Opinion
Index No.: 192/2015
06-24-2015
JAROSLAW BYCHOWSKI and TNB BAKERY CORP., Plaintiffs, v. NAS INTERNATIONAL, Defendant.
SHORT FORM ORDER PRESENT: HON. ROBERT J. MCDONALD Justice Motion Date: 04/24/15 Motion No.: 21 Motion Seq.: 1 The following papers numbered 1 to 13 were read on this motion by defendant, NAS INTERNATIONAL, for an order cancelling the Notice of Pendency filed by the plaintiffs on January 9, 2015 against real property owned by defendant NAS INTERNATIONAL; and the cross-motion of the plaintiff for an order dismissing the defendant's counterclaim and granting plaintiff summary judgment on its complaint:
| PapersNumbered | |
| Notice of Motion-Affidavits-Exhibits | 1 - 4 |
| Defendant's Cross-Motion and Affirmation in Opposition | 5 - 9 |
| Reply Affirmation | 10 - 13 |
Plaintiff commenced an action by filing a summons and complaint on January 8, 2015 in which he asserts that on March 1, 2011, plaintiff as tenant, and defendant as landlord, entered into a commercial lease agreement regarding the premises located at 44-12 Purves Street, Long Island City. The lease commenced on March 1, 2011 and was scheduled to terminate on February 28, 2016. The lease states that upon execution the plaintiff was to deposit $15,000 with the defendant for the security deposit. However, on December 31, 2014, the parties entered into an agreement terminating the lease. Plaintiff asserts that upon termination of the lease, the defendant only returned $6,000 of the $15,000 security deposit.
Based upon the failure to return the entire security deposit the complaint asserts causes of action for breach of the lease, breach of the termination agreement, breach of GOL 7-103 for failing to notify plaintiff in writing as to the name and address of the bank holding the security agreement, conversion in the amount of $9,000, breach of fiduciary duty, trust fund violation, money had and received, as well as a cause of action for interest, punitive damages, attorneys fees, costs and disbursements. Together with the summons and complaint, the plaintiff filed a lis pendens on January 9, 2015.
The defendant served an answer and counterclaim for breach of contract dated February 4, 2015. In its counterclaim, the defendant asserts that despite the terms of the original lease, the plaintiff only paid $10,000 as a security deposit and not the $15,000 called for in the lease. In addition, the defendant's counterclaim alleges that the plaintiff destroyed property belonging to the defendant and that the defendant incurred damages in the amount of $25,000.
Defendant now moves for an order pursuant to CPLR 6514(b) directing the plaintiff to cancel the Notice of Pendency filed against the real property located at 44-12 Purves Street and directing the plaintiff, pursuant to CPLR 6514( c), to pay all costs and expenses incurred as a result of the filing and cancellation of the notice of pendency. Defendant also seeks against plaintiffs and their counsel pursuant to Administrative Rule 130.1-1.1.
Defendant asserts that the Notice of Pendency was improperly filed by the plaintiff because the plaintiff's complaint only demands monetary damages. Counsel claims that the Notice of Pendency was intentionally filed to hold up a multi-million dollar transaction without any basis in law. The defendant asserts that pursuant to the lease termination agreement the defendant/landlord paid plaintiff the sum of $200,000 to vacate the premises. Counsel also asserts that pursuant to paragraph 10 of the termination agreement, the parties agreed to amend the provision of the lease and to deem the security deposit to be $8,000 which was to be returned to the tenant upon vacating the premises. Thus, defendant states that as $6,000 was returned to the plaintiff, the only amount in controversy at this time is $2,000.00. Counsel asserts that pursuant to CPLR 6501 a notice of pendency may be filed only in an action where the judgment demanded would effect title to or the possession, use, or enjoyment of real property. Here, as the complaint and notice of pendency only seek a money judgment or the return of the balance of the security deposit, the judgment requested will not affect the title to, use, or possession of the subject property (citing Shkolnik v Krutoy, 32 AD3d 536 [2d Dept. 2006]).
Plaintiff cross-moves for an order dismissing the defendant's counterclaim for damages and granting summary judgment on the complaint pursuant to CPLR 3212. Plaintiff claims that it properly filed a notice of pendency alleging that NAS had converted the plaintiff's security deposit and used the converted funds to make improvements and repairs to the property. The complaint alleges that the plaintiff now has a property interest in the subject premises because its converted funds were used to make improvements and repairs to the property. Plaintiff states that it offered to lift the notice of pendency pursuant to CPLR 6515 if NAS would post an undertaking for the amount in dispute.
Plaintiff also asserts that the defendant's counterclaim must be dismissed because NAS is doing business in this State but a search of the New York Secretary of State website shows that NAS International is a New Jersey Corporation and has not registered to do business in the State of New York and as such does not have capacity to sue in New York pursuant to BCL § 1312. Counsel asserts that NAS, as a New Jersey Corporation may not sue, counterclaim, or seek affirmative relief in New York unless it is authorized to do business in New York. Counsel asserts that NAS's illegal status prevents it from seeking to lift the Notice of Pendency or to move for affirmative relief.
Further, plaintiff asserts that the Notice of Pendency is valid because NAS took money belonging to the plaintiff and used it to make improvements to the property. Thus counsel claims that as the plaintiff's funds were used to make improvements to the subject property, the plaintiff has an equitable lien on the property (citing Restatement, Restitution § 206, comment (a)). Plaintiff also asserts that if the notice of pendency is vacated NAS should be required to file an undertaking or post a bond.
The plaintiff also seeks summary judgment on its complaint for violations of GOL § 7-103(1) which requires a security deposit to be held in a separate escrow fund and not be commingled with the personal monies of the landlord. Counsel asserts that here the defendant's commingling of the security deposit results in a forfeiture of the landlord's right to use the security deposit for any purpose and requires the immediate return of funds to the tenant (citing Gihon, LLC v 501 Second St., LLC, 103 AD3d 840 [2d Dept. 2013]; LeRoy v Sayers, 217 AD2d 63[1st Dept. 1995]). Counsel claims that the landlord's commingling of the security deposit is established by the landlord's failure to provide notice to plaintiff of the bank where the security deposit was being held (see GOL 7-103(2); Gihon, LLC v 501 Second St., LLC, 103 AD3d 840 [2d Dept. 2013]). Therefore, the plaintiff seeks summary judgment granting a money judgment against the defendant in the amount of $9,000.
In reply, Joseph Nastasi, President of NAS International submits an affidavit stating that Nas has legal capacity to sue as it is a valid New Jersey Corporation and is an authorized foreign corporation in the State of New York. Nastasi states that the infirmity has been cured and his corporation is now registered with the New York State Department of State as a foreign business corporation with a business location in Queens County. Secondly, Nastasi asserts that the plaintiff only paid $10,000 as a security deposit and submits a copy of the plaintiff's check for $10,000 dated 2/24/11 with the memo "security deposit."
Moreover, the defendant submits a copy of a lease termination agreement dated September 22, 2014, signed by all parties, pursuant to which the landlord paid the tenant $200,000 to vacate the premises prior to the termination date contained in the lease. Further, pursuant to the termination agreement the parties agreed that the lease was amended to reflect that the total security deposit was considered to be $8,000 which was to be returned to the plaintiff. Counsel states that the sum of $8,000 was placed in the escrow fund of the Axelrod Law Firm before $6,000 was returned to the plaintiff.
Accordingly, upon review of the defendant's motion, plaintiff's cross-motion and defendant's reply thereto this Court finds as follows:
Based upon the documents supplied by the defendant Nas International, the court finds that Nas presently has the capacity to defend against the plaintiff's complaint and to seek affirmative relief by counterclaim. The documents filed by NAS with the Department of State satisfies the requirements of BCL § 1312.
This Court finds that the defendant's application for an order vacating and cancelling the notice of pendency pursuant to CPLR 6514(b) is granted. As stated CPLR 6501 provides that in order to lawfully file a notice of pendency, the complaint must allege a cause of action for a judgment that would affect the title to or the possession, use or enjoyment of real property. Here, the complaint and amended complaint seek a money judgment based solely on the failure of the defendant to return the full amount of the security deposit. Plaintiff has failed to provide any evidence which would tend to show that it has an equitable lien on the property. As there is no claimed interest by the plaintiff in the real property, the notice of pendency must be vcated pursuant to CPLR 6514.
Further, as the evidence submitted demonstrates that there are questions of fact as to the amount of the security deposit which is due to the plaintiff, whether the termination agreement supercedes the lease with respect to the amount of the security deposit required to be returned to the plaintiff, and whether the plaintiff damaged the property prior to leaving the premises, the plaintiff's cross-motion for an order dismissing the defendant's counterclaim and for summary judgment on the complaint is denied. As the remaining security deposit is now being held in the escrow account of Peter Axelrod there is no need for a bond at this time.
Accordingly, for all of the reasons set forth above, it is hereby,
ORDERED, that the motion by defendant NAS INTERNATIONAL to vacate the notice of pendency filed on January 9, 2015 is granted, said notice of pendency is hereby canceled, and the motion for costs is denied; and it is further,
ORDERED that upon service upon her of a copy of this order with notice of entry, the Queens County Clerk shall vacate and cancel the notice of pendency filed by plaintiff against the property known as 44-12 Purves Street, Long Island City, New York, 11101 and it is further,
ORDERED, that this the matter is set down for a settlement conference with respect to the remaining issues at which all parties and counsel shall appear at 10:00 a.m on August 10, 2015 The conference shall be held in Room 304 of the Queens County Supreme Court, located at 25-10 Court Square, Long Island City, New York 11101.
Notify counsel. Dated: June 24, 2015
Long Island City, N.Y.
/s/ _________
ROBERT J. MCDONALD
J.S.C.