Rogan LLC v YHD Bowery Commercial Unit LLC
Annotate this CaseDecided on June 20, 2014
Supreme Court, New York County
Rogan LLC and ARTHUR RYAN, Plaintiff
against
YHD Bowery Commercial Unit LLC, Defendant.
651168/13
For Plaintiffs:
Robert L. Greene, Esq.
Storzer & Greene
110 Wall Street, 11th floor
N.Y., N.Y. 10005
For Defendant:
Bryan Kishner, Esq.
Ryan Miller, Esq.
Law Offices of Kishner & Miller
420 Lexington Ave., Suite 300
N.Y., N.Y. 10170
Nancy M. Bannon, J.
In January of 2008, plaintiff Rogan LLC, a clothing company, and 54 Bond LLC, then owner of the premises located at 54 Bond Street in Manhattan, entered into a seven-year lease for commercial retail space on the first floor of the building. Plaintiff Arthur Ryan, a member of Rogan LLC, signed as guarantor on the lease. The annual rent for the first year was $200,000, or $16,666.66 monthly. In early 2009, 54 Bond Street, as sponsor, converted the premises to a condominium. The defendant, YHD Bowery Commercial Unit, LLC, purchased the commercial space, including the subject unit, from 54 Bond, LLC in December 2010 and was assigned the plaintiff's lease. An estoppel certificate was executed confirming its terms.
On January 18, 2013, the condominium's board of managers approved a "Facade Restoration Capital Improvement Assessment" for a total amount of $2,870,830.31 to cover the costs of restoring the original cast iron exterior facade of the building and installing a new sidewalk. The commercial space was assessed $858,169.15 as its share of the assessment.
By a letter from its attorney Ryan Miller dated January 31, 2013, the defendant notified the plaintiff of the Facade Restoration Capital Improvement Assessment, represented that it had paid the building in full for the assessment, and demanded that the plaintiff pay $442,986.92, as its 51.62% proportionate share within 15 days "pursuant to the terms of the lease", specifically Paragraphs 41(B)(2) and 41(B)(3).
The plaintiff did not pay, but instead sent a letter to defendant requesting additional information and documentation. The defendant did not respond, but served a Five-Day Rent Demand dated March 26, 2013, requiring payment by March 31, 2013, of $404,713,38. This amount consisted of $304,735,87 for the assessment, with the balance attributed to rent, additional rent and late charges on all of those amounts, from January, February and March 2013. The plaintiff vacated the premises on April 5, 2013, pursuant to a written stipulation with the defendant of that date, in which both parties reserved all rights and remedies. As of October 2013, the space remained vacant.Prior to vacating, the plaintiffs commenced the instant action on or about April 1, 2013, seeking declaratory and injunctive relief against the defendant. Specifically, they seek a judgment declaring that they are not obligated to pay any part of the facade assessment and enjoining the defendant from terminating the lease or seeking possession of the premises. [The latter injunctive relief was rendered moot upon the plaintiff's vacatur on April 5, 2013.]
The defendant answered and asserted eight counterclaims seeking declaratory relief and money damages as against both plaintiffs, plus attorneys fees and late fees, based upon breach of contract theories. Specifically, it sought a declaration that the lease and guaranty obligate the plaintiffs to pay a proportionate share of the facade assessment and sought a money judgment for $304,735.87, for the assessment, plus rent and additional rent due for the months January through October 2013, the amount to be determined at inquest.
The defendant now seeks summary judgment as against both plaintiffs dismissing the complaint and granting judgment in its favor on all of its counterclaims, including a money judgment to include the sum of $295,038.55 for the assessment, plus rent, additional rent, attorneys fees and late fees, the amount to be determined at inquest.
The plaintiff cross-moves for partial summary judgment on its request for a declaration that it has no obligation to pay any portion of the facade restoration assessment.
For the reasons set forth below, defendant's motion for summary judgment is denied and plaintiff's cross-motion for partial summary judgment is granted.
DISCUSSION
It is well settled that the proponent of a summary judgment motion is entitled to that relief only upon a prima facie showing of entitlement to judgment as a matter of law, tendering [*2]sufficient proof in admissible form to eliminate any material issues of fact. See Alvarez v Prospect Hospital, 68 NY2d 320 (1986); Zuckerman v City of New York, 49 NY2d 557 (1980); O'Halloran v City of New York, 78 AD3d 536 (1st Dept. 2010). If the movant makes such a showing, the burden shifts to the non-movant to demonstrate the existence of factual issues requiring trial. See Dallas-Stephenson v. Waisman, 39 AD3d 303 (1st Dept 2007). However, if the initial burden is not met by the movant, summary judgment must be denied regardless of the sufficiency of the opposing papers. See Winegrad v New York University Medical Center, 64 NY2d 851 (1985); Giaquinto v Town of Hempstead, 106 AD3d 1049 (2nd Dept. 2013); O'Halloran v City of New York, supra. This is because " summary judgment is a drastic remedy, the procedural equivalent of a trial. It should not be granted if there is any doubt about the issue.'" Bronx-Lebanon Hosp. Ctr. v Mount Eden Ctr., 161 AD2d at 480 (1st Dept. 1990) quoting Nesbitt v Nimmich, 34 AD2d 958, 959 (2nd Dept. 1970).
It is also settled law that a lease is a contract which is subject to the same rules of construction as any other agreement. See George Backer Mgt. Corp. v Acme Quilting Co., Inc., 46 NY2d 211 (1978); 1009 Second Avenue Assocs. v New York City Off-Track Betting Corp., 248 AD2d 106 (1st Dept. 1998); New York Overnight Partners, L.P. v Gordon, 217 AD2d 20 (1st Dept. 1995). Thus, a written lease "agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms." Greenfield v Philles Records, Inc., 98 NY2d 562, 569 (2002); see MHR Capital Partners LP v Presstek, Inc., 12 NY3d 640 (2009); Ashwood Capital, Inc. v OTG Management, Inc., 99 AD3d 1 (1st Dept. 2012); 150 Broadway NY Associates, LP v Bodner, 14 AD3d 1 (1st Dept. 2004). "Extrinsic evidence of the parties' intent may be considered only if the agreement is ambiguous, which is an issue of law for the courts to decide." Greenfield v Philles Records, Inc., supra at 569; see 7495-Kasowitz, Benson, Torres & Friedman, LLP v Duane Reade, 98 AD3d 403 (1st Dept 2012); Jet Acceptance Corp. v Quest Mexicana S. A., 87 AD3d 850 (1st Dept 2011). Ambiguity is determined by looking within the four corners of the document and not to outside sources. See W.W.W. Assocs. v Giancontieri, 77 NY2d 157, 162-163 (1990).
Further, "[a]ll parts of a contract must be read in harmony to determine its meaning." Bombay Realty Corp v. Magna Carta, Inc., 100 NY2d 124, 127 (2003). This is because it is a cardinal rule of contract construction that no provision should be ignored nor any agreement interpreted so as to render any provision meaningless. See Beal Savings Bank v Sommer, 8 NY3d 318 (2007); Tini v Alliancebernstein L.P., 108 AD3d 409 (1st Dept. 2013); Kolmar Americas, Inc. V Bioversal, Inc., 89 AD3d 493 (1st Dept. 2011); Helmsley-Spear, Inc. v New York Blood Center, Inc., 257 AD2d 64 (1st Dept. 1999). Therefore, the "[m]ere assertion by one that contract language means something to him, where it is otherwise clear, unequivocal and understandable when read in connection with the whole contract, is not in and of itself enough to raise a triable issue of fact." Kasowitz, Benson, Torres & Friedman, LLP v Duane Reade, supra, at 406, quoting Unisys Corp. v Hercules Inc., 224 AD2d 365, 367 (1st Dept 1996).
Here, the defendant relies primarily upon the parties' lease to establish its entitlement to summary judgment. However, this reliance is misplaced as the terms of the lease make clear that the plaintiffs are not required to pay any portion of the "Facade Restoration Capital Improvement Assessment."
The language of the lease reflects that the parties contemplated the possibility of converting 52 Bond Street into a condominium from the outset. Paragraph 40 of the Rider, [*3]"Condominium Conversion" provides that "owner reserves the right, at any time during the term, to subject the land and building to a condominium form of ownership." That provision further provides for the Declaration, the condominium By-Laws, and other documents relating to the conversion, and required that all tenants comply with such documents. However, the same provisional expressly states that "[n]otwithstanding the preceding sentence, owner acknowledges that tenant's monetary obligations under this lease shall not increase as a result of such compliance." [emphasis added]. As observed by the plaintiffs, this language was included to protect it, as tenant, from additional costs and obligations that may arise in relation to a condominium conversion. That section also defines "tenant's proportionate share" as 15% "except that in the event of a condominium conversion ... the tenant's share shall be the fraction" of the subdivided commercial space, based on gross square footage "as determined by owner's architect."
Furthermore, the lease prohibits the owner from charging the tenant for capital improvements. Paragraph 41(B)(1)(a) of the Rider requires the tenant to pay, in addition to fixed rent, its proportionate share of the CAM costs, or common area maintenance, which, as defined in subsection 41(B)(1)[c] included electricity, steam and other fuel, water and sewer charges, insurance, payroll costs, and "all such maintenance and construction work as shall be required to preserve and maintain the utility, safety and appearance of the general common areas." However, this same paragraph expressly states that "[n]otwithstanding the foregoing, the following shall not be included as CAM costs (i) costs incurred in connection with the renovation projects currently underway and planned for the condominium project.. [and] ..(iv) costs for capital improvements, to the extent that same are not in furtherance of reasonable or necessary maintenance of the building." [emphasis added].
Paragraph 41(B)(2) provides that after the effective date of any condominium conversion, the tenant shall pay, "in lieu of CAM costs described in paragraph (B)(1) above", its proportionate share of the monthly common charges levied against the commercial unit, and "other special or regular assessments against the commercial unit." Notably, Article 5 of the Condominium By-Laws, submitted on the motion, limits the amount that any unit owner may be charged for any improvement to a common area, raising the issue of the propriety of the assessment as against the defendant in the first instance.
Paragraphs 41(B)(1)(c) and Article 41(B)(2) read together and giving effect to both, provide that the plaintiff is not obligated to pay for capital improvements since (B)(1)(c) expressly excludes from CAM costs any "costs incurred in connection with the renovation projects underway and planned for the Condominium project" and "costs for capital improvements, to the extent that they are not in furtherance of reasonable or necessary maintenance of the building." The defendant cannot reasonably argue that the nearly three million dollar facade project, which as denominated by the building as the "Facade Restoration Capital Improvement" is not in fact a capital improvement, or that restoration of the original cast iron exterior facade of the building constitutes necessary maintenance. The defendant's motion papers certainly do not establish that as a matter of law. Notably, the moving papers make no mention at all of the prior condition of the facade from which one could conclude that any repairs were necessary, much less an entire cast iron restoration project.
Contrary to the defendant's contention, Paragraph 41(B)(2) of the lease, which obligates plaintiff to pay its proportionate share of "monthly common charges and other special or regular [*4]assessments" after any conversion cannot be read to include more than the CAM costs referenced in Article 41(B)(1)[c], with the same exclusions applying. That is, the tenant could not be charged for any portion of the "costs incurred in connection with the renovation projects currently underway and planned for the condominium project" or the "costs for capital improvements" which are "not in furtherance of reasonable or necessary maintenance of the building." Supporting this conclusion is the provision of Paragraph 40 which unconditionally precludes any increase in the tenant's obligations as a result of the conversion. That provision leaves no room for doubt when it states "[n]otwithstanding the preceding sentence, owner acknowledges that tenant's monetary obligations under this lease shall not increase as a result of such compliance." To interpret the lease otherwise so as to increase the plaintiff's monetary obligations to the extent assessed for the facade project would render those provisions meaningless and negate the expressed intent of the parties to the lease. In this regard, the court notes that Paragraph 4 of the lease expressly requires the owner to "maintain and repair the public portions of the building, both exterior and interior" at its own cost. That provision must also be considered as it is part of the parties' agreement. Read together, the terms of the parties' lease make clear that the plaintiff has no rights or obligations in relation to the exterior or facade of 54 Bond Street, and Paragraph 41(B)(2) does not render these provisions null and void upon conversion to a condominium.
Even assuming that the lease did provide that the plaintiffs were obligated to pay some portion of the facade assessment, the defendant has failed to establish what that share is. As stated above, the defendant was assessed $858,169.15, and demanded $442,986.92 from the plaintiffs. In its counterclaims, the defendant seeks $304,735.87. In its summary judgment motion it seeks $295,038.55. As observed by the plaintiffs, the lease mentions a 15% proportionate share, and the defendant has variously stated the plaintiff's share at 25.1% (prior to the facade assessment), 51.62% (initial facade assessment), 35.51% (after plaintiff's counsel notified defendant of the error) and 34.38% (asserted in the affidavit of Eddie Arbittan in support of defendant's motion). In any event, the plaintiffs are not liable for pay portion.
This applies to the claims against both the plaintiff Rogan LLC as principal on the lease and plaintiff Arthur Ryan as signatory on a "Good Guy" and "Maximum Amount" guaranties. Additionally, as to plaintiff Ryan, the defendant has not shown that any demand for payment was made of him as required by the guaranty agreements and, in his affidavit, he denies receiving any, apart from the Five-Day Notice. In any event, the guaranty agreements limit his liability to 30 days after the date the tenant surrenders possession, which here was April 5, 2013, and to $100,000. Although Ryan may incur liability for unpaid rent, additional rent and attorneys fees, he cannot be liable for any part of the assessment since Rogan LLC is not.For these reasons , the court must deny the defendant's motion seeking summary judgment dismissing the complaint and seeking summary judgment in its favor on the counterclaims concerning the facade assessment. Nor has the defendant established its entitlement to summary judgment on the counterclaims concerning the unpaid rent, additional rent, attorneys fees and late fees.
In regard to unpaid rent and additional rent, the defendant seeks payment for the months of January through October 2013, the date of its motion. While the Five -Day Demand seeks stated amounts for January, February and March, no supporting proof is submitted on [*5]the motion, no particular amount is demanded in the counterclaims and no basis is stated for seeking rent through October, in light of the parties' stipulation. Further, the defendant has not established or even alleged how the plaintiffs may have otherwise violated the parties' agreements. The court notes however, that, to the extent any late fees were charged for the plaintiff's failure to pay the facade assessment, they cannot be recovered.
For the same reasons the defendant is not entitled to summary judgment, the plaintiffs are entitled to partial summary judgment, i.e. a declaration that they are not obligated under the parties' agreements, the lease and guaranty agreements, to pay any portion of the facade restoration assessment charged to them. The plaintiff established their prima facie entitlement to that relief and defendant has failed to raise any triable issue of fact in response .See Alvarez v Prospect Hospital, supra; Zuckerman v City of New York, supra.
CONCLUSION
The defendant's motion for summary judgment is denied in its entirety, and the plaintiffs' cross-motion for partial summary judgment is granted.
Accordingly, and upon the papers submitted, it is
ORDERED that the defendant's motion for summary judgment is denied in its entirety, and it is further,
ORDERED that the plaintiffs' cross-motion for partial summary judgment is granted and it is hereby,
ADJUDGED and DECLARED that the plaintiffs are not obligated under the parties' agreements to pay any portion of the "Facade Restoration Capital Improvement Assessment" charged to them by the defendant.
This constitutes the Decision and Order of the court.
Dated: June 20, 2014__________________________
NANCY M. BANNON, J.S.C
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