LLC v. Fabric & Fabric, Inc. and Fred M. Mahrach, Defendants. (2022)

The following e-filed documents, listed by NYSCEF document number (Motion 002) 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47 were read on this motion for DEFAULT JUDGMENT.

This is an action on commercial leases and accompanying guarantees, brought by the landlord, plaintiff Florencia Properties LLC, against the tenant, defendant Fabric & Fabric, Inc., and against the guarantor, defendant Fred Mahrach.

Landlord previously moved for default judgment against both tenant and guarantor, seeking unpaid rent and additional rent accruing from January 2021 through January 2022. This court granted the motion in part and denied it in part. The court held that landlord had provided proof of the facts constituting its claims only for unpaid rent accruing on the leases and guarantees from January 2021 through the end of July 2021, when tenant surrendered the premises—not also through January 2022. (Florencia Props., LLC v Fabric & Fabric, Inc., 2022 NY Slip Op 50518[U], at *2-3 [Sup Ct, NY County June 23, 2022].) This court therefore granted default judgment only with respect to the unpaid rent that had accrued as of the end of July 2021.¹ (See id. at *3.) The court also granted landlord leave to file a second default-judgment motion covering the period from August 1, 2021, through the date of entry of the order on the first motion (June 23, 2022), plus attorney fees. (Id.)

Landlord has now filed a second default-judgment motion, seeking unpaid rent/additional rent accruing from August 1, 2021, through July 30, 2022, plus default interest and attorney fees. Guarantor cross-moves for an order holding that he is not personally liable for unpaid rent/additional rent accruing after July 2021. Landlord's motion is granted in part and denied in part. Guarantor's cross-motion is denied.

DISCUSSION

On the prior motion, landlord established proper service and defendants' defaults. Landlord also provided an affidavit from its property manager, attaching copies of the leases and guarantee and rent ledgers. (Id. at *2.) The only gap in landlord's papers on that motion was the failure to indicate whether landlord had relet the premises following tenant's surrender on July 30, 2021—a necessary element of landlord's liquidated-damages claim under ¶ 18 of the lease. (Id. at *2-3.)

On this motion, landlord has remedied that defect: The affidavit of landlord's property manager represents that the leased premises "have not been relet since Tenant vacated." (NYSCEF No. 34 at ¶ 10.) Landlord is thus entitled to recover the full rent/additional rent accruing from August 1, 2021, through July 31, 2022, as against both tenant and guarantor.²

On guarantor's cross-motion, he argues that he is not liable for post-surrender rent/additional rent under the terms of his guarantees. Those guarantees, he asserts, "provided that upon surrender of the premises, the liability under [them] would end." (NYSCEF No. 44 at ¶ 5.) This assertion is incorrect. The guarantees provided that surrender of the premises on proper notice and in broom-clean condition (with return of the keys) would cut off guarantor's liability if tenant had paid all accrued rent "to and including the date which is the later of (i) the actual receipt by Owner of said Accrued Rent; (ii) the surrender of the Demised Premises; or (iii) receipt by Owner of said keys to the Demised Premises." (NYSCEF No. 38 at ¶ 1 [c]; see also NYSCEF No. 39 at ¶ 1 [c] [same].) Otherwise, the guarantor's obligations remain in effect until payment of all rent/additional rent accrued through the date of payment. (See id.) For this reason, the court noted on landlord's prior default-judgment motion that the surrender of the premises "did not terminate defendant Mahrach's obligations under his guarantees." (2022 NY Slip Op 50518[U], at *2 n 2.) Guarantor's cross-motion does not provide any reason to think this court's interpretation of the temporal scope of the guarantees was mistaken.

Landlord has established that it is entitled to the full amount of the unpaid rent/additional rent that accrued from August 1, 2021, through July 31, 2022—$441,780. Landlord also seeks interest on that amount at the default rate of 24%, running from August 1, 2021. (See NYSCEF No. 33 at ¶ 16 [affirmation of counsel].) Landlord is not entitled to the full amount of interest it seeks. As landlord itself acknowledges, the leases provide that landlord is entitled to collect default interest on installments of rent and additional rent as they come due—not interest on the ultimate total in unpaid rent/additional rent, retroactive to the first unpaid installment. (See id. at 15; NYSCEF Nos. 36 at ¶ 47, and 37 at ¶ 47 [leases].) To be sure, this court's prior order set August 1, 2021, as the interest-accrual date. But the court chose August 1, 2021, because it was the first day after the period for which this court was granting default judgment; not the first day of the period itself. (See 2022 NY Slip Op 50518[U], at *3.) Consistent with that approach, landlord is entitled on this motion to default interest on the full amount of the unpaid rent/additional rent running from the day after the end of the period at issue—i.e., August 1, 2022.

In addition to rent/additional rent plus interest, landlord also seeks attorney fees, as permitted under the leases and guarantees. To support its attorney-fee claim, landlord has provided an affirmation of counsel and detailed billing records. (NYSCEF No. 41.) Those records reflect, though, that some of the fees claimed by plaintiff are for legal services that did not relate to this action. (See id. at 7-8.) Excluding those fees, landlord is entitled to reasonable fees, costs, and disbursements in the amount of $7,036.01.

Accordingly, it is

ORDERED that landlord's motion for default judgment against tenant and against guarantor is granted; and it is further

ORDERED that guarantor's cross-motion is denied; and it is further

ORDERED that landlord is awarded a money judgment against defendants, jointly and severally, in the amount of (i) $441,780 in unpaid rent and additional rent; (ii) prejudgment interest on $441,780, running at the contractual default rate of 24% from August 1, 2022; (iii) $7,036.01 in reasonable attorney fees, costs, and disbursements; and it is further

ORDERED that landlord serve a copy of this order with notice of its entry on all parties and on the office of the County Clerk, which shall enter judgment accordingly.

Dated: December 9, 2022

Hon. Gerald Lebovits

J.S.C.

FOOTNOTES

1.   The default judgment against the tenant awarded the full sum in unpaid rent/additional rent accruing from January 2021 through July 2021 (plus interest). The default judgment against the guarantor covered only the unpaid rent/additional rent (and interest) that accrued in July 2021; landlord conceded that the guarantor protections of New York City Administrative Code § 22-1005 barred the landlord's recovery from the guarantor of amounts accruing between January 2021 and June 2021. (See Florencia Props., 2022 NY Slip Op 50518[U], at *3 & n 3.)

2.   As noted above, this court's prior order limited the scope of relief on a second motion to rent/additional rent accruing through entry of that order, June 23, 2022. (See 2022 NY Slip Op 50518[U], at *3.) This court did not then fully appreciate, however, that the underlying leases ran only through July 2022. Taking that end date into account, the court sees little purpose in requiring landlord to bring another motion (or even another action) to recover the five weeks of rent and interest accruing between June 23, 2022, and July 31, 2022. This court therefore holds that landlord may recover on this motion all rent/additional rent accruing from August 1, 2021, through the end of the leases.

Gerald Lebovits, J.