230 Park Avenue Holdco, LLC, Appellant,v.Kurzman Karelsen & Frank, LLP, et al., Respondents.BriefN.Y.March 22, 2016APL-2015-00161 New York County Clerk’s Index No. 653178/11 Court of Appeals STATE OF NEW YORK 230 PARK AVENUE HOLDCO, LLC, Appellant, against KURZMAN KARELSEN & FRANK, LLP, STANLEY E. MARGOLIES, PETER G. GOODMAN, PHYLLIS H. WEISBERG, DEIRDRE A. CARSON, ISAAC A. SAUFER, RICHARD E. MILLER, LOUIS I. NEWMAN, JOSEPH F. SEMINARA, ERNEST L. BIAL, M. DAVIS JOHNSON a/k/a MALCOM DAVIS JOHNSON JR., MICHAEL P. GRAFF, and JULIET KARELSEN and EVA KARELSEN, as Co-Executors of the Estate of FRANK E. KARELSEN, III, deceased, Respondents. >> >> AMENDED BRIEF FOR RESPONDENTS KURZMAN KARELSEN & FRANK, LLP Pro Se and Attorneys for Individual Respondents 437 Madison Avenue, 29th Floor New York, New York 10022 212-867-9500 Of Counsel: Charles Palella Arthur R. Block Date Completed: August 27, 2015 To Be Argued By: Charles Palella Time Requested: 15 Minutes 1 3954773v1 APL-2015-00161 COURT OF APPEALS STATE OF NEW YORK -------------------------------------------------------------x 230 PARK AVENUE HOLDCO, LLC, Appellant, -against- KURZMAN KARELSEN & FRANK, LLP, STANLEY E. MARGOLIES, PETER G. GOODMAN, PHYLLIS H. WEISBERG, DEIRDRE A. CARSON, ISAAC A. SAUFER, RICHARD E. MILLER, LOUIS I. NEWMAN, JOSEPH F. SEMINARA, ERNEST L. BIAL, M. DAVIS JOHNSON a/k/a MALCOLM DAVIS JOHNSON, JR., MICHAEL P. GRAFF, and JULIET KARELSEN AND EVA KARELSEN, AS CO-EXECUTORS OF THE ESTATE OF FRANK E. KARELSEN, III, DECEASED, Respondents. ---------------------------------------------------------------x New York County Index No. 653178/11 RULE 500.1(c) DISCLAIMER CHARLES PALELLA, an attorney duly admitted to practice law before the Courts of the State of New York, affirms the following to be true under penalty of perjury: 1. I represent the Respondents herein and am fully familiar with the facts and prior proceedings herein. 2 3954773v1 2. Pursuant to Rule 500.1(c), the Respondent Kurzman Karelsen & Frank, LLP, is a limited liability partnership with no corporate parents or subsidiaries. Dated: New York, New York August 27, 2015 CHARLES PALELLA i 3954773v1 TABLE OF CONTENTS Page Table of Authorities ............................................................................................ iii Preliminary Statement .......................................................................................... 1 Questions Presented ............................................................................................. 3 Counter-Statement of Facts .................................................................................. 5 Procedural History ............................................................................................. 13 POINT I LANDLORD CANNOT EVADE ITS CONTRACTUAL OBLIGATION TO ALLOW THE TENANT TO MARKET THE PREMISES FOR THE REMAINDER OF THE LEASE TERM AND TO CONSIDER PROSPECTIVE NEW TENANTS IN GOOD FAITH BY MISCHARACTERIZING TENANT’S AFFIRMATIVE DEFENSE AS AN ASSERTION OF A GENERAL DUTY TO MITIGATE DAMAGES ........................ 19 A. For Valuable Consideration, Landlord Undertook To Allow Kurzman To Market The Premises For The Remainder Of The Lease Term And To Consider Prospective New Tenants In Good Faith ............................................................................................... 19 1. The Parties’ Legal and Economic Positions Before the Stipulation ..................................................................................... 21 2. Legal and Economic Positions After the Stipulation .................... 23 B. The Entire Appellate Division Panel Agreed With The IAS Court That Kurzman’s Third Affirmative Defense Is Not At Odds With Holy Properties ..................................................................... 24 C. Landlord Clearly Assumed Obligations In The Final Sentence Of Paragraph 8 Of The Stipulation .......................................................... 28 ii 3954773v1 D. Assuming Arguendo That The Meaning Of Paragraph 8 Of The Stipulation Is Ambiguous, Then Landlord’s Motion Cannot Be Granted As A Matter Of Law .................................................................. 30 POINT II LANDLORD DID NOT MEET ITS BURDEN OF PROVING THAT THERE WERE NO MATERIAL FACTS IN DISPUTE AS TO KURZMAN’S DEFENSE THAT LANDLORD BREACHED ITS EXPRESS CONTRACTUAL OBLIGATIONS AND THE IMPLIED COVENANT OF GOOD FAITH PERFORMANCE ......................................................................... 33 A. The Standard Of Proof Applicable To Landlord’s Motion For Summary Judgment ................................................................................. 35 B. Viewing The Evidence In The Light Most Favorable To Kurzman, There Are Triable Issues Of Facts .......................................... 36 1. Removing the CoStar Listing ........................................................ 39 2. Stopping CBRE From Showing The Premises ............................. 41 3. Landlord’s Silence in the Face of Kurzman’s Legal Demand Letter ............................................................................... 41 C. Landlord Cannot Make Triable Issues Of Fact Disappear By Constructing A False Narrative And Making All Inferences In Favor Of The Moving Party .................................................................... 43 D. Additional Grounds For Denying Summary Judgment Are Equitable Estoppel And The Need For Full Discovery ........................... 45 POINT III IN NO EVENT IS LANDLORD ENTITLED TO A REMAND DIRECTING THE ENTRY OF A MONEY JUDGMENT ON THE RECORD HEREIN ................................. 49 CONCLUSION .................................................................................................. 52 iii 3954773v1 Table of Authorities Page(s) CASES 150 Broadway N.Y. Assoc., L.P. v Bodner, 14 A.D.3d 1 (1st Dep’t 2004) ............................................................................. 29 172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Ass'n, Inc., 24 N.Y.3d 528 (2014) ................................................................................... 26, 27 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 N.Y.2d 144 (2002) ............................................................................. 20, 31, 37 Adelsberg v Amron, 103 A.D.3d 571 (1st Dep’t 2013) ........................................................................ 30 American Bartenders School, Inc. v. 105 Madison Co., 59 N.Y.2d 716 (1983) ......................................................................................... 47 CBS Inc. v. Ahern, 108 F.R.D. 14 (S.D.N.Y. 1985) .......................................................................... 47 China Privatization Fund (Del), L.P. v Galaxy Entertainment Group Ltd., 95 A.D.3d 769 (1st Dep’t 2012) ......................................................................... 31 Color by Pergament, Inc. v. Pergament, 241 A.D.2d 418 (1st Dep’t 1997) ....................................................................... 35 Dietrich v. Grandsire, 83 A.D.3d 994 (2d Dep’t 2011) .......................................................................... 48 Evans v Famous Music Corp., 1 N.Y.3d 452 (2004) ............................................................................... 20, 31, 32 Guzman v L.M.P. Realty Corp., 262 A.D.2d 99 (1st Dep’t 1999) ......................................................................... 36 Hambrecht & Quist Guar. Fin., LLC v El Coronado Holdings, LLC, 27 A.D.3d 204 (1st Dep’t 2006) ......................................................................... 31 Henderson v. City of New York, 178 A.D.2d 129 (1st Dep't 1991) ........................................................................ 35 iv 3954773v1 Holy Properties Limited, L.P. v. Kenneth Cole Productions, Inc., 87 N.Y.2d 130 (1995). ...............................................................24, 25, 26, 27, 28 Icon Motors v. Empire State Datsun, 178 A.D.2d 463 (2d Dep't 1991) ........................................................................ 35 Imperator Realty Co. v. Tull, 228 N.Y. 447 (1920) ........................................................................................... 48 Muzak Corp. v Hotel Taft Corp., 1 N.Y.2d 42 (1956) ................................................................................. 28, 29, 30 Negri v. Stop & Shop, Inc., 65 N.Y.2d 625 (1985) ......................................................................................... 35 O.G. Orr & Co. v Fireman's Fund Ins. Co., 235 A.D. 1 (3d Dep’t 1932) ................................................................................ 37 Phillips v. Joseph Kantor & Co., 31 N.Y.2d 307 (1972) .......................................................................................... 35 Reyes v Harding Steel, Inc., 50 A.D.3d 427 (1st Dep’t 2008) ......................................................................... 36 Rivera v. City of New York, 212 A.D.2d 403 (1st Dep’t 1995) ....................................................................... 35 Sage Realty Corp. v. Kenbee Management-New York, Inc., 182 A.D.2d 480 (1st Dep’t 1992) ........................................................................ 26 Salvia v. Dyer, 21 Misc.3d 140(A), 2008 N.Y. Slip Op. 52359(U), 2008 WL 5004312 (App. Term 9th & 10th Dists. 2008) ............................................................... 25, 26 Sillman v. Twentieth Century-Fox Film Corporation, 3 N.Y.2d 395 (1957) ............................................................................................ 35 Sumitomo Mitsui Banking Corp. v Credit Suisse, 89 A.D.3d 561 (1st Dep’t 2011) ......................................................................... 36 Sutton v. East Riv. Sav. Bank, 55 N.Y.2d 550 (1982) ......................................................................................... 30 v 3954773v1 Telerep, LLC v U.S. Intern. Media, LLC, 74 A.D.3d 401 (1st Dep’t 2010) ......................................................................... 31 U.S. Bank Nat. Ass'n v Lightstone Holdings LLC, 103 A.D.3d 458 (1st Dep’t 2013) ................................................................. 29, 31 Urban Holding Corp. v. Haberman, 162 A.D.2d 230 (1st Dep’t 1990) ........................................................................ 47 Yelin v. American Dental Center, 184 A.D.2d 693 (2d Dep't 1992) ........................................................................ 35 STATUTES CPLR 3212(f) ........................................................................................................... 48 CPLR § 5602(a)(1)(ii) ................................................................................................ 7 RPAPL § 749(3) ....................................................................................................... 22 1 3954773v1 PRELIMINARY STATEMENT In an action to recover disputed post-occupancy rental amounts under a commercial lease agreement, the Appellant 230 Park Avenue Holdco, LLC (hereinafter “Landlord” ) appeals from an order of the Appellate Division, First Department entered on January 20, 2015 by permission of that Court granted in an order entered on May 7, 2015. The order now under review affirmed an order of the Supreme Court, County of New York (Coin, J.) entered on May 1, 2013 which denied a portion of Landlord’s motion for summary judgment seeking to strike the Tenant’s third affirmative defense which alleged that Landlord breached a Stipulation of Settlement in which it contractually agreed to allow the tenant to market the premises to prospective tenants for the remainder of the lease term and to consider prospective new tenants in good faith, in consideration for Tenant relinquishing possession pursuant to the Stipulation. Landlord asserts that the Appellate Division ruling will create uncertainty within the commercial landlord bar, and will degrade New York’s long-standing rule that commercial landlords have no duty to mitigate their damages. It will not. Rather, this case involves a simple dispute between one landlord and one tenant. Landlord disagrees with the Appellate Division’s interpretation of a sui generis provision in the Stipulation, but that Court employed well-settled rules of contract interpretation in rendering its determination. 2 3954773v1 The principal Respondent, the law firm of Kurzman Karelsen & Frank, LLP (hereinafter “Kurzman” or “Tenant”), and the additional Respondents, all of whom were guarantors under the lease (the “Guarantors”), maintain that the Appellate Division was clearly correct in finding that 1) the contractual language clearly and unambiguously placed upon Landlord an obligation to allow Kurzman to market the premises and to give good faith consideration to prospective tenants proffered by Kurzman; and 2) there were clear questions of fact precluding summary judgment on the issue as to whether Landlord interfered with Kurzman’s rights under this agreement. This Court should reject as meritless Landlord’s efforts to evade its contractual obligation by mischaracterizing Tenant’s affirmative defense as an assertion of a general duty to mitigate damages, as well as its attempt to gloss over the evidence which raised clear questions of fact as to whether Landlord sabotaged Tenant’s efforts to market the premises. 3 3954773v1 QUESTIONS PRESENTED 1. Whether a stipulation of settlement between a landlord and a tenant which provided that in exchange for the tenant’s vacating of a below-market rental commercial leasehold before the expiration of the lease term and for other valuable consideration, the landlord would allow the tenant to market the premises to prospective tenants for the remainder of the lease term and would consider prospective new tenants in good faith imposed enforceable obligations upon the landlord. The Appellate Division and the IAS Court answered this question in the affirmative. Respondent contends that these rulings were correct. 2. Whether a tenant’s affirmative defense, alleging that a landlord breached its contractual duties under a stipulation of settlement to allow the tenant, who vacated the subject leasehold pursuant to a written agreement, to market the premises to prospective new tenants for the remainder of the lease term and to consider prospective new tenants in good faith, should be stricken as a matter of law where evidence presented by the tenant, even before discovery was completed, shows: a. The landlord directed the principal on-line multiple listing service used by commercial real estate brokers to remove a listing seeking 4 3954773v1 such prospective tenants that the tenant’s broker had placed with the service; b. When the service asked the landlord to explain this instruction the landlord wrote back that even though the tenant had vacated the premises the landlord was not making the space available for prospective new tenants; c. The landlord refused requests of the tenant’s broker for access to the premises to show to prospective tenants; and d. The landlord remained silent after being presented with a declaration of breach of its obligations with respect to considering prospective tenants. The Appellate Division and the Supreme Court both ruled in the negative, and each held that Landlord’s motion for summary judgment striking the affirmative defense must be denied. Respondent contends that these rulings were correct. 5 3954773v1 COUNTER-STATEMENT OF FACTS Kurzman is a New York City law firm that traces its roots back to shortly after the Civil War. In or about 1929, the firm’s predecessor moved its offices into the newly opened New York Central Building located at 230 Park Avenue, which is presently co-named the “Helmsley Building” and the “Crown Jewel of Park Avenue” (“Building”).1 (R. 142).2 Kurzman maintained its law practice continuously in the Building pursuant to a series of renewal leases. The last of these was dated April 1, 1997, for a term ending on December 31, 2012 (“Lease”). (R. 65-111; 138 at ¶ 3; 142-43 at ¶¶ 21-25).3 Landlord was during all relevant times the successor in interest to the named Lessor, 230 Park Avenue Associates.4 At all times material hereto the Building’s managing agent was Monday Properties (“Monday”). The Kurzman law firm occupied the entire5 23rd floor suite in the Building’s central tower, one of the most desirable and prestigious office locations in New 1 During an intermediate period of its history the Building’s name was “New York General Building.” 2 Numbers in parenthesis preceded by the letter “R” refer to pages in the Record on Appeal. 3 The Guarantor defendants are sued based upon their individual guarantees of Kurzman’s obligations under the Lease, subject to a cumulative liability limit of $200,000. (R. 112-22). 4 In May 2015, after the ruling of the Appellate Division, Plaintiff sold the building. See Marketplace, New York Law Journal, May 13, 2015, http://goo.gl/bFHHdD. 5 The Landlord’s misleading description of the Premises as a “portion” of the 23rd floor (LL. Br. at p. 9) appears to be intended to fit into the Landlord’s narrative that it was doing Kurzman a favor by offering to transfer it to inferior space in the building prematurely when, in fact, the Landlord was extremely eager to benefit itself by regaining the full-floor suite for its inventory. See infra. 6 3954773v1 York City (“Premises”). During all times material to this case, Kurzman’s rent was far below market. (R. 151, ¶ 57)6 In January 2010, Kurzman contacted Monday to try to open negotiations for an extension of its leasehold past December 31, 2012, including a substantial rent increase. Over the following 12 months, Kurzman’s initiatives proved futile. At first, Landlord tried to avoid meeting with Kurzman. Next, it strongly implied that it was not going to negotiate for a renewal. Finally, it admitted that it had no intention of making any proposal to Kurzman for the 23rd floor. Instead, it periodically urged Kurzman to move out of its tower suite immediately so it could lease the Premises to another tenant. (R. 138 at ¶¶ 2-4; 142-43 at ¶¶ 21-24; 143-45 at ¶¶ 25-33; 145 at ¶¶ 34-36; 148-50 at ¶¶ 47-51). In May 2010 Landlord finally said, explicitly, that it wanted Kurzman to surrender its Lease immediately, move out of its tower suite, and enter into a new lease for an inferior space in the Building’s base. (R. 145, ¶34). Landlord repeated this request in December. Monday’s principal, Anthony Westreich, told Kurzman that Monday had an “outside tenant” prospect for the 23rd floor suite.7 Monday 6 The Landlord asserts that “the market rate . . . was more than double” the rent under the Lease. (R. 261, ¶12; see also LL. Br. at pp. 9-10). 7 It subsequently came to light that the Landlord wanted to remove Kurzman from the 23rd floor so it could offer the space to Golub Capital, Inc., a company whose broker had just submitted a “time sensitive” proposal of financial terms and renovation details for leasing the entire 21st floor in the tower. Because the 21st floor was already taken, the Landlord wanted to offer the 23rd floor as a substitute – after getting Kurzman to agree to move immediately. (R. 146-47 at ¶¶ 37- 41; R. 167-74). 7 3954773v1 wanted to offer Kurzman a new lease for less desirable space in the Building at what it wanted Kurzman to believe would be a favorable price, conditioned upon leaving the Premises right away. (R. 147-50, 175).8 By January 2011, Landlord’s tactic of refusing to offer terms for an extension of the Lease and pushing Kurzman to give up the Lease right away so Landlord could install a different tenant at a much higher rent, prompted Kurzman to begin looking for a new office location for the long term future.9 In July 2011 Kurzman, represented by CB Richard Ellis, Inc. a/k/a CBRE, signed a sublease for a full floor office suite at 437 Madison Avenue. Kurzman planned to move on August 31, 2011. (R. 150-51, ¶¶ 54-55). 8 The communications in December 2010 came a point when Mr. Unterman (on behalf of Kurzman) said to Mr. Westreich (in these or very similar words), “I know what you are telling me to do.” Mr. Westreich responded (also in these or similar words), “I know you do. Go do what you have to do.” (R. 150 at ¶ 52). 9 The Supreme Court record has additional details about the communications and events that led Kurzman to believe that there was a meeting of the minds that the Landlord would accept a surrender of the Lease if Kurzman was able to move out of the Premises. This evidence was submitted in opposition to the branch of the Landlord’s motion seeking summary judgment dismissing Kurzman’s affirmative defense of surrender by operation of law. The Supreme Court, and the Appellate Division in an interlocutory appeal, ruled against Kurzman on this defense, and Kurzman decided to defer seeking leave to appeal to this Court from the Appellate Division’s rulings unless and until there is a final judgment rendered against Kurzman. See CPLR § 5602(a)(1)(ii). The facts underlying Kurzman’s surrender by operation of law defense, however, are also relevant to the defense of breach of the Stipulation. For example, they demonstrate that the last sentence of Paragraph 8 is an important and meaningful provision that Kurzman relied upon when it gave up its right in the Lease to cover its future rent by finding a subtenant. Also, these background facts prove that the Landlord misrepresented to Kurzman its intention to market the space after Kurzman’s exit, and the Landlord acted in bad faith when it pulled CBRE’s advertising for the Premises, and warehoused the space indefinitely, as soon as Kurzman honored its obligation to vacate the premises. See infra. 8 3954773v1 Kurzman asked CBRE to notify Landlord of the move, and to try to work cooperatively on a smooth exit. On July 18, 2011, Ken Rapp of CBRE wrote to Anthony Westreich and Brian Robin of Monday: I wanted you to know that Kurzman Karelsen has signed a lease outside of the building so we are going to have to take some steps to handle our space at 230 Park. Of course we would still like to sit down with you and work out some type of exit that works for both parties. If you are still not interested in discussing this, please review our marketing flyer and let us know if you have any comments or changes. (R. 178). (R. 150-52 at ¶¶ 54-60; R. 178-79)(emphasis supplied). CBRE’s e-mail reflected Kurzman’s two-prong approach to the remaining 16 months on the Lease. Given Landlord’s recurring efforts to reclaim the 23rd floor suite, Kurzman believed there had been a meeting of the minds that as soon as Kurzman offered to move out, then Landlord would accept the surrender of the Lease – either in a new written instrument, or by not contesting Kurzman’s assertion of a surrender by operation of law. Hence, CBRE requested a meeting with Monday to renew its attempts to “work out some type of exit.” The second prong would keep the Lease in effect and Kurzman would exercise its right to sublet “our space at 230 Park” under Paragraph 53 of the Lease (“Sublet Clause”). (R. 94-98). While Kurzman preferred a clean break (first prong), it expected to be able easily to cover any claimed liability for post-occupancy rent by subletting (second prong). (R. 151, ¶ 57). 9 3954773v1 The Sublet Clause provided that Kurzman had the right to present a prospective subtenant and Landlord could not unreasonably delay or deny consent. In the alternative, Landlord was required to reclaim the Premises and release Kurzman from rent liability for the remainder of the term. (R. 94-98; R. 151 at ¶ 57). Given the significantly below market rent, Kurzman could offer the Premises to a business needing a short-term rental in a prestigious location at a price that was below market but still greater than the rent paid by Kurzman. (R. 94-98; 151 at ¶ 57) The “marketing flyer” that CBRE sent to Monday accurately stated: “CB Richard Ellis, Inc., as exclusive sublease agent, is pleased to offer the following prime space for sublease.” (emphasis supplied) (R. 179). CBRE also prepared a listing with similar information and placed it for publication with the New York City CoStar Group (“CoStar”), the leading commercial office on-line listing service. (R. 141 at ¶ 17). Landlord pre-approved the listing (“please call Costar and say no objection to the Kurzman listing”). (R. 218). Instead of meeting with CBRE as requested in its e-mail, Landlord had its attorneys send Kurzman a demand letter that it was going to sue in order to collect alleged arrearages for disputed additional rent charges.10 There ensued 10 Monday had begun to claim (inaccurately) that Kurzman was late in paying real estate tax escalation charges. It was the established practice between Kurzman and the Landlord to pay the yearly escalation rent in monthly installments. Suddenly, Monday repudiated this past practice 10 3954773v1 correspondence between the representatives and lawyers for Kurzman and Landlord regarding Landlord making a threat of litigation in response to Kurzman’s invitation to work out peacefully the logistics of the surrender. (R. 152-54 at ¶¶ 61-67). Negotiations ensued, resulting in a Stipulation of Settlement dated August 22, 2011 (the “Stipulation”). (R. 212-216; R. 154-56 at ¶¶ 68-72). In the Stipulation: − Landlord’s nonpayment proceeding was converted to a holdover proceeding, without any adjudication of Landlord’s disputed claim that Kurzman was in default under the Lease because of non-payment of additional rent amounts. (R. 212-16; ¶¶ 3, 9, 14); − Kurzman agreed to a final judgment of possession, with a stay until September 1, 2011. (R. 213, ¶ 5); − Kurzman agreed to pay a sum of money that was agreed to constitute all rent and additional rent due through August 31, 2011. (R. 213, ¶6); − The Stipulation was without prejudice to the parties’ respective claims and defenses regarding alleged liability for post-occupancy rent and alleged acceptance of surrender by operation of law. (R. 215-16, ¶¶ 9, 14); Most importantly, in the negotiations that produced the Stipulation, Kurzman insisted that it would not give up its rights under the Sublet Clause unless the Stipulation also provided that Kurzman could continue to try to locate possible new tenants. This is reflected in Paragraph 8. The second sentence provides that Kurzman “shall be prohibited from subletting or assigning any of its rights or and asserted that Kurzman was in arrears because it had not paid the then current year’s escalation rent in a lump sum advance payment. (R. 184; 224 at ¶ 11). 11 3954773v1 interests under the lease . . . . ” (R. 214). The following sentence, however, is the quid pro quo: [N]othing herein shall prohibit Respondent [Kurzman] from locating and/or offering to Petitioner [Landlord] a potential tenant for the Premises, subject to Petitioner’s approval of any such prospective tenant. ( R. 214-15). The plain meaning of this sentence is that after giving up its rights under the Sublet Clause, Kurzman could continue to have CBRE use standard professional methods to advertise the space and to follow up by showing the space to interested parties. Landlord could not obstruct those efforts, and would have to act in good faith in considering any prospective new tenants produced by Kurzman or CBRE. After August 31, 2011, CBRE (and Kurzman) attempted to continue the efforts (that had been commenced and approved by Landlord prior to the Stipulation) to market the Premises to prospective tenants. Landlord, however, obstructed these efforts and made it impossible for Kurzman to present a viable new tenant to Landlord. (R. 156-58, 220, 229-31). Without consulting Kurzman or CBRE, Landlord contacted CoStar directly on or about September 15, 2011 and instructed it to “remove the 23rd floor sublease listing.” Perplexed, CoStar responded: “Did Kurzman decide not to vacate the space?” Landlord replied: “They did vacate, but the space isn’t available yet.” 12 3954773v1 (emphasis supplied) (R. 219). As of September 1, 2011, however, the space was unencumbered and indisputably “available” for re-letting. Significantly, and inconsistent with Landlord’s argument on appeal, Landlord did not tell CoStar that the reason for pulling the listing was that as of September 1, 2011 the term “sublease” no longer applied.11 If that was Landlord’s concern then it would have easily been cured by asking Kurzman, CBRE or CoStar to change a few words in the listing, replacing “sublease” with “lease.” An essential element of marketing an office space is showing it to prospective tenants. Landlord further obstructed Kurzman’s ability to locate and offer prospective tenants by denying CBRE permission to enter the vacated space to show it to interested persons. (R. 158 at ¶¶ 83-84). On October 3, 2011, attorney Charles Palella (the Kurzman partner who negotiated the Stipulation) wrote to his counterpart, Jay Solomon. He declared Landlord in breach of the Stipulation: Paragraph 8 of that Stipulation specifically permits our firm to locate and offer to your client a prospective tenant for the premises. Despite this provision, Monday Properties, as agent for the Petitioner [Landlord], has not only resisted the efforts of our broker to show the space but has also in fact caused Costar to remove the listing of the premises as placed by our broker. These actions are in direct violation of Paragraph 8 of the Stipulation an[d] have caused us to lose any chance that 11 The CoStar listing and the marketing flyer were prepared (and approved by the Landlord) before the Stipulation, when Kurzman had the right to sublet. 13 3954773v1 prospective tenants found and to be found by our brokers would rent the premises. This is to put you on notice that we reserve our rights with respect to these violations. (R. 220). Landlord neither responded in writing to the Palella letter nor remedied its breach of the Stipulation. The 23rd floor in the tower of the “Crown Jewel of Park Avenue” was an extremely desirable – and marketable – property. Landlord’s obstruction of Kurzman’s and CBRE’s attempted advertising and marketing sabotaged Kurzman’s opportunity to identify one or more appropriate prospective tenants with the willingness to pay substantially more monthly rent to Landlord for September 2011 – December 2012 than Landlord would have received from Kurzman under the Lease. (R. 151 at ¶¶ 56-57; R. 158 at ¶ 88). PROCEDURAL HISTORY Landlord commenced this action in November 2011 seeking rental fees allegedly accrued during the period beginning after August 31, 2011 (the vacate and partial settlement date under the Stipulation) and ending on December 31, 2012 (the original termination date of the Lease). Against Kurzman, Landlord sought a judgment in the full amount of the alleged rent liability; against the Guarantors, Landlord sought a judgment up to the maximum coverage of the guaranty. (R. 47-57). Kurzman and the Guarantors answered and asserted two affirmative defenses: (a) a surrender of the Lease by operation of law occurred, effective as of 14 3954773v1 August 31, 2011, which served to relieve Kurzman from liability for rent and additional rent thereafter. (First Affirmative Defense [Kurzman]; Second Affirmative Defense [Guarantors]) (R. 59-61); and (b) Landlord breached its agreement to allow the tenant to market the premises to prospective tenants for the remainder of the lease term and to consider prospective new tenants in good faith, and is therefore barred from seeking damages for rental amounts for the period on or after September 1, 2011 (Third Affirmative Defense) (R. 61-62). Only the Third Affirmative Defense is at issue in the appeal to this Court. Landlord moved the Court below for summary judgment seeking dismissal of all of the affirmative defenses and the entry of judgment on its rent claim. Relevant to this appeal, Justice Coin denied the branch of Landlord’s motion seeking dismissal of the affirmative defense that Landlord breached the Stipulation. Justice Coin also denied the branch of the motion seeking summary judgment on the merits of its rent claim, because the pending affirmative defense of breach of the Stipulation rendered the calculation of damages, if any, inchoate at this time. (R. 13-14). Given its denial of summary judgment on the merits, the IAS Court did not have to address an additional ground for opposition, based upon the question of whether the lease provision limited the obligation to pay escalated real estate tax to a pro-rata portion of the tax year during which occupancy is surrendered. (R. 232 at ¶ 30). 15 3954773v1 Justice Coin quickly disposed of Landlord’s threshold legal objection to the breach of Stipulation defense. Starting with the uncontroversial legal premise that a commercial landlord has no general common law (or statutory) duty to mitigate damages, Landlord’s argument had jumped to the illogical conclusion that it could not have assumed a contractual obligation to allow Kurzman to market the premises and to give good faith consideration to prospective tenants proffered by Tenant when it executed a contractual agreement to that effect and had it so- ordered by a judge. Justice Coin observed that nothing in the law “prevents parties from agreeing between themselves as to obligations to release or mitigate damages.” (R. 21). Turning to the facts, Justice Coin ruled that Landlord had not carried its heavy burden on a motion for summary judgment to prove that there were no material facts in dispute as to whether Landlord had breached the Stipulation. Landlord’s principal argument was that its only duty under the Stipulation was to allow Kurzman to present prospective tenants, and it was undisputed that Kurzman failed to do so. Justice Coin found, however: While Kurzman failed to present a prospective tenant, 230 Park says little to contradict the evidence that it prevented Kurzman from locating one. If paragraph eight of the Stipulation does not obligate 230 Park to at least allow Kurzman to find a prospective tenant, then it is meaningless. 16 3954773v1 (R. 12). Landlord’s half-hearted attempt to exonerate its sabotage of Kurzman’s and CBRE’s attempts to locate potential tenants by pointing to the term “sublease” was not even deemed worthy of mention in the Decision. Justice Coin correctly concluded: As Kurzman has clearly raised an issue of fact as to whether 230 Park breached paragraph eight of the Stipulation by preventing it from finding a prospective tenant, 230 Park is not entitled to summary judgment dismissing Kurzman’s affirmative defense for breach of the Stipulation. (R. 23). Landlord appealed to the Appellate Division, First Department from the order of the IAS Court denying its motion to strike the third affirmative defense. (R. 4-5).12 In an order entered on January 20, 2015, the Appellate Division affirmed the order of the IAS Court. (R. 286-92). Referring to the critical provision of the stipulation forming the basis of the claim of breach, the majority fully adopted the reasoning of the IAS Court, finding the meaning of the provision to be clear and unambiguous: As the motion court held, the import of this provision was clearly to provide defendant with an opportunity to 12 Defendants filed a Notice of Cross-Appeal from the portion of the order which struck the affirmative defense of surrender by operation of law. As set forth supra, at footnote 9, the Appellate Division affirmed the dismissal of this affirmative defense, and Tenant elected not to seek permissive review by this Court of the adverse portion of the Appellate Division ruling at this time. 17 3954773v1 cover all or some of the damages that plaintiff is claiming are due under the lease. Otherwise the provision would have no meaning. (R. 286). With respect to the record on summary judgment on this issue, the Court stated as follows: There are triable issues of fact as to whether plaintiff improperly interfered with defendant's efforts, in violation of the stipulation, to find a tenant, which would, in turn, affect defendant's liability for future rent. Although plaintiff claims that it only contacted defendant's broker to have the subleasing listing removed, defendant claims that plaintiff interfered with defendant's right to list the space at all. There is evidence that plaintiff contacted defendant's broker directly in order to have the listing removed, and email correspondence between the parties shows that plaintiff did not make the space available for rent after defendant had vacated. The advertising flyer describing the broker retained by defendant as the "sublease agent" and offering the premises for sublet bears the date of July 2011, and there is evidence that it was approved by plaintiff and circulated prior to the date of the parties' August 22, 2011 stipulation. This circular does not satisfy plaintiff's prima facie burden on its motion of showing that its direct contact with the broker on September 15, 2011 was justified. (R. 287). Two members of the panel dissented. (R. 289-92). The basis of the disagreement with the Majority was the stated belief that once Kurzman had relinquished its right to possession, it could not have entered into any sublease at the time that Landlord interfered with its ability to present prospective tenants. The Dissent also opined that the language of the stipulation did not provide 18 3954773v1 Kurzman a definitive right to locate or offer potential tenants and that the Stipulation did not impose upon Landlord any obligation to mitigate damages. Finally, the Dissent maintained that the assertions by Kurzman that Landlord sabotaged its efforts to market the premises were “vague” and, therefore, insufficient to raise triable issues of fact. (R. 292). Landlord moved in the Appellate Division for reargument of the January 20, 2015 order determining the appeal, or, in the alternative, for leave to appeal to this Court. In an order entered on May 7, 2015, the Appellate Division denied the motion to the extent it sought reargument, but granted the motion for leave to appeal to this Court, certifying the following question of law: Was the order of the Supreme Court, as affirmed by this Court, properly made? (R. 284). 19 3954773v1 POINT I LANDLORD CANNOT EVADE ITS CONTRACTUAL OBLIGATION TO ALLOW THE TENANT TO MARKET THE PREMISES FOR THE REMAINDER OF THE LEASE TERM AND TO CONSIDER PROSPECTIVE NEW TENANTS IN GOOD FAITH BY MISCHARACTERIZING TENANT’S AFFIRMATIVE DEFENSE AS AN ASSERTION OF A GENERAL DUTY TO MITIGATE DAMAGES A. For Valuable Consideration, Landlord Undertook To Allow Kurzman To Market The Premises For The Remainder Of The Lease Term And To Consider Prospective New Tenants In Good Faith Landlord’s appeal is premised on its contention that the “Stipulation did not impose a duty upon Landlord to mitigate its damages.” (Br. at pp. i, 20). Kurzman’s third affirmative defense, however, does not claim that Landlord assumed a general duty to mitigate damages. Nor does this defense naively assert a common law duty of a commercial landlord to mitigate damages, contrary to the well-settled precedents of this Court. Rather, it is based upon Landlord’s breach of its specific contractual agreement to allow Kurzman, after vacating its law office suite, to market this prime office space to prospective new tenants, and Landlord’s breach of its promise to consider prospective new tenants in good faith. Landlord’s characterization of the affirmative defense and, ipso facto, of the Appellate Division’s holding, is a straw man. Paragraph 8 of the Stipulation provided, in pertinent part, that 20 3954773v1 [N]othing herein shall prohibit Respondent [Kurzman] from locating and/or offering to Petitioner [Landlord] a potential tenant for the Premises, subject to Petitioner’s approval of any such prospective tenant. ( R. 214-215). The plain meaning of this provision is that Kurzman could continue to have CBRE (the prominent commercial broker it hired originally to locate a suitable candidate for sublet) use standard professional methods to advertise the space and to follow up by showing the space to interested parties. Landlord could not obstruct those efforts, and would have to act in good faith13 in considering any prospective new tenants produced by Kurzman or CBRE. Referring to this provision, the majority in the Appellate Division found its meaning to be clear: As the motion court held, the import of this provision was clearly to provide defendant with an opportunity to cover all or some of the damages that plaintiff is claiming are due under the lease. Otherwise the provision would have no meaning. (R. 286). In the words of the IAS Court: If paragraph eight of the Stipulation does not obligate 230 Park to at least allow Kurzman to find a prospective tenant, then it is meaningless. (R. 23). 13 See 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 N.Y.2d 144, 153 (2002) (holding that every contract has an implied covenant of good faith and fair dealing); Evans v Famous Music Corp., 1 N.Y.3d 452, 463 (2004). See also infra, Point I.D. 21 3954773v1 Although the clear meaning of the text is a complete answer to Landlord’s principal argument on appeal, additional refutation is provided by an examination of the structure and context of the Stipulation, including the valuable consideration that Landlord received and Kurzman’s reliance upon Landlord’s promises. 1. The Parties’ Legal and Economic Positions Before the Stipulation Prior to Kurzman’s execution of the Stipulation dated August 22, 2011 (R. 216), it was in a strong legal and market position to avoid any post- occupancy rent liability. First, it was the legal occupant of the entire 23rd floor in the Building’s tower, one of the most desirable and prestigious office locations in New York City. Second, the Lease allowed Kurzman to sublet the Premises. (R. 94-98). If Kurzman presented a prospective subtenant to Landlord, then Landlord could not unreasonably delay or deny approval of the subletting. In the alternative, Landlord was required to reclaim the Premises and release Kurzman from rent liability for the remainder of the term. (R. 151 at ¶ 57). Third, the rent was far below market. Kurzman could offer the Premises to a business needing a short- term rental in a prestigious location at a price that was below market but still greater than the rent paid by Kurzman. (R. 151 at ¶ 57). Landlord freely admits that Kurzman was entitled to exercise its rights under the Sublet Clause up until the Stipulation was fully executed, (LL. Br. at p. 28), and its conduct in approving the 22 3954773v1 listing for a sublet is a further recognition of the then existing right to sublet. (R. 218). Unable to dispute these facts, Landlord implies that Kurzman could not even afford to pay the current rent; therefore it was inevitable that Kurzman would soon default and lose its rights under the Sublet Clause. (LL. Br. 10-11). This is a complete distortion of the Civil Court proceeding. Departing from decades of past practice in which Landlord accepted payment of real estate tax escalation pass- alongs in monthly installments, Landlord suddenly demanded payment in July 2011 of the entire FY 2012 tax bill. (R. 152, ¶62). Kurzman asserted that it was entitled to continue to pay the escalation in monthly installments. 14 This dispute was never adjudicated.15 For two years leading up to the Stipulation, Landlord’s efforts to entice or pressure Kurzman to give up its leasehold prematurely were unsuccessful. Its unprecedented acceleration of real estate tax billings, and its filing of the nonpayment proceeding, were yet another part of this strategy. As things stood, 14 Ironically, during this dispute about its accelerated billing of the real estate tax, the Landlord recognized that custom and practice can trump specific provisions of the lease. When Kurzman objected to the billing for the additional reason that that the Landlord failed to provide a certification of the tax escalation as expressly required in the Lease, the Landlord responded that because of the past practice of submitting the (monthly) bills without any certification, Kurzman had waived this provision in the Lease. (R. 204). 15 Furthermore, if there had been a ruling in favor of the Landlord regarding the escalation rent, Kurzman could have continued the Lease in effect by paying the escalation rent before the issuance of the warrant (see RPAPL § 749(3)) and recouped the outlay from a future subtenant or from the Landlord if the Landlord chose to take back the space instead of accepting a subtenant. 23 3954773v1 Landlord had no legal right to receive market rent income for the Premises for another 16 months. From a real estate management perspective, the 23rd floor was not part of its inventory to possibly include in a multi-floor leasehold in the tower that could command a premium rent and attract a prestigious tenant. 2. Legal and Economic Positions After the Stipulation Through the Stipulation Landlord obtained its long-sought objective of reclaiming the prime office space from Kurzman 16 months before the expiration of Kurzman’s leasehold. Receiving possession of the Premises from Kurzman enabled Landlord to rent it out at market rate with a long-term lease. This not only created the potential for increased revenue in the short term, but also the addition of a long-term tenant at market rates to the rent roll would increase the value of the building for sale and as security for mortgage lending. Additional valuable consideration to Landlord under the Stipulation was Kurzman’s payment of all undisputed financial claims through August 31, 2011. (R. 213, ¶6; 217) Through the termination of the lease under the Stipulation, Landlord received the consideration of Kurzman giving up its rights under the Sublet Clause, which would enable Kurzman to cover (or more than cover) the cost of post- occupancy rent at 230 Park Avenue after moving to 437 Madison Avenue. In the negotiations that produced the Stipulation, Kurzman insisted that it would not give up its rights under the Sublet Clause unless the Stipulation also provided that 24 3954773v1 Kurzman could continue to try to locate possible new tenants. The plain meaning of this provision is that Kurzman could continue to have CBRE use standard professional methods to advertise the space and to follow up by showing the space to interested parties. Landlord could not obstruct those efforts, and would have to act in good faith in considering any prospective new tenants produced by Kurzman or CBRE. In short, Kurzman gave, and Landlord received, valuable consideration for inclusion of the last sentence of Paragraph 8 in the Stipulation. As a matter of law, this provision is enforceable. Hence, Kurzman’s allegation that it was breached (an allegation supported by evidence in opposition to the summary judgment motion, see Point II, infra), is a sound basis for Kurzman’s third affirmative defense. B. The Entire Appellate Division Panel Agreed With The IAS Court That Kurzman’s Third Affirmative Defense Is Not At Odds With Holy Properties Landlord again suggests that Kurzman’s third affirmative defense conflicts with Holy Properties Limited, L.P. v. Kenneth Cole Productions, Inc., 87 N.Y.2d 130 (1995). (LL. Br. at pp. 20-21, 25, 31). Landlord persists in this alarmist contention even though one apparent point of agreement among all of the judges on the Appellate Division panel is that it has no merit. Neither Holy Properties nor the doctrine it recapitulates is discussed in either the majority or the dissenting 25 3954773v1 opinion. The IAS Court decision does mention Holy Properties, but only to observe that Landlord’s citation is inapposite because nothing in the doctrine “prevents parties from agreeing between themselves as to obligations to release or mitigate.” (R. 21). Hence, the instant appeal presents this Court neither with a potential challenge to the common law doctrine that is summarized in Holy Properties, nor with a need to interpret it. It is about a defense based upon a specific provision in a written contract between one landlord and one tenant. In the common law of contracts, the default position is that a party claiming breach is required to mitigate damages. This default position, however, can be superseded by an agreement between the parties, e.g. a liquidated damages clause. Holy Properties reiterates that if the contract is a real estate lease, then the default position for mitigation of damages is reversed. Holy Properties, however, does not change the rule that the parties – including a landlord and tenant -- may agree to a different damage remedy. A case in point is Salvia v. Dyer, 21 Misc.3d 140(A), 2008 N.Y. Slip Op. 52359(U), 2008 WL 5004312 (App. Term 9th & 10th Dists. 2008). In Salvia, the landlord and tenants entered into a “relet agreement” which required the landlord to advertise and show the unit, and required tenants to continue to pay rent for the remainder of the term unless the apartment was relet. The court began with the premise that the landlord, at first, had no duty to mitigate damages. “[O]nce plaintiff [landlord] affirmatively undertook to re-let the 26 3954773v1 apartment on defendants’ account,” however, “he was obliged to comply with the agreement and to so in a timely fashion.” Id. This principle applies in the instant case, even though the scope of the duty that the Landlord undertook is more limited than the landlord’s assumed duty in Salvia v. Dyer. Landlord misses the point when it says: “[E]ven if a commercial landlord voluntarily attempts to mitigate its damages, it does not, as a matter of law thereby assume a duty to mitigate damages.” (emphasis supplied) (LL. Br. at pp. 20-21). This noncontroversial statement is irrelevant. There is nothing “voluntary” about Landlord’s duties, spelled out in a lawsuit-ending settlement agreement that netted it a large payment of money and free-and-clear re-possession of one of the premiere office spaces in Manhattan, 16 months before the expiration of its far- below-market-rent lease.16 Landlord tries to breathe new life into its twice-rejected Holy Properties argument by referring this Court to its recent decision in 172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Ass'n, Inc., 24 N.Y.3d 528 (2014). (LL. Br. at pp. 20, 22, 31). The resuscitation attempt is unsuccessful. The landlord and 16 Landlord’s reliance on Sage Realty Corp. v. Kenbee Management-New York, Inc., 182 A.D.2d 480 (1st Dep’t 1992) is misplaced. (LL. Br. at 21). The Appellate Division made a clear distinction between unilateral, voluntary action, and a contractual undertaking to act. See Id., 182 A.D.2d at 481 (“the assumption of duty doctrine does not apply to preclude an award of summary judgment to a commercial landlord who voluntarily attempts to mitigate damages”). There is a difference between a landlord and tenant voluntarily entering into an agreement that creates mutual obligations (as in Savia v. Dyer, supra, and the instant case) as distinguished from a landlord voluntarily and unilaterally making some effort to mitigate damages without assuming a legal duty to act. 27 3954773v1 tenant in 172 Van Duzer Realty had agreed in advance on the landlord’s damages remedy in the event the tenant prematurely vacated the space and stopped paying rent. This liquidated damages clause provided that the landlord could immediately accelerate the due date for all future rent payments and sue the tenant not only for past due rent but also for future rent. This Court had to decide whether this remedy was very disproportionate to the damages (and possibly unconscionable) given that the landlord regained possession of the premises and was in a position to “double dip” by renting it out for months that were already paid for (in futuro) by the breaching tenant. As in the instant case, the common law default rule summarized in Holy Properties was not in play; it was superseded by the contractual provision. This Court held that although the landlord had no common law duty to mitigate damages, the liquidated damages clause might cause a disproportionate and unconscionable damage award for the landlord. This Court ruled against the landlord, sending the case back to the lower court for presentation of evidence and a ruling on the enforceability of the liquidated damages provision. The reasoning of 172 Van Duzer Realty – that Holy Properties was not a relevant precedent -- supports the reasoning of the Appellate Division and the IAS Court in this case, not Landlord’s appeal. Landlord also cites 172 Van Duzer Realty in making an argument that Article 5 of the 1997 Lease nullified the 2011 contractual agreement in which 28 3954773v1 Landlord assumed an obligation that could result in reduction of its damage. See LL. Br. at p. 22. This contention is frivolous. The provisions in a modification agreement prevail over any seemingly inconsistent provisions in the original contract. Muzak Corp. v Hotel Taft Corp., 1 N.Y.2d 42, 47 (1956). C. Landlord Clearly Assumed Obligations In The Final Sentence Of Paragraph 8 Of The Stipulation In the middle of Point I of its brief, Landlord shifts from arguing that Holy Properties nullifies its obligations in the final sentence of Paragraph 8 of the Stipulation, to saying that Landlord did not assume any obligations to begin with. It says that “the meaning of the last sentence in paragraph 8 of the Stipulation is to clarify that the previous sentence . . . .” See LL. Br. at p. 23 (emphasis supplied). The sentence, however, was a critical consideration for Kurzman to enter into the Stipulation and relinquish its leasehold rights and occupancy. Calling it a mere clarification of another sentence in the Stipulation – one that benefited Landlord -- is using a euphemism to assert that the Court should find that the sentence is superfluous. Landlord’s position violates the fundamental rule of contract construction that all provisions are presumed to have meaning and that no provision should be deemed to be superfluous. As this Court stated in Muzak Corp. v Hotel Taft Corp., supra, 1 N.Y.2d 42 at 46: 29 3954773v1 The rules of construction of contracts require us to adopt an interpretation which gives meaning to every provision of a contract or, in the negative, no provision of a contract should be left without force and effect. (1 Restatement, Contracts, § 235, subd. [c]; Fleischman v. Furgueson, 223 N. Y. 235; Rentways, Inc., v. O'Neil Milk & Cream Co., 308 N. Y. 342, 347.) Five decades later the Appellate Division reiterated the Muzak Corp. rule in 150 Broadway N.Y. Assoc., L.P. v Bodner, 14 A.D.3d 1, 6 (1st Dep’t 2004): It is a cardinal rule of contract construction that a court should “avoid an interpretation that would leave contractual clauses meaningless” (Two Guys from Harrison-N.Y. v S.F.R. Realty Assoc., 63 NY2d 396, 403 [1984]). Stated otherwise, “[c]ourts ‘are obliged to interpret a contract so as to give meaning to all of its terms' ” (Excel Graphics Tech. v CFG/AGSCB 75 Ninth Ave., supra at 69, quoting Mionis v Bank Julius Baer & Co., 301 AD2d 104, 109 [2002]) (emphasis supplied) In its opinion, the IAS Court correctly relied upon the “cardinal rule of contract construction” and the obligation to “interpret a contract so as to give meaning to all of its terms.”17 (R. 23). The Appellate Division Majority agreed, holding: As the motion court held, the import of this provision [the final sentence of Paragraph 8 of the Stipulation] was clearly to provide defendant [Kurzman] with an opportunity to cover all or some of the damages that plaintiff [Landlord] is claiming are due under the lease. Otherwise the provision would have no meaning. 17 The Supreme Court cited U.S. Bank Nat. Ass'n v Lightstone Holdings LLC, 103 A.D.3d 458 (1st Dep’t 2013), a decision that included the quotes in this sentence. 30 3954773v1 (R. 286) (emphasis supplied). 18 D. Assuming Arguendo That the Meaning of Paragraph 8 of the Stipulation is Ambiguous, Then Landlord’s Motion Cannot Be Granted as a Matter of Law As set forth supra, the Appellate Division Majority should be affirmed based on its finding that the clear meaning of the Stipulation is that Landlord assumed an obligation “to provide [Kurzman] with an opportunity to cover all or some of the damages that plaintiff is claiming are due under the lease.” (R. 286). Assuming arguendo that this Court finds that the Stipulation is ambiguous, that does not change the correctness of the Appellate Division’s holding that summary judgment was properly denied by the IAS Court. In the event of an ambiguity in a pivotal contact provision, a factual determination must be made on a full evidentiary record. This would include, inter alia, evidence regarding the formation of the contract; the intentions of the 18 The Landlord attempts to sidestep the clear import of these canons of contract interpretation by repeating the Appellate Division Dissent’s citations to cases that reference the method of according “fair and reasonable meaning” to ambiguous wording in a contract. See LL. Br. at 18, 23; Sutton v. East Riv. Sav. Bank, 55 N.Y.2d 550 (1982); Adelsberg v Amron, 103 A.D.3d 571 (1st Dep’t 2013). The first defect with this argument is that the Landlord’s idea of a “reasonable meaning” for the provision is to render it meaningless. Its reasoning is unreasonable and circular. It is in direct opposition to the canon of construction pronounced by this Court in Muzak, supra, half a century ago. The second defect is that the meaning of the sentence in question is clear, not ambiguous. 31 3954773v1 parties;19 Kurzman’s reasonable expectations when it entered into the Stipulation; and Kurzman’s reliance upon the final sentence of Paragraph 8 in agreeing to prematurely terminate its leasehold and its right to sublet. As this Court stated in Evans v Famous Music Corp., 1 N.Y.3d 452, 459 (2004), “Faced with this ambiguity, we turn to extrinsic evidence for guidance as to which interpretation should prevail.” See also Telerep, LLC v U.S. Intern. Media, LLC, 74 A.D.3d 401, 402 (1st Dep’t 2010) (“If the court concludes that a contract is ambiguous, it cannot be construed as a matter of law . . . .”) (emphasis supplied); U.S. Bank Nat. Ass'n v Lightstone Holdings LLC, 103 A.D.3d 458, 459- 60 (1st Dep’t 2013); China Privatization Fund (Del), L.P. v Galaxy Entertainment Group Ltd., 95 A.D.3d 769 (1st Dep’t 2012); Hambrecht & Quist Guar. Fin., LLC v El Coronado Holdings, LLC, 27 A.D.3d 204 (1st Dep’t 2006). In Evans v. Famous Music Corp., supra, this Court also found that the implied covenant of good faith and fair dealing in the course of performance was applicable to disputes about the breach of an arguably ambiguous contract provision. Quoting 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 N.Y.2d 144, 153 (2002), this Court wrote that the covenant of good faith and fair dealing “embraces a pledge that ‘neither party shall do anything which will have the effect of destroying or injuring the 19 Did the Landlord intend to take the Premises off the open market after Kurzman agreed to vacate and terminate the Lease? Did the Landlord intend to mislead Kurzman? Did it intend to breach its implied covenant of good faith and fair dealing? 32 3954773v1 right of the other party to receive the fruits of the contract.’ While the duties of good faith and fair dealing do not imply obligations ‘inconsistent with other terms of the contractual relationship’ they do encompass ‘any promises which a reasonable person in the position of the promisee would be justified in understanding were included’ ” (id. [citations omitted]). Evans v Famous Music Corp., supra 1 N.Y.3d 452 at 463. (emphasis supplied). The IAS Court (and the Appellate Division on appeal) had a sufficient record to determine, correctly, that the Stipulation was clear and Kurzman’s defense could not be dismissed as a matter of law. Even if Paragraph 8 were ambiguous, as the Appellate Division Dissent assumed, then the Appellate Division could not rule as a matter of law on the record of the summary judgment motion that the sentence in question was meaningless and that Landlord had not breached its implied covenant of good faith performance. As the foregoing authorities make clear, the most the Appellate Division could do to alter the IAS Court’s ruling would be to affirm the denial of summary judgment and remand for completion of discovery and revisiting of the issue of the meaning of Paragraph 8. * * * In conclusion, the Appellate Division Majority and the IAS Court applied the applicable rules of construction and concluded, correctly, that the final sentence of Paragraph 8 of the Stipulation was not superfluous; its meaning was “clear;” and it could be properly asserted as a defense to Landlord’s claim for post-occupancy 33 3954773v1 rent. In any event, the summary judgment evidentiary record was insufficient to support any ruling as a matter of law that the third affirmative defense should be dismissed. POINT II LANDLORD DID NOT MEET ITS BURDEN OF PROVING THAT THERE WERE NO MATERIAL FACTS IN DISPUTE AS TO KURZMAN'S DEFENSE THAT LANDLORD BREACHED ITS EXPRESS CONTRACTUAL OBLIGATIONS AND THE IMPLIED COVENANT OF GOOD FAITH PERFORMANCE The Appellate Division Majority held: There are triable issues of fact as to whether plaintiff improperly interfered with defendant’s efforts, in violation of the stipulation, to find a tenant, which would, in turn, affect defendant’s liability for future rent. (R. 287). This holding is doubly correct. Procedurally, it was Landlord’s burden to prove that there were no material facts in dispute as to Kurzman’s third affirmative defense. See Point II.A, infra. Substantively, viewing the evidence in the light most favorable to Kurzman, there clearly were material facts in dispute. See Point II.B, infra. In its appeal, Landlord tries to ignore this impregnable foundation for the Majority’s holding. The asserted basis for its appeal is that the Stipulation neither imposed a duty on Landlord, nor conferred any right upon Kurzman, with respect to not impeding Kurzman’s attempt to lessen (or eliminate altogether) damages for 34 3954773v1 post-occupancy rent by marketing the premises to new tenants. Landlord’s redundant Points I and II amount to an argument that the Stipulation was an illusory contract.20 But even the Dissent – which Landlord purports to champion – was not based on this implausible argument. The Dissent assumed that the Stipulation imposed some obligations on Landlord and went on to determine (we submit, incorrectly) that there was insufficient evidence to raise a material issue of fact as to whether the obligations were breached. It would find that Kurzman’s vague assertions that plaintiff otherwise sabotaged its efforts to identify prospective tenants and resisted CBRE’s efforts to show the premise to interested parties are insufficient to raise a triable issue of fact with respect to the third affirmative defense. (R. 292) (emphasis supplied). Landlord belatedly tries to bolster the Dissent’s evaluation of the evidentiary record. 21 (LL. Br. at pp. 28-30). Landlord is unpersuasive, however, because it speculates about alleged facts and it makes inferences in favor of the party moving for summary judgment instead of the other way around. See infra at Point II.C. The Majority’s holding that there are triable issues of fact is correct, and the Dissent is clearly in error. 20 Point I reads: “The Stipulation did not impose a duty upon the landlord to mitigate its damages.” (LL. Br. at p. 20.) Point II reads: “The Stipulation did not confer a right to Kurzman to locate a new tenant.” (LL. Br. at p. 24.) 21 Its comments are a non sequitur from the legal theory of its appeal as asserted in the preceding pages of its brief, i.e. the Landlord could not have breached the Stipulation because it undertook no obligation whatsoever with respect to facilitating covering the post-occupancy rent. 35 3954773v1 A. The Standard Of Proof Applicable To Landlord’s Motion For Summary Judgment Summary judgment is a drastic remedy. It should not be granted where there is any doubt as to the existence of a triable issue of fact or where the existence of such an issue is even arguable, since it deprives a party of its day in court. Sillman v. Twentieth Century-Fox Film Corporation, 3 N.Y.2d 395 (1957); Henderson v. City of New York, 178 A.D.2d 129 (1st Dep't 1991); Yelin v. American Dental Center, 184 A.D.2d 693 (2d Dep't 1992). It is not to be granted unless the moving party has established its case by competent, admissible evidence, as if at trial. Phillips v. Joseph Kantor & Co., 31 N.Y.2d 307 (1972). In ruling on a summary judgment motion, the court's function is to engage in issue finding rather than issue determination. Icon Motors v. Empire State Datsun, 178 A.D.2d 463, 464 (2d Dep't 1991). The Court views the evidence in the light most favorable to the nonmoving party, and gives the nonmoving party the benefit of all reasonable inferences that can be drawn from the evidence. Negri v. Stop & Shop, Inc., 65 N.Y.2d 625, 626 (1985). Credibility is not a proper consideration in resolving issues on a motion for summary judgment as the assessment of the value of a witnesses' testimony constitutes an issue for resolution by the trier of fact. Color by Pergament, Inc. v. Pergament, 241 A.D.2d 418, 420 (1st Dep’t 1997); Rivera v. City of New York, 212 A.D.2d 403, 404, (1st Dep’t 1995). 36 3954773v1 In opposing a motion for summary judgment, hearsay evidence may be utilized as long as it is not the only evidence submitted. Guzman v L.M.P. Realty Corp., 262 A.D.2d 99 (1st Dep’t 1999). See Sumitomo Mitsui Banking Corp. v Credit Suisse, 89 A.D.3d 561, 564 (1st Dep’t 2011) (“Although the Capmark letter is hearsay [citation omitted] it may be considered in opposition to plaintiff's motion because it is not the only proof submitted.”) See also Reyes v Harding Steel, Inc., 50 A.D.3d 427 (1st Dep’t 2008). B. Viewing The Evidence In The Light Most Favorable To Kurzman, There Are Triable Issues Of Facts The Appellate Division and the IAS Court held that the evidence that Kurzman proffered in opposition to Landlord’s summary judgment motion created triable issues of fact under the above-described standard. It is in fact fair to say that Kurzman significantly exceeded the minimum standard, especially considering that Landlord timed the motion to stop Kurzman’s discovery. Landlord tries to counter with hyperbole, e.g., “Kurzman did not submit any evidence” (LL. Br. at p. 27); “There is no evidence in the record” (Id. at p. 30); “The record is devoid of evidence” (Id.). Ironically, these assertions are only applicable to Landlord itself because, as stated by the Appellate Division, the evidentiary record “does not satisfy plaintiff’s [Landlord’s] prima facie burden on its motion.” (R. 288). Indeed, the conduct of Landlord, as set forth in the record in opposition to the summary judgment motion, presents a paradigm for the violation of the covenant 37 3954773v1 of good faith and fair dealing as Landlord’s activities had “the effect of destroying or injuring the right of the other party to receive the fruits of the contract.” 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 N.Y.2d 144, 153 (2002). The record establishes that Kurzman’s real estate broker, CBRE, placed a listing with CoStar, the principal on-line multiple listing service used by commercial real estate brokers, advertising the space for rent. Shortly after the Stipulation was entered and Kurzman vacated its offices, Landlord contacted CoStar directly and instructed it to remove the listing. When CoStar asked Landlord to explain this instruction Landlord wrote back that even though Kurzman had vacated the premises Landlord was not making the space available for prospective new tenants. In coordination with its unilateral direction to remove the listing, Landlord refused requests of CBRE for access to the premises to show to prospective tenants. Kurzman objected to these actions in a legal letter that declared Landlord in breach of its obligations under the Stipulation and demanded that Landlord remedy its actions forthwith. Landlord’s attorney (the same lawyer who represented Landlord in landlord tenant court and negotiated the Stipulation) chose to remain silent, apparently having no plausible answer, a tacit admission which has evidentiary value on a summary judgment motion. See O.G. Orr & Co. v Fireman's Fund Ins. Co., 235 AD 1, 2 (3d Dep’t 1932)(“From an evidentiary 38 3954773v1 standpoint, silence amounts to assent if statements or acts are such as to call for some response or act on behalf of the interested party.”) Landlord represents that it did not lease the Premises during the remaining 16 months of Kurzman’s lease. See LL. Br. at p. 30. As far as one can tell from the record, Landlord did not advertise the Premises for rent or make any physical preparations for marketing it during the 16 months for which it seeks post- occupancy rent. One may infer from Landlord’s behavior that when it induced Kurzman to enter into the Stipulation it had no intention of allowing Kurzman to market the space to prospective tenants.22 Indeed, the most likely inference to make from the record is that Landlord warehoused the Premises in search of some opportunity that would enhance its long-term rental value (e.g., finding a tenant willing to pay a premium to have multiple tower floors in the landmark building). Landlord presumably intended to have Kurzman subsidize its speculation by forcing Kurzman to pay post-occupancy rent during the time that the space was 22 Indeed, subsequent to the summary judgment motion that is the subject of this appeal, defendant filed a counterclaim alleging that Landlord made a material representation to Kurzman that it had a present intent to perform its obligations and duties set forth in the Stipulation that was false and that induced Kurzman to enter into the Stipulation which terminated the Lease and, thereby Kurzman’s sublet rights. The counterclaim was included in Kurzman’s Amended Answer, filed in response to plaintiff’s Amended Complaint. (The Supreme Court had granted plaintiff’s motion for leave to file an amended complaint, which motion was joined with the summary judgment motion.) 39 3954773v1 taken off the open market. See, e.g., Unterman Aff. paras. 11-12, R. 139-40.23 At best, Landlord breached its covenant of good faith and fair dealing; at worst it engaged in misrepresentation and fraud. 1. Removing the CoStar Listing In July 2011, while the Lease was in effect and Kurzman was in possession of the Premises, Kurzman engaged CBRE to find a subtenant to take over the space after Kurzman moved into its Madison Avenue office. CBRE initiated two advertising vehicles. One was a marketing flyer that it sent to Landlord for comment. (R. 152; see also R. 141). The other was a sublease listing – approved by Landlord – that CBRE placed with the CoStar Group, the premier commercial brokerage exchange in New York City. The Appellate Division correctly identified Landlord’s blocking of CBRE’s advertising as a prime example of Landlord’s obstruction of Kurzman’s attempt to market the Premises: [D]efendant claims that plaintiff interfered with defendant’s right to list the space at all. There is evidence that plaintiff contacted defendant’s broker directly in order to have the listing removed, and email correspondence between the parties shows that plaintiff did not make the space available for rent after defendant had vacated. (R. 287). 23 During the completion of discovery below, including, importantly, depositions, additional evidence can be developed regarding the Landlord’s true intentions when it entered into the Stipulation. But what cannot legitimately be disputed is that Kurzman raised clear questions of fact precluding the granting of summary judgment. 40 3954773v1 The “evidence” included a veritable smoking gun -- the email exchange of September 15, 2011. (R 219). As soon as Kurzman relinquished its right to sublet, and then surrendered possession to Landlord so it could be re-let, Landlord’s agent contacted CoStar directly and instructed: “Pls remove the 23rd floor sublease listing. Thx.” Id. CoStar was perplexed. It asked: “Did Kurzman decide not to vacate the space?” Id. Landlord responded: “They did vacate, but the space isn’t available yet.” Id.24 Corroborating this evidence of Landlord’s obstruction of Kurzman’s effort to find a prospective tenant is what Landlord did not say contemporaneously to CoStar, CBRE, or Kurzman. Landlord did not tell any of them that the space was unavailable only for a short period of time, but it would be available for showing soon. Landlord did not tell CoStar that the Kurzman listing – which Monday had previously approved (R. 218) – was now objectionable for the use of the word “sublease” and could be republished after substituting “lease” for “sublease.” Likewise, it did not tell CBRE merely to edit its marketing flyer (R. 178-79) to reflect leasing. 24 Landlord distorts the record with its disingenuous statement that "Kurzman did not object to the removal of the costar sublease listing when it occurred in September 2011…" (LL. Br. At p. 26, fn. 16)(emphasis supplied). Of course, Kurzman strongly objected to the removal in a letter dated October 3, 2011(R. 220) after it learned of the removal. It is the Landlord who failed utterly to dispute or respond at all to this letter. 41 3954773v1 2. Stopping CBRE From Showing The Premises Besides stopping CBRE and CoStar from advertising the space to prospective tenants, Landlord made it impossible for Kurzman’s broker to market the space by refusing CBRE’s normal professional request for reasonable access to the Premises to show it to prospective tenants. In his affidavit, Mr. Unterman testified that “Monday also resisted the efforts of CBRE to show the 23rd floor to interested parties.” (R. 158 at ¶ 83). Attorney Palella wrote to Landlord’s attorney on October 3, 2011, protesting that “Monday Properties, as agent for the Petitioner, has . . . resisted the efforts of our broker to show the space.” (R. 158 at ¶ 84; R. 220). Landlord did not present any evidence disputing these accounts.25 3. Landlord’s Silence In The Face Of Kurzman’s Legal Demand Letter The Stipulation was negotiated by Jay Solomon, representing Landlord, and Charles Palella, representing Kurzman. After Kurzman delivered possession of the Premises but Landlord obstructed its efforts to locate a prospective tenant, Palella wrote a legal letter to Solomon. (R. 220, 158 at ¶¶84- 85). Palella declared Landlord in breach of the Stipulation. Importantly, he stated unequivocally that Kurzman was attempting to locate prospective tenants (not 25 If the Landlord, in reply, makes an untimely attempt to argue that this evidence is hearsay, such an assertion would be frivolous. The facts stated in the Unterman testimony and Palella letter are mutually reinforcing with documentary and personal knowledge testimony about facts constituting interference with Kurzman’s attempt to market the Premises, in violation of the Stipulation. As shown in Point II.A, supra, such evidence clearly is admissible in opposition to a motion for summary judgment. 42 3954773v1 subtenants. He wrote that Landlord’s unilateral termination of the CoStar listing seriously impeded this search. Further, Landlord’s refusal to give access to the Premises to show it to prospective tenants “caused us to lose any chance that prospective tenants found and to be found by our brokers would rent the premises.” (R. 220). Kurzman demanded, inter alia, that Landlord re-authorize the publication of a rental listing and give CBRE access to the premises to show prospective tenants. Landlord did not answer the letter. It did not allow a new CoStar listing. It continued to bar CBRE or Kurzman from walking tenants through the Premises. Giving the lie to its present assertion that its problem with the CoStar listing was the term “sublease,” Landlord did not write back to Mr. Palella in September 2011 to say that it would consent to publication of a new CoStar listing that changed the word “sublease” to “lease.” Landlord’s silence is a tacit admission that it deliberately interfered with Kurzman’s efforts and it would not remedy its violations of its obligations. Landlord’s removal of the CoStar listing and taking the Premises off the market; its blocking of CBRE’s access to the Premises for showing to prospective tenants; its silence in the face of express legal demands to fulfill its obligations under the Stipulation; and its failure to remedy its violations; clearly raise triable 43 3954773v1 issues of fact. The Dissent’s characterization of them as “vague assertions” is clearly incorrect. (R. 292). C. Landlord Cannot Make Triable Issues Of Fact Disappear By Constructing A False Narrative And Making All Inferences In Favor Of The Moving Party Landlord’s appeal is based upon a patently false narrative. It claims that Kurzman and CBRE foolishly continued to try to market the Premises for subleasing after the Stipulation terminated the Lease effective September 1, 2011.26 It asks the Court to believe that it innocently took down the CoStar listing on September 15, 2011 simply to correct an editorial error.27 From this false factual premise Landlord argues: Kurzman did not submit any evidence to the Supreme Court showing that the Landlord interfered with its efforts to locate a prospective tenant. On the contrary, the evidence was abundantly clear that Kurzman took no affirmative steps to locate a prospective tenant after entering into the Stipulation, but merely relied on a prior listing for a sublease, which was no longer permitted or appropriate. 26 The Dissent apparently accepted this argument when it stated: “...having relinquished its right to possession of the premises as of August 31, 2011, Kurzman could not have entered into a sublease on September 15, 2011 when Monday emailed CoStar.” (R. 290). This statement exhibits a misreading of the record and a misinterpretation of the Stipulation. 27 It is indisputable that when Landlord answered CoStar’s query about the reason for removing the listing altogether, Landlord did not say that there was a problem with wording but rather that Landlord had taken the Premises off the market. All the Landlord cared about at the time was to stop advertising the Premises. The Landlord subsequently constructed the sublease/lease distinction as an obvious pretext to defend its actions in this lawsuit. 44 3954773v1 LL. Br. at p. 27. It goes on to say that “[a]fter September 3, 2011, the Premises remained vacant for the following sixteen months, throughout which time Kurzman did nothing to locate or offer a new tenant.” LL. Br. at p. 30. Hence, Landlord allegedly did not have occasion to breach its promise to consider a prospective tenant presented by Kurzman, because Kurzman did not refer any prospects. This is a classic “blame the victim” defense. It is beyond dispute that as soon as Kurzman found out that Landlord had directly contacted CoStar to pull the listing and was not allowing CBRE to show that space, it demanded that Landlord cease obstructing its broker’s advertising and marketing efforts. Landlord’s attorney did not answer the demand letter, and thereafter neither Landlord nor its attorney ever told Kurzman, CBRE, or CoStar that they could advertise the space and show it to prospective tenants so long as it was clear that the space was for leasing, not subleasing. Moreover, given the premium marketability of a full floor in the tower of the Helmsley Building, Landlord’s representation that the Premises were vacant for the remaining 16 months of the original lease (LL. Br. at p. 30) is proof that Landlord was not allowing advertising of the space on the open market. The inexorable inference from these facts is that Landlord wanted to prevent Kurzman from finding and proffering prospective tenants. 45 3954773v1 In another attempt to justify taking down the CoStar listing Landlord says: Surely, 230 Park was within its rights to reenter, inspect, repair, paint and perform all other prelisting work necessary to prepare the space for marketing after Kurzman had occupied it for 80 years. LL. Br. at 29. Landlord did not assert contemporaneously that this is why the space was (indefinitely) “unavailable.” It did not submit any evidence to prove that this was its motivation. It did not even make this unsupported argument on its motion. It is pure speculation, raised for the first time on appeal. In short, Landlord’s challenge to the Appellate Division is based upon unsupported factual allegations and on the improper drawing of all inferences in favor of itself, the moving party. D. Additional Grounds For Denying Summary Judgment Are Equitable Estoppel And The Need For Full Discovery Having ample grounds for denying Landlord’s summary judgment motion with respect to the defense of breach of the Stipulation, the IAS Court found that it “need not reach Kurzman’s argument as to equitable estoppel.” (R. 23). Kurzman briefed the point in the Appellate Division28 but the appeals court affirmed without referring to it. Presently, Kurzman re-iterates this alternative in opposition to the appeal. 28 Brief for Defendants-Respondents-Appellants, Point I.C, at pp. 31-34. 46 3954773v1 There are clear questions of fact raised as to whether Landlord is equitably estopped from seeking post-occupancy rental amounts. Landlord made a clear and unambiguous promise to Kurzman, reduced to writing in the Stipulation, that it would allow Kurzman to market the Premises and present prospective tenants for good faith consideration by Landlord. Kurzman relied on this promise to a very significant extent. Landlord induced Kurzman to terminate its then-existing right to sublet the Premises in exchange for the promise that it could market the Premises for re-letting. Because the promise arose from a negotiation between the parties’ respective attorneys there is no question but that Kurzman’s reliance on the promise was both foreseeable (and desired) by Landlord. Landlord breached its promise. First, its promise to consider prospective tenants brought to it by Kurzman was a lie. As soon as Kurzman fulfilled its obligations under the Stipulation, the Landlord took the Premises off the rental market. Second, it sabotaged Kurzman’s efforts to locate prospective tenants. Finally, Kurzman was injured by Landlord’s breach of its promise. The Stipulation settled all undisputed financial issues regarding the Lease through August 31, 2011. But for Landlord’s breach of its promise in Paragraph 8 of the Stipulation, it is likely that Landlord would not have even a colorable claim against Kurzman for hundreds of thousands of dollars in rent allegedly accrued after September 1, 2011. The vacant Premises were a prestigious and highly desirable 47 3954773v1 office space, and the market rent for the period September 1, 2011 through December 31, 2012 was far greater than the rent that Kurzman would have been paying under the Lease. If Landlord had made its promise in good faith and had subsequently considered prospective tenants rather than warehousing the space, it would easily have netted more rental income in the period ending December 31, 2012 than it would have received from Kurzman under the Lease. Hence, Kurzman produced evidence that it had satisfied all of the elements of equitable estoppel – “a promise clear and unambiguous on its terms, reasonable and foreseeable reliance, and injury caused by its reliance.” Urban Holding Corp. v. Haberman, 162 A.D.2d 230, 231 (1st Dep’t 1990), citing James King & Son Inc. v. DeSantis Construction Corp., 97 Misc.2d 1063, 1066 (Sup. Ct. N.Y. Co. 1977) and CBS Inc. v. Ahern, 108 F.R.D. 14, 23–24 (S.D.N.Y. 1985). Equitable estoppel is applicable both as an affirmative claim (commonly referred to as promissory estoppel) and also as a defense, including in the context of landlord-tenant relations. For example, in American Bartenders School, Inc. v. 105 Madison Co., 59 N.Y.2d 716, 718 (1983), this Court allowed that, if the evidence sustained its applicability,29 the doctrine would be effective in modifying the rights and duties of landlord or tenant under a written lease. “The purpose of 29 As noted by the Court below, in American Bartenders School this Court concluded that the factual record did not sustain all of the elements of the doctrine. (R. 22). In the instant case, by contrast, the evidence is more than sufficient to raise an issue of fact about the its applicability. 48 3954773v1 invoking the doctrine [of equitable estoppel],” this Court said, “is to prevent the infliction of unconscionable injury and loss upon one who has relied on the promise of another (3 Williston, Contracts [3d ed], §533A, at p 798; Imperator Realty Co. v. Tull, 228 N.Y. 447, 453 (1920)).” Id. Landlord’s egregious conduct (inducing Kurzman to enter into a settlement by making a promise that it had no intention of keeping; promising to consider prospective tenants and then making it impossible for Kurzman to identify prospective tenants with standard professional methods; trying to force Kurzman to pay post-occupancy rent on a very marketable space that Landlord chose to take off the market) makes all of the injury suffered by Kurzman unconscionable. The other alternative ground for affirming the Appellate Division and IAS Court is that facts essential to justify opposition to a motion for summary judgment are exclusively within the knowledge and control of the movant. CPLR 3212(f). Dietrich v. Grandsire, 83 A.D.3d 994 (2d Dep’t 2011). In Dietrich, the court stated: Under CPLR 3212(f), where facts essential to justify opposition to a motion for summary judgment are exclusively within the knowledge and control of the movant, summary judgment may be denied . . . This is especially so where the opposing party has not had a reasonable opportunity for disclosure prior to the making of the motion. 49 3954773v1 Here, Landlord moved for summary judgment on the issue of liability prior to the parties' depositions. Kurzman did not have an adequate opportunity to explore issues relevant to the third affirmative defense, such as the full extent of Landlord’s activities which interfered with Tenant’s ability to find a substitute tenant for the subject premises, or when and how Landlord decided that it would take the Premises off the market. POINT III IN NO EVENT IS LANDLORD ENTITLED TO A REMAND DIRECTING THE ENTRY OF A MONEY JUDGMENT ON THE RECORD HEREIN Landlord cavalierly seeks a remand for entry of a monetary judgment for a sum certain for rent due and owing, without including any points or authorities in its brief demonstrating entitlement to such relief. In fact, assuming arguendo that Landlord were to obtain dismissal of Tenant’s third affirmative defense, there are still questions of fact on this record which would preclude entry of any monetary judgment at this time. Landlord’s assertion in its brief (LL. Br. at p. 15) that Kurzman did not challenge the amounts due under the Lease is incorrect, as these issues were raised in opposition to the summary judgment motion. (R. 232-33). The Stipulation settled only the issue of possession. Importantly, Paragraphs 9 and 14 (R. 215-16) preserve all Kurzman’s “defenses afforded by the lease…and under applicable law.” Thus, Landlord-Tenant court proceeding and the 50 3954773v1 Stipulation do not constitute a determination that Kurzman was in default under the Lease, and certainly did not make any determination as to any amounts due. In fact, there are also issues of fact as to the amount of damages claimed by Landlord. For example, Landlord claimed that Kurzman was liable for Tax Escalation in the amount of $144,482.62 for periods attributable through July 1, 2012. (R. 36, ¶ 16) But the Lease, at Paragraph 24(c)(6), provides as follows: If the commencement date of the term of this lease is not the first day of the first comparative year, then the additional rent due hereunder for such first comparative year shall be a proportionate share of said additional rent for the entire comparative year, said proportionate share to be based upon the length of time that the lease term will be in existence during such first comparative year. Upon the date of any expiration or termination of this lease (except termination because of Tenant’s default) whether the same be the date hereinabove set forth for the expiration of the term or any prior or subsequent date, a proportionate share of said additional rent for the comparative year during which such expiration or termination occurs shall immediately become due and payable by Tenant to Landlord, if it was not theretofore already billed and paid. The said proportionate share shall be based upon the length of time that this lease shall have been in existence during such comparative year. Landlord shall promptly cause statements of said additional rent for that comparative year to be prepared and furnished to lessee. Landlord and Tenant shall thereupon make appropriate adjustments of amounts then owing. (R 68). Thus, where there is an expiration or termination of the Lease prior to the stated termination date, then Tenant is only responsible for a proportionate share 51 3954773v1 based upon the length of time the lease shall be in effect during the particular year. While this clause does not apply in cases of termination because of Tenant’s default, there are clear questions of fact here as to whether the Lease was in fact terminated by default due to the fact that the Lease was terminated by the Stipulation wherein the parties reserved their rights and defenses. Of course, any ambiguity in this Lease provision should be construed against Landlord, and this issue was never reached by either of the Courts below. Finally, the fact that it was no determination of default on behalf of Kurzman is also relevant to the issue of the interpretation of the Stipulation. Contrary to what Landlord argued below, Kurzman had the full right to sublet the premises prior to its execution of the Stipulation and was not precluded from doing so by any alleged default. Indeed, Landlord itself recognized that there was no default which would have precluded Kurzman from subletting the premises when it contemporaneously approved the COSTAR listing for sublet without ever raising the argument that any default on behalf of Kurzman precluded its right to sublet, (R 218), and again concedes this fact in its brief to this Court. (LL. Br. at p. 28). 52 3954773v1 CONCLUSION THE CERTIFIED QUESTION FROM THE APPELLATE DIVISION SHOULD BE ANSWERED IN THE AFFIRMATIVE AND THE ORDER OF THE APPELLATE DIVISION, TO THE EXTENT APPEALED FROM BY APPELLANT SHOULD BE AFFIRMED Dated: New York, New York August 27, 2015 KURZMAN KARELSEN & FRANK, LLP By:________________________ Charles Palella Pro Se and Attorneys for Individual Respondents 437 Madison Avenue-29th Floor New York, NY 10022 (212) 867-9500 Charles Palella, Arthur R. Block On the Brief
