Havana Central NY2 LLC v. Lunney's Pub, Inc. , 852 N.Y.2d 32 ( 2007 )

OPINION OF THE COURT

Andrias, J.

Because there are triable issues of fact as to whether the corporate defendant, Lunney’s Pub, Inc., a holdover tenant, intentionally induced its landlord to breach a lease provision to timely deliver the leasehold premises to plaintiff, Havana Central NY2 LLC, a new, incoming corporate tenant, Lunney’s motion for summary judgment dismissing Havana Central’s first cause of action for tortious interference with contract was properly denied.

Lunney’s was admittedly aware of Havana Central’s lease some nine months in advance, but remained on the premises nonetheless in an attempt to secure a renewal lease from the landlord and/or to avoid closing its business and losing clientele while it sought to secure a new, nearby business location. Lunney’s held over for approximately six months before it was forcibly evicted following summary proceedings. Havana Central alleges damages attributable to the holdover delays and the inability to start up its business in a timely manner.

Lunney’s claims that it is not the law in New York that a prior tenant commits a tortious wrong and is liable for damages simply by holding over, relying upon an unreported May 17, 2005 order in Kronish Lieb Weiner & Hellman LLP v Tahari Ltd. (2005 NY Slip Op 30171[U]), which dismissed Kronish’s cause of action for tortious interference based upon Tabari’s failure to vacate leased premises on May 31, 2003 when its sublease expired. Kronish, an existing tenant in the building, had exercised an option to lease the space but was unable to take possession on June 1, 2003 because Tahari held over. However, on appeal, in a decision and order decided after Lunney’s filed its briefs, this Court reinstated Kronish’s cause of action for tortious interference against Tahari, stating, in pertinent part:

“The causation element of tortious interference was sufficiently pleaded. A cognizable claim for tortious interference does not require an allegation that the defendant’s conduct was the sole proximate cause of the alleged harm. The motion court’s finding that the owner’s commencement of a holdover proceeding precluded a finding of causation was incorrect where the trespass had already been committed and the proceeding was merely an effort at mitigating or remedying the owner’s breach of its agreement to lease the space to plaintiff. Since the cause of action is for interference with an existing contract, rather than a prospective economic relationship, the defense of economic justification is inapplicable (see Bank of N.Y. v Berisford Intl., 190 AD2d 622 [1993]) and it is not necessary to allege that defendant used improper means or that its conduct was for the sole purpose of harming plaintiff (see Carvel Corp. v Noonan, 3 NY3d 182, 189-190 [2004]; Hoesten v Best, 34 AD3d 143, 159 [2006]; Krinos Foods, Inc. v Vintage Food Corp., 30 AD3d 332, 333 [2006])” (Kronish Lieb Weiner & Hellman LLP v Tahari, Ltd., 35 AD3d 317, 318-319 [2006]).

Thus, this Court has clearly recognized a claim for tortious interference brought against a holdover tenant by a new tenant who is prevented from taking possession by the wrongful holdover. Lunney’s also contends that both paragraph 24 of the new lease, which relieved the landlord of any liability to Havana Central in the event it failed to give possession on the commencement date of the lease, and paragraph 91 of the lease, which gave Havana Central the option to terminate the lease if possession was not given within 30 days of the commencement date, reflect a conditional rather than an absolute promise to deliver the premises on the commencement date. Thus, Lunney’s argues, its holdover did not “render performance impossible,” the landlord’s inability to deliver possession at that time was not a breach of the lease, and, since there was no breach by the landlord, there could be no inducement to breach by Lunney’s.

However, here, as in Kronish Lieb, Lunney’s became a trespasser once it held over and did not surrender the premises. Its right to continue in possession had expired. Likewise there is no doubt that the landlord’s failure to deliver possession of the premises to Havana Central at the commencement of its lease term constituted a material breach of their lease, albeit the exculpatory language of paragraph 24, if asserted as a defense by the landlord, would deprive Havana Central of a remedy for such breach. Neither this circumstance, nor Havana Central’s option to terminate the lease after 30 days, made the lease conditional or any less enforceable. Thus, it is a lease that could be tortiously interfered with. Furthermore, although Havana Central, as a consequence of the holdover, subsequently entered into an amended lease extending the initial term to compensate for the time lost, this did not effect a waiver, as Lunney’s claims, of a known right by Havana Central (vis-a-vis its claim for interference with contract) as a matter of law.

The second cause of action, alleging tortious interference with prospective economic advantage, was properly-dismissed absent evidence that Lunney’s had interfered with Havana Central’s new lease by wrongful means or for the sole purpose of harming it (see Snyder v Sony Music Entertainment, 252 AD2d 294, 299-300 [1999]). Concerning the purpose to harm, ample, unrefuted evidence in the record shows that Lunney’s held over for multiple reasons, including to reap holiday profits, potentially obtain a renewal lease at the premises, and avoid shutting its business down and losing its clientele before it could relocate nearby. Concerning use of wrongful means, Havana Central alleges that, based upon its anticipated taking possession of the premises on August 1, the commencement day of its lease, it originally intended to be operating its business by October 1. As a result, it intended to book holiday parties in November and December, the busiest time of the year for restaurants and bars in the Times Square area. With that knowledge, it is alleged, Lunney’s, by holding over, used unlawful or wrongful means in order to interfere with Havana Central’s prospective economic advantage, by preventing it from booking those holiday parties. However, in order to plead such a cause of action, the “wrongful means” prong of such claim requires a showing that the challenged wrongful conduct (Lunney’s holding over or trespass) was not directed at Havana Central, but at parties with which Havana Central had or sought to have a business relationship, i.e., the unnamed prospective holiday partygivers (see Carvel Corp. v Noonan, 3 NY3d 182, 192 [2004]). Here, as found by the motion court, Havana Central “has not set forth evidence of any specific contracts [or even prospective contracts] that it would have entered into, but for the interference of [Lunney’s]” (2005 NY Slip Op 30164[U], *7). As explained by the Court of Appeals, in answering a question certified to it by the Second Circuit in Carvel Corp., the wrongful means (in that case economic pressure) “that must be shown is not, as the franchisees [plaintiffs in federal court] assume, pressure on the franchisees, but on the franchisees’ customers” (3 NY3d at 192).

The third cause of action, alleging prima facie tort, was properly dismissed absent evidence that Lunney’s holdover was without excuse or justification, i.e., “disinterested malevolence” (see Curiano v Suozzi, 63 NY2d 113, 117 [1984]).

Havana Central’s cross motion to amend the complaint to add HMU Lunney Restaurant Corp. as a defendant should have been granted on renewal, where, inter alia, deposition testimony from Lunney’s principals indicated that its assets had been transferred to HMU Lunney, an entity incorporated just two months prior to commencement of the instant action. Documents filed with the Secretary of State indicated Lunney’s Pub, Inc. was now “inactive,” and its counsel in this action was designated to accept service of process on behalf of HMU Lunney. Such evidence, together with Havana Central’s showing of a viable cause of action for tortious interference with contract, warrants HMU Lunney’s joinder, as it could be inequitably affected by the judgment (see CPLR 1001 [a]; Thurston v Paul Bunyan Hardware Stores, 80 AD2d 971 [1981]). Lunney’s offers no credible argument of prejudice by reason of such an amendment (see Loomis v Civetta Corinno Constr. Corp., 54 NY2d 18, 23 [1981]).

Accordingly, the order of the Supreme Court, New York County (Louis B. York, J.), entered July 13, 2006, which, to the extent appealed from as limited by the briefs, granted the corporate defendant’s motion to renew and reargue a prior order but adhered thereto, and, to the extent appealable, denied plaintiffs cross motion to renew, should be modified, on the law, only to the extent of granting that branch of the cross motion seeking renewal of the motion to amend the complaint to add HMU Lunney Restaurant Corp. as an additional party defendant, and otherwise affirmed, without costs. The cross appeals from the order of the same court and Justice, entered October 25, 2005, which, to the extent appealed from as limited by the briefs, granted so much of defendants’ earlier motion for summary judgment as dismissed the second and third causes of action against the corporate defendant, denied such relief as to the first cause of action, and denied without prejudice plaintiffs cross motion to amend and supplement the complaint, should be dismissed, without costs, as superseded by the cross appeals from the later order.