PRESENT: Lowe, III, P.J., Schoenfeld, Ling-Cohan, JJ.
appeals from an order of the Civil Court of the City of New
York, New York County (Anthony Cannataro, J.), entered August
31, 2016, which denied its motion for summary judgment of
possession against respondents-undertenants in a nonpayment
summary proceeding and granted the cross motions of
respondents-undertenants, with the exception of
respondent-undertenant Jay Jay Cabaret, Inc., for summary
judgment dismissing the petition as against them.
Respondent-undertenant Jay Jay Cabaret, Inc., cross-appeals
from so much of the same order as denied its cross motion for
summary judgment dismissing the petition as against it.
(Anthony Cannataro, J.), entered August 31, 2016, modified to
deny respondents-undertenants' cross motions, reinstate
the petition and grant petitioner-landlord's motion for
summary judgment of possession as against all
respondents-undertenants; as modified, order affirmed, with
$10 costs. Execution of the warrant of eviction shall be
stayed for 30 days from service of a copy of this order with
notice of entry.
to the terms of a December 1979 commercial lease agreement,
respondent-tenant Elo Management LLC (Elo) became the net
lessee of the building located at 1674 Broadway in Manhattan.
The lease contained a mechanism, including arbitration, to
set the rent of the net lessee after the initial 35-year
term. Following an arbitration award that was confirmed by
Supreme Court, Elo's yearly rent was increased from $241,
999 to $3.15 million, commencing December 20, 2014. As a
result, Elo was now obligated to pay landlord rent in an
amount far greater than the amount of rent Elo collected from
Elo could not pay the increased rent, petitioner-landlord,
the building owner, served a 10-day notice dated October 15,
2015, specifying that Elo owed rent arrears totaling
approximately $2.7 million. Landlord then commenced this
nonpayment proceeding against Elo; the nonpayment petition
also named all of Elo's subtenants. Pursuant to a January
2016 so-ordered settlement stipulation between Elo and
landlord, Elo consented to a final judgment of possession and
the forthwith issuance of the warrant of eviction, execution
thereof stayed through February 1, 2016.
the remaining parties' respective cross motions for
summary judgment, Civil Court dismissed the petition against
all the undertenants, except for respondent Jay Jay Cabaret,
Inc. (Jay Jay), concluding, inter alia, that Elo's
voluntary surrender of possession did not affect the right of
the subtenants to remain in possession.
disagree and modify accordingly. The underlying settlement
stipulation between Elo and landlord did not constitute a
voluntary surrender agreement that would permit the
subtenants to continue in possession (see generally Eten
v Luyster, 60 NY 252, 259 ; Goldcrest Transp.
Ltd. v Across Am. Leasing Corp., 298 A.D.2d 494, 495
 [where a landlord and prime tenant enter into an
agreement to voluntarily terminate the paramount lease, the
subtenant becomes the immediate tenant of the original
lessor, and the interest of the subtenant and terms of the
sublease continue as if no termination occurred]). To the
contrary, the summary judgment record conclusively
establishes that Elo's net lease was terminated by
landlord based upon Elo's breach of the covenant to pay
rent, pursuant to a stipulation entered into in the instant
summary nonpayment proceeding against Elo, which proceeding
arose because of the significant shortfall between the amount
of rent Elo now owed landlord and the amount of rent Elo was
entitled to receive from its subtenants. Accordingly, rather
than a voluntary surrender by Elo, the net lease was
terminated based upon Elo's breach (see 380 Yorktown
Food Corp., v 380 Downing Dr., LLC, 107 A.D.3d 786');">107 A.D.3d 786
 , lv denied 22 N.Y.3d 860');">22 N.Y.3d 860  [sublease
was properly terminated when the prime tenant breached the
commercial overlease and stipulated that the lessor was
entitled to possession]). In these circumstances, the
termination of the net lease terminated the interests of each
of the subtenants. A sublease is dependent upon and limited
by the terms and conditions of the paramount lease from which
it is carved, and a subtenancy is terminated by the
expiration of the term of the prime tenant, or a re-entry by
the landlord for a condition broken (Goldcrest Transp.
Ltd. v Across Am. Leasing Corp., 298 A.D.2d at 496).
subtenants argue that, upon Elo's default, they became
the direct tenants of landlord by operation of paragraph 28
of the net lease. This provision, titled "Contingent
Assignment of Subleases, " specifies that if the net
lessee is in default in the payment of rent for 10 days after
notice, the net lessee assigns all subleases and rents to
landlord "until such default shall have been made
good" or "cur[ed]."
subtenants' reliance upon paragraph 28 is misplaced, both
because of the absence of privity, and the fact that the
subtenants were not third party beneficiaries as landlord
never undertook a duty toward them or intended to confer
benefits on them (see Tamco Enters. v Mitsubishi Elec.
Am., 190 A.D.2d 623');">190 A.D.2d 623 , lv denied 82 N.Y.2d
659 ). In this regard, the subtenants were not parties
to or named in the net lease, and their subleases were not
yet in existence when the net lease was executed. In fact,
any interpretation of paragraph 28 as creating tenancy rights
for unnamed, future subtenants would be contrary to the
reasonable expectation of the parties to the net lease and
would, as a practical matter, eviscerate landlord's
rights therein to increase the rent to market level and
recover possession in the event of the net lessee's rent
default, by binding the owner to subleases of the tenant.
Since the subtenants did not enter into any non-disturbance
agreements with landlord, the subtenants had no greater
rights to possession than those possessed by the
sublandlord/net lessee whose tenancy was terminated (see
Millicom Inc. v Breed, Abbott & Morgan, 160 A.D.2d
496, 497 , lv denied 76 N.Y.2d 703');">76 N.Y.2d 703 ).
note that, by statute, the net lease, including paragraph 28
thereof, was cancelled upon the issuance of the warrant of
eviction against the net lessee (se e RPAPL §
749) and there is no language in the net lease indicating
that paragraph 28 or any assignment created thereunder was to
survive the termination of the net lease (see e.g. Fisk
Bldg. Assoc. LLC v Shimazaki II, Inc., 76 A.D.3d 468');">76 A.D.3d 468
to the cross appeal, we reject respondent Jay Jay's claim
that the net lease was subordinate to its tenancy. Jay Jay
claims that its possession of the basement space was pursuant
to an assignment of a certain 1974 "Latin World"
lease which was not subordinate to the net lease. However,
the documentary proof in the record establishes that a 1982
"First Amendment" extended the Latin World lease
and specifically provided that said lease is a