805 Third Avenue Co. v. Levco Realty Corp.

(Sup. Ct. N.Y. Cty. 10/29/96)

We represented: Plaintiff

Herman Cahn, J.

DECISION and ORDER
In this action to recover unpaid rent under a commercial lease, plaintiff 805 Third Ave. Co. moves for (1) partial summary judgment in the amount of $446,500.02 representing unpaid base rent, plus interest; (2) severance of its claim for unpaid additional rent and liquidated damages; and (3) dismissal of defendant's affirmative defense and counterclaim, which allege overcharges with respect to the additional rent. Defendant Levco Realty Corp. cross-moves to compel disclosure. As set forth below, plaintiff's motion for partial summary judgment is granted, but its motion to dismiss defendant's counterclaim and affirmative defense is denied. Defendant's cross-motion to compel discovery is also denied.

By a written lease agreement dated February 25, 1983, plaintiff landlord leased to defendant tenant the 12th floor of a building located at 805 Third Avenue, New York, New York 10022, for a term commencing May 1, 1983 and ending April 30, 1998. Pursuant to the lease, defendant agreed to pay plaintiff both base and additional rent. Defendant has admittedly failed to pay any base or additional rent since July 1, 1994. As a result of defendant's failure to pay rent, the lease was terminated on December 18, 1994.

The amended complaint seeks the recovery of both unpaid base and additional rent in the total amount of $723,554.87 for the period from July 1, 1994 through December 1, 1994, and liquidated damages in excess of $4,500.00. In its answer, defendant asserts one affirmative defense and one counterclaim, both of which allege that plaintiff breached the lease by overcharging defendant for additional rent, including "common area" electricity charges, real estate taxes and porter's wage escalations, from on or about February 25, 1983 through on or about August 1, 1994, "in an amount to be determined (but not less than $300,000)" (Answer 56; Counterclaim 4).

Plaintiff now seeks the entry of partial summary judgment on the first cause of action in the amount of $446,500.02, representing unpaid base rent only, as well as an award of interest. Plaintiff also requests severance of its claim for additional unpaid rent and its claims for liquidated damages in the second and third causes of action.

The proponent of a summary judgment motion "must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Avotte v. Gervasio, 81 NY2d 1062 [1993]; Winegrad v. New York University Medical Center, 64 NY2d 851 [1985]; Whelan v. GTE Sylvania Inc., 182 AD2d 446 [1st Dept 1992]). To defeat a motion for summary judgment, the opposing party must show facts sufficient to require a trial of any issue of fact (Friends of Animals v. Associated Fur Mfrs., 46 NY2d 1065 [1979]).

Plaintiff is clearly entitled to partial summary judgment on its first cause of action in the amount of $446,500.02, representing base rent only, for the period July through December 1994. Plaintiff has conclusively demonstrated that the base rent sought to be recovered was due and payable pursuant to the lease, and that it was not paid. Pursuant to section 3.01 of the lease, the monthly rent payable for each of the months in question is $74,416.67. This amount, multiplied by six months (the period from July 1, 1994 through December 1, 1994), equals $446,500.02. In its answer, defendant admits not having paid any base rent for the period July through December 1994 (Answer 37). Although defendant asserts that plaintiff is not entitled to summary judgment because issues of fact exist with respect to the alleged overcharges for various items of additional rent, plaintiff is only moving for partial summary judgment with respect to its claim of unpaid base rent. No issues of fact have been raised as to this claim. Thus, neither the affirmative defense or counterclaim alleging overcharges with respect to additional rent is a defense to this motion which seeks the recovery of base rent only.

Accordingly, since defendant concedes it has not paid any rent since July 1994, in clear violation of the parties' lease agreement, and because defendant has failed to demonstrate a valid defense in opposition to plaintiff's motion, plaintiff is entitled to partial summary judgment in its favor against defendant in the amount of $446,500.02 on the first cause of action, representing unpaid base rent only, for the period from July 1, 1994 through December 1, 1994, with interest from December 1, 1994. Plaintiff's request for severance of that portion of its claim for additional rent contained in the first cause of action, as well as its claims for unpaid rent and liquidated damages in the second and third causes of action, is also granted.

Defendant argues that entry of partial summary judgment should be stayed because its counterclaim may exceed the amount sought by plaintiff. However, the cause of action for additional rent and the related counterclaim are unrelated to the base rent cause of action on which plaintiff is entitled to recover. Thus, plaintiff is entitled to summary judgment and entry of judgment unless it affirmatively appears that defendant will be severely prejudiced (Robert Stigwood Org. Inc. v. Devon Co., 44 NY2d 922 [1978]; Pease & Elliman, Inc. v. 926 Park Ave. Corp., 23 AD2d 361 [1st Dept 1965], aff'd, 17 NY2d 890 [1966]). Defendant has failed to establish that the amount of its counterclaim would exceed plaintiff's claims for additional rent and liquidated damages in excess of $4,500.00, or that plaintiff is financially unable to pay any judgment that might be rendered in defendant's favor on its counterclaim. Accordingly, there is no basis for withholding judgment in favor of plaintiff for base rent, as to which there is no factual issue (Id.).

Plaintiff also moves to dismiss defendant's affirmative defense and counterclaim on the grounds that it is barred by a no offset/counterclaim provision set forth in Section 16.10 of the lease:

Section 16.10. In any action or proceeding brought by Landlord against Tenant, predicated on a default in the payment of rent or additional rent, Tenant shall not have the right to interpose any set-off or counterclaim of any kind whatsoever. If Tenant has any claim, Tenant shall be entitled only to bring an independent action therefor; and if such independent action is brought by Tenant, Tenant shall not be entitled to and shall not consolidate it with any pending action or proceeding brought by Landlord against Tenant for a default in the payment of minimum rent or additional rent.

Although lease provisions waiving the right to assert counterclaims and/or to consolidate actions are generally enforced in summary proceedings involving commercial premises (see Bomze v. Jaybee Photo Suppliers, Inc., 117 Misc. 2d 957 [App Term 1st Dept 1983]), this case is a plenary action, not a summary proceeding. In a summary proceeding, enforcement of a lease provision prohibiting counterclaims or consolidation is appropriate in light of the public policy of expeditious resolution of special proceedings (see Ultrashmere House, Ltd. v. 38 Town Assocs., 123 Misc 2d 102 (Sup Ct NY County 1984]). Such concerns are not relevant here. Moreover, courts are not bound by lease provisions waiving counterclaims, and have the equitable power to disregard such a provision where the counterclaims are intertwined with the landlord's claim (see 610 W. 142nd Street Owners Corp. v. Braxton, 137 Misc 2d 567 [Civil Court, New York County 1987]; Randall Co. v. Alan Lobel Photography, Inc., 120 Misc 2d 112 [Civil Court, NY County 1983). Here, the counterclaim of defendant tenant alleging overcharges with respect to additional rent is so closely connected with the plaintiff landlord's claim of additional rent that resolving them in one lawsuit instead of two will result in economizing judicial and attorney time with a concomitant saving of legal costs (cf. Ultrashmere House v. 38 Town Assocs., supra, 123 Misc 2d 102). Accordingly, plaintiff's motion to dismiss defendant's affirmative defense and counterclaim is denied.

Although plaintiff contends that defendant's counterclaim is also barred by the six-year statute of limitations for contract actions or by the doctrine of waiver, these contentions at most raise factual issues which cannot be determined on this motion. Plaintiff may be equitably estopped from relying on the statue of limitations (see, e.g., Schirano v. Paggioli, 99 AD2d 802 [2d Dept 1984]), and the question of whether defendant intentionally waived its rights necessarily raises factual issues (see, e.g., General Motors Acceptance Corp. v. Clifton-Fine Central School District, 85 NY2d 232 [1995]; Bank of Seoul v. Norwest Bank Minnesota, N.A., 218 AD2d 542 [1st Dept 1995]).

Defendant's cross-claim for disclosure is also denied. Plaintiff has apparently produced all of the relevant documents in its possession, and defendant is not entitled to further disclosure, as this case is already set for trial.

The court has considered the remaining arguments, and finds them to be without merit.

Accordingly, it is

ORDERED that plaintiff's motion for partial summary judgment on the first cause of action for base rent only is granted and the Clerk is directed to enter judgment in favor of plaintiff and against defendant in the amount of $446,500.02, together with interest from December 1, 1994 to be computed by the Clerk, together with costs and disbursements to be taxed by the Clerk upon submission of an appropriate bill of costs; and it is further

ORDERED that plaintiff's claims for unpaid additional rent in the first cause of action and for unpaid rent and liquidated damages in the second and third causes of action are severed for trial; and it is further

ORDERED that defendant's cross-motion is denied.