6525 Belcrest Road, LLC

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

__________________________________________

:

In re: : Chapter 11

:

6525 Belcrest Road, LLC, : Case No. 21-10968 (MEW)

:

Debtor. :

__________________________________________:

DECISION AS TO PROOF OF CLAIM OF DEWEY, L.C.

A P P E A R A N C E S:

LEECH TISHMAN ROBINSON BROG PLLC

Attorneys for 6525 Belcrest Road, LLC

New York, New York

By: John D’Ercole, Robert Sasloff

WHITEFORD, TAYLOR & PRESTON LLP

Attorneys for Dewey, L.C.

Pittsburgh, Pennsylvania and New York, New York

By: Scott M. Hare, Kenneth M. Lewis

HONORABLE MICHAEL E. WILES

UNITED STATES BANKRUPTCY JUDGE

Debtor 6525 Belcrest Road, LLC (“Belcrest”) used a parking lot owned by Dewey, L.C.

(“Dewey”). A Ground Lease gave Dewey the right to designate nearby parking garages as

substitute parking spots for Belcrest’s use. Dewey exercised that right, but Belcrest opposed the

substitution. Belcrest claimed that it owned direct property rights in the Dewey parking lot that

were separate from the Ground Lease; those arguments were rejected by a local Planning Board,

an arbitrator and the Maryland state courts. Belcrest also argued that the proposed substitution

violated the terms and conditions of the Ground Lease. An arbitrator ruled against Belcrest on

the Ground Lease issues in a series of three summary judgment orders, the last of which was

issued on May 18, 2021.

Belcrest filed a chapter 11 petition on May 19, 2021 to try to stop the parking substitution

from taking effect. I denied Belcrest’s motions for a temporary restraining order and preliminary

injunction. I also granted relief from the automatic stay to permit the arbitration and state court

proceedings to continue. The arbitrator entered a final decision in favor of Dewey in August

2021, and thereafter Belcrest exercised its right to reject the Ground Lease under section 365 of

the Bankruptcy Code.

Dewey filed a proof of claim that seeks damages from the rejection of the Ground Lease

and that also seeks $23,812.19 of fees and costs that the arbitrator directed Belcrest to pay to

Dewey. Belcrest disputes Dewey’s claim. Belcrest argues that Dewey assigned all rights under

the Ground Lease to another party and that Dewey has no standing to file a claim. Belcrest also

argues that Dewey lied to the arbitrator about the arrangements that Dewey had made for the

substitute parking, and that Dewey should be estopped or otherwise punished for that conduct.

Belcrest also disputes some components of Dewey’s rejection damages claim. Dewey insists

that it owns the Landlord’s rights to collect rejection damages, that there is no basis for an

estoppel, and that Dewey has correctly calculated the amounts of its claim.

The parties stipulated to many of the underlying facts in a Joint Pretrial Order, ECF No.

191, and they stipulated to the admissibility of exhibits during a trial that was held on May 11,

2023. The parties have also submitted proposed findings of fact and conclusions of law, and

they have supplemented the record to include some additional papers that I requested and to

address additional points that I raised.

For the reasons set forth below, the Court will allow Dewey’s proof of claim in the

amount of $2,428,675.83.

Jurisdiction

The parties agree that I have jurisdiction under sections 157 and 1334 of title 28 of the

United States Code and section 502 of the Bankruptcy Code and the power to issue a final

determination as to Dewey’s claim.

Findings of Fact

The Ground Lease

1. In 1998, Dewey entered into a Ground Lease (the “Ground Lease”) with an

entity that owned the “Metro III” building in Hyattsville, Maryland. The “Leased Premises”

were 7.9 acres of property that was located across the street from the Metro III building. The

tenant under the Ground Lease (the “Tenant”) had the right to use the Leased Premises “for the

parking of vehicles.” The Tenant agreed to pay base rent that would equal a percentage of the

Tenant’s gross rental income but that could not be less than $690,000 per year. The Tenant also

agreed to pay taxes and utility charges as “Additional Rent.”

2. Section 6.1 of the Ground Lease gave Dewey the right “at any time and from time

to time” to designate “Substituted Leased Premises,” at which time the “Substituted Leased

Premises shall for all purposes of this Ground Lease become the Leased Premises.”

3. Dewey and a successor owner of the Metro III building entered into a First

Amendment to the Ground Lease dated July 16, 2014 (the “Ground Lease Amendment”). The

Ground Lease Amendment introduced the concepts of “Temporary Substituted Leased Premises”

and “Permanent Substituted Leased Premises” in place of the term “Substituted Leased

Premises.” It also expanded the locations that Dewey was permitted to designate for substitute

parking. The permissible “Permanent Substituted Leased Premises” included two garages

known as Parking Garage A and Parking Garage B, which were not owned by Dewey and which

were not located on property owned by Dewey.

4. At the times relevant to this matter, the Bernstein Companies (“Bernstein”)

owned New Town Parking, LLC (“New Town”), which in turn owned Parking Garage A.

Bernstein also owned New Town Metro I, LLC (“New Town Metro”), which leased Parking

Garage B from another party.

5. Belcrest bought the Metro III building in 2015. At that time Belcrest succeeded,

by assignment, to the rights and obligations of the Tenant under the Ground Lease and the

Ground Lease Amendment.

The 2019 Assignment Agreement

6. At some time in or before 2019, Dewey decided to develop property that it

owned, including the property that was subject to the Ground Lease. The development could not

proceed unless Dewey identified substitute parking for Belcrest.

7. Dewey entered into an Assignment and Assumption of Parking Lease with New

Town dated as of February 14, 2019 (the “Assignment Agreement”). The Assignment

Agreement recited Dewey’s desire to designate the top three floors of Parking Garage A as

Permanent Substituted Leased Premises under the Ground Lease. It also recited Dewey’s desire

to transfer, to New Town, “all of Assignor’s right, title and interest in and to” the Ground Lease.

8. Paragraph 3 of the Assignment Agreement required Dewey to send an “Exchange

Notice” informing Belcrest of the parking substitution and to do so “[o]n or before September

30, 2021.” The effective date of the substitution (the “Transfer Date”) was to be no earlier than

“thirty (30) days following the date of the Exchange Notice.”

9. The Assignment Agreement required that the “Exchange Notice” be in

substantially the following form:

Dewey, L.C. is the Landlord and 6525 Belcrest Road LLC is the assignee

Tenant under the lease referenced above (the “Parking Lease”). This letter

constitutes an Exchange Notice pursuant to Section 6.1 of the Parking Lease.

Tenant is hereby notified that effective _____, 20__ (the “Transfer Date”),

the Leased Premises, as defined in the Parking Lease, will become the top three

(3) floors of the structured parking garage known as “Parking Garage A” and

located at 3325 Toledo Road, Hyattsville, Maryland 20872. Under the Parking

Lease, space in Parking Garage A is expressly identified as a permitted Permanent

Substituted Leased Premises.

Garage A is owned by New Town Parking, LLC. Landlord has assigned

its interest in the Lease to New Town Parking, effective as of the Transfer Date.

To coordinate parking activity of your tenants (and permitted subtenants, if

applicable), please contact New Town Parking at [insert contact info].

Section 6.2 of the Parking Lease requires Tenant to execute and deliver

such documents as Landlord may reasonably require to evidence the substitution

of the Substituted Leased Premises for the Original Leased Premises, including,

without limitation, an amendment to the Parking Lease. Accordingly, Landlord

hereby requests that Tenant execute the enclosed Second Amendment to Parking

Lease and return it to us. We will return a fully executed copy to you.

10. The Assignment Agreement also required Dewey to include, with the Exchange

Notice, a proposed Second Amendment to the Ground Lease, the form of which was set forth in

another exhibit to the Assignment Agreement. However, Dewey and New Town agreed that a

failure by Belcrest to execute the proposed Second Amendment would not affect the validity of

the proposed assignment or the validity of the Exchange Notice.

11. Section 5 of the Assignment Agreement provided that all rents payable under the

Ground Lease prior to the “Transfer Date” were to belong to Dewey, but that rents payable after

the Transfer Date were to belong to New Town. Section 7(m) of the Assignment Agreement

stated that the parties did not intend its benefits to inure to any person or entity that was not a

party to the agreement.

12. Belcrest knew of Dewey’s development plans and was active in opposing them,

particularly as they might affect Belcrest’s parking rights. The history of many of those disputes

is recounted in two published decisions by the Maryland courts. See 6525 Belcrest Rd. LLC v.

Prince George’s Cnty. Council, No. 726, 2022 Md. App. LEXIS 335 (Md. Ct. Spec. App. May

4, 2022) and 6525 Belcrest Rd., LLC v. Dewey L.C., No. 1393, 2022 Md. App. LEXIS 763 (Md.

Ct. Spec. App. Oct. 25, 2022). However, Belcrest did not know of the Assignment Agreement

(or of a later amendment to that agreement that is described below) until June 2022, after this

Court ordered the production of certain documents in response to Belcrest’s discovery requests.

The May 2020 Notice of Substitution

13. Dewey sent a “Notice of Substitution” to Belcrest on May 5, 2020. The Notice of

Substitution designated 864 parking spaces in Parking Garage A and 142 spaces in Parking

Garage B as the Permanent Substituted Leased Premises under the Ground Lease. It also stated

that the exchange would be effective on November 15, 2020.

14. The full text of the May 5, 2020 Notice of Substitution was as follows:

This notice is sent on behalf of Dewey, LC. (“Landlord”) to 6525 Belcrest Road,

LLC (“Tenant”) pursuant to the terms of the Ground Lease dated March 31, 1998

(Ex. 1), the First Amendment to the Ground Lease dated July 16, 2014 (Ex. 2),

and the Assignment and Substitution of Ground Lease dated November 9, 2015

and recorded among the Land Records of the Circuit Court for Prince George’s

County on December 28, 2015 (Ex. 3).

Pursuant to Section 6.f of the First Amendment to the Ground Lease, this letter

shall provide notice of New Permanent Substituted Lease Premises. Tenant will

be allocated 864 spaces in Garage A and 142 spaces in Garage B. The spaces in

Garage A will consist of the top 3.5 floors. The location of Garage A is described

more fully in Exhibit #4. The Garage B spaces will be secured by issuance of

parking cards. Tenant will be issued 142 parking cards which will access 142

spaces. The location of Garage B is described more fully in Exhibit #4.

Access to Garage A and Garage B will be through the same entrance currently

used by parking patrons to those garages. Parking will be administered by the

current parking manager, Atlantic Parking. The garage will be continued to be

maintained by existing staff. The notice reiterates the invitation to address any

parking administrative questions to Atlantic Parking, the parking manager.

This exchange of lease premises shall become effective on November 15th, 2020.

Tenant will vacate the original leased premises and occupy the Permanent

Substitute Leases [sic] premises on that date. The Permanent Substituted Lease

Premises has direct access from a public thoroughfare. Tenant will be provided

appropriate easements of access that comply with the Ground Lease and first

amendment thereto. The designation complies with the terms of the Ground

Lease and first amendment thereto and complies with “all zoning and other

applicable laws, rules and regulations.” This designation is consistent with prior

communications to you through counsel dated March 10, 2020, March 18, 2020

and March 30, 2020. This notice constitutes the Exchange Notice under Section

6.1 of the Ground Lease.

Should Tenant contest this Notice of Exchange and the substitution of leased

premises, it may submit the issue to binding arbitration before the American

Arbitration Association as required by Section 11.12 of the Ground Lease, the

exclusive remedy for the resolution of any such claim(s).

15. The Notice of Substitution that Dewey sent to Belcrest on May 5, 2020 differed

from the Exchange Notice attached to the Assignment Agreement, and from other terms of the

Assignment Agreement, in the following ways:

(a) The Assignment Agreement stated that the Permanent Substituted Leased

Premises would be located in the top 3.5 floors of Parking Garage A. The May 2020

Notice of Substitution instead said that some spaces would be made available in Parking

Garage A and that other spaces would be made available in Parking Garage B. Parking

Garage B was owned by an unrelated party and was leased by New Town Metro, not by

New Town. New Town Metro was not a party to the Assignment Agreement. The

parties offered no evidence to explain why space in Parking Garage B had been included

in the May 5, 2020 Notice of Substitution. They also did not explain how (or whether)

the Parking Garage B spaces were subject to the Assignment Agreement in May 2020.

(b) The Assignment Agreement required Dewey to disclose the Assignment

Agreement to Belcrest. The May 2020 Notice of Substitution did not mention the

Assignment Agreement, and Dewey did not actually disclose it until June 2022.

(c) The Assignment Agreement required Dewey to ask Belcrest to sign an

amendment to the Ground Lease. The May 2020 Notice of Substitution did not refer to

any proposed amendment and did not ask Belcrest to execute any documents.

16. By letter dated June 12, 2020, Belcrest asked for “concrete and definitive

documentation about Dewey’s purported claims about having secured arrangements adequate

and sufficient to substitute” for Belcrest’s parking rights. The parties offered no evidence as to

how Dewey responded, except to confirm that Dewey did not provide Belcrest with a copy of the

Assignment Agreement at that time.

The Arbitration

17. Belcrest contested Dewey’s substitution notice, and Dewey commenced an

arbitration to resolve the parties’ disputes.

18. Belcrest argued that the arbitrator lacked authority over the parties’ dispute. It

also argued that Belcrest owned property rights under a variety of property, zoning and other

theories and that these rights were separate from (and superior to) any rights it might have under

the Ground Lease. Belcrest further argued that it had property rights to the entirety of a larger

19.96 acre site of which the “Leased Premises” were only a part.

19. On October 19, 2020, the arbitrator issued an order that granted partial summary

judgment in favor of Dewey on each of the issues mentioned in paragraph 18, above. The

arbitrator held that the arbitrator had authority over the parties’ dispute; that Belcrest did not own

an express or implied easement or any of the other separate property rights that Belcrest had

claimed; that the parties’ relationship was governed solely by the Ground Lease (as amended);

and that Belcrest’s rights were limited to the property specified in the Ground Lease and did not

extend to the larger 19.96 acre property. The arbitrator also declared that Dewey had a

contractual right to make a parking substitution under the Ground Lease and the Ground Lease

Amendment, while leaving open certain questions about the specific substitution that Dewey had

proposed.

20. The parties continued to litigate other issues relating to the substitute parking.

Belcrest argued that any substitution had to give Belcrest legal rights of the same character that

Belcrest had under its existing Ground Lease – i.e., a recordable leasehold or similar interest in

specific property. Belcrest also argued that Dewey should be required to prove that Dewey had

secured enforceable rights to the substituted parking for the entire remainder of the term of the

Ground Lease, which was not scheduled to expire until 2045.

21. As noted above, the Assignment Agreement provided that the designated parking

spaces would become the Leased Premises and that New Town would take over as lessor.

Belcrest concedes that “most, if not all of the Debtor’s arguments in the Arbitration would have

been negated by the Assignment, since the Debtor would have retained all of its rights under the

Ground Lease, only the Landlord and the location of the parking would be different.” See

Debtor’s Proposed Findings of Fact and Conclusions of Law, ECF No. 196, at ¶ 147; see also

Trial Tr. at 62:4-16. However, Dewey did not disclose the Assignment Agreement to the

arbitrator or to Belcrest.

22. On December 15, 2020, Dewey filed a second motion for partial summary

judgment in the arbitration. Dewey argued that the Ground Lease did not require that Dewey

have ownership or control over the property in which the substituted parking spaces would be

located. Dewey also stated that New Town Parking LLC had “leased” 842 spaces in Garage A to

Dewey and that New Town Metro I, LLC had “sublet” 142 parking spaces in Garage B to

Dewey, and that these spaces would constitute the substitute parking.

23. Before the submission of the December 15 motion papers the attorney for Dewey

(Mr. Maloney) circulated a proposed affidavit to be executed by Joseph Galli of New Town. The

draft affidavit described the arrangement between New Town and Dewey as a “sublet” of

parking spaces by New Town. One of the principals of Dewey (Mr. DeCain) said in an email

that he did not think the arrangement was a “sublet” with respect to Garage A, since New Town

owned Garage A. When counsel asked how the arrangement should be described, DeCain

answered that “I would call [the Garage A arrangement] a primary lease (as opposed to a

sublease). In Garage B, I would call it a sublease.”

24. On December 15, 2020, Mr. Galli executed an affidavit that was submitted with

Dewey’s motion for summary judgment. The Galli affidavit stated – as did the motion – that

New Town Parking, LLC had “leased” 842 parking spaces to Dewey in Garage A and that New

Town Metro I, LLC had “sublet” 142 parking spaces in Garage B to Dewey.

25. Belcrest filed papers in opposition to Dewey’s second motion for partial summary

judgment. Belcrest argued again that Dewey should be required to produce a lease or other

enforceable agreement showing Dewey’s control over the relevant parking spaces and showing

that such control would extend through 2045.

26. Dewey’s counsel and others discussed how to respond to Belcrest’s contentions.

Mr. DeCain of Dewey said in an email dated January 7, 2021 that the Assignment Agreement

provided the answer to Belcrest’s complaints:

[I]f I understand it correctly (and perhaps we don’t want to get into this at this

stage) but we are assigning the lease to Bernstein. They are effectively becoming

the new landlord. Dewey will not have a role going forward. With the

assignment, Bernstein will have an obligation to honor the lease, just like Dewey

did.

Mr. Maloney (Dewey’s counsel) responded that “[w]e don’t want to get into potential

assignment of their lease, at least right now. What can we say in the affidavit about the

relationship between Bernstein and Dewey which extends past 2045?”

27. In another message on January 7, 2021, Mr. Maloney asked “what is the

agreement between Bernstein and Dewey that gives us the right to designate this parking in the

Exchange Notice?” Mr. DeCain responded, “Well it is the assignment, but I think we do not

want to get into that, though I am not sure why.” Mr. Maloney then explained that a reference to

the assignment would introduce a new issue about which the arbitrator might want to have a

hearing. Mr. Maloney proposed that the reply papers continue to refer to sublets of the relevant

spaces.

28. Dewey’s counsel sent draft reply papers to Mr. Galli of New Town, which

included a proposed supplemental affidavit that continued to describe the arrangements between

New Town and Dewey as leases and subleases. Mr. Galli stated that the language was “cool

with me. Winning is everything.” He then executed a supplemental affidavit that stated that the

New Town entities had leased and subleased the relevant parking spaces to Dewey.

29. On January 8, 2021, Mr. DeCain sent an email after having re-reviewed the

Belcrest papers in opposition to summary judgment. He said:

We need a game plan with how we are going to deal with this. It is a legitimate

issue on their part – how have we proved that Bernstein in fact will provide the

parking if say something better comes along for them. We need to be able prove

that. And the only thing that does that is the assignment doc. Thoughts on how to

handle?

The parties were supposed to have an additional call to discuss the issue, but the evidence before

the Court does not disclose whether there were more discussions or what the outcomes were. In

any event, the description of the arrangements between New Town and Dewey as “leases” and

“subleases” continued, and the Assignment Agreement was not disclosed.

The Second Notice of Substitution and Further Arbitration Proceedings

30. On January 7, 2021, Dewey sent a Supplemental Notice of Substitution that

corrected the number of substituted parking spaces that would be made available. It stated that

919 spaces would be available in Parking Garage A and another 142 spaces in Parking Garage B.

It also stated that the exchange would be effective January 18, 2021.

31. On February 14, 2021, the arbitrator issued a ruling on Dewey’s second motion

for partial summary judgment. The order noted that the parties had agreed that the number of

substitute parking spaces to be provided was to be 1061 (the number referenced in the corrected

January 7, 2021 notice). The arbitrator also held that the Ground Lease Amendment had

eliminated any requirement that the substituted parking be provided on property owned by

Dewey or by Belcrest and held that the Ground Lease Amendment permitted the use of Parking

Garages A and B as substituted parking even though Dewey did not own those structures. The

arbitrator withheld decision (pending further evidence) as to whether Parking Garage B was

accessible from a public thoroughfare and as to whether the relevant parking spaces were

reserved for Belcrest’s exclusive use or otherwise would be sufficient for Belcrest’s needs.

32. During the course of the February 14, 2021 ruling the arbitrator stated, as an

“Uncontested Material Fact,” that the substituted parking spaces had been leased and subleased

by Dewey from New Town. However, he also observed that Dewey had not provided

documents showing how Dewey had secured rights to the substitute parking. He denied

Belcrest’s demand for such documents, holding that it was the Landlord’s continuing obligation

to ensure that the designated substituted parking would be available, and that Belcrest was not

entitled to know the details of how Dewey planned to satisfy that obligation.

33. Dewey sent another supplemental notice of substitution on March 6, 2021. (The

document bears a date of March 6, 2020, but the context makes clear that it was sent in 2021.)

The notice clarified that Belcrest would have exclusive rights to the designated substitute parking

spaces, which was one of the remaining disputed points in the arbitration.

34. On March 22, 2021, Dewey filed a third motion for summary judgment. In

response, Belcrest continued to argue that Dewey had not proved that it had made proper and

enforceable arrangements for the substitute parking. Dewey again replied that Belcrest had no

contractual entitlement to “assurances” that the parking spaces would be available through 2045,

noting that the Ground Lease permitted substitutions “at any time” and “from time to time,” so

that additional substitutions could be made by the Landlord if they were needed.

The April 2021 Amendment to the Assignment Agreement

35. At the end of April 2021, while the third summary judgment motion was

pending, Dewey and New Town executed a First Amendment to the Assignment and

Assumption of Ground Lease. In paragraph 2 of the amendment, the parties agreed that Dewey’s

prior notices of substitution would satisfy the “Exchange Notice” requirements of the

Assignment Agreement. However, they also agreed that the Transfer Date had not yet occurred

and that the Transfer Date “remained subject” to the issuance of a favorable arbitration decision:

Assignor and Assignee hereby agree that the Exchange Notice requirements of the

Assignment have been satisfied and the actual exchange of leased premises and

the Transfer Date remains subject to the favorable outcome of the Arbitration

whereby the substitute parking arrangement under Section 6.1 of the Parking

Lease is immediately enforceable. Upon Assignor receiving such a decision in

the Arbitration, Assignor, working in conjunction with Assignee, will

immediately commence the relocation of the parking from the current premises to

the Substituted Leased Premises, which is anticipated to take up to 14 days to

fully implement from the date Assignee received notice thereof, time being of the

essence, and the date Assignor provides Assignee with such notice shall be the

Transfer Date.

36. Paragraph 3 of the amendment made clear that the “Substituted Leased Premises”

would include spaces in both Garage A and Garage B. As noted above, the parties did not

explain how the Garage B spaces could be made subject to the Assignment Agreement without

the agreement of New Town Metro, which was the lessee and operator of Garage B. However,

the parties agreed that the spaces in Garage A and Garage B actually were made available to

Belcrest until Belcrest rejected the Ground Lease. The parties also have presented their cases

and their arguments as though the Amendment to the Assignment Agreement effectively covered

both the Garage A and Garage B spaces, so I will do the same.

37. The amendment to the Assignment Agreement provided for a “Revenue Transfer

Date” that would differ from the “Transfer Date,” and stated that Dewey would retain all rights

to rents payable under the Ground Lease until the “Revenue Transfer Date” occurred:

Irrespective of the actual Transfer Date, the Net Annual Rent and Additional Rent

shall continue to be paid to Assignor unless and until final, non-appealable

approval of the two Detailed Site Plans that will allow Assignor’s commencement

of infrastructure construction on the Leased Premises. . . . For the avoidance of

doubt, all Net Annual Rent or Additional Rent for the Parking Lease that is

accrued prior to the Revenue Transfer Date, paid or unpaid as of the Revenue

Transfer Date, if any, shall be retained by and/or delivered to Assignor upon

payment.

Dewey further agreed that it would reimburse New Town for certain expenses between the

Transfer Date and the Revenue Transfer Date:

Assignor agrees that, until the Revenue Transfer Date, it shall be responsible and

reimburse Assignee within thirty (30) days following receipt of an invoice for all

incremental operating and other costs incurred by Assignee, to the extent not

covered by the Parking Lease Tenant, that are associated with the use of the

Substituted Leased Premises during such period.

The Ruling on the Third Motion for Partial Summary Judgment

38. On May 18, 2021, the arbitrator granted Dewey’s third motion for summary

judgment. The arbitrator held that the Ground Lease did not require that Belcrest be given

“exclusive” access to parking spaces, and that Belcrest was only entitled to reasonable

assurances that the parking garages would not be filled to capacity by other users. The arbitrator

also noted that in any event “exclusive” access was being provided.

39. The arbitrator also rejected Belcrest’s continuing argument that Dewey had to

prove its “control” over the substituted parking and that such control would not expire until

2045:

The Arbitrator adopts the Claimant’s contentions as set forth in its Reply in

Support of its Third Motion for Summary Judgment. In essence, the Ground

Lease provides that the Landlord can make substitutions “at any time” and “from

time to time” and includes no obligation for the landlord to give “assurances” to

which Respondent maintains it is entitled. When the First Amendment was

executed, although Garages A and B were identified as permitted substitute

facilities, neither of them was owned or controlled by Dewey. There is no dispute

of material fact on this issue.

Again, [if] Respondent or its predecessor had wanted other provisions in the

Ground Lease or First Amendment, the provisions could have been negotiated.

Instead, the Respondent voluntarily accepted and agreed to the terms of the

Ground Lease, as amended.

40. Mr. DeCain sent an email to Mr. Galli and to a representative of Atlantic Parking

on May 19, 2021 that enclosed a copy of the arbitrator’s May 18 ruling and that stated that the

Dewey parking lot should be closed prior to the workday on May 20, 2021, and that customers of

Belcrest should be directed to Garage A.

41. The arbitrator issued a revised decision and order on May 19, 2020 that corrected

a minor error in the deadline for the filing of a request for the reimbursement of fees and costs.

The Bankruptcy Filing, Stay Relief, and the Final Arbitration Award

42. Belcrest filed a voluntary chapter 11 petition in this Court on May 19, 2021. On

May 31, 2021, Belcrest filed an adversary proceeding (Adv. Pro. No. 21-01140), seeking an

injunction that would have allowed Belcrest to continue to use the Dewey property for parking.

Belcrest argued that the automatic stay barred Dewey from changing the prior parking

arrangement and barred Dewey from enforcing the May 18, 2021 arbitration order.

43. I denied Belcrest’s request for entry of a temporary restraining order on June 3,

2021, ECF No. 7, Adv. Pro. No. 21-01140, but scheduled an evidentiary hearing to consider the

motion for a preliminary injunction.

44. On June 4, 2021, Dewey submitted papers in opposition to Belcrest’s motion for a

preliminary injunction. ECF No. 8, Adv. Pro. No. 21-01140. I take judicial notice that Dewey

made the following arguments:

(a) Dewey argued that the automatic stay did not bar Dewey from

implementing the substituted parking arrangements because the arbitrator’s decision on

that subject was final and enforceable when it was issued on May 18, 2021;

(b) Dewey argued that the arbitrator’s May 19, 2021 order had merely made a

clerical correction (changing the dates for further submissions to address fee awards) and

did not affect the finality and effect of the May 18, 2021 decision and order; and

(c) Dewey submitted a declaration by Timothy Maloney (Dewey’s counsel in

the arbitration), who represented that the arbitration “has now concluded” except for the

assessment of attorneys’ fees and costs. ECF No. 10, Adv. Pro. No. 21-01140, at ¶ 6.

45. I held an evidentiary hearing on June 14 and 15, 2021 to consider the motion for a

preliminary injunction. During that hearing Mr. DeCain testified that he had completed all steps

necessary to implement the substitute parking immediately after the issuance of the May 18

arbitration decision, and prior to the filing of Belcrest’s bankruptcy petition. Debtor’s Exh. MM

at 157, 159-160, 162.

46. At the conclusion of the hearing on June 15, 2021, I denied the motion for an

injunction for reasons that I dictated into the record. ECF No. 30, Adv. Pro. No. 21-01140, at

79-98. I also granted relief from the automatic stay to permit the conclusion of the arbitration,

the enforcement of the parking substitution, and the completion of other pending state court

proceedings. I entered an order to that effect on June 17, 2021. ECF No. 28, Adv. Pro. No. 21-

01140.

47. The Arbitrator entered a final award on August 12, 2021. The award required

Belcrest to comply with the parking substitution and directed that Belcrest pay $23,812.19 to

Dewey to reimburse Dewey for fees of the arbitrator that Dewey had advanced.

The Lease Rejection

48. On September 14, 2021, Belcrest filed a motion to reject the Ground Lease under

section 365 of the Bankruptcy Code. ECF No. 32. Belcrest’s papers made clear that the

economics of the Ground Lease did not make sense:

(a) Paragraph 12 of Belcrest’s motion stated that Belcrest had made

alternative parking arrangements and had negotiated lease amendments with its tenants

that would be less costly and that “the economics of the Ground Lease in combination

with these factors and the present costs of the rent paid under the Ground Lease support

the rejection of the Ground Lease.”

(b) Paragraph 12 also stated that “Although the Debtor will lose income from

the rejection of the Contracts, the loss is substantially less than the rent paid under the

Ground Lease and the Debtor submits that it will see a net gain with respect thereto.”

(c) Paragraph 19 of the motion stated that the minimum rent under the Ground

Lease was $690,000 per year plus taxes and insurance costs, but that at current occupancy

levels the Debtor needed only approximately 100 parking spots, which the Debtor could

obtain at a cost of less than $20,000 per month.

(d) In paragraph 20 of the motion, Belcrest represented that:

[I]n the short run, given the Debtor’s current needs, both from a zoning perspective

and a business perspective, the Debtor currently does not require the number of

parking spots that would be provided under the Ground Lease. The Debtor will

save significant monies by the rejection of the Contracts, and this will allow it to

refocus and reshape its rental plans. The effect of the rejection will be cash positive

for the Debtor.

(e) Footnote 3 on page 8 of the motion stated that the annual costs under the

Ground Lease (including taxes and insurance) exceeded $915,000 annually and that net

income from Belcrest’s use of the parking was only $323,000 in 2020.

(f) Paragraph 21 of the motion stated that Belcrest had made new

arrangements for 200 spaces in Parking Garage A and that Belcrest’s parking expenses

would decline by $30,000 to $40,000 each month.

49. On October 4, 2021, I entered an Order that approved the rejection of the Ground

Lease. The Order included a finding (proposed by Belcrest) that the Ground Lease was a

“burden” to Belcrest. At Belcrest’s request, and without objection, the rejection was made

effective as of October 1, 2021. The Order also stated that claims based on the rejection could be

filed within thirty days after the entry of the Order.

50. The parties agreed at trial that the substitute parking designated in Parking Garage

A and Parking Garage B was actually available for use by Belcrest and its customers from May

19, 2021 through the effective date of the Ground Lease rejection, and that Belcrest and its

customers had made some use of such parking.

51. Dewey filed a proof of claim on September 9, 2021, and filed amended proofs of

claim on October 5, 2021 and November 2, 2021. Those claims and amendments were timely

filed in accordance with deadlines set by the Court.

Subsequent Proceedings/Disclosure of the Assignment Agreement

52. The Maryland state court confirmed the arbitration award and decisions in a final

order dated October 5, 2021.

53. On February 15, 2022, I heard argument on Dewey’s motion that Belcrest should

be compelled to pay rents that had accrued after the filing of the bankruptcy case and prior to the

rejection of the Ground Lease. Belcrest argued that it had offset rights arising out of prior

overpayments of taxes and other sums. I declined to order payment of rents at that time because

of the factual issues that had been raised.

54. I take judicial notice of positions taken by the parties during the February 15,

2022 hearing. I noted during that hearing that it was unclear just how Dewey’s arrangements

with New Town had been structured. I asked who was collecting rents and why Dewey was

making a motion for payment of post-petition taxes on the New Town space. Dewey responded

that there was a “pass-through” arrangement between Dewey and New Town and that monies

paid to Dewey for rent would go to New Town. I said that it sounded as though Dewey had

assigned the Ground Lease to New Town, and Mr. DeCain stated that that was correct. I then

asked why Dewey was making the motion if the Ground Lease had been assigned, and Dewey’s

counsel stated that although there was a “pass-through” arrangement the parties to the Ground

Lease were still Belcrest and Dewey.

55. On March 1, 2022, Dewey’s counsel advised the Court that his comments at the

February 15, 2022 hearing had been incorrect, and that Dewey was not obligated to pay rents

over to New Town.

56. The parties’ attorneys exchanged further emails without reaching agreement as to

Belcrest’s discovery demands. I then held a conference to resolve the issues, at which I

instructed Dewey to disclose any agreements it had entered into with New Town. In June 2022,

Dewey for the first time provided Belcrest with copies of the Assignment Agreement and the

amendment to the Assignment Agreement.

Maryland Court Rulings

57. Belcrest filed an appeal from the Maryland court’s October 5, 2021 confirmation

of the arbitration award. In October 2022, Belcrest filed a motion seeking a stay of proceedings

in that appeal. Belcrest contended that the arbitration decision had been procured by fraud and

that Dewey had “made false representations to the Arbitrator regarding a material issue in the

Arbitration and procured a false affidavit from a third party in support of its false representations

to the Arbitrator, which the Arbitrator relied upon in rendering the Award.”

58. Dewey opposed Belcrest’s motion to stay the pending appeal. Dewey argued that

parking spaces had actually been provided to Belcrest from the time the substitute parking was

implemented through the rejection of the Ground Lease; that the arbitrator had found that Dewey

had no obligation to give Belcrest the contractual “assurances” that Belcrest wanted or to reveal

the details of how Dewey had arranged the parking; and that it was immaterial to the arbitration

whether substitute parking had been obtained under a lease, a sublease, an assignment, or some

combination thereof.

59. On October 25, 2022, the Maryland appellate court denied Belcrest’s motion for a

stay. It also denied Belcrest’s separate contentions that the issues were moot in light of the

rejection of the Ground Lease, and it affirmed the lower court’s confirmation of the arbitration

decisions.

60. On February 22, 2023, Belcrest filed a Verified Amended Petition in the

Maryland state court, seeking to vacate its prior confirmation of the arbitration award. Belcrest

argued that Dewey had falsely stated during the arbitration that Dewey had “leased” and

“subleased” space in Parking Garages A and B, and that Dewey had obtained false affidavits

from Mr. Galli confirming the existence of such “leases” and “subleases.” Belcrest argued that

the arbitrator had accepted these representations as material facts not genuinely in dispute; that

Dewey actually was not a party to any lease or sublease and therefore it had no actual rights to

use the substitute parking that it had designated; and that the second summary judgment decision

had been based on false and inaccurate statements. Belcrest also argued that in light of the

assignment Dewey was no longer the Landlord at relevant times.

61. Dewey filed a motion to dismiss Belcrest’s Verified Amended Petition on May 5,

2023. Dewey argued (among other things) that it was not required to lease or sublet parking

spaces in order to designate them as substitute parking under the Ground Lease; that it was

Dewey’s obligation to ensure the substitute parking would be available, but that there were no

particular means by which Dewey was obligated to do so; that the arbitrator had decided that

Belcrest was not entitled to any assurances as to Dewey’s rights as to the alternative parking or

any further disclosures as to the agreements between Dewey and New Town; and that the alleged

misstatements were neither fraudulent nor material.

62. Dewey and Belcrest have advised me that the Maryland court has granted

Dewey’s motion to dismiss Belcrest’s petition to vacate the confirmation of the arbitration

award. The order granting the motion is dated August 15, 2023. Belcrest contended that the

order was not publicly available until the week of October 2, 2023, and it asked the Maryland

court to revise and reissue the order so that Belcrest’s appeal period would not have expired.

The Maryland court denied that motion on November 9, 2023.

63. The parties have informed me that Belcrest has filed additional appeals in

Maryland from the denial of its motion to vacate and the denial of its request for a reissuance of

the August 15, 2023 order. However, I do not believe that I need to wait for the conclusion of

any additional appeals in Maryland before resolving the dispute that is before me.

Discussion

Many of the parties’ arguments require an interpretation of the Assignment Agreement

and a determination of when its provisions became effective. Neither party has been consistent

in its arguments on these points.

Belcrest has argued to the Maryland state court that Dewey had no sublease or lease with

New Town, and that Dewey therefore had no legal basis on which to make Parking Garages A

and B available to Belcrest as substitute parking. Trial Tr. at 18:11-23; Belcrest Trial Exh. KK, ¶

45 (arguing that “no lease or sublease for the Permanent Substituted Leased Premises had ever

existed” and therefore that “there was no legal basis upon which Dewey . . . could have possibly

provided the Permanent Substituted Leased Premises” to Belcrest). In this Court, however,

Belcrest contends that the Assignment Agreement with New Town actually took effect in 2020

(or no later than January 2021), so that New Town (not Dewey) was the new landlord under the

Ground Lease and was the only person entitled to file a proof of claim following the rejection of

the Ground Lease. Those contentions cannot both be true. If the Assignment Agreement

actually took effect (as Belcrest argues here), then the Assignment Agreement itself would have

provided the “legal basis upon which” Dewey made the substituted parking available. Parking

Garages A and B would have become the new “Leased Premises,” and Belcrest would have had

exactly the rights that it repeatedly said it wanted (namely, an enforceable leasehold right to the

parking spots).

Dewey has argued that the “Transfer Date” under the Assignment Agreement (as amended

by the First Amendment) did not occur until the issuance of the final arbitration award on August

12, 2021, or perhaps until the state court’s confirmation of the arbitration award on October 6,

2021. Trial Tr. at 69:2-24. As discussed below, there is merit to Dewey’s argument that the

separate “Revenue Transfer Date” did not occur until after the arbitration proceedings and appeals

were resolved. The “Transfer Date,” however, was triggered by the issuance of a favorable

arbitration decision. Dewey and New Town treated the May 18, 2021 arbitrator’s decision as the

event that triggered the Transfer Date, and Dewey’s counsel admitted, at trial, that Dewey and

New Town actually thought that the Transfer Date had occurred in May 2021. Trial Tr. at 70:2-

74:19.

In order to sort through the many conflicting arguments that the parties have made, it is

first necessary to look beyond the parties’ inconsistent contentions and to determine just what the

Assignment Agreement (including the First Amendment to the Assignment Agreement) actually

provided, and when its various terms became effective.

I. Effectiveness of the Assignment Agreement and Its First Amendment

I hold that the “Transfer Date” occurred on May 18, 2021 (the date of the arbitrator’s

final summary judgment decision) and that the Assignment Agreement (as amended) took effect

on that date. The parties’ arguments to the contrary are without merit.

A. Belcrest’s Contentions

The original Assignment Agreement said that it would be effective upon the “Transfer

Date.” The Transfer Date was defined as the date that would be specified in an Exchange Notice

as the date on which space in Garage A would become the Permanent Substituted Leased

Premises under the Ground Lease. Dewey sent a “Notice of Substitution” on May 7, 2020 that

designated spaces in Garage A and Garage B as the “Permanent Substituted Leased Premises”

and that stated that the substitution would be effective on November 15, 2020. Belcrest argues

that the Assignment Agreement therefore was effective, and the Transfer Date occurred, on

November 15, 2020. There are a number of reasons why this is not correct.

First, Belcrest itself disputed the validity and effectiveness of the Notice of Substitution

and whether it complied with the requirements of the Ground Lease. Belcrest argued, among

other things, that the May 2020 Notice of Substitution had not covered the correct number of

parking spaces. Dewey acknowledged the mistake and sent a Supplemental Notice of

Substitution dated January 7, 2021 that increased the number of spaces that would be made

available. That supplemental notice stated that the substitution would become effective on

January 18, 2021 – making clear, by implication, that the substitution had not yet occurred.

Belcrest’s counsel acknowledged at trial that the Assignment Agreement was premised

on the issuance of a substitution notice that was valid under the Ground Lease. He also

acknowledged that Belcrest could not contend that a notice of substitution was somehow

effective for purposes of the Assignment Agreement if the same notice was not valid and

effective for purposes of the Ground Lease itself. Trial Tr. at 44:24-45:15. The original Notice

of Substitution designated the wrong number of parking spots, and by Belcrest’s own prior

admissions the notice therefore was not effective under the Ground Lease. Accordingly, the

substitution could not have become effective (and the assignment to New Town could not have

become effective) in November 2020.

Second, the Assignment Agreement contemplated that Dewey would send a notice that

would designate spaces in “Garage A” as the “Permanent Substituted Leased Premises.” Dewey

did not do so. Instead, the May 2020 Notice of Substitution and the January 2021 Notice of

Substitution designated spaces in Garage A and Garage B as substitute parking. The Assignment

Agreement did not include any rights or agreements with respect to parking in Garage B, and

there is nothing in the record that suggests that as of May 2020 or January 2021 Dewey had

entered into any agreement by which any of the Landlord’s rights could be assigned to the owner

or lessee of the Garage B spaces.

Third, and most importantly, Dewey and New Town entered into an amendment to the

Assignment Agreement in late April 2021 that changed their agreement as to when the

“Transfer Date” would occur. The parties agreed in the amendment that the requirements of the

original Assignment Agreement regarding the sending of “Exchange Notices” had been satisfied.

They therefore waived any inconsistencies between the various prior Notices of Substitution and

the terms of the original Assignment Agreement. At the same time, however, they agreed that

the Transfer Date had not yet occurred, and that it would not occur until the issuance of a

“favorable outcome of the Arbitration whereby the substitute parking arrangement under section

6.1 of the Parking Lease is immediately enforceable.”

Belcrest points to the parties’ agreement that the prior Exchange Notices were sufficient

and argues that I should therefore hold that the Transfer Date had already occurred. Trial Tr. at

48:9-49:20. This makes no sense. The same agreement in which the parties waived any

deficiencies in the prior notices also set forth the parties’ agreement that the Transfer Date had

not yet occurred and would not occur until the issuance of a favorable arbitration decision. I

cannot make rulings based on one part of that agreement while ignoring the rest of it.

Even if the Transfer Date arguably had occurred under the terms of the original

Assignment Agreement (either in November 2020 or in January 2021), as Belcrest contends,

there was no reason why Dewey and New Town could not agree to change the effective date of

the assignment as they saw fit. The Assignment Agreement was between Dewey and New

Town. They reserved their rights to amend it (in paragraph 7(a)), and in paragraph 7(m) they

disclaimed any intent to grant rights to third party beneficiaries. Belcrest had steadfastly refused

to accept the validity of the substitution notices, and Belcrest was not using the proposed

substitute parking spaces at the time the amendment was executed. Belcrest had effectively

thwarted any effort to implement the substitution. Under these circumstances, there is no reason

why Dewey and New Town could not modify their agreement to confirm that the “Transfer

Date” had not yet occurred and that it would not occur unless and until the arbitrator ruled that

the substitution was valid and effective. Belcrest insists that somehow this could not be done,

but Belcrest cites no legal authority or legal principles that would support its contention.

B. Dewey’s Contentions

Under the First Amendment to the Assignment Agreement the “Transfer Date” was to

occur after the issuance of a favorable ruling in the arbitration, at which point Dewey was to

notify New Town of that favorable decision. On May 18, 2021, the arbitrator entered the third

summary judgment decision, which decided the remaining issues in favor of Dewey. Dewey

now contends, though, that the Transfer Date did not occur until after the filing of Belcrest’s

bankruptcy petition, and arguably did not occur until the arbitration award was confirmed on

August 12, 2021, or perhaps until the arbitration award was confirmed by the Maryland court on

October 6, 2021.

There is no merit to Dewey’s contentions. The terms of the parties’ agreements, the

evidence at trial, and Dewey’s own prior arguments make clear that the Transfer Date occurred

on May 18, 2021.

First, it is plain from the facts at trial that Dewey and New Town treated the entry of the

May 18, 2021 decision as the “favorable outcome of the Arbitration” that made the substitute

parking “immediately enforceable” and that gave rise to the Transfer Date under the First

Amendment to the Assignment Agreement. Dewey gave notice of the May 18, 2021 arbitration

decision to New Town and confirmed Dewey’s intention to enforce the substitution. Mr. DeCain

(on behalf of Dewey) and Mr. Galli (on behalf of New Town) each testified at trial that they

believed that the notice that Dewey sent to Mr. Galli after the entry of the arbitrator’s third

summary judgment decision was the notice contemplated by section 2 of the First Amendment to

the Assignment Agreement, to the effect that the substitution had become immediately

enforceable and therefore that the Transfer Date had occurred. Trial Tr. 159:9-160:15; 186:3-

187:2; 189:20-25. Dewey also sent notice to Belcrest that the substitute parking was taking

effect and that further access to the Dewey property would be denied. Dewey’s counsel

acknowledged at trial that the two parties to the Assignment Agreement actually believed that the

Transfer Date had occurred on May 18, 2021.

Second, a portion of Dewey’s claim relates to real estate taxes and utility costs that are

payable as “Additional Rent” with respect to the “Leased Premises.” When Dewey computed

those “additional rents,” Dewey allocated portions of the total real estate taxes and utility charges

payable from and after May 18, 2021 by New Town with respect to Garage A. Those taxes and

utility charges would only be relevant to the calculation of Additional Rent if, in fact, Garage A

had actually become part of the “Permanent Substituted Leased Premises” in May 2021. That

could only be the case if the “Transfer Date” occurred in May 2021.

Third, when Belcrest argued in this Court (shortly after the commencement of the

bankruptcy case) that the substitution of new parking spaces would violate the automatic stay,

Dewey responded that the substituted parking arrangement had already been accomplished prior

to the filing of the bankruptcy case, and therefore prior to the invocation of the automatic stay.

That contention by Dewey is irreconcilable with Dewey’s current contention that the “Transfer

Date” did not even occur until after Belcrest filed its bankruptcy petition.

Dewey argued at trial that the arbitrator issued a clarifying order on May 19, 2021 and

that this should be regarded as the effective date of the arbitrator’s ruling. However, that

clarifying order merely changed the dates by which applications for awards of fees and costs

were to be submitted. Dewey argued in June 2021 that the clarifying order did not affect the

finality of the May 18, 2021 Order, and I agree. The favorable decision that triggered the

Transfer Date was issued on May 18, 2021, not later.

II. Dewey’s Standing To Assert a Claim

Belcrest contends that if the “Transfer Date” occurred on May 18, 2021 then New Town

(not Dewey) was the “landlord” under the Ground Lease, and therefore that New Town was the

only party who had the right to file a proof of claim. Belcrest and Dewey agreed that this is a

legal issue to be resolved by the Court. Trial Tr. at 41:7-42:15.

The amendment to the Assignment Agreement made clear that the occurrence of a

“Transfer Date” did not result in the transfer of all rights that Dewey owned as landlord under

the Ground Lease. Instead, the amendment set forth a separate definition of the “Revenue

Transfer Date” that described the point at which the rights to receive rents under the Ground

Lease would be transferred. The parties agreed (in section 4 of the amendment) that

“[i]rrespective of the Transfer Date, the Net Annual Rent and Additional Rent shall continue to

be paid to Assignor unless and until final, non-appealable approval of the two Detailed Site

Plans” that would allow Dewey to complete the construction that it planned. Dewey “retained”

all rights to rents that “accrued” and were “paid or unpaid” prior to that date:

For the avoidance of doubt, all Net Annual Rent or Additional Rent for the

Parking Lease that is accrued prior to the Revenue Transfer Date, paid or unpaid

as of the Revenue Transfer Date, if any, shall be retained by and/or delivered to

Assignor upon payment.

See Amendment, § 4. The evidence at trial made clear that the Revenue Transfer Date did not

occur until long after Belcrest’s rejection of the Ground Lease and long after the filing of

Dewey’s proof of claim.

Belcrest argues that Dewey assigned “all” of its right, title and interest in the Ground

Lease on the Transfer Date, citing language that appeared in the original Assignment Agreement.

In Belcrest’s view, that means that Dewey did not “retain” any rights of the lessor, so that any

rights that Dewey had to receive money after the Transfer Date just represented monetary claims

that Dewey had against New Town. These arguments ignore the plain language of the First

Amendment to the Assignment Agreement. While it is true that the original Assignment

Agreement stated that Dewey would transfer “all” of its rights to New Town, that agreement was

later amended, and the First Amendment made clear that rents all rents would “continue to be

paid” to Dewey (not to New Town) until the Revenue Transfer Date occurred. The First

Amendment also stated clearly that Dewey “retained” all rights to such rents. These agreements

take precedence over any general language in the prior Assignment Agreement and make clear

that Dewey still owned the Landlord’s rights to receive rent payments from Belcrest.

The “Revenue Transfer Date” had not occurred at the time the Ground Lease was

rejected. Belcrest argues that Dewey should only be entitled to claim damages for the portion of

the remaining Ground Lease term that ran through the Revenue Transfer Date. I will discuss this

argument further below when I discuss the amount of Dewey’s allowed claim. Suffice it to say

here that even if Belcrest were correct, it would only affect the amount of Dewey’s allowed

claim, and not Dewey’s standing to assert a claim.

I hold that Dewey was entitled to file a proof of claim for damages caused by the

rejection of the Ground Lease. It is not necessary to address Dewey’s contentions that it was still

the “landlord” because an assignor arguably remains liable on a contract following an

assignment.

III. Belcrest’s Estoppel Claims Lack Merit

Belcrest argued in the Joint Pretrial Order that Dewey should be estopped from relying on

the existence of the First Amendment to the Assignment Agreement and should be relegated to

whatever position Dewey would have occupied if the Assignment Agreement were in place but

the First Amendment had not been signed. Belcrest has argued more generally in its post-trial

papers that Dewey should be estopped from asserting that it is the Landlord under the Ground

Lease. In each case, Belcrest’s arguments are premised on its contention that Dewey

fraudulently misrepresented to the arbitrator that Dewey had entered into leases and subleases

with New Town, and that Dewey intentionally concealed the existence of the Assignment

Agreement and the First Amendment to that agreement.

I cannot and will not condone the conduct by Dewey and its counsel during the

arbitration. The assertion that Dewey had rights under “leases” and “subleases” was a

contrivance – a loose and knowingly inaccurate characterization of the fact that New Town was

willing to make parking spaces available, and a deliberate misstatement of what the contractual

arrangements between New Town and Dewey actually were. The contemporaneous emails show

that Dewey and its counsel were aware that it was the Assignment Agreement (not any purported

lease or sublease) that formed the basis of Dewey’s rights to designate the parking spaces in

Garage A and Garage B as substitute parking. The record also shows that Dewey and its counsel

decided not to disclose the Assignment Agreement because counsel believed that doing so might

somehow further complicate the arbitration proceedings. In other words, the mischaracterization

was knowing and deliberate. I will direct the parties to deliver a copy of this decision to the

relevant Maryland state bar authorities for consideration by them as to whether the misstatements

to the arbitrator warrant any further action or any discipline of counsel.

While the conduct of Dewey and its counsel was improper and inexcusable, however,

that conduct does not support Belcrest’s contention that an “estoppel” should apply.

Belcrest has broadly invoked the doctrine of “equitable estoppel” in its post-trial

submission, but it appears from Belcrest’s contentions that it is actually invoking the doctrine of

“judicial estoppel” as well as a claim of “equitable estoppel.” “[J]udicial estoppel . . . precludes

a party who assumed a certain position in a prior legal proceeding and who secured a judgment

in his or her favor from assuming a contrary position in another action simply because his or her

interests have changed.” Abramovich v. Harris, 227 A.D.2d 1000, 643 N.Y.S.2d 811, 812 (N.Y.

App. Div. 1996) (quoting Prudential Home Mtge. Co. v. Neildan Constr. Corp., 209 A.D.2d 394,

618 N.Y.S.2d 108, 110 (N.Y. App. Div. 1994)). “Equitable estoppel” is more broadly the

principle by which:

[A] party is absolutely precluded from denying, or asserting the contrary of, any

material fact that, by the party’s words or conduct, either affirmative or negative,

the party has intentionally or negligently induced another, who had a right to rely

upon such words or conduct, to believe and act upon them, thereby changing

positions in such a way that the other party would suffer injury if a denial or

contrary assertion were allowed.”

57 N.Y. Jur. 2d Estoppel, § 3 (citing Triple Cities Const. Co. v. Maryland Cas. Co., 4 N.Y.2d

443 (1958) (other citations omitted). Although the two doctrines have somewhat different

purposes and elements, in each case “the party who is to be estopped . . .must have asserted a

fact or claim, or made a promise, that a court relied on or that another party relied on . . . and

then later attempted to take a contradictory stance.” Republic of Ecuador v. Chevron Corp., 638

F.3d 384, 395-6 (2d. Cir. 2011) (quoting Maitland v. Univ. of Minn., 43 F.3d 357 364 (8th Cir.

1994)).

Belcrest contends that Dewey has taken inconsistent positions in different proceedings,

that the arbitrator relied upon Dewey’s prior misrepresentations about the nature of Dewey’s

agreements with New Town, that Belcrest relied on Dewey’s misrepresentations, and that

Belcrest was injured by that reliance. Belcrest is wrong on each one of these separate points.

A. Whether Dewey Has Taken Inconsistent Positions

Belcrest says that Dewey’s arguments about “leases” and subleases should estop Dewey

from contending that it was entitled to file a proof of claim arising out of the rejection of the

Ground Lease. This makes no sense. Dewey’s statements about leases and subleases were

inaccurate, but that does not mean they were inconsistent with Dewey’s right to file a rejection

damages claim.

Belcrest also has argued that Dewey should be estopped from contending that Dewey was

still the Landlord at the time the Ground Lease was rejected. Trial Tr. at 56:1-57:4. But Dewey

never said anything during the arbitration that suggested that somebody else was the Landlord.

Its statements about “leases” and “subleases” did not have that effect.

It is Belcrest (not Dewey) who has invoked the terms of the Assignment Agreement in

this proceeding. Belcrest argues that as a result of the Assignment Agreement Dewey allegedly

did not have standing to file a proof of claim. I have considered the merits of that argument

above. In terms of the estoppel claim, the fact is that Dewey said nothing during the arbitration

about the terms of the Assignment Agreement or its effects on Dewey’s standing to file a claim.

The arbitration therefore provides no basis for an “estoppel” as to whether the Assignment

Agreement affects Dewey’s right to assert a claim.

What Belcrest actually has asked the Court to do, under the guise of its “estoppel”

arguments, is to bar Dewey from relying on the First Amendment to the Assignment Agreement

(which postponed the Transfer Date and introduced the new concept of a Revenue Transfer

Date), while at the same time permitting Belcrest to rely upon the terms of the original

Assignment Agreement in support of Belcrest’s contentions that Dewey transferred all rights and

claims to New Town and therefore lacks standing to file a claim. Perhaps an “estoppel” of this

kind might have been warranted if, for example, Dewey had disclosed the original Assignment

Agreement in the arbitration but had falsely stated that the agreement had never been amended.

Dewey did no such thing. Dewey did not mention the Assignment Agreement at all. There is

nothing about Dewey’s prior silence that would or should justify a determination by this Court

that Dewey’s rights should be assessed by severing the original Assignment Agreement from its

later amendment.

B. Alleged Reliance by the Arbitrator

Belcrest is wrong in contending that the arbitrator “relied” on Dewey’s prior statements

in a way that affected the outcome of the arbitration proceeding. One of the arbitrator’s

decisions referred to Dewey’s contentions about leases and subleases as uncontested facts. But

the arbitrator held in that same decision that the Ground Lease permitted the parking substitution,

that the Landlord would be permitted to make further substitutions if they became necessary, that

the details of Dewey’s arrangements with New Town were not relevant and that Belcrest had no

right to obtain any further information about those arrangements. The arbitrator reconfirmed

those rulings in the May 18, 2021 decision.

It is also apparent that the Assignment Agreement (if it had been disclosed) would not

have led to a different result in the arbitration. Belcrest concedes in its post-trial papers that

“most, if not all of the Debtor’s arguments in the Arbitration would have been negated by the

Assignment, since the Debtor would have retained all of its rights under the Ground Lease, only

the Landlord and the location of the parking would be different.” See Debtor’s Proposed

Findings of Fact and Conclusions of Law, ECF No. 196, at ¶ 147; see also Trial Tr. at 62:4-16.

The terms of the Assignment Agreement provided such a clear and complete answer to

Belcrest’s objections that it is a mystery to this Court why Dewey did not disclose it. In any

event, the Court finds that the failure to disclose the existence of the Assignment Agreement was

not relied upon by the arbitrator and did not alter the outcome of the arbitration.

C. Alleged Reliance by Belcrest

Belcrest itself did not rely, to its detriment, on the statements that Dewey made during the

arbitration. What Dewey actually said during the arbitration was that it had entered into leases

and subleases with New Town. I have reviewed the papers submitted during the course of the

arbitration, and it is quite clear that Belcrest did not accept Dewey’s statements. Instead,

Belcrest continued to ask for disclosure of the actual agreements between Dewey and New

Town, as well as to argue that “lease” and “sublease” arrangements were legally insufficient. In

no way did Belcrest “rely” to its detriment on the purported existence of such leases and

subleases.

Belcrest’s real contention is that it was Dewey’s concealment of the Assignment

Agreement (rather than the affirmative statements that Dewey made about leases and subleases)

that allegedly harmed Belcrest. However, the arbitrator’s decision made clear that Dewey had no

affirmative obligation to disclose the Assignment Agreement to Belcrest. The arbitrator noted

that the terms of Dewey’s agreements with New Town had not been made available, and rejected

Belcrest’s persistent requests for discovery of such terms, holding that Belcrest had no right to

see them. The mere failure to disclose the existence of the Assignment Agreement therefore did

not deprive Belcrest of information that it was entitled to have, and did not give rise to a proper

estoppel claim.

D. Belcrest Was Not Injured by Dewey’s Prior Statements

Finally, the evidence did not support Belcrest’s contention that it was injured by the

failure to disclose the existence of the Assignment Agreement.

As noted above, Belcrest has conceded that disclosure of the Assignment Agreement

actually would have been favorable to Dewey’s case during the course of the arbitration. The

Maryland state court has implicitly reached that same conclusion, as it has denied Belcrest’s

petition to vacate the confirmation of the arbitration award.

Belcrest argued at trial that if it had known of the existence of the Assignment Agreement

it would have attempted to negotiate a modification of the Ground Lease with New Town, under

which New Town might have agreed to lower rents. Belcrest contends that such a modification

might have made it unnecessary to reject the Ground Lease. However, until the occurrence of

the Revenue Transfer Date it was Dewey (not New Town) who continued to own the rights to

the Rents and Additional Rents that were payable under the Ground Lease. The premise of

Belcrest’s contention – that New Town somehow could have elected to compromise that claim

without Dewey’s agreement – is wrong.

Nor is there any evidence that New Town would been receptive to a modification of the

Ground Lease, even if New Town had been entitled to make that decision. Mr. Galli (the New

Town representative) certainly knew about the existence of the Assignment Agreement. If he

had had any ability to renegotiate terms, or any interest in doing so, he could have initiated such

a discussion with Belcrest. The evidence showed instead that New Town was working in

cooperation with Dewey.

Belcrest also failed to show that its hypothetical modification of the Ground Lease would

have made sense. Parties sometimes agree to modify contracts or leases to avoid rejections in

bankruptcy, but if they do so it is usually because the rejection damages claim will not be paid in

full and because the debtor might take its future business elsewhere in the absence of a

modification. In this case, Belcrest will pay the rejection damages claim in full. In addition, the

evidence showed that Parking Garage A was the most convenient location for Belcrest’s

customers. If New Town had an interest in having Belcrest as a parking customer, New Town

could have entered into a new lease with Belcrest following a rejection of the Ground Lease,

without sacrificing any of the Landlord’s rights to seek damages under the prior Ground Lease.

Belcrest posits that New Town might have willing, instead, to provide future parking

arrangements through a modification to the existing Ground Lease, thereby giving New Town

essentially the same future parking terms while in the process throwing away the rejection

damages claim for nothing in return. Belcrest provided no economic analysis that would have

shown that such a decision would have been a reasonable one, let alone a likely one.

The only evidence that Belcrest offered regarding a hypothetical modification of the

Ground Lease was the testimony of Belcrest’s principle (Mr. Mehta), who speculated without

foundation that a modification might have been negotiated. Trial Tr. at 215:18-217:18, 221:24-

222:22, 224:1-18. This testimony was self-serving and not credible. No evidence was offered to

support Belcrest’s contention that other parties would have been willing to negotiate changes to

the Ground Lease that would have prevented the rejection of the Ground Lease and thereby

eliminated the right to file a proof of claim for rejection damages.

IV. Belcrest’s “Unclean Hands” Arguments Lack Merit

Belcrest has argued in the alternative that I should bar or limit Dewey’s claim because

Dewey is guilty of “unclean hands.” Belcrest acknowledges that “unclean hands” is an equitable

defense that is not available as a defense to legal claims. See, e.g., Aetna Cas. and Sur. Co. v.

Aniero Concrete Co., 404 F.3d 566, 607 (2d Cir. 2005); Gala Jewelry, Inc. v. Harring, No. 05

Civ. 7713 (GEL), 2006 U.S. Dist. LEXIS 91449, at *5 n.3 (S.D.N.Y. Dec. 18, 2006) (“[T]his

circuit restricts the ‘unclean hands’ doctrine to suits in equity, thereby categorially defeating

defendant’s attempted defense in this suit at law.”). Belcrest argues that there is an exception

under which “unclean hands” may be asserted as a defense where “plaintiff seeks to reap the

fruits of his own immoral conduct.” Debtors’ Proposed Findings of Fact and Conclusions of

Law ¶ 151, citing In re Ampal-American Israel Corp., 545 B.R. 802, 811 (Bankr. S.D.N.Y.

2016). What the Ampal decision actually held, however, is that the related legal doctrine of “in

pari delicto” can bar legal relief if the allegedly wrongful conduct is directly related to the

subject matter of the litigation. Id. There is no contention that the defense of “in pari delicto” is

relevant to the proof of claim that Dewey has filed.

In any event, even if Belcrest were right, it is plain that Dewey’s alleged misconduct is

not “directly related” to the subject matter of this litigation. The subject matter of this

proceeding is the proof of claim that Dewey filed based on the rejection of the Ground Lease. I

have already held, for the reasons stated above, that Dewey was entitled to file that claim. There

is nothing about Dewey’s misconduct during the arbitration that is “directly related” to the

subject matter of the rejection claim itself.

I have also found that Belcrest was not injured by any of the conduct that allegedly

constituted “unclean hands” on the part of Dewey. Belcrest’s counsel agreed at trial that the

Court cannot deprive Dewey of a claim simply because Dewey allegedly acted badly (Trial Tr.

56:9-17), yet that is what Belcrest’s post-trial submissions have asked me to do. I hold there is

no merit to the “unclean hands” contentions that Belcrest has made.

V. Dewey’s Claim Is Overstated

Dewey’s proof of claim includes three components: (a) the Rent and Additional Rent that

had already come due and was unpaid at the time the bankruptcy petition was filed; (b) the damages

attributable to the rejection of the Ground Lease (subject to the cap set forth in section 502(b)(6)

of the Bankruptcy Code); and (c) costs awarded in the arbitration that Belcrest has not paid.

Belcrest has disputed some of these items, and it has argued that it is entitled to offsets based on

prior overpayments of taxes and utilities.

A. Accrued but Unpaid Prepetition Rent

Dewey contends that $98,612.50 was due and owing but was unpaid at the time the

bankruptcy petition was filed, representing $93,916.67 of basic rent plus the 5% penalty

specified in the Ground Lease. Belcrest does not dispute this figure.

B. Rejection Damages

Dewey’s damage claim based on the rejection of the Ground Lease is subject to section

502(b)(6) of the Bankruptcy Code, which provides that the claim of a lessor for damages

resulting from the termination of a lease of real property cannot exceed the amount due and

owing on the petition date plus “the rent reserved by such lease, without acceleration, for the

greater of one year, or 15 percent, not to exceed three years, of the remaining term of such

lease.” 11 U.S.C. § 502(b)(6). Although section 502(b)(6) refers to a “termination” of a lease

(rather than to a “rejection” of a lease), it is well-established that section 502(b)(6) applies as a

cap on rejection damages without regard to whether a lease has terminated for state law

purposes, and both parties agree that section 502(b)(6) acts as a cap on the Landlord’s allowable

rejection damages claim. See Flanigan v. Samalex Trust (In re Flanigan), 374 B.R. 568, 577

(Bankr. W.D. Pa. 2007) (holding that section 502(b)(6) applies upon rejection of a lease even if

there is not a “termination” for state law purposes); Broadfoot v. Jamestown Mgmt. Corp. (In re

Int’l. BioChemical Inds., Inc.), 521 B.R. 395, 402-3 (Bankr. N.D. Ga. 2014) (same); In re Mr.

Gatti’s, 162 B.R. 1004 (Bankr. W.D. Tex. 1994) (holding that section 502(b)(6) deals with

claims against the estate and that the rejection of a lease terminates the estate’s obligation to

perform under the lease, so that a rejection is a “termination” for purposes of section 502(b)(6)

even if it is not a “termination” for other legal purposes); 4 Collier on Bankruptcy ¶ 502.03[7][b]

(“In effect, though, courts treat the rejection of a lease under section 365 as equivalent to a

termination by breach for purposes of capping a landlord’s allowed damage claim under section

502(b)(6).”).

The calculation of Dewey’s allowed claim due to the rejection of the Ground Lease

requires that I determine (a) the maximum amount of the Landlord’s allowed claim under section

502(b)(6), (b) whether the Landlord’s actual damages due to the rejection of the Ground Lease

exceed the maximum allowable amount, and (c) whether Dewey properly may assert the entirety

of the Landlord’s allowed rejection damages claim.

1. The Section 502(b)(6) Cap

The Ground Lease was not scheduled to expire until June 30, 2045 (24 years after the

petition date and more than 23 years after the rejection date), so that the maximum time period

for which rejection damages may be collected under section 502(b)(6) is three years.

The Ground Lease provides for the payment of “rent” and “Additional Rent.” The parties

agree that both amounts are “rent” for purposes of computing the maximum claim under section

502(b)(6). “Base” rent payments were equal to a percentage of the income that Belcrest derives

from making parking available to its own tenants, subject to a minimum annual base rent

payment of $690,000 per year. Dewey has calculated its claim on the assumption that the annual

base rent would equal the contractual minimum ($690,000). The base rent payable for three

years would have been $2,070,000.

“Additional Rent” was payable in the form of the taxes and public utility charges “made,

assessed, levied, or imposed upon” the Leased Premises, which were to be paid “as the same

become due and payable.” Ground Lease, § 4.2(b). Portions of Garage A became part of the

“Leased Premises” once the Transfer Date occurred. It is therefore appropriate to use the taxes

and utilities payable with respect to Garage A in computing the maximum allowed rejection

damages claim that the Landlord may assert. Belcrest’s arguments that some of the future taxes

might have come due after the Revenue Transfer Date, and might have been payable to New

Town, is properly discussed in deciding how much of the Landlord’s allowed damages claim is

owned by Dewey, rather than in calculating the maximum amount of the Landlord’s allowed

rejection damages claim under section 502(b)(6).

Dewey’s proof of claim is in evidence, and it attached materials that verify Dewey’s

projections for taxes and utilities in Garage A. They show that over the relevant three years of the

Ground Lease term the tenant would have been responsible for the payment of taxes in the amount

of $483,490.09 and utilities in the amount of $48,629.64 with respect to Garage A. Belcrest has

not disputed those projections.

Dewey has not asked for payments of taxes and utilities with respect to the parking spaces

that were to be made available in Garage B, even though some spaces in Garage B were designated

as part of the Leased Premises. Neither party offered any explanation for this omission, but the

omission is favorable (not harmful) to Belcrest.

The sum of the base rent, taxes and utility charges that would have been payable as rent

over the relevant three years of the remaining lease term is $2,602,119.73. That amount represents

the maximum rejection damage claim that may be allowed in favor of the Landlord pursuant to

section 502(b)(6) of the Bankruptcy Code.

2. The Landlord’s Actual Damages

Section 502(b)(6) is a statutory “cap” on the allowable damage claim arising from the

termination of a lease of real property. The cap only applies if actual damages are higher than

the capped amount. If actual damages are lower, then the allowed claim from rejection of the

lease is equal to the actual damages.

There was little evidence at trial, and little to no discussion in the parties’ papers, about

the actual damages (lost rents) that were caused by the rejection of the Ground Lease. There

appears to be no dispute that the lost revenues would exceed the maximum amount allowed by

section 502(b)(6). No dispute over this point was raised in Belcrest’s objection to Dewey’s proof

of claim, ECF No. 159, or in the Joint Pretrial Order, or in Belcrest’s contentions at trial.

Belcrest argued for the first time, in its post-trial submission, that the Landlord’s actual

damages claim should not be based on lost rents, but instead should be equal to the “Default

Termination Payment” that the Ground Lease required if the tenant defaulted and if the Landlord

served a notice of termination of the Ground Lease. Section 10.4 of the Ground Lease states:

Upon such termination Tenant shall pay to Landlord a payment (the “Default

Termination Payment”) in an amount equal one hundred ten percent (110%) of an

amount equal to (i) fifteen percent (15%) multiplied by (ii) the Net Annual Rent

for the Lease Year most recently ending prior to the date of such termination

multiplied by (iii) the number of full and fractional years from the date of such

termination until June 30, 2035, increased by one and one-half percent (1.5%) per

month for each month or portion thereof between the date of termination of the

Ground Lease and the date upon which the Default Termination Payment is paid

to Landlord.

This argument was raised for the first time in a post-trial submission filed on May 22, 2023. The

issue was not raised in Belcrest’s objection to Dewey’s claim, or in the Joint Pretrial Order, or at

trial.

The Default Termination Payment is part of the Ground Lease itself, and so Dewey

certainly had notice of the existence of the provision. However, if the application of the

provision depends on the underlying facts, and if Belcrest’s delay deprived Dewey of a fair

opportunity to offer evidence as to those facts, then the delay may have been unfairly prejudicial

to Dewey. I therefore need to determine whether it is plain from the admitted facts that the

provision is applicable, or whether the application of the provision depended on facts about

which Dewey could have provided evidence if it had been given prior notice.

The key issue in deciding whether section 10.4 of the Ground Lease is applicable is

whether the Ground Lease was “terminated” as that term is used in the Ground Lease. Section

10.4 contemplates a termination following a default by the tenant and the issuance of a

termination notice by the Landlord. Here, Belcrest’s rejection of the Ground Lease constituted a

“breach” of the lease that is deemed to have occurred immediately prior to the bankruptcy filing.

11 U.S.C. § 365(g)(1). It is well-settled, though, that the rejection of a lease in bankruptcy does

not “terminate” a lease for contract or other state law purposes. See, e.g., Mission Prod.

Holdings v. Tempnology, LLC, 139 S.Ct. 1652, 1661 (2019) (holding that a rejection under

section 365 constitutes a breach, not a rescission of a rejected contract or lease); In re Old Carco

LLC, 406 BR 180, 199 (Bankr. S.D.N.Y. 2009) (citing 2 Norton Bankr. L. & Pract. 3d § 46:23

and holding that although rejection of a contract or unexpired lease constitutes a breach of

contract, it does not terminate the contract or lease “except in the narrow situations set out in

subsections (h) and (i) of § 365, which are not relevant here”); In re Enron Corp., 01 B 16034

(AJG), 2006 WL 898033, at *4 (Bankr. S.D.N.Y. Mar. 24, 2006) (noting that except in certain

limited circumstances, “rejection, although treated as a breach, does not terminate the lease or

contract”). The parties, in their recent submissions on this issue, have each agreed that the

rejection of the Ground Lease did not itself amount to a termination.

The Ground Lease provides that a “termination” occurs if the Landlord sends a notice of

termination following a tenant’s breach. However, there is no evidence that the Landlord issued

a termination notice to Belcrest.

Belcrest contends that Dewey wrongly evicted Belcrest from the original parking location

and wrongly forced Belcrest to use substitute parking to which Belcrest did not have enforceable

legal rights, and that I should regard this conduct by Dewey as a “termination” of the Ground

Lease. The arbitrator already held, however, that Dewey was entitled to designate Parking

Garages A and B as substitute parking and that Dewey did not breach the Ground Lease in doing

so. As noted several times above, Belcrest’s arguments that it was deprived of “legally

enforceable rights” to the substituted parking are belied by Belcrest’s own admissions that the

Assignment Agreement gave Belcrest a leasehold interest in the substituted spaces.

Perhaps Belcrest thinks that other conduct occurred that might indicate that the Ground

Lease was “terminated” for purposes of section 10.4 of the Ground Lease. The parties would

have had the opportunity to offer evidence on such points if Belcrest had raised the argument

before trial, or even during trial. Belcrest did not do so. It would be prejudicial to allow Belcrest

to make factual arguments about “termination” as to which Belcrest gave no fair notice before

trial. I will therefore foreclose Belcrest from pursuing its belated arguments about the Default

Termination Payment.

C. What Portion of the Landlord’s Claim Belongs to Dewey

Belcrest argues that Dewey should only be allowed to claim damages for rents lost prior

to the Revenue Transfer Date, on the theory that any later rents belong to New Town, which has

not filed a claim.

Under the Bankruptcy Code, the landlord’s “claim” for lost rents as of the petition date

includes all future rents, regardless of whether those future rent claims were matured or

contingent. 11 U.S.C. § 101(5). Courts have often referred to this feature of claims allowance as

an automatic acceleration of future obligations. HSBC Bank USA v. Calpine Corp., No. 07 Civ.

3088 (GBD), 2010 U.S. Dist. LEXIS 96792 at *10 (S.D.N.Y. Sept. 15, 2010) (holding that “the

filing of a bankruptcy petition renders all of a petitioner’s outstanding debts mature and

payable”); In re Manville Forest Prods. Corp., 43 B.R. 293, 297-98 (Bankr. S.D.N.Y. 1984)

(“Bankruptcy operates as the acceleration of the principal amount of all claims against the

debtor.”) (internal citations omitted)).

The First Amendment to the Assignment Agreement states that Dewey retained all rights

to rents that “accrued” prior to the Revenue Transfer Date. Belcrest rejected the Ground Lease,

leaving a claim under the Bankruptcy Code that became allowable and therefore “accrued” as of

the date of filing of the bankruptcy petition. 11 U.S.C. § 502.

In Belcrest’s view, Dewey and New Town each had separate rights to future rents, and

each therefore had a separate claim against Belcrest that was accelerated and that accrued at the

time of the bankruptcy filing. In Dewey’s view, the “Landlord” under the Ground Lease had a

single claim against Belcrest, and that claim accrued as of the bankruptcy filing date. Since the

bankruptcy filing date was before the Revenue Transfer Date, Dewey contends that Dewey owns

the claim. Notably, there is no dispute between New Town and Dewey on this contractual point.

New Town has confirmed that Dewey owns the entire claim and that New Town has no interest

in it. New Town has represented the following:

Reference is made to that certain Assignment and Assumption of Parking

Lease between Dewey L.C. (“Dewey”) and New Town Parking, LLC (“New

Town”), as amended pursuant to that certain First Amendment to Assignment and

Assumption of Parking Lease (the “Assignment”).

Reference is also made to that certain Proof of Claim filed by Dewey with

the United States Bankruptcy Court for the Southern District of New York (Claim

No. 5-3) (which amended Claim No. 5-2, which amended Claim No. 5-1), in the

principal amount of $2,724,544.42 (the “Claim”).

We understand there is an action pending in the Court in which Debtor has

objected to the allowance of the Claim. We further understand that at a

conference held on April 4, 2023 the Court requested confirmation from New

Town that Dewey is, and will continue to be the holder of the Claim.

This confirms that in accordance with the Assignment, the claim is held

by, and belongs to Dewey. This further confirms that New Town, on behalf of

itself and any of its affiliates, does not claim an interest in, and expressly waives

any future claim it may have with respect to, the Claim.

ECF No. 190. Dewey and New Town are in agreement on this point. Only Belcrest urges a

contrary interpretation, and Belcrest was not a party to the Assignment Agreement and played no

role in its negotiation or drafting.

Dewey and New Town are the best authorities as to the meaning of their own contract.

Dewey retained any rights the Landlord had to payments of rent and additional rent that accrued

before the Transfer Date, and Dewey and New Town agree that those rights included the claims

to damages under section 502(b)(6). Their position is consistent with the language of the

Assignment Agreement and with the operation of the Bankruptcy Code. Belcrest may wish that

the Assignment Agreement had stated otherwise, but Belcrest has no right to re-write other

parties’ contracts in order to achieve a windfall for itself. I therefore reject Belcrest’s contention

and hold that Dewey is entitled to assert the full amount of the Landlord’s allowed rejection

damages claim.

In light of this holding it is not necessary for me to rule on the alternative suggestion that

if New Town were deemed to own all or part of the claim then New Town should be allowed to

assert a late-filed claim on its own behalf. I note, however, that even if Belcrest were correct I

would be inclined to permit New Town to file a claim, notwithstanding the fact that the bar date

has passed. Belcrest has been on notice of the full Landlord claim at all times, and it would not

be prejudicial to Belcrest to allow a late-filed claim if one were needed.

* * *

Based on the foregoing, the portion of Dewey’s allowed claim that represents rejection

damages is equal to the maximum permitted under section 502(b)(6), or $2,602,119.73.

C. Arbitration Expenses

The arbitrator ordered Belcrest to reimburse Dewey for $23,812.19 of expenses and

arbitrators’ fees that had been advanced by Dewey. This amount has properly been included in

Dewey’s claim and is not subject to the section 502(b)(6) cap.

D. Belcrest’s Claimed Offsets

Belcrest contends that it is entitled to an offset of $384,155.53, representing amounts that

Belcrest previously overpaid for taxes. Belcrest contends that for many years prior to June 2021

Belcrest had been charged (and had paid) the taxes attributable to the entire 19.96 acre Dewey

property of which the 7.9237 acre “Leased Premises” were only a part. At prior stages in this

proceeding Dewey contended that Belcrest actually was using more than the 7.9237 acre “Leased

Premises” and that it therefore was appropriate for Belcrest to pay the taxes and utilities

attributable to the larger property. However, Dewey offered no evidence at trial of such use, or

of any agreement by Belcrest to pay anything for the use of the larger property. Dewey insisted

during the arbitration that the “Leased Premises” only encompassed the 7.9237 acre lot, and the

arbitrator ruled in favor of Dewey on that point. Any amounts that Belcrest paid that were not

attributable to the Leased Premises were excessive.

In its post-trial submissions Dewey does not deny that it charged Belcrest for the taxes

and utilities attributable to the entire 19.96 acre property. Instead, Dewey contends that the

evidence offered by Belcrest in support of its claimed offset was insufficient. I disagree. The

parties stipulated that the exhibits (including Belcrest’s Exhibit LL) were admissible in evidence.

Furthermore, the ways in which prior tax and utility charges had been allocated was primarily in

Dewey’s own knowledge. Dewey had notice of Belcrest’s calculations and had ample

opportunity to present contrary evidence if it had any, but Dewey did not do so.

Belcrest has sought an offset for payments that it made for tax periods from and after

November 15, 2015. Dewey contends that Belcrest’s claimed offsets are subject to a three-year

statute of limitations under Maryland law, a point which Belcrest has not disputed. Belcrest’s

exhibits do not state the dates on which payments were made. Dewey contends that the

maximum offset for payments made during the limitations period would be $295,868.59. If I

were to exclude all payments that might have been made before May 2018 (i.e., those made with

respect to tax years that include months prior to May 2018) then I would reach a lower figure

than the one that Dewey has calculated. In the absence of contrary evidence by Belcrest I will

accept the Dewey calculation of $295,868.59.

E. Dewey’s Allowed Claim

Based on the foregoing, Dewey is entitled to an allowed claim of $2,428,675.83,

representing the following:

Unpaid rent $ 98,612.50

Rejection damages $ 2,602,119.73

Arbitration expenses $ 23,812.19

Offset ($ 295,868.59)

Net $ 2,428,675.83

Dated: New York, New York

December 7, 2023

s/Michael E. Wiles

Honorable Michael E. Wiles

United States Bankruptcy Judge