Pack 2000, Inc. v. Cushman
| Decision Date | 01 February 2011 |
| Docket Number | No. 30540.,30540. |
| Citation | 126 Conn.App. 339,11 A.3d 181 |
| Parties | PACK 2000, INC. v. Eugene C. CUSHMAN. |
| Court | Connecticut Court of Appeals |
Andrew J. O'Keefe, with whom, on the brief, was Joseph M. Busher, Jr., Hartford, for the appellant (defendant).
Andrew Brand, New London, for the appellee (plaintiff).
LAVINE, BEACH and LAVERY, Js.
The plaintiff, Pack 2000, Inc., brought these actions against the defendant, Eugene C. Cushman, seeking specific performance of two options to purchase realty that the plaintiff had leased from the defendant. After a trial to the court, the court rendered judgments in favor of the plaintiff. The defendant then filed this appeal, claiming that the court was required to apply a strict compliance standard in determiningwhether the plaintiff had satisfied the conditions precedent to its exercise of the options and improperly determined that the plaintiff had retained its right to exercise the options.1
We agree with the defendant and, accordingly, reverse the judgments of the trial court.
The following facts and procedural history are relevant to our resolution of the defendant's claim on appeal. In July, 2002, the plaintiff, the defendant and ARCO Corporation (ARCO),2 a corporation controlled by the defendant, entered into a business transaction in which two Midas muffler shops (shops) 3 were to be transferred from ARCO to the plaintiff. 4 As part of the transaction, the parties executed a number of agreements, including two lease agreements, under which the defendant leased the realty where the shops are located to the plaintiff; a management agreement, under which the plaintiff assumed responsibility for the management and operation of the shops from ARCO; a letter of intent; and two promissory notes.
Each lease agreement contains a clause in paragraph 2 that provides the plaintiff with an option to purchase the leased realty subject to certain terms and conditions. The language of the two clauses is essentiallyidentical. Each clause provides in relevant part:
The management agreement also refers to the plaintiff's options to purchase the defendant's realty and contains the following language in paragraph 10 as it relates to the options:
In addition to the two lease agreements and the management agreement, the letter of intent also contains language that refers to the options. It provides in relevant part:
Under the terms of the two lease agreements, the management agreement and the promissory notes, theplaintiff was required to make a number of periodic payments both to the defendant and to certain third parties in order to exercise the options. Specifically, the plaintiff wasrequired to pay rent to the defendant by the first day of each month during the term of the lease, to make payments on both promissory notes by the eighth day of each month until the notes were fully paid and to pay all accounts, including, but not limited to, utilities, telephone service, real estate taxes, and hazard and liability insurance as well as an equipment lease.5 At trial, the defendant testified that timely payment of the aforementioned accounts was vital and that he informed the plaintiff that untimely payments would jeopardize his franchise agreements with Midas and his mortgages on the two shops.6
Nevertheless, the record reveals that the plaintiff was often late in making the aforementioned payments. Specifically, the record reveals that the following payments were late: the rent payment due on May 1, 2004; three payments on the promissory notes due on February 8, 2003, and May 8 and June 8, 2006; one payment to Groton Utilities, which resulted in a shutoff notice that the defendant forwarded to the plaintiff on January 23, 2003; several payments to a telephone company, which resulted in several collection letters and telephone calls that the defendant received in late 2002 and early 2003 as well as a threat to terminate telephone service to the defendant's unrelated business in March, 2003; two real estate tax installments on the New London shop due January 1, 2005, and January 1, 2007; one real estate tax installment on the Groton shop due July 1, 2007;twelve hazard and liability insurance installments between November, 2002, and January, 2004, that resulted in cancellation notices issued on July 30, 2003, and November 29, 2004; twenty health insurance installments between October, 2002, and September, 2005; and several installments under the terms of an equipment lease that resulted in several collection calls to the defendant in 2002 and 2003.
On August 22, 2003, the plaintiff's vice president, M. Paulina Anderson, faxed a letter to the defendant in which she stated that she wanted "to finalize the purchase of the shops and exercise the option[s] to purchase the real estate by the end of 2003." On August 29, 2003, Anderson sent a second letter to the defendant in which she sought information about a possible appraisal and indicated that Banterra Bank (bank) could not commit to financing the purchase until it had ascertained the value of the defendant's realty.
On September 2, 2003, the defendant, on behalf of ARCO, sent a letter to Anderson in which he stated that the plaintiff was not in compliance with the terms and conditions of the management agreement. Specifically, the letter stated: There is no record of the plaintiff having specifically responded to this letter.
On May 16 and 19, 2006, the plaintiff again sought to exercise the options to purchase the defendant's realty. At that time, however, the payment on one of the promissory notes that was due on May 8, 2006, had not been paid.
On July 17, 2006, the plaintiff commenced these actions against the defendant claiming that it was entitled to specific performance of the options to purchase the defendant's realty. In its disclosure of defense, filed on August 4, 2006, the defendant argued that the plaintiff's claim was without merit because, among other things, the plaintiff had not complied with the terms of one of the promissory notes and the conditions of the lease at the time of its attempt to exercise the options, and, therefore, the options had been forfeited or terminated by the plaintiff's fault or noncompliance. As of the date of trial, the plaintiff had paid the defendant in excess of $600,000 in rent under the terms of the lease agreements, $700,000 under the terms of the promissory notes and was not in arrears on its financial obligations under the terms of any of the aforementioned agreements.
On August 11, 2008, the trial court rendered judgments in favor of the plaintiff. The court determined that the plaintiff had retained the right to exercise the options because it had substantially complied with theterms and conditions of the options. The court also determined that the plaintiff had effectively exercised the options on August 22, 2003, and was entitled to specific performance. The court, therefore, ordered the defendant to sell the realty at issue to the plaintiff under the terms of their agreements. On August 28, 2008, the defendant filed a motion to open the judgments and for reconsideration, which the court denied on November 5, 2008. This appeal followed.
On appeal, the defendant claims that the court applied an improper standard in finding that the plaintiff had complied with the conditions precedent to its exercise of the options and...
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