Court Opinion

ID: 9810630
Source: CourtListenerOpinion
Date Created: 2023-08-31 21:54:56.471168+00
Date Added: 2024-06-11T13:40:07.558778
License: Public Domain

Hinds-Radix, J.,
dissents and votes to reverse the order insofar as appealed from, on the law, deny that branch of the plaintiff’s motion which was for summary judgment on the issue of liability against the defendant Walter Edwards, and grant that branch of the defendants’ cross motion which was for summary judgment dismissing the complaint insofar as asserted against the defendant Walter Edwards, with the following memorandum: On August 21, 2003, the plaintiff landlord entered into a 10-year lease of certain retail property to Kim Edwards, Inc. (hereinafter KEI), for use as a beauty parlor and hair salon. The lease provided that, upon the tenant’s default, rent was to be paid until the landlord’s reentry, and the tenant would also be liable for liquidated damages, inter alia, for any deficiency between the amount of rent collected by the landlord upon a new lease, and the rent provided in the lease in question. On the same day that the lease was executed, the appellant, Walter Edwards, executed a guaranty in favor of the landlord, which provided that he was liable for “all amounts due under such Lease as the same may be renewed, extended, amended or modified. . . . This Guaranty shall be a continuing guaranty and liability hereunder shall in no way be affected or diminished by any renewal, extension, amendment or modification of the Lease or any waiver of any of the provisions thereof. The Guarantor hereby waives any notice of default under the Lease.”
In 2009, the landlord, along with KEI, as tenant, and the appellant, as guarantor, agreed to extend the term of the lease until August 31, 2018. That same day, KEI assigned the lease to the third-party defendant, Angelina Liquors, Inc. (hereinaf*577ter Angelina), for use as a liquor store. Angelina assumed the obligations under the lease, and the appellant executed the assignment in his capacity as guarantor, and on behalf of KEI.
Angelina claimed that, in or around 2011, the landlord breached the covenant of quiet enjoyment, which induced Angelina to stop paying rent. In February 2013, the landlord commenced a proceeding in the District Court, Suffolk County, relating to Angelina’s nonpayment of rent. The landlord and Angelina entered into a stipulation of settlement, whereby Angelina agreed to vacate the premises, and to the entry of judgment against it in the sum of $8,133.40 in rent arrears. The stipulation further stated that “future rent must be timely paid in addition to any amount paid toward arrears. Failure to make a payment of future rent cannot be the basis of default under the terms of this stipulation, nor can future rent be included in the above judgment.” It is undisputed that Angelina timely vacated the premises, and that the landlord assumed possession.
In November 2013, the landlord commenced the instant action against KEI and the appellant to recover “payments in the amount due” in the sum of $129,001.87, plus $30,000 in attorneys’ fees. In their answer, the defendants asserted that the appellant had no knowledge of the stipulation of settlement and, therefore, was not liable to the landlord for the amounts claimed.
After issue was joined, the landlord moved for summary judgment on the issue of liability against the appellant, arguing that the appellant had no defense to the matter, and “[t]he only issue is the amount due.” The defendants cross-moved, inter alia, for summary judgment dismissing the complaint insofar as asserted against the appellant, asserting that the stipulation of settlement which was executed between the landlord and Angelina, without the appellant’s knowledge or consent, “materially altered and, consequently, discharged [his] purported obligations under the Guaranty.” In opposition to the cross motion, the landlord’s counsel submitted an affirmation, in which he argued that the stipulation of settlement did not relieve the appellant of his obligation under the guaranty, which was reaffirmed upon the assignment of the lease to Angelina, and which was not affected by the stipulation of settlement between the landlord and Angelina.
The Supreme Court granted the landlord’s motion for summary judgment on the issue of liability against the appellant. The court concluded that the lease was not modified by the stipulation of settlement and, in any event, the guaranty stated *578that the appellant’s obligations were not affected by the renewal, extension, amendment, or modification of the lease. The court further found that “the Lease contains provisions which grant certain remedies and rights in the event of a default,” and “[i]t was within the contemplation of the parties that those rights and remedies would be exercised.”
Once Angelina vacated the premises and the landlord assumed possession, the landlord-tenant relationship was terminated (see Holy Props. v Cole Prods., 87 NY2d 130, 134 [1995]): At that juncture, the tenant’s obligation to pay rent terminated (see Centre Great Neck v Rite Aid Corp., 292 AD2d 484, 485 [2002]; see also Licini v Graceland Florist, Inc., 32 AD3d 825, 826 [2006]).
The landlord’s primary argument is that the stipulation of settlement made provision for payment of rent after the landlord-tenant relationship was terminated. However, a guaranty is strictly construed, and cannot be altered without the consent of the guarantor (see White Rose Food v Saleh, 99 NY2d 589, 591 [2003]). Although the appellant agreed to guarantee obligations under the lease “as same may be renewed, extended, amended or modified,” once the lease terminated, the lease could no longer be renewed, extended, amended, or modified (see Lo-Ho LLC v Batista, 62 AD3d 558 [2009]).
The lease provided for liquidated damages upon termination of the lease, and the gravamen of the landlord’s claim is, in effect, for liquidated damages, which is different from rent (see Centre Great Neck v Rite Aid Corp., 292 AD2d at 485; see also Licini v Graceland Florist, Inc., 32 AD3d at 826). Essentially, the landlord contends that, pursuant to the terms of the stipulation between it and Angelina, liquidated damages amounted to the full amount of future rents, which was a modification of the definition of liquidated damages provided for in the original lease.
However, the stipulation does not equate rent with liquidated damages; rather, it makes no reference to liquidated damages. The stipulation constituted a new contract between the landlord and the tenant.
If that stipulation is interpreted as the landlord would have us interpret it — i.e., that the stipulation required, as liquidated damages, the payment in full of rent which would have been due had the lease been continued — it changed the definition of liquidated damages in the lease, which was any deficiency between the amount of rent provided for in the lease and any rent collected by the landlord upon a new lease. Thus, the stip*579ulation constituted a new contract between the landlord and the principal obligor as to damages due upon termination of the lease.
The landlord cannot seek damages under the original lease and the extension of the lease, since those obligations were altered by the stipulation of settlement. The alteration of those obligations, without the guarantor’s knowledge or consent, terminated the guarantor’s obligation as a matter of law (see Mount Vernon City School Dist. v Nova Cas. Co., 19 NY3d 28, 35 [2012]; Bier Pension Plan Trust v Estate of Schneierson, 74 NY2d 312, 315 [1989]). Accordingly, I would reverse the order insofar as appealed from.