In re 49 Bleecker Inc.
| Decision Date | 15 June 2021 |
| Docket Number | Case No. 21-10312 (MEW) |
| Parties | In re 49 BLEECKER INC., Debtor. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York |
ALTER & BRESCIA, LLP
New York, New York
Attorneys for Debtor 49 Bleecker, Inc.
By: Bruce Alter
FARBER SCHNEIDER FERRARI LLP
New York, New York
Special Counsel for Debtor 49 Bleecker, Inc.
By: Michael Farber
Daniel Schneider
BELKIN BURDEN GOLDMAN, LLP
New York, New York
By: Lewis Lindenberg
Jay Solomon
This chapter 11 bankruptcy case was filed on February 16, 2021. The debtor, 49 Bleecker Inc. (the "Debtor"), is the lessee of the third floor of a building located at 49 Bleecker Street in Manhattan. The lease ("Lease") is dated December 14, 2012 and was entered into between the Debtor and the prior owner of the building, Rogers Investments NV LP ("Rogers NV"). The building currently is owned by Rogers Investments NY, LLC ("Rogers NY"), which apparently is an affiliate of Rogers NV.
Section 2.4 of the Lease provides the Landlord with an option to declare an early termination. Rogers NY contends that the early termination option was properly exercised in 2017 by Rogers NV (which owned the building at the time) and that the Lease terminated as of December 31, 2018. The Debtor denies that proper notices were sent in accordance with the requirements of the Lease, denies that the notices were received, and asserts a number of other defenses that I will review.
There was a considerable amount of litigation between these parties in the New York State courts that preceded the bankruptcy filing. Rogers NY filed an action in the Civil Court of the City of New York in 2019, seeking possession of the premises. The Civil Court issued a decision holding that it lacked jurisdiction. As I will explain later the parties disagree over the interpretation and the implications of the Civil Court's decision.
Rogers NY then filed suit in the Supreme Court of the State of New York. At some point in early 2020 the state court decided that a hearing would be held to determine whether a proper notice of early termination had been sent in accordance with section 2.4 of the Lease. The parties have not provided the Court with a detailed history of the state court litigation but for one reason or another that hearing was never held. A November 2020 hearing date was postponed apparently because the Debtor wished to change counsel, and then a January 11 hearing date was postponed because the Debtor did not appear with counsel. We have been informed by the parties that the New York State Court scheduled a final hearing date of February 17, 2021, but the Debtor filed its bankruptcy petition on February 16, 2021, thereby invoking the automatic stay and preventing the state court hearing from going forward.1
Rogers NY promptly filed a motion seeking relief from the automatic stay on March 15, 2021. [Dkt. No. 9.] The Debtor opposed the motion and argued that any issues over the purported Lease termination should be resolved by me and not by the state court. [Dkt. No. 19.] The motion came on for hearing on April 20, 2021. At that time I noted that it was clear that the Debtor's claimed rights, as well as the stay relief motion and other issues that would inevitably arise in the bankruptcy case (such as the application of deadlines in the Bankruptcy Code for the assumption or rejection of leases involving nonresidential real property), all depended on whether the Lease had validly been terminated before the filing of the bankruptcy case. I further noted that some of those matters (such as the 120-day acceptance/rejection deadline under section 365(d)(4)) made it appropriate to obtain a prompt resolution of these issues and that the matter had been pending for some time in the state court without resolution. The Debtor had urged me to decide the issues, and I said that if it were agreeable to the parties I would schedule the matter for a prompt trial on the merits to decide whether the Lease had terminated or whether it remained in effect. The parties consented, and we scheduled a trial date of June 7, 2021.
During the last week in May and the first week of June the Debtor made several requests to postpone the scheduled trial, arguing that the Debtor wished to retain more specialized landlord/tenant counsel and that counsel would need additional time to prepare. I approved the retention of additional counsel but I denied the requests for an adjournment. The Debtor had had plenty of time since April 20, 2021 to retain specialized counsel if that was needed, not to mention the many months during which the Debtor could (and should) have hired counsel during the prior state court proceedings. I ruled that any difficulties that new counsel might have due to their late hiring was attributable to the Debtor's own delays and that I would not postpone the scheduled trial.
We proceeded with the trial on June 7, 2021, which was held via Zoom. Four witnesses testified. Austen Rabbie of Livingston Management Services (which performed services for Rogers NV and later for Rogers NY) testified about the preparation and service of a notice of early termination and about the managing agent's records of rent charges and payments. William A. Budd of Federal Express testified about certain business records of that entity. Joanna Gonzalez, also of Livingston, testified about the mailing of certain notices. Finally, Mr. Doran Zabari (who is the sole owner, sole officer and sole employee of the Debtor) testified about various matters, which testimony included his denial of receipt of the notice of early termination and his denial that the Debtor was ever in default under the Lease.
The Debtor has made a post-trial motion to reopen the record to include an additional exhibit and has made a post-trial request that I take judicial notice of information contained in a set of building department records. Those requests are discussed below in the portions of this Decision that discuss issues to which the exhibit and the building department records are purportedly relevant.
The Lease is dated December 14, 2012. It covers the entire third floor of the building located at 49 Bleecker Street in New York City. Article I of the Lease says that the scheduled expiration date was to be January 31, 2023. However, section 2.3 of the Lease says that the expiration date is December 31, 2022. That difference is somewhat odd, though it is not relevant to the issues that are now before me.
Section 2.4 of the Lease provides the Landlord with an early termination option, as follows:
Commencing at any time during the fifth (5th) year of the Term, and only during the fifth (5th) year of the Term, Landlord may provide notice of itselection, in Landlord's sole and absolute discretion to terminate this Lease without penalty prior to the Expiration Date, but only upon the delivery of a written notice (the "Early Termination Notice") to Tenant at least twelve (12) months prior to the effective date of such early termination. In the event the Landlord shall exercise such right of early termination, the Tenant shall quit and surrender possession of the Demised Premises on or before the date specified in the Early Termination Notice (the "Early Termination Date"). Between the date Landlord shall give the Early Termination Notice and the Early Termination Date, Tenant shall continue to be obligated under the terms of this Lease . . . Upon any such early termination by Landlord, then, provided Landlord promptly returns Tenant's Security Deposit (if Tenant is not then in default) this Lease and the Term and estate hereby granted shall terminate at noon of such Early Termination Date specified in the Early Termination Notice as if such Early Termination Date were the Expiration Date of the Term. In the event of Early Termination by Landlord as provided herein, Tenant shall be required to deliver the Demised Premises to Landlord in broom clean condition subject to reasonable wear and tear."
The Lease also contains certain provisions governing notices to the parties. Section 25.1, entitled "Notices," provides as follows:
Whenever any notice is required or permitted hereunder, such notice shall be in writing and shall be: (1) delivered by hand; (ii) delivered by a nationally recognized commercial overnight delivery service; or (iii) mailed postage prepaid by registered or certified mail, return receipt requested. Such notices shall be effective: (a) in the case of hand deliveries when received; (b) in the case of an overnight delivery service, on the next business day after being placed in the possession of such delivery service, with delivery charges prepaid; and (c) in the case of registered or certified mail, upon delivery or refusal. All such notices shall be directed as follows: if to Tenant: at the address listed herein in Article I; if to Landlord: at the address listed herein in Article I, with a simultaneous copy sent in like manner to Oved & Oved LLP, 401 Greenwich Street, New York, NY 10013, Attn: Terrence A. Oved, Esq. Notices from either party may be given by its respective attorney.
Article I of the Lease listed the "Tenant" as "49 Bleecker Inc." and the Tenant's Address as "49 Bleecker Street, Third Floor, New York, NY 10012."
The evidence at trial demonstrated that Rogers NV was the Landlord under the Lease until April 2018. In November 2017, Rogers NV prepared a notice purporting to exercise the early termination option granted by section 2.4 of the Lease. A copy of the notice was introduced into evidence as Landlord's Exhibit B. The notice was dated November 28, 2017 andstated that the Landlord had elected to terminate the Lease effective December 31, 2018. There is no dispute that the notice was issued during the fifth year of the term of the Lease. There is also no dispute that the specified early termination date (December...
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