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HOWARD-ARNOLD, INC. v. T.N.T. REALTY, INC.

(SC 19227)

Rogers, C. J., and Palmer, Zarella, Eveleigh, McDonald, Espinosa and

Robinson, Js.

Argued December 3, 2014—officially released March 3, 2015

Rowena A. Moffett, for the appellant (plaintiff).

Michael C. Jankovsky, for the appellee (defendant).
Opinion

ESPINOSA, J. This appeal arises from a dispute

between the parties over an option to purchase certain

real property contained in a lease agreement. The plaintiff, Howard-Arnold, Inc., appealed to the Appellate

Court from the judgment of the trial court1 denying its

request to order specific performance of the option to

purchase provision in the lease.2 Howard-Arnold, Inc.

v. T.N.T. Realty, Inc., 145 Conn. App. 696, 77 A.3d 165

(2013). We subsequently granted the plaintiff’s petition

for certification to appeal, limited to the following question: ‘‘Did the Appellate Court properly conclude that

the plaintiff did not correctly exercise the option to

purchase real estate when, at the time of such exercise,

the defendant had not performed its obligations to the

plaintiff with respect to the environmental remediation

of the real estate?’’ Howard-Arnold, Inc. v. T.N.T.

Realty, Inc., 310 Conn. 940, 941, 79 A.3d 892 (2013). The

defendant contends that the Appellate Court properly

concluded that the plaintiff had failed to exercise the

option to purchase because it did not tender the purchase price as required by the lease. The plaintiff counters that it was not required to tender the purchase price

in order to exercise the option to purchase, and that it

was excused from tendering the purchase price. We

conclude that the plaintiff did not properly exercise the

option to purchase the property under the terms of the

lease and, therefore, we affirm the judgment of the

Appellate Court.

The record reveals the following factual background

and procedural history.3 The plaintiff, a restaurant supply company, leased certain commercial property in

West Haven (premises) from the defendant, T.N.T.

Realty, Inc., for a term of ten years, ending in April,

2010. Howard-Arnold, Inc. v. T.N.T. Realty, Inc., supra,

145 Conn. App. 699. The premises consists of approximately 18,402 square feet of building space and approximately 1.1 acres of land, and contains a wholesale

restaurant supply business, offices, a showroom, a

warehouse, and a retail store. The lease provided the

plaintiff and Thomas Capobianco (guarantor) with the

option to purchase the premises. Id. Article thirty-six

of the lease provides in relevant part: ‘‘During the term

of the [l]ease of the [p]remises, [the plaintiff] and/or

[g]uarantor shall each have the right to purchase the

[p]remises . . . upon the payment of [$223,500] plus

the then unpaid balance of the [m]ortgage which [the

defendant] may then have on the [p]remises, provided

that such balance shall not exceed [$350,000] . . . .

Notwithstanding the foregoing, effective on April 14,

2010, [the plaintiff] and/or [g]uarantor shall each be

permitted to purchase the [premises] upon the payment

of the sum of [$223,500] to [the defendant].’’

In a separate provision, the lease also required the

defendant to perform environmental remediation on
the premises. Article nine of the lease provides in relevant part: ‘‘On or before April 30, 2001, [the defendant]

shall perform environmental remediation, as necessary,

attributable to oil and gas leakage existing as of the

[c]ommencement [d]ate of this [l]ease, including the

removal of the existing underground oil storage tank,

and including restoration of the [p]remises disturbed

in connection with such environmental remediation as

required by law and to substantially the same condition

as existed prior to the commencement of such work.’’

Although the defendant performed some environmental

remediation on the premises prior to the lease deadline,

the trial court found that the defendant had not proved

that it met its obligation pursuant to article nine of

the lease.

In 2001, the plaintiff applied to a bank for financing

in orderto purchase the premises. Howard-Arnold,Inc.

v. T.N.T. Realty, Inc., supra, 145 Conn. App. 702. The

bank performed an environmental review of the premises and concluded that the plaintiff would have to

conduct further environmental investigation, including

testing of soil samples, before the bank would provide

financing. Id. Also in 2001, the parties began extensively

corresponding regarding the plaintiff’s potential purchase of the property. Id., 705. For several years they

exchanged proposals, including discussions of a modified purchase price but never reached an agreement on

the terms of the sale. Id. On June 7, 2007, the plaintiff’s

attorney sent a letter to the defendant’s attorney stating

that the plaintiff ‘‘ ‘[had] elected to exercise [the] option

to purchase the premises,’ ’’ requesting a written copy

of the outstanding mortgage balance, and explaining

that, before the parties could close on the transaction,

the defendant had to fulfill its obligation under article

nine of the lease, including its obligation to complete

the environmental remediation. Id. The parties’ correspondence continued throughout June and July, 2007,

with the defendant providing the plaintiff with the mortgage information, but advising the plaintiff that it had

complied with its obligations under the lease. Id. It is

undisputed that the plaintiff never secured financing to

purchase the premises, nor did it ever attempt to tender

payment of the purchase price. Id.

The trial court found that, in order to exercise the

option to purchase the premises, the plaintiff had to

pay the purchase price either directly to the defendant

or by placing the money into an escrow account. Id.,

706. Because the plaintiff had not tendered the payment

as the lease required, the court declined to order specific performance. Id. The court also found that the

plaintiff was not excused from tendering the purchase

price, despite the defendant’s refusal to perform additional environmental remediation. Id. Additionally, the

court found that the plaintiff’s letters to the defendant

providing notice of its exercise ofthe option to purchase

were proposals to alter the terms of the lease. Id.
On appeal, the Appellate Court concluded that the

language of the option to purchase was clear and unambiguous and, ‘‘[g]iven the plain language of the option

and the unchallenged factual finding that the plaintiff

did not tender payment, the court did not err in finding

that the plaintiff failed to exercise the option in accordance with its terms.’’4

Id., 708. This certified appeal

followed.

In considering the certified question, we note that

the standard of review for a lease, which is a contract,

is plenary. ‘‘Although ordinarily the question of contract

interpretation, being a question of the parties’ intent,

is a question of fact . . . [w]here there is definitive

contract language,the determination of whatthe parties

intended by their contractual commitments is a question of law.’’ (Internal quotation marks omitted.) Bayer

v. Showmotion, Inc., 292 Conn. 381, 409, 973 A.2d 1229

(2009). The standard for determining whether a party

has exercised an option to purchase is well settled.

‘‘[A]n option to purchase, like the one at issue in the

present case, operates as a continuing offer to sell,

irrevocable until the expiration of the time period fixed

by agreement of the parties, which creates in the option

holder the power to form a binding contract by

accepting the offer.’’ (Internal quotation marks omitted.) Pack 2000, Inc. v. Cushman, 311 Conn. 662, 675,

89 A.3d 869 (2014). ‘‘When a tenant exercises an option

to purchase the leased premises, a new bilateral contract is created.’’ Bayer v. Showmotion, Inc., supra,

414. ‘‘With respect to the actual exercise of the option,

[t]o be effective, an acceptance of an offer under an

option contract must be unequivocal, unconditional,

and in exact accord with the terms of the option. . . .

If an option contract provides for payment of all or a

portion of the purchase price in order to exercise the

option, the optionee . . . must not only accept the

offer but pay or tender the agreed amount within the

prescribed time.’’ (Emphasis added; internal quotation

marks omitted.) Pack 2000, Inc. v. Cushman, supra,

676. ‘‘In such cases, a mere acceptance of the offer,

even though unequivocal, is insufficient to exercise the

option.’’ Smith v. Hevro Realty Corp., 199 Conn. 330,

339, 507 A.2d 980 (1986). ‘‘A tender is an offer to pay

a debt or discharge a duty, and . . . the offer to pay

involves, as a general rule, the actual production of the

money and the placing of it in the power of the person

entitled to receive it.’’ (Internal quotation marks omitted.) 19 Perry Street, LLC v. Unionville Water Co., 294

Conn. 611, 626, 987 A.2d 1009 (2010).

The plaintiff contends that it was not required to

tender payment because article thirty-six of the lease

is silent as to when the payment is to be made. Specifically, the plaintiff argues that because the full purchase

price cannot be determined until additional information

concerning the unpaid balance of the mortgage on the
premises is provided by the defendant, a plain reading

of the contract leads to the conclusion that the plaintiff

was not required to tender payment in order to exercise

the option. We are not persuaded.

We begin our analysis with the language of the relevant lease provisions. The language of article thirty-six,

providing that the plaintiff ‘‘shall . . . have the right

to purchase the [p]remises . . . upon the payment of

[$223,500] plus the then unpaid balance of the [m]ortgage,’’ is clear and unambiguous. As the provision

states, the plaintiff can only exercise the option to purchase upon the payment of the purchase price. Because

it is undisputed that the plaintiff did not tender the

purchase price as required, we conclude that the plaintiff failed to exercise the option to purchase during the

ten years of the lease when the option was available.

The lease does specify when the payment was to be

tendered; it was to be tendered on any date during the

ten year lease term on which the plaintiff wished to

exercise the option to purchase. Because the plaintiff

did not properly exercise the option to purchase, no

bilateral contract for sale was formed.

Notwithstanding the express contract language in the

lease requiring the plaintiff to tender the purchase price

in order to exercise the option to purchase, the plaintiff

also argues that it was excused from doing so because

the defendant had not fulfilled its obligations under

article nine of the lease to complete the environmental

remediation. We disagree. The option to purchase in

article thirty-six of the lease agreement made no reference to the environmental remediation requirement in

article nine, and the plaintiff’s obligation to tender payment in order to exercise the option was not contingent

on the defendant performing the remediation. In fact,

the lease allowed the plaintiff to exercise the option

and take title to the premises before the environmental

remediation had to be completed. Specifically,the plaintiff had the ability to exercise the option on day one of

the lease—April 14, 2000. The environmental remediation was not required to be completed, however, until

April 30, 2001. If the plaintiff had chosen to exercise

the option in the first year of the lease—which the

plaintiff very well could have done under its terms—

the environmentalremediation may not have been completed and there could be no expectation by the plaintiff

that it would have been, given the terms of the contract.

Finally, as we already have stated in this opinion, the

well established rule is that an exercise of an option

to purchase must be unequivocal, unconditional, and

in exact accord with the terms of the option. See, e.g.,

Pack 2000, Inc. v. Cushman, supra, 311 Conn. 676.

The plaintiff also argues that the defendant’s purported failure to perform the required environmental

remediation frustrated the plaintiff’s ability to exercise

the option.5

‘‘The doctrine of frustration of purpose
. . . excuses a promisor in certain situations where the

objectives of the contract have been utterly defeated

by circumstances arising after the formation of the

agreement. . . . Excuse is allowed under this rule even

though there is no impediment to actual performance.’’

(Citations omitted.) Hess v. Dumouchel Paper Co., 154

Conn. 343, 350–51, 225 A.2d 797 (1966). ‘‘A party claiming that a supervening event or contingency has frustrated, and thus excused, a promised performance must

demonstrate that: (1) the event substantially frustrated

his principal purpose; (2) the nonoccurrence of the

supervening event was a basic assumption on which

the contract was made;(3)the frustration resulted without the fault of the party seeking to be excused; and

(4) the party has not assumed a greater obligation than

the law imposes.’’ O’Hara v. State, 218 Conn. 628, 638

n.7, 590 A.2d 948 (1991). Under the facts of the present

case, this doctrine does not apply because the purpose

of the lease was to lease the premises to the plaintiff and

the lack of environmental remediation did not interfere

with that purpose. In fact, the plaintiff leased the premises for the entire ten years that the contract had anticipated and continues to occupy the premises today.

Article thirty-six of the lease, which included the option

to purchase, merely operated as an offer by the defendant to sell the property to the plaintiff. See Pack 2000,

Inc. v. Cushman, supra, 311 Conn. 675.6

We conclude that the plaintiff did not exercise the

option to purchase the premises and, accordingly, the

Appellate Court properly concluded that the trial court

did not abuse its discretion in denying specific performance.

The judgment of the Appellate Court is affirmed.

In this opinion the other justices concurred.

1 The plaintiff’s amended complaint sought in its prayer for relief: (1)

specific performance for necessary roof repairs; (2) specific performance

for all required environmental remediation; (3) specific performance for the

sale of the property pursuant to the option to purchase; (4) monetary damages; (5) attorney’s fees and costs; and (6) other relief the court deemed

just and reasonable in equity. In its two posttrial briefs and its posttrial oral

arguments, however, the only relief the plaintiff requested was an order of

specific performance. The defendant counterclaimed, seeking: (1) rental

and use and occupancy payments from the plaintiff; (2) damages for the

plaintiff’s failure to make repairs as specified under article nine of the lease

agreement; and (3) attorney’s fees. The trial court found for the plaintiff on

its claim that the defendant breached the lease for its failure to properly

perform the environmental remediation, and found for the defendant on its

claim that the plaintiff owed the defendant rental and use and occupancy

payments. The court declined to order specific performance or to award

monetary damages or attorney’s fees.

2 The plaintiff had also claimed in the Appellate Court ‘‘that the [trial] court

erred in (1) declining to order specific performance of . . . the defendant’s

obligation under the lease to perform roof repairs; (2) declining to award

damages to the plaintiff in lieu of specific performance after finding that

the defendant was in breach of the lease agreement; and (3) awarding to

the defendant rental and use and occupancy payments.’’ Howard-Arnold,

Inc. v. T.N.T. Realty, Inc., 145 Conn. App. 696, 698, 77 A.3d 165 (2013). The

Appellate Court reversed the trial court’s denial of specific performance of

the roof repair obligations, concluding that the court abused its discretion

by ‘‘improperly relying on the unpleaded defense of impossibility to deny

the remedy of specific performance.’’ Id., 712–13. The Appellate Court
declined to review the merits of the claim for damages in lieu of specific

performance because the plaintiff abandoned its request for damages before

the trial court, which prevented the defendant and the trial court from

addressing the claim. Id., 713–15. Lastly, the Appellate Court affirmed the

award of the rental and use and occupancy payments. Id., 715. None of

these claims is at issue in this appeal.

3 For a more detailed summary of the factual background, see HowardArnold, Inc. v. T.N.T. Realty, Inc., supra, 145 Conn. App. 699–703, 705–706.

4

In the Appellate Court, the plaintiff also argued ‘‘that the court improperly

declined to order specific performance because it was ‘ready, willing and

able’ to purchase the property.’’ Howard-Arnold, Inc. v. T.N.T. Realty, Inc.,

supra, 145 Conn. App. 709. The Appellate Court rejected that argument,

stating that, ‘‘the plaintiff confuses the legal principles applicable to an

option to purchase with those applicable to a contract for sale. Although

[i]t is well settled that a buyer seeking specific performance has the burden

of proving that he or she is ready, willing and able to purchase the premises

. . . this standard applies to requests for specific performance of contracts

for the sale of land, not specific performance of options. Options, which

impose obligations only on the optionor, require optionees to exercise them

in strict compliance with their terms.’’ (Citation omitted; internal quotation

marks omitted.) Id., 709–10. Before this court, the issue of whether the

plaintiff is ready, willing, and able to purchase the premises only becomes

relevant if we conclude that the plaintiff correctly exercised the option to

purchase or was excused from tendering the purchase price. Because we

conclude that the plaintiff did not properly exercise the option and that the

plaintiff was required to tender the money, we need not address this claim.

5 We consider this claim because, although the plaintiff did not label this

argument as ‘‘frustration of purpose,’’ the substance of the argument was

presented to both the trial court and the Appellate Court.

6 The plaintiff also argues that ‘‘[t]he trial court . . . erred in its conclusion that [the plaintiff’s] various notices of the exercise of its option were

ineffective because they did not unequivocally offer to pay the purchase

price set forth in the [l]ease, but rather demanded [the defendant’s] compliance with its obligations under the [l]ease prior to closing and/or contained

payment terms taking into account [the defendant’s] failure to do so.’’ As

we concluded earlier in this opinion, the plaintiff never properly exercised

the option to purchase because it never tendered the purchase price. Any

demands or requests included in letters sent to the defendant do not alter

this fact. Additionally, the plaintiff briefs the issue of whether it is entitled

to offset rental, use, and occupancy payments it made to the defendant and

to adjust the purchase price because the defendant had not met its obligations under article nine. This argument is only relevant if we decide this

case in the plaintiff’s favor. Because we conclude that the plaintiff did not

properly exercise the option to purchase and, therefore, no bilateral contract

for sale ever was created, we need not address this argument.

It is unclear whether the plaintiff also argues that it was excused from

tendering payment because the defendantrepudiated the option to purchase.

To the extent that the plaintiff makes this argument, we agree with the

Appellate Court. ‘‘Notwithstanding the absence of a factual finding by the

trial court that the defendant repudiated the option contract, this argument

conflates breach of the lease agreement with repudiation of the option.

Nevertheless, we cannot conclude based on the record before us that the

defendant made a statement indicating that it would not perform under the

option, such that the plaintiff’s tendering of payment would be excused.’’

Howard-Arnold, Inc. v. T.N.T. Realty, Inc., supra, 145 Conn. App. 709 n.7.