Riverside Research Institute v. KMGA, Inc.

• Decision Date: 21 May 1985
• Citation: 489 N.Y.S.2d 220,108 A.D.2d 365
• Parties: RIVERSIDE RESEARCH INSTITUTE, Plaintiff, and Warwick Investors, Plaintiff-Respondent, v. KMGA, INC. and K & M Jewelry, Inc., Defendants-Appellants.
• Court: New York Supreme Court — Appellate Division

Page 220

489 N.Y.S.2d 220

108 A.D.2d 365

RIVERSIDE RESEARCH INSTITUTE, Plaintiff, and Warwick Investors, Plaintiff-Respondent, v. KMGA, INC. and K & M Jewelry, Inc., Defendants-Appellants.

Supreme Court, Appellate Division,

First Department.

May 21, 1985.

Stephen M. Rathkopf, New York City, of counsel (Rodney A. Brown and Leonard A. Benowich, New York City, with him on the brief; Golenbock and Barell, New York City, attorneys) for defendants-appellants.

Laura H. Rubin, New York City, of counsel (Sherman J. Saxl, New York City, with her on the brief; Fine, Tofel, Saxl, Berelson & Barandes, P.C., New York City, attorneys), for plaintiff-respondent.

Before KUPFERMAN, J.P., and ROSS, BLOOM, KASSAL and ROSENBERGER, JJ.

KUPFERMAN, Justice Presiding.

Plaintiff-Respondent Warwick Investors (Warwick) is a New York partnership. In 1977 it acquired 80 West End Avenue, a commercial building. At that time, plaintiff-respondent Riverside Research Institute (Riverside) was a tenant of several floors pursuant to a lease due to expire September 30, 1980. Defendants-Appellants KMGA, Inc. and K & M Jewelry Co. (KMGA) were the tenants of the fifth floor under a lease expiring April 30, 1982, and subleased the sixth floor from Riverside under a sublease due to expire on September 29, 1980.

In early 1980, the American Broadcasting Company (ABC) sought to rent the sixth floor, from Warwick, occupancy to commence March 15, 1980. The rent offered was substantially in excess of that paid by KMGA. One of Warwick's partners approached KMGA, offering to compensate them if they vacated the sixth floor by April, instead of September, when the sublease expired. KMGA had recently purchased a building which it eventually planned to use for its activities. Although KMGA allegedly refused the initial offer, negotiations continued.

These negotiations eventually bore fruit, resulting in an understanding on March 13, 1980. KMGA contends that it was to surrender the fifth and sixth floors by April 30, 1980 and Warwick was to pay it $50,000 plus $4,166.67 for every month, through April 30, 1982, that Warwick was able to lease the fifth floor. It also contends that Warwick was acting as the agent for Riverside. Warwick contends that the deal was contingent upon signing a contract with ABC and disputes the contention that it served as agent for Riverside.

In reliance upon this oral understanding, KMGA had its contractor begin expedited renovations, for early occupancy, on the building it had purchased. Warwick knew of these events for when KMGA encountered trouble with receiving a new telephone switchboard, Warwick contacted ABC and secured permission for KMGA to keep its phone equipment on the premises for thirty to forty-five extra days.

While preparations to vacate were occurring, on March 30, 1980 KMGA received a memorandum of understanding of the March 13th meeting. This agreement was clearly contingent on Warwick leasing to ABC and was silent as to the cancellation of Riverside's sublease. KMGA alleged that it contacted Warwick and objected to the contingency. Warwick allegedly stated that the contingency was meaningless. KMGA was allegedly told during the month of April that they would not have to vacate by the end of April, but rather by the end of May.

Although the ABC deal fell through, Warwick told KMGA there was another potential tenant involved, thus lending credence to KMGA's assertion that the deal was not contingent solely upon the ABC deal. KMGA told Warwick on May 20th that it was leaving at the end of May and requested additional elevator service from May 27th until the move was completed. This was provided and KMGA vacated the premises by May 31st.

Warwick communicated with KMGA after the move to request that KMGA pay for some minor damage caused by the moving people, a total of $285, which KMGA paid. Warwick also purportedly acknowledged surrender of the premises. Shortly thereafter, KMGA requested that Warwick pay the $50,000 for KMGA's vacating the premises. Warwick denied the existence of such an agreement and demanded payment of KMGA's June rent for the fifth floor. Warwick thereafter brought an action against KMGA for rent due, as did Riverside, claiming KMGA was in default on its rent for the sublease through September, 1980.

Warwick's amended pleadings assert causes of action against KMGA for rent due, KMGA's share of real estate taxes, and pro rata share of operating costs and for attorneys fees and costs. KMGA counterclaimed for the $50,000 and the monthly amounts covering June 1980 to April 1982. It also sought restitution, claiming Warwick was unjustly enriched at KMGA's expense. The trial court held for Warwick on all its claims and against KMGA on all its claims. It required KMGA to pay Riverside the rent due it under the sublease and awarded both Warwick and Riverside attorneys fees.

Warwick seeks rent for the period of June 1980 to September 1981, when it sold the building to a third party, based on the fact that KMGA's lease ran through April 30, 1982. KMGA claims that the doctrines of equitable estoppel, surrender and acceptance and/or partial performance mandate dismissal and a finding for it on its counterclaims and third party complaint against Warwick, seeking indemnification in the event Riverside succeeds in its action for rent owed.

Under the Statute of Frauds, an oral agreement to surrender a lease with more than a year remaining is void. Gen.Oblig.Law § 5-703(1). Although more than a year remained on the lease, the Statute of Frauds could be inapplicable due to the doctrine of equitable estoppel.

The purpose of invoking the doctrine is to prevent the infliction of unconscionable injury and loss upon one who has relied on the promise of another. American Bartenders School v. 105 Madison Co., 59 N.Y.2d 716, 718, 463 N.Y.S.2d 424, 450 N.E.2d 230.

However:

Comparable to the requirement that partial performance be unequivocally referable to the oral modification, so, too, conduct relied upon to establish estoppel must not otherwise be compatible with the agreement as written (citations). Rose v. Spa Realty Associates, 42 N.Y.2d 338, 344, 397 N.Y.S.2d 922, 366 N.E.2d 1279.

Here, all KMGA...