First Resort, LLC v Demetriades

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First Resort, LLC v Demetriades 2007 NY Slip Op 34368(U) July 3, 2007 Supreme Court, Suffolk County Docket Number: 0029114/2005 Judge: Gary J. Weber Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1 ] INDEX NO. 05-291 14 SUPREME COURT - STATE OF NEW YORK I.A.S. PART 6 - SUFFOLK COUNTY i-lon.- Gary J. Weber MOTION DATE Motion Seq. # I Acting Justice of the Supreme Court Plaintiff(s) -against- HARVEY A. ARNOFF, ESQ. Attorney for Defendant 206 Roanoke Avenue Riverhead, New York 11901-2794 \ I ,I X I EMETRIADES, > I Defendant(s) i NON-JURY TRIAL TWOMEY, LATHAM, SHEA, KELLEY DUBIN, REALE & QUARTARARO, LLP BY: CHRISTOPHER KELLEY, ESQ. Attorneys for Plaintiff 33 West Second Street, P.O. Box 398 Riverhead, New York 1 1901 i ! RS I KLSORT, LLC, - DECISION AFTER -- a n dction brought by First Resort, LLC (hereinafter First Resort ) against the Defendant Alex Denietriades einaftei Demetriades) seeking the following relief: iii5 IZ ( iICI A declaration that plaintiffs lease was renewed for two additional years pursuant to [Lease] Rider paragraph 29; 1 kclaring that defendant s Notice of Intention to Terminate the Lease is void and that Plaintiff IS not in default under the lease. I ! t w c tnades, for his part, has denied the substantive allegations of First Resort and raised certain affirmative lenses and asserted, as well, various counterclaims: tic. I hat Plaintiff tortiously interfered with a contract of sale of the subject real property in question to hlackcilzie Realty, L.L.C., which the defendant had secured. 1 hat the Plaintiff owes the Defendant for use and occupancy of the subject real property and for unpaid real estate taxes in at least the sum of $36,574.64 . I liat the Plaintiff owes the Defendant, pursuant to the subject lease:, an unspecified sum in attorney s fees IbI defending this action as well as for disbursements. That the Plaintiff owes the Defendant a sum of money for the loss of certain furniture which was consigned b y Defendant to Plaintiff for sale. Ii o ~ h >icit.s have opcr included the usual prayer for such other and further relief as to the court may seem just and l ! b 1 i ( c ise w is tried before the Court without jury on April 29, April 30 and May 1, 2008. -1- [* 2 ] Background I < w ) i t and Denietriades entered into a lease for the commercial premises known as 640 County Road 39, I \,,\uthmptoii,New York on April 15, 2004 (Plaintiffs Exhibit 1). b,t 1 lit, lc.,iw contains, in pertinent part, the following provisions: Printed Form Portion Main Body I I t. N TH The Landlord has made no representations or promses In respect to said building or to the denvsed cxcept those contained herein, and those, if any, contained in some written communication to the Tenant, -iviictt t the Landlord This instrument may not be changed, modified, discharged or t e m n a t e d orally w \ IN1 j)i a n i w I \ \ i \r 1 11 I 11 If the Tenant shall at any time be in default hereunder, and if the Landlord shall institute an action 01 \iiiiinm) piocceding against the Tenant based upon such default, then the Tenant will reimbuise the Landloid for the \peiisc o f attoineys fees and disbursements thereby incurred by the Landlord, so far as the same are reasonable in .iiiiouiit Also, so long as the Tenant shall be a tenant hereunder the amouni of such expenses shall be deemed to be ,riiiliiioiial lent liereundei and shall be due from the Tenant to the Landlord on the first day of the month following tlic. i i i i u i ring of such respective expenses. I Rider - Twed Portion m LIMITED OPTION TO EXTEND TERM OF LEASE. During the first nine (9) months of the term of this Lease only, Tenant shall have the limited option to renew the term of the lease for a single two year (2) year period beyond the initial term. Upon Tenant s failure to give written notice to Landlord of its commitment to exercise such limited option to extend on or before December 3 1,2004, said limited option to renew shall be canceled. It is expressly understood and agreed that Tenant shall be able to exercise said option to renew only provided that: 1) this Lease shall not be have been previously terminated, 2) no Tenant default shall have occurred on either the date Tenant gives Landlord written notice to renewal or April 14, 2005, and 3) Tenant shall be in actual occupancy of the Denlised Premises. IC If such limited option to extend is exercised, the following base rent shall be due and payable for the extension period: I .. . material not reproduced here = I LIMITED NON-ASSIGNABLE OPTION TO PURCHASE. -\ Tenant shall have the limited non-assignable option to purchase the building and property which the denised premises are a part, in as is condition, for the purchase price of 1.75 Million Dollars ($1,750,000.00) in the event that, pursuant to the terms ofthis Article R30, Tenant shall deliver written notice of Tenant s election to purchase to Landlord s attorney, together with a contract deposit in the amount of $175,000.00, and four purchaser-executed copies of the contract of sale annexed hereto as Exhibit A . 1; 1. It is expressly understood and agreed that Tenant shall be able to exercise said option to purchase only provided that: 1) this Lease shall not be have been previously terminated and/or expired, ii) no Tenant default shall have occurred on either the date Tenant delivers to Landlord purchaser-executed contracts of sale together with a contract deposit -2- [* 3 ] or on the date of Closing, and iii) Tenant shall be in actual occupancy of the Demised Premises. It is further expressly understood and agreed that in the event that Tenant exercises said option to purchase, Tenant s obligations under this Lease shall continue in f i l l force and effect until the date of Closing, including without limitation, Tenant s obligations to pay any and all applicable taxes and operating expenses related to the demised premises to the date of Closing and to pay to Landlord a monthly use and occupancy fee in an amount equal to the then applicable base rent. I In the event Tenant shall not deliver written notice of its election to purchase, together with a contract deposit in the amount of $175,000.00, and four purchaser-executed copies of the contract of sale annexed hereto as Exhibit A , on or before April 14, 2005 and Tenant shall also have failed to exercise its limited option to renew this Lease pursuant to Article R29 hereof, the non-assignable option to purchase hereunder shall be deemed null and void. 2. In the event that Tenant shall have properly exercised its limited option to renew this Lease pursuant to Article R29 hereof, but fail to deliver written notice of its election to purchase, together with a contract deposit in the amount of $175,000.00, and four purchaser-executed copies of the contract of sale annexed hereto as Exhibit A , on or before April 14, 2007, the non-assignable option to purchase hereunder shall be deemed null and void. 1. i At Closing, Landlord shall credit Tenant towards the purchase price in an amount equal to Fifty Percent (50%) of all base rent paid to Landlord in the first year of this Lease. However, it is expressly understood and agreed that Tenant will not be entitled to no greater credit than $45,000.00 in the event that such Closing is held on or after April 14, 2005. I Iic principals of First Resort are Ms. Victoria Collett (hereinafter Collett ) and James Nicolino (hereinafter \ col1110 ) i L i t instant litigation centers around First Resort s claim that, despite First Resort s admitted failure to strictly comply with the renewal option portion of the lease, that the lease was renewed by operation of law, thus giving life to the purchase option portion of the lease which, under the circumstances of this case at least, would otherwise die aiong with the lease at its conclusion. The Facts I dc 11 bide called its principals to the stand but Collett and Demetriades were the main witnesses. The Court finds the o T each of them to have been credible in all material respects. ti,\tiiiioiiv I IKW no significant difference between the sides as to the facts in this matter. is i oilcit adniits 10 having executed the lease while represented by counsel. She also testified that in October of 2004 .md twice in November of 2004 she sent letters to Demetriades concerning it reduction in the level of post-sumnier I twt and asking for a reduction in rent (see Plaintiffs Exhibits 5 & 6 ) . She received no reply to these letters. I lont,\w, on December 19, 2004, Demetriades showed up unannounced at the premises and both Collett and I )rnirti lades concur that Demetriades agreed to accept $5,000.00 in rent for the winter months of December 2005, . i i d Janiiai y, February -3- [* 4 ] b:arcli of 2005 instead of the amount called for in the lease ($7,500.00). The unpaid rent was to be made up in suniiiier months which, by implication at least, signified that the lease would be renewed. Without a renewal the &iiiJ I~IL, IL ii>)c I\;ould expire on April 15, 2005, before the summer months could even begin. C ollclt testified that Demetriades was so happy with the appearance of the premises, which are operated as an \ oi f u i iiituie store by First Resort, that he kissed her on both cheeks as a celebration, Collett thought, of the tli it she, and First Resort, would be staying. .tiitrqw 1 J I I \ p i 11 X 2005 Collett and Nicolino sent a letter to Demetriades which stilted in relevant part: $10,000. This confirms our renewal the Icrlsc and it is considered in full force and effect. Currently, we are in the process 01 lining up the financing for the building. We do realize that no rent money will be \ipplit d Lou aid the agreed on purchase price. 1 i i i 1oic.d please find the lent check in the amount of &) - Nicolino James j J I I \pi11 9, 2005 Collett and Nicolino sent Demetriades another letter which said, in pertinent part: 1 \ . I \ 1:rtei IS to confirm that the original lease dated 4/15/04 has been :\i~.ndedpiirsuant to all temx and conditions as stated in the above. i peg 0111 conversation with you in the store on or about 12/19/04, it was tliat we would pay a reduced winter (November through March 2005) i c i i i d late of$. i,OOO/monthlywith the stipulation that when our lease term ~ m rw 011 April 15, 2005 we would make up the difference and begin d 1 3 4 q i i i g $10.000/iiionthly at start of new term as per contract. This rent check P I S iiiailed to you on April 8, 2005. . . . . . JCI ced 8 -~ - James Nicolino \ I ~ i O l l I i ollett (Defendant s Exhibit 11) i lic cliccL contined in the letter of April 8, 2005 as well as similar checks in the sum of $lO,OOO.OO each dated May 1005 and June 16, 2005 were all deposited on July 11, 2005 in Demetriades account and were endorsed .I )oposited under protest. Use and Occupancy only. No lease renewal, Partial Payment . -4- [* 5 ] \iiotliei check In the amount of $10,000.00 dated July 16,2005 was deposited without comment, as were 14 other ~liecks n various amounts for rent after July 15, 2005 up to and including May 15, 2007. (See Defendant s Exhibit i !-1 in evidence). I n April 12, 2007 Christopher Kelley, Esq., an attorney in the fm presently representing First Resort sent a letter containlug the signed contracts and a check for $175,000.00 to Demetrios Ci. Melis, Esq. who was then representing I )trmetnades, stating that First Resort was exercising the option to purchase contained in the lease as above iiicntioned and described at paragraph R30 of the original lease. (Plaintiffs Exhibit #21). 5 I< iettei dated April 17, 2007, Demetrious G. Melis, Esq., on behalf of his then client, Demetriades, rejected the y ic:nder made by First Resort (Plaintiffs Exhibit 22 in Evidence). I !IC i oiitract of sale attached to the lease, which had apparently been executed by First Resort contains the following Ilg 11agc . ! I It is expressly understood and agreed that Tenant shall be able to exercise said option to purchase only provided that: 1) said Lease shall not be have been previously terminated andor expired, 2) no Tenant default shall have occurred on either the date Tenant delivers to landlord purchaserexecuted contracts of sale together with a contract deposit or on the date of Closing, and 3) Tenant shall be in actual occupancy of the Premises. 1% It is further expressly understood and agreed that in the event that Tenant exercises said option to purchase, Tenant s obligations under said Lease shall continue in full force and effect until the date of Closing, including without limitation, Tenant s obligations to pay any and all applicable taxes and operating expenses related to the demised premises to the date of Closing and to pay to Landlord a monthly use and occupancy fee in an amount equal to Analysis of Plaintiffs Claims and Causes of Action : 1 J t .I K r d Coip. v. Cross Bay Chelsea Inc., (42 N.Y.2nd 392, 397 N.Y.S.2d 958 1977), the Court ofAppeals ~ I1eld that W]hen a tenant in possession under an existing lease has neglected to exercise an option to renew, he might suffer ibrfriture if he has made valuable improvements on the property. This of course generally distinguishes the lease optioii. to renew or purchase, from the stock option or the option to buy goods. This is a distinction which some of tlis oldet cases failed to recognize (see, e.g. Fidelity & Columbia Trust Co. v. Levin, supra: Doepfner v Bower, i i p i n : cf: People s Bank o Cir?,o N. Y. v. Mitchell, supra). More recently it has been noted that although the f f irliaiir has no legal interest in the renewal period until the required notice is given, yet an equitable interest is recognized and protected against forfeiture in some cases where the tenant has in good faith made improvements of a whstantlal character, intending to renew the lease, if the landlord is not hanned by the delay in the giving of the notict and the lessee would sustain substantial loss in case the lease were not renewed (2 Pomeroy, Equity .Iiisispi-udeiice[S ed], 9 453b, p 296). 4 i lie lcadiiig case on this point is Fountain Co. V. Stein (97 Corm 619; 27 ALR 976) and the rule has been accepted tioted conxnentators (see, e.g., 1 Corbin, op. Cit., § 35, p 146; 1 Williston, Contracts [3d ed], 4 76, p 249, n 4; 2 Poiiieroy. op. cit. 9: 453b, p 296). It has also been accepted and applied by this court. In Jones v. Gianjerante (305 3 I 35. 138). citing the Fountain case we held that the tenant was entitled to the benefit of the rule or practice in ti! wliicli relieves against such forfeitures of valuable lease terms when default I notice has not prejudiced the LY~LII~\ lmdlcitd, and has resulted from an honest mistake, or similar excusable fault. The rule was extended in Sy Jack A Lwit?, Co Pergmnent Syosset Corp. NY2d 449,453, supra to preserve the tenant s interest in a longit. -5- [* 6 ] .i,rndiiig location for a retail business because this is an important part of the good will of that enterprise, [and ilitis I the tenant stands to lose a substantial and valuable asset . f Ici-e. thc proof is that First Resort, the Tenant, did make substantial investments in the property (see Plaintiffs i.xhibit I). as an example), so much so that the Landlord, Demetriades, expressed his appreciation for the work that [lie T a i a n t had done by kissing Collett on both cheeks and proceeding to thereafter accept and cash First Resort s ..lit.Cl. s the delay in the giving of the written notice of renewal of the lease by First Resort was minimal - a of four months, and clearly inadvertent. Collett and Nicolino, while generally good intentioned, were naive in !>t.Iie\mg they could so easily deal with what has unnecessarily become a complicated legal situation, without that ilie aid of competent counsel, which is exactly what they were unsuccessfully attempting to do between the time that !Iie~~ signed the original lease and the time that they retained their present counsel. Such a mistake does not mean rhat ( ollett and Nicolino should necessarily lose everything that they have put into this project as a penalty for not \:riding :I written notice in proper form at the exact moment called for in the lease, even as Demetriades was ;-I occeding, albeit somewhat grudgingly, to collect rent checks meant to cover the extended term of the lease. i ! 1ii.f fsciit, jx i t o l )ciiic:ti.iacics admitted from the witness stand that he expected to make up for reduced rent which he had agreed to in I ihc M inter months by getting more rent in the summer. There could be no other way for him to logically expect to .ii.liicvc that unless the lease were extended. Moreover, Demetriades opined from the witness stand to the effect that ihe only hardship he would suffer in the event that the lease, and, hence, the option to purchase were to be extended, w o u l ~ be that he would not be able to sell the property for more money than called for in his agreements with First l ! < e s w ~ .Of course, one of the reasons that First Resort was willing to pay the substantial agreed rent in the first place as \tf I<> prevent Demetriades from doing exactly this, thus selling the place aut from under them. ~:, Ilie otlier hand, Plaintiffs position that First Resort need not pay rent for the period after which the option 111 iitwtinder was purportedly exercised andor that the proper amount of rent for the reasonable use and occupancy of \!it>pwmises is: not capable of being fixed on this record, is without merit. i i t i i i i t i l t tiles Brwbrintiz v S/zillzng 489 N.Y.S.2d 86 App. Div. Znd Dept. 1985) in support of the proposition that a onti .ict vendee in possession, need not pay rent. I l o \ v t ci ~ that case specifically holds that: ..\ltliough the two relationships are not mutually exclusive, the general rule is that execution of a contract of sale i~t*t\wcii landlord and tenant serves to merge the landlord-tenant relationship into the vendor-vendee relationship and iiiLis effectively terminates the former, unless the parties clearly intend the contrary result (compare BuZZock v. {.- i{ifitiy, 155 App. Div. 825, I40 N. Y.S. 686, with Bostwick v. FranMield, 74 N. Y. 207 and Sin Farber Hernmtecid i arp I. . Birckr e),, supra). ,:I intention to deviate from the general rule and to avoid a merger may be directly expressed in the agreement or may be infei-red from a medley of factors such as the terms of the agreement, the circumstances of its making, and i h i dxiequeiit behavior of the parties (see generally, Rae v. Courtney, 250 N.Y. 271, I65 N.E. 289; 2 Rasch, New I OI I\ I andlord and Tenant [2d ed.]; § 690). i I:I e thcic is a clause, paragraph 16.02 supra, in the option contract of sale specifically requiring that Plaintiff .ontiiiw to pay leiit during the pendency of the closing of title. axiomatic that he who seeks equity must do equity . First liesort, evidently, has been and continues posessioii of the prenuses, doing business there from the inception of the lease to the present day. i l o i c . o v c t . it is IO $.> be .I in ;enera1 principal, the seller must have either his rent or the ability to collect interest on purchase money. -6- [* 7 ] io t b the ,imouiit, the Court finds that the reasonable rent is the base rent payable as of the last month of the lease, as l i d hwn formally extended and, as to any previous period covered by the original lease as yet unpaid, if any, the ,:hnount called for in the lease, together with such other adjustments, such as payment of real property taxes, as were illect foi in the lease and or contract of sale arising out of the option. 11 I: I Analysis of Defendants CounterclaiiE And Causes of Action a counterclaim seeking damages for the alleged tortious interference by the a prospective sale by the defendants to MacKenzie Realty L.L.C. is dismissed as unproven. In any event, 111:i-e was no showing that it was the plaintiff who caused the sale to fail to materialize and it does not appear that I 11ei.ewi-t' any damages. 1 !.:teiidanis cause of action by way of I'lainiiff 111 I ~ I e i i ~ L i icoiinterclum for i~s t damages for goods left on consignment with Plaintiff to sell IS without merit. ~ ~ t c i i d a failed to pick up the goods after receiving much conlmunication from Plaintiff concerning his need to pick ni t h t x unsold items. This culminated in a letter dated October 20, 2005 (Plaintiffs Exhibit 30) which specifically furniture would be given to charity, if not picked up. The testimony is to the effect that t h i s 1:) exactly what occurred. In light of all of this, it is hard to see how Deinetriades has anybody or anything to Illamt: for the loss of the remaining portion of his used furniture consignment except his own obdurate refusal to pick iij) .ii-ncd llenietriades that the ' 1 1"). i i i . C'Iaiit, 110 j 1 I adequate proof was ever adduced as to the value of this missing property - if, under all the lost furniture had any significant value at all. uiiistGiiices,this Decision ~ ~ l L i i i ~ O iMl ~ S ~ 1 (letendant d balance of $6,574.64 because this amount was deducted from the total rent due of I O 000 00 from the rent check dated 12-15-05, so that tenant could install a new heating system. This was not pi I mitted puisuant to either the terms of the lease or as a general principal of law. '\I I ' i i \ t Remit, IS diiected to pay the Defendant, Demetriades all sums of money outstanding as rent or other !Iiisinicnts, puisuant to the original lease, including the sum of $6,574.64, as previously described, as well as rent at 111: rate ot $ 1 0,300.00 pei month togethei with such other adjustments as are called for in the original lease and or ill: option conliact This IS mostly occasioned by the legal action made necessary by the conduct of both parties L ,ulting i n a delay of both payment of rent and closing of title i'hinliti ,I I 1 ~ C I I I iL i i d a s shall either cash or return such checks from First Resort as he now holds. Any sum he receives from .tshing llir checks shall operate as a credit for the account of First Resort. l ' ~ a i n t ~ t Fiist Resoit, shall pay the sums above described to Defendant Denietriades within 30 days of the entry of l, I t o be signed heiein, then the lease option contract herein shall be of full force and effect and the parties Iu\c title in accoidance with its terms, as may be adjusted by the conditions of this decision and the older to toIk)\i .I\ well as those made necessaiy by the passage of time. ill; 01 del 'iLill I I I 11ic c\ e111 that Plaintiff, First Resort, shall not pay the sums aforementioned to Defendant, Demetriades, within 30 r ) t tile service upon its attorney or the opposing attorney of the order to be entered herein, then the lease option ~1nir:ictshall he of no further force and effect and the Defendant, Demetriades shall be free to pursue his remedies LI.~!,:, 11s. \v:)y of summary proceedings or otherwise. -7- [* 8 ] i 1. I I I C c \ m t that the parties cannot, within 5 days of the service upon them of the order to be entered herein, agree i ~ ~ )ihe ianiount of the sun= presently due Demetriades pursuant to this decision, prior to closing of title, Karl E. o ~ iit1iilit.im. Esq. o f 3 3 1 Griffng Avenue, Riverhead, New York is conditionally appointed as a Referee to hear, report to the Court the sums due pursuant to this decision and order. His fees shall be $300.00 an iioLii, : l i d split by the parties. Jt~~i:iitic 2nd lees are awarded either side as it cannot be said that either side was a prevailing party. In any event, adequate proof as to the value of attorney's fees provided eithtx side. Moreover, the lease provision at ~ ~ ~ I ~ i g20~which calls for payment of Landlord's attorney's fees by Tenant refers to a summary proceeding. This i aph , I < . : , I ( I I : IS oiic instituted by the Tenant to enforce Tenant's rights under the lease. (See Board of hfar1ager.s o f ! Xc i x ~ i r Poiid ('orirloininiiiiiz I 1'. Jngwani, 276 A.D. 2d 51 7, 713 N. Y.S.2iI 761 (2,"'Dept. 2000). h o atioriic\,'s ~IIL*I.L> ,vas I hsjt.i 110 \ ~IIC~ nothing as to his counterclaims for tortious interference with contiact and the alleged loss of his 1ui n 1ture c J ~ i r th a 1 1 I < t i i iyiiiierI t ircithci party c ~ be said to have prevailed, no costs or disbursements are awarded to either party. n + I1 o i l i ~ ~ q ~ p l i c m o n s piayeis for relief that are inconsistent with this decision are in all respects denied and no ,i oi hi'i iclicl 15 gimted to either side except as is herein specified. <I iit, O U I I 011 11s own motion, has conformed the pleadings to the proof. Gary J. Weber, Acting J.S.C. Non-Final Disposition Scan -8-

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