit manifested the plain-
tiff’s intent to terminate McMerlin’s tenancy. See id.,
755. On October 28, 2008, McMerlin vacated and sur-
rendered the premises to the plaintiff. As a conse-
quence, McMerlin was no longer obligated to make
monthly rental payments. Because the plaintiff insti-
tuted an action for breach of lease, however, the
remaining rental payments due under the lease could
be used as part of the calculation of the damages that the
plaintiff sustained. See id.; Rokalor, Inc. v. Connecticut
Eating Enterprises, Inc., 18 Conn. App. 384, 389–90,
558 A.2d 265 (1989). Accordingly, we conclude that the
court, after noting that the plaintiff had re-leased the
property effective October 1, 2011, properly awarded
damages for the plaintiff comprised of rent, common
area maintenance charges, merchant dues, and interest
through the end of September, 2011.
The judgment is affirmed.
In this opinion the other judges concurred.
1
This action was brought against McMerlin, LLC, Shane McMurray, and
Francis G. Linn. Although the appeal was filed by the three named defen-
dants, it was subsequently dismissed as to McMerlin, LLC, and McMurray,
leaving Linn as the sole appellant in this matter. For purposes of this opinion,
therefore, we refer to Linn as the defendant, to the other defendants individu-
ally by name, and to all of the defendants collectively as the defendants.
2
The defendants asserted special defenses alleging fraud in the induce-
ment, fraud, failure to mitigate damages, and payment and setoff. The defen-
dants also filed setoffs and counterclaims, asserting payment and setoff,
fraud in the inducement, fraud, negligent misrepresentation, violations of
the Connecticut Unfair Trade Practices Act, General Statutes § 42-110a et
seq., and statutory theft.
3
The lease referred to the property as store number 13 at 100 Main Street
North in Southbury. Christopher Gatto, the manager of the plaintiff, testified
at trial that the property was actually store number 11, and that the reference
to store number 13 in the lease was a typographical error.
4
Pursuant to the lease guarantees, McMurray and the defendant, jointly
and severally, ‘‘guarantee[d] to [the plaintiff] its successors and assigns, the
full and timely payment, performance and observance of all the covenants,
conditions and agreements provided to be performed and observed by
[McMerlin] in said Lease, including without limitation, the prompt payment
of all principal, interest, the Indebtedness (as defined in Section 45 of the
Lease) [pertaining to payment for fixtures] and all other amounts provided
in said lease to be paid by [McMerlin].’’
5
The housing court rendered judgment of possession in favor of the
plaintiff on November 13, 2008.
6
The court further found that the defendants had failed to establish the
elements necessary to prevail on their special defenses, counterclaims, and
setoffs alleging fraud in the inducement, fraud, failure to mitigate damages,
negligent misrepresentation, violations of the Connecticut Unfair Trade Prac-
tices Act, General Statutes § 42-110a et seq., and statutory theft. The court
found merit to the defendants’ claim of payment, specifically noting that
the defendants posted a security deposit in the amount of $15,042.45 with the
plaintiff and paid $35,000 toward an equipment purchase from the plaintiff.
7
We note that paragraph 21 (b) of the lease stated in relevant part: ‘‘Land-
lord’s consent to any assignment of this Lease, or the subletting of the
Leased Premises shall also be conditioned upon (1) any such assignee or
sublessee shall agree with Landlord in writing, prior to any such assignment
or subletting, to be bound by and to perform all covenants and conditions
of this Lease applicable to Tenant; (2) that Tenant shall remain liable for
observance and performance of all of the covenants and conditions of this
Lease; and (3) that notice of such assignment or subletting is given to
Landlord no less than fifteen (15) days prior thereto.’’
8
Although Duris testified about obstacles that prevented the transaction
from going forward, he testified that he did not recall making a determination
that the plaintiff was an obstacle.
9
The following exchange occurred between the plaintiff’s counsel and
Gatto during direct examination:
‘‘Q. And how do [GVA Williams and Wuchiski] go about their work for you?
‘‘A. A number of ways. They have—they do what’s called a blitz where
they’ll prepare a package of material on any given shopping center and then
send it by e-mail out to the real estate community to all the brokerage firms
who might be—have representatives who—who represent tenants. They also
attend various real estate events through the ICSE, which is an organization
related to the field. And, in addition, they cold call—they really use every
means necessary.
‘‘Q. Okay. And they do that for any vacant space you have in that particular
shopping center?
‘‘A. Yes.
‘‘Q. All right. And at the time that [McMerlin] vacated this space, did you
have other vacant space in the shopping center?
‘‘A. We had some—
‘‘Q. Okay.
‘‘A. —yes.
‘‘Q. All right. And GVA Williams and Mr. Wuchiski at that time were
working to fill all the space if they could?
‘‘A. Yes.’’
10
The court further stated: ‘‘The [plaintiff] affirmatively took more than
reasonable efforts to lease the subject premises promptly and continuously
following the termination of the lease until the property was [re-leased]
effective October 1, 2011. During the years between the termination of the
lease and the [re-leasing], the [plaintiff] continuously advertised, through
competent real estate agents, the subject premises, together with other
vacancies in the mall, as well as cataloguing, meeting, vetting, and negotiating
with potential tenants of the lease space. All the conduct of the [plaintiff]
can be described as consistent with reasonable business behavior. The
[plaintiff] appears to have made no distinction between the lease efforts of
the subject premises and lease efforts made of any other vacancy in the
mall. The plaintiff was operating the mall for profit and wished to have the
premises fully leased and took commercially reasonable efforts to do so.’’
11
We note that the defendant also questions the truthfulness of the wit-
nesses who testified for the plaintiff. In this regard, we reiterate that ‘‘[i]t
is the trier’s exclusive province to weigh the conflicting evidence, determine
the credibility of witnesses and determine whether to accept some, all or
none of a witness’ testimony.’’ (Internal quotation marks omitted.) Suntech
of Connecticut, Inc. v. Lawrence Brunoli, Inc., 143 Conn. App. 581, 589,
n.3, 72 A.3d 1113, cert. denied, 310 Conn. 910, 76 A.3d 626 (2013).