J.N.A. Realty Corp. v. Cross Bay Chelsea, Inc.

366 N.E. 2d 1313 (1977)


P originally leased premises to Victor Palermo and Sylvester Vascellaro for a 10-year term commencing on January 1, 1964. The lease granted the tenants an option to renew for a 10-year term provided 'that Tenant shall notify the landlord in writing by registered or certified mail six (6) months prior to the last day of the term of the lease that tenant desires such renewal.' The tenants opened a restaurant on the premises. In February 1964 they formed the Foro Romano Corp. (Foro) and assigned the lease to the corporation. In March 1968 Foro entered into a contract with D to sell the restaurant and assign the lease. As a condition of the sale Foro was required to obtain a modification of the option to renew so that D would have the right to renew the lease for an additional term of 24 years. P modified the option and consented to the assignment. The modification states: 'the Tenant shall have a right to renew this lease for a further period of Twenty-Four (24) years, instead of Ten (10) years, from the expiration of the original term of said lease * * * All other provisions of Paragraph #58 in said lease, * * * shall remain in full force and effect, except as hereinabove modified.' Foro then assigned the lease and sold its interest in the restaurant to D for $155,000. The bill of sale states that 'the value of the fixtures and chattels included in this sale is the sum of $40,000 and that the remainder of the purchase price is the value of the leasehold and possession of the restaurant premises.' P regularly informed D in writing of its obligations under the lease, such as the need to pay taxes and insurance by certain dates. On June 13, 1973, P sent a letter to D informing them that certain taxes were due to be paid. The option to renew was due to expire in approximately two weeks, but P made no mention of this. It was not until November 12, 1973, that P took any action to inform D that the option had lapsed. P ordered D to vacate. (There was also evidence that P used this same tactic on another tenant to get them to vacate). By letter dated November 16, 1973 D, through its attorney, sent written notice of intention to renew the option which, of course, P refused to honor. P sued to recover possession of the premises. At trial, it was determined that D, in fact, knew of the time notice for renewal. D testified that they had spent an additional $15,000 on improvements, at least part of which had been expended after the option had expired. The lower court held that D was entitled to equitable relief. The Appellate Court affirmed, The Appellate Division reversed and granted the petition. D appealed.