2261 Realty, LLC v Cai Ping Wang
Attorneys and Parties
Brief Summary
Commercial lease dispute involving unpaid rent during the COVID-19 pandemic (COVID-19), alleged oral rent reductions and installment-payment arrangements, and whether promissory estoppel or part performance can overcome a no-oral-modification clause under the statute of frauds.
The Supreme Court, Kings County granted the landlord summary judgment for $105,365.55 and dismissed the tenant/guarantor’s fourth, fifth, and sixth affirmative defenses.
The Appellate Division reversed the judgment, denied summary judgment on the breach of contract claim, and reinstated the fourth, fifth, and sixth affirmative defenses; the appeal from the interlocutory order was dismissed as subsumed.
The landlord’s submissions (including its rent ledger) showed a years-long course of accepting twice-monthly payments and reduced rent from March 2020 through August 2022, creating triable issues of promissory estoppel and oral modification notwithstanding General Obligations Law § 15-301(1) [statute of frauds barring oral modification where the contract requires changes to be in writing], in light of possible part performance unequivocally referable to the alleged promises. The landlord also failed to submit the lease and did not address pandemic-related discussions, so it did not meet its initial summary-judgment burden; issues from the order were reviewable on the appeal from the judgment under CPLR 5501(a)(1) [rule allowing review of issues from nonfinal orders upon appeal from final judgment].
Background
In 2017, 2261 Realty, LLC (landlord) leased a Brooklyn commercial unit to NY PDK Trading, Inc. (tenant) for a five-year term (Nov. 1, 2017–Oct. 31, 2022) for use as a gift shop; the tenant’s principal, Cai Ping Wang, executed a personal guaranty. The lease required monthly rent on the first, imposed a 10% late fee for payments more than five days late, contained a no-oral-modification clause, and allowed tenant cancellation on six months’ written notice. The shop closed for at least two months at the outset of COVID-19. In 2021, the landlord brought a nonpayment proceeding that settled in August 2022 by stipulation: the tenant consented to a final judgment of possession and a warrant stayed through the lease end; rent claims through October 2022 were severed for a plenary action. The tenant vacated on October 1, 2022. The landlord then sued for breach of contract to recover rent/additional rent, and the defendants asserted affirmative defenses based on promissory estoppel and oral modifications: (i) permission to pay monthly rent in two installments; (ii) agreement to reduced rent during COVID-19; and (iii) reliance on the reduced-rent arrangement in declining to exercise the early termination clause.
Lower Court Decision
The Supreme Court, Kings County granted the landlord summary judgment for $105,365.55 and dismissed the fourth, fifth, and sixth affirmative defenses, effectively enforcing the written lease terms and guaranty and rejecting defenses premised on oral promises and pandemic-related rent adjustments.
Appellate Division Reversal
The Appellate Division dismissed the appeal from the order as subsumed by the judgment (issues reviewable under CPLR 5501[a][1]) and reversed the judgment. It held the landlord failed to meet its prima facie burden: it did not submit the lease and its own rent ledger showed long-term acceptance of twice-monthly payments and reduced rent from March 2020 to August 2022, while its affiant did not address COVID-19 discussions or efforts to prevent cancellation. These facts raise triable issues of promissory estoppel and of oral modifications supported by part performance that may be unequivocally referable to the alleged promises, notwithstanding General Obligations Law § 15-301(1). Accordingly, the court denied summary judgment on the breach of contract claim and reinstated the fourth, fifth, and sixth affirmative defenses.
Legal Significance
Consistent acceptance of reduced or installment rent over an extended period—particularly during COVID-19—can create triable issues of promissory estoppel or oral modification sufficient to defeat summary judgment despite a no-oral-modification clause. A landlord moving for summary judgment must submit the operative lease and affirmatively negate such course-of-performance issues.
In commercial rent cases, a course of accepting split or reduced payments may be treated as part performance unequivocally referable to an oral promise, supporting promissory estoppel or oral modification and precluding summary judgment where the movant’s proof does not eliminate those issues.