Daily Development for Tuesday, January 15, 2008
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri

LANDLORD/TENANT; LANDLORD DUTIES; HOLDOVERS: New tenant may sue old tenant who holds over for tortious interference with the new tenant's contract rights under the new lease. 

Havana Central v. Lunney's Pub, 2007 Westlaw 4533126 (N.Y.A.D. 12/27/07)

Lunney's operated a pub in the Times Square neighborhood. Lunney's knew that its lease was expiring and that the landlord had located a new tenant. It  was angling to preserve customer good will by arranging to locate to a nearby location. Perhaps also it also was trying to induce the landlord to relet to it by causing problems with the new tenant. In any event, although Lunney's knew nine months out that its lease was expiring and that Havana, the new tenant, was moving in, Lunney's didn't vacate at lease end, leaving Havana without a business premises in the hot end of the year holiday period.

Havana brought a lawsuit for against Lunneys for tortious interference with its economic opportunity when Lunny's allegedly induced the landlord to fail to perform its contract obligation to deliver the premises on time, and also for tortious interference with prospective economic advantage.  Havana alleged that it lost a lot of business opportunities as a consequence of Lunney's failure to move out.

The trial court gave summary judgment to Lunney's and the appellate division here reversed on the tortious inducement count but affirmed the tortious interference count.  There was a strong dissenting opinion on the tortioius inducement claim, and the case is a good read. 

An important element of the case was that the Havana  lease contained a waiver of damages clause concerning holdover tenants, apparently common in New York:
 "If Owner is unable to give possession of the demised premises on the date of the commencement of the term hereof, because of the holding-over or retention of possession of any tenant ... or if Owner has not completed any work required to be performed by Owner, or for any other reason, Owner shall not be subject to any liability for failure to give possession on said date."

Lunney's argued that it could not be held liable for inducing the landlord to breach by tolerating the holdover when in fact Havana's lease didn't require the landlord to prevent a holdover.

The majority disagreed.  It stated that there is no doubt that the landlord's failure to deliver the premises upon holding over was a "material breach" of the lease notwithstanding the fact that there was no damage claim available. Therefore, it reversed summary judgment against Lunney's so that Havana could prove that Lunney's induced landlord to breach landlord's duty.

The dissent stated that the landlord had no duty to provide possession:

"Putting aside the niceties of the pure question of contract law of whether the landlord breached the lease, it strikes me as indisputable that Havana Central had no legally enforceable right against the landlord to possession of the premises on the commencement date whenever the landlord was unable to give possession."

Comment 1: The editor  originally was struck by the fact that neither the majority or minority in this case discussed where New York stands on the common law debate as to whether a landlord has an absolute common law duty to provide possession to the tenant at the outset of the lease (English rule - the majority in America) or not (known as the "American Rule" although it is the minority in America.) This issue is discussed in Section 4.2.1 of Friedman on Leasing, Randolph Edition.  In fact, Friedman notes that the "American Rule" is also referred to by Friedman as the "New York Rule," so we know what New York common law provided - no duty.

But Friedman reports that result was changed by statue in New York - 233-a of the New York Real Property Law.

"In the absence of an express provision to the contrary, there shall be implied in every lease of real property a condition that the lessor will deliver possession at the beginning of the term. In the event of breach of such implied condition the lessee shall have the right to rescind the lease and to recover the consideration paid. Such right shall not be deemed inconsistent with any right of action he may have to recover damages."

Friedman goes on to say that, as a consequence of the statute, most New York leases contain a waiver protecting the landlord from liability in the event of a holdover. As noted, the the plaintiff's lease in Havana contained such a waiver of liability.

Comment 2:  The dissent's argument, as noted, appears to assume that it is up to the new tenant to throw out the old tenant. As noted above, though, current  New York law is exactly the opposite. Consequently, the landlord had a contract duty, as to which, the editor assumes, assume specific performance was available, to terminate Lunney's possession.  In fact, apparently it did do this in the end. Thus, the editor disagrees with the dissent that the landlord had no duty simply because no damages were available.

But the dissent notes that Havana also had a right to collect damages from Lunney for Lunney's wrongful possession. Therefore, it asks, what's the point of this action against Lunney for tortious inducement?

The editor  would agree with the dissent if Havana not only had a claim for damages against Lunney for trespass, but also had the same right to a summary possession action to throw Lunney off the premises that the landlord had, together with any right to attorney's fees that landlord had. I assume that the landlord did have the right, both at law and in the lease, to evict Lunney. If it was more advantageous to Havana for the landlord to do this that it would have been for Havana to do it for itself, then it seems to me that it should be able to show that Lunney "induced" landlord to drag its feet on evicting Lunney. This was a summary judgment action, and we don't know what Havana could have proved. Certainly simply showing that Lunney was there when the lease ended would not be enough.

Comment 4: Still, one must ask why the plaintiff viewed the tortious interference tort as all that helpful. Trespass is also a tort, and presumably could also carry a punitive damages claim. Perhaps Havana pursued the case (and the appeal) because of the other prong in its attack - a suit for wrongful interference with prospective economic advantage. Here the majority and dissent agreed - Havana had no such cause of action. Such a suit is available only when the defendant's alleged tortious action was aimed directly at injurying plaintiff. Here there appeared to be other explanations for Lunney's conduct.

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