Frebar Dev. Corp. v Posner

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[*1] Frebar Dev. Corp. v Posner 2010 NY Slip Op 52421(U) Decided on November 16, 2010 Supreme Court, New York County Wooten, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 16, 2010
Supreme Court, New York County

Frebar Development Corporation and FRED L. PASTERNACK, Plaintiffs,

against

elana Waksal Posner, Defendant.



103525/2010



ATTORNEY FOR THE PLAINTIFF :

HARRIET N. BOXER, ESQ.

31 EAST 32ND STREET, STE 300

NEW YORK, NEW YORK 10016

Paul Wooten, J.



This is a breach of contract action by plaintiffs Frebar Development Corporation ("Frebar") and Dr. Fred L. Pasternack ("Dr. Pasternack") (collectively "plaintiffs") to recover unpaid rent and related fees allegedly owed by defendant Elana Waksal Posner ("defendant") under a residential lease. Defendant never took possession of the subject apartment and plaintiffs now seek to recover the outstanding rents due under the terms of the lease. Discovery has not been completed and the Note of Issue has not been filed. Before the Court is plaintiffs' motion for summary judgment, pursuant to CPLR 3212, seeking judgment against defendant in the amount of $52,000 for unpaid rent, plus late fees, attorney's fees and costs; or, alternatively, dismissing defendant's affirmative defenses.

BACKGROUND

In support of their motion, plaintiffs submit, inter alia, Dr. Pasternack's affidavit; the lease agreement; a series of emails between Dr. Pasternack and defendant and between Dr. Pasternack and Halstead Property ("Halstead"); and correspondence between Dr. Pasternack and defendant's counsel. Defendant submits her own affidavit; emails between herself and Dr. Pasternack; and correspondence between defendant's counsel and Dr. Pasternack.[FN1] The following facts are undisputed. [*2]

Frebar, a corporation, is the former owner of a townhouse located at 29 East 63rd Street, New York, New York. Dr. Pasternack, a physician, is the President of Frebar and the current owner of the townhouse.[FN2] Defendant is a former practicing attorney.

On December 28, 2007, Frebar and defendant executed a residential lease agreement, pursuant to which Frebar agreed to rent the fifth floor of the townhouse (a one-bedroom unit) to defendant for a one-year term at the rate of $6,500 per month. The lease term was to begin on February 1, 2008 and to end on January 31, 2009. Upon execution of the lease, defendant paid to Frebar the sum of $26,000, representing the first and last month's rent and a two month security deposit. Dr. Pasternak signed the lease on Frebar's behalf.

Paragraph 17 of the lease provided that defendant would be in default if, inter alia, she failed to take possession or move into the apartment 15 days after the beginning of the lease (see Plaintiffs' Index of Exhibits, Ex. A, Lease Agreementat ¶ 17). Paragraph 18 set forth the parties' remedies and liabilities in the event of default, and provided in pertinent part:

"If this Lease is ended by Owner because of your default, the following are the rights and obligations of You and Owner: (a) You must pay your rent until this Lease has ended . . . (b) Once You are out, Owner may re-rent the Apartment or any portion of it for a period of time which may end before or after the ending date of this Lease . . . (c) Whether the Apartment is re-rented or not, You must pay to Owner as damages: (1) the difference between the rent in this Lease and the amount, if any, of the rents collected in any later lease or leases of the Apartment for what would have been the remaining period of this Lease; and (2) Owner's expenses for attorneys fees, advertisements, broker's fees . . . ." (id. at ¶ 18) (emphasis added).

The Rider to the lease also contained provisions providing for late fees in the form of monthly interest, and for recovery of the costs of bringing a legal action to enforce the terms of the lease (see id. at Rider ¶¶ 2, 6). The Preamble to the lease further provided that all agreements between Frebar and defendant were written into the lease, and that "any agreements made before or after this Lease was signed and not written into it will not be enforceable" (id. at Preamble).

Shortly after executing the lease, defendant learned that she was pregnant. The parties thereafter engaged in a series of emails and correspondence about occupancy of the apartment in view of the changed circumstances. The first series of emails occurred on January 16, 2008, when defendant asked Dr. Pasternack how he felt about her taking occupancy and if he wanted to try to re-rent the apartment. She also acknowledged that the lease was her obligation, stating: "I obviously know the lease is my obligation . . . ." (id., Ex. E). Dr. Pasternack responded that it was her call and that he would contact his real estate brokers at Halstead about finding a replacement upon receiving word from her. Defendant emailed him back and stated, "Let's try to get a replacement and if you can't, I'll take occupancy" (id.). Dr. Pasternack informed her that he would start looking and asked when she wanted to take occupancy if he could not find a replacement, to which she replied, "Middle of February? A month?" (id.).

On January 23, 2008, defendant informed Dr. Pasternack that she no longer planned to stay in New York and that he should re-rent the apartment. Emails between Dr. Pasternack and Halstead between January 20, 2008 and February 9, 2008, reveal that Dr. Pasternack communicated with brokers about finding a new tenant and made the apartment available to be [*3]shown, but that the apartment remained vacant.

On February 11, 2008, defendant requested the return of her security deposit. Dr. Pasternack emailed her back and informed her that he was attempting to re-rent the apartment but that she remained liable under the lease, stating:

"You are essentially currently the tenant with all terms of the lease in effect as you acknowledged in your email to me of 16 Jan. If you wish to physically occupy the apartment, that's fine. In the interim, at your request, I am attempting to re-rent it. . . ." (id., Ex. F).

Defendant sent a follow-up email reminding Dr. Pasternak that she was no longer interested in the apartment. He emailed back that he had no problem with an alternate tenant or her moving in. His subsequent emails with Halstead on February 15, 2008 and March 10, 2008, indicate that the apartment continued to be shown.

On March 18, 2008, defendant's counsel wrote a letter to Dr. Pasternack and formally demanded return of the security deposit. Dr. Pasternak responded by email on March 20, 2008, informing counsel that the apartment was listed with Halstead and that defendant had indicated that she would take occupancy if it was not re-rented, and further stating: "I have no problem with your client, you, or anyone she tasks with the effort [in] finding an acceptable replacement tenant" (id., Ex. H).

Dr. Pasternack emailed defendant directly on March 25, 2008, and notified her that she remained liable under the terms of the lease. He again indicated that he had no problem with her or anyone she designated finding a replacement tenant. On April 9, 2008, he emailed another overdue notice and stated: "I would encourage you to find a surrogate for your tenancy. Absent an acceptable replacement, please understand I shall be obligated to enforce the terms of the lease" (id.). Emails between Dr. Pasternack and Halstead in May 2008, reveal that he continued to work with the brokers and that a potential tenant came close to signing a lease but the deal fell through.

On May 25, 2008, Dr. Pasternak once again informed defendant that she would be held to the terms of the lease until a new tenant was found. He informed her that he had made good faith attempts to find a replacement tenant and that two prospective tenants came close to signing a lease but decided not to. He also indicated that he would continue his efforts to find a new tenant, stating: "Finally, be assured that I shall continue my efforts to re-rent the apartment" (id.).

Defendant's counsel thereafter wrote to Dr. Pasternack on May 28, 2008, and informed him that defendant considered the matter closed. Dr. Pasternak responded by letter on May 31, 2008, stating that the matter was not closed and again requested payment. He also noted that his attempts to re-rent the apartment "continue to date" (id.).

Dr. Pasternack continued his attempts to re-rent the apartment until at least December 18, 2008. He was not able to find a new tenant and the apartment remained vacant through the end of the lease term. On January 12, 2009, he advised defendant that her lease would be expiring at the end of the month and that she would then be ten months in arrears. Defendant did not pay the outstanding balance and the present action followed.

In her affidavit, defendant admits her default but claims that she refrained from subletting or assigning her lease in reliance upon Dr. Pasternack's repeated representations that he would find a replacement tenant. She references Dr. Pasternack's statements made on March 20, 2008, May 25, 2008 and May 31, 2010, that he was attempting to re-rent the apartment, and claims that she would have found a replacement tenant had Dr. Pasternack told her it was her responsibility. Defendant also asserts that if she is permitted to conduct [*4]discovery, she will focus her efforts on reviewing emails concerning Dr. Pasternak's attempts to re-rent the apartment, and will depose Dr. Pasternack to confirm that he told her that he would re-rent the apartment and understood that she would not look for a subtenant or assignee.

DISCUSSION

Plaintiffs argue that they are entitled to recover all outstanding sums due under the terms of the lease, as a matter of law, because they have established defendant's default and, pursuant to Holy Properties Ltd., L.P. v Kenneth Cole Productions, Inc., 87 NY2d 130 [1995], and its progeny, they had no legal duty to mitigate damages by re-renting the apartment. They seek judgment in the amount of $52,000 for unpaid rent, plus late fees, attorney's fees and costs. In the alternative, they seek dismissal of defendant's affirmative defenses.[FN3]

Defendant argues that summary judgment should be denied under the doctrine of equitable estoppel, because she refrained from subletting or assigning the lease in reliance upon Dr. Pasternack's representations that he would find a replacement tenant. She additionally argues that the motion should be denied so that she may take discovery.

Summary judgment is a drastic remedy that should be granted only if no triable issues of fact exist and the movant is entitled to judgment as a matter of law (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]; Andre v Pomeroy, 35 NY2d 361, 364 [1974]). The party moving for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence in admissible form demonstrating the absence of material issues of fact (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; CPLR 3212 [b]). A failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers (see Smalls v AJI Indus., Inc., 10 NY3d 733, 735 [2008]). Once a prima facie showing has been made, however, "the burden shifts to the nonmoving party to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact that require a trial for resolution" (Giuffrida v Citibank Corp., 100 NY2d 72, 81 [2003]; see also Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; CPLR 3212 [b]).

When deciding a summary judgment motion, the Court's role is solely to determine if any triable issues exist, not to determine the merits of any such issues (see Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]). The Court views the evidence in the light most favorable to the nonmoving party, and gives the nonmoving party the benefit of all reasonable inferences that can be drawn from the evidence (see Negri v Stop & Shop, Inc., 65 NY2d 625, 626 [1985]). If there is any doubt as to the existence of a triable issue, summary judgment should be denied (see Rotuba Extruders, Inc. v Ceppos, 46 NY2d 223, 231 [1978]).

Plaintiffs have set forth sufficient evidence to prima facie establish that there was a binding lease agreement; that defendant breached the lease by failing to take occupancy; that unpaid rent, late fees, attorney's fees and costs are owed to plaintiffs under the terms of the lease; and that defendant has not paid the amounts due (see J.A.B. Madison Holdings LLC v Levy & Boonshoft, P.C., 2009 WL 765038, at *3 [NY Sup Ct NY County 2009]). The burden thus shifts to defendant to assert a defense to the enforcement of the terms of the lease that is sufficient to raise a triable issue of fact (see id.).

It is well established that, under New York law, a landlord has no duty to mitigate damages by re-renting leased premises upon a tenant's default (see Holy Properties, 87 NY2d at 133 [holding that once "the lease is executed, the lessee's obligation to pay rent is fixed [*5]according to its terms and a landlord is under no obligation or duty to the tenant to relet, or attempt to relet abandoned premises in order to minimize damages"); 85 John St. Partnership v Kaye Ins. Assoc., L.P., 261 AD2d 104, 105 [1st Dept 1999] [landlord owed no duty to re-let premises in order to mitigate damages, either in law or under the lease]; Gordon v Eshaghoff, 60 AD3d 807, 808 [2d Dept 2009] ["the Supreme Court properly determined that the plaintiff, a residential landlord, was under no duty to mitigate her damages caused by the defendants' breach of the parties' lease"]). Therefore, as a matter of law, plaintiffs had no legal obligation to mitigate damages by re-renting the apartment upon defendant's failure to take occupancy. Nor was such a duty imposed by the lease agreement itself, which expressly required defendant to pay rent until the end of the lease term in the event of default, whether the apartment was re-rented or not (see 85 John, 261 AD2d at 105).

However, defendant argues that plaintiffs should be equitably estopped from recovering the outstanding sums due under the lease because Dr. Pasternack repeatedly represented that he would find a replacement tenant. She claims that she would have sublet or assigned the lease had she known that Dr. Pasternack would not re-rent the apartment, and that she was misled into believing that he would find a new tenant and not assert his right to hold her to the lease once a substitute tenant signed a lease.

The purpose of invoking the doctrine of equitable estoppel is "to prevent the infliction of unconscionable injury and loss upon one who has relied on the promise of another" (American Bartenders School, Inc. v 105 Madison Co., 59 NY2d 716, 718 [1983]). The necessary elements are: (1) conduct amounting to false representation or concealment of material facts; (2) intention or expectation that the other party will act upon such conduct; and (3) actual or constructive knowledge of the true facts (see BWA Corp. v Alltrans Express U.S.A., Inc., 112 AD2d 850, 853 [1st Dept 1985]). In order to prevail, the party seeking estoppel must show: (1) lack of knowledge of the true facts; (2) reliance upon the conduct of the party estopped; and (3) a prejudicial change in his or her position (see id.; River Seafoods, Inc. v JP Morgan Chase Bank, 19 AD3d 120, 122 [1st Dept 2005]).

The Court finds defendant's proof insufficient to raise a triable issue of fact regarding the applicability of the doctrine of equitable estoppel. Defendant has failed to set forth any facts demonstrating that Dr. Pasternack's representations that he was attempting to re-rent the apartment were contrary to the agreement of the parties as set forth in the lease (see 167-169 Allen St. H.D.F.C. v Ebanks, 22 AD3d 374, 375 [1st Dept 2005] [finding no basis for claim of estoppel where statements were "not contrary to the agreement of the parties as set forth in the Proprietary Lease"]; see also Eujoy Realty Corp. v Van Wagner Communications, LLC, 73 AD3d 546 [1st Dept 2010] [where lease had "no oral modification" and "no waiver" clauses, defendant's purported understanding that it could terminate lease at any time after a certain date without being obligated to pay full year's rent as lease required did not demonstrate that equitable estoppel applied since plaintiff engaged in no conduct that was otherwise incompatible with the agreement as written]; Joseph P. Day Realty Corp. v Jeffrey Lawrence Assoc., Inc., 270 AD2d 140, 141 [1st Dept 2000] ["conduct relied upon to establish estoppel must not otherwise be compatible with the agreement as written"] [quotations omitted]. Paragraph 18 of the lease expressly granted plaintiffs the option of re-renting the apartment in the event of default, and further provided that defendant was obligated to pay rent until the lease term ended regardless of whether or not the apartment was re-rented. Thus, Dr. Pasternack's efforts to re-rent the apartment were consistent with the terms of the lease, and principles of estoppel do not apply (see 167-169 Allen, 22 AD3d at 375).

Defendant has also failed to raise a triable issue of fact regarding whether she was misled into believing that Dr. Pasternack would find a new tenant and not seek to hold her to [*6]the terms of the lease (see Fundamental Portfolio Advisors, Inc. v Tocqueville Asset Management, L.P., 7 NY3d 96, 106-07 [2006] ["in the absence of evidence that a party was misled by another's conduct or that the party significantly and justifiably relied on that conduct to its disadvantage, an essential element of estoppel is lacking"] [quotations omitted). Whether a party was misled by the representations of another party and whether the party justifiably relied on such representations to his or her disadvantage can raise questions of fact precluding summary judgment (see id. at 107). A triable issue will not be found, however, where an opposing affidavit merely contains conclusory allegations (see Freedman v Chem. Constr. Corp., 43 NY2d 260, 264 [1977]).

Here, defendant asserts in her affidavit that she refrained from subletting or assigning her lease because Dr. Pasternack made multiple promises to re-rent the apartment and that she would have found a replacement tenant had he informed her that it was her responsibility. Apart from referencing Dr. Pasternack's emails indicating that he was attempting to find a replacement tenant, she submits no evidence that would support a reasonable conclusion that Dr. Pasternack's representations about his efforts to find a new tenant released defendant from her obligations under the lease. To the contrary, this same evidence, as well as other undisputed record evidence, reveals that Dr. Pasternack repeatedly and unequivocally informed defendant that she would be held to the terms of the lease. Defendant's bald, conclusory allegations that she was misled are insufficient to defeat a motion for summary judgment (see Zuckerman, 49 NY2d at 563; Liddle, O'Conner, Finkelstein & Robinson v Koppelman, 215 AD2d 204, 204 [1st Dept 1995]).

The Court is also unpersuaded by defendant's argument that summary judgment should be denied due to the need for discovery. Defendant has not demonstrated the likelihood that discovery will lead to evidence sufficient to defeat summary judgment since, as indicated above, plaintiffs were not required to mitigate damages (see Global Minerals and Metals Corp. v Holme, 35 AD3d 93, 102-03 [1st Dept 2006]; J.A.B., 220 WL 765028, at *4; CPLR 3212 [f]).[FN4]

The Court therefore concludes that plaintiffs are entitled to recover the outstanding sums due under the terms of the lease, and accordingly, plaintiffs' motion for summary judgment is granted on the issue of liability. This matter will be referred to a Special Referee to hear and report with recommendations on the amount of plaintiffs' damages, which shall include unpaid rent, late fees, reasonable attorney's fees and costs.

For these reasons and upon the foregoing papers, it is,

ORDERED that plaintiffs' motion for summary judgment is granted on the issue of liability; and it is further,

ORDERED that the issue of plaintiffs' damages, which shall include unpaid rent, late fees, attorney's fees and costs, is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the damages issue; and it is further,

ORDERED that not later than November 30, 2010, plaintiffs shall serve a copy of this Order with Notice of Entry on the Special Referee Clerk in the Motion Support Office at 60 Centre Street, Room 119, to arrange a date for the reference to a Special Referee.

This constitutes the Decision and Order of the Court.

[*7]Dated: November 16, 2010

Paul WootenJ.S.C. Footnotes

Footnote 1:The parties rely upon the same documentary evidence to the extent that the emails and correspondence submitted by defendant are included among those submitted by plaintiffs. Neither side has challenged the authenticity of this evidence.

Footnote 2:Frebar transferred its interest in the townhouse to Dr. Pasternack by quit claim deed on January 29, 2010.

Footnote 3:Defendant raises five affirmative defenses in her answer: (1) failure to state a cause of action; (2) laches; (3) equitable estoppel; (4) Dr. Pasternack lacks standing because he is not a party to the lease; and (5) the action is barred because plaintiffs did not provide adequate heat to the premises.

Footnote 4:The defenses raised in defendant's answer, to the extent not expressly addressed, have also been examined and found to lack merit.