Soho Development Corp. v. Dean & DeLuca Inc.

• Decision Date: 30 June 1987
• Citation: 517 N.Y.S.2d 498,131 A.D.2d 385
• Parties: SOHO DEVELOPMENT CORPORATION, Petitioner-Landlord-Appellant, v. DEAN & DeLUCA INCORPORATED, Respondent-Tenant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 498

517 N.Y.S.2d 498

131 A.D.2d 385

SOHO DEVELOPMENT CORPORATION, Petitioner-Landlord-Appellant, v. DEAN & DeLUCA INCORPORATED, Respondent-Tenant-Respondent.

Supreme Court, Appellate Division First Department.

June 30, 1987.

H.J. Petchesky, H. Minkin, New York City, for petitioner-landlord-appellant.

G. Rocca, New York City, for respondent-tenant-respondent.

Before MURPHY, P.J., and SULLIVAN, ROSS, ASCH and WALLACH, JJ.

MEMORANDUM DECISION.

Order of the Supreme Court, Appellate Term, First Department (Xavier C. Riccobono, Jawn A. Sandifer, Stanley Parness, JJ.), entered October 18, 1985, which affirmed the judgment of the Civil Court, New York County (John Stackhouse, J.), entered August 20, 1984, which dismissed petitioner-landlord's petition in this holdover proceeding and granted final judgment of possession in favor of respondent-tenant, unanimously reversed on the law and the facts, with costs, and petition is granted in favor of petitioner-landlord. Use and occupancy of the premises since expiration of the lease on September 14, 1983 is awarded to petitioner-landlord at a rental of $4,200 per month through September 14, 1985 and at $5,500 per month thereafter. Attorneys' fees are awarded to petitioner-landlord in the amount of $10,000.

On March 29, 1977, petitioner-landlord, Soho Development Corporation, entered into a lease agreement with respondent-tenant, Dean & DeLuca, Inc., for the store and basement at 121 Prince Street, in the Soho district in Manhattan. The lease-term ended six and one-half years later on September 14, 1983. The lease provided, in unambiguous terms, that the tenant would have an option to renew the lease for ten years. However, a condition of the option was that it be exercised at least six months prior to the expiration of the lease. The tenant negligently failed to timely notify the landlord of its intent to exercise the option. Not until three and one-half months after the renewal option had expired, and after the tenant had written the landlord to discuss a renewal of the lease, did the tenant actually exercise the option. The tenant refused to renegotiate.

As a result, the tenant commenced an action in Supreme Court, New York County, for a judgment declaring that it had properly exercised its renewal option. Soon thereafter, the lease expired and the landlord commenced this holdover proceeding. Respondent-tenant moved to dismiss the holdover proceeding on the ground that another action was pending. Judge Lehner denied the motion ruling that the Civil Court had the power to relieve the tenant of its failure to timely exercise its option.

The holdover proceeding was thereafter tried in Civil Court. Justice Stackhouse held that the tenant's failure to timely exercise the lease renewal option was excusable and thus equitably deemed the late renewal of the option as timely. Appellate Term affirmed the Civil Court's decision without opinion. On July 17, 1986, this Court granted petitioner-landlord leave to appeal. In passing, we cannot help but comment that Justice Stackhouse's conduct throughout the trial was less than exemplary. Obviously impressed with the gourmet food store, Dean & DeLuca, the court actively intervened throughout the trial, practically to the point of testifying for the tenant.

In concluding that the tenant's failure to exercise the option was excusable, Justice Stackhouse relied upon the now leading case J.N.A. Realty Corp. v. Cross Bay Chelsea, Inc., 42 N.Y.2d 392, 397 N.Y.S.2d 958, 366 N.E.2d 1313 (1977). J.N.A. Realty concerned a situation where a tenant negligently failed to timely renew its lease option. One of the "primary questions" raised in J.N.A. Realty, and in similar cases upon which it relied, in determining whether to grant a tenant equitable relief, was whether "the tenant suffer a forfeiture if the landlord is permitted to enforce the letter of the agreement." Id. at 395, 397 N.Y.S.2d 958, 366 N.E.2d 1313. Surely, a tenant in possession, who has made a "considerable investment in improvements on the premises" and who "would undoubtedly lose a considerable amount of its customer good will" if he lost his location, would suffer a forfeiture if equity did not relieve him of his negligence. Id. at 399.

Under the circumstances, the instant case is not one in which equity should intervene to relieve the tenant of his obligations under the lease. The tenant has failed to present adequate evidence to prove that strict adherence to the requirements of timely exercise of the lease renewal option would constitute a forfeiture. Cf. J.N.A.Realty, supra; cf. United Skates of America v. Kaplan, 96 A.D.2d 232, 468 N.Y.S.2d 642 (2d Dept.1983), appeal dismissed, 63 N.Y.2d 944.

The record demonstrates that the major costs of improvements made by the tenant were...