I45 Park Avenue, L.P. v. IRF/ACORN Group LLC a/k/a RF Furniture Rentals

(Supreme Court of the State of New York, July 26, 2004)

We represented: Plaintiff-Landlord

Shirley Werner Kornreich, J.S.C.

DECISION and ORDER

DECISION AND ORDER:

This is an action by a landlord against a former tenant to collect the balance of unpaid rent due under a written lease which was repudiated by the tenant when it vacated the premises prior to the end of the lease term. In its answer the tenant claims there had been an oral modification of the contract. Landlord now moves for summary judgment and seeks attorney's fees pursuant to the lease.

I.      Factual and Procedural Background

          Defendant, IFR/Acorn Group LLC. (tenant), was a long-term commercial tenant in the premises. See Aff. of Edward Ronsenfeld, 4. The business relationship allegedly began in 1973, with International Furniture Rentals (IRF), the tenant's predecessor-in-interest. See Rosenfeld Aff., 4. In 1991, IFR entered into a new, ten-year lease, ending in September, 2001. See Aff. Of Roslyn Stuart, Ex. 1, "Lease" § 1.02. A one-time option to renew the lease was exercised by the tenant, successor-in-interest for IFR, in January of 2001. See Stuart Aff., Ex. 2.

         Allegedly as a result of the events of September 11, tenant suffered a sharp decline in business and became financially unstable. See Ex. A of Rosenfeld Aff. Landlord allegedly granted tenant a six-month reduction in rent through March 2002, but no writing evidenced this arrangement. See Reply Affirmation, 19. At the end of the six-month period, defendant claims it sought and was granted an extension of the alleged oral modification. See Rosenfeld Aff. 5. In support of this claim, tenant submits an unsigned letter it allegedly sent to landlord, seeking the additional period of reduced rent and further submits copies of two cashed checks made out for the reduced amount, to the landlord. See Rosenfeld Aff. and attached exhibits.

Article 20 of the lease provides:

This lease may not be changed, modified or discharged, in whole or in part, orally and no executory agreement shall be effective to change, modify or discharge, in whole or in part, this Lease or any obligations under this Lease, unless such agreement is set forth in a written instrument executed by the party against whom enforcement of the change modification or discharge is sought.

         From April 2002 until February 2003, during the period in which the tenant paid the reduced rent, landlord continued to apply the remaining balance still due to each subsequent month's invoice. See Reply Affirmation, Ex. 1, p.p. 1-5. Plaintiff claims that this balance is due and owing and that tenant did not pay any rent for the months of March 2003 through August 5, 2003, the month tenant purportedly vacated the premises and surrendered it to landlord. See Aff., 10. Defendant, admitting that it paid no rent for April and May 2003, claims that it surrendered the premises in June, not August. See Rosenfeld Aff., 6.

Finally, section 19.02 of the lease provides:

Tenant agrees to indemnify and save Owner harmless of and from all loss, cost, liability damage and expense including, but not limited to, reasonable counsel fees, penalties and fines, incurred in connection with or arising from (i) any default by Tenant in the observance or performance of any of the terms, covenants or conditions of this Lease on Tenant's part to be observed or performed...

II.      CONCLUSIONS OF LAW

     A.      Motion for Summary Judgment

         To obtain summary judgment, a moving party must establish his defense sufficiently to warrant the court, as a matter of law, to direct judgment in his favor. Zuckerman v. City of N.Y., 49 N.Y.2d 557, 652 (1979); Friends of Animals, Inc. v. Associated Fur Mfrs., Inc., 46 N.Y.2d 1065, 1067. Only when movant has met this burden, must the opposing party show facts sufficient to raise material triable issues in order to defeat the motion. Id.

         In the present case, landlord claims that the amount of the past-due unpaid rent is not in dispute and that the tenant's sole defense, that the contract was orally modified, is inadmissible to raise a material issue that would bar summary judgment. Generally, a contractual term barring oral modifications is effective and any modifications must be in writing and signed by both parties. N.Y. Gen. Oblig. Law 15-301 (2004). Oral evidence of a modification of a written contract should not be considered unless there is evidence of partial performance. Rose v. Spa Realty Associates, 42 N.Y.2d 338, 343 (1977). Where there is a motion for summary judgment seeking to strike the defense of oral modification as contradicting a written term barring such modification, the motion may be denied where the defense is material and sufficient and there is evidence of an executed oral modification. Simon v. Wohl, 93 A.D.2d 818, 819 (2nd Dept. 1983). But even where there is partial performance in accordance with the alleged oral modification, that performance must be unequivocally referable to the oral modification in order for the writing requirement to be overcome. Rose, 42 N.Y.2d at 343 (emphasis added). Conduct is unequivocally referable where it is inconsistent with any other explanation. Richardson & Lucas, Inc. v. N.Y. Athletic Club of N.Y., 304 A.D.2d 462, 463 (1st Dept. 2003).

         In the present case, the purported oral modification is not inconsistent with an alternative explanation expressly put forth by defendant, i.e., that the temporary abatement in rent was intended to be a showing of good-faith toward long-term tenant and not as a modification to the terms of the lease. See Reply Affirmation, 19. Thus, the rent reduction is not unequivocally referable to an oral modification of the lease. The copy of the unsigned letter from the managing member of the defendant/company to the Senior Vice President of the building management company does not change this result. This self-serving letter is inadmissible hearsay. Joseph P. Day Realty Corp. v. Jeffrey Lawrence Assocs., A.D.2d 140, 142 (1st Dept. 2000).

         Nonetheless, the issue of when tenant actually vacated the premises still remains. Landlord has consistently maintained that the tenant vacated and surrendered the property on August 5, 2003. On the other hand, tenant claims it surrendered the premises in June of that year. Where, as here, there is a writing which on its face represents a complete agreement between the parties - even when there is no express merger clause - "the parol evidence rule operates, absent fraud or mutual mistake..., to exclude proof of all prior or contemporaneous negotiations between the parties, as well as any extraneous oral agreement which is intended to contradict or modify the terms of the instrument." Manufacturers Hanover Trust Co. v. Margolis, 115 A.D.2d 406, 407 (1st Dept. 1985). Accord Domansky v. Berkovitch, 259 A.D.2d 331 (1st 1999). The question of whether tenant vacated in June or August would however be relevant in relation to damages. This issue is not material to the cause of action for breach of the rental agreement and as such is insufficient to bar summary judgment as to liability.

         A tenant is liable for al monetary obligations expressly provided for in the lease. Holy Properties Ltd., L.P. v. Kenneth Cole Prods., Inc., 250 A.D.2d 744, 774 (2nd Dept. 1998).

         Here, the parties expressly agreed that tenant would pay for any "reasonable counsel fees" should it breach the contract. Such a breach has been found. As the non-prevailing party, tenant is liable for the reasonable legal costs associated with this action. Accordingly it is

         ORDERED the defense of oral modification is struck and summary judgment is granted as to liability only; and it is further

         ORDERED that the plaintiff's are granted reasonable attorney's fees; and it is further

         ORDERED that the issues determining damages and of reasonable attorney's fees is referred to a Special Referee, to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further

         ORDERED that this motion is held in abeyance pending receipt of the report and recommendations of the Special Referee and motion pursuant CPLR 4403 or receipt of the determination of the Special Referee or the designated referee; and is further

         ORDERED that a copy of this order with notice of entry shall be served on the Clerk of the Judicial Support Office (Room 311) to arrange a date for the reference to a Special Referee.

         The foregoing constitutes the decision and order of the Court.

Dated July 14, 2004
     New York, New York

SHIRLEY WERBER HORNREICH