57^th Street Day Spa, LLC v. 135 East 57^th Street, LLC

(Sup. Ct. N.Y. Cty. 12/9/05)

We represented: Defendant-Landlord

DeGrasse, J.:

DECISION and ORDER Plaintiff moves for a Yellowstone injunction. Defendant cross-moves for an order dismissing the complaint pursuant to CPLR 3211 (a) (1). Paragraph 30.01 of the parties' lease requires plaintiff to give defendant a $200,000 letter of credit as a security deposit. The said paragraph also gives defendant the right to draw down on the letter of credit

"to the extent required for the payment of any Minimum Rent or additional rent, or any other sum as to which Tenant is in default, or for any sum that landlord may expend or may be required to expend by reason of Tenant's default, in respect to any of the terms, covenants and conditions of this lease . . ."

Paragraph 30.01 also requires plaintiff to keep the letter of credit funded up to $200,000 and to restore any of its proceeds applied by defendant to the payment of rent. The paragraph also gives defendant the right to treat plaintiff's failure to replenish the letter of credit as a default.

Plaintiff withheld $79,088.97 of its rent based upon a claim that an overpayment in the said sum had been made prior to January 28, 2003. Thereafter, defendant drew down the sum of $63,572.48 and applied same to the payment of plaintiff's rent. A notice to cure was served upon plaintiff's failure to replenish the letter of credit. The relief prayed for in the complaint includes a declaration that plaintiff is not obligated to pay the security deposit restoration as additional rent. Plaintiff's obligation to replenish the letter of credit as set forth above is unqualified. Therefore, the lease provides a complete defense to plaintiff's claims. Moreover, plaintiff's claim of an overpayment is precluded by an estoppel letter dated November 5, 2003. By that instrument plaintiff acknowledged that it was not entitled to any offsets, abatements or deductions against the rent payable under the lease other than those provided for by the lease.

For the foregoing reasons, plaintiff's motion for a preliminary injunction is denied. Defendant's cross motion for an order dismissing the complaint is granted to the extent that it is adjudged and declared that plaintiff defaulted under the lease by failing to replenish the letter of credit as set forth under defendant's notice to cure dated July 29, 2005. The claims set forth in the complaint are dismissed in all other respects. Correspondence annexed to plaintiff's reply affirmation suggests that plaintiff has cured its default after commencing this action. Such a cure would not affect the disposition of the motion. Defendant's counterclaim is severed and continued. The branch of the cross motion by which defendant seeks attorneys' fees is denied. Attorneys' fees are sought under the counterclaim while the cross motion addresses only the complaint. Judgment in favor of defendant under the counterclaim would be available only upon trial or a CPLR 3212 motion. A preliminary conference shall be conducted on January 23, 2006 at 2:00 p.m. Settle judgment and order.

Dated: December 9, 2005