Decided November 28, 2011.
Plaintiff's attorneys are Goldberg Weprin Finkel Goldstein LLP, by Matthew Hearle, Esq., New York, New York.
Defendant's attorneys are Herrick, Feinstein LLP, by Scott E. Mollen, Esq., Two Park Avenue, New York, New York.
This is an action for injunctive and declaratory relief. Plaintiff tenant 51 Park Place LH, LLC moves for a Yellowstone injunction tolling and staying the cure period in a default notice, dated September 14, 2011, until a reasonable time after this court has determined whether such a default validly exists, and enjoining defendant-landlord Consolidated Edison Company of New York, Inc. from declaring plaintiff-tenant to have committed an "event of default" under the lease for the subject premises and from taking any steps to terminate the lease or plaintiff's right to purchase the premises pursuant to an option under the lease. As plaintiff notes, "the Premises have been highly publicized of late due to Plaintiff's intention to build a peaceful Islamic community center on the site." Plaintiff speculates as to whether defendant may be bowing to unnamed political pressure.
Pursuant to the parties' lease, the tenant had a right to renew its lease for 21 years, with rent set during the renewal term pursuant to a formula based upon the value of the land only, as vacant and unimproved, to be determined through arbitration if the parties were unable to agree. Specifically, section 1.04 of the lease provides:
The Rental which Tenant agrees to pay during each renewal term shall be an amount per annum equal to ½ of 1% in excess of the prime rate . . ., of the fair market value . . . of the Land only considered as vacant and unimproved as of the date six (6) months prior to the commencement of each such renewal term. . . .
There is no dispute that the prime rate for purposes of the calculation is 5%. Plaintiff exercised its right to a renewal, and an arbitration was ultimately held to determine the fair market value of the premises. Defendant contends that pursuant thereto plaintiff now owes $1,700,875 in arrears, for which the subject default notice was sent.
While plaintiff maintains that it will seek to set aside the appraisal in a proceeding pursuant to article 75 of the CPLR, for purposes of this action plaintiff asserts that, even accepting the appraisal as valid, defendant's method of calculating arrears based upon the appraisal is incorrect. In addition, plaintiff argues that the default notice was deficient as the lease requires a second cure notice with an additional ten day cure period, in addition to the 20 day cure period within the subject notice, that plaintiff's contention is that the subject notice fails to provide because the subject notice states that, if plaintiff does not cure within the 20 day cure period within the notice, then defendant may exercise all of the available remedies under the lease, including termination thereof. That does not mean that defendant would not fulfill its responsibility under the lease to serve the second notice to cure before serving a termination notice. Nevertheless, plaintiff contends that if its contentions are incorrect, it is ready, willing, and able to cure. Defendant disputes plaintiff's ability to cure, noting various financial difficulties of plaintiff's principal and emphasizes the suggestion by plaintiff that, if it has to pay the arrears the amount that defendant contends is due. Plaintiff counters with how it would pay the full amount if necessary.
As the Court of Appeals reiterated in Graubard Mollen Horowitz Pomeranz Shapiro v 600 Third Ave. Assoc. ( 93 NY2d 508, 514):
The party requesting a Yellowstone injunction must demonstrate that:
(1) it holds a commercial lease; (2) it received from the landlord either a notice of default, a notice to cure, or a threat of termination of the lease; (3) it requested injunctive relief prior to the termination of the lease; and (4) it is prepared and maintains the ability to cure the alleged default by any means short of vacating the premises ( Internal quotation omitted).
There is no dispute as to the first three factors. While defendant disputes plaintiff's calculation of the arrears, it is the very purpose of a Yellowstone injunction to afford the tenant an opportunity to contest the alleged violation in the notice to cure while preserving the tenant's right to cure in the event the tenant is wrong and a violation is found to exist ( see Post v 120 E. End Ave. Corp., 62 NY2d 19, 25; Stuart v D D Assoc., 160 AD2d 547, 548 [1st Dept 1990]; Garland v Titan W. Assoc., 147 AD2d 304, 307 [1st Dept 1989]). Indeed, plaintiff need not establish a probability of success or the other normal elements of a preliminary injunction to obtain a Yellowstone injunction ( see Jemaltown of 125th St. v Leon Betesh/Park Seen Realty Assoc., 115 AD2d 381, 382 [1st Dept 1985]).
While the parties differ on the propriety of the notice, whether the notice is understood as a defective notice to cure or a threat of termination, it would satisfy the second element for a Yellowstone injunction ( cf. Empire State Bldg. Assoc. v Trump Empire State Partners, 245 AD2d 225, 228 [1st Dept 1997] [where the Court held that Yellowstone relief was still available although the failure of the notice to set forth the cure period may have made the notice defective]).
Plaintiff's reading of the formula in the lease — that "½ of 1 % in excess of the prime rate" prime should be understood as prime plus 1% divided by two rather than a half a percentage point above the prime rate — is strained at best.
While defendant disputes plaintiff's ability to cure the alleged violation, plaintiff need not prove its ability to cure in order to obtain a Yellowstone injunction ( id.; Herzfeld Stern v Ironwood Realty Corp., 102 AD2d 737, 738 [1st Dept 1984]; see ERS Enters. v Empire Holdings, 286 AD2d 206, 207 [1st Dept 2001]). While plaintiff effectively acknowledges that it does not have the cash on hand necessary to pay the full amount at once, it nevertheless contends that it is ready, willing and able to cure. In reply, plaintiff's member Sharif El-Gamal notes that he could get a mortgage on the property next door, which he owns and is mortgage free, in order to cover the arrears.
Accordingly, by separate decision and order of this date, the motion was granted. The Yellowstone injunction is conditioned on the payment of use and occupancy of $47,437.50 per month during the pendency of the action and, as sought by defendant, the posting of an undertaking. The amount thereof has been set at $1,600,875 for the claimed arrears ( see 61 W. 62nd Owners Corp. v Harkness Apt. Owners Corp., 173 AD2d 372, 372-373 [1st Dept 1991] [where the Court held that an undertaking was not excessive where it was set in an amount that defendant contested was twice the amount of the rent arrears]; cf. Graubard Mollen Horowitz Pomeranz Shapiro v 600 Third Ave. Assoc., 93 NY2d at 515-516).
The court has subtracted $100,000 from the amount that defendant requested for the undertaking because plaintiff has already filed an undertaking of $100,000 as a condition of the temporary restraining order on the order to show cause (CPLR 6313 [c]).