Court Opinion

ID: 2780734
Source: CourtListenerOpinion
Date Created: 2015-02-20 14:02:31.066811+00
Date Added: 2024-06-11T11:28:17.357547
License: Public Domain

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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 plain-
tiff, 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 ques-
tion: ‘‘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 pur-
chase price as required by the lease. The plaintiff count-
ers 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 sup-
ply 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 approxi-
mately 18,402 square feet of building space and approxi-
mately 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 rele-
vant 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 order to 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 prem-
ises 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 pur-
chase of the property. Id., 705. For several years they
exchanged proposals, including discussions of a modi-
fied 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’ corre-
spondence continued throughout June and July, 2007,
with the defendant providing the plaintiff with the mort-
gage 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 spe-
cific performance. Id. The court also found that the
plaintiff was not excused from tendering the purchase
price, despite the defendant’s refusal to perform addi-
tional environmental remediation. Id. Additionally, the
court found that the plaintiff’s letters to the defendant
providing notice of its exercise of the 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 unam-
biguous 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 accor-
dance 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 what the parties
intended by their contractual commitments is a ques-
tion 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 omit-
ted.) 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 con-
tract 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 omit-
ted.) 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. Specifi-
cally, 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 rele-
vant 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]ort-
gage,’’ is clear and unambiguous. As the provision
states, the plaintiff can only exercise the option to pur-
chase 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 plain-
tiff 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 refer-
ence to the environmental remediation requirement in
article nine, and the plaintiff’s obligation to tender pay-
ment 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 plain-
tiff had the ability to exercise the option on day one of
the lease—April 14, 2000. The environmental remedia-
tion 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 environmental remediation may not have been com-
pleted 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 pur-
ported 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 claim-
ing that a supervening event or contingency has frus-
trated, 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 with-
out 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 prem-
ises for the entire ten years that the contract had antici-
pated 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 defen-
dant 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 per-
formance.
      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 dam-
ages; (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 Howard-
Arnold, 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 conclu-
sion 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] compli-
ance 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 obliga-
tions 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 defendant repudiated 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.