Opinion
No. CV 05 40001609S
October 24, 2006
MEMORANDUM OF DECISION
This is an action brought by the plaintiff, Connecticut Pain Care, P.C. ("CPC"), against the defendants, Doctor Philip Ho and Litchfield Hills Ear, Nose Throat, LLC (Litchfield Hills ENT) for damages arising out of the alleged breach of a commercial sub-lease. The Court finds for the plaintiff and awards damages against Dr. Ho in the amount of $27,602.61 as more fully discussed below.
FACTUAL AND PROCEDURAL HISTORY
The Court finds the following facts. The plaintiff, Connecticut Pain Care, P.C., is a professional corporation licensed to transact business in the State of Connecticut. The plaintiff provides anesthesiology and pain management services to patients at several locations in western Connecticut. Beginning in 2001, CPC leased satellite office space at Suite 201, 131 Kent Road, Building A, New Milford, Connecticut from 151 Kent Road LLC. CPC leased the space on a full-time basis from 151 Kent Road LLC but only saw patients in that location on Wednesdays of each week. Because the office space that CPC had leased remained empty for much of each business week, CPC sought to sublease the space to another medical practice for the remaining days of the week.
On July 20, 2004, CPC entered into a written agreement with Dr. Philip Ho to sublease, from July 20, 2004 and July 31, 2005, the office space on Monday, Tuesday, Thursday and Friday of each week. Dr. Ho is an ear, nose and throat specialist who was in the process of starting and building a medical practice, which operates under the name of Litchfield Hills Ear, Nose Throat, LLC.
The sublease required Dr. Ho to pay rent in the amount of $3,000 per month. Additionally, the sublease contained a provision that Dr. Ho would be permitted to make improvements to the leased space, such as upgrading the telephone equipment, provided he obtained pre-approval from CPC. Pursuant to the lease, Dr. Ho was financially responsible for any improvements made by him. Moreover, the sublease provided that Dr. Ho could not make any changes or improvements to the space that would inhibit CPC's use of the space in any way.
Dr. Ho began occupying the space in late July 2004 and made the required lease payments in July, August and September of that year. Dr. Ho also upgraded the telephone system in the space in order to better accommodate his practices needs.
In September 2004, various disagreements began to arise between CPC and Dr. Ho regarding the leased space. First, Dr. Ho requested that his practice's name or his name be added to a sign in the front of the building so that his patients could more easily find his office. CPC indicated to Dr. Ho that it could not erect an additional sign, or have Dr. Ho's name added to the existing sign, because CPC's lease with 151 Kent Road LLC did not permit additional signage, town zoning regulations did not permit an additional sign, and there was no remaining room on the existing sign.
Second, Dr. Ho requested permission from CPC to purchase and install certain exam chairs that Dr. Ho believed were appropriate for his patients. CPC denied Dr. Ho's request because the proposed exam chairs did not permit CPC's patients to lay flat or in the prone position, a requirement that CPC had explicitly included within the sublease agreement. Although Dr. Ho had the option to purchase exam chairs that suited both his patient's needs and those of CPC's, Dr. Ho was unwilling to pay the substantial difference between the price for those exam chairs and the exam chairs he wished to purchase.
Third, Dr. Ho requested permission from CPC to install an audiology booth in the leased space so that Dr. Ho could perform certain audiology tests on his patients. CPC denied Dr. Ho's request because, in its view, the booth would take up so much space in one of the exam rooms, that it would interfere with CPC's medical equipment and reduce the number of patients that CPC could see at this location.
On October 13, 2004, Dr. Ho informed CPC in writing that he intended to vacate the space for various reasons, including, but not limited to, the three issues discussed above. Dr. Ho eventually vacated the space on November 23, 2004.
Dr. Ho did not pay CPC any rent beyond the September 2004 rent payment. Dr. Ho also did not pay CPC for the $602.61 CPC expended to improve the telephone system at Dr. Ho's request.
After Dr. Ho vacated the leased space, CPC took a number of reasonable steps to find a new subtenant for the space. CPC ran ads in local papers, spoke to realtors and, through "word of mouth," attempted to find another tenant by speaking to other doctors and medical practice groups in the area. CPC was unable to find another tenant in order to mitigate its damages. At no time did CPC release Dr. Ho from the lease.
On January 26, 2005, CPC initiated this action against Dr. Ho for damages arising out of his breach of the written agreement. CPC subsequently amended its complaint so as to name Litchfield Hills ENT as a defendant because Dr. Ho had asserted as a defense that Litchfield Hills ENT, rather than he personally, had entered into the agreement.
In turn, Litchfield Hills ENT asserts by way of counterclaim that CPC breached the written agreement, breached certain oral agreements, and breached the implied duty of good faith and fair dealing. Both Dr. Ho and Litchfield Hills ENT also assert a number of special defenses that will be discussed below.
After hearing the evidence and reviewing the parties' post-trial submissions, the Court finds the issues for CPC against Dr. Ho. Other factual findings will be discussed as necessary.
LEGAL ANALYSIS A. Count One
In Count One of the plaintiff's complaint, CPC seeks to recover damages for Dr. Ho's breach of the sub-lease agreement. "The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) Rosato v. Mascardo, 82 Conn.App. 396, 411, 844 A.2d 893 (2004).
Based upon the facts set forth above, the Court finds that the plaintiff has established the necessary facts to prevail on this Count. The defendants, however, raise a series of special defenses and other legal arguments as to why the plaintiff cannot prevail on this Count. These claims will be discussed seriatim.
1. The written agreement is a lease rather than a license
The defendants first argue that the sub-lease agreement is a mere license to use the office space, rather than an actual lease of that space, and therefore is not enforceable as a contract. Specifically, the defendants argue that because the agreement did not provide for the total exclusion of the landlord from the space, the written agreement must be construed as establishing only a mere license to use the space. This claim is without factual and legal merit.
"[A] license in real property is a mere privilege to act on the land of another, which does not produce an interest in the property . . ." (Internal quotation marks omitted.) Woodhouse v. McKee, 90 Conn.App. 662, 674, 879 A.2d 486 (2005). "On the other hand, [a] lease is a contract under which an exclusive possessory interest in property is conveyed . . . A lease is more than a mere license; it is a contract for the possession and profits of lands and tenements on the one side, and a recompense of rent or other income on the other; or, in other words, a conveyance to a person for life, or years, or at will, in consideration of a return of rent or other recompense . . . Its distinguishing characteristic is the surrender of possession by the landlord to the tenant so that he may occupy the land or tenement leased to the exclusion of the landlord himself." (Citations omitted; internal quotation marks omitted.) Murphy Inc. v. Remodeling, Etc., 62 Conn.App. 517, 522-23, 772 A.2d 154, cert. denied, 256 Conn. 916, 773 A.2d 945 (2001).
Consequently, the issue in this case is whether the parties intended to enter into an agreement for the lease of the office space or intended simply to create in Dr. Ho a license to use the office space. "The construction of a contract to ascertain the intent of the parties presents a question of law when the contract or agreement is unambiguous within the four corners of the instrument . . . [T]he construction of a written contract is a question of law for the court." (Citation omitted; internal quotation marks omitted.) Sachs v. Sachs, 60 Conn.App. 337, 342, 759 A.2d 510 (2000). In the present case, the terms of the sub-lease agreement, and the reasonable inferences drawn therefrom, demonstrate that the parties intended to enter into an agreement that Dr. Ho would have exclusive possession of the office on Mondays, Tuesdays, Thursdays, and Fridays. The purpose and intent of the agreement was to lease the space to Dr. Ho so that he could see patients in the space four days a week and the reasonable implication from the terms of the agreement is that CPC would not have the right to possession and use of the office space on those days. The sole exception to Dr. Ho's exclusive possession of the office space was that a third party, Housatonic Valley Radiology ("HVR"), would be permitted to enter the space on a periodic and limited basis to use one of the procedure rooms. This limited exception does not transform the lease agreement into a mere license. Instead, HVR's right to use the procedure room a few times a month is best viewed as a license that minimally burdened Dr. Ho's leasehold interest in the office space.
Dr. Ho has not cited any cases in which a court has held that an agreement that permits a landlord to possess and use for one day a week the property that is the subject of the agreement must be construed as a license rather than a lease.
This case is factually dissimilar to the cases relied upon by the defendants such as Murphy, Inc. v. Remodeling, Etc., 62 Conn.App. 517, 522-23, 772 A.2d 154, cert. denied, 256 Conn. 916, 773 A.2d 945 (2001) and Jo-Mark Sand Gravel Co. v. Pantanella, 139 Conn. 598, 601 A.2d 217 (1953). In Murphy, the agreement simply permitted one party to use, maintain and service advertising signs on the roof of a commercial property owned by the other party to the lease agreement. The Court found nothing in the agreement that could be reasonably construed as an intention to give exclusive possession of the premises to the licensee, who at most had a right to non-exclusive ingress and egress over the property in order to maintain the signs.
Similarly, in Jo-Mark, an owner of land had agreed with a sand and gravel company that the company could enter upon her land and remove sand and gravel during the period of agreement. Jo-Mark, supra, 139 Conn. at 599. The Connecticut Supreme Court construed the agreement as a license rather than a lease because there was nothing in terms of the agreement that the Court could infer any intent to confer exclusive possession of the land to the company. Id., 601-02. Finally, in this case, the terminology used by the parties in the written agreement indicates that the parties intended that their relationship was to be that of landlord and tenant. Although this language is not conclusive if it is inconsistent with the actual character of the document, see, e.g., Jo-Mark supra, 139 Conn, at 602; it is additional evidence that the parties intended the agreement to be a lease and enforceable by way of contract law.
The defendants also argue that both parties mistakenly believed that they were entering into a sublease agreement that was binding and not revocable at the will of the plaintiff and that this "mutual mistake" renders the agreement unenforceable. Of course, this assertion is factually inconsistent with the defendants arguments that the parties intended to enter into a license agreement. In any event, because the court has concluded that the written agreement is a lease rather than a license, there was not mutual mistake that renders the agreement unenforceable.
Accordingly, the Court rejects the defendants' claim that the written agreement is unenforceable because it is a license.
2. Dr. Ho rather than Litchfield Hills ENT is a party to the lease.
Dr. Ho next argues that the plaintiff cannot prevail on Count One because he did not sign the written sub-lease agreement in his personal capacity but instead signed the documents in his capacity as a member or manager of Litchfield Hills ENT. The Court does not find this claim to be persuasive.
The Court concludes that the document is somewhat ambiguous as to the identity of the sub-tenant. However, an overall construction of the lease, as well as extrinsic evidence offered at trial, compels the Court to conclude that Dr. Ho signed the agreement in his personal capacity.
This conclusion is based on the following facts. First, the most critical language of the lease regarding this issue is found in its initial paragraph, which defines the parties to the lease: "This sublease of Suite 201, 131 Kent Road, Building A, New Milford, Connecticut is made . . . by and between Connecticut Pain Care PC and . . . Phillip Ho MD (Subtenant) of Litchfield Hills ENT LLC." Significantly, the document clearly distinguished between CPC, a corporate body, and Dr. Ho., as an individual. If the lease had been intended to bind Litchfield Hills ENT, there simply would have been no need to add Dr. Ho's name to the first sentence of the lease just as there was no need to insert Dr. Kloth's name before CPC. Moreover, the placement of the parenthetical with the word "subtenant" directly after Dr. Ho's name, rather than after the LLC's name, is further evidence that Dr. Ho was to be the subtenant and not the LLC. Indeed, reciting the name of the LLC appears to be done only to further describe or indicate the identity of Dr. Ho. In other words, if the parties had not intended Dr. Ho, in his personal capacity, to be a party to the lease, the document would have read: "This sublease is between Connecticut Pain Care PC . . . and Litchfield Hills ENT, LLC" without referring to Dr. Ho at all in the paragraph that appears to be specifically included to identity of the parties to the agreement.
Throughout the lease the subtenant is referred to by the use of the masculine possessive "his" rather than by the term "its." For example, the lease provides that the "Subtenant will provide at his own expense [certain office equipment]." The lease also provides that the "Subtenant will be responsible for any damage caused by the subtenant, his patients, his employees or any visitor on the premises with his permission. Obviously, if Litchfield Hills ENT was the subtenant, party to the lease, then use of the possessive would have been grammatically incorrect.
It is also important to note that the signature blocks at the end of the lease are materially different as between CPC and Dr. Ho. The lease is signed by CPC by Dr. Kloth, its President, while Dr. Ho did not sign the agreement in any particular capacity or under any particular claim of authority for Litchfield Hills ENT.
The only significant ambiguity in the agreement is found in the sentence providing that the lease would terminate upon the "[l]egal dissolution of either business entity." This ambiguity, however, does not compel a conclusion that Litchfield Hills ENT is a party to the agreement. Instead, this provision can simply be construed as permitting Dr. Ho to terminate the lease if his practice dissolves, a construction that is not necessarily inconsistent with a determination with the other language in the lease indicating that Dr. Ho is the subtenant.
Finally, the extrinsic evidence at trial supports a conclusion that the parties intended Dr. Ho to be a party to the agreement rather than Litchfield Hills ENT. The Court credits the testimony of Barbara Dorry, CPC's business manager, who negotiated the lease on CPC's behalf. She testified, and the Court finds, that it was understood that throughout the negotiation process that Dr. Ho was to be the subtenant and to be a party to the lease and that Dr. Ho never indicated a contrary intention to her. Accordingly, the Court finds that Dr. Ho is a party to the agreement and can be held personally liable for its breach.
The defendants also assert that CPC cannot prevail on Count One because CPC breached various oral agreements Dr. Ho and CPC had reached regarding an advertising sign and the installation of an audiology booth. The defendants appear to argue that even though these contractual issues are not included within the written agreement, CPC's alleged breach of the oral agreements excuses the defendants from performing its obligation to pay rent under the lease. The Court rejects this claim because it cannot find, based on the evidence before it, that these oral agreements in fact existed. Instead, the Court finds that these issues arose primarily after the written agreement was signed and the parties were never able to reach a satisfactory agreement regarding the issues of the sign or the installation of an audiology booth. Consequently, the defendants cannot prevail on this claim.
3. CPC reasonably attempted to mitigate its damages.
The defendants also argue that CPC failed to mitigate its damages. CPC argues that it was not legally obligated to mitigate its damages because this was a commercial lease and CPC refused to accept the surrender of the premises. See, e.g., Dewart Building Partnership v. Union Trust Co., 4 Conn.App. 683, 687, 496 A.2d 241 (1985); KR Realty Associates v. Gagnon, 33 Conn.App. 815, 819, 639 A.2d 524 (1994). The Court concludes that it does not need to reach the legal question of the applicability of this line of authority to the present case because CPC did in fact take reasonable steps to mitigate its damages. The failure to find a new tenant was not the product of a lack of effort by CPC but instead resulted from the unique need to find another tenant who was willing to lease the space for only four business days a week. Accordingly, the defendants cannot prevail on this claim.
4. CPC did not breach its duty of good faith and fair dealing.
The defendants final claim is that CPC breached its implied duty of good faith and fair dealing. Specifically, the defendants argue that CPC breached this duty by failing to accommodate Dr. Ho's request for advertising space on the sign and to install an audiology booth in the procedure room. The court rejects this claim. CPC acted in good faith with respect to these issues, which Dr. Ho could have insisted be included within the specific written terms of the sub-lease. Even though CPC had no obligation to permit Dr. Ho to install the booth or to find him advertising space on the sign in front of the building, CPC attempted to work with Dr. Ho to accommodate his needs. CPC rejected his requests regarding the sign only when told by its landlord that town zoning rules would not permit a larger or additional sign and that the only solution would be for CPC to reduce the size of its own name on the sign in order to include Dr. Ho's name or practice. Similarly, CPC rejected installation of the audiology booth only after it determined that it would reduce the number of patients that CPC itself could see in the office. Accordingly, CPC did not breach its duty of good faith and fair dealing.
B. Count Two
The Second Count of the plaintiff's second amended complaint seeks recovery from Litchfield Hills ENT for breach of contract. Because the Court has concluded that Dr. Ho rather than Litchfield Hills ENT was the subtentant in the written lease agreement, CPC cannot recover from Litchfield Hills ENT on this Count of the complaint.
C. Count Three
Finally, in Count Three of its complaint CPC seeks punitive damages from Dr. Ho for his alleged bad faith in failing to comply with the written agreement. The Court concludes that CPC has failed to establish that Dr. Ho acted in bad faith. Instead, the Court concludes that Dr. Ho's actions arose out of a good faith but mistaken belief that he could resolve certain important issues relating to the lease without specifically negotiating over them prior to signing the written agreement and then including them in the specific terms of the agreement. Only after signing the lease and trying to resolve the issues did Dr. Ho then conclude that his medical practice could not thrive while leasing office space that was inadequate for his needs. His subsequent breach of the lease therefore was not in bad faith but instead a good faith belief that it would be better to breach the agreement then to continue seeing patients in that space. The Court concludes that Dr. Ho's actions do not rise to the level of bad faith and CPC is not entitled to punitive damages.
In their post-trial submission, the defendants appear to abandon the counterclaims filed by them in this matter. Even if they intended to pursue them, the Court concludes that they have failed to demonstrate sufficient facts that would entitle them to recover under any of the theories alleged.
D. Damages
Having prevailed on Count One of its complaint, CPC is entitled to damages. "It is axiomatic that the sum of damages awarded as compensation in a breach of contract action should place the injured party in the same position as he would have been in had the contract been performed." Argentinis v. Gould, 219 Conn. 151, 157, 592 A.2d 378 (1991). Here, CPC did not receive the agreed upon lease payments of $3,000 per month for 10 months. CPC also did not receive the $602.61 it expended on Dr. Ho's behalf to improve the phone system. The total of these amounts is 30,602.61. Dr. Ho is entitled to a set off of $3,000 for the security deposit retained by CPC. Consequently, CPC is entitled to a total damage award of $27,602.61 against Dr. Ho.
Judgment shall enter accordingly.