Landlord & Tenant

AppDiv, First Dept

(memorandum opinion)

In tenant's action for a declaratory judgment, reformation of contract, damages for breach, and partial eviction, tenant appealed from Supreme Court's denial of a Yellowstone injunction. The Appellate Division reversed and granted the Yellowstone injunction, emphasizing tenant's extensive expenditures in reliance on the lease and the windfall landlord would reap if tenant's lease were forfeited.

In 1997, tenant executed a 49-year lease, with the City of New York as landlord, covering Pier A and adjacent underwater lands in the Battery Park section of Manhattan. Tenant was to replace substantial portions of the pier's structure and to conduct additional renovation work. The city was to contribute part of the cost, in return for which the city parks department would take a sublease, at token rent, to operate a visitors' center. Tenant was also to pay rent of $440,000 per month after an initial abatement period. Tenant contends that the city received funding from the state to pay a portion of the visitors' center renovation, and agreed to compensate tenant by amending the lease. The city sent rental bills that appeared to incorporate the rent reduction under the amendment, but later began to bill tenant retroactively for the rent amounts allegedly abated in the amendment. The amendment was never signed by the city. In August 2001, tenant brought an article 78 proceeding to compel the city to sign the amendment or declare it effective. After the 9/11 attacks, however, the city seized the premises and excluded tenant. Since November 2001, another enterprise has been conducting ferry service from the pier. The city served tenant with a notice of default, and tenant moved for a Yellowstone injunction. Supreme Court denied the injunction.

In reversing, the Appellate Division emphasized the $22,000,000 tenant had expended in the process of renovating the pier. The court held that tenant did not have to show an ability to cure, but only that a basis exists for believing tenant has the ability to cure. Here, the court concluded that tenant might be able to cure by means of prevailing in its declaratory judgment action, even though the court was unwilling to take a position on the likelihood of success in that action. The court emphasized that the drastic forfeiture would permit the city to reap a windfall under circumstances still being litigated. As a result, the court concluded that Supreme Court had acted improvidently in denying the Yellowstone injunction, which simply maintains the status quo by tolling the cure period under the lease.

No Waiver Clause in Sublease Precludes Subtenant from Claims

Avenue of the Americas Deli Corp. v. MA Enterprises, Inc.

NYLJ 7/9/03, p. 21, col. 1

Civil Ct., N.Y. Cty

(Thomas, J.)

In tenant's commercial holdover proceeding against subtenant, tenant sought summary judgment. The court granted tenant's motion based on subtenant's illegal assignment, rejecting subtenant's waiver, laches, and estoppel claims.

On June 21, 1999, the parties entered into a sublease that provided that subtenant, a corporation, would not be permitted to assign or sublet during the first 4 years of the sublease, and also provided that any transfer by subtenant's president of any interest in subtenant would be deemed a prohibited assignment. On July 16, 2001, subtenant's president transferred 49% of the corporate shares. Based on subtenant's default, tenant, on February 3, 2003, served a notice to cure, followed by a notice of termination. (Subtenant had sought, and was denied, a Yellowstone injunction). Tenant then brought this holdover proceeding. Subtenant contended that a prior lease, executed June 2, 1999, was the operative lease, and gave subtenant a one-time right to assign or sublet. Subtenant also contended that by waiting until early 2003 to serve a notice to cure, tenant's proceeding should be barred by doctrines of waiver, laches, and estoppel.

In awarding summary judgment to tenant, the court first rejected the argument that the June 2 lease was the governing document, noting that subtenant had expressly surrendered the June 2 lease when the June 21 lease was executed. The court then noted that the June 21 lease expressly included a “no waiver” clause. As a result, the court found no outstanding issues of fact, and awarded summary judgment to tenant.

Tenant Awarded Yellowstone Injunction Without Demonstrating Ability to Cure

WPA/Partners LLC v. Port Imperial Ferry Corp.

NYLJ 8/4/03, p. 18, col. 6

AppDiv, First Dept

(memorandum opinion)

In tenant's action for a declaratory judgment, reformation of contract, damages for breach, and partial eviction, tenant appealed from Supreme Court's denial of a Yellowstone injunction. The Appellate Division reversed and granted the Yellowstone injunction, emphasizing tenant's extensive expenditures in reliance on the lease and the windfall landlord would reap if tenant's lease were forfeited.

In 1997, tenant executed a 49-year lease, with the City of New York as landlord, covering Pier A and adjacent underwater lands in the Battery Park section of Manhattan. Tenant was to replace substantial portions of the pier's structure and to conduct additional renovation work. The city was to contribute part of the cost, in return for which the city parks department would take a sublease, at token rent, to operate a visitors' center. Tenant was also to pay rent of $440,000 per month after an initial abatement period. Tenant contends that the city received funding from the state to pay a portion of the visitors' center renovation, and agreed to compensate tenant by amending the lease. The city sent rental bills that appeared to incorporate the rent reduction under the amendment, but later began to bill tenant retroactively for the rent amounts allegedly abated in the amendment. The amendment was never signed by the city. In August 2001, tenant brought an article 78 proceeding to compel the city to sign the amendment or declare it effective. After the 9/11 attacks, however, the city seized the premises and excluded tenant. Since November 2001, another enterprise has been conducting ferry service from the pier. The city served tenant with a notice of default, and tenant moved for a Yellowstone injunction. Supreme Court denied the injunction.

In reversing, the Appellate Division emphasized the $22,000,000 tenant had expended in the process of renovating the pier. The court held that tenant did not have to show an ability to cure, but only that a basis exists for believing tenant has the ability to cure. Here, the court concluded that tenant might be able to cure by means of prevailing in its declaratory judgment action, even though the court was unwilling to take a position on the likelihood of success in that action. The court emphasized that the drastic forfeiture would permit the city to reap a windfall under circumstances still being litigated. As a result, the court concluded that Supreme Court had acted improvidently in denying the Yellowstone injunction, which simply maintains the status quo by tolling the cure period under the lease.

No Waiver Clause in Sublease Precludes Subtenant from Claims

Avenue of the Americas Deli Corp. v. MA Enterprises, Inc.

NYLJ 7/9/03, p. 21, col. 1

Civil Ct., N.Y. Cty

(Thomas, J.)

In tenant's commercial holdover proceeding against subtenant, tenant sought summary judgment. The court granted tenant's motion based on subtenant's illegal assignment, rejecting subtenant's waiver, laches, and estoppel claims.

On June 21, 1999, the parties entered into a sublease that provided that subtenant, a corporation, would not be permitted to assign or sublet during the first 4 years of the sublease, and also provided that any transfer by subtenant's president of any interest in subtenant would be deemed a prohibited assignment. On July 16, 2001, subtenant's president transferred 49% of the corporate shares. Based on subtenant's default, tenant, on February 3, 2003, served a notice to cure, followed by a notice of termination. (Subtenant had sought, and was denied, a Yellowstone injunction). Tenant then brought this holdover proceeding. Subtenant contended that a prior lease, executed June 2, 1999, was the operative lease, and gave subtenant a one-time right to assign or sublet. Subtenant also contended that by waiting until early 2003 to serve a notice to cure, tenant's proceeding should be barred by doctrines of waiver, laches, and estoppel.

In awarding summary judgment to tenant, the court first rejected the argument that the June 2 lease was the governing document, noting that subtenant had expressly surrendered the June 2 lease when the June 21 lease was executed. The court then noted that the June 21 lease expressly included a “no waiver” clause. As a result, the court found no outstanding issues of fact, and awarded summary judgment to tenant.