Eujoy Realty Corp., Respondent,v.Van Wagner Communications, LLC, Appellant.BriefN.Y.October 8, 2013To be Argued by: VICTOR P. MUSKIN (Time Requested: 30 Minutes) New York County Clerk’s Index No. 116655/07 Court of Appeals of the State of New York EUJOY REALTY CORP., Plaintiff-Respondent, – against – VAN WAGNER COMMUNICATIONS, LLC, Defendant-Appellant. BRIEF FOR DEFENDANT-APPELLANT SCHEICHET & DAVIS, P.C. Attorneys for Defendant-Appellant 767 Third Avenue, 24th Floor New York, New York 10017 Tel.: (212) 688-3200 Fax: (212) 371-7634 Date Completed: January 24, 2013 COURT OF APPEALS STATE OF NEW YORK EUJOY REALTY CORP., Plaintiff-Respondent, -against- VANWAGNER COMMUNICATIONS, LLC, Defendant-Appellant. APPELLANT'S RULE 500.1(f) DISCLOSURE STATEMENT LIST OF APPELLANT'S PARENTS, SUBSIDIARIES AND OTHER AFFILIATED ENTITIES 729 Seventh Sign, LLC 932 Southern Boulevard, LLC AEG-VW Lawndale Marquee, LLC Aerial Five, Inc. Aero Tech Industries, Inc. Airborne Billboards, Inc. Boston Outdoor Ventures, LLC BQE Expressway, LLC Century Prince Street, Inc. Dorna Playground Programs, LLC Forward Communications, Inc. Millenium Billboard, LLC Mizey Realty Co., Inc. Seashore Advertising Corp. Take Two Outdoor Media, LLC Van Wagner Aerial Media, LLC Van Wagner Boston, LLC Van Wagner Bus Advertising, LLC Van Wagner/Capital, LLC Van Wagner Chicago, LLC Van WagnerDorna U.S.A., LLC Van Wagner Electrical & Maintenance, LLC Van Wagner Enterprises, LLC Van Wagner Kiosk Advertising, LLC Van Wagner Miami, LLC Van Wagner San Francisco, LLC Van Wagner Sign Erectors, LLC Van Wagner Sports and Entertainment Holdings, LLC Van Wagner Sports and Entertainment, LLC Van Wagner Sub LLC Van Wagner Transportation Advertising, LLC Van Wagner Twelve Holdings, LLC Van Wagner/Wall to Wall, LLC Van Wagner WWRAM Miami, LLC Dated: New York, New York January 31, 2013 204498 SCHEICHET & DAVIS, P.C. by 1/;clnf.~ Victor P. Muskin Of Counsel 767 Third Avenue- 24th Floor New York, NY 10017 (212) 688-3200 Attorneys for Appellant 2 i 262064 TABLE OF CONTENTS Table of Authorities…………………………………………………………… iv Preliminary Statement………………………………………………………...…..1 Questions Presented and the Majority’s Answers………………………………...1 Proceedings Below……………………………………………………………......3 (1) In Supreme Court……………………………………………………….3 (2) In the Appellate Division, First Department……………………….…...4 Statement of Facts………………………………………………………….……..5 The Appellate Division’s Order…………………………………………………..9 (1) The Oral Modification Issue………………………………………........9 (2) The Stopped Check, Advance Payment and Lease Issues…….…….....11 (3) The Dissent…………………………………………………………….12 (a) The Lease…………………………………………………………...12 (b) Proper Appellate Practice…………………………………….…….12 (c) General Obligations Law § 7-103…………………………….…....13 ARGUMENT………………………………………………………….……........14 POINT I……………………………………………………………….………….14 RESPONDENT’S UNPLEADED CLAIM FOR POST-TERMINATION RENT SHOULD BE DISMISSED………………………………………….…….…..…14 (1) The Lease Terms Require Dismissal………………..……………….…14 ii 262064 (a) Relevant Lease Clauses………………………………….…………14 (b) The Motion Court’s Ruling……………………………….………..16 (c) The Majority’s Ruling…………………………………….………..16 (2) Respondent’s Unconditional Acceptance of Termination And Surrender Precludes Its Claim……………………………………19 (3) Respondent’s Failure to Invoke the Lease’s Default Clauses Precludes This Action………………………………………...21 (4) The Lease’s Non-Waiver Clause Is Of No Help to Respondent’s Claim………………………………………………..22 (5) The Majority Rewrote the Parties’ Agreement………………………..24 POINT II RESPONDENT’S CLAIM IS BARRED BY GENERAL OBLIGATIONS LAW §7-103……………………………....26 POINT III RESPONDENT’S “DUE DATE” ARGUMENT SHOULD NOT HAVE BEEN ENTERTAINED………………………...30 POINT IV THE MAJORITY’S GRANT OF SUMMARY JUDGMENT FOR RESPONDENT IMPROPERLY ADJUDICATED TRIABLE ISSUES OF FACT UNDER APPELLANT’S ALTERNATIVE CLAIMS………………………….…33 (1) Procedural Context……………………………………………………33 (2) The Oral Modification and Estoppel Claims………………………….34 iii 262064 (a) Oral Modification…………………………………………………35 (b) Estoppel………………………………………………………..….38 (3) Summary Judgment For Respondent Was Improper…………...…..…40 CONCLUSION……………………………………………………………..…...41 iv 262064 TABLE OF AUTHORITIES Cases: 85th St. Rest. Corp. v. Sanders, 194 A.D.2d 324 (1st Dep’t 1993)……………………………………...............24 1251 Ams. Assoc. II, L.P. v. Rock 49th Rest. Corp., 13 Misc.3d 142(A), 2006 NY Slip Op 52282[U] (2006)……..………….. 17, 20 Bank of New York v. Spiro, 267 A.D.2d 339 (2nd Dep’t 1999)…………………………………………..…19 Banque Worms v. Bankamerica International, 77 N.Y.2d 362 (1991)…………………………………………………………19 Cornwell v. Sanford, 222 N.Y. 248, 253 (1918)……………………………………...………..…..19 Esteve v. Abad, 271 App.Div. 725 (1st Dep’t 1947)….……………………………………...41 Flag Wharf, Inc. v. Merrill Lynch Capital Corp., 40 A.D.3d 506, 836 N.Y.S.2d 406 (1st Dep’t 2007)….…………………….24 Halkedis v. Two E. End Ave. Apt. Corp., 137 A.D.2d 452, 453 (1st Dep’t 1988), aff’d 72 N.Y.2d 933 (1988)……....24 Herter v. Mullen, 159 N.Y. 28 (1899)…………………………………………………….….19, 27 Holt v. Feigenbaum, 52 N.Y.2d 291 (1981)…………………………………………………..……36 Hutzler v. Hertz Corp., 39 N.Y.2d 209 (1976)…………………………………………………….....9, 16 In re Roth & Appel, 181 Fed. 667 (1910)……………………………………………………..…… 19 v 262064 Joseph P. Day Realty Corp. v. Jeffrey Lawrence Associates, 270 A.D.2d 140 (1st Dep’t 2000)……………………………..….……36, 37, 38 Lumbermens Mut. Cas. Co.v. Morse Shoe Co., 218 A.D.2d 624 (1st Dep’t 1995)……………..…………………….….…….32 Madison Ave. Leasehold, LLC v. Madison Bentley Assoc., LLC, 8 N.Y.3d 59 (2006)……………………………..…………………….….…...22 Matter of Bombay Realty Corp. v. Magna Carta, 100 N.Y.2d 124 (2003)……………………………...…………………..…….18 Matter of People v. Booke, 58 A.D.2d 142, 145 (1st Dep’t 1977)…………………………….………........26 Matter of Perfection Tech. Servs. Press, 22 A.D.2d 352, 354 (2nd Dep’t 1965), aff’d 18 N.Y.2d 644 (1966).................26 Matter of Ryan, 294 N.Y. 85 (1945)……………………………………………………….19, 27 Matter of Wallace v. 600 Partners Co., 86 N.Y.2d 543 (1995)…………………………………………..…………...24 Ritt v. Lenox Hill Hospital, 182 A.D.2d 560, 562 (1st Dep’t 1992)………………………………………32 Riverside Research Institute v. KGMA, Inc., 108 A.D.2d 365 (1st Dep’t 1985)………………………………………..39, 40 Ronnen v. Ajax Elec. Motor Corp., 88 N.Y.2d 582 (1996)…………………………….…………………………..18 Rose v. Spa Realty Associates, 42 N.Y.2d 338 (1977)……………………………………………….35, 36, 39 Sillman v. Twentieth Century Fox Film Corp., vi 262064 3 N.Y.2d 395 (1957)………………………………..……………………….41 Stendig v. Thom Rock Realty Company, 163 A.D.2d 46, 558 N.Y.S.2d 917 (1st Dep’t 1990)…………………..…….. 39 Triple Cities Construction Co. v. Maryland Casualty Co., 4 N.Y.2d 443 (1958)………………………………………………………….38 Werner v. Padula, 49 App.Div. 135 (1900)………………………………….20 Statutes: General Obligations Law §7-103……………………..….……13, 25, 26, 28, 29 Real Property Law §227……………………………….….…………………..20 1 262063 BRIEF FOR APPELLANT Preliminary Statement The Appellate Division, First Department, two justices dissenting, awarded Respondent landlord a windfall recovery of advance rent covering almost an entire calendar year after Appellant tenant’s proper termination of a commercial lease, plus attorney’s fees (R124-147). On this appeal, the Court will decide whether the Appellate Division correctly reversed the dismissal ordered at Motion Term (R7-9, R151-155) and granted Respondent’s pre-discovery motion for summary judgment. Appellant submits that the result ordered by the Appellate Division is manifestly unjust and wrong on the law and the facts and that Supreme Court judgment and Appellate Division dissent were correct. The order of the Appellate Division should be reversed, the judgment in favor of Respondent (R145-150) vacated and the dismissal granted at Motion Term reinstated. In the alternative, the case should be remanded to Supreme Court for discovery and trial. Questions Presented and the Majority’s Answers 1. Did a clause in a commercial lease entitling Respondent to retain advance rent only if prepaid prior to termination of the lease preclude this post- termination suit for unpaid advance rent? The majority answered in the negative. 2 262063 2. Did Respondent’s unconditional acceptance of Appellant’s termination of the lease extinguish all rent obligations by Appellant for periods subsequent to such termination? The majority answered in the negative. 3. Did Appellant’s payment of pro-rated rent for the eight days of January 2007 during which it occupied the subject premises prior to properly terminating the lease, which Respondent accepted without reservation, satisfy Appellant’s rent obligation in full? The majority answered in the negative. 4. Did the default clauses in the lease require Respondent to declare Appellant in default for non-payment as a condition precedent to instituting suit for advance rent? The majority answered in the negative. 5. Did the non-waiver clause survive termination of the lease? The majority answered in the affirmative. 6. Did the non-waiver clause, which referred to monthly rent, preclude Respondent from claiming annual rent and limit its claim for advance rent to the balance of January 2007 at the most? The majority answered in the negative. 7. Was Respondent’s claim for post-termination rent precluded by §7- 103 of the General Obligations Law? The majority answered in the negative. 8. Was Respondent’s claim for a full year’s advance rent despite accepting Appellant’s surrender of the property and undisputed termination of the lease properly entertained on appeal even though this claim was not alleged in the 3 262063 complaint, was asserted at Motion Term only on reply and was not entertained by the Motion Court? The majority answered in the affirmative. 9. Alternatively, were there triable issues of fact, among others, as to (a) whether the parties partially performed an oral modification of the lease whereby Respondent agreed to accept Appellant’s pro-rated rent in full satisfaction of Appellant’s rent obligation, and (b) whether Respondent misled Appellant into retaining possession into 2007 based on that agreement; and should Appellant have been permitted to plead an affirmative defense of estoppel? The majority answered all of the above in the negative. Proceedings Below (1) In Supreme Court The action was commenced in the Supreme Court, Queens County on or about October 17, 2007 (R53). On November 16, 2007, Appellant answered (R23- 29) and demanded that the venue be changed to New York County (R55-57), and filed a motion accordingly. On December 19, 2007, Respondent consented to the change of venue to New York County (R59). After the change of venue, Respondent moved for summary judgment and Appellant cross-moved for the same relief. On its cross-motion, Appellant requested, in the event the case was not dismissed on the basis of the lease, that it be granted leave to amend its answer to add an affirmative defense of estoppel and 4 262063 that the case be set down for trial due to disputed issues of fact (R47-52). The parties stipulated that if both motions were denied, Respondent consented to the amendment (R8). The Motion Court denied Respondent’s motion (R7-9), granted summary judgment to Appellant and, on August 15, 2008, entered judgment dismissing the case (R151-155). (2) In the Appellate Division, First Department Respondent appealed to the Appellate Division, First Department. By an order dated May 18, 2010, the Appellate Division, two justices dissenting, reversed the Supreme Court judgment, directed judgment in favor of Respondent and remanded the case for an assessment of counsel fees (R124-144). Appellant’s prior appeal to this Court was dismissed, sua sponte, for lack of finality of the proceedings below. Respondent then moved in Supreme Court for an assessment of counsel fees. On December 22, 2011 the parties stipulated to counsel fees of $50,000.00. On October 9, 2012 a final judgment was entered in Supreme Court awarding Respondent $94,133.57 in advance rent, $50,000.00 in attorney’s fees, plus interest and costs (R145-150). On November 9, 2012, Respondent refiled its appeal to this Court as of right based on the double dissent at the Appellate Division (R122-123). 5 262063 Statement of Facts Appellant operates outdoor advertising media in the New York City area and beyond (R66). Respondent owns an advertising billboard on the roof of a building located near the Long Island Expressway in Queens (R30, 67, 124, 130). On October 18, 2000, Appellant leased the sign from Respondent for a fifteen-year term, commencing December 1, 2000, in order to post advertising thereon for its customers (R30-44, R124). As required by the lease, Respondent regularly paid the rent annually in advance (R68). Since the advertising value of the sign depends on its visibility to passing motorists on the Long Island Expressway, Article 53 of the lease’s second rider entitled Appellant to terminate it “in the event of the erection of a new building or the increase in height of a building between the location of the [sign] and the Long Island Expressway so as to substantially obstruct vision of the [sign] from the Long Island Expressway.” (R42, 125, 130) The rental terms were set forth in Schedule A of the lease (R34-36). Paragraph A of Schedule A, entitled “Basic Rent,” set forth graduated annual basic rent amounts for each year of the lease (R34-35). Paragraph B of Schedule A, entitled “Additional Rent,” provided for additional rental amounts to be paid on execution of the lease and a year later (R35-36). Paragraph C of Schedule A, entitled “No Return of Basic Rent or Additional Rent,” provided as follows: 6 262063 Should this Lease be terminated for any reason prior to the date of its expiration, Tenant shall not be entitled to the return of any additional rent theretofore paid or any basic rent paid in advance and covering a period beyond the date on which the Lease is terminated, provided, however, that with respect to basic rent only, should this Lease be terminated pursuant to either Article 9, 10 or 50, the basic rent shall be paid through the date of termination and basic rent paid on account of any period subsequent to termination of the Lease shall be returned to Tenant (R36). In 2006, new construction was commenced between the Sign and the Long Island Expressway that would soon “substantially obstruct” the view of the Sign from the roadway (R67). The parties had several conversations about this in which Appellant informed Respondent, and Respondent understood, that Appellant would soon have to terminate the Lease pursuant to Article 53 because it would no longer be able to sell the advertising space to its customers (R67, R124-125). Appellant had an alternate location available to which it was able to move its customers’ advertising (R67-68). However, in consideration of its cordial relationship with Respondent over the years in which they had been in business under the Lease, Appellant agreed with Respondent that it would keep its advertising posted on the Sign and defer terminating the Lease for as long as possible, so as to give Respondent the benefit of rental income for a partial year, as long as the sign was usable. It was mutually understood that no further rent would be due after the lease was terminated (R68). Relying on the parties’ verbal 7 262063 understanding, Appellant forbore from terminating the Lease in 2006 even though it could have done so due to the rising obstruction of the view of the Sign, and instead it continued in occupancy of the Sign until early January 2007 (R68). In early January 2007, Appellant was no longer able to sell advertising space on the Sign due to the obstruction of view. As had been agreed, Appellant notified Respondent, at first orally and later in writing, that it was terminating the Lease as of January 8, 2007. Respondent accepted the termination. There is no dispute that the Lease was properly terminated (R68, R124-125, R130). Due to an oversight, however, Appellant’s accounts payable department accidentally sent Respondent a check for $96,243.00, representing the full year’s rent for 2007 rather than the pro-rated rent through January 8, 2007 (R125, R130- 131). Appellant notified Respondent as soon as it learned of the mistake and stopped payment on the check (R68-89, R125, R131). Upon receiving bank confirmation of the stop order (R87), Appellant sent Respondent a replacement check for $2,109.43, representing the pro-rated rent due through January 8, 2007 (R27-28, R125, R131). Respondent accepted the pro-rated rent (R 69). It did not contest Appellant’s termination of the Lease as of January 8, 2007, nor did it claim that there was a default or otherwise seek to collect any additional rent. Almost a year later, never having sent a notice of default or claimed that Appellant owed it any additional money, and having indisputably benefited from 8 262063 the parties’ mutual understanding whereby Respondent deferred termination of the Lease into early 2007, Respondent brought this action to recover $94,133.57, representing the balance of the funds on which payment had been stopped. The complaint alleged two causes of action. The first cause of action sought recovery of the above amount based upon the theory that Appellant’s accidental check for the full year’s rent constituted payment of advance rent, and that Appellant’s stop payment order on that check amounted to recovery of the advance rent, to which Appellant was not entitled under Paragraph C of Schedule A of the lease. The second cause of action sought attorney’s fees under the lease (R131). On its motion for summary judgment, Respondent relied exclusively on its pleaded theory that Appellant had duly paid the year’s rent in advance and had improperly recovered it by stopping payment on the check (R131-132). Appellant answered that argument in its responsive papers (R132). On reply, apparently having some doubt about its theory of the case, Respondent shifted gears and introduced a new theory that it had not pleaded in the complaint or sought by way of amendment. The unpleaded theory contended that as the full year’s advance rent was allegedly due and payable as of the first day of the year, Respondent could sue for it at any time. In essence, Respondent’s new claim was that it could collect post-termination rent despite a lease clause specifically providing that it was only entitled to such rent if it had been paid in advance (R133-134). 9 262063 Granting Appellant’s cross-motion for summary judgment and dismissing the case, the Motion Court (Hon. Richard F. Braun, J.) stated: Plaintiff has not demonstrated that it is entitled to summary judgment, but Defendant has. Paragraph 53 of the second rider to the subject lease gave defendant the right to terminate the lease under the circumstances, and defendant did so. Paragraph C of Schedule A gave plaintiff the right to keep any rent that was paid in advance pursuant to paragraph A for the subject lease year. . . Defendant did not pay any such rent because defendant stopped payment on the rent check before plaintiff cashed it (see Hutzler v. Hertz Corp., 39 NY 2d 209, 214 [1976] (R8-9). The Motion Court correctly declined to entertain Respondent’s new theory, raised for the first time on reply and not alleged in the complaint, which Respondent never sought to amend (R131). Appellant’s motion for summary judgment was correctly granted in the Motion Court and the case was properly dismissed. The Appellate Division’s Order Reversing the judgment of dismissal and directing entry of judgment for Respondent, the Appellate Division, two justices dissenting, focused on three main points. (1) The Oral Modification Issue The majority focused first on Appellant’s alternative contention that the parties’ course of dealings had raised issues of fact as to an oral modification of the 10 262063 lease (R126-127). Appellant contended that under the modification Respondent had agreed, in light of the impending visual obstruction and termination, to accept pro-rated rent through the date of termination, even if for a partial year, in full satisfaction of the lease. Appellant contended that it had unequivocally relied on this oral agreement by deferring termination from late 2006 into early 2007, which no reasonable person would have done without such an agreement, and that this reliance and Respondent’s acceptance of the pro-rated rent without demanding a full year’s rent prior to suit amounted to partial, or even full, performance of the modification. Because Appellant’s alternative theory raised triable issues of fact, neither party sought summary judgment on those issues. Instead, they stipulated that in the event summary judgment was denied, Appellant would be permitted to amend its answer in order to add an estoppel defense for trial based on the alleged modification (R8). The Motion Court acknowledged this stipulation but did not reach these issues because it dismissed the case under the lease. The majority disregarded the parties’ stipulation and expanded the grant of summary judgment to determine, as a factual matter, solely on the basis of conflicting affidavits (R66-71, R84-86), that there had been no partially performed oral modification (R126-127). 11 262063 The extended attention given by the majority to the oral modification issue reversed the focus of Appellant’s arguments. Appellant had contended that the oral modification and estoppel theories were alternative arguments raising fact issues to be preserved for trial if for any reason it was found that the lease itself did not support dismissal, and the parties had so stipulated. Because the Motion Court correctly dismissed the case on the basis of the lease, it did not reach the modification issue. Since Appellant’s alternative oral modification and estoppel theories raise triable issues of fact not addressed by the lower court, the Appellate Division should not have determined them on summary judgment. The dissent did not need to reach these issues and this Court need not do so now. (2) The Stopped Check, Advance Payment and Lease Issues The majority accepted the Motion Court’s determination that the mistaken payment and stopped check did not amount to recovery of rent paid in advance. Nevertheless, it ruled that the lease provision entitling the landlord to post- termination rent only if paid in advance and the provision requiring the tenant to pay the annual rent on the first day of the year, although both part of the rent schedule, are “separate and distinct” and need not be reconciled. The majority acknowledged that permitting “recovery of the full year’s rent under these circumstances is a windfall to plaintiff,” but concluded that the result was mandated by the lease (R127). 12 262063 (3) The Dissent (a) The Lease All of the justices accepted the Motion Court’s determination that Appellant’s delivery of the annual rent check on which payment was thereafter stopped did not amount to payment (R141). That, however, and the fact that the majority’s ruling granted Respondent a windfall (R127, R144), were the only points of unanimous agreement. The dissent agreed with the Motion Court’s rationale. Further, it urged that Respondent’s acceptance of the surrender of the premises operated to discharge the Appellant from all liability beyond the pro-rated rent tendered and accepted for Appellant’s few days of occupancy in 2007. The dissent also noted that as Respondent had failed to exercise its remedies the lease for default, the suit could not be justified by Appellant’s alleged default. (b) Proper Appellate Practice The dissent also urged that under well settled rules of appellate practice, Respondent’s new “due date” theory should not have been considered on appeal because it was not (i) raised in the Motion Court except on reply, (ii) alleged in the complaint, (iii) supported by an amendment to the complaint, or (iv) considered by the motion court, as a result of which (v) there was no ruling on that point by the 13 262063 court of original instance as to which error could be assigned as a predicate for reversal (R133-134). (c) General Obligations Law§ 7-103 The dissent also pointed to General Obligations Law §7-103, which provides, in material part: Whenever money shall be deposited or advanced on a contract or license agreement for the use or rental of real property as security for the performance of the contract or agreement or to be applied to payments upon such contract or agreement when due, such money, with interest accruing thereon, if any, until repaid or so applied, shall continue to be the money of the person making such deposit or advance and shall be held in trust by the person with whom such deposit or advance shall be made (emphasis supplied). Because the lease defines the annual rent payments as advance rent, the dissent concluded “there is no question” that such payments are subject to § 7-103 (R137). Under that statute, the dissent reasoned, any rent payments made by a tenant in advance must be held by the landlord in trust for the tenant until they actually accrue. Since the lease in this case was properly terminated, accrual of the rent stopped as of the date of termination, and since the landlord was fully paid through the date of termination, the dissent concluded that it had no further claim (R137- 142). 14 262063 The dissent sharply criticized the majority’s ruling as ignoring “controlling statute and case law as well as the terms of the lease for the sake of bestowing a mere windfall.” (R144). ARGUMENT POINT I RESPONDENT’S UNPLEADED CLAIM FOR POST-TERMINATION RENT SHOULD BE DISMISSED (1) The Lease Terms Require Dismissal The lease in this case was for a 15 year term commencing on December 1, 2000 (R30). (a) Relevant Lease Clauses (i) Paragraph A of Schedule A (R34-35) lists graduated annual rental amounts payable in advance as of the first day of each year. For Lease Year 7, Paragraph A provides: The annual basic rent for the period January 1, 2007 through December 31, 2007 shall be $96,243.00 which Tenant shall pay in advance on January 1, 2007 (R34). (ii) Paragraph C of Schedule A provides: Should this Lease be terminated for any reason prior to the date of its expiration, Tenant shall not be entitled to the return of any additional rent theretofore paid or any basic rent paid in advance and covering a period beyond the date on which the Lease is terminated, provided, 15 262063 however, that with respect to the basic rent only, should this Lease be terminated pursuant to either Article 9, 10 or 50, the basic rent shall be paid through the date of termination and basic rent paid on account of any period subsequent to termination of the Lease shall be returned to Tenant (R36). (iii) Article 53 of the Second Rider provides that Respondent was entitled to terminate the lease . . . in the event of the erection of a new building or the increase in height of a building between the location of the [sign] and the Long Island Expressway so as to substantially obstruct vision of the [sign] from the Long Island Expressway (R42). (iv) Article 43 of the Rider lists nonpayment of the basic rent as a default if: (a) Default shall be made in the payment of the basic rent and such default shall continue for a period of ten (10) days after notice thereof shall have been given to Tenant . . . (R38) (v) Article 18 provides the landlord with remedies for default including re-entry, dispossesses and liquidated damages (R32). (vi) Article 25 contains a non-waiver provision stating: No payment by tenant or receipt by owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent . . .and Owner may accept such check or payment without prejudice to Owner’s right to recover the balance of such rent or pursue any other remedy in this lease provided (R33). 16 262063 (b) The Motion Court’s Ruling Construing Article 53 and Paragraphs A and C of Schedule A, the Motion Court stated: Plaintiff has not demonstrated that it is entitled to summary judgment, but Defendant has. Paragraph 53 of the second rider to the subject lease gave defendant the right to terminate the lease under the circumstances, and defendant did so. Paragraph C of Schedule A gave plaintiff the right to keep any rent that was paid in advance pursuant to paragraph A for the subject lease year. . . Defendant did not pay any such rent because defendant stopped payment on the rent check before plaintiff cashed it (see Hutzler v. Hertz Corp., 39 NY 2d 209, 214 [1976] (R 8-9). (c) The Majority’s Ruling In reversing, the majority held: Defendant’s reliance on Section C of Schedule A is misplaced. The lease provision that the tenant shall not be entitled to the return of any basic rent paid in advance of lease termination is separate and distinct from the lease requirement that the full year’s rent be paid on January 1st. One provision simply makes clear that the rent paid in advance will not be returned upon termination of the lease, while the other plainly provides that the entire year’s rent is due on January 1st. It is a contortion of these two provisions to argue, as defendant does here, that if defendant had paid the annual rent on January 1st it would not be entitled to a refund but that since defendant did not pay as required, plaintiff is not entitled to recover the full year’s rent. While recovery of the full year’s rent under these circumstances is a windfall to plaintiff, it is a result mandated by the lease (R127). 17 262063 In support of this conclusion, the majority cited only 1251 Ams. Assoc. II, L.P. v. Rock 49th Rest. Corp., 13 Misc.3d 142(A), 2006 NY Slip Op 52282[U] (2006). In 1251, the tenant unsuccessfully sought to vitiate a notice of termination by paying the monthly rent then due the day after receiving the notice. The landlord accepted the payment. For the following reasons, this unremarkable Appellate Term ruling has no bearing on the situation at bar: (a) The only issue in 1251 was whether the landlord’s acceptance of the rent vitiated its prior notice of termination; (b) Unlike this case, the termination in 1251 had been invoked by the landlord and was contested by the tenant; (c) There was no claim by the landlord in 1251 for rent, as contrary to the case at bar the tenant had voluntarily paid the rent; (d) There was no claim by the tenant in 1251 for a refund of the unapplied rent; and (e) There was no lease clause in 1251 comparable to Paragraph C of Schedule A at issue in this case. For all of the above reasons, 1251 provides no support for the majority’s award of a windfall to the landlord in this case. 18 262063 Restating an axiomatic rule of contract interpretation, this Court, construing a commercial lease in Matter of Bombay Realty Corp. v. Magna Carta, Inc.,100 N.Y.2d 124 (2003), stated at p. 127: All parts of a contract must be read in harmony to determine its meaning (Ronnen v. Ajax Elec. Motor Corp., 88 N.Y.2d 582, 587, 589 [1996]). One portion of the lease should not be read so as to negate another portion. In order to determine the meaning of income, we need to read the entire lease. In Ronnen v. Ajax Elec. Motor Corp., supra, cited in Bombay, this Court stated at p. 589: We have long and consistently ruled against any construction which would render a contractual provision meaningless or without force or effect. Vitiating a contractual provision is exactly what the majority did in this case. While Paragraph A of Schedule A (R34) required the annual rent to be paid in advance, Paragraph C of Schedule A (R36) provided that in the event the lease was terminated, the landlord could retain advance rent only if it was actually prepaid prior to termination. Since that did not happen in this case, the Motion Court correctly held that there was nothing for the landlord to retain and, therefore, nothing it could claim. Contrary to the majority, this is not a “contortion” of the lease; it is what the parties provided1. Paragraphs A and C of Schedule A are not 1 Even if the stop order had failed to block cashing of the check, Respondent still would not be entitled to post-termination rent. Absent any showing by Respondent of detrimental reliance on 19 262063 “separate and distinct” as the majority put it (R127). They are interrelated parts of the same rent schedule. The majority failed to give due regard to the Court’s duty to harmonize all provisions of the lease by reading the document, or at least Schedule A, as a whole. As a result, it improperly construed Paragraph A of Schedule A to negate a crucial part of Paragraph C of the same schedule. (2) Respondent’s Unconditional Acceptance of Termination And Surrender Precludes Its Claim As the dissent correctly pointed out, it is long-settled law that a landlord’s acceptance of the tenant’s surrender of the premises discharges the tenant from liability for rent in the future. Herter v. Mullen, 159 N.Y. 28, 33 (1899) (R137). Since rent is the quid pro quo for the use and enjoyment of the property, the obligation to pay ceases if the right to occupy terminates. Matter of Ryan, 294 N.Y. 85, 95 (1945), citing In re Roth & Appel, 181 Fed. 667 (1910) (R138-139). Once the tenant rightfully removes itself from the premises, the relation of landlord and tenant is canceled. Cornwell v. Sanford, 222 N.Y. 248, 253 (1918) (R139). the mistake, Appellant would have been entitled under settled law to seek restitution of the erroneous payment. Banque Worms v. Bankamerica International, 77 N.Y.2d 362, 366-67 (1991); Bank of New York v. Spiro, 267 A.D.2d 339 (2nd Dep’t 1999). Since payment of the erroneous check was successfully stopped, that issue did not arise. 20 262063 As the dissent correctly noted, by rejecting these long-standing principles, the majority upheld a novel claim based upon a lease that was no longer in effect (R134). It cited only 1251 Ams. Assoc.II, L.P. v. Rock 49 Rest. Corp., supra, which as shown above bears no relationship to the issues in this case. Even the harsh result in Werner v. Padula, 49 App.Div. 135 (1900), relied on by Respondent below and discussed by the dissent (R135-136), is of no help to Respondent. In Werner, the Court rejected the plaintiff’s claim for a refund of advance rent that was unearned due to destruction of the premises by fire, a result later abrogated by statute2. Werner was the harshest case among those upon which Respondent relied at the Appellate Division. Even there, however, the landlord was not claiming, and the court did not award, additional rent for periods after termination of the lease as the majority did here. Under the principles set forth above and in the dissent, Appellant’s rightful surrender of the premises and Respondent’s unconditional acceptance of Appellant’s notice of termination of the lease ended any obligation by Appellant for the payment of additional rent beyond the date of surrender and termination (R139-140). The majority’s rejection of settled law should be rejected. 2 Real Property Law §227. 21 262063 (3) Respondent’s Failure to Invoke the Lease’s Default Clauses Precludes This Action Although claiming that Appellant had defaulted by failing to pay the full year’s rent, Respondent never served the notice of default and opportunity to cure that were a pre-requisite under Article 43 to suit for the rent. The majority ruled that this was not necessary because “the tenant had already terminated the lease in writing.” (R129). The dissent, however, correctly noted that that by accepting Appellant’s termination, Respondent also accepted that Appellant’s rental obligation had come to an end (R137-139). The parties provided remedies in the lease for nonpayment of rent and Respondent had an option. It could have rejected Appellant’s notice of termination, declared a default under Article 43 (R38) and demanded payment for the full year. In the absence of payment within 10 days, it could have terminated the lease and sought liquidated damages under Article 18 (R32) to the extent such damages were appropriate in view of Appellant’s termination rights under Article 53 (R42). Respondent did none of this. Instead, it unconditionally accepted Appellant’s termination with the pro-rated rent, only much later purporting to declare a default with respect to the rest of the year’s rent. 22 262063 This Court has enforced the obligations of landlords to proceed strictly under default clauses in order to sue a tenant for default. Madison Ave. Leasehold, LLC v. Madison Bentley Assoc., LLC, 8 N.Y.3d 59 (2006). The dissent correctly concluded that Respondent’s election not to do so, in addition to the other circumstances of this case, foreclosed any possible claim by Respondent for post- termination rent or damages (R141-142). (4) The Lease’s Non-Waiver Clause Is Of No Help to Respondent’s Claim The majority’s reliance in part on the lease’s non-waiver clause is not well taken. The relevant part of that clause appears in Article 25 of the lease (R33) and is quoted above at p. 15, supra. It provides in essence that the landlord may accept less than the monthly rent stipulated in the lease without prejudice to its right to recover “the balance of such rent” or pursue any other remedy “in this lease provided.” The landlord’s rights under the non-waiver clause, however, depended on the continuation of the landlord and tenant relationship. In this case, as shown above, that relationship came to an end upon Appellant’s rightful surrender of the 23 262063 premises and Respondent’s unconditional acceptance of Appellant’s termination of the lease. Therefore, the non-waiver clause was of no further effect after that date3. Furthermore, the non-waiver clause by its terms permitted the landlord to accept “a lesser amount than the monthly rent stipulated herein . . . while reserving its right to recover “the balance of such rent” or pursue any other remedy “in this lease provided.” By its placement within the same sentence, the term “such rent” indisputably meant the monthly rent, as there is no reference in the non-waiver clause to annual rent (R33, p. 15, supra). Finally in this context, the non-waiver clause, if at all applicable, at most preserved Respondent’s right to pursue any other remedy “in this lease provided.” This suit, however, is extra-contractual, as it is not based on the default remedies or any other remedy provided in the lease. By permitting Respondent to claim a default outside the lease, in order to collect money that under the lease it could not retain, the majority rewrote the parties’ terms to grant Respondent a remedy that they had excluded from their carefully drafted agreement. 3 The majority’s reliance on the non-waiver clause in support of the landlord’s claimed right to bring this suit (R126) is inconsistent with its excusal of the landlord’s failure to invoke the lease’s default procedures as a necessary precondition to doing so (R129). If the lease termination ended Respondent’s contractual obligation to invoke the default clauses prior to suit, it also ended Respondent’s contractual right to rely on the non-waiver clause. 24 262063 For the foregoing reasons, even if it survived termination of the lease, the non-waiver clause at most preserved the landlord’s right to sue for the balance of the rent due for January 2007. (5) The Majority Rewrote the Parties’ Agreement Courts may not rewrite a contract that has been carefully negotiated between sophisticated, counseled parties. The cases upholding this point are legion. E.g. Matter of Wallace v. 600 Partners Co., 86 N.Y.2d 543 (1995); Flag Wharf, Inc. v. Merrill Lynch Capital Corp., 40 A.D.3d 506 (1st Dep’t 2007). As the dissenting justices observed, “a court may not ‘rewrite the terms of an agreement under the guise of interpretation,’ ” citing 85th St. Rest. Corp. v. Sanders, 194 A.D.2d 324, 326 (1st Dep’t 1993) and Halkedis v. Two E. End Ave. Apt. Corp., 137 A.D.2d 452, 453 (1st Dep’t 1988), aff’d 72 N.Y.2d 933 (1988). (R142-143). The lease in this case was negotiated between sophisticated parties represented by experienced counsel. This is evidenced by the numerous excisions and interlineations in the preprinted portion of the New York Real Estate Board’s commercial lease form, plus the three-page rent schedule, five-page rider and second rider (R30-44). Nevertheless, as shown, the majority rewrote the parties’ agreement in several respects: 25 262063 (a) As the dissent concluded, it abrogated fundamental aspects of the lease, particularly the need for consideration (the right to occupy the premises as the quid pro quo for the tenant’s payment of rent) and the covenant of quiet enjoyment (the right to possess the premises undisturbed by a claim of superior title, including that of the landlord); (R144); (b) As the dissent further concluded, it rewrote Schedule A of the lease, the rent schedule, to permit the landlord to sue for unpaid advance rent “in the absence of any lease provision that preserves a right to recovery for unpaid rent” (R144) and which under Paragraph C of Schedule A (R36) it was not entitled to retain; (c) As shown in Point II below and as the dissent further noted, it rewrote Schedule A in an additional respect by converting the stipulated advance payment of rent into a current payment in order to avoid the effect of §7- 103 of the General Obligations Law (R142-144); (d) It rewrote Article 25 of the lease, the non-waiver clause (R33 and p. 15, supra), if applicable, to preclude waiver of Respondent’s claim for unpaid annual rent when the language in that clause limited any such claim to the amount of unpaid monthly rent; and (e) It rewrote Article 25 in an additional respect, to permit this extra- contractual suit which that clause had excluded (R141-142). 26 262063 POINT II RESPONDENT’S CLAIM IS BARRED BY GENERAL OBLIGATIONS LAW §7-103 Section 7-103(1) of the General Obligations Law provides in material part as follows: Whenever money shall be deposited or advanced on a contract or license agreement for the use or rental of real property as security for the performance of the contract or agreement or to be applied to payments upon such contract or agreement when due, such money, with interest accruing thereon, if any, until repaid or so applied, shall continue to be the money of the person making such deposit or advance and shall be held in trust by the person with whom such deposit or advance shall be made and shall not be mingled with the personal moneys or become an asset of the person receiving the same, but may be disposed of as provided in section 7- 105 of this chapter (emphasis supplied). Under §7-103(3), any contractual provision purporting to waive the protection of this statute is void. As the dissent correctly observes, §7-103 applies equally to security deposits and prepaid rent, citing Matter of People v. Booke, 58 A.D.2d 142 (1st Dep’t 1977) (security deposits) and Matter of Perfection Technical Services Press, 22 A.D.2d 352 (2nd Dep’t 1965), aff’d 18 N.Y.2d 644 (1966) (prepaid rent) (R136). The dissent further notes that under the statute prepaid rent remains the property of the 27 262063 payor and must be held in trust by the payee until it is applied to payments under the agreement when due (R136). Schedule A of the parties’ lease expressly describes the payments due thereunder as advance payments. Thus, for 2007, Schedule A stated: The annual basic rent for the period January 1, 2007 through December 31, 2007 shall be $96,243.00 which Tenant shall pay in advance on January 1, 2007 (emphasis supplied) (R34) Similar clauses set forth the rent payable for each of the 15 years of the lease term. Schedule C likewise referred to “rent paid in advance” (R36). Notably, these provisions do not state that the rent is “due” on the first of year. What they do state is that the annual rent was to be paid in advance on the first day of the year. Clearly, as the dissent emphasized, if the rent were “due” on the first of the year, the payment would be a current payment, not an advance payment as the lease states (R142). Thus, as the dissent correctly notes, the lease’s terminology unquestionably brought the rent payments within General Obligations Law §7-103 as advances to be applied to the rent as it accrued (R137). As a result, the tenant’s obligation to pay the rent remained contingent on its right to use and occupy the premises. It ceased when that right was terminated because at that point the rent ceased to accrue. Matter of Ryan, supra; Herter v. Mullen, supra. (R139). 28 262063 The majority avoids the plain import of the General Obligations Law by means of a broad brush assertion that “the terms of the lease provide that the entire year’s base rent is due on the first of the year.” (R129). This brief characterization is the sole basis of the majority’s ruling that §7-103 is not applicable to this case, and it is plainly erroneous. As shown above, a careful examination of the lease reveals that it nowhere states that the annual rent is “due” on the first day of the year. On the contrary, the rent clause states that the sign is leased “at the annual rental rate . . . set forth in Schedule A hereto which Tenant agrees to pay in lawful money of the United States . . . in installments in advance pursuant to Schedule A” (R30) (emphasis supplied). Schedule A then sets forth the graduated rental amounts for each of the 15 years of the lease term, “which Tenant shall pay in advance on January 1, 20__.” (R34-35) (emphasis supplied). This is not ambiguous. If the rent payments were actually “due” on the first day of the year, they would have been described as current rather than advance payments and the lease should have simply said they were “due.” That, however, is not what this lease says, as the term “due” appears nowhere. In sum, textual analysis demonstrates the correctness of the dissent’s view of the case. The lease specified that what was payable on the first of the year was the advance payment (R34). Under long-settled law, in order for an advance payment 29 262063 to be applied to rent, the obligation to pay the rent had to accrue. That obligation accrued as long as the tenant had the right to use and occupy the premises. When that right ceased as a result of a rightful surrender, the obligation to pay ceased. Since the rent was paid through the date of termination, the landlord has no further claim (R140). The “no refund” clause does not change this (R139), particularly since no advance rent was paid for 2007 and no refund has been sought. As the dissent further noted, the majority’s construction of the lease so as to avoid application of General Obligations Law §7-103 “thwarts the legislative intent to cast the landlord in a fiduciary capacity” and permits a landlord to confiscate money advanced by its tenant (R143) despite the absence of a default or breach of covenant. The majority chides Appellant for arguing that “if defendant had paid the annual rent on January 1 it would not be entitled to a refund but that since defendant did not pay as required, plaintiff is not entitled to recover the full year’s rent” (R127), but that is not Appellant’s position on this appeal. While the lease in fact did so provide, the dissent makes clear that unapplied advance rent paid for periods subsequent to a rightful lease termination is a trust fund subject to reimbursement under General Obligations Law §7-103(1). Appellant therefore submits that in the hypothetical case that had it actually paid the full year’s rent for 2007 in advance on January 1, it would be entitled under the statute to 30 262063 reimbursement of the unapplied portion of the payment for the period after its rightful termination. Anything in the “no refund” clause purporting to waive that protection is potentially void under §7-103(3). In any event, there was no trust fund in this case because no advance rent was paid for the year in question. The majority’s ruling is erroneous not only because it permitted the landlord to sue for and recover unaccrued and unpaid advance rent that under the lease it could not keep; but also because it authorized the landlord’s affirmative claim for funds that if received in the ordinary course would have been trust funds subject to reimbursement under the General Obligations Law. POINT III RESPONDENT’S “DUE DATE” ARGUMENT SHOULD NOT HAVE BEEN ENTERTAINED Respondent’s “due date” argument was raised in the Motion Court only on reply, as an afterthought, when it became clear that its primary theory of the case was of dubious validity. The complaint had alleged merely that Appellant’s delivery of a check for the full year’s rent, even if accidental, and even though stopped, amounted to payment of the rent that Appellant recovered by virtue of the stop order. The complaint alleged that the stop payment order thus amounted to recovery of advance rent in violation of the “no refund” clause in the lease. 31 262063 Respondent moved for summary judgment on this theory, and Appellant cross-moved for summary judgment in its favor. In its reply in the Motion Court, Respondent switched horses, introducing a new theory of the case not alleged in the complaint – that because under the lease the annual rent for 2007 was allegedly “due” on January 1 and had not been paid, the landlord could recover the full year’s rent notwithstanding the provision in Paragraph C of Schedule A that it could retain advance rent only if actually prepaid prior to termination, which did not occur. Respondent did not seek an amendment of its complaint to assert its new theory. The Motion Court correctly declined to entertain it, granting summary judgment in favor of Appellant on the ground that delivery of a check thereafter stopped did not constitute payment of advance rent, and inasmuch as there had been no such payment, there was nothing for Respondent to retain or recover. As a result, as the dissent pointed out, the Motion Court made no ruling with respect to Respondent’s unpleaded claim that could be assigned as error and serve as a predicate for reversal (R133). Respondent’s appeal to the Appellate Division nevertheless focused primarily on its new “due date” theory. However, since the basis of Respondent’s motion for summary judgment was limited to the grounds set forth in its complaint, the dissent noted that Respondent should not, under settled rules of appellate 32 262063 practice, have been permitted to introduce that alternative theory at the Appellate Division (R133-134). The majority ruled otherwise, noting that Respondent’s “due date” theory had been asserted in the Motion Court (R128). However, as the dissent responded, Respondent’s new argument was introduced for the first time on reply, and entertaining it was contrary to prior Appellate Division prior rulings that “[a]rguments advanced for the first time in reply papers are entitled to no consideration by a court entertaining a summary judgment motion,” and that the Court “has and will require consistent application of the rule[,]” citing Lumbermens Mut. Cas. Co.v. Morse Shoe Co., 218 A.D.2d 624, 626 (1st Dep’t 1995). (R134) As Lumbermens further stated, citing Ritt v. Lenox Hill Hospital, 182 A.D.2d 560, 562 (1st Dep’t 1992): [T]he function of a reply affidavit is to address arguments made in opposition to the position taken by the movant and not to permit the movant to introduce new arguments in support of the motion (citation omitted). The dissent continued: As a matter of practice, an appeal cannot be exploited as a means to assert new arguments. The function of an appellate court is to determine whether an error was made in reaching a decision, not to render a de novo ruling on the basis of some novel ground. 33 262063 The majority’s grant of summary judgment to Respondent on its unpleaded “due date” theory failed to apply the strict rule precluding consideration of arguments advanced for the first time in reply papers, is contrary to settled appellate practice and should not be permitted to stand. POINT IV THE MAJORITY’S GRANT OF SUMMARY JUDGMENT FOR RESPONDENT IMPROPERLY ADJUDICATED TRIABLE ISSUES OF FACT UNDER APPELLANT’S ALTERNATIVE CLAIMS (1) Procedural Context The record at Motion Term shows that on its cross-motion, Appellant sought leave, in the event that summary judgment was denied, to amend its answer to assert an alternative affirmative defense of estoppel based on a partially performed oral modification to the lease (R79-80). Recognizing that the case was in a pre- discovery phase and that this defense would present fact issues, the parties stipulated that in the event summary judgment was denied, Appellant’s answer would be so amended. Motion Term acknowledged the stipulation but because it granted Appellant’s cross-motion, the stipulated amendment was never put into effect (R8). 34 262063 Respondent’s summary judgment motion was addressed solely to Respondent’s original claim that the advance rent had been paid by virtue of the stopped check. As discussed above, the Appellate Division majority, although rejecting that theory, expanded Respondent’s motion to include not only Respondent’s unpleaded “due date” theory, but also Appellant’s alternative oral modification argument despite the obvious factual issues as to the latter. (2) The Oral Modification and Estoppel Claims The triable issues of fact relating to these claims fall into two categories: (a) whether the parties made and performed an oral pre-termination agreement whereby (i) Appellant agreed to refrain from terminating the lease for as long as it could sell the advertising space on the sign; (ii) Respondent agreed that no further rent would be due once the lease was in fact terminated, and (iii) whether Appellant’s reliance on such agreement led to its deferring the termination from 2006 into 2007; and (b) whether Respondent wrongfully induced Appellant to defer the lease termination into 2007 based on a misrepresentation that no post-termination rent would be claimed, and is therefore estopped from claiming such rent. 35 262063 (a) Oral Modification Parties to a written contract may modify its terms orally, even if the contract contains a “no oral modification” clause, and the modification may be enforced if performed or partly performed. Rose v. Spa Realty Associates, 42 N.Y.2d 338 (1977). In this case, the record shows (R 66-70) that Appellant’s Executive Vice- President Jordan Schaps, seeing the rising obstruction, telephoned Respondent in 2006 to explain that the lease would soon have to be terminated. Respondent fully understood this. Appellant offered to continue to use the sign for as long as possible, with the understanding that it would terminate the lease when it could no longer use the sign, with no further rent due. According to Appellant, Respondent agreed to this and Appellant relied on that agreement to its detriment by continuing to use the sign through the first week of 2007. Appellant had already secured an alternate sign location and had the right to terminate due to the obstruction in 2006 but forbore from doing so in consideration of the parties’ then courteous business relationship. Obviously, had Respondent revealed that after inducing Appellant to remain in possession into 2007, it would turn around and claim rent for the balance of the new year notwithstanding the concededly proper termination of the lease and the parties’ agreement, Appellant 36 262063 would have simply terminated the Lease prior to the end of 2006, which it clearly had a right to do. Appellant forbore from exercising that right on condition that when it eventually did terminate, Respondent would accept the termination with no further rent claimed. In return for the benefit of additional rent through the first week of 2007, which it would not have received had Appellant exercised its termination right prior to the end of 2006, Respondent agreed that no further rent would be due after the lease was terminated. Thus, wholly apart from the terms of the lease itself, the parties’ fully performed agreement overrides any contention that Appellant can be held liable for post-termination rent. Notwithstanding the above, the majority, relying on Joseph P. Day Realty Corp. v. Jeffrey Lawrence Associates, 270 A.D.2d 140 (1st Dep’t 2000), ruled that the record disclosed no conduct that was “unequivocally referable to the alleged oral agreement” as required by Rose v. Spa Realty Associates, supra. In so doing, the majority ignores the following: (a) No rent was required by the lease to be paid in 2007 because Appellant could have terminated the lease in 2006; (b) Appellant forbore from terminating the lease until early 2007, which no sensible businessperson would have done if liable for a full year’s rent as a result of a week’s occupancy; then (c) stopped payment on the erroneous check, (d) terminated the lease and (e) paid the pro-rated rent. In addition, Respondent (a) 37 262063 accepted the pro-rated rent, surrender and termination and (b) failed to declare a default or (c) otherwise demand payment of additional rent. Furthermore, there was no “record” except for conflicting affidavits (R66-71, R84-86). Appellant submits that the described actions by both parties are all inconsistent with continuing the lease and cannot be referable to anything but the pre-termination agreement. Appellant’s forbearance from terminating the Lease in 2006 in reliance on Respondent’s promise not to seek post-termination rent was not only inconsistent with its right to terminate the lease; it was a change of position to its detriment and clearly constituted consideration. Holt v. Feigenbaum, 52 N.Y.2d 291, 299 (1981). The majority nevertheless concluded that the above actions were “unilateral conduct” by Appellant and not evidence of a modification. However, that conclusion could only proceed from discrediting Appellant’s affidavit and crediting Respondent’s affidavit denying the pre-termination discussions and agreement (R84-85), both of which were contrary to the Court’s duty in the context of a summary judgment motion. Furthermore, Joseph P. Day, on which the majority relied, is factually distinct from the case at bar. In Day, the issue was whether the landlord had orally agreed to an early termination, unlike this case in which the landlord has conceded that early termination was proper. The tenant in Day had sent the landlord a letter 38 262063 purporting to confirm the alleged oral lease modification just prior to vacating the premises. Notably, the Court responded: When juxtaposed against landlord’s immediate commencement of this action, it cannot be said that landlord admitted the existence of the purported agreement by remaining silent in the face of the letter. To the contrary, landlord’s conduct evinced an immediate rejection of any purported agreement to modify the lease. 270 A.D.2d at 142 In this case, contrary to Day, Respondent did not reject Appellant’s termination letter; it accepted it along with Appellant’s check for the pro-rated rent, did not complaint about the stop order and did not bring suit until almost a year had passed. Respondent’s silence when it should have spoken stands in sharp contrast to the landlord’s immediate reaction in Day and, contrary to Day, evinces Respondent’s acceptance and performance of the oral lease modification. (a) Estoppel The above circumstances also show a classic estoppel. In Triple Cities Construction Co. v. Maryland Casualty Co., 4 N.Y.2d 443 (1958), Judge Fuld observed that an estoppel ‘rests upon the word or deed of one party upon which another rightfully relies, and, so relying, changes his position to his injury.’… Indeed, ‘A party may not, even innocently, mislead an opponent and then claim the benefit of his deception.’ (4 N.Y.2d at 448) (citations omitted). 39 262063 That is precisely what Respondent did here. In good faith, Appellant relied to its detriment on Respondent’s agreement that no rent would be payable once the lease was terminated, extending its occupancy into the first week of 2007 despite having a right to terminate sooner. Having thus induced Appellant to remain in occupancy until that time and accepted the additional pro-rated rental payments that resulted, Respondent should not be permitted to take advantage of Appellant’s good faith reliance on its assurances and sue for the balance of the new year’s rent, based on nothing more than Appellant’s one-week occupancy at the beginning of 2007 and a check error that that was immediately caught and corrected. The circumstances of this case estop Respondent from asserting any such claim here. See Rose v. Spa Realty Associates, supra; Stendig v. Thom Rock Realty Company, 163 A.D.2d 46, 558 N.Y.S.2d 917 (1st Dep’t 1990). In any event, this Court need not reach these issues. In Riverside Research Institute v. KMGA, Inc., 108 A.D.2d 365 (1st Dep’t 1985), the landlord communicated with the tenant after it vacated, but only to demand $285 for damages caused by the movers. The tenant paid the $285 and the landlord acknowledged surrender of the premises. The landlord later sued for back rent and attorney’s fees. The tenant claimed that the landlord was estopped from denying an oral lease modification permitting early termination. The Court found that the tenant’s actions were not unequivocally referable to the alleged oral modification. 40 262063 It nevertheless ruled for the tenant, finding no need to reach the estoppel issue and observing: KMGA intended to surrender the premises and Warwick knew this. The only claim Warwick originally made was for the $285 for some minor damage caused by the move. This was clearly an acceptance of the surrender, especially in light of the fact that Warwick only asserted its claims after KMGA asked for the $50,000 pursuant to the agreement. 108 A.D.2d at 368. In this case, Respondent’s conduct is similarly consistent with its acceptance of Appellant’s rightful surrender, making a similar result appropriate here. (3) Summary Judgment for Respondent Was Improper Respondent’s denial of Appellant’s description of the oral pre-termination modification agreement (R84-85) sets up factual disputes facts as to all of the matters discussed above. The parties’ stipulation permitting Appellant to amend its answer to assert these matters if summary judgment was denied preserved those issues for trial. Appellant has been denied pre-trial discovery with respect, among other things, to Respondent’s knowledge of the rising obstruction and its discussions of the impending lease termination with Appellant and others, including possible measures taken for re-renting the premises. On motions for summary judgment, “issue finding, rather than issue determination, is the key to the procedure,” requiring that the motion be denied if the court finds any genuine issue of fact. Esteve v. Abad, 271 App.Div. 725 (1st Dep't 1947), quoted in Sillman v. Twentieth Century Fox Film Corp., 3 N.Y.2d 395 (1957). This is particularly true on pre-discovery motions as in this case. The majority's summary disposition violated this rule, depriving Appellant of its fundamental right to develop a full trial record on its alternative ground for dismissal. CONCLUSION The unearned rent awarded to Respondent is a windfall and entirely without justification. The order of the Appellate Division and judgment for Respondent were in error, should be reversed and the prior judgment of dismissal entered in Supreme Court reinstated. Alternatively, the case should be remanded to Supreme Court for discovery and trial together with such other and further relief as is just and proper. Dated: New York, New York January 24, 2013 262063 Respectfully submitted, SCHEICHET & DAVIS, P.C. By KctofJ~~ Victor P. Muskin Of Counsel 767 Third Avenue- 24th Floor New York, NY 10017 (212) 688-3200 Attorneys for Appellant 41 42 262063 Of Counsel: Khine Z. Aung