Opinion
Index 157715/2019
04-19-2022
49 GROVE REALTY LLC, Plaintiff, v. GREENWICH HERITAGE GROUP INC., MANOUCHER HEDVAT Defendant. Motion Seq. No. 001
Frank Nervo, Judge
Unpublished Opinion
MOTION DATE 12/09/2020.
PRESENT: HON. FRANK NERVO, Justice.
DECISION + ORDER ON MOTION
Frank Nervo, Judge
The following e-filed documents, listed by NYSCEF document number (Motion 001) 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46 were read on this motion to/for SUMMARY JUDGMENT (AFTER JOINDER .
This matter was transferred to Part IV and the Court held argument on this motion on April 13, 2022. Following consideration of the parties' submissions and arguments proffered on the record, the Court issues the instant decision and order.
Background
In this commercial landlord/tenant action, plaintiff 49 Grove Realty LLC (49 Grove) moves for summary judgment to dismiss the affirmative defenses of co-defendants Greenwich Heritage Group Inc. (Greenwich) and Manoucher Hedvat a/k/a Monoucher Hedvat (Hedvat; together, defendants), as well as for summary judgment on the complaint (motion sequence numbers 001). Plaintiff has brought four related actions against Hedvat and his businesses, which leased space in the subject building (NY Index Nos. 157712/2019; 157714/2019; 157716/2019).
49 Grove is the corporate owner of a commercial premises located at 49 Grove Street in the County, City and State of New York (the building). See verified complaint, ¶ 2. In 2012, 49 Grove and Greenwich executed a commercial lease for the building's "Store # 9" that ran from February 1, 2012 through August 3, 2023 (the lease). Id., ¶ 5; notice of motion, exhibit 2. As relevant to this action, the "acceleration clause" contained in subparagraph 40 (b), states as follows:
"Notwithstanding anything to the contrary . . ., in the event that the Tenant [i.e., Greenwich] intends to vacate and/or abandon the premises or does vacate and/or abandon the premises, whether said Tenant is then in default of any rental installment or in default of any other obligation of this Lease due and owing, the Landlord [i.e., 49 Grove] has the right to declare without notice the total rent reserved for the full term of this Lease to be then due and owing and may bring any legal action to collect such amount. This right is in addition to any other right and remedy which the Landlord may have in law or in equity, and an election of one remedy shall not constitute a bar to the pursuit of other remedies."Id., notice of motion, exhibit 2.
On February 27, 2012, Hedvat, as principal of Greenwich, executed a guaranty with 49 Grove on behalf of Greenwich (the guaranty), the relevant provisions of which state as follows:
A. The Undersigned [i.e. Hedvat] guarantees to Landlord [i.e., 49 Grove], its successors and assigns, that he/she shall pay to Landlord all base rent, Additional Rent and all other charges including but not limited to use and occupancy that have accrued or may accrue under the terms of the Lease (hereinafter collectively referred to as ('Accrued Rent'), through and including the latest date that Tenant [i.e., Greenwich] and its assigns . . . if any, (hereinafter collectively referred to as 'Tenant') shall have completely vacated and surrendered possession of the premises ('Vacate Date') to the Landlord and have paid all rent and additional rent due through such Vacate Date. Upon the undersigned's full compliance with the payment requirements of this Guaranty, the liability of [Hedvat] hereunder shall cease and terminate.
B. The undersigned guarantees to Landlord, its successors and assigns that he/she will pay to Landlord any damages suffered or incurred by Landlord as a result of Tenant holding-over in the Demised Premises after the expiration or sooner termination of this Lease.
C. It is agreed that any security deposited under the Lease shall not be computed as a deduction from any amount owed and payable by Tenant or the Guarantor under the terms of this Guaranty of Lease.
D. This Guaranty is absolute and unconditional and is a Guaranty of payment and not of collection. The undersigned hereby waives all notice of non-payment,
nonperformance, non-observance, or proof, notice, or demand, whereby to charge the undersigned therefore, all of which the undersigned waives and agrees that the validity of this Guaranty, and the obligation of the Guarantor hereto shall in no wise be terminated, affected or impaired by reason of the assertion by Landlord against Tenant of any of the rights or remedies reserved to Landlord pursuant to the performance of the within Lease. The undersigned further covenants and agrees that this Guaranty shall remain and continue in full force and effect, as to any renewal, modification or extension of the Lease and during any period when Tenant is occupying the premises as a 'statutory tenant' (including, but not limited to a month-to-month tenancy). As a further inducement to Landlord to make this Lease and in consideration thereof, Landlord and the undersigned covenants and agree that in any action or proceeding brought by either Landlord or the undersigned against the other on any matters whatsoever arising out of, under, or by virtue of the terms of this Lease or of this Guaranty that Landlord and the undersigned shall and do hereby waive trial by jury.
E. The Guarantor shall reimburse Landlord for any and all reasonable costs incurred in connection with the enforcement of this Guaranty including without limitation Landlord's reasonable attorney fees.See notice of motion, exhibit 5.
49 Grove and Greenwich subsequently executed two lease modifications, both of which Hedvat signed in his capacity as an officer of Greenwich (the first and second lease modification agreements). See verified complaint, ¶¶ 6-7; notice of motion, exhibits 3, 4. The relevant portion of the second lease modification agreement provided that:
7. The Lease as modified herein is in full force and effect as unmodified except as provided for herein and is hereby ratified and reaffirmed as is the guaranty of Monoucher Hedvat dated February 27, 2012 and that Tenant acknowledged the Premises in 'as is' condition.Id., exhibit 4.
On October 25, 2017, 49 Grove, Greenwich and Hedvat jointly executed a "conditional modification agreement," pursuant to which Greenwich's monthly rent would be reduced for the duration of its tenancy (the CMA). See verified complaint ¶¶ 10-11; notice of motion, exhibit 6. This reduction was conditioned on all of Hedvat's business enterprises renting space in the building remaining "in full compliance with each of their respective leases and with this Agreement subject to applicable notice and cure periods." Id., exhibit 6. Paragraph 6 of the CMA further provided that:
6. This conditional deferment and reduction and the release of Greenwich and Hedvat under the Greenwich Lease are specifically subject and conditioned upon and the obligations of the Landlord Parties under this Agreement shall continue only so long as all four (4) of the Tenant Parties under this Agreement are in full compliance with each of their respective leases and with this Agreement subject to applicable notice and cure periods.Id., exhibit 6.
Greenwich ceased paying rent sometime in 2018, and 49 Grove subsequently commenced a summary commercial nonpayment proceeding against it in the Civil Court of the City of New York (the Civil Court proceeding; L&T Index Number 081122/2018). See verified complaint, ¶¶ 12, 15; notice of motion, exhibit 8. The Civil Court proceeding was resolved by a stipulation between the parties, dated January 29, 2019, in which Greenwich agreed to the entry of a $65,804.10 money judgment for accrued rent and additional rent due through January 31, 2019, and a possessory judgment with the warrant of eviction issued forthwith and its execution also stayed through January 31, 2019 (the stipulation). Id., ¶¶ 16-17; notice of motion, exhibit 9. Thereafter, Greenwich vacated the building. Verified complaint, ¶ 17. The relevant portion of the stipulation provides as follows:
9. It is understood and agreed that this Stipulation, the terms contained therein and the money judgment granted to Petitioner as against Respondent as well as the issuance of the warrant of eviction as against Respondent is without prejudice to the claims of Petitioner as against Respondent with respect to the balance of the term of the Lease between Petitioner and Respondent and any and all defenses thereto.Id., exhibit 9.
After the Civil Court proceeding was resolved via Greenwich's eviction, 49 Grove commenced this action on August 19, 2019 by serving a summons and verified complaint that set forth causes of action against Greenwich and Hedvat for: 1) a money judgment against Hedvat for the amount specified in the stipulation (pursuant to the terms of the guaranty); 2) a money judgment against Greenwich for the rent due for the remainder of the lease term including the reduction permitted by the CMA (pursuant to the lease's acceleration clause and the acceleration notice); 3) a money judgment against Hedvat for the rent due for the remainder of Greenwich's lease term including the reduction permitted by the CMA (pursuant to the terms of the guaranty and the acceleration notice); 4) a money judgment against Greenwich for the amounts due for the remainder of its lease term without the reduction permitted by the CMA (pursuant to the lease and the acceleration notice); 5) a money judgment against Hedvat for the amounts due for the remainder of Greenwich's lease term without the reduction permitted by the CMA (pursuant to the guaranty and the acceleration notice; 6) an award of attorney's fees against Greenwich (pursuant to the terms of the lease); and 7) an award of attorney's fees against Hedvat (pursuant to the terms of the guaranty). See verified complaint.
On October 15, 2019, Greenwich and Hedvat served a verified answer that raised the affirmative defenses that: 1) the complaint fails to state causes of action; 2) Hedvat's obligations under the guaranty ended on April 17, 2019 when Greenwich was evicted; 3) 49 Grove's right to accelerate its demand for Greenwich's future rent is an unenforceable liquidated damages request; and 4) 49 Grove's demands for money judgments are subject to "set-off and reduction" in accordance with Greenwich's existing security deposit. See verified answer. On December 9, 2020, 49 Grove filed the instant motion for summary judgment to dismiss defendants' affirmative defenses as well as summary judgment on the complaint. See notice of motion.
Discussion On a motion for summary judgment, the burden rests with the moving party to make a prima facie showing they are entitled to judgment as a matter of law and demonstrate the absence of any material issues of fact. Friends of Thayer lake, LLC v. Brown, 27 N.Y.3d 1039 [2016]. Once met, the burden shifts to the opposing party to submit admissible evidence to create a question of fact requiring trial. Kershaw v. Hospital for Special Surgery, 114 A.D.3d 75 [1st Dept 2013]. "Where a defendant moves for summary judgment and establishes a prima facie entitlement to such relief as a matter of law, the burden shifts to the plaintiff to raise a triable issue of fact". Kesselman v. Lever House Rest., 29 A.D.3d 302 [1st Dept 2006].
However, a "feigned issue of fact" will not defeat summary judgment. Red Zone LLC v. Cadwalader, Wickersham & Taft LLP, 27 N.Y.3d 1048 [2016]. A failure to make a prima facie showing requires the Court to deny the motion, regardless of the sufficiency of opposing papers. Alverez v. Prospect Hosp., 68 N.Y.2d 320, 324 [1986]; see also JMD Holding Corp. v. Congress Financial Corp., 4 N.Y.3d 373 [2005].
First Cause of Action - Rent and Additional Rent 49 Grove's first cause of action seeks a money judgment against Hedvat for $65,804.10, the amount of the money judgment against Greenwich for rent and additional rent, as negotiated and agreed to in the January 29, 2019 Civil Court stipulation. See verified complaint, ¶¶ 19-23. 49 Grove bases this claim on the terms of the lease, the guaranty and the stipulation. See notice of motion, Pollock affirmation, ¶¶ 25-28; exhibits 2, 5, 9. Defendants concede that the guaranty "should be enforced to limit Hedvat's personal liability only to the periods when the Tenants actually occupied the respective premises," which was "January 31, 2019 with respect to Greenwich." See defendants' mem of law at 11-12. However, defendants contend that "Hedvat is [only] responsible for the fixed rents as of January 31, 2019 . . . less total security deposits," and that "[a]ll other rent was paid prior to surrender of the Leases." Id. 49 Grove replies that "the material facts are not in dispute and the matter can be submitted on the resulting issues of law." See plaintiff's reply mem at 6.
As was recently discussed by the Appellate Division, Second Department:
"A guaranty is a promise to fulfill the obligations of another party, and is subject to the ordinary principles of contract construction' (Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A., Rabobank Intl.,' N.Y. Branch v Navarro, 25 N.Y.3d 485 [2015] [internal quotation marks omitted]; see Encore Nursing Ctr. Partners Ltd. Partnership-85 v Schwartzberg, 172 A.D.3d 1166, 1167 [2d Dept 2019]). "A guaranty is to be interpreted in the strictest manner" (White Rose Food v Saleh, 99 N.Y.2d 589, 591 [2003]; see Wider Consol., Inc. v Tony Melillo, LLC, 107 A.D.3d 883, 884 [2d Dept 2013]; Arlona Ltd. Partnership v 8th of Jan. Corp., 50 A.D.3d 933, 933 [2d Dept 2008]). A guarantor should not be bound beyond the express terms of the written guaranty (see Solco Plumbing Supply, Inc. v Hart, 123 A.D.3d 798, 800 [2d Dept 2014]; Wider Consol., Inc. v Tony Melillo, LLC, 107 A.D.3d at 884; Walker v Roth, 90 A.D.2d 847, 847 [2d Dept 1982]). "On a motion for summary judgment to enforce a written guaranty, all that the creditor need prove is an absolute and unconditional guaranty, the underlying debt, and the guarantor's failure to perform under the guaranty"(H.L. Realty, LLC v Edwards, 131 A.D.3d 573, 574 [2d Dept 2015] [internal quotation marks omitted]; see Encore Nursing Ctr. Partners Ltd. Partnership-85 v Schwartzberg, 172 A.D.3d at 1168)2402 E 69th St., LLC v. Corbel Installations, Inc., 183 A.D.3d 859, 861 [2d Dept 2020].
Here, plaintiff has established that it is entitled to summary judgment pursuant to the principles discussed in 2402 E 69th St v. Corbel Installations, supra, in that Hedvat's guaranty was absolute and unconditional; Greenwich is liable for the rent and additional rent as modified by the Civil Court stipulation; and Greenwich has not yet satisfied that debt. Likewise, the Court finds that defendants have not raised any triable issue of fact related to this claim, nor does the Court find defendants' affirmative defense related to this claim, that plaintiff has failed to state a claim, meritorious. Consequently, plaintiff is entitled to judgment in the amount of $65,804.10 against Hedvat.
Defendants second and third affirmative defenses relate to claims of accelerated rent, not at issue in plaintiff's first cause of action. Likewise, to the extent that defendant contends in the fourth affirmative defense that a claim for unpaid rent must be offset by the security deposit, paragraph C of the guaranty agreement expressly provides "any security deposited under the Lease shall not be computed as a deduction from any amount owed and payable by Tenant or the Guarantor." See also notice of motion, exhibit 5.
Second, Third, Fourth and Fifth Causes of Action - Accelerated
Rent Plaintiff next seeks judgment for accelerated rent against defendants Greenwich and Hedvat for the remainder of the lease term, that is, the amount of rent Greenwich would have paid from the date it vacated the premises through the end of the lease term.
Greenwich vacated on January 31, 2019 and the lease term expired August 31, 2023.
The calculation of accelerated rent necessarily involves a determination of the proper monthly rent during the subject period. The court finds that due to Greenwich's default in making the required reduced monthly payments as required by the CMA, the reduced monthly rent authorized by the CMA, $8,000, is not controlling on calculations of rent owed during the accelerated period; instead, the monthly rent is governed by paragraph 40 of parties' lease agreement. Consequently, plaintiff's second and third causes of action, which seek recovery of accelerated rent based upon the reduced monthly rent in accordance with the parties' CMA are, therefore, inapplicable and hereby stricken, as paragraph 40 of the lease agreement establishes the monthly rent for this period.
Paragraph 6 of the CMA provides, in relevant part, that the reduced monthly rent "[is] specifically subject [to] and conditioned upon . . . all four (4) of the Tenant Parties under this Agreement [remaining] in full compliance with each of their respective leases and with this Agreement".
Turning to plaintiff's fourth and fifth causes of action for accelerated rent based upon the parties' lease and guaranty agreements, plaintiff is entitled to recover for same based upon the documentary evidence. See e.g. Hawthorne Gardens, LLC v. Salman Home, Inc., 94 A.D.3d 425 [1st Dept 2012]. However, the determination as to the amount of accelerated rent, as liquidated damages, requires a finding that same does not amount to an impermissible penalty. See e.g. Trustees of Columbia Univ. in the City of N.Y. v. D'Agostino Supermarkets, Inc., 36 N.Y.3d 69 [2020]; 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Assn. Inc., 24 N.Y.3d 528 [2014]. Here, on these papers, it is unknown whether the premises was re-let. As such, the determination as to whether the accelerated rent sought amounts to impermissible penalty, or double dipping, cannot be made at this time. Accordingly, the Court grants summary judgment on plaintiff's fourth and fifth causes of action as to liability only, subject to a determination of whether the accelerated rent amounts to an impermissible penalty if the premises has be re-let and the appropriate amount of damages for same; as such, the Court refers this issue to a referee, as below.
To the extent that defendants contend payments made during this period were not credited in plaintiff's claims, the calculation of damages necessary encompasses this argument.
Notably, to the extent the defendants contend they were to be afforded notice of plaintiff's intent to accelerate rent for the entire term of the lease, and that notice was not provided, such argument is entirely without merit. Paragraphs 17(2) and 40(b) of the parties' lease agreement does not provide for a notice and cure period and, instead, provides that upon default by the tenant plaintiff may seek recovery of the without further notice. Likewise, to the extent that defendants contend the stipulation effectuated in Civil Court prohibits or limits recovery for accelerated rent, this Court does not so find. See defendants' mem of law at 6-11. It is beyond cavil that as guarantor, Hedvat was not a party to the Civil Court stipulation and the stipulation did not alter Hedvat's obligations under the guaranty agreement. Guarantors are not proper parties to non-payment proceedings against the tenant whose rent they guaranty. See e.g. PB 2180 Pitkin Ave., LLC v. Tress, 65 Misc.3d 12 [App Term, 2d Dept 2019]; State Realty, LLC v. Ger, 55 Misc.3d 133(A) [App Term, 2d Dept 2017].
Sixth and Seventh Causes of Action - Attorney's Fees
Plaintiff seeks an award of attorney's fees against Greenwich, pursuant to paragraph 19 of the parties' lease which provides that plaintiff may seek reasonable attorney's fees when it prevails on an action related to the lease. Furthermore, paragraph 7 of the parties' Civil Court stipulation expressly reserves plaintiff's right to seek these costs and fees. Likewise, plaintiff seeks an award of attorney's fees against Hedvat pursuant to the express terms of the guaranty agreement.
Accordingly, having determined that plaintiff is entitled to judgment on its first, fourth, and fifth causes of action, plaintiff has prevailed on its claims related to the lease and guaranty and is, therefore, entitled to reasonable attorney's fees. The calculation of same, however, is referred to a referee, as below.
Conclusion
Accordingly, it is ORDERED and ADJUDGED that plaintiff shall have judgment on its first cause of action in the amount of $65,804.10 against defendant Manoucher Hedvat; and it is further ORDERED that plaintiff's second and third causes of action are dismissed; and it is further
ORDERED that plaintiff's fourth and fifth causes of action are granted as to liability, in an amount to be determined by the referee, as below; and it is further
ORDERED that plaintiff's sixth and seventh causes of action for attorney's fees are granted, in an amount to be determined by the referee, as below; and it is further
ORDERED that defendants' first affirmative defense is stricken; and it is further
ORDERED that a Judicial Hearing Officer ("JHO") or Special Referee shall be designated to hear and report to this court, in conjunction with the related matters under NY Index Nos. 157712/2019; 157714/2019; and 157716/2019, on the following individual issues of fact, which are hereby submitted to the JHO/Special Referee for such purpose:
1. The amount of accelerated rent due plaintiff from defendants, if any, including whether same amounts to an impermissible penalty pursuant to 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Assn., Inc. and its progeny;
2. The amount of attorney's fees due plaintiff from defendants in bringing this action; and it is further
ORDERED that the powers of the JHO/Special Referee shall not be limited beyond the limitations set forth in the CPLR: and it is further
ORDERED that this matter is hereby referred to the Special Referee Clerk (Room 119, 646-386-3028 or spref@nycourts.gov) for placement at the earliest possible date upon the calendar of the Special Referees Part (Part SRP), which, in accordance with the Rules of that Part (which are posted on the website of this court at www.nycourts.gov/supctmanh at the "References" link), shall assign this matter at the initial appearance to an available JHO/Special Referee to hear and report as specified above; and it is further
ORDERED that counsel shall immediately consult one another and counsel for plaintiff/petitioner shall, within 15 days from the date of this Order, submit to the Special Referee Clerk by fax (212-401-9186) or e-mail an Information Sheet (accessible at the "References" link on the court's website) containing all the information called for therein and that, as soon as practical thereafter, the Special Referee Clerk shall advise counsel for the parties of the date fixed for the appearance of the matter upon the calendar of the Special Referees Part; and it is further
ORDERED that on the initial appearance in the Special Referees Part the parties shall appear for a pre-hearing conference before the assigned JHO/Special Referee and the date for the hearing shall be fixed at that conference; the parties need not appear at the conference with all witnesses and evidence; and it is further
ORDERED that, except as otherwise directed by the assigned JHO/Special Referee for good cause shown, the trial of the issue(s) specified above shall proceed from day to day until completion and counsel must arrange their schedules and those of their witnesses accordingly; and it is further
ORDERED that counsel shall file memoranda or other documents directed to the assigned JHO/Special Referee in accordance with the Uniform Rules of the Judicial Hearing Officers and the Special Referees (available at the "References" link on the court's website) by filing same with the New York State Courts Electronic Filing System (see Rule 2 of the Uniform Rules); and it is further [continued on following page]
ORDERED that any motion to confirm or disaffirm the Report of the JHO/Special Referee shall be made within the time and in the manner specified in CPLR 4403 and Section 202.44 of the Uniform Rules for the Trial Courts.
This constitutes the Decision, Order, and Order of Reference of the Court.