Garland v. Titan West Associates

147 A.D.2d 304, 543 N.Y.S.2d 56, 1989 N.Y. App. Div. LEXIS 8029
Appellate Division of the Supreme Court of the State of New York·Decided June 20, 1989·Published·Cited by 30 cases

Opinion

OPINION OF THE COURT

Sullivan, J. P.

Plaintiffs are the tenants of store premises located in upper Manhattan under a written lease with the landlord’s predecessor for a term commencing January 1, 1985 and expiring December 31, 1999. Paragraph 28 of the lease grants them the right to assign or sublet the demised premises without the landlord’s consent, subject to the landlord’s right of first [306] refusal, which must be exercised within 30 days.* The lease further provides that neither plaintiffs nor their assignees or sublessees are to make any alterations to the premises without the landlord’s written consent.

On or about May 5, 1987, plaintiffs sublet the premises to Taft Pharmacy, Inc. for a period beginning June 1, 1987 and ending November 30, 1999. Plaintiffs allege that before executing the sublease they forwarded a copy to the landlord’s attorney, who had played an active role in the more than six months of negotiations between them and the proposed subtenant. Although its attorney, by letter dated May 7, 1987, insisted on the inclusion of a rider providing for the pro rata sharing of the expense of any sidewalk or storefront replacement between the landlord and sublessee, the landlord never objected to the sublease, nor attempted to exercise its right of first refusal.

After taking possession, Taft Pharmacy made certain improvements to accommodate the premises, which had been used by plaintiffs as a real estate office, to its new use. It installed new lighting fixtures, wall covering and drop ceiling, replaced a vinyl floor covering, and removed two non-weight-bearing partitions. Apparently, sometime thereafter, Taft Pharmacy either assigned its sublease to Amsterdam Pharmacy and Drugs, Inc., as the landlord claims, or, as plaintiffs contend, entered into an operating agreement with Amsterdam Pharmacy.

On or about October 5, 1988, the landlord served plaintiffs with a notice to cure, alleging, as lease violations, that plaintiffs had assigned and/or subleased the subject premises to Amsterdam Pharmacy without affording it the right of first refusal and that the assignee or subtenant had made alterations without obtaining its written permission. The notice required plaintiffs to cure on or before October 15, 1988.

On October 12, 1988, plaintiffs commenced this action, seeking a declaration that the sublease was in accordance with the lease terms, that any violation caused by an assignment of the sublease to Amsterdam Pharmacy had been cured by an agreement between the parties thereto voiding said assignment, and that the repairs to the demised premises were cosmetic only and did not constitute alterations. Appar[307] ently, the principal officers of Amsterdam Pharmacy and Taft Pharmacy, who are the same, have occupied and maintained the premises as a pharmacy in the name of Amsterdam Pharmacy. Simultaneously with the commencement of the action, plaintiffs, by order to show cause which temporarily provided such relief pending the hearing of the application, moved for a Yellowstone injunction staying termination of the lease and tolling the running of the cure period.

After joinder of issue, the court, without addressing the merits of the application, granted Yellowstone relief for a 60-day period, during which the parties were to attempt to resolve their differences. If the matter were not resolved, the motion would be denied, unless renewed by plaintiffs. Without waiting for the 60-day period to run, apparently because of the absence of any prospect of a disposition by the parties, plaintiffs appealed and now request this court to grant them Yellowstone relief pending resolution of the matter on the merits. We modify to grant the preliminary injunction as sought.

The purpose of a Yellowstone injunction is to maintain the status quo so that the tenant served with a notice to cure an alleged lease violation may challenge the propriety of the landlord’s notice while protecting a valuable leasehold interest. (First Natl. Stores v Yellowstone Shopping Center, 21 NY2d 630; Ameurasia Intl. Corp. v Finch Realty Co., 90 AD2d 760; Podolsky v Hoffman, 82 AD2d 763.) The grant of Yellowstone relief effectively tolls the running of the cure period so that in the event of an adverse determination on the merits the tenant may still cure the defect and avoid a lease forfeiture. (Post v 120 E. End Ave. Corp., 62 NY2d 19; Wilen v Harridge House Assocs., 94 AD2d 123.)

In granting Yellowstone injunctions to avoid a forfeiture of the tenant’s interest, courts have generally accepted far less than the showing normally required for the grant of preliminary injunctive relief. (Post v 120 E. End Ave. Corp., supra, 62 NY2d, at 25.) Thus, a tenant seeking to avoid forfeiture of its lease is less likely to be required to demonstrate a likelihood of success, irreparable injury, and a balancing of the equities in its favor, as those terms are traditionally understood. (Supra; see, Ameurasia Intl. Corp. v Finch Realty Co., 90 AD2d 760, supra; Finley v Park Ten Assocs., 83 AD2d 537, 538; Podolsky v Hoffman, 82 AD2d 763, supra.) The mere threat of termination and forfeiture of the lease has been held sufficient [308] to justify maintenance of the status quo by injunction. (Post v 120 E. End Ave. Corp., supra, at 26.)

We find that plaintiffs have shown their entitlement to Yellowstone relief by demonstrating that they hold a valuable commercial lease; that they received a notice to cure; that they requested injunctive relief prior to the termination of their lease; and that they are prepared and maintain the ability to cure the alleged default by any means short of vacating the premises. (See, Continental Towers Garage Corp. v Contowers Assocs. Ltd Partnership, 141 AD2d 390; see also, Jemaltown of 125th St. v Leon Betesh/Park Seen Realty Assocs., 115 AD2d 381; Finley v Park Ten Assocs., 83 AD2d 537, supra.) They have a substantial property interest in their lease. Equity demands that their right to cure be preserved so that if they prevail on the merits their success will be more than a hollow victory. (Wuertz v Cowne, 65 AD2d 528; Podolsky v Hoffman, supra.)

Rather than grant the requested relief, however, the motion court ordered a 60-day preliminary injunction so that the parties might, on their own, resolve the matter. This was error since plaintiffs, at the very least, made a prima facie showing that they were not in violation of their lease, and of their entitlement to an opportunity to cure if indeed any violation existed. The interests of justice would best be served by granting the requested Yellowstone injunction pending a judicial determination of the issues. Insofar as can be discerned, the landlord will not be aggrieved, nor suffer any measure of perceptible damage, if enjoined from terminating the lease until plaintiffs have their day in court.

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Garland v. Titan West Associates, 147 A.D.2d 304, 543 N.Y.S.2d 56, 1989 N.Y. App. Div. LEXIS 8029 (N.Y. Ct. App. 1989).

147 A.D.2d 304 (Garland v. Titan West Associates) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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