Golden Rock Mgmt. LLC v Realistic Holding Corp.

[*1] Golden Rock Mgmt. LLC v Realistic Holding Corp. 2006 NY Slip Op 50376(U) [11 Misc 3d 1063(A)] Decided on March 16, 2006 Nassau District Court Fairgrieve, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 16, 2006
Nassau District Court

Golden Rock Mgmt. LLC, Petitioner,

against

Realistic Holding Corp., XYZ CORPORATION, Respondent(s).



SP 5856/05



Horing, Welikson & Rosen, P.C., Williston Park, for petitioner.

Jay A. Marshall, Esq., Garden City, for respondent.

Scott Fairgrieve, J.

Petitioner, a commercial landlord, moves for summary judgment against the commercial tenant to recover the sum of $15,719.00.

The parties entered into a lease commencing October 1, 2004, and terminating September 30, 2009, for respondent to conduct a restaurant business at 244 Rockaway Avenue, Valley Stream, New York. Paragraph "36" of the Rider provides monthly rent of $2,080.00.

Petitioner's managing member Russell Lee submits an affidavit stating that $15,719.00 is due for rent and additional rent through February 28, 2006. According to Mr. Lee, petitioner's predecessor entered into the restaurant lease in July of 2004 with respondent. Petitioner became title owner on May 24, 2005. Respondent received possession of the premises in October of 2004, but has not opened for business because of three pending violations on the building. Respondent notified petitioner in or about September 2005, that violations existed on the building which prevented respondent from obtaining the necessary permits to perform renovations on the demised premises so that it could operate a restaurant.

Petitioner states that it took immediate action to remove the violations. Two violations were for signs (not connected with respondent). The third violation dealt with a "vent stack erected without a permit in the neighboring delicatessen." Petitioner indicates that an application has been [*2]submitted to the Village of Valley Stream "for the removal and relocating of the vent stack to remove the third and final violation. However, the violation for the vent stack will not be removed of record until the work is entirely completed."

Petitioner admits that respondent will not be able to obtain a permit from Valley Stream for restaurant renovations until the vent stack violation is removed: "By reason of all of the foregoing, the Village of Valley Stream will not issue a permit to the respondent herein for the renovation of the premises to a restaurant until all building violations are corrected."

Petitioner further avers that respondent has "advised petitioner that it will not make any payments of rent until it is able to obtain a permit for the renovation of the premises and thus, use the premises for the purposes intended."

Petitioner contends that respondent is obligated pursuant to paragraph "45" of the lease to pay all rent and additional rent in spite of respondent's inability to obtain the permit from Valley Stream. Petitioner also cites paragraphs "36" and "14" which make respondent liable for the rent no matter the circumstances.

These relevant paragraphs state: "45. Licenses And PermitsTenant agrees to secure and maintain, at its own expense, all licenses and permits from Federal, State and local authorities as may be necessary for the conduct of Tenant's business, and shall comply with all applicable laws, rules and regulations. Landlord does not represent that any license or permit which may be required will be granted or, if granted, will continue in effect or be renewed. Tenant's obligations under this lease shall in no way be affected by Tenant's inability to secure or maintain any license or permit.""36. RentAll rent shall be paid to Landlord without notice, demand, counterclaim, setoff, deduction or defense, and nothing shall suspend, defer, diminish, abate or reduce any rent, except as otherwise specifically provided in this lease.""FOURTEENTH No diminution or abatement of rent, or other compensation shall be claimed or allowed for inconvenience or discomfort arising from the making of repairs or improvements to the building or to its appliances, nor for any space taken to comply with any law, ordinance or order of a governmental authority. In respect to the various "services" if any, herein expressly or impliedly agreed to be furnished [*3]by the Landlord to the Tenant, it is agreed that there shall be no diminution or abatement of the rent, or any other compensation, for interruption or curtailment of such "service" when such interruption or curtailment shall be due to accident, alterations or repairs desirable or necessary to be made or to inability or difficulty in securing supplies or labor for the maintenance of such "service" or to some other cause, not gross negligence on the part of the Landlord. No such interruption or curtailment of any such "service" shall be deemed a constructive eviction. The Landlord shall not be required to furnish, and the Tenant shall not be entitled to receive, any of such "services" during any period wherein the Tenant shall be in default in respect to the payment of rent. Neither shall there be any abatement or diminution of rent because of making of repairs, improvements or decorations to the demised premises after the date above fixed for the commencement of the term, it being understood that rent shall, in any event, commence to run at such date so above fixed."

Jean Millien, President of Realistic Holding Corp., describes in her affidavit that the demised premises is located on the ground floor along with two other stores; offices are located on the second floor.

Respondent hired the contractor Christopher Geraci, to perform the renovations. A set of plans were submitted to Valley Stream. A letter dated September 12, 2005 was issued by Valley Stream denying review of the plans until the violations were corrected. The said letter states: "Before we can complete our review of your application to take-out deli at the above captioned property, it will be necessary to comply with and submit the following. Please note that approval of application is not necessarily limited to the items below:1.All Building violations must be corrected."

Respondent states that these violations "arose as the result of the failure of the petitioner, and not the respondent, to comply with certain Village ordinances.

Respondent's position with regards to this situation is summarized in paragraph "7" of Jean Millien's affidavit as follows: "7.This summary proceeding was commenced in December, 2005 to recover base rent due on October 1, 2005, November 1, 2005 and December 1, 2005 along with other items of additional rent which were billed subsequent to the date that I was notified that the Village would not entertain my application for a building permit because of the open building violations. I have withheld the rent which would be otherwise due and payable to the petitioner solely because of the petitioner's failure to satisfy the open building violations and maintain the building of which the demised premises forms a part in accordance with the Village laws and ordinances. [*4]I am not permitted to enter into the demised premises to perform any work whatsoever without a building permit. The absence of a building permit bars me from moving forward with my plans to use the demised premises for its intended purpose and has resulted in the respondent being constructively evicted from the demised premises."

DECISION

This Court agrees with respondent that it is not liable for the rent and additional rent demanded. This Court rejects petitioner's position that paragraphs "14", "36", and "45" render respondent liable. Respondent has been unable to obtain the necessary permit because of inability of petitioner to eliminate the violation on the building. In sum, petitioner asks this Court to render respondent liable for rent even though petitioner has failed to have a violation removed.

In every contract, there is an implied covenant of good faith and fair dealing. This doctrine is clearly set forth in Aventine Investment Management, Inc. v. Canadian Imperial Bank of Commerce, 265 AD2d 513, 697 NYS2d 128 (2nd Dep't 1999): Within every contract is an implied covenant of good faith and fair dealing (see, Rowe v. Great Atlantic & Pacific Tea Co., 46 NY2d 62, 412, NYS2d 827, 385 NE2d 566). This covenant is breached when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement (see, Jaffe v. Paramount Communications, 222 AD2d 17, 22-23, 644 NYS2d 43).

See also, Gray v. Kramer, 184 AD2d 409, 585 NYS2d 46 (1st Dep't 1992), wherein the court held: In every contract there is a covenant of good faith and fair dealing preventing a party from doing anything to destroy or injure the right of the other party to receive the fruits of the contract (Gallagher v. Lambert, 74 NY2d 562, 549 NYS2d 945, 549 NE2d 136, rearg. denied 75 NY2d 866, 552 NYS2d 931, 552 NE2d 179; Black v. MTV Networks, 172 AD2d 8, 576 NYS2d 846, appeal dismissed 79 NY2d 915, 581 NYS2d 667, 590 NE2d 252).

In this case, petitioner's actions have prevented respondent from obtaining the fruits of the lease by its failure to remove the violation and thus, violated the covenant of good faith and fair dealing.

A case with a parallel situation is Economy v. S.B. & L. Bldg. Corporation, 138 Misc. 296, 245 NYS 352 (App. Term, 1st Dep't 1930). In that case the parties entered into a lease for a premises to be used as a restaurant and cabaret. The tenant applied for a license to operate a cabaret. The license was denied because the owner of the building failed to comply with the applicable building [*5]code which required the building to be fire proof.

In refusing to enforce the lease, the Appellate Term ruled: The contract [therefore] was incapable of lawful performance when it was made, although it is not to be supposed that any illegality was contemplated by the parties to it. Municipal Metallic Bed Mfg. Corporation v. Dobbs, 253 NY 313, 318, 171 NE 75. It is a case where the parties, in good faith, made an agreement under which plaintiff has paid moneys and promised to make further payments over a long period, and where the consideration for both the payment and the promise has failed. Judgment affirmed, with $25 costs. All concur."

In reference to this aforementioned case, the Hon. Robert F. Dolan writes in Rasch's Landlord & Tenant, Section 2:17, the following: If the tenant chose to take a lease without conditions under such circumstances, and so to bind himself absolutely for the payment of rent, the court could not relieve him from the contract. In the present case the right to a license did not depend on the exercise of discretion. The ordinance absolutely forbade the use of the premises for the single purpose to which their use was expressly restricted. (The building was not fireproof.) "The licensing officer had no power to dispense with the statutory prohibition. Use of the premises for the purpose specified in the lease would have been unlawful, with or without a license, and their use for any other purpose was forbidden by the lease. The contract, therefore, was incapable of lawful performance when it was made, . . ." In other words, when the parties know that the right to use the premises for the purpose contemplated depends upon obtaining a license, which rests in the discretion of the authorities, and the tenant chooses to take a lease without conditions under such circumstances, and so, to bind himself absolutely for the payment of rent, the court cannot relieve him from his contract. But where the license does not depend upon anyone's discretion, and the use of the premises for the single purpose to which their use is expressly restricted is forbidden by law, as, for example, a building is not fireproof, so that the authorities have no power to dispense with the statutory prohibition, and the use of the premises will be unlawful with or without a license, the contract is incapable of lawful performance when made, and therefore is voidable at the tenant's election.

In Turim v. Fantasia, 147 Misc 2d 450, 556 NYS2d 195 (Dist. Ct., Nassau Cty. 1990), Judge Dolan ruled against the petitioner landlord who sued for rent, insurance for the premises, late fees and attorney fees. The court held there was a failure of consideration where use of the premises would be illegal unless the landlord obtained the necessary variance from the local municipality.

In the case at bar, there has been a failure of consideration because the petitioner has failed [*6]to remove the violation for which it is responsible and thus prevented tenant from operating a restaurant. Operation of a restaurant by the tenant would be illegal without the proper approval from Valley Stream.

CONCLUSION

The motion for summary judgment is denied and the petition is dismissed with prejudice.

So Ordered:

DISTRICT COURT JUDGE

Dated:March 16, 2006

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