Opinion
112467-2008.
Decided March 25, 2009.
Plaintiff, E-Z Eating 41 Corp. ("plaintiff") moves by order to show cause to stay and toll a 15-Day Notice To Cure (the "Notice to Cure"), to enjoin defendants H.E. Newport, L.L.C. ("HE"), HTS-NY LLC ("HTS") and Hyatt Hotels Corp. ("defendants") from seeking to recover possession of the said premises, and for an award of attorney's fees, costs and disbursements. Factual Background
Plaintiff also filed a summons and complaint for a declaration of the rights of the parties under the terms of the Lease.
Plaintiff, as tenant, and HE and HTS's predecessor in interest 485 Fifth Avenue, as landlord, are parties to a commercial lease, dated July 3, 1997 (the "Lease"). Pursuant to paragraph 2 of the Lease, plaintiff was permitted to occupy the demised premises, "for restaurant purposes." Paragraph 2 also referred to "Article 41." Under Article 41 ("Paragraph 41"), plaintiff's was obligated to operate its business "solely as a restaurant with table-seating operated under the name and style of Burger King' for on and off site consumption of food and beverage and for no other purpose."
Article 41 is found in the Rider to the Lease.
On October 6, 2008, HE and HTS served plaintiff with the Notice to Cure. The Notice to Cure faults plaintiff for failing to abide by Paragraphs 2 and 41(a). The Notice to Cure alleges, inter alia, that (1) plaintiff "does not operate its business at the Premises under the name Burger King,'" (2) plaintiff "caused and/or permitted the termination of its franchise agreement with Burger King Corporation ("BKC") to operate its business at the Premises under the name "Burger King" (the "Franchise Agreement")," (3) plaintiff "is no longer licensed and/or permitted to operate under the name "Burger King" for on and off site consumption of food and beverage"; and that (4) the "United States District Court for the Southern District of Florida, Miami Division, has entered an Order on Motion for Summary Judgment dated July 25, 2008 (the "District Court Order"), finding, among other things, that BKC properly terminated the Franchise Agreement."
Order to Show Cause
Plaintiff asserts that at the time the Lease was executed, plaintiff was in the process of becoming a franchisee of the Burger King Corporation. This process required plaintiff to obtain a 20-year lease, to be approved by Burger King Corporation, and to include reference in the lease to a restaurant operated "under the name and style of Burger King for on and off site consumption of food and beverage and for no other purpose." Accordingly, plaintiff obtained these terms for plaintiff's own benefit.
Plaintiff maintains that the Lease permitted, but did not require a Burger King franchise as the tenant in the demised premises. Paragraph 53 of the Rider to the Lease permits, with the Landlord's consent, assignments or sublets of the entire demised premises for use as a restaurant and nothing therein requires that the assignee or sublessee be a Burger King restaurant. Further, paragraph 53 of the Supplemental Rider permits the tenant, without the landlord's consent, to assign or sublet the premises, to certain defined entities which are controlled by, or of which the ownership consists of at least 50% of the principals of the tenant. Plaintiff asserts that L. Luan Sadik ("Luan") and his sister, Elizabeth Sadik ("Elizabeth"), own an equal amount of shares of plaintiff and those shares exceed 50% of the assignee or sublessee of the company.
Plaintiff also asserts that as a result of defendant's decision to build a luxury hotel at the subject building, plaintiff "created an impossible atmosphere for Plaintiff's restaurant" and that plaintiff could not sustain and operate the business, i.e., a Burger King, it had entered into the lease to conduct. According to plaintiff, defendants removed plaintiff's heating system, removed plaintiff's service elevators, blocked passageways for entrance into the restaurant, installed a crane in front of the store, and performed construction work inside the store, causing a metal beam to crash through the ceiling nearly injuring an employee. Nonetheless, rather than break the Lease based on constructive eviction, plaintiff "continued to pay the rent." (Luan's Affidavit, pp. 5-7).
Defendants maintain that all construction disputes were resolved in a "global" settlement, pursuant to a Stipulation of Settlement, dated on or about November 28, 2006. Plaintiff's and EZ-47's recitations of these events are wholly irrelevant to the inquiry before the Court and it is respectfully submitted that the pages devoted to this subject are merely a red-herring, intended to mislead or distract the Court.
Plaintiff no longer operates a Burger King franchise. Plaintiff's franchise agreement with BKC terminated as a result of certain United States District Court for the Southern District of Florida orders ("District Court Orders"). Such orders have been appealed, and until the Circuit Court of Appeals renders a decision, the alleged default is incapable of being cured within the time frame set by the Notice to Cure. Additionally, the restrictive covenants contained in the franchise agreement with BKC allow plaintiff to continue in the restaurant business after mid-January 2009. Thus, even if the Circuit Court of Appeals affirms such Orders, upon expiration of the term of the restrictive covenants, plaintiff can continue its restaurant operation.
Further, plaintiff continues to operate a restaurant at the demised premises, and asserts that once construction of the hotel is completed, it will continue to operate the premises as a restaurant with table seating for on and off-site consumption of food and beverage, for example, an Arby's/Wendy's or an independent "Burger 41" restaurant. Plaintiff argues that although it does not believe it is in default, if the Court determines there is a default, said default can be cured.
Plaintiff also argues that defendant's assertion of the right to prohibit plaintiff from opening anything other than a Burger King restaurant is unsupported by the Lease.
Motion to Intervene
In the interim, plaintiff sublet the demised premises to EZ-Eating 47 Corp. ("EZ-47") (the "sublease"). Thus, EZ-47 moves to intervene in this proceeding to assert that as sublessee, it intends to fully comply with all provision of the Lease, and to operate a restaurant with table seating for on and off site consumption.
EZ-47 argues that it is a corporation under the common control of Luan and Elizabeth, and that the paragraph 53 of the Supplemental Rider gives plaintiff the right to sublet the demised premises to EZ-47 without the consent of the Landlord. The sublease provides EZ-47 with use of the demised premises as a restaurant with table seating for on and off-site consumption. EZ-47's use under the Lease is not restricted by any provision respecting Burger King. Paragraph 53 of the Rider provides that the Landlord's consent to the subleasing of the premises to an unaffiliated assignee will not be unreasonably withheld, provided that the premises be used as a restaurant with table-seating for on and off site consumption and for no other purpose; the restaurant need not operate as a Burger King.
In addition, any restricted use is disfavored in th law and must be strictly construed. If the Lease required the subleasee to operate a Burger King, Rider Paragraph 53 and Supplemental Rider Paragraph 53 would and should say so.
Further, EZ-47 must be given a reasonable time to prepare the premises for its restaurant. The Lease contemplated that at times, the lessee or its subleasee would require time to renovate the demised premises. Paragraph 58(B) of the Rider to the Lease expressly provides that the Tenant may initiate construction work on the premises, and at subparagraph 58(B)(d), states: "Tenant's Work . . . shall proceed diligently . . . in order to complete same within a reasonable period of time using first class materials and in a good and workmanlike manner." Accordingly, EZ-47 may take time to renovate the Premises for the purposes of establishing "a restaurant with table seating, so long as its renovation will be "diligent" and completed within a reasonable period of time." Since EZ-47's renovations are not expected to extend past the next few months, such renovations will not place EZ-47 or plaintiff under default. However, assuming that such renovations somehow might place plaintiff or EZ-47 in default, the court will not err in granting a Yellowstone injunction to permit plaintiff to cure. It should be noted that EZ-47's renovations will be far less protracted than defendants' renovations.
Finally, assuming, arguendo, that the Lease is ambiguous as to whether EZ-47 must operate a Burger King, a trial will be necessary to determine EZ-47's rights. And, any ambiguity will be interpreted against the drafters, in this case, defendants. Additionally, extrinsic evidence, including the affidavit of Elizabeth Sadik, demonstrates that at the time the original parties entered the Lease, plaintiff understood that their relationship with Burger King might not last 20 years, and that the Lease would have to allow for assignment if BKC went bankrupt, if the relationship proved unprofitable, or if some other disagreement with Burger King came to pass.
According to her affidavit, Elizabeth is the Vice-President of EZ-47 and a shareholder of 50% of the issued and outstanding shares of stock in the corporation. She is also the President and 50% shareholder of the plaintiff. The relationship of Elizabeth and her brother as franchisees with Burger King required them to obtain a 20-year lease. She and her brother "wanted the ability to freely assign or sublet the restaurant to another franchisee or to anyone else in the event Burger King failed or we could not make a go of it. [They] successfully negotiated for the right to assign or sublet the restaurant with certain conditions required by the Landlord." According to Elizabeth, they "insisted upon a provision that we could assign or sublet the lease without the Landlord's consent to an entity in which [her] brother and [she] owned more than 50% of the shares or controlled the management, just in case the franchise" did not work out, Burger King terminated its business, or they decided to take business in another direction. Elizabeth also attests that the Landlord wanted "control over who, other than ourselves, would be an assignee or sublessee." The Landlord required the Lease to provide that its consent be obtained in such situations, and agreed to not unreasonably withhold consent if the sublessee or assignee was acceptable. Further, the intent of the Landlord and plaintiff was to install a non Burger King restaurant to occupy the space, such as an Arby's/Wendy's, so that plaintiff would be protected for the 20-year term of the Lease and be able to recoup its investment. Therefore, plaintiff negotiated with the Landlord to be able to continue operating a restaurant other than a Burger King, without the burden of obtaining consent.
Opposition
Defendants oppose Yellowstone relief, and seek the costs and disbursements, including reasonable attorneys' fees, incurred by defendants in this action. Defendants argue that plaintiff has not cured, and lacks the ability to cure, its default under the Lease. Nor has plaintiff or EZ-47 demonstrated any willingness to cure the defaults under the Lease. Plaintiff's improper sublease of the Premises to EZ-47 is, far from the complete "cure" that plaintiff attempts to portray, and is yet another incurable breach of the Lease.
The Lease provides that the only permitted use of the premises, whether by a tenant or subtenant, is "under the name and style of 'Burger King' . . . and for no other purpose." However, BKC terminated plaintiff's franchise agreement, and has obtained a permanent injunction that
forever bars plaintiff and EZ-47 from operating a Burger King restaurant. Although plaintiff has purported to effect a sublease to a sister entity wholly controlled by plaintiff's own principals, which entity was also the subject of the principals' litigation with BKC, EZ-47 is now also barred by a permanent injunction from operating a Burger King pursuant to the consolidated litigation in the Federal District Court of Florida.
The only permissible "cure" of plaintiff s Lease defaults is for plaintiff (or EZ-47) to operate a Burger King in the premises, and the sublease to EZ-47 is not, and cannot be, a cure. The matter before the Court is a legal question of lease interpretation: whether or not the Lease permits the premises to be used as other than a Burger King.
Paragraph 2 of the Lease as modified by paragraph 41 of the Rider provides that plaintiff shall operate its business "as a restaurant with table-seating operated under the name and style of "Burger King" for on and off site consumption of food and for no other purpose. The Lease also provides that plaintiff shall not operate the premises in any manner that might "detract from the character, appearance or dignity of the Building," a concern which, as established in the affidavit of Steve Sokol, Vice President of HE and HTS, is of paramount importance to defendants.
Moreover, paragraph 11 of the Lease as modified by paragraph 53 of the Rider provides that any sublease or assignment of the Lease for which the landlord's prior consent is required must conform to the limitations of paragraph 53 of the Rider. Specifically, paragraph 53 of the Rider provides that Tenant shall not assign the Lease or sublease the demised premises without the prior consent of Landlord, and that the Landlord shall not unreasonably withhold its consent, provided that: the proposed use of the premises shall be as a restaurant with table-seating for on and off site consumption and for no other purpose, and shall not violate the terms of this Lease or of any applicable law.
As an exception to paragraph 53 of the Rider, paragraph 53 of the Supplemental Rider provides the one instance where plaintiff need not obtain the landlord's prior consent or authorization to sublease the Premises: when assigning or subletting to an "affiliate" of plaintiff.Thus, paragraph 53 of the Supplemental Rider governs the terms and conditions of subleasing only to an "affiliate" of plaintiff, such as EZ-47, where Landlord's consent is not required.
Conversely, paragraph 53 of the Rider governs subleasing to non-affiliates of plaintiff, with the attendant enumerated terms and conditions discussed above, where Landlord's consent is required.
Accordingly, paragraph 53 of the Rider cannot be read together with paragraph 53 of the Supplemental Rider because they govern two separate and distinct instances of a sublet or assignment.
Although Burger King is a fast food restaurant, the Court may take judicial notice that Burger King is also an international Fortune 500 company with a worldwide reputation. As explained in the affidavit by Steve Sokol, Burger King has uniform standards of quality, cleanliness, appearance and design, as well as strict financial requirements for franchisees. Furthermore, HE and HTS believe that the quality and assurances that come with a Burger King restaurant as a tenant are superior to the quality and assurances that may be associated with another restaurant that is similar to Burger King, but which lacks the standards and corporate backing of BKC.
Upon information and belief, prior to January 25, 2008, plaintiff and EZ-47 were engaged in a dispute with BKC over, among other things, plaintiff's and EZ-47's refusal, in violation of their Franchise Agreements with BKC, to offer a "Value Menu" to customers. The resulting litigation proved to be disastrous for plaintiff and EZ-47. After the July 25, 2008 District Court Order finding, that BKC properly terminated its Franchise Agreement with Plaintiff was issued, on or about August 5, 2008, the District Court entered a Final Judgment for Damages and Permanent Injunction (the "permanent injunction") which, among other things, permanently enjoins plaintiff, its principals, and EZ-47, from operating a Burger King restaurant.
By letter, dated October 22, 2008 (the "Transfer Letter"), counsel for Plaintiff wrote to Administrative Judge Jacqueline Silberman (without copying Justice Edmead), requesting that the instant action be "transferred" to the Commercial Division, and away from your Honor. In the Transfer Letter, plaintiff's counsel concedes that the very narrow issue before the Court is "whether tenant can use the remaining nine years of a 20-year commercial lease in New York County for restaurant purposes without it being used as a Burger King restaurant" with no mention made of any alleged construction disputes.
On or about October 27, 2008, without the landlord's knowledge and in violation of the terms of the Lease, plaintiff purported to sublease the premises (the "sublease") to EZ-47. The Court should note that the purported sublease between plaintiff and EZ-47 was executed on October 27, notwithstanding the sublease's "effective date" of October 1, 2008, and that EZ-47 was barred from doing so along with plaintiff pursuant to the permanent injunction.
Although pursuant to paragraph 53 of the Supplemental Rider, plaintiff is permitted to sublease the premises to an "affiliate," plaintiff failed to abide by the Lease's numerous requirements for such a sublease, and as established below, thereby committed numerous additional defaults under the Lease.
At oral argument on EZ-47's Order to Show Cause, plaintiff claimed that the sublease, dated October 27, 2008, was retroactively effective as of October 1, 2008 and that it therefore "related back" prior to service of the Notice to Cure, and constituted a complete cure of all Lease defaults, which cure moots the Notice to Cure.
Neither plaintiff nor EZ-47 is able to cure because they are prohibited, by the permanent injunction, from operating the premises "under the name and style of Burger King . . . and for no other purpose." Moreover, plaintiff has overwhelmingly failed to demonstrate willingness to cure, making only improper, vague and conclusory allegations of future intentions by way of attorney affirmation.
Where a commercial lease has an express use clause limiting and restricting the use of the rented premises to a specific purpose, such provisions will be enforced. Notwithstanding plaintiff's and EZ-47's improper submission of pages of conclusory and self-serving allegations of the parties'"intent" in executing the Lease, such parol evidence cannot be considered when the lease's meaning is clear, as it is here.
Plaintiff's argument that it is entitled to sublease rights greater than it enjoys pursuant to the Lease is untenable. Under plaintiff's line of reasoning, plaintiff could sublease the premises to a bar so long as the subtenant was an "affiliate" of plaintiff. Notwithstanding that paragraph 72 of the Rider bars use of the premises for residential purposes, plaintiff could sublease the restaurant premises to an affiliate for use as a personal apartment. Indeed, notwithstanding that paragraph 41(d) of the Rider prohibits "obscene, nude or semi-nude live performances," "sex clubs" or a "massage parlor" in the premises, because such restrictions are not regurgitated verbatim in paragraph 53 of the Supplemental Rider, plaintiff could sublease the premises for such improper purposes. To take plaintiff's argument to its logical conclusion, plaintiff must claim that the very day in 1997 that the Lease was executed, plaintiff was immediately authorized to sublet the premises to an "affiliated" entity for any purpose, thereby nullifying the clear terms of the bargained-for terms, frustrating the intention of the parties, and rendering the Lease virtually meaningless.
If plaintiff truly sought to have unfettered rights to operate the business of its choice under the Lease, it would not have agreed to a clause that permitted just a single use for the premises as a Burger King. A restriction that limits a tenant's scope of operations and thereby limits potential profits cannot possibly be for the tenant's "benefit," as plaintiff's and EZ-47's principals insist. If plaintiff wanted the right to operate as other than a Burger King, it should have bargained for such right and included it in the Lease.
Plaintiff's argument, that paragraph 53(a)(i) of the Rider does not limit the "use" of the premises to a "Burger King" restaurant is fatally flawed for two reasons. First, as set forth above, paragraph 53(a)(i) of the Rider enumerates conditions precedent to obtain landlord consent to a sublease to a non-affiliated subtenant. This provision cannot be read together with paragraph 53 of the Supplemental Rider, which governs subleasing only to an "affiliate"of plaintiff, such as EZ-47, and which does not require landlords' consent. Second, assuming that paragraph 53(a)(i) of the Rider were to be read with paragraph 53 of the Supplemental Rider, plaintiff and EZ-47 conveniently fail to recite the entire sentence contained in paragraph 53(a)(i), which provides that the proposed use of the premises "not violate the terms of this lease . . ." Accordingly, paragraph 53(a)(i) of the Rider expressly requires full compliance with all terms of the Lease, including paragraph 41 of the Rider, and plaintiff cannot cure its Lease default by a sublease unless such sublease results in the operation of a "Burger King" restaurant. No such sublease to an "affiliate" is possible because plaintiff, EZ-47 and the principals of both are all permanently enjoined from operating a Burger King.
The cases on which EZ-47 rely are also inapplicable.
Further, the argument that any ambiguity is to be interpreted in favor of plaintiff and EZ-47 lacks merit, since defendants were not the drafters of the Lease, as alleged. Defendants are not even parties to the Lease. Moreover, there is no ambiguous Lease provision that might warrant the introduction of parol evidence
Because neither plaintiff nor EZ-47 can comply with the Lease and cure the defaults by operating as a Burger King, Yellowstone relief is unwarranted and should be denied. When, as here, "there is no issue for future determination," it is error for a court to issue a Yellowstone injunction.
And, a tenant that lacks the willingness and ability to cure a lease default is not entitled to a Yellowstone injunction. Here, Luan openly states that plaintiff's defaults "cannot be cured" until the remaining Florida litigations are "decided or [certain] construction is substantially completed." Luan also states that "we do not believe Plaintiff is in default, but if the Court determines there is a default, that default can be cured, but not in the period demanded by Defendants." These rather contradictory, vague and conclusory allegations are insufficient, and unsubstantiated statements by plaintiff's counsel that the premises may be operated as a Wendy's or Arby's, even assuming such a use could constitute a cure (which it could not), is also insufficient; plaintiff has evidently forgotten that it negotiated the Lease to include a prohibition on the landlord renting commercial space in the Building to Wendy's or any other fast food restaurant (see paragraph 11 of the Supplemental Rider). In light of this provision, it is the height of absurdity for plaintiff to allege that operating a Wendy's pursuant to a sublease constitutes a cure. Further, Wendy's or Arby's will not enter into a franchise agreement without, at least, a 20-year term on the lease, and here plaintiff merely has 9 years remaining on the Lease term. In any event, such operations could not possibly cure the failure and inability to operate "under the name and style of 'Burger King' . . . and for no other purpose."
Even in the event that the Court interprets the Lease such that paragraph 53 of the Rider, rather than paragraph 53 of the Supplemental Rider, governs the Sublease, the purported Sublease is defective, and violates numerous provisions of the Lease regulating subleases. Paragraph 53(a) of the Rider provides that, when subleasing to a non-affiliated entity, the landlord must not unreasonably withhold or delay its consent provided that the proposed use does not violate the terms of this lease. This provision concerns conditions precedent to obtaining landlord's approval of a "proposed" subtenant and its "proposed" use of the premises. Other deficiencies in the Sublease include: a) in violation of paragraph 53(a)(iv) of the Rider, plaintiff failed to furnish the landlord with required information concerning the subtenant and the character and nature of the business it proposes to operate, the subtenant's financial statements, and a copy of the purported sublease agreement; and b) in violation of paragraph 53(a)(x) of the Rider, plaintiff failed to make the Sublease expressly subject to all of the "covenants, agreements, terms, provisions and conditions" of the Lease. Specifically, with respect to EZ-47, paragraph 11 of the Sublease purports to nullify and exclude the requirement that the premises be operated solely as a Burger King, Rider paragraph 65, providing the tenant's obligations with respect to obtaining and maintaining liability insurance; Supplemental Rider paragraph 9, permitting the tenant to install a neon Burger King sign in the Premises; and Supplemental Rider paragraph 12, governing the parties' relationship with BKC.
Plaintiff's final violation of the Lease consists of its failure to abide by the terms of paragraph 53(b) of the Rider, which requires payment of landlord's sublease "processing fee" of up to $1,000.00 as well as landlord's reasonable attorneys' fees incurred in connection with any sublease. Plaintiff has failed to make payment of the processing fee, nor has it paid landlord's attorneys' fees.
Finally, plaintiff's disingenuous motion papers, coupled with the outrageous Transfer Letter, compounded by plaintiff's improper sublease all establish that plaintiff has unclean hands and should be denied any equitable relief, including a Yellowstone injunction.
Specifically, plaintiff and EZ-47's argument that paragraph 53 of the Supplemental Rider permits plaintiff to sublease to an affiliate without limitation is frivolous. Plaintiff's attempt to engage in impermissible "judge shopping" by its submission of the Transfer Letter to Judge Silberman is also frivolous. EZ-47's false claim that defendants wrote the Lease is also inconsequential. Moreover, EZ-47's attempts to confuse the Court by pretending that this action centers upon certain construction disputes with the prior landlord and with Defendants is also demonstration of unclean hands, as all such issues were previously resolved in a global settlement, and none of these issues was even mentioned in the Notice to Cure.
In the event the Court grants plaintiff and/or EZ-47 relief, such relief should be conditioned upon plaintiff and EZ-47 posting an undertaking and paying use and occupancy for the premises, pendente lite, pursuant to CPLR § 6312(b). Granting such relief to plaintiff and/or EZ-47 will cause damage to the defendants, and violations and fines may issue as a result of plaintiff's and EZ-47's use and occupancy of the premises, in addition to its possible alterations of the premises. The posting of an undertaking will assure defendants that they will be able to recover for (i) any damages they may prove as a result of plaintiff's and EZ-47's breaches of the Lease, (ii) any potential liability resulting from plaintiff's and EZ-47's impermissible and/or illegal use and occupancy of the premises; and (iii) damages from the delay of an adjudication on the merits of the Notice to Cure served on plaintiff.
Analysis Yellowstone Injunction
The purpose of the Yellowstone injunction is to maintain the status quo so that a commercial tenant may protect its valuable property interest in its lease while challenging the landlord's assessment of its rights ( see Lexington Ave. 42nd Street Corp. v 380 Lexchamp Operating, Inc., 205 AD2d 421 [1st Dept 1994], citing Post v 120 E. End Ave. Corp., 62 NY2d 19, 26). A Yellowstone injunction forestalls the cancellation of a lease to afford the tenant an opportunity to obtain a judicial determination of its breach, the measures necessary to cure it, and those required to bring the tenant in future compliance with the terms of the lease ( see Waldbaum, Inc. v Fifth Ave. of Long Is. Realty Assocs., 85 NY2d 600, 606).
In order to obtain a Yellowstone injunction, the tenant must demonstrate (1) the existence of a commercial lease; (2) receipt from the landlord of a notice of default thereunder, a notice to cure such default, or a threat of termination of the lease; (3) application for the issuance of an injunction, made prior to the lease's termination; and (4) the tenant's ability and desire to cure the alleged default, by any means short of vacating the premises ( New Eagle Inc. v H.R. Neumann Assoc., Inc. 2004 NY Slip Op. 50724(U); Empire State Bldg. Assoc. v Trump Empire State Partners, 245 AD2d 225 [1st Dept 1997]; Marathon Outdoor, LLC. v Patent Const. Sys. Div. of Harsco Corp., 306 AD2d 254 [2d Dept 2003]; WPA/Partners LLC. v Port Imperial Ferry Corp., 307 AD2d 234 [1st Dept 2003], citing Herzfeld Stern, supra]). A tenant seeking a Yellowstone injunction must convince the court "of his desire and ability to cure the defects by any means short of vacating the premises" ( Cemco Rest., Inc. v Ten Park Ave. Tenants Corp., 135 AD2d 461 [1st Dept 1987]; Jemaltown of 125th St., Inc. v Leon Betesh/Park Seen Realty Assoc., 115 AD2d 381, 382 [1st Dept 1985]).
Essentially, the Notice to Cure claims that plaintiff violated the Lease by failing to operate a Burger King restaurant at the premises since January 2008, and because plaintiff's Burger King Franchise Agreement was terminated and plaintiff is permanently enjoined from operating a Burger King restaurant. Whether plaintiff violated the Lease turns on an interpretation of the provisions governing the use of the premises as defined by express terms of the Lease.
Contracts: Clear and Unambiguous
Courts must construe a contract in a manner that avoids inconsistencies and reasonably harmonizes its terms ( James v Jamie Towers Housing Co., Inc., 294 AD2d 268, 743 NYS2d 85 [1st Dept. 2002]; Barrow v Lawrence United Corp., 146 AD2d 15, 18, 538 NYS2d 363 [3rd Dept. 1989]), remaining "consistent[] with the over-all manifest purpose of the . . . agreement." The fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent ( see Slatt v Slatt, 64 NY2d 966, 967, 488 NYS2d 645, rearg denied 65 NY2d 785, 492 NYS2d 1026). "The best evidence of what parties to a written agreement intend is what they say in their writing" ( Slamow v Del Col, 79 NY2d 1016, 1018, 584 NYS2d 424). Thus, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms ( see e.g. R/S Assoc. v New York Job Dev Auth., 98 NY2d 29, 32, 744 NYS2d 358, rearg denied 98 NY2d 693, 747 NYS2d 411; W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162, 565 NYS2d 440). A contract is unambiguous if the language it uses has "a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion" ( Breed v Insurance Co. of N. Am., 46 NY2d 351, 355, 413 NYS2d 352, rearg denied 46 NY2d 940, 415 NYS2d 1027). Thus, if the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity ( see e.g. Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 520, 640 NYS2d 472; First Natl. Stores v Yellowstone Shopping Ctr., 21 NY2d 630, 638, 290 NYS2d 721, rearg denied 22 NY2d 827, 292 NYS2d 1031). "It is a court's task to enforce a clear and complete written agreement according to the plain meaning of its terms, without looking to extrinsic evidence to create ambiguities not present on the face of the document" ( 150 Broadway NY Assoc., L.P. v Bodner ,14 AD3d 1, 6).
"A contract is ambiguous if the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings'" ( Feldman v National Westminster Bank, 303 AD2d 271, lv denied 100 NY2d 505). However, mere assertion by a party that contract language means something other than what is clear when read in conjunction with the whole contract is not enough to create an ambiguity sufficient to raise a triable issue of fact ( Ruttenberg v Davidge Data Sys. Corp., 215 AD2d 191, 193).
Ultimately, the aim is a practical interpretation of the language employed so that there be a realization of the parties'"reasonable expectations" ( see Sutton v East River Sav. Bank, 55 NY2d 550, 555, 450 NYS2d 460).
A landlord has a legal right to control the uses to which his building may be put by appropriate lease provisions, which to be effective must be enforced ( Qwakazi, Ltd. v 107 West 86th Street Owners Corp., 123 AD2d 253, 506 NYS2d 162 [1st Dept 1986] citing Lyon v Bethlehem Eng. Corp., 253 NY 111, 113-114). Where such a lease has express provisions which limit and restrict the use of a building to a specific purpose, such provisions will be given effect ( Kem Cleaners Inc. v Shaker Pine Inc., 217 AD2d 787, 629 NYS2d 492 [3d Dept 1995] citing Qwakazi, supra; see Burber v Jilamb Prime Meat. Inc., 115 Misc 2d 976, 977, 455 NYS2d 44, 46 [Civ. Ct. NY Co. 1982][use clauses should be construed whenever possible to "carry out the intent of the parties," which should be "ascertained from an examination of the lease"]).
Paragraph 2 of the Lease initially governs the Occupancy of the demised premises as follows:
"Tenant shall use and occupy demised premises for restaurant purposes. See Article [Paragraph] 41."
Paragraph 41, which is found in the Rider to the Lease, provides that:
41. Use and Occupancy.
(a)Tenant shall operate its business in the Demised Premises during the Term and occupy the Demised Premises solely as a restaurant with table-seating operated under the name and style of "Burger King" for on and off site consumption of food and beverage and for no other purpose. The Tenant is prohibited from operating a bar within the Demised Premises. (Emphasis added).
Upon a plain reading of the above, the requirement that the premises be operated "in the name and style of 'Burger King' . . . and for no other purpose" is clear and unambiguous. Therefore contrary to plaintiff's initial contention, the Lease requires that the Tenant, i.e., the plaintiff herein, operate the premises solely as a Burger King restaurant.
It is uncontested that at the time the Notice to Cure was issued on October 6, 2008, plaintiff was not operating the premises as a Burger King restaurant. Further, plaintiff had been precluded from operating a Burger King restaurant due to the July 25, 2008 District Court Orders terminating the Franchise Agreement between plaintiff and BKC.
Plaintiff's ability to cure its default, however, turns on the interpretation of the clauses of the Rider and Supplemental Rider governing assignments and subleases. In this regard, the Rider and Supplemental Rider provides as follows:
[Rider] 53. Assignment or Subletting. (Supplementing the provisions of Paragraph 11 hereof.) (a) Tenant shall not assign this lease or sublease the Demised Premises without the prior written consent of Landlord. Landlord shall not unreasonably withhold or delay its consent to an assignment of this Lease or a subletting of the entire Demised Premises, provided that (i) the proposed use of the premises shall be as a restaurant with table-seating for on and off site consumption and for no other purpose and shall not violate the terms of this lease or of any applicable law; (ii) the proposed assignee or subtenant and its proposed use of the premises shall be in keeping with the character of the Building; (iii) Tenant is not in default in the performance of any of the terms and conditions of this lease; (iv) Tenant shall furnish Landlord with the name and business address of the proposed assignee or subtenant, a counterpart of the proposed assignment or subleasing agreement, and satisfactory information with respect to the nature and character of the business of the proposed assignee or subtenant, together with current financial information and references reasonably satisfactory to Landlord so that Landlord may determine that the proposed assignee or subtenant is financially responsible;. . . .
The terms of paragraph 11 are not at issue.
[Supplemental Rider] 3. Insert at the end of paragraph 53
Notwithstanding any provisions to the contrary contained in this Lease, this Lease may be assigned, or the Premises may be sublet in whole or in part, without the consent of Landlord, to any corporation or other entity into or with Tenant may be merged or consolidated or to any corporation or other entity which shall be an affiliate, subsidiary, parent or successor of Tenant, or of a corporation or other entity into or with which Tenant may be merged or consolidated.
"Affiliate" is then defined as "any corporation which, directly or indirectly, controls or is controlled by or is under common control by the principals of Tenant. For this purpose, "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities or by contract or otherwise." The parties do not dispute that EZ-47 is an affiliate of plaintiff.
Based on the plain reading of paragraph 53 from both the Rider and Supplemental Rider, it is clear that the plaintiff was not permitted to sublet the premises in any part, without the consent of the landlord, unless the premises were sublet to, for example, an affiliate of the plaintiff. Where consent of the landlord was required, the landlord agreed to not unreasonably withhold consent, provided that the premises would be used as "a restaurant with table-seating for on and off site consumption" and "no other purpose," meaning that the premises would be used solely as a such a restaurant and that such proposed use would not violate "the terms of this lease." The terms of the Lease include, inter alia, paragraph 41, which limited the use of the premises to a restaurant "named and styled" Burger King. Thus, to the extent the landlord's consent to a sublease was required, the proposed use by the subtenant was limited to operation of a Burger King restaurant.
Furthermore, contrary to plaintiff's contention, even under circumstances where consent of the landlord was not required, i.e., where the premises were sublet to an affiliate of the plaintiff, the proposed use of the premises remains governed by paragraph 41 of the Lease. Whereas paragraph 53 of the Supplemental Rider obviated the need for the landlord's consent to a sublease where the sublease is made to plaintiff's affiliate, such Supplemental Rider cannot be read so as to obviate the use and occupancy restrictions of the Lease. It strains credulity that the parties agreed that paragraph 53 would permit use of the premises by plaintiff's affiliate, without regard to any of the provisions of the Lease governing the use of the premises. To hold otherwise requires a reading that would permit plaintiff's affiliate to unfettered and unconditional use of the premises, without restriction, a reading wholly unsupported by the Lease when read as a whole. Otherwise, plaintiff's affiliate would be permitted to operate the premises as, for example, a bar or massage parlor, which uses are expressly prohibited by the Lease ( see also, Rodkine Serv. Sta. v Gribin, 109 AD2d 873, 486 NYS2d 786 [2d Dept 1985] [restricting premises "to be used and occupied only for a gasoline station" barred the sale and rental of video tapes]; Dennis Jimmy's Food Corp. v Milton Co., 99 AD2d 477, 470 NYS2d 412 [2d Dept 1984][clause permitting only the sale of delicatessen items and groceries barred tenant from operating as a video arcade]). This is not an instance where the restrictive use clause leaves any room for interpretation ( see Kem Cleaners Inc. v Shaker Pine Inc., 217 AD2d 787, 629 NYS2d 492 [3d Dept 1995] [clause providing that tenant "shall use and occupy the Premises for no purpose other than a dry cleaning establishment or other retail use reasonably acceptable to" defendant contemplates a different retail use, including a video sales and rental]), or is confusing or ambiguous by its terms ( cf. Smokes N Sweets Inc. v West Lake Assocs., 227 AD2d 757, 642 NYS2d 358 [3d Dept 1996] [use clause's enumeration of the specific items plaintiff was permitted to sell, followed by the term "etc." and then the language "and for no other purpose", created an ambiguity]).
Therefore, reading the Lease provisions together as a whole and discerning the party's intent from the four corners of the Lease itself, the Court finds that, as a matter of law, that the Lease, precludes the use of the premises by either Tenant or its subtenant, for any purpose, other than "as a restaurant with table-seating operated under the name and style of "Burger King" for on and off site consumption of food and beverage."This interpretation is consistent with caselaw holding that a landlord can withhold consent where the subtenant is unsuitable for the particular building ( see Astoria Bedding, Mr. Sleeper Bedding Ctr. v Northside Partnership 239 AD2d 775, 657 NYS2d 796 [3d Dept 1997] [where a landlord affirmatively promises not to unreasonably withhold its consent, its refusal can only be based upon a consideration of objective factors, such as the financial responsibility of the subtenant, the subtenant's suitability for the particular building, the legality of the proposed use and the nature of the occupancy, i.e., office, factory, retail]).
Here, the record indicates that in addition to plaintiff, intervenor EZ-47 is also precluded from operating a Burger King restaurant. Therefore, while it is clear that there is a commercial lease, and a notice of default and notice to cure such default, and that this Yellowstone application was made prior to the Lease's termination, plaintiff (and the intervenor/subtenant EZ-47) failed to establish an ability to cure the alleged default. Therefore, the order to show cause for, inter alia, Yellowstone relief is denied.
Conclusion
Based on the foregoing, it is hereby
ORDERED that the order to show cause by plaintiff to stay and toll the 15-Day Notice To Cure, to enjoin defendants H.E. Newport, L.L.C., HTS-NY LLC and Hyatt Hotels Corp. from seeking to recover possession of the said premises, and for an award of attorney's fees, costs and disbursements, is denied; and it is further
ORDERED and that the plaintiff's complaint seeking (A) a declaration that (1) defendants' requirement that plaintiff obtain their prior consent to plaintiff's continued use of the premises for restaurant purposes violates the terms and provisions of the Lease, (2) defendants may not interfere with plaintiff's use of the Leasehold for preparation and sale of food and beverages for on and off-site consumption in the same style and manner as when plaintiffs operated the restaurant as a Burger King franchisee, (2) plaintiff is permitted to continue to use the demised premises for restaurant purposes and that its use of such premises as a fast food burger restaurant is consistent with and allowed by the terms and provisions of the Lease, (4) the rights and obligations of the parties will not be altered by plaintiff's continued use of the premises for fast food and beverage sales for on and off site consumption, (5) plaintiff is entitled to legal fees and its costs in this action; and (B) consequential relief that defendants be enjoined from requiring plaintiff to seek defendant's consent to its continued use of the premises for restaurant purposes with table seating for on and off site consumption of food and beverages, is dismissed, in its entirety; and it is further
ORDERED that the complaint filed by the intervenors, EZ-Eating 47 Corp. in this action, demanding judgment that (1) the Lease dated July 3, 1997, for the term July 15, 1997, terminating July 31, 2017, is in force and effect; (2) there is no default under the Lease dated July 3, 1997, for the term July 15, 1997, terminating July 31, 2017; (3) any purported default under the Lease dated July 3, 1997, for the term July 15, 1997 terminating July 31, 2017, has been cured; (4) the sublease to E-Z 47 is effective and binding on the defendants; (5) E-Z 47 may operate a restaurant with tableseating for on and off site consumption of food and beverage; (6) E-Z 47 is not required to operate a Burger King franchise, is also hereby dismissed, in its entirety; and it is further
ORDERED that the defendants serve a copy of this order with notice of entry upon all parties within 20 days of entry; and it is further
ORDERED that the Clerk may enter judgment dismissing the Complaint accordingly.
This constitutes the decision and order of the Court.
In accordance with the accompanying Memorandum Decision, it is hereby
ORDERED that the order to show cause by plaintiff to stay and toll the 15-Day Notice To Cure, to enjoin defendants H.E. Newport, L.L.C., HTS-NY LLC and Hyatt Hotels Corp. from seeking to recover possession of the said premises, and for an award of attorney's fees, costs and disbursements, is denied; and it is further
ORDERED and that the plaintiff's complaint seeking (A) a declaration that (1) defendants' requirement that plaintiff obtain their prior consent to plaintiff's continued use of the premises for restaurant purposes violates the terms and provisions of the Lease, (2) defendants may not interfere with plaintiff's use of the Leasehold for preparation and sale of food and beverages for on and off-site consumption in the same style and manner as when plaintiffs operated the restaurant as a Burger King franchisee, (2) plaintiff is permitted to continue to use the demised premises for restaurant purposes and that its use of such premises as a fast food burger restaurant is consistent with and allowed by the terms and provisions of the Lease, (4) the rights and obligations of the parties will not be altered by plaintiff's continued use of the premises for fast food and beverage sales for on and off site consumption, (5) plaintiff is entitled to legal fees and its costs in this action; and (B) consequential relief that defendants be enjoined from requiring plaintiff to seek defendant's consent to its continued use of the premises for restaurant purposes with table seating for on and off site consumption of food and beverages, is dismissed, in its entirety; and it is further
ORDERED that the complaint filed by the intervenors, EZ-Eating 47 Corp. in this action, demanding judgment that (1) the Lease dated July 3, 1997, for the term July 15, 1997, terminating July 31, 2017, is in force and effect; (2) there is no default under the Lease dated July 3, 1997, for the term July 15, 1997, terminating July 31, 2017; (3) any purported default under the Lease dated July 3, 1997, for the term July 15, 1997 terminating July 31, 2017, has been cured; (4) the sublease to E-Z 47 is effective and binding on the defendants; (5) E-Z 47 may operate a restaurant with tableseating for on and off site consumption of food and beverage; (6) E-Z 47 is not required to operate a Burger King franchise, is also hereby dismissed, in its entirety; and it is further
ORDERED that the defendants serve a copy of this order with notice of entry upon all parties within 20 days of entry; and it is further
ORDERED that the Clerk may enter judgment dismissing the Complaint accordingly.
This constitutes the decision and order of the Court.