Jefpaul Garage Corp. v. Presbyterian Hosp. in City of New York

• Decision Date: 03 April 1984
• Citation: 61 N.Y.2d 442,462 N.E.2d 1176,474 N.Y.S.2d 458
• Parties: , 462 N.E.2d 1176 JEFPAUL GARAGE CORP., Respondent, v. PRESBYTERIAN HOSPITAL IN CITY OF NEW YORK, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 458

474 N.Y.S.2d 458

61 N.Y.2d 442, 462 N.E.2d 1176

JEFPAUL GARAGE CORP., Respondent, v. PRESBYTERIAN HOSPITAL IN CITY OF NEW YORK, Appellant.

Court of Appeals of New York.

April 3, 1984.

[462 N.E.2d 1177] John M. O'Connor and Joyce A. Leahy, New York City, for appellant

[61 N.Y.2d 444] Robert L. Beerman and Barry A. Wadler, New York City, for respondent.

OPINION OF THE COURT

SIMONS, Judge.

Defendant, Presbyterian Hospital in the City of New York, is the owner of property located at 507 West 166th Street, New York City. In 1971, it leased the premises to plaintiff's assignor for use as a public garage and a gasoline station. The lease was subsequently amended to extend the term to December 31, 1982, and to permit the tenant to renew for two additional five-year terms. A dispute arose in April, 1981, when plaintiff attempted to exercise its first renewal option. Defendant refused to agree to the renewal, notifying plaintiff that it was in default on the lease for failure to pay the April and May rent in 1981 and for repeatedly neglecting to pay rent and New York City taxes when due in the past. In accordance with the lease, it advised plaintiff that it had 15 days to cure these objections. The parties dispute whether it did so within the specified time, but concede that plaintiff did tender the April and May rent checks tardily and that defendant accepted them. On July 15, defendant served another notice to cure by July 31, 1981, alleging that plaintiff had violated the lease not only because of late payments of rent and taxes but that it had also sublet the premises without consent. On July 30, 1981 plaintiff instituted this action and obtained a "Yellowstone" injunction tolling the cure period (see First Nat. Stores v. Yellowstone Shopping Center, 21 N.Y.2d 630, 290 N.Y.S.2d 721, 237 N.E.2d 868; Podolsky v. Hoffman, 82 A.D.2d 763, 441 N.Y.S.2d 763). Thereafter defendant continued to accept plaintiff's rent payments until December 31, 1982. Plaintiff tried again to exercise the options for the renewal terms in October, 1981 but its notifications were rejected by defendant and the underlying term expired at the end of 1982, during the pendency of this action. All that is at stake now is plaintiff's right to renew. Plaintiff remains in possession contending that it validly exercised its option.

The issue is whether defendant's acceptance of rent during the term with knowledge of plaintiff's violations and without terminating the lease, assuming plaintiff had violated its terms, constituted a waiver of the violations as a matter of law and thus enabled plaintiff not only to remain in possession during the lease term but also to exercise the option to renew. Plaintiff contends that it did and that its actions were legally effective to "prolong" the lease for the renewal terms (see Atkin's Waste Materials v. May, 34 N.Y.2d 422, 426, 358 N.Y.S.2d 129, 314 N.E.2d 871; see, also, Gulf Oil Corp. v. Buram Realty Co., 11 N.Y.2d 223, 228 N.Y.S.2d 225, 182 N.E.2d 608; 1 Rasch, NY Landlord & Tenant [2d ed.], § 334). It instituted this action seeking a declaration of its rights and moved for summary judgment. Special Term denied the motion but the Appellate Division, relying on Atkin's Waste Materials v. May (supra), reversed the order and granted plaintiff judgment.

There should be a reversal. On the record before us whether or not plaintiff violated the terms of the lease and, if so, whether it cured the violations in accordance with the 15-day requirement of the lease thereby enabling it to exercise its renewal option, are questions of fact. Defendant has not waived the violations, if such they were, and the Appellate Division erred in holding as a matter of law that it did.

A waiver is the voluntary abandonment or relinquishment of a known right. It is essentially a matter of intent which must be proved (Alsens Amer. Portland Cement Works v. Degnon Contr. Co., 222 N.Y. 34, 37, 118 N.E. 210; Beacon Term. Corp. v. Chemprene, Inc., 75 A.D.2d 350 429 N.Y.S.2d 715; 22 N.Y.Jur.2d, Contracts, § 330, p. 212). While waiver may be inferred from the acceptance of rent in some circumstances, it may not be inferred, and certainly not as a matter of law, to frustrate the reasonable expectations of the parties embodied in a lease when they have expressly agreed otherwise. This lease contained a nonwaiver and merger clause which provided: "The receipt by Landlord of rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach and no provision of this lease shall be deemed to have been waived by Landlord unless such waiver be in writing signed by the Landlord."

Its language is clear and unambiguous. The parties having mutually assented to its terms, the clause should be enforced to preclude a finding of waiver of the conditions precedent to renewal (see Matter of Wil-Low Cafeterias v. 650 Madison Ave. Corp., 95 F.2d 306 (2 Cir.1938), cert. den. 304 U.S. 567, 58 S.Ct. 950, 82 L.Ed. 1533; Brainerd Mfg. Co. v. Dewey Garden Lanes, 78 A.D.2d 365, 435 N.Y.S.2d 417, app. dsmd. 53 N.Y.2d 701, 439 N.Y.S.2d 109, 421 N.E.2d 504).

Nor should the intent to waive be inferred from acceptance of rent during the period of the "Yellowstone" injunction. The broad restraint of that order foreclosed defendant after July 30, 1981 from taking any steps to terminate the lease and tolled the notice to cure. The order applied only during part of the period under consideration but plaintiff attempted to exercise the option for both renewal terms during that time and it would be patently inequitable to hold that defendant had waived its objections to them by accepting rent during the period when it was stayed indefinitely from terminating the lease and evicting plaintiff (see Boynton v. Bassford, 188 Misc. 188, 67 N.Y.S.2d 369).

Our decision in Atkin's Waste Materials v. May, 34 N.Y.2d 422, 358 N.Y.S.2d 129, 314 N.E.2d 871, supra does not require a contrary holding. In that case the tenant leased land from the City of Rochester for use as a scrap processing yard and later executed a written lease which provided for options to renew conditioned upon faithful performance of the lease. The 1967 renewal of the lease was to expire on November 30, 1971, and the tenant attempted a further renewal by letter dated December 30, 1970. After failing to act for four months, the city rejected the renewal notice because of the tenant's failure to faithfully and fully perform the covenants in the lease. During the period of the alleged default and until November, 1971, however, the...