I & T Petroleum Inc. v Lascalia

[*1] I & T Petroleum Inc. v Lascalia 2009 NY Slip Op 50173(U) [22 Misc 3d 1118(A)] Decided on January 26, 2009 Supreme Court, Nassau County Austin, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 January 26, 2009
Supreme Court, Nassau County

I & T Petroleum Inc. and Indrajeet Thakurdeen, Plaintiffs,

against

James Lascalia, Joanne Lascalia, and Delta Property Leasing Corp., Defendants.



10337/07



COUNSEL FOR PLAINTIFF

Nicholas J. Damadeo, PC

27 West Neck Road

Huntington, New York 11743

COUNSEL FOR DEFENDANT

(for Lascalia)

Alan M. Davis, Esq.

121-B West Oak Street

Amityville, New York 11701

(for Delta)

NO APPEARANCE

Leonard B. Austin, J.

Defendants, James LaScalia, Jr. and Joanne LaScalia ("LaScalias"), move to dismiss the complaint of Plaintiffs, I & T Petroleum Inc. ("I & T") and Indrajeet Thakurdeen ("Thakurdeen"), as asserted against them pursuant to CPLR 3211(a)(3) and (7).

BACKGROUND

Plaintiffs commenced this action against the LaScalias and Defendant Delta Property Leasing Corp. ("Delta") alleging three causes of action seeking the following relief: (1) money damages due to breach of the terms of the sublease with Delta by the LaScalias; (2) a permanent injunction against the LaScalias directing them to replace the underground gasoline storage tanks on the property with tanks equal in size and number and able to store gasoline blended with ethanol; and (3) a permanent injunction against Delta enjoining it from taking any action to collect rent from Plaintiffs.

According to the complaint, the LaScalias own property, located at 5220 Merrick Road, Massapequa, New York 11758 ("Premises"), a portion of which contains a gas station.

On July 30, 2000, the LaScalias entered into a lease ("Lease") for the Premises with Continental Petroleum Corp. ("Continental").[FN1] Paragraph 20 of the Lease affords Continental the right to sublease and/or assign the Lease upon the prior approval of the LaScalias which would not be unreasonably withheld. In the event of a sublet or an assignment of the Lease, Continental would remain liable under the Lease.

On July 30, 2003, Continental and Delta entered into an Assignment and Assumption of Lease for the Premises ("2003 Agreement"). The LaScalias acknowledged the 2003 Assignment from Continental to Delta and gave their written consent. Continental and Delta are owned by the same individual, Adil Bayat, who signed the 2003 Assignment on behalf of both Continental and Delta.

Delta thereafter sublet the Premises to Venket Enterprises, LLC ("Venket"), pursuant to a "Sub-lease", dated November 13, 2003 ("2003 Sub-lease").

By an Assignment and Assumption of Lease, dated May 15, 2006, Venket, assigned the 2003 Sub-lease to Seshardi Venkatachari ("Venkatachari") ("May 2006 Assignment"). For the 2006 Assignment, there is no written consent from the LaScalias, but there is written consent from Delta. It references the November 13, 2003 "written lease agreement" between Venket "as sublessee" and Delta "as sublessor". The May [*2]2006 Assignment makes no reference to the Lease with the LaScalias and incorrectly identifies Venket as "the lessor and owner of the premises".

With respect to the subleases and assignments, Plaintiffs allege that the LaScalias retained ownership of the underground gasoline storage tanks at the Premises and that the replacement of the tanks is subject to the provisions of the initial Lease.

Plaintiffs allege that I & T purchased the gasoline station business located at the Premises from Venkatachari on September 5, 2006, and that Venkatachari assigned the Sub-lease to Thakurdeen, by an Assignment and Assumption of Lease, dated September 14, 2006 ("September 2006 Agreement"). There is no written consent from the LaScalias but there is written consent from Delta. The September 2006 Assignment references the November 13, 2003 "written lease agreement" but misidentifies "the assignor" as being the sublessee under the agreement when, in fact, "the assignor," Venkatachari, acquired his rights under the May 2006 Assignment between himself and Venket. The September 2006 Assignment makes no reference to the prime Lease with the LaScalias.

In moving to dismiss the complaint, the LaScalias argue that they did not approve or consent to the 2003 Sub-lease to Venket, or the subsequent assignments of the 2003 Sub-lease to Venkatachari or to Thakurdeen.

The LaScalias argue that their required approval of any purported sublease or assignment of the Sub-lease would have to have been in writing pursuant to General Obligations Law §5-703(2), since the Lease between the LaScalias and Continental, which was assigned to Delta, is not scheduled to terminate until June 30, 2010. The LaScalias allege that the purported sublease, dated November 13, 2003, and subsequent assignments of the sublease, dated May 15, 2006, and September 14, 2006, respectively, are for a period of more than one year, and as such, the required approval by the LaScalias, would have to be in writing; otherwise, they would be void. Therefore, the LaScalias contend that I & T and Thakurdeen are not in privity of contract with them and therefore do not have the legal capacity to sue them. In addition, the LaScalias argue that the complaint fails to state a cause of action against them.

In opposition to the motion, Plaintiffs argue that the LaScalias at all times had knowledge of the existence of other tenants and never took any action against Delta or the other tenants to enforce the provision of the Lease requiring prior written consent from them prior to any assignments or subleases. The Lease establishes that only a portion of the Premises was actually leased out by the LaScalias: the portion used for gasoline sales, three-fourths of the office space in the building and shared restroom facilities. With respect to the remainder of the space at the Premises, Plaintiffs maintain that the LaScalias operated their own business.

Moreover, I & T and Thakurdeen contend that the LaScalias were aware of a new tenant's presence given the requirement in the "Sub-Lease" between Delta and Venket, that required the LaScalias to be named as additional insureds on Venket's environmental insurance policy. Furthermore, Thakurdeen, along with Mr. LaScalia and Vankatachari, was present at a hearing before the DEC with respect to the gas tanks. Therefore, Plaintiffs contend that the LaScalias waived the requirement for written [*3]consent and that Plaintiffs are assignees of the Prime Lease, not subtenants, and as such are in privity with the LaScalias.

Plaintiffs contend that with respect to the replacement cost of the underground storage tank, it is clear that the LaScalias intended future sublessees and/or assignees operating the gasoline business on the Premises to be third-party beneficiaries of the Lease's procedure for tank replacement. The Lease provides in ¶ 8 that the LaScalias are responsible "for all repairs and maintenance at the demised premises, including maintenance of the gas tanks." That paragraph also provides:

In the event the gasoline storage tanks must be replaced at any time in the future and the Landlord cannot afford to pay the full cost of the same, the Tenant shall have the option to share in the cost of said replacement. If the cost of replacement is beyond what the parties can afford either party may cancel this Lease.

The Sub-Lease of which the LaScalias had knowledge makes express reference to this provision in ¶ 8:

Neither the Sublessor or the Sublessee shall be responsible for the replacement of the gasoline storage tanks if such replacement is the result of a lawful mandate of the State of New York or the County of Nassau . . . . The replacement will be subject to the provisions of the prime lease.

The complaint alleges that the tank must be replaced by law because they are not ethanol compliant. The LaScalias were directed by the Department of Environmental Conservation to remove the tank. They never did.

Thus, even if written consent of the assignment was required, Plaintiffs maintain that they are third-party beneficiaries of the Prime Lease provision relating to tank replacement.

DISCUSSION

A.Motion to Dismiss - Legal Standard

1.CPLR 3211(a)(3)

CPLR 3211(a)(3) permits the court to dismiss an action when the party bringing the action lacks the legal capacity to bring the action. The concept of capacity is a separate legal doctrine from the concept of standing. Community Bd. 7 of Borough of Manhattan v. Schaffer, 84 NY2d 148, 154 (1994). "Capacity... concerns a litigant's power to appear and bring its grievance before the court." Id. at 155. It is a "threshold question involving the authority of a litigant to present a grievance for judicial review". Town of Riverhead v. New York State Bd. of Real Property Services, 5 NY3d 36, 41 (2005). Artificial entities, such as business corporations, unincorporated associations and governmental entities, obtain the capacity to sue through statute or relevant enabling legislation. Community Bd. 7 of Borough of Manhattan v. Schaffer, supra at 155. 2.CPLR 3211(a)(7)

CPLR 3211(a)(7) permits the court to dismiss a complaint that fails to state a cause of action. [*4]

When deciding such a motion, the court must determine whether the plaintiff has a legally cognizable cause of action and not whether the action has been properly plead. Guggenheimer v. Ginzburg, 43 NY2d 268 (1977); and Rovello v. Orofino Realty Co., 40 NY2d 633 (1976); and Well v. Yeshiva Rambam, 300 AD2d 580 (2nd Dept. 2002); and Frank v. Daimler Chrysler Corp., 292 AD2d 118 (1st Dept. 2002). The complaint must be liberally construed, and plaintiff must be given the benefit of every favorable inference. Leon v. Martinez, supra; Sitar v. Sitar, 50 AD3d 667 (2nd Dept. 2008); Mitchell v. TAM Equities, Inc., 27 AD3d 703 (2nd Dept. 2006); and Paterno v. CYC, LLC, 8 AD3d 544 (2nd Dept. 2002). The court must also accept as true all of the facts alleged in the complaint and any factual submissions made in opposition to the motion. 511 West 232rd Street Owners Corp. v. Jennifer Realty Co., 98 NY2d 144 (2002); Sokoloff v. Harriman Estates Development Corp., 96 NY2d 409 (2001); and Alsol Enterprises, Ltd. v Premier Lincoln-Mercury, Inc., 11 AD3d 493 (2nd Dept. 2004).

If, from the facts alleged in the complaint and the inferences which can be drawn from those facts, the court determines that the pleader has a cognizable cause of action, the motion must be denied. Sokoloff v. Harriman Estates Development Corp., supra; and Stucklen v. Kabro Assocs., 18 AD3d 461 (2nd Dept. 2005).

While factual allegations contained in the complaint are deemed true, legal conclusions and facts contradicted on the record are not entitled to a presumption of truth. In re Loukoumi, Inc., 285 AD2d 595 (2nd Dept. 2001); and Doria v. Masucci, 230 AD2d 764 (2nd Dept. 1996).

B.General Obligations Law

Section 5-703(2) of the General Obligations Law provides that: "(a) contract for the leasing for a longer period than one year, or for the sale, of any real property, or an interest therein, is void unless the contract or some note or memorandum thereof, expressing the consideration, is in writing, subscribed by the party to be charged, or by his lawful agent thereunto authorized by writing."

Exceptions to the statute of frauds include waiver, estoppel, and partial performance. 310 S. Broadway Corp. v. Barrier Gas Serv., 224 AD2d 409, 410 (2nd Dept. 1996). With respect to the exception of "waiver" a defendant waives the affirmative defense of the statute of frauds by failing to assert it either in its answer or a motion to dismiss. Con-Solid Contr. v. Litwak Dev. Corp., 236 AD2d 437 (2nd Dept. 1997).

In the instant matter, Plaintiffs submitted a copy of the Assignment and Assumption of Lease, between Venkatachari and Thakurdeen, dated September 14, 2006. Consequently, the writing requirement of General Obligations Law §5-703(2) is satisfied.

In support of their motion, the LaScalias cite to Dadich v. Ilana Knitting, Inc., 208 AD2d 792, 793 (2nd Dept. 1994). In Dadich, the Court held that a purported assignment of a five-year lease to a second tenant by a first tenant was void under the statute of frauds because the assignment was not in writing. Id. at 793 Dadich differs from the case at bar since Plaintiffs have produced a writing relating to the assignment of the Lease which satisfies the statute of frauds. Similarly, Geraci v. Jenrette, 41 NY2d 660 [*5](1977) and Oniniano v. Magier, 181 AD2d 438 (1st Dept. 1992), the two other cases cited by the LaScalias in support of their motion, are distinguishable.

C.Waiver

A waiver is the voluntary abandonment or relinquishment of a known right which is essentially a matter of intent which must be proved. Jefpaul Garage Corp. v. Presbyterian Hosp. in City of New York, 61 NY2d 442, 446 (1984). While waiver may be inferred from the acceptance of rent in some circumstances, it may not be inferred, and certainly not as a matter of law, to frustrate the reasonable expectations of the parties embodied in a lease when they have expressly agreed otherwise. Id.

It is well settled that acceptance of rent by a landlord from a tenant with knowledge of the tenant's violation of the terms of the lease normally results in a waiver of the violation. Id. at 447. The option rests with the landlord to recognize the violation and terminate the tenancy and if the landlord chooses to ignore it and accepts rent with knowledge of the violation then the acceptance evidences his waiver and an election to hold the tenant to the lease. Id. at 447- 448. See also, Sea Cliff Delicatessen, Inc. v. Skrepek,199 AD2d 510, 511 (2nd Dept. 1993) (landlord's acceptance of rent checks from tenant's corporate assignee for approximately five years waived landlord's right to consent to any assignment).

Knowledge of the subtenancy must be imputed to the landlord. Schwartz v. Certified Management Corp., 117 AD2d 521, 522 (1st Dept. 1986). In Schwartz, the subtenant was personally known to agents of the landlord, the managing agent and the doormen. Id. at 522. The Schwartz Court held that the landlord's acceptance of the rent, with knowledge that plaintiff was subletting to another, constituted a waiver of the right summarily to terminate plaintiff's tenancy for breach of the covenant against subletting. Id. at 523.

In the instant matter, the LaScalias utilize a portion of the Premises for their own business purposes. In addition, they share restroom facilities with the tenant. Delta, the only assignee-tenant to whom the LaScalias gave written consent to the assignment, "subleased" the Premises to another tenant in November 2003. Therefore, for more than five years, a tenant other than Delta has been operating the gas station located at the Premises. In addition, the LaScalias were named as additional insureds on Venket's insurance policy, a tenant to which the LaScalias did not consent. In light of the foregoing, the LaScalias have waived the requirement in the Lease that they must give written consent to any assignment or sublease. Therefore, by the LaScalias' failure to take any action during the past five year period to remove any of the assignees and/or sub-tenants after Delta, they have waived their right to require written approval of the assignment.

D.Distinction between an Assignment and Sublease

The essential distinction between an assignment and a sublease is . . . [i]f a lessee, by any instrument whatever, whether reserving conditions or not, parts with his entire interest, he has made a complete assignment; if he has transferred his entire interest in a part of the premises, he has made an assignment pro tanto. If he retains a reversion in himself, he has made a sub-lease (citations omitted). [*6]

Bostonian Shoe Co. v. Wulwick Assoc., 119 AD2d 717, 718-19 (2nd Dept. 1986); and Middle Village Assoc. v. Pergament Home Centers, Inc., 184 Misc 2d 552 (Sup. Ct. Nassau Co. 2000).

Since a sublease is an agreement between a tenant and the subtenant, with the reversionary estate remaining in the sublessor-tenant, no contractual liability arises between the subtenant and the landlord-lessor, and there is thus no privity of contract between the subtenant and the landlord-lessor. Tefft v. Apex Pawnbroking & Jewelry Co., 75 AD2d 891 (2nd Dept. 1980).

"The distinction between an assignment and a subtenancy is based upon the principle of a twofold privity existing between a landlord and tenant, a privity of contract and a privity of estate. The first rests upon the terms of the agreement between the parties; the second, upon the interest in the real property leased." New Amsterdam Cas. Co. v. National Union Fire Ins. Co. of Pittsburgh, 266 NY 254, 259 (1935). See also, Damaro Restaurant Group, LLC v. Gazette Realty Holdings, LLC, Misc 3d , 2008 WL 4909405 at *8 (Sup. Ct. Westchester Co. 2008). When an assignment occurs, "the assignee becomes directly liable to the original landlord as the transfer creates a privity of estate between the landlord and the transferee of the lease or of a part thereof." New Amsterdam Cas. Co. v. National Union Fire Ins. Co. Of Pittsburgh, supra. When a subtenancy occurs, privity of estate does not arise between the landlord and the transferee. Id. at 260.

The term of the Lease between Continental and the LaScalias commenced July 1, 2000 and ran until June 30, 2005. However, the Lease could be renewed at Continental's option for an additional five year period through June 30, 2010. Continental has a first right to rent the Premises in the event that the LaScalias continued to lease out the premises after June 30, 2010. According to the 2003 Assignment, Delta assumed full responsibility for the lease as if it signed the lease originally as the tenant. The 2003 "Sub-lease", between Delta and Venket, demonstrates that Delta assigned all of its rights pursuant to the 2003 Assignment to Venket. The "Sub-lease" ran through June 30, 2010, the date that the original Lease terminated after its five year extension. Thus, this was an assignment and not a sub-lease since Delta did not retain any rights under the Lease. Subsequent to the 2003 assignment, the Lease was then assigned to Venkatachari, who eventually assigned his rights to Thakudeen. Consequently, Thakudeen, as assignee, is in privity with the LaScalias and the LaScalia's motion pursuant to CPLR 3211(a)(3) must be denied.

In light of the foregoing, the Court finds that it is not necessary to address Plaintiffs' alternative argument alleging that they are third-party beneficiaries of the Lease.

Moreover, the allegations raised in the complaint are sufficient to assert cognizable causes of action against the LaScalias. Thus, the LaScalia's motion pursuant to CPLR 3211(a)(7) must be denied.

Accordingly, it is,

ORDERED, that the motion of the Defendants, James LaScalia and Joanne LaScalia, to dismiss the complaint is denied; and it is further,

ORDERED, that counsel shall appear for a status conference on March 6, 2009 at 9:30 a.m.

This constitutes the decision and order of this Court.

Dated: Mineola, New York

January 26, 2009

_____________________________

HON. LEONARD B. AUSTIN, J.S.C. Footnotes

Footnote 1: The complaint alleged upon information and belief that the Lease between the LaScalias and Continental was dated June 21, 2000. However, the LaScalias annexed a copy of the Lease to their motion and the Lease is dated July 30, 2000. The Lease is only signed by Continental and not the LaScalias.