Jefpaul Garage Corp. v. Presbyterian Hosp., 61 N.Y.2d 442 (1984)
A landlord’s acceptance of rental payments from a tenant prior to serving a notice of default under a lease agreement constitutes a waiver of the default, thereby precluding the landlord from terminating the lease based on that default.
Summary
Jefpaul Garage Corp. (tenant) and Presbyterian Hospital (landlord) had two leases with termination clauses requiring a written notice of default. The tenant withheld rent due to separate disputes, but the landlord didn’t send the required notices. The tenant sued to prevent the landlord from declaring a lease violation. While the lawsuit was pending, the tenant paid all withheld rent. The Court of Appeals held that the landlord’s acceptance of the rental payments before sending default notices meant the leases remained in effect. The notices, sent after the rent was paid, were ineffective, and the acceptance of rent waived the default, despite any non-waiver clauses in the lease.
Facts
Plaintiff (tenant) and defendant (landlord) had two separate leases for real property.
Each lease contained a clause stating that if the tenant defaulted on rent payment, the landlord could give written notice specifying the default and stating a termination date at least five days after the notice.
The tenant withheld partial rent payments due to disputes with the landlord, violating the leases.
The landlord did not serve notices of default as required by the termination clauses before receiving the back rent.
Negotiations failed, and the tenant sued to prevent the landlord from declaring the tenant in violation of the leases.
While the lawsuit was pending, the tenant paid all withheld rents to the landlord.
Procedural History
The tenant initiated actions seeking injunctions against the landlord.
The landlord filed cross-motions for summary judgment.
The Appellate Division granted the tenant’s motions for injunctions and denied the landlord’s cross-motions for summary judgment.
The landlord appealed to the New York Court of Appeals.
Issue(s)
Whether a landlord’s acceptance of rental payments from a tenant, prior to serving a notice of default as required by the lease’s termination clause, constitutes a waiver of the default, precluding the landlord from terminating the lease based on that default.
Holding
Yes, because the landlord’s acceptance of the rental payments prior to serving the notices of default resulted in each lease remaining in full force and effect. The notices, sent after the rent was paid, were therefore ineffective.
Court’s Reasoning
The Court of Appeals reasoned that the termination clauses in the leases were conditional limitations. The lease automatically terminates based on the passage of time specified in the termination notice.
“Under the particular clauses here, it is not the tenant’s conduct which, at the option of the lessor, operates on the lease to effect its termination as in some termination clauses…Rather, it is by the passage of time — the period of time specified in the termination notice —that the lease automatically comes to an end”.
Because the landlord accepted all withheld rent before serving the termination notices, the rental delinquencies were remedied. The notices were thus ineffective since there were no outstanding rental defaults to which they could apply.
The court rejected the landlord’s argument that the notices were effective because the withheld rents were paid pursuant to a stipulation reserving the parties’ rights, clarifying that the reserved contentions related to a different issue regarding the tenant’s right to cure defaults.
The Court also dismissed the landlord’s argument that the