Mid Valley Associates, LLC v Foot Locker, Inc., 2005 NY Slip Op 30383(U) (N.Y. Sup. Ct. 4/12/2005), 603069/02
| Decision Date | 12 April 2005 |
| Docket Number | 603069/02 |
| Citation | 2005 NY Slip Op 30383 |
| Parties | MID VALLEY ASSOCIATES, LLC, Plaintiff, v. FOOT LOCKER, INC., f/k/a F.W. WOOLWORTH CO., Defendant. |
| Court | New York Supreme Court |
In this commercial landlord-tenant dispute, the parties separately move for summary judgment.1 For the following reasons, defendant's motion is granted, and plaintiffs motion is denied.
Plaintiff Mid Valley Associates, LLC ("Mid Valley") is the current owner of a shopping center, located in Newburgh, New York, called the "Mid Valley Discount Mall" ("the Mall"). On November 30, 1990, Mid Valley's predecessor in interest, as landlord (hereafter "the Original Landlord"),2 and defendant,3 as tenant, executed a lease for commercial space in the Mall (the Lease). The Lease had a 10-year term, which began on August 7, 1991 and expired on December 31, 2001. The Lease contains two options to renew for two five year terms. Section 12.7, regarding assignment and subletting, provides, that:
(a) Tenant expressly covenants and agrees that it shall not assign...this Lease, nor underlet, or suffer or permit the Leased Premises or any part thereof to be used or occupied by others without the prior written consent of Landlord in each instance. If this Lease is assigned, or if the Lease Premises or any part thereof be underlet or occupied by anybody other than Tenant, Landlord may, after default by Tenant collect rent from the assignee, undertenant or occupant, and no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, undertenant or occupant as tenant, or a release of Tenant from further performance by Tenant of the covenants on the part of Tenant herein contained.
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(c) (2) No assignment or subletting hereunder, whether or not with Landlord's consent, nor the acceptance of rent by Landlord from any assignee or subtenant, shall release Tenant from any obligations or liabilities under this Lease, and Tenant shall continue to be primarily liable for the performance and observance of all of the terms, covenants and conditions of this Lease. If Tenant's assignee or sublessee defaults under this Lease, Landlord may proceed directly against Tenant without pursuing its remedies against the assignee or sublessee. Consent to one assignment or subletting shall not be deemed a consent to any subsequent assignment or subletting. Landlord may consent to subsequent assignments or modifications of this Lease or subletting upon notice to Tenant and Tenant shall not be relieved of liability under this Lease.
On April 13, 1995, defendant sent the Original Landlord a letter requesting permission to assign the Lease to a subsidiary corporation that defendant had created called Rx Realty Corp. Defendant planned to transfer all of its discount pharmacy business assets to Rx Realty Corp., and thereafter to sell its entire discount pharmacy operation (i.e., Rx Realty Corp.) to Pharmhouse Corp. (Pharmhouse).
Pursuant to a document entitled "Assignment of Lease" with an effective date of April 25, 1995, defendant agreed to "assign[] all of its right, title and interest in and to the Lease and the store premises to Rx [Realty Corp]" and Rx Realty Corp. agreed to "assume[] the Lease and agree[] directly with Landlord and [defendant] to pay, perform and observe all the Tenant's obligations under the Lease accruing from and after the effective date hereof." After entering into the Assignment of Lease agreement, defendant consummated the sale of Rx Realty Corp. to Pharmhouse and entered into an Asset Purchase Agreement under which Pharmhouse acquired all of Rx Realty Corp.'s leases by assignment. Pharmhouse immediately took up occupancy of the commercial premises covered by the Lease.
Neither the Original Landlord nor Mid Valley consented to the assignment of the Lease to Rx Realty or to Pharmhouse. And, the record indicates that the Original Landlord never signed a document providing for its consent to the assignment and releasing defendant from its obligations under the Lease. When Pharmhouse sent a letter with a rent check to the Original Landlord for May rent, the Original Landlord returned it in a letter dated May I, 1995, stating that "you are not the tenant." Subsequently, by letter dated May 8, 1995, counsel for defendant informed Pharmhouse that it had paid the rent directly to the Original Landlord and indicated that "the location will be a sublease."
Between 1995 and 1999, Pharmhouse remitted rent for the premises to defendant, who thereafter caused its subsidiary RX Realty to forward payment to the Original Landlord, which refused to recognize Rx Realty as its Tenant, or to accept rent from it. Mid Valley acquired the Mall in March of 1999. When it did so, it applied to the Dime Savings Bank to refinance the underlying mortgage on the Mall. As part of Mid Valley's refinance application, the Dime Savings Bank required all of the Mall's tenants to execute tenant estoppel certificates that stated, among other things, that said tenants had not assigned any portion of their respective leases. Defendant executed two such estoppel certificates, in February and again in August of 1999, and both times stated that it had not assigned, but had rather sublet, the premises at the Mall to Pharmhouse.
On March 15, 1999, an entity called Phar-Mor, Inc. (Phar-Mor) purchased all of Pharmhouse's stock and took over all of Pharmhouse's business, including the use and occupation of the commercial premises at the Mall. After Phar-Mor purchased Pharmhouse stock, it paid rent to defendant directly, and defendant paid Mid Valley. However, in December 1999, Mid Valley began accepting rent directly from Phar-Mor.
On December 20, 2000, a year before the Lease was due to expire, Phar-Mor made a written request to Mid Valley, through its management company to extend the term of the Lease, for the period of January 1, 2002 through December 31, 2006. Mid Valley agreed to grant "the Tenant" a further five-year renewal option, for a term to run from January 1, 2007 through December 31, 2012, as provided in the Lease and an additional five year option for a third renewal term at a rent 15% higher than the previous term, which was not provided for under the Lease, Defendant was not consulted during these negotiations and did not consent to the third renewal term.
On September 24, 2001, both Rx Realty Corp. and Phar-Mor filed for Chapter 11 bankruptcy protection. On November 20, 2001, Phar-Mor sent Mid Valley a letter notifying Mid Valley that it intended to vacate the premises at the Mall, and subsequently did vacate those premises on November 30, 2001. Thereafter, on January 23, 2002, Mid Valley served a rent demand on defendant, and commenced this action.
Mid Valley's first amended complaint sets forth one cause of action for breach of the Lease, and one cause of action for court costs and attorney's fees. Defendant answered, and now moves for summary judgment to dismiss the complaint. In response, Mid Valley cross-moves for summary judgment on the issue of liability.
When seeking summary judgment, the moving party bears the burden of proving, by competent, admissible evidence, that no material and triable issues of fact exist. See e.g. Winegrad v New York Univ. Med. Ctr., 64 NY2d 851 (1985); Sokolow. Dunaud, Mercadier & Can-eras LLP v Lacher, 299 AD2d 64 (1st Dept 2002). Once this showing has been made, the burden shifts to the party opposing the motion to produce evidentiary proof, in admissible form, sufficient to establish the existence of material issues of fact which require a trial of the action. See e.g. Zuckerman v City of New York, 49 NY2d 557 (1980); Pemberton v New York City Trans. Auth., 304 AD2d 340 (1st Dept 2003). Further, it is well settled that, on a motion for summary judgment, "the construction of an unambiguous contract is a question of law for the court to pass on, and [that] circumstances extrinsic to the agreement or varying interpretations of the contract provisions will not be considered, where... the intention of the parties can be gathered from the instrument itself." Maysck & Moran, Inc. v S.G, Warburg & Co., Inc., 284 AD2d 203, 204 (1st Dept 2001)(internal citation omitted).
The threshold issue to be decided concerns whether the Rx Realty was defendant's assignee or sublessee. "'An assignment is a transfer or setting over of property, or of some right or interest therein from one person to another, and unless in some way qualified, it is properly the transfer of one whole interest in an estate, or chattel, or other thing." In re Stralem, 303 AD2d 120 (2d Dept 2003); McSpadden v. Dawson, 117 AD2d 453, 460. (1st Dept 1986). In contrast to an assignment, a sublease reserves some portion of the interest in the property to the transferor. Id.
In this case, the Assignment of Lease between defendant and Rx Realty, unambiguously assigns, without limitation, all rights and obligations under the Lease to Rx Realty, and thus indicates that there was an assignment and not a sublease. Moreover, Dennis Sheehan, defendant's current Deputy Counsel, testified that Rx Realty became the tenant under the Lease, pursuant to the Assignment of Lease.
Defendant argues, however, that as the Original Landlord (and Mid Valley) did not consent to the assignment, continued to collect rent directly from defendant, and required defendant to perform various obligations in connection with the Lease, that there was no effective assignment. Instead, defendant asserts that there was a sublease agreement.
In support of this position, defendant relies on the affidavit and deposition testimony of its former Associate General Counsel, James Mullin, who maintains that since the Original Landlord refused to consent to the assignment, it never came into existence and there was a verbal sublease agreement between Rx...
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