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. REPLY 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: March 25, 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 Broadcast Services, Ltd. Aerial Five, Inc. Aero Tech Industries, Inc. Airborne Billboards, Inc. American Blimp Co., LLC (tka American Blimp Corporation) Beijing Lightship Advertising Co., Ltd. Boston Outdoor Ventures, LLC BQE Expressway, LLC Century Prince Street, Inc. China Lightship Leasing Co., Ltd. Dorna Playground Programs, LLC Forward Communications, Inc. Fuel Miami, LLC Fuel Outdoor, LLC Fuel Outdoor Holdings, LLC Fuel Outdoor San Francisco, LLC Metro Fuel, LLC Millenium Billboard, LLC Mizey Realty Co., Inc. Motion Picture Promotions, LLC Seashore Advertising Corp. Take Two Outdoor Media, LLC Van Wagner Aerial Media, LLC Van Wagner Airships America, LLC ( fka Lightship America, Inc.) Van Wagner Asia Pacific, LLC (fka Lightship Asia Pacific, LLC) Van Wagner Airships Australia, Ltd. (fka Lightship Australia Pty Ltd.) Van Wagner Airships Domestic Holdings, LLC Van Wagner Airships Europe, Ltd. (fka Lightship Europe Ltd.) Van Wagner Airships Group, LLC ( fka The Lightship Group) Van Wagner Airships International Holdings, LLC Van Wagner Airships Latin America, LLC ( fka Lightship Latin America LLC) Van Wagner Airships Repair Station, LLC (fka Lightship Repair Station LLC) Van Wagner Airships Title, LLC ( fka Virgin Lightships, Inc.) Van Wagner Big Screen Network Productions, LLC Van Wagner Boston, LLC Van Wagner Bus Advertising, LLC Van Wagner/Capital, LLC Van Wagner Chicago, LLC Van Wagner Dorna U.S.A., LLC Van Wagner Electrical & Maintenance, LLC Van Wagner Enterprises, LLC Van Wagner Experiential, LLC Van Wagner International, LLC Van Wagner Kiosk Advertising, LLC Van Wagner Miami, LLC Van Wagner Minnesota, 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 VWCL, LLC 262235 2 Dated: New York, New York March 25, 2013 SCHEIFHET & 9f\VIS, P.C .. by {/)· c_/yyfl ~4- Victor P. Muskin Of Counsel 767 Third Avenue- 24th Floor New York, NY 10017 (212) 688-3200 Attorneys for Appellant TABLE OF CONTENTS Table of Authorities ........................................................... .iii Preliminary Statement ............................................................. 1 Argument .......................................................................... 1 POINT I APPELLANT'S PAYMENT OF PRO-RATED RENT THROUGH JANUARY 8, 2007 DISCHARGED ITS RENT OBLIGATION IN FULL .......................................... 1 POINT II THIS ACTION IS PRECLUDED BY REPSONDENT'S FAILURE TO DECLARE APPELLANT IN DEPAUL T UNDER ARTICLE 43 OF THE LEASE ..................................... 5 POINT III THE NON-WAIVER CLAUSE, IF APPPLICABLE, EXCLUDED AT MOST A WAIVER OF A MONTH'S RENT ......................................................... 10 POINT IV RESPONDENT'S "DUE DATE" THEORY WAS RAISED IN THE MOTION COURT ONLY ON REPLY AND WAS CORRECTLY DISREGARDED .................... .13 262338 POINTY THE ADVANCE RENT PAYMENTS IN TillS CASE WERE TRUST FUNDS UNDER GENERAL OBLIGATIONS LAW §7-103 ................................. 16 POINT VI ISSUES OF FACT AS TO ORAL MODIFICATION AND ESTOPPEL SHOULD HAVE PRECLUDED SUMMARY JUDGMENT FOR RESPONDENT .......................... 18 CONCLUSION .................................................................. 26 11 262338 TABLE OF AUTHORITIES Cases: Anostario v. Vicinanzo, 59 N.Y.2d 662 (1983) .................................. 23 Barkleyv. McCue, 25 Misc. 738 (App.Term lstDep't 1899) ................. .4 Bernstein v. Englander, 25 N.Y.S.2d 139 (App.Term 1st Dep't 1941) ....... .4 Cheesebrough v. Lieber, 18 Misc. 459 (App.Term 1st Dep't 1896) .......... .4 Goldstein v. Stadler's Shoes, Inc., 159 Misc. 804 (App.Term 1st Dep't 1936) ........................................................ .4 Harris v. Shorall, 230 N.Y. 343, 349 (1921) .................................... 20 Holt v. Feigenbaum, 52 N.Y.2d 291,299 (1981) ............................... 24 Holy Properties Ltd., LP v. Kenneth Cole Productions, Inc., 87 N.Y.2d 130 (1995) ............................................................... 3 Imperator Realty Co., Inc. v. Tull, 228 N.Y. 447 (1920) ............. 20, 21, 26 Intel/157 West 57th Street Realty, LLC v. Block, 2002 WL 243391 (App.Term 1st Dep't 2002) ......................................................... .4 International Publications, Inc. v. Prince G. Matchabelli, 260 N.Y.451 (1933) .................................................................. 3 J & R Landscaping, Inc. v. Damianos, 1 A.D.3d 563 (2nd Dep't 2003) ...... 20 Jefpaul Garage Corp. v. Presbyterian Hospital in City of New York, 61 N.Y.2d 442 (1984) .......................................................... 12, 13 Joseph P. Day Realty Corp. v. Jeffrey Lawrence Associates, 270 A.D.2d 140 (1st Dep't 2000) .............................................. 24, 25 Kahn v. Simons, 25 Misc. 737 (App.Term 1st Dep't 1899) ..................... .4 111 262338 Madison Ave. Leasehold, LLC v. Madison Bentley Assoc., LLC, 8 N.Y.3d 59 (2006) ................................................................... 6 Petrelli v. Kagel, 3 7 Misc.2d 246 ( Civ. Ct. Bronx Co. 1962) ................ 1 0 Rose v. Spa Realty Associates, 42 N.Y.2d 338 (1977) ............... 19, 20, 24 Sperry v. Miller, 8 N.Y. 336 (1854) .......................................... .4, 10 219 Broadway Corp. v. Alexander's, Inc., 46 N.Y.2d 506 (1979) ............ 9 Werner v. Padula, 49 App.Div. 135 (1st Dep't 1900) ........................... .4 Statutes: General Obligations Law § 7-1 03 ............................................. 16, 18 Other Authorities: 74A N.Y.Jur.2d, Landlord and Tenant §898 ........................................ .3 IV 262338 PRELIMINARY STATEMENT Appellant respectfully submits this Reply Brief in further support of its request for reversal of the order of the Appellate Division and reinstatement of the original judgment of dismissal in the Motion Court. POINT I APPELLANT'S PAYMENT OF PRO-RATED RENT THROUGH JANUARY 8, 2007 DISCHARGED ITS RENT OBLIGATION IN FULL Appellant showed in its opening brief (App. Br. at 19-21 )1 that the dissent correctly argued that under settled precedent, Respondent's acceptance of Appellant's rightful surrender and pro-rated rent terminated any further obligation by Appellant to pay rent. Respondent has failed to address this. Respondent insists that Appellant remains liable for the full 2007 rent notwithstanding its concededly proper termination and payment of the correct pro- rated rent, but it nowhere quotes Schedule A, Paragraph C, which it drafted. Because it was crucial to the Motion Court's determination and remains so, we repeat that clause here: 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, 1 Appellant's opening brief is referred to as "App. Br." and Respondent's opposing brief is referred to as "Opp. Br." 1 262236 however, that with respect to the basic rent only, should this Lease be terminated pursuant to either Article 9, 1 0 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) (emphasis supplied). Schedule A, Paragraph C provides that if the lease is terminated before its expiration date for any reason other than Articles 9, 10 or 50, the tenant is not entitled to reimbursement of any prepaid advance rent covering periods beyond the termination date. Conversely, the landlord is entitled under this clause to keep any advance rent paid prior to termination other than in the case of Article 9, 10 or 50 terminations. But in order for this to occur, the advance rent must actually be prepaid. If no advance rent for post termination periods has been paid prior to termination of the lease, there is nothing for the landlord to retain as the Motion Court correctly held. Respondent nevertheless argued to the Appellate Division that it could sue to collect unpaid advance rent despite the fact that under Schedule A, Paragraph C it had no right to unpaid advance rent. The majority agreed, regarding Appellant's position as a "contortion" that would reward its pre-termination "default." Appellant contends that it is not its position, but rather the majority's ruling, that contradicted the lease. Appellant relied on Schedule A, Paragraph C as written, but the majority erased that clause's restriction limiting Respondent's right to post- termination rent to advance rent that had actually been prepaid. The recovery thus 2 262236 allowed for Respondent was contrary to a lease clause that excluded precisely such a recovery. A landlord's right to recover post-termination rent, if any, is generally covered in rent survival clauses. As stated in 74A N.Y.Jur.2d Landlord and Tenant §898: After the termination of a lease, the tenant remains obligated to pay rent for as long as it is in possession of the premises. Otherwise, tenants may be held liable for rent and associated fees for the period subsequent to the termination date of the lease only in the event that the parties clearly contracted to make the defaulting tenants liable therefor after such termination. The parties to a lease are free to contract as they please, even in respect to the period subsequent to eviction and after the termination of the relationship of landlord and tenant; the resulting provisions are known as survival clauses (emphasis supplied). In Holy Properties Ltd., LP v. Kenneth Cole Productions, Inc., 87 N.Y.2d 130 (1995) (cited by the dissent at R139-140), the tenant was held liable for post- termination rent under a survival clause providing that upon defendant's abandonment of the premises or eviction, it would remain liable for all monetary obligations arising under the lease. In International Publications, Inc. v. Prince G. Matchabelli, 260 N.Y.451 (1933), the tenant was held liable for post-termination rent under a lease clause providing that "any entry or re-entry by the landlord ... in any manner, shall not be deemed to have absolved or discharged the tenant from any liability hereunder." Rent survival clauses are strictly construed, "for the 3 262236 courts are reluctant through strained interpretations to impose on a tenant an obligation which the tenant has not assumed." 74A N.Y.Jur.2d Landlord and Tenant §898, supra. As the dissent correctly noted, no such clause exists in this case. Had the parties desired, they could have easily obligated the tenant to pay the full rent for the year of termination regardless of whether it had been prepaid by adding such a proviso to Article 53 or Schedule A, Paragraph C. They did not. The majority improperly rewrote the parties' contract to insert that omitted proviso into the lease. The result was a windfall for Respondent (R127, 144). Respondent relies on the routine lower court case authorities it cited to the Motion Court and the Appellate Division, most of which are ancient and all of which are inapposite. In Werner v. Padula, 49 App.Div. 135 {1 51 Dep't 1900) and Goldstein v. Stadler's Shoes, Inc., 159 Misc. 804 (App.Term 1st Dep't 1936), unlike this case, the advance rent had been paid; the landlord was opposing claims for refunds but was not claiming that additional rent was owed. In Cheesebrough v. Lieber, 18 Misc. 459 (App.Term 1st Dep't 1896), Barkley v. McCue, 25 Misc. 738 (App.Term 1st Dep't 1899) and Kahn v. Simons, 25 Misc. 737 (App.Term 1st Dep't 1899), unlike this case in which there was a rightful termination, the tenant had abandoned the premises. In Intel/ 157 West 5ih Street Realty, LLC v. Block, 2002 WL 243391 (App.Term 1st Dep't 2002) the rent had also been paid. Bernstein v. 4 262236 Englander, 25 N.Y.S.2d 139 (App.Term 1st Dep't 1941) was undefended and also appears to have involved an abandonment. Sperry v. Miller, 8 N.Y. 336 (1854) resulted not in a judgment for the landlord but a new trial due to disputed facts. None of these cases involved a lease clause comparable to Paragraph C of Schedule A, which contractually excludes Respondent's claim. Respondent's acceptance of Appellant's rightful termination together with the correct amount of pro-rated rent ended the lease and Appellant's rental obligations. The majority granted Respondent a right that was not only outside the lease; it was contrary to a lease provision that expressly excluded it. Appellant does not seek to be rewarded for a default2• It does seek to enforce the lease as written. POINT II THIS ACTION IS PRECLUDED BY RESPONDENT'S FAILURE TO DECLARE APPELLANT IN DEFAULT UNDER ARTICLE 43 OF THE LEASE The dissent correctly reasoned that to hold Appellant m default for nonpayment of rent, Respondent was required to follow the default procedures spelled out in Article 43 of the lease. Subdivision (1 )(a) of Article 43 required, among other things, that the landlord give the tenant a ten-day notice and that the nonpayment remain uncured for fifteen days thereafter. Only upon the expiration 2 Appellant denies that it was in default. See Point II, infra. 5 262236 of the fifteen day post-notice interval could a late rent payment could constitute a default and trigger the landlord's default remedies (R141-142). Since Respondent did not adhere to any of the requirements of Article 43, Appellant was not in default (R142). As we pointed out in Appellant's opening brief, in Madison Ave. Leasehold, LLC v. Madison Bentley Assoc., LLC, 8 N.Y.3d 59 (2006), this Court has required landlords to proceed strictly under their contractual default clauses in order to hold a tenant in default (App. Br. at 21-22). Respondent's failure to do so should have precluded this action. The majority excused Respondent's non-compliance with the default procedures, ruling that Article 43 no longer applied because "the tenant had already terminated the lease in writing" (R129). Echoing the majority, Respondent argues in its brief that "Article 43 has no application where Tenant terminates the Lease" (Opp. Br. at 23). Respondent then asserts that "no authority" supports the position, clearly articulated by the dissent, that the rent ceased to accrue on termination of the lease (Opp. Br. at 23-24). In so doing, Respondent failed to address the authority cited by the dissent and explained in our opening brief, which addresses that very point (R137; App. Br. at 19-20). Respondent also argues that "no authority" supports the dissent's finding that the lease did not contain a rent survival clause preserving the landlord's right to recover rent for post-termination period (Opp. Br. at 23). Of course, the latter 6 262236 point is a question not of "authority," but contract. As to that, Respondent points to Articles 18 and 19 of the lease. Article 18, discussed above, sets forth the landlord's remedies in case of default. It is supplemented by Article 43. Article 19 is the attorney's fee clause and is irrelevant to this point. With respect to Article 18, Respondent cites the sentence stating: "Mention in this lease of any particular remedy shall not preclude Owner from any other remedy, in law or equity." However, nothing in that sentence or elsewhere in the lease, excuses the landlord from following the procedures required by Article 43 to hold the tenant in default, and nothing in Article 43 states that it applies only when the landlord terminates the lease but not when the tenant does so. As set forth in our opening brief and by the dissent, Respondent's failure to declare a default under Article 43 means that there was no default (R142). There being no default, Respondent had no right of action under Articles 18, 43 or otherwise. It is not difficult to discern why Respondent elected not to declare a default under Article 43 and proceed under Article 18. As the dissent noted, Article 18 provides that the rent payable up to the time of the landlord's re-entry "shall become due thereupon and shall be paid up to the time of such re-entry, dispossess or expiration" (R32). This clearly implies that the rent due upon re-entry was the pro-rated rent, and that had already been paid. 7 262236 Satisfied at first with the pro-rated rent, Respondent later changed its mind and decided it wanted more. Article 18 also provided for liquidated damages but there were several problems with using it, including the following: ( 1) the amount of liquidated damages was limited to the difference between the lease rent and the rent collected on a re-letting plus expenses "for each month of the period which would otherwise have constituted the balance of the term of this lease"; (2) the liquidated damages were payable by the tenant in monthly installments; and (3) since Respondent conceded that Appellant properly terminated under Article 53, the lease term had ended. Having accepted Appellant's termination and the pro- rated rent, and there being no basis under Article 18 to collect annual damages in addition, Respondent had no further remedy under the lease. To claim a windfall, it had to look elsewhere. That was when it came up with its "wrongful stop payment" theory and, when that proved insufficient, its "due date" theory. Although Respondent relies on the preservation of"any other remedy, in law or equity" provided in Article 18, it fails to mention that that clause does not nullify stated restrictions in the lease and, moreover, is limited by Article 43. The latter, found in the rider, states, in subdivision (3): 262236 Nothing in this Article 44 [sic] shall limit the right of the Landlord to recover possession of the demised premises for non-payment of the basic rent or any item of additional rent pursuant to any summary proceeding or other proceeding or remedy available to it by law or by statute at any time after the occurrence of an Event of 8 Default of the character specified in subdivision (a) hereof [sic](emphasis supplied) (R39) The subdivision (a) referred to in the quoted clause is found in Article 43(1) not 43(3). That subdivision is the nonpayment clause which requires ten days' notice plus fifteen days to cure before the landlord can declare a default (seep. 5, supra). In Article 43(3), the lease conditioned the availability of any "other proceeding or remedy available to it by law or statute" on an Article 43(1)(a) default, which did not occur. With no further remedy available under the lease, Respondent proceeded to chase its claimed windfall by proceeding outside the lease, but that belated claim is precluded by its failure to properly declare a default. There is no basis for the majority's ruling that Article 43 does not apply to this case. Respondent cites 219 Broadway Corp. v. Alexander's, Inc., 46 N.Y.2d 506, 509 (1979) for the self-evident proposition that a lease is a contract requiring the parties to fulfill certain obligations. Respondent does not explain why, recognizing those commitments, it did not, while the lease was in effect, notify Appellant that it claimed the balance of the year's rent and declare a default for nonpayment before accepting Appellant's termination and surrender. The answer, of course, is that the termination was proper, indeed expected under the visual obstruction clause, and Respondent recognized that it had no claim. 9 262236 The remaining authorities upon which Respondent relies (Opp. Br. at 24-25), all lower court cases except for this Court's 1854 ruling in Sperry v. Miller (discussed at p. 5, supra), do not help its argument3, as they all deal with monthly rent that is "due" on the first day of the month, not with annual rent amounts payable in advance. We discuss this further in Point V below. POINT III THE NON-WAIVER CLAUSE, IF APPPLICABLE, EXCLUDED AT MOST A WAIVER OF A MONTH'S RENT Respondent mischaracterizes Appellant's argument that Paragraph 25 did not survive the termination of the lease and mistakenly chides Appellant for raising it for the first time in this Court (Opp. Br. at 29). This point is not well taken. In Appellant's opening brief, we noted the majority's inconsistency in ruling that the lease's default clause (Article 43) had no further application due to the termination of the lease, while relying on the non-waiver clause (Article 25) in support of its determination to permit this suit (App. Br. at 23 fn.3). Appellant argued that if Respondent was no longer required to comply with the default clause due to termination of the lease, it should not be permitted to rely on the non-waiver clause 3 Interestingly, in one of Respondent's cases, Petrelli v. Kagel, 37 Misc.2d 246 (Civ. Ct. Bronx Co. 1962) the tenant claimed that the landlord had orally agreed to allow him to hold over for three days without paying rent. The claim was dismissed, but only after trial. That is in stark contrast to this case, in which the majority below improperly disregarded conflicting affidavits and dismissed Appellant's oral modification and estoppel claim on summary judgment. See Point VI below. 10 262236 for the same reason. The argument is raised on this appeal because it was suggested by the inconsistency in the Appellate Division's ruling 4• Even if applicable, the non-waiver clause contains express limitations. It provides that acceptance by the landlord of an amount less than the "monthly" rent shall not prejudice the landlord's right to recovery the balance of"such rent" (R33, ~25, quoted at App. Br. at 15). Respondent attempts to avoid the limitation of this non-waiver provision to the monthly rent by arguing that the reference was "inadvertent" and that the "intent and purpose" of the clause was to preserve a right to claim the annual rent notwithstanding the language actually used (Opp. Br. at 31 ). While invoking the non-waiver clause as grounds for this suit (R126), the majority avoided the issue, ignoring that by its terms the clause in this case expressly applies to monthly, not annual, rent. Here again, the majority rewrote the parties' contract, this time by amending, sub silentio, the word "monthly" to read "annual." It is not clear that the reference to "monthly" was inadvertent as Respondent now claims. The lease was a standard New York Real Estate Board form. A review of the document in issue (R30-44) shows that it contains at least 39 excisions, deletions, insertions, interlineations and footnotes, together with a rent schedule and two riders containing five pages and 13 paragraphs in addition to those in the 4 Conversely, if the non-waiver clause continues to be applicable, then so should the default clause. See Point II, supra. 11 262236 preprinted form. All of these changes were obviously made by experienced real estate counsel who went through every part of the form with a fme-toothed comb. In fact, the limitation of paragraph 25 to monthly rent is not the lease's only such reference to monthly accruals. Paragraph 18 provided in subsection (c) that in the event of a default and re-entry by the landlord, the tenant would pay as liquidated damages the difference between the rent collected by the owner on a re- letting "for each month of the period which otherwise would have constituted the balance of the term of this lease." The same paragraph provided that liquidated damages "shall be paid in monthly installments." The drafters were obviously content to leave some of the accruals under the lease, including rent under the non- waiver clause, on a monthly basis, notwithstanding the provisions for payment of the annual rent in advance. Respondent relies mainly on Jejpaul Garage Corp. v. Presbyterian Hospital in City of New York, 61 N.Y.2d 442 (1984) quoting at length from this Court's opinion in that case. Contrary to this case, Jefpaul was a typical "Yellowstone" litigation in which the tenant sought to establish the landlord's waiver of a breach in order to enjoin termination and renew its lease. Respondent failed to note that in Jejpaul, while holding for the landlord, this Court observed that whether or not a landlord's acceptance of rent with knowledge of a default constitutes a waiver is 12 262236 often a question of fact. 61 N.Y.2d at 448. In this case the questions of fact abound (See Schaps and Springer affidavits, R66-70; R84-85). We demonstrated in Appellant's opening brief that courts may not rewrite an agreement negotiated between carefully counseled parties (App. Br. at 24-25). None of the cases that Respondent cites support its position that the Court may amend the non-waiver clause in this case to expand its application from monthly rent to annual rent. For the foregoing reasons, the non-waiver clause, if applicable at all, limits Respondent's claim to one month's rent at most. POINT IV RESPONDENT'S "DUE DATE" THEORY WAS RAISED IN THE MOTION COURT ONLY ON REPLY AND WAS CORRECTLY DISREGARDED Recognizing that its cause of action for rent "unlawfully recovered" by means of the stop payment order was unlikely to succeed in the Motion Court, Respondent switched horses in its reply. Its new theory sought to circumvent the lease by arguing that because the full year's rent was payable in advance on the first day of the year, it was collectible even though Schedule A, Clause C precluded claims for advance rent not actually prepaid prior to termination. We refer to Respondent's new claim as its "due date theory." 13 262236 Attempting to avoid the fact that it did not raise its "due date" theory in the Motion Court until its reply, Respondent is changing its argument again. It now attempts to recharacterize its complaint so as to make it seem that the due date theory was pleaded all along (Opp.Br. Pt. I), but was just not noticed in either of the courts below. This is but another attempt at "amendment by brief." It is contrary to the record and goes even beyond what the Appellate Division majority allowed, but is consistent with the moving target that Respondent has presented at each phase of this controversy. Respondent's latest argument is put to rest by a simple review of its complaint (Rl9-22). After identifying the parties, the complaint's factual allegations allege the making of the lease (R20, ~4) and the amount of the annual advance rent required to be paid for 2007 (R20, ~5). They go on to allege that Appellant "timely remitted the annual rent of $96,243.00 by check" but then "wrongfully stopped payment on the check" and remitted payment of only the pro- rated rent (R20, ~6). The complaint then sets forth the text of Section 53 of the lease which authorized the termination in this case (R20, ~7) and the text of Schedule A of Paragraph C (R20-21, ~8), on which Respondent relied for the proposition that prepaid advance rent was not recoverable. In its first cause of action, the complaint alleges that the stop payment order was wrongful (R21, ~ 1 0) because the lease was terminated pursuant to Section 53 14 262236 and not pursuant to Articles 9, 10 or 50 (R21, ~9). The clear basis of the claim was that while Articles 9, 10 or 50 terminations allowed recovery of prepaid advance rent, an Article 53 termination did not. Because the instant termination was under Article 53, Respondent alleged that Appellant had improperly recovered prepaid advance rent by means of the stop payment order, and therefore had to pay it back. This is the only theory expounded in the moving affirmation of Respondent's counsel in support of summary judgment (Rl3-17). There is no other fair reading of Respondent's first cause of action. The Motion Court correctly ruled that no payment had been made except the pro-rated payment, and that Schedule A, Paragraph C of the lease mandated dismissal because under that clause, Respondent was entitled to keep post-termination advance rent only if it had actually been prepaid, which was not the case here. Even the Appellate Division majority agreed that the gravamen of the complaint's first cause of action was a claim to recoup advance rent that Appellant had improperly recovered by means of the stop payment order. It allowed the alternative due date theory because it found that Respondent had in fact made that argument in the Motion Court (Rl28). Where the dissent differed, correctly we believe, was in noting that Respondent did not raise the due date argument until its reply, and that this was a misuse of the reply which should have precluded consideration of that theory on appeal (Rl33-34 ). That Respondent quotes from its 15 262236 reply brief in the Motion Court in order to prove that it raised the due date argument below is an admission that it did not raise that argument until filing that reply (Opp. Br. at 15). Respondent does not contend that dissent misstated the law on this point, but it does contend that all six of the justices below misread the complaint by failing to detect the due date theory in the first cause of action as pleaded. As shown, however, a fair review of Respondent's pleading shows that the due date theory simply wasn't there. The record is clear that it came up only on reply, as an afterthought, and only when Respondent became concerned about the viability of its first cause of action as pleaded. The Motion Court properly disregarded it. It is too late now for Respondent to pretend, for the first time, by attempting to amend its complaint by way of its brief in this Court, that its unpleaded claim was in fact there all the time. POINTY THE ADVANCE RENT PAYMENTS IN THIS CASE WERE TRUST FUNDS UNDER GENERAL OBLIGATIONS LAW §7-103 The non-waivable provisions of §7-103 of the General Obligations Law also defeat Respondent's claim. To avoid the impact of §7-103, Respondent continues to conflate the lease's advance payment schedule with its inconsistent assertion that the annual rent was "due" on the first day of the year. The rent schedule, 16 262236 Schedule A, states repeatedly that the tenant shall pay the graduated annual rent amounts "in advance" (R34-35). It nowhere states that the annual rent was "due" on the first of the year or even uses the term "due" (App. Br. at 26-30). The distinction is important because as the dissent carefully explained, rent that is "due" is current rent, while rent that is payable in advance accrues as it is earned (R136, 142-143). Respondent argues that "[t]he provisions of the lease prevail" (Opp. Br. at 27) but contrary to the lease it seeks to convert the advance payment provisions into current payment obligations (Ibid). The majority sustained Respondent's view, but that ruling was based on a misreading of the lease, resulting in yet another rewrite, to find that the annual rent was "due" on dates when the lease required only that the advance payments be made. Respondent asserts that the lease contains no provision making the advance rent payments "security for performance of the Lease or security for rent to become due after January 1, 2007" (Opp. Br. at 27, 28), but Appellant has never contended that the lease contains any such provision. Respondent confuses advance rent payments with security deposits but purports to attribute that confusion to Appellant. This is a serious mischaracterization of the record. Respondent disputes the dissent's view that the advance rent in this case accrued as earned (Opp. Br. at 26-28), but it fails to address the multiple parts of the lease that expressly provide for monthly accruals. As discussed above (pp. 9- 17 262236 1 0, supra), Article 18 provides that liquidated damages shall accrue by the month and be paid monthly, and Article 25 limits the non-waiver clause to monthly rent. The dissent's view that the advance rent payable under the lease accrued as earned is consistent with the other monthly accrual provisions of the lease. The majority's disregard of the lease's advance payment provisions is inconsistent with the trust fund provisions of General Obligations Law § 7-1 03. POINT VI ISSUES OF FACT AS TO ORAL MODIFICATION AND ESTOPPEL SHOULD HAVE PRECLUDED SUMMARY JUDGMENT FOR RESPONDENT The Appellate Division majority stated that "the record5 contains no evidence of partial performance by defendant that is unequivocally referable to the alleged oral agreement" and summarily dismissed the need for a trial (R126) as to these alternative defenses. In so ruling, the majority misapprehended Appellant's oral modification defense, and Respondent attempts in its brief to capitalize on the error (Opp. Br. Pt. VI). It is appropriate to dispel the confusion. "Unequivocal reference" is undoubtedly the rule in relation to whether partial performance will take an oral agreement out of the statute of frauds. Appellant contends, however, that the oral 5 The record on this point consists only of the conflicting affidavits of Jordan Schaps (R66-71) and Louise Springer (R84-86). 18 262236 modification in this case was fully performed (R63-64, R115-116), as to which the rule is different. In Rose v. Spa Realty Associates, 42 N.Y.2d 338 (1977), Judge Breitel explained the difference as follows: On the other hand, when the oral agreement to modify has in fact been acted upon to completion, the same need to protect the integrity of the written agreement from false claims of modification does not arise. In such case, not only may past oral discussions be relied upon to test the alleged modification, but the actions taken may demonstrate, objectively, the nature and extent of the modification. Moreover, apart from statute, a contract once made can be unmade, and a contractual prohibition against oral modification may itself be waived. Thus, section 15-301 nullifies only "executory" oral modification. Once executed, the oral modification may be proved. (citations omitted) Where there is partial performance of the oral modification sought to be enforced, the likelihood that false claims would go undetected is similarly diminished. Here, too, the court may consider not only past oral exchanges, but also the conduct of the parties. But only if the partial performance be unequivocally referable to the oral modification is the requirement of a writing under section 15-301 avoided. 42 N.Y.2d at 343-44. The conduct of the parties is thus considered both in relation to full and partial performance claims, but the "unequivocal reference" standard applies only with respect to partial performance. The disputed facts concerning the modification here in issue should have entitled Appellant to a trial of the conduct of the parties. 19 262236 When the evidence shows that an oral modification of a real estate contract is fully performed, the modification is enforced notwithstanding the statute of frauds. The result is the same whether the performance is mutual, Harris v. Shorall, 230 N.Y. 343, 349 (1921); J & R Landscaping, Inc. v. Damianos, 1 A.D.3d 563 (2nd Dep't 2003), or by one side in reliance on a verbal promise by the other. Imperator Realty Co., Inc. v. Tull, 228 N.Y. 447 (1920). Judge Cardozo's concurrence in Imperator is particularly apt here: 262236 The defendant might have retracted his oral promise an hour after making it, and the plaintiff would have been helpless. He might have retracted a week before the closing, and, if a reasonable time remained within which to remove the violations, the plaintiff would still have been helpless. Retraction even at the very hour of the closing might not have been too late if coupled with the offer of an extension which would neutralize the consequences of persuasion and reliance. Arnot v. Union Salt Co., 186 N.Y. 501, 79 N. E. 719; Brede v. Rosedale Terrace Co., 216 N.Y. 246, 110 N. E. 430. The difficulty with the defendant's position is that he did none of these things. He had notified the plaintiff in substance that there was no need of haste in removing the violations, and that title would be accepted on deposit of adequate security for their removal in the future. He never revoked that notice. He gave no warning of a change of mind. He did not even attend the closing. He abandoned the contract, treated it as at an end, held himself absolved from all liability thereunder, because the plaintiff had acted in reliance on a *457 consent which, even in the act of abandonment, he made no effort to recall. I do not think we are driven by any requirement of the statute of frauds to sustain as lawful and effective this precipitate rescission, this attempt by an ex post facto 20 revocation, after closing day had come and gone, to put the plaintiff in the wrong. 'He who prevents a thing from being done may not avail himself of the nonperformance, which he has, himself, occasioned, for the law says to him, in effect: 'This is your own act, and, therefore, you are not damnified." Dolan v. Rodgers, 149 N. Y. 489, 491, 44 N. E. 167, quoting West v. Blakeway, 2M. & Gr. 751. The principle is fundamental and unquestioned. U. S. v. Peck, 102 U. S. 64, 26 L. Ed. 46; Gallagher v. Nichols, 60 N. Y. 438; Risley v. Smith, 64 N. Y. 576, 582; Gen. El. Co. v. Nat. Contracting Co., 178 N.Y. 369, 375, 70 N. E. 928; Mackay v. Dick, 6 App. Cas. 251; New Zealand Shipping Co. v. Societe des Aletiers, etc., 1919 A. C. 1, 5. 228 N.Y. at 456-457. The following facts which support Appellant's claim of full performance of the oral modification are not disputed: (a) No rent was required by the lease to be paid in 2007 because due to the visual obstruction, Appellant could have terminated the lease under Article 53 in 2006; (b) All parties were aware of the visual obstruction and Appellant's right to terminate; (c) Appellant forbore from terminating the lease until early 2007; (d) Appellant would not have forgone terminating in 2006 had Respondent disclosed that it intended to claim rent for the full year 2007; (e) No reasonable business tenant would have remained in occupancy into 2007 if liable for a full year's rent of almost $100,000 as a result of a week's occupancy; 21 262236 (f) Appellant terminated the lease effective January 8, 2007 and surrendered the premises; (g) Appellant issued an erroneous check for the year's rent but immediately stopped payment on it; (h) Appellant notified Respondent of the stop order and sent Respondent a replacement check for the correct pro-rated rent through January 8, 2007; (i) Respondent did not object to the stop payment order either verbally or in writing at any time prior to suit; G) Respondent accepted the pro-rated rent, surrender and termination; (k) Respondent did not declare Appellant to be in default; and (1) Respondent did not bill Appellant or otherwise demand payment of additional rent prior to suit. Appellant contends that the above circumstances not only show full performance of the oral modification, but also satisfy the stricter standard for proving partial performance. Respondent does not dispute the above facts but does dispute that it agreed to modify the lease. Ignoring Appellant's claim of full performance, and addressing only the part performance side of the argument, the majority ruled that the facts recited above were explainable by Appellant's simply continuing "to rent the structure," and therefore insufficient as evidence of partial performance (R126). This conclusion 22 262236 is totally unreasonable. It is unfathomable that any sensible tenant would have stayed over into the new year for a week at the price of a full year's rent. Neither of the parties in this case were so lacking in business acumen. In order to show that conduct was not "unequivocally referable" to an alleged oral modification, it must be demonstrated that the conduct in question has a reasonable explanation that is consistent with the lease. Anostario v. Vicinanzo, 59 N.Y.2d 662 (1983). Simply continuing "to rent the structure" (R126) for a week is not a reasonable explanation of Appellant's conduct under these circumstances, where other options were available as Mr. Schaps explained (R68). As the described actions by both parties were all inconsistent with continuing the lease, they cannot reasonably be referable to anything but performance of the pre- termination agreement, whether complete or partial. Respondent also claims there was no consideration for the alleged oral agreement (Opp. Br. at 35), but that ignores that Appellant's forbearance from terminating was a change of position to its detriment and therefore clearly consideration. Holt v. Feigenbaum, 52 N.Y.2d 291, 299 (1981). In addition, Appellant's forbearance indisputably afforded Respondent an opportunity to earn rental income in 2007, which would not have otherwise been the case. That was additional consideration. 23 262236 The modification was fully performed, and the courts below should have permitted it to be proved if summary judgment for Appellant was not granted on the grounds set forth in the preceding points. As to equitable estoppel, Judge Breitel went on in Rose to note: There is, however, another qualification to the mandates of section 15-301. Analytically distinct from the doctrine of partial performance, there is the principle of equitable estoppel. Once a party to a written agreement has induced another's significant and substantial reliance upon an oral modification, the first party may be estopped from invoking the statute to bar proof of that oral modification (citations omitted). It is highly inequitable for Respondent to have induced Appellant to continue in occupancy into 2007 on the basis of its agreement not to seek rent beyond the pro-rated amount due for the week in issue, to collect pro-rated rent that would not have been earned had Appellant terminated nine days earlier, and then about-face and claim post-termination rent for the balance of the entire year. These circumstances estop Respondent from denying the pre-termination agreement. The related issues of fact should have also precluded summary judgment for Respondent (App. Br. at 38-39). The majority relied on Joseph P. Day Realty Corp. v. Jeffrey Lawrence Associates, 270 A.D.2d 140 (1st Dep't 2000) in support of dismissal (Rl26). We showed in our opening brief that in Day, unlike this case, the landlord immediately rejected the tenant's attempted termination, whereas in this case, the landlord 24 262236 accepted the termination, did not complain about the stop payment order, accepted the pro-rated rent and stood silent when it should have spoken. (App. Br. at 36-38). Respondent continues to cite to Day but fails to answer Appellant's showing that the facts in that case support reversal. Respondent's ex post facto revocation of its oral agreement after inducing Appellant's reliance on it should not be permitted. Had Respondent notified Appellant before the end of 2006 that it no longer agreed to pro-rating the rent for 2007, Appellant could have acted. A month's notice, a week's notice or even a few days' notice during the Christmas holidays would have sufficed to remove from the premises. Respondent gave no warning of its change of mind. Instead it waited until after Appellant's occupancy continued into the new year, indeed until long after it had accepted Appellant's termination, surrender and pro-rated rent without comment, before springing the trap. But Respondent may not profit from the inaction which it occasioned, "for the law says to him, in effect: 'This is your own act, and, therefore, you are not damnified."' Imperator Realty Co., Inc. v. Tull, supra, 228 N.Y. at 457 (Cardozo, J., concurring). If denied summary judgment on the grounds set forth above, Appellant should have been permitted to prove its oral modification and estoppel claims to a trier of fact. 25 262236 CONCLUSION The order and judgment below should be reversed and the original judgment of dismissal reinstated. If the Court determines for any reason that summary judgment in favor of Appellant is not warranted, the case should be remanded to Supreme Court for discovery, trial and such other relief as is just and proper. Dated: New York, New York March 25, 2013 Of Counsel: Khine Z. Aung 262236 Respectfully submitted, SCHEICHET & DAVIS, P.C. By 1/;cdrJ I!~ Victor P. Muskin Of Counsel 767 Third Avenue- 24th Floor New York, NY 10017 (212) 688-3200 Attorneys for Appellant 26