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KOYLUM, INC. v. PEKSEN REALTY CORP.

December 2, 2004.

KOYLUM, INC. Plaintiff,
v.
PEKSEN REALTY CORP., f/k/a Route 25 Calverton Realty Corp., Successor by merger to Ridge Petroleum Realty Corp., and 1677 RIDGE ROAD REALTY CORP., Defendants, and ADNAN KIRISCIOGLU and EROL BAYRAKTAR, Additional Party Defendants.



The opinion of the court was delivered by: ARTHUR SPATT, District Judge

MEMORANDUM OF DECISION AND ORDER

Presently before the Court is a motion for summary judgment by the defendant 1677 Ridge Road Realty Corp. ("1677 Ridge" or the "Defendant") to enforce a liquidated-damages clause against the plaintiff Koylum, Inc. ("Koylum" or the "Plaintiff") and the additional party defendants Adnan Kiriscioglu ("Kiriscioglu") and Erol Bayraktar ("Bayraktar"). The plaintiff and the additional party defendants cross move for summary judgment.

I. BACKGROUND

  It is assumed that the parties are familiar with the factual background of this case, as set forth in the Court's two prior decisions, dated September 30, 2002 ("September 30, 2002 Order") and March 17, 2004 ("March 17, 2004 Order"). For the purpose of clarity, the factual background will be repeated in relevant part. This case involves a gas station located at 1677 Route 25A, Ridge, New York ("Premises") and a series of transactions with its landlords and gasoline supply company. The defendant 1677 Ridge is the current owner of the Premises. It is also the assignee of all the landlord rights pursuant to a lease dated January 1, 1994 ("Lease") for the Premises originally between Ridge Petroleum Realty Corp., as landlord, and R.B.P. Enterprises, Inc., as tenant. The termination of that Lease by the landlord was a subject of this lawsuit.

  Koylum operated a gas station on the Premises between June 21, 1996 and October 31, 2002 as a result of an assignment of the Lease. The station, which was a Coastal Refining and Marketing, Inc. ("Coastal") branded station, was previously operated by Koylum's assignor, R.B.P. Enterprises, pursuant to two agreements: (1) the Lease under which Koylum's assignor leased the Premises from the predecessor in interest of the defendant Peksen Realty Corp. ("Peksen"); and (2) a Supply Agreement that fixed the terms under which the operator would purchase its gasoline supplies from Ocean Petroleum, Inc., which distributed Coastal petroleum.

  The Lease includes provisions that are material to the issues in this case. Initially, the Court notes that the Lease expressly refers to the Supply Agreement, as follows: "Section 2.10. Purchase Agreement: means the Agreement dated January 1, 1994 between Ocean Petroleum Inc., as Seller, and Tenant, as Purchaser, under which Tenant has contracted to purchase all of its requirements of Gasoline to be sold at the Demised Premises." (Dft. Ex. B).

  Also relevant is Section 7.03, entitled "Purchase of Petroleum Products" and reads as follows:
Section 7.03. Purchase of Petroleum Products:
(a) In order to induce Landlord to enter into this Lease, Tenant covenants and agrees that during the term of this Lease, Tenant shall not nor permit others to store, handle, sell, offer for sale, advertise for sale, use or permit to be used upon the Demised Premises or any part thereof or any premises adjacent thereto over which Tenant has control any Gasoline, oil or other petroleum product not supplied by Seller under the Purchase Agreement.
(b) In furtherance of Tenant's covenants contained in subsection (a), Tenant agrees to enter into the Purchase Agreement simultaneously with the execution of this Lease.
(Dft. Ex. B).
  In addition to the Supply Agreement, a Rider was executed on December 1, 1995 that further delineated the relationship of the parties. In particular, the rider provided that the tenant could exercise an option to purchase petroleum from suppliers other than Ocean, but only under certain circumstances and conditions. Specifically, the Rider provided that if petroleum was to be purchased from other suppliers, the product should be transported as follows:
It is further agreed that the transport of any and all petroleum products sold by any supplier from all terminals in the Long Island and Metropolitan area to 450 Neighborhood Rd., Mastic Beach, County of Suffolk, State of New York and 1677 Route 25, Ridge, County of Suffolk, State of New York, shall be made by National Petroleum Transporters, Inc. at a transportation rate of .0125 cents per gallon.
(Dft. Ex. B)

  The relationship between the landlord and the supplier is relevant in this case. Peksen and Ocean were affiliated with one another, in that both are closely held corporations owned by Refik Peksen and Mine Peksen, who are husband and wife. Mine Peksen was the Vice President of Ocean, which distributed Coastal petroleum. Mine Peksen and her husband Refik, who were separated at the time of the trial, operated a family business which included Ocean, Peksen, and National Petroleum Transporters, Inc. Ocean supplied gasoline to the Ridge Station. Mine Peksen was also an officer of Ridge Petroleum Realty Corp., the prior owner and landlord of the Ridge Station premises. Ocean was an authorized distributor for Coastal and sold that brand of product to Koylum for resale at the Premises, pursuant to the Supply Agreement. The defendant Peksen is the successor to Ridge Petroleum Realty Corp., as owner of the Ridge Station property and as the landlord of Koylum.

  Sometime in 1998, Koylum began purchasing non-Coastal gasoline without complying with the Rider or the Supply Agreement. Specifically, Koylum did not provide documentation to Ocean on the prices that were paid for the non-Coastal petroleum and the products were not transported via National Petroleum Transporters. By letter dated October 2, 1998, Peksen informed Koylum that it would terminate the Lease as of midnight October 6, 1998. The termination letter accused Koylum of purchasing unbranded gasoline and selling it under the Coastal trademark in violation of the Supply Agreement. The next day, Peksen initiated dispossess proceedings in the Suffolk County District Court to evict Koylum from the Premises as a holdover tenant. This proceedings was stayed by a stipulation between the parties.

  Koylum continued to operate the gas station on the Premises without complying with the agreements. On January 29, 1999, Mine Peksen wrote to Koylum (Plf. Ex. 40) calling to its attention certain lease provisions, namely, Sections 5.04(b)(i), 5.04(b)(ii) and 7.03(a). The letter also notified Koylum of alleged violations of the Supply Agreement, as follows:
By reason of you having stored, handled, sold, marketed and dispensed gasoline that has been supplied by someone other than Ocean Petroleum, Inc. under the Purchase Agreement it had with you; to wit: as recently as January 26, 1999 when a gasoline delivery truck of Ark Transportation, tractor number TX6834, trailer number 731891 was observed delivering gasoline to your station at about 5:30 p.m. This delivery is not the first. Moreover, on at least another occasion and on October 7, 1998, you had 8,500 gallons of gasoline delivered by Mystic Bulk Carriers, Inc. which was purchased from Benit Fuel Sales and Services which you sold from the premises.
Accordingly, notice is hereby given that on two days from the date of this letter your lease shall terminate. You are thereby expected to vacate the premises and remove all of your personal property.
In the interim, you should be further advised that the underground storage tanks and related piping, the gasoline dispensing pumps and signs are not owned by you and you have no right to use that equipment for any purpose whatsoever, including the storage, supply, sale or offering for sale gasoline you purchase form any source other than Ocean Petroleum, Inc.
Moreover, the sign is owned by Ocean Petroleum, Inc. and by selling gasoline provided by another source as Coastal gasoline you may be violating Coastal's trademark rights.

  Therefore you are required to immediately cease and desist from any use of the equipment at the premises.

  At no time did Koylum request permission from Ocean to sell gasoline other than Coastal gas. Notwithstanding this failure to obtain consent, Koylum purchased gas from other distributors, such as Benit, T. Hutchinson Trading Corp., Ercat Corp. and Nassau and Suffolk Fuel Oil Corp.; it stored the non-Coastal gasoline at the Ridge Station when it had Coastal markings; and then unilaterally removed the Coastal markings. The record is replete with documents showing Koylum's purchase of gasoline from distributors other than Ocean. With regard to non-Coastal purchases, no documents of any kind, as to price or otherwise, were ever sent by Koylum to Peksen or Ocean, in violation of the Rider provisions. Further, none of these deliveries were made by National Petroleum Transporter Inc. Failure to use National Petroleum Transporters to deliver the non-Coastal gasoline was also a violation of the Rider provisions.

  On May 6, 1999, Peksen Realty Corp. sold the premises to 1677 Ridge, which is the present owner of the premises and the landlord of Koylum. Frank Mascolo ("Mascolo") is the principal owner and President of 1677 Ridge. He also operates three other gasoline stations and is a Coastal brand wholesale petroleum distributor. At the time of the purchase, Mascolo knew that the Supply ...


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