ROUTE 18 CENTRAL PLAZA, LLC v. FERGUSON ENTERPRISES NY-METRO, INC.
Filing
11
OPINION. Signed by Judge Jose L. Linares on 6/8/15. (DD, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ROUTE 18 CENTRAL PLAZA, LLC,
Civil Action No. 15-2054 (JLL) (JAD)
Plaintiff,
v.
OPINION
FERGUSON ENTERPRISES NY-METRO,
NC.,
Defendant.
LINARES, District Judge.
This matter comes before the Court by way of Defendant Ferguson Enterprises NYMetro, Inc. (“Defendant”)’s motion to dismiss Plaintiff Route 18 Central Plaza, LLC
(“Plaintiff’)’s Complaint (ECF No. 1) pursuant to Federal Rule of Civil Procedure 12(b)(6).
(ECF No. 5). The Court has considered the parties’ submissions in support of and in opposition
to the instant motion and decides this matter without oral argument pursuant to Federal Rule of
Civil Procedure 78. For the reasons set forth below, the Court denies Defendant’s motion.
I. BACKGROUND
1
Plaintiff is a New Jersey Limited Liability Company. (Compl. at 1). Defendant is a
¶
corporation located in Virginia. (Id. at ¶ 2). On or about November 1, 2012 Plaintiff and Karl’s
Sales and Service Company, LLC (“KSSC”) signed and executed a lease, in which Plaintiff
agreed to rent property located in East Brunswick New Jersey to KSSC from November 11,
2012
‘The following is taken as true solely for the purposes of this motion.
to November 10, 2017. (Id. at ¶J 3-4). Paragraph 2 of the lease provided that the tenant shall
have a one-time option to terminate the lease as of February 1, 2015, by delivering to the
landlord a written, unconditional termination notice no later than November 1, 2014. (Id. at 5).
¶
The lease further provided that the termination by the tenant shall only be effective if the tenant
has fully and timely complied with all of its obligations under the Lease through November 11,
2014, (Id).
KSSC failed to timely pay the monthly installment of fixed rent and additional rent that
was due to Plaintiff on June 1, 2013, and Plaintiff did not receive said payment from KSSC until
June 5, 2013. (Id. at ¶ 11). KSSC’s payment of fixed rent and additional rent was also late in the
following months: July 2013, August 2013, September 2013, October 2013, November 2013,
December 2013, and January 2014. (Id. at ¶J 12-18). Given KSSC’s failure to timely make the
previously mentioned monthly payments of fixed rent and additional rent to Plaintiff, KSSC
relinquished its option to terminate the lease under the aforementioned paragraph 2. (Id. at 19).
¶
On or about January 20, 2014, KSSC and Defendant entered into an Asset Purchase
Agreement (“APA”), where Defendant purchased the existing business of KSSC. (Id. at 20). In
¶
connection with the transaction set forth in the APA, Defendant sought to lease the premises
from Plaintiff as of January 20, 2014. (Id. at ¶ 21). On January 20, 2014, Plaintiff, KSSC, and
Ferguson executed an Assignment, Consent, and Estoppel Agreement whereby KSSC assigned
all of its rights under the lease to Ferguson and Plaintiff consented thereto in accordance with the
terms of the lease. (Id. at ¶ 22).
Plaintiff alleges that because KSSC relinquished its option to terminate the lease under
paragraph 2 by failing to timely make monthly payments of fixed rent and additional rent
to
Plaintiff, KSSC could not have transferred said option to Defendant under the Assignment,
Consent, and Estoppel Agreement because said option no longer existed under the lease. (Id. at
¶
23). On January 20, 2014, Defendant also executed a Guaranty of lease, wherein Defendant
“unconditionally [guaranteed] to Landlord the full and punctual payment of all rents and other
sums payable by tenants under the lease”. (Id. at ¶ 24). The Guaranty of Lease further stated that
Defendant “waives notice of any breach or default by Tenant under the Lease”, which “shall
apply without limitation to Landlord’s waiver of or failure to enforce any Tenant Obligations
andlor Landlord’s granting extensions of time of performance to Tenant.” (Id. at 25).
¶
Plaintiff further alleges that Defendant failed to timely pay the monthly installment of
Fixed and Additional Rent that was due to Plaintiff on February 1, 2014 and Plaintiff did not
receive said payment from Defendant until February 10, 2014. (Id. at 26). On September 26,
¶
2014, Defendant notified Plaintiff via letter that it was exercising its paragraph 2 option and
terminating the lease. (Id. at ¶ 28). Plaintiff alleges that Defendant has breached the terms of its
Lease and Guaranty of Lease with Plaintiff, wrongfully failed and refused to make any further
payments of fixed and addition rent to Plaintiff, failed and refused to take any actions to remedy
its breaches, and as a direct a proximate result of Defendant’s breaches, Plaintiff has suffered and
will continue to suffer damages. (Id. at ¶J 28-33).
IL LEGAL STANDARD
For a complaint to survive dismissal, it “must contain sufficient factual matter, accepted
as true, to ‘state a claim to relief that is plausible on its face.” Ashcrofl v. Iqbal, 556 U.S. 662,
678 (2009) (citing Bell Ati. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Threadbare recitals
of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”
Id. In determining the sufficiency of a complaint, the Court must accept all well-pleaded
factual
allegations in the complaint as true and draw all reasonable inferences in favor of the non-
moving party. See Phillips v. County ofAllegheny, 515 F.3d 224, 234 (3d Cir. 2008). But, “the
tenet that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678. Thus, legal conclusions draped in the
guise of factual allegations may not benefit from the presumption of truthfulness. Id.; In re Nice
Svs., Ltd. Sec. Litig., 135 F. Supp. 2d 551, 565 (D.N.J. 2001).
III. DISCUSSION
A. Motions Before the Court
1. Defendant’s Motion to Dismiss
Defendant argues that Plaintiffs Complaint should be dismissed upon the following
grounds: (1) The documents cited in the Complaint make clear that Plaintiff cannot state a claim
that the lease termination was ineffective because (a) Plaintiff concedes that it received all of the
rent due and owing to it and (b) Plaintiffs claim that KSSC and/or Defendant failed to comply
with the rental obligations is barred by the documents cited in the Complaint.
2. Plaintiffs Opposition
Plaintiff responds to Defendant’s arguments for dismissal by stating that: (1) Defendant
was undisputedly late paying rent in February 2014 and waived all notice under the terms
of the
guaranty, and therefore Defendant’s option to terminate the lease was extinguished; and (2)
KSSC could not have assigned its option to terminate the lease to Defendant because said
option
had been extinguished by KSSC’s habitually late payments of rent.
B. Analysis
2
2
When deciding a motion to dismiss, generally, “a court looks only to the facts alleged in
the complaint and its
attachments
Jordan, 20 F.3d at 1261. However, a court may also look to “a document integral
to or explicitly
relied on in the complaint” without converting the motion into one for summary judgment.
In re Burlington Coat
Factory Sec. Litig., 114 F.3d at 1426 (quotation marks and citation omitted). This exception
to the general rule
exists “so that [a] plaintiff cannot maintain a claim ‘by extracting an isolated statement from
a document and placing
it in the complaint, even though if the statement were examined in the full context of the
document, it would be clear
Plaintiff claims that Defendant has not fully and timely complied with the Lease because
according to Plaintiff, KSSC and then Defendant made untimely rental payments. Defendant
argues that the very documents that Plaintiff cites in its Complaint make clear that there was full,
complete, and timely compliance with the Lease. First, Defendant argues that because Plaintiff
does not allege that Defendant or KSSC failed to pay any of the rent that was due or because
Plaintiff does not allege that Defendant failed to pay any rent once it assumed the Lease through
the termination of the Lease, Plaintiff has failed to allege that there has not been full compliance
with the lease and concedes that it received all of the rent due and owing to it. Next, Defendant
argues that Plaintiffs claim that KSSC failed to comply with the rental obligations is barred by
the express language in the estoppel certificate. Defendant contends that Plaintiff never alleged
that it provided KS SC with notice of its late payment as required under Section 1 4(a)( 1) of the
Lease. Defendant further notes that in the Estoppel Certificate, Plaintiff expressly warranted and
represented that the “Lease [was) in full force and effect,” KSSC had not defaulted on the Lease
and that KSSC had “fully performed” all of its obligations under the Lease. Defendant argues
that by bringing this case, Plaintiff is wrongfully attempting to frustrate the very purpose of the
Estoppel Certificate, which is to “prevent [Plaintiff] from.
.
.
claiming a different state of facts”
than those to which it had certified to in the Estoppel Certificate.
Moreover, Defendant contends that Plaintiffs argument that the termination was not
valid based on its claim that Defendant failed to fully perform under the Lease by making the
February 2014 rental payment on February 10, 2014 likewise fails to state a claim based on the
express language in the Lease. Plaintiff points to the language of the Lease which provides that
that the statement [did not support the claimj.” Mele v. Fed. Reserve Bank of ]‘L Y., 359 F.3d 251, 256 n.5 (3d Cir.
2004) (quoting In re Burlington Coat Factoiy Sec. Litig., 114 F.3d at 1426).
the failure to pay rent is untimely and constitutes an event of default only if certain conditions
are met:
(1) the tenant fails to pay rent within five days of when the rent is due;
(2) thereafter, the Landlord delivers to the tenant written notice of the
failure to pay; and
(3) the tenant is provided an additional five days to make the payment
before an event of default can be declared.
Lease,
§
14(a)(l). Defendant cites to case law for the proposition that failure to comply with such
notice and opportunity to cure defeats Plaintiff’s claim that the purported late payment was
a
violation of the Lease. Moreover, Defendant argues that even if Plaintiff had provided the
requisite notice of the purported late payment, that notice could not have been made until on or
after February 6, 2014 (i.e., five business days after the first of the month). The rent payme
nt is
not deemed untimely or an event of default if it is received within five days of the notice
--
here,
the eleventh of the month. Defendant states that since Plaintiff concedes it received the Februa
ry
2014 payment on February 10, 2014 (Compi. ¶ 26), this payment cannot be deemed untime
ly as
it was paid within the notice and opportunity to cure time provisions.
Plaintiff responds to Defendant’s arguments by citing to a provision in the lease which
states:
[A] 11 payments of fixed and additional rent shall be made by the Tenant
to the Landlord, without notice or demand, in advance, without set-off or
deduction of any kind, and shall be due and payable and must be received
by Landlord no later than the first day of each and every calendar month.
See Lease, ¶3(b). Plaintiff argues that faced with its clearly late payment and the terms
of the
“early termination clause”, Defendant attempts to claim that its late payment was
not an “event
of default” under the Lease. Notably, Plaintiff points out, the “early termin
ation clause” in
paragraph 2 does not require an “event of default” to occur in order for the Tenant
’s option to
terminate to be extinguished. Plaintiff contends that Paragraph 2 of the Lease more stringently
requires that the “Tenant has fully and timely complied with all of its obligations under this
Lease” through November 1, 2014. Plaintiff states that it is beyond dispute that Ferguson failed
to “fully and timely” make its monthly rental payment to Plaintiff in February 2014.
Moreover, Plaintiff argues that contrary to Defendant’s contention, paragraph 1 4(a)( 1) of
the Lease does not require that Plaintiff provide written notice of each and every missed or late
payment, but requires Plaintiff to do so only “once each calendar year.” Second, even if Plaintiff
was required to provide written notice to Defendant in February 2014—thereby extending the
deadline for payment until February 11, 201 4—Defendant waived all such notice in the
Guaranty. Plaintiff notes that the Guaranty states that Defendant “waives notice of any breach or
default by Tenant under the Lease”, which “shall apply without limitation to Landlord’s waiver
of or failure to enforce any Tenant Obligations and/or Landlord’s granting extensions of time of
performance to Tenant.” See Guaranty, ¶3. Plaintiff further points to the language of lease,
specifically, paragraph 14(e), which provides that “[t]he failure on the part of the Landlord
...
to
enforce any of its rights as provided in this section upon any default, shall not be deemed a
waiver of any of the terms and conditions of this Lease.” See Lease, ¶14(e).
Additionally, Plaintiff argues that KSSC could not have assigned its option to terminate
the lease to Defendant because said option had been extinguished by KSSC’ s habitually late
payments of rent. Plaintiff points to the Assignment, which states that “[tjhe Assignor (KS SC)
hereby assigns and transfers to the Assignee (Defendant) all of Assignor’s right, title and interest
in and to the Lease and the Security Deposit.” See Assignment, ¶2. Plaintiff asserts that KSSC
could assign only its remaining rights under the Lease to Defendant (i.e. the remaining term,
security deposit, etc.), and could not assign its one-time option to terminate the Lease when
KSSC no longer had any such right.
The Court finds it inappropriate to dismiss Plaintiffs claims at this stage of the litigation.
While the Court is cognizant that by signing the Estoppel Certificate, which specifically stated
that there were no defaults, Plaintiff may not be able to assert that the termination of the lease
was ineffective, the Court is still persuaded by Plaintiffs citation to the general provision within
the lease which states:
[A]1l payments of fixed and additional rent shall be made by the Tenant
to the Landlord, without notice or demand, in advance, without set-off or
deduction of any kind, and shall be due and payable and must be received
by Landlord no later than the first day of each and every calendar month.
See Lease, ¶3(b). It is undisputed that Defendant did not pay its February 2014 rent until
the 10th
day of the month. Paragraph 2 of Lease specifically states:
Tenant shall have the one-time option, exercisable in strict
compliance with this paragraph, to terminate this Lease as follows: Tenant
shall have the option to terminate this Lease as of the first day of the
twenty-seventh month following the Commencement Date [February 1,
2015] by delivering to Landlord a written unconditional termination notice
to be received by Landlord no later than the first day of the 24th month
following the Commencement Date [November 1, 2014], time being of the
essence.
The termination by Tenant shall be effrctive only f Tenant
hasfully and timely complied with all of its obligations under this Lease
through the second anniversary of the Commencement Date [November
1,2014].
...
See Lease, ¶2. (Emphasis added). Accordingly, because the Lease requires that all payme
nts be
made and received by the first calendar month and Defendant has allegedly failed
to comply with
this requirement by paying its February 2014 rent on the tenth day of the month
, Plaintiffs
Complaint is pled in a manner sufficient to defeat Defendant’s motion to dismis
s. Therefore,
Defendant’s motion is denied.
IV. CONCLUSION
For the reasons herein expressed, Defendant’s motion to dismiss Plaintiff’s Complaint is
denied.
An appropriate Order accompanies this Opinion.
DATE:June
Linares
States District Judge
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