Heyman v. CBS, Inc.

• Decision Date: 03 July 1979
• Citation: 423 A.2d 887,178 Conn. 215
• Court: Connecticut Supreme Court
• Parties: Samuel HEYMAN et al. v. CBS, INC.

Page 887

423 A.2d 887

178 Conn. 215

Samuel HEYMAN et al. v. CBS, INC.

Supreme Court of Connecticut.

Argued March 16, 1979.

Decided July 3, 1979.

Austin K. Wolf and Stewart I. Edelstein, Bridgeport, with whom, on the brief, was James J. O'Connell, Bridgeport, for appellants-appellees (plaintiffs).

Gary A. MacMillan, Stamford, with whom, on the brief, were George F. Lowman, Stamford, and Jerod A. Rosenthal, New York City, for appellee-appellant (defendant).

Before COTTER, C. J., and LOISELLE, BOGDANSKI, LONGO and PETERS, JJ.

PETERS, Associate Justice.

This case concerns the enforceability of a contract arising out of the sale and leaseback of real estate. After the defendant attempted to exercise the option to purchase contained in the contract of lease, the plaintiffs brought this action for a declaratory judgment to determine the enforceability of the option clause and to recover on various ancillary monetary claims. The defendant answered and counterclaimed, urging enforcement of the option and entitlement to monetary compensation. This appeal by both parties followed from the judgment of the trial court finding for the defendant on the plaintiffs' complaint and for the plaintiffs on the defendant's counterclaims.

The underlying facts found by the trial court are not in dispute. In 1957, Reeves Soundcraft Corporation (Soundcraft), the defendant's predecessor in interest, purchased unimproved and unencumbered real estate on Great Pasture Road in Danbury, for the purpose of constructing a plant to manufacture magnetic recording tape. Soundcraft decided not to construct the plant itself but rather to have it constructed by Lazarus Heyman, the plaintiffs' predecessor in interest, under a sale-leaseback arrangement in which Soundcraft would be granted an option to repurchase the property. Accordingly, the property was sold and a lease was executed between Soundcraft and the Old Colony Company, a corporation owned by Lazarus Heyman. Thereafter the plant was built and the lease term of twenty-one years was by agreement of the parties stipulated to begin on October 1, 1958. Because the construction required outside financing, the lease from the outset provided for the possibility of subordination of the lease to a mortgage lien not to exceed a fixed amount which ultimately came to be set at $500,000. The Prudential Insurance Company of America (Prudential) became the construction mortgagee and subsequently the take-out permanent mortgagee. Appropriate subordination agreements were concluded among Soundcraft, Old Colony, and Prudential; they were accompanied by hold harmless agreements protecting Soundcraft from defaults by Old Colony.

After completion of the construction, Old Colony assigned its interest in the property to Lazarus Heyman. That interest is now held by the plaintiffs, Samuel Heyman and Abigail Heyman. Soundcraft in turn in 1969 sold out to the defendant CBS, Inc. CBS elected in 1975 to exercise its option to purchase the property and duly gave the plaintiff the required notices thereof. CBS, but not the Heymans, appeared at an attempted closing on October 31, 1975, where CBS was prepared to tender a check in the amount of $292,800. The plaintiffs refused to convey, contending that the option clause was unenforceable because of the Statute of Frauds, and this litigation ensued.

The trial court concluded that the option clause satisfied the requirements of the Statute of Frauds ¹ and denied the plaintiffs' monetary claims except for an entitlement to interest from the date of the abortive closing to the date of the judgment. The plaintiffs appeal from all of these conclusions. The court also denied the defendant's counterclaims alleging breach of lease by the plaintiffs' failure to cooperate in the defendant's effort to obtain a zoning variance and alleging monetary damages arising out of the plaintiffs' refusal to convey the property. The defendant's cross appeal challenges these latter two determinations.

I

The central issue on the plaintiffs' appeal is the enforceability of Article VIII of the Agreement of Lease as amended in 1960. Article VIII is entitled "Option to Purchase" and states, in relevant part: "The Tenant is hereby given an irrevocable option to purchase the demised premises at October 31, 1970, at October 31, 1975, or on October 31 of any year thereafter until the end of the term of the Amended Lease, provided that at the time of exercising such option, the Tenant shall not then be in default in the performance of any of the terms, provisions and covenants of the Amended Lease, on the following terms: If the option is exercised ... at October 31, 1975, $292,800 .... The option shall be exercised by written notice .... It is agreed that time is of the essence with respect to such closing date and if for any reason the Landlord shall be unable or shall fail to deliver the deed upon such closing date no further base rental shall be due or payable subsequent to such closing date. Upon the closing of the transaction, the Landlord shall deliver to the Tenant a warranty deed and the Tenant shall pay to the Landlord in cash or certified or bank check any balance of the purchase price over the amount then due upon any existing mortgage or mortgages. Not less than twenty (20) days prior to said closing date, the Landlord shall deliver to the Tenant a statement subscribed by the holder or holders of any existing mortgage or mortgages stating the unpaid amount of principal and interest, together with a copy of the mortgage or mortgages; provided, however, that the Tenant shall be required to accept a conveyance of said premises subject to an outstanding mortgage or mortgages only if such mortgage or mortgages contain a provision for prepayment without penalty or with a penalty or single charge of not more than two percent (2%) of the then outstanding principal balance. If a greater prepayment penalty or charge is provided for, the amount of such excess shall be deducted from the purchase price. In the event that the Landlord fails to deliver said statement and said copy of the mortgage or mortgages within such period, said premises shall be conveyed to the Tenant upon the closing date, free and clear of all liens and encumbrances. In the event that at the time of the closing of the purchase of said premises by Tenant in the exercise of its option as aforesaid, there are outstanding mortgages aggregating more than the purchase price payable by the Tenant, the Landlord shall take such steps as may be necessary for the partial discharge of such outstanding mortgage lien or liens so that upon the closing of the transaction, such outstanding liens shall not exceed the purchase price payable by the Tenant."

The trial court found that the defendant, CBS, was on October 31, 1975, the date on which it attempted to exercise its option, ready and able to comply with all of the requirements of the option clause. It was not in default and had given the appropriate notices. The plaintiffs had failed to provide the defendant with any statement about outstanding mortgage indebtedness, which the court nevertheless found to be in the amount of $222,432.17 as of October 31, 1975. On the basis of these findings the court concluded that the defendant had by its tender of $292,800 on October 31, 1975, duly performed all of the conditions to be performed on its part, and as of that date became the equitable owner of the property.

The plaintiffs do not deny that these findings of fact are amply supported by the evidence before the trial court but argue rather that the option clause violates the Statute of Frauds, General Statutes § 52-550. Although the option price of $292,800 is on its face unassailably specific, they maintain that other language in the option clause fatally undermines this specificity. In particular, the plaintiffs point to the language that "the Tenant shall pay ... any balance of the purchase price over the amount then due upon any existing mortgage or mortgages" and to the provisions about the effect of prepayment penalty clauses on the option price.

It is important to place this argument into context. The Statute of Frauds applies, of course, to contracts concerning real property and a fortiori to options to purchase real property. Pigeon v. Hatheway 156 Conn. 175, 181, 239 A.2d 523 (1968); Didriksen v. Havens, 136 Conn. 41, 46, 68 A.2d 163 (1949). The statute requires such contracts, in the absence of extenuating circumstances such as part performance or reliance, to be memorialized by an adequate written memorandum. Botticello v. Stefanovicz, 177 Conn. 22, 31, 411 A.2d 16 (1979); Montanaro v. Pandolfini, 148 Conn. 153, 157, 168 A.2d 550 (1961); Santoro v. Mack, 108 Conn. 683, 687-88, 145 A. 273 (1929). Because the primary purpose of the statute is to provide reliable evidence of the existence and the terms of the contract, the requirements of the statute can be met either by a single document or, as in this case, by a series of related writings which, taken together, describe the essential terms and conditions of the contract. Vachon v. Tomascak, 155 Conn. 52, 56-57, 230 A.2d 5 (1967); Burns v. Garey, 101 Conn. 323, 329, 125 A. 467 (1924); Shelinsky v. Foster, 87 Conn. 90, 97-98, 87 A. 35 (1913); Restatement (Second), Contracts § 208 (Tentative Draft 1973).

In 1975, when the defendant CBS invoked its rights under the option clause contained in the amended 1960 lease, any ambiguities about mortgage commitments or penalty clauses had long since been resolved by formal written agreements to which all of the parties (or their predecessors in interest) had, in one form or another, agreed and subscribed. On March 8, 1961, Old Colony, Soundcraft, and Prudential met and closed the permanent mortgage loan and subordination transactions. They executed a mortgage, a mortgage note from Old Colony to Prudential, and a subordination agreement among Prudential, Old Colony, and...