FILED: NEW YORK COUNTY CLERK 06/29/ :31 PM INDEX NO /2017 NYSCEF DOC. NO. 48 RECEIVED NYSCEF: 06/29/2018

Transcription

1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: X XT 14 STREET OWNER LLC : Index No.: Plaintiff : : /2017 WESTSIDE -against- -aga1ils t- : DONUT 6 AVE. VENTURES LLC, : : AFFIDAVIT WESTSIDE DONUT 544 VENTURES LLC, : (Motion Seq. RICHARD GREENSTEIN, AND : HOWARD NOVICK : 001) X Defendants : +? STATE OF NEW YORK } COUNTY OF NEW YORK } } ss.: RICHARD GREENSTEIN, being duly sworn, here deposes and says: 1. I am one name Defendants herein as well as a member Westside Donut Avenue Ventures LLC (hereinafter "Westside h") and Westside Donut 544 Ventures LLC (hereinafter "Westside 544"). As such, I am fully familiar with facts and circumstances set forth below. 2. This Affidavit is submitted in support Defendants, Richard Greenstein and Howard Novick's "Guarantors" (hereinafter "Guarantors") application to dismiss this action and in opposition to Plaintiff's application primarily for summary judgment. 3. In sum, Guarantors' application to dismiss should be granted because Plaintiff agreed to release us from all claims under governing lease based upon our payment $22, to Plaintiff. 4. Moreover, Plaintiff's application should be denied inasmuch as Westside Ave sold its assets to Westside 544 for $92,000.00, i.e., fair consideration, and re was a surrender operation law

2 5. A guarantor cannot exercise a good guy guaranty absent a surrender. 6. Indeed, Duell family, Plaintiff's predecessor in interest, is a sophisticated real estate investor. By virtue express language Lease and Guaranty, Plaintiff's predecessor unequivocally contemplated closing Westside 6* Ave's business and sale its assets. 7. Simply put, Plaintiff's predecessor did not bargain for a personal or corporate guaranty Lease term. To contrary, it bargained for a single-purpose entity tenant, with no or assets, and a "good guy" guaranty, and that is precisely what it received. THE LEASE 8. This is a commercial landlord-tenant dispute between Plaintiff and Defendant-Tenant, Westside Ave, over alleged unpaid rent. Annexed hereto as Exhibit "A" complaint filed on January 27, The Defendants filed an answer on February 24, Annexed hereto as Exhibit "B" is a copy Defendants' Verified Answer. 10. In October 2008, Defendant, Westside 6* 6 Ave entered into possession Premises virtue a certain assignment and assumption agreement dated October 3, 2008 (hereinafter Agreement" "Assignment Agreement"). 11. The Assignment Agreement assigned to Westside Ave, as tenant, a commercial lease dated September 11, 2000 between Duell, LLC and Whitestone Plaza Donut Corp. (hereinafter "Lease" "Lease"). See Exhibit "A" 'A Schepansky Affidavit. 12. Of particular importance, Article "46" Lease, entitled "Demolition or Restoration", permitted Plaintiff to unilaterally terminate Lease on only three (3) months' notice. SINGLE-PURPOSE ENTITY AND THE GOOD GUY GUARANTY 13. In connection with Assignment Agreement, Guarantors executed "good guy"

3 guaranties. See Exhibit 'E" Schepansky Affidavit. 14. The prior landlord required good guy guaranties because Westside Ave was, at time it executed Lease, a single-purpose entity with no assets or credit history. Annexed hereto as Exhibit "C" is a true copy Division Corporations entity information. Westside Ave was incorporated on May 20, 2008 and remains an "active" corporation. 15. Indeed, I, along with my partner, Howard Novick, currently operate numerous Dunkin' Donuts franchises and this is our standard practice. 16. For each franchise location, a separate corporate entity was created for sole purpose operating a Dunkin' Donuts franchise at that specific location. In this way, one unfortunate problem with a specific franchise cannot bring down any or franchise. 17. The prior landlord was fully aware financial condition Westside Ave. That is exactly why both Guarantors were required to execute "good guy" guaranties as a condition assignment Lease. 18. Specifically, Good Guy Guaranty states, at paragraph "S" rein, that Guarantor's obligations cease upon: (a) Tenant's surrender possession premises to Owner at any time during term this lease consisting (i) delivery vacant possession, free all occupancies and tenancies, with all rent and additional rent paid in full to such date; (ii) execution Tenant and delivery an instrument surrender and release; and (iii) delivery keys to premises; or (b) and assignment lease with Landlord's prior written consent. 19. Thus, Plaintiff here has received full and complete benefit its bargain, i.e., payment in full, through vacate date, and retention security. 20. Plaintiff's predecessor in interest simply did not bargain for, and we would not have agreed to, a personal or corporate guaranty entire term lease

4 TRANSFER OF ASSETS AND SURRENDER OF POSSESSION 21. In December 2015, Plaintiff acquired title to Premises and assumed Lease. See Exhibit "G" Schepansky Ajidavit 22. Shortly reafter, Defendants received a letter from prior landlord advising sale and assignment Lease. 23. Upon investigation, I learned that Gary Barnett's Extell Development Company had purchased Premises. Published reports also confirmed Extell Development Company's acquisition. Annexed hereto as Exhibit "D" are exemplary copies published news reports. 24. As Guarantors, we were concerned about future Westside >s business, as we were fully aware Termination clauses in Lease. 25. We refore contacted Asher Schepansky, Extell Development Company, who was manager location. 26. As set forth in my deposition transcript, at page 45, I testified as follows: Q. Why did 536 vacate premises at 536 Avenue? A. I'm going to tell you why. Because we were notified new landlord, Extell Corporation, that we were going to be losing our store at that location. I had a conversation with Asher Schepanksy and asked him straight out what his plans were. And his answer was very clear and very chilling. His answer to that was we are developers, which I took to understand that y bought this building to develop it and current tenants would be displaced, disrupted and out business. 27. Faced with real peril termination Westside Ave's tenancy, it made no practical sense to improve and maintain Avenue location. 28. Instead, Guarantors, letter dated June 1, 2016, elected to invoke "Good Guy" guaranties and cause Westside Ave to vacate Avenue location June 30, Annexed hereto as Exhibit "E" June 1, 2016 Letter. 29. In conjunction with Guarantors' election to invoke Good Guy guaranties, Westside 6d

5 Ave sold its assets to Defendant, Westside 544, pursuant to an Asset Purchase Agreement dated February 16, 2016 for $92, See Exhibit "G" Grill Affirmation. 30. The purchase price was allocated as follows: Merchandise and Equipment $5, Goodwill $5, Franchise Agreement $82, With respect to Franchise Agreement valuation, Westside Ave entered into a Franchise Agreement in June, 2014, to extend its Franchise Term for twenty (20) years. Annexed hereto as Exhibit "F" Contract Data Schedule for June, 2014 Franchise Agreement. 32. At that time, per-year rate for a franchise term extension was $4, per year. Therefore, twenty (20)-year extension cost $90, The $82, valuation reflects balance franchise term. 34. Westside Ave's equipment was used at time Westside Ave took possession Ave location. The equipment had a limited shelf-life, as an upgrade was required pursuant to paragraph "G" under Contract Data Schedule in 2014 Franchise Agreement. Therefore, equipment was little value. 35. Finally, Plaintiff, relying upon Westside 662 Ave's ledger, which mistakenly lists goodwill as a $625, credit, claims that goodwill was undervalued. 36. Upon investigation, $5, valuation assigned to Goodwill was overvalued. The goodwill inures to franchisor, not to franchisee, and is refore no value to Westside Ave. Annexed hereto as Exhibit "G" form Rider that is attached to every Dunldn Donut asset transfer. See, Section 2.10 rein. 37. This transaction closed on May 11, Notably, Westside 544 did not assume any liabilities Westside Ave

6 38. In fact, Westside Avenue remained open for months after transfer its assets to continue paying any remaining debts and liabilities. 39. For example, attached hereto as Exhibit "H" a check from Westside Ave's account, dated August 17, 2016, made payable to Cheung Kee Refrigeration, Westside Ave's refrigeration repair company. 40. Westside 544 was opened with separate funds, at a separate location, pursuant to a separate lease, wherein it paid a security deposit with separate funds. Indeed, security deposit for Westside Ave has not been returned. 41. On June 1, 2016, Westside Ave notified Plaintiff that it would be surrendering possession Avenue location as June 30, See, Defendant's Exhibit "E". 42. Having received no objection from Plaintiff, Tenant memorialized its surrender possession as June 30, 2016 letter dated July 8, 2016, and delivered keys to Landlord. Annexed hereto as Exhibit "I" July 8, 2016 Letter. 43. The Landlord's counsel first objected to surrender and release Guarantors, letter dated July 15, 2016, on mere grounds that keys were delivered to Landlord on July 8, 2016 rar than July 1, Annexed hereto as Exhibit "J" July 15, 2016 Letter. THE RELEASE 44. Ultimately, in consideration an additional payment $22, (one month's rent and additional rent), Landlord released Guarantors from, amongst or things, all actions, causes action, and controversies (hereinafter "Release"). Annexed hereto as Exhibit "K" Release dated August 18, Specifically, Guarantors were released from: all actions, causes actions, suits debts... claims and demands whatsoever, in law, admiralty or equity which against RELEASEE

7 [Defendants], REALSOR [Plaintiffj... ever had, now have or hereafter can, shall or may, have for, upon, or reason any matter, cause or thing, whatsoever from beginning world to day date this RELEASE, expressly limited to Releasee's obligations (i) pursuant to Guaranty, dated October 2, 2008, to guaranty payment and performance obligations WESTSIDE DONUT AVE. VENTURES LLC, as tenant, under lease dated September 11, 2000 between Duel LLC and Whitestone Plaza Donut Corp., as "Lease" modified, extended and assigned ( "Lease") and (ii) under Lease, if any. 46. The Release clearly and unequivocally released Guarantors from "all actions" and "causes actions" that Plaintiff "ever had, now have or hereafter can, shall or may, have for, upon, or reason any matter cause or thing" relating to Lease. 47. Dov Hertz executed Release as an authorized signatory Plaintiff. 48. This present action relates to recovery rent due under Lease and as such is expressly barred Release. 49. Indeed, Plaintiff's counsel concedes, at paragraph "39" his affirmation, that Release "applies only to Novick and Greenstein". 50. Accordingly, instant action should be dismissed as to Guarantors. SURRENDER BY OPERATION OF LAW 51. The Defendant, Westside Ave, informed Plaintiff on June 1, 2016, that it would be surrendering Ave location on June 30, See, Defendant's E xhibit 'E". 52. Having not received a single objection to surrender, Defendant, Westside Ave surrendered possession on June 30, 2016 and delivered keys to Plaintiff on July 8, See, Defendant's Exhibit "f". 53. It was only after receiving keys that Plaintiff objected to surrender. The objection, however, simply related to keys being received on July 8, 2016, not July 1, See, Defendant's Exhibit 'J". 54. The parties resolved surrender an additional payment $22,

8 55. As reported in news, and as confirmed Asher Schepansky in our phone conversation, Plaintiff is a real estate developer, indeed considered, perhaps, largest, most active developer in city over last decade, that intended to redevelop Avenue location. 56. This act, i.e., redevelopment solely for benefit landlord, is inconsistent with landlord-tenant relationship re creating a surrender operation law as July 1, Plaintiff has confirmed that Defendant's space, as well as or spaces on that subject block, have remained vacant and are not being re-rented. 58. Westside Ave paid all rent and additional rent due and owing prior July 1, Accordingly, Plaintiff's application for partial summary judgment and legal fees should be denied. RENT LEDGER UNSUBSTANTIATED 60. Plaintiff claims that certain additional rent payments were due pursuant to Section 44 Lease. See, Shepansky Afdavit, However, Plaintiff has failed to substantiate any "Property Tax Charges" set forth in Plaintiff's ledger. See, Exhibit "L" Shepansky Afdatit. 62. Westside Ave did not receive any tax statements setting forth Real Estate Tax calculation. 63. Indeed, Mr. Shepansky, at his deposition, was unable to verify if rent statements were sent to Westside Ave. See, Exhibit "C" to Grill Afrmation, 100:5-25, 101: Moreover, Plaintiff's affidavit fails to account for security paid Westside Ave. 65. Finally, payment made Guarantors in exchange for Release is not reflected in rent ledger submitted Plaintiff. 66. Accordingly, Plaintiff has failed to prove that $476, is due and owing. DEPOSITIONS OF GARY BARNETT AND DOV HERTZ 67. In April, 2018, Defendants caused Subpoenas Ad Testificandum to be served upon Gary

9 Barnett and Dov Hertz. See, Exhibits "M" and "N" GrillAjirmation. 68. Gary Barnett, Extell Development's Principal and Plaintiff's President, likely issued direction that vacant spaces at Avenue location were not to be re-rented. Page 48 Exhibit 'C" David Grill, Esq. Afirmation. ~9jPrmation. 69. It is no moment that Plaintiff has not commenced demolition. 70. The refusal to rent any vacant space within building, and all adjacent buildings it owns on block, is consistent with a redevelopment for Plaintiff's sole benefit, re creating a surrender operation law. 71. The depositions Gary Barnett and Dov Hertz are necessary to explore Plaintiff's plans for building. 72. Mr. Schepansky, witness produced Plaintiff, was unable to confirm or deny redevelopment and indicated that Gary Barnett, Dov Hertz, "acquisition team" and "development team" would know plans for building. See Pages 35-37, Exhibit "C" David Grill, Esq. Ajirmation. 73. Inasmuch as Mr. Schepansky had no personal knowledge Plaintiff's redevelopment, Defendants sought to depose Gary Barnett and Dov Hertz. See Exhibits "M" and "N" Grill Ajinnation. 74. Accordingly, inasmuch as all facts relating to redevelopment property are within control Plaintiff, Defendants should be permitted to depose Gary Barnett and Dov Hertz. CONCLUSION 75. In closing, this action should be dismissed as to Guarantors, and Plaintiff's application should be denied in its entirety

10 WHEREFORE, it is respectfully requested that Defendants' application be granted, in its entirety, and that Plaintiff's application be denied, toger with such or and furr relief as Court deems just and proper. ~A ~q RICHARD GREENSTEIN Swayn to befo e this /Æy.~ay u, 201 Not Publi FRED L SEEMAN NotaryPublic, State NewYork No. 02SE Qualified in New York County Commission Expires July31,2018 X:\Office\Clients\F9643\Affirdavit.2.docx