Summary
holding words "FULL BALANCE DUE (RENT)" written in upper left corner of check satisfied "conspicuous statement" requirement under Connecticut's "Accord and satisfaction by use of an instrument" statute
Summary of this case from United Auto. Ins. Co. v. Rivero Diagnostic Ctr.Opinion
No. CV-06-5001851
January 22, 2009
MEMORANDUM OF DECISION
The plaintiff brings this action against the defendant seeking to recover rent owed pursuant to an oral lease involving commercial property located at 280 High Street, Milford, Connecticut. The defendant denies the material allegations of the plaintiff's single-count complaint and asserts the following special defenses: (1) the plaintiff's claims are barred by the statute of limitation in General Statute § 52-576: (2) the plaintiff's claims are barred by the statute of limitation in General Statute § 52-581; (3) payment: (4) waiver; and (5) accord and satisfaction.
The action was tried to the court, which finds the following facts credibly proven. At all relevant times, the plaintiff owned property located at 280 High Street in Milford. The property is located in a mixed use zone.
The plaintiff, as lessor, and the defendant, as lessee, entered into an oral month-to-month lease concerning the property. The lease commenced on November 1, 1993 and the parties agreed to a monthly rent in the amount of $1,850.00.
The defendant was in the photography business, which generated uneven cash flow. Consequently, from the beginning of the lease the parties engaged in a course of conduct concerning the payment of rent whereby the defendant did not pay the rent on a monthly basis to the plaintiff. Rather, the defendant made payments when he had sufficient cash flow to pay his bills. He generally made rent payments in the lump sum amount of $5,000 or $6,000 at a time. The plaintiff testified that he understood the cash flow issues experienced by the defendant in his business. He was satisfied with periodic rent payments because he was living in South Carolina and only expected payment when he came to Connecticut.
The defendant's daughter, Nancy Nastri, was the bookkeeper in his photography business. Her responsibilities included making and keeping records of the defendant's rent payments. Nastri testified that she, the plaintiff and the defendant had a "friendly relationship besides a business" relationship. Such a relationship manifested itself in the casual course of conduct relating to the rent payments, and in the fact that the plaintiff did not keep track of how much rent was due and owing at a given time but relied on Nastri's "honesty to give [him] the balance." The amount of rent due and owing at a given time was further subject to adjustments made in favor of the plaintiff to the rent for leasehold-improvements made by the defendant. In this regard, the defendant performed fit up work that included a conference room, a multi-purpose room, a video room, and carpeting and painting.
The plaintiff proposed to increase the monthly rent payment in 2001 from $1,850 to $2,100. The defendant rejected the increase. Nastri told the plaintiff that the business could not afford the increase, and, thereafter, the parties continued their course of conduct concerning the payment of rent. The defendant's records show that he paid less than the full amount of rent owed for the years 2000, 2001 and 2002, and substantially less than the amount of rent paid in the prior years.
In the spring of 2002, the defendant notified the plaintiff that he intended to terminate the lease. The parties terminated the tenancy on July 3, 2002, and the defendant vacated the premises. On that date, the plaintiff and Nastri met and discussed the amount of rent owed by the defendant. The plaintiff knew that there was an outstanding balance, but did not know how much rent was due. Nastri presented the plaintiff with a check dated July 3, 2002 in the amount of $6,000 payable to the plaintiff and drawn on a Fleet Bank account of the defendant. It is clearly written in capital letters in the upper left-hand corner of the check "Final Balance Due (Rent)." Nastri filled out and signed the check in the presence of the plaintiff, and told him that "this is all the money we have," referring to the photography business. The back side of the check indicates that it was endorsed "for deposit only." The check cleared the defendant's Fleet Bank account and the proceeds were ultimately deposited into a First Union Bank account.
The court finds the plaintiff's testimony concerning his meeting with Nastri and the negotiation of the check to lack credibility. Specifically, the court rejects the plaintiff's assertions that Nastri stated to him upon presenting him with the check that "[t]his is all I can to for you. When business gets better we will give you your money." The court rejects the plaintiff's specific assertion that he did not accept the check as final payment for the balance of rent due to him. The established facts, and the reasonable inferences drawn therefrom, show that the defendant was having trouble paying the rent due in the years 2000 through the termination of the tenancy in July 2002. The defendant, not the plaintiff, caused the termination of the tenancy. The reasonable inference under the circumstances is that the defendant was experiencing business difficulties. The plaintiff accepted the fact that the defendant could not afford an increase in the rent as was requested by the plaintiff in 2001. The parties had a friendly relationship during the approximately nine years that the defendant operated his photography business out of the plaintiff's property. Accommodations were made by both sides during the entire tenancy. For example, the plaintiff accommodated the defendant's periodic rent payments and the defendant performed fit up work in consideration for a credit on the rent. The plaintiff's acceptance and cashing of the defendant's rent check dated July 3, 2002 represented a final accommodation. The parties mutually and amicably agreed to end their relationship, and the plaintiff agreed to accept the amount of $6,000 as a full and final rent payment based on the fact that the defendant was terminating the lease and had no more money to pay to the plaintiff. The facts that the plaintiff did not make a demand upon the defendant to pay the claimed balance due on the rent until approximately sixteen months after accepting and cashing the rent settlement check, and did not make a second demand until another year later, are further evidence that on July 3, 2002 the plaintiff accepted the defendant's check as full and final payment of any rent obligations under the parties' oral month-to-month lease.
The defendant submitted into evidence a copy of Nastri's handwritten check ledger purporting to show the rent due each month and the payments made against the rent due, and a computer generated ledger showing the rent payments made from January 1, 1995 through July 7, 2003. The documents show a monthly rent payment in the amount of $1,850. The plaintiff claims that the rent due and owing from January 1, 2001 to July 3, 2002 is based upon an increase in the rent payment to $2,100.
The evidence establishes that on the date the tenancy was terminated, the amount of rent due was an unliquidated and was in dispute between the parties. The plaintiff apparently believed that the defendant agreed to pay an increased rent beginning in 2001, and the defendant, in fact, rejected an increase in the rent because the business could not afford such an increase. Further, the aforementioned demand letters, sent by different attorneys, set forth different amounts claimed to be owed as rent. The demand letter dated November 17, 2003 vaguely states that the plaintiff "calculates that approximately $20,000.00 is still owed."
The defendant responded to the plaintiff's payment demands by letters dated November 22, 2004 and March 29, 2005, respectively. In each letter, the defendant denied that he owed any money to the plaintiff because, as agreed, the plaintiff received a full and final rent payment on the date of the termination of the tenancy.
At trial, the plaintiff submitted a document containing the balance of rent due through 1998, the rent due and paid during the years 1999 through the termination of the tenancy in 2002, and the amount the plaintiff claims remains outstanding. The document shows that the plaintiff claims an outstanding balance of rent due and owing in the amount of $26,833.00. Additionally, the plaintiff claims interest pursuant to General Statutes § 37-3a at the rate of ten percent from the date of the termination of the lease.
Based on a consideration of the evidence, the court finds that the plaintiff has proven a prima facie case that on the date the lease was terminated the defendant owed him rent. The court further finds, however, that the defendant has proven his special defense of accord and satisfaction.
The defendant claims to have entered into an accord and satisfaction with the plaintiff by way of a negotiated instrument. More particularly, the defendant claims that the rent due to the plaintiff was disputed on the date that the parties mutually terminated the tenancy, that the plaintiff's acceptance of the defendant's check in the amount of $6,000 on the date the tenancy was terminated represented an accord and the plaintiff's obtaining payment on the check constituted a satisfaction of the balance due on the rent.
"An accord is a contract between creditor and debtor for the settlement of a claim by some performance other than that which is due. Satisfaction takes place when the accord is executed." (Internal quotation marks omitted.) Herbert S. Newman Partners, P.C. v. CFC Construction Ltd Partnership, 236 Conn. 750, 764, 674 A.2d 1313 (1996). Section 42a-3-211 of the General Statutes, titled "Accord and satisfaction by use of an instrument," governs the defendant's claim. Section 42a-3-311(a) provides: "If a person against whom a claim is asserted proves that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument, the following subsections apply." Section 42a-3-311(b) provides, in pertinent part, that "the claim is discharged if the person against whom the claim is asserted proves that the instrument or accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered in full satisfaction of the claim." The phrase "good faith" as used in this article means "honesty in fact and the observance of reasonable commercial standards of fair dealing." General Statutes § 42a-1-201(20); General Statutes § 42a-3-103(d) ("In addition, article 1 contains general definitions and principles of construction and interpretation applicable throughout this article").
As discussed, the plaintiff and Nastri met on July 3, 2002, the date that the parties mutually terminated the tenancy. There is no dispute that the rent was in arrears on that date, and that the plaintiff was uncertain of the exact amount owed. There was a dispute on that date, as shown by the document breaking down the arrearage in the principal amount of $26,833, as to whether the defendant had agreed to a rent increase from $1,850 to $2,100 commencing in 2001. The plaintiff claims at trial that the defendant agreed to the increase, and the defendant denies that he agreed. The reasonable inference from the established facts is that the defendant was experiencing more severe cash flow difficulties in his photography business the last few years of the tenancy. At her meeting with the plaintiff on July 3rd and in his presence, Nastri drafted a check on an account maintained by "Robert J. Reid Associates" in the amount of $6,000, informed the defendant that the amount was all the defendant could afford to pay against the rent arrearage, and clearly and conspicuously wrote on the check "FULL BALANCE DUE (RENT)."
Based on the evidence, the amount was tendered by Nastri on behalf of the defendant in good faith and in full satisfaction of the plaintiff's claim against the defendant. At that time, the amount of the rent due and owing to the plaintiff was unliquidated or subject to a good faith dispute. The plaintiff promptly deposited the check and obtained payment of the proceeds. The check contained a clear and conspicuous notation that it was given by the defendant to the plaintiff in full satisfaction of the defendant's rent obligation.
Under those circumstances, the plaintiff's claim against the defendant was discharged. General Statutes § 42a-3-311(b). Therefore, judgment is rendered on the plaintiff's complaint in favor of the defendant and against the plaintiff. Because of that finding and conclusion, the court need not address the claims asserted by the defendant in his remaining special defenses.