Opinion
No. X07 CV 07 4028205 S
July 27, 2007
MEMORANDUM OF DECISION
I
In this summary process action, the plaintiff owner, Pondy Associates, Limited Partnership (Pondy), seeks to evict the defendant tenant, Max's Oyster Bar, LLC (Max's Oyster Bar), from 964 Farmington Avenue in West Hartford on the grounds that the lease expired on December 31, 2006. The agreement between the parties included a ten-year renewal option but required notice to Pondy on or before July 1, 2006, six months before the lease was to expire. Max's Oyster Bar failed to give that notice as required — it was approximately eighty-nine days late — and Pondy commenced this action seeking possession of the premises.
Pondy does not claim that Max's Oyster Bar violated any other provision of the lease.
The parties are not the signatories to the original leasing agreement; thus, a brief history is useful to understanding this case. On March 31, 1989, 962-966 Farmington Avenue Associates entered into a ten-year indenture of lease with C.C.E.S., Inc. for the subject property with the option to extend for two five-year terms. On March 7, 1994, a lease modification and extension agreement was entered into by Pondy Limited Partnership and C.C.E.S., Inc. that, among other things, acknowledged the assignment of the lease to Pondy Limited Partnership and extended the term through December 31, 2003. The agreement was signed by C.C.E.S., Inc. and "Midwood Management Corp. as Agent by John Usdan, Its President."
At trial, no document was introduced or testimony given establishing the actual assignment of 962-966 Farmington Avenue Associates' interest in the property to Pondy.
On July 31, 1996, a second lease modification and extension agreement was entered into by Pondy Limited Partnership and Saini Sraw, Inc. The agreement consented to the assignment from C.C.E.S., Inc. to Saini Sraw, Inc. It also extended the term of the lease through December 31, 2006 and provided the option to extend the lease through December 31, 2011, if notice was given no later than July 1, 2006.
On or around October 22, 1998, John Usdan of Midwood Management Corp. (Midwood) signed a letter confirming that the assignment of the lease from Saini Sraw, Inc. to "Richard B. Rosenthal or a Connecticut corporation, partnership or limited liability company in which Richard B. Rosenthal has a controlling or managing interest" was "agreed to and accepted by the Landlord Pondy Limited Partnership." The letter also acknowledged that Rosenthal had the option to extend the lease for a term of five to ten years as provided for in the second lease modification and extension agreement. Rosenthal signed a guaranty of a lease between Pondy Limited Partnership and Max Tavern, LLC (Max Tavern).
Rosenthal testified that he was the managing member of six Max restaurants, including Max Tavern, LLC and Max's Oyster Bar, LLC.
Pondy Limited Partnership and Max Tavern entered into a third lease modification and extension agreement dated October 30, 1998, which, among other things, gave Max Tavern the right to lease additional space known as 964A Farmington Avenue. By the terms of the agreement, the tenant could exercise the option to extend the lease for a period from January 1, 2007 through December 31, 2016 if notice was given by July 1, 2006. The agreement was signed by Usdan for Midwood and Rosenthal as managing partner for Max Tavern.
On or around October 31, 1998, Saini Sraw, Inc. assigned its interest in the lease to Max Tavern. Rosenthal for Max Tavern sent a letter, dated December 17, 1998, to Usdan, which was "agreed to and accepted by the landlord Pondy Limited Partnership by John Usdan, its general partner," reflecting its desire to lease the 964A Farmington Avenue space. Finally, in a letter dated May 24, 1999, Usdan confirmed that the assignment of the lease from Max Tavern to Max's Oyster Bar, a limited liability company in which Rosenthal has a controlling or managing interest. The letter stated that the assignment was "agreed to and accepted by the landlord Pondy Limited Partnership by John Usdan, its general partner."
By letter dated September 21, 2006, sent by certified mail, John Martin, general counsel for "Midwood Management Corp., as agent for Pondy Limited Partnership, Landlord" advised Max Tavern that the lease would terminate on December 31, 2006 because it did not give notice exercising the option by July 1, 2006. Specifically, the letter stated, "Notwithstanding the fact that you failed to exercise the Option, and that over eighty (80) days have passed from the deadline to exercise the Option, we are willing to enter into negotiations for a new Lease to commence on January 1, 2007, with conditions and terms to be negotiated by the parties. Please contact the undersigned immediately by letter to . . . or my phone at . . ."
By letter dated September 28, 2006, by certified and overnight mail, Rosenthal for Max Tavern wrote to both Pondy Limited Partnership and Pondy Limited Partnership, care of Midwood, advising that it was exercising its option to extend the lease. Rosenthal added that "[a]ny delay in exercising this option was inadvertent in that it was not diaried properly."
By certified, regular and express mail, in a letter dated October 4, 2006, Martin advised Max Tavern that "[s]ince you failed to exercise the option in a timely manner, whether inadvertently or not, the terms of the original option are no longer available." He reiterated that they were still willing to enter into negotiations for a new lease.
In a letter to Max Tavern, care of Max Restaurant Group, dated October 12, 2006, Martin indicated that he had not received a response from Rosenthal concerning negotiations for a new lease. Martin added that "[i]f we do not hear from you by October 23, 2006, we will assume that you are not interested in pursuing a new lease, and we will commence negotiations for the space with other tenants." Counsel for Max Tavern and Max's Oyster Bar sent a letter dated November 1, 2006 to Pondy's counsel explaining that "any exercise of the option . . . was intended to be an exercise both on behalf of Max Tavern, LLC and Max's Oyster Bar, LLC." Rosenthal wrote an additional letter, dated November 20, 2006, attempting to exercise the option with a signature of "Max Tavern, LLC d/b/a Max's Oyster Bar."
Sometime in November of 2006, Pondy caused a "for lease" sign to be placed on the exterior wall above the restaurant's sign on Farmington Avenue. After counsel exchanged letters as to whether the sign interfered with the tenant's quiet enjoyment, it was removed two days later by a Max's Oyster bar employee. On December 11, 2006, Pondy filed a motion for a temporary injunction prohibiting interference with the sign. This court denied the motion on April 13, 2007.
On January 22, 2007, Pondy filed the instant action seeking to evict Max's Oyster Bar. Max's Oyster Bar filed an answer and asserted the special defense of equitable nonforfeiture on February 23, 2007. A trial was held on April 4, 2007, April 5, 2007 and April 9, 2007, and the parties reserved the right to present further evidence on the financial loss to Max's Oyster Bar.
All correspondence and the leasing documents refer to Pondy Limited Partnership as the owner. Nevertheless, the complaints in both this case and the declaratory judgment action, now withdrawn, are filed by Pondy Associates, Limited Partnership. "Our Supreme Court has explained that [General Statutes] § 52-123 replaces the common law rule that deprived courts of subject matter jurisdiction whenever there was a misnomer . . . in an original writ, summons, or complaint . . . When a misnomer does not result in prejudice to a party, the defect in the writ is circumstantial error . . . When the correct party is designated in a way that may be inaccurate but which is still sufficient for identification purposes, the misdesignation is a misnomer." (Citation omitted; internal quotation marks omitted.) Rock Rimmon Grange #142, Inc. v. The Bible Speaks Ministries, Inc., 92 Conn.App. 410, 414, 885 A.2d 768 (2005). In the present case, designating itself as Pondy Associates, Limited Partnership was a misnomer and was sufficient identification of the landlord plaintiff to the tenant defendant.
Similarly, the court notes that the plaintiff argues that the September 28, 2006 letter, signed by Rosenthal for Max Tavern, was an ineffective attempt to exercise the option as the lease was assigned by Max Tavern to Max's Oyster Bar in 1999. Indeed, the court heard a substantial amount of testimony and argument at trial concerning the significance of the letter. This court ruled that, notwithstanding whether the defendant would be successful with its special defense on the doctrine of equitable nonforfeiture, all parties considered the two entities to be one and the same.
For example, all of Martin's (general counsel for Midwood) letters to Rosenthal were addressed to Max Tavern and not to Max's Oyster Bar. Martin testified that he intended to send the letters to the tenant. The telephonic communications between the parties concerning the negotiating of the new lease did not distinguish between the two. Prior communications between landlord and tenant were also sent to Max Tavern. Rosenthal was clearly attempting to exercise the option for Max's Oyster Bar in the September 28, 2006 letter. Additionally, counsel for Max Tavern and Max's Oyster Bar attempted to clarify the matter in the November 1, 2006 letter to Pondy's counsel. Rosenthal submitted another letter, dated November 20, 2006, exercising the option with a signature for "Max Tavern, LLC d/b/a Max's Oyster Bar"; this was a "belt and suspenders" notice. Rosenthal's designation in the letters as agent for Max Tavern was sufficient identification to put Pondy on notice that Rosenthal was attempting to exercise the option on behalf of Max's Oyster Bar. Therefore, the misdesignation of Max Tavern in Rosenthal's letters is a distinction without a difference in this case.
On October 31, 2006, Pondy instituted a declaratory judgment action against both Max Tavern and Max's Oyster Bar seeking a determination that both failed to give notice by July 1, 2006 and that the lease would terminate on December 31, 2006. See Pondy Associates, Ltd. Partnership v. Max Tavern, LLC, Superior Court, complex litigation docket at Hartford, Docket No. X07 CV 06 4027330. This action was withdrawn at the start of the trial on the summary process action on April 4, 2007.
"[E]quitable defenses and counterclaims implicating the right to possession are available in a summary process proceeding. If, then, the tenant's equitable claim was properly raised, it was properly before the trial court." Fellows v. Martin, 217 Conn. 57, 62-63, 584 A.2d 458 (1991); see also Oakland Heights Mobile Park, Inc. v. Simon, 36 Conn.App. 432, 436, 651 A.2d 281 (1994).
While not labeled as equitable nonforfeiture, Max's Oyster Bar sufficiently alleged the defense in its answer and special defenses. Specifically, it alleged, "First special defense . . . the plaintiff seeks to take advantage of the inadvertent failure of the defendants to notify the plaintiff within the time designated in the lease, which occurred as a result of an inadvertent misdiary of the date to extend, and the relief sought by the plaintiffs is barred on equitable grounds. Second special defense: The defendants have invested substantial sums into the subject premises and continue to invest . . . all of which is known to the plaintiff, and in the event of enforcement of the termination of the lease and refusal to acknowledge the extension of same, the defendants will suffer substantial economic forfeiture . . . and hence the relief sought by the plaintiffs is barred on equitable grounds." These allegations make it clear that it was relying on the doctrine. Pondy did not seek to have the special defense revised or stricken but, on April 4, 2007, merely replied denying the allegations.
On April 5, 2007, Max's Oyster Bar sought to amend the special defenses essentially combining the earlier defenses into one and adding a second special defense pertaining to the Max Tavern/Max's Oyster Bar issue. This court granted the motion to amend as to the first special defense for a number of reasons, including: (1) while the proposed amendment may have clarified the equitable doctrine originally pleaded by Max's Oyster Bar, it did not change the fact that the doctrine was initially pleaded; (2) Pondy had not challenged the special defense either by filing a request to revise or a motion to strike pursuant to Practice Book §§ 10-35 or 10-39; (3) Max's Oyster Bar is allowed to conform pursuant to Practice Book § 10-62. As to the second special defense, see footnote 5.
Nevertheless, on June 21, 2007, during a conference call with the court, the parties agreed that the evidence was closed and that further argument was not desired. Pursuant to this agreement, Max's Oyster Bar submitted a post-trial brief on June 29, 2007. Pondy submitted its post-trial brief on July 3, 2007.
B.
Because the six-month renewal notice was not given by the required date, Max's Oyster Bar has no right to relief unless it can establish facts which warrant relief under equitable principles. See Tartaglia v. R.A.C. Corp., 15 Conn.App. 492, 494, 545 A.2d 573, cert. denied, 209 Conn. 810, 548 A.2d 443 (1988). "The doctrine of equitable nonforfeiture is a defense implicating the right of possession that may be raised in a summary process proceeding, and is based on the principle that [e]quity abhors . . . a forfeiture." (Internal quotation marks omitted.) Connecticut Light Power Co. v. Lighthouse Landings, Inc., 279 Conn. 90, 106 n. 15, 900 A.2d 1242 (2006). "Equitable relief is extraordinary and not available as a matter of right, but rather it is within the discretion of the court . . . This discretion, however, is not without limitation . . . The tripartite standard . . . requires that the tenant establish (1) that the delay was a result of mere neglect and not gross or wilful negligence, (2) that the delay was slight, and (3) that the lessor suffered only minimal harm while the harm to the lessee was substantial. All three elements of this standard must be met before equitable relief will be granted." (Internal quotation marks omitted.) Modzelewski v. William Raveis Real Estate, Inc., 65 Conn.App. 708, 715, 783 A.2d 1074, cert. denied, 258 Conn. 948, 788 A.2d 96 (2001).
1.
"In deciding whether to grant equitable relief, the court first considers the nature of the lease violation involved. [I]n cases of wilful or gross negligence in failing to fulfil a condition precedent of a lease, equity will never relieve. But in [a] case of mere neglect in fulfilling a condition precedent of a lease, which does not fall within accident or mistake, equity will relieve when the delay has been slight, the loss to the lessor small, and when not to grant relief would result in such hardship to the tenant as to make it unconscionable to enforce literally the condition precedent of the lease." (Internal quotation marks omitted.) Connecticut Light Power Co. v. Lighthouse Landings, Inc., supra, 279 Conn. 106 n. 15.
"Black's Law Dictionary (6th Ed. 1990) demonstrates the varied ways that wilful has been defined ranging from voluntary; knowingly; deliberate . . . [i]ntending the result which actually comes to pass; designed; intentional; purposeful; not accidental or involuntary to [p]remeditated; malicious; done with evil intent, or with a bad motive or purpose, or with indifference to the natural consequences. Additionally, we have defined the term differently depending on the context. See, e.g., Dubay v. Irish, 207 Conn. 518, 533, 542 A.2d 711 (1988) (wilful misconduct requires design to injure); DeMilo v. West Haven, 189 Conn. 671, 678-79, 458 A.2d 362 (1983) (wilful destruction of bridge means intentional destruction of bridge and intent to cause injury); State v. Gotsch, 23 Conn.Sup. 395, 398-99, 184 A.2d 56 (1962) (wilful commonly means intentional, as opposed to accidental, but in penal statute it means with evil intent); Guest v. Administrator, 22 Conn.Sup. 458, 459, 174 A.2d 545 (1961) (wilful breach of rule means deliberate violation done purposely with knowledge as opposed to result of thoughtlessness or inadvertence)." (Internal quotation marks omitted.) Doe v. Marselle, 236 Conn. 845, 851-52 n. 8, 675 A.2d 835 (1996).
However the word "wilful" is defined, it connotes a degree of intent, purpose or design that is simply not present in this case. The failure of Rosenthal to give proper notice was not intentional or purposeful but was, as admitted by Rosenthal, certainly negligent because it was not calendared properly. There was no evidence of an intention not to seek the renewal of the lease. Therefore, this court finds that the failure to exercise the option was not wilful.
At trial, there was some evidence presented that Pondy construes in its post-trial brief as Max's Oyster Bar having "discussed rental space" at Blue Back Square in West Hartford. Perhaps this could be interpreted as some evidence of intent or design. The court finds, however, this evidence to be questionable. "[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.) Greene v. Perry, 62 Conn.App. 338, 343, 771 A.2d 196, cert. denied, 256 Conn. 917, 773 A.2d 943 (2001).
The question then is whether Rosenthal's negligence rises to the level of gross negligence. " `Gross negligence' is a nebulous term that is defined in a multitude of ways, depending on the legal context and the jurisdiction. `Gross negligence' is commonly defined as very great or excessive negligence, or as the want of, or failure to exercise, even slight or scant care or `slight diligence.' `Gross negligence' means more than momentary thoughtlessness, inadvertence or error of judgment; hence it requires proof of something more than the lack of ordinary care. It implies an extreme departure from the ordinary standard of care, aggravated disregard for the rights and safety of others, or negligence substantially and appreciably greater than ordinary negligence." 57A Am.Jur.2d 296, Negligence § 227 (2004); see also Hanks v. Powder Ridge Restaurant Corp., 276 Conn. 314, 337-38, 885 A.2d 734 (2005).
Pondy argues that the failure to properly diary the date to exercise the option constitutes gross negligence in light of the current market rate. This court rejects that argument: if that were the test, the doctrine of equitable nonforfeiture would almost never apply because in every case the current rental rate would presumably be higher than the contracted rate made years earlier. Rather, the focus of the court's inquiry must concern all of the tenant's actions.
For this proposition, Pondy cites to Seven Fifty Main Street Associates v. Spector, 5 Conn.App. 170, 174, 497 A.2d 96, cert. dismissed, 197 Conn. 815, 499 A.2d 804 (1985), in its post-trial brief. In that case, the lower court's consideration of the rental rate was found to be harmless error because the trial court found that there was no evidence of "such hardship to the tenant to make it unconscionable to enforce literally the condition precedent of the lease." (Internal quotation marks omitted.) Id., 175. Thus, Seven Fifty Main Street Associates does not require the court to consider gross negligence in terms of higher market rental rates.
"The option to renew is plainly of great value to commercial tenants in these days of spiraling rents, and usually given in exchange for valuable consideration. The length of such leases predictably gives rise to occasions in which a tenant overlooks the date, often several months before the expiration of the lease, when the option must be exercised." George W. Millar Co. v. Wolf Sales Service Corp., 65 Misc.2d 585, 587, 318 N.Y.S.2d 24 (1971). "[T]he failure of plaintiff to give the thirty-day notice was mere forgetfulness which at most is negligence, and that nothing short of wilful, that is, voluntary, gross or inexcusable neglect, would prevent equitable relief . . ." F.B. Fountain Co. v. Stein, 97 Conn. 614, 624, 118 A. 47 (1922).
In the present case, Rosenthal testified that he believed that he had an additional two years left on the lease he took over from the prior tenant and that it expired in 2008, not 2006. He had not calendared the date and admitted he made a mistake — an error for which he suffers tremendous embarrassment. He further testified that he did not respond to Martin's offer to negotiate rent because Rosenthal believed that he had exercised the option, albeit late. This court finds that the failure to exercise the option was surely forgetful and therefore negligent, but not grossly negligent. See F.B. Fountain Co. v. Stein, supra, 97 Conn. 624; see also Xanthakey v. Hayes, 107 Conn. 459, 468, 140 A. 808 (1928).
Furthermore, in Cumberland Farms, Inc. v. Dairy Mart, Inc., 225 Conn. 771, 627 A.2d 386 (1993), our Supreme Court reviewed the doctrine of equitable nonforfeiture and upheld a lower court decision refusing to grant possession to the landlord for nonpayment of rent. The court found that "[t]hroughout the entire period of nonpayment the tenant consistently affirmed its intention and willingness to pay the rent and did tender the arrearage within approximately thirty days after calculations were finally provided." (Internal quotation marks omitted.) Id., 777. The court held that "[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." Id., 778. While the court noted that the wilful or grossly negligent test is to be strictly applied, "[t]he doctrine against forfeitures applies to a failure to pay rent in full when that failure is accompanied by a good faith intent to comply with the lease or a good faith dispute over the meaning of a lease." (Internal quotation marks omitted.) Id., citing Fellows v. Martin, 217 Conn. 57, 69, 584 A.2d 458 (1991).
While the present case does not involve nonpayment of rent, there was a good faith intent to comply with the lease. The evidence indicates that Pondy, whether through Steven Schwartz, chief operating officer of Midwood, or Martin or anyone else, was never aware of the default until sometime in August. Once the September 21, 2006 letter was received, Rosenthal acted within a few days, i.e., by letter dated September 28, 2006, to exercise the option for Max's Oyster Bar. Had he waited eighty days after receipt of the September 21, 2006 letter to contact the plaintiff, that would have constituted gross negligence. See Fusco v. RW Steak Houses, Inc., Superior Court, judicial district of New Haven, Docket No. SPNH 8912-23660WH (August 16, 1990, DeMavo, J.) [ 2 Conn. L. Rptr. 578] (finding "gross or wilful negligence" where tenant gave notice six months after failure to exercise option was brought to attention of tenant). As this is not the case here, the court finds that the failure to exercise the option was not grossly negligent. Furthermore, the failure was accompanied by a good faith intent to comply with the lease.
Pondy also argues that Rosenthal was grossly negligent in that he did not keep the dates for the leases of all of the restaurants in some kind of tracking system. It should be noted that, although Midwood, Pondy's management group, maintained a system, no one appears to have been made aware of Max's Oyster Bar's failure to exercise the option until at least a month after the fact. Indeed, Schwartz testified that he first learned that Max's did not exercise the option in August of 2006. In light of this and while Rosenthal's lack of a formal system to track these dates is an error in judgment, the court cannot find that it rises to the level of gross negligence. See 57A Am.Jur.2d 296, supra, § 227.
2.
The second test is whether the delay was slight. Modzelewski v. William Raveis Real Estate, Inc., supra, 65 Conn.App. 715. At first glance, eighty-nine days does not seem to be slight. "Slight" is defined as "small of its kind or in amount." Webster's Third New International Dictionary. Our Supreme Court has found a delay of a few days to be slight. See Galvin v. Simons, 128 Conn. 616, 620, 25 A.2d 64 (1942) (thirteen days), Xanthakey v. Hayes, supra, 107 Conn. 468 (three days), F.B. Fountain Corp. v. Stein, supra, 97 Conn. 621-22 (four days). More recently, our Appellate Court has found a delay of approximately thirty-seven days to be slight. See RE of Connecticut, Inc. v. Stiegler, 4 Conn.App. 240, 246, 493 A.2d 293 (1985). On the other hand, a delay of six months has been found to be not slight. See Modzelewski v. William Raveis Real Estate, Inc., supra, 715; see also Tartaglia v. R.A.C. Corp., supra, 15 Conn.App. 495 (finding that trial court's ruling that five and one-half months, where time was of the essence, was not slight delay was dispositive on appeal). In the present case, the delay is approximately three months.
While there is no appellate authority in Connecticut on whether three months is slight, courts in other jurisdictions have addressed whether a delay of more than one month is slight. For example, in Aickin v. Ocean View Investments Co., Inc., 84 Haw. 447, 455, 935 P.2d 992 (1997), the court found that a delay of four months in the context of a ten-year lease was not unreasonably long. The Aickin court also noted that the lessees' ten year lease term had not yet expired when they gave notice of their intent to renew, that the lessor did not dispute receiving this notice and that the lessees' actions were not intentional, wilful, or even grossly negligent, but due to an oversight. Id. Additionally, other courts have found a two-month delay to be slight. See, e.g., Trollen v. Wabash, 287 N.W.2d 645, 648 (Minn. 1979) (holding that delay was relatively slight as tenant gave written notice with four of six months of notice period remaining); Wharf Restaurant, Inc. v. Port of Seattle, 24 Wash.App. 601, 603, 605 P.2d 334 (1979) (finding that conduct of defendant's employees contributed to delay); see also Popyork, LLC v. 80 Court Street Corp. 23 App.Div.3d 538, 539, 806 N.Y.S.2d 606 (2005) (noting that defendant offered no evidence that it was prejudiced by notice that was late by two and one half months); Beltrone v. Danker, 228 App.Div.2d 763, 764, 643 N.Y.S.2d 720 (1996) (finding that two-month delay did not prejudice landlord); but see Soho Development Corp. v. Dean DeLuca, Inc., 131 App.Div.2d 385, 517 N.Y.S.2d 498 (1987) (denying equitable relief where tenant was three and one half months late).
It should be noted, however, that the legal standard in New York does not consider whether the delay was slight or not. Indeed, the tripartite standard is that "equity will intervene to relieve a tenant of the consequences of an untimely renewal notice where (1) the tenant's failure or delay was the result of inadvertence or an honest mistake, (2) the nonrenewal would result in a substantial loss to the tenant, and (3) the landlord would not he prejudiced by the delay in notice of renewal." Popyork, LLC v. 80 Court Street Corp., supra, 23 App.Div.3d 539. Query whether this may be a better test as it does not seek to draw a bright line as to what amount of time may be "slight" or not but rather focuses on the relative impact on the parties.
Here, this court finds that the delay of approximately three months was slight. Pondy received notice that Max's Oyster Bar was exercising the option with three months remaining in the initial term of the lease. This lag was small particularly in light of the other considerations in this case. Specifically, as discussed above, Rosenthal's conduct was not wilful or grossly negligent; he made a good faith effort to comply with the terms of the lease soon after he was informed of his oversight; and, as discussed below, Max's Oyster Bar, if evicted, would suffer a substantial loss compared to the negligible injury to Pondy.
Schwartz testified that he first learned that Max's did not exercise the option in August 2006 and discussed this with Martin. Martin was unsure of when he first learned about the noncompliance with the July 1, 2006 requirement. The first letter from Midwood about the failure to comply was dated September 21, 2006. Thus, it appears that Pondy chose not to inform Max's Oyster Bar until about a month after it discovered the issue. The added month made Max's Oyster Bar approximately 48 percent late, instead of approximately 17 to 30 percent late (depending upon when in August Schwartz became aware of the noncompliance), in exercising the option. See Galvin v. Simons, supra, 128 Conn. 620 (stating that thirteen days delay was a small percentage of ninety-day notice required). While Pondy had no duty to inform Max's Oyster Bar about the date for exercising the option, the court takes into account the added delay as an equitable consideration. "The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court." (Internal quotation marks omitted.) Electrical Wholesalers, Inc. v. M.J.B. Corp. 99 Conn.App. 294, 301, 912 A.2d 1117 (2007).
3.
The third test is whether "the lessor suffered only minimal harm while the harm to the lessee was substantial." (Internal quotation marks omitted.) Modzelewski v. William Raveis Real Estate, Inc., supra, 65 Conn.App. 715. An option to renew in a commercial lease is one of the most valuable rights that a tenant has. See 7 P. Rohan, Current Leasing Law and Techniques (1997) § 4C.01[1], p. 4C-3. In considering the loss of the option to the tenant, courts consider a number of factors: initial investment, improvements, good will at present location, loss of existing business, costs of moving and availability of another location. See F.B. Fountain Co. v. Stein, supra, 97 Conn. 627-28 (adopting rule requiring admission of all evidence tending to show equity of lessee's claim or hardship of enforcing lessor's claim including lessee's good will); see also Cumberland Farms, Inc. v. Dairy Mart, Inc., supra, 225 Conn. 779-80 (considering value of capital improvements); Galvin v. Simons, supra, 128 Conn. 620 (noting trial court's consideration of cost of moving and availability of another location).
In the present case, Max's Oyster Bar has established that it will lose its initial investment, valuable improvements, employees, good will and location if evicted. Like the tenant in Cumberland Farms; see Cumberland Farms, Inc. v. Dairy Mart, Inc., supra, 225 Conn. 780; Max's Oyster Bar has made substantial investment in the present location. According to Rosenthal, it took two years to find the present location that was chosen due to both the proximity to the highway and the demographics of West Hartford. Rosenthal testified that he paid $225,000 to acquire the Saini Sraw, Inc. space and an additional $30,000 for the 964A Farmington Avenue space. It took approximately one year between design and construction to finish the build out of the 4200 square feet at a cost of approximately $1.2 million dollars. These are mostly aesthetic improvements that cannot be transferred to another location.
Opening in October 1999, the restaurant grosses approximately $6.8 million yearly. It currently has eighty-five employees and serves approximately 2000 meals weekly. Rosenthal testified that he would likely lose his employees in the delay between the closure and the reopening of a new restaurant. He further testified that the restaurant has many repeat customers and a private dining room that is rented three to five times each week with advance reservations of up to eight months. "The importance of location to the ultimate success of a business cannot be overemphasized, particularly where a retail enterprise is concerned. Dislocation can have a severe impact on a business. Even when the initial location of a business is not crucial, moving to a new location after a business is established is almost always costly in terms of lost business. And, if a business has had to construct its building to adapt to its own needs, a dislocation can result in increased costs of having to do this in another location." 7 P. Rohan, supra, p. 4C-4. Rosenthal also testified that he was familiar with all potential locations in West Hartford, that none were suitable and that moving the restaurant would cost approximately $2 million.
Additionally, he stated that the restaurant would suffer a substantial loss in its customer base were it required to move. "Since a long-standing location for a retail business is an important part of the good will of that enterprise, the tenant stands to lose a substantial and valuable asset." Sy Jack Realty Co. v. Pergament Syosset Corp., 27 N.Y.2d 449, 453, 267 N.E.2d 462, 318 N.Y.S.2d 720 (1971). Consequently, the court finds that the loss to Max's Oyster Bar, if evicted, would be substantial.
It is noted that, in a conference call between the court and the parties on June 21, 2007, Pondy's counsel stated that he did not wish to present additional evidence to controvert the evidence of the financial loss to Max's Oyster Bar.
Pondy's loss, on the other hand, is the opportunity to take advantage of something which it did not have in the first place — the right to increase the amount of rent. It knew of the rental amounts in the extension when it became the landlord and when it approved the modifications to the lease. Furthermore, in RR of Connecticut, Inc. v. Stiegler, supra, 4 Conn.App. 246, the court held that "[t]he propriety of considering the possible loss to the landlord of a more advantageous use of its property . . . is immaterial to the question involved in this case" and that "[t]he application of the F.B. Fountain Co. rule requires that the landlord be prejudiced by a change in position during the period between the time when notice was due and the time when it was given. In other words, the delay itself must have caused the loss."
It is clear from the letter to Max Tavern dated September 21, 2006, as well as the testimony of Martin and Schwartz, that Pondy had taken no action to relet the property during the period of time when notice was due, i.e., June 30, 2006, to the time notice was given, i.e., on or around September 28, 2006. Rather, Martin offered to negotiate with Max Tavern. Martin indicated that he made this offer to negotiate without discussing the same with Schwartz. Schwartz indicated that at some point he started to prepare the property for market; while both he and Martin were unsure when the rental sign was procured or installed, as previously noted, other testimony indicates that it was installed on November 26, 2006 Martin testified that he did not know that the restaurant was successful, was not aware of any efforts to market the property prior to the sign installation of November 26, 2006 and was not sure whether negotiations were taking place with any potential tenants. Schwartz testified that in November he had some casual discussions with other potential tenants. Pondy did not list the property with a real estate broker and the property was never advertised, Therefore, there is no evidence of a loss to Pondy from June 30, 2006 to September 28, 2006. In sum, the court finds that Pondy suffered no harm while the harm to Max's Oyster Bar will be substantial if it were denied equitable relief
Rather, the evidence tends to show that Pondy's intention was not to replace Max's Oyster Bar with another tenant but to take advantage of Rosenthal's oversight and to negotiate higher rent. Indeed, on one occasion, Schwartz told Rosenthal that Max's Oyster Bar was "out of its league," that Pondy was the best real estate operator and that Rosenthal could come to Park Avenue in Manhattan to negotiate a new lease. Thus, Pondy has not truly sought to terminate its relationship with Max's Oyster Bar. On the contrary, Pondy indicated on at least four occasions that it would be willing to enter into a new lease with Max's Oyster Bar.
III
For the above reasons, this court finds that Max's has met its burden in proving its special defense of equitable nonforfeiture and judgment therefore enters for the defendant.