Terminal Central, Inc. v. Henry Modell & Co.

212 A.D.2d 213, 628 N.Y.S.2d 56
CourtAppellate Division of the Supreme Court of the State of New York
DecidedJune 6, 1995
StatusPublished
Cited by16 cases

This text of 212 A.D.2d 213 (Terminal Central, Inc. v. Henry Modell & Co.) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Terminal Central, Inc. v. Henry Modell & Co., 212 A.D.2d 213, 628 N.Y.S.2d 56 (N.Y. Ct. App. 1995).

Opinion

OPINION OF THE COURT

Sullivan, J.

By agreement dated May 17, 1979, plaintiff Terminal Central, Inc. (TCI) leased from Regency-Lexington Partners commercial space, i.e., a portion of the ground floor and basement within the Grand Hyatt Hotel located at 109 East 42nd Street in the Borough of Manhattan. In early 1986, Henry Modell & Company, Inc., another commercial tenant in the building, required more space and entered into negotiations with the landlord Regency. At the same time, Modell and TCI entered into an agreement, dated April 25, 1986, whereby TCI, in consideration of $1,725,000 payable by Modell to it in 180 monthly "Assignment Payments” over a 15-year period, assigned its lease to Modell "so as to enable Modell to effect a cancellation thereof and to immediately thereafter enter into a new lease [the Modell Lease] covering a portion of the [p]remises as well as certain other space in the said building.” In order to consummate the assignment and induce the landlord to enter into a new lease with Modell the agreement was modified by an April 29, 1986 letter agreement which provided that out of the sum due TCI each month $416.67 be paid directly to Donald J. Trump. The April 25, 1986 agreement did not contain a clause accelerating the monthly assignment payments in the event of Modell’s default.

[215]*215In order "to protect and secure TCI with respect to any default by Modell concerning the [assignment [p]ayments”, the April 25 agreement provided that Modell was to assign the Modell Lease to it, the assignment to be held in escrow. In the event of a final judicial determination of a default with respect to the monthly payments due TCI, the escrow agents were to deliver the assignment of the Modell Lease to TCI. If all the monthly payments were made, the assignment was to be delivered to Modell. The agreement also specifically provided that in the event of a default by Modell "TCI may take possession of the demised premises” under the Modell Lease. The agreement further provided that if TCI expended any sums to cure Modell’s default under the Modell Lease, Modell was to repay said sums to TCI with its next monthly assignment payment installment.

As this record shows, on April 29, 1986, TCI, with the landlord’s approval, assigned its lease to Modell, which simultaneously surrendered the TCI lease and entered into the Modell Lease. Modell then incorporated TCI’s space, now part of the demised premises under the Modell Lease, and made it part of its new, larger store premises.

It is undisputed that Modell is in default, having failed to pay the November 1, 1993 monthly assignment payment in the sum of $9,333.33. After proper notice of default, Modell failed to pay subsequent monthly payments due through and including February 1, 1994. This action, alleging breach of the April 25, 1986 agreement and seeking, in a first cause of action, $37,333.32 by virtue of Modell’s failure to pay the four monthly installments due on November 1 and December 1, 1993, January 1 and February 1, 1994, and seeking, in a second cause of action, $885,499.71, by virtue of the anticipatory breach of the entire agreement, was commenced in February 1994. Modell subsequently defaulted in the payment of the March 1, April 1 and May 1, 1994 monthly payments.

After joinder of issue, TCI moved for summary judgment on both causes of action. Modell cross-moved to dismiss the complaint or for summary judgment dismissing the same or, alternatively, for leave to file an amended answer. Modell’s motion to dismiss was based on its alleged surrender of the demised space to the landlord as a result of the landlord’s purported breach of the covenant of quiet enjoyment. Specifically, Modell claimed that its occupancy of the demised premises was plagued from the onset by a " 'dirt migration [216]*216problem’ ”, that is, a " 'film-like dust’ ”, with a high iron content, which seeped through a faultily constructed premises wall abutting an adjoining subway station and tracks. Modell feared that prolonged exposure to this " 'steel dust’ ” would adversely affect the health and well-being of its customers and employees. In view of the "actual and/or constructive eviction”, Modell argued, it was relieved of its obligation under the April 25, 1986 agreement to make the monthly assignment payments to TCI. In moving to amend its answer, Modell sought to interpose counterclaims alleging actual and constructive eviction, breach of the covenant of quiet enjoyment, lost profits, breach of contract, negligence and seeking, inter alia, damages, rescission and reformation. Additionally, Modell sought to commence a third-party action against the landlord.

The IAS Court denied TCI’s motion for summary judgment as well as Modell’s motion to dismiss the complaint but granted Modell leave to amend its answer, holding, with respect to TCI’s motion, that an issue of fact was presented "as to whether [its] remedy for [Modell’s] default in assignment payments was limited to assignment of [Modell’s] lease, to [TCI].” To the extent that the IAS Court identified a factual issue, i.e., whether the remedies available as a result of Modell’s default in making its monthly assignment payments were limited to an assignment of the Modell Lease to TCI, it implicitly found a default on Modell’s part. In the next breath, however, the court allowed the interposition of counterclaims, which, if meritorious, would provide a defense to plaintiff’s assignment payment claims since Modell alleges that its eviction extinguished the obligation to make such payments. In any event, the remedy issue is not one of fact at all but of law, which the IAS Court should have resolved. We find TCI’s remedies are not so limited and that Modell has failed to proffer any defenses to its claims under the first cause of action, as to which TCI’s appeal, by its brief, is limited. Moreover, since the counterclaims sought to be interposed against TCI and the third-party complaint against the landlord all relate to claims which are irrelevant to this action, leave to amend the answer should have been denied. Nor is there any merit to Modell’s claim of a lack of proper notice of default, also raised on its cross appeal. The requisite notice was given by notice dated November 22, 1993 and, in light of Modell’s legal position, no further notice was required.

On this record, it is undisputed that TCI fully performed its [217]*217obligations under the April 25, 1986 agreement. Pursuant to the agreement, TCI assigned its lease to Modell. It is also not disputed that, simultaneously with that assignment, Modell surrendered TCI’s lease to the landlord effecting a cancellation thereof and entered into a new lease, the Modell Lease, with the landlord. Finally, it is undisputed that Modell has failed to make any payments since November 1, 1993 and is therefore, absent a defense to the nonpayment, in default under the terms of the April 25,1986 agreement.

Modell’s only discernible defense is that the monthly assignment payments were conditioned upon its use and occupancy of the Modell Lease premises and that its actual or constructive eviction therefrom excuses its obligation to make those payments. Whether Modell has been evicted, constructively or otherwise, from the demised premises is irrelevant to Modell’s obligations under the April 25, 1986 agreement, which constitutes a $1,725,000—payable over 15 years—sale of a leasehold, not a sublease.

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Cite This Page — Counsel Stack

Bluebook (online)
212 A.D.2d 213, 628 N.Y.S.2d 56, Counsel Stack Legal Research, https://law.counselstack.com/opinion/terminal-central-inc-v-henry-modell-co-nyappdiv-1995.