Opinion
No. 56097/2014.
11-06-2014
COMMERCE STREET PROFESSIONAL CENTER, LLC, Plaintiff, v. John J. CONNOLLY, Defendant.
The Law Office of Peter S. Liaskos, Esq., White Plains, attorney for defendant. Schulte Roth & Zabel, LLP, New York, Of Counsel to defendant. Shamberg Marwell Hollis Andreycak & Laidlaw, P.C., Mount Kisco, attorney for plaintiff.
The Law Office of Peter S. Liaskos, Esq., White Plains, attorney for defendant.
Schulte Roth & Zabel, LLP, New York, Of Counsel to defendant.
Shamberg Marwell Hollis Andreycak & Laidlaw, P.C., Mount Kisco, attorney for plaintiff.
Opinion
WILLIAM J. GIACOMO, J.
The following papers numbered 1 to 10 were considered on defendant's motion to dismiss the complaint and plaintiff's cross motion for summary judgment.
| PAPERS | NUMBERED |
|---|---|
| Notice of Motion/Affidavits/Exhibits/Memo of Law | 1–4 |
| Notice of Cross Motion/Affidavits/Exhibits/Memo of Law | 5–8 |
| Reply Memo of Law in Support or Motion to Dismiss | 9 |
| Plaintiff's Reply in support of Cross Motion for Summary Judgment | 10 |
Factual and Procedural Background
On January 10, 2006, plaintiff landlord and tenant Health Enhancement, Inc. entered into a commercial lease for a certain property in Yorktown Heights, New York. The term of the original lease ran from March 1, 2006 though February 28, 2013. Vincent Houston, the president of Health Enhancement, Inc., and defendant, John J. Connolly, executed a personal guaranty of the terms of the original lease.
On April 10, 2008, landlord and tenant entered into a Extended and Modified Lease Agreement (“the Extension Agreement”). The Extension Agreement leased additional space, extended the term of the lease by two years, increased the rent and changed a security provision of the original lease. The Extension Agreement is personally guaranteed by Houston. Defendant was not involved in the negotiation or execution of the Extension Agreement nor does the extension agreement indicate that it is guaranteed by Connolly. It is also not signed by Connolly.
Tenant defaulted under the terms of the lease, as modified and extended, on February 27, 2014. Notably, this default occurred during the extension period.
On April 18, 2014, plaintiff commenced this action against defendant seeking damages on the ground that defendant was the personal guarantor of the Original Lease and the Extension Agreement. Plaintiff alleges that defendant's guaranty of the Original Lease also extended to a guaranty of the Extension Agreement. Plaintiff notes that pursuant to the language of the guaranty signed by defendant at the time of the original lease “[the defendant] covenants and agrees that this guaranty shall remain and continue in full force and effect as to any renewal, modification, or extension of this lease ...” Therefore, according to plaintiff, defendant guaranteed Health Enhancement, Inc.'s obligation pursuant to the terms of the Extension Agreement even though he had no involvement with the extension nor did he sign the extension as guarantor.
Defendant makes this pre-answer motion to dismiss the complaint on the ground that based upon documentary evidence, the sole guarantor of the Extension Agreement is Houston. Defendant argues that if, as plaintiff alleges, the guaranty he and Houston signed with respect to the original lease was to cover the terms of the extension agreement, Houston would not have signed a second guaranty with respect to the Extension Agreement.
Defendant argues that guaranties are strictly interpreted and that a guarantor's obligation cannot be altered without his consent. Defendant argues that the Extension Agreement's terms are materially different from those of the original lease including a longer term and increased rent, and as such, impermissibly increased his obligation as guarantor without his consent.
Defendant also argues that pursuant to the language of the Extension Agreement if there are any inconsistencies between the Original Lease and the Extension Agreement, the Extension Agreement governs. Therefore, Houston is the sole guarantor of the Extension Agreement since he was the one who agreed to it.
Defendant also relies on a signed “Term Sheet” used by the parties during the negotiation of the Extension Agreement. The Term Sheet indicates that the guaranty was “BY VINCENT HOUSTON ONLY.”
Defendant argues that since he did not agree to the terms of the Extension Agreement the complaint must be dismissed.
Plaintiff opposes the motion on the ground that the guaranty executed by defendant was a continuing guaranty and extends to the Extension Agreement. Plaintiff argues that defendant's documentary evidence does not conclusively establish a defense to this action. Plaintiff notes that the Term Sheet relied upon by defendant is not a binding contract and does not discharge him from his obligations as guarantor of the original lease. Plaintiff also argues that Houston's guaranty of the Extension Agreement is not inconsistent with defendant's guaranty.
Plaintiff also cross moves for summary judgment on the ground that there is no dispute that Health Enhancement, Inc. defaulted under the terms of the lease and that defendant guaranteed the lease.
Discussion
Under CPLR 3211(a)(1), a complaint may be dismissed where a “defense is founded upon documentary evidence”. However, to prevail under this provision, “the documentary evidence that forms the basis of the defense must be such that it resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff's claim” (Teitler v. Max J. Pollack & Sons, 288 A.D.2d 302 [2d Dept.2001] ).
By contrast, on a motion for dismissal pursuant to CPLR 3211(a)(7) for failure to state a cause of action, “[the Court's] well-settled task is to determine whether, accepting as true the factual averments of the complaint, plaintiff can succeed upon any reasonable view of the facts stated” ‘ (Campaign for Fiscal Equity, Inc. v. State, 86 N.Y.2d 307,318 [1995] [internal citations and quotation marks omitted] ). In performing that task, the Court “[is] required to accord plaintiff[ ] the benefit of all favorable inferences which may be drawn from [its] pleading, without expressing [any] opinion as to whether [it] can ultimately establish the truth of [its] allegations before the trier of fact” (ibid. ).
Defendant's Motion to Dismiss
It is well settled that a “guarantor should not be bound beyond the express terms of his guarantee.” (665–75 Eleventh Avenue Realty Corp. v. Schlanger, 265 A.D.2d 270, 271 [1st Dept 1999] ). Moreover, a “guaranty is to be interpreted in the strictest manner, particularly in favor of a private guarantor, and cannot be altered without the guarantor's consent.” (Lo–Ho LLC v. Batista, 62 AD3d 558, 559 [1st Dept 2009] [internal citations omitted] ). Specifically, “[a] guaranty of a tenant's obligations under a lease must be strictly interpreted in order to assure its consistency with the lease terms to which the guarantor actually consented.” (404 Park Partners, L.P. v. Lerner, 75 AD3d 481, 482 [1st Dept 2010] ). Indeed, “if the original [lease] is modified without [the guarantors] consent, a guarantor is relieved of its obligation.” (White Rose Food v. Saleh, 99 N.Y.2d 589, 591 [2003] ; Arlona Ltd. Partnership v. The 8th of January Corp., 50 AD3d 933, 857 N.Y.S.2d 208 [2nd Dept 2008] ).
Here, there is no factual dispute that defendant did not expressly agree to guaranty the Extension Agreement. Notably, the extension agreement changed material terms of the original lease including lengthening the term of the lease, increasing the amount of space leased and increasing the amount of rent due. When he executed the guaranty of the original lease in 2006 with a term which expired in 2013 defendant could not have anticipated that his obligation pursuant to the lease would be extended for two years, the space leased would expand and the rent substantially increased. Therefore, the language of the guaranty in the original lease cannot be read to expose defendant to a greater obligation than he intended nor to which he did not consent.
This is not the situation where the original lease contains language regarding the terms of any renewal period and amount of renewal rent. If the original lease had contained those types of terms defendant would have been aware of the obligations to which he was guarantying payment. (See Hawthorne Gardens, LLC v. Salman Home, Inc., 94 AD3d 425, 941 N.Y.S.2d 489 [1st Dept 2012] [Although the guaranty was only for the first two years of the lease, the court properly awarded the landlord the entire accelerated rent amount through the end of the six year lease term. This did not subject the individual guarantor to a greater obligation than he intended or offend the rule of strict construction of guaranties]; Aimco 240 West 73rd Street, LLC v. Ofer, 2013 WL 753899 [NY Sup Ct 2013] ).
In 250 West 78th LLC. v. Pildes of 83rd Street, Inc. (2014 WL 1396940 [NY Sup Ct 2014] ), a factually similar case, the motion court in granting summary judgment dismissing the complaint in favor of the guarantor, held:
Interpreting the guaranty in the strictest manner, we agree that the subsequent revised lease renewals were not an extensions of the lease as would permit 250 West to recover from Defendant guarantor. The usual rule is where a guaranty obligates a guarantor as to any “renewal, change or extension of the lease,” upon the expiration of the lease, the guaranty lapses and can no longer bind defendant. (Lo–Ho LLC v. Batista, 62 AD3d 558 (N.Y.App. Div. 1st Dep't 2009) ). The renewal option found in paragraph 69 of the Lease provides for one renewal of five years and sets forth calculations for determining the renewal's rent schedule. The subsequent renewal was for three years and did not follow the rental calculations set forth in the 1996 lease and the 2006 renewal increased the rental obligations. Further, the 2006 agreement makes no reference that the renewal was made pursuant to the renewal option in the 1996 lease. The 2009 renewal was the second renewal, and also included new terms and conditions. Indeed, the rent obligation was increased and the security deposit was significantly increased.
Just as the guarantor in 250 West 78th LLC could not be bound to terms to which he did not consent, defendant herein cannot be bound to guaranty the terms of the Extension Agreement dated April 10, 2008 to which he did not consent nor intend to be bound. Thus, this Court holds that the Extension Agreement executed in 2008 was not an extension of the original lease dated March 2006, which would allow plaintiff to recover from defendant. Id.
Accordingly, defendant's motion to dismiss the complaint is GRANTED.
Plaintiff's Cross Motion for Summary Judgment
Based upon the foregoing, holding plaintiff's cross motion for summary judgment is DENIED as moot.