Opinion
No. 51931/2016.
11-01-2017
WHEELER AVE. LAUNDRY LLC, Plaintiff, v. MODERN YONKERS REALTY LLC, Ghaith Annabi a/k/a Gaith Annabi and James Ferreira, Defendants.
John J. Hughes, Bertine, Hufnagel, Headley, Zeltner, Drummond & Dohn, Scarsdale, for plaintiff. Robert F. Zerilli, Law Office of Robert F. Zerilli, Yonkers, for defendant.
John J. Hughes, Bertine, Hufnagel, Headley, Zeltner, Drummond & Dohn, Scarsdale, for plaintiff.
Robert F. Zerilli, Law Office of Robert F. Zerilli, Yonkers, for defendant.
TERRY JANE RUDERMAN, J.
The following papers were considered in connection with plaintiff's motion for an order granting partial summary judgment against defendant Modern Yonkers Realty on its third and sixth causes of action, and the motion of defendants Modern Yonkers Realty and Ghaith Annabi for summary judgment dismissing plaintiff's second, third, fifth, sixth, eighth and ninth causes of action:
Papers—Sequence 5/Numbered
Notice of Motion, Affidavit, Affirmation, Exhibits 1–33,
and Memorandum of Law 1
Affirmation in Opposition, Exhibits A–J 2
Affirmation in Reply, Exhibits 1–2, Reply Affidavit 3
—Sequence 6
Notice of Motion, Affirmation, Exhibits A–K 4
Affidavit in Opposition, Affirmation, Exhibits 1–14 5
Reply Affirmation 6
Plaintiff Wheeler Ave. Laundry LLC is a commercial tenant under a 10–year lease dated October 1, 2011, with defendant James Ferreira as landlord. The lease covers ground floor space in a four-story, mixed-use building located at 271/273 New Main Street, Yonkers, New York, to be used for a laundromat. Following a fire that occurred on July 18, 2013 within apartment 1–C, an upstairs residential unit in the building, the electric and gas service to the building was cut off and the tenants were required to vacate. The City of Yonkers required the owner, defendant Ferreira, to make certain repairs before the building could be re-occupied by its tenants, issuing two Violation Notices. The notice dated July 19, 2013 prohibited re-occupancy of the premises "until all electrical repairs [had] been made, all debris [was] removed and certificate of completion [ ] issued for the [work required under a] fire damage debris removal permit." The July 24, 2013 notice indicated further structural problems requiring repairs.
While Ferreira submitted an application for Minor Alterations/Repairs on July 26, 2013, pursuant to which the Yonkers Department of Housing and Buildings issued a permit, the required repair work was not completed. On April 15, 2014, Ferreira sold the building to defendant Modern Yonkers Realty LLC ("MYR"). Defendant Annabi is the sole principal of MYR.
Shortly after MYR purchased the building, the Yonkers Department of Housing and Buildings issued an Order of Condemnation on April 25, 2014. In a letter dated May 5, 2014, MYR advised plaintiff that it was terminating the lease as of July 7, 2014, pursuant to paragraph 13 of the lease. According to plaintiff's Managing Member, Donald Utschig, plaintiff did not receive that May 5, 2014 letter until it was enclosed with a letter dated June 16, 2014 from defendants' attorney to plaintiff's attorney. Regardless of when plaintiff received that termination letter, Utschig states that MYR and its attorney thereafter suggested that they would be willing to allow plaintiff to re-take possession once the work was completed if plaintiff would renegotiate the terms of the lease. Specifically, according to Utschig, defendant Annabi confirmed during a walk-through in November 2014 that plaintiff could reoccupy the leased premises after the repairs were completed.
However, more than a year later, by a letter dated December 10, 2015 from defendants' attorney, Andrew M. Romano, to plaintiff's attorney, plaintiff was again advised that defendants "decided to cancel the lease as pursuant of its terms." Utschig explains that this letter was issued after a breakdown in negotiations, and Romano testified to the same effect at his deposition, adding that in his view, the lease had been in effect until the December, 2015 letter.
Plaintiff has not paid rent on the premises since July 2013.
At some point, the required repairs were completed. Utschig asserts that he learned during the course of discovery that most, if not all of the repairs were completed by the time of the December 10, 2015 letter. In addition, Patrick Losco, a Senior Building Inspector for the City of Yonkers, testified at his deposition that once electric and gas service was restored to the building, and the debris was cleared away, the landlord could have sealed off the apartment in which the fire had occurred, where more structural repairs were needed, and could have allowed the tenants back into the other leased units. Losco said he gave the landlord verbal permission to have other tenants return to the building a month or two before a new Certificate of Occupancy was issued for apartment 1–C in February, 2016.
Certifications of Completion were issued by the City of Yonkers on February 18, 2016. Plaintiff asserts that MYR thereafter leased the laundromat premises to a new tenant, including all of plaintiff's laundromat machines and equipment, and changed the locks on the premises, which prevented plaintiff from retrieving its property. The new tenant also operated a laundromat.
Plaintiff commenced this action on February 16, 2016, against Ferreira for breach of the commercial lease and fraudulent inducement, and against MYR for breach of contract for failure to timely make repairs, breach of the covenant of quiet enjoyment, intentional interference with contract and violation of RPAPL 853 ; its claims against Annubi are based on piercing the corporate veil.
Defendant Ferreira has defaulted, and a default judgment against him was granted in this action by decision and order dated September 12, 2016. Defendants MYR and Annabi filed an answer. Following a decision and order of this Court filed May 16, 2017, both plaintiff and defendants MYR and Annabi filed amended pleadings.
Plaintiff now moves (sequence 5), pursuant to CPLR 3212, for partial summary judgment as to liability against defendant Modern Yonkers Realty on its third cause of action, for breach of the covenant of quiet enjoyment, and on its sixth cause of action, for violation of RPAPL 853. Defendants Modern Yonkers Realty and Ghaith Annabi move (sequence 6) for summary judgment dismissing plaintiff's causes of action for breach of contract based on the failure to make timely repairs (second), breach of the covenant of quiet enjoyment (third), intentional interference with contract (fifth), violation of RPAPL 853 (sixth), conversion (eighth), and its cause of action for judgment against defendant Annabi based on piercing the corporate veil (ninth).
Analysis
Lease Paragraph 13
Plaintiff's position is that MYR, as landlord, improperly terminated the lease without basis in the lease provisions or the circumstances, and improperly caused plaintiff to be unable to re-take possession of the leased premises and ultimately lose access to the premises when it had a right to re-occupy under the terms of its lease. Defendants claim that MYR was entitled under lease paragraph 13 to terminate the lease. Paragraph 13 provides that
"In the event of a partial destruction of the premises during the term hereof, from any cause, Lessor shall forthwith repair the same, but such partial destruction shall not terminate this lease, except that Lessee shall be entitled to a proportionate reduction of rent while such repairs are being made, based upon the extent to which the making of such repairs shall interfere with the business of Lessee on the premises. If such repairs cannot be made within said sixty (60) days, Lessor, at his option, may make the same within a reasonable time, this lease continuing in effect with the rent proportionately abated as aforesaid, and in the event that Lessor shall not elect to make such repairs which cannot be made within sixty (60) days, this lease may be terminated at the option of either party."
Initially, the use of the term "the premises" in Paragraph 13 must be understood as the unit being leased, not the building as a whole, since the term "the premises" is used throughout the lease to refer to the leased premises. Accordingly, paragraph 13 concerns the possibility that the leased unit would suffer "partial destruction," and provides for a proportionate reduction of rent while repairs are performed to the unit; it further provides for other options if those repairs of the unit cannot be made within 60 days. Paragraph 13 does not authorize termination based on partial destruction of another part of the building, or a municipal order requiring all the tenants to vacate.
Defendants do not assert any other basis under the lease to support their termination of the agreement. Therefore, in view of the inapplicability of lease paragraph 13, the parties' respective rights and obligations derive from the common law.
Third Cause of Action—Breach of the Covenant of Quiet Enjoyment
Plaintiff moves for summary judgment on this cause of action; defendant moves for summary judgment dismissing it.
"If a landlord by his or her own acts keeps a tenant out, the latter may sue the landlord for breach of the covenant of quiet enjoyment" (74 N.Y. Jur Landlord and Tenant § 232). "To make out a prima facie case of breach of the covenant of quiet enjoyment, a tenant must establish that the landlord's conduct substantially and materially deprived the tenant of the beneficial use and enjoyment of the premises ( Jackson v. Westminster House Owners Inc., 24 AD3d 249, 250 [1st Dept 2005], citing Barash v. Pennsylvania Term. Real Estate Corp., 26 N.Y.2d 77, 82–83 [1970] ). The covenant covers commercial as well as residential leases (see e.g. Barash, supra ). It may be established by either an actual or constructive eviction (see Grammer v. Turits, 271 A.D.2d 644, 645–646 [2d Dept 2000] ). "[W]here the landlord barred the tenant from entering the premises it has been held a partial actual eviction.... Similarly, where the landlord changes the lock, or padlocks the door, there is an actual eviction" ( Barash, 26 N.Y.2d at 83 ).
Plaintiff does not suggest that its initial ouster from its premises by municipal authorities was wrongful, or was defendants' responsibility. Rather, it contends that the cause of action is established by defendants' continued prevention of the possibility that it could re-take possession, when the necessary work that would have been sufficient to allow it to re-take possession could have been completed far sooner. In essence, plaintiff maintains that defendants purposefully elected not to make the repairs necessary for the lifting of the condemnation order in an effort to convince plaintiff to voluntarily abandon the lease or coerce plaintiff to renegotiate the terms of its lease. Plaintiff also relies on the landlord's wrongful termination of the lease.
"[A] failure to repair a building can constitute actual or constructive eviction" ( 34–35th Corp. v. 1–10 Indus. Assoc., LLC, 16 AD3d 579, 580 [2d Dept 2005] ; see also 74 N.Y. Jur Landlord and Tenant § 232). Where there is evidence that the defendant made efforts to cure the problems, an issue of fact may be presented as to whether those efforts were sufficient (see 34–35th Corp. v. 1–10 Indus. Assoc., 16 AD3d at 580 ).
Plaintiff's claim that MYR could have completed the necessary repairs to allow plaintiff to re-occupy its leased premises, but chose not to, is not established as a matter of law by the submissions. Therefore, plaintiff is not entitled to judgment as a matter of law on this cause of action.
In seeking dismissal of this cause of action, MYR contends that plaintiff cannot establish the elements of this cause of action because plaintiff has not paid rent since July 2013. The notion that a tenant who has allegedly been wrongfully prevented by the landlord from re-taking physical possession of the leased premises must continue paying rent to the landlord in order to be entitled to claim a breach of the covenant of quiet enjoyment, is based on the rule that "The tenant must ... have performed all covenants which are a condition precedent to its right to insist upon the covenant [of quiet enjoyment]" ( Dance Magic, Inc. v. Pike Realty, Inc., 85 AD3d 1083, 1088 [2d Dept 2011], citing Dave Herstein Co. v. Columbia Pictures Corp., 4 N.Y.2d at 121 ; Leider v. 80 William St. Co., 22 A.D.2d 952, 953, 255 N.Y.S.2d 999 [1964] ). In Dance Magic, because the plaintiff tenant "failed to pay rent while retaining possession of the subject premises for a portion of December 2007, ... the plaintiffs failed to satisfy the condition precedent in their lease, and [were] thereby precluded from claiming a breach of the covenant of quiet enjoyment" ( 85 AD3d at 1088 ).
In Dave Herstein Co. v. Columbia Pictures Corp. (4 N.Y.2d 117 [1958] ), where the plaintiff tenant stopped paying rent, claiming that removal of toilet facilities and the demolition of an area that he used as a stockroom was a partial actual eviction, the Court explained that "Whether the breach of the covenant is alleged as a defense to an action for rent due, or is used as a basis for an action for damages, the determining factor, with few exceptions, is whether the tenant has vacated the premises" ( 4 N.Y.2d at 121 ). It added, "[i]t is also a well-settled proposition that the tenant must perform the conditions precedent to maintain the action for breach of the covenant of quiet enjoyment, unless there was a waiver of those conditions. This is so since such breaches of covenant by the landlord are breaches of an independent covenant and, hence, do not exonerate a refusal or failure to pay rent" (id. ).
Plaintiff argues that the rule requiring payment of rent in order to claim breach of quiet enjoyment is limited to leases where the covenant of quiet enjoyment is expressly conditioned on payment of rent, observing that such explicit lease provisions were present in Dave Herstein v. Columbia Pictures, supra, and Phoenix Garden Rest., Inc. v. Chu, 245 A.D.2d 164 [1st Dept 1997] ). However, in other cases citing and applying the rule, it does not appear that the courts have relied on explicit lease provisions. In Leider v. 80 William St. Co., 22 A.D.2d 952 [2d Dept 1964] ), where the plaintiff-tenant claimed constructive eviction based on the landlord's failure to further essential services, the Court explained that "had plaintiff not paid his rent, his claim for breach of the covenant of quiet enjoyment ... would not have been available to him" ( id. at 953 ).
Here, plaintiff is asserting actual rather than constructive eviction, and it is undisputed that it was entirely out of possession of the leased premises. There is no indication that at any point either Ferreira or MYR made a claim for continued payment of rent. Given plaintiff's actual involuntary ouster and inability to return to its leased premises, allegedly due to defendants' conduct and choices, the termination letter MYR sent plaintiff on May 5, 2014, just a few weeks after it took ownership, and MYR's apparent position that plaintiff would only be permitted to re-take possession of the leased premises upon renegotiation of the lease, defendants cannot establish as a matter of law that plaintiff is precluded from making a claim for breach of the covenant of quiet enjoyment, based on its failure to continue paying rent after its continued dispossession. Indeed, under the circumstances MYR may have waived any such claim. Therefore, defendants' motion to dismiss this cause of action is denied.
Sixth Cause of Action—Violation of RPAPL 853
Plaintiff moves for summary judgment on this cause of action; defendants move for summary judgment dismissing it.
Plaintiff's sixth cause of action alleges that defendants violated RPAPL 853, which provides that "If a person is disseized, ejected, or put out of real property in a forcible or unlawful manner, or, after he has been put out, is held and kept out by force or by putting him in fear of personal violence or by unlawful means, he is entitled to recover treble damages in an action therefor against the wrong-doer." Before 1981, the statute only covered situations where a tenant was put out or kept out of property by force or through fear of personal violence (see Drinkhouse v. Parka Corp., 3 N.Y.2d 82, 91 [1957] ). A 1981 amendment added the words "by unlawful means," broadening the potential liability of landlords who dispossess tenants without using violence or threats of violence (see Lyke v. Anderson, 147 A.D.2d 18, 27–28 [2d Dept 1989] ).
Lyke v. Anderson elaborated on the intended coverage of the 1981 amendment to RPAPL 853 when the Legislature added the term "unlawful means" to the previous requirement of "force or personal violence" (see 147 A.D.2d at 29 ). In Lyke, "the defendant's son and general manager ... [i]ntentionally and without legal right, ... disconnected the utilities and electrical lines to the mobile home, smashed the attached sun deck and, finally, physically removed the mobile home from the leased lot and dumped it in a swampy area" (id. ). The Court observed that "[t]hese destructive actions are illustrative of the precise evil that RPAPL 853, as amended, was designed to prevent" (id. ).
Another example of eviction by "unlawful means" appears in Clinkscale v. Sampson (48 AD3d 730, 731 [2d Dept 2008] ), where a landlord unlawfully evicted the tenant by self-help measures "including the shutting off of the plaintiff's utilities in the middle of February, the padlocking of the entrance of the building, and the ultimate subdivision of her former apartment," entitling the tenant to treble damages.
The question of whether the means by which MYR allegedly kept plaintiff out of its leased premises constituted "unlawful means," as contemplated by RPAPL 853, cannot be determined as a matter of law based on the submissions here. It turns in part on whether MYR acted without legal justification in its handling of the repairs once it took ownership of the property. While plaintiff claims that repairs were completed well in advance of MYR's efforts to have the condemnation order lifted, it fails to provide clear evidence establishing that assertion as a matter of law.
This Court is also unable to determine in this context whether MYR's manner of purportedly terminating the lease amounted to "unlawful means" of ousting plaintiff under RPAPL 853. Although termination was not authorized by the lease, mere erroneous reliance on paragraph 13, in itself, does not establish ouster by "unlawful means" as a matter of law. Defendants cite Shapiro v. 350 East 78th Street Tenants Corp. (2008 N.Y. Slip Op 30669 [Sup Ct New York County 2008] ), where the court held that inducing a tenant to leave voluntarily by using misrepresentations did not qualify as an unlawful means of ouster. However, here, the allegations against MYR are not limited to its making misrepresentations. There is a question of fact regarding whether MYR's actions, taken all together, constituted "unlawful means" of preventing plaintiff from taking possession of its leasehold interest.
Furthermore, there is a question of fact as to exactly when the cause of action accrued for purposes of determining whether the claim was timely made within the applicable one year limitations period (see PK Restaurant, LLC v. Lifshutz, 138 AD3d 434, 436–437 [1st Dept 2016] ; Kolomensky v. Wiener, 135 A.D.2d 505, 507 [1987] ). The moment at which MYR denied plaintiff's right to return is currently unclear: while there was a termination letter dated May 5, 2014, there is evidence of subsequent negotiations, as well as a later termination letter of December 10, 2015, which support, but do not require, a determination that the May 5, 2014 letter was implicitly rescinded.
Therefore, both parties' motions for summary judgment regarding RPAPL 853 are denied.
Defendants' Motion for Summary Judgment: Breach of Contract based on the failure to make timely repairs (second cause of action)
Defendants argue that the lease did not require it to make any repairs to the leased premises; the only lease provisions concerning repairs related to the building roof, walls and foundation. Defendants point out that the lease did not require the landlord to provide gas and electric service. However, plaintiff's claim is not that defendants failed to abide by a lease provision requiring them to make repairs to its premises. Rather, it is that defendant had an obligation under the lease to make the repairs required by the City's violation notices within a reasonable period of time so that the Condemnation Order could be lifted and the tenants restored to possession. This presents an issue of fact requiring the denial of defendants' motion for summary judgment.
Intentional Interference with Contract (fifth cause of action)
"The tort of inducement of breach of contract, now more broadly known as interference with contractual relations, consists of four elements: (1) the existence of a contract between plaintiff and a third party; (2) defendant's knowledge of the contract; (3) defendant's intentional inducement of the third party to breach or otherwise render performance impossible; and (4) damages to plaintiff" ( Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94 [1993] ). While the amended complaint contends that Annabi and MYR intentionally interfered with plaintiff's contract with Ferreira, this contention cannot stand since MYR simply undertook Ferreira's contractual obligations, and there is no basis for a claim that MYR or Annabi did something to prevent Ferreira from making repairs he would otherwise have made. Plaintiff now asserts, in opposition to defendants' motion, that Annabi may be said to have interfered with plaintiff's contract with MYR. This contention must fail; it was Annabi who made decisions on behalf of MYR. If Annabi induced MYR to breach its contract with plaintiff, he did so as MYR's representative, not as a separate entity.
The complaint fails to establish the elements of this cause of action, and it is therefore dismissed.
Conversion (eighth cause of action)
"Conversion is the ‘unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights' " ( Vigilant Ins. Co. of Am. v. Housing Auth. of City of El Paso, Tex., 87 N.Y.2d 36, 44 [1995] [citation omitted] ). This cause of action is supported by the allegation that defendants locked out plaintiff and prevented it from retrieving its machinery and equipment. While defendants assert that plaintiff was permitted to retrieve its property while Ferreira was the owner, and that the current lessee is willing to permit plaintiff to retrieve its property, these assertions do not disprove the cause of action as a matter of law.
Piercing the Corporate Veil (ninth cause of action)
This Court's May 17, 2017 order permitting plaintiff to amend its complaint explained that although New York "does not recognize a separate cause of action to pierce the corporate veil" ( Hart v. Jassem, 43 AD3d 997 [2d Dept 2007] [internal quotation marks and citation omitted] ), the allegations in support of plaintiff's proposed ninth cause of action were factual assertions supporting a finding that the corporate veil might be pierced in the other causes of action, as in Hart v. Jassem. Accordingly, although the separate cause of action pleaded as plaintiff's ninth cause of action must be dismissed because plaintiff has no right to separate relief based on those allegations, the allegations contained therein will remain part of the complaint as "an assertion of facts and circumstances which [may] persuade the court to impose the corporate obligation on its owner[ ]" ( Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 141 [1993] ).
Accordingly, it is hereby
ORDERED that plaintiff's motion for summary judgment on its third and sixth causes of action is denied; and it is further
ORDERED that defendant's motion to dismiss is granted only as to plaintiff's fifth and ninth causes of action, with the allegations underlying the ninth cause of action to remain as support for claims that Annabi is liable based on conduct of MYR; and it is further
ORDERED that the parties are to appear at the Settlement Conference Part, Courtroom 1600, Westchester County Supreme Court, 111 Dr. Martin Luther King Jr. Blvd., White Plains, New York, on Tuesday, December 5, 2017 at 9:15 a.m. to schedule a trial.
This constitutes the Decision and Order of the Court.