Peter-Michael, Inc. v. Sea Shell Associates

• Decision Date: 31 March 1998
• Docket Number: No. 15789,PETER-MICHAE,INC,15789
• Citation: 709 A.2d 558,244 Conn. 269
• Court: Connecticut Supreme Court
• Parties: v. SEA SHELL ASSOCIATES et al.

Page 558

709 A.2d 558

244 Conn. 269

PETER-MICHAEL, INC. v. SEA SHELL ASSOCIATES et al.

No. 15789.

Supreme Court of Connecticut.

Argued Jan. 13, 1998.

Decided March 31, 1998.

Max F. Brunswick, New Haven, for appellant (plaintiff).

Richard E. Minton, Stratford, for appellee (named defendant).

Eric R. Gaynor, Milford, for appellee (defendant Sand Dollar Development Group, LLC).

Before CALLAHAN, C.J., and BORDEN, BERDON, NORCOTT, KATZ, PALMER and McDONALD, JJ.

NORCOTT, Associate Justice..

The dispositive issue in this appeal is whether the plaintiff, Peter-Michael, Inc., has stated a legally sufficient cause of action against the defendants, Sea Shell Associates (Sea Shell) and Sand Dollar Development Group, LLC (Sand Dollar), for breach of contract arising out of the defendants' alleged failure to offer the plaintiff a right of first refusal upon the sale of certain premises leased by the plaintiff. The defendants successfully moved to strike the plaintiff's complaint on the ground that the plaintiff's contractual right of first refusal did not carry over to its current holdover month-to-month tenancy. We reverse the judgment of the trial court striking the plaintiff's complaint. ¹

"The purpose of a motion to strike is to contest ... the legal sufficiency of the allegations of any complaints ... to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 580, 693 A.2d 293 (1997). "In an appeal from a judgment granting a motion to strike, we operate in accordance with well established principles." (Internal quotation marks omitted.) Skuzinski v. Bouchard Fuels, Inc., 240 Conn. 694, 696, 694 A.2d 788 (1997). "[W]e must take as true the facts alleged in the plaintiff's complaint and must construe the complaint in the manner most favorable to sustaining its legal sufficiency. Sassone v. Lepore, 226 Conn. 773, 780, 629 A.2d 357 (1993); Michaud v. Wawruck, 209 Conn. 407, 408, 551 A.2d 738 (1988). Waters v. Autuori, 236 Conn. 820, 822, 676 A.2d 357 (1996)." (Internal quotation marks omitted.) Parsons v. United Technologies Corp., 243 Conn. 66, 68, 700 A.2d 655 (1997). "If facts provable in the complaint would support a cause of action, the motion to strike must be denied." (Internal quotation marks omitted.) Faulkner v. United Technologies Corp., supra, at 580, 693 A.2d 293.

We assume as true the following facts as alleged in the plaintiff's complaint. On March 31, 1981, the plaintiff entered into a written lease agreement with Hadknight Associates, the predecessor in title to Sea Shell, for certain real property located in Cheshire, consisting of a movie theater and six stores. The lease agreement defined the term of the lease as a period of five years, beginning April 1, 1981, and ending March 31, 1986. The lease provided that the plaintiff had the option to extend the term of the lease for an additional five year period. If the plaintiff remained in possession of the premises after that time, the lessor could elect to treat the tenancy as a month-to-month tenancy. Specifically, paragraph twenty, which governed the month-to-month tenancy, provides in relevant part that "[i]n the event that the Tenant shall remain in the demised premises after the expiration of the term of this lease without having executed a new written lease with the Landlord, such holding over shall not constitute a renewal or extension of this lease.... [T]he Landlord may elect, at its option, to construe such holding over as a tenancy from month to month, subject to all the terms and conditions of this lease, except as to duration thereof ...." (Emphasis added.) The lease also contained a provision that, upon receipt by the lessor of a bona fide offer from a third party, the plaintiff had a right of first refusal to purchase the property on the same terms and conditions. Specifically, paragraph A-6 of the lease addendum ² provides in relevant part that "[i]n the event that, at any time during the lease term, Landlord shall receive a bona fide offer from any person to purchase the [leased] premises ... Landlord shall give Tenant notice of the price and terms of such an offer and of the intention of the Landlord to accept the same. Tenant shall have the right for 15 days thereafter to purchase the leased premises in its own name ... for the purchase price and on the terms specified in Landlord's notice...." (Emphasis added.) During the first five year term, Hadknight Associates sold the premises to Sea Shell. The plaintiff exercised its option to extend the lease for an additional five year period from April 1, 1986, through March 31, 1991. Upon expiration of this second five year term in 1991, Sea Shell elected to treat the plaintiff as a month-to-month tenant in accordance with the terms of the lease. On March 29, 1996, Sea Shell sold the property to Sand Dollar. The plaintiff was neither notified of the terms of Sand Dollar's offer nor given an opportunity to purchase the property.

Thereafter, the plaintiff brought this complaint seeking specific performance of the contract and damages for breach of the contract. ³ The defendants moved to strike the plaintiff's complaint for failure to state a cause of action upon which relief could be granted asserting that, as a matter of law, the right of first refusal was limited to the additional five year lease term, which ended on March 31, 1991. Accordingly, the defendants maintained that the plaintiff did not have a right of first refusal when Sea Shell sold the property to Sand Dollar in 1996. The trial court agreed and granted the defendants' motions to strike the plaintiff's complaint. ⁴

The trial court focused exclusively on paragraph twenty of the lease and paragraph A-6 of the lease addendum in its analysis of whether the plaintiff's right of first refusal existed at the time that Sea Shell had sold the property to Sand Dollar in 1996. The court reasoned that paragraph A-6 "expressly conditioned" the plaintiff's right of first refusal "upon the landlord's receiving a bona fide offer to purchase 'at any time during the lease term.' " (Emphasis added.) The court then determined that the "lease term" was limited to the original five year period and the extension of the lease by the plaintiff for an additional five year term, and thus expired in 1991.

The trial court then examined paragraph twenty to determine the status of the month-to-month tenancy. In reconciling paragraphs A-6 and twenty, the court construed the word "term" used in paragraph A-6 as synonymous with the word "duration" used in paragraph twenty. On the basis of this construction, the court reasoned that because the "offer of purchase did not occur until the termination of the lease and its replacement by a holdover month-to-month tenancy that did not incorporate the duration of the original lease into its terms and conditions, the plaintiff did not have a right of first refusal with respect to any offer of purchase made after March 31, 1991." In addition, the trial court noted that "a number of other courts have suggested that a purchase option ⁵ or right of first refusal does not survive the expiration of the formal lease term and conversion into a holdover month-to-month tenancy." This appeal followed.

The plaintiff argues that the trial court improperly granted the defendants' motion to strike because a factual determination should have been made as to whether the parties intended the right of first refusal to extend to the month-to-month tenancy. The plaintiff claims that the month-to-month tenancy reasonably could be construed as an extension of the lease because it was subject to all the terms and conditions of the lease. The plaintiff asserts that the text of the terms and conditions that applied to the month-to-month tenancy supports a conclusion that the holdover period constituted an extension of the lease, or at the very least, constitutes evidence that the lease is ambiguous. Under the plaintiff's construction, the complaint states a cause of action because the March 31, 1996 sale of the property occurred within the "lease term" and, accordingly, was subject to the plaintiff's right of first refusal.

The defendants argue that the trial court properly granted the motion to strike because the "clear and unambiguous language" of the lease establishes that the "lease term" does not encompass the holdover tenancy and, accordingly, the plaintiff's right of first refusal expired in 1991. The defendants contend that, despite the continuation of the terms and conditions of the lease, the month-to-month tenancy cannot be construed as an extension falling within the "lease term," because paragraph twenty expressly states that "such holding over shall not constitute a renewal or extension of this lease...."

In construing a written lease, which constitutes a written contract, "three elementary principles must be kept constantly in mind: (1) The intention of the parties is controlling and must be gathered from the language of the lease in the light of the circumstances surrounding the parties at the execution of the instrument; (2) the language must be given its ordinary meaning unless a technical or special meaning is clearly intended; (3) the lease must be construed as a whole and in such a manner as to give effect to every provision, if reasonably possible. Perkins v. Eagle Lock Co., 118 Conn. 658, 663, 174 A. 77 [1934]. Ingalls v. Roger Smith Hotels Corporation, 143 Conn. 1, 6, 118 A.2d 463 (1955); Lonergan v. Connecticut Food Store, Inc., 168 Conn. 122, 128, 357 A.2d 910 (1975); Collins v. Sears, Roebuck & Co., 164 Conn. 369, 373-74, 321 A.2d 444 (1973); Perruccio v. Allen, 156 Conn. 282, 285, 240 A.2d 912 (1968)." (Internal quotation marks omitted.) Central New Haven Development Corp. v. La Crepe, Inc., 177 Conn. 212, 214-15, 413 A.2d 840 (1979).

We recognize that " '[t]he question whether an option to purchase...