Thirty-One Corp. v Flax

[*1] Thirty-One Corp. v Flax 2006 NY Slip Op 50619(U) [11 Misc 3d 1079(A)] Decided on February 21, 2006 Supreme Court, New York County Solomon, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through April 25, 2006; it will not be published in the printed Official Reports.

Decided on February 21, 2006
Supreme Court, New York County

Thirty-One Corp., Plaintiff,

against

LEONARD FLAX, FLAX ART SUPPLY CORP. a/k/a THE FLAX ART SUPPLY CORPORATION, Defendants.



601061/05

Jane S. Solomon, J.

Plaintiff Thirty-One Corp. ("Thirty-One") moves for summary judgment on the complaint, and dismissing defendants' counterclaim and affirmative defense in this action arising from a commercial tenancy. Defendants Leonard Flax ("Flax") and Flax Art Supply Corp. a/k/a The Flax Art Supply Corporation ("Flax Art Supply") oppose the motion, which is granted for the below reasons.

Thirty-One Corp. leased commercial property to Flax Art Supply pursuant to a lease. The term of the lease began on August 1, 1999, and expired on July 31, 2004. In connection with the lease, Flax agreed to personally guarantee Flax Art Supply's payment obligations under the lease. Paragraph 65 of the lease provides that

. . . if the demised premises are not surrendered and vacated as and at the time required by this lease (time being of the essence), Tenant shall be liable to Owner per diem for use and occupancy in respect of the demised premises equal to two times the fixed rent and additional rent payable under this lease for the last year of the term of this lease . . .

Article 25 of the lease provides in relevant part that the landlord did not waive any rights under the lease unless it did so in writing, and that acceptance by it of an amount less than that due in rent and additional rent shall not be deemed anything other than on account, and the landlord may accept partial payment without prejudice to its right to recover the balance. Article 54 provides that if the tenant is in arrears in the payment of rent or additional rent, it waives any right to designate items against which any payments made are to be credited. Article 21 provides that all agreements made before the lease was executed are merged into the lease, and any executory agreement made thereafter must be in writing and signed by the party against whom enforcement is sought to be effective.

Flax Art Supply remained in the premises past the lease expiration date. According to its chief financial officer, Thirty-One demanded payment for the months of August through October 2004 "in a sum just exceeding $13,000". The CFO gives no details regarding how this demand was communicated, and there is no documentary evidence to support it. Flax Art Supply tendered a rent check for the month of August 2004 in the amount of $13,187.44; in the amount of $13,,233.91 for September; and in the amount of $13,115.88 for October. [*2]In each case, Thirty-One accepted and cashed the checks. However, it refused Flax Art Supply's tender for the month of November. Flax Art Supply vacated the premises on January 10, 2005.

Thirty-One alleges four causes of action: first, it demands payment from Flax under the guaranty in the amount of $116,651.54; second, it demands the same amount of Flax Art Supply for rent and additional rent; third, it demands $114,431.08 on an account stated; and fourth, it demands reasonable attorneys' fees and expenses for this action against defendants jointly and severally. On this motion, Thirty-One seeks summary judgment on the first, second and fourth causes of action (i.e., on all claims except the account stated).

In its counterclaim, Flax Art Supply demands the return of two security deposits it paid, after crediting Thirty-One with unpaid rent. It also asserts an affirmative defense that "[t]he complaint fails to state a cognizable cause of action under CPLR 3017".

Flax Art Supply contends that it paid Thirty-One a security deposit for the premises in the amount of $18,116.67, plus a separate security deposit for another space in the same building in the amount of $12,416.66, for a total of $30,533.33. Flax Art Supply acknowledges that it owes rent for the months of December 2004 through January 2005, and it argues that the rent is $13,115.88 per month for a total of $39,347.64. It argues that since Thirty-One accepted its tender of rent after the lease expired, become a month-to-month to tenant under Real Property Law ("RPL") § 232-c, and not a holdover subject to the use and occupancy rate under Article 65. It further argues that Thirty-One is not entitled to recover legal fees, since it became a month-to-month tenant and therefore did not default or holdover under the lease.

RPL § 232-c provides that Where a tenant whose term is longer than one month holds over after the expiration of such term, such holding shall not give to the landlord the option to hold the tenant for a new term solely by virtue of the tenant's holding over. In the case of such a holding over by the tenant, . . . if the landlord shall accept rent for any period subsequent to the expiration of such term, then, unless an agreement either express or implied is made providing otherwise, the tenancy created by the acceptance of such rent shall be a tenancy from month to month . . .

Here, the parties agreed that in the event Flax Art Supply held over, no new leasehold would be established by reason of the holding over, but that the tenant would pay use and occupancy at an agreed rate. Accordingly, defendants' reliance on RPL § 232-c is unavailing. The lease also provides at Article [*3]25 that Thirty-One did not waive its right to full payment under the lease by accepting a lesser amount. Thirty-One has established that Sam Flax Art Supply defaulted in its payment obligations under the lease, and that it failed to vacate the premises when the lease terminated, so it is entitled to reasonable attorneys' fees and costs. Moreover, Flax personally guaranteed the obligations of Sam Flax Art Supply.

The claim by Sam Flax Art Supply's chief financial officer that Thirty-One demanded a payment of $13,000 for August 2004, rather than the amount provided for under the terms of Article 65, is not sufficient to raise a triable issue of fact. The alleged demand would constitute a modification of the lease, which must be in writing to be enforced (see, Article 21, General Obligations Law § 15-301, and Aris Indus. v Trizecahn-Swig LLC, 294 AD2d 107 (1st Dept 2002).

With respect to Sam Flax Art Supply's counterclaim, there is an issue of fact regarding the amount Thirty-One is holding as a security deposit for the subject premises, and whether any of the security deposit held in connection with the other premises in the same building is subject to a set-off in connection with that leasehold. Finally, the motion to dismiss the affirmative defense is granted without opposition. Accordingly, it hereby is

ORDERED that plaintiff's motion for summary judgment on the first, second and fourth causes of action, and the affirmative defense, is granted; and it further is

ORDERED that the motion to dismiss the defendant Sam Flax Art Supply's counterclaim is denied; and it further is

ORDERED that plaintiff's third cause of action is dismissed sua sponte as duplicative; and it further is

ORDERED that plaintiff shall file and serve a note of issue forthwith; and it further is

ORDERED that the issue of (1) the amount of money owed to plaintiff under the lease for rent, additional rent, use and occupancy, reasonable attorneys' fees and costs; (2) the amount of defendant's security deposit held by plaintiff for the subject premises; and (3) the amount of defendant's security deposit held by plaintiff for the other premises referenced in the counterclaim that is owed to defendant, is referred to a Special Referee to hear and report with recommendations; and it is further

ORDERED that this motion is held in abeyance pending receipt of the report and recommendations of the Special Referee and a motion pursuant to CPLR 4403; and it further is

ORDERED that a copy of this order with notice of entry shall be served by hand on the Clerk of the Judicial Support Office (Room 311) to arrange a date for the reference to a Special Referee.

Dated: February 21, 2006

ENTER: [*4]

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J.S.C.