Sakele Brothers, LLC v. Dey Street Enterprises

(Civ. Ct. NY 9/14/07)

We represented: Petitioner/Landlord, Sakele Brothers, LLC

Jeffrey K. Oing, J.C.C.

DECISION and ORDER

Background

Petitioner, Sakele Brothers, LLC, is the landlord of the Manhattan premises located at 5-7 Dey Street (the "premises"). Respondent tenant operates a restaurant at the premises pursuant to a written lease with a lease term from July 19, 2002 to June 30, 2012 (Moving Paper, Ex. A).

Petitioner claims that respondent breached the lease by failing to pay base and additional rent totaling $103,780.71 (Moving Papers, Ex. A). Petitioner served respondent with a notice to cure on June 7, 2007 seeking monthly charges for base rent, electric and water, container service, late fees, legal fees, real estate taxes, returned check fees, and a water meter fee (Id.). As further provided in the petition, respondent had until June 21, 2007, or 10 days, to cure its default. When respondent failed to cure the default, on June 22, 2007, petitioner served respondent with a notice terminating the tenancy as of June 30, 2007 (Id.). Respondent remains on the premises which necessitated petitioner's commencement of the instant holdover proceeding.

In support of its dismissal motion, respondent makes several arguments. First, respondent claims that prior to the instant proceeding petitioner initiated two non-payment proceedings, one in February 2007 and the other in May 2007 (Polinsky Affirm., 7/20/07, ¶ 5; Moving Papers, Exs. B and C). Respondent represents that petitioner discontinued the February 2007 proceeding shortly after respondent answered the petition. With respect to the May 2007 proceeding, respondent claims that its attorney advised petitioner's counsel that he would be present in court on the return date for the May 2007 petition with payment of the amount due (Polinsky Affirm. 7/20/07, ¶ 7). According to respondent, petitioner appeared in court before respondent's counsel arrived and discontinued the case (U>Id., ¶ 8). Respondent claims that on June 4, 2007 it delivered funds in the amount of $86,772.65 to petitioner's counsel (Moving Papers, Ex. D). Respondent further argues that even though it made payment of the rent due, petitioner served a notice to cure on or about June 7, 2007 (Polinsky Affirm., 7/20/07, ¶ 10). Respondent argues that even if petitioner has a claim for legal fees or late charges, that such a claim is de minimus in light of the substantial payment made by respondent (Polinsky Affirm., 7/20/07, ¶ 18).

Next, respondent claims that it never executed a stipulation consenting to a discontinuance of either of petitioner's two prior non-payment proceedings. Respondent argues that the second discontinuance acts as a discontinuance with prejudice as a matter of law pursuant to CPLR 3217(c).

In addition, respondent argues that the lease provision that petitioner invoked to commence the instant holdover proceeding, paragraph 42, is ambiguous and provides no clear basis for petitioner to commence the proceeding (Polinsky Affirm., 7/20/07, ¶ 20). In that regard, respondent argues that paragraph 17(2) as modified by insert 13, of the standard form printed lease relates to defaults and does not contain a conditional limitation based upon a default in the payment of rent (Polinsky Affirm., 7/20/07, ¶ 21). According to respondent, insert 13 treats rent defaults in a materially different and contradictory way from paragraph 42 of the lease thus creating confusion and ambiguity (Id., ¶ 21).

Discussion

The principle is well settled that on a pre-answer motion to dismiss, pursuant to CPLR 3211(a) [7], the petition is to be liberally construed and the court must presume the facts pleaded to be true and must accord them every favorable inference (Leder v Spiegel, 31 AD3d 266 [1^stGorelik v Mount Sinai Hospital Center, 19 AD3d 319 [1^stGorelik v Mount Sinai Hospital Center, supra, 19 AD3d). "Whether [petitioner] can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss" (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11 [2005]).

As for respondent's argument that paragraph 17(2), as modified by insert 13, and paragraph 42 are contradictory and confusing, thus creating ambiguity in the lease, the argument is unavailing. Insert 13 provides the following:

If Tenant shall make default in the payment of the rent reserved herein, or any item of additional rent mentioned, or any part of either, or in making any other payment herein required, then in any of such events, Owner may reenter the demised premises and dispossess Tenant by summary or other legal proceedings, 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. The preceding sentence does not constitute a conditional limitation.

(Moving Papers, Ex. A).

Paragraph 42, entitled "Default in the Payment of Rent" provides:

Notwithstanding any provision contained herein to the contrary, and without waiving Landlord's right to commence summary eviction proceedings for nonpayment of rent, the Landlord, at Landlord's sole discretion, shall have the right to exercise the provisions of this Article. In the event Tenant defaults in fulfilling the covenant to make timely payment of base rent and/or additional rent in any month, the Landlord may send the Tenant TEN (10) days notice in writing, specifying a default in the payment of base rent and/or additional rent and upon expiration of said TEN (10) days, if Tenant shall have failed to make payment of the base rent and/or additional rent and thereby remedy the default, then the Landlord may send to the Tenant a written FIVE (5) day notice of cancellation of this Lease, and upon expiration of said FIVE (5) days, this Lease and the term hereunder shall end and fully expire as 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 thereof and Tenant shall then quit and surrender the demised premises to the Landlord and Tenant shall remain liable to Landlord as elsewhere provided in this Lease…

(Moving Papers, Ex. A, [emphasis added]).

Petitioner landlord asserts that paragraph 42 does indeed contain a conditional limitation (Itkowitz Affirm, ¶ 38). However, petitioner claims that the remedies set forth in paragraphs 17(2), as modified by insert 13, and paragraph 42 are cumulative, not mutually exclusive (Itkowitz Affirm., ¶ 39).

As emphasized in paragraph 42, supra, the lease clearly provides petitioner landlord with discretion in treating a default in the payment of rent or additional rent as a conditional limitation. Additionally, contrary to respondent's contention that conditional limitations are not favored by law, when a lease between commercial parties contains a conditional limitation for nonpayment of rent, it shall be enforced in the absence of a showing of fraud, overreaching or other unconscionable conduct by the landlord (Metropolitan 919 3^rd Avenue LLC v P.J. Clarke's Restaurant Corp., 2001 NY Slip Op 50055U [App Term, 1^st Dept 2001; Grand Liberte Cooperative, Inc. V Bilhaud, 126 Misc 2d 961 [App Term, 1^st Dept 1984]).

Respondent fails to make such a showing.

Regarding respondent's claim that petitioner's discontinuance of the second non-payment proceeding acts as a discontinuance with prejudice pursuant to CPLR 3217(c), the argument is also unavailing. The purpose of CPLR 3217(c) is to restrict the use of the discontinuance device as a means of harassment and a source of repetitive litigation (Tortorello v Carlin, 162 AD2d 291 [1^st Dept 1990]; Decarvalhosa v Adler, 2001 NY Slip Op 40614U [App Term, 1^st Dept 2001]). Where it is clear that a party is not attempting to harass, but has a legitimate purpose for a discontinuance, a prior discontinuance by means of notice does not operate as an adjudication on the merits (Tortorello v Carlin, supra, 162 AD2d at 291; Decarvalhosa v Adler, supra, 2001 NY Slip Op 40614U).

Here, petitioner claims that respondent agreed to pay the full amount due upon petitioner's voluntary discontinuance of the May 2007 non-payment proceeding. Pursuant to the parties agreement, petitioner's counsel appeared in court on June 1, 2007 and discontinued the action. Petitioner maintains that respondent failed to appear on that day thus preventing the execution of a written stipulation. Under these circumstances, the present record does not support an argument that petitioner was attempting to harass respondent, but had a legitimate purpose in its prior discontinuance on notice. That is, petitioner's anticipation of being paid without going forward with the nonpayment proceeding. In addition, the instant action is a holdover proceeding, thus it is not "based on … the same cause of action" as the prior nonpayment proceedings (CPLR 3217[c]).

Finally, respondent contends that any remaining claims petitioner may have are de minimus in light of its substantial payment. Respondent points out that the law abhors forfeiture of leases where there is no substantial harm to the landlord, and that conditional limitations are subject to strict scrutiny and will not be enforced for minor breaches or where no substantial injury occurs (Polinsky Affirm., 7/20/07, ¶¶ 18 and 19).

Petitioner claims that respondent's tender of the checks making up the $86,772.65 amount did not occur on June 4, 2007 as claimed. Petitioner's counsel asserts that his office did not receive the checks until June 7, 2007 after petitioner had already served the notice to cure (Itkowitz Affirm., ¶¶ 16-17; Sakele Aff., ¶¶ 8-11). Indeed, respondent's own correspondence shows that the checks were not included with respondent's counsel's June 4 letter (Moving Papers, Ex. D). In fact, the checks were not delivered to petitioner's counsel's office later that day despite respondent's promise to do so (Itkowitz Affirm., 7/31/07, ¶ 17). Petitioner points out that respondent's tender of $86,772.65 still left $17,008.06 remaining due (Sakele Aff., ¶ 12). As a result, petitioner served the notice of termination dated June 22, 2007 terminating respondent's tenancy as of June 30, 2007 (Sakele Aff., ¶ 24).

Respondent, however, disputes the charges that total $17,008.06 that petitioner claims remained due and owing during the cure period (Polinsky Affirm., 8/7/07, ¶¶ 3-5). Such disputes are not appropriate for resolution on a pre-answer CPLR 3211(a) [7] motion to dismiss for failure to state a cause of action.

In reviewing the petition's four corners, this Court finds that the factual allegations state a viable claim forming the basis for the instant holdover proceeding. As such, dismissal pursuant to 3211(a) [7] is unwarranted.

Accordingly, respondent's motion to dismiss the petition is denied. Respondent is directed to serve an answer to the petition within 10 days after service of a copy of this order with notice of entry. This matter is hereby restored to the Part 52 calendar for trial. The parties are directed to appear in Part 52 on October 22, 2007 at 9:30 a.m.

This memorandum opinion constitutes the decision and order of the Court.

Dated: September 14, 2007