Opinion
110737/08.
Decided January 22, 2009.
MEMORANDUM DECISION
In this action, plaintiff Humphreys Harding, Inc. ("plaintiff") seeks a judgment against defendant NY Medscan, LLC a/k/a New York Medscan LLC ("defendant") for unpaid rent, pursuant to the parties' sublease, and the cost of collecting said unpaid rent.
Defendant now moves to dismiss plaintiff's claim, pursuant to CPLR §§ 3211(a)(1) and (a)(5), on the ground that plaintiff's cause of action is barred because of payment and/or release and/or accord and satisfaction.
Plaintiff's Complaint
On or about July 30, 1998, plaintiff, as a tenant, entered into a lease with 40th Realty LLC ("Realty") to rent the entire second floor of 755 Second Avenue, New York, New York ("premises"). The lease was for a term of July 30, 1998 through January 31, 2009. On or about March 1, 2007, plaintiff, as sublessor, entered into a Sublease Agreement with defendant ( see "Sublease," defendant's Exh. A., plaintiff's Complaint, Exh. 1). According to the terms of the Sublease, defendant was to rent from plaintiff a 1,500 square foot portion of the premises from March 1, 2007 through January 30, 2009.
A copy of Realty's Consent to Sublease is attached to defendant's motion as Exh. A., plaintiff's Complaint, Exh. 2.
Plaintiff continued to possess the premises, with defendant as subtenant, through November 29, 2007. On November 29, 2007, plaintiff entered into an agreement to surrender its interest in the premises to ASN Murray Hill LLC ("ASN") as the new owner/landlord ( see "Surrender Agreement," defendant's, Exh. A., plaintiff's Complaint, Exh. 3). Defendant "remained in possession of the subleased portion of the premises pursuant to a new direct lease with" the new landlord (Surrender Agreement, ¶ 7).
Plaintiff alleges that defendant failed and refused to pay the $7,666.66 rent due on August 1, 2007, September 1, 2007, October 1, 2007 and November 1, 2007. Therefore, defendant is seeking a judgment against plaintiff for $7,666.66 with an interest rate of 1.25% per month from August 1, 2007; $7,666.66 with an interest rate of 1.25% per month from September 1, 2007; $7,666.66 with an interest rate of 1.25% per month from October 1, 2007; and $7,666.66 with an interest rate of 1.25% per month from November 1, 2007, as per plaintiff's Sublease with defendant. In addition, plaintiff is seeking a judgment against defendant for no less than $10,222.21 in compensation for any cost, expense or disbursement, including reasonable attorney fees, involved in collecting rent or enforcing any rights against defendant, as per the Sublease.
Defendant's Motion
Defendant argues that plaintiff's claim is barred by the terms of plaintiff's Surrender Agreement with ASN, and the terms of the new lease between defendant and ASN (the "ASN-Medscan Lease," defendant's Exh. B). Defendant contends that plaintiff was in arrears for $325,521 on its original lease with Realty. As part of plaintiff's Surrender Agreement with ASN, ASN was to draw $50,000 from plaintiff's security deposit, which was held by ASN in the form of a letter of credit. That $50,000 represented the "settlement of all sums due from Tenant to Landlord under the . . . lease" between plaintiff and Realty (defendant's motion, ¶ 8, citing the Surrender Agreement at ¶ 4). "The Surrender Agreement also expressly acknowledges that ASN has negotiated a new, direct Lease with [defendant] for the Premises which, upon execution and delivery of this Surrender Agreement shall become effective'" (defendant's motion, ¶ 9, citing the Surrender Agreement at ¶ 1).
According to the terms of the new lease between ASN and defendant, defendant agreed to pay ASN "$240,000 of the outstanding rent and other payments owed by [plaintiff] to Landlord" (the ASN-Medscan Lease, defendant's Exh. B, ¶ 37.01). The ASN-Medscan Lease states that defendant's agreement to Article 37 of the lease was "material inducement" for ASN's agreeing to enter into the lease with defendant ( id. at 37.02).
Defendant argues that the Surrender Agreement between plaintiff and ASN, and the ASN-Medscan Lease between defendant and ASN, "read fairly and logically in conjunction with one another, effectively transform the payment obligation of [defendant] to [plaintiff] (under the Sublease) into payment obligations of [defendant] to ASN (under the ASN-Medscan Lease)" (defendant's motion at ¶ 10). If the Court allowed defendant's payments to ASN to release plaintiff's debt to ASN, which accrued under plaintiff's lease with Realty, and, at the same time, required defendant to pay plaintiff under the Sublease, plaintiff would improperly receive a double payment from defendant, "a windfall," defendant argues.
Defendant contends that the arrangement established by the Surrender Agreement and the ASN-Medscan Lease is identical to the operation of CPLR § 5209 ("Discharge of Garnishee's Obligation") (defendant's motion, ¶ 11). Defendant represents the equivalent of a garnishee, plaintiff represents the equivalent of a judgment debtor, and ASN represents the equivalent of a judgment creditor. As a payment by a garnishee to the judgment creditor discharges the garnishee's obligation to pay the judgment debtor, so has defendant's payment obligations to ASN discharged defendant's obligation to pay plaintiff. Defendant goes on to argue that New York courts have held that it is against New York public policy to impose double liability on a garnishee (defendant's motion, ¶ 12).
Defendant cites the language of CPLR § 5209: "A person who, pursuant to an execution or order, pays or delivers, to the judgment creditor or a sheriff or receiver, money or other personal property in which a judgment debtor has or will have an interest, or so pays a debt he owes the judgment debtor, is discharged from his obligation to the judgment debtor to the extent of the payment or delivery."
Defendant cites in support Oppenheimer v Dresdner Bank A.G., 50 AD2d 434, 441, 377 NYS2d 625, 632 [2d Dept 1975] and JPMorgan Chase Bank, N.A. v Motorola, Inc. , 47 AD3d 293 , 306, 846 NYS2d 171, 181 [1st Dept 2007].
Plaintiff's Opposition
In opposition, plaintiff argues that the Surrender Agreement between plaintiff and ASN does not release plaintiff's claims and rights as against defendant for unpaid rent for the months of August, September, October and November 2007. The Surrender Agreement only releases claims between plaintiff and ASN (plaintiff's reply, ¶ 3).No release of plaintiff's claim against defendant exists. Further, defendant fails to establish any agreement between [plaintiff] and [defendant] or payment pursuant to such an agreement that would represent an accord and satisfaction of the debt defendant owes plaintiff (id. at ¶ 7).
Plaintiff goes on to contest defendant's argument that, read together, the Surrender Agreement and ASN-Medscan Lease transform defendant's payment obligation to plaintiff, which accrued under the Sublease, into a payment obligation of defendant to ASN under the ASN-Medscan Lease (id. at ¶ 9). "However the agreements are read, there is simply no agreement by [plaintiff] to release [defendant] from its obligation to pay [plaintiff] $30,666.64 plus interest (consisting of $7,666.66 rent for 4 months) due under the sublease. However the agreements are read, there is no acknowledgment that the $30,666.64 will be paid to ASN" ( id.).
Plaintiff goes on to argue that defendant also fails in its attempt to compare the ASN-Medscan Lease to a CPLR § 5209 Discharge of Garnishee's Obligation."ASN did not have a judgment against [plaintiff]; ASN did not issue execution; and [defendant] did not pay this sum to a judgment creditor, sheriff or receiver," as CPLR § 5209 states ( id. at ¶ 10). Further, the caselaw defendant cites fails to support its theory ( id. at ¶¶ 12-13). For example, defendant here was not under a court order to make a payment, as was the defendant, Dresdner Bank, in Oppenheimer v Dresdner Bank A.G. (50 Ad2d 434, 377 NYS2d 625 [2d Dept 1975]). Therefore, defendant "was not put into a position where payment pursuant to a lawful court order would expose it to double liability. Instead, aware of its obligation to [plaintiff] under its sublease, [defendant] chose to fail to pay its contractual obligation to [plaintiff], and to knowingly enter into an agreement with ASN to rent the same premises upon agreed to terms" ( id. at ¶ 14). Defendant's situation is more analogous to a debtor who pays over assignment and has to pay the same debt twice because of the debtor's own unwise actions. Even if defendant paid ASN $30,666.64 and interest, defendant still owes plaintiff. The sole fact that defendant acted unwisely in paying the amount to ASN would not discharge its debt to plaintiff.
Finally, plaintiff argues that defendant admits that it had an obligation to plaintiff under the Sublease and that it had failed to pay plaintiff the amount that accrued under the Sublease. Because no facts are in dispute as to plaintiff's right to payment from defendant, the Court should treat defendant's motion as a motion for summary judgment and grant summary judgment in favor of plaintiff.
Defendant's Reply
Defendant reiterates its arguments that, read "logically and fairly" together, the Surrender Agreement and the ASN-Medscan Lease "effectively transform" its payment obligation to plaintiff into payment obligations to ASN, and that to require defendant to pay plaintiff under the Sublease would result in a double payment by defendant. While plaintiff is correct in asserting that the Surrender Agreement makes no mention of "any of the terms" of the ASN-Medscan Lease, the Surrender Agreement "expressly acknowledges and make reference to the new, direct ASN-Medscan Lease. There is simply no reason for the Surrender Agreement to make any mention of the ASN-Medscan Lease if not to operate (in conjunction with the ASN-Medscan Lease) to shift [plaintiff's] payment obligations to ASN for rent arrears to [defendant] as consideration for the release of [plaintiff's] indebtedness to ASN" (defendant's reply, ¶ 3).
Defendant also reiterates its argument that the "tri-party arrangement" is analogous to situations contemplated by CPLR § 5209.
True, as [plaintiff] asserts in its opposition papers, [defendant] did not make payment, or assume payment obligation, under direction of court order. Nevertheless, CPLR § 5209 and the cases cited by [plaintiff] in its moving papers reflect a policy, fully applicable here, against the imposition of "double liability" upon a debtor ( id. at ¶ 4).
Defendant contests plaintiff's argument that defendant's situation is more analogous to a debtor who pays over assignment and is forced to pay the same debt twice because of its own actions. "In fact, UCC § 9-406 is specifically intended to prevent double payment by a debtor in such a situation, by providing that upon receipt of a notification of assignment, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor'" ( id. at ¶ 4). Here, the Surrender Agreement and the ASN-Medscan Lease gave plaintiff notice of the assignment. Therefore, defendant (similar to the debtor described in UCC § 9-406) does not owe plaintiff (the assignor), and defendant is protected from paying twice ( id.).
Finally, defendant opposes plaintiff's suggestion that the Court grant plaintiff summary judgment. CPLR § 3212(a) "expressly provides that a party may not move for summary judgment before issue is joined" ( id. at ¶ 5). Defendant "clearly has the right to serve an answer responding to the factual allegations of the complaint and asserting any affirmative defenses it may possess" ( id.).
AnalysisDismissal Based on Documentary Evidence and Payment
Under CPLR 3211(a)(1), the dismissal of a complaint is warranted where "the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law" based on documentary evidence ( 150 Broadway NY Associates, L.P. v Bodner , 14 AD3d 1 [1st Dept 2004]). The term "documentary evidence" referred to in CPLR 3211(a)(1) "typically means judicial records such as judgments and orders or out-of-court documents such as contracts, deeds, wills, and/or mortgages and includes [a] paper whose content is essentially undeniable and which, assuming the verity of its contents and the validity of its execution, will itself support the ground on which the motion is based'" ( Webster Estate of Webster v State of New York, 2003 WL 728780 (NY Ct Cl), 2003 NY Slip Op. 50590(U) citing Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3211:10, at 20 and 7 Weinstein-Korn-Miller, NY Civil Practice, P 3211.06). Further, CPLR § 3211(a)(5) allows a cause of action to be dismissed on the ground that "the cause of action may not be maintained because of arbitration and award, collateral estoppel, discharge in bankruptcy, infancy or other disability of the moving party, payment, release, res judicata, statute of limitations, or statute of frauds." In the case at bar, contrary to defendant's contentions, the Surrender Agreement and the ASN-Medscan Lease do not clearly dispose of plaintiff's claims for unpaid rent or the cost of collecting said unpaid rent. Further, defendant fails to provide sufficient evidence of payment and/or release and/or accord and satisfaction that would bar plaintiff's cause of action. Contract Interpretation
When considering documentary evidence, such as a lease, the Court looks to see whether the lease "unambiguously contradicts the allegations supporting a litigant's cause of action" ( 150 Broadway NY Associates, L.P. v Bodner , 14 AD3d 1, 5-6 [1st Dept 2004]). "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" ( id. at 6). The test for ambiguity in a written agreement is well settled: "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). A 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 sufficient to create an ambiguity sufficient to raise a triable issue of fact ( Ruttenberg v Davidge Data Sys. Corp., 215 AD2d 191, 193).
Further, the 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, 269 [1st Dept. 2002]; Barrow v Lawrence United Corp., 146 AD2d 15, 18, 538 NYS2d 363 [3d Dept 1989] ["Thus, it is equally settled law that specific clauses of a contract are to be read consistently with the over-all manifest purpose of the parties' agreement" ( id.)]). 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, 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). 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, rearg denied 98 NY2d 693, 747 NYS2d 411; W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162).
Furthermore, 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, rearg denied 46 NY2d 940). 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; First Natl. Stores v Yellowstone Shopping Ctr., 21 NY2d 630, 638, rearg denied 22 NY2d 827[1968]). 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).
The rules of construction that govern the interpretation of written agreements apply to leases ( New York Overnight Partners, L.P. v Gordon 217 AD2d 20, 24-25 [1st Dept 1995]). Here, defendant does not dispute the terms of the March 1, 2007 Sublease with plaintiff; nor does defendant dispute that it owes plaintiff rent for the months of August 2007 through November 2007 under the terms of the March 1, 2007 Sublease with plaintiff. Instead, defendant offers two other agreements the November 29, 2007 Surrender Agreement between plaintiff and ASN, and the ASN-Medscan Lease between defendant and ASN, also made on November 29, 2007 as proof that defendant has satisfied its obligation to pay to plaintiff the rent defendant owed in arrears. The Court has examined the plain, unambiguous language of the Surrender Agreement and finds no proof in the document that defendant satisfied its debt to plaintiff under the Sublease. Instead, the Court finds that, according to the Surrender Agreement, plaintiff satisfied all debts plaintiff owed to ASN upon surrendering its lease to ASN. Further, the Surrender Agreement makes clear that the agreement between plaintiff and ASN does not release or discharge any debt or liability incurred by plaintiff before the surrender date of the Surrender Agreement. The Surrender Agreement between plaintiff and ASN contains the following provisions:
Landlord [ASN] hereby acknowledges that Tenant [plaintiff] has vacated the Premises prior to ths Surrender Date, except that [plaintiff's] subtenant New York Medscan, LLC [defendant] remained in possession of the Premises up to the Surrender Date under Agreement of Sublease by and between [plaintiff] and [defendant], dated as of March 1, 1007 [ sic]. [ASN] hereby further acknowledges that it has negotiated a new, direct Lease with [defendant] for the Premises which, upon execution and delivery of this Surrender Agreement shall become effective.
(Surrender Agreement, ¶ 1)
[ASN] shall accept such surrender as of the Surrender Date and in consideration of such surrender by [plaintiff] and of acceptance of such surrender by [ASN], [plaintiff] and [ASN] do hereby mutually release each other, their respective successors and assigns of and from any and all claims, damages, obligations, liabilities, actions and causes of action, of every kind and nature whatsoever arising under or in connection with the Lease from and after the Surrender Date, except that nothing herein contained shall be deemed to constitute a release or discharge: (a) of [plaintiff] with respect to any obligation or liability accrued or in incurred under the Lease, up to and including the Surrender Date, or (b) of either [plaintiff] or [ASN] with respect to claims for contribution or indemnification or both arising out of third-party claims against the other arising on or before the Surrender Date, or (c) or either [plaintiff] or [ASN] with respect to their obligations pursuant to this Surrender Agreement, including, without limitation, pursuant to the provisions of the immediately succeeding sentence. Notwithstanding the foregoing, [plaintiff] acknowledges and agrees that [ASN] intends to lease the Premises to [defendant] for a term commencing immediately after the Surrender Date (the "New Lease"), and [plaintiff] hereby indemnifies [ASN] from any and all damages, losses, or claims arising in connection with [plaintiff's] failure to vacate the Premises in accordance with this Surrender Agreement.
(Surrender Agreement, ¶ 3) ( emphasis added).
The Surrender Agreement goes on to state that as of the surrender date, plaintiff was in arrears of $324,521, and that ASN planned to draw $50,000 from a security deposit provided by plaintiff "representing settlement of all sums due from [plaintiff] to [ASN] under the Lease" (Surrender Agreement at ¶ 4) ( emphasis added). Defendant was not a party to the Surrender Agreement; the document is signed and notarized by only plaintiff and ASN. Further, the Surrender Agreement between plaintiff and ASN makes no reference to any debt defendant owed plaintiff under defendant's Sublease with plaintiff.
The Court also has examined the plain, unambiguous language of the lease between defendant and ASN (the "ASN-Medscan Lease"). The Court finds no proof in that document that defendant satisfied its debt to plaintiff, which accrued under the Sublease. According to the terms of the ASN-Medscan Lease, defendant owed ASN "additional charges" comprising, among other things, the arrears plaintiff owed to ASN (defendant's Exh. B, Article 1.01(ii)). The ASN-Medscan Lease contains the following provisions:
As material inducement for [ASN] to enter into and deliver this Lease, [defendant] covenants to pay to [ANS], as Additional Charges, from and after the Effective Date, the following sums, which represent $240,000 of the outstanding rent and other payments owed by [plaintiff] to [ASN] up to and including the Effective Date pursuant to the provisions of the [lease with plaintiff] . . . [Defendant] acknowledges that [defendant's] agreement to the provisions of this Article 37 is a material inducement in [ASN] agreeing to enter into this Lease. Any failure by [defendant] to comply with the requirements of this Article 37 shall be deemed a material breach of this Lease, for which [ASN] shall be entitled to any and all of it [ sic] remedies in accordance with terms, conditions and covenants of this Lease."
(defendant's Exh. B, Article 37) ( emphasis added)
The ASN-Medscan lease makes clear that defendant's agreement to pay ASN $240,000 of the outstanding rent and other payments plaintiff owed ASN was material inducement, or as part of the bargain, for ASN to enter into a new lease with defendant. Nowhere in the ASN-Medscan Lease does it indicate that any part of defendant's payment to ASN was to satisfy the debt defendant owed to plaintiff under the Sublease. The ASN-Medscan Lease does not even mention the Sublease between defendant and plaintiff. Plaintiff was not a party to the ASN-Medscan Lease; the document is signed and notarized by only defendant and ASN. Further, the Surrender Agreement between plaintiff and ASN makes no reference to any debt defendant owed plaintiff.
Defendant argues in its motion that the two agreements should be read together, and in reading the documents together, defendant's payments to ASN "effectively transform the payment obligation of [defendant] to [plaintiff] (under the Sublease) into payment obligations of [defendant] to ASN (under the ASN-Medscan Lease)" (defendant's motion at ¶ 10). New York courts have held that, under certain situations, individual agreements can and should be read as one unified agreement. "Where several instruments constitute part of the same transaction, they must be interpreted together. In the absence of anything to indicate a contrary intention, instruments executed at the same time, by the same parties, for the same purpose, and in the course of the same transaction will be read and interpreted together, it being said that they are, in the eye of the law, one instrument ( BWA Corp. v Alltrans Exp. U.S.A., Inc., 112 AD2d 850, 852 [1st Dept. 1985], citing Nau v Vulcan Rail Construction Co., 286 NY 188, 197 [1st Dept 1941] and holding that a sublease and a letter agreement could be read as one instrument). The intent of the parties is dispositive ( see Commander Oil Corp. v Advance Food Service Equipment, 991 F2d 49, 52-53 [holding that an asset purchase agreement and a lease should be read together as one instrument]). However, "where two agreements involve different parties and are executed at different times, the conclusion of separateness becomes all but inescapable'" ( Eastern Consol. Properties, Inc. v Adelaide Realty Corp., 261 AD2d 225 [1st Dept 1999], citing Rudman v Cowles Communications, 30 NY2d 1, 13, aff'd, 95 NY2d 785). Here, defendant has failed to provide any evidence that the Surrender Agreement and the ASN-Medscan Lease were executed at by the same parties and for the same purpose. Further, defendant has failed to demonstrate that the intent of the parties was for the Surrender Agreement and the ASN-Medscan Lease to be read together as one instrument.
Defendant also argues that the arrangement established by the Surrender Agreement and the ASN-Medscan Lease is identical to the operation of CPLR § 5209 ("Discharge of Garnishee's Obligation") (defendant's motion, ¶ 11). The case at bar is easily distinguishable from the case of a party that is under a court order to pay a judgment creditor money owed to a judgment debtor, which is the type of situation contemplated by CPLR § 5209. As such, defendant's argument lacks merit.
Defendant fails to provide any documentary evidence of payment and/or release and/or accord and satisfaction that would bar plaintiff's cause of action to recover the debt defendant owes under the Sublease. Even accepting defendant's argument that requiring a debtor to pay a debt twice violates New York public policy, defendant failed to demonstrate that, as a debtor to plaintiff, it's payment to ASN included its debt owed to plaintiff. Accordingly, no such a public policy is violated here. Therefore, defendant failed to meets its burden under CPLR §§ 3211(a)(1) and (a)(5). Accordingly, defendant's motion for an order, pursuant to CPLR §§ 3211(a)(1) and (a)(5), dismissing plaintiff's complaint, is denied.
Conclusion
Based on the foregoing, it is hereby
ORDERED that defendant's motion for an order, pursuant to CPLR §§ 3211(a)(1) and (a)(5), dismissing plaintiff's complaint, is denied; and it is further
ORDERED that defendant serve its Answer upon plaintiff and file same within ten (10) days of service of notice of entry of this Order; pursuant to CPLR § 3211(f), and it is further
ORDERED that the parties appear for a preliminary conference on Tuesday, March 31, 2009 at 2:15 p.m. in Part 35; and it is further
ORDERED that defendant serve a copy of this order with notice of entry upon all parties within 20 days of entry.
That constitutes the decision and order of the Court.