NL Industries, Inc. v. PaineWebber Inc.
Decision Date | 25 August 1989 |
Docket Number | No. 88 Civ. 8602 (MBM).,88 Civ. 8602 (MBM). |
Citation | 720 F. Supp. 293 |
Parties | NL INDUSTRIES, INC., Plaintiff, v. PAINEWEBBER INCORPORATED, Defendant. |
Court | U.S. District Court — Southern District of New York |
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E. Tom Bayko (Paul A. Share and Stephen E. Tisman, of counsel), Holtzman & Urquhart, New York City, for plaintiff.
Allen G. Reiter (Peter T. Shapiro, of counsel), Siller, Wilk, Menchen & Simon, New York City, for defendant.
Plaintiff NL Industries Inc., a New Jersey corporation with its principal place of business in Texas, moves for possession of over two and one-half floors of commercial space in New York City's McGraw-Hill Building that it leased to defendant PaineWebber Inc., a Delaware corporation with its principal place of business in New York. Fed.R.Civ.P. 56(a). NL moves also for summary judgment dismissing or staying PaineWebber's counterclaim for breach of contract. Fed.R.Civ.P. 56(b). In response, PaineWebber moves to dismiss the complaint, and moves to enjoin NL from obtaining possession. Fed.R.Civ.P. 12(b)(6), 56(b), 65. Both parties have treated PaineWebber's motion to dismiss as one for summary judgment, and have adduced record evidence in support of their respective positions. Therefore, the motion will be treated as a motion for summary judgment. Fed.R.Civ.P. 12(b). For the reasons given below, NL is granted possession of the leased premises, PaineWebber's motion for summary judgment or an injunction is denied, and PaineWebber's counterclaim is stayed pending resolution by an arbitrator.
The McGraw-Hill Building is located at 1221 Avenue of the Americas and is owned by Rock-McGraw, Inc. Rock-McGraw leases most of the building to McGraw-Hill, including the 30th through 32nd floors. McGraw-Hill, in turn, leases the eastern half of the 30th floor, a portion of the western half, and all of the 31st and 32nd floors to NL. On September 29, 1976, NL subleased this space to PaineWebber's predecessor in interest, Eastdil Realty, Inc., which then assigned its rights and obligations to PaineWebber. For the sake of brevity, the NL-Eastdil lease assigned to PaineWebber will be treated to as NL's lease with PaineWebber.
The lease between McGraw-Hill and NL, incorporated by reference into the lease between NL and PaineWebber, provides that the lessor will determine how much should be added to the rent to cover the cost of electricity. In practice, McGraw-Hill presents NL with an electricity bill that NL passes on to PaineWebber in the form of what the lease terms "additional rent." During the term of the lease, PaineWebber determined that it was paying for more electricity than it used. After efforts to rectify the problem broke down, PaineWebber withheld rent in the amount of the alleged overcharge. However, even after the alleged overcharge was recovered, PaineWebber continued to pay less than the full amount of rent, asserting that it was still being billed too much for electricity. In addition, PaineWebber refused to pay for water damage allegedly caused by its air conditioner. Based on these events, NL sent PaineWebber a notice of default, which was received on October 24, 1988. On November 4, 1988, NL sent PaineWebber a notice of termination. According to the notice, the lease ended on November 7, 1988. When PaineWebber did not vacate the premises, this action ensued.
NL alleges that it followed the prescribed procedures for terminating the lease of a defaulting tenant. Therefore, NL concludes that it is entitled to possession of the property, among other remedies. For its part, PaineWebber asserts that NL did not comply with the contractual or legal requirements for terminating the lease, and further claims, among other things, that the alleged overcharges for electricity constitute a breach of contract.
Merely because both parties move for summary judgment does not mean that one party must prevail. Home Ins. Co. v. Aetna Casualty & Sur. Co., 528 F.2d 1388, 1390 (2d Cir.1976) (per curiam). Instead, if neither party demonstrates that summary judgment in its favor is warranted, neither motion will be granted. E.g., Schwabenbauer v. Board of Educ., 667 F.2d 305, 313-14 (2d Cir.1981). Under Fed.R.Civ.P. 56(c), a trial judge must grant summary judgment if the evidence offered demonstrates that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). The moving party initially must inform the court of the basis for its motion, and identify "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," that the movant believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)); Adickes v. S.H. Kress & Co., 398 U.S. 144, 153, 90 S.Ct. 1598, 1606, 26 L.Ed.2d 142 (1970). When the moving party bears the ultimate burden of proof on an issue it seeks summary judgment of, it has met its burden by showing sufficient evidence to justify a jury verdict in its favor. In contrast, when the moving party does not bear the ultimate burden of proof on an issue it seeks summary judgment of, it has met its burden by indicating that the nonmoving party has failed to adduce sufficient evidence to raise a genuine issue of fact about the issue. Catrett, 477 U.S. at 322-24, 106 S.Ct. at 2552-53.
Once a movant meets its initial burden, thereby establishing a prima facie case for summary judgment, the opponent of summary judgment must adduce enough evidence to support a jury verdict in its favor. Liberty Lobby, Inc., 477 U.S. at 249, 106 S.Ct. at 2510 (citing First Nat'l Bank of Ariz. v. Cities Svc. Co., 391 U.S. 253, 288-89, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968)); Trebor Sportswear Co. v. The Ltd. Stores, Inc., 865 F.2d 506, 511 (2d Cir. 1989); 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2727 (2d ed. 1983 & Supp.1988). The non-moving party cannot rest upon mere allegations, but must set forth specific facts showing that there is a genuine issue for trial. Fed.R.Civ.P. 56(e).
In assessing whether there are any factual issues to be tried, a court must view the facts in the light most favorable to the non-moving party, and must resolve all ambiguities and draw all reasonable inferences against the moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) (per curiam); Ramseur v. Chase Manhattan Bank, 865 F.2d 460, 465 (2d Cir.1989); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987). However, when there is nothing more than a metaphysical doubt as to the material facts, summary judgment should be granted. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986). Moreover, in New York, whose law the parties have adopted in the lease, summary judgment is proper only if the language of the contract is unambiguous and reasonable persons could not differ on its meaning, and is correlatively improper when different interpretations of the contract are supportable by the record evidence. E.g., United States Naval Inst. v. Charter Communications, Inc., 875 F.2d 1044, 1048 (2d Cir.1989).
The initial issue is the proper procedure for terminating NL's lease with PaineWebber. Both parties agree on one major aspect of the controversy, that NL's lease with PaineWebber contains a conditional limitation. A conditional limitation allows a lessor to notify the tenant that an uncured default has caused the lease to end automatically — in this case after an agreed-upon number of days. Although the lessor has the right to decide whether and when to send such a notice, once the notice is sent, the leasehold will end at some definite point in the future. TSS-Seedman's Inc. v. Elota Realty Co., 72 N.Y.2d 1024, 534 N.Y.S.2d 925, 531 N.E.2d 646 (1988) (mem. op.) (citing, among other authority, 2 J. Rasch, New York Landlord & Tenant (Rasch) §§ 23.29—29.30 (3d ed. 1988)). In contrast, if the lessor retains the option not to send a letter of termination, but actually to terminate the lease, such a termination provision is a condition subsequent, sometimes called a condition.
Because a conditional limitation, once invoked, brings the lease to an end, if a lessor seeks to terminate the lease for nonpayment of rent, and a tenant wishes to maintain its rights under the lease and extend the time to cure or challenge the validity of the termination, the tenant must obtain injunctive relief to toll the running of the cure period. E.g., First Nat'l Stores, Inc. v. Yellowstone Shopping Center, Inc., 21 N.Y.2d 630, 637, 290 N.Y.S.2d 721, 725, 237 N.E.2d 868, 870-71 (1969); 144 E. 40th St. Leasing Corp. v. Schneider, 125 A.D.2d 195, 508 N.Y.S.2d 459 (1st Dep't 1986) (mem. op.); Times Square Stores Corp. v. Bernice Realty Co., 107 A.D.2d 677, 484 N.Y.S.2d 591 (2d Dep't 1985) (mem. op.). In contrast, if a lessor invokes a condition subsequent based upon a tenant's failure to pay rent, the lessor must go to court, obtain a favorable judgment, and then give the tenant 10 additional days from the date of the judgment to cure the defect. N.Y.Real Prop.Acts. & Proc.Law § 751(1) (McKinney 1979). Therefore, if a lessor could terminate a tenancy for nonpayment of rent only by invoking a condition subsequent, the lessor would be required to obtain a judgment against the tenant, and then give the tenant 10 days to pay the delinquent rent. Hollymount Corp. v. Modern Bus. Assocs., 140 A.D.2d 410, 528 N.Y.S.2d 113 (2d Dep't 1988) (mem. op.); see Affidavit of Ann S. Goldwater Exhibits B & C (record on appeal in Modern Bus....
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