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Dee Cee Associates LLC v. 44 Beehan Corp.

Supreme Court of New York, First Department

March 30, 2017

Dee Cee Associates LLC, Plaintiff-Appellant,
v.
44 Beehan Corp., et al., Defendants-Respondents, John Maloney, Defendant.

          Robert M. Olshever, P.C., New York (Robert M. Olshever of counsel), for appellant.

          David A. Kaminsky & Associates, P.C., New York (James A. English of counsel), for 44 Beehan Corp. and John Higgins, respondents.

          Dennis Houdek, New York, for Brendan Bowes, respondent.

          Friedman, J.P., Renwick, Richter, Moskowitz, Kapnick, JJ.

         Order, Supreme Court, New York County (Eileen A. Rakower, J.), entered on or about January 7, 2016, which denied plaintiff's motion for summary judgment on the complaint and granted defendants' cross motion for summary judgment to the extent of dismissing the first cause of action as against defendants 44 Beehan Corp., John Higgins and Brendan Bowes, unanimously modified, on the law, to grant plaintiff's motion to the extent it seeks partial summary judgment as to liability on the second cause of action for rent arrears for the period commencing July 1, 2009, and ending May 31, 2013, and to grant plaintiff summary judgment as to liability on the third cause of action for attorney's fees, and otherwise affirmed, without costs.

         Plaintiff landlord, Dee Cee Associates, LLC, (Dee Cee) entered into a lease agreement with defendant tenant 44 Beehan Corp. (44 Beehan) on February 1, 1998, to lease restaurant premises located at 696 Eighth Avenue in New York City. The lease agreement was for a term of fifteen years, commencing on June 1, 1998, and ending on May 31, 2013. The lease agreement rider provided that the annual rent would increase incrementally on an annual basis, from $360, 000 for the first year to $599, 412 for the fifteenth year.

         On January 29, 1998, Dee Cee entered into a "good guy" guarantee agreement with defendants John Higgins, Brenden Bowes, and John Maloney (collectively, the guarantors), under which the guarantors promised to fulfill any of 44 Beehan's obligations that accrued prior to surrender of the premises.

         On January 8, 1999, Dee Cee and 44 Beehan entered into a letter agreement affecting the lease. Neither Dee Cee nor 44 Beehan has presented a copy of the letter agreement, each representing that its copy has been lost. Further, neither side has offered an affidavit reconstructing the terms of the letter agreement. As explained below, the 1999 letter agreement may have changed the dates of the lease from June 1, 1998, through May 31, 2013, to December 1, 1998, through November 30, 2013.

         On November 27, 2001, Dee Cee and 44 Beehan entered into an agreement to address 44 Beehan's rent arrears of $25, 478.91, and 44 Beehan's assertion that it could not pay the full base rent for the next four months. The parties agreed to a payment schedule for the rent arrears, and further agreed that 44 Beehan would pay half of its regular rent for the next four months while the remaining half of the monthly rent would be deducted from its security deposit. 44 Beehan further agreed to pay an additional $5, 000 of rent each month, beginning on April 1, 2002, until the security deposit was restored to its original amount.

         The 2001 agreement included three provisions which are particularly pertinent to the instant appeal. First, the agreement contained a "whereas" clause stating that the parties had entered into a lease "dated February 1, 1998 for a term of fifteen (15) years which commenced December 1, 1998 and will end on November, 30, 2013 (hereinafter the Lease')." As defendants' counsel noted during oral argument in Supreme Court, the 1999 letter agreement may have changed the term of the lease from June 1, 1998, through May 31, 2013, to December 1, 1998, through November 30, 2013, because the 2001 agreement refers to the later dates without explanation. Second, the 2001 agreement specified that the base monthly rent for October 2001 is $31, 200, which corresponds precisely to the monthly rent for the third year of the lease stated in the rider to the original lease. This provision indicates that the schedule of annual rent increases stated in the original lease rider was not changed by the 1999 letter agreement. Third, the agreement stated that "[e]xcept as expressly set forth herein, all of the terms, conditions, covenants and obligations set forth in the Lease remain in full force and effect and without modification or change." Both Dee Cee and 44 Beehan signed the 2001 agreement, which reaffirms that all of the terms of the original lease not specifically altered by the 2001 agreement remain in effect.

         As of September 30, 2006, 44 Beehan had accumulated rent arrears totaling $244, 733.11. On November 16, 2006, Dee Cee and 44 Beehan entered into an agreement (the 2006 agreement) under which Dee Cee agreed to discount the base rent by 30 percent beginning on October 1, 2006, and to consider the discounted rent "deferred rent." In exchange, 44 Beehan granted Dee Cee the right to terminate the lease on January 1, 2009, or at any time thereafter, "by giving notice to [44 Beehan], no less than ninety (90) days prior" to the effective date of the termination set forth in the notice. Dee Cee agreed to pay a termination payment of $2, 000, 000, less the $244, 733.11 rent arrears and any deferred rent, in the event Dee Cee exercised its termination right on Jan 1, 2009. The sum of the termination payment would be reduced by 1/35 over the ensuing 35 months until November 30, 2011, after which date Dee Cee would be entitled to terminate the lease without making any termination payment. The 2006 agreement further provides: "In the event that the Lease is not terminated by [Dee Cee], the $244, 733.11 arrears owed through September 30, 2006, plus the Deferred Rent, shall be forgiven at the end of the term of the Lease."

         As of June 1, 2013, 44 Beehan had allegedly accumulated rent arrears totaling $479, 601.00 including the rent for June 1, 2013, through June 30, 2013. On June 7, 2013, 44 Beehan surrendered the premises to Dee Cee. An employee of 44 Beehan signed a surrender agreement acknowledging that 44 Beehan was surrendering the premises. The surrender agreement included a provision noting that Dee Cee reserved all of its rights and remedies with respect to any rent arrears accrued through June 7, 2013. At his deposition in this action, Dee Cee's principal, Philip Katz, acknowledged that the mutually agreed-upon surrender of the premises was not an exercise of Dee Cee's option under the 2006 agreement to terminate the lease unilaterally.

         On June 6, 2013, Dee Cee filed the complaint in this action against 44 Beehan and the guarantors, asserting three causes of action. The first cause of action seeks $244, 733.11 in rent arrears for the period from the inception of the tenancy through September 30, 2006. The second cause of action seeks $479, 601.00 in rent arrears for the period from July 1, 2009, through June 7, 2013. The third cause of action seeks attorney's fees based on a clause in the lease providing that Dee Cee was entitled to attorney's fees incurred to collect rent. Defendant John Maloney failed to answer the complaint, and on December 5, 2013, Dee Cee was granted a default judgment against him. The remaining defendants answered the complaint and discovery ensued. On October 7, 2014, Philip Katz, Dee Cee's managing member, was deposed and explained various calculations in Dee Cee's statement of outstanding rent.

         On March 9, 2015, Dee Cee moved for summary judgment on all three causes of action in the complaint, and submitted in support of its motion the original lease, the 2001 and 2006 agreements, the surrender agreement, and a statement of outstanding rent calculating rent arrears of $479, 601.00 for the period from July 1, 2009, through June 7, 2013. In response, defendants cross-moved for summary judgment dismissing the first cause of action. As to the second cause of action, defendants argued that Dee Cee had failed make a prima facie showing because they did not submit the 1999 letter agreement, and further argued that Dee Cee's statement of arrears did not reflect numerous payments made by 44 Beehan. In reply, Dee Cee argued that they had properly credited all of defendant's rent payments and submitted a revised statement of outstanding rent that allegedly noted all of defendant's rent payments. Dee Cee did not explain why the second statement calculated rent arrears of $469, 932.15, rather than ...


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