Opinion
05693-2009.
Decided August 5, 2010.
Attorney for Plaintiff, Brian T. Egan, Esq., Egan Golden, LLP, Patchogue, New York.
Attorney for Defendants, Maria Gasparis, Esq., Tsunis, Gasparis Lustig, LLP, Islandia, New York.
ORDERED , that the motion (motion sequence number 001) by plaintiff pursuant to CPLR § 3212 for summary judgment is granted; and it is further
ORDERED , that the cross-motion (motion sequence number 002) by defendants pursuant to CPLR § 3212 for summary judgment is denied; and it is further
ORDERED , that a hearing on counsel fees is scheduled for September 14, 2010 at 9:30 a.m. before the undersigned.
Plaintiff commenced this declaratory judgment action against defendants by the filing of a Summons and Verified Complaint on March 9, 2009 and issue was joined by defendants' filing of a Verified Answer with Counterclaims on or about May 1, 2009. Plaintiff served a Reply to the counterclaims on or about May 15, 2009. The action arises out of a February 8, 2006 Asset Purchase Agreement (the "Agreement") entered into between the parties wherein plaintiff purchased from the defendants all of the defendants' assets used in the operation of the Three Village Inn restaurant, hotel and catering facility located at 150 Main Street, Stony Brook, New York (collectively referred to as the "subject premises"). The purchase price for the subject premises was $1,300,000.00 payable as follows: a deposit of $130,000.00 upon the signing of the Agreement, $370,000.00 payable upon closing and the sum of $800,000.00 by delivery of a promissory note payable to the defendant, the Inn at Stony Brook. Plaintiff executed a separate Promissory Note pursuant to which plaintiff agreed to pay the $800,000.00 in sixty (60) consecutive equal monthly installments of $15,466.24 and provided for acceleration of the balance owed in the event of a default in payment. Section 8.1 of the Agreement provided that a condition precedent to plaintiff's obligation to close under the Agreement was defendants' receipt of an assignment and assumption of the lease for the subject premises in a form satisfactory to plaintiff, with the landlord's written consent. At the time of the execution of the Agreement, defendants were the tenants, pursuant to a written lease dated September 7, 1988 with The Stony Brook Community Fund ("landlord") for a fifteen year term. The face of the lease indicated the term was "15 years — April 1, 1989 through March 31, 2004". The gravamen of the dispute between the parties centers on Section 2.5(e) of the Agreement which states:
Post-Closing Credits to Seller. The Seller shall be entitled to an additional Purchase Price adjustment, after the Closing Date, in the event that the term of the Lease for the premises is extended beyond the current expiration date of March 31, 2014. Subsequent to the Closing, but no later than One Hundred and Eight (180) days thereafter, the Buyer will begin good-faith negotiations with the Landlord to secure an extension of the Lease. The Seller agrees to use its best efforts to assist the Buyer in procuring the Lease extension. If the Buyer is successful, regardless of the Seller's efforts, in securing an extension of the Lease at any date after the Closing Date, then the Buyer shall be obligated to pay the sum of One Hundred Thousand (100,00.00) Dollars to the Seller. The Buyer's indebtedness will be evidenced by a $100,000 promissory note in favor of the Seller, or a party designated by the Seller, at six (6%) percent interest per-annum, payable in twelve (12) equal monthly installments of $8,606.64. The promissory note shall be secured by the collateral described in Section 2.4 of this Agreement. If the Buyer chooses not to pursue or accept reasonable terms and conditions for such extension (reasonable lease terms being defined herein as an extension of the Lease for a term of three (3) years, under similar terms and conditions as the original Lease with customary increases in rent and additional rent, as well as required capital improvements not exceeding $150,000, will not render the Lease terms unreasonable) then the Buyer shall pay the Seller the sum of $50,000, in cash to the Seller. Buyer shall update the Seller on all lease extension negotiations with the Landlord and shall provide the Seller with copies of all correspondence exchanged between the Buyer and the Landlord regarding the Lease extension negotiations.
(Emphasis added).
The submissions reflect that on or about December 19, 2008, plaintiff and the-then landlord, Eagle Realty Holdings, Inc. ("landlord") entered into a document titled "LEASE AGREEMENT" (hereinafter the "2008 lease") which provided for a lease term of twenty (20) years commencing February 1, 2009 and terminating January 31, 2009. This 2008 lease provided in relevant part as follows:
3.03 PRIOR LEASE. On the date hereof, Tenant occupies certain space more particularly described in a certain lease, dated September 7, 1988, as amended from time to time (the "Prior Lease"), between Landlord's predecessor in interest and Tenant's predecessor in interest. In consideration of Tenant entering into this Lease, Landlord agrees to cancel the Prior Lease on the Commencement Date of this Lease. Tenant will pay rent and comply with all other obligations under the Prior Lease until the expiration of the Prior Lease as contemplated herein, and Tenant shall then commence rent payments pursuant to this Lease. Tenant will relinquish all rights under the Prior Lease upon the Commencement Date of this Lease and shall execute any and all document required by Landlord to memorialize same.
(Emphasis added). Plaintiff seeks a declaratory judgment that defendants are not entitled to the $100,000.00 post-closing credit because the prior lease was not extended, but rather, the 2008 lease represented a "new lease" between the parties. Pursuant to section 14.6 of the Agreement, plaintiff also seeks counsel fees in this action.
Plaintiff moves for summary judgment and argues that pursuant to the plain and unambiguous language of the Agreement and the 2008 lease, defendants are not entitled to the post-closing credit. First, the 2008 lease specifically sets forth that the prior lease was cancelled. Plaintiff argues that the 2008 lease is not an extension of the prior lease, but rather a "new" lease, which does not entitle defendants to the $100,000.00 credit. Plaintiff notes what it deems the significant differences between the prior lease and the 2008 lease, including rent escalations and capital improvement requirements and further that defendants were specifically released as guarantors under the 2008 lease. Plaintiff also annexes a January 7, 2009 correspondence from defendants' principal, Louis Miaritis ("Miaritis") wherein he congratulated plaintiff on the negotiation of a "new lease". Similar correspondence from Miaritis to the landlord, also dated January 7, 2009, also referred to a "new long-term lease" with plaintiff. Plaintiff argues that there is no question of fact that the 2008 lease was a "new lease" and not an extension of the prior lease, and the motion for summary judgment must be granted and the matter set down for a hearing on counsel fees.
Defendants oppose the motion and cross-move for summary judgment dismissing the Complaint and granting summary judgment in their favor on their counterclaims for (1) a judgment in the amount of $321,451.32, the balance due on the promissory note; (2) a judgment in the amount of $100,000.00 representing the post-closing credit; (3) a judgment in the amount of $50,000.00 based upon plaintiff's alleged failure to accept reasonable terms to extend the prior lease; and (4) a judgment for counsel fees, costs and disbursements in this action.
Defendants submit an affidavit by Miaritis who explains that he negotiated on behalf of defendants for the sale of the Three Village Inn business to plaintiff and that he obtained an assignment of defendants' lease (the former lease) with the landlord. After the closing with plaintiff, Miriatis was hired by plaintiff as Executive Vice President, and in such capacity, negotiated with the landlord to extend the term of the former lease. Subsequently, on December 31, 2007, Miriatis ended his employment with plaintiff and was no longer involved in the lease negotiations with the landlord. Miriatis states that he believed the negotiations for an "extension" of the former lease were ongoing, based upon representations by the landlord, until he learned that a "new lease" was executed on December 19, 2009 to commence on February 1, 2009 with a twenty (20) year term. In sum, defendants argue that the former lease term was extended beyond March 31, 2014 and therefore they are entitled to the $100,000.00 post closing payment. Defendants urge the Court to disregard the use of the words "new lease" in the January 7, 2009 letter by Miaritis in light of the fact that he also referred to the "extension of the existing lease" in such correspondence. Defendants believe that plaintiff and the landlord were negotiating an extension of the lease term which was based upon rent escalations and capital improvements. Since the new lease was an enlargement and extension of the prior lease which was assigned to plaintiff, defendants urge the Court to deny plaintiff's motion for summary judgment and grant their cross motion for summary judgment.
In reply, plaintiff reiterates that the former lease was not extended, but rather, a new lease was entered into between plaintiff and the landlord. The new lease explicitly terminated the prior lease and plaintiff relinquished all rights thereunder and defendants recognized that the lease was terminated. Moreover, the substantial differences between the terms of the two leases further establishes that the former lease was not extended. Plaintiff argues that defendants have failed to raise a triable issue of fact and its motion for summary judgment must be granted and defendants' cross motion denied.
It is well settled that to obtain summary judgment, the moving party must make a prima facie showing of entitlement to judgment as a matter of law, offering sufficient evidence to demonstrate the absence of any material issues of fact. Goldberger v. Brick Ballerstein, Inc. , 217 AD2d 682, 629 NYS2d 813 (2d Dept. 1995) (internal citations omitted). The burden then shifts to the party opposing the motion to come forward with proof in admissible form demonstrating there are genuine issues of material fact which preclude the granting of summary judgment. Zayas v. Half Hollow Hills Cent. School Dist. , 226 AD2d 713, 641 NYS2d 701 (2d Dept. 1996). However, if the movant fails to meet its prima facie burden, the Court need not consider the sufficiency of the opposition papers. McMahan v. McMahan , 66 AD3d 970 , 886 NYS2d 825 (2d Dept. 2009). "It is not up to the court to determine issues of credibility or the probability of success on the merits, but rather to determine whether there exists a genuine issue of fact." Triangle Fire Protection Corp. v. Manufacturer's Hanover Trust Co. , 172 AD2d 658, 570 NYS2d 960 (2d Dept. 1991). A motion for summary judgment "should not be granted where the facts are in dispute, where conflicting inferences may be drawn from the evidence, or where there are issues of credibility." Scott v. Long Island Power Auth. , 294 AD2d 348, 741 NYS2d 708 (2d Dept. 2002).
The Court of Appeals has recognized that:
In cases of contract interpretation, it is well settled that when parties set down their agreement in a clear, complete document, their writing should be enforced according to its terms. This principle is particularly important in the context of real property transactions, where commercial certainty is a paramount concern, and where . . . the instrument was negotiated between sophisticated, counseled business people negotiating at arm's length. It is also important to read the document as a whole to ensure that excessive emphasis is not placed upon particular words or phrases.
South Road Assoc., LLC., v. International Business Machines Corp. , 4 NY3d 272, 793 NYS2d 835, 826 NE2d 806 (2005) (internal quotations omitted). These principles have been oft repeated by the Second Department where it has held that a written agreement that is "complete, clear, and unambiguous" on its face must be enforced according to the plain meaning of the terms contained therein. Johnston v. MGM Emerald Enterprises, Inc. , 69 AD3d 674 , 893 NYS2d 176 (2d Dept. 2010). See also, Lobacz v. Lobacz , 72 AD3d 653 , 897 NYS2d 516 (2d Dept. 2010); M R Rockaway, LLC v. SK Rockaway Real Estate Co. , 74 AD3d 759 , 902 NYS2d 621 (2d Dept. 2010).
In this case, plaintiff has met its prima facie burden of demonstrating entitlement to summary judgment. The plain language of the former lease provided that if the term of the lease was "extended" beyond March 31, 2014, defendants were entitled to the post-closing credit. Importantly, the new lease explicitly stated that the former lease was terminated and thus, the term of the former lease was not extended. Moreover, defendants negotiated with the landlord and entered into a new lease containing several different provisions than the former lease. In consideration of the lengthy term of the new lease, plaintiff agreed to substantial capital contributions and rent escalations not contained in the prior lease. Additionally, defendants were released as guarantors. The relationship between plaintiff and the landlord and the rights of each are now governed by the new lease and not the terms of the former lease and thus, defendants' claims that the former lease was "extended" is without merit. See, Dime Savings Bank v. Montague Street Realty Assoc. , 90 NY2d 539, 664 NYS2d 246, 686 NE2d 1340 (1997). See also, Lo-Ho LLC v. Batista , 62 AD3d 558 , 881 NYS2d 33 (2d Dept. 2009).
In opposition defendants have failed to raise a triable issue of fact.
Based on the foregoing, plaintiff's motion for summary judgment is granted on the first cause of action for a declaratory judgment that defendants are not entitled to the $100,000.00 post-closing credit and the second cause of action for attorneys' fees and costs under the Agreement. A hearing on the amount of attorneys' fees and costs is scheduled for September 14, 2010 at 9:30 a.m. before the undersigned.
Defendants' cross-motion for summary judgment is denied in its entirety.
This constitutes the DECISION and ORDER of the Court.