Leeber Realty LLC v. Trustco Bank ( 2019 )

19‐1626‐cv (L)
Leeber Realty LLC v. Trustco Bank
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE
OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A
SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE
FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A
PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED
BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in
the City of New York, on the 19th day of December, two thousand nineteen.
PRESENT: BARRINGTON D. PARKER,
DENNY CHIN,
Circuit Judges,
DENISE COTE,
District Judge.*
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LEEBER REALTY LLC, BERNARD COHEN,
Plaintiffs‐Counter‐Defendants‐
Appellees‐Cross‐Appellants,
v. 19‐1626‐cv;
19‐1692‐cv
TRUSTCO BANK,
Defendant‐Counter‐Claimant‐
Appellant‐Cross‐Appellee.
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* Judge Denise Cote, of the United States District Court for the Southern District of
New York, sitting by designation.
FOR PLAINTIFFS‐COUNTER‐ MICHAEL A. FREEMAN, Greenberg Freeman
DEFENDANTS‐APPELLEES‐ LLP, New York, New York.
CROSS‐APPELLANTS:
FOR DEFENDANT‐COUNTER‐ PETER A. PASTORE, McNamee Lochner P.C.
CLAIMANT‐APPELLANT‐ Albany, New York.
CROSS‐APPELLEE:
Appeal from the United States District Court for the Southern District of
New York (Karas, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Plaintiffs‐counter‐defendants‐appellees‐cross‐appellants Leeber Realty
LLC and Bernard Cohen (together, ʺLeeberʺ) and defendant‐counter‐claimant‐
appellant‐cross‐appellee Trustco Bank (ʺTrustcoʺ) cross‐appeal from an amended
judgment entered July 23, 2019, awarding Leeber $953,461.12 in damages, attorneysʹ
fees, costs, and pre‐judgment interest, and setting the post‐judgment interest rate at
2.41% per annum. The amended judgment was identical to a judgment entered May 1,
2019, except that it lowered the post‐judgment interest rate from 8% to 2.41% per
annum. In an opinion and order entered June 4, 2018 (the ʺJune 4 Orderʺ), the district
court granted summary judgment in favor of Leeber, holding that Trustco breached its
commercial lease agreement with Leeber. On appeal, Trustco principally argues that
the district court erred in granting summary judgment against it, and Leeber principally
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challenges the amount of damages awarded. We assume the partiesʹ familiarity with
the underlying facts, the procedural history of the case, and the issues on appeal.
In its April 21, 2017 complaint, Leeber sued for damages, alleging that
Trustco breached its lease. On October 10, 2017, Trustco filed its answer and
counterclaim, alleging that Leeber failed to make necessary repairs on the premises and
that Trustco was constructively evicted. Leeber moved for summary judgment. In its
June 4 Order, the district court granted in part and denied in part Leeberʹs motion.
On July 17, 2018, Trustco moved to vacate the June 4 Order pursuant to
Rule 60(b)(1), (4), (6) and to dismiss for lack of subject matter jurisdiction under Rule
12(h)(3). By opinion and order entered February 8, 2019, the district court denied
Trustcoʹs motion to vacate the June 4 Order.
The original judgment, with a post‐judgment interest rate of 8%, was
entered on May 1, 2019. On May 6, 2019, Trustco moved to amend the judgment to
modify the post‐judgment interest rate from the contractual rate of 8% to the applicable
federal rate under 28 U.S.C. § 1961, which, at the time, was 2.41%. Before the district
court ruled on the motion, on May 31, 2019, Trustco filed its notice of appeal from the
original judgment. Leeber filed a notice of cross‐appeal on June 6, 2019.
On July 18, 2019, the district court issued an order granting Trustco relief
under Rule 60(b)(1) and holding that the post‐judgment interest rate should accrue at
the federal statutory rate, rather than the contractual rate of 8%. The amended
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judgment was entered July 23, 2019. Trustco filed an amended notice of appeal on July
24, 2019. Leeber filed an amended notice of cross‐appeal on July 31, 2019.
BACKGROUND
The following facts are not in dispute. Leeber and Trustco entered a 20‐
year commercial lease on December 31, 2003, pursuant to which Leeber leased premises
to Trustco to operate a bank branch. The building is served by a single sewer line that
connects to a system owned by the local municipality.
On March 27, 2017, Trustco sent a letter notifying Leeber that ʺsince in or
about 2009ʺ Trustco experienced ʺhazardous environmental conditionsʺ at the premises
and that, due to Leeberʹs failure to remedy these conditions, there was a ʺconstructive
evictionʺ from the premises. J. Appʹx at 313. The identified ʺhazardous environmental
conditionsʺ were ʺmold and sewage backup.ʺ J. Appʹx at 313. Accordingly, Trustco
purported to terminate the lease on March 31, 2017. On April 4, 2017, Leeber notified
Trustco that it had defaulted under the lease. On April 18, 2017, Leeber sent Trustco a
written notice declaring an ʺEvent of Defaultʺ under the lease based on nonpayment of
rent and abandonment of the premises. J. Appʹx at 333‐34. Trustco has not paid any
rent since April 5, 2017.
From January 2012 to March 2016, Trustco experienced problems with the
sewage facilities six times. Trustco called a plumber each time. Trustco did not inform
Leeber of any problem with the sewer line or that a plumber had been called. On
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December 18, 2016, a Trustco employee contacted Leeber about a toilet backup. In
response, Leeber called a plumber and later confirmed with the Trustco employee that
the issue had been resolved. At deposition, the Trustco employee testified that he was
unaware of any communications with Leeber regarding sewage problems at the
premises, besides the December 18, 2016 conversation.
Because Leeber was unable to pay its mortgage on the property, on July
13, 2017, Flushing Bank commenced a foreclosure action. A Receiver was appointed in
the foreclosure action on March 23, 2018. On July 17, 2018, the Receiver filed his oath
and bond with the state court, and the same day, Leeber filed for Chapter 11
bankruptcy protection.
STANDARD OF REVIEW
ʺWe review a district courtʹs decision on a motion for summary judgment
de novo, resolving all ambiguities and drawing all factual inferences in favor of the
non‐moving party.ʺ Mudge v. Zugalla, 939 F.3d 72, 79 (2d Cir. 2019). ʺSummary
judgment is appropriate where there exists no genuine issue of material fact and, based
on the undisputed facts, the moving party is entitled to judgment as a matter of law.ʺ
Novella v. Westchester Cty., 661 F.3d 128, 139 (2d Cir. 2011). We review the denial of
a Rule 60(b)(4) motion de novo. Burda Media, Inc. v. Viertel, 417 F.3d 292, 298 (2d Cir.
2005).
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DISCUSSION
Trustco appeals the dismissal of its constructive eviction defense, the
order enforcing an accelerated rent provision in the commercial lease, and the denial of
its July 17, 2018, Rule 60(b)(4) motion claiming a lack of jurisdiction. Leeber cross‐
appeals the order denying accelerated rent for the five‐year option period and the
issuance of an amended judgment for lack of jurisdiction.
A. Constructive Eviction
The district court properly granted summary judgment in favor of Leeber
on Trustcoʹs constructive eviction defense. Under New York law, ʺconstructive eviction
exists where, although there has been no physical expulsion or exclusion of the tenant,
the landlordʹs wrongful acts substantially and materially deprive the tenant of the
beneficial use and enjoyment of the premises.ʺ Barash v. Penn. Terminal Real Estate Corp.,
26 N.Y.2d 77, 83 (1970). Here, even assuming the sewage problems created a hazardous
condition, a reasonable jury could only conclude that Trustco failed to comply with the
notice provisions in the lease requiring it to provide written notice to Leeber in the
event of ʺany environmental concernsʺ or any ʺdefects [in the premises] or in any
fixtures or equipment.ʺ J. Appʹx at 86, 101. The record shows that on the occasion when
Leeber was notified of a sewage problem, it acted promptly in calling a plumber. At
deposition, a Trustco employee admitted that he was not ʺaware of anyone at Trustco
who ha[d] sent a letter or written documentʺ to Leeber ʺconcerning any condition or
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event at the lease premises.ʺ J. Appʹx at 188. Accordingly, we hold that the district
court correctly granted summary judgment in Leeberʹs favor on the constructive
eviction defense.1
B. Rent Acceleration
The district court properly granted accelerated rent to Leeber based on the
valid and enforceable liquidated damages provision in the lease.2 Under New York
law, ʺ[a] contractual provision fixing damages in the event of breach will be sustained if
the amount liquidated bears a reasonable proportion to the probable loss and the
amount of actual loss is incapable or difficult of precise estimation.ʺ Truck Rent–A–Ctr.,
Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 425 (1977).
Trustco argues that rent acceleration clauses are not enforceable where the
lease does not require the landlord to re‐rent the premises and apply the rent received
to the benefit of the tenant. The New York Court of Appeals, however, has already
1 Because we find ample evidence in the record supporting the district courtʹs decision to
grant summary judgment on the constructive eviction defense, we need not reach Trustcoʹs
other arguments relating to the scope of Leeberʹs duty to repair and the extent Trustco waived
its constructive eviction defense under New York law. Even assuming Leeber owed a duty to
repair the sewage facilities and Trustco had not waived its constructive eviction defense, a
reasonable jury could not conclude that Trustco provided Leeber the mandatory written notice,
as required in the commercial lease.
2 The commercial lease provides, in relevant part, that upon an event of default, Leeber
may terminate the lease and recover from Trustco ʺall damages incurred by reason of such
breach, including the cost of recovering the [] Premises plus the total of all Minimum Annual
Rent, Additional Rent and all other charges reserved in th[e] Lease payable over the remainder
of the stated Lease Term discounted to net present value utilizing a 6% discount rate.ʺ J. Appʹx
at 109.
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rejected this argument on the ground that a landlord is not required to mitigate
damages in the event a tenant breaches its lease agreement. See 172 Van Duzer Realty
Corp. v. Globe Alumni Student Assistance Assʹn, Inc., 24 N.Y.3d 528, 535 (2014) (ʺonce a
tenant abandons the property prior to expiration of the lease, a landlord is within its
rights under New York law to do nothing and collect the full rent due under the leaseʺ
(alterations and internal quotation marks omitted)).
The district court denied acceleration with respect to the five‐year
extension of the lease that was part of a prior settlement of a prior dispute. Leeber
contends this was error. We agree with the district court that the acceleration
provisionʹs reference to ʺthe stated Lease Termʺ unambiguously refers to the twenty‐
year term set forth in Section 1.01 of the lease. The five‐year extension was a separate
ʺOption Termʺ and not part of the ʺLease Term.ʺ The parties unambiguously
ʺexercise[d] its first option to extend that lease and renew that lease for an additional
five‐year periodʺ in an open court stipulation settlement. J. Appʹx at 494. That
additional five‐year period was an ʺOption Term,ʺ and not part of the ʺLease Termʺ as
clearly defined in the lease. Under New York law, an ʺopen courtʺ stipulation is a
contract enforceable according to its terms, absent a showing of ʺfraud, collusion,
mistake or accident.ʺ Hallock v. State, 64 N.Y.2d 224, 230 (1984); see also Corona Fuel Corp.
v. Nayci, 35 N.Y.S.3d 171, 173 (2d Depʹt 2016). The district court properly excluded
Leeberʹs counselʹs declaration contradicting the unambiguous terms of the ʺopen courtʺ
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stipulation as inadmissible parol evidence. See Schron v. Troutman Sanders LLP, 20
N.Y.3d 430, 436 (2013) (ʺParol evidence ‐‐ evidence outside the four corners of the
document ‐‐ is admissible only if a court finds an ambiguity in the contract.ʺ).
C. Joinder of Indispensable Parties
Moreover, the district court did not err in denying Trustcoʹs motion under
Rule 60(b)(4). Trustco argues that the district court erred in not dismissing the case for
lack of jurisdiction because Flushing Bank and the Receiver were indispensable parties
whose inclusion in the case would have destroyed diversity jurisdiction. A ʺcourt will
be deemed to have plainly usurped jurisdiction only when there is a ʹtotal want of
jurisdictionʹ and no arguable basis on which it could have rested a finding that it had
jurisdiction.ʺ Nemaizer v. Baker, 793 F.2d 58, 65 (2d Cir. 1986) (quoting Lubben v. Selective
Serv. Sys. Local Bd. No. 27, 453 F.2d 645, 649 (1st Cir. 1972)).
The district court properly exercised its jurisdiction having found that the
Receiver and Flushing Bank were not indispensable parties. As noted by the district
court, the Receiver was not authorized to collect rents due until he filed his oath and
bond on July 17, 2018, well after this suit was commenced in April 2017. Furthermore,
Flushing Bank was also not an indispensable party because it did not take affirmative
steps to enforce its right to collect rent under the lease until it commenced a foreclosure
action in July 2017. Indeed, Trustco failed to raise any jurisdictional challenge before
the district court issued its summary judgment decision on June 4, 2018. Because the
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mortgage agreement between Leeber and Flushing Bank confirmed Leeberʹs residual
interest in collecting rent, even in the event of default, the district court properly held
that at the outset of the litigation in April 2017 and at time of its June 4, 2018 decision,
the Receiver and Flushing Bank were not indispensable parties.3
D. Amended Judgment
The district court properly exercised its jurisdiction in issuing an amended
judgment after the parties filed notices of appeal. While it is true that the filing of a
notice of appeal typically ʺdivests the district court of its control over those aspects of
the case involved in the appeal,ʺ Griggs v. Provident Consumer Disc. Co., 459 U.S. 56, 58
(1982) (per curiam), a notice of appeal does not divest a district court of jurisdiction to
decide a timely‐filed motion pursuant to Federal Rule of Civil Procedure 60. Under
Federal Rule of Appellate Procedure (4)(a)(4)(B)(i), a notice of appeal filed while a Rule
60(b) motion is outstanding in the district court ʺbecomes effectiveʺ only once that
motion is resolved. Fed. R. App. P. 4(a)(4)(B)(i); see also Fed. R. App. P. 4(a)(4) advisory
committeeʹs note to 1993 amendment (ʺA notice [of appeal] filed . . . after the filing of a
motion [such as a Rule 60(b) motion] but before disposition of the motion is, in effect,
3 For substantially the same reasons as discussed above and the reasons reviewed by the district
court, we also agree that Leeber had standing at the outset of this litigation in April 2017 to pursue rent
payments from Trustco. See Comer v. Cisneros, 37 F.3d 775, 791 (2d Cir. 1994) (ʺstanding is measured as of
the time the suit is broughtʺ).
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suspended until the motion is disposed of . . . ʺ). However, an amended notice of
appeal is required for this Court to have jurisdiction to review the resolved motion.
Here, on May 6, 2019, Trustco timely filed its letter motion seeking an
amended judgment, which the district court construed as a Rule 60 motion. Trustco
then filed a notice of appeal on May 31. After the district court issued an amended
judgment on July 23, Trustco filed an amended notice of appeal on July 24. The
amended judgment and the district courtʹs Rule 60(b)(1) decision adjusting the post‐
judgment interest rate are properly before this Court. For the reasons articulated in the
district courtʹs well‐reasoned July 18, 2019 order, we affirm the amended judgment.
* * *
We have reviewed the partiesʹ remaining arguments and conclude they
are without merit. For the foregoing reasons, we AFFIRM the judgment of the district
court.
FOR THE COURT:
Catherine O=Hagan Wolfe, Clerk of Court
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