The following papers numbered 1 to ___ Read on this motion, Noticed on and duly submitted as No. 001 on the Motion Calendar of ____ PAPERS NUMBERED Notice of Motion, Order to show Cause- Exhibits and Affidavits Annexed 1 Answering Affidavits and Exhibits Replying Affidavit and Exhibit Affidavits and Exhibits Pleadings — Exhibit Stipulation(s) — Referee’s Report — Minutes Filed Papers Memoranda of Law his Notice of Motion (Motion Seq. #001) submitted by Defendant seeking an order of dismissal is granted in part in accordance with the Court’s Decision and Order dated March 29, 2021. DECISION AND ORDER In light of the foregoing, it is hereby ORDERED that Defendant’s application to dismiss this action based upon documentary evidence pursuant to CPLR 3211(a)(1) is granted to the extent that Plaintiff’s Fourth Cause of Action for constructive eviction is dismissed in accordance with the Court’s findings above; and it is further ORDERED that Defendant’s application to dismiss this matter for failure to state a cause of action pursuant to CPLR 3211(a)(7) is denied in its entirety in accordance with the Court’s findings above; and it is further ORDERED that the parties shall appear virtually for a preliminary conference in this matter on May 13, 2021 at 11:00 a.m. This shall constitute the decision and order of the Court. The following e-filed documents, listed on NYSCEF as document numbers 3, 4, 5, 9, 10, 11, 12, 13, 14, (Motion Seq. #001) were read on this motion seeking an order of dismissal. 1877 Webster Ave. Inc., Plaintiff v. Tremont Center, LLC, Defendant; 29239/2020 Upon the foregoing cited papers, the Decision and Order of this Motion is as follows: Defendant moves, pursuant to CPLR 3211(a)(1), for an order of dismissal based upon documentary evidence. Defendant also moves for an order of dismissal based upon Plaintiff’s failure to state a cause of action pursuant to CPLR 3211(a)(7). Plaintiff opposes Defendant’s applications. Defendant’s application for an order of dismissal based upon documented evidence is granted in part to the extent that Plaintiff’s Fourth Cause of Action is dismissed. Defendant’s application for an order of dismissal for failure to state a cause of action is denied. The Court determines Defendant’s applications as follows. Background The parties entered into a written commercial lease on or about November 15, 2019, wherein Plaintiff agreed to lease from Defendant retail space known as 396 East Tremont Avenue, Bronx, New York 10467 a/k/a Corner Retail Entrance and Basement, in the building known as and located at 1877 Webster Avenue, Bronx New York 10467, for a period of ten (10) years. The parties specified in their lease that “[t]he Premises shall be used and occupied solely as a first class NIGHT CLUB and for no other purpose.” Plaintiff commenced this action seeking a declaration that the purpose of the lease has been frustrated by the COVID-19 pandemic (“Covid”) and that it is released from its obligations because the lease was voided and/or terminated as of March 17, 2020. Plaintiff also commenced this action seeking rescission of the lease based upon impossibility of performance; failure of consideration; constructive eviction; and a declaration that the personal guaranty is void. Documentary Evidence Defendant argues that Plaintiff is not entitled to declaratory relief nor rescission based upon the terms of their lease. Defendant asserts that Plaintiff’s frustration of purpose and impossibility of performance claims must fail because there is no force majeure provision in their lease.1 Defendant suggests that Plaintiff’s obligations under the lease cannot be excused under theories of frustration or impossibility because of an economic downturn caused by Covid which could have been foreseen or guarded against in their lease. Defendant insists that the parties should be bound to the allocation of the risks they agreed to in their lease and notes that Plaintiff agreed to indemnify it “from any liability or expense arising from the use or occupancy of the premises…” Defendant suggests that Plaintiff’s claims of frustration and impossibility must also fail because the Covid pandemic was foreseeable. Defendant insists that they could have allocated the risk of a global pandemic in their lease. Defendant also argues that their lease only entitles Plaintiff to a rent abatement even if it is determined that Plaintiff’s performance is excused by the Covid pandemic and the Governor’s executive orders. Defendant insists that Plaintiff is attempting to get out of his obligations under the lease because he has buyer’s remorse. Defendant asserts that the closure of the Plaintiff’s business is temporary and only for a few months of the parties’ 10-year lease. Defendant notes that Plaintiff admits that the business can now open. Defendant asserts that the lease specifically allocates the risks of closure to each party and Plaintiff acknowledged that the closing of the business was not due to any failure of the landlord. Plaintiff argues that the global pandemic and Governor’s executive orders were unforeseeable. Plaintiff suggests that material issues of fact regarding the foreseeability of the impact of Covid warrant denial of Defendant’s motion to dismiss this action. Plaintiff asserts that Defendant’s suggestion that its various causes of action are barred because the lease does not contain a force majeure clause which could have encompassed an unforeseen global health crisis goes against public policy. Plaintiff insists that its claims for frustration and impossibility are not waived because their lease does not contain a force majeure clause. Plaintiff suggests that Defendant’s self-serving interpretation of their lease is not documentary evidence that provides a complete defense to its various claims for declaratory relief. Plaintiff notes that pre-answer dismissal motions are discouraged particularly when the parties have not engaged in discovery. It is well established that “[o]n a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction” (Leon v. Martinez, 84 NY2d 83 [1994] citing Morone v. Morone, 50 NY2d 481 [1980]; Rovello v. Orofino Realty Co., Inc., 40 NY2d 633 [1976]). The court must accept facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory (Leon, 84 NY2d 83). Moreover, an order of dismissal pursuant to CPLR 3211(a)(1) may be granted “only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law” (Leon, 84 NY2d at 88). Generally, a document relied upon by the moving party seeking dismissal pursuant to CPLR 3211(a)(1) will qualify as documentary evidence if it is unambiguous and of undisputed authenticity (Anderson v. Armentano, 139 AD3d 769 [2d Dept 2016]). “[J]udicial records, as well as documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are ‘essentially undeniable,’ would qualify as ‘documentary evidence’ in the proper case” (Anderson, 139 AD3d 769). Initially, the Court finds in the instant matter that the fully executed written lease dated November 15, 2019 relied upon by the Defendant qualifies as documentary evidence as it is a document reflecting the parties’ undeniable out-of-court transaction for the lease of the subject premises. The lease is unambiguous and of undisputed authenticity. Nevertheless, Defendant’s reliance on the fact that the lease does not contain a force majeure clause does not conclusively establish a defense to all of the Plaintiff’s claims as a matter of law. Contrary to Defendant’s suggestion, the parties’ failure to include a force majeure clause in their lease does not preclude Plaintiff from alleging extra-contractual doctrines such as frustration of purpose and impossibility of performance (see Stephen P. Younger, Muhammad Faridi, Timothy Smith, COVID-19′S Impact on Commercial Transactions and Disputes, 92-APR NYSTBJ 22 [April 2020]; Melissa E. Scott, Esq., Fox Rothschild LLP, Pandemic poses peril for both sides in IP Licenses, 2020 PRINDBRF 0142, 2020 WL 3022969 [June 5, 2020]). In addition, caselaw has demonstrated that a party’s performance may be excused even if the contract contained no express provision for the event that made performance impossible (see for example City of New York v. Local 333, Mar. Div., Intl. Longshoremen’s Assn., 79 AD2d 410 [1st Dept 1981]). The First Department in Local 333, Mar. Div., Intl. Longshoremen’s Assn. noted that “[r]ather than mechanically apply any fixed rule or law, where the parties themselves have not allocated responsibility, justice is better served by appraising all of the circumstances, the part the various parties played, and thereon determining liability” (79 AD2d 410, 412-413). Accordingly, the Court must review each of the Plaintiff’s causes of action to determine whether the lease relied upon by the Defendant as documentary evidence conclusively establishes a defense to the asserted claims as a matter of law (Leon, 84 NY2d 83, 88). Plaintiff’s First Cause of Action seeks a declaration that the purpose of the lease has been frustrated due to the Covid pandemic and the Governor’s executive orders shutting down night clubs. The doctrine of frustration of purpose offers a defense against enforcement of a contract when the reasons for performing the contract cease to exist due to an unforeseeable event which destroys the reasons for performing the contract (see for example Warner v. Kaplan, 71 AD3d 1 [1st Dept 2009]). The First Department noted in Warner that “the doctrine of frustration of purpose is not available where the event which prevented performance was foreseeable and provision could have been made for its occurrence” (Warner, 71 AD3d 1). The parties’ conflicting arguments regarding the foreseeability of the impact of the Covid pandemic create genuine issues of fact on this record. It is well established that dismissal based upon documentary evidence is only warranted if the evidence submitted resolves all factual issues and disposes of plaintiff’s claims as a matter of law (see for example Sebrow v. Sebrow, 69 Misc3d 1064 [Sup Ct, Bronx County 2020] citing Array BioPharma, Inc. v. Astra Zeneca AB, 184 AD3d 463 [1st Dept 2020]). The lease relied upon by the Defendant does not resolve the parties’ factual dispute regarding the foreseeability of the Covid pandemic at this early stage of the litigation to warrant dismissal Plaintiff’s frustration of purpose cause of action as a matter of law. Plaintiff’s Second Cause of Action alleges that the Covid pandemic and the Governor’s executive orders have made it impossible to perform its obligations. “Impossibility excuses a party’s performance only when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible. Moreover, the impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract” (Warner, 71 AD3d 1). The parties’ conflicting arguments regarding their abilities to anticipate or guard against the Covid pandemic that resulted in the Governor’s executive orders shutting down Plaintiff’s business also create a genuine issue of fact. The Court must find that the lease relied upon by the Defendant does not resolve this factual issue to warrant dismissal Plaintiff’s impossibility of performance cause of action as a matter of law. Plaintiff’s Third Cause of Action seeks rescission of the lease due to a failure of consideration. Caselaw has determined that a “[f]ailure of consideration exists wherever one who has promised to give some performance fails, without its own fault, to receive, in some material respect, the agreed quid pro quo for that performance, this failure of consideration giving the disappointed party the right to rescind the contract” (see for example Fugelsang v. Fugelsang, 131 AD2d 810 [2d Dept 1987]). The parties on this record present conflicting arguments as to whether there has been a complete failure of consideration. Plaintiff insists that the impact of Covid has completely deprived it of the beneficial use and occupancy of the subject premises it bargained for. Defendant suggests that there has not been a complete failure of Plaintiff’s business because the closure of Plaintiff’s business is temporary and only for a few months of the parties’ 10-year lease. This genuine issue of fact at this early stage of the litigation, particularly since government’s restrictions are slowly being lifted, must be resolved before a determination can be made that there has been a complete failure of consideration to warrant dismissal of this cause of action as a matter of law. Plaintiff’s Fourth Cause of Action alleges that it has been constructively evicted from the subject premises because Defendant failed to take reasonable and/or necessary precautions to protect against the Covid pandemic so that it could safely occupy the building. “To establish constructive eviction, a tenant need not prove physical expulsion, but must prove wrongful acts by the landlord that ‘substantially and materially deprive the tenant of the beneficial use and enjoyment of the premises’” (see for example Pacific Coast Silks, LLC v. 247 Realty, LLC, 76 AD3d 167 [1st Dept 2010]). This Court’s review of the parties’ lease finds that the Plaintiff fails to make a prima facie showing of a wrongful act by the Defendant that substantially and materially deprived Plaintiff of the beneficial use and enjoyment of the subject premises. The Court notes that the parties agreed in Article 11, Paragraph 11.01 of their lease that “[d]uring the term of this Lease, Landlord shall not be responsible to make any repairs to the Premises for any reason.” The allocation of the risk to take reasonable and/or necessary precautions to protect against the Covid pandemic so that Plaintiff could safely occupy the building clearly belongs to the Plaintiff in accordance with the parties’ lease. Accordingly, the Court finds that the parties’ lease does resolve all factual issues regarding Defendant’s alleged wrongful act and disposes of Plaintiff’s claim for constructive eviction as a matter of law (Array BioPharma, Inc., 184 AD3d 463). Plaintiff’s Fourth Cause of Action seeking a finding of constructive eviction is dismissed based upon the documentary evidence submitted on this record pursuant to CPLR 3211(a)(1). Plaintiff’s Fifth Cause of Action seeks to void a personal guarantee made by Michael Franklin on behalf of the Plaintiff. Generally, “[a] guaranty is a promise to fulfill the obligations of another party, and is subject to the ordinary principles of contract construction” (see for example Seabring, LLC v. Elegance Restaurant Furniture Corp., 188 AD3d 744 [2d Dept 2020]). This Court’s review of the “Good Guy Guarantee,” which is a separate contract, finds that Mr. Franklin did not waive any of the affirmative defenses alleged by the Plaintiff (see for example Chip Fifth Avenue LLC v. Quality King Distributors, Inc.,158 AD3d 418 [1st Dept 2018]). Mr. Franklin did not execute an unconditional guarantee and is therefore entitled to rely on the same extra-contractual doctrines asserted by the Plaintiff. The same questions of fact regarding foreseeability and consideration noted above prevent this Court from finding that the parties’ lease conclusively establishes a defense to Plaintiff’s efforts to void the guarantee executed by Mr. Franklin (Array BioPharma, Inc., 184 AD3d 463). Failure to State a Cause of Action Plaintiff argues that it adequately pleads various causes of action due to the Covid pandemic to defeat Defendant’s applications to dismiss. Plaintiff asserts that it was forced to close down because of the impact of Covid and the Governor’s executive orders that declared a statewide emergency. Plaintiff notes that it provided Defendant with notice that it was terminating their lease because the business was force to close on March 17, 2020 due to the Covid pandemic. Plaintiff asserts that it is entitled to terminate the lease because the impact of Covid and the Governor’s executive orders frustrated its ability to operate the night club which was the essential purpose of the lease. Plaintiff insists that the parties did not allocate the risk of a global pandemic in their lease because they never assumed that the pandemic would occur during the term of their lease. Plaintiff notes that it did not cause the global pandemic. Accepting the facts as alleged and providing Plaintiff the benefit of every possible favorable inference, the Court finds that Plaintiff sufficiently pleads cognizable causes of action for a declaration of frustration of purpose; impossibility of performance; rescission based on failure of consideration; and a declaration to void the guaranty. First, Plaintiff sufficiently alleges that the Covid pandemic and the Governor’s executive orders prevented it from exclusively operating the subject premises as a night club as required by the lease. Plaintiff presents a legally cognizable theory that Covid and the executive orders completely frustrated the purpose of the parties’ lease as both parties understood, and that without the ability to operate the nightclub, the lease and the guarantee make “little sense” (Warner, 71 AD3d 1). Second, Plaintiff sufficiently alleges a cognizable theory that Covid and the Governor’s executive orders shutting down nonessential businesses have rendered its performance objectively impossible because it is unable to conduct business as originally contemplated by the parties’ lease. Plaintiff sufficiently alleges that the exclusive purpose of the lease was to operate as a first class night club. Plaintiff’s allegations establish a prima facie showing of impossibility of performance as a defense. Third, Plaintiff sufficiently alleges a legally cognizable theory that the Covid pandemic and Governor’s executive orders shutting down nonessential businesses caused its consideration for the lease to become worthless. Plaintiff sufficiently alleges that he has been completely deprived of the beneficial use of the premises because the lease only allows him to operate as a night club (Fugelsang, 131 AD2d 810). Finally, Plaintiff’s sufficiently alleges a legally cognizable theory that the personal guarantee made by Mr. Franklin should be declared void based upon the frustration of purpose and impossibility of performance as discussed hereinabove. Mr. Franklin did not sign an unconditional guarantee nor waived any of the extra-contractual doctrines alleged by the Plaintiff. In light of the foregoing, it is hereby ORDERED that Defendant’s application to dismiss this action based upon documentary evidence pursuant to CPLR 3211(a)(1) is granted to the extent that Plaintiff’s Fourth Cause of Action for constructive eviction is dismissed in accordance with the Court’s findings above; and it is further ORDERED that Defendant’s application to dismiss this matter for failure to state a cause of action pursuant to CPLR 3211(a)(7) is denied in its entirety in accordance with the Court’s findings above; and it is further ORDERED that the parties shall appear virtually for a preliminary conference in this matter on May 13, 2021 at 11:00 a.m. This shall constitute the decision and order of the Court. Dated: March 29, 2021
