Empire State Bldg. Co., LLC v Joseph Scott Props., Inc.

[*1] Empire State Bldg. Co., LLC v Joseph Scott Props., Inc. 2011 NY Slip Op 50248(U) Decided on February 23, 2011 Appellate Term, First Department 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 February 23, 2011
APPELLATE TERM OF THE SUPREME COURT, FIRST DEPARTMENT
PRESENT: Schoenfeld, J.P., Shulman, Hunter, Jr., JJ
570812/09.

The Empire State Building Company, LLC, Petitioner-Landlord-Appellant,

against

Joseph Scott Properties, Inc., - Appellant, -and- Joseph Scott Financial, JSF Mortgage Investments, Ebert & Associates LLC a/k/a E & A and "XYZ Corporation," Respondents-Undertenants.

Landlord appeals from that portion of an order of the Civil Court of the City of New York, New York County (Joan M. Kenney, J.), entered November 2, 2009, which denied its motion to dismiss tenant's first, second and third affirmative defenses in a commercial nonpayment summary proceeding. Tenant cross appeals from that portion of the aforesaid order which denied its motion for leave to conduct disclosure.

Per Curiam.

Order (Joan M. Kenney, J.), entered November 2, 2009, insofar as appealed and cross appealed from, modified to grant landlord's motion to strike tenant's first, second and third affirmative defenses; as modified, order affirmed, without costs.

Landlord commenced this commercial summary nonpayment proceeding against tenant, alleging, among other things, that tenant was required under the governing commercial lease agreement to pay certain additional rent stemming from the cost of electricity, but failed to do so. The lengthy and detailed subject "ELECTRICITY" provision specifies that electricity is furnished to tenant on a "rent inclusion basis" and that tenant's fixed annual rent is to be increased by an "Electricity Rent Inclusion Factor" ("ERIF"), a specific dollar amount "per rentable square foot" multiplied by the number of square feet of the demised space. This lease provision also provides that the ERIF may be adjusted by landlord pursuant to a formula that factors, among other things, the percentage change in landlord's electricity costs. According to tenant, as landlord's electricity costs rise, the lease provision at issue permits landlord to increase its profit margin on the sale of electricity to tenants.

Tenant's claims that the electricity provision permits landlord to reap an illegal windfall [*2]profit and that the provision is invalid because it does not expressly state that landlord may make a profit, are without merit (see Accurate Copy Serv. of Am., Inc. v Fisk Bldg. Assocs.,72 AD3d 456 [2010]; Adams, Stevens & Bradley Ltd. v Empire State Bldg. Co. LLC, 2009 NY Slip Op 33045[U] [2009]). That landlord profits pursuant to this agreed-upon formula affords tenant no defense to this proceeding (see George Backer Mgmt. Corp. v Acme Quilting Co., Inc., 46 NY2d 211, 218 [1978]; Accurate Copy Serv. of Am., Inc., supra). In this regard, we note that, "A lease agreement, like any other contract, essentially involves a bargained-for exchange between the parties. Absent some violation of law or transgression of a strong public policy, the parties to a contract are basically free to make whatever agreement they wish, no matter how unwise it might appear to a third party" (Rowe v Great Atlantic & Pac. Tea Co., Inc., 46 NY2d 62, 67-68 [1978]). Moreover, tenant's affirmative defense premised upon the alleged unconscionability of the electricity provision is devoid of merit (see Accurate Copy Serv. of Am., Inc., supra; see also Gillman v Chase Manhattan Bank, N.A., 73 NY2d 1, 12-13 [1988]). Therefore, landlord's motion to dismiss tenant's first and third affirmative defenses should have been granted. Tenant's second affirmative defense has been abandoned and must be also dismissed.

With respect to tenant's cross-appeal, since tenant's first and third affirmative defenses must be dismissed, tenant's disclosure requests are moot.

THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.
Decision Date: February 23, 2011