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Supreme Court, Appellate Division, First Department, New York.

43RD STREET DELI, INC. doing business as Bella Vita Restaurant, Plaintiff–Appellant–Respondent, v. PARAMOUNT LEASEHOLD, L.P., Defendant–Respondent–Appellant.

10482 & M-7290

Decided: December 03, 2019

Acosta, P.J., Renwick, Mazzarelli, Kapnick, JJ. Cornicello, Tendler & Baumel–Cornicello, LLP, New York (David Tendler of counsel), for appellant-respondent. Rosenberg & Estis, P.C., New York (Norman Flitt of counsel), for respondent-appellant.

Order, Supreme Court, New York County (Joel M. Cohen, J.), entered on or about January 3, 2019, which, to the extent appealed from as limited by the briefs, adjudged that plaintiff tenant was not entitled to exercise a right to renew its lease, referred plaintiff's claim for rent credit in the amount of $62,724.79 to a Judicial Hearing Officer to hear and determine, awarded defendant attorneys' fees and referred the reasonable amount of defendant's attorneys' fees to a JHO to hear and determine, unanimously affirmed, without costs.

Supreme Court's determination that plaintiff was not entitled to exercise its right to renew the lease was supported by the evidence.  The lease provided that tenant could renew the lease for a 5–year period starting February 1, 2011 provided that tenant was not in default of the lease beyond the allowed grace period following the expiration of the lease.  This provision made the lease renewal option conditional (see e.g. Ahmed v. C.D. Kobsons, Inc., 67 A.D.3d 467, 467–468, 890 N.Y.S.2d 469 [1st Dept. 2009]), and therefore, tenant could not exercise this right validly unless it was in full compliance with the lease (see Jefpaul Garage Corp. v. Presbyterian Hosp. in City of N.Y., 61 N.Y.2d 442, 448, 474 N.Y.S.2d 458, 462 N.E.2d 1176 [1984]).

Tenant's arguments that external circumstances should alter this conclusion are unavailing.  The lease clearly provides that tenant defaulted as soon as it failed to pay percentage rent, and landlord was not obligated to provide notice of such default.  Moreover, tenant failed to make any payments towards its water bills as additional rent from November 2005 until January 2013, including at the time of the renewal notice (July 1, 2009) and commencement of the renewal term (February 1, 2011).  Tenant's bona fide objection to the inflated water bills did not warrant a complete failure to pay.  Tenant could have preserved its right to dispute the accuracy of its bills by mitigating this litigation and paying its bills simultaneously (Beltway 7 Props., Ltd. v. Blackrock Realty Advisers, Inc., 167 A.D.3d 100, 104, 90 N.Y.S.3d 3 [1st Dept. 2018], lv denied 32 N.Y.3d 916, 2019 WL 740446 [2019]; Jenoure v. Body Solutions Plus, LLC of Westbury, 29 Misc.3d 84, 86, 912 N.Y.S.2d 370 [App. Term, 2d Dept. 2010]).

Supreme Court properly referred the issue of the “waived rent arrears” or “rent credit” to a JHO to hear and determine.  Prior to this litigation, the parties were involved in a separate rent litigation whereby landlord sought $133,936.03 from tenant.  The parties settled that litigation for $71,211.24, and landlord agreed to waive its collection of the remaining $62,724.79.  In connection with this litigation, the parties dispute whether landlord ever removed the $62,724.79 debt from tenant's rental account.  At trial, Supreme Court found that landlord's only witness, the building's managing agent, provided testimony that did not allow for a reliable conclusion as to whether the rent credit was ever applied to tenant's account.  As this was a bench trial, “deference is accorded the trial court's factual findings particularly where they rest largely upon an assessment of credibility” (Jump v. Jump, 268 A.D.2d 709, 710, 701 N.Y.S.2d 503 [3d Dept. 2000]; see also Cushman & Wakefield, Inc. v. 214 E. 49th St. Corp., 218 A.D.2d 464, 467–468, 639 N.Y.S.2d 1012 [1st Dept. 1996], lv dismissed 88 N.Y.2d 951, 647 N.Y.S.2d 708, 670 N.E.2d 1339, lv denied 88 N.Y.2d 816, 651 N.Y.S.2d 406, 674 N.E.2d 336 [1996]).  Moreover, the documentary evidence in the record was inconclusive with respect to whether the rent credit was applied fully, partially, or not at all.

Landlord was entitled to attorneys' fees.  While normally litigants are required to pay their own legal fees, there is an exception if the parties contract otherwise, as was the case here (Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 31 N.Y.3d 569, 584, 81 N.Y.S.3d 816, 106 N.E.3d 1176 [2018]).  In addition, landlord prevailed over the central relief sought (Matter of Wiederhorn v. Merkin, 98 A.D.3d 859, 863, 952 N.Y.S.2d 478 [1st Dept. 2012], lv denied 20 N.Y.3d 855, 2012 WL 6582317 [2012]; see also Blue Sage Capital, L.P. v. Alfa Laval U.S. Holding, Inc., 168 A.D.3d 645, 646, 92 N.Y.S.3d 268 [1st Dept. 2019], lv denied 33 N.Y.3d 904, 2019 WL 2041623 [2019]).  Landlord's other contentions with respect to attorneys' fees address unappealable dicta (see Grunewald v. Metropolitan Museum of Art, 125 A.D.3d 438, 439, 3 N.Y.S.3d 23 [1st Dept. 2015], lv denied 27 N.Y.3d 907, 2016 WL 3150646 [2016]).