Article

Note: Pret 399 Park, Inc. (Lessee/Applicant) opened a standby letter of credit to assure payment of rent in favor of BP 399 Park Avenue LLC (Landlord/Beneficiary) as required by a commercial lease agreement. When Lessee/Applicant failed to pay its rent, Landlord/Beneficiary drew on the standby and was paid.

Landlord/Beneficiary then sued Lessee/Applicant for residual unpaid rent and other damages. Lessee/Applicant moved to dismiss and Landlord/Beneficiary moved for summary judgment. The Supreme Court of New York, New York County, Ramos, J., rejected both motions. The Supreme Court of New York, Appellate Division, First Department, Sweeny, JP., Renwick, Andrias, Feinman, Gesmer, JJ., in a per curiam opinion, affirmed.

The appellate court rejected Lessee/Applicant’s argument that Landlord/Beneficiary had exhausted its remedies by drawing on the standby. The opinion noted that the lease did not provide that drawing on the standby would be the only remedy available; in fact, the lease granted Landlord/Beneficiary “the right to invoke any other remedy allowed by law or in equity.” The appellate court further noted that the standby did not cover the full rent for the lease period, and Landlord/Beneficiary was not barred from pursuing an action for additional amounts due. The appellate court also noted that Lessee/Applicant raised a triable issue of fact “whether Citibank ([Landlord/Beneficiary]’s predecessor) knew that it was contracting with an assetless [sic] entity…and could not recover against [Lessee/Applicant’s parent company]”, and “whether Citibank received a benefit (a larger than usual security deposit) in exchange for entering into a lease with an assetless [sic] entity”.

[ARB/MMY]

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