Opinion
600949/05.
Decided December 21, 2005.
Background
This is an action for a declaration of plaintiff's right to a lease to a disputed space and for specific performance of an option agreement that plaintiff Kenyon Kenyon negotiated with its landlord, defendant Logany, LLC ("Logany"). Kenyon now moves for summary judgment while Logany cross moves to dismiss and for the reservation of its right to occupy a carved out space in a portion of the option area.
Kenyon and Kenyon ("Kenyon") is a law firm specializing in the area of intellectual property while Logany is a corporation organized for the sole purpose of owning and operating the building located at One Broadway. Kenyon has been a tenant in that building for 25 years and now occupies all of the non-retail area of the building, except for one-half of the 6th floor. The area that Kenyon is now claiming is the other half of the 6th floor, referred to by the parties as the expansion space.
At the outset of this lawsuit, I issued a temporary restraining order, preventing Logany from leasing the expansion space pending argument on a preliminary injunction. Argument was held on the preliminary injunction and a hearing was then conducted on the question of irreparable harm. Pending the decision, the TRO was continued. However, before it was decided, this motion for summary judgment was initiated, the determination of which moots the preliminary injunction and the temporary restraining order. For the reasons described infra, the plaintiff's motion is granted.
Facts
The option for the 6th floor space was originally held by the Brundage Corporation ("Brundage"), which at one time occupied a different part of the building. The Brundage lease, which included the option for the 6th floor space, was assigned to Kenyon. Brundage left, and Kenyon assumed the floor that had been occupied by Brundage. Kenyon then negotiated its own lease for all of the area it occupied with its own option for the expansion space.
The lease negotiated between Logany and Kenyon requires, inter-alia, that Kenyon has the right of first refusal, which Logany must give to Kenyon before it can rent the space to anyone else. Kenyon must, therefore, match any offer that Logany gets in writing to be entitled to lease that space. The lease also states that any waiver of any of its terms must be in writing.
When Brundage left, Kenyon and Logany began to negotiate the terms of the lease for the expansion space all of which were agreed to by the negotiators. Although there was an oral agreement among the negotiators that the rent was to be between $26 and $28 a square foot, that proved to be a stumbling block with Dr. Stoeffel, Logany's president. This occurred after Kenyon had rejected Logany's request to temporarily vacate the top floor so that Logany could build a penthouse on the roof.
Nevertheless, while negotiations were going on, Logany would not allow the tenant that had been occupying the expansion space to hold over until Kenyon had consented. Logany also sent Kenyon an e-mail setting forth that tenant wished to maintain a portion of the expansion space if Kenyon consented, which Kenyon also rejected. Also, Kenyon claims that Logany's representative told it that the space was "yours," although Logany denies this. In relying on these facts, Kenyon had, at its expense, plans drawn for the redesign of the 6th floor space and made hiring offers in reliance on the availability of the space. Kenyon refrained from looking for spaces elsewhere because it was led to believe that it had a done deal.
Contentions
In rejecting Kenyon's claim for the entire expansion space, Logany contends that Kenyon was required to exercise its option in writing which it failed to do. Moreover, it argues that it will lease a carved-out space to its parent company which it claims is not the third person that Kenyon would have a first refusal right against. The carved-out space, according to Logany is a space in the middle of the 6th floor between the portion of the 6th floor occupied by Kenyon and the expansion space.
Kenyon argues that the time to notify the plaintiff in writing has not yet run because Logany never notified it in writing that it's right of first refusal was triggered as required by the lease. Meanwhile, the conduct of the parties reflected their understanding that the option had been exercised. Moreover, Logany and its parent were separately incorporated entities, so that the requirement to notify Kenyon in writing was triggered. Logany counters that the lease could only be modified in writing and any waiver also had to be in writing.
Decision
To begin with, Logany and its parent company are separate incorporated entities. These two companies cannot pierce the corporate veil for their own benefit. Their separate existences are primarily for the purpose of shielding them from liability. They cannot, therefore, shed such a distinction for their convenience ( See, Diston Co. v. Aktiebolag, 187 AD2d 283, 589 NYS2d 442 [1st Dept 1992]). While the defendant claims that it served whatever written notice that plaintiff was entitled to under the lease, in fact, it merely notified plaintiff of its consent to the assignment of Brundage's lease to Kenyon. Thereafter, it entered into a new lease with Logany which gave it a right of first refusal in that agreement. The time limit on that right would only begin to run when Logany gives written notice of the offer by a third party ( Carnegie Successors v. Gross, 166 AD2d 224,560 NYS2d 436 [1st Dept 1990]). Nothing in the record before the Court indicates that such written notice was given. The holding of this Court is, therefore, that Kenyon has not defaulted in exercising its option ( See, Cinema II Development Corporation v. Thirty-Eight Realty Corp., 49AD2d 698, 540 NYS2d 305 [2nd Dept. 1989]). Therefore, Kenyon could still give that written notice at this time. But it doesn't have to. By their conduct, both sides have recognized that the option has been validly exercised ( Messner Vetere Berger McNamee Schmetterer Euro RSCG v. Aegis Group, 93 NY2d 229, 689 NYS2d 674), and, in fact, with the possible exception of the amount of the rent to be paid, the essential terms of the option have been agreed to. In accordance with the option, the amount of the rent may be determined by arbitration if the parties cannot reach an agreement by themselves.
Despite the existence of a non-waiver clause unless there is a writing, it is established law that such a clause may nevertheless be waived ( Allen V. Rose v. Spa Realty Associates, 42 NY2d 338, 343, 397 NYS2d 922). The parties' conduct evinced their intention to modify the written notice requirement id. at 344.
The Court agrees with Kenyon that the belated introduction of this so-called carve-out space in the middle of the sixth floor is a red herring. It was not mentioned by Logany in its written opposition to the motion for a preliminary injunction, nor in the hearing conducted by the Court in connection with the preliminary injunction. Neither is it mentioned in the lease, including the option clause. It consists of some dotted lines in one of the plans introduced for the sixth floor without any explanation in those plans. Logany's president, Dr. Stoeffel, first raised it in his deposition and reiterates it in his affidavit. But how can he possibly know what those lines stand for when he was not yet on the board when the lease was executed and the plans exchanged? In this Court's opinion, it was created out of whole cloth in a desperate attempt to obtain leverage over the defendants as this would seriously impair the plaintiff's use of the space by separating Kenyon's personnel from each other by an unrelated and potentially hostile group in the middle of its 6th floor space. The intention, the Court submits, is to induce the plaintiff to moderate its refusal to vacate the 12th floor, thereby enabling Logany to use that area to build a penthouse on the roof.
Conclusion
Accordingly, it is
ORDERED and ADJUDGED that:
1. plaintiff's motion for summary judgment is granted and defendant's cross-motion for partial summary judgment is denied, together with costs and disbursements of $_______________ as calculated by the Clerk in favor of the defendant;
2.In accordance with the option clause of the lease, defendant Logany is ordered to enter into a lease with Kenyon for either the entire space of the 6th floor or for the expansion space on the 6th floor;
3. defendant Logany shall allow Kenyon to occupy the expansion space forthwith;
4. in the event that the amount of the rent for the expansion space cannot be agreed to within ten (10) days of the service of a copy of this Order with Notice of Entry, the parties shall proceed to arbitration in accordance with the arbitration clause of the lease;
5. If the matter of the amount of rent cannot be resolved within ten (10) days of the service of a copy of this lease with Notice of Entry, the Court will accept an application to determine the amount payable by plaintiff for use and occupancy, without prejudice, until a final determination is reached on the amount of the rent for the expansion space.