7955 AE Co. Inc. v Nasax Inc. 2025 NY Slip Op 31465(U) April 24, 2025 Supreme Court, New York County Docket Number: Index No. 159953/2023 Judge: Lyle E. Frank Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 159953/2023 NYSCEF DOC. NO. 59 RECEIVED NYSCEF: 04/24/2025
SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. LYLE E. FRANK PART 11M Justice ---------------------------------------------------------------------------------X INDEX NO. 159953/2023 7955 AE COMPANY INC., MOTION DATE 11/13/2024 Plaintiff, MOTION SEQ. NO. 002 -v- NASAX INC. D/B/A GONG CHA, GONG CHA USA NY3 LLC A/K/A GONG CHA USA NY6 LLC,SARABJIT LAMBA DECISION + ORDER ON SINGH MOTION Defendant. ---------------------------------------------------------------------------------X
The following e-filed documents, listed by NYSCEF document number (Motion 002) 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58 were read on this motion to/for JUDGMENT - SUMMARY .
Upon the foregoing documents, plaintiff’s motion is granted in part and denied in part,
and defendant’s cross motion is granted in part and denied in part.
Background
In 2013, 7955 AE Company Inc. (“Plaintiff”) signed a ten-year lease (the “Lease”) for a
commercial space located at 72 Bayard Street. Then in 2015, Plaintiff sub-leased a portion of the
premises to Gong Cha USA NY3 LLC a/k/a Gong Cha USA NY6 LLC (“Gong Cha”) for use as
a food and beverage vendor, with a term expiring in February of 2021 (the “Sub-Lease”). In
connection with the Sub-Lease, Sarabjit Lamba Singh (the “Individual Defendant”) executed a
written guaranty agreement (the “Guaranty”) that guaranteed the full payment and performance
of Gong Cha. There were several subsequent addendums for the Sub-Lease. In 2017, Gong
Cha’s subtenancy was assigned to Nasax Inc. d/b/a Gong Cha (“Business Defendant”,
collectively with Gong Cha and the Individual Defendant the “Defendants”).
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At the expiration of the sub-lease term, the Business Defendant allegedly owed unpaid
rent arrears and stayed on as a month-to-month subtenant as rent, use and occupancy, and other
charges continued to accrue. They were given a thirty-day notice of termination effective in
January of 2023, the same date that Plaintiff was obligated to return the premises to the over-
landlord. When the Business Defendant failed to vacate the premises, Plaintiff commenced a
summary holdover proceeding against them and the over-landlord likewise commenced a
summary holdover proceeding against Plaintiff. As a result of this last proceeding, Plaintiff
incurred holdover damages they were required to pay to the over-landlord. The Business
Defendant vacated the premises on May 15, 2023. In October of 2023, Plaintiff filed this
underlying proceeding against Defendants, with causes of action for breach of contract, unjust
enrichment, quantum meruit, breach of guaranty, and for attorneys’ fees. Defendants answered,
pleading thirteen affirmative defenses and two counterclaims.
Standard of Review
Under CPLR § 3212, a party may move for summary judgment and the motion “shall be
granted if, upon all the papers and proof submitted, the cause of action or defense shall be
established sufficiently to warrant the court as a matter of law in directing judgment in favor of
any party.” CPLR § 3212(b). Once the movant makes a showing of a prima facie entitlement to
judgment as a matter of law, the burden then shifts to the opponent to “produce evidentiary proof
in admissible form sufficient to establish the existence of material issues of fact which require a
trial of the action.” Stonehill Capital Mgt. LLC v. Bank of the W., 28 N.Y.3d 439, 448 (2016).
The facts must be viewed in the light most favorable to the non-moving party, but conclusory
statements are insufficient to defeat summary judgment. Id.
Discussion
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In the present motions, Plaintiff is seeking 1) summary judgment against the Business
Defendant on the first and second causes of action, 2) summary judgment against the Individual
Defendant on the fifth cause of action, 3) an order deeming the complaint amended to conform
with evidence (to add that the unpaid rent owed is now being sought at a higher rate than was
originally stated in the complaint), 4) dismissal of the first and second counterclaims and all
thirteen affirmative defenses in the answer, and 5) a money judgment against Defendants for
attorneys’ fees. Defendant has cross-moved for dismissal as against the Individual Defendant and
in opposition to the Plaintiff’s motion. For the reasons that follow, both motions are denied in
part and granted in part.
Breach of the Sublease is Established as to Liability
Plaintiff argues that they are entitled to summary judgment against the Business
Defendant for breach of contract because the Business Defendant breached the Sublease by
failing to pay rent from April 1, 2020, to February 28, 2021. They also argue that during the
monthly subtenancy, the Business Defendant was subject to the same terms and conditions from
the Sublease, including the provisions for holdover and liquidated damages. Defendants briefly
state in their opposition that their “position is that any rental arrears owed have first started
during September 2022.” Plaintiff has provided a copy of their rent ledger and a sworn
affirmation from their assistant secretary stating that the Business Defendant repeatedly failed to
pay rent. Defendants have provided evidence going to the amount of arrears owed under the
monthly subtenancy, but not as to liability for breach of the sublease. When a party establishes a
prima facie entitlement to summary judgment, the burden shifts to the other party to rebut that
showing. See, e.g., Roques v. Noble, 73 A.D.3d 204, 207 (1st Dept. 2010). Here, Plaintiff has
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established prima facie entitlement to summary judgment as to the breach of contract claims, but
Defendant has not provided proof rebutting their liability under the sublease.
Complicating the issue is an apparent oral agreement between the parties relating to the
amount of rent that was owed during the monthly subtenancy. Defendant disputes the amounts
provided by Plaintiff and argues that Plaintiff voluntarily waived the right to collect rent at the
amount set forth in the lease. Plaintiff concedes that there was an oral agreement that the
Business Defendant would pay 50% of the rent during the monthly subtenancy but maintains that
this lower rate was conditioned on the Business Defendant’s payment of other alleged arrears,
and that such condition was not met. Defendants have submitted statements sent to them during
the monthly subtenancy that include a written waiver of some of the rent listed. While Plaintiff
has submitted evidence that arrears are owed, there are questions of fact as to the amount of said
arrears. Finally, Defendants argue that Plaintiff was also present during the holdover period and
therefore they cannot seek liability against Defendants for the holdover damages paid to the
over-landlord. But they have not disputed that they did not vacate the premises when the Lease
had expired, nor have Defendants cited to any authority for the proposition that Plaintiff’s
alleged holdover would negate Defendant’s liability for their own holdover damages under the
terms of the Lease and Sublease. Therefore, granting summary judgment as to liability only for
the breach of contract claims would be proper.
Guarantor Has Liability under the Guaranty Agreement but It Is Limited by the Guaranty Law
Plaintiff seeks to hold the Individual Defendant liable under the Guaranty for the arrears
owed by the Business Defendant. Defendants argue that the Guaranty expired by its own natural
terms and that any attempt to hold the Individual Defendant liable for rental arrears accrued prior
to September 2022 is invalid under the Guaranty Law. Defendants also argue that the Individual
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Defendant cannot be held liable for the sublease after it was assigned to the Business Defendant,
as he was not a signatory to that assignment. Firstly, the assignment between Gong Cha and the
Business Defendant states that the Guaranty continues as enforceable. And according to the
terms of the Guaranty signed by the Individual Defendant, he agreed to guaranty the full
payment and performance of:
the sub-tenant hereunder as the term hereof may be renewed, extended or otherwise modified, or the obligations of such other person or person entities, which, pursuant to the terms of this lease, may be a sub-tenant or occupant hereunder, without offset, counterclaim, or defense, of any kind or nature, until such time as the sub-tenant actually delivers possession of the premises to the over-tenant and all of the obligations of the sub-tenant under this sub-lease are satisfied.
By the plain terms of the agreements, the Individual Defendant was liable for the
payment and performance of the Business Defendant because it was a sub-tenant, and he was
liable until the Business Defendant actually delivered possession of the premises to Plaintiff and
the obligations under the Sublease were satisfied. Such continuing guaranties are enforceable.
See, e.g., Davimos v. Halle, 60 A.D.3d 576, 577 (1st Dept. 2009) (holding that a “guarantor is
bound by an anticipatory agreement in his undertaking that he will not be relieved of liability by
a modification of the principal contract”); Perlbinder Holdings LLC v. Patel, 217 A.D.3d 426,
427 (1st Dept. 2023) (upholding a guaranty that stated that the obligations would “not be
impaired by any subsequent amendment, extension, modification, or assignment”).
Defendant argues that the Guaranty Law found in NYC Administrative Code § 22-1005,
which states that natural persons do not have liability as guarantors in certain circumstances
which apply here, means that the Individual Defendant does not have liability for obligations that
accrued between March 7, 2020, and June 30, 2021. Plaintiff argues that this Guaranty Law is
unconstitutional and cites for support to a Southern District of New York case. Melendez v. City
of New York, 668 F. Supp. 3d 184 (S.D.N.Y. 2023). As an initial note, the holdings of federal
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district courts, alongside federal courts of appeals, “do not bind [state courts] when it decides a
federal constitutional issue.” Bochner v. City of New York, 118 F.4th 505, 523 – 24 (2nd. Cir.
2024). This Court is bound on this issue by the First Department, who continues to enforce the
Guaranty Law post-Melendez. See, e.g., 3rd & 60th Assoc. Sub LLC v. Zavolunov, 223 A.D.3d
488, 490 – 91 (1st Dept. 2024). Absent a contrary holding by a binding court, this Court finds
that the Guaranty Law is valid and therefore bars the Individual Defendant’s liability under the
Guaranty for the period covered by the Guaranty Law.
But Plaintiff has alleged that the Business Defendant has accrued outstanding amounts
after June 30, 2021, and these amounts would not be protected by the Guaranty Law. See, e.g.,
88 Greenwich Owner LLC v. 21 Rector St. LLC, 217 A.D.3d 432, 434 (1st Dept. 2023).
Therefore, the Plaintiff has established entitlement as to liability under the Guaranty, but there
are remaining issues of fact relating to the amount of damages owed.
The Motion to Amend the Pleadings is Granted
Plaintiff seeks to have the complaint deemed amended in order to conform to the proof
presented. Specifically, Plaintiff seeks to amend the pleadings to seek increased holdover
payments under the terms of the Lease that it initially believed were unenforceable but that it
now, with the aid of new counsel, believes are valid. Defendants oppose, and while this portion
of their papers merely quotes several cases on the amendment standard and does not explain their
position further, presumably they are arguing that the proposed amendment is too late and would
prejudice them. Considering that the new damages sought arise out of the terms of an agreement
that has been disclosed from the beginning, any prejudice to Defendants is small. Regarding the
issue of delay, “[w]here there is extended delay in moving to amend, an affidavit of reasonable
excuse for the delay in making the motion and an affidavit of merit should be submitted in
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support of the motion.” Cherebin v. Empress Ambulance Serv., Inc., 43 A.D.3d 364, 365 (1st
Dept. 2007). Here, Plaintiff has submitted an affidavit from their Assistant Secretary explaining
the reason for the delay. The Court grants leave to amend the pleadings as requested by Plaintiff.
There is No Contractual Right to Attorneys’ Fees
Plaintiff in their complaint requests attorneys’ fees, and in this motion seeks summary
judgment in their favor on this matter. Defendant opposes and argues that there is not a
contractual right to attorneys’ fees here. Plaintiff cites to both the Sublease and the Lease as
providing grounds for attorneys’ fees, but outside of identifying the provisions in question, fails
to explain how they give Plaintiff the right to recover attorneys’ fees for this present action. To
begin with, the attorneys’ fees provision in the Rider to the Sublease is clearly an
indemnification clause and does not by its terms grant attorneys’ fees incurred during attempts to
recover for breaches of the Sublease or in the holdover proceeding. The provision in question is
titled “Hold Harmless” and states:
The sub-tenant shall indemnify and hold over-tenant for and against and all claims, lawsuits, penalties, damages, expenses, judgment, cost and attorneys fees arising from injury during said term to person or property or property of any nature occasioned wholly or in party by nay [sic] act or acts, omissions of the sub-tenant, its’ employees, guests, or invitees, or growing out of the use or occupation or [sic] the demised premises.
This indemnification provision does not grant Plaintiff the contractual right to attorneys’
fees from Defendants for proceedings brought by Plaintiff against Defendant or brought against
Plaintiff by the over-landlord for the lease holdover action. An indemnification provision must
“meet the exacting Hooper test of unmistakable intention” in order to grant a winning side
attorneys’ fees. Gotham Partners, L.P. v. High Riv. Ltd. Partnership, 76 A.D.3d 203, 204 (1st
Dept. 2010). Furthermore, an indemnification provision “must unequivocally be meant to cover
claims between the contracting parties rather than third-party claims.” Id., at 207 (emphasis in
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original). Here, this provision does not make it clear or unequivocal that it covers claims between
the parties to the Sublease, and therefore cannot be construed as granting Plaintiff a contractual
right to reasonable attorneys’ fees.
Plaintiff also cites to two provisions in the Lease as grounds for attorneys’ fees. In
Section 11 of the Sublease, it states that “[t]he provisions of the Over-Lease are part of this
Sublease. All the provisions of the Over-Lease applying to the Overtenant are binding on you,
the Undertenant.” In the Lease, Article 19 states that if the tenant defaults in the observance of
any term of the Lease, the “Owner” may recover reasonable attorneys’ fees incurred in
proceedings connected with the default. Article 59 states that if the tenant breaches the lease or
defaults in the payment of rent, the “Landlord” may recover reasonable attorneys’ fees. A plain
reading of these contractual provisions together certainly would grant the Landlord/Owner the
right to recover attorneys’ fees from the Business Defendant connected with a breach of the
Sublease. But the Landlord/Owner is defined in the Lease as a non-party Janco Realty Corp., not
Plaintiff. And while Section 11 of the Sublease explicitly transfers Plaintiff’s obligations under
the Lease to the Business Defendant, it is silent as to Plaintiff assuming any of the rights of Janco
Realty Corp. under the Lease.
Plaintiff has pointed to contractual support for the contention that the Business Defendant
would take on the obligations under the Lease that 7955 AE Company would have, but Plaintiff
has cited to no provision nor any case law or argument in support of the contention that Plaintiff
would then get to take on the rights due to Janco Realty Corp. under the Lease. The Lease and
Sublease clearly obligate the Business Defendant to cover reasonable attorneys’ fees that Janco
Realty Corp. incurs in pursuing a breach of either agreement. What it does not authorize is
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Plaintiff’s right to recover such fees from any party, including the Business Defendant.
Therefore, Plaintiff has failed to establish a prima facie entitlement to reasonable attorneys’ fees.
Defendant’s Affirmative Defenses and Counterclaims
Plaintiff also seeks to strike the affirmative defenses and counterclaims from the Answer.
They cite to provisions in the Lease and the Guaranty and argue that the counterclaims and
defenses are meritless. In response, Defendants briefly claim that such arguments are conclusory.
Starting with the argument that the terms of the Lease bar defenses and counterclaims asserted
by the Business Defendant as against Plaintiff, this argument fails for the same reason as the
attorneys’ fees argument above. While there is a contractual basis for the Business Defendant to
have assumed the obligations of Plaintiff under the Lease, there is no contractual basis giving
Plaintiff the rights of the landlord/owner under the Lease. There is a defenses and counterclaim
waiver provision in the Guaranty, however, that clearly states that the Individual Defendant
guarantees the payment and performance “without offset, counterclaim, or defense, of any kind
or nature, whatsoever.” This would validly bar all defenses and counterclaims asserted by the
Individual Defendant against Plaintiff except for the Eighth Affirmative Defense asserting timely
payment of all monies owed.
Several of the affirmative defenses do, however, simply state a legal conclusion without
pleading any facts. Such defenses are “properly stricken as insufficient.” 170 W. Vil. Assoc. v. G
& E Realty, Inc., 56 A.D.3d 372, 372 – 73 (1st Dept. 2008). Therefore, all except the fifth,
eighth, and twelfth affirmative defenses are stricken as insufficient for offering no facts and
merely stating a legal conclusion. The fifth affirmative defense alleges upon information and
belief that Defendants were not served, but Plaintiff has provided the affidavits of service and
Defendants have not continued this line of argument. Therefore, the fifth affirmative defense is
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stricken as moot. The eighth alleges that Plaintiff has been paid all monies owed. As addressed
above, there are issues of fact regarding what amount Plaintiff was owed and therefore dismissal
of this affirmative defense would be premature. The twelfth affirmative defense alleges that
Plaintiff accepted the surrender of the premises and waived any rights to future rent. But Plaintiff
is not seeking any damages for the period after the Defendants surrendered the premises.
Therefore, the twelfth affirmative defense fails as a matter of law.
Defendants have pled two counterclaims. As addressed above, the Individual Defendant
has waived all defenses and counterclaims except for actual payment, but the Business
Defendant has not. Plaintiff moves to dismiss these counterclaims as meritless. The first
counterclaim states in a conclusory fashion that this proceeding is frivolous and seeks legal fees
from Plaintiff. Defendants have not pled any grounds for seeking legal fees, nor have they
opposed Plaintiff’s motion to dismiss their counterclaims other than by stating briefly that
“Plaintiff cites nothing more than boilerplate and outdated case law with little relevance to the
instant proceeding.” Dismissal of the first counterclaim for failure to state a claim is therefore
proper. The second counterclaim alleges that Plaintiff comingled their security deposit in
violation of NY General Obligations Law 7-103(1) and that they wrongfully converted the
security deposit. Plaintiff denies that they have comingled funds and asserts that they were
entitled to retain the security deposit. But their arguments do not overcome the favorable
inferences that Defendants are afforded on a motion to dismiss standard. Plaintiff has not met
their burden to dismiss this counterclaim. Accordingly, it is hereby
ADJUDGED that defendant’s cross-motion is granted as to the extent Plaintiff is seeking
damages that accrued during the period covered by Administrative code § 22-1005 and denied as
to any damages that accrued outside this period; and it is further
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ADJUDGED that plaintiff’s motion is granted in part and denied in part; and it is further
ORDERED that plaintiff is granted summary judgment as to liability only on the first and
second causes of action as against defendant Nasax Inc. d/b/a Gong Cha; and it is further
ORDERED that plaintiff is granted summary judgment as to liability only on the fifth
cause of action as against defendant Sarabjit Lamba Singh; and it is further
ORDERED that the Complaint is deemed amended to conform to the evidence presented
on this motion; and it is further
ORDERED that plaintiff is granted summary judgment dismissing the first counterclaim
in verified answer; and it is further
ORDERED that plaintiff is granted summary judgment dismissing the second
counterclaim in the verified answer as asserted by defendant Sarabjit Lamba Singh and denied as
asserted by the other defendants; and it is further
ORDERED that plaintiff’s motion for summary judgment granting them attorneys’ fees
is denied.
4/24/2025 DATE LYLE E. FRANK, J.S.C. CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION
GRANTED DENIED X GRANTED IN PART OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
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