OPINION, FINDINGS OF FACT, AND CONCLUSIONS OF LAW
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.
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.
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
Towers, a New York general partnership controlled by the Muss family, owns a seventeen-story building situated at 118-35 Forest Hills, New York, and is located in a highly traveled commercial area. The partnership owns several properties and is in the business of leasing commercial office space. Towers' managing partner is Joshua Muss.
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.
(Exh. 23). BWIA finally contends that these discussion culminated in a June 2, 1992 meeting when Markowitz once again stated that the lease could be broken for $ 150,000. (R. 180; Exh. 43). BWIA maintains that this representation by Markowitz was an oral agreement between the parties which it relied upon when it signed the Florida lease.
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.
The court also determines that the testimony of Cook, who is the main witness presented by BWIA to support its claim that there was an oral agreement, is incredible. Initially, Cook admits that he did not have any experience in either the real estate or legal field when he was hired by BWIA (R. 153). Moreover, Cook admitted to being discharged because he thought "the company lost faith" in his abilities (R. 189). Cook was criticized for a number of incidents he was involved in. Not only did such dissatisfaction result from the way this matter was handled, but BWIA made other allegations regarding Cook's deficient performance. The complaints included improper leasing of computer equipment, improper purchase of office equipment, and mismanagement in hiring staff exceeding the budget (R. 190). Essentially, the court is of the opinion that Cook admittedly did not have any expertise in this field, and while he may very well believe that there was an agreement, his mere belief is simply not enough. In light of all the testimony, exhibits, and Cook's history of his alleged mismanagement, the court finds that the evidence is insufficient to support BWIA's claim that there was an oral agreement allowing it to "break the lease."
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 went to the seventeenth floor and could not gain access (R. 229-231). Baldeo did not contact anyone other than Reichert or try the back door.
Another factual dispute arises regarding whether a representative from BWIA received a key to the new locks. Towers contends that somewhere in March or April 1983, Busch gave instructions to Reichert to provide keys to John Bolen, in charge of commercial construction for Towers, who was going to make sure the necessary keys were left at the reception desk to be obtained by BWIA (R. 253). Bolen received the keys and gave them to his secretary instructing her to give the keys to any representative of BWIA who asked for them, and then issue a receipt (R. 270). Terry Getchell, a receptionist for Towers, testified that although she could not remember the person, she gave to someone who appeared to her to be an employee of BWIA, keys to the offices and received a receipt that met Getchell's satisfaction (R. 281-83).
BWIA argues that none of its representatives ever received a key from Towers. Indeed, BWIA urges that because Getchell could not remember the person to whom she gave the key, or that Towers could not produce the receipt, the court should find Getchell's testimony incredible (Defendant's post trial brief, pp. 19-20). The court declines to do so, and determines that the keys were turned over by Getchell to an individual who appeared to be an employee of BWIA. The following factors support this finding.
Initially, the court was able to observe the testimony and demeanor of the witness, and believes Getchell to be credible. Moreover, the testimony of Busch was consistent with that of Reichert regarding the approved policy for providing the keys to the new locks. Additionally, the stipulation between the parties regarding entrance to the building, weighs in favor of Towers. The attorneys stipulated:
If we [BWIA] had wanted to go in and called Mr. Korotkin, he would make arrangement to assist BWIA or any representative of BWIA to get into the premises that Mr. Korotkin would have done that. I will stipulate.
(R. 303). Based on that stipulation, the evidence definitively shows that the locks securing the offices were not changed with the intent to deprive BWIA of access. Taking the stipulation into account, corroborated by Muss' reasons for changing the locks, the fact that the rear door had the original lock to which BWIA still had keys, and the testimony of Getchell, the court finds that Towers did not intend to keep BWIA out of the building; and that the evidence supports Towers' claim that an apparent representative from BWIA obtained keys to the new locks from Getchell.
Towers continued to send monthly invoices which were not paid by BWIA. New tenants signed a lease to begin paying rent for the premises starting on July 1, 1995. In an effort to attract the tenants, Towers maintains that it was required to alter the space, and consequently seeks from BWIA, in addition to back rent and attorney fees, and the expenses for the renovations.
By the terms of the lease, this case is governed by New York law. Since the court finds that there was no oral agreement between the parties to release BWIA from the lease in exchange for $ 150,000, there is no occasion to address whether such an oral provision could be enforced. There does remain, however, two legal defenses raised by BWIA which, it contends, releases BWIA from any obligations to Towers. Specifically, BWIA alleges that Blake, the Vice-President in charge of North American Operations, did not have the authority to sign the lease extension. Accordingly, BWIA reasons that the extension is therefore unenforceable. Second, BWIA argues that not withstanding the validity of the lease extension, Towers' act of changing the office locks constitutes an eviction which would relieve BWIA of any obligation to pay rent. For the following reasons, the court finds both claims by BWIA to be meritless.
BWIA maintains that Blake, its senior vice-president in charge of North America did not have authority to enter into the lease agreement. Continuing, BWIA relies on a policy manual, which provides that only its board of directors, the Chairman of the Board, or its Managing Director are authorized to enter into a leasehold agreement. Towers responds that Blake had actual authority to enter into the agreement, that even if such authority was lacking it relied on Blake's apparent authority, and finally even if there was no authority whatsoever, BWIA ratified the agreement through its performance for several years.
Under New York law, an agent's authority may be actual or apparent. The court credits Towers' claim that Blake had actual or at least implied authority to bind BWIA to the lease extension. "Actual authority is the result of the principal's consent manifested to the agent". Oriental Commercial & Shipping v. Rosseel N.V., 702 F. Supp. 1005, 1014 (S.D.N.Y. 1988), quoting, Wen Kroy Realty Co. v. Public National Bank & Trust Co., 260 N.Y. 84, 91, 183 N.E. 73 (1932). An agent may be expressly given power to act on behalf of a principal or the authority may be implied. An agent enjoys implied authority to enter into a transaction when the principal by its acts reasonably gives the appearance of authority to the agent. Greene v. Hellman, 51 N.Y.2d 197, 204, 433 N.Y.S.2d 75, 80, 412 N.E.2d 1301 (1980); see King World Productions v. Financial News Network, Inc., 660 F. Supp. 1381, 1384 (S.D.N.Y. 1987) aff'd, 834 F.2d 267 (2d Cir. 1988)("an agent employed to do an act is deemed authorized to do it in the manner which business entrusted to him is usually done."). Obviously, if a principal empowers its agent either expressly or impliedly to act, that principal is bound by the agents actions.
Here, there exists ample evidence demonstrating that Blake had actual or at the very least implied authority to bind BWIA into the lease extension. In his deposition, Blake specifically stated that he had authority to bind BWIA to the extension saying that:
it's inconceivable that I could sign any lease for BWIA without authority from as high up as the managing director. Those things are discussed at length because you're talking about a lot of money so not only that, every lease, I don't care what it was, I had to discuss it with head office and immediately after it had to be on an aircraft, otherwise somebody would be jumping all over you down to the head office. Plus we go though like any company a budget process and during that budget process, again repeat that the company is losing money pretty tight on your dollars, and as I recall the president or managing director of the company went in detail on that budget. For one to suggest that I signed something without authority had to be crazy.
(Exh. 94, at 9-10). Significantly too, Blake recalled that this particular lease extension had been discussed by him with both the President of BWIA and the Corporate Manager.
Beyond the direct evidence that Blake had actual authority from BWIA to sign the lease extension, additional evidence corroborates Blake's testimony. Blake, as vice-president in charge of North American Operations, was one of the chief negotiators who crafted the lease extension. Indeed, it is not a wild stretch of the imagination to believe the person who was in charge of North American Operations would be authorized to sign a lease extension relating to the North American headquarters, which he negotiated. Moreover, Towers sent the lease extension for signature to BWIA without any specification as to who it wanted to be the signatory. Along with a letter dated August 11, 1987, BWIA returned the lease extension signed by Blake. The decision to have Blake sign for BWIA was made by BWIA. Towers should be able to rely on the decision made by BWIA to bind BWIA. Viewed in conjunction with Blake's deposition, all of the surrounding circumstances indicate that he was empowered by BWIA to bind it to the lease extension.
Even if the court accepted BWIA's proposition that Blake was not actually empowered to enter into the lease extension, the evidence still warrants a finding for Towers under the doctrine of apparent authority. Apparent authority bars a principal from disavowing the transactions of its agent. The New York State Court of Appeals has explained when this doctrine is appropriate:
The existence of "apparent authority" depends on the factual showing that the third party relied upon the misrepresentation of the agent because of some misleading conduct on the part of the principal - not the agent.