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Eujoy Realty Corp. v. Van Wagner Communications

May 18, 2010


Order, Supreme Court, New York County (Richard F. Braun, J.), entered August 4, 2008, which, in an action for rent in the amount of $94,133.57 and counsel fees arising out of a terminated lease agreement, denied plaintiff landlord's motion for summary judgment, granted the part of defendant tenant's cross motion that sought summary judgment dismissing the complaint and denied the part that sought, in the alternative, leave to amend the answer to add the affirmative defense of estoppel, reversed, on the law, without costs, plaintiff's motion granted and defendant's motion denied in its entirety, and the matter remanded for an assessment of counsel fees.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Tom, J.P., Friedman, Moskowitz, Freedman, Abdus-Salaam, JJ.


Plaintiff is the owner of an advertising billboard that it leased to defendant pursuant to a 15-year written lease that commenced on December 1, 2000. When new construction undertaken at a nearby site substantially obstructed the view of the sign, defendant invoked its right under paragraph 53 of the lease to terminate the agreement as of January 8, 2007. Due to an oversight by defendant's accounts payable department, a check for $96,243.00, the full year's rent for 2007, was sent to plaintiff. When defendant learned of the error, it notified plaintiff that it had stopped payment on the check. Defendant then forwarded a replacement check to plaintiff for $2,109.43, the rent prorated for the period of January 1, 2007 through January 8, 2007. Plaintiff accepted the prorated rent without protest and subsequently commenced this action, seeking recovery of the balance of the full year's rent, plus interest, counsel fees and costs.

Summary judgment in favor of plaintiff was warranted. Schedule A of the lease agreement prescribes the annual basic rent for each year and provides that the tenant shall pay in advance on January 1st of each year. The annual basic rent for the period January 1, 2007 through December 31, 2007 was $96,243.00, "which Tenant shall pay in advance on January 1, 2007." Section C of Schedule A provides, in relevant part, "Should this Lease be terminated for any reason prior to the date of its expiration, Tenant shall not be entitled to the return of any additional rent theretofore paid or any basic rent paid in advance and covering a period beyond the date on which the Lease is terminated."

Although it was obligated to pay the basic annual rent for 2007 on January 1, 2007 and did not do so, defendant asserts that it is not liable to plaintiff for the annual rent because, in 2006, there were discussions between defendant's principal and plaintiff regarding the obstruction of the sign, in which defendant purportedly told plaintiff that the lease would soon be terminated. Defendant claims that it had an alternate location available to use for its customers' advertising, but that, in consideration of its cordial relationship with plaintiff, it agreed to defer terminating the lease for as long as possible. Aside from plaintiff's denial of any such discussions, the lease includes "no oral modification" and "no waiver" clauses, and the record contains no evidence of partial performance by defendant that is "unequivocally referable to the alleged oral agreement" (Teri-Nichols Inst. Food Merchants, LLC v Elk Horn Holding Corp., 64 AD3d 424, 425 [2009], lv dismissed 13 NY3d 904 [2009]). Rather, defendant continued to rent the structure as per the lease. Defendant's unilateral act of terminating the lease in early January and then deeming its rent obligation to be limited to a pro rata amount does not establish a modification, "since, if such unilateral conduct were sufficient, the requirement that modifications be in a writing signed by the landlord would be rendered a nullity" (Joseph P. Day Realty Corp. v Lawrence Assoc., 270 AD2d 140, 142 [2000]).

Defendant's purported understanding that it could terminate the lease at any time after January 1, 2007 without being obligated to pay the full year's rent on January 1st as the lease required does not demonstrate that principles of equitable estoppel are applicable here, since plaintiff engaged in no conduct that was "otherwise . . . [in]compatible with the agreement as written" (Rose v Spa Realty Assoc., 42 NY2d 338, 344 [1977]).

Defendant's reliance on Section C of Schedule A is misplaced. The lease provision that the tenant shall not be entitled to the return of any basic rent paid in advance of lease termination is separate and distinct from the lease requirement that the full year's rent be paid on January 1st. One provision simply makes clear that the rent paid in advance will not be returned upon termination of the lease, while the other plainly provides that the entire year's rent is due on January 1st. It is a contortion of these two provisions to argue, as defendant does here, that if defendant had paid the annual rent on January 1st it would not be entitled to a refund but that since defendant did not pay as required, plaintiff is not entitled to recover the full year's rent. While recovery of the full year's rent under these circumstances is a windfall to plaintiff, it is a result mandated by the lease.

Our dissenting colleague's concern that plaintiff has adopted a new theory of recovery not raised before the motion court and that we are therefore barred from considering it, is unfounded. Notably, defendant has not asserted in this appeal that plaintiff is raising a new theory that should not be considered by this Court. While plaintiff certainly did argue before the motion court that, notwithstanding that defendant had stopped payment on the check, defendant had paid the rent in advance and was not entitled to a refund, plaintiff also argued that it did not matter that the check was issued accidentally because defendant was obligated under the lease to pay the basic rent for the year on January 1, 2007. Where a lease requires the tenant to pay the rent in advance, the tenant is obligated to pay the entire amount even though the lease is subsequently terminated before the lease term expires (see 1251 Ams. Assoc. II, L.P. v Rock 49 Rest. Corp, 13 Misc 3d 142(A), 2006 NY Slip Op 52282[U] [2006]).

Nor does our holding run afoul of General Obligations Law § 7-103(1), which prohibits the commingling by a landlord of funds deposited by a tenant as security or prepaid rent, since that situation is not present here. Matter of Perfection Tech. Servs. Press (Cherno-Dalecar Realty Corp.) (22 AD2d 352 [1965], affd 18 NY2d 644 [1966]) and Purfield v Kathrane (73 Misc 2d 194 [1973]), cited by the dissent, involved the tenant's deposit with the landlord of several months of advance rent, to be applied to each month's rent as it became due during the term. Here, in contrast, the terms of the lease provide that the entire year's base rent is due on the first of the year. Finally, we disagree with the dissent's position that in order to recover for the yearly rent due under the lease, the landlord was required to issue a default notice to the tenant since the tenant had already terminated the lease in writing.

We have considered plaintiff's remaining contentions and find them unavailing. All concur except Tom, J.P. and Freedman, J. who dissent in a memorandum by Tom, J.P. as follows:

TOM, J.P. (dissenting)

On this appeal, plaintiff landlord has abandoned the theory of recovery advanced before Supreme Court, adopting a new argument that this Court is barred from considering by well settled rules of appellate practice. As a result, there is before us no ruling assigned as error that might serve as a predicate for reversal. Moreover, the new theory that landlord has devised to support the recovery of rent after valid termination of the ...

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