Opinion
35057/04.
Decided January 29, 2008.
Holly Gerstenfeld, Esq., Assistant Corp. Counsel, City of New York, New York, NY.
John Houghton, Esq., Goldstein, Goldstein, Rikon Gottlieb, New York, NY.
Upon the foregoing papers in this eminent domain proceeding, condemnor the City of New York (the City) moves for an order dismissing the fixture claims of 534 Bushwick Avenue Corporation (534) and Sound and Security Solutions, Inc. (Sound and Security).
Facts and Procedural Background
534 is the former owner of the property located at Block 3137, Lots 1 and 6 on Bushwick Avenue in Brooklyn. Sound and Security is the former owners of property located at Block 3137, Lot 9.
Pursuant to two separate ten-year lease agreements dated January 10, 2004, J T Auto Sales Corp. (J T) acquired a tenancy interest in the properties. As is relevant to the instant dispute, the leases provide that:
"If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of the unexpired term of said lease."
(Lease Agreements, para 10).
"The said premises is vacant land and any improvements placed thereon shall become the property of the Landlord and at the option of the Landlord shall remain at the premises at the conclusion of the lease. The Landlord may request tenant to remove any structure/or improvement placed upon the premises at the conclusion of the lease and tenant shall be responsible for the removal of same. . . .
(Lease Agreements, Rider, paras 1).
"That in the event of condemnation of the whole premises or any portion thereof, tenant waives any rights to any portion of the recovery in favor of the Landlord. Upon the actual taking of the premises and payment to the Landlord, the Landlord agrees to reimburse tenant for actual capital improvements to the premises based upon the formula of actual cost less deprecation."
(Lease Agreements, Rider, paras 3).
The City acquired title to the subject property on February 28, 2005. On June 20, 2006, claimants served the City with an Amended Notice of Trade Fixture Claim.
The Parties' Contentions
In support of its motion, the City argues that fixtures are installed by a tenant during its lease term to carry on its business. Herein, since claimants 534 and Sound and Security were not operating a business on the properties at the time of the taking because they were not physically present at the site, which was actually occupied by J T, they cannot assert a trade fixture claim.
In opposition, 534 and Sound and Security argue that by operation of their lease agreements with J T, claimants are the former owner of the trade fixtures located on the subject properties. More specifically, claimants contend that in the lease that each entered into with J T, J T transferred both the ownership of the improvements and fixtures and its right to make a claim in the any condemnation action to them.
The Law
"It is fundamental that an owner whose property has been taken in condemnation is entitled to just compensation'" ( Matter of City of New York , 39 AD3d 131, citing US Const 5th Amend; NY Const, art I, § 7[a]). It is equally well settled that "[c]ondemnees include the owners of fixtures appended to real property taken by eminent domain" ( Village of Port Chester v Sorto , 14 AD3d 570, lv dismissed 100 NY2d 577, citing Matter of City of New York [G C Amusements], 55 NY2d 353, 359, reh denied 56 NY2d 805; Interlake Serv. Sta. v State of New York, 249 AD2d 275, 276, lv denied 92 NY2d 809; Whitehall Corners v State of New York, 210 AD2d 398).
In addressing the right of a landlord and tenant to receive compensation for fixtures taken in an eminent domain proceeding, it has been held that:
"In fixing awards in condemnation proceedings, the value of what has been taken must be determined and then that value must be divided among those whose interests are extinguished by the taking. Those interests may be defined by contract of the parties interested and in the same way the parties may determine by agreement how compensation shall be divided upon the extinguishment of those interests by the sovereign."
( Matter of City of New York [Allen St.], 256 NY 236, 242-243). Hence:
"It is a fundamental principle that the [court] has jurisdiction, and indeed an obligation, to make an award in compliance with the terms of an agreement between a landlord and a tenant and that in so doing it may exclude one of the parties from part or all of an award to which it might otherwise be entitled."
( Castellano v State, 43 NY2d 909, 911, citing Traendly v State of New York, 51 AD2d 489, affd 43 NY2d 804; Cooney Bros. v State of New York, 24 NY2d 387; Matter of City of New York [Allen St.], 256 NY 236). Stated differently, "[a] landlord (fee owner) and tenant may determine by agreement how a condemnation award shall be divided. The court hearing the condemnation proceeding must divide the award according to the terms of the agreement" ( Traendly, 51 AD2d at 492-493).
In this regard, in affirming the denial of a claim for damages to a leasehold interest because the lease contained a provision that the fee owner reserved any condemnation award for himself, the court explained that:
"It is clear that where the agreement between the lessor and lessee provides for the reservation to the landlord of any condemnation award and terminates the lease in the event of condemnation, the lessee has no claim for injury to his leasehold interest ( Matter of City of New York [Allen St.], 256 NY 236; Matter of Mayor, etc., of City of NY, 168 NY 254)."
( Cooney Bros., 24 NY2d at 392). From this it follows that a lessee is not entitled to compensation for the value of trade fixtures where the lease expressly provides that "improvements" are to become the property of the landlord upon installation ( see e.g. Matter of City of New York [G C Amusements], 55 NY2d at 361]; Interlake Serv. Station, 249 AD2d at 276).
Discussion
The above quoted provisions of the leases between 534 and Sound and Security and J T clearly provide that the leases terminates upon the vesting of title in a condemnation proceeding, that any improvements placed upon the property become the property of the landlord and that the tenant waives any rights to any portion of the recovery obtained in a condemnation proceeding in favor of the landlord. Thus, applying the above discussed law to the facts of this case, it is clear that J T has no claim in the instant condemnation proceeding and that the right to be compensated for any fixtures on the property belongs to 534 and Sound and Security, as landlord and owner of the fixtures. In fact, if J T had filed a fixture claim, the claim would be subject to dismissal on this basis ( see e.g. Matter of Arverne Second Amended Urban Renewal Project ,44 AD3d 760 [the court properly dismissed sublessee's claim to be compensated for a refrigeration facility located on land, since pursuant to the terms of the lease between the owner and lessor, the refrigeration facility became the property of the owner, so that the sublessee was not entitled to compensation for the fixtures]; Village of Port Chester v Martinez , 5 AD3d 692 [the court properly dismissed a lessee's claim for compensation for various trade fixtures that she alleges that she paid for and installed where pursuant to the terms of her lease, the fixtures were her landlord's property]).
Conclusion
For the above stated reasons, the City's motion is denied.
The foregoing constitutes the decision and order of the court.