Opinion
11744/07.
Decided March 26, 2008.
Plaintiff was represented by Benjamin B. Xue, Esq.
Defendant was represented by Meryl L. Wenig, Esq. of Wenig, Saltiel Greene, LLP.
This is the third action or proceeding between plaintiff Guan Tou Market, Inc., former occupant of commercial premises at 371 Wythe Avenue, Brooklyn, and defendant 373 Wythe Avenue, Realty, Inc. a/k/a 373 Wythe Realty, Inc., the owner of the premises. Defendant commenced a summary holdover proceeding in Civil Court (L T Index No. 50033/07), seeking possession of the premises; Plaintiff had previously commenced an action in this court (Index No. 35118/05), seeking a Yellowstone injunction ( see First National Stores, Inc. v Yellowstone Shopping Center, Inc., 21 NY2d 630), which it obtained.
The summary proceeding and Yellowstone action were resolved in August 2006. Pursuant to a Stipulation of Discontinuance, the Yellowstone action was discontinued with prejudice. The parties entered into a Stipulation of Settlement in the summary proceeding, providing, among other things, for a final judgment of possession in favor of Defendant. Now, Plaintiff's Verified Complaint seeks damages for Defendant's alleged breach of the Stipulation of Settlement; other claims were dismissed in a decision and order of the Hon. Gloria Dabiri dated November 7, 2007. Defendant's Verified Answer alleges four counterclaims. With this motion, Plaintiff seeks summary judgment on liability under its remaining cause of action, having withdrawn at oral argument any request for judgment on damages, and also seeks dismissal of Defendant's counterclaims.
Plaintiff took occupancy of the premises pursuant to an Agreement of Lease dated "December, 2001," which would have expired according to its terms on December 31, 2012. The Stipulation of Settlement constituted an express surrender of the parties' lease (¶¶ 8-9; see Matter of Wasserman v Ewing, 270 AD2d 427, 428 [2nd Dept 2000]), although Plaintiff's occupancy and possession of the premises would continue. The Stipulation is dated "August, 2006," but Plaintiff asserts, without contradiction, that it was executed on August 11, 2006.
In addition to entry of a final judgment of possession, Plaintiff "agree[d] to surrender all rights in and to the Premises . . . by surrendering possession of and surrendering keys to the Premises no later than March 31, 2007 . . . to [Defendant or Defendant's] attorney." (¶ 3.) Plaintiff's continued possession was subject to payment of use and occupancy, including specified amounts due on or before August 16, 2006; although a warrant of eviction could issue forthwith, its execution would be stayed, pending the required payments, until March 31, 2007. (¶ 4.)
The Stipulation provided further, however, that Plaintiff could vacate the premises before March 31, 2007, "pay[ing] use and occupancy through the month of the vacatur." (¶ 6.) "In such an event [Plaintiff] shall notify [Defendant] fourteen (14) days prior to the earlier vacatur date and [Defendant] shall deposit $13,500.00 and $125,000.00 one week prior to said proposed vacate date, and shall notify [Plaintiff's] counsel of said deposit." ( Id.) The $13,500.00 amount would represent return of Plaintiff's security deposit, and the $125,000.00 would represent "Buy-Out Funds." (¶ 5.)
If Plaintiff did not vacate earlier, then,"Providing [Plaintiff] [did] not default on any payment due through March 31, 2007, [Defendant] agree[d] at the time of surrender of the broom clean premises" to return the security deposit and pay the "Buy-Out Funds." ( Id.) And Defendant "shall deposit [$138,500.00] in [Defendants's] counsel's escrow account by March 15, 2007, and notify [Plaintiff's] counsel of said deposit." ( Id.)
Because these provisions are at the heart of the current controversy, it is important to note what is expressly provided and what is not. "A stipulation of settlement is a contract, enforceable according to its terms" ( see McKenzie v Vintage Hallmark, PLC, 304 AD2d 503, 504 [2nd Dept 2003]), and "subject to principles of contract construction" ( see Hotel Cameron, Inc. v Purcell, 35 AD3d 153, 155 [1st Dept 2006].) "Where . . . a party seeks to enforce the terms of [a] stipulation [of settlement], a court must effectuate the parties' intent"; "where the stipulation's terms are unambiguous, the parties' intent must be gleaned from the plain meaning of the words used by the parties." ( Vider v Vider, 46 AD3d 673, 674 [2nd Dept 2007].)
Keeping in mind the distinction between a promise and a condition, and that a particular provision may be both ( see Merritt Hill Vineyards Inc. v Windy Heights Vineyard, Inc., 61 NY2d 106, 112-13), the provisions for Defendant's deposit and payment of $138,500 are promises, such that a failure to comply would be a breach of contract, subjecting Defendant to liability for damages ( see id., at 113.) The parties clearly so intended, for they also provided, "In the event that [Defendant] fails to deposit or fails to release said Buy-Out Funds or security deposit and [Plaintiff] successfully litigates the issue and compels release of said funds, it shall be entitled to an award of reasonable legal fees and actual damages." (¶ 13.)
Defendant's making the deposit or payment is not an "express condition" to any duty of Plaintiff under the Stipulation, but might well be a "constructive condition" to its obligation to vacate the premises ( see Oppenheimer Co., Inc. v Oppenheim, Appel, Dixon Co., 86 NY2d 685, 690.) That question need not be answered because, as will appear, Plaintiff did vacate despite the absence of a deposit or payment. As will also appear, there is yet a question as to whether the promises to make the deposit and payment are conditions to any other of Plaintiff's duties.
Also to be noted is the condition to Defendant's promise to pay the $138,500 upon Plaintiff's vacatur on March 31, 2007 that Plaintiff "does not default on any payment due" through that date, and the condition that Plaintiff "surrender . . . broom clean premises." (¶ 5.) One may fairly construe the Stipulation as imposing the condition that Plaintiff be current on its payments on Defendant's promise to make the deposit to its counsel's escrow account by March 15.
One may also fairly construe the Stipulation as imposing the conditions that Plaintiff be current on its payments and "surrender . . . broom clean premises" on Defendant's promises should Plaintiff vacate before March 31, 2007. Moreover, Plaintiff's notification of Defendant 14 days before an earlier vacatur date must be deemed a condition to Defendant's obligation to make the deposit. (¶ 6.)
It is not so clear, however, that Plaintiff's agreement to "surrender all rights to an interest in the Premises . . . by surrendering possession of and surrendering keys to the Premises no later than March 31, 2007" (¶ 3 [emphasis added]) may also be construed as a condition to Defendant's obligation to make the $138,500 payment. "Actual surrender is traditionally effected by vacating the premises and returning the keys to the landlord" ( Webb v Barskey, 9 Misc 3d 138 [A], 2005 NY Slip Op 51748 [U] [App Term, 2nd Dept] [ quoting Matter of Eight Cooper Equities v Abrams, 143 Misc 2d 52, 55 (Sup Ct, NY County 1989)]), but returning the keys is not always deemed essential ( see Asset 42302 LLC v United States, 77 Fed Cl 552, 564-65 [Ct Fed Claims 2007].) Moreover, "[e]xpress conditions must be literally performed, whereas constructive conditions, which ordinarily arise from language of promise, are subject to the precept that substantial compliance is sufficient." ( Oppenheimer Co., Inc. v Oppenheim, Appel, Dixon Co., 86 NY2d at 690.)
Plaintiff's Verified Complaint alleges total damages in excess of $738,500 resulting from Defendants's breach of the Stipulation in failing to make the escrow deposit, and in failing to return the security deposit and pay the Buy-Out Funds. The total is comprised of the $138,500 in Buy-Out Funds and security deposit ( see Verified Complaint, ¶ 32); not less than $200,000 "for having to give up the Premises that it had spent money to renovate during the tenancy" ( id., ¶ 33); not less than $200,000 "for having to spend money in adapting and preparing the new premises for business uses" ( id., ¶ 34); and not less than $200,000 for "loss of business and goodwill that Plaintiff has built up which is associated with the Premises" ( id.,¶ 35.)
The evidence in support of Plaintiff's motion establishes prima facie that, on August 15, 2006, Plaintiff's counsel notified Defendant's counsel that Plaintiff would be vacating the premises by August 31; that, notwithstanding the requirement in the Stipulation that Plaintiff's counsel be notified that the $138,500 deposit had been made, no such notice was given; and that $138,500 has not been paid. Defendant's Verified Answer "[a]dmits that no escrow deposit was made." (¶ 11.)
The Court disagrees with Plaintiff that the Stipulation imposed no condition on Defendant's obligation to make the escrow deposit "aside from notice of the vacatur date" ( see Affirmation in Support of Motion, ¶ 33.) The Stipulation clearly specifies payment of "August 2006 rent of 7746.00; August 2006 taxes of 385.21; and electric of 4144.69 from invoice dated 7/20/06; on or before August 16, 2006." (¶ 4.) And, as the Court has already determined, Plaintiff's being current on payments due was a condition to Defendant's obligation to make the escrow deposit. The Affidavit of Plaintiff's President asserts only that "Plaintiff remitted all rent and/or use and occupancy for the subject premise ( sic) through August 31, 2006." (Affidavit of Yong Guang Lin, ¶ 9.) Plaintiff provides no documentary evidence of payment, and does not clearly assert payment of taxes and electric.
Plaintiff has failed, therefore, to make a prima facie showing that Defendant breached the obligation to make an escrow deposit of $138,500, because it has failed to show prima facie that it complied with all of the conditions to Defendant's obligation. Plaintiff makes no showing, and the Court offers no opinion, on whether the damages claimed, as described above, would qualify as "actual damages" under the Stipulation.
Plaintiff has also failed to make a prima facie showing that Defendant breached the obligation to make the $138,500 payment. Although it has established prima facie that the payment has not been made ( see Affidavit of Yong Guang Lin, ¶ 12), it has failed to show prima facie that it has complied with the conditions to Defendant's obligation — namely, that it was current on its payments and that it "surrender[ed] . . . broom clean premises." The conclusory assertion of Plaintiff's President that there was a surrender ( see id., ¶ 11) is insufficient, whether or not surrender must include delivery of the keys. The date and method of surrender are not specified, and there is no assertion that the premises were broom clean.
The Court notes that although certain deficiencies in Plaintiff's prima facie showing on its cause of action are addressed in an affidavit submitted in reply, the affidavit has not been considered. "[N]ew matters raised for the first time in a reply affidavit are not properly considered." ( Alto v Firebaugh Realty Corp., N.V., 33 AD3d 738, 739 [2nd Dept 2006]; see also Jefferson v Netusil, 44 AD3d 621, 622 [2nd Dept 2007]; Berktas v McMillian, 40 AD3d 563, 564 [2nd Dept 2007].)
With respect to that portion of Plaintiff's motion that seeks dismissal of Defendant's counterclaims, Defendant seeks $59,036.94, representing "rent/use and occupancy, Real Estate Taxes, water charges, and electric charges required by the Stipulation" (Verified Answer, ¶ 53); $12,000 in "costs . . . to remove Plaintiff's possessions and personalty from the premises" ( id., ¶ 59); estimated legal fees no less than $50,000; and "costs of $38,500.00 repairing the damage caused by Plaintiff" to the premises ( id., ¶ 70.) Defendant contends that "Plaintiff failed to surrender to Defendant possession of the premises" ( id., ¶ 14), and that "in March 2006 ( sic)
Defendant evicted Plaintiff and obtained legal possession of the premises through a lawful eviction of the Plaintiff by the Sheriff" ( id., ¶ 22.)
In asserting that it is entitled to judgment dismissing the counterclaims, Plaintiff contends that "Defendant breached the Stipulation of Settlement on August 24, 2006" when it failed to make the required escrow deposit, and that the breach "is a material breach that discharges all of Plaintiff's subsequent obligations pursuant to the Stipulation of Settlement, including the surrender of possession, payments rent ( sic), use, occupancy, for the period after the vacatur period, etc." (Affirmation in Support of Motion, ¶ 49.) But, as determined above, Plaintiff has not established on this motion that Defendant breached the Stipulation by failing to make the escrow deposit. Moreover, the Stipulation expressly provides for remedies of actual damages and attorney fees for Defendant's breach, and no other remedy. ( See Vider v Vider, 46 AD3d at 674.)
Defendant's escrow deposit is not an express condition of any obligation of Plaintiff, except perhaps to vacate the premises in accordance with a notice, and is not shown to be a constructive condition of any obligation. Plaintiff's contention that, in the absence of the escrow deposit, it was neither required to surrender the premises nor pay for its use and occupancy is not supported by any provision in the Stipulation or by commercial logic and common sense.
Plaintiff asserts additional grounds, however, in support of dismissal of Defendant's counterclaims. The First Counterclaim, again, alleges that Plaintiff is liable in the amount of $59,036.94 "for payment of rent/use and occupancy" and other charges "required by the Stipulation." (Verified Answer, ¶ 53.) Defendant does not allege the period for which Plaintiff is allegedly liable for "rent/use and occupancy," and does not break down the total by reference to "rent/use and occupancy" and the other charges, nor does Defendant specify the provision[s] of the Stipulation that require such payments. The Stipulation does not contain an express promise to make any payment, so as to support a claim to damages for breach, as opposed to payment as a condition to the stay of execution of the warrant of eviction (¶ 4) and to Defendant's return of the security deposit and payment of the Buy-Out Funds (¶ 5),
Plaintiff does not on this motion dispute an obligation to make the payments, contending instead that "Plaintiff did in fact surrender the premises." (Affirmation in Support of Motion, ¶ 51.) But, as determined above, Plaintiff does not make a prima facie showing either of surrender, or of payment of use and occupancy and other specified charges until surrender.
The Second Counterclaim seeks recovery of expenses for removal of "motor vehicles, garbage, debris and other personalty" (Verified Answer, ¶ 58) that Plaintiff allegedly left on the premises when it vacated; and the Fourth Counterclaim seeks compensation for physical damage to the premises consisting of a "broken garage door, a missing barricade, holes in the concrete floor, and damage to the front door and roof" ( id., ¶ 69.) Unlike the First Counterclaim, which alleges the Stipulation as the source of Plaintiff's obligation, and the Fourth Counterclaim, which alleges the Lease as the source, the Second and Third Counterclaims do not indicate whether the source of Plaintiff's liability is the Stipulation, the Lease, both, or neither.
Plaintiff argues that "the Stipulation of Settlement is a comprehensive agreement' between the parties" (Affirmation in Support of Motion, ¶ 53), quoting a "whereas" clause in the Stipulation; and that "no provision enables Defendant to recover for expenses it incurred in removing personalty and plaintiff's possessions from the Premises and for other damage at the premises ( sic)" ( id.)
Plaintiff is correct that the Stipulation contains no express promise with respect to either the condition of the premises or removal of possessions, although it does address possessions left by Plaintiff (¶ 14) and a structural change to the premises made by Plaintiff (¶ 10.) The premises are required to be "broom clean" as a condition to Defendant's return of the security deposit and payment of the Buy-Out Funds (¶ 5), but the phrase does not appear as part of Plaintiff's promise to surrender the premises no later than March 31, 2007 (¶ 3.) The Stipulation specifies remedies for Plaintiff's failure to timely surrender (¶¶ 11, 12), but there is no remedy given for damage to the premises, except for the ramp, nor for possessions left on the premises, except that they are deemed abandoned.
The Stipulation is ambiguous, however, on the continued applicability of the provisions of the Lease. On the one hand, the Stipulation states that "it is the intent of the parties to completely extinguish any rights in the Lease" (¶ 8); that "the provisions of this Stipulation shall define the relationship of the parties hereto until the Vacate date ( sic)"; and that "all the understandings of the parties are contained" in the Stipulation and it "constitutes the complete understanding of the parties" (¶ 18.) On the other hand, the Stipulation provides, "Up through and including the Vacate Date [Plaintiff] may continue to use and occupy the Premises in accord with the terms of this agreement and terminated Lease" (¶ 8.)
There is nothing in the affidavit of Plaintiff's President or in the affirmation of its counsel asserting that the intent of the parties in executing the Stipulation was that its terms alone, and nothing in the "terminated Lease," would govern their relationship from that time on. Nor is there any showing that the Lease does not provide a basis for the liability alleged in the Second and Fourth Counterclaims. Plaintiff has failed, therefore, to make a prima facie showing that those counterclaims should be dismissed.
As to the Third Counterclaim, seeking legal fees but not specifying for what, Plaintiff cites only the provision in the Stipulation that allows legal fees to Plaintiff if it successfully litigates a breach by Defendant ( see ¶ 13.) A separate provision of the Stipulation allows Defendant reasonable legal fees under specified circumstances ( see ¶ 12.) In any event, the Third Counterclaim states the Lease as the basis for the claimed legal fees. ( See Verified Answer, ¶ 63.) But, here again, Plaintiff makes no showing that the Lease is unavailable to Defendant, or that it would not provide the remedy sought.
Having determined that Plaintiff has failed to make a prima facie showing that it is entitled to judgment as a matter of law on the remaining cause of action in its Verified Complaint, or on the counterclaims alleged in Defendant's Verified Answer, it is not necessary to address Defendant's opposition. ( See Winegrad v New York Univ. Med Ctr., 64 NY2d 851, 853.)
Plaintiff's motion is denied.