269 Conn. 424 | Conn. | 2004
Opinion
This appeal arises out of a dispute between the plaintiff, De La Concha of Hartford, Inc., the lessee of certain retail space in the Hartford Civic Center (Civic Center), and the defendant, Aetna Life Insurance Company, the former owner of the Civic Cen
The trial court’s memorandum of decision sets forth the following relevant facts. “The [Civic Center] . . . in downtown Hartford is an enclosed mall with retail stores facing inward toward a central court and generally not visible from the street. The facility also contains a coliseum used for events and exhibitions, and an arena for sporting contests. Customers are attracted to the Civic Center by the direct advertising of retailers, by promotion of the Civic Center as a downtown shopping mall and by events at the coliseum and sports arena.
“[The plaintiff] was a retail distributor of tobacco and tobacco related products. The defendant . . . [was] the owner and lessor of the Civic Center. In 1975, [the plaintiff] entered into a fifteen year' lease with . . . [the defendant’s predecessor]
“The lease provided for an annual rental of $6502 the first year, $9625 the second and third years, and $13,125 the fourth through the fifteenth years, plus a percentage rental of 5 percent of gross sales. The lease further required [the plaintiff] to contribute $18.23 a month to a promotional fund, to which other tenants contributed amounts based on the square footage of their stores. [The defendant] agreed to contribute not less than 25 percent of the total amount of funds paid by the [retail] tenants of the . . . [Civic Center] .... However ... at its option [the defendant could] contribute all or part of the services of a promotion director and/or secretary or [could] provide reasonable office space and equipment in lieu of the cash contributions.
“[The plaintiff’s] lease was amended as of January 1, 1980, to provide that the percentage rent would be 5 percent of gross sales in excess of $262,500 each year
“[The plaintiffs] lease did not [contain], as the leases of other tenants did, a clause tying [the plaintiffs] tenancy either to a prescribed occupancy rate of the Civic Center or to a key tenant remaining at the Civic Center.
“The Civic Center opened in 1975. It was essentially fully occupied. However, [the defendant] was never able to find an anchor tenant. As a consequence, it created [Luettgens Ltd.] as an upscale department store, which, during the entire time of its existence, lost money and required subsidization by [the defendant]. In subsequent years, the Civic Center’s occupancy rate fluctuated with the Hartford economy. In the early 1980s, when the Hartford economy contracted, the occupancy rate dropped to between [50 and 75 percent]; in the mid and late 1980s, when the Hartford economy rebounded, the occupancy rate rose to 90 percent. When the Hartford economy [became] depressed again in the early 1990s, the occupancy rate again started dropping. Yet, even when fully occupied, [the defendant] lost money as the owner of the Civic Center.
“For many years, [the defendant] spent enormous amounts of its own money to make the Civic Center a
“In the mid 1990s, a number of factors contributed to the falling occupancy at the Civic Center and the difficulty [the defendant] had acquiring new tenants: (1) [a] number of Hartford companies laid off downtown employees, reducing the source of customers for the Civic Center; (2) [n]ew shopping centers expanded, upgraded or opened in the suburbs, including West-farms Mall, West Hartford center, and Buckland Hills; (3) [t]he [Civic Center] coliseum lost out in ticket sales to the Meadows Music Theater in . . . Hartford; (4) [t]he Hartford Whalers [ice hockey franchise], the biggest sports draw in Hartford, left in 1997; [and] (5) [d]owntown Hartford retail establishments such as G. Fox and Sage Allen closed their doors, leaving little to attract customers to downtown Hartford.
“Although [the defendant] tried to buck the trend, its efforts at promotion did not increase traffic, obtain new tenants or acquire tenant replacements at the Civic Center.
“In 1995, David Romano became [the defendant’s asset] manager for the Civic Center. When he analyzed the financial outlook, he found the Civic Center had lost more than $50 million in twenty years, had few substantial tenants and was hemorrhaging thousands of dollars for lack of rental income and high operating expenses. [Romano] explored the possibilities of [the defendant’s] closing the Civic Center, selling it or finding a partner able to run it profitably. His analysis revealed that, by closing the Civic Center, [the defendant] would lose [approximately $5 million] in rents and still incur nondiscretionary operating expenses of
“Because [Romano] deemed [the sale of] the Civic Center as the most likely alternative, but . . . could not foresee what use the potential purchaser might make of the [Civic] [C] enter, he undertook a policy of entering into short-term leases or [leases] giving [the defendant] the right to recapture the premises in order to make the Civic Center more saleable. That policy, however, seemed to have little impact on acquiring new tenants, and some of the existing tenants actually insisted on year-to-year leases or early termination dates before renewing. In 1995, [the defendant] essentially terminated its efforts to promote the Civic Center and substantially cut its promotion budget. It stopped [television], radio, and newspaper advertising and promotional events [at the Civic Center]. It also stopped requiring tenants to contribute to the Civic Center marketing fund.
“This lack of promotion, however, had little effect on tenant sales. In fact, in . . . December, 1998, the Civic Center retailers reported a 5.5 percent increase in sales, and in the period from May, 1998, to May, 1999, a 1.5 percent increase in sales.
“At the same time, from 1992 to 1997, the cigar industry experienced its biggest boom. In 1997, [the plaintiffs] sales peaked at $550,027, over 70 percent higher than they had been just five years earlier.
“In fiscal year 1998, [the defendant] collected $80,470 in. tenant contributions to the Civic Center marketing fund and spent $66,700 for direct advertising and promotion of the Civic Center. For fiscal year 1999, the [Civic Center] tenants contributed $29,179 and [the defendant] spent less than $12,000 in direct promotion.
“In 1997, [the defendant] finally decided to sell the Civic Center. [The defendant nevertheless] incurred indirect promotion expenses [in order to avoid violating] the terms of the lease [s]. [The defendant] sent out promotional material to potential buyers and notified its tenants. The first potential purchaser, the Huten-sky Group, was rejected by the city of Hartford. Finally, in 1999, [the defendant] agreed to sell the Civic Center to Northland, Inc., for development into a high rise residential complex with some retail stores.
“[The plaintiff] continued in business but the cigar [boom was over] in 1998. In 1999, [the plaintiffs] sales dropped from $401,120 to $283,535. [The plaintiff] also started to default in its rent. Despite [a] reduction in sales, in 2000, however, [the plaintiff] sought to exercise its option to renew its lease for another five years. [The plaintiff] was then behind in [paying rent] and had failed to maintain its annual sales of at least $262,500 . . . [a condition] for renewal [of] the lease. [The defendant] rejected [the] plaintiffs option to renew. [The plaintiff closed its business onMarch 17,2001.]”
The plaintiff contends that the factual findings upon which the trial court relied in rejecting the plaintiffs claims are clearly erroneous.
We turn now to the legal principles governing each of the plaintiffs two claims. With respect to the plaintiffs allegation that the defendant breached the implied covenant of good faith and fair dealing, “[i]t is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship. See Magnan v. Anaconda Industries, Inc., 193 Conn. 558, 566, 479 A.2d 781 (1984); see also 2 Restatement (Second), Contracts § 205 [1981] ([e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement).” (Internal quotation marks omitted.) Hoskins v. Titan Value Equities Group, Inc., 252 Conn. 789, 793, 749 A.2d 1144 (2000). In other words, every contract carries an implied duty “requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement.” (Internal quotation
“To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiffs right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith.” Alexandru, v. Strong, 81 Conn. App. 68, 80-81, 837 A.2d 875, cert. denied, 268 Conn. 906, 845 A.2d 406 (2004), citing Gupta v. New Britain General Hospital, 239 Conn. 574, 598, 687 A.2d 111 (1996). “Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one’s rights or duties, but by some interested or sinister motive. . . . Bad faith means more than mere negligence; it involves a dishonest purpose.” (Citation omitted; internal quotation marks omitted.) Habetz v. Condon, 224 Conn. 231, 237, 618 A.2d 501 (1992).
With respect to the plaintiffs CUTPA claim, “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
With these legal principles in mind, we consider first the plaintiffs contention that the trial court improperly rejected its claim that the defendant breached the implied covenant of good faith and fair dealing. At trial, the plaintiff maintained that, because the economic viability of any one retail tenant of an enclosed mall, such as the Civic Center, depends upon the occupancy rate of the entire mall, the defendant had an obligation, implied under its lease, to make good faith efforts to promote and to maintain the mall. In support of this contention, the plaintiff relies on two provisions in the lease: the gross sales provision, which afforded the plaintiff the right to renew its lease provided its gross sales exceeded $262,500, and the promotional fund provision, which required the defendant to contribute not less than 25 percent of the total amount that the Civic Center tenants had paid into the promotional fund. According to the plaintiff, the gross sales provision of the lease impliedly obligated the defendant to refrain from conduct that created any unfair or unnecessary risk of adversely affecting the plaintiffs sales. The plaintiff further claimed that the promotional fund provision gave rise to a duty on the part of the defendant to make reasonable efforts to promote and to maintain the Civic Center for the purpose of achieving an occupancy rate
The plaintiff asserted that the defendant failed to meet its obligation to promote the Civic Center and to make reasonable efforts to maintain the occupancy rate at an acceptable level. In particular, the plaintiff claimed that the evidence established, as a matter of law, that the defendant, once it had decided to sell the Civic Center, engaged in a “scheme” or course of conduct to “starve out” the plaintiff and other tenants so as to make the Civic Center more appealing to potential purchasers who, in the absence of tenants, would have greater flexibility in deciding how to maximize profitability.
Finally, the plaintiff challenged the propriety of the defendant’s refusal to renew the plaintiff’s lease in 2000 on the ground that the plaintiff had failed to attain gross annual sales of $262,500. Specifically, the plaintiff
In rejecting the plaintiffs claims, the trial court found that the defendant had not breached any express term of the lease nor had it engaged in any conduct prohibited by the lease’s implied covenant of good faith and fair dealing. In particular, the court found that, although the defendant had an obligation to conduct itself in conformity with the express lease provisions and with the plaintiffs justified expectations in light of those provisions, the defendant’s conduct had satisfied that standard. In this regard, the trial court noted: “The Civic Center was an economic venture in which [the defendant] was engaged . . . not only as a good citizen of Hartford but also to make a profit. Clearly, [the defendant’s] reasonable expectations did not include continuing to promote the Civic Center when it was losing hundreds of thousands of dollars every year. Nor did it assume an obligation as a guarantor of the plaintiffs prosperity. . . .
“Here, [the defendant] acted reasonably to cut its losses arising from the operation of the Civic Center in light of the departure of the [Hartford] Whalers, the expansion of shopping malls in the suburbs and the deteriorating economic situation in downtown Hartford.”
With regard to the promotional fund provision of the lease, the court found that the defendant had contributed substantially more to promoting and marketing the Civic Center than that required under the lease. The court further found that even if the defendant had failed,
The trial court also found that the plaintiff had failed to establish that the defendant acted in bad faith at any time. In particular, the trial court concluded that, although the defendant had “pursued its own self-interest in limiting its losses in the operation of the Civic Center ... it did not do so because of a dishonest purpose, a furtive design or ill will toward the plaintiff.”
Finally, the trial court rejected the plaintiffs claim that the defendant had violated the lease’s implied covenant of good faith and fair dealing by refusing to renew the plaintiffs lease. The court concluded that the defendant had acted reasonably and within its rights under the lease in rejecting the plaintiffs option to renew because the plaintiff, having failed to pay rent for the several months preceding its renewal request, was in default and, therefore, not entitled to the renewal that it had sought.
To the extent that the plaintiff contends that the defendant was obligated to conduct itself in good faith
As we have indicated, the thrust of the plaintiffs claim was that, once the defendant had decided to sell the Civic Center, it took steps to “starve out” the tenants to make the Civic Center more marketable. Contrary to the plaintiffs claim, the evidence supported the trial court’s finding that the defendant’s decision to sell the Civic Center and the steps it took to implement that decision were undertaken reasonably and in good faith, and for the purpose of extricating itself from a well-intended but unsuccessful business venture that resulted in the defendant’s loss of more than $50 million over the course of approximately twenty years. In particular, the evidence established that the defendant went to considerable lengths to retain existing tenants and to attract new ones; indeed, the defendant offered certain tenants substantial rent reductions to induce them to renew their leases. With respect to the defendant’s decision to enter into short-term leases with recapture provisions, a number of tenants or potential tenants themselves insisted on such terms in light of the precarious state of the Hartford economy.
Moreover, some existing tenants simply refused to renew their leases, not because of the terms offered by the defendant but, rather, because of the bleak retail climate in downtown Hartford. In light of the weak economy, it also was difficult, if not impossible, for the defendant to attract new tenants to the Civic Center. As Romano testified: “It was very hard to attract retail tenants to downtown Hartford because of the general economic nature of downtown Hartford. Again, it had suffered through serious job loss from [the late 1980s to the mid 1990s]. Retail had left downtown. You had expanded retail options in the suburbs, which were the new shopping areas of choice, and so it was difficult
The trial court reasonably concluded, moreover, that the defendant’s conduct subsequent to its decision to sell the Civic Center, including its efforts to minimize operating losses by ehminating direct expenditures for promotional activities, had no material bearing on the plaintiffs gross sales. As the evidence indicated and the trial court found, the weak Hartford economy and the end of the cigar boom combined to cause the reduction in the plaintiffs gross sales from 1998 through 2000, not the management policies implemented by the defendant in the face of substantial annual operating deficits.
The plaintiff also cannot prevail on its claim that those policies, which were predicated in large part on the defendant’s decision to keep the Civic Center open until a buyer could be secured rather than to close the Civic Center and to buy out existing leases, necessarily demonstrated that the defendant’s conduct was motivated by bad faith. On the contrary, the defendant was free to take appropriate action to reduce the losses it had incurred for many years, and the evidence fully supported the trial court’s conclusion that the ameliorative measures that the defendant had taken were reasonably designed to achieve that end. The defendant, moreover, had no obligation to buy out the plaintiffs lease or even to reheve the plaintiff of its responsibilities under the lease.
For all of the foregoing reasons, we conclude that the trial court properly found that the management policies that the defendant had implemented after it had decided to sell the Civic Center did not violate the lease’s implied covenant of good faith and fair dealing. In light of the court’s findings regarding the propriety of those policies, the plaintiffs claim that the defendant violated the lease’s implied covenant of good faith and fair dealing by rejecting the plaintiffs option to renew its lease also is without merit; because the defendant was not responsible either for the plaintiffs failure to pay rent or for its failure to attain gross annual revenue of at least $262,500, the defendant was entitled, under the express provisions of the lease, to decline the renewal of the lease for those reasons.
We turn, finally, to the plaintiffs CUTPA claim. With respect to that claim, the trial court determined that, “[a]t the most, [the] plaintiff has shown that [the defendant], in an attempt to extricate itself from an unprofitable business venture, reduced its promotion of the Civic Center and changed its leasing policies in order to facilitate a sale of the Civic Center. That hardly constitutes unfair, immoral or unscrupulous conduct. . . .
In rejecting the plaintiffs claim that the defendant had breached the implied covenant of good faith and fair dealing, we concluded that the evidence supported the trial court’s findings that the defendant acted in good faith toward the plaintiff and that the weak Hartford economy and the end of the cigar boom, rather than any conduct of the defendant, caused the plaintiffs economic woes. The very same evidence upon which those findings were predicated also provides the basis for the court’s determination that the defendant did not engage in any conduct prohibited by CUTPA. We therefore reject the plaintiffs CUTPA claim as well.
The judgment is affirmed.
In this opinion the other justices concurred.
The plaintiff appealed to the Appellate Court and we transferred the appeal to this court pursuant to General Statutes § 51-199 (c) and Practice Book § 65-1.
The plaintiff also asserted claims for breach of contract, promissory estoppel, tortious interference with business expectancies and negligent misrepresentation. With respect to the plaintiffs claims of breach of contract, promissory estoppel and tortious interference with business expectancies, the plaintiff failed to address them in its posttrial brief and the trial court deemed them abandoned. With respect to the plaintiffs negligent misrepresentation claim, the trial court concluded that the plaintiff had not established that claim. The plaintiff has not appealed from that part of the trial court’s judgment concerning those four claims. This appeal, therefore, is limited to the trial court’s rejection of the plaintiffs CUTPA claim and the plaintiffs claim regarding the defendant’s alleged breach of the implied covenant of good faith and fair dealing.
The original lessor of the space leased by the plaintiff was Aetna Life and Casualty Company, the defendant’s predecessor. At all times relevant to this appeal, however, the defendant was the owner and lessor of the premises leased by the plaintiff.
The trial court stated in i1s memorandum of decision that the plaintiff commenced this action shortly after it closed its business. In fact, the plaintiff commenced this action in May, 1998, nearly three years before it ceased operations.
Whether a contract has been breached ordinarily is a question of fact, subject to the clearly erroneous standard of review. E.g., Strouth v. Pools by Murphy & Sons, Inc., 79 Conn. App. 55, 59, 829 A.2d 102 (2003).
We note that the plaintiff did not claim that the sale of the Civic Center was barred either by the lease terms themselves or by the lease’s implied covenant of good faith and fair dealing. The plaintiff asserted, rather, that the policies implemented by the defendant in preparation of the sale were improper.
The recapture provisions generally allowed the defendant to terminate the lease upon notice to the tenant of between thirty and ninety days.
In this regard, the plaintiff refers to evidence that, in the latter years of the lease, the defendant did not expend the full amount of the promotional fund on marketing and promoting the Civic Center. The trial court found, however, and the evidence indicates, that the defendant never breached its obligation under the lease to promote the Civic Center because the expenditures that it made in the discharge of that obligation, whether derived directly from the promotional fund or otherwise, always met, and generally exceeded, the requirement for such expenditures under the provisions of the lease.
In fact, Anthony G. Breault, an employee of Jones Lang LaSalle Americas, Inc., a company retained by the defendant to provide management services for the Civic Center, testified that, to his knowledge, for the period from 1995 until the sale of the Civic Center by the defendant, no prospective or
Specifically, the terms of the proposed lease purported to give both the defendant and Successories of Connecticut, Inc., the right to terminate the lease upon sixty days’ notice.
As the trial court noted, the plaintiffs lease, unlike the leases of other tenants, contained no provision linking the plaintiffs obligations under the lease either to a particular occupancy rate or to a key tenant remaining at the Civic Center.
In support of its claim of bad faith, the plaintiff offered the testimony of George Garrity, the former general manager of the Civic Center mall, who stated that, because the occupancy rate of the mall was crucial to its long-term success, he considered it his responsibility to maintain a high occupancy rate. This testimony, however, does not undermine the trial court’s conclusion that the defendant’s failure to achieve a high occupancy rate was not the result of bad faith but, rather, a virtually inevitable consequence of economic factors—most significantly the downturn of the Hartford economy—beyond the defendant’s control.