Opinion
10723/07.
Decided on March 10, 2010.
Ostrer Rosenwasser, LLP.
Kurzmann Law Offices, P.C.
Maizes Maizes, LLP.
Gilwit Associates, Esq.
The above captioned actions arise out of the same commercial lease of certain real property located at 15 Monsey Boulevard, Monsey New York (hereafter "the premises"), and more-commonly known and operated as the Monsey Park Home for Adults.
Baygold Associates, Inc. (hereinafter "Baygold") commenced Action #1 seeking a declaratory judgment that a lease between itself and Monsey Park Hotel, Inc. (hereinafter "Monsey Park Hotel") had been properly renewed and sought monetary damages. By stipulation executed by all parties, Congregational Yetev Lev of Monsey, Inc. (hereinafter "Yetev Lev") replaced Monsey Park Hotel as defendant in Action #1. Monsey Park Home for Adults, Inc. (hereinafter "Monsey Park Home") commenced Action #2 against their subtenant, Israel Orzel, alleging breaches of the sublease, demanding their ejectment from the premises and seeking restoration to possession of the premises. By agreement of all parties, Action #2 has been stayed, pending the outcome of Action #1, since, to a large extent, the outcome of Action #1 may be determinative of Action #2.
Baygold, Plaintiff in the first action, and Monsey Park Home, Plaintiff in the second action, are the same entity operating under different names.
The lease at issue was entered into on or about August 2, 1976, between Monsey Park Hotel, as landlord, and Baygold, as tenant. The lease was for an initial ten year period, but was subject to a series of ten year renewals at Baygold's option. On or about January 3, 1985, Baygold, with the permission of Monsey Park Hotel, sublet the premises to the Israel Orzel, who continues to occupy the premises. There is no dispute that the lease was properly extended in or about 1985 and 1995. It should be noted that Yetev Lev purchased the premises from Monsey Park Hotel during the pendency of this action with full knowledge of it and subject to any leases thereupon.
The issue currently before the Court is whether the lease in question was properly renewed in 2005. Baygold and Monsey Park Home contend that by notice dated November 1, 2005, the term of the lease was extended to include the period of October 1, 2007 through September 30, 2017. Yetev Lev asserts that the November 1, 2005 notice did not extend the lease for such a period because the notice did not comply with the express terms of the lease agreement.
Plaintiff's Legal Argument
The law is clear that "an election to renew must be timely, definitive, unequivocal and strictly in compliance with the lease term." See e.g., American Realty Co. v. 64 B Venture, 176 AD2d 226(1st Dept. 1991), citing J.N.A. Realty Corp. v. Cross Bay Chelsea, 42 NY2d 392 (1977). The tenant bears the burden of establishing that it strictly complied with the lease term(s) governing renewal.
The Court notes that the facts in Arziliant v. Eagle Chase Associates, 213 AD2d 573 (2nd Dept. 1995) are very similar to the instant matter. In Arziliant, a lease provided that the tenant could exercise an option to cancel by a written notice sent by certified mail. The notice recipient alleged it was not received, giving rise to the issue as to whether notice had been properly given. The sender was unable to establish that the notice had been sent by certified mail and the recipient denied receipt. "While a rebuttable presumption of receipt based on proof of regular mailing may be available in cases where regular mailing is itself sufficient to comply with the requirements of the law, or with the requirements of the parties' contract, we do not believe that this presumption is available to the plaintiff herein, in the absence of sufficient evidence attesting to the mailing of the . . . letter itself, or to the existence of an office practice geared to ensure the proper addressing or mailing of [correspondence]"(emphasis supplied). See, also, New York and Presbyterian Hosp. v. Allstate Ins. Co. , 29 AD3d 547 (2nd Dept. 2006).
The relevant renewal provision is contained in Paragraph 22 of the lease between Monsey Park Hotel and Baygold dated August 2, 1976. Said paragraph provides as follows:
EXTENSION OF TERM: Tenant, at its option, shall have the right to extend the term of this lease for four (4) additional periods of ten (10) years each, provided that in the case of the second and subsequent extension periods, this lease shall have been extended for each prior extension period. The option to extend must be exercised by Tenant giving notice to Landlord not later then two hundred seventy (270) days prior to the expiration of the term hereof, or of any extended term, as the case may be. Tenant may exercise options to extend for more then one (1) extended term at any time.
Paragraph 21 of the same lease indicates how notice is to be given:
NOTICES: Any notice which is required to be given under the terms of this lease, . . . shall be given by certified mail with return receipt requested, as follows: A. If to the landlord, addressed to Monsey Park Hotel Inc., c/o Jack Rubenfeld, 6 Sunrise Drive, Monsey New York 10952 . . . C. Either party may hereafter designate, by such notice, such other address as said party may deem suitable or necessary for this purpose.
The primary witness presented by Plaintiff as to the issue of proper renewal was Richard Blakeman. Blakeman, at all relevant times, was an attorney and either he or his firm were the attorneys for Baygold since approximately 1985. He testified to being generally familiar with the dealings between Baygold and the landlord and that at some time in the middle of 2005, he received a letter from his client directing him to renew the lease for two successive ten year periods. In response to this letter, Blakeman testified that he determined when the lease was to expire and, based upon this date, calculated that the notice would have to be sent by November 5, 2005 to be timely. He thereafter prepared a letter dated November 1, 2005 which purported to renew the lease, a copy of which was admitted into evidence. Blakeman then testified he placed the letter in an envelope, attached the requisite forms to send same by certified mail, and drove to a nearby post office, where a postal clerk affixed the proper postage for a certified mailing.
Plaintiff submitted into evidence Blakeman's "pre-bill worksheet" for the period in question as proof of his actions. The only entry on the worksheet for the relevant date is "Prepare lease renewal letter to Rubenfeld." The worksheet does not contain an entry reflecting the time expended for Blakeman's trip to the post office, nor is there any charge back to the client for the cost of the certified mailing. The lack of these entries is particularly noteworthy when compared to a prior entry on the worksheet for June 7, 2005, which contains an entry specifically stating ". . . . send certified letter to. . ." and reflects the time attributable to this mailing. Blakeman offered no explanation as to the distinction between the entries for these two dates.
Upon cross-examination, Blakeman testified that he does not maintain a mail log to memorialize these type of events, nor does he type the certified mailing number on the letter. Notwithstanding his practice of placing mailing receipts in clients' file folders, Blakeman could not produce the receipts or other proof of this mailing, did not recall receiving the return receipt "green card" back, made no follow-up inquiry after the purported mailing, and produced no other proof of mailing.
Subsequent testimony established that by November of 2005, the time of Blakeman's mailing of the renewal notice, the person Monsey Park Hotel designated to accept service on their behalf, Jack Rubenfeld, had died, and the designated address for notice, 6 Sunrise Drive, Monsey New York, no longer existed. Neither of these facts were known to Blakeman at the time the notice was sent.
In support of its position that Blakeman mailed the renewal notice on the date in question, Plaintiff presented two witnesses who testified to contemporaneously receiving copies of the November 1, 2005 letter from Blakeman. However, neither witness was able to testify as to the manner by which the mailing was done.
Blakeman further testified to ongoing negotiations concerning various aspects of the lease over the next period of months. He testified that it was not until September, 2007, that he had any indication that there was an issue concerning the lease renewal, when he received a letter from landlord's counsel indicating that the lease was not renewed and was expiring at the end of September, 2007.
Plaintiff also presented testimony that Orzel attempted to renew the lease. However, Plaintiff has not presented sufficient proof that Orzel's attempt to renew complied with both the terms of his sublease and the lease in question.
Based upon the foregoing, the Court finds that Plaintiff has not met its burden of establishing that notice was sent in the manner required under the terms of the lease. Therefore, as a matter of law, the Court finds that the lease was not renewed.
Plaintiff's Equity Argument
Plaintiff contends that the Court should find that the lease was renewed based upon the equities presented in the instant action. According to Plaintiff, even if the Court found, as it did here, that the lease was not properly renewed by its terms, it could make a finding of renewal based upon equitable factors. In opposition, Defendant states that equity may intervene only when a tenant claims excusable default . Defendant further posits that since Plaintiff does not allege an excusable default, but rather asserts that notice was both timely and properly sent by certified mail, the Court need not address Plaintiff's equity argument. The Appellate Division, Second Department, has held that "equity will relieve a tenant from a failure to timely exercise an option to renew if (1) the tenant in good faith made substantial improvements to the premises and would otherwise suffer a forfeiture, (2) the tenant's delay was the result of an excusable default, and (3) the landlord was not prejudiced by the delay." Vitarelli v. Excel Automotive Tech. Ctr. Inc., 25 AD3d 691 (2nd Dept. 2006) (emphasis supplied); see also, J.N.A. Realty Corp. v. Cross Bay Chelsea, 42 NY2d 392 (1977). Therefore, all three of these factors must be established before a court may exercise its equitable powers. As the Appellate Division, Second Department, held in McVey v. Simone, 73 AD2d 959 (2nd Dept 1980), ". . . [N]othing . . . suggests that equity may reach out to find that a party has substantially complied with the terms of an option clause when he has not, or to rewrite the clause to suit one of the parties" "Substantial noncompliance with the terms of an option clause cannot be rewarded by a judicial forgiveness that redounds to the detriment of the other party to the contract." Id.
The Court finds that Plaintiff has failed to establish that its failure to renew in accordance with the express terms of lease was the result of any excusable default. To the contrary, Blakeman testified that he mailed the notice in strict conformity with the lease provisions. He did not testify that he sent it by regular mail, as opposed to certified mail, or that the notice was not timely. In short, he never testified to any mistake at all, and thus this Court cannot find his default excusable. Therefore, the issues as to whether or not the tenant made improvements, or that the landlord was not prejudiced, need not be reached herein. Based upon the foregoing, Plaintiff is not entitled to the relief sought on an equitable basis.