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UNDER THE TERMS OF THE SURRENDER AGREEMENT THE TENANT OWED THE LANDLORD AN ADDITIONAL $175,000; UPON DEFENDANT’S DEFAULT, THE PLAINTIFF SUED FOR THE CONTRACTUAL LIQUIDATED DAMAGES OF OVER $1,000,000; THE JUDGMENT FOR $175,000 WAS UPHELD; THE LIQUIDATED DAMAGES OF OVER $1,000,000 VIOLATED THE PUBLIC POLICY AGAINST NON-STATUTORY PENALTIES AND FORFEITURES (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Rivera, over a three-judge dissent, determined the liquidated damages provision of the landlord-tenant surrender agreement violated the public policy against penalties or forfeitures for which there is no statutory penalty. Defendant-tenant, a grocery store chain, entered a surrender agreement with plaintiff-landlord which allowed defendant to get out from under the lease by making certain installment payments. Defendant defaulted on some of the payments (approximately $175,000) and plaintiff sought to recover liquidated damages of over $1,000,000. Defendant had timely surrendered the premises and it had been relet. Supreme Court had denied plaintiff’s motion for summary judgment and granted defendant’s cross-motion agreeing to pay $175,000:

Under our well-established rules of contract, the Surrender Agreement’s liquidated damages provision does not fairly compensate plaintiff for defendant’s delayed installment payments. The provision calls for a sum more than sevenfold the amount due if defendant had complied fully with the Surrender Agreement. We cannot enforce such an obviously and grossly disproportionate award without offending our State’s public policy against “the imposition of penalties or forfeitures for which there is no statutory authority” … . Accordingly, there was no error in rejecting plaintiff’s liquidated damages provision. Trustees of Columbia Univ. in the City of N.Y. v D’Agostino Supermarkets, Inc., 2020 NY Slip Op 06937, Ct App 11-24-20

 

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