4261 Realty Holding LLC v DB Real Estate Assets II LLC
Annotate this CaseDecided on August 20, 2013
District Court of Nassau County, First District
4261 Realty Holding LLC, Petitioner(s)
against
DB Real Estate Assets II LLC d/b/a DUNKIN DONUTS, Respondent(s).
LT-001687-13
Law Office of Kramer & Shapiro, P.C., Attorney for Petitioner, 80-02 Kew Gardens Road, Suite 302, Kew Gardens, N.Y. 11415, 718-520-1600; O'Rourke & Degen, PLLC, Attorney for Respondent, 225 Broadway, Suite 715, New York, N.Y. 10007, 212-227-4530.
Scott Fairgrieve, J.
The following named papers numbered 1 to 9
submitted on Motions
on July 23, 2013
papers numbered
Notice of Motion for Summary Judgment by Petitioner ..............................1
Notice of Motion for Summary Judgment [by Respondent]..........................2
Affidavit in Opposition to Respondent's
Motion for Summary Judgment .........................................................3
Affirmation in Further Support of Respondent's Motion for
Summary Judgment and in Opposition to Petitioner's
Motion for Summary Judgment ..........................................................4
Petitioner's Affirmation in Reply to Respondent's Opposition
Papers and in Further Support of its Petitioner's
Summary Judgment .............................................................................5
Memorandum of Law of Respondent DB Real Estate Assets II LLC
in Further Support of its Motion for Summary Judgment and
in Opposition to Petitioner's Motion for Summary Judgment ............6
Memorandum of Law of DB Real Estate Assets II LLC
in Support of its Motion for Summary Judgment ...............................7
[*2]
Reply Affirmation in Further Support of Respondent's Motion for
Summary Judgment and in Opposition to Petitioner's Motion
for Summary Judgment .......................................................................8
Exhibits of Respondent DB Real Estate Assets II LLC in Support
of its Motion for Summary Judgment .................................................9
The petitioner, 4261 Realty Holding LLC., commenced this non-payment landlord/ tenant summary proceeding against the respondent, DB Real Estate Assets II LLC d/b/a Dunkin Donuts, to recover possession of the premises 4261 Austin Boulevard, Island Park, New York 11558. The petitioner also seeks a money judgment for rent arrears in the sum of $52,624.00, with interest thereon from November 1, 2012, plus legal fees of $2,000.00, together with costs and disbursements. At bar are motions for summary judgment by both parties, which are decided as follows.
Summary judgment is drastic relief it denies one party the opportunity to go to trial. Thus, summary judgment should only be granted where there are no triable issues of fact (see Andre v Pomeroy, 35 NY2d 361 [1974]). The focus for the court is on issue finding, not issue determining (see Hantz v Fishman, 155 AD2d 415 [2d Dept 1989]).
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering evidence in admissible form to demonstrate the absence of any material issues of fact. Failure to make such a prima facie showing requires denial of the motion, regardless of the sufficiency of the opposing papers (see Alvarez v Prospect Hospital, 68 NY2d 320 [1986]; Winegrad v New York University Medical Center, 64 NY2d 851 [1985]).
Once the movant has demonstrated a prima facie showing of entitlement to judgment, the burden shifts to the party opposing the motion, to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action (see Zuckerman v City of New York, 49 NY2d 557 [1980]).
On the record before this court, it is undisputed that on June 23, 2008, the parties entered into a written lease for the store and parking lot located at 4261 Austin Boulevard, in Island Park, New York. The premises were to be used for the operation of a Dunkin Donuts and/or Baskin-Robbins shop, at a rent of $9,568.00 per month. The written lease expressly permitted the respondent to assign its interest or sublet the demised premises, without petitioner's consent, to an authorized Dunkin Donuts and/or Baskin-Robbins franchisee. In that event, the respondent would still remain liable under the lease.
On January 30, 2009, respondent entered into a written sublease agreement [*3]with FRJ Austin Donuts Inc. Pursuant to the franchise agreement, FRJ Austin Donuts Inc. was operating a Dunkin Donuts shop at the premises.
On October 29, 2012, Superstorm Sandy struck New York. According to the affidavit of Christopher J. Egan, the Director and Legal Counsel for Dunkin Donuts Franchising LLC, the respondent notified petitioner on November 19, 2012 of its intent to stop paying rent. The letter, which was mailed by Federal Express and Certified Mail, stated:
"per paragraph 9 of our lease, we are discontinuing paying all rent as of October 28, 2012 when the shop had to close because of damage from Sandy. This rent abatement will continue until the shop reopens for business."
By letter dated December 6, 2012, petitioner objected to the abatement of rent, and cited paragraphs 40, 52 and 60 of the rider to the lease which, according to petitioner, required respondent to repair, at its own cost and expense, all structural damage to the property. The letter further provided that "unless you claim some structural damage to the roof and outside walls, the rent obligation is not suspended" [see Petitioner's Notice of Motion, Exhibit D].
In pertinent part, paragraph 9 [Destruction, Fire and Other Casualty] of the lease provides:
"(a) If the demised premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Owner and this lease shall continue in full force and effect except as hereinafter set forth" [emphasis added].
The court finds that respondent's letter sufficiently notified petitioner of its intent to discontinue paying rent, notwithstanding that it was not sent by certified mail, return receipt requested, as required by paragraph 43 of the rider to the lease. The petitioner's failure to object promptly and specifically to the means by which respondent transmitted its notice, while objecting to its substance, waived any defect in the mailing (see Dean v Tappan Wire and Cable Inc., 2002 NY Slip Op 40377[U] [App Term, 2d Dept, 9th & 10th Jud Dists 2002]).
Moreover, the petitioner received notice promptly and responded as necessary, rendering any defect in service of no legal consequence (see Mlcoch v Smith, 173 AD2d 443 [2d Dept 1991]; Rower v West Chamson Corp., 210 AD2d 7 [1st Dept 1994]; Milltown Park v American Delt & Filter Co., 180 AD2d 235 [3d Dept 1992]). Thus, any noncompliance was a mere technicality and insufficient to invalidate the respondent's right to exercise its options under the lease (see Mlcoch v Smith, 173 AD2d 443 [2d Dept 1991]).
Even if the petitioner's response to respondent's notice did not waive any defect in the mailing, under a reasonable construction of the lease, paragraph 43's certified [*4]mail, return receipt requirement, does not govern paragraph 9's notice requirement. Paragraph 9 simply requires that the "Tenant shall give immediate notice thereof to Owner" of damage to the leased premises from a casualty. The notice must be immediate, but need not be in writing or mailed by any particular means or to any particular address. The requirement for immediacy, but not for a writing or cumbersome mailing procedures, is consistent with the exigent circumstances being addressed, where both time and conditions likely would render such requirements unrealistic (see Wallace v 600 Partners Co., 86 NY2d 543 [1995]; Farrell Lines v City of New York, 30 NY2d 76 [1972]; Tri-Messine Construction Company v Telesector Resources Group, 287 AD2d 558 [2d Dept 2001]). Immediate notice alone triggers the remaining provisions regarding a casualty, if the premises are, in fact, damaged by a casualty (see Vermont Teddy Bear v 538 Madison Realty Company, 1 NY3d 470 [2004]).
More importantly, to permit paragraph 43 of the rider to the lease, regarding the tenant's notices to the owner generally, to supersede paragraph 9, regarding the tenant's notice to the owner in the specific exigent circumstances of a casualty, would completely negate paragraph 9's notice requirement and impose writing and mailing requirements absent from paragraph 9's plain terms (see Vermont Teddy Bear v 538 Madison Realty Company, 1 NY3d 470 [2004]; Reiss v Financial Performance Corp. v 97 NY2d 195 [2001]; Rowe v Great Atlantic & Pacific Tea Company, 46 NY2d 62 [1978]).
For the owner's notices to the tenant of either an election to terminate the lease or the premises' readiness for re-occupancy, paragraph 9 imposes its own "written notice" requirements, and in the former instance a time requirement of "within 90 days" after the casualty, as well as the writing requirement. For the tenant's notice to the owner of damage from a casualty, paragraph 9 distinctly omits the writing requirement, but imposes a time requirement, "immediate". To impose writing and mailing requirements would create a different procedure not specifically intended for the circumstances of a casualty (see Wallace v 600 Partners Co., 86 NY2d 543 [1995]; Farrell Lines, v City of New York, 30 NY2d 76 [1972]; Tri-Messine Construction Company v Telesector Resources Group, 287 AD2d 558 [2d Dept 2001]). Had the parties intended such a result, they could have negotiated and included those explicit terms.
The petitioner further contends that even if respondent's notice was effective, the premises was never rendered "wholly unusable" so as to trigger a rent abatement, as provided for in paragraph 9 of the lease. However, according to the respondent, the damage from Superstorm Sandy was such that the premises was rendered "wholly unusable." The respondent contends that the interior of the store had upwards of five (5) feet of water. The electricity had not been restored, the sewer system was clogged and backing up, a leak in the roof from the upstairs tenant existed, the parking lot was damaged and needed to be repaved and/or repaired, along with complete destruction to all of the interior furnishings, equipment and machines inside of the store. [*5]
On March 12, 2013, Christopher J. Egan, the Director and Legal Counsel for Dunkin Donuts Franchising LLC, emailed petitioner's attorney regarding the damages that continued to exist in the premises. In response, petitioner's counsel stated in pertinent part:
"Please be advised that your client is not authorized to make any repairs wherein it would deduct the cost from the rents. There is no legal authority to deduct any repairs' from the rent. Your client must pay the rent and start a plenary action if it seeks redress."
In the instant case, paragraph 9 [Destruction, Fire and Other Casualty] of the lease provides in pertinent part:
"(b) If the demised premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of the Owner and the rent and other items of additional rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises that is usable [emphasis added].
(c) If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent and other items of additional rent as hereinafter expressly provided shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner (or sooner re-occupied in part by Tenant then rent shall be apportioned as provided in subsection (b) above), subject to Owner's right to elect not restore the same as hereinafter provided.....Tenant's liability for rent shall resume five (5) days after written notice from Owner that the premises are substantially ready for Tenant's occupancy [emphasis added].
(d) [u]nless Owner shall serve a termination notice as provided for herein, Owner shall make the repairs and restorations under the conditions of (b) and (c) hereto with all reasonable expedition subject to delays due to adjustment of insurance claims ..... and causes beyond owner's control" [emphasis added].
(f) Tenant hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof."
At the outset, it is clear that by agreeing to the standard form provision in paragraph 9, the respondent waived its rights set forth in Real Property Law §227 that permits a lessee of destroyed property to "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" (RPL§ 227; RVC Associates v Rockville Anesthesia Group, 267 AD2d 370 [2d Dept 1999]; Schwartz, Karlan & Gutstein v 271 Venture, 172 AD2d 226 [1st Dept 1991]; Milltown Park v American Delt & Filter Co., 180 AD2d 235 [3d Dept 1992]). [*6]
In this case, neither party claims that the lease is ambiguous or incomplete. Instead, the petitioner argues that paragraphs 40, 52 and 60 of the rider to the lease require the respondent to repair and restore the premises for re-occupancy. The petitioner also claims that these provisions supersede paragraph 9 of the lease. In addition, the petitioner contends that despite the language of paragraph 9(c) which states "Tenant's liability for rent shall resume five (5) days after written notice from Owner that the premises are substantially ready for Tenant's occupancy," no written notice to the respondent was required, because the respondent "alone" was "responsible for the restoration of the premises" (Chase Affidavit ¶4).
In opposition to these claims, the respondent contends that the lease paragraphs upon which petitioner relies only require the respondent to furnish utilities and perform repairs, except for structural repairs to the roof and walls. Respondent further claims that none of these provisions refer to paragraph 9 of the lease or to a "fire or casualty" or to the respondent's right to an abatement of rent in the event of a casualty that renders the premises unusable
In construing the instant lease, the court must seek to avoid an interpretation that would render a provision ineffective (Two Guys, from Harrison NY v SFR Realty Association, 63 NY2d 396 [1984]), and the words must be accorded their fair and reasonable meaning (Albanese v Consolidated Rail Corp., 245 AD2d 475 [2d Dept 1997]). Moreover, the court must arrive at a construction so that there is a reasonable determination of the parties' expectations (see Patrick v Guarniere, 204 AD2d 702 [2d Dept 1994]).
All contracts imply a covenant of good faith and fair dealing in the course of performance (511 West 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144 [2002]; Smith v General Acc. Ins., 91 NY2d 648 [1998]), and the court will not set aside a contract merely because, in hindsight, a party decides that the terms of the contract were improvident (see Town of Clarkstown v M.R.O. Pump & Tank, 287 AD2d 497 [2d Dept 2001]).
In the absence of any ambiguity, the court must look solely to the language used by the parties to discern the contract's meaning. According to paragraph 9(c), if the demised premises are "totally damaged" or rendered "wholly unusable" by fire or other casualty, then the rent and other items of additional rent shall be proportionately paid up to the time of the casualty and shall cease until the date when the premises shall have been repaired and restored by owner. Tenant's liability for rent shall resume "five (5) days after written notice from Owner" that the premises are substantially ready for Tenant's occupancy. This is an explicit requirement that the owner give tenant notice that the rental premises have been restored. In the instant case, it is uncontroverted that no such notice by the owner was ever given to the respondent.
Moreover, paragraph 9(d) provides that unless the owner shall serve a [*7]termination notice as provided for herein, "Owner shall make the repairs and restorations under the conditions of (b) and (c)." It is also uncontested that no termination notice was given to respondent. Assuming the premises had been timely repaired, it would have been in the petitioner's best interest to provide written notice of the completed restoration as soon as possible to trigger respondent's obligation to pay rent. The logic of this conclusion is supported by the plain meaning of the contract terms.
With regard to the payment of rent, the documentary evidence establishes that a payment of $9,568.00 by check No.147560 was made to petitioner on October 24, 2012 representing the rent for November 2012. In addition, a payment of $12,221.77 by check #150574 dated March 30, 2013, which represented one (1) month's rent of $9,568.00, a school real estate tax of $2,901.45, and a general tax payment of $986.90, along with what petitioner claims was an unauthorized deduction of $1,234.58 as an October rent credit. In addition, a payment of $9,9855.00 by check #151797 was paid on May 22, 2013 and check #152301 in the sum of $9,855.00 was paid on June 19, 2013. Furthermore, the petitioner concedes that the respondent has paid rent for the month of July 2013 in the amount of $9,855.00.
According to the affidavit of Rizwan Sheikh, the Vice President of FRJ Austin Donuts, Inc., various repairs were completed. On December 16, 2012, Kerzner Contracting Corp., located at 10 Cleveland Avenue, Sayville, New York submitted a proposal for the demolition of a portion of the premises, along with the removal of "all equipment that had contact with water front line and back line." Mr. Sheikh contends that two (2) payments totaling $31,540.00 were paid to Kerzner Contracting Corp. In addition, a second proposal dated January 29, 2013, for additional work to be performed by Kerzner was submitted. A third payment of $102,790.00 was paid to Kerzner to restore the premises from storm damage. Mr. Sheikh further states that the total cost of restoring the premises was $385,000.00, not counting roof and sewer repairs [Sheikh affidavit ¶6, ¶12].
Here, the terms of the lease, specifically the casualty clause in paragraph 9, is free of ambiguity. If the demised premises are "totally damaged" or rendered "wholly unusable" by fire or other casualty, then the rent and other items of additional rent shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by the owner.
The issue, however, of whether the premises were "totally damaged" or rendered "wholly unusable" as a result of the destruction of Superstorm Sandy must be determined by a trial of this action. In other words, there are questions of fact as to the extent of the damage to the premises, and whether the premises was rendered "wholly unusable" thus triggering an abatement of rent. Only at trial can it be determined whether the respondent is entitled to an abatement of rent from October 29, 2012 and if so, the amount of such abatement. [*8]
In view of the foregoing, both the petitioner's motion and the respondent's motion for summary judgment are hereby denied in all respects.
This case is set down for trial on September 26, 2013 at 9:30 a.m.
This constitutes the decision and order of the court.
So Ordered:
/s/ Hon. Scott Fairgrieve
DISTRICT COURT JUDGE
Dated:August 20, 2013
cc:Law Office of Kramer & Shapiro, P.C.
O'Rourke & Degen, PLLC
SF/mp
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