A.K. Estates v 454 Cent. Corp., LLC

[*1] A.K. Estates v 454 Cent. Corp., LLC 2010 NY Slip Op 52050(U) [29 Misc 3d 1227(A)] Decided on November 29, 2010 District Court Of Nassau County, First District Fairgrieve, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through December 7, 2010; it will not be published in the printed Official Reports.

Decided on November 29, 2010
District Court of Nassau County, First District

A.K. Estates, Petitioner(s)

against

454 Central Corp., LLC, "XYZ" Corp., "JOHN DOE" and "JANE DOE," Respondent(s)



SP 003823/10



Horing, Welikson & Rosen, P.C., Attorneys for Petitioner, 11 Hillside Avenue, Williston Park, New York 11596, 516-535-1700; Jeffrey W. Toback, P.C., Attorneys for Respondent, 314 Virginia Avenue, Oceanside, New York 11572, 516-644-1558.

Scott Fairgrieve, J.

Petitioner, A.K. Estates owns the premises located at 454-456 Central Avenue, Cedarhurst, New York. Respondent, 454 Central Corp., L.L.C. leases said premises for the operation of a retail establishment for sale of infant and children's clothing, operated under the name of "Bib and Tucker." Petitioner and Respondent entered into a 10 year lease commencing September 1, 2009 and ending August 31, 2019.

Respondent notes that it expended over $60,000.00 to improve the premises since taking possession. The premises had been vacant for over four years and was in a complete state of disrepair.

Petitioner commenced the holdover proceeding to evict Respondent based upon its violation of Paragraph 60 of the rider to the store lease. Paragraph 60 of the rider states:

Default: Supplementing paragraph "17," in the event Tenant shall make default in the payment of the rent reserved herein, or any item of additional rent herein mentioned, or any part of either, or in making any other payment herein required, for a total of three (3) months, whether or not consecutive, in any eighteen (18) month period, and whether or not Owner shall have commenced one or more summary proceedings to dispossess Tenant, then, notwithstanding that such defaults have been cured (prior to entry of judgment against Tenant if Owner shall have brought one or more summary proceedings), Tenant's said third default shall be deemed to be deliberate, and Owner may serve a written five (5) days notice of cancellation of this Lease upon Tenant, and upon the expiration of said five (5) days, this Lease and the Term hereunder shall [*2]end and expire as fully and completely as if the expiration of such five (5) day period were the day herein definitely fixed for the end and expiration of this Lease and the Term hereon and Tenant shall then quit and surrender the demised premises to Owner, but Tenant shall remain liable as elsewhere herein provided.

Petitioner sent Respondent a five (5) day notice of termination. Petitioner contended in its said 5 day notice that Respondent violated Paragraph 60 by not timely paying its rent in at least 3 different months in an 18 month period outlined as follows:

YOU ARE HEREBY NOTICED AND ADVISED that the landlord does hereby elect to terminate your tenancy of the above described premises now held by you under leasehold hiring. Unless you remove from the premises by June 21, 2010, the day on which your term expires pursuant to this Notice, the landlord will commence summary proceedings under the Statute to remove you from the premises for Holding Over after the expiration of your term.

PLEASE TAKE FURTHER NOTICE that termination of your tenancy is based upon the fact that in violation of Paragraph 60 of the Rider To Store Lease, dated September 1, 2009, you have defaulted in the payment of rent reserved for a total of three (3) months, in an eighteen (18) month period. More specifically, you have repeatedly defaulted with respect to the provisions of the Preamble and Paragraph 42 of the Rider To Lease, which require payment to be received by the Owner on the first day of each month. To wit, your initial rent payment default occurred in December 2009 wherein the rent due on December 1, 2009 was not tendered in full until March 25, 2010. You further so defaulted in January 2010 wherein the rent due on January 1, 2010 was not tendered in full until April 8, 2010. Your third rent payment default occurred in February 2010 wherein the rent due for February 1, 2010 was not tendered in full until June 3, 2010. Your fourth, fifth, sixth and seventh defaults in your rent payment obligations under the Store Lease include monies due to date for March 2010, April 2010, May 2010 and June 2010, and remain outstanding.

Dated: Williston Park, New York A.K. ESTATES, Owner-Landlord

June 9, 2010By: /s/ Freda Rosenthal

Freda Rosenthal, Partner

Petitioner contends that the said lease automatically terminated by the service of the said 5 day notice which constitutes a conditional limitation. Petitioner further points out that the lease contains a no waiver clause which basically allows it to accept rent without waiving its right to terminate the lease. Paragraph 24 of the lease states:

The failure of Owner to seek redress for performance of any covenant or condition of this lease or of any of the Rules or Regulations set forth or hereafter adopted by Owner, shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Owner of rent and/or additional rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such [*3]breach, and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent wherein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner's right to recover the balance of such rent or pursue any other remedy in this lease provided. No act or thing done by Owner or Owner's agents during the term hereby demised shall be deemed in acceptance of a surrender of the demised premises and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No employee of Owner or Owner's agent shall have any power to accept the keys of the demised premises prior to the termination of the lease, and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the demised premises.

Respondent contends in its motion that the proceeding should be dismissed because Petitioner failed to comply with Paragraph 17 of the lease which requires Petitioner to serve a notice to cure before serving its said 5 day notice terminating the lease. Paragraph 17 states:

17. (1)If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent; or if the demised premises become vacant or deserted; or if any execution or attachment shall be issued against Tenant or any of Tenant's property, whereupon the demised premises shall be taken or occupied by someone other than Tenant; or if this lease shall be rejected under Section 365 of Title 11 of the U.S. Code (Bankruptcy Code), or if Tenant shall have failed, after five (5) days written notice, to redeposit with Owner any portion of the security deposit hereunder which Owner has applied to the payment of any rent and additional rent due and payable hereunder, or if Tenant shall be in default with respect to any other lease between Owner and Tenant; or if Tenant shall fail to move into or take possession of the demised premises within thirty (30) days after the commencement of the term of this lease, of which fact Owner shall be the sole judge; then, in any one or more of those events, upon Owner serving a written fifteen (15) day notice upon Tenant specifying the nature of said default, and upon the expiration of said fifteen (15) days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said fifteen (15) day period, and shall not thereafter with reasonably diligence in good faith proceed to remedy or cure such default, then owner may serve a written five (5) day notice of cancellation of this lease upon Tenant, and upon the expiration of said five (5) days, this lease and the term thereunder shall end and expire as fully and completely as if the expiration of such five (5) day period where the day therein definitely fixed for the end and expiration of this lease and the term thereof and Tenant shall then quit and surrender the demised premises to Owner, but Tenant shall remain liable as hereinafter provided.

17.(2)If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid, or if Tenant shall make default in the payment of the rent reserved herein, or [*4]any item of additional rent herein mentioned, or any part of either or any item of other payment herein required; then, and in any of such events, Owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise and the legal representative of Tenant or other occupant of the demised premises, and remove their effects and hold the demised premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or institute legal proceedings to that end.

Petitioner cross moves for summary judgment requesting an award of possession, an award of money for use and occupancy, and attorney fees.

Petitioner contends that Respondent's argument that a notice to cure was needed is without merit because Paragraph 17 clearly states that the notice to cure does not apply to the default in paying rent and additional rent.

Respondent further contends that Petitioner waived its right to terminate the lease by its acceptance of rent as outlined in Paragraph 8 of Respondent's attorney's affirmation dated July 7, 2010:

8.In fact, there has been no default in the payment of rent, which the Petitioner readily admits in the Notice. Rent was merely late, but always accepted; The December 1, 2009 rent was paid and accepted without notice of default on March 15, 2010; the January, 2010 rent was paid and accepted without notice of default on April 8, 2010; the February, 2010 rent was paid and accepted without notice of default on June 3, 2010.

Petitioner contends that Respondent's argument is without merit because Paragraph 24 allows Petitioner to accept late payment of rent without waiving its right to terminate the lease.

Decision

The Court grants Petitioner's cross motion for summary judgment and denies Respondent's motion to dismiss.

There is no question that Respondent violated Paragraph 60 by defaulting in its payment of rent for at least 3 months in an 18 month period. The 5 day notice effectively terminated the lease. A plain reading of Paragraph 17 clearly states that the requirement of service of a notice to cure applies to situations not involving the failure to pay rent and additional rent. There is simply no construction of Paragraphs 17 and 60 requiring the service of a notice to cure before serving the 5 day notice of termination. Contract clauses must be construed to give effect to the clear and plain intent of the parties. See Grand Liberte v. Bilhaud, 126 Misc 2d 961, 487 NYS2d 250 (App Term, 1st Dept 1984). Paragraph 60, allowing termination of the lease for failure to pay rent has been consistently upheld by New York Courts. Bowan v. Professional Data Management, Inc., 218 AD2d 637, 631 NYS2d 19 (1st Dept 1995). [*5]

In Ranalli v. Burns, 157 AD2 936, 550 NYS2d 192 (3d Dept 1990), the court upheld the conditional limitation clause due to non-payment of rent:

[1]Respondent contends that paragraph 28a of the lease creates a condition subsequent rather than a conditional limitation such that an action in ejectment is the appropriate remedy and not this summary proceeding. We disagree. The termination clause contained in paragraph 28a is a conditional limitation; its language clearly provides that, if a notice of default were sent, the lease would automatically expire on the termination date fixed in the notice (see, Perrotta v. Western Regional Off-Track Betting Corp., 98 AD2d 1, 5, 469 NYS2d 504). "If the tenant continues in possession after the automatic expiration of the lease, he is holding over and a summary proceeding is maintainable

* * * " (Lamlon Dev. Corp. v. Owens, 141 Misc 2d 287, 533 NYS2d 186 [citations omitted]).

In Grand Liberte v. Bilhaud, supra , the court upheld the termination of a commercial tenant's lease based upon the non-payment of rent by the service of a notice which constituted a conditional limitation.

[1][2]We reverse. Where a leave between commercial parties contains a conditional limitation for nonpayment of rent, it shall be enforced in the absence of a showing of fraud, exploitive overreaching or other unconscionable conduct on the part of the landlord (Matter of Birnbaum v. Yankee Whaler, Inc., 75 AD2d 708, 427 NYS2d 129, affd. 51 NY2d 935, 434 NYS2d 994, 415 NE2d 982). In the commercial arena, "A covenant to pay rent at a specified time ... is an essential part of the bargain as it represents the consideration to be possession of the property of the landlord" (Fifty Statements Management Corp. v. Pioneer Auto Parts, Inc., 46 NY2d 573, 578, 415 NYS2d 800, 389 NE2d 113). The original parties to the proprietary lease expressly agreed to a conditional limitation in the event of a default in rent, and must have anticipated the effect of such a clause in a nonpayment situation.

Respondent argues that "[w]hen rent is accepted with knowledge of particular conduct which is claimed to be a default, the acceptance of such rent constitutes a waiver by landlord of the default." [Madison Avenue Leasehold, LLC v. Madison Associates, 30 AD3d 1, 811 NYS2d 47 (2006).] Based on this, Respondent alleges that Petitioner has waived its rights to act on Respondent's default. To the contrary, Petitioner protected itself by including a "no waiver" provision in the lease. Specifically, Paragraph 24 of the lease in pertinent part reads, "The receipt by owner of rent and/or additional rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach." [Petitioner's Affirmation in Support of Motion.]

The treatise of Daniel Finkelstein and Lucas A. Ferrara, Landlord and Tenant Practice in New York, section 4:263 (West 2009) states:

Landlords do not always or consistently enforce every provision of a lease. Prior failures [*6]to enforce a lease covenant could waive the tenant's subsequent compliance and foreclose certain grounds for future termination of the tenancy. To avoid this possibility, landlords often include language providing that a failure to require strict compliance with the conditions of the agreement shall not constitute a waiver of enforcement of the condition in the future. Such a provision often protects landlords when rent is accepted with knowledge of a lease violation.

Thus, petitioner's acceptance of late rental payments, with knowledge of the rent defaults, does not constitute the landlord's waiver of the default.

Case law supports the finding herein. For example, in Monarch Information Services, Inc. v. 161 William Associates, even though rent had been accepted, a lease provision precluded a holding of waiver. [103 AD2d 703, 477 NYS2d 650 (1984).] Analogously, in Rodking Service Station, Inc. v. Gribin, rent had been accepted for four months. [109 AD2d 873, 486 NYS2d 786 (1985).] The landlord had knowledge of the tenant's violation. [Id.] However, this was found not to constitute waiver because the lease contained a provision that reserved the rights of the landlord regardless of whether the landlord required strict performance of the lease. [Id.] Heartland Associates v. Adam Oser Inc. held that a "no waiver" clause defeated any claim of waiver as a matter of law. [2003 WL 22757714 (2003).]

Conclusion

Petitioner is awarded a judgment of possession with the warrant stayed until December 31, 2010. This matter is set down for an inquest on all outstanding sums

owed, including legal fees, for December 15, 2010.

So Ordered:

/s/ Scott Fairgrieve

DISTRICT COURT JUDGE

Dated:November 29, 2010