A rental agreement between the Plaintiff as lessor and defendant as lessee has been terminated. Under the settlement agreement, the defendant paid the plaintiff $261,751.73. The Agreement also required the Defendant to make monthly “Currency Payments” and further provided that if the Defendant defaults under the Agreement “the aggregate amount of all Fixed Rent, additional rent or other amounts and charges due during the term of the Lease becomes due and payable immediately afterwards…”

The defendant failed to make four monthly surrender payments on time and, notwithstanding the fact that the plaintiff re-let the property one month after delivery, the plaintiff filed a lawsuit to enforce the damages provision, requesting a summary judgment to collect $1,020,125.15, plus interest and other costs provided for in the lease. Confirming the rulings of the court and the First Department Appeals Division, the New York Court of Appeals ruled that the damages determined was an unenforceable penalty

“because it is clearly disproportionate to the damages for the sole contractual breach at issue in this appeal, that is, arrears of the monthly surrender installments … The indemnity provision effectively reinstated Defendant’s future lease obligations under the terminated lease. .. arising out of a breach of the Surrender Agreement. That damages was 7½ times what the claimant would have received had the defendant fully complied with the Surrender Agreement. The claimant cannot enforce a non-existent lease under the guise of damages for breach of a separate contract.”

The Administrators of Columbia University in the City of New York v. D’Agostino Supermarkets, Inc., 2020 NY Slip On 06937, Decided November 24, 2020, is posted on http://nycourts.gov/reporter/3dseries/2020/2020_06937.htm.

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