Opinion
Index No. 651376/2022 Motion Seq. No. 001 NYSCEF Doc. No. 51
01-03-2024
206 EAST 124TH STREET CONDOMINIUM, BOARD OF MANAGERS, Plaintiff, v. BROOKLYN NEIGHBORHOOD DEVELOPERS, LLC, Defendant.
Unpublished Opinion
DECISION + ORDER ON MOTION
HON. VERNA L. SAUNDERS, JSC
The following e-filed documents, listed by NYSCEF document number (Motion 001) 12, 13, 14, 15, 16, 17, 19,20, 24, 25, 26, 27, 28, 29 were read on this motion to/for APPOINT REFEREE .
Plaintiff, the Board of Managers of the building located at 206 East 124th Street, New York, NY 10035 the ("Condominium"), alleges that defendant, who owns five units at the condominium (Units A, B, C, D, and 4B), stopped paying common charges and assessments in violation of the terms and conditions of the Condominium's by-laws ("By-laws"). Plaintiff sets forth that it sent monthly payment demand invoices reflecting current common charges, including arrears, late fees and other charges to defendant, which defendant has never disputed (NYSCEF Doc. No. 2, verified complaint, ¶20-21). According to plaintiff, lien notices have been recorded for the units and, on October 5, 2021, rent payment demands were sent to tenants of units A, B, C and 4B, but tenants failed to remit payment. Plaintiff alleges that unit D is vacant.
Based on a breach of contract theory, plaintiff seeks to recover from defendant damages in an amount to be determined at trial believed to be in excess of $15,529.32, together with interest, relating to unit A (first cause of action); $8,846.47, plus interest, relating to unit B (second cause of action); $15,854.65, plus interest, relating to unit C (third cause of action); $9,247.34, plus interest, relating to unit D (fourth cause of action); and $11,025.68, plus interest, relating to unit 4B (fifth cause of action). Based on these facts, plaintiff also asserts unjust enrichments claims against defendants (sixth, seventh, eighth, ninth and tenth causes of action), in addition to costs associated with the collection of such unpaid charges and attorney's fees for all causes of action.
In its answer, defendant denies all allegations and asserts numerous affirmative defenses including: the invoices used as a predicate notice to initiate this proceeding were either not sent in accordance with the express terms of the agreement and/or said invoices were never properly delivered (first affirmative defense); unjust enrichment (second affirmative defense); failure to mitigate damages (third affirmative defense); defendant did not cause the injury alleged (fourth affirmative defense); claims are barred by the statute of limitations (fifth affirmative defense); constructive eviction (sixteenth affirmative defense); trespass (seventeenth affirmative defense) (NYSCEF Doc. No. 7, amended verified answer).
Plaintiff now moves for an order pursuant to Real Property Law ("RPL") § 339-aa, Real Property Actions and Proceedings Law ("RPAPL") §1325 and CPLR 6401, appointing a temporary receiver for the five units. Plaintiff argues that there is a compelling need for the appointment of a receiver, as the Condominium only consists of 16 units and it is experiencing financial difficulty, due, in part, to defendant's failure to pay common charges and assessments. According to plaintiff, defendant's ownership in the condominium amounts to approximately 31% of the total of its monthly common charges (NYSCEF Doc. No. 15, Soto affirmation in support of motion). It is plaintiffs contention that, in accordance with RPL § 339-aa and Article VI, § 4 of the Condominium's by-laws, upon the condominium's filing of a lien for unpaid common charges and commencement of this proceeding to foreclose such lien, the condominium may also seek the appointment of a temporary receiver of the rents and profits of the unit. Plaintiff submits the affidavit of Mark Krull ("Krull"), president of the Condominium, who purports to have personal knowledge of the facts alleged herein. Krull avers that units A, B, C and 4B are occupied by tenants and that defendant is collecting rents from said tenants (NYSCEF Doc. No. 13, Krull affidavit). Plaintiff asserts that, at the time of the filing of this motion, defendant had accrued $156,095.73 in common charges, as reflected in the account history as to the respective units, annexed as Exhibit D. Hence, according to plaintiff, unless a receiver is appointed, defendant will continue to enjoy the benefits of ownership and rent from the units' occupants to its detriment. Plaintiff further requests that the court appoint a Referee to ascertain and compute the amount due to it, including principal, interest, late fees, assessments, attorney's fees and all other charges and disbursements advanced, to collect the rents and profits of units during the pendency of this action, and to report whether units should be sold in one or more parcels.
In opposition, defendant contends that plaintiff seeking the appointment of a receiver is inapposite since plaintiff is seeking a money judgment in this action, and under RPL § 339-aa, the court may only appoint receiver in a foreclosure action. According to defendant, both the statute and the by-laws expressly distinguish between foreclosures and suits to recover money judgments. Defendant furnishes the affidavit of Jonathan Peldman, a member of defendant, who avers that defendant stopped paying the common charges after plaintiff entered defendant's units and, without authorization, installed obstructive and intrusive pipes which resulted in a tenant vacating a unit, and defendant losing substantial sums of money (NYSCEF Doc. No. 28, Peldman affidavit). Defendant disputes the amounts owed and claims that it was constructively evicted after plaintiff trespassed on its property. Furthermore, defendant articulates that it has been paying all common charges for the five units since April 2023. Plaintiff may not use a receiver for the satisfaction of arrears, defendant argues, nor may the receiver use the rent to pay arrears on common charges. Lastly, defendant contends that statute and the by-laws only authorize the appointment of a receiver to collect rent from the unit owner and not tenants, and that the units themselves are sufficient security for plaintiffs lien, as the total value of the units should be approximately $2,260,000.00. In support of this point, defendant submits an appraisal of the five units based on a comparative market analysis (NYSCEF Doc. No. 29, appraisal).
In reply, plaintiff rebuts defendant's assertion that it was constructively evicted and denied quiet enjoyment in the five units, arguing that the decision to install pipes in unit D was performed with defendant's knowledge, and that said claims do not excuse defendant's obligation to pay common charges and assessments on the subject units. Plaintiff maintains that RPL § 339-aa does not prohibit the appointment of a temporary receiver to collect rent from a non-occupying owner's tenant, and that since RPL § 339-kk(b) authorizes plaintiff to collect all rental payments from the tenant to satisfy the arrears, a temporary receiver should be appointed to ensure the letter and spirit of RPL § 339 is followed. Plaintiff disputes defendant's contention that it has paid common charges in full since April 2023, arguing instead that defendant paid only the 'base common charges' for units D and 4B but has made no payments for units A, B and C. Likewise, plaintiff posits that defendant has failed to pay the assessments for any of the units. Plaintiff further asserts that, given defendant's default in payment, it has been unable to make critical repairs to the condominium, and thereby directly threatening the health, safety and structural integrity of the condominium. Plaintiff also requests that the court order defendant to place a bond to reduce the financial risk to plaintiff if a temporary receiver is not appointed. Lastly, plaintiff seeks the opportunity to amend its complaint to include a lien foreclosure cause of action, or to file an Order to Show Cause, naming the tenants of the respective units as codefendants and an Order directing the tenants to comply with RPL § 339-kk(b), if its request for the appointment of a temporary receiver is denied.
CPLR 6401, entitled "Appointment and Powers of Temporary Receiver" provides: "[u]pon motion of a person having an apparent interest in property...a temporary receiver of the property may be appointed...where there is danger that the property will be removed from the state, or lost, materially injured or destroyed.
Under Real Property Law § 339-aa, the appointment of a receiver and the collection of rent in the event of a default on common charges is proper where authorized under the by-laws (see Heywood Condominium v Wozencraft, 148 A.D.3d 38, 46 [1st Dept 2017]).
"In any action brought by the Board of Managers to foreclose a lien on a Unit because of unpaid Common Charges, the Unit Owner shall be required to a reasonable rental for the use of his Unit and the plaintiff in such foreclosure action shall be entitled to the appointment of a receiver to collect the same" (NYSCEF Doc. No. 34, by-laws, Article VI, Section 6).
The Court retains, as an exercise of its equitable power, the discretion to deny the appointment of a receiver (see ADHY Advisors LLC. v 530 W. 152nd St. LLC, 82 A.D.3d 619, 619 [1st Dept 2011]; Deutsche Bank Trust Co. v A &R 1392 Realty, LLC, 2023 NY Slip Op 34354[U], *2 [Sup Ct, NY County 2023]).
Courts exercise extreme caution in appointing receivers, since such appointments generally result in the taking and withholding of property from a party without adjudication on the merits (see Hahn v Garay, 54 A.D.2d 629, 629-30 [1st Dept 1976]).
Here, plaintiffs motion seeking the appointment of a receivership and interest, late fees, assessments, attorney's fees is denied insofar as the by-laws provide for the appointment of a receiver where there is an "action brought by the Board of Managers to foreclose a lien on a Unit because of unpaid Common Charges" (NYSCEF Doc. No. 34, by-laws, Article VI, Section 6). This, however, is not a lien foreclosure action. Moreover, while CPLR 6401 authorizes the appointment of a receiver where "there is danger that the property will be removed from the state, or lost, materially injured or destroyed", plaintiff has not demonstrated that such apparent danger is present here (see Trepper v Goldbetter, 205 A.D.2d 363, 364 [1st Dept 1994]; Mandel v Grunfeld, 111 A.D.2d 668, 668 [1st Dept 1985). There has been no showing here whatsoever that, absent a receivership, plaintiff would suffer an irreparable loss or that the units would be diverted or wasted (see Armienti v Brooks, 309 A.D.2d 659, 661 [1st Dept 2003]).
The court denies movant's request for additional relief, i.e., leave to amend the complaint to add a foreclosure cause of action and requesting that a bond be posted, insofar as they are improperly raised for the first time in reply. Furthermore, plaintiff has failed to establish its entitlement to a bond on this application. All remaining arguments and requests have been considered and are either without merit or need not be addressed given the findings above. It is hereby
ORDERED that plaintiffs motion is denied in its entirety; and it is further
ORDERED that, within twenty (20) days after this decision and order is uploaded to NYSCEF, counsel for defendant shall serve a copy of this decision and order, with notice of entry, upon plaintiff.
This constitutes the decision and order of this court.