SNL Leaseholder, LLC v. Oakdale Rd. Holdings LLC
| Citation | 2022 NY Slip Op 33271 (U) |
| Decision Date | 30 September 2022 |
| Docket Number | EFCA2021002326 |
| Parties | SNL LEASEHOLDER, LLC, Plaintiff, v. OAKDALE ROAD HOLDINGS LLC, Defendant. OAKDALE ROAD HOLDINGS LLC, Counterclaim Plaintiff, v. MICHAEL H. HUMPHREY and DAVID BOLTON, Counterclaim Defendants. |
| Court | United States State Supreme Court (New York) |
Unpublished Opinion
Counsel for Plaintiff· and proposed Counterclaim Defendants: DAVID BOLTON, ESQ. David Bolton, P.C.
Counsel for Defendant and Counterclaim Plaintiff: JULIAN B MODESTI, ESQ. Harris Beach, PLLC PRESENT: HON. EUGENE D. FAUGHNAN Justice Presiding
This matter is before the Court to consider the motion filed on behalf of Plaintiff, SNL Leaseholder, LLC ("SNL" or "Tenant"), and Counterclaim Defendants Michael W. Humphrey ("Humphrey") and David Bolton, Esq. ("Bolton"). The motion, pursuant to CPLR 3211 (a)(1) and (a)(7), seeks to dismiss the First, Second, Third, Fifth, Sixth and Seventh Counterclaims contained in the Verified Amended Answer with Counterclaims filed by Oakdale Road Holdings LLC ("Oakdale" or "Landlord").[1] Humphrey is the sole member of Plaintiff SNL, and Bolton is attorney for SNL. The parties appeared for oral argument before the Court on June 10,2022. After due deliberation, this constitutes the determination of this Court.
In a case that is distinguishing itself based on the number of motions made against the pleadings even before discovery has been undertaken, the current issue is focused on Oakdale's counterclaims. The Court has written two prior Decisions in this case, and the underlying facts are set forth in those prior Decisions and will only be highlighted here. By Decision and Order dated March 4, 2022, the Court denied Plaintiffs motion for default judgment, and granted Defendant's motion to serve a late Answer. Plaintiff appealed that Decision and Order, and oral argument is scheduled on the appeal in front of the Third Department on October 12,2022. This Court rendered a second Decision and Order on May 25, 2022, which granted Plaintiffs motion to dismiss Oakdale's Amended Complaint/Counterclaim, as this was not a situation where third-party practice was appropriate. The Court concluded that any cross-claims or counterclaims needed to be asserted by way of an Answer. Thus, Oakdale was limited to its Verified Amended Answer with Counterclaims dated March 16, 2022.
The underlying facts can be briefly summarized. In March 2020, SNL and Oakdale entered into a Lease agreement, whereby SNL (Tenant) leased certain commercial property from Oakdale (Landlord). Humphrey signed on behalf of SNL, and he also executed a personal guaranty. Paragraph 9 of the Lease entitled "Lessor's Work" identified certain repairs/alterations that Oakdale would be responsible to perform, with SNL making periodic payments in consideration of the work being done. That paragraph also stated that rent payments would be abated from the Commencement Date [March 17,2020] until Lessor's Work was substantially completed such that SNL could use the premises for its intended purposes, including a valid Certificate of Occupancy to be obtained by Oakdale. If the Lessor's Work was not substantially completed and a Certificate of Occupancy obtained within 150 days of the Commencement Date then SNL would be entitled to terminate the Lease and obtain a refund of all rent and other monies paid. The parties subsequently entered into an amendment of the Lease (First Amendment) on October 9, 2020, which extended Oakdale's time to substantially complete Lessor's Work and obtain a Certificate of Occupancy to December 31,2020. Disputes arose between the parties, and SNL took the position that Oakdale had not substantially performed its obligations under the contract because it had not obtained a Certificate of Occupancy. By written notice dated July 3,2021, SNL chose to terminate the Lease and seek a refund of amounts it had already paid. SNL subsequently commenced this action to recover those amounts.
Oakdale claims that it was Plaintiff who breached the Lease by not paying rents due under the Lease. Oakdale also seeks to recover from Humphrey under the guaranty. A clause in the Lease provided that Humphrey would sign a personal guaranty that would be effective for 18-months. Although a draft of the guaranty had the 18-month duration, the guaranty that was eventually signed was only effective for 180 days.
Oakdale's Verified Amended Answer with Counterclaims sets forth seven counterclaims: 1) breach of contract against SNL, 2) declaratory judgment of the parties' rights under the Lease and Amendment to the Lease, 3) breach of contract under the guaranty against Humphrey, 4) reformation of the guaranty based on mutual mistake, 5) reformation of the guaranty based on scrivener's error, 6) reformation of the guaranty based on unilateral mistake induced by fraud committed by Bolton and Humphrey, and 7) money damages due to fraud committed by Bolton and Humphrey. SNL, Humphrey and Bolton seek dismissal of all the counterclaims except for the fourth counterclaim.[2]
"On a motion to dismiss made pursuant to CPLR 3211, a court should construe the pleadings liberally, accept the allegations as true and afford the party opposing the motion the benefit of every possible inference to determine whether the facts alleged fit within a cognizable legal theory." T. Lemme Meek, Inc. v. Schalmont Cent. School Dist., 52 A.D.3d 1006,1008 (3rdDept. 2008) (citations omitted); see, EBC I, Inc. v. Goldman Sachs &Co.,5 NY3d 11,19 (2005); Leon v. Martinez, 84 N.Y.2d 83, 87 (1994); Kreamer v. Town of Oxford, 91 A.D.3d 1157 (3rd Dept. 2012); Stainless Broad. Co. v. Clear Channel Broad. Licenses, L.P., 58 A.D.3d 1010 (3 rd Dept. 2009). The "ultimate criterion is whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one." Schmidt & Schmidt, Inc. v. Town of Charlton, 68 A.D.3d 1314,1315 (3rd Dept. 2009), quoting Leon v. Martinez, 84N.Y.2d at 88. The court should not make factual determinations on a motion to dismiss. See, Niagara Mohawk Power Corp. v. State, 300 A.D.2d 949 (3rd Dept. 2002). "Notwithstanding the broad pleading standard, bare legal conclusions with no factual specificity do not suffice to withstand a motion to dismiss ...[and] '[dismissal... is warranted if the [pleading] fails to assert facts in support of an element of the claim, or if the factual allegations and inferences to be drawn from them do not allow for an enforceable right of recovery.'" Mid-Hudson Valley Fed. Credit Union v. Quartararo & Lois, PLLC, 155 A.D.3d 1218,1219 (3rd Dept. 2017) [internal citations omitted] quoting Connaughton v. Chipotle Mexican Grill, Inc., 29 N.Y.3d 137, 142 (2017).
"A motion to dismiss pursuant to CPLR 3211 (a) (1) will be granted only if the 'documentary evidence resolves all factual issues as a matter of law, and conclusively disposes of the ... claim."' Fontanetta v. John Doe 1, 73 A.D.3d 78, 83-84 (2nd Dept. 2010) quoting Fortis Fin. Servs., LLC v. Fimat Futures USA, 290 A.D.2d 383, 383 (1st Dept. 2002); see, Leon v. Martinez, 84 N.Y.2d 83; Jenkins v. Jenkins, 145 A.D.3d 1231 (3rd Dept. 2016); Haire v. Bonelli, 57 A.D.3d 1354 (3rd Dept. 2008). "[I]t is clear that judicial records, as well as documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are 'essentially undeniable,' would qualify as 'documentary evidence' in the proper case." Fontanetta v. John Doe 1, 73 A.D.3d at 84-85; see Koziatek v. SJB Dev. Inc., 172 A.D.3d 1486 (3rd Dept. 2019). Furthermore, dismissal may also be warranted where the "factual claims ... are flatly contradicted by documentary evidence or are inherently incredible." Hyman v. Schwartz, 127 A.D.3d 1281,1283 (3rd Dept. 2015) quoting DerOhannesian v. City of Albany, 110 A.D.3d 1288,1289 (3rd Dept. 2013); Ozdemir v. Caithness Corp., 285 A.D.2d 961, 963 (3rd Dept. 2001) ("a court need not accept as true legal conclusions or factual allegations that are either inherently incredible or flatly contradicted by documentary evidence."). The Lease and amendment to the Lease are contracts, and are the type of "documentary evidence" referred to in CPLR 3211 (a)(1). See, 150 Broadway N.Y.Assocs., L.P. v. Bodner, 14 A.D.3d 1 (1st Dept. 2004); Ozdemir v. Caithness Corp., 285 A.D.2d 961.
"The grounds for dismissal under CPLR 3211 (a) (7) are... strictly limited; the court is not allowed to render a determination upon a thorough review of the relevant facts adduced by both parties, but rather is substantially more constrained in its review, examining only the plaintiffs pleadings and affidavits." Carr v. Wegmans Food Mkts., Inc., 182 A.D.3d 667, 668 (3rdDept. 2020) citing Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 635, (1976); Sokol v. Leader, 74 A.D.3d 1180,1181 (2nd Dept. 2010). "The 'sole criterion' under a motion to dismiss for failure to state a cause of action pursuant to CPLR 3211 (a) (7) is whether, 'from [the pleading's] four corners [,] factual allegations are discerned which taken together manifest any cause of action cognizable at law'" Doller v. Prescott, 167 A.D.3d 1298,1299 (3rd Dept. 2018), quoting People v. Coventry First LLC, 13 N.Y.3d 108,115 (2009).
Defendant's first and second counterclaims seek to recover damages for breach of the Lease as well as unpaid rent to the end of the lease. The third counterclaim asserts that Humphrey is liable under the guaranty for SNL's breach of the Lease. Movants contended on this motion that Oakdale's counterclaims do not allege that the Lease has been terminated, and that Oakdale can only recover rents which accrued prior to the date that the Answer with...
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