555 Prospect Assoc., L.L.C. v Interfaith Med. Ctr., Inc.

[*1] 555 Prospect Assoc., L.L.C. v Interfaith Med. Ctr., Inc. 2005 NY Slip Op 51926(U) [10 Misc 3d 1053(A)] Decided on November 25, 2005 Civil Court, Kings County Bluth, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 25, 2005
Civil Court, Kings County

555 Prospect Associates, L.L.C., Petitioner-Landlord,

against

Interfaith Medical Center, Inc., Respondent-Tenant.



L&T72739/05

Arlene P. Bluth, J.

Upon the foregoing cited papers and after argument, petitioner 555 Prospect Associates, L.L.C. moves for an order striking respondent's first and only affirmative defense and granting petitioner summary judgment; respondent Interfaith Medical Center, Inc. cross-moves for summary judgment dismissing the petition. For the following reasons, the petition is dismissed.

A. Statement of Facts [*2]

This is a summary holdover proceeding for recovery of a commercial space located at 555 Prospect Place, Brooklyn, New York. Apparently, the tenant/respondent previously owned the premises and sold it to the landlord/petitioner. Prior to the sale, however, the parties entered into a possession agreement dated April 10, 2002 ("Possession Agreement") whereby the buyer/petitioner would allow the seller/respondent to remain in possession of the premises free of charge for three years, until April 10, 2005; if the seller/respondent did not vacate by April 10, 2005, then it would be responsible for a charge of $2,000.00 per day.[FN1] The petition alleges that respondent "is the tenant . . . for a term starting heretofore, ending April 10, 2005" and that respondent holds over past April 10, 2005 without petitioner's permission. Thus, petitioner bases this proceeding on the sole ground that the term of the Possession Agreement has expired.

The term of the Possession Agreement, however, was modified by a one-page letter agreement between the parties dated May 17, 2004 ("Modification Agreement"). The Modification Agreement extended the respondent's term to the later of "(a) April 10, 2005 and (b) the day that shall be thirty (30) days after the 'Commencement Date' (as such term is defined in the Occupancy Lease)." The Occupancy Lease is a separate contract, also executed on May 17, 2004, between respondent as tenant and 1545 Atlantic Development, L.L.C. (hereinafter "1545 Atlantic"), a corporation affiliated with petitioner, as landlord and developer.[FN2]

Under the Occupancy Lease, 1545 Atlantic was to build and develop a new space at 1545 Atlantic Avenue, Brooklyn, New York ("New Space") for respondent to move into upon its vacatur of 555 Prospect Place. The "Commencement Date" referred to in the Modification Agreement is defined in the Occupancy Lease for the New Space as (a) 30 days after 1545 Atlantic gives respondent written notice that the New Space is ready or (b) the date on which respondent opens for business in the New Space.

Neither party claims the Commencement Date for the New Space has passed. Therefore, in its answer as an affirmative defense, and in its cross-motion, respondent invokes the Modification Agreement and asserts that it is fully entitled to remain in possession of the premises for free.

In support of its motion, petitioner argues that respondent is equitably estopped from relying on the Modification Agreement. Petitioner bases its argument on respondent's admitted [*3]requests to 1545 Atlantic to stop construction of the New Space, which petitioner claims it relied upon to its detriment. On September 23, 2004, four months after the Modification Agreement was executed, respondent's then-counsel wrote to 1545 Atlantic requesting that the latter stop construction on the project "due to unforseen financial issues that have arisen at the hospital." The letter continued: "Of course, we will be in touch with you very soon to attempt to resolve these difficulties and work out any necessary steps under the contract."

Respondent apparently followed up on the matter, because on November 4, 2004, 1545 Atlantic wrote to respondent as follows: "This confirms I have been advised by you to proceed with the construction work at the premises as pursuant (sic) to the terms of the lease. I shall treat the letter, dated September 23, 2004 . . . as a nullity." Four days later, however, on November 8, 2004, respondent's counsel wrote to 1545 Atlantic once again requesting that construction be suspended: "In reply to your letter of November 4th, you should be advised that the Hospital, wanting to proceed very cautiously in this matter, still requests you not to proceed with construction work at this time. The reason for this is that they have not received full and final approval from the Dormitory Authority and in the absence of this full and final approval, they are reluctant to incur any additional costs. I am hopeful that we will be able to receive the required approval in a matter of weeks."[FN3]

In response to respondent's November 8, 2004 request to stop construction, 1545 Atlantic suspended construction of the New Space. Petitioner claims that since construction of the New Space ceased at respondent's request, petitioner expected respondent would vacate the subject premises on April 10, 2005, the date provided for in the April 2002 Possession Agreement.[FN4] Because it is unfair to reward respondent with free space indefinitely when it is respondent who caused the construction delay, petitioner argues that respondent is equitably estopped from relying on the Modification Agreement.

B. Legal Analysis

An estoppel "is imposed by law in the interest of fairness to prevent the enforcement of [*4]rights which would work fraud or injustice upon the person against whom enforcement is sought and who, in justifiable reliance upon the opposing party's words or conduct, has been misled into acting upon the belief that such enforcement would not be sought." Nassau Trust Co. v Montrose Concrete Prod. Corp., 56 NY2d 175, 184, 451 NYS2d 663, 667 [1982]. Here, petitioner has not shown any indication that respondent even unwittingly misled petitioner into believing that respondent had repudiated the Modification Agreement or that it intended to vacate on April 10, 2005. To the contrary, respondent's two letters requesting that construction be suspended[FN5] in no way indicated or implied that it was repudiating the Modification Agreement; in fact, both letters expressed a desire to resolve the temporary problems and be able to proceed with the project. See 9/23/04 Letter ("[W]e will be in touch with you very soon to attempt to resolve these difficulties and work out any necessary steps under the contract"); 11/8/04 Letter ("I am hopeful that we will be able to receive the required approval in a matter of weeks."). Therefore, if petitioner relied upon those letters to assume respondent was vacating on April 10, 2005, then such reliance was not justified. Indeed, even 1545 Atlantic, which claims to have changed its position by suspending construction for the New Space, could not credibly argue that the above correspondence misled it into thinking the deal was off.

Not only has petitioner failed to show justifiable reliance that respondent would vacate by April 10, 2005, it also has not shown that it took any action to its detriment in purported anticipation of respondent's vacatur. To establish an equitable estoppel, "a party must prove that it relied upon another's actions, [that] its reliance was justifiable, and that, in consequence of such reliance, it prejudicially changed its position." Town of Hempstead v Incorporated Village of Freeport, 15 AD3d 567, 570, 790 NYS2d 518, 520 [2nd Dept 2005]. See also Chadirjian v Kanian, 123 AD2d 596, 506 NYS2d 880 [2nd Dept 1986]. The instant holdover petition is not concerned with the suspension of construction of the New Space; it is concerned only with the occupancy of the current space. Therefore, in order to support the application of equitable estoppel, petitioner 555 Prospect Associates, L.L.C. must show that it prejudicially changed its position in anticipation of respondent's anticipated compliance with the Possession Agreement and expected vacatur by April 10, 2005. This it has not done.

Petitioner has shown not a single action directly related to anticipating respondent's vacatur. A change in position anticipating the vacatur would be, for example, entering into a lease for the space at 555 Prospect Place with another tenant, with occupancy to begin after April 10, 2005 or at least marketing the space in search of a new tenant, making plans to demolish the building, or selling the building, relying upon the vacatur date. If petitioner truly believed that respondent had repudiated the Modification Agreement and if petitioner truly changed its position in reliance thereon, then at least there would be some correspondence before April 10, 2005 tending to show that petitioner was expecting respondent to leave. There is none. [*5]

Moreover, even if this Court were to impute 1545 Atlantic's conduct to petitioner, equitable estoppel still would not be appropriate. That 1545 Atlantic may have temporarily

stopped construction is not directly attributable to any purported reliance on the belief that respondent had repudiated the Modification Agreement. 1545 Atlantic could have temporarily stopped construction for many reasons even if it fully believed that the deal would eventually go through. If 1545 Atlantic truly believed that respondent had abandoned its plans to move into the New Space and truly changed its position in reliance thereon, then 1545 Atlantic would have sought to market the New Space to others and attempted to collect the costs respondent was obligated to pay if it backed out of the deal. 1545 Atlantic did neither. Therefore, the Court rejects petitioner's argument for equitable estoppel, and declines to strike respondent's affirmative defense invoking the Modification Agreement. That having been the sole ground for petitioner's motion for summary judgment, the motion is denied.

C. Conclusion

The petition is based solely on the expiration of the term of the April 2002 Possession Agreement that is, there is a holdover simply because respondent remains on the premises after April 10, 2005. However, in light of this Court's holding that petitioner is bound by the Modification Agreement and that respondent's term does not end until the later of April 10, 2005 or the Commencement Date for its New Space being developed by 1545 Atlantic, the instant petition fails to state a cause of action and must be dismissed.[FN6]

Based on the foregoing, petitioner's motion is denied, the petition is dismissed, and the Court need not reach the remaining arguments in respondent's cross-motion.

This is the Decision and Order of the Court.

Dated: November 25, 2005ARLENE P. BLUTH

Judge, Civil Court Footnotes

Footnote 1: The Possession Agreement is in the form of and is denominated a stipulation of settlement, contains a caption, provides for the commencement of a holdover proceeding with the stipulation submitted in lieu of an answer, is signed by the parties' attorneys, and provides for the entry of a judgment of possession with the execution of the warrant of eviction stayed for three years, until April 10, 2005. Since no proceeding was commenced at that time, the Court, like the parties, considers the Possession Agreement a contract entered into by the parties by their authorized agents, the attorneys-signatories.

Footnote 2: It is undisputed that 1545 Atlantic shares the same managing member as petitioner.

Footnote 3: The Occupancy Lease is conditioned, by its terms, upon respondent's obtaining all the necessary governmental approvals, which respondent agreed to pursue diligently and in good faith. The Occupancy Lease also provided that if respondent were ultimately denied approval, it would be responsible for all construction costs incurred until the date of denial. Respondent states, and petitioner does not deny, that all approvals have since been received .

Footnote 4: Actually, the motion papers are supported only by affirmations by counsel and lack an affidavit from anyone with personal of what petitioner relied upon or expected to happen. Nevertheless, in the interest of judicial economy, this Court will assume for the purposes of these motions that what counsel says about petitioner that "having heard nothing else from respondent, it was expected that respondent would vacate the subject premises on April 10, 2005 since the construction had ceased at respondent's request" is in fact true (Moving affirmation, para. 9).

Footnote 5: The Court notes that neither letter was addressed to petitioner both were sent to 1545 Atlantic. Technically, then, respondent did not make any representations to petitioner at all, further weakening petitioner's claim that equitable estoppel should apply. As noted above, however, the interrelationship between 1545 Atlantic and petitioner is undisputed.

Footnote 6: In so holding, this Court need not reach the question of whether petitioner could prevail in a holdover based on another theory such as respondent's alleged breach of the Modification Agreement.