242 W. 38th St., LLC v Madame Paulette, Inc.
Annotate this CaseDecided on March 16, 2011
Supreme Court, New York County
242 West 38th Street, LLC, Plaintiff,
against
Madame Paulette, Inc., Defendant.
115799/09
For plaintiff:
Eric N. Pitter, Esq.
Smith & Krantz, LLP
122 East 42nd ST, Suite 1518
NY NY 10168
(212) 661-0279
For defendant:
John L. Overland, Esq.
Wagner & Davis P.C.
99 Madison Ave, 11th floor
NY NY 10016
(212) 481-9600
Joan A. Madden, J.
In this action to recover rent and other amounts due under a commercial lease, plaintiff landlord moves for summary judgment on its first and second causes of action, and to dismiss defendant's defenses. Defendant tenant opposes the motion.
The following facts are not disputed. In or about March 2004, plaintiff as landlord and defendant as tenant entered into a commercial lease for the "entire sixth floor" in the building located at 242 West 38th Street in Manhattan. The lease was for a five-year term commencing April 1, 2004. On April 13, 2007, the parties executed a First Amendment of Lease which, inter alia, extended the lease term for an additional five years from June 1, 2009 to May 31, 2014. The First Amendment provided for monthly rent of $7,707 for the period from June 1, 2009 through May 31, 2010, and monthly rent of $7,938.21 for period from June 1, 2010 through May 31, 2011. [*2]
In August 2009, plaintiff commenced a Civil Court summary non-payment proceeding against defendant, claiming that defendant owed rent and additional rent for the months of June, July and August 2009. In September 2009, the non-payment proceeding was settled pursuant to a Stipulation of Settlement, in which plaintiff agreed to discontinue the proceeding on condition that defendant pay the amount of $35,421.39, representing rent and additional rent owed through September 30, 2009 ($32,921,39) and attorneys fees ($2,500). On September 30, 2009, the parties executed a separate Surrender Agreement, with defendant agreeing to surrender possession of the premises "on or before September 30, 2009," and plaintiff agreeing "to accept surrender of the Premises from the Tenant without release of the obligations under the Lease [emphasis added]." The Surrender Agreement also stated that "Landlord's acceptance of possession of the Premises and Landlord's agreement stated herein do not in any manner or fashion release Tenant from its obligations under the Lease [emphasis added]."
On November 19, 2009, plaintiff commenced the instant action seeking rent and additional rent (first cause of action) and attorney's fees (second cause of action). Defendant answered asserting four affirmative defenses of accord and satisfaction, failure to state a cause of action, promissory estoppel, and failure to mitigate damages. Plaintiff is now moving for summary judgment on its first cause of action for rent and additional rent in the amount of $28,728 for period from October 1, 2009 through January 31, 2010, in addition to "such sums that come due under the Lease until issuance of judgment." Plaintiff also moves for partial summary judgment as to the issue of liability on its second cause of action for attorneys fees, and summary judgment dismissing defendant's affirmative defenses.
As the proponent of a motion for summary judgment, plaintiff bears the initial burden to make a prima facie showing of entitlement to judgment as a matter of law by tendering sufficient evidentiary proof to eliminate any material issues of fact from the case. See Winegrad v. New
York University Medical Center, 64 NY2d 851, 853 (1985). Once that showing is satisfied, the burden of proof shifts to the party opposing the motion to produce evidentiary proof in admissible form establishing the existence of a material issue of fact requiring a trial. Alvarez v. Prospect Hospital, 68 NY2d 320, 324 (1986).
In support of its motion for summary judgment, plaintiff submits a an affidavit from Sylvia Bonet, the Director of Asset Management for Winoker Realty Co., Inc., plaintiff's managing agent. Plaintiff also submits an attorney's affirmation, as well as the pleadings, and copies of the Lease, the First Amendment of Lease, the Surrender Agreement and a statement of the outstanding arrears. After the parties appeared for oral argument, the court contacted counsel and requested additional papers addressing plaintiff's claim for rent and additional rent "com[ing] due under the Lease until issuance of judgment." Plaintiff and defendant each submitted supplemental affidavits and affirmations, and plaintiff produced additional documentation, including a copy of its lease with the new tenant of the premises, which commenced on August 1, 2010.
Plaintiff's affidavits and supporting documents are sufficient to establish prima facie that for the four-month period from October 1, 2009 through January 31, 2010, defendant owes plaintiff rent and additional rent in the amount of $28,728 (monthly rent of $7,707 x 4 = $30,828; plus $400 in additional rent for sprinkler, and water and sewer charges; less payment of $2,500). The record is also sufficient to establish that plaintiff is entitled to rent and additional rent that [*3]subsequently became due and owing during the pendency of this action until the new tenant's lease commenced on August 1, 2010. For the six-month period from February 1, 2010 through July 31, 2010, defendant owes plaintiff rent and additional rent in amount of $47,304.42 (monthly rent of $7,707 for February through May 2010 = $30,828; monthly rent of $7,938.21 for June and July 2010 = $15,876.42; monthly additional rent of $50 for sprinkler charges = $300; and monthly additional rent of $50 for water and sewer charges = $300). Based on the attorney's fees provision in the lease, plaintiff is also entitled to an award of reasonable attorney's fees, the amount of which shall be determined at a fee assessment hearing.
In opposing summary judgment, defendant argues that triable issues of fact exist as to its third affirmative defense of promissory estoppel. Defendant relies solely on its promissory estoppel defense, and does not argue that a triable issue of fact exists as to any of the other affirmative defenses. To assert a defense of promissory estoppel, defendant must demonstrate a clear and unambiguous promise, reasonable and foreseeable reliance by the party to whom the promise is made, and an injury sustained in reliance on that promise. See Braddock v. Braddock, 60 AD3d 84, 95 (1st Dept), app withdrawn, 12 NY3d 780 (2009); Williams v. Eason, 49 AD3d 866, 868 (1st Dept 2008).
Defendant submits an attorney's affirmation, an affidavit from its President John Mahdessian, and an affidavit from Rene Antanesian, President of another entity, non-party HRBDx, Inc. Defendant's counsel asserts that when defendant executed the stipulation settling the non-payment proceeding and the Surrender Agreement, defendant relied on plaintiff's representations to HRBDx that upon defendant's surrender, plaintiff would lease the premises to HRBDx and HRBDX would in turn sublease the premises or a portion of the premises to defendant. Counsel also asserts that defendant relied on plaintiff's promise of a lease to HRBDx and changed its position by tendering payment and surrendering the premises, and as a result defendant has no premises from which to conduct its business and finds itself facing this action seeking even more rent and legal fees, which plaintiff "would clearly have mitigated" had it entered into the lease with HRBDx.
In his affidavit, defendant's President, John Mahdessian, states that in connection with the summary non-payment proceeding, defendant's counsel was authorized "to negotiate and conclude a stipulation of settlement with an agreement to surrender the premises," and pursuant that stipulation, defendant tendered two checks to plaintiff for unpaid rent ($32,921,39 ) and attorney's fees ($2,500). Mahdessian, also states that "additional and concurrent negotiations were being conducted" between defendant, plaintiff and HRBDx, for HRBDx to lease the premises from plaintiff, and for HRBDX to sublease the premises or a portion of the premises to defendant. He further states that while plaintiff initially agreed to the proposal, after plaintiff and defendant entered into the Surrender Agreement, he learned that HRBDX had never entered into a lease with plaintiff for the sixth floor premises.
According to HRBDx's President Rene Antanesian, in August 2009, his company and defendant "were involved in negotiations wherein HRBDx was to enter into a sublease" with defendant for a portion of the premises, and the "negotiations subsequently changed to include Plaintiff and concerned a proposal wherein HRBDx would lease the Premises directly from Plaintiff upon Madame Paulette's surrender of the Premises to Plaintiff." Antanesian states that it "was understood throughout these negotiations that upon HRBDx's entry into a lease with [*4]Plaintiff," HRBDx would then sublease the premises to Madame Paulette. He states that he met with a representative of plaintiff's managing agent, Winoker Realty, and that "[a]t first, Winoker was agreeable" and requested financial information, which HRBDx provided, but "despite repeated requests by HRBDx to Winoker for a lease agreement for the Premises, Winoker never provided HRBDx with a lease agreement for signature." Antanesian states that instead, Winoker continued to meet with him "to suggest other commercial premises in the building for lease and to pressure HRBDx into accepting other premises," but HRBDx was not interested in any other premises and "insisted upon a lease for the Premises formerly possessed by Madame Paulette as promised HRBDX by Plaintiff." He states that HRBDx "finally terminated those negotiations in or about November or December 2009, after it became apparent that Plaintiff was not interested in leasing the Premises to HRBDx as Plaintiff had originally promised to HRBDx."
The foregoing allegations are insufficient to raise a material issue of fact as to the defense of promissory estoppel. Plaintiff's negotiations with HRBDx and defendant, "hardly amounted to a clear and unambiguous promise" by plaintiff that it would lease the premises directly to HRBDx, so that HRBDx could sublease the premises to defendant. Knight Securities L.P. v. Fiduciary Trust Co., 5 AD3d 172, 174 (1st Dept 2004). Moreover, it would have been neither reasonable nor foreseeable for defendant to rely on such a promise, in light of the clear and express provisions of the Surrender Agreement, in which plaintiff agreed to accept defendant's surrender "without release of the obligations under the Lease." The Surrender Agreement reiterated that plaintiff's acceptance of possession and "agreement stated herein do not in any manner or fashion release Tenant from its obligations under the Lease." Notably, defendant executed the Surrender Agreement on September 30, 2009 and agreed to vacate the premises on that same date, yet for at least one month thereafter, Antenesian continued to negotiate with plaintiff's managing agent "through November or December 2009," when it became "apparent" that plaintiff was not interested in leasing the premises to HRBDx.
In its reply papers, plaintiff submits a copy of an Agreement executed by Mahdessian in March 2004, when the original lease was signed. That Agreement is a so-called "good guy" guarantee, whereby Mahdessian agreed to remain personally liable for defendant's lease violations so long as defendant remained in possession of the premises. Once, however, defendant vacated the premises, Mahdessian "will have no obligation or liability under this Agreement (although the obligation and liability of the Tenant under the Lease will continue in accordance with the Lease)." Clearly, Mahdessian, in his corporate capacity, executed the
Surrender Agreement and agreed that defendant would vacate the premises, so as to relieve himself of his personal obligations under the guarantee.
Finally, in response to the court's request, the parties submitted supplemental affidavits, affirmations and documents addressing plaintiff's claim for rent and additional rent that "come due under the Lease until issuance of judgment." The parties do not dispute that plaintiff is entitled to such amounts up until the time it secured a new tenant to occupy the premises. Plaintiff submits a copy of its lease with the new tenant, Johnny's Fashion Studio Corp., which commenced on August 1, 2010. While plaintiff concedes that the new tenant moved into the premises on July 30, 2010, plaintiff argues that defendant owes rent for the subsequent months of August and September 2010, based on paragraph 61 of the lease, which relieved the new tenant of its obligation to pay rent for those months. Defendant opposes plaintiff's request for rent [*5]through September 30, 2010, and argues one of its employees observed the new tenant occupying the premises as early as May 2010. Neither plaintiff's nor defendant's argument is persuasive. Rather, since it is undisputed that plaintiff secured a new tenant to occupy the premises and they executed a lease that commenced on August 1, 2010, defendant's obligations under its own lease ended when that new lease commenced, and plaintiff is entitled to rent and additional rent through July 31, 2010.
Accordingly, it is
ORDERED that plaintiff's motion is granted; and it is further
ORDERED that defendant's defenses are dismissed in their entirety; and it is further
ORDERED that the Clerk is directed to enter judgment in favor of plaintiff 242 West 38th Street, LLC and against defendant Madame Paulette, Inc., in the amount of $76,032.42; and it is further
ORDERED that plaintiff is entitled to an award of reasonable attorney's fees and said claim is severed and a fee assessment hearing is directed to determine the reasonable amount of such attorney's fees; and it is further
ORDERED that on or before April 15, 2011, plaintiff shall file a copy of this order with notice of entry, a note of issue and a statement of readiness, upon the Clerk of the Trial Support Office (Room 158), and shall pay the proper fees, if any, and said Clerk shall place this action on the appropriate calendar for the assessment herein above directed; and it is further
ORDERED that if plaintiff fails to comply with the immediately preceding paragraph, the claim for attorney's fees will be dismissed.
The court is mailing copies of this decision and order.
DATED: March 16, 2011ENTER:
___________________________
J.S.C.
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