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TRIOLOGY VARIETY STORES v. CITY PRODS. CORP.

June 22, 1981

TRIOLOGY VARIETY STORES, LTD., also known as Trilogy Variety Stores, Ltd., and Primo Philip Profeta, Plaintiffs,
v.
CITY PRODUCTS CORPORATION, Defendant



The opinion of the court was delivered by: MOTLEY

MEMORANDUM OPINION

This is a diversity action removed from the Supreme Court, County of Rockland, pursuant to 28 U.S.C. § 1441, in which plaintiffs, Triology Variety Stores, Ltd. (Triology) and Primo Philip Profeta (Profeta), seek injunctive relief and damages on multiple claims arising out of plaintiffs' dual relationships, as franchisee and sublessee, with defendant, City Products Corporation (City Products). Defendant has moved, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss the entire complaint for failure to state a claim upon which relief can be granted.

 For the purposes of this motion, the allegations of the complaint are to be construed in plaintiff's favor. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 1686, 40 L. Ed. 2d 90 (1974). Defendant City Products, as tenant, entered into a lease agreement in June, 1965, with Bridon Realty Company (Bridon Realty), as landlord, for premises located at the Clarkstown Plaza Shopping Center in New City, New York. The particular premises at issue are known as 204 South Main Street, New City, New York, and were to be used by City Products, as the franchisor, as a "Ben Franklin Store" for the sale of goods to the general public. This lease commenced on January 1, 1966, and terminated on January 31, 1976. The tenant, City Products, was given options to renew the lease for either a single ten year period or for up to two successive five year periods.

 In July, 1965, plaintiff Triology, at that time owned by Louis and Rita Iessi, entered into a franchise agreement with City Products whereby Triology became City Products' franchisee with the right to use City Products' trade name of "Ben Franklin Store" and to carry out the business of selling franchise goods to the public. Concurrent with their execution of the franchise agreement, the Iessis, as owners of Triology, entered into a second agreement with City Products whereby Triology became the sublessee of City Products with respect to the same premises for which the latter held the prime lease as the tenant of Bridon Realty. This subtenancy commenced on January 1, 1966, and terminated on January 15, 1976.

 City Products exercised its option to renew the prime lease with Bridon Realty for a single five year term, such term commencing on February 1, 1976, and terminating on January 31, 1981. Likewise, a subsequent renewal of the sublease agreement between City Products and Triology extended its operation through January 30, 1981.

 Plaintiff Profeta is the present owner of Triology, having purchased its business and stock from the Iessis in November, 1978 for $ 63,000.00. Because he was buying one of its existing franchises, Profeta was first screened and approved by City Products and the latter was represented at the closing of the transaction of sale. A new franchise agreement, with a termination date of December 31, 1983, was prepared for Profeta and executed by the parties. At the time of Profeta's purchase, the remaining term of Triology's sublease with City Products was just over two years. Because the franchise agreement, at paragraph 11(c), permits City Products to terminate in the event the franchise is moved to a location other than that at which franchise operations were commenced, Profeta was concerned that the business in which he was investing might not outlast the remaining term of the sublease. It is alleged that Profeta, before purchasing Triology, therefore sought and obtained promises from various agents and employees of City Products, including T. B. Jennings, Director, Franchise & Real Estate Development, that as long as the franchise remained in good standing, the sublease would be renewed. These promises, although never reduced to writing, and the extent of plaintiffs' reliance thereon, form the basis of this lawsuit.

 In July, 1980, Profeta, on behalf of himself and Triology, contacted City Products and requested a renewal of the sublease. Approximately two weeks later City Products notified Bridon Realty and Triology that it would not renew either the sublease to Triology or its own prime lease with the landlord, both of which agreements were to terminate as of January 31, 1981.

 It is plaintiffs' contention that in the absence of City Products' assurances that the sublease would be renewed, Profeta would not have purchased the stock of Triology and would not, along with Triology, have had any interest in the ownership of a Ben Franklin franchise that could be terminated upon expiration of the then existing sublease only twenty-six months thereafter.

 The first cause of action set forth in the complaint alleges that because of City Products' refusal to renew the sublease, plaintiffs are prevented from performing the franchise agreement since the place of performance is an integral term thereof. Plaintiffs claim that this is a breach of the franchise agreement and seek specific performance of that agreement in the form of an order directing City Products to execute a renewal of its lease with Bridon Realty and its sublease with plaintiffs, such sublease to terminate on December 31, 1983, along with the franchise agreement.

 The second cause of action seeks reformation of the franchise agreement to permit its performance at another location. Also sought are damages for the cost of increased rental and renovation of new premises.

 The third cause of action seeks damages for the full value of Triology, which plaintiffs contend has now been "rendered valueless by the wrongful and willful conduct of the defendant."

 The fourth cause of action alleges that plaintiffs, with the knowledge of defendant, in reliance upon the latter's oral promises to renew the sublease, spent $ 10,000.00 to renew and refurbish the premises and have consequently been damaged in that amount.

 The fifth and final cause of action claims that Profeta's purchase of Triology for $ 63,000.00, and his investment of an additional $ 20,000.00 to provide working capital, would not have been made but for his reliance on City Products' oral promises. Profeta further claims that City Products induced his purchase of Triology and investment of working capital by knowing that he would make such purchase and investment in reliance on those promises.

 For the reasons set forth below, defendant's motion to dismiss is granted, with the exception of the fourth and fifth causes of ...


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