Selkirk Ventures, LLC v Ge Capital Pub. Fin., Inc.
Annotate this CaseDecided on October 25, 2004
Supreme Court, Albany County
SELKIRK VENTURES, LLC, Plaintiff,
against
GE CAPITAL PUBLIC FINANCE, INC. and GENERAL ELECTRIC CAPITAL, , Defendants.
7954-03
Christopher P. Langlois, Esq.
Attorney for Plaintiff
Girvin & Ferlazzo, P.C.
20 Corporate Woods Boulevard
Albany, NY 12211
Neil L. Levine, Esq.
Alan J. Goldberg, Esq.
John P. Calareso, Esq.
Attorneys for Defendants
Whiteman, Osterman & Hanna, LLP
One Commerce Plaza
Albany, NY 12211
Louis C. Benza, J.
Plaintiff moves this Court for an order pursuant to CPLR 3212(e) granting plaintiff partial summary judgment directing defendants remove certain equipment from plaintiff's premises and pay rent for storing the same equipment on plaintiff's premises. Defendants cross-move seeking summary judgment dismissing plaintiff's complaint. Thereafter, defendants moved for leave to serve an amended answer setting forth an additional affirmative defense.
In May 2002, plaintiff leased certain premises located in the Town of Bethlehem from the Town of Bethlehem Industrial Development Agency [hereinafter "subject premises"]. Plaintiff [*2]then subleased the subject premises to Daisytek Incorporated [hereinafter Daisytek] and, in the event of Daisytek's default, the sublease allowed plaintiff to enter the premises and remove all persons or property. Daisytek used the subject premises for its office supply business and placed certain specialized equipment and other property on the premises. Some of the equipment placed on the subject premises was leased by Daisytek from defendant GE Capital Public Finance, Inc. [hereinafter GE] pursuant to a Master Lease Agreement, also entered in May 2002. Upon expiration of the Master Lease Agreement, Daisytek was required to return the equipment to GE, or purchase the equipment under terms provided by the agreement. The equipment was valued at approximately $802,000.00. In order to obtain certain benefits from IDA, Daisytek conveyed its interest in the equipment to IDA, who, in turn, leased the equipment back to Daisytek. This lease agreement provided, however, that all rights pursuant to the agreement were subordinate to the Master Lease Agreement. In any event, as protection for GE, a Landlord Waiver was entered between plaintiff, GE and IDA in July 2002.
The Landlord Waiver provided that in the event of Daisytek's default on the Master Lease Agreement, GE was allowed, pursuant to the conditions contained in the waiver, to enter the premises and remove the equipment. The Landlord Waiver further provided that, in the event of Daisytek's default under the sublease with plaintiff, GE could occupy the subject premises to maintain the equipment that was subject to the Master Lease Agreement, for a period not to exceed 180 days, or beyond the lease term between plaintiff and Daisytek. In the event that GE exercised its right to use and occupancy of the subject premises, the Landlord Waiver required that GE pay plaintiff rent, if such period of occupation exceeded 31 days after plaintiff provided notice to GE of Daisytek's default. Thereafter, GE assigned all of its rights under the Master Lease Agreement and Landlord Waiver to defendant General Electric Capital Corporation [hereinafter defendants are collectively referred to as GE].
In May 2003, Daisytek defaulted on the sublease with plaintiff, the Master Agreement with GE and the lease agreement with IDA, and filed for protection in Bankruptcy Court. On May 30, 2003, plaintiff notified GE of Daisytek's default. Within two weeks, GE moved in Bankruptcy Court to vacate the automatic stay so as to allow GE to terminate the Master Leasing Agreement and obtain possession of the leased equipment that was subject to the Master Lease Agreement. In making this motion, GE argued that it was burdened by the Landlord Waiver requiring GE to pay rent to plaintiff for the leased premises in the event the equipment was not removed within 31 days of Daisytek's default. Ultimately, Bankruptcy Court granted GE's request.
In any event, pursuant to the order of the Bankruptcy Court, Daisytek made rent payments to plaintiff through August 2003. On August 20, 2003, plaintiff notified GE that Daisytek rejected the sublease on the subject premises and, as such, GE must either pay rent beginning September 1, 2003, if GE wished to continue storing the equipment on the subject premises. It is undisputed that GE neither paid rent nor removed the equipment. Plaintiff and GE did, however, work together to locate a tenant for the premises and marketed the premises as a turnkey operation. The parties negotiated terms for an agreement wherein GE would rent the subject premises to continue to store its equipment. When negotiations broke down, plaintiff commenced this action in December 2003, alleging breach of the Landlord Waiver and seeking removal of the equipment or an adjudication that it was abandoned, and rent for GE's use and [*3]occupancy of the subject premises (first - second causes of action) and unjust enrichment (third causes of action). After issue was joined, the parties brought these applications. It is noted that GE's submission in opposing plaintiff's motion for summary judgment and in support of its cross motion, state that it is not the owner of the equipment and does not intend to exercise any of its security rights to the equipment, now or in the future. Thus, GE abandoned the equipment as it "relinquished all title, possession, or claim to or of it" (Foulke v New York Consol. R. Co., 228 NY 269, 273 [1920]), and the Court grants that part of plaintiff's motion seeking a declaration that the equipment is deemed abandoned. Given GE's abandonment, plaintiff is not required to wait 30 days before it may dispose of the equipment, but may immediately take any actions that it deems appropriate.
Next, the Court addresses defendants' motion for leave to amend their answer to include the affirmative defense of failure to satisfy a condition precedent to the Landlord Waiver. In so doing, the Court repeats the often-stated rule that leave to amend pleadings is freely given "unless the proposed amendment is wholly devoid of merit or the delay prejudices the defendant" (Fleming v Barnwell Nursing Home and Health Facilities, Inc., 309 AD2d 1132, 1133 [2003]; CPLR 3025[b]). Here, GE states that it never sent plaintiff written notice required under the Landlord Waiver of its intention to occupy the leased premises and never did, in fact, occupy the premises. Plaintiff opposes this relief contending, inter alia, that the record demonstrates that the defense is without merit. At this juncture, the Court does not agree that the defense is wholly without merit and discerns no prejudice from this defense as the parties have extensively briefed this issue in the course of the pending motions. Accordingly, defendants are granted leave to amend their answer to include this affirmative defense.
Turning to the merits, in support of its motion, plaintiff contends that GE's obligation for rent for use and occupancy under the Landlord Waiver was not subject to any written notice by GE. Plaintiff contends that it sent written notice of Daisytek's default as required under the Landlord Waiver and, as such, GE is responsible for rent of the leased premises having failed to remove the equipment. Alternatively, plaintiff contends that GE provided plaintiff written notice of its intention to occupy the leased premises as required under the Landlord Waiver, and refers to the affidavit submitted by GE to the Bankruptcy Court seeking vacateur of the automatic stay. Further, plaintiff contends that, even if this writing is insufficient under the Landlord Waiver, GE should be estoped from arguing that it never provided notice due to Bankruptcy Court submissions. In sum, GE counters that the Landlord Waiver and Master Lease Agreement gave GE the right, not obligation, to enter the premise to secure the equipment, and it neither provided plaintiff a writing indicating an intent to do such nor occupied the premises.
The Landlord Waiver provides as follows:
[Plaintiff] agrees that upon breach or default by [Daisytek] under the lease and upon receipt by the [plaintiff] of written notice from [GE], [GE] may use and occupy the premises for a period not to exceed 180 days. * * * [I]f [GE] uses and occupies the premises pursuant hereto beyond 31 days after [GE] receives from [plaintiff] notice of a default under the lease, [GE] shall pay plaintiff an amount in advance equal to the monthly base rent. * * * until the date on which [GE] shall have tendered possession of the premises to [plaintiff] and shall have removed or abandoned all of the goods (Affidavit of Christopher P. Langlois [*4]dated April 5, 2004; exhibit "A", ¶ 8).
In the affidavit submitted by GE in support of its application to vacate the automatic stay and take possession of the equipment before Bankruptcy Court, an officer of GE averred as follows:
A provision of the [Landlord] Waiver provides that upon any breach or default by [Daisytek] under its lease obligations to [plaintiff], [GE] may enter the premises for the purpose of removing or selling the equipment. The [Landlord] Waiver provides a period of 180 days within which [GE] may use and occupy the premises for the purpose of removing or selling the equipment, provided, however, that if [GE] uses or occupies the premises for more that 31 days after [GE] receives notice from [plaintiff] of a default by [Daisytek] under its real property lease with [Daisytek], [GE] must begin paying rent to [plaintiff] under the terms of said lease, which requires monthly lease payments of approximately $100,000.00. [Plaintiff] gave notice to [GE] of [Daisytek's] default under the lease on May 30, 2003, thereby requiring [GE] to remove the equipment no later June 30, 2003, or begin paying rent [emphasis added] (Affidavit of David M. Buicko dated April 5, 2004, exhibit "H" ¶ 5).
GE acknowledges that as a creditor of Daisytek, plaintiff was served with GE's motion to Bankruptcy Court. The Court finds, therefore, that this writing constitutes written notice as required pursuant to the Landlord Waiver and GE has exercised its option to use and occupy the subject premises. The Court is cognizant of GE's argument that it prepared the motion on an expedited basis and sought only to preserve its rights to the equipment in the event that it chose to exercise its option to use and occupy the subject premises. However and regardless of whether Bankruptcy Court relied on GE's averments, the Court cannot sanction GE's action which, in effect, argues before Bankruptcy Court that pursuant to the Landlord Waiver it has an imminent obligation to pay rent, and then argues before this Court that it is not obligated because it did not notify plaintiff in writing of its intent to use and occupy the premises. To do otherwise, would allow GE to rely on the Landlord Waiver when seeking relief in Bankruptcy Court and then invoke the Landlord Waiver to seek protection from liability arising therefrom in this proceeding. Thus, GE would be using the Landlord Waiver as both a sword and a shield, which simply cannot be sanctioned (see, Matter of Liquidation of Union Indem. Ins. Co. of New York , 89 NY2d 94, 104 [1996]).
Next, the Court considers plaintiff's August 20, 2003 letter to GE . Pursuant to the direction of the Bankruptcy Court, Daisytek made several post-petition rental payments to plaintiff. These payments ended in August 2003, when Daisytek rejected the lease for the subject premises, as directed by the Bankruptcy Court. As a result, plaintiff notified GE that it was responsible for rent beginning September 2003, if it wished to continue to store the equipment at the subject premises. At this time, equitable principles required GE to act, as the purpose of the Landlord Waiver was not to allow GE an unspecified amount of time to assess its options but, rather, a reasonable time to act. Thus, even if the Court had not determined that GE's submissions to Bankruptcy Court were sufficient to constitute written notice under the Landlord Waiver to impose liability for use and occupancy (see, infra p 5-6), GE would not escape [*5]liability. Given GE's failure to either forward rent or state that it was abandoning the equipment, it is estopped from asserting the requirement of written notice to avoid liability for rent (see, e.g. Rose v Spa Realty Associates 42 NY2d 338, 344 [1977]).
Further, the Court is unpersuaded that the fact that the parties subsequently entered negotiations for a rental agreement alters this Court's analysis. Parties are, of course, always free to renegotiate the terms of their agreement, and the Court discerns no inference from these actions that alters its determination. As such, plaintiff's motion for summary judgment finding GE liable for rent on the subject premises for its use and occupancy pursuant to the Landlord Waiver is granted. Given that plaintiff seeks a hearing to determining the amount of rent due pursuant to the Landlord Waiver, the Court directs that a hearing be held November 15, 2004 at 10:30 am in chambers in Room 201 of the Albany County Courthouse located at 16 Eagle Street, Albany, New York.
Accordingly, defendants' motion for leave to amend pleadings is granted. Likewise, plaintiff's motion for summary judgment is also granted. All remaining relief is denied. This memorandum constitutes the Decision and Order of this Court. All papers including this Decision and Order are returned to plaintiff's attorney. The signing of this Decision and Order shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable
provisions of this rule with regard to filing, entry and Notice of Entry.
Albany, New York________________________________
October 25, 2004Hon. Louis C. Benza, JSC
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