Opinion
No. HHD-CV-08-4038808-S
April 7, 2011
MEMORANDUM OF DECISION
This action arises out of a conflict over the interpretation of a certain ground lease on property at 628 Hebron Avenue, Glastonbury, Connecticut. Plaintiffs, Charles Nardi and Marie Nardi, as ground lease tenants, sue defendant Grunberg 628 Hebron LLC, as ground lease landlords, in ten counts, in essence, alleging defendant denied plaintiffs the right to parking under the lease, tortiously interfered with plaintiffs' contracts and business expectations to sell their property, breached implied covenants of quiet enjoyment and of good faith and fair dealing, violated Connecticut Unfair Trade Practices Act, and improperly charged plaintiff for common area maintenance charges. Plaintiffs also seek an injunction prohibiting defendant from improperly limiting plaintiffs' parking rights and a declaratory judgment setting forth plaintiffs' parking rights under the ground lease.
Defendant interposes special defenses of estoppel, defendant's right to impose reasonable rules on parking, and defendant's right to communicate its opinion as to the legal rights of the parties under the ground lease to third parties. Defendant also seeks a declaratory judgment as to the parking rights of the parties under the ground lease. Defendant also seeks to quiet title to the underground garage on the bases that plaintiffs' parking rights under the ground lease do not include the parking garage, plaintiffs' parking rights as to the garage have been extinguished through adverse use, and the plaintiffs have abandoned their rights to use it.
The facts are as follows:
In December 2004, plaintiffs purchased for $1.3 million, a building known as Building C in a corporate center located on Hebron Avenue in Glastonbury, Connecticut and at the same time assumed a certain ground lease. The building (hereinafter called "the Nardi building") was located on Parcel II and was constructed in 1986.
The subject ground lease is dated September 3, 1986 and is for a term of 100 years. The leased premises are described in Schedule A, annexed to the lease, as, "A certain piece or parcel of land designated `lease line' of building `C' on a certain map or plan recorded in the Glastonbury Town Clerk's Office." After stating the metes and bounds of the land, the lease provides: "`Said premises are leased together with the right, privilege and licenses unto the lessee, its heirs, successors and assigns to use and pass and repass over by foot or vehicle, all rights of way, rights of ingress and egress, and easements of record on or upon and between Parcels I, II and III as shown on said plan, and to use and occupy for vehicular parking and pass between by foot or vehicle, all vehicular designated parking areas and spaces shown on Parcels II and III in said plan and to be added to said Parcels II and III for the term of this lease.'" The plan referred to provided for the construction of Building B on Parcel III, having 155,400 sq. feet of rentable space and an underground garage. That building was constructed in 1988.
Building 4 was the last office building completed in 1991 and it is a one-story building located on Parcel III, having approximately 4,910 square feet.
The ground lease also provided at Section 6(e): "During the term of this Lease the Tenant shall pay to the Landlord, his successors and assigns, its pro rata share of the cost of maintaining access roads and parking areas serving the buildings shown on the site plan . . . The Tenant's pro rata share shall be determined by dividing the square footage of all gross floor space in the buildings to be constructed on the Demised Premises by the total square footage of gross floor space in all buildings existing or constructed on the premises . . . designated as Parcels II and III as shown on the map . . ."
The Nardi building has about 12, 311 square feet of rental space. The owner prior to Nardi had as tenants a law firm and accounting firm, the employees of which used fifty parking spaces.
Nardi pays 7.47% share of the maintenance of the parking area, which percentage approximates the ratio of space in the Nardi building to the total of all the space in the office buildings at the corporate center.
After the underground garage was built in 1988, neither the prior owner of the Nardi building nor the plaintiffs themselves claimed any right to utilize the parking located in the underground garage. Plaintiffs' predecessor in interest paid their ground lease landlord additional money for the privilege of parking some vehicles in the garage. Nardi's tenants never sought to park in the garage.
There are 88 surface parking spaces in front of the Nardi building, a total of 465 surface parking spaces in the lots at the corporate center, plus 120 parking spaces in the underground garage of Building B, and 90 additional parking spaces available off premises at Glastonbury Soccer Club adjacent to the subject property.
Defendant Grunberg acquired fee title to the corporate center on June 7, 2006, some eighteen months after Nardi's purchase of the Nardi Building. The corporate center then consisted of three buildings on Parcels II and III and was managed by Cushman Wakefield. The parking lots were substantially full. Met Life was a large tenant in Building B and occupied its space at the rate of about seven employees per 1,000 square feet.
When defendant acquired its interest in the corporate center, plaintiffs executed an estoppel certificate in favor of the defendant representing and warranting that nothing would constitute a breach of the ground lease. After acquiring the fee title to Parcels II and III, defendant determined that overcrowded parking conditions were caused by: (a) non-tenants and abandoned cars on the surface lots; and (b) the existence of Met Life as a large "high density" tenant in Building B.
The estoppel certificate was given before defendant asserted a right to limit plaintiffs' parking and thus cannot constitute a defense to plaintiffs' causes of action.
In late 2006, defendant undertook steps to implement a "hang tag" parking system to ensure that the tenants of Building B and Building C would only use a certain allotted number of parking spaces within the corporate center. However, defendant intentionally did not seek to implement this program for the Nardi Building. Beginning in 2007, Met Life began vacating their leased space in Building B, thus significantly alleviating the crowded parking condition on the surface lots within the office complex. Defendant never stopped anybody associated with the Nardi Building for parking at the office complex or even threatened to tow or remove any cars associated with the Nardi Building from any of the office complex surface lots.
In the summer of 2006, plaintiffs decided to sell the Nardi Building. They listed it with O, RL Commercial Realty Company. Robert Gaucher was the broker handling the transaction. Mr. Gaucher was uncertain about the plaintiffs' parking rights under the ground lease and requested a meeting with the Grunberg people to discuss plaintiffs' parking entitlement. The meeting took place at the Grunberg office on October 9, 2006. Among those present were plaintiff, Charles Nardi, the broker Robert Gaucher and some Grunberg people including Susan Donahue, Grunberg's chief property manager. Ms. Donahue stated at the meeting that plaintiffs were entitled to only 35 surface parking spaces and no underground parking. She based that assertion on the ground that since the plaintiffs paid 7.47% of common area maintenance charges, they were only entitled to 7.4% of the available surface parking. This amounted to three spaces per thousand square feet of the Nardi Building. No other tenant at the Glastonbury corporate complex had a similarly limited parking allocation.
Defendant at the time of the October meeting and continuing thereafter through at least February 2007, was actively marketing its buildings and advertising them for parking at the rate of four spaces per thousand feet. Ms. Donahue testified that that ratio was reasonable for the corporate center.
Following the October 9, 2006 meeting, Attorney Robert Sullivan representing the plaintiffs, wrote to the defendant to the effect that the plain language of the lease granted to the plaintiffs the right to use and occupy for parking all parking spaces located on Parcels II and III in common with the other tenants in the corporate center on an equal basis, share and share alike. Mr. Sullivan further asserted the plaintiffs were entitled to parking in the underground garage based on the fact the lease specifically granted plaintiffs the right to park in any parking areas to be added to Parcels II and III for the term of the lease.
Attorney Paulekas, representing defendant, responded to the effect that Mr. Sullivan's plain reading of the ground lease was "convoluted" and he threatened that "any application of your theory at the property would likely result in litigation."
On April 23, 2007, plaintiffs entered into an agreement of purchase and sale of the Nardi Building to Hebron Avenue Realty Holdings, Inc., LLC (a company formed by Marvin Ostreicher) for the purchase price of $1,550,000.00. The agreement provided a contingency period of sixty days for the buyer to determine the economic viability of the purchase, and if the buyer found any unsatisfactory condition or circumstance with respect to the property, in its sole discretion it could terminate the agreement. Mr. Ostreicher was particularly looking for a parking allocation of four spaces per thousand feet and for an occasional need for fifteen or so additional spaces for sales and directors' meetings. Defendant had a policy of accommodating the occasional needs for increased parking of tenants in its buildings at the corporate center, but it would not commit itself to plaintiffs having more than thirty-seven parking spaces.
In August 2007, Mr. Ostreicher terminated the purchase agreement solely on account of the defendant's position about parking.
Subsequently, Mr. Ostreicher made an offer to purchase the Nardi Building for $1.325 million, with Ostreicher having the right to sue the defendant for enforcement of the ground lease, but conditioned on Nardi refraining from litigation against Grunberg. This was not acceptable to the plaintiffs and that opportunity fell through.
The plaintiffs continued to try to sell their building. They had an offer from Diversified Group Brokerage Corporation on March 21, 2008 for the price of $1,512,500.00. That deal did not reach the point of a purchase and sale agreement. On November 25, 2008, the plaintiffs did sign a purchase and sale agreement with LEI Associates, LLC for $1,100,000.00. This transaction faltered because the buyer could not finance the ground leasee's interest without some amendments being made to the ground lease unrelated to parking rights. Finally, the plaintiff entered into a lease and a purchase and sale option dated March 16, 2009 with National Groups for a net purchase price of $760,000.00.
1. Claim for Declaratory Judgment as to Plaintiffs' Right of Parking
Both parties seek a declaratory judgment as to plaintiffs' right to park on the surface spaces of Parcels II and III and plaintiffs' right to park in the underground garage under Building B on Parcel III.
The ground lease gives plaintiffs and their tenants the right to park on "all vehicular parking areas and spaces shown on Parcels II and III in said plans and to be added to said Parcels II and III for the term of this lease."
That provision is not limited as to the number of parking spaces. Plaintiffs have never sought to park unlimited number of cars on Parcels II and III. They have sought to park in common with the tenants of other buildings in the corporate center on a first come, first serve basis. Defendant, on the other hand, has asserted that plaintiffs and their tenants were limited to a total of thirty-five or thirty-seven spaces based on the ground that that number represented the share of the common area maintenance costs plaintiffs were paying. The ground lease does provide (at Section 6(e)) that the lessee shall pay its pro rata share of the costs of maintaining access roads and parking areas serving the buildings on the site plan and under that formula, plaintiffs' pro rata share was 7.47% of common area expenses.
However, that section had nothing to do with the number of parking spaces to which plaintiffs were entitled. The ground lease could have stated a linkage between payment of common area charges and number of parking spaces, but it did not.
However, a right to "all" parking is so broad as to justify limiting the right to a reasonable number of parking spaces to take into account the rights of tenants in other buildings to park also. In Fender v. Matranga, 58 Conn.App. 19, 24 (2000), where an easement granted authority to pass and repass "for all purposes whatsoever" the court interpreted it to mean "any use reasonably connected to the reasonable use of the land." See also Lichteig v. Churinetz, 9 Conn. 406, 410 (1986).
As to what constitutes reasonable parking, the history of parking under the ground lease is significant. The evidence was that plaintiffs' predecessor in title to the Nardi Building used fifty spaces in the area in front of the building. The evidence further was that several other tenants in the buildings on Parcels II and III were awarded the right to use four parking spaces per 1,000 square feet of rental space. Defendants' representatives conceded that four parking spaces per 1,000 was reasonable. Moreover, defendants' representatives indicated that up to 15 to 20 spaces would be allowed to accommodate tenants' needs for directors or sales meetings.
As to plaintiffs' right to park in the garage under Building B, the ground lease does provide that the lessee has the right to park not only in spaces on Parcels II and III, but also on spaces "to be added to said Parcels II and III." The lease is dated 1986 and Building B and the underground garage were built in 1988. Thus, if the ground lease is read literally, it gives plaintiffs the right to use the garage.
But here again history is important. After the garage was built, plaintiffs' predecessor owner of the Nardi building never exercised the right to park there under the ground lease. Those tenants paid a fee for the privilege of underground parking. When Nardi purchased the building in 2006, his tenants did not seek to park in the garage.
Thus, from 1988 to 2008, the owners and tenants of the Nardi Building interpreted the ground lease as not giving them the right to underground parking.
The practice of the parties can reveal their interpretation of a contract. Taft Realty Corporation v. Yorkhaven Enterprises, Inc., 146 Conn. 338, 343 (1959); May Centers, Inc. v. Paris Croissant of Enfield Square, Inc., 42 Conn.Sup. 77, 80 [ 4 Conn. L. Rptr. 1] (1991). Here the failure of any lessee under the ground lease to assert a right to underground parking for close to twenty years is clear evidence that none of them intended to have that right under the lease.
Moreover, ground leasees waived their right to park in the garage by their failure to exercise the right for such a long period of time. Waiver may consist of acts or conduct from which it may be inferred. Wiele v. Board of Assessment Appeals, 119 Conn.App. 544, 549 (2010).
Thus this court interprets plaintiffs' parking rights under the ground lease as follows: plaintiffs have a right to 48 spaces of surface parking in Parcels II and III in common with other tenants in the buildings of the complex and, in addition, plaintiffs are entitled to use up to 15 spaces to accommodate those attending occasional meetings. Plaintiffs have no right to park in the underground garage.
2. Plaintiffs' Claims of Defendant's Violating the Covenants of Quiet Enjoyment and of Good Faith and Fair Dealing.
Plaintiffs' claim defendant violated the covenant of quiet enjoyment and of good faith and fair dealing by denying plaintiffs their parking rights under the lease.
The lease specifically provides (at Section 20) that the tenant "shall quietly have and enjoy the Demised Premises during the term of the lease, without hindrance or molestation by anyone."
The ground lease is a contract and also is entitled to the implied covenant of good faith and dealings found in every contract. Twelve Havmeyer Place Company, LLC v. Gordon, 93 Conn. App. 140, 159 (2006). As stated in Elm Street Builders, Inc. v. Enterprise Park Condominium Ass'n., Inc., 63 Conn. App. 657, 667 (2001), "[T]he common law duty of good faith and fair dealing implicit in every contract requires that `neither party [will] do anything that will injure the right of the other to receive the benefits of the agreement . . . essentially it is a rule of construction designed to fulfill the reasonable expectations of the contracting parties as they presumably intended.'" See also 2 Restatement (2nd) Contract, Section 205.
Here the ground lease expresses the rights of the parties regarding parking. Plaintiffs were entitled to a reasonable number of spaces of surface parking in Parcels II and III in common with other tenants. As indicated above, the court has determined that reasonable number to be 48.
In meetings with the representatives of the plaintiffs, defendant asserted that plaintiffs were only entitled to 35 or 37 spaces. When the Met Life employees in Building B were crowding the lots, defendant issued hang tags to limit the parking in the lots. But it never enforced the program. Moreover, there is no evidence that, despite defendant claiming that the plaintiffs were only entitled to 35 or 37 parking spaces, that it ever restricted the number of parking spaces plaintiffs or their tenants could use. As also indicated above, the court interprets the ground lease to give no parking rights to the plaintiff in the underground garage.
Consequently, plaintiffs have failed to prove defendant violated the covenants of quiet enjoyment and of good faith and fair dealing with respect to plaintiffs' use of its proper number of parking spaces.
3. Claim of Tortious Interference
The elements of a claim for tortious interference with business expectancies are: "(1) a business relationship between the plaintiff and another party; (2) the defendant's intentional interference with the business relationship while knowing of the relationship; and (3) as a result of the interference, the plaintiff suffers actual loss." Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20, 22 (2000).
To prove such a cause of action plaintiff must show that the defendant was guilty of misrepresentation or that the defendant acted maliciously in the sense that he intentionally interfered without justification. American Diamond Exchange, Inc. v. Albert, 101 Conn.App. 83, 90-91 (2007).
In this case, the facts are that Ostreicher entered into a purchase and sale agreement with the plaintiffs to buy the Nardi Building for $1.55 million. During the period of due diligence, Ostreicher's broker, Robert Gaucher, sought at a meeting in October 2006 to get from defendant a confirmation of the parking rights of the Nardi Building. Susan Donahue, defendant's property manager, stated at the meeting that the defendants were entitled to 35 spaces and no more. She based that number on plaintiffs' pro rata share of common area expenses for the parking area. Her statement was not an opinion but a representation of fact that she knew the buyer would rely upon.
Thereafter, there was correspondence between attorneys for Ostreicher and for defendant to the effect that Ostreicher was seeking a right to only four spaces per 1,000 square feet of rental space (48 spaces) in common with other tenants and if he could not get a confirmation of that right, he would terminate the purchase and sale agreement with plaintiffs. Defendant refused to give such a confirmation and even threatened litigation over the issue. Ostreicher at that point did not want litigation and terminated the agreement to purchase. As Ostreicher's attorney, Mr. Evans said in an email as to the reason for the termination: "The issue is not the price. The issue is that the ground lessor will only give us the unfettered right to park in 37 spaces . . ."
The insistence by defendant that plaintiffs' buyer was only entitled to that few spaces was unjustified. The ground lease gave plaintiffs the right to "all vehicular designated areas spaces as shown on Parcels II and III . . ." This court interprets that provision as giving plaintiff a reasonable number of spaces — that is 48, which defendant's representative conceded was reasonable. Yet through all the letters flowing between counsel for Ostreicher and Nardi on the one hand, and for defendant on the other, defendant persisted in restricting plaintiff's right to 37 spaces. Moreover, defendant was clearly informed such a position would imperil the Ostreicher deal.
Moreover, defendant had a malicious motive. At that time the parking lots of Parcels II and III were over crowded. By asserting that plaintiffs had limited right to parking spaces, it was seeking to improve the parking situation at the corporate center and enhance the value of its property.
Thus, all the elements of a cause of action for tortious interference with business expectancy were proven: (1) there was a business relationship with the plaintiffs and Ostreicher to sell the building for a specific price; (2) the defendant knew of the relationship and unjustifiably interfered with that relationship by asserting that the potential buyer had a right to a limited number of parking spaces that was less than the ground lease allowed; and (3) this insistence by the defendant caused the termination of the agreement to purchase and as a result the plaintiff suffered actual loss.
As to the damages plaintiffs are entitled to for this tort, further facts are that after Ostreicher backed out of his deal with the plaintiffs over parking at a price of $1.55 million, he subsequently offered to purchase the Nardi Building for $1.325 million, notwithstanding the dispute over parking rights. The offer was conditioned on plaintiffs not suing defendant. Plaintiffs refused the offer. Plaintiffs continued to offer the building for sale during a declining real estate market and to maintain it when it became empty. Finally, plaintiffs negotiated a sale for the building in March 2009 at the agreed selling price of a net of $760,000.00.
Plaintiffs claim damages of the difference between the first Ostreicher price of $1.55 million and the last sales price of a net of $760,000.00, or the amount of $790,000.00. However, the court finds plaintiffs failed to mitigate their damages by rejecting Ostreicher's second offer of $1.325 million because Ostreicher assumed the risk of the parking issue and whatever claims plaintiffs had against the defendant revolved solely around that issue.
Consequently, the court concludes plaintiffs are entitled to damages of $225,000.00.
4. Claim of Violation of CUTPA.
The elements of an action for a violation of Connecticut Unfair Trade Practices Act are:
1. The defendant's act "offends public policy as it has been established by statute, the common law or otherwise";
2. It is immoral, unethical, oppressive or unscrupulous; and
3. It causes substantial injury to the plaintiff.
Cheshire Mortgage Services, Inc. v. Montez, 223 Conn. 80, 105-06 (1992). The court finds the plaintiffs proved two of the these elements: defendant violated the common law by tortiously interfering with plaintiffs' business expectancy and that caused injury to the plaintiffs. Our Supreme Court noted in Sportsman's Boating Corporation v. Hensley, 192 Conn. 747 (1984): ". . . It is difficult to conceive of a situation where tortious interference would be found but a CUTPA violation would not." 192 Conn. 747, 757.
Thus, the court finds plaintiff has proven a violation of CUTPA and under that statute is entitled to counsel fees.
5. Claim of Unlawful Assessment.
Plaintiffs' claim and the defendant concedes that a credit should issue to the plaintiffs for $191.89 for an erroneous garage related charge and for $14,409.68 for road improvements assessments paid by the plaintiffs since the defendant acquired the office complex. Thus, plaintiff is entitled to $14,601.57 on this claim. The court exercises its discretion not to award prejudgment interest on this amount.
Based on the foregoing, a judgment may enter as follows:
A declaratory judgment construing the ground lease to mean that plaintiffs have the right to 48 surface parking spaces on Parcels II and III for its tenants in common with other tenants in the complex, together with additional spaces of up to 15 for occasional special meetings held by its tenants. Plaintiffs have no right to park in the underground garage.
An injunction may issue prohibiting defendant from interfering with plaintiffs' aforesaid parking rights. An order may issue quieting title in the defendant to the underground garage.
Judgment may enter for the plaintiffs on the claim that defendant tortiously interfered with plaintiffs' business expectancies, in the amount of $225,000.00. Plaintiffs have proven their claim of defendant's violation of CUTPA and plaintiffs are entitled to counsel fees to be determined at a subsequent hearing. Plaintiffs are entitled to a judgment in the amount of $14,601.57 for defendant's charging improper assessments.