Opinion
24412/10.
Decided March 16, 2011.
William P. Walzer, Esq., Davidoff Malito Hutcher LLP, Garden City, NY, Attorney for Plaintiff.
Stephen Erlitz, Esq., Erlitz Erlitz, LLP, Brooklyn, NY, Attorney for Defendants.
The following papers numbered 1 to 10 read on this matter:
Papers Numbered 1-4; 5-67-8 9 Plaintiff's Memorandum of Law 10
Notice of Motion/Order to Show Cause/ Petition/Cross Motion and Affidavits (Affirmations) Annexed Opposing Affidavits (Affirmations) Reply Affidavits (Affirmations) Affidavit (Affirmation) Other PapersUpon the foregoing papers, in this action for a declaratory judgment and injunctive relief, plaintiff Dance Showcase II, Incorporated moves, by order to show cause, for an order: (1) pursuant to CPLR 6301, enjoining and restraining defendants Wayne Byrd and Harvestime Tabernacle, Inc. (collectively, defendants), their officers, directors, employees, servants, agents, attorneys, successors, assigns, or persons under their dominion and control, or acting in concert with them, during the pendency of this action, from: (a) leasing the store premises now occupied by it, which is located at 507 East 78th Street, in Brooklyn, New York (the store premises), to anyone but it, and (b) taking any action to terminate its occupancy of the store premises, and (2) staying the holdover proceeding now pending in the Civil Court, Kings County, Commercial L T Part 52, under Index No. 089156/2010.
A temporary restraining order, restraining defendants from taking any action to terminate plaintiff's occupancy of the store premises, pending the determination of this motion, was granted by the court.
Pursuant to a lease dated September 1, 2005, plaintiff, as the tenant, leased the store premises from 1567 East 78th Street Associates, as the landlord, for a monthly rent of $1,200, to be increased by 3% at the start of each lease year. Plaintiff was to use and occupy the store premises for a dance studio and sale of apparel. The lease provided that it was "for the term of five (5) years with a right of Tenant to renew the term for an additional five years." The five-year term of the lease commenced on September 1, 2005 and ended on August 31, 2010. No further terms are provided as to what plaintiff must do to exercise the option to renew other than paragraph 27 of the lease, which pertains to notice. Paragraph 27 of the lease provides that "[a]ny notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice."
The store premises is located in a strip shopping center with addresses that run from 501 to 509 East 78th Street (the shopping center premises). At the time the lease was executed, Catherine Consalvas, who is the president of plaintiff and who, along with Bonnii Gargano, own all of its shares, was one of the two partners of 1567 East 78th Street Associates, the owner and landlord of the shopping center premises, including the store premises, and she executed the lease on behalf of the landlord, 1567 East 78th Street Associates, as its partner, and on behalf of the tenant, plaintiff, as its president. By deed dated December 12, 2005, 1567 East 78th Street Associates sold the shopping center premises, which included the store premises, to Wayne Byrd and his wife, Annith Byrd. According to Wayne Byrd, he and his wife entered into the contract to purchase the shopping center premises on September 30, 2005, but did not receive a copy of the lease for the store premises until the date of the closing. Wayne Byrd also asserts that the lease was prepared by Catherine Consalvas' attorney.
The other partner of 1567 East 78th Street Associates is Catherine Consalvas' brother.
Wayne Byrd and his wife operate a church in the shopping center premises in a space immediately adjacent to the store premises. Catherine Consalvas asserts that she would deposit plaintiff's rent checks in Wayne Byrd's locked mailbox, which is located outside the church. Catherine Consalvas claims that when she delivered the rent on or about May 1, 2010 to Wayne Byrd's locked mailbox, she included a written statement that plaintiff was exercising its option to extend the lease term. This alleged notice stated: "Dear Wayne Byrd-Enclosed please find May rent check. Also we would like to entered [sic] exercise our five year rider with you-Thank[s] Cathy Consalvas." Wayne Byrd denies receipt of this notice, and he asserts that no notice regarding a renewal of the lease by plaintiff was ever given to him.
Wayne Byrd claims that his attorney sent plaintiff a letter, dated August 18, 2010, which stated: "I strongly advise you not to sign any contracts with potential customers for the fall term for reasons that will become readily apparent to you shortly." Catherine Consalvas denies receipt of this letter.
On August 4, 2010, a deed was recorded transferring the shopping center premises to Harvestime Tabernacle, Inc., a corporation which had not yet been formed. However, as evidenced by a certificate of incorporation, on October 18, 2010, Harvestime Tabernacle, Inc. (in which Wayne Byrd is one of the trustees) was formed pursuant to article 9 of the Religious Corporation Law. In addition, a correction deed, dated October 25, 2010, was executed by Wayne Byrd and his wife, which transferred the shopping center premises from them to Harvestime Tabernacle, Inc.
Plaintiff's attorney asserts that since he was only able to find an entity with a similar name, Harvestime Plaza, Inc., with its registered address as the address in the shopping center where Wayne Byrd operates his church, he believed that Wayne Byrd and his wife must have intended to convey the shopping center to Harvestime Plaza, Inc. and got the name wrong. Plaintiff, therefore, named "Harvestime Tabernacle, Inc., also known as Harvestime Plaza, Inc.," as defendants in this action, along with Wayne Byrd.
On September 7, 2010, Wayne Byrd commenced a summary holdover proceeding against plaintiff in the Civil Court, Kings County (the holdover proceeding). In the holdover proceeding, Wayne Byrd, as the petitioner, seeks a final judgment of eviction, awarding him possession of the store premises. The petition in the holdover proceeding alleges that the respondent (plaintiff herein) has continued in possession without Wayne Byrd's permission after the expiration of the lease term on August 31, 2010. In plaintiff's answer, as the respondent, plaintiff asserts affirmative defenses, including the defenses that the term of the lease has not expired and that such term has been extended pursuant to the terms of the lease.
A cross motion by defendants for an order amending the caption of the holdover proceeding and this action to reflect Harvestime Tabernacle, Inc. as the petitioner in that proceeding and as a defendant in this action, was denied by the court on December 1, 2010, at oral argument, with respect to the holdover proceeding, and it is moot with respect to this action.
On October 4, 2010, plaintiff filed this action against defendants. Plaintiff, in paragraph 10 of its complaint, alleges that the lease provided that, at the expiration of the original term on August 31, 2010, the term of the lease may be extended for an additional term of five years, at its sole option, upon delivery of notice. Plaintiff's complaint seeks injunctive relief, during the pendency of this action, restraining defendants from interfering with its tenancy, and a declaratory judgment that it has effectively exercised its option to renew in accordance with the terms and conditions of the lease, and that the lease has been extended for a five-year period commencing on September 1, 2010.
In addressing plaintiff's instant motion, it is noted that "in order to prevail on a motion for a preliminary injunction, the movant has the burden of demonstrating (1) a likelihood of ultimate success on the merits, (2) irreparable injury absent the granting of the preliminary injunction, and (3) that a balancing of equities favors the movant's position" ( Walter Karl, Inc. v Wood, 137 AD2d 22, 26; see also Aetna Ins. Co. v Capasso, 75 NY2d 860, 862; W.T. Grant Co. v Srogi, 52 NY2d 496, 517; Berkoski v Board of Trustees of Inc. Vil. of Southampton , 67 AD3d 840 , 844; Tatum v Newell Funding, LLC , 63 AD3d 911 , 912; Gluck v Hoary , 55 AD3d 668 , 668).
In order to satisfy the burden of demonstrating a likelihood of success on the merits, the movant is required to "demonstrate a clear right to relief which is plain from the undisputed facts'" ( Blueberries Gourmet v Aris Realty Corp., 255 AD2d 348, 349-350, quoting Family Affair Haircutters v Detling, 110 AD2d 745, 747; see also Mosseri v Fried, 289 AD2d 545, 546). Where the facts of the case are sharply disputed, the movant cannot demonstrate a clear right to injunctive relief ( see Eklund v Pinkey , 31 AD3d 908 , 909; Digestive Liver Disease, P.C. v Patel , 18 AD3d 423, 423; Mosseri, 289 AD2d at 546).
Here, the likelihood of ultimate success on the merits turns upon the lease terms and whether plaintiff made an appropriate election to renew under the lease. "A lease is a contract" ( Genovese Drug Stores, Inc. v William Floyd Plaza, LLC, 63 AD3d 1102, 1103; see also Vermont Teddy Bear Co. v 538 Madison Realty Co. , 1 NY3d 470 , 475; Matter of Wallace v 600 Partners Co., 86 NY2d 543, 548; Riccardo's Lounge Inc. v Maggio, 9 Misc 3d 1112[A], 2005 NY Slip Op 51509[U], *6 [Sup Ct, Nassau County 2005]), and "[w]here the terms of a contract are clear and unambiguous, the contract must be enforced according to its terms" ( Genovese Drug Stores, Inc., 63 AD3d at 1103-1104; see also Reiss v Financial Performance Corp., 97 NY2d 195, 198; W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162; Riccardo's Lounge Inc., 9 Misc 3d 1112[A], 2005 NY Slip Op 51509[U], *6).
It is well established that "[a]n election to renew must be timely, definite, unequivocal, and strictly in compliance with the terms of the lease" ( Redlyn Elec. Corp. v Louis Shiffman, Inc., 2011 NY Slip Op 00666, *2 [2d Dept 2011]; see also J.N.A. Realty Corp. v Cross Bay Chelsea, 42 NY2d 392, 396; Dan's Supreme Supermarkets v Redmont Realty Co., 216 AD2d 512, 513; American Realty Co. v 64 B Venture, 176 AD2d 226, 227). Thus, "[a]n option [to renew] must be exercised within the time and in the manner established by the terms of the option" ( Riccardo's Lounge Inc., 9 Misc 3d 1112[A], 2005 NY Slip Op. 51509[U], *6).
Here, as discussed above, paragraph 27 of the lease required that notice must be served by registered or certified mail addressed to the owner. Plaintiff concedes that notice was not served by it in this manner.
The general rule is that a tenant who fails to exercise an option to renew a lease in a timely or required manner "is without a remedy at law" ( Dan's Supreme Supermarkets v Redmont Realty Co., 240 AD2d 460, 461; see also J. N. A. Realty Corp., 42 NY2d at 396-397; Redlyn Elec. Corp., 2011 NY Slip Op 00666, *2; American Realty Co., 176 AD2d at 227). However, in J. N. A. Realty Corp. ( 42 NY2d at 397-399), the Court of Appeals stated that under certain circumstances, equity may intervene to aid a tenant in possession who has failed to exercise an option when it might otherwise suffer a forfeiture, even if the tenant itself has failed to exercise its option through neglect or inadvertence. Specifically, "[e]quity will intervene . . . to relieve a tenant from the consequences of an untimely renewal notice where (1) the tenant's failure or delay was the result of inadvertence or an honest mistake, (2) the tenant made valuable and substantial improvements to the leased premises with the intent to renew the lease, (3) the nonrenewal would result in a substantial loss to the tenant, and (4) the landlord would not be prejudiced by the delay in notice of renewal" ( O'Malley v Ruggiero, 245 AD2d 1129, 1129; see also 5 E. 41 Check Cashing Corp. v Park Fifth Owner, LLC , 44 AD3d 373 , 373; Dan's Supreme Supermarkets, 216 AD2d at 513; Dutchess Radiology Assoc. v Narotzky, 192 AD2d 1049, 1049; Nanuet Natl. Bank v Saramo Holding Co., 153 AD2d 927, 928).
Plaintiff argues that if, under principles of equity, late exercise of an option can be forgiven, then any technical flaws in the manner that notice was given by it should also be overlooked. In attempting to support this argument, Catherine Consalvas states that plaintiff was organized in 1990 for the purpose of operating a dance studio at the store premises, and that it has operated at that location for more than 20 years under successive leases with the predecessors of the present owner. Catherine Consalvas also states that plaintiff's store premises is occupied with dance classes roughly 50 hours each week, that the start of the school year is plaintiff's busiest period, and that plaintiff had taken new contracts from at least 120 students which ran through the fall. In addition, Catherine Consalvas asserts that in July 2010, plaintiff spent about $10,000 refurbishing the interior of the store premises, which included a paint job, the replacement of the floor with new tiles, and a major repair to the air conditioning system. Catherine Consalvas further asserts that plaintiff has built up good will at this location in the more than 20 years it has operated there, that there are no similar stores available for rent in the neighborhood, and that plaintiff could not find any store with the advantageous rent it now pays under the present lease.
The equitable remedy sought by plaintiff is available, however, only if, among other things, it can be demonstrated that the landlord would suffer no prejudice ( see J.N.A. Realty Corp., 42 NY2d at 400; Dan's Supreme Supermarkets, 216 AD2d at 513; McVey v Simone, 73 AD2d 959, 960). Wayne Byrd, in response to plaintiff's motion, states that the rent which plaintiff pays under the lease for the store premises, which has approximately 1,400 square feet of floor area, is far below market value. Wayne Byrd has submitted a copy of an appraisal from Maurice N. Perkins Company, Inc., dated November 5, 2010, a real estate appraisal company, which states that the current market rent for the store premises is $2,800. Plaintiff concedes that the rent paid by it under the lease is "advantageous." Wayne Byrd asserts that under principles of equity, he should not be subjected to a grossly inadequate rent for the next five years. Wayne Byrd also asserts that since Catherine Consalvas' attorney drafted the lease, plaintiff should be required to strictly comply with the terms of paragraph 27 of the lease.
In any event, issues of fact are raised as to whether the notice claimed to be put in Wayne Byrd's mailbox was actually sent and received by Wayne Byrd. As noted above, where issues of fact are sharply disputed, a preliminary injunction must be denied ( see Eklund, 31 AD3d at 909; Digestive Liver Disease, P.C., 18 AD3d at 423; Mosseri, 289 AD2d at 546). Thus, the court cannot grant injunctive relief since there is a material triable issue of fact raised as to whether plaintiff ever provided written notice of its election to exercise the renewal option in the lease ( see Matter of Bart-Rich Enters., Inc. v Boyce-Canandaigua, Inc. , 8 AD3d 1119, 1120). "A tenant who never provides written notice and does not allege that the landlord waived that requirement is not entitled to equitable relief" ( id.; see also McVey, 73 AD2d at 960). "[N]othing in J.N.A. [ Realty Corp., 42 NY2d at 399-400] suggests that equity may reach out to find that a party has substantially complied with the terms of an option clause when [it] has not, or to rewrite the clause to suit one of the parties . . . Substantial noncompliance with the terms of an option clause cannot be rewarded by a judicial forgiveness that redounds to the detriment of the other party to the contract" ( McVey, 73 AD2d at 960; see also Matter of Bart-Rich Enters., Inc. v Boyce-Canandaigua, Inc., 8 AD3d at 1120).
Consequently, plaintiff has failed to satisfy its burden of demonstrating a likelihood of ultimate success on the merits ( see Blueberries Gourmet, 255 AD2d at 350). This mandates denial of the preliminary injunction ( see CPLR 6301).
While plaintiff argues that it will be irreparably harmed absent the granting of a preliminary injunction and seeks a preliminary injunction restraining defendants from taking any action to evict it or an order staying the holdover proceeding, "[i]t is well settled that the danger of impending judicial proceedings is not an injury justifying an injunction" ( Spellman Food Servs. v Partrick, 90 AD2d 791, 791; see also Genovese Drug Stores, Inc. v William Floyd Plaza, LLC , 63 AD3d 1102 , 1104). Indeed, "it has been consistently held that a preliminary injunction restraining an eviction may not be granted in favor of a tenant on facts which may be effectively interposed as a defense in summary eviction proceedings" ( Spellman Food Servs., 90 AD2d at 791; see also Geed v Braunsdorf, 277 App Div 1001, 1001-1002; Boyle v Pogs Constr. Corp., 74 Misc 2d 307, 308; Alpern v K K Leasing Corp., 28 Misc 2d 635, 636; Einhorn v Perma Realty Corp., 207 Misc 1123, 1125).
The court will not grant a stay of the holdover proceeding ( see 44-46 W. 65th Apt. Corp. v Stvan , 3 AD3d 440 , 441; Scheff v 230 E. 73rd Owners Corp., 203 AD2d 151, 151; Spellman Food Servs., 90 AD2d at 791; Lun Far Co. v Aylesbury Assoc., 40 AD2d 794, 794). "It is well settled that [the] Civil Court has jurisdiction over landlord-tenant disputes encompassed in summary proceedings and that when it has the power to decide the dispute, it is desirable that it should do so" ( Subkoff v Broadway-13th Assoc., 139 Misc 2d 176, 177; see also Post v 120 E. End Ave. Corp., 62 NY2d 19, 28; Lun Far Co., 40 AD2d at 794).
Both this action and the holdover proceeding pending in the Civil Court involve a dispute over the possession of the store premises, and the resolution of this dispute will determine the rights of the parties ( see Langotsky v 537 Greenwich LLC , 45 AD3d 405 , 405). While the Civil Court may not issue a declaratory judgment ( see CPLR 3001; BLF Realty Holding Corp. v Kasher, 183 Misc 2d 953, 954), it nevertheless can grant the parties the reality of full relief ( see Subkoff, 139 Misc 2d at 177). Pursuant to the New York Constitution, article VI, § 15 (b), the Civil Court has "such equity jurisdiction as may be provided by law," and the Legislature has authorized the Civil Court to hear equitable defenses (CCA 905). Thus, plaintiff's claim herein is one which may be asserted as an equitable defense in the holdover proceeding now pending in the Civil Court ( see 537 Greenwich LLC v Chista, Inc. , 19 Misc 3d 1133 [A], 2008 NY Slip Op 50989[U], *7-8 [Civil Ct, NY County 2008]; Subkoff, 139 Misc 2d at 178), and (as noted above) plaintiff, in fact, has asserted in its answer to the petition in the holdover proceeding, the affirmative defenses that the term of the lease has not expired and that the lease has been extended pursuant to its terms.
Therefore, whereas plaintiff has asserted its right to a renewal lease in the holdover proceeding in the Civil Court as a defense to that proceeding, and although a declaratory judgment may not be granted in that court, all of the issues raised in this declaratory judgment action will be resolved in the holdover proceeding in the Civil Court ( see Langotsky, 45 AD3d at 405; Subkoff, 139 Misc 2d at 178), which is the preferred forum for landlord-tenant disputes ( see Langotsky, 45 AD3d at 405; 44-46 W. 65th Apt. Corp., 3 AD3d at 441; Scheff, 203 AD2d at 151; Subkoff, 139 Misc 2d at 177). If a declaratory judgment is still required, it will be available in this court, on motion, after the summary proceeding is resolved ( see Subkoff, 139 Misc 2d at 178). It is noted that no motion for consolidation or for removal of the pending summary proceeding to the Supreme Court has been made. ( See Lazich v Vittoria Parker, 196 AD2d 526, 530 [2d Dept 1993], precluding such removal sua sponte).
Accordingly, plaintiff's motion by order to show cause, dated October 5, 2010, as augmented by supplemental order to show cause, dated October 8, 2010 (seq. No.# 1-2), for a preliminary injunction and for a stay of the holdover proceeding is denied in its entirety. The temporary restraining order, dated October 5, 2010, as supplemented on October 8, 2010, heretofore granted is vacated.
This constitutes the decision and order of the court.