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Inc. v. BFN Realty Associates, LLC

Supreme Court of New York, Second Department

January 15, 2020

Laundry Management - N. 3rd Street, Inc., respondent,
v.
BFN Realty Associates, LLC, appellant. Index No. 3343/12

          Submitted - October 1, 2019

         D61775 M/afa

          Horing Welikson & Rosen, P.C., Williston Park, NY (Renee Digrugilliers of counsel), for appellant.

          Pamela A. Elisofon, Brooklyn, NY (Barry Elisofon of counsel), for respondent.

          MARK C. DILLON, J.P. JEFFREY A. COHEN ROBERT J. MILLER FRANCESCA E. CONNOLLY, JJ.

          DECISION & ORDER

         In an action, inter alia, to recover damages for breach of contract, the defendant appeals from a judgment of the Supreme Court, Kings County (Yvonne Lewis, J.), dated February 27, 2017. The judgment, upon a decision of the same court dated December 1, 2015, made after a nonjury trial, is in favor of the plaintiff and against the defendant in the principal sum of $1, 250, 000.

         ORDERED that the judgment is affirmed, with costs.

         The plaintiff tenant, Laundry Management - N. 3rd Street, Inc. (hereinafter LM), operated a laundromat on premises located at 173 N. 3rd Street in Brooklyn (hereinafter the premises), which were owned by the defendant landlord, BFN Realty Associates, LLC (hereinafter BFN). Pursuant to the lease for the premises, which LM assumed in 2005 from the previous tenant, the original term expired on November 30, 2011. However, pursuant to the lease rider, the tenant had the option to renew the lease for two successive five-year renewal periods. The same provision required the tenant to notify the landlord of its intent to exercise a renewal option no later than six months prior to the expiration of the then existing lease term. Another provision of the lease rider stated, inter alia, that any notice or other communication which either party may desire or be required to give to the other under the lease "shall be deemed sufficiently given or serviced if in writing and delivered personally or by registered or certified mail, return receipt requested, or sent by Fed Ex, or other reputable overnight courier service." The parties dispute whether LM provided timely notice of its intent to exercise its option to renew the lease, and BFN only acknowledged receiving notice from LM by certified mail in November 2011, which BFN rejected as untimely. LM vacated the premises pursuant to court order in April 2012.

         In February 2012, LM commenced this action against BFN, seeking, inter alia, damages for breach of contract. After a nonjury trial, the Supreme Court, inter alia, awarded LM damages in the principal sum of $1, 250, 000. BFN appeals.

         "'In reviewing a determination made after a nonjury trial, the power of this Court is as broad as that of the trial court, and we may render the judgment we find warranted by the facts, bearing in mind that in a close case, the trial judge had the advantage of seeing the witnesses'" (Burnside 711, LLC v Amerada Hess Corp., 175 A.D.3d 557, 558, quoting Bolender v Ronin Prop. Partners, LLC, 168 A.D.3d 1032, 1035). "'Where the trial court's findings of fact rest in large measure on considerations relating to the credibility of witnesses, deference is owed to the trial court's credibility determinations'" (Cohen v Kalfa, 170 A.D.3d 949, 950, quoting Bennett v Atomic Prods. Corp., 132 A.D.3d 928, 930).

         "An election to renew must be timely, definite, unequivocal, and strictly in compliance with the terms of the lease" (Redlyn Elec. Corp. v Louis Shiffman, Inc., 81 A.D.3d 621, 622; see J.N.A. Realty Corp. v Cross Bay Chelsea, 42 N.Y.2d 392, 396; Dan's Supreme Supermarkets v Redmont Realty Co., 216 A.D.2d 512, 512; American Realty Co. v 64 B Venture, 176 A.D.2d 226, 227). Here, LM failed to establish that it exercised the option to renew the lease within the time and in the manner provided in the lease. Although Jeong R. Kim, one of LM's principals, testified at trial that he had an employee of LM deliver a lease renewal letter dated May 30, 2011, to BFN's office, he failed to mention this purported hand delivery in his deposition or in two sworn affidavits (see Green v William Penn Life Ins. Co. of N.Y., 74 A.D.3d 570, 574). Further, Kim never provided an explanation as to why he omitted the purported hand delivery from his deposition testimony (cf. Dutcher v Fetcher, 183 A.D.2d 1052, 1055). The employee who purportedly delivered the letter dated May 30, 2011, did not testify. In addition to denying receipt of the May 30, 2011, letter, representatives of BFN testified at trial that BFN's office was closed on May 30, 2011, and the Supreme Court took judicial notice that May 30, 2011, was Memorial Day. While deference is owed to the Supreme Court's credibility determinations (see Morrone v Costagliola, 151 A.D.3d 1055, 1056; Two Guys From Harrison-NY v S.F.R. Realty Assoc., 186 A.D.2d 186, 188), here, the court never expressly found that Kim's testimony regarding the purported hand delivery of the May 30, 2011, letter was credible, and under the circumstances presented, we find that this testimony was not credible.

         Although the general rule is that a tenant that fails to exercise an option to renew within the time and in the manner provided in the lease is without remedy at law (see Dan's Supreme Supermarkets v Redmont Realty Co., 240 A.D.2d 460, 461), equity will intervene to relieve a commercial tenant's failure to exercise an option to renew within the time and in the manner provided in the lease "where (1) such failure was the result of 'inadvertence,' 'negligence' or 'honest mistake'; (2) the nonrenewal would result in a 'forfeiture' by the tenant; and (3) the landlord would not be prejudiced by the tenant's failure to send, or its delay in sending, the renewal notice" (Baygold Assoc., Inc. v Congregation Yetev Lev of Monsey, Inc., 19 N.Y.3d 223, 225, quoting J.N.A. Realty Corp. v Cross Bay Chelsea, 42 N.Y.2d at 394, 398-400; see Waterfalls Italian Cuisine, Inc. v Tamarin, 149 A.D.3d 1141, 1142-1143).

         Here, we agree with the Supreme Court's determination, in effect, that Kim believed that he provided timely notice to BFN of LM's intent to exercise its option to renew the lease through conversations with BFN's majority member, Yehuda Backer, and by sending the May 30, 2011, letter by regular mail. In contrast to the purported hand delivery of the May 30, 2011, letter, Kim testified at his deposition that he sent the letter dated May 30, 2011, by regular mail and provided an explanation at trial for why he did not mention this mailing in his affidavits (see Dutcher v Fetcher, 183 A.D.2d at 1055; Keane v City of New York, 57 A.D.2d 789, 789). Further, Kim's testimony that his business partner had severely limited his access to the premises and his mistaken belief that oral notice was sufficient established that LM's failure to exercise the option to renew within the time and in the manner provided in the lease was the result of inadvertence, negligence, or honest mistake (see Pitkin Seafood v Pitrock Realty Corp., 146 A.D.2d 618, 619; Grunberg v George Assoc., 104 A.D.2d 745, 745; United Skates of Am. v Kaplan, 96 A.D.2d 232, 238-239).

         We disagree with the Supreme Court's determination that LM proved that it made substantial improvements to the premises sufficient to constitute a forfeiture justifying equitable relief, as the testimony and documentary evidence established that most of LM's claimed expenditures were for nonpermanent fixtures (see Oriental Buffet & Grill Inc. v Vornado Gun Hill Rd. LLC, 33 A.D.3d 436, 437; Soho Dev. Corp. v Dean & DeLuca, 131 A.D.2d 385, 387) or regular operations of the business (see Matter of 221-06 Merrick Blvd. Assoc., LLC v Crescent Elec. Acquisition Corp., 79 A.D.3d 896, 897), which do not constitute substantial improvements. However, we agree with the court's determination that LM lost the long-standing goodwill associated with the premises, which was a valuable asset (see Baygold Assoc., Inc. v Congregation Yetev Lev of Monsey, Inc., 19 N.Y.3d at 227; 135 E. 57th St. LLC v Daffy's Inc., 91 A.D.3d 1, 6; Popyork, LLC v 80 Ct. St. Corp., 23 A.D.3d 538, ...


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