That is the lesson of the recent case of Elliott Enterprises, LLC v. Goodale, _____ Conn.App. ________ (June 28, 2016). In Goodale, the landlord attempted to evict a bakery tenant over a dispute of common area charges. The landlord claimed that the tenant had not paid its fair share of upgraded sewer charges. But, the tenant claimed it had been overpaying on taxes that the landlord had incorrectly calculated. The court found that the bakery had overpaid, to the tune of about $15,000, but affirmed the eviction anyhow, as it appeared they had underpaid on the sewer charges and late fees to the tune of about $4,000. The trial court ordered the eviction, but held it had no authority to award money damages to the tenant (or presumably the landlord, although the tenant was the one which had overpaid.) The eviction was stayed pending appeal.
The bakery, not surprisingly, appealed. The Court of Appeal held that the over-payment on one line item had to be counted against an underpayment in another. In other words, the aggregate amount paid (or owing, as the case may be) had to be considered as a whole, and not merely on a line by line basis. Also, since the tenant had overpaid, it could also plead the doctrine of equitable nonforfeiture.
‘‘The doctrine of equitable nonforfeiture is a defense implicating the right of possession that may be raised in a summary process proceeding, and is based on the principle that [e]quity abhors . . . a forfeiture.’’ (Internal quotation marks omitted.) Connecticut Light & Power Co. v. Lighthouse Landings, Inc., 279 Conn. 90, 106 n.15, 900 A.2d 1242 (2006). ‘‘Equitable principles barring forfeitures may apply to summary process actions for nonpayment of rent if: (1) the tenant’s breach was not [wilful] or grossly negligent; (2) upon eviction the tenant will suffer a loss wholly disproportionate to the injury to the landlord; and (3) the landlord’s injury is reparable. . . . Moreover, [t]he doctrine against forfeitures applies to a failure to pay rent in full when that failure is accompanied by a good faith intent to comply with the lease or a good faith dispute over the meaning of a lease.’’ (Citation omitted; emphasis added; internal quotation marks omitted.) 19 Perry Street, LLC v. Unionville Water Co., supra, 294 Conn. 630.
Of course, in this case because the landlord had been overpaid, the tenant could not have been held to have willfully underpaid, and the doctrine of equitable nonforfeiture prevented the bakery’s eviction.
If you need help with a commercial or business real estate deal, please give us a call.