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C.E. TOWERS CO. v. TRINIDAD & TOBAGO AIRWAYS CORP.

October 12, 1995

C.E. TOWERS CO., Plaintiff, against TRINIDAD AND TOBAGO (BWIA INTERNATIONAL) AIRWAYS CORPORATION, d/b/a/ BWIA INTERNATIONAL, Defendant.

Bernard Newman, U.S.D.J., by designation


The opinion of the court was delivered by: NEWMAN

BERNARD NEWMAN, Senior Judge:1

 C.E. Towers Co. (hereinafter "Towers"), a general partnership and owner of a seventeen story building located in Forrest Hills, brings this diversity action against Trinidad and Tobago (BWIA International) Airways Corp. (hereinafter "BWIA"), a company involved in the airline industry. Towers seeks $ 1,276,562.78 in damages for its claim that BWIA breached a lease it had entered into with Towers. BWIA asks that the complaint be dismissed; and each party seeks attorney fees.

 This matter arises under the court's diversity jurisdiction, in conformity with 28 U.S.C. § 1332(a), and the case was tried to the court in a two day bench trial. Pursuant to F.R.C.P. Rule 52(a), the following constitutes the court's findings of fact and conclusions of law.

 THE RECORD

 In its direct case, Towers presented two witnesses: Stanley Markowitz, senior vice-president of Towers and Shilla Patel, in charge of accounts receivable. BWIA presented two witnesses: Timothy Cook, Senior Vice President of General Marketing in North America and Chandra Baldeo, a former secretary for BWIA. Testifying for Towers in its rebuttal case were John Busch, director of management; Harold Reichert, superintendent at the Towers building; John Bolen, in charge of commercial leasing; and Terry Getchell, who was a receptionist in 1993 for Towers. In addition, pursuant to F.R.C.P. Rule 32(a)(3)(E), the depositions of Keith Chong, former director of finance for BWIA, Horace Blake, former senior vice-president in charge of North America, and Bert Rivero, former director of sales and operations for Northern USA, were admitted into evidence with the consent of both parties. *fn2" The parties moved 147 exhibits into evidence.

 CONTENTIONS OF THE PARTIES

 Towers contends that BWIA's abandonment of the premises and failure to pay rent since October 1992 breaches the lease it signed with BWIA in 1982. In its favor, Towers points to the 1982 lease entered into with BWIA and subsequent "lease extension" which was signed in August 1987, providing that Towers would lease office space in its building to BWIA for the agreed upon rent until August 31, 1997. Towers maintains that it was notified by BWIA in July 1992 that BWIA was terminating the agreement and leaving the building by October 10, 1992. Despite the repeated insistence by Towers that BWIA honor the agreement, on October 10, 1992 BWIA employees left the office, taking the furniture and disconnecting the phone. Accordingly, Towers asserts that it is entitled to recover the outstanding rent, reimbursement for out-of-pocket expenses to re-let the building, and attorneys' fees.

 BWIA responds that Towers orally agreed to excuse the leasehold obligations in exchange for $ 150,000, which BWIA offered to pay Towers, but was refused. Moreover, BWIA argues that the lease extension which Towers relies upon, cannot be enforced because the individual who signed the lease, purportedly on behalf of BWIA, did not have the authority to do so. Additionally, BWIA alleges that because on October 23, 1992 Towers changed the locks to the offices, BWIA was evicted and under New York law, does not have any further rent obligations to Towers. Finally, in addition to seeking its own attorney's fees, BWIA argues that the figure submitted by Towers for their attorneys' fees is unreasonable.

 FINDINGS OF FACT

 BWIA is a business incorporated under the laws of the Republic of Trinidad and Tobago. Since 1964, BWIA has been authorized to do business in the state of New York. BWIA operates international air transport services in several countries including the United States.

 Towers and BWIA entered into the lease agreement on June 2, 1982 as landlord and tenant, respectively. The five year lease, expiring on August 31, 1987, provided that BWIA would occupy the seventeenth floor of the Forest Hills building as its North American headquarters. Subsequently, the lease was modified on two occasions: in September 1983, BWIA gave up some of the space it had rented, and in October 1983 the notice provisions of the lease were amended in favor of the mortgagee of the premises. Each modification was made in writing and signed on behalf of BWIA by Keith Chong and Peter Lookhong, the manager in charge of North American Operations.

 From January to July 1987, Towers and BWIA negotiated to extend the lease. The following individuals negotiated the extension on behalf of BWIA: Horace Blake, vice-president of North American Operations; Thomas J. Hill, Regional Manager of North Eastern United States; Keith Chong and Peter Lookhong. A written agreement extending the lease effective September 1, 1987 was executed on August 11, 1987. The extension was signed by Joshua Muss, representing Towers and sent to BWIA, who returned two copies of the extension bearing the signature of Blake, Vice-President in charge of North American Operations dated August 11, 1987. Thereafter, on August 24, 1987 Towers sent the fully signed lease extension to BWIA.

 The extension was to run for a ten year term expiring on August 31, 1994 and consisted of a two page document incorporating the terms, conditions and covenants of the original lease dated June 2, 1982. Further, the extension modified the duration and rental obligations. Specifically, in addition to extending the lease ten years beyond its original termination date, the extension set forth the base rents, schedule of additional rents, and money due for submetered electric service to the premise. From September 1, 1987 until October 31, 1992, BWIA was normally billed and without incident paid the rent to Towers. On May 30, 1990, a tenant Estoppel Certificate signed by Horace Blake was filed with the New York State Comptroller stating that the lease and the extension were in full force.

 In September 1991, BWIA considered relocating its New York offices to Florida for business and economic reasons. Moreover in September 1991, representatives of BWIA began to discuss with Towers the feasibility of extricating itself from the lease. Several representatives of BWIA including Chong, Lewis, and Cook met with Stanley Markowitz, senior vice-president at Towers. Markowitz' responsibilities included "the planning, marketing, negotiating and leasing of commercial office space, rental space, and industrial space" (R. 29). The parties agree that talks took place between Markowitz and BWIA concerning such matters as cost reduction and release from the lease. Several ideas were discussed, including the possibility of BWIA subletting the space, moving to another building owned by Towers, and buying out the lease.

 BWIA maintains that in several meetings beginning in November 1991, Cook and Chong were told by Markowitz "that it would be $ 150,000 if we [BWIA] broke the lease" (R. 141). Cook and Chong both state that Markowitz unequivocally and repeatedly said that $ 150,000 would be the price to "break the lease" (R. 141; Exh. 95 p. 43). Beyond the testimony of the two individuals, BWIA offered the following note written by Markowitz stating:

 
Here is the present balance difference between the BWIA lease and a new market rate lease for the same space (not including any fix-up work or any brokerage commission) $ 150,000.

 Towers flatly denies that any oral agreement was ever made. Testifying for Towers, Markowitz stated that he had general discussions with representatives from BWIA including Cook and Chong. Among the topics discussed were rent reduction, the ability of BWIA to find a subtenant, relocation, and the difference between the present value of the lease and another market rate lease which came to approximately $ 150,000 (R. 40). Explaining that these meetings were informal and many different scenarios were discussed, Markowitz testified he never agreed that BWIA could be excused from the lease for $ 150,000 (R. 94). Significantly, he stated that although BWIA representatives had on several occasions asked for a writing documenting that the lease would be excused for $ 150,000, he had repeatedly told the representatives that he "was not authorized to provide such a writing, and that there was no such agreement that if they [BWIA] paid $ 150,000 or thereabouts that they would be released form their obligations of the lease" (R.54).

 Resolving this factual dispute, the court credits the testimony of Markowitz and finds that no oral agreement existed. In addition to finding Markowitz forthright and credible, the court looks to several other factors which support its conclusion. While it is clear that a figure approximating $ 150,000 was brought up in the discussion between Towers and BWIA, the evidence simply does not support BWIA's claim that there was a concrete agreement between the two parties. Markowitz' handwritten note regarding one of the meetings indicates that the $ 150,000 was the difference between rent BWIA was paying and the approximate amount of money for which the same offices could be leased, rather than a buy-out price for BWIA (Exh. 23).

 An undisputed factor that weighs in favor of Towers is its refusal to give BWIA written confirmation of the alleged agreement. Certainly if Towers had agreed to the terms as BWIA claims, there would be no reason why Towers would not reduce the agreement to writing. The evidence is clear that despite repeated requests by BWIA to Towers for a writing, none was ever forthcoming. Towers insists that the reason it refused to provide any writing was simply because it had made no such agreement. The short of the matter is: considering that all other modifications of the lease were made in writing, the only logical conclusion as to why Towers never agreed to a writing was that it never agreed to the terms put forth by BWIA.

 Closer scrutiny of BWIA's allegations exposes even further problems with its story. Cook, who was one of the principals to whom this oral agreement was allegedly made, testified that on June 2, 1992, there was a final meeting with Markowitz, where he asserts Markowitz again agreed that BWIA could "break the lease" for $ 150,000 (R. 179-81). Indeed, in a memo from Cook to file, he wrote:

 
On June 2nd, Keith Chong and I had a final meeting with Mr. Markowitz one more time before we had to sign the lease for the Doral property in Miami, just to make sure that $ 150,000 was the correct number. Again, Mr. Markowitz at that meeting said what he said all along, that he thought he would be able to get some space for the Sales Office, and the number was going to be $ 150,000 or lower if we were able to rent the space. Based on all these assurances, we signed the lease for the Doral building in Miami.

 (Exh. 43)(emphasis added). At trial, Cook directly contradicts this memo by admitting that the Florida lease was signed on May 21, 1992, almost two weeks before the meeting (R.181-82). Logic dictates that if there was a firm agreement between the two parties, such agreement would have been finalized before the second lease was signed by BWIA. By Cook's own admissions at trial, BWIA signed the Florida lease before the final meeting with Towers. The court, therefore, finds further support for its conclusion that no agreement existed between the parties.

 By letter dated July 13, 1992, BWIA advised Towers that it was vacating the building on October 1, 1992. Towers responded by letter dated August 3, 1992 stating that although it would continue discussions with BWIA, "until some further written agreement is executed and delivered by both Landlord and Tenant," BWIA was to "faithfully observe all of the obligations of its lease agreement with Towers" (Exh. 32). While the parties continued to correspond, Towers continued to demand that BWIA abide by the provisions of the lease until such time as another agreement was reached.

 On October 2, 1992 an initial group of BWIA employees vacated the premises. The remainder of the employees left on October 10, 1992, at which point BWIA also removed its furniture and disconnected the phone lines. No keys were returned by BWIA to Towers. BWIA tendered a check for $ 150,000 to Towers on October 26, 1992 which was refused. In mid-November, Markowitz on behalf of Towers wrote to BWIA stating in pertinent part:

 
We therefore advise you that your rental and other lease obligations continue unchanged, which of itself constitutes a further breach of the lease, and that your rent for the month of November, as previously billed, is now past due. Demand for payment of such rent is hereby made.

 (Exh. 39). Although Towers continued to send regular bills to BWIA for rent due, BWIA never remitted any additional payment.

 After BWIA had left the premises, Towers had the locks changed on all of the doors with the exception of the back door (R. 256, 261-62). John Busch, Towers' director of management, testified that the reason for the lock change was a security policy because of a previous incident where a woman after being forced into a vacant office was raped (R. 249). Busch further explained that he left instructions that if any BWIA representatives requested access to the building, such representatives should be allowed to enter the offices (R. 250). Additionally, Busch told Harold Reichert, a superintendent in the Forest Hills building, that "should anybody from BWIA contact him, that he should refer them to me." (R. 251).

 On February 23, 1993, at the request of Cook, Reichert was contacted by Chandra Baldeo, a secretary for BWIA (R. 215, 218). Reichert explained that the locks were changed and that he, Reichert, would have to obtain approval from Mr. Busch to let Baldeo in the offices (R. 215). While Baldeo knew who Busch was, she did not seek to contact him at any future time regarding keys (R. 222). Baldeo, with Errol Millington an employee of BWIA who retained his keys, went back to the building on March 16, 1993. Although the two did not contact anybody, they ...


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