Opinion
CVH8214
05-16-2016
Enfield Retail Properties, LLC v. Camel Fitness, Inc. aka Camel Fitness, " Inc." /Enfield, CT et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
Hon. Glenn A. Woods, J.
This action arises out of a dispute between a landlord and a tenant involving the use and leasing of commercial property located at 640 Enfield Street in Enfield (property). The plaintiff, Enfield Retail Properties, LLC, commenced this action against the defendants, Camel Fitness, Enfield, Inc., Frank Rinaldi, and Stephen Suschana based upon alleged violations of the commercial lease that governed the use and occupancy of the property. Count one of the plaintiff's amended complaint, which was filed on March 14, 2013, seeks " additional rent" based upon the defendants' alleged violations of the lease. Count two of the amended complaint, which the plaintiff argues in its memoranda of law is an alternative cause of action, seeks " liquidated damages" based upon the defendants' alleged violations of the lease. On March 22, 2013, the defendants asserted six special defenses in response to the plaintiff's amended complaint and also filed a counterclaim against the plaintiff. Count one of the defendants' counterclaim alleges a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. Count two of the defendants' counterclaim alleges a claim for abuse of process based upon the plaintiff's efforts to seek and impose a prejudgment remedy.
Camel Fitness, Enfield, Inc., Frank Rinaldi, and Stephen Suschana advance the same arguments in joint, post-trial memoranda of law As such, they will collectively be referred to as the defendants.
A trial to the court commenced on February 13, 2015, and continued over several non-consecutive days, concluding on August 27, 2015. This court has reviewed the transcripts from the proceedings, the evidence submitted by the parties, and the parties' post-trial memoranda of law. For the reasons set forth herein, the court concludes that the plaintiff is not entitled to additional rent or liquidated damages and, therefore, finds in favor of the defendants on counts one and two of the plaintiff's amended complaint. The court further finds that the plaintiff's conduct in this case does not amount to a violation of CUTPA and, therefore, does not find in favor of the defendants on count one of their counterclaim. Additionally, the defendants are not entitled to prevail on count two of their counterclaim.
FACTUAL FINDINGS
The defendants own and operate a health and fitness facility in the Enfield Plaza Shoppes at 640 Enfield Street in Enfield. The defendants entered into a written lease agreement dated July 19, 2003, with the prior landlord of said property. The plaintiff purchased Enfield Plaza Shoppes in 2007 and has succeeded to all of the prior landlord's rights and obligations under the lease.
The lease was amended on October 7, 2004, to add a basement space and Rinaldi and Suschana made guaranties of lease on July 19, 2003, and September 27, 2004, guaranteeing all of Camel Fitness' obligations under the lease. The lease and the subsequent amendments are referred to as the " lease."
The parties to this action filed a stipulation of facts at the beginning of the trial. The stipulation of facts is reproduced below.
1. The plaintiff, Enfield Retail Properties, LLC, is a Connecticut limited liability company having a principal place of business in Waterbury, CT.
The plaintiff is owned by Industrial Development Group and Kenneth Devino is the principal of that entity.
2. The defendant, CAMEL FITNESS, INC. A/K/A CAMEL FITNESS, " INC." /ENFIELD, CT claims to be a Connecticut Corporation with a place of business in Enfield, Connecticut.
3. The defendant, Frank E. Rinaldi, is an individual with a last known address of 41 Pond Circle, Somers, CT.
4. The defendant, Stephen J. Suschana, is an individual with a last known address of 12 Pheasant Run, Somers, CT.
5. The plaintiff is the current owner of the premises known as the Enfield Plaza Shoppes, located at 640 Enfield Street, Enfield, CT (" shopping center").
6. By a written lease dated July 19, 2003, made by James S. Viola, Robert T. Mercik, Frank J. Troiano and Anthony Troiano, Jr., collectively as landlord, and Camel Fitness, Inc. d/b/a Gold's Gym, as tenant (" tenant"), as amended by an amendment to lease dated October 7, 2004, made by Enfield Plaza Shoppes, LLC, as successor landlord (landlord and successor landlord herein collectively referred to herein as " landlord"), and tenant, as tenant (the lease as amended collectively referred to herein as the " main lease"). Landlord and tenant entered into a landlord-tenant relationship covering a certain demised premises, as defined in the lease (hereinafter the " main space"), within the shopping center. Thereafter, defendants took possession of the main space pursuant to the main lease.
7. By guaranties of lease (the " guaranties") dated July 19, 2003, and September 27, 2004, made by defendants, Frank E. Rinaldi and Stephen J. Suschana (the " guarantors"), guarantors jointly, severally and unconditionally guaranteed all of tenant's obligations under the main lease.
8. The term of the main lease was fifteen (15) years, with an optional extension term of five (5) years.
9. The fixed minimum rent of the main lease payable each month by the defendants, as amended, is as follows:
Year 1
$7,000.00
Year 2
$8,000.00
Year 3-5
$8,500.00
Year 6-10
$10,000.00
Year 10-15
$11,500.00
Extension
$13,500.00
10. The main lease contains the following language: " 1.01( l ) 'Permitted Use' shall mean solely as a typical Gold's Gym."
11. The main lease contains the following language: " 3.01(a) Tenant shall use the Leased Premises solely for the Permitted Use. Tenant shall conduct continuously in the Lease premises the business of the Permitted Use. Tenant will not use, permit, or suffer the use of the Lease premises for any other business or purpose. No 'auction, ' 'fire, ' 'bankruptcy, ' 'going out of business, ' 'lost our lease, ' 'liquidation' or other such sales may be conducted (or advertised to be conducted) in the leased premises. Tenant shall not commit or suffer to be committed any waste upon the Leased Premises or any nuisance or other act or thing which may disturb the quiet enjoyment of the Landlord or of any other tenant in the Shopping Center."
12. The main lease contains the following language: " 20.02(a) Event of Default. Upon the occurrence of an Event of Default, Landlord shall have the right, at its option and without further notice to Tenant, to take any or all of the following actions: (1) terminate this Lease and recover possession of the Leased Premises to the extent permitted by law; (2) terminate Tenant's right to possession of the Leased Premises and, without terminating this Lease, re-enter and resume possession of the Leased Premises to the extent permitted by law; (3) whether or not the Lease is terminated, sue Tenant for damages arising out of the breach (for the purpose of this provision, the failure to timely cure a default pursuant to Section 20.01(a) shall render the balance of the payments to be made by Tenant for the remainder of the Term of this Lease immediately due and payable); (4) seek injunctive relief for a declaratory judgment where appropriate, the parties agreeing that a non-monetary Event of Default causes Landlord irreparable harm; (5) declare some or all Special Rights, if any, under the Lease to be void and irrevocably terminated; or (6) take any other action in law or equity to address the Event of Default. Without limitation as to any other right or remedy available to Landlord, in the event that Tenant violates any of the provisions of Section 3.01 and fails to cease any conduct prohibited hereby immediately upon notice thereof by Landlord, Tenant shall pay to Landlord, as Additional Rent, Five Hundred ($500.00) Dollars per day while such violation continues."
13. The main lease contains the following language: " 20.02(e) Liquidated Damages Remedy. As an alternative damages remedy for an Event of Default, Landlord, at its sole option and discretion, may invoke this Liquidated Damages Remedy. Should Landlord choose to invoke this Section, the parties recognize that the occurrence of an Event of Default prior to the end of the Term of this Lease results in damages to Landlord which are difficult to measure and this Section quantifies that amount to be recovered by Landlord which is agreed to be the closest approximation possible to the actual damages to be incurred by Landlord. Liquidated Damages, as defined under this Section, shall be that amount determined in accordance with this Section. In order to calculate Liquidated Damages hereunder, Landlord shall calculate the following: (a) the sums of the Rent to be paid for each remaining Lease Year (or portion thereof) for the balance of the Term of this Lease (each annual Lease Year Rent to be discounted as set forth herein below) plus (b) all anticipated costs incurred to return the Leased Premises to the condition it was in on the Delivery Date and leasing expenses (the sum of (a) and (b) herein called the " Sum"). For purposes of discounting the Rent remaining to be paid for each Lease Year, as set forth in (a) above, each such Lease Year Rent shall be discounted by a present value rate of interest (the " Discount Rate") which shall be the Prime Rate of interest as reported in The Wall Street Journal as of the date of the declaration of the Event of Default (the " Declaration Date") by Landlord (the discount method set forth above herein referred to as the " Discount Method"). The Sum shall be reduced by a credit for the aggregate amount of rent anticipated to be received from a replacement tenant for the Leased Premises (the " Replacement Rental"), which Replacement Rental shall be and hereby is agreed to be seventy-five (75%) percent of the sum of all Fixed Minimum Rent due under this Lease for each remaining Lease Year (or portion thereof), discounted by the Discount Rate pursuant to the Discount Method, such Replacement Rental deemed to commence on the first day of the twenty-fourth (24th) month after the Declaration Date and continuing uninterrupted through the expiration of the Term of this Lease. For purposes of this Section, all variable rent, including percentage rent, common area maintenance charges, insurance charges and tax charges shall be deemed to be charged annually based upon their respective totals during the calendar year most recently completed which preceded the Declaration Date. The Sum, as reduced by credit for Replacement Rent, is herein called the Preliminary Amount. Finally, in addition to the Preliminary Amount, Liquidated Damages, as calculated pursuant to this Section, shall include any and all charges which were due and owing from Tenant as of the Declaration Date, including, but not limited to, any and all Rent with interest thereon at the Default Rate."
14. Plaintiff has acquired the shopping center and has succeeded to all of landlord's rights and obligations under the lease and is now the landlord under the lease.
15. Defendants have paid all fixed minimum rent, as defined under the main lease, due and owing from the commencement of the main lease term to date. This does not include payment of any additional rent, fees, attorneys fees, costs and penalties claimed by the Plaintiff.
16. Defendants ended their franchise relationship with Gold's Gym upon the expiration of their franchise contract in May of 2011.
17. The main space continues to operate as a physical fitness facility under name of Club Fitness.
18. The parties agree that all evidence regarding claims for legal fees and costs will be reserved until after the court's ruling on liability and other damages.
In 2011, the defendants declined to renew their agreement with Gold's Gym and began to operate their business under a private brand, Club Fitness. The defendants created a new corporation, Club Camel, Inc., Enfield (Club Camel), with Suschana's father and Rinaldi's mother as principals. The defendants still owned another fitness center operating under a Gold's Gym agreement, thereby necessitating the new corporation. Rinaldi claims to have spoken to the property manager for the landlord in 2011 and received tacit approval of the change. The Court does not find this self-serving testimony credible. Additional facts will be included as necessary.
" The [fact-finding] function is vested in the trial court with its unique opportunity to view the evidence presented in a totality of circumstances, i.e., including its observations of the demeanor and conduct of the witnesses and parties . . ." Cavolick v. DeSimone, 88 Conn.App. 638, 646, 870 A.2d 1147, cert. denied, 274 Conn. 906, 876 A.2d 1198 (2005). " It is well established that in cases tried before courts, trial judges are the sole arbiters of the credibility of witnesses and it is they who determine the weight to be given specific testimony . . . It is the quintessential function of the factfinder to reject or accept certain evidence." (Internal quotation marks omitted.) In re Antonio M., 56 Conn.App. 534, 540, 744 A.2d 915 (2000). " [T]he trier is free to juxtapose conflicting versions of events and determine which is more credible . . . It is the trier's exclusive province to weigh the conflicting evidence and determine the credibility of witnesses . . . The trier of fact may accept or reject the testimony of any witness . . . The trier can, as well, decide what--all, none, or some--of a witness' testimony to accept or reject." (Citations omitted, internal quotation marks omitted.) State v. Osborn, 41 Conn.App. 287, 291, 676 A.2d 399 (1996).
II
PARTIES' ARGUMENTS
The arguments advanced by the plaintiff in support of its cause of action are straightforward. As to count one, the plaintiff argues that the defendants' unilateral choice to no longer operate a franchised Gold's Gym, deciding instead to operate an independent gym, violated section 3.01(a) of the lease. Such violation, the plaintiff argues, triggers the " additional rent" provision contained in section 20.02(a). This language is unambiguous according to the plaintiff and cannot be refuted by the introduction of parol evidence.
As to count two, the plaintiff argues that, in the alternative, the cumulative lease violations by the defendants entitle it to liquidated damages pursuant to section 20.02(e). Specifically, the plaintiff argues that the defendants violated the permitted use clause, failed to provide insurance coverage, failed to provide financial statements, and violated the assignment and subletting clause of the lease. The plaintiff argues that it is entitled to enforce the liquidated damages provision notwithstanding its decision to not terminate the commercial tenancy. Moreover, it need not prove actual damages suffered by the alleged violations in order to enforce the liquidated damages provision.
[6]Section 20.02(a) of the lease would appear to be an " in terorrem clause." Black's Law Dictionary (5th Ed. 1979) defines an in terrorem clause as " [a] provision in a document such as a lease or will designed to frighten a beneficiary or lessee into doing or not doing something . . ." Cf. E. Farnsworth, Contracts (3d Ed. 2004) § 12.18, p. 318. (" A provision that simply attempts to add a sum to the injured party's actual damages is ordinarily an obvious penalty.") At various points in both its post-trial memorandum of law and reply memorandum of law, the plaintiff indicates that it has not terminated the lease.
In response to the plaintiff's arguments for counts one and two of the amended complaint, the defendants argue that the lease is ambiguous with respect to sections 1.01(l ) and 3.01(a), thereby permitting the introduction of parol evidence to illuminate the parties' intentions regarding the permitted use of the property. Specifically, the defendants argue that the parties intended to simply have the property be used as a health/fitness facility, not specifically a Gold's Gym. Thus, the defendants' operation of a business other than a typical Gold's Gym did not violate the lease. The defendants also argue that the additional rent provision outlined in section 20.02(a) operates as a penalty provision that is unenforceable under Connecticut law. Finally, the defendants argue that the plaintiff is not entitled to liquidated damages pursuant to section 20.02(e) because the plaintiff has not terminated the tenancy.
As to count one of the defendants' counterclaim, the defendants argue that the plaintiff's conduct, namely its attempted enforcement of the additional rent provision and its pre-litigation conduct, amounts to a violation of CUTPA. They argue that the plaintiff's conduct in this case is a " quintessential example of bad faith and unfair trade practices." In response, the plaintiff argues that the evidence presented at trial does not amount to a CUTPA violation and, critically, the defendants failed to provide the court with any proof of damages.
Finally, neither party has provided any argument regarding count two of the defendants' counterclaim, which alleged an abuse of process.
III
DISCUSSION
A
Count One of the Amended Complaint--" Additional Rent"
It is well established that " [a] lease is a contract." (Internal quotation marks omitted.) David Caron Chrysler Motors, LLC v. Goodhall's, Inc., 304 Conn. 738, 749, 43 A.3d 164 (2012). " A contract must be construed to effectuate the intent of the parties, which is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction . . . [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms . . . Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact . . . [w]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law." (Internal quotation marks omitted.) Heaven v. Timber Hill, LLC, 96 Conn.App. 294, 306, 900 A.2d 560 (2006).
1
Parol Evidence
As a threshold matter, the parties have devoted considerable attention to the question of whether the relevant terms of the lease are ambiguous, such that this court should credit parol evidence in determining whether the parties intended that the property be used solely as a Gold's Gym or any other kind of health spa/fitness facility. This court is unpersuaded by the defendants' argument that the terms of the lease are ambiguous.
" A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity . . . Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms." (Internal quotation marks omitted.) Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P., 252 Conn. 479, 498, 746 A.2d 1277 (2000). " It is, of course, fundamental, as a matter of substantive law, that the terms of a written contract which is intended by the parties to set forth their entire agreement may not be varied by parol evidence." (Internal quotation marks omitted.) Heaven v. Timber Hill, LLC, supra, 96 Conn.App. 307. " The parol evidence rule does not apply . . . if the written contract is not completely integrated . . . As a threshold matter, therefore, a court must conduct an inquiry and take evidence as to whether there is an integrated agreement." (Citation omitted; emphasis in original; internal quotation marks omitted.) Conn Acoustics, Inc. v. Xhema Construction, Inc., 88 Conn.App. 741, 745, 870 A.2d 1178 (2005). Generally, the insertion of a merger clause in a contract created by parties with equal bargaining power operates as conclusive evidence of the parties' intent to create a fully integrated contract, thereby prohibiting the consideration of extrinsic parol evidence. Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P., supra, 252 Conn. 503-05; accord Benvenuti Oil Co., Inc. v. Foss Consultants, Inc., 64 Conn.App. 723, 728-29, 781 A.2d 435 (2001).
Nonetheless " [t]he parol evidence rule does not of itself . . . forbid the presentation of parol evidence, that is, evidence outside the four corners of the contract concerning matters governed by an integrated contract, but forbids only the use of such evidence to vary or contradict the terms of such a contract." Alstom Power, Inc. v. Balcke-Durr, Inc., 269 Conn. 599, 609, 849 A.2d 804 (2004). Thus, extrinsic parol evidence is admissible in certain circumstances, including when such evidence would be " relevant (1) to explain an ambiguity appearing in the instrument . . ." (Internal quotation marks omitted.) Id. When interpreting contracts, " [o]nly if the language is ambiguous and susceptible to more than one meaning will a court allow extrinsic evidence of the parties' intent." McLoughlin v. McLoughlin, 157 Conn.App. 568, 583 n.8, 118 A.3d 64 (2015).
Section 29.03 of the lease, entitled " entire agreement, " is a merger clause, indicating that the lease sets forth the parties' intent to create a fully integrated contract. Moreover, the language contained in section 1.01(l ) of the lease, defining " permitted use" to mean " solely as a typical Gold's Gym, " is not ambiguous when applied to section 3.01(a), the " use of leased premises" clause of the lease. Notwithstanding the preceding word " typical, " the parties' use of " Gold's Gym" in this commercial lease reflects an unambiguous intent to have the premises be used as such and a reference to " Gold's Gym" is not susceptible to more than one meaning. Indeed, the introduction of parol evidence for the purpose of illuminating any ambiguity in the phrase " typical Gold's Gym" would vary or contradict the explicit reference to " Gold's Gym." Here, this is especially so where such evidence attempted to demonstrate that the parties meant anything other than a Gold's Gym. Accordingly, the parol evidence rule bars the introduction of extrinsic evidence in this context. Based on the evidence before the court, this court finds that the defendants violated section 3.01(a) by using the property as anything other than a Gold's Gym.
2
Additional Rent Provision as an Impermissible Penalty
This court now turns to count one of the plaintiff's amended complaint. As a general matter, courts will enforce " additional rent" or " rent escalation" provisions contained in commercial leases. See, e.g., Water & Way Properties v. Colt's Mfg. Co., 230 Conn. 660, 665-67, 646 A.2d 143 (1994) (affirming decision that required defendant to pay utility charges where plain and unambiguous terms of lease indicated that unpaid utility charges " shall be deemed additional rent"); Collins v. Sears, Roebuck & Co., 164 Conn. 369, 372-77, 321 A.2d 444 (1973) (affirming decision to enforce rent escalation provision that required defendant to pay landlord-mortgagor additional fees if mortgagee commenced foreclosure proceeding against rented premises). Nonetheless, " [t]he law is well established in this jurisdiction . . . that a term in a contract calling for the imposition of a penalty for the breach of the contract is contrary to public policy and invalid, but a contractual provision fixing the amount of damages to be paid in the event of a breach is enforceable if it satisfies certain conditions." Berger v. Shanahan, 142 Conn. 726, 731, 118 A.2d 311 (1955); accord Norwalk Door Closer Co. v. Eagle Lock & Screw Co., 153 Conn. 681, 686, 220 A.2d 263 (1966).
" A contractual provision for a penalty is one the prime purpose of which is to prevent a breach of the contract by holding over the head of a contracting party the threat of punishment for a breach . . . A provision for liquidated damages, on the other hand, is one the real purpose of which is to fix fair compensation to the injured party for a breach of the contract. In determining whether any particular provision is for liquidated damages or for a penalty, the courts are not controlled by the fact that the phrase 'liquidated damages' or the word 'penalty' is used. Rather, that which is determinative of the question is the intention of the parties to the contract. Accordingly, such a provision is ordinarily to be construed as one for liquidated damages if three conditions are satisfied: (1) The damage which was to be expected as a result of a breach of the contract was uncertain in amount or difficult to prove; (2) there was an intent on the part of the parties to liquidate damages in advance; and (3) the amount stipulated was reasonable in the sense that it was not greatly disproportionate to the amount of the damage which, as the parties looked forward, seemed to be the presumable loss which would be sustained by the contractee in the event of a breach of the contract." (Citation omitted.) Berger v. Shanahan, supra, 142 Conn. 731-32.
Courts have consistently recognized that a penalty provision is one whose " prime purpose . . . is to prevent a breach of the contract by holding over the head of a contracting party the threat of punishment for a breach." Id., 731; accord American Car Rental, Inc. v. Commissioner of Consumer Protection, 273 Conn. 296, 306, 869 A.2d 1198 (2005); Hanson Development Co. v. East Great Plains Shopping Center, Inc., 195 Conn. 60, 65, 485 A.2d 1296 (1985). Moreover, our case law has recognized " the clearly established public policy against the enforcement of penalty clauses in contracts." HH East Parcel, LLC v. Handy & Harman, Inc., 287 Conn. 189, 205, 947 A.2d 916 (2008).
In determining whether the challenged provision is an impermissible penalty provision, the weight of authority recognizes that the contractual language used by the parties is of minimal significance. As stated by our Supreme Court, " [t]he exact language used by the parties . . . is not determinative. Rather, the intention of the parties is the determining factor. Berger v. Shanahan, supra, [142 Conn.] at 732 . . . In other words, was the provision intended to deter one party from breaching its contract and then penalize that party for doing so or was it intended to specify a sum which the parties, in good faith, agreed would represent the damages which would ensue from a breach?" Hanson Development Co. v. East Great Plains Shopping Center, Inc., supra, 195 Conn. 65; see also 24 R. Lord, Williston on Contracts (4th Ed. 2002) § 65:10, pp. 270-71 (noting that if court's task was to simply look at contract language to determine whether provision was an impermissible penalty or enforceable liquidated damages provision, then penalty clauses would generally be allowed); 3 Restatement (Second), Contracts § 356, comment (c), p. 159 (1982) (noting that parties sometimes attempt to disguise penalty provisions by using language which purports to call for alternative performance).
Moreover, " [a] breaching party seeking to nullify a contract clause that fixes an amount as damages for the breach bears the burden of proving that the agreed upon amount so far exceeds any actual damages to be in the nature of a penalty." American Car Rental, Inc. v. Commissioner of Consumer Protection, supra, 273 Conn. 314; accord Tsiropoulos v. Radigan, 163 Conn.App. 122, 129, 133 A.3d 898 (2016); St. Margaret's-McTernan School, Inc. v. Thompson, 31 Conn.App. 594, 598, 627 A.2d 449 (1993).
Finally, the Appellate Court's decision in CMG Realty of Connecticut, Inc. v. Colonnade One Limited Partnership, 36 Conn.App. 653, 663-66, 653 A.2d 207 (1995), is relevant to the case presently before the court. There, the plaintiff argued that it was entitled to a $50,000 fee pursuant to the brokerage contract at issue in that case because the defendants terminated the contract without cause. Although the attorney trial referee found that the subject fee was an appropriate " termination fee, " the trial court concluded otherwise, finding that the subject clause " was a penalty and not a termination clause." Id., 663. On appeal, the Appellate Court affirmed the trial court's legal conclusion, noting " that the termination fee was a penalty as it was not related to any damages that the plaintiff would suffer in the event of a breach by the defendants." (Emphasis added.) Id., 664. Accordingly, CMG Realty of Connecticut, Inc. recognizes that a contractual provision can operate as an impermissible penalty regardless of the provision's label and this is especially the case where the fee or stipulated sum of money contained in that provision fails to relate to the damages that a party might suffer in the event of a breach.
Section 20.02(a) of the commercial lease before the court, entitled " event of default, " provides in relevant part that " [u]pon the occurrence of an event of default, landlord shall have the right . . . to take any or all of the following actions . . . (3) whether or not the lease is terminated, sue tenant for damages arising out of the breach . . . Without limitation as to any other right or remedy available to landlord, in the event that tenant violates any of the provisions of section 3.01 and fails to cease any conduct prohibited hereby immediately upon notice thereof by landlord, tenant shall pay to landlord, as additional rent, five hundred ($500.00) dollars per day while such violation continues ." (Emphasis added.) This section, which permits the plaintiff-landlord to charge the defendants $500 per day as " additional rent, " is only triggered when the defendants violate particular provisions contained in the lease and fail to cease such violations. In other words, if the defendants operate a facility other than a Gold's Gym--a violation of section 3.01(a)--the plaintiff is entitled to charge the defendants $500 per day until the defendants cease such operation. The provision effectively " hold[s] over the head of [the defendants] the threat of punishment for a breach" of the lease by imposing $500 per day while such violation continues . E.g., Berger v. Shanahan, supra, 142 Conn. 731. The fact that section 1.01(m) of the lease defines " rent" to include " additional rent" does not remove section 20.02(a) from the realm of being a penalty. See, e.g., Hanson Development Co. v. East Great Plains Shopping Center, Inc., supra, 195 Conn. 65 (contractual language used not determinative of whether provision is penalty).
Moreover, the $500 per day charge fails to relate to any damages that the plaintiff might suffer based on the defendants' breach. See CMG Realty of Connecticut, Inc. v. Colonnade One Limited Partnership, supra, 36 Conn.App. 664. This court finds that the defendants have met their burden of proving that section 20.02(a) of the lease is a penalty clause, not an additional rent provision, and is therefore unenforceable as being against public policy. Accordingly, the court finds in favor of the defendants on count one of the plaintiff's amended complaint.
B
Count Two of the Amended Complaint--Liquidated Damages
As argued by the plaintiff, count two of the amended complaint advances an alternative cause of action. Having found that the " additional rent" provision contained in section 20.02(a) amounts to an unenforceable penalty provision, this court now turns to the plaintiff's alternative ground of recovery, which seeks liquidated damages based upon the defendants' violations of the lease.
Under general contract principles, a party may enforce a liquidated damages clause based upon a party's breach of the contract. See, e.g., Old Colony Construction, LLC v. Southington, 316 Conn. 202, 113 A.3d 406 (2015) (liquidated damages provision properly enforced where contractor failed to timely complete construction); Tsiropoulos v. Radigan, supra, 163 Conn.App. 129-30 (liquidated damages provision enforceable in breach of residential real estate sales agreement). That general principle, however, is contrasted with a subtle nuance that exists in our case law that deals with a lessee's breach of a lease for commercial real estate.
" In Connecticut, [ 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 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 . . . When the tenancy ends, the tenant is released from his obligations under the lease and is, therefore, no longer obliged to pay rent." (Citations omitted; emphasis added; internal quotation marks omitted.) K& R Realty Associates v. Gagnon, 33 Conn.App. 815, 819, 639 A.2d 524 (1994); accord, Southhaven Associates, LLC v. McMerlin, LLC, 159 Conn.App. 1, 10-11, 122 A.3d 670 (2015); Brennan Associates v. OBGYN Specialty Group, P.C., 127 Conn.App. 746, 754, 15 A.3d 1094, cert. denied, 301 Conn. 917, 21 A.3d 463 (2011); Rokalor, Inc. v. Connecticut Eating Enterprises, Inc., 18 Conn.App. 384, 388, 558 A.2d 265 (1989).
Should the lessor elect to terminate the tenancy, " as in any other contract action, the measure of damages is that the award should place the injured party in the same position as he would have been in had the contract been fully performed . . . As a consequence, the unpaid rent, while not recoverable as such, may be used by the court in computing the losses suffered by the plaintiff by reason of the defendant's breach of contract of lease. [A lessor] would be entitled to recover the damages which would naturally flow from such a breach." Rokalor, Inc. v. Connecticut Eating Enterprises, Inc., supra, 18 Conn.App. 389; see also Sagamore Corp. v. Willcutt, 120 Conn. 315, 318, 180 A. 464 (1935) (bringing action for damages based on tenant's breach of covenant to pay rent manifests intent to terminate tenancy); Southhaven Associates, LLC v. McMerlin, LLC, supra, 159 Conn.App. 11 (landlord manifested intent to terminate tenancy, thus instituting action for breach of contract, and remaining rental payments due could be used to calculate damages).
Thus, upon a lessee's breach of a commercial lease for real estate, the lessor may either terminate the tenancy, in which case the lessor can sue to recover damages that would naturally flow from the breach based on standard contract principles, or the lessor may continue the tenancy and simply recover the rent due as provided for in the lease. E.g., Rokalor, Inc. v. Connecticut Eating Enterprises, Inc., supra, 18 Conn.App. 388-89; see also Dewart Building Partnership v. Union Trust Co., 4 Conn.App. 683, 687, 496 A.2d 241 (1985) (lessor-plaintiff did not terminate tenancy and, therefore, " defendants remained bound by the lease, " so plaintiff could sue for rent due); N. Allen, Connecticut Landlord and Tenant Law with Forms (2014) § 11-2:2, p. 149 (lessor of commercial property can pursue one of two options when tenant breaches lease).
As previously noted, liquidated damages provisions are designed " to fix fair compensation to the injured party for a breach of contract ." (Emphasis added.) Berger v. Shanahan, supra, 142 Conn. 731. Thus, liquidated damages provisions become applicable when a party proceeds under a " breach of contract" theory in order to obtain the stipulated sum that reasonably relates to the presumed loss, that is, damages, flowing from a breach of contract. Such provisions determine, in advance of a breach, the damages that are likely to flow from a breach and are advantageous because they ultimately reduce the parties'--and the court's--obligation to compute actual damages flowing from the breach. See, e.g., Norwalk Door Closer Co. v. Eagle Lock & Screw Co., supra, 153 Conn. 689 (" In a valid contract for liquidated damages, the parties are permitted, in order to avoid the uncertainties and time-consuming effort involved, to estimate in advance the reasonably foreseeable damages which would arise in the event of a default"); cf. Sanitary Services Corp. v. Greenfield Village Ass'n, Inc., 36 Conn.App. 395, 398, 651 A.2d 269 (1994) (" Both actual damages and liquidated damages cannot be awarded").
In its post-trial memoranda of law, the plaintiff indicates that it " has not terminated the lease." Thus, the plaintiff has expressly indicated that it has not manifested an intent to terminate the tenancy; it was, therefore, entitled to sue for the rent due under the terms of the lease based upon the defendants' violations. E.g., K& R Realty Associates v. Gagnon, supra, 33 Conn.App. 819; see also Dewart Building Partnership v. Union Trust Co., supra, 4 Conn.App. 687 (lessor-plaintiff did not terminate tenancy and, thus, entitled to sue for rent due). Section 1.01(m) provides that rent " shall mean all fixed minimum rent, percentage rent and all other additional rent payable hereunder to landlord." Liquidated damages are not contained within that definition. Moreover, as a matter of law, liquidated damages become applicable in a commercial lease context when the landlord elects to terminate the lease and proceeds under a breach of contract theory. E.g., Rokalor, Inc. v. Connecticut Eating Enterprises, Inc., supra, 18 Conn.App. 388. Here, the plaintiff has not elected to terminate the tenancy based on the defendants' violations of the lease and, therefore, foreclosed access to damages, including liquidated damages that might flow from a breach. Had the plaintiff elected to terminate the commercial tenancy, the result in this case may very well have been different. The court finds that the plaintiff, having elected to continue the tenancy, is not entitled to liquidated damages. Moreover, as previously noted, the parties have stipulated that the defendants have paid all fixed minimum rent due under the lease. Accordingly, this court finds in favor of the defendants on count two of the plaintiff's amended complaint.
[8]Because the court has ruled in favor of the defendants as to counts one and two of the plaintiff's amended complaint, it does not address the special defenses raised by the defendants. [9]Because the defendants have not proven a CUTPA violation, this court does not address whether the defendants sustained an ascertainable loss. " The ascertainable loss requirement is a threshold barrier which limits the class of persons who may bring a CUTPA action seeking either actual damages or equitable relief." Marinos v. Poirot, 308 Conn. 706, 713, 66 A.3d 860 (2013), see also General Statutes § 42-110g(a). See Plaintiff's Post-Trial Memorandum of Law at page 14 and Plaintiff's Post-Trial Reply Memorandum of Law at page 17.
C
Count One of the Defendant's Counterclaim--CUTPA
In their counterclaim, the defendants allege that the plaintiff's conduct in dealing with the defendants amounted to a violation of CUTPA. The following facts as proven at trial are relevant to the court's resolution of this count. The plaintiff employed John Maloney to be the property manager for the subject property. Upon the plaintiff's purchase of the property from the defendants' prior landlord, Maloney and the defendants began to have disagreements. Such disagreements related to various aspects of the defendants' use and occupancy of the property and also issues relating to the adjacent parking lot. The defendants and the plaintiff's representatives met in order to potentially resolve these disagreements, at which point the defendants were asked to pay an increased rent. Subsequently, the defendants were asked to pay an increased rent on different occasions. Finally, in connection with the plaintiff's lawsuit, the plaintiff obtained a pre-judgment remedy based upon the defendants' violations of the lease.
General Statutes § 42-110b(a) provides that " [n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110a(4) defines trade and commerce to include the rental or leasing of property. " Connecticut courts, when determining whether a practice violates CUTPA, will consider (1) whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise--whether, in other words, it is within at least the penumbra of some common-law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers (or competitors or other businessmen) . . . Thus, a violation of CUTPA may be established by showing either an actual deceptive practice . . . or a practice amounting to a violation of public policy . . . Whether a practice is unfair and thus violates CUTPA is an issue of fact . . . The facts found must be viewed within the context of the totality of circumstances which are uniquely available to the trial court . . . Additionally, our Supreme Court has stated that [a]ll three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three." (Emphasis omitted.) Gaynor v. Hi-Tech Homes, 149 Conn.App. 267, 275, 89 A.3d 373, 380 (2014).
As to the first criteria, this court finds that the plaintiff's conduct does not violate public policy. In American Car Rental, Inc. v. Commissioner of Consumer Protection, supra, 273 Conn. 310, our Supreme Court held that the enforcement of a penalty provision in a contract can violate CUTPA without needing to address the remaining criteria of the cigarette rule. The defendants cite to American Car Rental, Inc. in their memoranda of law in support of their contention that the plaintiff's conduct here violates public policy. In that case, however, a party had already enforced a penalty provision by charging customers " speeding fees" without notification. Id., 300. Here, the plaintiff sought to enforce an additional rent provision or to enforce a liquidated damages provision. This court has already determined that the plaintiff cannot prevail on enforcing either provision.
Although the plaintiff may have attempted to enforce these provisions, the defendants have not presented any evidence demonstrating that the plaintiff was aware that its claims were without merit. Upon discovering that a tenant may have breached the terms of a commercial lease, it does not offend public policy for the lessor to bring what it perceives to be colorable claims against the tenant. See, e.g., Ancona v. Manafort Bros., Inc., 56 Conn.App. 701, 715, 746 A.2d 184, cert. denied, 252 Conn. 953, 749 A.2d 1202 (2000) (not clearly erroneous for court to find that filing civil action with probable cause did not form basis of CUTPA violation); see also Suburban Restoration Co., Inc. v. ACMAT Corp., 700 F.2d 98, 102 (2d Cir. 1983) (Connecticut courts would likely hold that filing of single non-sham lawsuit cannot form basis of CUTPA violation); Zeller v. Consolini, 59 Conn.App. 545, 553, 758 A.2d 376 (2000) (agreeing with Second Circuit in Suburban Restoration Co., Inc. ).
As to the second criteria, this case involves a dispute over a commercial lease between sophisticated parties. Notwithstanding the disagreements between the parties and their representatives, the parties were of equal bargaining power, they agreed to the contractual terms of the lease, and were contractually obligated to perform under the lease. The plaintiff's pre-litigation conduct towards the defendants, including the conduct of Maloney and requesting additional rent, was not immoral, unethical, oppressive, or unscrupulous.
Finally, as to the third criteria of CUTPA, the plaintiff's conduct in this case did not and will not cause substantial injury to consumers, competitors, or other businesspersons.
Based on the foregoing, this court finds that the defendants have not proven a violation of CUTPA. Accordingly, the defendants cannot prevail on count one of their counterclaim.
D
Count Two of the Defendant's Counterclaim--Abuse of Process
As previously noted, the defendants have not provided the court with any argument regarding count two of their counterclaim. " [The Connecticut Supreme Court has] repeatedly . . . stated that [it is] not required to review issues that have been improperly presented to [the] court through an inadequate brief . . . Analysis, rather than mere abstract assertion, is required in order to avoid abandoning an issue by failure to brief the issue properly . . . Where a claim is asserted in the statement of issues but thereafter receives only cursory attention in the brief without substantive discussion or citation of authorities, it is deemed to be abandoned . . . These same principles apply to claims raised in the trial court." Connecticut Light and Power Co. v. Department of Public Utility Control, 266 Conn. 108, 120, 830 A.2d 1121 (2003). Having failed to argue their abuse of process claim in their post-trial memoranda of law, the court deems count two of the defendants' counterclaim to be abandoned.
CONCLUSION
For the foregoing reasons, this court finds in favor of the defendants on counts one and two of the plaintiff's amended complaint. Section 3.01(a) of the lease calls for an impermissible penalty and the plaintiff has not terminated the tenancy following the defendants' breach of the lease. Additionally, this court finds in favor of the plaintiff on counts one and two of the defendants' counterclaim. The defendants have not presented evidence sufficient to establish a violation of CUTPA and have abandoned their abuse of process claim.
SO ORDERED.