E–z Eating 41 Corp.. v. H.E. Newport L.L.C.

• Decision Date: 03 May 2011
• Parties: E–Z EATING 41 CORP., Plaintiff–Appellant,E–Z Eating 47 Corp., Intervenor–Plaintiff–Appellant,v.H.E. NEWPORT L.L.C., et al., Defendants–Respondents.
• Court: New York Supreme Court — Appellate Division

84 A.D.3d 401

922 N.Y.S.2d 329

2011 N.Y. Slip Op. 03652

E–Z EATING 41 CORP., Plaintiff–Appellant,E–Z Eating 47 Corp., Intervenor–Plaintiff–Appellant,

v.H.E. NEWPORT L.L.C., et al., Defendants–Respondents.

Supreme Court, Appellate Division, First Department, New York.

May 3, 2011.

Karson & Long LLP, New York (Barry M. Karson of counsel), for E–Z Eating 41 Corp., appellant.Tobias Law Firm, P.C., New York (David G. Tobias of counsel), for E–Z Eating 47 Corp., appellant.Rosenberg & Estis, P.C., New York (Jeffrey Turkel of counsel), for respondents.GONZALEZ, P.J., FRIEDMAN, McGUIRE, DeGRASSE, MANZANET–DANIELS, JJ.

Appeals from orders, Supreme Court, New York County (Carol R. Edmead, J.), entered March 27, 2009, which, inter alia, denied plaintiff tenant's and intervenor subtenant's motions for Yellowstone injunctions and dismissed their complaints for declaration of their rights under a lease and sublease, dismissed as moot, without costs, and the orders vacated.

Given that the time to cure the alleged lease default has expired, and that the E–Z Eating 41 Corp. has surrendered possession of the premises, the orders appealed are presently moot ( see Matter of Johnson v. Pataki, 91 N.Y.2d 214, 222, 668 N.Y.S.2d 978, 691 N.E.2d 1002 [1997]; cf. Automated Ticket Sys., Ltd. v. Quinn, 90 A.D.2d 738, 739, 455 N.Y.S.2d 799 [1982] [dismissing claims for declaratory relief relating to contract; “[t]he contract having expired, all of the rights asserted by plaintiff against defendants have accrued, and plaintiff should seek its remedy in an action at law for damages”] [internal quotation marks omitted] ). In addition, there is no indication that the appeal should be excepted from the mootness doctrine ( see Matter of Hearst Corp. v. Clyne, 50 N.Y.2d 707, 714–715, 431 N.Y.S.2d 400, 409 N.E.2d 876 [1980] ).

While the general rule in New York is to simply dismiss an appeal which has been rendered moot, vacatur of an order or judgment on appeal has, in circumstances such as those presented here, been held to be an appropriate exercise of discretion where necessary “ ‘in order to prevent a judgment which is unreviewable for mootness from spawning any legal consequences or precedent’ ” ( see Funderburke v. New York State Dept. of Civ. Serv., 49 A.D.3d 809, 811, 854 N.Y.S.2d 466 [2008], quoting Matter of Hearst Corp. v. Clyne, 50 N.Y.2d at 718, 431 N.Y.S.2d 400, 409 N.E.2d 876).

Our vacatur is without prejudice to the parties seeking any further relief they deem appropriate.

All concur except McGUIRE, J. who dissents in a memorandum as follows.McGUIRE, J. (dissenting).

I disagree with the majority on an issue about which reasonable minds can differ: whether these appeals and the underlying actions are moot. Because I conclude the appeals and the underlying actions are not moot, I reach the merits and would reverse.

In July of 1997, plaintiff-appellant E–Z Eating 41 Corporation (E–Z Eating) entered into a 20–year lease with an entity that is not a party to this action to operate a Burger King restaurant on certain premises at 485 Fifth Avenue in Manhattan. Nonetheless, subparagraph (a) of paragraph 41, entitled “Use and Occupancy,” of a “Rider” to the lease states that “[t]enant shall operate its business in the Demised Premises during the term and occupy the Demised Premises solely as a restaurant with table-seating operated under the name and style of ‘Burger King’ for on and off site consumption of food and beverage and for no other purpose.” On the other hand, subparagraph (b) of the same paragraph states that “[t]enant shall use, occupy, operate and maintain the Demised Premises through the Term as a restaurant with table-seating for on and off site consumption in a reputable manner and in a manner which shall not detract from the character, appearance or dignity of the Building.” Although these two subparagraphs share a common parent in paragraph 41, the relationship between these siblings is at best strained. That relationship and certain provisions of the lease relating to assignment and subletting are at the heart of the parties' dispute.

In July of 2008, a federal district court in Florida granted permanent injunctive relief to Burger King in an action between it and, inter alia, E–Z Eating, its affiliate, E–Z Eating 47 Corporation (E–Z 47), and Elizabeth and L. Luan Sadik, the principals of both entities, each of whom owns 50% of each corporation's shares. The injunction bars E–Z Eating, E–Z 47 and the Sadiks from operating a Burger King restaurant. In addition, the court granted summary judgment to Burger King, declaring, inter alia, that Burger King's termination of franchise agreements between it and E–Z Eating and E–Z 47 had been proper. E–Z Eating commenced this action for declaratory and injunctive relief on September 11, 2008,¹ asserting in its complaint that counsel for the owners of the building in which the premises are located, the successors-in-interest to the original landlord, defendants H.E. Newport L.L.C., HTS–NYC LLC and Hyatt Hotels Corporation (the Owners), had taken the erroneous position that, absent the Owners' consent, the lease did not permit E–Z Eating to use the premises for any purpose other than a Burger King. E–Z Eating seeks a declaration that it is permitted to use the premises for a fast food burger restaurant in the style and manner of a Burger King and an injunction barring the Owners from requiring E–Z Eating to seek their consent to use the premises for the purpose of operating such a restaurant.

Shortly thereafter, the Owners served E–Z Eating with a 15–day notice to cure in which they contended that E–Z Eating was in breach of the lease because subparagraph (a) of Paragraph 41 requires it to operate its business in the premises solely as a Burger King restaurant. By order to show cause dated October 16, 2008, E–Z Eating sought both a Yellowstone injunction tolling the running of the notice to cure and an injunction restraining the Owners from taking steps to terminate its tenancy and from commencing any action to recover possession of the premises. The next day, Supreme Court granted the requested relief in the form of a temporary restraining order, thereby tolling the running of the notice to cure, which otherwise would have expired on October 22, 2008. Meanwhile, E–Z Eating and E–Z 47 entered into a sublease, dated as of October 1, 2008, of the premises. On October 30, 2008, Supreme Court granted, on consent, E–Z 47's motion to intervene. In its intervenor complaint, E–Z 47 alleges that: the lease permits E–Z Eating, without the consent of the Owners, “to sublet the entire premises ... for the continued use of the entire premises for restaurant purposes with table-seating for on and off site consumption and for no other purpose to an affiliate, as defined in the lease, or to a subsidiary”; it is such an affiliate and is not required by the lease to operate a Burger King restaurant on the premises; and any default under the lease by E–Z Eating had been cured. Accordingly, E–Z 47 seeks a judgment declaring, inter alia, that: the lease is in force and effect; any default under the lease has been cured; it is permitted by the lease to operate such a restaurant on the premises and is not required to operate a Burger King; and the sublease is effective and binding on the Owners.

By an order dated March 24, 2009 and a decision and order dated March 25, 2009, Supreme Court denied E–Z Eating's motion for Yellowstone relief and for an injunction restraining the Owners from taking steps to terminate its tenancy and from bringing any action to recover possession of the premises. In Supreme Court's view, the lease unambiguously “precludes the use of the premises by either [t]enant or its subtenant, for any purpose, other than ‘as a restaurant with table-seating operated under the name and style of ‘Burger King’ for on and off site consumption of food and beverage.' ” Although Supreme Court acknowledged that the lease permitted E–Z Eating to assign or sublet the lease to an affiliate without the consent of the landlord, the court ruled that such an assignee or sublessee is required, absent the consent of the landlord, to operate a Burger King restaurant. For these reasons, and because it was undisputed that E–Z Eating and E–Z 47 were barred by the federal injunction from operating a Burger King, Supreme Court denied the motion. Although the Owners had not cross-moved for any relief, Supreme Court nonetheless dismissed both complaints.

On March 27, 2009, the Owners served a five-day notice of cancellation of the lease on E–Z Eating. Both E–Z Eating and E–Z 47 promptly moved in this Court for injunctive relief pending their separate appeals from the two March orders of Supreme Court. Specifically, each sought an order tolling the notice of cancellation and enjoining the Owners from interfering with their possession and use of the premises. A Justice of this Court granted an interim stay on April 2, 2009, but a panel of this Court denied their respective motions on May 14, 2009 ( see M–1604–1605, 2009 N.Y. Slip Op. 72471(u), 2009 WL 1324938; 2009 N.Y. Slip Op. 72472(u), 2009 WL 1324939 [1st Dept.2009] ).

By a letter dated August 31, 2009, counsel for the Owners advised this Court of a decision in a summary holdover proceeding it had commenced against E–Z Eating and E–Z 47 in Civil Court. According to the decision, dated August 20, 2009, the Owners commenced the proceeding on June 12, 2009. The decision recites statements by E–Z Eating and E–Z 47 that once this Court denied their motions for an order, inter alia, tolling the expiration of the notice of cancellation, the Owners regained possession of the premises. For this reason, Civil Court granted the motion of E–Z Eating to dismiss the Owners' petition, reasoning that the proceeding was pointless because “the landlord already ha[d] full legal possession of the premises.” In his letter, counsel for the Owners did not...