DUPONT, J.
The plaintiff, Brennan Associates, the lessor of certain commercial premises, appeals from the judgment of the trial court rendered in favor of the defendants, OBGYN Specialty Group, P.C. (OBGYN), the original lessee of the plaintiff's property, and Physicians for Women's Health, LLC (Physicians), the assignee of OBGYN's lease, in the plaintiff's action arising out of the defendants' failure to pay rent and other charges allegedly due under the lease.
The defendants filed a cross appeal from the judgment rendered in favor of the plaintiff on the defendants' counterclaim, in which they alleged that the plaintiff breached its covenant of good faith and fair dealing by unreasonably withholding its consent to the assignment of the lease to the proposed tenant. We affirm the court's judgment that the defendants failed to prove that the plaintiff breached the covenant of good faith and fair dealing.
The following facts and procedural history are relevant to both the plaintiff's appeal and the defendants' cross appeal. The plaintiff commenced this action alleging that it sustained damages arising out of the defendants' failure to pay rent and other charges due pursuant to a commercial lease. See footnote 1 of this opinion. The defendants filed a special defense, claiming that their performance under the lease was discharged by the plaintiff's material breach of the lease because the
Many of the material facts described herein are not disputed by the parties or were found by the trial court.
In July, 2004, the defendants vacated the premises to move to another, larger premises. The defendants continued to pay rent to the plaintiff until February, 2006. Thereafter, no rental payments were made. On April 10, 2006, the plaintiff served the defendants with a notice to quit and the defendants surrendered possession of the premises to the plaintiff on April 17, 2006. After the defendants vacated the premises in July, 2004, agents acting on behalf of the defendants made efforts to find a replacement tenant for the remainder of the lease term. Paragraph 7 of the lease provides in relevant part that the lessee "will not assign this [l]ease, either in part or whole, nor sublet part of the whole of the premises without the written consent of the [l]essor," and that such "consent shall not be unreasonably withheld. . . ." The plaintiff claims that the defendants were required to provide a medical use tenant, also pursuant to paragraph 7 of the lease, which provides in relevant part that the lessee shall not "use the [premises] for any purpose other than the operation of a practice of medicine, obstetrics and gynecology. . . ."
Regarding the plaintiff's duty to mitigate its damages, the court found that the plaintiff made "acceptable and reasonable" efforts per industry standards to advertise the premises after April, 2006, when it regained possession of the premises but that its refusal to accept the tanning salon's proposal on or around December, 2005, "stopped the liability of the defendants" as of February, 2006. Specifically, the court stated: "The fact that the [tanning salon] proposal also included a request for [an] additional three years seemed reasonable given the unique circumstances of the premises, especially since the tenant was also willing to pay the higher rate requested by the plaintiff for the additional time. . . . [D]ue to the infighting of the [plaintiff] partnership, it took months before a response was given and even then, it came in the form of a counteroffer. If [the plaintiff] had accepted the proposal in reasonable time and fashion, they would have been in the same position as if the contract had been performed by [the defendants]." Accordingly, the court concluded, the defendants owed no money to the plaintiff after February, 2006. From this decision, the plaintiff appealed.
The court also concluded that the plaintiff had no sinister motive or design to mislead or deceive the defendants and, accordingly, held that the defendants failed to prove their counterclaim alleging a breach of the implied covenant of good faith and fair dealing. From this decision, the defendants filed a cross appeal.
The first questions we must resolve are (1) whether the plaintiff had an obligation to mitigate its damages and, if so, (2) when
"An appellate court's review of a trial court decision is circumscribed by the appropriate standard of review. As we have often stated: The scope of our appellate review depends upon the proper characterization of the rulings made by the trial court. To the extent that the trial court has made findings of fact, our review is limited to deciding whether such findings were clearly erroneous. When, however, the trial court draws conclusions of law, our review is plenary and we must decide whether its conclusions are legally and logically correct and find support in the facts that appear in the record. . . . It is well established that [i]n a case tried before a court, the trial judge is the sole arbiter of the credibility of the witnesses and the weight to be given specific testimony.. . . On appeal, we do not retry the facts or pass on the credibility of witnesses." (Citations omitted; internal quotation marks omitted.) Powers v. Olson, 252 Conn. 98, 104-105, 742 A.2d 799 (2000).
Connecticut law is clear that "[i]n an action for rent due, a lessor of commercial property is generally under no obligation to mitigate his damages after the lessee fails to pay rent. White v. Miller, 111 Conn. 53, 58, 149 A. 237 (1930). Such an obligation arises only if the lessor manifests an intent to terminate the tenancy either by taking an unequivocal act showing this intent or by bringing an action for damages based on the tenant's breach of contract. Sagamore Corp. v. Willcutt, 120 Conn. 315, 318, 180 A. 464 (1935)." Dewart Building Partnership v. Union Trust Co., 4 Conn.App. 683, 687, 496 A.2d 241 (1985). In other words, "[w]hen the lessee breaches a lease for commercial property, the lessor has two options: (1) to terminate the tenancy; or (2) to refuse to accept the surrender. . . . Where the landlord elects to continue the tenancy, he may sue to recover the rent due under the terms of the lease. Under this course of action, the landlord is under no duty to mitigate damages. . . . When the landlord elects to terminate the tenancy, however, the action is one for breach of contract . . . and, when the tenancy is terminated, the landlord is obliged to mitigate his damages." (Citations omitted; internal quotation marks omitted.) K & R Realty Associates v. Gagnon, 33 Conn.App. 815, 819, 639 A.2d 524 (1994).
"The duty to mitigate damages [does] not require the plaintiff [landlord] to sacrifice any substantial right of its own. . . or to exalt the interests of the tenant above its own. . . . It [is] required to make reasonable efforts to minimize damages. What constitutes a reasonable effort under the circumstances of a particular case is a question of fact for the trier. . . . [T]he general rule for the measure of damages in contract is that the award should place the injured party in the same position as he would have been in had the contract been performed. . . ." (Citations omitted.) Danpar Associates v. Somersville Mills Sales Room, Inc., 182 Conn. 444, 446, 438 A.2d 708 (1980).
In the present case, it is undisputed that the defendants paid rent until February, 2006, and thereafter ceased paying rent. The plaintiff served a notice to quit the premises in April, 2006.
The plaintiff, having elected to terminate the tenancy, was obligated to mitigate its damages after April, 2006. The court found that after April, 2006, the plaintiff made "acceptable and reasonable" efforts per industry standards to mitigate its damages by advertising the premises. Nonetheless, the trial court further concluded that the plaintiff's failure to accept the tanning salon as a tenant in December, 2005, "stopped the liability of the defendants" for rent as of February, 2006. The court also concluded that, had the plaintiff accepted the tanning salon proposal "in reasonable time and fashion, [it] would have been in the same position as if the contract had been performed by [the defendants]." The question thus becomes whether, despite having fulfilled its obligation to mitigate its damages through its advertising efforts, the plaintiff breached its obligation on another ground, namely, by its rejection of the tanning salon as a tenant. The plaintiff argues that the tanning salon proposal was for neither an assignment nor a sublease and that its failure to accept the tanning salon proposal did not constitute a breach of its obligation to mitigate its damages. We agree with the plaintiff.
Our Supreme Court has recognized that "despite a landlord's theoretical right to refuse consent to an assignment, its duty to mitigate damages operated as a practical constraint on its exercise of such a right. Danpar Associates v. Somersville Mills Sales Room, Inc., supra, [182 Conn. at] 446-47 [438 A.2d 708]." Warner v. Konover, 210 Conn. 150, 154, 553 A.2d 1138 (1989). In Danpar Associates v. Somersville Mills Sales Room, Inc., supra, at 447, 438 A.2d 708, the trial court concluded that it was unreasonable for the landlord to reject a potential assignment that would have placed it in "statu[s] quo ante." Specifically, the landlord was unwilling to extend the renewal option contained in the original tenant's lease to the prospective assignee, and the prospective assignee refused to rent the premises without the renewal option. Id., at 445, 438 A.2d 708. Our Supreme Court agreed with the trial court, reasoning that "in assessing the reasonableness of the landlord's efforts to mitigate damages the trier may consider whether the landlord was justified in refusing to rent the demised premises to a prospective tenant who was otherwise satisfactory and who would have put him in at least as good a position as if the original contract had been fully performed." Id., at 446, 438 A.2d 708. The holding in Danpar Associates has "the practical effect of limiting the landlord's right to refuse an assignment . . . ." (Emphasis added.) Id., at 447, 438 A.2d 708. The distinction between the present case and Danpar Associates lies in the fact that the tanning salon proposal at issue was not one for an assignment or sublease; rather, it was for a modification of the lease terms and an extension of its duration.
A lessee cannot convey to a potential subtenant or assignee more than it possesses. See Powers v. Olson, supra, 252 Conn. at 110, 742 A.2d 799 ("[i]t is
In the present case, the tanning salon proposed to occupy the premises for the balance of the defendants' lease term for the rental amount contained therein but requested a three year extension at a higher negotiated rental amount and an option to renew the lease for an additional five years. The proposed lease would have materially modified the original lease because it would have extended the term for the proposed tenant for, potentially, another eight years. Because it proposed terms that lengthened the term of the landlord's commitment to the proposed tenant, the tanning salon proposal cannot be characterized as either an assignment or a sublease. Rather, it was a proposal for a new lease, to which the plaintiff responded with a counteroffer that ultimately was rejected. Because the tanning salon proposal was not one for an assignment or sublease, the plaintiff was entitled to negotiate with the tanning salon, or any other prospective tenant, as part of its efforts to mitigate its damages. See Danpar Associates v. Somersville Mills Sales Room, Inc., supra, 182 Conn. at 447, 438 A.2d 708 (noting that landlord need not accept prospective tenant proffered by current tenant but rather could "relet the premises to a tenant of its own choice at a rent greater than that which the proffered tenant was willing to pay"). Thus, any counteroffer proposed by the plaintiff to the tanning salon was not a waiver of the use restriction because it would require a totally new lease rather than a sublease or an assignment. See footnote 5 of this opinion. Moreover, the court found that, although the plaintiff's delay in responding to the tanning salon proposal was a result of its own internal conflicts, the plaintiff did not act in bad faith in that it had no sinister motive or design to deceive or mislead the defendants by failing to accept the tanning salon proposal.
We conclude that the trial court improperly held that the defendants' liability under the lease was discharged as of February, 2006, because the plaintiff did not accept the tanning salon proposal in December, 2005. The court reasoned that the plaintiff could have accepted the proposal in December, 2005, and been made whole by a tenant willing to sublet the premises at an increased rental for the balance of the defendants' lease, which would have stopped the liability of the defendants. The flaw in the reasoning of the court is that the proposal was not one for an assignment or sublease but one for a new lease. It was not unreasonable for the plaintiff to assess the economic desirability of a longer term lease and conclude that, although the plaintiff might be mitigating the defendants' liability for rent if it agreed to that lease, the plaintiff might be forgoing an economic opportunity of its own due to a partial sale of the shopping
In their cross appeal, the defendants claim that the trial court improperly concluded that they failed to prove that the plaintiff breached its implied covenant of good faith and fair dealing. The defendants alleged in their counterclaim that, pursuant to the lease, the lessee had the right to sublet the premises, upon the consent of the lessor, which consent shall not be unreasonably withheld, and alleged further that the lessor failed to give reasonable consideration to proposed subleases.
"The relevant legal principles are well established. [I]t is axiomatic that the . . . duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship. . . . To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a [party] allegedly impedes the [other party's] right to receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith. . . .
"Bad faith has been defined in our jurisprudence in various ways. Bad faith in general implies both actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive. . . . Bad faith means more than mere negligence; it involves a dishonest purpose. . . . [B]ad faith may be overt or may consist of inaction, and it may include evasion of the spirit of the bargain. . . ." (Citation omitted; internal quotation marks omitted.) Keller v. Beckenstein, 117 Conn.App. 550, 563-64, 979 A.2d 1055, cert. denied, 294 Conn. 913, 983 A.2d 274 (2009).
Because the plaintiff was not presented with a proposal for an assignment or sublease, the requirement under the lease that the landlord could not unreasonably withhold its consent to a proposed sublease or assignment was not implicated. Moreover, our review of the record reveals that there was ample evidence to support the trial court's conclusion that the plaintiff had no sinister motive or design to mislead or deceive the defendants in refusing to accept the proposed tenant, and, thus, the defendants failed to prove that the plaintiff acted in bad faith. Accordingly, we affirm the judgment of the trial court with regard to the defendants' counterclaim.
The judgment in favor of the defendants on the plaintiff's complaint is reversed and the case is remanded with direction to render judgment for the plaintiff on the complaint and for further proceedings to determine the amount of damages due to the plaintiff by the defendants. The judgment on the defendants' counterclaim is affirmed.
In this opinion the other judges concurred.
The court held that the defendants' use of the premises was restricted to the practice of medicine but that the restriction did not apply to any potential sublessee or assignee that the defendants may propose. Therefore, "any tenant, regardless of the type of business, would have been able to sublet the premises under the language of the lease." The court also stated that "the evidence supports that any restriction by [the plaintiff] was imposed after the defendants vacated the premises only as a loyalty factor to the other tenants of the shopping center."
On appeal, the plaintiff claims that this holding was in error. The defendants claim that the fact that the plaintiff made a counteroffer to a tanning salon, which was not a medical use tenant, is evidence that, if the use restriction did apply to potential tenants, the plaintiff waived the restriction.