Capogrosso v. Reade Broadway Associates

(Supreme Court, NY County, 12/11/06)

We represented: Defendant Read Broadway

Justice Rosalyn Richter, J.S.C.

DECISION and ORDER

This decision is issued following a non-jury trial on plaintiff's claims that defendant breached the parties' lease and constructively evicted plaintiff by failing to provide adequate electricity, heat, security and cleaning services. The trial also addressed defendant's counterclaim which sought to recover as damages accelerated rent due under the lease and the damages that allegedly flowed from the breach including legal fees and costs.

Plaintiff, an attorney, rented commercial space from defendant. At trial, plaintiff contended that for several years during her tenancy, defendant failed to supply adequate heat to her law office, failed to supply adequate cleaning services and security, and failed to remedy numerous problems with the electrical system. As to her complaints about the lack of heat and the poor cleaning services, the Court credited plaintiff's testimony. Plaintiff described in great detail the difficulties which she and her staff encountered in obtaining regular cleaning services and how cold the offices were during the winter months. She produced numerous letters written over a period of several years in which she documented these problems and asked the landlord to remedy them. She also produced a violation notice from the Fire Department concerning garbage being left in the hall.

The letters echo plaintiff's testimony at trial and it is impossible to believe that, years before this lawsuit was commenced, plaintiff would fabricate these letters either to get defendant to reduce her rent or because she anticipated at some later time, not paying her rent at all. Rather, it was much more believable that the letters were written because there was a problem with the services that were being provided. In addition to her complaints about the cold, especially in the morning hours, plaintiff credibly described a persistent problem with picking up the garbage, especially when the cleaning lady was on vacation.

At trial, plaintiff explained that because of the problem with the garbage pick-up, tenants would sometimes leave the garbage in the hallway and would expect the super to take it down the elevator. According to plaintiff, it was this problem with tenants leaving the garbage in the hallway that led to the Fire Department notice that was introduced at the trial. Although the landlord sought to attribute this notice to the result of tenant's not following required procedures, this explanation seemed a bit too convenient. Rather, it seemed far more credible, given the extensive letters from plaintiff, that there were persistent problems with building services, which became so severe that a government agency issued a notice about them.

The Court rejects the testimony of defendant's cleaning person, Magda Alcayaga, which was offered to refute plaintiff's testimony about the deficiencies in the cleaning services. Ms. Alcayaga sought to persuade the Court that the dust in plaintiff's offices was allegedly created by plaintiff whom Ms. Alcayaga claimed was doing some sculpting in the office in addition to running a law practice. First, the gravamen of plaintiff's complaint about the cleaning services was not about dust, but after the failure to pick up garbage for extended periods of time. Indeed, it is the garbage pick up problem that is documented in plaintiff's numerous letters. It also seemed difficult to believe that plaintiff, who was obviously struggling to maintain her legal practice, was going to spend significant time doing sculpture in her office, rather than spending time earning her living as a lawyer. Ms. Alcayaga was not a disinterested witness, but someone who had an obvious motive to testify the way she did. Not only does she work for defendant, but it was her own job performance that was at issue in this case. It seemed unlikely that she was going to admit that she did not always clean thoroughly or that there were problems with the garbage pick-up. Furthermore, having credited plaintiff's testimony, which is supported by her letters, on this point, the Court must of necessity reject Ms. Alcayaga's account, which cannot be reconciled with that-given by plaintiff.

The defendant argued at trial that plaintiff's claims about the lack of services for the period before October 8, 2003 were barred because on that date, plaintiff and defendant entered into a rent reduction agreement. The letters confirming the terms of that rent reduction agreement are in evidence as Plaintiff's Exhibits 2 and 3. The letters do not indicate, in any way, that plaintiff is waiving her claims about the lack of services and in fact, Exhibit 3, explicitly states that the Agreement refers to rent only. It states that all other terms and conditions of the Lease are unchanged. Thus, the Court rejects defendant's waiver argument.

The more difficult issue in this case involves plaintiff's complaints about the electricity. Plaintiff claimed at trial that the electric outlets in the space were inadequate and that the landlord had breached its agreement to improve the electrical outlets. Before addressing the credibility issues involved in this aspect of plaintiff's case, the Court notes that this aspect of her claim appears to be barred by the lease provision which indicates she is not entitled to any setoff or reduction in rent because of the landlord's failure to comply with the covenant to repair the premises. In any event, the Court accepts the testimony of the defendant's witness, Mr. Itzkowitz, who stated he did not agree to put additional outlets in the space, and that the outlets on the diagram introduced by plaintiff at the trial were put on the diagram for the prior tenant. In support of her claim, plaintiff offered a diagram, which was stapled to the lease, which she alleged showed the work that the landlord had agreed to do in the space. Plaintiff admitted, however, that the diagram is dated July 7, 1997, a date prior to the start of her tenancy. She claimed that the July 7, 1997 was crossed out to reflect the agreement of the landlord when he signed the lease with her to do this work. However, no new date was substituted for July 7, 1997 and neither the plaintiff nor defendant's initials appear on the diagram to confirm that the date was crossed out when plaintiff's tenancy began. In fact, the July 7, 1997 date is consistent with the landlord's position that this diagram was prepared for the tenant and that it was merely annexed to the lease to confirm what space plaintiff was renting.

Plaintiff is a practicing attorney and it seemed doubtful that she and the landlord would enter into an agreement for the landlord to do electrical work without there being some clear written record of that arrangement. In fact, there is a work letter annexed to the lease which lists the work to be performed by the landlord and it does not contain any reference to electrical work. Thus, this "work letter" is inconsistent with plaintiff's claims at trial. Furthermore, the lease only requires the landlord to maintain the building electrical systems and makes no reference to upgrading the internal electrical systems within the plaintiff's office. Plaintiff offered no persuasive proof that there was a problem with the building electrical system. Rather, it was her contention that the primary problem was with the electricity within her office, which was apparently insufficient to maintain the copiers, computers and other equipment typically used in a law office. However, absent a specific promise by the landlord to enhance the electrical system to accommodate the amount of equipment plaintiff had, no basis exists to conclude that the landlord breached its obligations under the lease in connection with the provision of electrical service.

The Court recognizes that it is crediting plaintiff's testimony about the heat and garbage problems and yet rejecting her testimony as to the landlord's promise to upgrade the electricity. As the trier of fact, the Court is not required to accept a witness' testimony in its entirety, but may accept only those portions it finds credible. Here, plaintiff's testimony about the electricity is contradicted by the work letter attached to the lease, which is one of the reasons the Court was not persuaded by it. Furthermore, it was apparent at trial that the landlord was not anxious to spend money it did not have to. Indeed, this was one of the reasons plaintiff argued it did not provide adequate heat. Thus, it seemed more likely that the landlord would, as it argued at trial, not offer to spend money on upgrading the electrical system, but would expect its tenant to be responsible for this problem.

It was undisputed that at one point, the landlord sent electricians to take care of the problems, which the landlord contended the plaintiff had created. In particular, the landlord argued that plaintiff's constant use of small electrical heaters was over-loading the system and the landlord had a dedicated electrical line put in for her heaters. He also upgraded the air conditioners in response to plaintiff's complaint and put in new windows for the sub-tenants, which the landlord thought might make the space less drafty. Mr. Iztkowitz, the landlord's witness at trial, explained that the plaintiff's use of extension cords for her office equipment and her use of electric heaters were a concern to him because she had tripped the circuit breaker from over-use of the electrical system. Thus, he had someone come in to correct the situation so that she would stop tripping the breaker, which affected other tenants.

At trial, plaintiff sought to establish that the work done by the landlord violated the Administrative Code and was not done properly. First, her breach of lease claim cannot be sustained even if this were true since she failed to show that the landlord had an obligation under the lease to do this work in the first place. Second, her complaint does not contain a cause of action for negligent repairs nor did she prove at trial any damages flowing from this work. To the extent that her complaint can be read as claiming that her telephone system was damaged because of these repairs, this Court dismissed that cause of action at trial for the reasons stated on the record.

Plaintiff's cause of action for constructive eviction based on the landlord's failure to provide adequate heat and cleaning services cannot be maintained because plaintiff did not abandon the premises and continued to use them for their intended purpose until after defendant obtained a judgment awarding it possession. 186-90 Joralemon Associates v. Dianzon, 161 A.D.2d 329, 331 (1st Dept. 1990); Minjak Co. v. Randolph, 140 A.D.2d 245 (1st Dept. 1988); Bedford Myrtle Corp. v. Martin, 28 Misc.2d 33 (Sup. Ct. Kings Cty. 1960); Ashton Holding Co. v. Ross, 98 Misc. 586 (App. Term 1st Dept. 1917). Plaintiff did not voluntarily move out of the law offices or abandon them under pressure, see Dinicu v. Groff Studios Corp., 257 A.D.2d 218 (1st Dept. 1999), but rather she was forced out because the landlord went to Court and ultimately obtained a judgment of possession based on plaintiff's failure to pay rent. More significantly, even after that judgment was obtained, plaintiff sought and obtained a stay of execution of that judgment of possession and plaintiff remained in the space for over a month paying the landlord use and occupancy. Plaintiff's request to remain in the space even after the eviction, and her request that her subtenants also be allowed to remain for at least a brief period of time, can hardly be reconciled with her current claim that the space was virtually unusable as a law office and unfit for business purposes. 1

Plaintiff argues that she should not be penalized for the delay in raising her claim of constructive eviction because she should not be expected to move out while discussions were occurring with the landlord about rent issues and other repairs. However, at the point when plaintiff stopped paying rent, it should have been apparent to her that there was not going to be any action by the landlord on her requests to remedy the alleged deficiencies in services. At this point, plaintiff already had obtained a rent reduction and thus, the Court does not even understand how she can argue, in good faith, that there were still discussions underway about a rent reduction. Furthermore, plaintiff's argument on this point cannot be reconciled with the Appellate Division cases cited above and plaintiff makes no attempt to distinguish them. Graecen v. Barker, 130 N.Y.S. 141 (App. Term. 1911 ), did not involve a tenant who waited until after the landlord commenced a summary dispossess proceeding, but rather in that case, the tenant waited a few months to abandon the premises hoping the landlord would remedy the defects. That case might apply if plaintiff had moved out before the landlord obtained a dispossess order against her, but does not change the result of this case since plaintiff did not even abandon the premises after the dispossess order was obtained. To the extent that plaintiff now is seeking money damages for her claim of breach of the covenant of quiet enjoyment, defendant argues that her refusal to pay rent based on a theory of constructive eviction constitutes an election of remedies and she has no claim for such damages. See 487 Elmwood Inc. v. Hassett, 107 A.D.2d 285 (4th Dept. 1985); Frame v. Horizons Wine & Cheese, Ltd., 95 A.D.2d 514 (2d Dept. 1983). Even if this Court were to accept plaintiff's argument that notwithstanding her withholding of rent there was no election of remedies, she did not prove her claims for money damages at this trial. Among the items for which she claims damages is reimbursement for the time she spent in writing to the landlord about these problems. She argues that as an attorney, she would have been able to do work for clients if she were not dealing with building problems. She testified that her regular billing rate during this period was $250 per hour and she estimated she spent 80 hours dealing with landlord related complaints. However, there is absolutely no proof of what plaintiff's total income was during these years. Defendant argued that plaintiff's business was not doing well, which it argued was the real reason she wanted her rent reduced. Plaintiff did not provide any proof at trial that she turned work away because she was too busy dealing with the landlord, or that-she would have been able to obtain a sufficient number of clients to fill up all the hours that she allegedly spent on her lease related issues. Plaintiff did not provide any proof that a single client refused to come to her firm, or failed to return because of the conditions in her office. She did not call any witnesses to corroborate that her staff refused to work there, which might have affected her income, or to testify that they called in sick because of the conditions, including the alleged cold, in the office. She did not introduce any contemporaneous time records to document how many hours she spent on these matters and it seemed to the Court that her claim that she spent 80 hours writing or contacting the landlord was based on nothing more than a guess. Nor did plaintiff establish the value of any diminution in her leasehold due to the lack of heat and the poor cleaning services.

Similarly, her testimony that she should be compensated for the 70 hours spent on searching for a new office and unpacking her new office also was unsupported by anything in the record. Here again, she failed to adequately explain how she compiled this number or to show that she would have been working on client matters during this period if she had not encountered problems with her landlord. Plaintiff also cited no case to support her theory that her time in unpacking her new office could be compensable as monetary damages for any breach of the lease. Indeed, her post-trial memoranda cite a case about "lost profits," but she offered no proof of any lost profits. The case she mentions in the lost profits section, P. W.B. Enterprises, Inc. v. Moklam Enterprises, Inc., 243 A.D.2d 350 (1st Dept. 1997), emphasizes that any claim for lost profits must be "reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes." Here, plaintiff offered no evidence to show that she had any lost profits or that they would have been directly traceable to the time she allegedly spent writing to the landlord or looking for new space.

Her claim-that she was entitled to money damages because her secretaries had to spend time re-doing documents that were lost because of the electrical problems must be rejected because this Court has found that file landlord was not in breach of the lease for failing to correct the electrical problems. In any event, her testimony on this issue was generalized and she did not identify any specific cases which had to be redone. She admitted that the secretaries did not work a consistent number of hours per week and thus the Court could not imagine how she could come up with a figure for the extra labor she claimed was needed to re-type documents. Her testimony that they spent 25% of their time fixing problems arising from document loss due to electrical and computer problems, like most of her other testimony about the damages, seemed like pure guesswork.

Although the Court accepted plaintiff's testimony that there was not someone regularly providing security or signing people in and out of the building, she did not point to any obligation in the lease for the landlord to provide such services. Her suggestion that the downtown location of this building created an implied obligation to provide security, especially after September 11, was unpersuasive and would, if accepted, extend to every landlord in the area. Similarly unpersuasive was her argument that the general clause in the lease (paragraph 23) which guarantees the tenant the quiet enjoyment of the premises created an implied obligation on the part of the landlord to have lobby security. She cites no case to support this argument nor has the Court found one. Thus, she is not entitled to any damages flowing from the alleged failure to provide adequate security in the lobby nor did she explain what such damages would be except for her time in writing to the landlord about this problem, a claim this Court has already analyzed.

Plaintiff's complaint, in the first and second causes of action, alleges that the fair market rental value of the premises was 80% less than the amount set forth in the lease because of the problems with security and electricity. Although this Court has rejected plaintiff's argument's that the landlord was obligated to provide these services, the Court also notes that plaintiff failed to prove this aspect of her damages claim.

At trial, plaintiff tried to establish that she had "surrendered" the premises to the landlord on May 2, 2004, a month after the landlord had obtained a judgment of possession. This surrender argument was raised in response to the landlord's attempts to collect damages for rent due under the lease for the period commencing May 1 and thereafter. First, plaintiff's lease had already been terminated by operation of law when the Civil Court issued a judgment of possession to the landlord at the end of March 2004. Although a stay of that order was granted by order of the Civil Court dated April 22, 2004, it did not vacate the earlier order but merely indicated that plaintiff could remain in possession provided she pay use and occupancy on the first of each month. Furthermore, although plaintiff paid use and occupancy for April 2004, she did not pay it for May 2004 and she admits she did not leave until May 1st. The terms of the April 22, 2004 order specifically indicate that use and occupancy was due on the first of each month.

Plaintiff does not contend that the landlord agreed that she could vacate on May 1st. Rather, she argues that she could not move out on April 30th because her subtenants were using the elevator all day to move their things out. She does not contend that she ever apprised the landlord of this problem or sought his permission to leave a day late. In fact, she contends that on May 1st, she merely left the landlord a letter indicating that she slipped a notice under the landlord's office door with the keys. 2

Plaintiff did not persuade the Court that the landlord agreed to absolve her of any further liability for rent and damages under the lease. Here, not only did the landlord in March 2004 obtain a judgment of possession, but a few weeks after plaintiff's departure, the landlord obtained a martial's notice of possession. The landlord also brought an action in Civil Court for attorney's fees and to obtain May 2004 use and occupancy. Thus, its actions are inconsistent with a claim that it had accepted plaintiff's surrender and intended to absolve her of any further financial liability.

The landlord has counterclaimed for accelerated rent and late fees due under the lease. Because the Court has dismissed plaintiff's claims of a constructive eviction, she cannot argue that this is a defense to the landlord's demand for this rent. The rider to the lease, Article 42, paragraph 6.1, provides that in the event of a default, the landlord may elect to declare due and payable all minimum rent and additional rent, payable under the Lease. This paragraph further provides that if the Landlord shall make such election, "such minimum rent and additional rent be due and payable within five (5) days after Landlord's notice to Tenant of such election." Here, the landlord never served the tenant with notice that it was making such an election. The rider to the lease, paragraph 56, specifically provides that notices and other communications given under the Lease shall be in writing and sent by registered or certified mail, return receipt requested, to the tenant at the address set forth in the rider. That was not done in this case.

In Bijan Designer for Men, Inc. v. St. Regis Sheraton Corp., 142 Misc.2d 175 (Sup. Ct. N.Y. Cty.), aff'd, 150 A.D.2d 244 (1st Dept. 1989), the Court specifically held that where the "drastic relief of the acceleration of the full term's rent is sought, the type of notice provided for by mutual agreement must be adhered to." In Bijan, the landlord did not give proper notice of the default under the terms of the lease and the Court held that the landlord therefore had no right to that relief. Similarly, having failed to give the required notice of the request for accelerated rent as required under the rider to the lease, the landlord has not established his right to relief at this time.

In its post-trial memoranda, the landlord does not dispute that it did not give the required written notice, but contends that its counterclaim in this lawsuit was sufficient to put plaintiff on notice of the request. Such an argument, if accepted, would essentially eliminate the notice requirement in the lease and would re-write the contract reached by the parties. It would allow a landlord to sue for accelerated rent without providing the type of notice set forth in the lease, a result which this Court does not believe is warranted under the case law or under basic principles of contract interpretation.

Article 18 of the lease provides that in the event of the tenant's default or dispossess by summary proceedings, the Owner may re-let the premises for a term which may be less than or exceed the period which would otherwise have constituted the balance of the term of the lease and may grant concessions or free rent or charge a higher rental than that set forth in the lease. This section of the lease further provides that the tenant, in the event of a default or dispossess, shall pay the Owner as liquidated damages any deficiency between the rent reserved and/or covenanted to be paid under the lease and "the net amount, if any, of the rents collected on account of the lease or leases of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease." In computing such liquidated damages, the lease explicitly states that "there shall be added to the said deficiency such expenses as Owner may incur in connection with re-letting, such as legal expenses, reasonable attorney's fees, brokerage... " Thus, in addition to the remedy of accelerated rent, which requires notice under the rider to the lease, the main lease sets forth an additional measure of damages to be collected by the landlord. This provision in the main lease does not require notice. It is well settled that such damages which are the difference between the rent due under the lease and the amount actually collected by the landlord, are permissible when the parties contract for them. See Holy Properties, Limited, L.P. v. Kenneth Cole Productions, Inc., 87 N.Y.2d 130 (1995); Dress for Less, Inc. v. Lenroth Realty Co., Inc., 260 A.D.2d 220 (1st Dept. 1999).

Here, the landlord has provided proof that it was not able to lease the premises until September 2005 and that it provided free rent to the new tenant for several months, something which is permitted under the terms of the lease. It also has provided proof that it incurred a broker's fee of $15,161.04. The tenant therefore is liable for liquidated damages in the amount of $216,075.40.

The tenant argues that the provisions of Article 18 concerning her liability for this rent difference as liquidated damages are superseded by Article 42 of the lease rider. She contends that since Article 42 does not mention this measure of damages, but only discusses accelerating the rent, the landlord cannot collect this amount in damages. There is absolutely nothing in the rider to support the tenant's argument. It does not state that it overrides the measure of damages as set forth in the main lease. Rather, the rider appears to give the landlord the right to accelerate the rent provided notice is given.

The tenant argues that the landlord cannot rely on the main lease because its counterclaim did not mention Article 18 of the main lease. However, at the conclusion of the trial, the Court granted the landlord's motion to conform the pleadings to the proof. Furthermore, the counterclaim provides the tenant, who also is an attorney, with ample notice of the gravamen of the claim i.e. that she is liable for any rent deficiency because she abandoned the premises without the landlord's consent during the term of the lease. Indeed, the landlord's reliance on the main lease, as opposed to the acceleration clause in the rider, is to the benefit of the plaintiff since it means that she is entitled to an offset for any rent actually collected by the landlord. See generally, Holy Properties, 87 N.Y.2d at 134 (landlord could do nothing and collect full rent due under the lease).

The tenant further argues that she is entitled to the benefit of the reduced rent arrangement of $7,200. However, as the landlord correctly notes, this agreement was conditioned on her timely payment of this amount going forward. Having breached that agreement, she is bound by the terms of the lease and the rent set forth in that lease.

Article 19 of the main lease provides that if the Owner, in connection with any default by tenant in the covenant to pay rent makes any expenditures including reasonable attorney's fees in "instituting, prosecuting or defending any action or proceeding and prevails in any such action or proceeding," the tenant shall reimburse the Owner for such sums with interest and costs. Article 50 of the rider provides that the tenant shall pay to the landlord all costs and expenses including attorney's fees and disbursements incurred by landlord in enforcing any of the covenants and provisions of the lease in any action or proceeding brought by landlord against tenant. Here, the landlord has prevailed on its counterclaim for unpaid rent and it is entitled to its attorney's fees, costs and disbursements incurred in this proceeding.

The amount of attorney's fees, costs and disbursements owed by plaintiff to defendant could not be determined until the Court decided that the landlord had prevailed on its counterclaim in this action. The issue of the amount of such attorney's fees, costs and disbursements is severed and referred to a referee, who shall hear and report on this issue, unless the parties consent to the referee hearing and determining this issue. Defendant shall, if it wishes, be permitted to enter judgment for $216,075.40 (the amount of the rent deficiency and brokerage fees) and that aspect of the case is severed from the issues of attorney's fees and costs to be heard by the referee. 3

Settle order on notice.

December 11, 2006


1 Although the gravamen of plaintiff's claim at trial was that she was constructively evicted from the entire space, a claim of partial constructive eviction also requires evidence that plaintiff abandoned or surrendered a portion of the demised premises. See Lincoln Plaza Tenants Corp. v. MDS Properties Development Corp., 169 A.D.2d 508 (1st Dept. 1991). No such proof exists here.

2 At trial, the landlord's witness denied receiving the keys. This Court need not resolve this credibility issue because even if the landlord had gotten the keys, there is not enough evidence to establish surrender, especially in light of the other circumstances discussed above.

3 The Court, prior to rendering its decision in this matter, requested that the parties order a part of the trial transcript and directed that they split the costs. The Court has been advised by the Court reporter that defendant paid the entire amount and the Court does not know whether it has received reimbursement from the plaintiff for her share. In the event that no such reimbursement has yet been provided, the referee shall also address whether this payment is an expense for which defendant is entitled to be reimbursed as part of the final judgment.