- Good-Guy Guarantors Were Not So Good
- Million Dollar Collection Not “Tangible Personal Property”
- Teacher Aide’s Prior Conviction Not An Impediment
Good-Guy Guarantors Were Not So Good
In REP A8-2026, LLC v. Authority Transportation, Inc., we recently won a motion before the Nassau County Supreme Court for summary judgment against a corporate tenant, which breached a lease by vacating the leased premises well before the expiration of its lease term, and its guarantors who signed a “good-guy guarantee.”
The Court recognized that a “guarantee of a commercial lease that includes a so-called ‘good guy’ clause is often referred to as being a ‘good guy guarantee.’ The good guy clause typically addresses the conditions that must be satisfied to terminate the guarantee when the tenant (i.e., the principal obligor) vacates and surrenders the leased premises – and the landlord (i.e., the creditor) regains possession – at or prior to the lease’s expiration. Such conditions may vary as negotiated and agreed to between the guarantor and landlord, but usually include timely prior notice of the tenant’s intention to vacate and surrender the premises, the condition status of the premises forms in a favorable condition when vacated and that the tenant be current in the payment of rent, and other obligations through the date the premises is surrendered. If the specified conditions are met, the guarantee will be terminated and the guarantor released from obligations under the lease that arise after the premises surrender. The guarantor, however, will remain liable, and the guarantee enforceable against it, for guaranteed obligations that accrue before and were outstanding upon, the surrender date.”
In this case, the good-guy guarantee provided as follows:
The continuing obligations of Guarantor under this Guaranty may be unilaterally terminated by Guarantor at any time provided each and every one of the following conditions are met: (a) Tenant surrenders the premises demised by the Lease to Owner vacant and in the condition required by the terms of the Lease for surrender of possession at the expiration of the term of the Lease; (b) all rent (whether fixed or additional rent) due and owing through and including the date which is two (2) months following the surrender date is paid in full; (c) Tenant tenders the keys to the demised premises to an officer, director or partner of Owner; (d) Tenant delivers a written acknowledgement that Tenant is only surrendering possession of the Premises and that it remains liable for its obligations under the lease; (e) no uncured default exists under the Lease at the time of such surrender; and (f) any monies paid or payable to the Broker shall have been reimbursed to Landlord. Upon full and complete satisfaction of the foregoing conditions, Guarantor shall be released from those obligations under this Guaranty which accrue from and after the date of such satisfaction. Nothing in this paragraph or this Guaranty shall be deemed to release Tenant from its obligations under the Lease.
In opposition to the motion for summary judgment, the tenant and guarantors argued that the conditions of the good guy clause were met. However, the Court concluded to the contrary, because the tenant did not submit any canceled checks to demonstrate it had paid the rent through the date it allegedly vacated the premises or that it paid the additional money required under the good-guy guarantee. Additionally, the Court concluded that the tenant failed to deliver the keys to “an officer, director or partner of Owner.” Recognizing that the “Lease provides that no employee of the plaintiff/landlord or plaintiff/landlord’s agent shall have the power to accept the keys of the premises prior to termination of the lease, that in any event the delivery of the keys to any such employee or agent shall not operate as a termination of the lease or surrender of the demised premises, and a no surrender and acceptance of the lease would be binding unless in writing signed by the plaintiff/landlord,” the tenant’s argument that an employee of the landlord told the tenant to leave the keys in the mailbox with “Harry,” did not satisfy the surrender requirement. The Court also noted that the lease incorporates an “integration and no oral modification clause which provides that, in order to be effective, any change, modification, discharge or abandonment of the Lease must be done through a signed, written agreement.” Therefore, any of the tenant’s arguments that the landlord by its conduct somehow modified the tenant’s or the guarantors’ contractual obligations was to no avail. The Court further found that the tenants’ “self-serving emails confirming the ‘oral agreement’ [to surrender the premises] may not support the claimed modification since ‘[u]nanswered written communications are not, ordinarily admissible in evidence against the person addressed, as admissions of truth of a statement contained therein.’”
Based on these conclusions, supported by the unequivocal terms of the lease and good-guy guarantee, summary judgment was granted as to liability, and the matter has been set down for trial on the amount damages and attorneys’ fees to be awarded the landlord. This case demonstrates the need to strictly adhere to the conditions of a “good-guy clause” in order to avoid liability, and the importance of a strong integration and no oral modification clause and no surrender clause.
Million Dollar Collection Not “Tangible Personal Property”
In Estate of Rothschild, a Bronx County Surrogate’s Court held that the decedent’s multi-million dollar collections, including stamps and coins did not constitute tangible property specifically bequeathed under a will.
In this will construction proceeding, the respondent, Susan Nieschlag, a cousin of the decedent’s predeceased spouse, sought an order determining that the decedent’s collections of stamps, platinum, gold, and silver coins and various currencies (“the collections”) constitute “tangible personal property” specifically bequeathed to her under Article TWO (A) of the decedent’s will.
The motion was opposed by the executor, who contended that the collections are part of the “residuary estate” that passes to an irrevocable trust established by the decedent with numerous beneficiaries, principally charities (“the trust”).
The decedent died on June 2, 2012, and his spouse, Gertrude F. Rothschild, predeceased him on November 11, 2010. They fled Germany during the 1930’s to escape the Holocaust, married in 1950 and had no children. The decedent was a successful commodities trader, and his spouse was a scientist and professor at Columbia University. They executed similar trusts and wills on March 22, 2010.
The decedent’s will and trust leave approximately 70 percent of the net distributable estate to charities, and the remaining 30 percent remains in trust for designated individuals with the balance passing to charities upon their deaths. Their collections were not maintained in the traditional way or displayed in their various homes, but were secreted in various locations in their Hartsdale, New York house. Article TWO (A) of the decedent’s will states:
“I give all of my tangible personal property (other than currency) including without limitation, wearing apparel, personal effects, jewelry, furniture, furnishings, pictures, paintings and other objects of art, silver, china, glassware and other household effects, books and automobiles to my wife, or if she does not survive me, to SUSAN NIESCHLAG, or if she does not survive me, to ALEXA NIESCHLAG.”
Nieschlag urged a very broad construction of the term “tangible personal property” as “encompassing all property that can be measured, felt or touched, or is in any other way perceptible to the senses.” The executor opposed the motion and asserted that the investment-grade collections, worth millions of dollars, are not items of tangible personal property intended to be disposed of under Article TWO (A) of the will, and instead are part of the decedent’s residuary estate passing to an irrevocable inter vivos trust under Article FOUR of the will.
The Court reasoned that “[t]he primary purpose in construing a will or trust is to ascertain and give effect to the testator’s intent as expressed in the instrument, and whenever possible, intent should be determined from the four corners of the instrument itself. When there is a residuary clause, the whole will must be read as one instrument and a construction is not to be given to a preceding clause as to cause it to frustrate the testator’s intent to give the residuary to a different beneficiary.”
The Court further reasoned that “the term ‘tangible personal property’ embracing the words ‘personal effects’ is construed as being limited to tangible property having an intimate relation to the testator and ordinarily used by him. Pursuant to the rule of ejusdem generis, a bequest will be deemed to be restricted to the particular types of property which are specifically mentioned in the same text. In Paragraph TWO (A) the decedent specifically lists items presumably used by him on a daily basis: wearing apparel, jewelry, furniture, furnishings, pictures, paintings, and other objects of art, silver, china, glassware and other household effects, books and automobiles. There is no mention of the collections, currency is specifically excluded, and there is nothing in the will suggesting an intention to include the collections in Article TWO (A).” Also, Article Two (A) did not expand tangible personal property to mean personal property “of every kind,” but enumerated specific items conveyed.
The Court also noted that the “value of an item is not necessarily determinative of whether it constitutes personal property. For example, a yacht frequently used for entertainment and enjoyment by a decedent and his spouse who enjoyed a lavish lifestyle, as well as six automobiles located at various seasonal homes, were determined to constitute tangible personal property passing to the spouse.”
The Court found that the decedent and the spouse secreted the collections in various hiding places in their home, and also stored many stamps in bank vaults, each of which supports an inference that the collections were not openly displayed or enjoyed on a daily or frequent basis.
The Court concluded: “Based on this state of the record, the will is construed to read that stamps, coins, pure platinum, gold, and silver coins, various currencies and bullion are to pass into the residuary estate under Article FOUR, to be added to the principal of the decedent’s irrevocable trust, which principally benefits numerous charities, as well as certain individuals, including the Nieschlags.”
Teacher Aide’s Prior Conviction Not An Impediment
In Matter of Thomas v. N.Y.C. Dep’t of Educ., a former teacher aide, Thomas, sued to overturn the Department of Education’s (DOE) denial of his application to return to his paraprofessional position. He previously pleaded guilty to drunk driving assault after seriously injuring a pedestrian, and the DOE terminated his employment. A school principal offered Thomas a paraprofessional position at his school, but DOE denied Thomas’ application to return arguing his criminal record bore a direct relationship to the license’s requirement of working with children.
The Court began its decision noting: “This case is about the second chances afforded by Correction Law § 752.” As previously reported in earlier newsletters, the New York State Human Rights Law states that a job applicant may not be denied employment or licensure because of his or her conviction record, unless there is a direct relationship between the offense and the job or license sought, or unless hiring or licensure would create an unreasonable risk to property or to public or individual safety. This law applies to employers with ten or more employees. Factors to consider in analyzing whether employment may be denied are found in N.Y. Corrections Law, Article 23-A.
Here, Thomas argued the DOE’s denial violated Correction Law Article 23, noting there was no evidence his conviction bore a direct relationship to his ability to perform as a paraprofessional, or that employing him posed an unreasonable risk to the safety and welfare of children. The Court found that Thomas “worked as a paraprofessional with special needs children without blemish since 2002, until he made the selfish decision to get behind the wheel of a car and drive drunk in 2006, seriously injuring a pedestrian. Petitioner’s blood alcohol was double the legal limit. He pled guilty in 2009 to a drunk driving assault in the second degree (Penal Law §120.05 ). As a result of his guilty plea, DOE terminated petitioner’s employment in 2009. Petitioner maintains that he has been sober since the accident. He successfully completed treatment at Montefiore Medical Center, North Division Outpatient Chemical Dependency Program. For the last four years petitioner has been employed — without incident — as a truck driver. His quest is supported by many people including public school Principal Frank Hernandez, who interviewed petitioner and offered him a paraprofessional position at the principal’s school. His current employer submitted a letter of recommendation in support of his application.”
The DOE denied petitioner’s application to return as a paraprofessional, because Thomas’ “criminal record history includes a recent felony offense for assault. Furthermore, statements made by you during the background interview that you were ‘under the influence’ of alcohol at the time of that incident, which subsequently caused substantial injury to a pedestrian.” The DOE argued that Thomas’ application was properly denied because the DOE weighed the relevant statutory factors under Article 23-A of the Correction Law and properly concluded that petitioner’s conviction and prior acts do bear a “direct relationship” to his ability to perform as a paraprofessional and that employing him poses an unreasonable risk to the safety and welfare of children.
Correction Law § 752, which is entitled “Unfair discrimination against persons previously convicted of one or more criminal offenses prohibited” provides:
No application for any license or employment, and no employment or license held by an individual, to which the provisions of this article are applicable, shall be denied or acted upon adversely by reason of the individual’s having been previously convicted of one or more criminal offenses, or by reason of a finding of lack of “good moral character” when such finding is based upon the fact that the individual has previously been convicted of one or more criminal offenses, unless:
(1) there is a direct relationship between one or more of the previous criminal offenses and the specific license or employment sought or held by the individual; or
(2) the issuance or continuation of the license or the granting or continuation of the employment would involve an unreasonable risk to property or to the safety or welfare of specific individuals or the general public.
Under Correction Law § 753, the following specific factors must be considered in making any determination:
(a) The public policy of this state, as expressed in this act, to encourage the licensure and employment of persons previously convicted of one or more criminal offenses.
(b) The specific duties and responsibilities necessarily related to the license or employment sought or held by the person.
(c) The bearing, if any, the criminal offense or offenses for which the person was previously convicted will have on his fitness or ability to perform one or more such duties or responsibilities.
(d) The time which has elapsed since the occurrence of the criminal offense or offenses.
(e) The age of the person at the time of occurrence of the criminal offense or offenses.
(f) The seriousness of the offense or offenses.
(g) Any information produced by the person, or produced on his behalf, in regard to his rehabilitation and good conduct.
(h) The legitimate interest of the public agency or private employer in protecting property, and the safety and welfare of specific individuals or the general public.
The Court noted that in making this determination it is important for the agency to carefully analyze all the factors and to consider that “[t]he Legislature has determined that, as a general rule, it is unlawful for a public or private employer to deny an application for a license or employment on the ground that the applicant was previously convicted of a crime. This general prohibition advances the rehabilitation and reintegration goals of the Penal Law. Furthermore, barring discrimination against those who have paid their debt to society and facilitating their efforts to obtain gainful employment benefits the community as a whole.”
The Court also noted that an applicant who has a certificate of relief from disabilities is entitled to a presumption of rehabilitation in regard to the specified offense. A certificate of relief from disabilities is issued by New York State to a person who has committed a felony or misdemeanor, but has subsequently shown that he or she has been rehabilitated, and removes mandatory legal bars or disabilities imposed as a result of the conviction. Thomas has such a certificate and therefore, is entitled to that presumption.
The Court concluded that although the DOE considered all the requisite elements, “[i]t erroneously concluded that the crime, and the facts which surrounded petitioner’s plea, bore a ‘direct relationship to the license’s requirement of working with children and, failed to give effect to the presumption to which petitioner was entitled. This conclusion is arbitrary and capricious as there is no evidence in the record concerning this ‘direct relationship’ nor does the DOE ever articulate how petitioner’s crime or his prior acts bear a ‘direct relationship’ with the job duties of a paraprofessional. Instead the denial appears to be based simply on supposition unsupported by facts. Such decision-making does not comport with the Correction Law, and runs athwart the presumption of rehabilitation afforded by Correction Law. *** Further, DOE arbitrarily concluded that petitioner would pose an unreasonable risk to the safety and welfare of the children with whom he previously — and successfully worked — presumably because he would relapse or because he is in denial.”
The Court held: “Therefore, the law mandates that petitioner is entitled to a second chance.”