SUSHI TATSU LLC - v. - BAHRAM BENARESH, d/b/a Bahram Benaresh Realty

R&E OBTAINS A TOTAL VICTORY IN A COMMERCIAL LEASE DISPUTE

This case presents a prime example of R&E using the opposing party's strategy in our client's favor. Our client, a commercial tenant, sued to enforce a termination option under its lease and to recover $153,000 that the tenant paid on signing the lease, plus consequential damages and attorneys' fees. On August 30, 2017, Norman Flitt obtained a ruling from Justice Robert Reed of the Supreme Court, New York County, that resulted in a total victory for the client, both on the client's motion for partial summary judgment declaring that the lease had been properly terminated, and for a money judgment for the $153,000 paid by the tenant when it signed the lease; and as to the landlord's liability on the tenant's claims for consequential damages and attorneys' fees. Justice Reed's ruling as to the landlord's liability for consequential damages and attorneys' fees was the result of R&E's request, made in response to the landlord's cross-motion for partial summary judgment dismissing the tenant's claims for a declaratory judgment and consequential damages, that the Court search the record pursuant to CPLR 3212(b) and award summary judgment to the tenant as to the landlord's liability for consequential damages and the tenant's attorneys' fees.

Our client, Sushi Tatsu, LLC, entered into a commercial lease for a restaurant space at 175 Franklin Street in Manhattan with the landlord, Bahram Benaresh, for a term of 15 years, to construct, use and occupy the demised premises as an upscale sushi restaurant and whiskey bar. The building located at 175 Franklin Street is a Landmark building with, among other violations, an outstanding Landmarks violation that arose out of the landlord's construction of a bulkhead on the roof of the building, which was visible from the street and was unacceptable to the New York City Landmarks Commission ("Landmarks").

Under the terms of the lease, it was the landlord's obligation to remove the Landmarks violation so that the tenant could proceed with its tenant installations and obtain a permit to do so.

To protect itself, the tenant negotiated a termination option, under which the tenant could terminate the lease and get back the $153,000 that the tenant paid upon signing the lease if the landlord's delay "cost the tenant more than six months."

After signing the lease, the tenant prepared for its permit filings and the eventual opening of its restaurant by retaining professionals, preparing plans and hiring a chef, expending over $300,000 in the process. However, the tenant could not obtain a permit unless the landlord cured the Landmarks violation. Accordingly, the tenant made repeated demands that the landlord cure the Landmarks violation, but to no avail. Thus, more than six months passed from the date the lease was signed without any action on the landlord's part to remove the violation. As a result, the tenant terminated the lease on May 23, 2016 and demanded the return of the $153,000 that it had paid when it signed the lease.

A dispute then arose between the parties regarding the tenant's entitlement to exercise its termination option. The landlord erroneously contended that the tenant should first have applied for a permit and been denied before exercising the option. On this basis, the landlord claimed that the tenant's exercise of the option was premature. The tenant, relying on the clear and unambiguous provisions of the termination clause, argued successfully that the only condition precedent to tenant's exercise of its termination option was that the landlord's delay cost tenant more than six months. In addition, the tenant proffered documentary evidence from individuals at Landmarks, who stated that it would have been futile for the tenant to apply for a permit, as a permit would have inevitably been denied given the outstanding Landmarks violation.

After document disclosure and the taking of the tenant's deposition, the tenant moved for partial summary judgment for, among other things, an order declaring that the lease had properly been terminated and for a money judgment against landlord, in the amount of $153,000, plus

interest. In response, the landlord cross-moved to dismiss the tenant's claims for the declaration that the lease had been terminated and for the money judgment that it was entitled to as a result, and also sought to dismiss tenant's third cause of action for the approximately $300,000 in consequential damages, even though the tenant's claim for consequential damages was not at issue on the tenant's motion for partial summary judgment. The tenant had initially sought merely to sever the consequential damages and attorneys' fees claims for future adjudication.

As the landlord, by its cross-motion, had put the tenant's consequential damages claim at issue, R&E's opposition to the cross-motion included evidence to establish the $300,000 in damages, including the tenant's agreements with its various contractors and professionals, and copies of paid invoices. R&E also requested that the Court search the record pursuant to CPLR 3212(b) and award the tenant a money judgment for the consequential damages, in addition to the money judgment sought in the original motion, or, at a minimum, find that the landlord was liable to the tenant for the consequential damages claimed.

In his decision and order, Justice Reed declared that the lease had properly been terminated, granted tenant a money judgment in the amount of $153,000 plus interest from the date of the tenant's termination notice, and instead of merely severing the tenant's claims for consequential damages and attorneys' fees for future adjudication as the tenant had requested in its original motion papers, Justice Reed directed that the tenant file a note of issue to schedule an inquest to determine the amount of such damages and attorneys' fees. Justice Reed thereby resolved the entire matter in our client's favor, subject only to the tenant proving the amount of the damages and the attorneys' fees at an inquest.

(Supreme Court, New York County, Decided August 30, 2017)
(Rosenberg & Estis, P.C. Team: Norman Flitt)