September 3, 2024

I take pride in the fact that I am NOT at the Appellate Division every five minutes like some of my colleagues. The modern legal customer is paying for solutions to problems, not for protracted litigation. Nevertheless, sometimes you need to take something up to an appellate court to effectuate justice for your client.

In this case, I represented a commercial landlord. The guarantor of the commercial lease successfully resisted summary judgment at the trial court level. I appealed. I won.

There is an old trick when opposing a summary judgment motion. The summary judgment opponent spews a whole ton of lies and half-truths, many of them insulting to the summary judgment proponent. The summary judgment proponent is then supposed to be outraged and reflexively start demonstrating to the Court what a dissembler the opponent is. “Your Honor, my opponent is lying! That’s not how it happened!” If the summary judgment proponent falls for this clever trap, then the Court might well be justified in saying, “you do not get summary judgment if you are arguing about the facts.”

Defendant in the subject case painted a very different picture of events than that offered in Plaintiff’s submissions. Defendant said that the Lease was orally modified, and Plaintiff waived all of Tenant’s, and therefore Defendant-Guarantors’, liability thereunder. But fortunately, Defendant’s assertions did not matter. The subject lease included a merger clause, which stated:

All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant, and any executory agreement hereinafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought.

New York General Obligations Law (“GOL”) 15-301 codifies the efficacy of such clauses:

1. A written agreement or other written instrument which contains a provision to the effect that it cannot be changed orally, cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of the change is sought or by his agent.

2. A written agreement or other written instrument which contains a provision to the effect that it cannot be terminated orally, cannot be discharged by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of the discharge is sought, or by his agent, and cannot be terminated by mutual consent unless such termination is effected by an executed accord and satisfaction other than the substitution of one executory contract for another, or is evidenced by a writing signed by the party against whom it is sought to enforce the termination, or by his agent.

Let us consider some examples of the exceptions to GOL 15-301 operate (there are not many). The leading case is Eujoy Realty Corp. v Van Wagner Communications, LLC, 22 NY3d 413 [2013] (“[A] party can overcome [a merger] clause and enforce an oral modification to a written agreement by demonstrating either that the oral modification has in fact been acted upon to completion; or, where there is only partial performance, that the partial performance [is] unequivocally referable to the alleged oral modification.) Moreover, Eujoy is helpful here when the court states:

In this case, [tenant] depicts the facts as consistent with its claim of a fully performed oral modification because “no sensible businessperson” would have terminated the lease on January 8, 2007 “if liable for a full year’s rent as a result of a week’s occupancy,” and [landlord] “accepted” the termination along with a check for the prorated rent. As for [landlord]’s conduct, article 53 of the lease clearly gave [tenant] the right to terminate the lease in the event new construction substantially obstructed the view of the billboard from the LIE. [Landlord]’s acquiescence to termination on this ground was, therefore, compatible with the lease. So, too, [landlord]’s acceptance of [tenant]’s check for $2,109.43 since the lease includes a standard “no waiver” provision. As for [tenant’s]’s conduct, it might also be said that “no sensible businessperson” would neglect to reduce a lease modification to writing. Regardless, [tenant]’s payment of prorated rent in lieu of the annual basic rent was just as demonstrative of breach of contract as of completion of the purported oral modification. General Obligations Law § 15–301 becomes meaningless if a tenant’s nonpayment of the rent required by a lease is sufficient to prove an oral modification of payment terms, or estop the landlord from recovering the shortfall [citations omitted].

 

[Emphasis supplied.]

If every tenant could vacate a space before the expiration of a lease and say, “hey I thought the landlord was letting me go…”, and was thereby excused by reference to an oral modification, then, as the Court of Appeals points out in Eujoy, every merger clause and GOL 15–301 are rendered meaningless.

There is another old trick – asserting that because a draft of a deal was being circulated among the parties, that the deal somehow became binding, even though the party to be charged never signed it. But a document unsigned by the party to be charged proves the opposite; it proves there was no modification. See Tenber Associates v Bloomberg L.P., 51 AD3d 573 [1st Dept 2008] (“The evidence at Civil Court established that despite several discussions and the exchange of a proposed extension of the lease, the parties…ultimately did not reach an agreement…Appellate Term properly rejected Bloomberg’s estoppel claim since, under the circumstances, there could have been no reasonable reliance on the alleged oral promise and no unconscionable injury.”) See also Sayed v Rapp, 10 AD3d 717 [2d Dept 2004] (“Upon weighing the relative probative force of conflicting testimony as well as conflicting inferences which may be drawn therefrom [citations omitted] we conclude that since the landlord did not execute the 1996 Lease Modification, it was unenforceable.”)

Next, we examine the unequivocally referable exception to oral modification in contravention of a merger clause. There are very few cases where the court finds such unequivocal reference. Singh v Benzina, Inc., 189 AD3d 1494 [2d Dept 2020], is an example of such a case. Benzina concerned an option to refurbish and lease a dilapidated gas station. Money was held in escrow, pending the refurbishment. The agreement contained a merger clause. In Benzina:

[Tenant] submitted an affidavit in which he averred that the only reason he agreed to release the $25,000 held in escrow was in accordance with the parties’ oral modification of the Option to Lease. He also averred that he actively participated in the [landlords’] rehabilitation project at the [landlords’] request by assisting in design choices, locating contractors, and regularly inspecting the worksite, among other things. The [tenant] also supplied documentation of his agreement with a gasoline supplier that he claimed he entered into in reliance upon the oral modification.

In Little Nest Community Nursery LLC v 501 Church LLC, 50 Misc.3d 1215(A) [Supreme Court, Kings County, 2016], a case where the lease made obtaining a certificate of occupancy for the premises tenant’s job, the court held:

[Tenant] also points to conduct by [landlord] after the execution of the lease, and argues that this shows that there was a subsequent oral modification, and part performance by the actions taken by him. Specifically, [tenant] asserts that [landlord] made telephone calls on its behalf regarding the status of the certificate of occupancy and attempted to expedite obtaining the certificate of occupancy and that he called the architect and followed-up on the status of the certificate of occupancy. This argument, however, is unavailing since such conduct is not unequivocally referable to the alleged oral modification [citations omitted]. Rather, any efforts by [landlord] to expedite obtaining the certificate of occupancy are consistent with his and 501 Church LLC’s attempt to avoid any delay in [tenant]’s obtaining a certificate of occupancy so as to avoid a further rent free period pursuant to paragraph 95 of the lease.

Here, in the case I won, the Appellate Division, First Department, held:

To the extent defendants’ arguments may be construed as urging their detrimental reliance defense as a basis for affirmance, we reject the argument. The lease contained a merger clause, and no written modification of the lease was ever signed (Joseph P. Day Realty Corp. v Lawrence Assoc., 270 AD2d 140, 141-142 [1st Dept 2000]). Defendants’ conduct, which included moving out their subtenants, vacating the premises, and agreeing to give up their security deposit, is not “unequivocally referable” to the modification, which was never signed (id.).

Respectfully submitted,

Michelle Itkowitz