113 Misc. 2d 683 | N.Y. City Civ. Ct. | 1982
OPINION OF THE COURT
The unique issue that I must resolve in this commercial nonjury holdover proceeding is: May a document conveying a property interest that is called a sublease by the parties to it, but is under accepted principles of real property law, an assignment (because the transferor had not reserved any part of the transferred term to itself) be modified by a later agreement between the named parties to it, which creates a new expiration date, prior to the end of the previously transferred term, thereby attempting to create a reversionary interest?
The importance of the legal effect of this subsequent modification agreement (hereinafter the Agreement) is highlighted by another clause in the agreement that states in part that a default by the tenant debtor under the terms of a separate security agreement is a conditional limitation of the “sublease”, causing an immediate and final termination of the tenant’s estate.
The pertinent facts briefly stated are as follows: On March 22, 1977, Murray Hill Mews Associates as landlord and Murray Hill Mello Corp. (the petitioner here) as lessee entered into a store lease, the term to run from March 15,
A default occurred in the payment of a certain note under the security agreement. A notice of default was mailed to the respondent by the attorneys for the secured party, not the petitioner. The default was not cured in time. The present summary proceeding for eviction was then commenced by the petitioner.
Under the foregoing circumstances, may this proceeding be maintained? I hold that it cannot.
It is law in New York that where a lessee of real property transfers his entire interest in the premises to a third party who enters into possession, retaining no reversionary interest in the property transferred, such transfer constitutes an assignment of the lease and the assignee becomes directly liable to the original landlord. (New Amsterdam Cas. Co. v National Union Fire Ins. Co. of Pittsburgh, 266 NY 254; Stewart v Long Is. R. R. Co., 102 NY 601; Spencer
The “sublease” agreement reserved no interest in the transferred term to Murray Hill Mello Corp., the petitioner. Although the overlease grants a right of re-entry and although provisions of the overlease are deemed part of the “sublease”, it is the law in New York that “[t]he possible right of re-entry for breach of any condition was not the retention of such a reversionary interest as is intended when distinctions are drawn between assignments and subleases.” (See Friedman, Leases, § 7.4, citing Gillette Bros, v Aristocrat Rest., 239 NY 87, 90.) The legal effect of the “sublease” was to create an assignment of the overlease of March 22, 1977. Therefore, the subsequent modification agreement that sought to establish an earlier termination date for the sublease was a nullity because the petitioner had no interest in the demised premises when the modification agreement was executed. There was nothing to modify. The remainder of its lease term had been legally assigned (see Stewart v Long Is. R.R. Co., supra).
To be sure, the rule of law applicable to a determination of whether a real property transfer is an assignment or a sublease (based on whether the primary lessee has transferred his whole estate or has retained a fragment of his estate) has received criticism. (See Stewart v Long Is. R.R. Co., supra, p 617 [Finch, J., dissenting opn].) The dissenting argument advanced against the application of the traditional rule of law is essentially twofold: that it is
The importance of promoting uniformity and certainty in rules of property has been judicially recognized (Heyert v Orange & Rockland Utilities, 17 NY2d 352; Rock Spring Distilling Co. v Gaines & Co., 246 US 312, 320.) In fact, the Court of Appeals has said: “This court has often emphasized the importance of enforcing law as it finds it in decisions (Sternleib v. Normandie Nat. Securities Corp., 263 N. Y. 245) holding that ‘established precedents are not lightly to be set aside even thoúgh they seem archaic’; the remedy being ordinarily with the Legislature (Schindler v. Royal Ins. Co., 258 N. Y. 310, 314).” (Heyert v Orange & Rockland Utilities, supra, p 360.) So, when rules involving rights in real property are concerned, the doctrine of stare decisis is more strictly followed. (17 NY2d 352, 362.) This is especially so where the effect of holding otherwise, might be to favor the enforcement of a conditional limitation which would have the dire effect of causing a forfeiture under a lease (First Nat. Stores v Yellowstone Shopping Center, 21 NY2d 630; see Kirschenbaum v M.T.S. Franchise Corp., 77 Misc 2d 1012).
Even cases (e.g., Spencer Operating Corp. v Spencer Hotel Corp., supra) that have seemed to support the view that the intention of the parties, rather than the length of the reversionary term, should prevail in issues of contraction, will allow the intention of the parties to prevail as a
That being said, the “sublease” in issue is legally an assignment which ended the petitioner assignor’s privity of estate with his landlord, under the overlease. The modification agreement was therefore made with one who had no estate in the premises and was void. Since there was no reassignment back to the petitioner and a reconveyance to the respondent by a “true” sublease, the assignment remained in effect and the modification agreement changed nothing at all.
Had I found the modification agreement to be effective, I still would have held that this action may not be maintained because the petitioner’s notice of default was ineffective. Pursuant to the modification agreement, a five-day written notice to cure a default in the security agreement must be given to the tenant before a termination of the lease may be effected. The termination of the lease under the provision is stated to be at the landlord’s option. The notice to cure the default however was sent by the attorneys for the secured party, Beal, Kagan & Lentz, P. C., not by the landlord, the petitioner here. Was termination sought at the landlord’s option as required by the modification agreement? I hold that it was not. In giving notice of termination under a termination option in a lease, there must be strict observance with the provisions of the lease. (Rasch, New York Landlord and Tenant [2d ed], § 766; see, also, Dubois & Son v Goldsmith Bros., 273 App Div 306.) The notice of default in this case was transmitted to the respondent by the attorneys for the secured party not the petitioner landlord. That constituted an insufficient and therefore invalid notice of default (see 185 East 85th St. Co. v Gravanis, NYLJ, Jan. 21,1981, p 6, col 2 [App Term, 1st Dépt]).
Since I have held that the original sublease was in reality an assignment, the relationship of the petitioner and the respondent is that of assignor and assignee, not that of landlord and tenant. But, an assignor of a lease cannot maintain a summary proceeding for eviction
The petition is therefore dismissed.