Cut-Outs, Inc. v. Man Yun Real Estate Corp.

• Decision Date: 16 August 2001
• Citation: 729 N.Y.S.2d 107,286 A.D.2d 258
• Parties: CUT-OUTS, INC., Appellant-Respondent,<BR>v.<BR>MAN YUN REAL ESTATE CORP., Respondent-Appellant.
• Court: New York Supreme Court — Appellate Division

286 A.D.2d 258

729 N.Y.S.2d 107

CUT-OUTS, INC., Appellant-Respondent,

v.MAN YUN REAL ESTATE CORP., Respondent-Appellant.

Decided August 16, 2001.

Concur — Nardelli, J. P., Tom, Andrias, Rubin and Marlow, JJ.

The evidence at trial established that plaintiff is engaged in the business of die-cutting, mounting and finishing paper products, which involves the use of heavy machinery. For approximately 39 years, plaintiff occupied the entire seventh floor of defendant's building located at 107-113 Grand Street in Manhattan, pursuant to a series of five-year leases. The last of plaintiff's leases was a modified "Standard Form of Loft Lease," providing for a term commencing on February 1, 1992 and expiring on January 31, 1997. The lease provided for a base rent of $6,000 per month, plus certain additional rent, during the relevant period.

Plaintiff used a loading dock at 32 Mercer Street, around the corner from the building's main entrance, for bringing in materials and sending out finished products. The building had two freight elevators accessed from the loading dock, as well as a manually operated passenger elevator accessed through the front entrance and lobby. The lease contained a provision requiring defendant to "provide passenger elevator service on business days from Monday through Fridays from 8:00 AM to 5:00 PM, and normal business hours on Saturdays. Freight elevator service shall be provided Mondays through Fridays during normal business hours (8:30 AM to 4:30 PM)."

Around the beginning of 1996, defendant advised plaintiff (which was then one of only three tenants remaining in the building, the other two being month-to-month holdovers) that its lease would not be renewed when it expired. At about the same time, defendant began making extensive renovations to the building for the purpose of converting it from light industrial use to office use, including, among other things, replacement of the manually operated passenger elevator with a handicapped-accessible automatic elevator.

By letter dated May 9, 1996, plaintiff's counsel gave defendant notice of various alleged defaults under the lease, and demanded cure. Thereafter, plaintiff did not pay rent for the months of June or July, and vacated the premises in mid-July 1996, more than six months in advance of the expiration of the lease.

Plaintiff subsequently commenced this action in October 1996, asserting causes of action for, inter alia, partial actual eviction, constructive eviction, breach of the covenant of quiet enjoyment, breach of contract, and return of plaintiff's $12,000 non-interest bearing security deposit. The complaint alleged that, by reason of defendant's alleged defaults, plaintiff had not been obligated to pay rent for April 1996 or subsequent months, and sought, among other damages, return of the rent plaintiff had paid for the months of April and May 1996. Defendant's answer asserted, inter alia, a counterclaim for recovery of the rent due under the lease from June 1996 through January 1997, and requested an award of defendant's attorneys' fees in this action, pursuant to article 19 of the Lease.

After a non-jury trial, the court found that plaintiff had proven both a partial actual eviction and a constructive eviction as of April 1996, and awarded plaintiff damages in the amount of the base rent it had paid for April and May 1996 ($12,000) and return of its $12,000 security deposit, for total damages in the principal amount of $24,000. The court declined to award plaintiff damages for the costs it incurred in relocating its business or its attorneys' fees in this litigation. The court also dismissed all of defendant's counterclaims.

In rendering its decision, however, the trial court neglected to consider or discuss the effect of the exculpatory provisions of the lease, specifically, article 4 ("Repairs"), article 13 ("Access to Premises"), article 20 ("Building Alterations and Management"), and article 31 ("Elevators, Heat, Cleaning"), which defendant invoked in its opening statement at trial and in its post-trial submissions. Those provisions specifically authorized defendant to perform the work in question without incurring liability to plaintiff, and without abating plaintiff's obligation to pay rent. Plaintiff's argument that the exculpatory provisions do not protect acts that would otherwise constitute a partial actual eviction or constructive eviction, if accepted, would largely read them out of the lease.

Plaintiff alleged that it was partially evicted by defendant's taking of a 6-foot by 10-foot portion of the vestibule outside the passenger elevator on plaintiff's floor which was walled off pending the renovation of that elevator. However, such temporary walling off of the elevator is precisely the sort of activity incident to renovation addressed by article 20 ("Building Alterations and Management"), which was plainly intended to preclude technical eviction claims based on such renovation-related temporary encroachments on plaintiff's premises. As for the 2.5-foot-wide vestibule space that defendant's construction manager testified would be permanently taken when the renovation was completed, plaintiff failed to prove that this encroachment constituted anything more than a de minimis taking of inessential space. Any such taking was protected by the terms of article 20, which permits defendant to "change the arrangement and/or location of public entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other parts of the building. * * * There shall be no allowance to Tenant...