Preview
FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021
NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF QUEENS
_________________._.________________.._____________________________Ç
CIAMPA STEINWAY LLC, : Index No. 728594/2021
:
Plaintiff, :
- against - :
FARAH RAZVI, :
:
Defendants. :
______________________________________________________________..___Ç
AMENDED
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT IN LIEU OF COMPLAINT
CORNICELLO, TENDLER &
BAUMEL-CORNICELLO, LLP
Attomeys for Defendant
20th
Two Wall Street, Floor
New York, New York 10005
T. (212) 994-0260
F. (212) 994-0268
Susan Baumel-Cornicello, Esq.
scornicello@ctbclaw.com
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TABLE OF CONTENTS
I. Preliminary Statement........................................................................................
1
II. Statement of Facts.............................................................................................
3
i The Lease...............................................................................3
iiThe Tenant Action................................................................................
5
iiiThe Guaranty..........................................................................6
iv The Tenanes Default...............................................................7
III. Legal Standard on a Motion for Summary Judgment in
Lieu of Complaint...................................................................................
8
IV. The Guaranty Legislation ................................................................................
8
V. Argument......................................................................................................
10
A. Plaintiff is Entitled to Summary Judgment in Lieu of Complaint
on the Issue of Liability Under the Guaranty....................................10
B. Melendez Casts Doubt on the Enforceability of the
Guaranty Legislation...............................................................13
C. Defendant Guarantor's Liability ifUnpaid Rent and Additional Rent
Accruing During he Window Period are Excluded..........................15
Conclusion.................................................................................................
.........16
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TABLE OF AUTHORITIES
Cases Page
Melendez v. City of New York, U.S. App. Lexis 32327, 2021 WL 4997666
(2nd
Cir. 2021)..........................................................................................2,14
European Am. Bank & Trust Co. v. Schirripa, 108 A.D.2d 684, 485 N.Y.S.2d
(1st 1985).................................................................................
763 Dep't ...............7
(1st
Spring Prince LLC v. Eli Tahari, Ltd.., 173 A.D.3d 544 Dep't 2019)....................7
(1st
Davimos v. Halle, 35 A.D.3d 270, 272, 836 N.Y.S.2d 61 Dep't 2006)..................8
Cooperative Centrale Raiffeisen-Boerenleenbank, A.A. v. Navarro, 36 N.E.3d
80, 84 (2015)..............................................................................................7,8
Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce,
Fenner & Smith Inc., 188 F.3d 31, 34 (2d Cir. 1999)............................................8
(1st
City of New York v. Clarose Cinema Corp., 256 A.D.2d 69, 71, 681 N.Y.S.2s 251
Dep't 1998)..............................................................................................8, 13
(1st
Midland Steel Warehouse Corp. v. Godinger Silver Art Ltd., 276 A.D.2d 341, 343
Dept 2000)................................................................................................12
558 Seventh Ave Corp. v. Times Sq. Photo, 194 A.D.2d 561, 149 N.Y.S.3d 55
(1st
Dep't
2021)........................................................................................................12
Kensington House Co. v. Oram, 293 A.D.2d 304, 304, 739 N.Y.S.2d 572,
572-74 (1st Dep't 2002)...............................................................................13
Statutes and Regulations Page
CPLR §3213 ..............................................................................................................6,7
Alcoholic Beverage Control Law, Sections 64(7), 64-a(7)......................................5
New York City Admin Code 22-1005....................................2,8,9,10,11,13,14, 15,16
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PRELIMINARY STATEMENT
Plaintiff Ciampa Steinway LLC ("Plaintiff") submits this memorandum of law in
support of its motion for summary judgment in lieu of complaint against Defendant Farah
Razvi ("Guarantor"). The Guarantor absolutely and unconditionally guaranteed the
payment of all rent and additional rent owing under a written lease agreement dated July
2, 2018 ("Lease") between Plaintiff, as landlord, and non-party Cavali NY Inc. ("Tenant"),
as Tenant. It isTenanis default in the payment of rent and additional rent accruing under
the Lease which forms the basis of this lawsuit.
At the onset, addressing the pink elephant in the room, Tenant's default under the
Lease did not occur due to Covid-19. The Lease commenced July 1, 2018. After receiving
the benefit of four (4) months free rent and additional rent to assist Tenant in its build-out
of the Premises¹, Tenant immediately defaulted under the Lease. By March 7, 2020,
Tenant was in default in the payment of rent and additional rent in the amount of
$138,338.35.2
The Covid-19 pandemic has been devastating to both tenants and landlords.
Numerous businesses, including restaurants were forced to close temporarily and/or
subject to stringent occupancy restrictions. There was a great concern that as a result of
the pandemic, individuals who had guaranteed leases would lose their life savings due to
the restrictions imposed on their businesses.
1 Capitalizedterms are as defined herein and in the affidavitof Joseph G. Ciampa,
accompanying submitted
herewith.
2 See annexed to the Ciampa at Exhibit"D ".
Ledger, Affidavit,
1
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In response the legislature enacted New York City Administrative Code §22-1005,
which shielded individual guarantors from personal liabilityfor defaulted rental obligations
accruing between March 7, 2020 and June 30, 2021, provided the default was caused by
Covid-19. The intent of this legislation was to protect guarantors whose businesses were
failing due to government restrictions enacted in response to Covid-19. However, the law
Free"
was not meant to be a fortuitous "Get Out Of Jail card for guarantors whose liability
arose long before the Covid-19 pandemic, and where the underlying default(s) had
nothing to do with any governmental restrictions. Additionally, the Second Circuit Court
of Appeals decision in Melendez v. City of New York, U.S. App. Lexis 32327, 2021 WL
(2nd
4997666 Cir. 2021) shows that there are serious concerns about the Guaranty Law's
constitutionality.
In this case, Defendant Guarantor's liability under the Guaranty was triggered
upon the firstdefault under the Lease, which occurred long before Covid-19, and, while
some subsequent defaults did occur after March 7, 2020, those defaults were not the
causing"
"default or other event the Guarantor to become wholly or partially liable as
Law.3
required, by the Guaranty
Given that the Guaranty in this action is an unconditional guaranty of payment,
Plaintiff is entitled to summary judgment in lieu of complaint for the arrears in Rent and
Additional Rent in the total amount of $433,232.874. Alternatively, Plaintiff is entitled to
summary judgment in lieu of complaint for allarrears that falloutside the Window Period
Law5
of the Guaranty in the amount of $155,519.71, without prejudice to Plaintiff's right
3
See Administrative Code §22-1005.
4 "M".
See Exhibit
5 through 6/30/21.
3/7/20
2
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to recover arrears accruing during the Window Period should the Guaranty Legislation be
overturned.6
STATEMENT OF FACTS
The Lease
Plaintiff is the owner of 36-21 Steinway Street, Long Island City 11101 (the
"A"
"Premises"). Annexed to the Ciampa Affidavit at Exhibit is a true and accurate copy
of the deed to the Premises. By agreement dated July 2, 2018 (the "Lease"), Plaintiff
leased the Premises to non-party Cavali NY Inc. "Tenant") for a ten (10) year period
("Term"), commencing July 1, 2018, at an initial rent of $20,000.00 per month (hereinafter
"Rent"), for the purposes of operating a restaurant and lounge. A true and accurate copy
of the Lease is annexed to the Ciampa Affidavit at Exhibit "B".
The Lease issued to Tenant contained a four (4) month Rent and Additional Rent
concession for the period July 1, 2018 through October 31, 2018 for the purposes of
assisting Tenant in their build-out of the Premises. Payment of Rent therefor was to
commence November 1, 2018 with each monthly Rent payment to be received in advance
of the first day of each month. In the event Tenant defaulted in itspayment of Rent and/or
Additional Rent, Tenant lost the benefit of the four (4) month rent waiver. See Paragraph
"40" "B"
of the Lease, Exhibit herewith.
Relevant to this action, additional rent ("Additional Rent") was defined at Paragraph
R5 of the Lease as being "all other amounts, liabilities and obligations which Tenant
hereunder"
assumes or agrees to pay and upon the failure of Tenant to pay such
6 "M". expenses do not include legalfees for which Plaintiffrequests a hearing.
See Exhibit The
3
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Additional Rent, "the Landlord shall have all of the rights, powers and remedies provided
for herein and by law".
Rent was adjusted annually by 3% increases as of July 1 of each year during the
Term of the Lease, such that as of July 1, 2019 the Rent increased to $20,600.00, as of
July 1, 2020 the Rent increased to $21,218.00 and on July 1, 2022 the Rent increased to
"B"
$21,854.54. See Paragraph R40 of the Lease, Exhibit to the Ciampa Affidavit.
Tenant further agreed to pay, as Additional Rent, 67% of the total real estate tax
increases assessed against the Building over the real estate taxes assessed against the
"B"
Building in the 2017/2018 tax year. See Paragraph R27 of the Lease, Exhibit to the
Ciampa Affidavit.
Tenant further agreed to pay for itswater usage based upon consumption "in the
same"
same manner and at the same rate that Landlord is obligated to pay for and the
bill rendered for such water consumption is to be paid as Additional Rent. See
"B"
Paragraphs 28 and R2 of the Lease, Exhibit to the Ciampa Affidavit.
Tenant is obligated to pay and reimburse Plaintiff for legal fees, cost and expenses
incurred by reason of any default of the Lease, with said payments being designated as
"B"
Additional Rent. See Paragraph R54 of the Lease, Exhibit to the Ciampa Affidavit.
Late fees accrue under the Lease at the rate of 5% for each item of Rent and
Additional Rent unpaid by the tenth (10th) day of the month. See Article R40(C) of the
Lease.
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The Tenant Action
In March, 2020, Plaintiff commenced a non-payment proceeding against Tenant
for Rent and Additional Rent due and owing for December 2018 through April 2019.
Tenant thereafter commenced the Tenant action, by Order to Show Cause, seeking
monetary damages, and preliminarily, consolidation of the nonpayment proceeding with
the Tenant's action for damages.
By order dated May 15, 2020, the Hon. Cheree A. Buggs ordered the consolidation
of the Tenanes Action with the nonpayment proceeding, determining that an issue existed
commenced.7
as to when the Tenanes obligation to pay Rent The issue in the Tenant
Action revolves around Article R40(B) in the Lease that states ifthe Tenanes New York
State Liquor Authority ("SLA") application for a liquor license was "delayed for an
administrative investigation or hearing solely due to any alleged misconduct at the
premises, which occurred prior to the execution of this lease, then no rent or additional
rent shall be due until such investigation or hearing is completed". Tenant took the position
that the delay in obtaining the SLA license was due to prior misconduct at the Premises.
Plaintiff claimed Rent was due upon completion of a SLA hearing (held pursuant to
Section 64(7) or 64-a(7) of the Alcoholic Beverage Control Law, concerning a proposed
premises which is located within a 500 foot radius of at least three (3) other licensed and
operating on-premises liquor establishments8) that took place on October 18, 2018.
2019.9
Tenant obtained its liquor license on January 11,
7A ofthe 2020 Order is annexed to the Ciampa Affidavitat Exhibit"E".
copy May 15,
8A ofthe Notice of atthe SLA isannexed to the Ciampa Affidavitat Exhibit"F".
copy Hearing
9 Annexed "G"
to the Ciampa Affidavitat Exhibit is a recordfrom the SLA indicating the liquorlicense was issuedon
January 11, 2019.
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The Guaranty
Concurrently with the execution of the Lease, Defendant Farah Razvi ("Defendant
Guarantor") executed the Guaranty of Lease ("Guaranty"). A true and accurate copy of
the Guaranty is annexed hereto at Exhibit "C". The duly acknowledged and executed
Guaranty designated Defendant Guarantor as the guarantor of Tenanes obligations under
the Lease. The Guaranty provides, inter alia, that Defendant Guarantor:
unconditionally and absolutely guarantees to landlord, and Landlord's
successors and assigns, the full payment of all rent and additional rent due
pursuant to the Lease, the lien-free completion of all alterations and
construction performed by Tenant and the sign-offs and completion of all
such work as required by law, as well as the performance and observance
of all the covenants, conditions, obligations and agreements therein
provided to be performed and observed by Tenant, its successors and
assigns, and under any and all amendments, modifications and other
instruments relating thereto, whether now or hereafter existing, and the full
and prompt payment of all damages, costs and expenses which shall at any
time be recoverable by the Landlord from Tenant by virtue of the Lease and
any amendments...".
In the event of a default by Tenant under the terms of the Lease, the Plaintiff is not
required to first demand that the Tenant perform, before itlooks to the Guarantor, as the
"C"
"Guarantor's liabilityhereunder is primary". See Exhibit to the Ciampa Affidavit.
The Guaranty also contemplates Plaintiff seeking enforcement of the Guaranty
pursuant to a CPLR Rule 3213 motion, "[t]his Guaranty is an instrument for the payment
of money only and is enforceable by a motion for summary judgment under CPLR Section
3213 in addition to all other lawful means of enforcement", and for Plaintiff to recover
reasonable attorney's fees, costs and expenses in the event an action or proceeding is
commenced under the Guaranty.
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Tenant's Default
As noted above, the rent commencement date under the Lease was November 1,
2018 and Tenant immediately went into default under the Lease. Even utilizing February
1, 2019 as the rent commencement date of the Lease, which is the date AFTER Tenant
obtained its liquor license, Tenant failed to make payments of Rent and Additional Rent
to the Landlord, such that Tenant was indebted to Landlord in the sum of $447,761.33 by
the time March 7, 2020 came upon us.
LEGAL STANDARD ON A MOTION FOR SUMMARY JUDGMENT
IN LIEU OF COMPLAINT
CPLR §3213 provides: "[w]hen an action is based upon an instrument for the
payment of money only or upon any judgment, the plaintiff may serve with the summons
complaint."
a notice of motion for summary judgment and the supporting papers in lieu of a
CPLR §3213 (McKinney's 2019). The purpose of CPLR 3213 is "to provide quick relief
on documentary claims so presumptively meritorious that a formal complaint is
superfluous, and even the delay incident upon waiting for an answer and then moving for
needless."
summary judgment is Spring Prince LLC v. Eli Tahari, Ltd., 173 A.D.3d 544
(1st
Dep't 2019).
New York Courts, including the Court of Appeals, have consistently explicitly held
only"
that an unconditional guaranty is an instrument for the payment of "money within
the meaning of CPLR 3213. Cooperative Centrale Raiffeisen-Boerenleenbank, A.A. v.
Navarro, 36 N.E.3d 80, 84 (2015) citing European Am. Bank & Trust Co. v. Schirripa, 108
(1st
A.D.2d 684, 485 N.Y.S.2d 763 Dep't 1985) ("An unconditional guaranty is an
only"
instrument for the payment of "money withing the meaning of CPLR 3213."); see
7
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also Spring Prince, LLC, 173 A.D.3d at 544 ("Plaintiff's motion for summary judgment in
lieu of complaint was properly granted against defendant based on the guaranty in the
lease.") To meet its prima facia burden on its summary judgment motion, a Plaintiff must
prove "the existence of the guaranty, the underlying debt, and the guarantor's failure to
guaranty." (1st
perform under the Davimos v. Halle, 35 A.D.3d 270, 272, 836 N.Y.S.2d 61
Dep't 2006); City of New York v. Clarose Cinema Corp., 256 A.D.2d 69, 71, 681 N.Y.S.2s
(1st
251 Dep't 1998).
Moreover, guaranties that contain language obligating the guarantor to payment
without recourse to any defenses or counterclaims, i.e.,guaranties that are "absolute and
unconditional,"
have been consistently upheld in New York courts. Cooperative Centrale
Raiffeisen-Boerenleenbank, supra, at 36 N.E.3d 84, citing Compagnie Financiere de CIC
et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 188 F.3d 31, 34
(2d Cir. 1999) ("Absolute and unconditional guaranties have in fact been found to
preclude guarantors from asserting a broad range of defenses."). Unequivocal guaranties
of contractual debts and obligations, such as in the Defendanis Guaranty herein,
therefore, fall squarely within the purview of CPLR §3213, provided that Plaintiff meets its
prima facie burden.
THE GUARANTY LEGISLATION
On May 26, 2020, the New York City Counsel enacted Int. No 2083-A, which
amended the New York City Administrative Code Section 22-1005 (the "Guarantor
Legislation").
The Guarantor Legislation provides as follows:
8
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A provision in a commercial lease or other rental agreement involving real
property located within the city that provides for one or more natural persons
who are not the tenant under such agreement to become, upon the
occurrence of a default or other event, wholly or partially personally liable
for payment of rent, utility expenses or taxes owed by the tenant under such
agreement, or fees and charges relating to routine building maintenance
owed by the tenant under such agreement, shall not be enforceable against
such natural persons ifthe conditions of paragraph 1 and 2 are satisfied:
1. The tenant satisfies the conditions of subparagraph (a),
(b) or (c):
(a) The tenant was required to cease serving patrons food
or beverage for on-premises consumption or to cease
operation under executive order number 202.3 issued by
the governor on March 16, 2020;
(b) The tenant was a non-essential retail establishment
subject to in-person limitations under guidance issued by
the New York state department of economic development
pursuant to executive order number 202.6 issued by the
governor on March 18, 2020; or
(c) The tenant was required to close to members of the
public under executive order number 202.7 issued by the
governor on March 19, 2020.
On September 28, 2020, the Guaranty Legislation was amended to extend the
"2"
time period contained in paragraph above from September 30, 2020 to March 31,
2021, and clarified that a guaranty subject to the Guaranty Legislation did not have to be
document.10
contained solely within a lease, but rather could be a separate The Guaranty
Legislation was amended a second time, extending the protections of the Guaranty
2021.¹¹
Legislation to June 30,
10 Local Law No. 98 of Council Int.No. 2083-A of 2020.
See 2020,
¹¹ Local Law No. 50 of Council Int.2243-A of enacted April 2021.
See 2021, 2021, 25,
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ARGUMENT
A. Plaintiff is Entitled to Summary Judgment in Lieu of Complaint
on the Issue of Liability Under the Guaranty
Plaintiff is entitled to summary judgment against Defendant Guarantor based upon
the Tenanes default. Under the Guaranty, Defendant-Guarantor "unconditionally and
absolutely "guarantee[d] to Landlord, and Landlord's successors and assigns, the full
payment of all rent and additional rent due pursuant to the Lease", as well as "the fulland
prompt payment of all damages, costs, and expenses which shall at any time be
recoverable by the Landlord from Tenant by virtue of the Lease". Insofar as Tenant failed
to pay rent under the Lease from the inception of the Lease, Defendant Guarantor's first
liability arose as far back as February 1, 2019¹², long before Covid-19. That said,
Defendant Guarantor's liability for Tenanes default was not the result of a default by
Tenant during the Window Period insofar as the default or other event causing the
Guarantor to become wholly or partially personally liable for the Rent and Additional Rent
arose prior to March 7, 2020.
It is uncontested that Guaranty Legislation bars a landlord from enforcing a
guaranty against an individual under certain, narrowly prescribed, circumstances. The
relevant sections of the Guaranty Legislation are as follows:
A provision in a commercial lease or . .. that provides for one
or more natural persons who are not the tenant under such
agreement to become, upon the occurrence of a default or
¹² obligation rent began on November
The Plaintiff
believes the to commence paying 1,2018, however, given the
outstanding factual issue tobe determined inthe Tenant Action, for purposes of summary judgment inlieu of
complaint, Plaintiffseeks judgment for outstanding Rent and AdditionalRent for the period after the liquorlicense
was issued,February 1,2019, todate, without prejudice to Plaintiff's
claim to the Rent accruing priorto February
1, 2019 should the Court inthe Tenant Action determine that the rent commencement date was priorto February
1, 2019.
10
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other event, wholly or partially personally liable for payment of
rent . .. shall not be enforceable against such natural persons
ifthe conditions of paragraphs 1 and 2 are satisfied: . ..
2. The default or other event causina such natural persons to
become wholly or partially personally liable for such obligation
occurred between March 7, 2020 and June 30, 2021, inclusive.
(emphasis added)
Itis important to note that this law only applies ifboth the conditions to paragraphs
"1" "2"
and are satisfied. There is no dispute that ifTenant were operating itwould have
been required to cease serving patrons food or beverage for on-premises consumption,
satisfying paragraph "1". Therefore, the issue is whether the default which caused the
Defendant Guarantor to become wholly or partially personally liable for Tenanes
obligations occurred during the Window Period.
The default which triggered Tenanes Lease liability did not occur during the
Window Period, itoccurred before that. In fact, as of March 7, 2020, Tenant was already
in substantial arrears.
As set forth in the annexed affidavit of Joseph G. the Defendant-
Ciampa,
Guarantor's liabilityunder the Lease arose in 2018 when Tenant started falling behind on
obligations.13
its rent Even assuming, for purposes of this summary judgment motion,
that liability for the payment of Rent and Additional Rent did not accrue until February 1,
2019, after issuance of the liquor license, by March 1, 2020, Tenant was already
$89,532.33 in arrears in Base Rent and Additional Rent, and this number does not even
take into the account the fact that Tenant lost the four (4) month rent concession it
received at the inception of the Lease when itdefaulted in the payment of Rent and
l3 "D"
See Exhibits and "M".
Preview
FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF QUEENS _________________._.________________.._____________________________Ç CIAMPA STEINWAY LLC, : Index No. 728594/2021 : Plaintiff, : - against - : FARAH RAZVI, : : Defendants. : ______________________________________________________________..___Ç AMENDED MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT IN LIEU OF COMPLAINT CORNICELLO, TENDLER & BAUMEL-CORNICELLO, LLP Attomeys for Defendant 20th Two Wall Street, Floor New York, New York 10005 T. (212) 994-0260 F. (212) 994-0268 Susan Baumel-Cornicello, Esq. scornicello@ctbclaw.com 1 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 TABLE OF CONTENTS I. Preliminary Statement........................................................................................ 1 II. Statement of Facts............................................................................................. 3 i The Lease...............................................................................3 iiThe Tenant Action................................................................................ 5 iiiThe Guaranty..........................................................................6 iv The Tenanes Default...............................................................7 III. Legal Standard on a Motion for Summary Judgment in Lieu of Complaint................................................................................... 8 IV. The Guaranty Legislation ................................................................................ 8 V. Argument...................................................................................................... 10 A. Plaintiff is Entitled to Summary Judgment in Lieu of Complaint on the Issue of Liability Under the Guaranty....................................10 B. Melendez Casts Doubt on the Enforceability of the Guaranty Legislation...............................................................13 C. Defendant Guarantor's Liability ifUnpaid Rent and Additional Rent Accruing During he Window Period are Excluded..........................15 Conclusion................................................................................................. .........16 2 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 TABLE OF AUTHORITIES Cases Page Melendez v. City of New York, U.S. App. Lexis 32327, 2021 WL 4997666 (2nd Cir. 2021)..........................................................................................2,14 European Am. Bank & Trust Co. v. Schirripa, 108 A.D.2d 684, 485 N.Y.S.2d (1st 1985)................................................................................. 763 Dep't ...............7 (1st Spring Prince LLC v. Eli Tahari, Ltd.., 173 A.D.3d 544 Dep't 2019)....................7 (1st Davimos v. Halle, 35 A.D.3d 270, 272, 836 N.Y.S.2d 61 Dep't 2006)..................8 Cooperative Centrale Raiffeisen-Boerenleenbank, A.A. v. Navarro, 36 N.E.3d 80, 84 (2015)..............................................................................................7,8 Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 188 F.3d 31, 34 (2d Cir. 1999)............................................8 (1st City of New York v. Clarose Cinema Corp., 256 A.D.2d 69, 71, 681 N.Y.S.2s 251 Dep't 1998)..............................................................................................8, 13 (1st Midland Steel Warehouse Corp. v. Godinger Silver Art Ltd., 276 A.D.2d 341, 343 Dept 2000)................................................................................................12 558 Seventh Ave Corp. v. Times Sq. Photo, 194 A.D.2d 561, 149 N.Y.S.3d 55 (1st Dep't 2021)........................................................................................................12 Kensington House Co. v. Oram, 293 A.D.2d 304, 304, 739 N.Y.S.2d 572, 572-74 (1st Dep't 2002)...............................................................................13 Statutes and Regulations Page CPLR §3213 ..............................................................................................................6,7 Alcoholic Beverage Control Law, Sections 64(7), 64-a(7)......................................5 New York City Admin Code 22-1005....................................2,8,9,10,11,13,14, 15,16 3 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 PRELIMINARY STATEMENT Plaintiff Ciampa Steinway LLC ("Plaintiff") submits this memorandum of law in support of its motion for summary judgment in lieu of complaint against Defendant Farah Razvi ("Guarantor"). The Guarantor absolutely and unconditionally guaranteed the payment of all rent and additional rent owing under a written lease agreement dated July 2, 2018 ("Lease") between Plaintiff, as landlord, and non-party Cavali NY Inc. ("Tenant"), as Tenant. It isTenanis default in the payment of rent and additional rent accruing under the Lease which forms the basis of this lawsuit. At the onset, addressing the pink elephant in the room, Tenant's default under the Lease did not occur due to Covid-19. The Lease commenced July 1, 2018. After receiving the benefit of four (4) months free rent and additional rent to assist Tenant in its build-out of the Premises¹, Tenant immediately defaulted under the Lease. By March 7, 2020, Tenant was in default in the payment of rent and additional rent in the amount of $138,338.35.2 The Covid-19 pandemic has been devastating to both tenants and landlords. Numerous businesses, including restaurants were forced to close temporarily and/or subject to stringent occupancy restrictions. There was a great concern that as a result of the pandemic, individuals who had guaranteed leases would lose their life savings due to the restrictions imposed on their businesses. 1 Capitalizedterms are as defined herein and in the affidavitof Joseph G. Ciampa, accompanying submitted herewith. 2 See annexed to the Ciampa at Exhibit"D ". Ledger, Affidavit, 1 4 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 In response the legislature enacted New York City Administrative Code §22-1005, which shielded individual guarantors from personal liabilityfor defaulted rental obligations accruing between March 7, 2020 and June 30, 2021, provided the default was caused by Covid-19. The intent of this legislation was to protect guarantors whose businesses were failing due to government restrictions enacted in response to Covid-19. However, the law Free" was not meant to be a fortuitous "Get Out Of Jail card for guarantors whose liability arose long before the Covid-19 pandemic, and where the underlying default(s) had nothing to do with any governmental restrictions. Additionally, the Second Circuit Court of Appeals decision in Melendez v. City of New York, U.S. App. Lexis 32327, 2021 WL (2nd 4997666 Cir. 2021) shows that there are serious concerns about the Guaranty Law's constitutionality. In this case, Defendant Guarantor's liability under the Guaranty was triggered upon the firstdefault under the Lease, which occurred long before Covid-19, and, while some subsequent defaults did occur after March 7, 2020, those defaults were not the causing" "default or other event the Guarantor to become wholly or partially liable as Law.3 required, by the Guaranty Given that the Guaranty in this action is an unconditional guaranty of payment, Plaintiff is entitled to summary judgment in lieu of complaint for the arrears in Rent and Additional Rent in the total amount of $433,232.874. Alternatively, Plaintiff is entitled to summary judgment in lieu of complaint for allarrears that falloutside the Window Period Law5 of the Guaranty in the amount of $155,519.71, without prejudice to Plaintiff's right 3 See Administrative Code §22-1005. 4 "M". See Exhibit 5 through 6/30/21. 3/7/20 2 5 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 to recover arrears accruing during the Window Period should the Guaranty Legislation be overturned.6 STATEMENT OF FACTS The Lease Plaintiff is the owner of 36-21 Steinway Street, Long Island City 11101 (the "A" "Premises"). Annexed to the Ciampa Affidavit at Exhibit is a true and accurate copy of the deed to the Premises. By agreement dated July 2, 2018 (the "Lease"), Plaintiff leased the Premises to non-party Cavali NY Inc. "Tenant") for a ten (10) year period ("Term"), commencing July 1, 2018, at an initial rent of $20,000.00 per month (hereinafter "Rent"), for the purposes of operating a restaurant and lounge. A true and accurate copy of the Lease is annexed to the Ciampa Affidavit at Exhibit "B". The Lease issued to Tenant contained a four (4) month Rent and Additional Rent concession for the period July 1, 2018 through October 31, 2018 for the purposes of assisting Tenant in their build-out of the Premises. Payment of Rent therefor was to commence November 1, 2018 with each monthly Rent payment to be received in advance of the first day of each month. In the event Tenant defaulted in itspayment of Rent and/or Additional Rent, Tenant lost the benefit of the four (4) month rent waiver. See Paragraph "40" "B" of the Lease, Exhibit herewith. Relevant to this action, additional rent ("Additional Rent") was defined at Paragraph R5 of the Lease as being "all other amounts, liabilities and obligations which Tenant hereunder" assumes or agrees to pay and upon the failure of Tenant to pay such 6 "M". expenses do not include legalfees for which Plaintiffrequests a hearing. See Exhibit The 3 6 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 Additional Rent, "the Landlord shall have all of the rights, powers and remedies provided for herein and by law". Rent was adjusted annually by 3% increases as of July 1 of each year during the Term of the Lease, such that as of July 1, 2019 the Rent increased to $20,600.00, as of July 1, 2020 the Rent increased to $21,218.00 and on July 1, 2022 the Rent increased to "B" $21,854.54. See Paragraph R40 of the Lease, Exhibit to the Ciampa Affidavit. Tenant further agreed to pay, as Additional Rent, 67% of the total real estate tax increases assessed against the Building over the real estate taxes assessed against the "B" Building in the 2017/2018 tax year. See Paragraph R27 of the Lease, Exhibit to the Ciampa Affidavit. Tenant further agreed to pay for itswater usage based upon consumption "in the same" same manner and at the same rate that Landlord is obligated to pay for and the bill rendered for such water consumption is to be paid as Additional Rent. See "B" Paragraphs 28 and R2 of the Lease, Exhibit to the Ciampa Affidavit. Tenant is obligated to pay and reimburse Plaintiff for legal fees, cost and expenses incurred by reason of any default of the Lease, with said payments being designated as "B" Additional Rent. See Paragraph R54 of the Lease, Exhibit to the Ciampa Affidavit. Late fees accrue under the Lease at the rate of 5% for each item of Rent and Additional Rent unpaid by the tenth (10th) day of the month. See Article R40(C) of the Lease. 4 7 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 The Tenant Action In March, 2020, Plaintiff commenced a non-payment proceeding against Tenant for Rent and Additional Rent due and owing for December 2018 through April 2019. Tenant thereafter commenced the Tenant action, by Order to Show Cause, seeking monetary damages, and preliminarily, consolidation of the nonpayment proceeding with the Tenant's action for damages. By order dated May 15, 2020, the Hon. Cheree A. Buggs ordered the consolidation of the Tenanes Action with the nonpayment proceeding, determining that an issue existed commenced.7 as to when the Tenanes obligation to pay Rent The issue in the Tenant Action revolves around Article R40(B) in the Lease that states ifthe Tenanes New York State Liquor Authority ("SLA") application for a liquor license was "delayed for an administrative investigation or hearing solely due to any alleged misconduct at the premises, which occurred prior to the execution of this lease, then no rent or additional rent shall be due until such investigation or hearing is completed". Tenant took the position that the delay in obtaining the SLA license was due to prior misconduct at the Premises. Plaintiff claimed Rent was due upon completion of a SLA hearing (held pursuant to Section 64(7) or 64-a(7) of the Alcoholic Beverage Control Law, concerning a proposed premises which is located within a 500 foot radius of at least three (3) other licensed and operating on-premises liquor establishments8) that took place on October 18, 2018. 2019.9 Tenant obtained its liquor license on January 11, 7A ofthe 2020 Order is annexed to the Ciampa Affidavitat Exhibit"E". copy May 15, 8A ofthe Notice of atthe SLA isannexed to the Ciampa Affidavitat Exhibit"F". copy Hearing 9 Annexed "G" to the Ciampa Affidavitat Exhibit is a recordfrom the SLA indicating the liquorlicense was issuedon January 11, 2019. 5 8 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 The Guaranty Concurrently with the execution of the Lease, Defendant Farah Razvi ("Defendant Guarantor") executed the Guaranty of Lease ("Guaranty"). A true and accurate copy of the Guaranty is annexed hereto at Exhibit "C". The duly acknowledged and executed Guaranty designated Defendant Guarantor as the guarantor of Tenanes obligations under the Lease. The Guaranty provides, inter alia, that Defendant Guarantor: unconditionally and absolutely guarantees to landlord, and Landlord's successors and assigns, the full payment of all rent and additional rent due pursuant to the Lease, the lien-free completion of all alterations and construction performed by Tenant and the sign-offs and completion of all such work as required by law, as well as the performance and observance of all the covenants, conditions, obligations and agreements therein provided to be performed and observed by Tenant, its successors and assigns, and under any and all amendments, modifications and other instruments relating thereto, whether now or hereafter existing, and the full and prompt payment of all damages, costs and expenses which shall at any time be recoverable by the Landlord from Tenant by virtue of the Lease and any amendments...". In the event of a default by Tenant under the terms of the Lease, the Plaintiff is not required to first demand that the Tenant perform, before itlooks to the Guarantor, as the "C" "Guarantor's liabilityhereunder is primary". See Exhibit to the Ciampa Affidavit. The Guaranty also contemplates Plaintiff seeking enforcement of the Guaranty pursuant to a CPLR Rule 3213 motion, "[t]his Guaranty is an instrument for the payment of money only and is enforceable by a motion for summary judgment under CPLR Section 3213 in addition to all other lawful means of enforcement", and for Plaintiff to recover reasonable attorney's fees, costs and expenses in the event an action or proceeding is commenced under the Guaranty. 6 9 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 Tenant's Default As noted above, the rent commencement date under the Lease was November 1, 2018 and Tenant immediately went into default under the Lease. Even utilizing February 1, 2019 as the rent commencement date of the Lease, which is the date AFTER Tenant obtained its liquor license, Tenant failed to make payments of Rent and Additional Rent to the Landlord, such that Tenant was indebted to Landlord in the sum of $447,761.33 by the time March 7, 2020 came upon us. LEGAL STANDARD ON A MOTION FOR SUMMARY JUDGMENT IN LIEU OF COMPLAINT CPLR §3213 provides: "[w]hen an action is based upon an instrument for the payment of money only or upon any judgment, the plaintiff may serve with the summons complaint." a notice of motion for summary judgment and the supporting papers in lieu of a CPLR §3213 (McKinney's 2019). The purpose of CPLR 3213 is "to provide quick relief on documentary claims so presumptively meritorious that a formal complaint is superfluous, and even the delay incident upon waiting for an answer and then moving for needless." summary judgment is Spring Prince LLC v. Eli Tahari, Ltd., 173 A.D.3d 544 (1st Dep't 2019). New York Courts, including the Court of Appeals, have consistently explicitly held only" that an unconditional guaranty is an instrument for the payment of "money within the meaning of CPLR 3213. Cooperative Centrale Raiffeisen-Boerenleenbank, A.A. v. Navarro, 36 N.E.3d 80, 84 (2015) citing European Am. Bank & Trust Co. v. Schirripa, 108 (1st A.D.2d 684, 485 N.Y.S.2d 763 Dep't 1985) ("An unconditional guaranty is an only" instrument for the payment of "money withing the meaning of CPLR 3213."); see 7 10 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 also Spring Prince, LLC, 173 A.D.3d at 544 ("Plaintiff's motion for summary judgment in lieu of complaint was properly granted against defendant based on the guaranty in the lease.") To meet its prima facia burden on its summary judgment motion, a Plaintiff must prove "the existence of the guaranty, the underlying debt, and the guarantor's failure to guaranty." (1st perform under the Davimos v. Halle, 35 A.D.3d 270, 272, 836 N.Y.S.2d 61 Dep't 2006); City of New York v. Clarose Cinema Corp., 256 A.D.2d 69, 71, 681 N.Y.S.2s (1st 251 Dep't 1998). Moreover, guaranties that contain language obligating the guarantor to payment without recourse to any defenses or counterclaims, i.e.,guaranties that are "absolute and unconditional," have been consistently upheld in New York courts. Cooperative Centrale Raiffeisen-Boerenleenbank, supra, at 36 N.E.3d 84, citing Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner & Smith Inc., 188 F.3d 31, 34 (2d Cir. 1999) ("Absolute and unconditional guaranties have in fact been found to preclude guarantors from asserting a broad range of defenses."). Unequivocal guaranties of contractual debts and obligations, such as in the Defendanis Guaranty herein, therefore, fall squarely within the purview of CPLR §3213, provided that Plaintiff meets its prima facie burden. THE GUARANTY LEGISLATION On May 26, 2020, the New York City Counsel enacted Int. No 2083-A, which amended the New York City Administrative Code Section 22-1005 (the "Guarantor Legislation"). The Guarantor Legislation provides as follows: 8 11 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 A provision in a commercial lease or other rental agreement involving real property located within the city that provides for one or more natural persons who are not the tenant under such agreement to become, upon the occurrence of a default or other event, wholly or partially personally liable for payment of rent, utility expenses or taxes owed by the tenant under such agreement, or fees and charges relating to routine building maintenance owed by the tenant under such agreement, shall not be enforceable against such natural persons ifthe conditions of paragraph 1 and 2 are satisfied: 1. The tenant satisfies the conditions of subparagraph (a), (b) or (c): (a) The tenant was required to cease serving patrons food or beverage for on-premises consumption or to cease operation under executive order number 202.3 issued by the governor on March 16, 2020; (b) The tenant was a non-essential retail establishment subject to in-person limitations under guidance issued by the New York state department of economic development pursuant to executive order number 202.6 issued by the governor on March 18, 2020; or (c) The tenant was required to close to members of the public under executive order number 202.7 issued by the governor on March 19, 2020. On September 28, 2020, the Guaranty Legislation was amended to extend the "2" time period contained in paragraph above from September 30, 2020 to March 31, 2021, and clarified that a guaranty subject to the Guaranty Legislation did not have to be document.10 contained solely within a lease, but rather could be a separate The Guaranty Legislation was amended a second time, extending the protections of the Guaranty 2021.¹¹ Legislation to June 30, 10 Local Law No. 98 of Council Int.No. 2083-A of 2020. See 2020, ¹¹ Local Law No. 50 of Council Int.2243-A of enacted April 2021. See 2021, 2021, 25, 9 12 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 ARGUMENT A. Plaintiff is Entitled to Summary Judgment in Lieu of Complaint on the Issue of Liability Under the Guaranty Plaintiff is entitled to summary judgment against Defendant Guarantor based upon the Tenanes default. Under the Guaranty, Defendant-Guarantor "unconditionally and absolutely "guarantee[d] to Landlord, and Landlord's successors and assigns, the full payment of all rent and additional rent due pursuant to the Lease", as well as "the fulland prompt payment of all damages, costs, and expenses which shall at any time be recoverable by the Landlord from Tenant by virtue of the Lease". Insofar as Tenant failed to pay rent under the Lease from the inception of the Lease, Defendant Guarantor's first liability arose as far back as February 1, 2019¹², long before Covid-19. That said, Defendant Guarantor's liability for Tenanes default was not the result of a default by Tenant during the Window Period insofar as the default or other event causing the Guarantor to become wholly or partially personally liable for the Rent and Additional Rent arose prior to March 7, 2020. It is uncontested that Guaranty Legislation bars a landlord from enforcing a guaranty against an individual under certain, narrowly prescribed, circumstances. The relevant sections of the Guaranty Legislation are as follows: A provision in a commercial lease or . .. that provides for one or more natural persons who are not the tenant under such agreement to become, upon the occurrence of a default or ¹² obligation rent began on November The Plaintiff believes the to commence paying 1,2018, however, given the outstanding factual issue tobe determined inthe Tenant Action, for purposes of summary judgment inlieu of complaint, Plaintiffseeks judgment for outstanding Rent and AdditionalRent for the period after the liquorlicense was issued,February 1,2019, todate, without prejudice to Plaintiff's claim to the Rent accruing priorto February 1, 2019 should the Court inthe Tenant Action determine that the rent commencement date was priorto February 1, 2019. 10 13 of 20 FILED: QUEENS COUNTY CLERK 03/10/2022 03:41 PM INDEX NO. 728594/2021 NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 03/10/2022 other event, wholly or partially personally liable for payment of rent . .. shall not be enforceable against such natural persons ifthe conditions of paragraphs 1 and 2 are satisfied: . .. 2. The default or other event causina such natural persons to become wholly or partially personally liable for such obligation occurred between March 7, 2020 and June 30, 2021, inclusive. (emphasis added) Itis important to note that this law only applies ifboth the conditions to paragraphs "1" "2" and are satisfied. There is no dispute that ifTenant were operating itwould have been required to cease serving patrons food or beverage for on-premises consumption, satisfying paragraph "1". Therefore, the issue is whether the default which caused the Defendant Guarantor to become wholly or partially personally liable for Tenanes obligations occurred during the Window Period. The default which triggered Tenanes Lease liability did not occur during the Window Period, itoccurred before that. In fact, as of March 7, 2020, Tenant was already in substantial arrears. As set forth in the annexed affidavit of Joseph G. the Defendant- Ciampa, Guarantor's liabilityunder the Lease arose in 2018 when Tenant started falling behind on obligations.13 its rent Even assuming, for purposes of this summary judgment motion, that liability for the payment of Rent and Additional Rent did not accrue until February 1, 2019, after issuance of the liquor license, by March 1, 2020, Tenant was already $89,532.33 in arrears in Base Rent and Additional Rent, and this number does not even take into the account the fact that Tenant lost the four (4) month rent concession it received at the inception of the Lease when itdefaulted in the payment of Rent and l3 "D" See Exhibits and "M".