Opinion
160746/16
03-20-2017
Madangsui, Inc., Plaintiff, v. Crystal Properties LLP, PD PROPERTIES LLC, AND JOHN DOES "1-10" said fictitious, defendants being and intended to represent unknown individuals and entities who have entered into a new lease with Crystal for the use and occupancy of the subject premises, Defendants.
Gary Kushner, Esq. Goetz Fitzpatrick LLP Attorney for Plaintiff Madangsui, Inc. One Penn Plaza New York, NY 10119 (212) 695-8100 Harry Shapiro, Esq. Smith & Shapiro Attorney for Defendant Crystal Properties LLP 116 East 27th St. New York, NY 10016 (212) 685-6400 Defendant PD Properties 1270 Broadway, Suite 709 New York, NY 10001
Gary Kushner, Esq. Goetz Fitzpatrick LLP Attorney for Plaintiff Madangsui, Inc. One Penn Plaza New York, NY 10119 (212) 695-8100 Harry Shapiro, Esq. Smith & Shapiro Attorney for Defendant Crystal Properties LLP 116 East 27th St. New York, NY 10016 (212) 685-6400 Defendant PD Properties 1270 Broadway, Suite 709 New York, NY 10001 Kathryn E. Freed, J.
RECITATION, AS REQUIRED BY CPLR 2219 (a), OF THE PAPERS CONSIDERED IN THE REVIEW OF THIS PETITION. PAPERS/NUMBERED PLTF.'S ORDER TO SHOW CAUSE AND KIM AFF. IN SUPPORT 1-2 (Exs. 1-16) PLTF.'S EMERGENCY AFF. IN SUPPORT 3 (Exs. A-C) PLTF.'S MEMO. OF LAW IN SUPPORT 4 AFFIDAVIT IN OPPOSITION 5 (Exs. A-J) MEMO. OF LAW IN OPP. 6 SUPP. AFF. IN SUPPORT 7 (Exs. A-B) SUPP. MEMO. OF LAW IN SUPPORT 8
UPON THE FOREGOING CITED PAPERS, THIS DECISION/ORDER ON THE MOTION IS AS FOLLOWS:
In this action seeking, inter alia, declaratory relief and damages for breach of contract, Madangsui, Inc. ("plaintiff") moves, by order to show cause ("OSC"), for an order: 1) preventing defendant Crystal Properties LLP ("Crystal") from terminating plaintiff's lease of the premises known as the "Eastern Street and Basement" of 35 West 35th Street, New York, New York ("the premises") pending the determination of the claims asserted in the verified complaint; 2) preventing Crystal from interfering with plaintiff's exclusive right to use and occupy the premises; 3) preventing defendant John Does "1-10" from entering the premises or otherwise interfering with plaintiff's exclusive right to use and occupy the premises; and 4) for such other and further relief as this Court deems just and proper. Crystal opposes the application. After oral argument, and after a review of the parties' papers and the relevant statutes and case law, the application is granted. FACTUAL AND PROCEDURAL BACKGROUND :
On or about December 22, 2004, Crystal, as owner, leased the premises to Mr. Kabob Café, Inc. Ex. 1 to Kim Aff. The lease was to expire December 31, 2016. Id.Paragraph 87 of the lease provided, in pertinent part, that:
Tenant shall have the right to extend the term of this lease for an additional five years, from January 1, 2017 [until] December 31, 2021 (the "Extension Term"), provided that a) Tenant is in compliance with all the terms and conditions of this lease both at the time of Tenant's exercise of this option and at the time the Extension Term is to commence, b) Tenant shall exercise this option by giving Landlord not less than twelve (12) months' written notice of its intent to extend the term of the lease, in the manner prescribed in Paragraph 51, above and c) Tenant is not in violation of local safety ordinances, health laws, or building codes . . .Id., at par. 87.
Paragraph 51 of the lease required that all notices pursuant to the lease, except for the payment of rent or additional rent, "must be in writing and must be sent by registered or certified mail . . . " Id., at par. 51.
On April 24, 2005, the lease was modified to include additional basement space and to adjust the rent. Ex. 2 to Kim Aff. The lease was assigned by Mr. Kabob Café, Inc. to Jazzy's Food Emporium on December 30, 2005. Ex. 3 to Kim Aff. On January 11, 2007, Jazzy's Food Emporium assigned the lease to plaintiff Madangsui, Inc. Exs. 4 and 5 to Kim Aff.The assignment was executed on behalf of plaintiff by its president and sole owner, Sang Woo Kim ("Kim"). Id.
In April of 2014, plaintiff's attorney, Samuel Ahne, contacted Steve Cytryn, Director of Leasing and Management for Crystal, to advise the latter that plaintiff was seeking to extend its lease, that it needed a bank loan, and that its bank required that the new lease term be at least 10 years. Cytryn Aff. In Opp., at p. 5; Ex. A to Cytryn Aff.Cytryn responded that he would discuss a10-year extension with Crystal's principals. Cytryn Aff. In Opp., at p. 5. On July 21, 2014, Ahne once again asked Cytryn whether plaintiff's lease could be extended for 10 years. Ex. B to Cytryn Aff. The same day, Ahne advised Cytryn that plaintiff needed a loan to "have [its] restaurant updated" and that plaintiff's bank required that, in order to obtain such a loan, the restaurant needed a lease with a minimum term of 10 years. Id. On August 12, 2014, Ahne asked Cytryn if the latter could provide plaintiff's bank with a letter stating that Crystal intended to extend the lease to facilitate plaintiff obtaining a loan. Ex. C to Cytryn Aff. On August 13, 2014, Cytryn wrote to Ahne representing that "[Crystal does] plan to offer an extension to plaintiff's lease" and he apologized that Crystal "[has] not been able to do so already" because its principals had been traveling during the summer. Id. On September 30, 2014, Ahne again wrote to Cytryn stating that plaintiff needed his help so that the restaurant could obtain the loan it needed to undergo a renovation. Id.
In early October, 2014, Kim asked Cytryn to email him a letter addressed to Woojin Choi, a loan officer at plaintiff's bank, to assist Kim in obtaining a loan. Cytryn Aff., at p. 6; Kim Aff. In Supp., at p. 4 n.1.On October 15, 2014, Cytryn sent an email to Choi, advising that Crystal was in the process of preparing a lease extension agreement for plaintiff. Ex. 6 to Kim Aff. Cytryn further stated in the email that plaintiff was "an excellent tenant" and that Crystal hoped to keep Sangwoo Kim as a tenant "for a long time to come." Id.
In January of 2016, Kim was contacted by a restauranteur who expressed interest in purchasing plaintiff restaurant and assuming its lease. Ex. C to Emerg. Aff., at par. 30. The prospective buyer said that he would need a 10-year lease. Id., at par. 31. In March of 2016, Kim accommodated Cytryn's request for a walk-through of the premises and they discussed the 10-year extension at that time. Id., at par. 34. Thus, alleged Kim, Cytryn knew at that point that plaintiff intended to remain in the premises for no less than an additional 5-year term. Id., at par. 35.
By email dated May 13, 2016, Cytryn asked Kim if the latter would be "making the deal [he had been considering] with [another] Korean restaurant owner." Ex. 8 to Kim Aff. Cytryn further stated that, since plaintiff's lease was to expire on December 31, 2016, he needed to know whether the lease would be renewed "as soon as possible." Id. On May 15, 2016, Kim advised Cytryn by email that he was "definitely going to sign to extend the term of the lease" regardless of the actions of the potential buyer. Ex. 9 to Kim Aff. By email dated May 26, 2016, Kim asked Cytryn if plaintiff could have a 10-year lease extension. Ex. 11 to Kim Aff. Cytryn responded on June 10, 2016 that the landlord proposed a 10-year lease extension but that the agreement would not be possible unless all outstanding charges were paid by plaintiff. Ex. 12 to Kim Aff. Cytryn's email stated that the proposal was "non-binding and for discussion purposes only." Id.
On July 19, 2016, Cytryn advised Kim that a new lease was being prepared but that "there [was] a problem-it seem[ed] there [were] unpaid charges [of $29,430.74] on [plaintiff's] rent statement." Ex. 13 to Kim Aff.On or about August 19, 2016, Crystal delivered to plaintiff a 10-year renewal lease for the premises. Ex. C to Emerg. Aff. at par. 47; Cytryn Aff., at p. 9; Ex. F to Cytryn Aff. In his email to plaintiff that day, Cytryn wrote, inter alia, that Crystal "shall not have any legal obligation to [plaintiff] with respect to the matters set forth in the attached proposed lease unless and until a lease agreement is fully negotiated, executed, and delivered by [Crystal] to [plaintiff]." Ex. F to Cytryn Aff. The letter further stated that either party could "discontinue negotiations with or without cause at any time with no resulting obligation to the other." Id. Cytryn conceded that he withdrew the proposal before it was accepted by plaintiff because plaintiff failed to exercise its right to a 5-year lease extension pursuant to paragraph 87 of the lease. Cytryn Aff., at p. 10. Instead, on September 20, 2016, Crystal executed a new lease for the premises with 35 West Enterprises, Inc. ("35 West") Ex. G to Cytryn Aff. According to Cytryn, as a result of executing the lease with 35 West, Crystal became obligated to pay its broker, defendant PDP Properties LLC ("PDP"), a $245,000 fee. Ex. H to Cytryn Aff.
According to Kim, he contacted Cytryn immediately upon his receipt of the renewal lease to advise the latter that he would be in South Korea until after Labor Day and that he would have his attorney review the lease in the interim. Kim Aff., at par. 33.Kim further stated that his return from Korea was delayed approximately one week and that, when he returned, he met with Cytryn on or about September 21, 2016, at which time plaintiff paid Cytryn $7,108.04, the amount of arrears plaintiff allegedly owed Crystal, and that Cytryn accepted this amount in satisfaction of the debt. Kim Aff., at par. 34; Ex. 14 to Kim Aff. The motion papers do not contain any indication that plaintiff was in arrears to Crystal after that payment was made. Kim claims that in September, 2016, while plaintiff's counsel was in the process of reviewing the proposed lease sent by Crystal, Cytryn advised plaintiff that it had found a new tenant for the premises for a term commencing January 1, 2017 at a higher base rent of $36,000 per month. Ex. C to Emerg. Aff., at par. 53.
By correspondence dated October 20, 2016, counsel for plaintiff wrote to Crystal and its attorney giving formal notice of its intention, pursuant to paragraph 87 of the lease, to extend the lease term from January 1, 2017 until December 31, 2021. Ex. 15 to Kim Aff. On November 4, 2016, Cytryn advised plaintiff's attorney that:
Because [plaintiff] failed to timely elect to renew its lease, and did not enter into any extension agreement not a new lease with the landlord, the landlord has changed its position and entered into a new lease with a new tenant. The landlord now has a contractual obligation to a new tenant and to a broker for a brokerage commission.Ex. 16 to Kim Aff.
By correspondence dated October 28, 2016, plaintiff's attorney wrote to Crystal requesting that the latter execute a 10-year renewal lease based on the fact that a 10-year lease had been sent to plaintiff by Crystal for execution. Ex. J to Cytryn Aff.
On or about November 8, 2016, Cytryn emailed Kim the terms of a proposed agreement extending the lease term through the end of 2026. Ex. 7 to Kim Aff.Cytryn stated in the email that the proposal was "non-binding and for discussion purposes only" and that "[t]he [l]andlord shall not have any legal obligation to the [t]enant with respect to the matters set forth [in the proposal] unless and until a lease or lease modification agreement [was] fully negotiated." Id.
On December 21, 2016, plaintiff commenced the captioned action against Crystal, PDP, and John Does "1-10", which fictitious defendants were intended to represent unknown individuals or entities who or which may have entered into a new lease with Crystal for the use and occupancy of the premises. Ex. C to Emergency Aff; NYSCEF Doc. Nos. 1 and 2. In the complaint, plaintiff asserted claims against Crystal, which, it claimed, owned and/or managed the premises, seeking: a declaration that the lease is valid through the end of 2021; specific performance of the lease through the end of 2021; damages for breach of contract; estoppel of Crystal from evicting plaintiff from the premises pending the outcome of the captioned action; damages for breach of the covenant of good faith and fair dealing; and a permanent injunction preventing Crystal from terminating the lease until the end of 2021. Id. Plaintiff also claimed a breach of fiduciary duty against PDP for using financial information it obtained from plaintiff to help a competitor restaurant secure financing to lease the premises. Id. PDP allegedly obtained this information beginning in 2013, when it began assisting plaintiff in exploring the possibility of opening another restaurant at 306 Fifth Avenue. Id.
As noted above, the entity with which Crystal executed a new lease was 35 West.
The same day, plaintiff filed the instant order to show cause seeking the relief set forth above. Crystal, which filed its answer to the complaint with this Court on January 19, 2017 (NYSCEF Doc. No. 42), opposes the application. Although PDP was served with the complaint and the instant application on December 22, 2016 (NYSCEF Doc. No. 29), it has failed to respond to either.
At a preliminary hearing held in connection with the OSC on December 22, 2016, this Court issued a temporary restraining order granting the relief demanded pending the hearing of the application. NYSCEF Doc. No. 28. At oral argument of the application on January 23, 2017, this Court directed that plaintiff post a $50,000 bond pending the outcome of the motion. Although a bond has not been posted, plaintiff has deposited $50,000 in escrow.
This Court reminds plaintiff that, in the future, it cannot ignore a court's order to post a bond and decide, on its own, to instead put money in escrow. However, since the money has already been placed in escrow, this Court will not insist on the posting of a bond at this time.
By stipulation dated February 14, 2017, the parties agreed that plaintiff would pay Crystal $16,500 per month, plus additional rent, for use and occupancy of the premises pending the determination of this application. NYSCEF Doc. No. 58. POSITIONS OF THE PARTIES :
Plaintiff argues that it is entitled to specific performance of the 5-year lease extension because it timely exercised its option to such an extension. It maintains that this Court has the discretion to award specific performance and that it is entitled to the same because it has made substantial improvements to the premises and has developed a substantial clientele and reputation at the site. Plaintiff further asserts that, if specific performance is granted, Crystal would not be prejudiced.
Alternatively, plaintiff asserts that, even if it failed to provide timely notice of its extension to extend its lease, equity should intervene to allow it such an extension since this Court's refusal to do so would result in plaintiff's forfeiture. It further asserts that, if there had been a forfeiture by plaintiff, Crystal waived the right to enforce the same by waiting until November 4, 2016 to reject the lease extension.
Plaintiff maintains that it is entitled to a preliminary injunction enjoining Crystal from removing it from the premises since it is likely to succeed on the merits of its claims. It maintains that it would suffer irreparable harm, i.e. the loss of its leasehold, in the absence of the granting of equitable relief.Further, plaintiff maintains that the equities weigh in its favor since it has been an excellent tenant and has even been offered a leasehold longer than 5 years by Crystal.
Additionally, plaintiff argues that it is entitled to a declaratory judgment determining that Crystal is estopped from rejecting plaintiff's proposed lease extension since Crystal led plaintiff to believe that it would be able to sign a lease extension.
In opposition, Crystal argues that plaintiff is not entitled to a preliminary injunction. Crystal maintains that plaintiff rejected the 5-year renewal lease it was offered and, in 2014, sought a 10-year lease, and did not seek a 5-year lease again until after Crystal signed a lease with a new tenant. It asserts that the 10-year lease extension was not a renewal of the prior lease but rather a new lease. Additionally, Crystal maintains that it would be prejudiced if plaintiff were entitled to a lease extension since it is contractually obligated to pay its broker $245,000.
In a supplemental affidavit in support, submitted to refute Crystal's argument at the January 23, 2017 hearing before this Court that Kim did not make substantial improvements to the premises, Kim asserts that, on September 12, 2013, plaintiff was approved for a $100,000 line of credit by PNC Bank, which he personally guaranteed. Plaintiff used $50,000 to ship and install 22 individual table barbeque units. He used the remaining $50,000 to repair and replace the electrical, plumbing and gas systems at the premises.On August 12, 2015, plaintiff obtained a $150,000 loan from FC Marketplace, LLC, which he also personally guaranteed, to replace the entrance to the restaurant, improve the appearance of the premises, purchase and install new freezers, and remove and replace the electrical systems and plumbing.
Although plaintiff did not obtain this Court's leave to serve the supplemental affidavit, or his supplemental memorandum of law, this Court, in its discretion, considers the same insofar as they are responsive to arguments made by Crystal at oral argument on January 23, 2017.
In its supplemental memorandum of law in support, plaintiff argues that it is entitled to a preliminary injunction since it will suffer a forfeiture if it does not obtain the lease extension. LEGAL CONCLUSIONS :
"A preliminary injunction substantially limits a defendant's rights and is thus an extraordinary provisional remedy requiring a special showing. Accordingly, a preliminary injunction will only be granted when the party seeking such relief demonstrates a likelihood of ultimate success on the merits, irreparable injury if the preliminary injunction is withheld, and a balance of equities tipping in favor of the moving party." 1234 Broadway LLC v West Side SRO Law Project, 86 AD3d 18, 23 (1st Dept 2011). Whether to grant a preliminary injunction is a matter to be determined in the discretion of the court. See Cityfront Hotel Assoc. Ltd. Partnership v Starwood Hotels & Resorts Worldwide, Inc., 142 AD3d 873 (1st Dept 2016).
This Court finds that plaintiff has established its entitlement to a preliminary injunction based on the facts herein.
The general rule is that a tenant who fails to timely exercise an option to renew a lease is without a remedy at law. However, equity will intervene to relieve a tenant from the consequences of the tenant's inadvertence or neglect to timely exercise a renewal option so long as there is no prejudice to the landlord. J. N. A. Realty Corp. v Cross Bay Chelsea, 42 NY2d 392, 399-400; Tritt v Huffman & Boyle Co., 121 AD2d 531, 532. A landlord suffers prejudice when, after the tenant's default, the landlord, in relying on the agreement, in good faith, makes other commitments for the premises (J. N. A. Realty Corp. v Cross Bay Chelsea, supra, at 400). "The inability to consummate a valuable lease because of the unavailability of the premises would clearly be prejudicial to the [landlord]" (Dan's Supreme Supermarkets v Redmont Realty Co., 216 AD2d 512, 513).Dan's Supreme Supermarkets v Redmont Realty Co., 240 AD2d 460, 461 (2d Dept 1997).
In J.N.A. Realty, the Court of Appeals found that, in determining whether to grant equitable relief to a tenant which failed to timely exercise its option to renew a lease, one of the "primary questions" raised was whether "the tenant [will] suffer a forfeiture if the landlord is permitted to enforce the letter of the agreement." Id., at 395. The Court stated that a tenant in possession who has made a "considerable investment improvements on the premises" and who "would undoubtedly lose a considerable amount of its customer good will" if it lost its location, would suffer a forfeiture if equity did not relieve it if its failure to exercise its option. Id., at 399.
Nevertheless, the Court of Appeals has authorized equitable relief against untimely renewal where there was no indication that substantial improvements had been made. Indeed in J. N. A. Realty the Court cited Sy Jack Realty Co. v Pergament Syosset Corp. (27 NY2d 449 [1971]), in which it had affirmed the grant of equitable relief to the commercial tenant, not because the substantial improvements to the premises would otherwise be forfeited, but "to preserve the tenant's interest in a 'long-standing location for a retail business' because this is 'an important part of the good will of that enterprise, [and thus] the tenant stands to lose a substantial and valuable asset'" (J. N. A. Realty at 398, quoting Sy Jack Realty at 453). The equivalent circumstance is presented here.135 E. 57th St. LLC v Daffy's Inc., 91 AD3d 1, 5-6 (1st Dept 2011).
Since plaintiff's lease, by its terms, was to expire on December 31, 2016 and paragraph 87 of the lease required plaintiff to give at least 12 months notice of its intention to renew, plaintiff had until December 31, 2015 to provide Crystal with written notice of its intention to exercise its renewal option.Although plaintiff did not technically comply with the written notice requirements set forth in paragraphs 51 and 87 of the lease, there is no doubt that Cytryn was aware, as early as April of 2014, that plaintiff sought a lease extension. Cytryn Aff. In Opp., at p. 5; Ex. A to Cytryn Aff. Although plaintiff requested a 10-year, instead of 5-year extension, Cytryn represented that he would discuss the 10-year extension with his principals. Cytryn Aff. In Opp., at p. 5. On July 21, 2014, plaintiff's attorney once again asked Cytryn whether plaintiff's lease could be extended for 10 years. Ex. B to Cytryn Aff. On August 12, 2014, plaintiff's counsel yet again asked Cytryn about a 10-year lease extension (Ex. C to Cytryn Aff.) and, the following day, Cytryn responded that "[Crystal does] plan to offer an extension to plaintiff's lease" and that he apologized that Crystal "[has] not been able to do so already" but its principals were traveling during the summer. Id.
In early October, 2014, Kim asked Cytryn to email him a letter addressed to Woojin Choi, a loan officer at plaintiff's bank, to assist Kim in obtaining a loan. Cytryn Aff., at p. 6; Kim Aff. In Supp., at p. 4 n.1. In an email dated October 15, 2014, Cytryn advised Choi that Crystal was in the process of preparing a lease extension agreement for plaintiff. Ex. 6 to Kim Aff. Cytryn further stated in the email that plaintiff was "an excellent tenant" and that Crystal hoped to keep Sangwoo Kim as a tenant "for a long time to come." Id. Although Cytryn maintains that he wrote the email merely as an accommodation for Kim (Cytryn Aff., at p. 6), it is evident that the email reflected Cytryn's intention to extend plaintiff's lease.
In January of 2016, Kim was contacted by a restauranteur who expressed interest in purchasing Kim's restaurant and assuming the lease. Ex. C to Emerg. Aff., at par. 30. The prospective buyer said that he would need a 10-year lease and Kim then discussed the possibility of a 10-year extension with Cytryn. Id., at pars. 31, 34.
On May 13, 2016, Cytryn asked Kim about the possible sale of the restaurant and said he needed to know "as soon as possible" if the lease would be renewed. Ex. 8 to Kim Aff.On May 15, 2016, Kim advised Cytryn by email that he was "definitely going to sign to extend the term of the lease" regardless of the actions of the other Korean restaurant owner. Ex. 9 to Kim Aff. On May 26, 2016, Kim asked Cytryn if plaintiff could have a 10-year lease extension. Ex. 11 to Kim Aff. Cytryn responded on June 10, 2016 that the landlord proposed a 10-year lease extension but that the agreement would not be possible unless all outstanding charges were paid by plaintiff. Ex. 12 to Kim Aff.On July 19, 2016, Cytryn advised Kim that Crystal was preparing a renewal lease but that plaintiff owed Crystal arrears. Exs. 13 and 14 to Kim Aff.
On or about August 19, 2016, Crystal delivered plaintiff a 10-year renewal lease for the premises. Ex. C to Emerg. Aff. at par. 47; Cytryn Aff., at p. 9; Ex. F to Cytryn Aff. In his email to plaintiff that day, Cytryn wrote, inter alia, that Crystal "shall not have any legal obligation to [plaintiff] with respect to the matters set forth in the attached proposed lease unless and until a lease agreement is fully negotiated, executed, and delivered by [Crystal] to [plaintiff]." Ex. F to Cytryn Aff. The letter further stated that either party could "discontinue negotiations with or without cause at any time with no resulting obligation to the other." Id. On September 20, 2016, Crystal executed a new lease for the premises with 35 West Enterprises, Inc. ("35 West") Ex. G to Cytryn Aff. On or about September 21, 2016, plaintiff paid Cytryn $7,108.04, the amount of arrears plaintiff allegedly owed Crystal, clearly in contemplation of signing the lease extension. Kim Aff., at par. 34; Ex. 14 to Kim Aff. On October 20, 2016, plaintiff provided Crystal written notice of its intention to accept a 5-year lease extension. Ex. 15 to Kim Aff. On November 4, 2016, Cytryn advised plaintiff that it would not renew the lease because plaintiff failed to comply with the formal notice requirements set forth in the lease. Ex. 16 to Kim Aff. Cytryn conceded that he withdrew the proposal before it was accepted by plaintiff because plaintiff failed to timely exercise its right to a 5-year lease extension pursuant to paragraph 87 of the lease. Cytryn Aff., at p. 10.
Although Crystal emphasizes this purported "escape clause", it cites no authority for the proposition that such language in its correspondence would preclude the granting of a preliminary injunction to plaintiff especially since, as noted below, the facts suggest that Crystal may have acted in bad faith.
The parties do not address why plaintiff accepted a 5-year renewal lease in writing after Crystal had sent it a 10-year renewal lease.
The foregoing facts establish that, despite plaintiff's failure to provide the required written notice, it clearly made Crystal aware of the fact that it wished to exercise its option to extend the lease. Not a single communication from Crystal - from 2014 until the time it notified plaintiff that the premises had been rented to another tenant - contained an insistence that plaintiff strictly comply with the notice requirements of the lease. Instead, Crystal continued to negotiate the terms of an extension with plaintiff, ultimately resulting in Crystal sending plaintiff a 10-year lease extension for execution. It was not until after plaintiff sent Crystal an October 20, 2016 letter asking it where to send the executed lease that Crystal finally objected to the fact that plaintiff had not complied with the notice requirement of the lease.
Thus, this Court finds that plaintiff has set forth the likelihood of success on its claim for equitable relief. Plaintiff's delay or failure to give timely written notice of its intention to renew the lease was clearly excusable given the lengthy communications it had with Crystal between 2014 and 2016 about the length of the lease extension. Indeed, Crystal's failure to insist on formal written notice throughout the course of these lengthy, ongoing communications was tantamount to a waiver of the notice requirement. See Kenyon & Kenyon v Logany, 33 AD3d 538, 538-539 (1st Dept 2006).Further, should plaintiff not be able to renew its lease at the location where is has conducted a retail business since 2007, it will lose its "valuable business" and "well-known Korean barbecue restaurant" which it has operated at the premises for 9 years (Lim Aff., at pars. 3, 4, 13), and will thus suffer a "forfeiture of its interest in the substantial and valuable asset of [its] goodwill" at the premises (135 E. 57th St., at *5-*6).
Although Crystal asserts that it would be prejudiced if it were not permitted to proceed with the lease it entered into with its new tenant since it now owes its broker a fee of $245,000 in connection with the new tenancy, any such prejudice arose from Crystal's own actions in entering into a lease with a new tenant after it was aware that plaintiff wished to extend its term. Thus, no "prejudice resulted from the breach" of the notice provisions in the lease. See 135 E. 57th St., at *6-*7, quoting Cellular Tel. Co. v 210 E. 86th St. Corp., 14 AD3d 305, 306 [2005]).
Additionally, the alleged breach did not arise from any bad faith on the part of plaintiff given the long-term communications between the parties leading plaintiff to believe that it would be entitled to extend the lease term. See Sy Jack Realty, at 452. If anything, Crystal's "conduct effectively mis[led plaintiff]" (cf. Soho Dev. Corp. v Dean & DeLuca, Inc., 131 AD2d 385, 387 (1st Dept 1987) into believing that it would be able to extend the term of its lease without providing formal written notice as required by the lease. Since Crystal's rental of the premises to a different tenant willing to pay a higher rent after stringing plaintiff along for months, at almost exactly the same time plaintiff paid off its arrears to Crystal, and while Cytryn knew plaintiff's execution of the renewal lease may have been delayed by Kim's trip to South Korea, was conduct that, at the very least, raises doubts about whether it acted in good faith (see Dan's Supreme Supermarkets v Redmont Realty Co., 240 AD2d, at 461, citing J. N. A. Realty, supra), the balance of the equities weigh in plaintiff's favor and it is therefore entitled to the injunctive relief it seeks.
Indeed, Crystal's contentions that plaintiff sought "either a ten year lease extension or a new lease" (Cytryn Aff., at p. 7) and that plaintiff was "only interested in a new 10 year lease" (Cytryn Aff., at p. 10) are disingenuous given that Cytryn's correspondence with Kim consistently referred to a lease extension.
Finally, this Court notes that Crystal's assertion at oral argument that plaintiff did not make substantial improvements to the premises is belied by Kim's supplemental affidavit in support of plaintiff's motion and the exhibits annexed thereto. In his supplemental affidavit, Kim asserts that, in 2013, plaintiff was approved for a $100,000 line of credit from PNC Bank, which he personally guaranteed. Kim's Supp. Aff., at pars. 3-4; Ex. A to Kim's Supp. Aff. Plaintiff used $50,000 of the loaned money to import from Korea and install 22 individual, custom-made table barbeque units. Kim used the remaining $50,000 to repair and replace the electrical, plumbing and gas systems in order to operate the barbeque units. On or about August 12, 2015, plaintiff obtained a $150,000 loan from FC Marketplace, LLC, which he personally guaranteed. Kim's Supp. Aff., at pars. 5-6; Ex. B to Kim's Supp. Aff. Plaintiff used the money loaned by FC Marketplace to "replace the entrance to the restaurant, improve and replace the restaurant's interior design, to move the location of the cashier station, to purchase and install new freezers, as well as improve and replace the electrical systems and plumbing." Kim's Supp. Aff., at par. 5. Given the aforementioned improvements, it is even clearer to this Court that plaintiff would suffer a forfeiture if it were to lose its lease. J.N.A. Realty Corp. v Cross Bay Chelsea, supra, at 394-395, 399.
Therefore, in accordance with the foregoing, it is hereby:
ORDERED that the motion by plaintiff Madangsui, Inc. seeking a preliminary injunction is granted; and it is further,
ORDERED that the parties are to appear for a preliminary conference in this matter on May 23, 2017 at 2:30 p.m. at 80 Centre Street, New York, New York, Room 280, at which time the issues of plaintiff's payment of additional use and occupancy and the necessity of posting of a bond will be addressed; and it is further,
ORDERED that this constitutes the decision and judgment of the Court. DATED: March 20, 2017 ENTER: ________________________ Hon. Kathryn E. Freed, J.S.C.