135 East 57th Street LLC v. Daffy’s Inc.

Daffy’s Inc. (the defendant) was a discount clothing retail chain with multiple locations throughout New York City. One of the defendant’s locations was under a lease from 135 East (the plaintiff) in 1994. Under the terms of the lease, the defendant had an option to renew the lease for a five-year term. The lease required the option to be exercised by January 31, 2010 in writing, but the defendant accidentally missed the option date. Instead, the defendant verbally notified the plaintiff of its intent to renew five days after the renewal date and eventually notified the plaintiff in writing five days later. The plaintiff sought a declaratory judgment that the defendant failed to timely renew its lease. At trial, the defendant argued that its mistake was made in good faith, and that the mistake did not prejudice the plaintiff. Additionally, the defendant presented evidence that it made improvements to the property by painting the retail space when it acquired the lease in 1994. The trial court found for the defendant and excused the late renewal, holding that the defendant was entitled to equitable relief due to the improvements that the defendant made to the property. If the lease were terminated, the defendant would suffer a forfeiture. The plaintiff appealed.