Summary
accepting rent waived purported breach of non-assignment provision in lease
Summary of this case from In re Sok Jun KongOpinion
April 6, 1992
Appeal from the Supreme Court, Suffolk County (Namm, J.).
Ordered that the order is modified, on the law, by adding thereto a provision declaring that the merger of Brentwood Plaza Food Corp. into the appellant did not breach the 4th and 31st provisions of the lease; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.
The predecessor landlord of the subject commercial property leased the property, which is located in Brentwood, New York, to the predecessor tenant, the defendant 1925 Brentwood Road Food Corp. (hereinafter Food Corp.) for a period of approximately six years. The lease provided that the property was to be used and occupied only for a supermarket. The rider to the lease contained the following covenant: "31st * * * Tenant further agrees that it will not assign, mortgage, pledge or otherwise encumber this lease or any interest therein, or sublet the whole or part of the demised premises, without obtaining on each occasion the written consent of the Landlord. Consent to assignment shall not be unreasonably withheld by Landlord, and if consent is granted, Tenant shall remain liable on this Lease. Transfer or sale of fifty percent (50%) or more of the stock of the Corporation shall constitute an assignment of this Lease which must require Landlord's consent as set forth above".
On August 14, 1986, Food Corp. entered into an assignment and assumption agreement with Brentwood Plaza Food Corp. (hereinafter BPFC) which was at the time a wholly-owned subsidiary of the appellant, D'Urso Supermarkets, Inc. The predecessor landlord consented to the assignment and assumption. As of December 17, 1986, the appellant owned all outstanding shares of each class of stock of BPFC and, pursuant to a plan of merger adopted by the appellant's board of directors on that date, BPFC was merged into the appellant. A certificate of merger effecting the merger was filed with the Department of State of the State of New York on December 19, 1986. The appellant executed no assignment or sublease. Brentsun Realty Corp. (hereinafter Brentsun) the present landlord, contends that the merger violated the above-quoted lease provision and thus the appellant cannot exercise its right to renew the lease.
We find Brentsun's contention to be without merit and modify the order to declare that the appellant and its subsidiary BPFC did not breach the nonassignment clause of the lease. Under the facts of this case, the merger of the subsidiary corporation into its parent corporation did not constitute an assignment for purposes of violating the nonassignment covenant in the lease (see generally, Business Corporation Law § 906; Torrey Delivery v Chautauqua Truck Sales Serv., 47 A.D.2d 279; Albert v Salzman, 41 A.D.2d 501; Platt Corp. v Platt, 21 A.D.2d 116, affd 15 N.Y.2d 705; Rubinstein Bros. v Ole of 34th St., 101 Misc.2d 563). The merger did not change the beneficial ownership, possession, or control of BPFC's property or leasehold estate. Only BPFC's corporate form was affected, not the corporate property. Therefore, no assignment or similar transfer of the lease occurred. The provision in the lease which states that transfer or sale of 50% or more of the stock of the "Corporation" shall constitute an assignment does not apply in this case because at no time since BPFC assumed the lease did it transfer or sell at least half of its stock to the appellant.
Moreover, we conclude that, by accepting rent from the appellant for over two years after the merger, Brentsun waived the purported breach of the nonassignment provision of the lease (see, e.g., Atkin's Waste Materials v May, 34 N.Y.2d 422; Conger v Duryee, 90 N.Y. 594; Murray v Harway, 56 N.Y. 337; Condit v Manischewitz, 220 App. Div. 366; Schwartz v Certified Mgt. Corp., 117 A.D.2d 521; Witkoff v Shopwell, Inc., 112 A.D.2d 295).
The appellant contends, with respect to Brentsun's contention that it failed to timely execute its option to renew the lease, that although there is a question of fact, if it is found that it did not timely execute its option to renew the lease, it is entitled to equitable relief from the forfeiture of its leasehold estate, in part because of the substantial expenditures it made for improvements to the property (see, e.g., J.N.A. Realty Corp. v Cross Bay Chelsea, 42 N.Y.2d 392; Sy Jack Realty Co. v Pergament Syosset Corp., 27 N.Y.2d 449). However, if the appellant can prove that it properly exercised its option to renew the lease within the time period specified in the lease, it may have an adequate remedy at law (see, J.N.A. Realty Corp. v Cross Bay Chelsea, supra, at 397-398), in which case it will not be entitled to equitable relief (see, Boyle v Kelley, 42 N.Y.2d 88, 91; Lichtyger v Franchard Corp., 18 N.Y.2d 528, 537). We therefore find that the court properly denied the appellant's motion for summary judgment insofar as it was to declare that the lease renewal option was properly exercised, as there are issues of fact as to whether the appellant properly exercised its option to renew the lease. Bracken, J.P., Eiber, O'Brien and Pizzuto, JJ., concur.