Centurian Development Ltd. v. Kenford Co., Inc.
| Decision Date | 16 December 1977 |
| Citation | 400 N.Y.S.2d 263,60 A.D.2d 96 |
| Parties | CENTURIAN DEVELOPMENT LTD., Respondent, v. KENFORD COMPANY, INC. (formerly Lancaster Sales, Inc.), Appellant. |
| Court | New York Supreme Court — Appellate Division |
Hodgson, Russ, Andrews, Woods & Goodyear, Buffalo, for appellant (Victor Fuzak, Buffalo, of counsel).
Richard O. Robinson, Buffalo, for respondent.
Before MARSH, P. J., and SIMONS, HANCOCK, DENMAN and WITMER, JJ.
Plaintiff brought this action to recover rent due for premises leased to defendant and for physical damage allegedly caused when defendant directed the gas company to turn off the heat, and the water pipes burst. Defendant does not contend that it paid the rent. It maintains that it is released from its obligations under the lease because it surrendered the premises at the end of May, 1975 and plaintiff accepted the surrender. The trial court, sitting without a jury, found defendant liable for $18,033.45 rent for the period from May, 1975 through January, 1976 and $2500 compensation for the property damage resulting from the termination of heat.
The applicable legal principles are quickly stated.
When defendant abandoned or surrendered these premises prior to expiration of the lease, the landlord had three options: (1) it could do nothing and collect the full rent due under the lease (Becar v. Flues, 64 N.Y. 518; Sancourt Realty Corp. v. Dowling, 220 App.Div. 660, 222 N.Y.S. 288), (2) it could accept the tenant's surrender, re-enter the premises and re-let them for its own account and under these circumstances the tenant would be released from further liability from rent, or (3) it could notify the tenant that it was entering and re-letting the premises for the tenant's benefit. If it attempted to re-let for the benefit of the tenant, the rent collected would be apportioned first to repay the landlord's expenses in re-entering and re-letting and then to pay the tenant's rent obligation. Any excess would be payable to the tenant and the tenant would remain liable for any deficiency (Lease, Para. 16; see Underhill v. Collins, 132 N.Y. 269, 30 N.E. 576). In this case, the landlord re-let larger and different premises from those leased to defendant without notice to defendant, for a new term which exceeded the tenant's original term and by an agreement which obligated extensive repairs and modifications to the premises. While the presumption that these acts of the landlord were done in hostility to the tenant's rights may be rebutted the landlord expressly denies any agreement to re-let the premises for the benefit of the tenant. The issue on this appeal, then, is whether there was a surrender and acceptance of the lease for the landlord's own benefit, thereby terminating the tenant's liability, or whether the tenant remained liable for rent under the terms of its lease.
Defendant's predecessor, Lancaster Sales, Inc., had conducted a franchised Ford automobile dealership on the demised premises since 1956. The present lease term commenced on September 1, 1971 and was due to expire on August 31, 1976. Prior to the expiration of the lease Lancaster terminated its dealership with Ford, effective January 20, 1975, and began to liquidate its business. By the beginning of March it had sold its vehicle inventory and had discharged all but two employees. The parts inventory was returned to Ford and the remaining employees were engaged in winding up the company affairs, cleaning the premises and storing a substantial quantity of used parts, tools and furniture in what had been used as the service area of the dealership.
During this period Lancaster's officers received inquiries from representatives of Ford Motor Company about establishing another franchise in the same building and the possibility of awarding the franchise to one of defendant's former employees. Defendant's officers assured Ford that defendant would make the premises available before expiration of the lease and they referred the Ford representatives, as well as others who made inquiry, to plaintiff. Indeed, it is conceded that plaintiff brought prospective tenants to the premises on various occasions during the spring of 1975 before defendant vacated and that it requested and received a key from defendant so that it would have access for that purpose.
Lancaster completed its removal from the premises by the end of May except for the stored items which were left in the hope that they could be sold to a new Ford franchise if the property was rented to Ford. From time to time defendant re-entered the premises to sell some of these and, although several items were stolen in October, some personal property remained stored there until the new tenant took over in 1976. Defendant retained a key for the purpose of access and it continued to heat the premises until November, 1975.
On June 6, 1975 plaintiff granted the first of a series of options to a representative of Ford. These options covered the premises formerly leased to defendant and also an adjoining area of the building of approximately equal size. Plaintiff agreed to make extensive repairs to the property within 60 days if Ford exercised the option and plaintiff warranted that it had the "right to re-let" the premises. The first option was for one dollar and other good and valuable consideration. The second option was executed for a consideration of $5000 for the period September 10, 1975 to November 10, 1975. If exercised before October 10, part of the consideration paid was to be applied towards rent. If the option was not exercised by October 10 the entire consideration could be kept by plaintiff. The option was not exercised and plaintiff kept the $5000 payment. The option was renewed thereafter for additional consideration of $5000.
On February 26, 1976 Ford notified plaintiff that it intended to rent the premises for a five year term and the landlord started to make the required repairs. Plaintiff commenced this action to recover the rent for the months of June, 1975 through February, 1976.
When defendant...
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