Sterling Natl. Bank v Fashion Assoc.

[*1] Sterling Natl. Bank v Fashion Assoc. 2007 NY Slip Op 52242(U) [17 Misc 3d 1133(A)] Decided on November 19, 2007 Supreme Court, New York County DeGrasse, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 19, 2007
Supreme Court, New York County

Sterling National Bank, Plaintiff,

against

Fashion Associates, Defendant.



602395/05

Leland G. DeGrasse, J.

Defendant Fashion Associates (landlord) moves, pursuant to CPLR 3212, for summary judgment dismissing the complaint and for summary judgment on its counterclaims. Plaintiff Sterling National Bank (tenant) cross-moves for summary judgment dismissing defendant's counterclaims, and for declaratory relief.

FACTS

Plaintiff, pursuant to two commercial leases, dated February 15, 1985, was the tenant of the 11th, 12th and 13th floors of defendant's building located at 148 West 37th Street, New York, New York. One lease covered the 11th and 12th floors, and the other lease covered the 13th floor. On July 30, 1993, the parties entered into a lease modification agreement whereby the parties substituted the 13th floor leasehold for the 11th floor leasehold, thus creating a modified lease for the 12th and 13th floors. The 11th floor leasehold was substituted for the 13th floor leasehold, thus creating a modified lease for the 11th floor. Pursuant to the terms of the modification agreement, plaintiff was allowed to terminate the 11th floor lease prior to the expiration of the lease term, and the lease term for the 12th and 13th floor lease was extended for a ten-year period. In May 2005, plaintiff surrendered the 12th and 13th floor premises, thus terminating the 12th and 13th floor lease.

On July 1, 2005, plaintiff commenced the present action against defendant seeking a judgment declaring that (1) plaintiff is not responsible for restoring the 12th and 13th floor premises upon terminating the lease, (2) plaintiff fully performed under the parties' lease agreement, and (3) plaintiff is released from all liability and has no further obligations under the agreement. Plaintiff also seeks to recover the costs, disbursements and attorney fees that it incurred in bringing this action.

In its answer, dated July 27, 2005, defendant interposed three counterclaims for damages alleging that plaintiff is liable on the first counterclaim (breach of the lease) in an amount not less [*2]than $160,000 for failure to perform the restoration work required under Article 12 of the 12th and 13th floor lease. The second counterclaim (loss of rental income) alleges that plaintiff is liable for damages in an amount not less than $21,281.67 for the six-month period in which defendant did not receive rent, because of the restoration work it had to perform to the premises. The third counterclaim (attorneys' fees) alleges that pursuant to Article 40 of the lease, plaintiff is liable for the legal expenses incurred by defendant in connection with this action.

With respect to its counterclaims, defendant seeks to recover the cost for restoring the premises to a rentable condition pursuant to the lease, and lost rental income from July 2005 to December 2005. Plaintiff asserts that it fully performed under the parties' 12th and 13th floor lease, and was not responsible for restoring the 12th and 13th floors prior to terminating the lease.

DISCUSSION

Summary Judgment Standard

The law is well-settled that summary judgment is a drastic remedy to be granted only when there is clearly no genuine issue of fact to be presented at trial (see Andre v Pomeroy, 35 NY2d 361 [1974]; Benincasa v Garrubbo, 141 AD2d 636 [1988]). "When reviewing a motion for summary judgment the focus of the court's concern is issue finding, not issue determination, and the affidavits should be scrutinized carefully in the light most favorable to the party opposing the motion" (Robinson v Strong Mem. Hosp., 98 AD2d 976, 977 [1983], quoting Goldstein v County of Monroe, 77 AD2d 232, 236 [1980]). The burden on a motion for summary judgment rests initially upon the moving party to come forward with sufficient proof in admissible form to enable a court to determine that it is entitled to judgment as a matter of law (Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957], rearg denied 3 NY2d 941 [1957]). Failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers (Winegrad, 64 NY2d at 853). However, once a moving party has made a prima facie showing of its entitlement to summary judgment, "the burden shifts to the opposing party to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action" (Garnham & Han Real Estate Brokers v Oppenheimer, 148 AD2d 493, 494 [1989]; see also Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

Defendant argues that plaintiff breached the 12th and 13th floor lease by failing to restore the 12th and 13th floor premises to a rentable condition in compliance with Article 12 of the lease. As a result of plaintiff's failure to perform its restoration obligations under the lease, defendant claims that it is entitled to recover damages for (1) having to perform removal and restoration work at the premises, (2) loss of rental income due to the six-month period it took to restore the premises, and (3) attorneys' fees pursuant to Article 40 of the lease. Defendant further claims that plaintiff's defense of its breach is purportedly based upon paragraph 4 of the modification agreement which "is applicable only to the 11th [f]loor [p]remises and has nothing at all to do with the removal and restoration requirement of the 12th/13th [f]loor [l]ease."

Plaintiff counters that paragraph 4 of the modification agreement relieves plaintiff from any restoration obligation under Article 12 of the lease. Plaintiff further argues that defendant's notice letter, dated April 14, 2005, purportedly given pursuant to Article 12, was insufficient to trigger plaintiff's restoration obligations, because it "did not reproduce the language of the lease that the [*3]notice purportedly was relying upon and failed to specify exactly what [defendant] wished for [plaintiff] to do with respect to Article 12." Plaintiff also argues that if the court should find that plaintiff was responsible for restoring the 12th and 13th floor premises prior to terminating the lease, an inquest should be held to determine the amount of damages that defendant is entitled to since a considerable portion of defendant's claimed damages concern demolition work that plaintiff was not contractually obligated to perform. Finally, plaintiff argues that defendant's claim of loss of rental income is baseless, given the fact that defendant has failed to submit any evidence showing that its failure to re-rent the subject premises for six months was a result of anything other than the prevailing market demand.

"A lease, like any other contract, is to be interpreted in light of the purposes sought to be attained by the parties" (Farrell Lines, Inc. v City of New York, 30 NY2d 76, 82 [1972]). In searching for the probable intent of the parties the fair and reasonable meaning of the words control (Sutton v East River Savings Bank, 55 NY2d 550 [1982]). When the terms of the contract are clear and unambiguous the intent of the parties must be found within the four corners of the contract (Greenfield v Philles Records, Inc., 98 NY2d 562 [2002]; Slamow v Delcol, 174 AD2d 725, affd 79 NY2d 1016 [1991]; Wood v Maggie's Tavern, Inc., 257 AD2d 733 [1999]). Clear language does not become ambiguous just because the parties argue differing interpretations (Bethlehem Steel Co. v Turner Construction Co., 2 NY2d 456 [1957]; Wilhelmina Artist Mgt., LLC v Knowles, 8 Misc 3d 1012 (A) [2005]). However, in cases of doubt or ambiguity, a contract must be construed most strongly against the party who prepared it and favorably to a party who had no voice in the selection of its language (67 Wall Street Co. v Franklin Natl. Bank, 37 NY2d 245 [1975]; Lai Ling Cheng v Modansky Leasing Co., Inc., 73 NY2d 454 [1989]; Croman v Wacholder, 2 AD3d 140 [2003]; Mario & Di Bono Plastering Co., Inc. v Rivergate Corp., 140 AD2d 164 [1988]). The proper aim of the court is to give fair meaning to all of the language employed by the parties, and to reach a "practical interpretation of the expressions of the parties" (Brown Bros. Elec. Constrs. v Beam Constr. Corp., 41 NY2d 397, 400 [1977]).

Article 12 of the 12th and 13th floor lease agreement, entitled "Alterations" provides the following: "TWELFTH: (a) Tenant shall make no alterations, decorations, installations, additions or improvements in or to the demised premises, including, but not limited to, an air-conditioning or cooling system, unit or part thereof or other apparatus of like or other nature, not bring materials in connection therewith on the demised premises, without Landlord's prior written consent, and then only by contractors or mechanics approved by Landlord, and subject to plans and specifications approved by Landlord. All such work, alterations, decorations, installations, additions or improvements shall be done at Tenant's sole expense and at such times and in such manner as Landlord may from time to time designate. All alterations, decorations, installations, additions or improvements upon demised premises, made by either party, including all paneling, decorations, partitions, railings, mezzanine floors, galleries, steam, water and air conditioning systems and units, shelving, electric fixtures and the like, excepting desks, office equipment, computer equipment, business machines [and] trade fixtures shall, unless Landlord elect or otherwise (which election shall be made by giving notice pursuant to the provisions hereof not [*4]less than thirty (30) days prior to the expiration or other termination of this lease or any renewal or extension thereof) become the property of Landlord, and shall remain upon, and be surrendered with, said premises, as a part thereof, at the end of the term or renewal term, as the case may be. In the event Landlord shall elect otherwise, then such alterations, installations, additions or improvements made by Tenant upon the demised premises as the Landlord shall select, shall be removed by Tenant at Tenant's sole cost and expense. All alterations, decorations, installations, additions or improvements installed by Tenant may be used by Tenant without additional charge for such use, and without any right in the Landlord to remove the same in the absence of any default under this lease during the term hereof."(b) Tenant, at its own expense, will promptly repair all damage and injury resulting from such removal and restore the space theretofore occupied by such fixtures and installations to good order and condition and to character and appearance equal to that of the area adjacent thereto, in default of any of which Landlord may at its option cause the same to be done at Tenant's expense."

The modification agreement, which was prepared by plaintiff's attorney, Mr. Samuel Schneeweiss, who according to plaintiff is "a venerable, seasoned attorney with considerable real estate and commercial lease experience," provides, in pertinent part:

"WHEREAS, Landlord and Tenant entered into an agreement of lease made as of February 15, 1985 (the "11th-12th Floor Lease"), 148 West 37th Street, New York, New York (the "Building"), a copy of which lease is annexed hereto as Exhibit A; and

"WHEREAS, Landlord and Tenant entered into an agreement of lease made as of February 15, 1985, covering the thirteenth floor of the Building (the "13th Floor Lease"), a copy of which lease is annexed hereto as Exhibit B; and

"WHEREAS, the parties wish (I) to substitute the 13th floor for the 11th floor to Exhibit A (hereinafter referred to as the "12th-13th Floor Lease" or the "Exhibit A Lease"), (ii) to substitute the 11th floor for the 13th floor in Exhibit B (hereinafter referred to as the "11th Floor Lease" or the "Exhibit B Lease"), and (iii) to extend the term of the 12th-13th Floor Lease, all in accordance with the terms and conditions hereinafter set forth; and

"WHEREAS, subject to the terms and conditions hereinafter set forth, the parties wish to terminate the Exhibit B Lease [the 11th floor lease]; and

"3. Effective as of the first day of the month next succeeding the issuance by the NYCDB [the New York City Department of Buildings] of the Amended C/O [Certificate of Occupancy for the Building] (said first day of said month hereinafter the Extension Commencement Date'), the Exhibit A Lease [the 12th-13th floor lease] shall be deemed extended for a term ending on the date [*5]immediately preceding the tenth anniversary of the Extension Commencement Date.

"4. Provided that said Amended C/O has been issued and the Exhibit A Lease [the 12th-13th floor lease] has been extended as provided above, the Exhibit B Lease [the 11th floor lease] shall be deemed terminated (unless sooner terminated pursuant to Paragraph 1 hereof) as of the later of: ( I) the date when Tenant surrenders the 11th floor, vacant and broom clean, or (ii) the date which is thirty (30) days after the Extension Commencement Date, as though the Exhibit B Lease [the 11th floor lease] had ended in accordance with its terms and Tenant shall have no obligation to remove any alterations, installations, additions or improvements made upon the demised premises by Tenant or by Landlord on behalf of Tenant; provided, however, that Tenant shall enclose the connecting stairway between the 11th and 12th floors. In the event that the date of termination shall occur prior to the last day of the month, all monetary obligations shall be apportioned as of the date of termination. The termination of the Exhibit B Lease [the 11th floor lease] shall not affect Tenant's obligations under said Exhibit B Lease [the 11th floor lease] arising prior to the effective date of said termination, all of which obligations shall survive said termination."

The central issue in this action is whether plaintiff was relieved from its obligation to surrender the subject premises in a rentable condition in compliance with Article 12 of the lease when the parties executed a modification agreement in July 1993. The relevant clauses in the lease and modification agreements are clear and unambiguous. Article 12 of the lease agreement concerns alterations made to the 12th and 13th floor premises and provides that in the event defendant requires that plaintiff remove its alterations from the 12th and 13th floors prior to terminating the lease, "[plaintiff], at its own expense, will promptly repair all damage and injury resulting from such removal and restore the space to good order and condition and to character and appearance equal to that of the area adjacent thereto." Paragraph 4 of the modification agreement deals exclusively with plaintiff's rights and obligations under the 11th floor lease and expressly provides that if plaintiff has enclosed the connecting stairway between the 11th and 12th floors prior to terminating the lease, plaintiff shall have no obligation "to remove any alterations, installations, additions or improvements made upon the demised premises by [plaintiff]."

The court finds that the lease agreement as a whole unquestionably imposes a restoration obligation upon plaintiff which is explicitly set forth in Article 12 of the lease. Further, nothing in the language of paragraph 4 discharges plaintiff's obligation to perform the restoration work required under Article 12. There is no merit to plaintiff's contention that defendant's April 2005 letter was insufficient notice so as to trigger plaintiff's removal and restoration obligations under the lease. The record shows that on April 14, 2005, Kenneth G. Walsh, Director of Operations of Adams & Company Real Estate, LLC, sent a letter to Joseph V. McGee, plaintiff's Administrative Vice President and Security Officer, on defendant's behalf. The letter advised McGee that defendant "is hereby giving you notice pursuant to Article No.12 of your lease dated February 15, 1985, as extended, covering the [12th and 13th floor] premises." The letter also requested that McGee contact the undersigned "to coordinate the demolition and removal of the installations." As such, defendant's April 2005 letter informed plaintiff that it was being given notice pursuant to Article 12 of the lease. The relevant language of Article 12 (a) states that if defendant gives plaintiff notice "pursuant to the provisions [of Article 12]," plaintiff shall be required to remove all "alterations, installations, additions or improvements made by [plaintiff] upon the demised premises as the [*6][defendant] shall select, at [plaintiff's] sole cost and expense." Further, Article 12 (b) states, in pertinent part, that "[plaintiff], at its own expense, will promptly repair all damage and injury resulting from such removal and restore the space theretofore occupied by such fixtures and installations to good order and condition and to character and appearance equal to that of the area adjacent thereto." Thus, it is clear that defendant's April 2005 notice to plaintiff was sufficiently specific to demonstrate what remedial action was being required and what lease provision required it.

In drafting the modification agreement, the parties took pains to identify and delete Articles 57 and 84 of the 12th and 13th floor lease. The parties also specifically modified Article 68 of same. The absence of language similarly deleting or modifying Article 12 leads to the conclusion that the parties intended to leave it intact. All parts of a contract must be read in harmony to determine its meaning (Bombay Realty Corp. v Magna Carta, 100 NY2d 124, 127 [2003]).

The court notes that plaintiff's May 11, 2005 response makes no reference to the alleged defect in defendant's notice. Instead, the response merely recites plaintiff's position that the notice was preempted by the parties' agreement. Also, plaintiff's cause of action is in no way based upon the claimed insufficiency of the notice. Therefore, plaintiff has waived its right to complain about any defect in the notice by not doing so in its response to defendant or its pleading (see e. g. Metro. Transp. Auth. v Cosmopolitan Aviation Corp., 99 AD2d 767 [1984] affd 64 NY2d 623 [1984].

Defendant has successfully established that plaintiff was responsible for restoring the 12th and 13th floor premises upon ending the lease term. Since plaintiff has failed to raise a triable issue of fact in opposition to defendant's prima facie showing, defendant is entitled to summary judgment.Defendant is not entitled to the lost rental income sought under the second counterclaim because the lease does not provide for such consequential damages (see Solow Mgt. Corp. v Hochman, 191 AD2d 250 1993] lv dismissed 82 NY2d 802 [1993].

For the foregoing reasons, defendant's motion is granted except to the extent that it seeks judgment on the second counterclaim. Plaintiff's cross motion is granted only to the extent that the second counterclaim is dismissed. It is adjudged and declared that plaintiff is obligated to remove the alterations, decorations, installations, additions or improvements referred to at Article 12 of the surviving lease for the 12th and 13th floors. The complaint is dismissed in all other respects. The issue of liability is resolved in favor of defendant and against plaintiff on the first and third counterclaims. In light of the mutual jury waiver set forth at Article 42 of the lease and pursuant to CPLR 4317 (b), this matter is referred to the Special Referee Clerk in the IAS Motion Support Office for assignment to a special referee to hear and determine the amount of defendant's damages. As a condition of the reference, defendant shall file a copy of the judgment and order to be settled with the Special Referee Clerk within 20 days after entry. The decision of this court dated January 30, 2007 granting defendant's motion on default is vacated. Settle judgment and order.

DATED:

J.S.C.