Papa Gino's of America, Inc. v. Broadmanor Associates, Ltd.

500 A.2d 1341, 5 Conn. App. 532, 1985 Conn. App. LEXIS 1192
CourtConnecticut Appellate Court
DecidedNovember 26, 1985
Docket3539
StatusPublished
Cited by3 cases

This text of 500 A.2d 1341 (Papa Gino's of America, Inc. v. Broadmanor Associates, Ltd.) is published on Counsel Stack Legal Research, covering Connecticut Appellate Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Papa Gino's of America, Inc. v. Broadmanor Associates, Ltd., 500 A.2d 1341, 5 Conn. App. 532, 1985 Conn. App. LEXIS 1192 (Colo. Ct. App. 1985).

Opinion

Daly, J.

The plaintiff lessee instituted this action for a declaratory judgment and for injunctive relief, seeking the determination of the meaning of the term “gross sales” contained in a lease held by the defendant lessor. The trial court, acting on motions for summary judgment filed by both parties, ruled that free and discounted meals offered to the plaintiffs employees are exempt from the calculation of gross sales; that aspect of the summary judgment is not involved in this appeal. The court also ruled that the face value of discount coupons made available to the public and redeemed at the plaintiff’s restaurant are not exempt from the gross sales calculation. The plaintiff appeals from this second aspect of the court’s ruling.

The facts are not in dispute. On July 1, 1978, the plaintiff, Papa Gino’s of America, Inc., entered into a written lease with the predecessor in title to the defendant, Broadmanor Associates, Ltd., for the rental of commercial premises at the Manchester Shopping Parkade where the plaintiff operates a restaurant business. The lease was for a term of ten years with three options of five years each to extend the lease. The lease provided for a fixed minimum rental payment at a specified monthly rate, and for additional rent equal to five percent of the plaintiff’s “annual Gross Sales in excess of $285,000

Under the lease, the plaintiff, as lessee, was to maintain a complete and accurate set of books and records of its gross sales showing daily receipts. If an audit disclosed a liability for rent, the plaintiff would be liable for the deficiency, together with the cost of the audit.1 [534]*534In the event that the defendant, as lessor, brought suit for a breach of the lease, the plaintiff could be liable for the expenses of litigation, including attorney’s fees.2

It has been the plaintiff’s policy and practice to provide meals free of charge or at a discount to its employees during their work shifts. The plaintiff has also made discount coupons available to the public. Upon presentation, the plaintiff deducted the face value of each coupon from the regular menu price of the goods and services purchased by the holder.

In 1981, the defendant purchased the parkade subject to the lease held by the plaintiff. In October, 1982, the defendant notified the plaintiff of its intention to proceed against the plaintiff for deficiencies in the percentage rental amount because the plaintiff had not included the value of free and discounted employees’ meals and the face value of the discount coupons in its report of gross sales. To protect its rights under the lease, the plaintiff paid, under protest, $963.21 to the defendant’s attorney to be held in escrow pending the resolution of the dispute. Of that amount, $150 is attributable to attorney’s fees, $550 for audit expenses, and the remainder represents the amount claimed for the rental deficiencies and interest.

The plaintiff initiated this action for a determination that it was not in default of the lease, for a return of the escrow funds and for an injunction restraining the defendant from proceeding against it. On motions for summary judgment filed by both parties, the trial court [535]*535held that the term “gross sales”3 in the lease included the face value of the discount coupons made available to the public upon redemption. The court declined to issue injunctive relief.

The plaintiff has raised the following issues on appeal: (1) whether the trial court erred in failing to declare that the term “gross sales” in the lease does not include the face value of the discount coupons made available to the public, because the plaintiff receives no monetary compensation for the amount discounted in sales to coupon holders; and (2) whether the trial court erred in denying the return of the escrow fund to the plaintiff. We find that the trial court was in error on both points.

“A lease is a contract. In its construction, three elementary principles must be kept constantly in mind: (1) the intention of the parties is controlling and must [536]*536be 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. Ingalls v. Roger Smith Hotels Corporation, 143 Conn. 1, 6, 118 A.2d 463 (1955).” Hatcho Corporation v. Della Pietra, 195 Conn. 18, 20, 485 A.2d 1285 (1985); Central New Haven Development Corporation v. La Crepe, Inc., 177 Conn. 212, 214-15, 413 A.2d 840 (1979). It has been established that a party is entitled to rely on its written contract as the final integration of its rights and duties. Zullo v. Smith, 179 Conn. 596, 601, 427 A.2d 409 (1980).

A lease which provides for a percentage rent added to a fixed rent is a common arrangement for the rental of commercial premises. McMichael & O’Keefe, Leases-Percentage, Short and Long Term (6th Ed.) pp. 5, 32. The percentage lease gears the landlord’s return to the productivity of his location, such productivity being measured by the tenant’s gross dollar volume in sales. Note, “The Percentage Lease—Its Functions and Drafting Problems,” 61 Harv. L. Rev. 317, 318 (1948). In addition to a percentage lease arrangement, the lease in question defined “gross sales” to mean “the entire gross income from the use or occupancy of the leased premises (including advertising and demonstrations) and of all business conducted thereat. These terms shall also include the full price of all sales made and services rendered at the leased premises .... There shall also be deducted, to the extent to which they shall be included in the sales price, the amount of sales or other taxes which may be imposed by law on the purchaser.” See footnote 3, supra.

The definition of the term “gross sales” has no definitive judicial meaning, is imprecise, and depends prin[537]*537cipally upon the wording established by the parties in a particular contract. Annot., 58 A.L.R.3d 384, 400. The term “sale,” as ordinarily defined and popularly understood, means the transfer of property for money paid or to be paid; this is the usage of the term in the lease with which we are here concerned. Freund Motor Co. v. Alma Realty & Investment Co., 235 Mo. App. 587, 142 S.W.2d 793 (1940). The term “receipts” indicates money received from a sale. Taft Realty Corporation v. Yorkhaven Enterprises, Inc., 146 Conn. 338, 343, 150 A.2d 597 (1959). Further, under the Connecticut sales tax laws, cash discounts are not included as taxable income and not considered as “gross receipts.” General Statutes § 12-407 (9).

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Cite This Page — Counsel Stack

Bluebook (online)
500 A.2d 1341, 5 Conn. App. 532, 1985 Conn. App. LEXIS 1192, Counsel Stack Legal Research, https://law.counselstack.com/opinion/papa-ginos-of-america-inc-v-broadmanor-associates-ltd-connappct-1985.