GIOIA EQUITIES INC. v. ONC Dev. LL
| Decision Date | 22 February 2011 |
| Docket Number | Docket Number: 112451/2009 |
| Parties | GIOIA EQUITIES, INC., Plaintiff v. ONC DEVELOPMENT LL |
| Court | New York Supreme Court |
OPINION TEXT STARTS HERE
DECISION AND ORDER
APPEARANCES: For Plaintiff Howard Stern Esq.
For Defendants Chung and Kim Byung H. Chung, Pro Se
Heather Kim, Pro Se
Plaintiff sues defendants based on breach of a lease between plaintiff, the owner of commercial premises, and defendant ONC Development LLC, the tenant. Defendant Chung, a member of ONC Development, executed the lease, which he and defendant Kim, Chung's wife, each personally guaranteed. Plaintiff moved for a default judgment against defendants after they failed to answer the complaint. C.P.L.R. § 3215(e). Upon oral argument, for the reasons explained below, the court grants plaintiff's motion to the extent of a judgment on liability against ONC Development and Kim, but denies its motion against Chung.
To obtain a default judgment against non-answering defendants, plaintiff must support its motion with evidence of the facts constituting its claim. C.P.L.R. § 3215(f); Woodson v. Mendon Leasing Corp., 100 N.Y.2d 62, 70 (2003). An affidavit, a personally verified complaint, or other admissible, evidence establishing a viable claim satisfies this requirement. Wilson v. Galicia Contr. & Restoration Corp., 10 N.Y.3d 827, 830 (2008); Woodson v. Mendon Leasing Corp., 100 N.Y.2d at 71; Mejia-Ortiz v. Inoa, 71 A.D.3d 517 (1st Dep't 2010); Al Fayed v. Barak, 39 A.D.3d 371, 372 (1st Dep't 2007). To defeat a default judgment, defendants must show a reasonable excuse for defaulting and a meritorious defense. Johnson v. Peas, 32 A.D.3d 253, 254 (1st Dep't 2006); ICBC Broadcast Holdings-NY, Inc. v. Prime Time Adv., Inc., 26 A.D.3d 239, 240 (1st Dep't 2006); Estrella v. Herrera, 23 A.D.3d 320, 321 (1st Dep't 2005); 114 W. 26th St. Assoc. LP v. Fortunak, 22 A.D.3d 346 (1st Dep't 2005).
Plaintiff's president has personally verified its complaint, which plaintiff shows it served with a summons on defendant limited liability company (LLC) September 21, 2009, by delivery to the New York Secretary of State, N.Y. Ltd. Liab. Co. Law § 303, and on the individual defendants October 1, 2009. C.P.L.R. § 308(1) and (2). Plaintiff further shows that it mailed the summons and complaint to the LLC October 7, 2009, and to the individual defendants January 14, 2010, to comply with the statutory second mailing requirements. C.P.L.R. § 3215(g)(3) and (4). Defendants did not answer.
Along with the verified complaint, the affidavit of plaintiff's president, Richard Gioia, attests that under the lease defendant LLC executed for commercial premises commencing February 1, 2009, for a term of 10 years, and guaranteed by the individual defendants, defendants failed to pay rent as of April 2009 as well as late fees of $820.00 per month. Plaintiff re-let the premises for a rent lower than the $8,200.00 per month defendants agreed to pay. Under the lease, if plaintiff re-let at a lower rent, defendants are obligated to pay the difference. Aff. of Howard Stern, Ex. A ¶ 18. Plaintiff thus supports its claim against defendants. C.P.L.R. § 3215(f).
The individual defendants rely on two letters to the court, dated June 14 and July 21, 2010, each signed but not sworn to by both Chung and Kim. At an appearance August 3, 2010, Chung swore to the truth of each letter in open court. The June 14 letter states that defendants leased the premises from plaintiff to operate a cafeteria-style restaurant, but requested to terminate the lease when defendants could not secure the permit necessary to operate that business. Defendants claim plaintiff agreed to terminate the lease and return $20,000.00 of the $38,000.00 deposit and then changed the lock and erected a sign advertising the premises for rent.
If Chung's evidence supports a surrender, it terminates the parties' obligations under the lease. Riverside Research Inst. V. KMGA, Inc., 68 N.Y.2d 689, 691-92 (1986); Sandra's Jewel Box v. 401 Hotel, 273 A.D.2d 1, 3 (1st Dep't 2000); Bay Plaza Estates v. New York Univ., 257 A.D.2d 472, 473 (1st Dep't 1999). A surrender may be accomplished by the parties' express agreement or impliedly by operation of law. A surrender by agreement requires that the landlord accept the premises and waive its right to recover damages pursuant to the lease. Banc of Am. Sec. LLC v. Solow Bldg. Co. II, L.L.C., 77 A.D.3d 533, 534 (1st Dep't 2010); Ring v. Printmaking Workshop, Inc., 70 A.D.3d 480, 481 (1st Dep't 2010). See Hudson Towers Hous. Co., Inc. v. VIP Yacht Cruises, Inc., 63 A.D.3d 413, 414 (1st Dep't 2009); Connaught Tower Corp. v. Nagar, 59 A.D.3d 218 (1st Dep't 2009); Sandra's Jewel Box v. 401 Hotel, 273 A.D.2d at 2. A surrender by operation of law occurs when the parties to the lease act inconsistently with the landlord-tenant relationship, indicating an intent to consider the lease terminated. Riverside Research Inst. v. KMGA, Inc., 68 N.Y.2d at 691-92; Forty Four Eighteen Joint Venture v. Rare Medium, Inc., 18 A.D.3d 237, 238 (1st Dep't 2005); Bay Plaza Estates v. New York Univ., 257 A.D.2d at 473.
While the lease's prohibition against oral modification, Stern Aff., Ex. A ¶ 98, may pose a barrier to demonstrating the parties' agreement for a surrender of the premises, N.Y. Gen. Obligs. Law § 15-301(1); Eujoy Realty Corp. v. Van Wagner Communications, LLC, 73 A.D.3d 546, 548 (1st Dep't 2010); Aris Indus, v. 1411 Trizechahn-Swig, 294 A.D.2d 107 (1st Dep't 2002); Gottlieb V. Newton, 253 A.D.3d 383, 384 (1st Dep't 1998), if proved true, Chung's evidence does show actions by plaintiff as well as defendants consistent with such an agreement and inconsistent with a continuation of their lease, to establish a surrender by operation of law. See Euioy Realty Corp. v. Van Waaner Communications, LLC, 73 A.D.3d at 548; Connaught Tower Corp. v. Naqar, 59 A.D.3d 218 (1st Dep't 2009); Aris Indus, v. 1411 Trizechahn-Swig, 294 A.D.2d 107; Joseph P. Day Realty Corp. v. Lawrence Assoc., 270 A.D.2d 140, 141-42 (1st Dep't 2000).
Plaintiff of course may claim defendants' request to terminate the lease amounted to its repudiation, entitling plaintiff to lock out defendants and re-rent the premises, but this version of events only raises a dispute for trial. Banc of Am. Sec. LLC v. SolowBldg. Co. II, L.L.C-, 77 A.D.3d at 534; Sandra's Jewel Box v. 401 Hotel, 273 A.D.2d at 2-3. See Joseph P. Day Realty Corp. v. Lawrence Assoc, 270 A.D.2d at 142; Ford Covle Props., Inc. v. 3029 Ave. V Realty, LLC, 63 A.D.3d 782 (2d Dep't 2009). Defendants' version indicates simply a request to terminate the lease that plaintiff accepted and, particularly in the absence of conclusive evidence regarding the sequence of the alleged oral termination agreement, lock-out, re-letting, and nonpayment, not necessarily any acts of repudiation or breach before plaintiff acted entirely incompatibly with the tenant's continued tenancy. See Carlin v. Jemal, 68 A.D.3d 655, 656 (1st Dept 2009); Richardson & Lucas, Inc. v. New York Athletic Club of City of N.Y., 304 A.D.2d 462, 463 (1st Dep't 2003); O'Reilly v. NYNEX Corp., 262 A.D.2d 207, 208 (1st Dep't 1999). Defendants thus demonstrate a meritorious defense of surrender of the premises, whether by law or an oral modification of the lease providing for the surrender, through evidence, albeit partially disputed, of both the landlord's and the tenant's actions consistent with a surrender and inconsistent with a continuing lease.
The July 21 letter explains that Chung traveled to Korea in August 2009 and remained there until he returned to the United States in February 2010, when he discovered the mail notifying defendants of this action and moving for a default judgment. This explanation furnishes a reasonable excuse for Chung's failure to answer. Obermaier v. Fix, 25 A.D.3d 327 (1st Dep't 2006); Wilson v. Sherman Terrace Coop., Inc., 14 A.D,3d 367 (1st Dep't 2005). His reasonable excuse for failing to respond to the complaint until after he received plaintiff's motion also constitutes grounds to deny a default judgment against him. Spira v. New York City Tr. Auth., 49 A.D.3d 478 (1st Dep't 2008); Guzetti v. City of New York, 32 A.D.3d 234 (1st Dep't 2006); Rodriguez v. Dixie N.Y.C., Inc., 26 A.D.3d 199, 200 (1st Dep't 2006); Terrones v. Morera, 295 A.D.2d 254, 255 (1st Dep't 2003). See Mayerson Stutman, LLP v. Most, 30 A.D.3d 261 (1st Dep't 2006); Tullev v. Straus, 265 A.D.2d 399, 401 (2d Dep't 1999).
In an unsworn letter dated August 12, 2010, Kim explains that she did not open the mail received while Chung was in Korea because she had "no intention to sign with him." Reviewing any of the multiple copies of the summons and complaint, mailed or personally delivered, to her individually as well as to her husband and to his LLC, would have notified Kim that the action was against her in addition to defendants Chung and ONC Development. She does not dispute that the summons and complaint were personally delivered to her October 1, 2009. C.P.L.R. § 308(1); Koutrakos v. Vernon Sutton Realty, 40 A.D.3d 355, 356 (1st Dep't 2007). Her suggestion that she ignored the mailings of the pleadings because they concerned the leased premises is belied by defendants' affidavits that the mailings were in envelopes marked "personal and confidential" and not indicating "the communication was from an attorney or concerned and alleged debt". Stern Aff., Ex E at 4; C.P.L.R. § 3215(g) (3) (1).
Nor does Kim deny that the signature on the guaranty is hers or furnish any other defense to her liability based on the guaranty. While she signed the June 14 letter raising the surrender and oral modification defenses, she never swore to it, despite repeated...
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