Opinion
No. CV 044100844
December 7, 2005
MEMORANDUM OF DECISION RE WHETHER PROPERTY MANAGER, AS AGENT, HAD AUTHORITY TO BIND PRINCIPAL IN SIGNING OF LONG-TERM LEASE
This is a declaratory judgment action in which plaintiff Shamrock Ridge, LLC, alleges the existence of a bonafide dispute as to whether its agent had the authority to enter into a fifteen-year commercial lease with Heidi Blaisdell for the use of the first floor space at 100 Main Street in Norwich, Connecticut. Plaintiff Shamrock Ridge alleges and maintains that its agent did not have the authority, and that its agent informed the defendant that he had to obtain the approval of the principal before agreeing to the 15-year extension.
Plaintiff Shamrock Ridge alleges that the rent charged is below market, and that the defendant knew that the lease required the principal's advance approval for the fifteen-year extension. Defendant Heidi Blaisdell asserts that she was not informed that the agent allegedly needed the plaintiff's advance approval. Furthermore, she is resolute in her position that the agent at all times gave the full impression that he had the authority on behalf of Shamrock Ridge to sign the original lease, as well as the fifteen-year extension.
Defendant Heidi Blaisdell asserts the following special defenses to the declaratory judgment complaint in this case: the plaintiff's ratification of the lease by accepting lease payments; equitable estoppel; the doctrine of unclean hands; and, accord and satisfaction. In addition, the defendant asserts the following Counterclaims: 1) a claim for counsel fees to be awarded for the prevailing party in a challenge under the lease; and 2) counsel fees and punitive damages for a violation of the Connecticut Unfair Practices Act.
Trial CT Page 15728
The parties appeared for trial on December 1, 2005. At that time the Court bifurcated the trial and decided to first determine whether the principal's agent had the authority to enter into and bind the principal to the fifteen-year lease; and then later determine what, if any, damages either party is entitled to recover.The following persons testified during the trial:
Yitzchok Mitnick, a principal in Shamrock Ridge; David Holtzworth, the manager of the building known as 100 Main Street in Norwich, Connecticut; Zane Megos, a real estate agent; and Heidi Blaisdell.
From the testimony and exhibits the Court finds the following facts. In making its findings the court evaluated the credibility of the witnesses.
Findings
Plaintiff Shamrock Ridge, LLC, owned a building located at 100 Main Street in Norwich, Connecticut. Through its manager, David Holtzworth, plaintiff Shamrock Ridge entered into a commercial lease with Heidi Blaisdell which conveyed possession of approximately 2000 square feet of space on the first floor of the building for use as a photography studio. The lease established the rental charge at $500 per month for the first two years, and provided to Heidi Blaisdell an option to extend the lease for an additional two years at a rental rate of $600 per month. This lease was signed on September 13, 2001 by David Holtzworth on behalf of Shamrock Ridge, and by Heidi Blaisdell on behalf of herself.
At all times material David Holtzworth held himself out as the manager of the subject property and as the person having authority to lease and take care of the rental units in the building. He collected rents not only from Heidi Blaisdell but also from other tenants in the building. He arranged for the issuance of a notice-to-quit and a complaint in summary process against the former tenant of the first floor office space at the subject property. He maintained a checking account for the property into which he deposited rental payments and from which he made necessary disbursements. He made and was responsible for making repairs to the building, and for responding to complaints of its tenants. He received $200.00 per month from Shamrock Ridge for his services as property manager.
The plaintiff charged the former tenant of the subject space $1,100 per month. However, after that tenant was evicted for non-payment of rent, the space was vacant for a considerable period of time, prompting Yitzchak Mitnick, one of the principals of Shamrock Ridge, to instruct David Holtzworth to rent it as soon as possible so that it would produce some income with which to pay expenses. Thereafter David Holtzworth negotiated with Heidi Blaisdell with whom he signed the lease on September 13, 2001
Shortly after signing the lease Heidi Blaisdell made substantial improvements to the leased space, and discussed with David Holtzworth extending the lease to a term of fifteen years. Their discussions resulted in an amendment to the lease whereby the original two-year extension for $600 per month was cancelled, and the following rental amounts were added: $600 per month, commencing on January 1, 2007 for five years; and $750 per month, commencing on January 1, 2012, for a period of ten years; thus, creating an effective extension of fifteen years. The amendment was handwritten on the original lease by Heidi Blaisdell, and signed by David Holtzworth and her on January 1, 2002. David Holzworth agreed to the fifteen-year lease term because Heidi Blaisdell liked the space, invested a lot of time and money in improving it, and he expected that she would terminate her tenancy prior to the expiration of fifteen years.
The first contact which defendant Heidi Blaisdell had with a principal of Shamrock Ridge was in June of 2002 — approximately six months after she signed the extension for fifteen years — when she called Yitzchot Mitnick on the telephone and spoke to him about an opportunity to arrange the selection of a tenant to occupy the vacant apartment above her studio.
During the telephone conversation in June of 2002 Yitzchok Mitnick stated to Heidi Blaisdell "how did you get such a sweet deal?," referring to the lease. Yitzchot Mitnick agreed to allow her to advertise for a tenant with the understanding that prospective tenants would then be referred to David Holtzworth. During this telephone conversation Yitchot Mitnick asked the defendant to send her rental payments directly to him. She agreed to do so. He did not disavow the lease.
`The court finds that Shamrock Ridge was aware of the subject lease, and that having such knowledge it thereafter entered into a contract to sell the property at 100 Main Street, Norwich to an entity known as 100 Main Street Associates, LLC. Related to the sales contract is an Agreement between Shamrock Ridge, LLC, the Seller, and 100 Main Street Associates, LLC, the buyer, that Shamrock will assist 100 Main Street Associates in its efforts to displace the first floor tenant. This agreement reflects that the seller and buyer question the legitimacy of the defendant's lease.
The court further finds that it was only after Shamrock Ridge obtained a buyer for the property that it questioned the legitimacy of the defendant's lease.
Agency
The following quotation from American Jurisprudence succinctly articulates the agency principles applicable to this case.
The "authority or the agent" is the power of the agent to affect the legal relations of-the principal by acts done in accordance with the principal's manifestations of consent to the agent.
The authority of the agent is the very essence of the principal and agent relationship. Unless otherwise agreed, it includes only authority to act for the benefit of the principal, and that the source of the authority is always the principal, never the agent.
There are two basic types of authority of an agent: actual authority and apparent authority. Actual authority is that which is actually granted, and it may be express or implied. Apparent or ostensible authority is that authority which, though not actually granted, the principal knowingly permits the agent to exercise or which the principal holds the agent out as possessing. Even where neither actual nor apparent authority has been given prior to the act, the principal may confer authority after the act by means of ratification.
3 Am.Jur.2d Sec. 68, pp 482-83 (footnotes omitted).
Conclusions CT Page 15731
From the foregoing, the court finds that David Holtzworth had implied and therefore actual authority to enter into and bind Shamrock Ridge, LLC to the fifteen-year contract at issue. Evidence supporting the implied, thus actual, authority consists of the manner in which Shamrock Ridge, LLC, the principal, allowed David Holtzworth, its agent, to deal with the tenants and the property, by permitting him to exercise control of leasing, the receiving of rents, the paying of bills, and to be responsible for and to make repairs to the property from 1994 until the property was sold in 2002. Maharishi School of Vedic Sciences, Inc. v. Connecticut Constitution Associates Ltd. Partnership, 260 Conn. 598, 607 (2002).The court also finds that apparent authority supports the validity of the lease. Evidence of apparent authority consists of Shamrock Ridge, LLC permitting David Holtzworth to show his aforesaid exercise and control to third parties, including the defendant, and to act on behalf of Shamrock Ridge. In this regard, it is noted as an aside that the written contract signed by the defendant does not include a written provision that it is subject to approval by Shamrock Ridge. "Apparent authority is to be determined, not by the agent's own acts, but by the acts of the agent's principal . . . The issue of apparent authority is one of fact to be determined based on two criteria . . . First, it must appear from the principal's conduct that the principal held the agent out as possessing sufficient authority to embrace the act in question, or knowingly permitted [the agent] to act as having such authority . . . Second, the party dealing with the agent must have, acting in good faith, reasonably believed, under all the circumstances, that the agent had the necessary authority to bind the principal to the agent's action. (Quotation marks omitted.) Gordon v. Tobias, 262 Conn. 844, 850-51, 817 A.2d 683 (2003).
Even if Shamrock Ridge, LLC did not have such actual or apparent authority, because of its knowledge of the contract and acceptance of the rental payments, the court finds that ratification supports the viability of the lease. In this regard, evidence of Yitzchok Mitnick's knowledge of and the receipt of rental payments by the plaintiff from the defendant for the lease are sufficient to establish that Shamrock Ridge ratified the lease. See Fairfield County National Bank v. DeMichely, 185 Conn. 463, 472 (1981).
Declaratory Judgment
Accordingly, the court declares that the lease between Shamrock Ridge, LLC, and Heidi Blaisdell exists upon good and sufficient authority.
Further Hearings
The Office of Case Flow will contact the parties to Schedule further hearings in this case.