C & E 608 Fifth Ave. Holding, Inc. v Swiss Ctr.,Inc.

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C & E 608 Fifth Avenue Holding, Inc. v Swiss Center, Inc. 2006 NY Slip Op 30390(U) July 7, 2006 Supreme Court, New York County Docket Number: Judge: Joan A. Madden Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. Q s .. U . .'.- FOR II THE FOLLOWING REASON(S1: MOTION/CASE I RESPECTFULLY REFERRED TO JUSTICE S [* 1 ] [* 2 ] C & E 608 FIFTH AVENUE HOLDING, INC. d/b/a C & E FLFT1-I AVENUE HOLDLNG, INC. d/b/a CHALANO &L CO., INDEX NO. 100245/06 PI aint.irf, R /,r -againstSWISS CENTER, INC. 1 % Defend ant . 78 ! ..,i /!.:.. 20 1;jtiPb,. . 06 T.',/.\,.'q-' Ly;:" ; ~ '> X .:L,4 _,,, * I ' . ? . 6 ".. ) ----_------_______I-____________________-~------------------- 4.- I'-. JOAN A . MADDEN, J.: In this action involving a dispute bctween a commcrcial tenant and landlord, plaintiff tenant is inoving by order to show cause lor a Ycllowstone injunction: 1) staying, tolling and extending the cxpiration o l the cure period in the Notice of Default datcd Deceinbcr 21, 2005; and 2) restraining and en-joining defendant landlord, its employees, agcnts, servants, rcprcscntatives and all other persons acting 011 its behalf lrom tcrminal.ing plaintiff's lcase bascd on the Noticc o f Default datcd Decenibcr 2 I , 2005, and commencing any action or procceding to obtain posscssion o l the prcmises and otherwise attcrnpting to gain possession ol thc premises. Defendant landlord opposes the motion and cross-moves for- an order pursuant to CPLR 321 l(a)( 1 ) and (7) dismissing the complaint bascd on documentary evidence and for Fdilurc to state a c:iuse o l action. Plaintill C SL E GO8 Fifth Avenue Holding, Inc. d b / n C & E Fifth Avenuc Holding, Inc. d/b/a Chalano & Co. (hereinalter "C & E") occupies strect level retail space and second floor- 1 [* 3 ] office spacc in the building located at 608 Fifth in Manhattan, pursuant to a lease dated Dcceniher 16, 1094, as amcnded, between dcfendant Swiss Center as landlord, and plaintiff s predecessor, as tcnant. Thc lcase teim expires in 2011. On May 3, 2005, C & E s Presidcnt Elliot Cohen wrote to Swiss Ccntcr requesting written approval for proposed new signs to be installed on the interior of the windows so as to be visiblc from the exterior of the premises. After receiving no rcsponse from Swiss Center, Cohcn sent a second lctter dated May 26,2005, stating that hc was still waiting for Swiss Centcr s approval. By letter datcd July 6, 2005, C 6r E s attorney informed Swiss Centcr that [als more that two months have passed since Chalano [C & E] first requestcd wrilten approval for certain signage, Swiss Ccnter, Inc. is in dcfault of Articlc 41 of the Lease. . , . As the lease is silent as to Chalano s rernedics for Swiss Ccnter s default or the leasc, unless Swiss Centcr, Inc. provides n rcasonable objcction to Chalano s proposed signage on or bcfore July 16, 2005, Chalano shall install such signage and reserve its right to scck damages for Swiss Center, Inc. s intentional defaull of the tcrms of the lease. By lctter dated July 22, 2005, C & E s attorney informed Swiss Center that it had not responded to C & E s three previous letters, and again rcquested a response, Tn November 2005, C & E installed the proposcd signs in the upper interior portion of the windows facing the sidewalk, so as to be visible from thc extcrior of the premises. On or about Deccmbcr 21, 2005, Swiss Ccnter served C & E with a Noticc of Default dated December 21, 2005, stating that C 6 E was defult under the leasc, [s]pccificially, in violation of Ai-ticles 35. : 41 and 45 of thc Lcasc and paragiaphs 5 and 9 of thc Rules and Regulations attached to the Lease, you havc placed signs in the upper windows at the front of the Premises without the 2 [* 4 ] Landlord s consent. The notice further provided that pursuant io Ai-ticlc 17 and 61 of the Leasc, you m-e hereby required to curc the aforementioned violations of the Lease on or befor-c January 17, 2006 . . . and that upon your failure to cure thc aforernentioncd violations, the Landlord will tenninatc your tenancy. On January 11, 2006, plaintiif securcd the instant Order to Show Cause seeking a Ycllowstone injunction tolling the expiration of the period to cure the allegcd lease violations. The purposc of a Yellowstonc injunction is to maintain the status quo so that a commercial tenant, when confronted by a threat of termination of its lease, may protcct its invcstment in the lcaschold by obtaining a stay tolling the cure pcriod so that upon an adverse determination on the merits, the tenant may cure the default and avoid a foifeiture. Graubard Mollen Hor-owitz Pomeranz &L Shapiro v. 600 Third Avenuc Assocs., 93 NY2d 508, 514 (1999). As such, it may tie grantcd on less than the normal showing requircd for preliminary irijunctive St. relief. LexinEton Avenue & 42 Corn, v. 380 Lexchamp Operating, Inc., 205 AD2d 42 1, 423 ( I Dept. 1994). In ordcr to obtain a Yellowstonc injunction, a tenant must demonstrate that: 1) it holds ;i commcrcial lease; 2) it receivcd from the landlord a notice to curc, a notice of defdult, or ;I thrcat that the lease would bc tcrminated; 3) it requested injunctivc rclicf prior to the expiration of the cure period and termination of the lease; and 4) it is prepared and maintains the ability to cure the alleged dcfault by any mcans short of vacating the premiscs. Graubard Mollcn Horowitz Poineranz & Shapiro v. 600 Third Avenue Assoc., supra. It is not disputed th:\t Swiss Ccnter sent C & E a prior Noticc of Default dated March 16, 2005, stating that in violation of Articles 35 and 45 of thc Lcasc and paragraphs 5 and 9 of [he Rules and Regulations, you have placed signs in the uppcr windows at the front of the Premises without the Landlord s consent, and requiring C & E to cure the violation by April 6, 2005. T is t also not disputcd that C & E removed the signs within the cure peiiod. 3 [* 5 ] C & E has made a sufficient showing to be entitled to Yellowstone relief. It undisputed that C & E holds a commcrcial lcase and received a notice from Swiss Center that the lease would be terminated if it did not cure certain defaults by rcmoving the unapproved signs. Moreover, by the instant ordcr to show cause, C & E has made a timely application for injunctive relief prior to the expiration of the curc period. C & E has further established its desire and ability to curc thc alleged lease violations. C & E s Prcsidcnt, Elliot Cohen submits an affidavit that C & E is able to and is willing to cure the default. Based on the foregoing, plaintiff is entitled to a Yellowstonc injunction. Tuining to Swiss Ccntcr s cross-motion, Swiss Ccntcr seeks dismissal of the complaint pursuant to CPLR 321 l(a)(l) and (7) based upon documcntary cvidence consisting of the lease, and for failure to state a cause of action. On a prc-answcl- motion to dismiss thc complaint pursuant to CPLR 321 l(a)(7) for failurc to state a causc of action, the court must libcrally construe the complaint, accept as true the facts as alleged in the complaint and any submissions in opposition to the motion, and accord plaintiff the benefit of cvcry possible favorablc inference. See 51 1 West 232 d Owncrs Corn. v. Jcnnifer Realty Co., 98 NY2d 144, 151-152 (2002); L o n v. Marlinez, 84 NY2d 83, 87-88 (1994); Gnrelik v. Mount Sinai Hospital Center, 19 AD3d 319 (1 Dcpt 2005), Iv app den 6 NY3d 707 (2006). The motion must bc denied if from thc four corners of thc complaint, factual allcgations are discerncd which taken togcther manifest any cause of action cognizable at law. 5 1 1 West 232 dOwncrs COT. v. Jennifcr Realty Co,, supra (quoting Polonetskv v. Better Horncs Depot,lnc., 97 NY2d 46, 54 [ZOOl]); see also Gorelik v. Mount Sinai Hospital Center, supra. 4 [* 6 ] Moreover, dismissal under CPLR 321 l(a)(l j is warranted only if defendant submits documentary evidencc conclusively establishing a defense to the asserted claims as a matter of law. Sce 51 1 Wesl 232 Owners Corn. v. Jennifcr Realty Co., supra; Gnrclik v. Mount Sinai Hospital Center, supra. Swiss Center contends that thc complaint must be dismissed based upon the clear and exprcss language in Ai-ticlc 41 of the lease, which givcs it unfeuei-ed discretion to approvc, disapprove or ignorc c I% requests to install signs on the interior windows of the premises. E s The Cou1-l docs riot agree. Under New York law, a covenant of good faith and fair dealing is implied in all contracts, including commercial leascs. 511 West 232ndOwners Corn v. Jennifer Realty Co., supra at 153; Dalton v Educational Testing Service, 87 NY2d 384, 389 (1995). This covenant embraces a plcdgc that neither party shall do anything which will have the effcct of dcstroying or injuring the right of the oiher party to rcccivc thc fruits of the contract. (quoting Dalton v. Educational Testinp Services, supra at 389). Thc cxercise of an apparently unfettered discretionary contract right breaches the implied obligation of good faith and fair dealing i f it frustrates the basic purpose of the agrccmcnt and deprives plaintiffs of their rights lo its benefits. Hirsch v. Food Resourccs, Inc., 24 AD3d 293,296 ( I Dept 2005); see l radewinds Financial Cori). v. Refco Securities, Inc., 5 AD3d 229, 231 (1 Depl2004); Richbell Information Services, Inc. v. Jupiter Partners, L.P.,309 AD2d 288, 302 (1 Dept 2003). In other words, where the contract calls for thc excrcisc of discretion, the duty of good faith and fair dcaling includcs a promise not to act arbitrarily or irralionally in exercising that discretion. Dalton V. 5 .. . .. . . ~ [* 7 ] Educational Testing Servicc, 87 NY2d 384, 389 (1995); see Kaszier v. Kaszicr, 298 AD2d 109, 110 (1 Dept 2002). The first paragraph of Article 4 o f the lease gives C & E the right lo place signs on the 1 on the inlerior of thc windows and doors of the premises to bc visible from the exterior of the premises. Spccifically, the first paragraph of Ar-ticle 41 provides that C & E shall not erect, place or maintain any sign, advcrtisemcnt or notice visible from the exterior of the demised prcmises except on the window glass and the entrance door or doors o f thc demiscd premises. Any such sign, advcrtisement or notice shall be of such sizc, color, content and style as LANDLORD shall prior to the ercction or placing thereof have approved i n writing. While this provision docs no1 explicitly prohibit Swiss Cenkr from acting unreasonably in withholding or delaying its approval,* Swiss Center ncverthelcss has an implied obligation to exercisc good faith and act reasonably in responding to C & E s requcsts and reaching a dctcrnnination as to whelher to approve Lhc size, color, content and style of the signs C & E was proposing to place on the intcrior windows of the premises. See Dalton v. Educational TcstinE Scrvice, supra; 1-10 Industry Assocs, LLC v. Trim Corporation of America, 297 AD2d In contrast, the second paragraph or Article 41 which governs C & E s right to place a sign on the cxtcrior o f the premiscs, includes specific language that Swiss Center s approval s shall not be unrcasonably withheld or delayed. The second paragraph provides in pertincnt part as follows: TENANT may at its own cost and cxpensc erect a dignified sign or symbol i n conformity with the architectural design of the exterior of the building to be placc on thc exterior of the demised premises. Before erecting any such sign or symbol TENANT shall secure LANDLORD S approval in writing of the design, material, size and location thereof, which qJyroval s l i d not hc unrcasonahly wilhhukl or dt.layc.d, and TENANT shall likewisc securc LANDLORD S approval in writing of the manner of its attachmcnt to the building so that it docs not damage the extcrior marble. [cmphasis added] 6 [* 8 ] 630, 63 I (2 d Dept 2002). Taking thc allegations in the complaint as truc, BS the court must on a motion to dismiss pursuant to CPLR 321 I, issues of fact exist as to whether Swiss Center s excrcise of discretion in failing to respond to C & E s repeated rcqucsts in writing for approval of the proposed signs, was arbitrary, irrational or not madc in good faith. See Tradewinds Financial Corp. v. Rcfco Securities, Inc., supra at 231 ; Kaszicr v . Kaszier, supra. Based upon thc foregoing, the lease by itself does not cnnclusivcly cstablish as a matter of law, a defensc to C & E s claim for a declaratory judgmcnt that it is not in default of the leasc for installing the signs without Swiss Center s prior written approval. Swiss Center, therefore, is not entitlcd to dismissal of the complaint. Accordingly, it is hercby ORDERED that plaintiff s motion for a Yellowstone injunction is granted, and the expiration of the period for plaintiff to cure any alleged defaults pursuant to defendant s Noticc of Dcfault dated December 21, 2005 is stayed and tollcd; and it is furthcr ORDERED that defendant, its employees, agents, servants, representatives and all other persons acting on defendant s bchalf arc restraincd and cnjoincd from terminating plaintiff s lease based on the Notice of Dcfault, and from commcncing any action or proceeding to obtain possession of thc prcmiscs and othcrwisc attcmpting to gain posscssion of thc premises based on the Noticc of Dcfault; and i t is further ORDERED that defendant s cross-motion to dismiss the complaint is denied; and it i s furthcr ORDERED that dcfcndant shall serve and file an answer within 15 days of thc datc of this dccision and order; and it is further 7 [* 9 ] ORDERED that the parties are directed to appcar for a preliminary conference on July 27, 2006, at 9:30 a.m., Part 11, Room 351, 60 Centre Strcct. The Court i s notifying [he parties by mailing copies of this decision and order. DATED: July 7, 2006 ENTER: m J.S.C. 8

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