The following is an identification of the players in this controversy:

(1) Split Rock Developers-Petitioner and who rented the property in controversy located at 103 Northern Boulevard, Great Neck, New York, from the Estate of Frank Cornell and subleased it to Respondent . The principals of Split Rock are Madeline Mason and Linda Fisher.

(2) Estate of Frank Cornell-owner of 103 Northern Boulevard, Great Neck, New York.

(3) Zartab, Inc.- Respondent and subtenant who leased the property located at 103 Northern Boulevard, Great Neck, New York from Split Rock Developers. Respondent's witness was Shahram Zarighian who is its President and owner.

(4) Petitioner's witness- Roger Fisher who works for A.H. Scott & Company, Inc., which manages the property located at 103 Northern Boulevard, Great Neck, New York for Split Rock.

(5) Law firm of Mason & April- who were retained by Roger Fisher of A.H. Scott & Company, Inc. to send default notices to the Respondent.

(6) Steven Baron-identified by both sides but whose status was not made clear at trial. He may be married to Madeline Mason who is on one of the principals of Split Rock. The court assumes that Mr. Baron is associated with A.H. Scott & Company, Inc. because respondent called him to pick up the rent, as explained herein.

Petitioner commenced this holdover proceeding against respondent Zartab to recover possession of the premises located at 103 Northern Boulevard, Great Neck, New York.

The petition describes the premises as a triangular parking lot for which respondent is liable to pay rent of $1,450.00 per month. [*2]

Rent arrears are alleged in the Petition to be $4,965.00 as of July 25, 2003. The petition states that a certified letter was sent on July 11, 2003, "demanding rent and terminating tenancy pursuant to the terms of the lease".

The amended verified answer dated September 16, 2003, denies the allegations of the petition concerning money owed. Respondent asserts as an affirmative defense that respondent lawfully tendered the rent but that the petitioner unreasonably rejected the tender.

The parties entered into two stipulations during trial:

(1) Respondent withdrew its claim that the ten day notice of cancellation was defective. In return, petitioner stipulated that respondent did mail a letter on July 16, 2003 to 7907 De Fender Avenue, Rowlett, Texas, via certified mail, however, without conceding the issue of what was mailed.

(2) The parties agreed that rent was not tendered during the period of July 1 through July 15, 2003.

Roger Fisher testified that he works for A.H. Scott & Company, Inc. which manages the property located at 103 Northern Boulevard, Great Neck, New York. This property is a triangular shaped property bordering Northern Boulevard and is paved and has no buildings on it. This property was used by respondent in conjunction with the bordering piece of property located at 105 Northern Blvd., which respondent purchased from petitioner.

Petitioner sold the property located at 105 Northern Boulevard to respondent which respondent used to sell used vehicles. At the same time, petitioner and respondent entered into the lease for the rental of 103 Northern Boulevard which respondent used in conjunction with the sale of used cars.

Petitioner had entered into a fifty year lease for 103 Northern Boulevard with the Estate of Frank Cornell (which owns the property) from October 1, 1985 through September 30, 2035.

Petitioner subleased 103 Northern Boulevard to respondent for 35 years which commenced upon closing of title for 105 Northern Boulevard (paragraph 15 of the lease).

Mr. Fisher testified that only part of 103 Northern Boulevard was rented to respondent at the rate of $1,425.00 monthly; petitioner kept part of the property to rent to others. Petitioner cited the following paragraphs of the sublease which bear directly upon the issues to be determined:

15. TERM AND RENT:

The term of this Sublease shall commence upon the Closing of title to the premises adjacent to the demised premises known as 105 Northern Blvd., Great Neck, New York (the "Adjacent Premises") pursuant to a Contract of Sale of even date herewith between Overtenant, as Seller and Undertenant, as Purchaser, and this Sublease shall not be effective until such date, and shall terminate on August 31, 2035. In the event Closing of title to the Adjacent Premises does not take place for any reason, this Sublease will be deemed null and void and of no force and effect.

Undertenant shall pay rent for the demised premises during said term in an amount equal to the entire "basic net rent" payable by Overtenant to Landlord pursuant to the Overlease, plus all other items of additional rent set forth in the Overlease, including without limitation CPI increases, but excluding real estate taxes (hereinafter collectively referred to as the "Gross Annual Rent"). Undertenant shall pay the Gross Annual Rent under the Sublease directly to the Landlord and shall [*3]provide Overtenant with copies of all rent and additional rent checks and correspondence forwarded to the Landlord by Undertenant and to the Undertenant by the Landlord. Notwithstanding anything contained herein to the contrary, in the event Overtenant receives a default notice or communication from the Landlord stating that the rent or additional rent was not timely paid by the Undertenant, Overtenant shall have the right to make that payment and to thereafter require the Undertenant to pay the rent and additional rent to Overtenant, who shall thereupon promptly remit same to the Landlord.

22. TERMINATION:

In addition to the event of default set forth in the Overlease, this Sublease shall be terminated upon the happening of any of the following events:

(c) If Undertenant shall fail to comply with the terms and conditions of this Sublease relating to the payment of rent or additional rent and such failure remains uncured after ten (10) days' written notice to the Undertenant,

24. ATTORNEY'S FEES:

In the event Overtenant shall issue any notices of default to Undertenant and/or commence any legal proceedings against Undertenant on account of an alleged default or breach by Undertenant of the terms of this Sublease, Undertenant shall be obliged to pay to Overtenant the attorney's fees and costs incurred by Overtenant in issuing such default notices and/or instituting and maintaining such legal proceedings. Notwithstanding the foregoing, in the event Undertenant prevails in such legal proceedings, Overtenant shall be obligated to pay the Undertenant the attorney's fees and costs incurred by Undertenant in such legal proceedings.

25. LATE CHARGES:

In the event that any additional rent payments hereunder is not received by Overtenant on or before the tenth (10th) day after such payment is due under the Sublease, Undertenant agrees to pay Overtenant a late payment fee equal to five (5%) percent of the payment so overdue, but in no event shall such late payment fee be less than FIFTY ($50.00) DOLLARS. Such late payment fee shall be paid together with the said overdue payment of additional rent. Such late payment is not a penalty but is a mutually agreed upon administrative charge to defray the expense incurred by Overtenant on account of such later payment. Acceptance of such late payment fee shall not be deemed a waiver of Overtenant's right to declare a default under the Sublease for non-payment.

Mr. Fisher stated that Respondent failed to pay July 2003 rent of $1,450.00 which triggered the July 11, 2003 default notice being sent to respondent by the Law Firm of Mason & April; this default notice states:

Dear Mr. Zarnighian:

Please be advised that my firm represents Split Rock Developers, LLC, Overtenant of the [*4]above-referenced premises pursuant to Sublease dated August 30, 2000 between Split Rock Developers, LLC, as Overtenant, and Zartab, Inc., as Tenant (the "Sublease").

My client has been advised by the Landlord, the Estate of Frank Cornell, that you have failed to make the July, 2003 rent payment due July 1, 2003, in the amount of $1,450.00. In addition, I have been advised that you were more than ten (10) days late on the May, 2003 rent, and therefore owe late charges for both months in the aggregate amount of $145.00.

Therefore, PLEASE TAKE NOTICE that in the event you fail to remit to my client (I) a certified check in the sum of $1,595.00 payable to the order of Split Rock Developers, LLC for the July, 2003 rent and aforementioned late charges within ten (10) days from the date of this notice, you will be in default under the Sublease. In such event, my client will have no alternative but to take appropriate legal action to have your tenancy terminated for nonpayment of rent and to pursue any and all additional remedies available to them at law or equity. I hope this will not be necessary.

Please be guided accordingly.

Lori S. April

Pursuant to the July 11, 2003 notice, respondent was required to sent the rent directly to petitioner and not to the Estate of Cornell. The basis of this demand is paragraph 15 of the lease, which allows petitioner to demand that the monthly rent be paid to it instead of the Estate of Cornell by respondent under certain circumstances.

Petitioner never received rent for July, August and September of 2003 in the monthly sum of $1,450.00; late charges are also due pursuant to paragraph 25 of the lease. Legal fees based upon Article 24 are further sought by petitioner.

Split Rock is run by Madeline Mason and Linda Fisher, who is the wife of the witness, Roger Fisher. Steven Baron may be married to Madeline Mason. Steve Baron is not connected to Split Rock.

The witness, Roger Fisher gave the default information to the law firm of Mason & April who then sent out the default notice to respondent Zabtab, Inc.

The August 14, 2003 default notice was authorized by Mr. Fisher. The notice, which was signed by Lori S. April, states:

Dear Mr. Zarnighian:

As you are aware, my firm represents Split Rock Developers, LLC, Overtenant of the above-referenced premises pursuant to a Sublease dated August 30, 2000 between Split Rock Developers, LLC, as Overtenant, and Zartab, Inc., as Tenant (the "Sublease').

My client has been advised by the Landlord, the Estate of Frank Cornell, that you have failed to make the August, 2003 rent payment due August 1, 2003, in the amount of $1,450.00, plus late charges in the amount of $72.50. [*5]

Therefore, PLEASE TAKE NOTICE that in the event you fail to remit to my office (I) a certified check in the sum of $1,522.50 payable to the order of Mason & April, LLC, as attorney, for the August, 2003 rent and aforementioned late charges within ten (10) days from the date of this notice, you will be in default under the Sublease.

Please be guided accordingly.

Mr. Fisher never spoke with the tenant about the rent problem.

The July 11, 2003, default notice was received on or about July 14, 2003. The witness sent the July rent to the Estate of Cornell in Texas on July 16, 2003. The letter was never picked up in Texas and was returned. The witness attempted to retrieve the rent letter from the post office but the letter was destroyed or lost.

Mr. Zarnighian testified that he contacted Steve Baron and made an appointment for him to pick up the rent in the beginning of August of 2003. Mr. Baron never showed up for this appointment. Mr. Baron was contacted again to pick up the August rent but Mr. Baron never came to pick up the rent.

On cross examination, respondent admitted that the business is not operating now. He turned in his business license to sell used cars to the Department of Motor Vehicles in June of 2003. He stated he had no copies of the rent check sent to the Estate of Cornell.

In spite of the July 11, 2003 notice, the witness says he sent the rent payment to the Estate of Cornell because he didn't trust Split Rock. Steven Baron said he was going to pick up the rent check but never did.

Petitioner's attorney attempted to inquire if the witness was indicted by the Federal Grand Jury for money laundering. This court sustained the objection of respondent's attorney for the reasons set forth herein.

Paragraph 15 of the lease is confusing and contradictory concerning the obligation of requiring Undertenant Zartab to pay monthly rent to the Overtenant Split Rock instead of payment to the Estate of Frank Cornell. One interpretation would first require payment by the Overtenant to the Landlord who could then require the Undertenant to pay the rent to the Overtenant.

The second interpretation would allow the Overtenant (upon the Undertenant's default of payment to the Landlord-Estate of Cornell) the option to pay the rent to the Estate of Cornell before or after receiving the rent from the Undertenant. In other words the Overtenant could demand payment from the Undertenant upon a default and there is no obligation by the Overtenant to first pay the monthly rent to the Estate of Cornell before demanding payment to it upon the Undertenant's default. Support for this interpretation is in the last page of paragraph 15 which states "...and to thereafter require the Undertenant to pay the rent and additional rent to Overtenant, who shall thereupon promptly remit same to Landlord". [*6]

The first interpretation is a condition precedent situation which requires Overtenant to make payment to the Estate of Cornell before demanding payment from the Undertenant. Petitioner's attorney adopts the first interpretation in his Memorandum of Law (dated October 27, 2003) wherein the following is stated

"In the event the Overtenant received a default notice or communication for the Landlord stating that the rent or additional rent was not timely paid by the Undertenant, the Overtenant had the right to make that payment and thereafter to require the Undertenant to pay the rent and additional rent to the Overtenant who then would pay the amount to the Landlord. Paragraph 22c of the sublease provides that the lease shall be terminated upon the Undertenant's failure to comply with the terms and conditions of the Sublease relating to the payment of rent or additional rent should such failure continue to remain incurred after ten days' written notice to the Undertenant.

In July, 2003, the Undertenant was in default for failure to pay the rent that had come due on July 1, 2003. Pursuant to the sublease, the Overtenant-petitioner, therefore, paid that amount to the Landlord. At the same time, the Overtenant-petitioner's attorney wrote to the Undertenant-respondent to notify Respondent of the default and to demand that the unpaid rent be paid to the attorney within ten days from the date of the letter. By August 14, 2003, the undertenant again was in default, this time for failure to pay the rent that had come due on August 1, 2003. Pursuant to the Sublease, the Overtenant-petitioner, therefore, also paid that amount to the Landlord. The Petitioner's attorney again wrote to the undertenant-respondent to notify Respondent of the default and to demand that the unpaid rent be paid to the attorney within ten days from the date of the letter".

The court agrees with the Petitioner's interpretation of paragraph 15 that the Overtenant must first pay the Estate of Cornell and only then seek payment from the Undertenant. Even if Petitioner didn't adopt this position, this court would be constrained to adopt the first interpretation because leases are strictly construed against the Landlord and any ambiguities are resolved in favor of the Tenant. See Eighteenth St. Realty Corporation v. Maxthan Realty Co., 233 A.D. 687, 249 N.Y.S. 405 (2nd Dept. 1931); Rasch's Landlord & Tenant, Fourth Edition, Vol., Section .6.8, Construction Against Draftsman of Lease.

This overtenant must satisfy the condition precedent contained in paragraph 15 of the sublease agreement by paying the Landlord before the subtenant became obligated to pay the overtenant with the rent.

Respondent is correct its brief that there was no proof of payment by the overtenant of the monthly rent to the Estate of Cornell which then triggered the obligation by the undertenant to pay the monthly rent to the overtenant. The court has reviewed the exhibits and the trial transcript and finds no support for petitioner's argument that proof of payment by the overtenant to the undertenant was proven.

Thus petitioner's failure to prove compliance with the condition precedent mandates dismissal. See Weisblatt v. Shwimner, 249 A.D. 2nd 297, 670 N.Y.S. 891 (2nd Dept. 1998); Walter [*7]v. Esstern Analytical Labs, Inc., 246 A.D. 532, 667 N.Y.S. 407 (2nd Dept. 1998).

This court would have enforced the termination of the lease within the context of the paragraphs of the sublease which create a conditional limitation because a commercial lease is present as opposed to a residential lease; however enforcement is not warranted because the Landlord didn't comply with the terms of the lease for proper termination. See N L Industries v. Painewebber, 720 F. Supp. 293 (U.S. Eastern District Court 1989).

The court agrees with respondent that the notice of termination was defective. Respondent raised the foregoing in its amended answer which states:

4. This Court lacks jurisdiction herein that the respondent was

served with a defective ten day notice of termination.

The July 2003 notice of termination gave respondent 10 days to pay the rent to the petitioner or the sublease would be terminated. This July notice of termination was relied upon by petitioner in its petition. However, petitioner served another notice of termination dated August 14, 2003 advising respondent that respondent "will be in default under the sublease" if respondent failed to remit $1,522.50 within ten (10) days. Thus respondent had until August 24, 2003, to comply with the terms of the lease. For some unknown reason, petitioner had the notice of petition and petition served upon respondent on August 20, 2003, which voids the August termination notice. Furthermore, the August termination notice voids the July termination notice because it certainly creates the impression that the respondent was not in default until August 24, 2003. Substantive inconsistencies or errors void the termination notice. See Landlord & Practice in New York, West's New York Practice Series, Daniel Finkelstein Lucas A. Ferrara, Vol. G, Section 15:460 - Equivocal Notice.

However, since respondent waived the first affirmative defense asserted in its amended answer concerning the defective ten day notice, this constitutes a waiver and can't be asserted as a defense to these proceedings. See generally Landlord & Practice in New York, Vol. G, Section 15:459 - Service objections may be waived.

This court credits respondent's testimony that rent was paid to the Estate of Cornell in July of 2003, but it was not claimed. Furthermore, the court further credits respondent's testimony that arrangements were made for Mr. Steven Baron to pick up the July and August rent from respondent but he never kept his appointment to obtain the rent. Mr. Steven Baron's position was not identified by any of the parties but the court assumes that he was an employee of petitioner. Petitioner never called Mr. Steven Baron to refute respondent's claim that appointments were made with him to pick up the rent.

Finally, this court sustained the objection of respondent concerning the indictment of Mr. Zarnighian for money laundering. The court upheld the objection because this issue has no relevance whether respondent did or did not pay rent and comply with the lease. See Liberto v Worcester Mut. Ins. Co, 87 AD 2d 477, 452, NYS 2d 74 (2nd Dept 1982); 35 NY Jur. 2d Section 2008, Criminal Law, [*8]

The petition is dismissed because petitioner failed to comply with the condition precedent of paragraph 15. Furthermore the court credits respondent's claim that July rent was tendered and that respondent made some arrangements for the payment of July and August 2003 rent but Steven Baron failed to keep his appointment.

Respondent waived any defect with respect to the notice of termination by its stipulation of waiver during trial. So ordered.

E N T E R :

DISTRICT COURT JUDGE

Dated: January 12, 2004

cc: Bruce R. Bekristky, Esq.

Murray Honig, Esq.

Decision Date: January 12, 2004