Opinion
150400/2018
06-25-2020
William E. SCHAFFER, Plaintiff, v. VSB BANCORP, INC., VSB41 Development LLC, V.I.P. Real Estate, Inc. and Stephen E. Picciurro, Defendants.
Howard File for defendants. John Z. Marangos for plaintiff.
Howard File for defendants.
John Z. Marangos for plaintiff.
Orlando Marrazzo Jr., J. Defendants VSB Bancorp, Inc. and VSB41 Development LLC (hereinafter together "Defendants VSB") bring an Order to Show Cause before this Court seeking an Order pursuant to CPLR § 5519(a)(3) setting the amount of an undertaking to stay enforcement of the Order of this Court dated May 7, 2020 and entered May 8, 2020 (hereinafter the "Prior Order") pending appeal. The Court hereby denies such Order to Show Cause in its entirety.
Plaintiff commenced this Action by filing the Summons and Complaint in the Office of the Richmond County Clerk on February 20, 2018. Plaintiff owns the premises located at 2055 Victory Boulevard, Staten Island, NY, also known as Block 462, Lots 11 and 14 on the Tax Map of the County of Richmond County, City of New York (hereinafter "Premises" or "Property"). Plaintiff represents that Defendant Stephen E. Piccuirro ("Piccuirro") was an agent of Defendant V.I.P. Real Estate, Inc. ("V.I.P") and was authorized to negotiate the terms for leasing the Premises on behalf of Defendant VSB Bancorp, Inc. (hereinafter "Bank"). Plaintiff alleges that during August and September 2015, Picciurro sent Plaintiff's real estate attorney the Bank's desired terms and conditions as well as an outline of Defendant Bank's proposal to lease the Premises ("Proposal"). According to Plaintiff, the Proposal did not contain information regarding a lane from the adjacent street onto the Premises, disturbing the widening line, demolishing the existing structure or a widening the street adjacent to the Premises. The parties engaged in negotiations from approximately August 27, 2015 to April 18, 2016 and allegedly discussed the Bank improving the existing structure that was located on the Premises. Plaintiff represents that during negotiations, the parties only discussed the possibility of the City of New York widening Victory Boulevard at the Premises ("Widening") in the "distant future." According to Plaintiff, Picciurro falsely represented that neither Plaintiff nor the Bank would be responsible for any costs related to a future Widening.
On or about April 18, 2016, Plaintiff leased the Premises to Defendant Bank (the "Lease"). Plaintiff maintains that the Bank prepared the Lease, which included a site plan marked as Exhibit B ("Lease Site Plan"). Plaintiff states that the Lease, including the Lease Site Plan, did not mention disturbing the widening line, demolishing the structure located on the Premises or the Widening. Plaintiff also represents that at Defendant's request, it received a waiver of curb alignment from the City of New York for the consideration of $1.00 for the purpose of the Widening on or about November 28, 2016 (the "Waiver"). Plaintiff allegedly executed the Waiver based on Picciurro's representation that such would relieve the parties of costs associated with any Widening and movement of utilities that could occur in the "distant future." Plaintiff further maintains that at Defendant Bank's request, he executed a Letter of Public Dedication that the Bank represented was necessary to move forward with the Lease Site Plan.
On or around January 2018, Defendant Bank demolished the building located on the Premises. To obtain the permits required for the demolition, Defendant Bank allegedly submitted plans to the City of New York that "included widening the sidewalk, included a turn lane from the street onto the Premises, and required the City of New York to widen the street adjacent to the Premises." Plaintiff alleges that the City of New York required Defendant Bank to widen the street adjacent to the Premises and to assume all costs. According to Plaintiff, the Defendants concealed the Plans, which necessitated the Widening. Plaintiff asserts that Defendants now seek to hold him responsible for the cost of the Widening, which he represents is approximately $400,000.00.
Plaintiff maintains that Defendants made several misrepresentations during negotiations, including the financial obligations he would incur as a result of the Bank's plan to improve the structure on the Premises, the "false" Lease Site Plan and the purpose of the Waiver. Defendants allegedly made such misrepresentations to deceive Plaintiff so that he would execute the Lease, the Waiver and the Letter of Public Dedication. Plaintiff asserts that when he signed the Lease, he reasonably relied on the Site Plan and Defendants' repeated assurances that he would not be liable for any associated costs.
To recover his alleged damages of over $400,000.00, Plaintiff brought seven courses of action against all Defendants, including for declaratory judgment annulling the Lease, fraudulent inducement and unjust enrichment. Plaintiff also seeks judgment declaring that Defendants are obligated to pay for the Widening, the movement of utilities and related costs. Finally, Plaintiff seeks to be indemnified by Defendants VSB, V.I.P. and Picciurro for any costs regarding the Widening for which he may be deemed responsible.
Defendants' Answers, Counterclaims and Cross-Claims
Defendants VSB filed their Verified Answer with Counterclaims and Cross-Claim in the Office of the Richmond County Clerk on May 14, 2018. In their Verified Answer, Defendants VSB deny Plaintiff's assertions and set forth several affirmative defenses. Defendants VSB also brought counterclaims against Plaintiff, including breach of the Lease agreement and fraud, as well as a cross-claim against Defendants V.I.P. and Picciurro for indemnity and/or contribution.
Defendants VSB represent that the Lease was duly assigned to Defendant VSB41 Development LLC on or about February 13, 2018 and such assignment was expressly effective as of that date. Defendants VSB assert that in accordance with the Lease and Lease Site Plan, the Premises was to be improved by the demolition of the existing structure and construction of bank building with an office, a minimum of twelve parking spaces and a drive-through. Defendants VSB maintain that Plaintiff is responsible under the Lease for all costs in connection with any capital improvements including any proposed street widenings to Victory Boulevard. Defendants VSB deny any liability in connection with such expenses. Defendants VSB allege that despite his knowledge of the proposed Widening prior to executing the Lease, Plaintiff has failed to pay for the costs required by the City of New York, including those of required capital improvements and the Widening.
To recover their alleged damages of $1,000,000.00, Defendants VSB bring several counterclaims against Plaintiff. Under their first counterclaim, Defendants VSB seek to hold Plaintiff in default under the Lease Agreement. Defendants VSB bring a second counterclaim against Plaintiff for fraud based on his alleged misrepresentations in promising to pay the costs of the capital improvements under the Lease with the knowledge that such promise was a material inducement for the Bank to rely upon it to its own detriment. Defendants VSB also seek to be indemnified by Plaintiff for any potential costs imposed on the Bank due to his alleged default under the Lease and bring a counterclaim to recover costs required to cure Plaintiff's alleged default, including reasonable attorney's fees.
Defendants VSB assert that Plaintiff made this promise with a "preconceived and undisclosed intention of not performing" and with falsity and utter disregard to the truth.
On August 23, 2018, Defendants V.I.P and Picciurro filed their Verified Answer and Cross-Claim in the Office of the Richmond County Clerk in which they denied Plaintiff's assertions. V.I.P. and Picciurro also brought a cross-claim against Defendants VSB for indemnification and/or contribution.
The Court's Prior Order
On December 20, 2019, Plaintiff filed a Motion pursuant to CPLR § 3212 for partial summary judgment on his third and fourth causes of action. Defendants VSB opposed Plaintiff's Motion and made a Cross-Motion against Plaintiff for dismissal of his first, third, and sixth causes of action. On May 8, 2020, this Court entered its Prior Order in which the Court granted in part and denied in part Plaintiff's Motion for Partial Summary Judgment. The Court ordered
Defendants VSB Bancorp, Inc., VSB41 Development LLC shall be responsible to pay use and occupancy according to the terms of the lease agreement which is the subject matter of this action starting January 1, 2020. The payment shall be from the escrow held by the defendants VSB Bancorp, Inc., VSB41 Development LLC. Should no escrow be had, defendants VSB Bancorp, Inc., VSB41 Development LLC are still directed to pay the use and occupancy ($10,833.33) from January 1, 2020 together with the real property taxes due as of January 1, 2020 and April 1, 2020 and shall continue to so pay until further Order of this Court.
The Court denied the other relief sought by Plaintiff without prejudice and also reserved decision as to Defendants VSB's Cross-Motion.
This Court reserved decision as to whether it would consider documents submitted by VSB Defendants after Plaintiff submitted his reply.
Defendants VSB's Current Motion
On May 11, 2020 Defendants VSB filed a Notice of Appeal in the Appellate Division, Second Judicial Department appealing the portion of the Prior Order requiring that it pay Plaintiff use and occupancy at the rate of $10,833.33 "despite the express provisions of Pars. 5 and 22 of the parties' Lease Agreement dated April 18, 2016." Defendants VSB now bring an Order to Show Cause seeking an Order from this Court pursuant to CPLR § 5519(a)(3) setting the amount of an undertaking to stay enforcement of this Court's Prior Order pending appeal.
Defendants VSB argue they are entitled to an automatic stay of the Prior Order provided they post an undertaking in an amount fixed by this Court sufficient to pay for each installment that becomes due pending the appeal. Defendants VSB argue that Plaintiff is liable for the $438,000.00 cost of the Widening and they are entitled to credit same against ongoing rents pursuant to Paragraph 22 of the Lease. Defendants VSB assert that Bank has paid all ongoing real estate taxes from the Rent Commencement Date in May 2018 and will continue to do so during the course of the appeal. Defendants VSB request that the undertaking be set at $200,000.00, which they represent is current remaining uncredited costs of the Widening. In the alternative, Defendants VSB request that this Court stay enforcement of its Prior Order under CPLR § 5519(c).
In opposition, Plaintiff argues that Defendants VSB has not paid any sum for use and occupancy despite taking occupancy in or around January 2018 and conducting business as a bank. Plaintiff also asserts that Defendants VSB only paid real property taxes in December 2019 after they were served with Plaintiff's Partial Summary Judgment Motion. According to Plaintiff, Defendants owe Plaintiff $465,831.00 through December 2019 and another $65,000.00 for use and occupancy through June 1, 2020. Plaintiff asserts that the Prior Order at issue is analogous to one requiring a spouse pay temporary maintenance during the course of a divorce action and therefore Defendants VSB cannot be relieved completely of their obligation to make interim payments upon posting an undertaking. In his affidavit Plaintiff states that other than Social Security, the Lease agreement represents his retirement income and what he and his wife planned to live on. Plaintiff explains "we are struggling to economically survive and are at a loss at to how to afford our financial obligations." Plaintiff argues that Defendants VSB, who he alleges have been conducting business without paying him use and occupancy, will not be prejudiced if they continue to pay use and occupancy under the Prior Order since such payments made will be a credit against rent or use and occupancy due during the initial 15 year provided for under the Lease. In contrast to the alleged lack of harm on Defendants VSB's part, Plaintiff argues he will be financially ruined and irreparably harmed if he does not receive the payments set forth in the Prior Order. In the event the Court does set an amount for an undertaking, Plaintiff requests that the Court set the undertaking amount at $800,000.00.
Plaintiff represents that he has been denied a loan on the Property based on the instant litigation.
DISCUSSION
The purpose of an undertaking is to "preserve the status quo during the pendency of an appeal." (Warren v. Bd. of Trs. , 2006 NY Misc. LEXIS 4105, *2-3 (NY Sup. Ct., 2006] ). In Robert Stigwood Organisation, Inc. v. Devon Co., the court explained that "underlying CPLR § 5519 (subd [a], par 2) is the statutory intent that should a party be denied the fruits of his judgment below because of the delay engendered by an appeal, that party is entitled to have his victory secured so that when the stay of enforcement resulting from the appeal is vacated by affirmance, a ready fund with which to satisfy the judgment shall be available." ( Robert Stigwood Organisation, Inc. v. Devon Co., 91 Misc.2d 723, 398 N.Y.S.2d 463, 464 [N.Y. Sup. Ct. 1977] ).
CPLR § 5519 governs the stay of enforcement of orders that are the subject of an appeal and provides automatic stays for certain circumstances, including an order directing the payment of a sum in fixed installments. Pursuant to CPLR § 5519(a)(3), service upon the adverse party of a notice of appeal stays all proceedings to enforce the judgment or order appealed from pending the appeal where
the judgment or order directs the payment of a sum of money, to be paid in fixed installments, and an undertaking in a sum fixed by the court of original instance is given that the appellant or moving party shall pay each installment, which becomes due pending the appeal and that if the judgment or order appealed from, or any part of it, is affirmed, or the appeal is dismissed, the appellant or moving party shall pay any installments or part of installments then due or the part of them as to which the judgment or order is affirmed.
While CPLR § 5519(a) sets forth the conditions for entitlement to an automatic stay, CPLR § 5519(c) clearly gives the Court discretion with respect to such automatic stays and also allows it to stay all proceedings to enforce a judgment or order appealed from in a case not provided for under subdivision (b). According to CPLR § 5519(c),
The court from or to which an appeal is taken or the court of original instance may stay all proceedings to enforce the judgment or order appealed from pending an appeal or determination on a motion for permission to appeal in a case not provided for in subdivision (a) or subdivision (b), or may grant a limited stay or may vacate, limit or modify any stay imposed by subdivision (a), subdivision (b) or this subdivision, except that only the court to which an appeal is taken may vacate, limit or modify a stay imposed by paragraph one of subdivision (a).
Under CPLR § 5519(c), " there is no single factor in determining whether to grant a stay, " ‘... the court's discretion is the guide’ " and " ‘it will be influenced by any relevant factor, including the presumptive merits of the appeal and any exigency or hardship confronting any party.’ " (See Deutsche Bank Natl. Trust Co. v. Royal Blue Realty Holdings, Inc. , 2016 N.Y. Slip Op. 31510(U), 2016 WL 4194201 [N.Y. Sup. Ct. 2016] (quoting Richard C. Reilly, Practice Commentaries McKinney's Cons Laws of NY , CPLR C:5519:4)).
While the case law regarding CPLR § 5519(a)(3) and CPLR § 5519(c) is sparse, the few relevant cases provide some guidance for the Court in deciding Defendants VSB's Order to Show Cause. In the matrimonial action of Wechsler v. Wechsler, the Court entered an interim order mid-trial and directed the defendant to pay $475,000.00 for the legal and professional fees the plaintiff already incurred. (See Wechsler v. Wechsler , 8 Misc.3d 328, 797 N.Y.S.2d 844, 845 [N.Y. Sup. Ct., 2005] ). The court noted that the award was subject to reallocation at trial and could be chargeable to plaintiff's equitable distribution share. After defendant filed a notice of appeal and posted the sum of the award with the County Clerk, plaintiff moved to vacate the automatic stay under CPLR § 5519(c). The Court found that
the fact that the stay is automatic does not remove it from the purview of the court's discretion to otherwise vacate, limit or modify the stay. Moreover, the statute expressly gives the court issuing the order appealed from such discretion. ( Id. at 845 ).
The Court noted that equally important to the purpose of ensuring that the money at issue will be available if the appeal is not successful is the purpose of ensuring "... that if appellant is successful, no problems will occur in trying to recoup money already paid out to plaintiff." Id. at 846 (citing Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 5519:1, at 221). The court considered whether (1) the defendant would be prejudiced if the stay was vacated, (2) the defendant would have difficulty recouping the money if his appeal was successful and (3) the award was affordable for defendant to pay. (See id. at 846-47 ). After weighing these factors, the Court vacated the automatic stay "in the exercise of appropriate discretion" under CPLR § 5519(c).
In McKiernan v. McKiernan , the defendant requested the Court stay the pendente lite awards granted in its previous Order pending appeal pursuant CPLR § 5519(a)(3). The Court recognized that the automatic nature of CPLR § 5519(a)(3), but further found that
while a permanent maintenance award may be the subject of a stay secured by an undertaking, even in those instances an allowance is made in the form of a temporary maintenance during the pendency of the appeal. Hence, due to the nature of a temporary maintenance award, the giving of an undertaking cannot be used to wholly stay a party's obligation to continue making interim payments. ( McKiernan v. McKiernan , 223 A.D.2d 917, 917-918, 636 N.Y.S.2d 477 [3d Dept., 1996] (internal citations omitted)).
The Appellate Division, Third Department found that the Supreme Court appropriately denied Defendant's motion seeking to fix the amount of an undertaking under CPLR § 5519(a)(3). In Du Jack v. Du Jack , the Court similarly held the defendant spouse would not have been relieved of the obligation to continue making interim payments to the plaintiff through temporary maintenance under CPLR § 5519. (See Du Jack v. Du Jack , 243 A.D.2d 908, 909, 663 N.Y.S.2d 349 [3d Dept. 1997] ).
In the instant case, Plaintiff argues that the award for use and occupancy payments under this Court's Prior Order is analogous to temporary maintenance awards discussed in McKiernan and Wechsler . After reviewing these cases, the Court agrees and finds that like the Defendants in McKiernan , Wechsler and Du Jack , Defendants VSB are not relieved of their obligation to continue making interim payments. As stressed by the Courts in those cases, the award at issue is temporary and is not a permanent award that is the proper subject of an automatic stay under CPLR § 5519(a)(3). Much like a spouse who is seeking an award of temporary maintenance, Plaintiff states in his affidavit that the payments at issue represent the majority of his income. Plaintiff also attests that he will suffer "permanent and irreparable financial ruin" if he does not receive such payments during the course of this litigation and Defendants VSB's appeal. In contrast to Plaintiff who has demonstrated severe prejudice, Defendants VSB are currently in possession of the Property and are continuing to operate a business on the Premises during the course of this litigation and their appeal.
In the same way that the defendant in Wechsler could charge any erroneous temporary maintenance payments to his spouse's equitable share, Defendants VSB can later resolve any erroneous use and occupancy payments through a credit under the Lease. A court has "broad discretion" in awarding use and occupancy pendente lite and can do so without a hearing. (See Alphonse Hotel Corp. v. 76 Corp. , 273 A.D.2d 124, 124, 710 N.Y.S.2d 890 [1st Dept., 2000] ). See Andejo Corp. v. S. St. Seaport Ltd. Partnership , 35 A.D.3d 174, 825 N.Y.S.2d 50 [1st Dept., 2006] ). The most appropriate remedy for a party who suffers an erroneous assessment of use and occupancy is a speedy trial, whereby it can be awarded a refund or credit. (See Getty Properties Corp. v. Getty Petroleum Mktg. Inc. , 106 A.D.3d 429, 430, 966 N.Y.S.2d 1 [1st Dept., 2013] ; Morris Hgts. Health Ctr., Inc. v. DellaPietra , 38 A.D.3d 261, 261, 834 N.Y.S.2d 9 [1st Dept., 2007] ; E. 4th St. Garage, Inc. v. Estate of Berkowitz , 265 A.D.2d 249, 249, 697 N.Y.S.2d 266 [1st Dept., 1999] ). Here, any amounts Defendants VSB pay for use and occupancy that are later found to be erroneous can be resolved by crediting such payments to the remaining balance due under the Lease, which has a 15-year initial period.
As previously stated, the Court holds that the award for use and occupancy under the Prior Order is analogous to the temporary maintenance awards at issue in McKiernan , Wechsler and Du Jack . Therefore, Defendants VSB are still obligated to make interim payments to Plaintiff and are not entitled to an automatic stay under CPLR § 5519(a)(3).
The Court further rules that even if Defendants VSB are entitled to an automatic stay under CPLR § 5519(a)(3), the Court must exercise its discretion and vacate such stay under CPLR § 5519(c). In examining the factors set forth by the Court in McKiernan , the Court finds that Defendants VSB will not be prejudiced if the stay is vacated, since they are still profiting from their use of the Property and can receive a credit under the Lease for any potentially erroneous payments made pursuant to the Prior Order. Defendants VSB will also not have difficulty recouping the money in the event their appeal is successful since they can receive a credit under the Lease. Finally, the Court finds that Defendants VSB have failed to show they are unable to make such payments, but rather continue to conduct business as a bank on the Property.
In the interests of justice, this Court cannot allow Plaintiff to suffer irreparable and permanent financial ruin while Defendants VSB continue to make a profit through their possession of the Property. When balancing the equities, it is clear that Plaintiff will be severely prejudiced and disadvantaged if the Court does not vacate any automatic stay Defendants VSB may be entitled to under CPLR § 5519(a)(3). Even if the automatic stay is vacated, the policy behind CPLR § 5519 remains intact, as Defendants will recoup any erroneous payments made pursuant to the Prior Order through a credit under the Lease. Based on public policy and in the interests of justice, this Court cannot permit Defendants VSB to post an undertaking and negate their obligations to make interim payments to Plaintiff under the Prior Order.
Accordingly, it is hereby:
ORDERED Defendants VSB's Order to Show Cause is denied in its entirety.
This constitutes the final Decision and Order of this Court.