Opinion
652180/2017
08-18-2021
723 EDIBLES, INC., Plaintiff, v. 721 BORROWER, LLC, Defendant.
SDK Heiberger, LLP, New York, NY, (Steven Sperber of counsel) for plaintiff. Charles E. Boulbol, Esq., New York, NY, for defendant.
SDK Heiberger, LLP, New York, NY, (Steven Sperber of counsel) for plaintiff.
Charles E. Boulbol, Esq., New York, NY, for defendant.
Gerald Lebovits, J.
The following e-filed documents, listed by NYSCEF document number (Motion 003) 61, 62, 63, 64, 65, 66, 67, 68, 69, 71, 72, 73, 74, 75, 76 were read on this motion to ENFORCE JUDGMENT OR ORDER.
This action arises from a dispute between plaintiff, 723 Edibles, Inc. (tenant), and defendant, 721 Borrower, LLC (landlord). The landlord now seeks to compel the tenant to vacate the premises, contending that the tenant has impermissibly held over under a lease modified by a so-ordered stipulation that the parties entered into earlier in this action. The landlord also moves under the stipulation to compel the tenant to pay owed rent and arrears, to pay $7,500 a day in use and occupancy of the premises for each day after the lease's December 31, 2020, termination date, and to pay the landlord its reasonable attorney fees. The motion is granted.
BACKGROUND
The tenant brought this action in April 2017, seeking an order compelling the landlord to sign a permit application needed to replace kitchen equipment destroyed by a fire. (NYSCEF No. 10.) In October 2017, the parties entered into a two-attorney stipulation, so-ordered by this court, that resolved many aspects of their dispute. The stipulation provides that the tenant must vacate and surrender possession of the basement, ground floor, and second floor of 723 Seventh Avenue by December 31, 2020. (See NYSCEF No. 66.) Paragraph 6 (c) of the stipulation requires the tenant to pay rent and additional rent, plus $7,500 a day for each day that the tenant remains in possession after December 31, 2020. (See id. at 5.) The stipulation also provides that the tenant consents to the entry of a writ of assistance in the event that it remains in possession after that date. And the parties agreed that in the event of a motion, action, or proceeding to enforce the stipulation, the successful party would be reimbursed for reasonable attorney fees. (See id. at 6, 12.)
The tenant operates a full-service restaurant on the premises under the lease. (NYSCEF No. 71 at 1.) The landlord asserts that the tenant has not paid any rent, including unpaid arrears and deferred rent, since January 2020. (See NYSCEF No. 62 at 4.) The landlord alleges that the tenant owes it $2,010,368.53 in back rent and additional rent, plus accrued use and occupancy. (See id. ) The tenant claims that its business was unable to generate income to pay rent due to the pandemic and accompanying executive orders closing restaurants. (See NYSCEF No. 71 at 2.)
DISCUSSION
I. The Branch of the Landlord's Motion Seeking a Money Judgment for Unpaid Rent, Arrears, and Use and Occupancy
The landlord moves under CPLR 2104 to enforce the terms of the parties’ stipulation, seeking (i) a money judgment of $1,335,752.73 in unpaid rent and additional rent (including $33,749.60 in arrears); (ii) $674,615.80 in unpaid deferred rent owed for the period February 1, 2017, through January 1, 2018, totaling $2,010,368.53; and (iii) use and occupancy, accruing at $7,500 per day beginning on January 1, 2021.
A. Unpaid Rent and Arrears
With respect to the landlord's claims for unpaid rent and additional rent, arrears, and deferred rent, the parties do not dispute either the landlord's entitlement to those sums under the 2017 stipulation, or the amount owed by the tenant. This branch of the landlord's motion is therefore granted, and the landlord is awarded a money judgment for the full $2,010,368.53 requested (plus interest).
B. Use and Occupancy
The landlord's request for an award of $7,500 a day in use and occupancy under the 2017 stipulation is more contested. It is undisputed that the stipulation qualifies as a binding, enforceable agreement under CPLR 2104. The landlord therefore argues that it is entitled to strict enforcement of the stipulation's terms, including its use-and-occupancy provision. In opposition, the tenant contends that the $7,500/day provision is unconscionable because it amounts to an assessment of double rent over periods in which the tenant's restaurant was required to be closed under pandemic-related executive orders. This court agrees with the landlord.
When a stipulation is "unambiguous, ‘literal enforcement of its terms is not unjust.’ " ( Taboola, Inc. v Newsweek Media Group, Inc. , 171 AD3d 510, 511 [1st Dept 2019], quoting Cadlerock Joint Venture, L.P. v Rubenstein , 26 AD3d 219, 220 [1st Dept 2006].) Stipulations of settlement are favored by courts, "will not be lightly set aside, and ‘are to be enforced with rigor and without a searching examination into their substance." ( Peralta v All Weather Tire Sales & Serv. , 58 AD3d 822 [2d Dept 2009], quoting Bonnette v Long Is. Coll. Hosp. , 3 NY3d 281, 286 [2004].) A party will be relieved from the consequences of a stipulation "only when there is cause sufficient to invalidate a contract, such as fraud, collusion, mistake, or accident." ( Hallock v State , 64 NY2d 224, 230 [1984].) When sophisticated parties, represented by counsel, mutually negotiate the terms of the agreement, a liquidated-damages provision is entitled to deference. (See Addressing Sys. & Prods., Inc. v George Friedman , 59 AD3d 359, 360 [1st Dept 2009].)
A liquidated-damages provision that is not reasonably proportional to the actual loss will constitute an unenforceable penalty. (See Wirth & Hamid Fair Booking v Wirth , 265 NY 214, 223 [1934].) The rent value under a lease can be probative in determining whether use and occupancy is reasonable. ( Mushlam, Inc. v Nazor , 80 AD3d 471, 472 [1st Dept 2011].) Thus, in Trustees of Columbia Univ. in the City of NY v D'Agostino Supermarkets, Inc. , the Court of Appeals held that a liquidated-damages clause violated public policy because it required a payment of seven times the amount due if the defendant had fully complied with the initial agreement. ( See 36 NY3d 69, 71 [2020].) But in this case, the stipulation's liquidated-damages provision awards use and occupancy at twice the monthly rent should the tenant not vacate as agreed, rather than seven times rent. That award, in the context of a commercial tenancy, is not an unenforceable penalty. (See Getty Props., Corp. v Getty Petroleum Mktg., Inc. , 2015 NY Slip Op 32524[U], at *3 [Sup Ct, NY County May 14, 2015] [collecting cases].)
Additionally, although the pandemic may have been disruptive to the tenant's business, the purpose of the lease was not so frustrated as to render the liquidated-damages provision inapplicable. (See 558 Seventh Ave. Corp. v Times Sq. Photo , 194 AD3d 561, 562 [1st Dept 2021] [holding that a business that was able to reopen for curbside service and was able to gain access to the premises during a period of nonpayment could not invalidate the lease under a frustration of purpose argument]; see also Childs v Levitt 151 AD2d 318, 320 [1st Dept 1989] [holding that "equity will not relieve a party of its obligations under a contract merely because subsequently, with the benefit of hindsight, it appears to have been a bad bargain"].)
The landlord's request to enforce the stipulation's provision awarding $7,500 per day for every day the tenant remains in occupancy after December 31, 2020 is granted.
II. The Branch of the Landlord's Motion Seeking a Writ of Assistance
The landlord also argues that it is entitled to specific performance of the stipulation's warrant of ejectment provision under CPLR 2104 and RPAPL § 221. The tenant does not meaningfully oppose the landlord's request for specific performance of the stipulation's warrant-of-ejectment provision, or the issuance of a writ of assistance. The landlord's request is therefore granted. Execution by the sheriff of the writ of assistance is stayed until the August 31, 2021, expiration of the eviction moratorium imposed by the COVID-19 Emergency Protect Our Small Businesses Act of 2021, L 2021, ch 73.
III. The Branch of the Landlord's Motion Seeking Attorney Fees
Finally, the landlord seeks an award of attorney fees under ¶ 22 of the stipulation, which provides for an award of fees to the prevailing party in a motion or action to enforce the stipulation. (See NYSCEF No. 64 at 12.) The landlord clearly has prevailed "on the central claims advanced," and is entitled to "receive substantial relief in consequence thereof." ( Sykes v RFD Third Ave. I Assoc., LLC , 39 AD3d 279 [1st Dept 2007].) The landlord is therefore awarded reasonable attorney fees. The landlord is directed to file a separate motion in this action to determine the amount of those fees; the landlord's papers on that motion should fully explain and document the fees claimed.
Accordingly, for the foregoing reasons, it is hereby
ORDERED that the branch of the landlord's motion under CPLR 2104 seeking the award of a money judgment for unpaid rent and additional rent, arrears, and deferred rent is granted; and it is further
ORDERED that the branch of the landlord's motion under CPLR 2104 seeking the award of use and occupancy at $7,500 per day for each day the tenant occupies the premises after December 31, 2020, is granted; and it is further
ORDERED that the branch of the landlord's motion under CPLR 2104 seeking a warrant of ejectment and the issuance of a writ of assistance is granted, with execution by the sheriff of the writ of assistance to be stayed until September 1, 2021; and it is further
ORDERED that upon the tenant's ejectment from the premises, the parties shall file a stipulation on the docket in this action identifying the last day of the tenant's occupancy of the premises; and it is further
ORDERED the branch of the landlord's motion under CPLR 2104 seeking the award of reasonable attorney fees is granted; the landlord is directed to file a motion in this action seeking the determination of the amount of those fees, and may later enter a second, supplemental judgment in this action for the amount of those fees as determined in a subsequent order of this court; and it is further
ORDERED that the landlord is awarded a money judgment against the tenant in the amount of (i) $2,010,368.53 (comprising unpaid rent and additional rent, arrears, and deferred rent), plus interest at nine percent running from January 1, 2020, until the entry of judgment; and (ii) use and occupancy, accruing at $7,500 day from January 1, 2021, through the last day of the tenant's occupancy of the premises, inclusive, plus interest at 9%; and it is further
ORDERED that the landlord serve a copy of this order with notice of its entry on all parties and on the office of the county clerk, which shall enter judgment accordingly.