JO-ANN STORES v. PROPERTY OPERATING CO.

• Court: Connecticut Court of Appeals
• Writing for the Court: FLYNN, J.
• Citation: JO-ANN STORES v. PROPERTY OPERATING CO., 91 Conn.App. 179, 880 A.2d 945 (Conn. App. 2005)
• Decision Date: 30 August 2005
• Docket Number: No. 25694.,25694.
• Parties: JO-ANN STORES, INC. v. PROPERTY OPERATING CO., LLC.

880 A.2d 945

91 Conn.App. 179

JO-ANN STORES, INC. v. PROPERTY OPERATING CO., LLC.

No. 25694.

Appellate Court of Connecticut.

Argued March 30, 2005.

Decided August 30, 2005.

Edwin L. Doemberger, Hamden, with whom was Pamela T. Harvey, for the appellant (defendant).

James M. Ruel, Hartford, with whom, on the brief, was John F.X. Peloso, Jr., Stamford, for the appellee (plaintiff).

LAVERY, C.J., and FLYNN and DUPONT, Js.

FLYNN, J.

The defendant, Property Operating Co., LLC, appeals from the judgment of the trial court finding it liable to the plaintiff, Jo-Ann Stores, Inc., on a theory of unjust enrichment and awarding the plaintiff $206,741.15 in damages, plus taxable costs. On appeal, the defendant claims that the court (1) made several erroneous findings, (2) improperly determined that the defendant had been unjustly enriched, (3) improperly ruled that the plaintiff did not waive its rights and (4) improperly awarded damages to the plaintiff and failed to award damages to the defendant on its counterclaim. We affirm the judgment of the trial court.

The following facts and procedural history, as reflected in the record, are relevant to this appeal.¹ On April 15, 1991, the parties entered into a lease (the lease) for commercial space in a shopping center located in Wallingford (plaza). The lease specifically named Clothing Super Store as the anchor tenant. An anchor tenant in a shopping center is a major retail tenant whose business attracts sufficient shoppers to create a spillover trade for other smaller satellite stores that occupy space in the center. The issues in this case arise out of § 15 of the lease, which concerns the anchor tenant in the plaza. That section permits a diminution in the tenant's rent if the anchor tenant ceases to do business and is not replaced by a comparable substitute tenant that uses the anchor tenant space for a first class retail purpose. Section 15 refers to the plaintiff as tenant and the defendant as landlord. It states: "(a) To induce Tenant to enter into this Lease and to fulfill its obligations hereunder, Landlord covenants and warrants that it has entered into a binding lease (cancellable only in the event of the tenant's default or condemnation) for the use and occupancy of Clothing Super Store (the `Anchor Tenant'). In the event that, at any time during the Initial Term and any extended term, the Anchor Tenant shall not be open for business with retail customers, Tenant shall be obligated to pay only Substitute Rent, as defined in Section 14 hereof, for so long as such vacancy or cessation continues. In the event said vacancy or cessation continues for a period of six (6) months and is not corrected by the replacement of said Anchor Tenant with a comparable substitute tenant which uses and occupies said Anchor Tenant's space for a first class retail purpose (e.g., not a flea market, night club, second hand store, or a furniture store) and is open for business with customers prior to the expiration of said six (6) month period, Tenant shall have the right and option (i) to continue its tenancy upon the terms and conditions of this Lease subject to the obligation to pay only Substitute Rent until the replacement of the Anchor Tenant with a comparable substitute tenant, or (ii) to terminate this Lease by giving thirty (30) days prior written notice to Landlord. Failure to exercise (ii) above shall not waive Tenant's continuing right to do so as long as said vacancy continues." Section 30 of the lease required any waiver of the lease covenants to be in writing signed by both parties.

The lease designated Clothing Super Store, a retailer of adult clothing, as the anchor tenant. Clothing Super Store had occupied 16,300 square feet of space in the plaza at the time the plaintiff signed its lease and when it commenced occupancy in the shopping center. However, this anchor tenancy subsequently changed when Clothing Super Store assigned its space to Clothing Liquidation Center, Inc., doing business as Kid's Clothing Outlet. The issues pertinent to § 15 of the lease arose when Clothing Liquidation Center, Inc. (Clothing Liquidation Center), in 1996, subleased to J.J., LLC, doing business as Curley's Children's World With a Twist (Curley's), a children's recreation center that also served fast food. In the 12,000 foot area, Curley's operated a children's recreation center that included an indoor playground, redemption games, two birthday party rooms and a dining area that measured fifty feet by twenty feet, where it served fast food items such as pizza and hot dogs. Books and stuffed animals were sold in an area in the front portion of the store measuring only fifty feet by twenty feet. Approximately one year later, in an amendment to the sublease dated July, 1997, Clothing Liquidation Center sub-leased the remaining 4300 square feet of the anchor tenant space to Curley's. Under this amendment, Kid's Clothing Outlet was permitted to continue operating in 1500 square feet of the 4300 square foot space until it was able to find alternative space in the shopping center. Also pursuant to the amendment, that remaining 1500 square feet was to be assumed completely by Curley's by December 1, 1997. Curley's operated Kid's Care Child Development Center (day care center), a day care center, in the 4300 square feet that it had subleased in 1997. The day care center, which did not sell items to the public, used not only its 4300 square foot space, but also the entire 12,000 square feet of Curley's space on weekdays from 7:00 a.m. until 5:30 p.m. The day care center ceased business at 5:30 p.m. on weekdays, and at that time Curley's would open for business. During the ten and one-half daily hours in which the day care center was open, it did not sell any items to the public in any portion of the total 16,300 square feet of the anchor tenant's space that it occupied.

Approximately eleven years after first signing its lease, the plaintiff filed a complaint in March, 2002, alleging that it erroneously had paid the defendant regular rent under the lease from "the departure of the Anchor Tenant" until August 1, 2001, at which time it began paying substitute rent. The plaintiff sought a declaratory judgment from the court declaring that it was required to pay only substitute rent under the lease. The plaintiff further claimed unjust enrichment. The plaintiff argues that, upon the departure of Clothing Super Store, the original anchor tenant, it was required to pay only a lesser substitute rent under the lease provision that authorized a lesser monetary payment if the anchor tenant was changed to one that was not a comparable substitute tenant using the premises leased for a first class retail purpose. Thus, the plaintiff claimed it had overpaid the defendant by paying regular rent. The plaintiff's prayer for relief claimed, inter alia, "1. A declaration that plaintiff is only required to pay Substitute Rent under the Lease. 2. An order requiring defendant to return to plaintiff all amounts paid to defendant over and above the amounts required under the lease. 3. Attorney's fees, costs and interest."

The court heard testimony and filed a written memorandum of decision on July 28, 2004. Specifically, the court found that "in September, 1996, when [Clothing Liquidation Center] doing business as Kid's Clothing Outlet (the first replacement tenant) reduced its retail space to 4300 square feet of the total 16,300 square feet originally occupied by Clothing Super Store, the combination of Curley's and Clothing Liquidation Center doing business as Kid's Clothing Outlet ceased to constitute a replacement anchor tenant as contemplated by § 15 of the lease agreement. Curley's, which occupied the majority of the `Anchor Tenant's space,' did not qualify as a `first class retail' establishment. From that point until the new tenant, One Stop Pet Shop Super Store, took occupancy, the plaintiff was responsible only for `Substitute Rent' under the lease agreement." The court awarded the plaintiff $206,741.15 plus taxable costs. This appeal followed. Additional facts will be set forth as necessary.

I

The defendant first claims that the court made several improper findings. We disagree.

"The trial court's findings are binding upon this court unless they are clearly erroneous in light of the evidence and the pleadings in the record as a whole." (Internal quotation marks omitted.) Putnam Park Associates v. Fahnestock & Co., 73 Conn.App. 1, 11, 807 A.2d 991 (2002).

A

The defendant first claims that the term "first class retail purpose" as used in the lease was ambiguous and that the trial court improperly determined that Curley's did not qualify as a "`first class retail' establishment."

At the outset, we note that the lease did not simply require that any replacement tenancy be a first class retail establishment but also required that it be a "comparable substitute tenant . . . ." The court found not only that the substitute tenancy did not constitute a "`first class retail' establishment" but also that it "ceased to constitute a replacement anchor tenant as contemplated by the lease."

Section 15 of the lease gave the plaintiff certain rights and options, specifically that, "[i]n the event that ... the Anchor Tenant shall not be open for business with retail customers, Tenant shall be obligated to pay only Substitute Rent ... for so long as such vacancy or cessation continues. In the event said vacancy or cessation ... is not corrected by the replacement of said Anchor Tenant with a comparable substitute tenant which uses and occupies said Anchor Tenant's space for a first class retail purpose (e.g., not a flea market, night club, second hand store, or a furniture store) ...." The court found that "[c]ommencing in September, 1996, when Clothing Liquidation Center doing business as Kid's Clothing Outlet (the first replacement tenant) reduced its retail space to 4300 square feet of a total 16,300...