Trinity Ctr., LLC v Wall St. Cor Respondents, Inc.

[*1] Trinity Ctr., LLC v Wall St. Correspondents, Inc. 2004 NY Slip Op 51060(U) Decided on August 9, 2004 Supreme Court, New York County 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 August 9, 2004
Supreme Court, New York County

TRINITY CENTRE, LLC, PLAINTIFF,

against

WALL STREET CORRESPONDENTS, INC., DEFENDANT.



TRINITY CENTRE, LLC, PLAINTIFF, against

against

MARKUS KOCH, DEFENDANT.



113287/02



Pryor Cashman Sherman & Flynn Llp

Todd E. Soloway, Esq.

Mark A. Tamoshunas, Esq.

Attorneys for Plaintiff

410 Park Avenue

New York, New York 10022

Alfred W. Charles, Esq.

Attorney for Defendants

415 Madison Avenue 22nd Floor New York, New York 10017

Rolando T. Acosta, J.

Background[FN1]

Wall Street Correspondents ("WSC") is a media company providing media coverage from the New York financial markets for German and Swiss television, radio and print media. Markus Koch is the president of WSC. WSC had its office at 55 Broadway, but was looking to expand its business. On August 4, 2000, WSC entered into a five year lease to commence on October 15, 2000, with the owners of 111 Broadway, for commercial space on the 17th floor; the new space was about twice the size of the space at 55 Broadway. Subsequent to the signing of the lease, Trinity Centre became the owners of 111 Broadway. On the same day WSC entered into the lease, Koch executed a guaranty of WSC's obligations under the lease through and including the vacate date. It was WSC's intention to sublet their space at 55 Broadway, but was unable to do so. Consequently, WSC was paying rent at both locations although its employees were working only out of 111 Broadway.

Pursuant to Article 9 of the lease, entitled Destruction, Fire and Other Casualty, WSC waived [*2]"the provisions of Section 227 of the Real Property Law[FN2] and agrees that the provisions of this article shall govern and control in lieu thereof." Under the provision of the lease, if WSC's space was damaged by fire or other casualty, WSC was not allowed to terminate the lease, but merely relieved of the obligation to pay rent until the space was restored. Trinity was required to "make repairs with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond [its] control." Article 9 of the lease also states that "Tenant's liability for rent shall resume five (5) days after written notice by the Owner that the premises are substantially ready for tenant's occupancy."

Notice is governed by Article 28 of the lease, which states that when Trinity is required to give WSC notice, it do so personally or by registered or certified mail, with return receipt requested (see insert 29 of the lease).

On September 11, 2001, approximately one year after WSC signed the lease, the World Trade Center was attacked and the United States Army and the New York City Police cordoned off the area where both locations were situated. As a result of the attack, there was no electrical, telephone or internet service. From September 21 to October 1, 2001, tenants were allowed in the restricted zone to remove whatever they wanted. On October 6, 2001, Trinity Centre, through its agents, sent WCS a letter (dated October 5) by certified mail that "our plan is to have the building back in full operation and available for you on October 10, 2002." The letter went on to say that "you may plan to resume your tenancy at that time" and that Trinity "was in the process of calculating any rent credit to which you may be entitled for the period through October 9, 2001." Although the letter appears to have been sent by certified mail, the record does not show that it was mailed with "return receipt requested," as required by insert number 29 of the lease.[FN3]

According to Trinity, on October 10, 2001, the elevators, HVAC system, electrical power, and heat and hot water were all operational. The telephone and internet services, however, were still not fully operational, but those services were not provided by Trinity. Trinity, who had its offices at 111 Broadway, asserted that it had its telephone and internet service restored before October 10, [*3]2001, and MCI was able to restore telephone service to various tenants within 3-5 days after October 1, 2001.

WSC maintains that without telephone and internet service it would have gone out of business. In addition, WSC argued that ``the door and ceiling in its office space were damaged, the air quality made it impossible to breath and the air was not being filtered on the 17th floor (an allegation which Trinity disputes), there was no mail service, and its telephone and internet providers informed it that because of the tremendous backlog, they could not say when they would restore service. On October 22, WSC vacated the 111 Broadway space and moved back to its space at 55 Broadway. In his affidavit in support of it cross-motion, Koch stated that WSC had been able to get telephone and internet service at that location by October 5. At his deposition, however, he admitted that there was no telephone or internet service at 55 Broadway for at least a week after WSC moved back. According to WSC, "the old space at 55 Broadway was grossly insufficient for our current needs, but we had to make due we had no choice. Our customers were threatening to leave us unless we got back into business, because they were paying for services which they were not getting."

On November 19, 2001, WSC gave Trinity notice that it had vacated the premises and set February 18, 2002 as the vacate date for Koch under the guarantee. Trinity, however, rejected the surrender of the lease on November 30, 2001, January 29, 2002, and again on April 10, 2002 noting that under the express terms of the lease there must be a surrender agreement in writing by Trinity. According to Trinity, WSC was experiencing a slowdown in business and used the 9/11 events to attempt to get out of its lease.

On or about January 17, 2002, Trinity served a Ten Day Notice to Tenant upon WSC seeking payment of rent arrears. This action was commenced against WSC on February 19, 2002, and against Koch on June 18, 2002. Trinity is seeking liquidated damages of $109,569.05 for fixed rent, additional rent and other charges as well as attorney's fees from WSC pursuant to the lease, and $48,525.10 from Koch as guarantor. In its answer, defendants assert the defenses of actual and constructive eviction, and that the lease was surrendered on November 19, 2001.

Plaintiff's Motion for Summary Judgment

It is well settled that the proponent of a motion for summary judgment must establish that "there is no defense to the cause of action or that the cause of action or defense has no merit," (C.P.L.R. §3212[b]), sufficiently to warrant the court as a matter of law to direct judgment in his or her favor. Bush v. St. Claire's Hospital, 82 N.Y.2d 738, 739 (1993); Winegrad v. New York University Medical Center, 64 N.Y.2d 851, 853 (1985). This standard requires that the proponent of the motion "tender[] sufficient evidence to eliminate any material issues of fact from the case," id., "by evidentiary proof in admissible form." Zuckerman v. City of New York, 49 N.Y.2d 557, 562 (1980). Thus, the motion must be supported "by affidavit [from a person having knowledge of the facts], by a copy of the pleadings and by other available proof, such as depositions." C.P.L.R. §3212(b).

Where the proponent of the motion makes a prima facie showing of entitlement to summary judgment, the burden shifts to the party opposing the motion to demonstrate by admissible evidence the existence of a factual issue requiring a trial of the action, or to tender an acceptable excuse for his or her failure to do so. Vermette v. Kenworth Truck Company, 68 N.Y.2d 714, 717 (1986); Zuckerman v. City of New York, supra, 49 N.Y.2d at 560, 562. Like the proponent of the motion, [*4]the party opposing the motion must set forth evidentiary proof in admissible form in support of his or her claim that material triable issues of fact exist. Id. at 562.

Here, Trinity made a prima facie showing of entitlement to summary judgment on the issue of liability. Specifically, it established, through admissible evidence, that WSC entered into a valid lease and has not paid rent and additional rent since September 1, 2001, and that Koch, as the guarantor, is liable for any rent and additional rent due from the September 1, 2001 through February 18, 2002, the vacate date.

Moreover, inasmuch as Trinity or its agents have never wrongfully physically prevented WSC from occupying the premises, there has been no actual eviction. Barash v. Pennsylvania Terminal Real Estate Corp, 26 N.Y.2d 77 (1970); Sapp v. Propeller Co. LLC, 5 A.D.3d 181 (1st Dept. 2004). In fact, shortly after the attack, tenants were allowed back into the premises to remove property and the building was reopened for occupancy on October 10, 2002. That the United States Army and the New York City Police Department restricted access to the area for several weeks does not amount to actual eviction. See 74 N.Y. Jur. 2d., Landlord and Tenant, § 296 (1999)(acts of public authorities in the exercise of the police power, which decrease the value or utility to a tenant of the demised premises . . . do not amount to an eviction); see also Dolman v. United States Trust Co., 2 N.Y.2d 110, 114 (1956).

There was also no constructive eviction because WSC waived any casualty related constructive eviction claim. Schwartz, Karlan & Gutstein v. 271 Venture, 172 A.D.2d 226 (1st Dept. 1991); see also Real Property Law § 227; RVC Associates v. Rockville Anesthesia Group, 267 A.D.2d 370 (2nd Dept. 1999); Milltown Park, Inc. v. American Felt and Filter Co., 180 A.D.2d 235 (3rd Dept. 1992); Rodriguez v. Nachamie, 57 A.D.2d 920 (2nd Dept. 1977). Pursuant to Article 9 of the lease, entitled Destruction, Fire and Other Casualty, WSC waived "the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lie thereof." Under the provision of the lease, if WSC's space was damaged by fire or other casualty, WSC was not allowed to terminate the lease, but merely relieved of the obligation to pay rent until the space was restored. Trinity was required to "make repairs with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond [its] control." Thus, by the express terms of the lease, WSC waived any constructive eviction claim based on casualty and, instead is entitled pursuant to the lease to a rent abatement for the period that the space was unusable.[FN4]

Last, Trinity never accepted surrender of the premises in writing as required by the lease. See Lease at paragraph 25 (Exhibit A). Nor has there been a surrender of the premises by operation of law because Trinity never demonstrated an intent through its actions to accept surrender of the space. Reiseler v. 60 Gramercy Park North Corp, 88 A.D.2d 312 (1st Dept. 1982). Indeed, "merely quitting [*5]the premises does not constitute a valid surrender and does not relieve the tenant of its obligations under the lease." Personnel Corp. of Am. v. Robert Fraser Holdings Ltd, No. 92 Civ. 3449, 1993 WL 88264 (S.D.N.Y. March 25, 1993), amendment denied, 1993 WL 147478 (S.D.N.Y. April 30, 1993).

Here, Trinity rejected WSC's attempt to surrender on November 30, 2001, January 29, 2002, and again on April 10, 2002. Indeed, WSC has conceded that Trinity has refused to accept surrender of the lease and, as such, the lease is still in effect.

Thus, Trinity having established prima facie entitlement to summary judgment, the burden shifted to WSC and Koch to establish a triable issue of fact, which defendants have failed to do with respect to their liability under the lease. In fact, defendants do not address Trinity's position that there was no actual eviction. As for constructive eviction, defendants appear to make several arguments.

First, they argue that they were not given proper notice under Articles 9 and 28 of the lease that the building was operable. Instead, Trinity notified WSC that the premises were ready on October 10, 2001, by e-mail dated October 17, 2001. Thus, according to WSC, the notice was defective because it was not served personally or by registered or certified mail[FN5] and, inasmuch as WSC had no internet service, it never received the e-mail.

In reply, however, Trinity attached a copy of a letter dated October 5, 2001, informing WSC that its plan was to have the building fully operational on October 10, 2001, and that WSC "may plan to resume your tenancy at that time." The letter appears to have been sent by certified mail on October 6, 2001, but there is no indication that it was done by "return receipt requested." See Exhibit C in Plaintiff's Reply. Trinity's failure to give proper notice under the lease does not invalidate the lease. It merely raises an issue of fact as to when defendants were obligated to resume paying under the lease.

Defendants also argue that Trinity did not explain how it arrived at the amounts that it is seeking from defendants. Even if true, calculations only go to damages not liability. The amount, nevertheless, is derived from the lease and the rent history, both of which are attached to Trinity's motion. Next, defendants claim that Trinity charged WSC for electrical charges even though WSC was not using the space. The lease, however, charged a flat rate for electrical usage that was not based on use. See Lease at Paragraph 38(a).

Defendants also claim that "[a]nother triable issue of fact is whether the Landlord truly completed the necessary repairs to reopen the building for occupancy. The air quality in the building was still horrible; the ceiling in the premises was still broken with electrical wires hanging out; there was no telephone, internet and IDSN service; there was no mail service; etc." WSC's proof of ceiling damage consisted of a photograph depicting a missing ceiling panel with a protruding electrical box. There was also some indication that their door was damaged and Koch stated by [*6]affidavit that "the poor air quality in our office made it impossible for us to breathe." Weak as this evidence may be, there are nonetheless issues of fact as to the extent of the damages to WSC's space, the air quality,[FN6] and to what extent, if any, are defendants entitled to an abatement in excess of the credit extended by Trinity. See RVC Associates v. Rockville Anestesia Group, supra, 267 A.D.2d at 371-72.

Defendant's Cross-Motion for Summary Judgment

Defendant cross-moves for summary judgment declaring the lease null and void by reason of impossibility of performance. Defendant's, however, never raised this defense in their answer. In fact, by this motion, defendants are seeking leave of the court for permission to amend the existing answer to include these claims. Defendants' request to amend their answer is denied for the following reasons. First of all, this claim could have easily been made earlier, even prior to extensive discovery. Moreover, defendants fail to offer an explanation for failing to raise this claim earlier.

Plaintiff, on the other hand would be prejudiced by allowing the amendment, especially given the weakness of defendants' impossibility of performance claim. Although the terrorist act caught the whole city by surprise, the lease between the parties in fact anticipated a potential casualty. By the express terms of the lease, WSC would receive a rent abatement for the period during which the space was unusable. WSC's claim that its need for telephone and internet service, air quality, and damage to the space made its occupancy under the lease impossible fails for several reasons. First, it obtained telephone and internet service at 55 Broadway about a week after it moved there on October 22, 2001. There is no indication in the record that restoration of service at 111 Broadway would have taken longer. Second, the air quality at 55 Broadway, just two blocks south of 111 Broadway could not have been much better. Last, the minor damages refer to by WSC would not have prevented it from operating its business.

The tragic events of 9/11 do not relieve defendants of their obligations under the lease. In their application for federal assistance, WSC stated that after September 11, as the operations at WSC "scaled down, the company has fewer employees and our lease for 55 Broadway is still running we decided to go back to this smaller space." A down turn in the economy partially resulting from the 9/11 tragedy, however, is not a valid reason for relieving a party from its responsibilities under a lease. Defendants' request to amend their answer is, therefore, denied.

This constitutes the decision, judgment and order of the Court.

__________________________

Dated: August 9, 2004 Hon. Rolando T. Acosta, J.S.C. Footnotes

Footnote 1:1. This decision was edited for publication

Footnote 2:2. RPL § 227, When Tenant May Surrender Premises, states: Where any building, which is leased or occupied, is destroyed or so injured by the elements, or any other cause as to be untenable, and unfit for occupancy, and no express agreement to the contrary has been made in writing, the lessee or occupant may, if the destruction or injury occurred without his or her fault or neglect, quit and surrender possession of the leasehold premises, and of the land so leased or occupied; and he or she is not liable to pay to the lessor or owner, rent for the time subsequent to the surrender. Any paid rent in advance or which may have accrued by the terms of the lease or any other hiring shall be adjusted to the date of such surrender (emphasis added).

Footnote 3:3. Although plaintiff attached a "return receipt requested" card to it's reply affidavit with WSC' name and address on it, the card did not have the certification number on it nor was it signed by WSC. Plaintiff did not provide an explanation for its failure to complete the card and only casually addressed the issue on reply. Furthermore, the print on the Certified Mail Receipt attached as an exhibit is not very clear.

Footnote 4:4. Had WSC not waived RPL § 227, there may have been a triable issue of fact regarding constructive eviction notwithstanding Barash v. Pennsylvania Terminal Real Estate Corp, supra, 26 N.Y.2d at 83. See, e.g. Duane Fabs Properties Corp. v. Cronus Consulting LLC, N.Y.L.J., 9/11/02, p. 18, col. 5; Trinity Centre, LLC v. Laidlaw Capital Management Inc, N.Y.L.J., 6/19/02, p.18, col. 6; but see WFKC Office Ltd. v. Law Office of Mark Landesman P.C., Index No. 100427/01 (Civ Ct NY 2/15/02)(Rakower, J.). Inasmuch as this Court finds that WSC waived the claim, however, it need not reach this issue.

Footnote 5:5. As this Court noted in Bellstell 140 East 56th Street, LLC v. Layton, N.Y.L.J., 2/17/99, p. 32, col. 5 (Civ. Ct., N.Y. Co.), "[i]t is well settled that a landlord and a tenant may, by the terms of their lease, agree to a more specific manner of service of notices, and that those terms are generally enforceable. . . ," citing Chumley's Bar and Restaurant Corp. v. Bedford Court Associates, 174 A.D.2d 398 (1st Dept. 1991); Hendrickson v. Lexington Oil Co., Inc., 41 A.D.2d 672 (2d Dept. 1973); B & A Realty Co. v. Castro, N.Y.L.J., 5/9/95, p. 25, col. 1 (App. Term, 1st Dept.).

Footnote 6:6. It should be noted that the air quality could not have been much better two blocks south at 55 Broadway, especially since Trinity had installed air filters in the building.