Celentano v. Oaks Condominium Assn.

• Decision Date: 02 September 2003
• Docket Number: (SC 16684).
• Court: Connecticut Supreme Court
• Parties: VINCENT CELENTANO ET AL. v. OAKS CONDOMINIUM ASSOCIATION ET AL.

265 Conn. 579

830 A.2d 164

VINCENT CELENTANO ET AL. v. OAKS CONDOMINIUM ASSOCIATION ET AL.

(SC 16684).

Supreme Court of Connecticut.

Argued January 8, 2003.

Officially released September 2, 2003

Borden, Norcott, Katz, Palmer and Zarella, Js. Dina S. Fisher, with whom was Patrick J. Sweeney, for the appellants-appellees (defendants).

Paul M. Sabetta, for the appellees-appellants (plaintiffs).

Opinion

KATZ, J.

This appeal and cross appeal¹ arise out of an action by the plaintiffs,² lessors of the land underlying the Oaks condominium complex (Oaks), against the defendants, the Oaks Condominium Association (association) and the members of its board of directors,³ alleging that the defendants had violated their obligations under the lease for the underlying land (ground lease)⁴ and seeking an accounting of rents due and damages for allegedly unlawful conduct pertaining to the collection and payment of rent. The defendants asserted several special defenses, including that the ground lease could not be enforced because the "hybrid" condominium form of the Oaks, in which the building units are owned and the underlying land is leased, violated the Condominium Act of 1976 (condominium act), General Statutes § 47-68a et seq. The defendants also filed a counterclaim, seeking to invalidate the ground lease, to obtain title to the land and to recover certain rental payments made to the plaintiffs. The trial court rendered partial judgment in favor of the plaintiffs, awarding damages for, inter alia, rents and interest due under the terms of the ground lease and the cost of the accounting to determine the amount due. The trial court also awarded the defendants damages based on its determination that the plaintiffs had breached the duty of good faith and fair dealing. The defendants appeal and the plaintiffs cross appeal from the trial court's judgment. We affirm the judgment of the trial court.

The record reflects the following facts and procedural history. The plaintiffs owned two parcels of real property, located at 79 and 80 Claudia Drive in West Haven, on which two apartment buildings were situated. In 1982, the plaintiffs sold the buildings to Melrose Apartments, Inc. (Melrose). The plaintiffs concurrently executed a ground lease whereby they conveyed to Melrose a leasehold interest in the underlying land for a term of ninety-nine years, with an escalating rent schedule, plus an option to purchase. In November, 1982, Melrose thereafter, as set forth under the terms of the ground lease, declared a condominium, named the Oaks, in the two properties, consisting of 108 units in total. Pursuant to a "Deed of Condominium Unit and Assignment of Leasehold Interest" (deed), purchasers of the individual condominium units received a fee simple absolute interest in their unit and an assignment of a fractional interest in the underlying ground lease. The purchasers also received, in accordance with the deed and the ground lease, a purchase option for their leasehold interest that could be exercised collectively by the unit owners in the eleventh year of the lease. Unit owners individually were responsible for the rent payments to the plaintiffs, although the unit owners actually made these payments to the association, which in turn remitted the payments to the plaintiffs.

In the early 1990s, the defendants began inquiring about exercising the purchase option. In a January, 1993 letter, the defendants asked the plaintiffs to indicate a purchase price and the time frame within which the purchase option could be exercised. The plaintiffs responded by letter that they would not "presume to advise [the defendants] as to what is `the period within which to exercise said options.'" On April 2, 1993, the defendants sent a letter to the plaintiffs stating that they wanted to exercise the purchase option and identifying the purchase price as $416,000. On April 7, 1993, the plaintiffs responded to the defendants' April 2 letter, noting the defendants' intention to exercise the purchase option, but indicating that the price offered was too low.

On June 16, 1993, the defendants filed a demand for arbitration with the American Arbitration Association, seeking a "valuation of an option to purchase a land lease for premises commonly known as 79 and 80 Claudia Drive, West Haven ... and issues ancillary thereto," including the issue of whether the option had been exercised timely. In response, the plaintiffs filed an action in Superior Court seeking to enjoin the arbitration. In October, 1994, the trial court, Booth, J., rendered judgment in favor of the plaintiffs on the ground that the value of the land was the only issue that could be arbitrated pursuant to General Statutes § 52-408,⁵ as it was the only issue that the parties had agreed in writing to arbitrate. The issue of whether the option had been exercised timely was not subject to arbitration under the ground lease; therefore the court enjoined the defendants from pursuing arbitration on that matter.

While the action to enjoin the arbitration was pending before the trial court, the defendants sent two more letters to the plaintiffs, dated December 16, 1993, and May 4, 1994, again indicating that they wanted to exercise the purchase option. The plaintiffs did not respond to either letter.

In 1995, the defendants began withholding the rents due under the terms of the ground lease and depositing them in an escrow account. This action stemmed from the determination by the property manager of the Oaks that the association had been overpaying ground rents to the plaintiffs, because the association had been paying the full amount due under the ground lease and not deducting amounts not collected from unit owners who were delinquent in making rent payments. Some of the ground rents withheld were used by the defendants to pay back property taxes due and to make capital improvements to the common elements of the Oaks.

As a result of the association's refusal to remit all the rent payments due, the plaintiffs brought this action. In their third amended revised complaint, the plaintiffs alleged that the defendants: (1) wrongfully had withheld ground rent and taxes due under the terms of the ground lease; (2) had been negligent in the manner in which they undertook their duties to collect rents from the unit owners; (3) should be ordered to furnish an accounting of the rent payments held in escrow; (4) had converted the rents collected to their own use; and (5) had violated the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq. The defendants asserted several special defenses, including, inter alia, that the condominium had not been created legally in accordance with the condominium act. The defendants also filed a counterclaim, alleging that: (1) title to the land underlying the Oaks should be quieted by declaring the association the owner of the property; (2) the plaintiffs had been unjustly enriched by ground lease payments they had received after a certain date; (3) the defendants were entitled to specific performance on the purchase option in the lease; (4) the lease was presumptively unconscionable pursuant to General Statutes § 47-210; (5) the plaintiffs had breached the covenant of good faith and fair dealing; (6) the plaintiffs had violated CUTPA; and (7) the plaintiffs' actions had constituted conversion.

Thereafter, the defendants filed a motion for summary judgment on their special defense that the Oaks was an illegally formed condominium, which motion was denied by the trial court. After a bench trial, the court rendered partial judgment for the plaintiffs. Specifically, the court rejected the defendants' claim that the ground lease was unconscionable and, accordingly, awarded the plaintiffs past and future rents due under the lease and ordered the defendants to provide an accounting for rents they had collected but had not remitted to the plaintiffs. The trial court also concluded that the defendants were time barred from enforcing their purchase option through specific performance, but awarded the defendants damages based on its finding that the plaintiffs had breached the duty of good faith and fair dealing in their conduct toward the defendants when they had attempted to exercise the purchase option. The trial court rejected the parties' remaining claims. This appeal and cross appeal followed. Additional facts will be set forth as necessary.

The parties each raise several claims for our consideration on appeal. In their appeal, the defendants claim that the trial court improperly concluded that: (1) the Oaks was a legally created condominium pursuant to the condominium act; (2) the ground lease was not presumptively unconscionable pursuant to § 47-210; and (3) the defendants were not entitled to specific performance on the purchase option because the applicable limitations period under General Statutes § 47-33a was not tolled by the doctrine of equitable estoppel.⁶ The plaintiffs, in their cross appeal, claim that the trial court improperly refused to award them attorney's fees, as provided for in the ground lease, and improperly awarded the defendants damages for the plaintiffs' breach of the covenant of good faith and fair dealing in the absence of sufficient evidence to support such a finding.⁷ We reject all the claims, on both the appeal and the cross appeal and, accordingly, affirm the judgment of the trial court.

I

The defendants' claims turn on our construction of various provisions of the condominium act and § 47-210. Issues of statutory construction raise questions of law, over which we exercise plenary review. Commissioner of Transportation v. Kahn, 262 Conn. 257, 272, 811 A.2d 693 (2003). "The process of statutory interpretation involves a reasoned search for the intention of the legislature.... In other words, we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of ...