Opinion
INDEX NO. 507788/2015
08-20-2020
538 MORGAN AVENUE PROPERTIES LLC AND NY STONE KITCHEN DEPOT, INC. Plaintiffs, v. 538 MORGAN REALTY LLC, SD INT'L INC., DIAN KUI SU, QING MEI ZHAO, AND TIAN FANG SU, Defendants. 538 MORGAN REALTY LLC, Third-Party Plaintiff, v. HAIDONG WENG AND SHUN KUAN LIU, Third-Party Defendants.
NYSCEF DOC. NO. 618 At an IAS Term, Part NJTRP of the Supreme Court of the State of New York, held in and for the County of Kings, at the Courthouse, at Civic Center, Brooklyn, New York, on the 20th day of August, 2020. PRESENT: HON. LAWRENCE KNIPEL, Justice. The following e-filed papers read herein:
| Notice of Motion/Cross Motion andAffidavit(s) (Affirmations) and Exhibits | 582-585, 586-590, 591-607 |
|---|---|
| Opposing Affidavit(s) (Affirmations) and Exhibits | 608 592-607, 610-614 |
| Reply Affidavits (Affirmations) | 609, 610-614, 615 |
New York State Courts Electronic Filing Document Numbers
Upon the foregoing e-filed papers read herein, plaintiffs 538 Morgan Avenue Properties LLC (538 Avenue) and NY Stone Kitchen Depot, Inc. (NY Stone), (collectively, plaintiffs) move, in motion sequence (mot. seq.) 32, for an order striking the jury demand of defendant/third-party plaintiff 538 Morgan Really LLC (538 Realty), and defendants SD Int'l Inc. (SD), Dian Kui Su (Su), Qing Mei Zhao, and Tian Fang Su (collectively, defendants). By separate notice of motion, plaintiffs move, in mot. seq. 33, for an order "modifying the preliminary injunction as issued in this case regarding the use and occupancy payments due in light of the Covid-19 crisis." Defendants cross-move, in mot. seq. 34, for an order: a) "amending the preliminary injunction issued by the Supreme Court to upwardly modify and adjust the use and occupancy payable to the [t]hird-[p]arty [p]laintiff" (538 Realty); b) "compelling the Plaintiff and occupants of the premises at issue to correct any and all property violations and pay the penalties accrued and caused by their misuse"; and c) "compelling the Plaintiff and occupants to provide proof of liability insurance coverage."
By order dated May 3, 2017, the court, in mot. seqs. six and eight, granted plaintiffs' motion for a preliminary injunction enjoining defendants from interfering with their tenancy at the subject property at issue (the Property) (see infra) on condition that monthly use and occupancy in the amount of $21,252 was paid along with the filing of an undertaking of $80,000, and denied defendants' cross motion to obtain unpaid rent (see NYSCEF Doc. No. 589, Decision and Order dated May 3, 2017 at 5, annexed as exhibit A to plaintiffs' mot. seq. 33 papers]).
By order dated November 15, 2017, the court, in mot. seq. 11, granted defendants' motion to renew and reargue the court's May 3, 2017 order and, upon renewal and reargument, upwardly modified plaintiffs' monthly use and occupancy starting January 1, 2018 from $21,252 to $22,986, and held that "use and occupancy may be adjusted on a yearly basis" (see NYSCEF Doc. No. 590, Decision and Order dated November 15, 2017 at 12, annexed as exhibit B to plaintiffs' mot. seq. 33 papers). Plaintiffs presumably seek modification of the use and occupancy as set forth in the November 15, 2017 order.
This breach of contract action involves the sale of defendants' business and real property to plaintiffs. A concise background history of this matter is set forth in the court's May 3, 2017 decision and order, in mot. seqs. six and eight, as follows:
"On March 3, 2015, [plaintiff NY Stone] [] entered into a business sales contract with [defendant SD] [] whereby NY Stone purchased SD's business, including assets, for a total purchase price of $702,793.00. The 'business' refers to the import and sale of stone, marble, tiles and counter tops. In association with the purchase of the business, the parties also entered into a separate real estate contract dated March 3,2015, whereby [plaintiff 538 Avenue] [] purchased from [d]efendant owner [538 Realty] [] real property known as 538 Morgan Avenue in Brooklyn, New York ('Property'), the location of the business at all relevant times. The real estate sales contract reflects a purchase price of $4,000,000.00.
"According to [p]laintiffs, on March 3, 2015, NY Stone made a $500,000.00 payment to. SD for the purchase of the business. On the same day, [plaintiff 538 Avenue] [] made a down payment in the amount of $100,000.00 for the Property, Plaintiffs claim that, on the next day, March 4, 2015, [plaintiff 538 Avenue] [] made a second payment of $1,820,000.00 to [defendant 538 Realty] [], all in cash.
"By letter dated May 8, 2015, [defendant 538 Realty] [] cancelled the real estate sales contract asserting a material breach by [plaintiff 538 Avenue] [] for its 'failure to pay the full amount of $202,793.00 as of date.' The letter further stated that '[s]aid payment should have been made on or before 6:00 pm of April 3, 2015, as provided under the Provision 18 of the Rider to the Premises Sale Contract.'
"According to [p]laintiffs, the $202,793.00 figure represented the balance for certain 'goods en route' and is referenced in the business sales contract. Plaintiffs also state that on, March 3, 2015, the parties executed a written amendment extending the time to pay for the goods en route to 30 days after the last container arrived, which was on April 9, 2015. Further, that the time to pay for the goods was not made 'time of the essence' and thus, [p]laintiffs
had a reasonable time to tender performance. Plaintiffs contend that, on April 21, 2015, [they] attempted to tender the full payment of $202,793.00, but that only $90,000.00, in the form of a personal check, was accepted. Plaintiffs further contend that on May 11, 2015, they procured a certified cheek for the remaining $112,793.00 but [d]efendants refused to accept payment. Based on the foregoing, it is [p]laintiffs' position that [d]efendants were in breach when canceling the contract by letter dated May 8, 2015" (NYSCEF Doc. Nos. 239 and 589, Decision and Order dated May 3, 2017 at 2-3, annexed as exhibit A to plaintiffs' mot. seq. 33 papers).
Also known as 18 Anthony Street in Brooklyn, New York (NYSCEF Doc. No. 593, affidavit of Dian Kui Su, at 1, ¶ 1).
As noted above, plaintiffs subsequently moved for a preliminary injunction enjoining defendants from interfering with their tenancy at the Property and defendants cross-moved to recover unpaid rent. Pursuant to the May 3, 2017 order, plaintiffs' motion was granted on condition that they posted a bond and paid use and occupancy in the amount of $21, 252 per month - the amount of rent plaintiffs had been paying to SD since March 3, 2015 when the parties entered into the subject agreement. This use and occupancy was payable until the transfer of ownership of the Property from defendant 538 Realty to plaintiff 538 Avenue.
Thereafter, defendants moved to renew and reargue the court's May 3, 2017 order and upon renewal and reargument for, among other relief, an upward modification of the plaintiffs' monthly use and occupancy. As indicated, by order dated November 15, 2017, the court modified plaintiffs' monthly use and occupancy to $22,986 and directed that use and occupancy "may be adjusted on a yearly basis." Motion practice continued through 2020, whereupon the parties made the instant motions presently before the court for disposition.
Discussion
Plaintiffs' Motion to Modify Use and Occupancy
"Real Property Law [§] 220 provides that a landlord can recover use and occupancy for the reasonable value of the premises and for use of those premises" (Adler v Edwards, 6 Misc 3d 1024 [A], 2005 NY Slip Op 50168 [U], *1 [Civ Ct, Kings County 2005]), Moreover, it is the "the general judicial policy" to grant " requests to set use and occupancy pendente lite when a leasehold interest is the subject of civil litigation other than summary proceedings" (Davis v Cole, 193 Misc 2d 380, 383 [Sup Ct, NY County 2002]).
"A court has broad discretion in awarding use and occupancy pendente lite" (43rd St. Deli, Inc. v Paramount Leasehold, L.P., 107 AD3d 501, 501 [1st Dept 2019]). "The award of use and occupancy during the pendency of an action or proceeding accommodates the competing interests of the parties in affording necessary and fair protection to both" (255 Butler Assocs., LLC v 255 Butler, LLC, 173 AD3d 651, 653-654 [2d Dept 2019] [internal citations and quotation marks omitted]). Moreover, "an occupant's duty to pay the landlord for its use and occupancy of the premises is predicated upon the theory of quantum meruit, and is imposed by law for the purpose of bringing about justice without reference to the intention of the parties" (id. [internal citations and quotation marks omitted]).
In determining use and occupancy, "the Court has the obligation to appraise the actual value of the property taking into consideration whatever restrictions apply because of agreements between the parties, or to governmental decrees, or other factors" (438 W. 19th St. Operating Corp. v Metropolitan Oldsmobile, Inc., 142 Misc 2d 170, 173 [1989]). Finally, "[a]lthough the landlord generally has the burden of proving the amount owed by the tenant," it is the plaintiff's burden on a motion to modify an order granting use and occupancy to show that the amount originally awarded "was unjust" (255 Butler Assocs., LLC, 173 AD3d at 654 [internal citations omitted]).
In support of their motion to modify their use and occupancy payments due in light of the Covid-19 crisis, Haidong Weng, principal of plaintiffs 538 Avenue and NY Stone, avers in his affidavit that NY Stone operates a stone fabrication store where "we work with various stones to build items such as kitchen countertops, or marble tables, or fire places" and that "[t]he work has to be in done person and cannot be done remotely" (NYSCEF Doc. No. 587, at 1, ¶ 3). According to Weng, "[b]ecause of Co[]vid 19 and multiple government regulations that first decreased and eventually completely forbid [sic] me from having workers work on-site, I closed my business on March 22, 2020 in compliance with the State's executive order" which he understands will expire on May 15, 2020 (id. at 2, ¶ 4). Weng states further that "[t]he current government regulations have prevented me from being able to operate my business in any way and in fact, would prevent any similar business from being able to operate" (id. at 2, ¶ 5). Thus, he asks the court to "consider modifying the use and occupancy as previously imposed and waive any use and occupancy payments for the period from March 22, 2020 through May 15, 2020" (id. at 2, ¶ 7).
In further support of plaintiffs' motion, counsel for plaintiffs notes that Executive Order 202.8 directed all non-essential businesses statewide to close in-office personnel functions effective on 8 PM Sunday, March 22, 2020. Quoting 438 W. 19th St. Operating Corp. (142 Misc 2d at 173), counsel for Weng asserts that "'[i]n determining the use and occupancy as in landlord and tenant matters, 'the Court has the obligation to appraise the actual value of the property taking into consideration whatever restrictions apply because of agreements between the parties, or to governmental decrees, or other factors'" (NYSCEF Doc. No. 588, at 2, ¶ 6, annexed to plaintiffs' mot. seq. 33 papers). Counsel contends that Executive Order 202.8 bars plaintiffs from being able to operate at the Property, and asks the court to suspend use and occupancy "from March 22, 2020 until such time as [p]laintiffs are legally permitted to resume business operations" (id. at 2, ¶ 9).
In opposition to plaintiffs' motion and in support of that branch of defendants' cross motion to increase plaintiffs' use and occupancy, counsel for defendants asserts that Executive Order 202.8 only prohibits a landlord from evicting a tenant and assessing late fees through August 2020, but does not amend the obligations of a commercial tenant to pay rent, nor does it substantively change the terms of a commercial tenancy or a commercial mortgage. In this regard, counsel notes that the underlying taxes and mortgage obligations that the commercial property owner must pay continue to accrue. Counsel also points out that the use and occupancy has never been increased, which is warranted here because the rate being charged to plaintiffs is unfair to the owner (i.e. defendants) (NYSCEF Doc. No. 592, at 2, ¶ 6, annexed to plaintiffs' papers in mot. seqs. 33 and 34).
In his own affidavit in opposition to plaintiffs' motion and in support of that branch of defendants' cross motion to increase use and occupancy, Dian Kui Su (Su), managing member of defendant/third-party plaintiff 538 Realty and president of SD avers, with respect to use and occupancy, that the executive order is a deferral of late fees and payments only, and is not debt forgiveness or modification; that beginning in or about July, 2016 for approximately 10 months, plaintiffs had failed to pay use and occupancy; and that plaintiffs' application is a thinly veiled attempt to obtain forgiveness of use and occupancy payments (NYSCEF Doc. No. 593, at 5, ¶ 15, annexed to defendants' papers in mot. seqs. 33 and 34).
Su also states that plaintiffs used the property recklessly resulting in: 1) safety hazards (referencing NYSCEF Doc. Nos. 264-274, submitted in support of 538 Realty's reconsideration motion, mot. seq. 11); 2) Department of Buildings violations, accruing fines and penalties totaling $23,250 as of October 2019 (referencing NYSCEF Doc. Nos. 523-562, submitted in support of mot. seq. 29 [in part discussing violations] and NYSCEF Doc. Nos. 560, 561, and 555 [his own affidavits purportedly showing violations caused by plaintiffs]), which plaintiffs must correct themselves and pay; and 3) cancellation of plaintiffs' insurance policy (see NYSCEF Doc. No. 593, at 6 ¶ 17). Su further asserts that plaintiffs sublet the property, in violation of the lease (id. at 5-6, ¶ 16), and profiled from the sublease and below market value rents (id. at 12, ¶ 27); and that under a surviving provision in the business contract, plaintiffs agreed during the lease period to hold defendants "harmless from and against all debts, liabilities, claims[] [and] allegations arising after the Closing of this transaction in connection with the business subject to be transferred within or outside the Premises or in connection with the Premises during the Lease Period" (id. at 6-7, ¶ 19, quoting from business contract, NYSCEF Doc. No. 594, at ¶ 4).
Further, Su notes (id. at 7-8, ¶¶ 21-22) that pursuant to the court's August 14, 2019 order (see NYSCEF Doc. No. 549 regarding mot. seq. 29), defendants provided a rent study performed by a licensed New York State expert appraiser, who concluded that the monthly rent should be $34,166.67. excluding real estate taxes, insurance, repairs and maintenance (see NYSCEF Doc. No. 600, exhibit G to Su's June 15, 2020 affidavit, NYSCEF Doc. No. 593). Taking into account these expenses (see NYSCEF Doc. No. 593, at 8, ¶¶ 23-25), Su asserts that the fair market value of the monthly rent for the property should be $42,151.65, but that plaintiffs, at the time of this cross motion, were only paying $22,986 per month (id. at 8, ¶ 26).
In reply, counsel for plaintiffs concedes that Executive Order 202.8 does not apply to plaintiffs because plaintiffs are seeking a modification of use and occupancy, not rent. Counsel also contends that defendants' cross motion to upwardly modify the use and occupancy should be denied because defendants previously made this request at a court appearance held on January 22, 2020, which was denied by order of that same date. In any event, counsel argues that defendants have failed to establish their entitlement to an upward modification because it is based upon defendants' expert's rent study dated September 26, 2019, and therefore does not account for the impact of Covid-19 on New York City (see NYSCEF Doc. No. 610 at 1, ¶ 3, at 2, ¶¶ 5-7 and at 2-3, ¶¶ 10-13).
As plaintiffs note, Executive Order No. 202.8 (9 NYCRR 8.202.8), issued on March 22, 2020, directed all workers employed by nonessential businesses to begin working from home during the coronavirus pandemic. Specifically, the executive order directed all nonessential businesses; and nonprofit organizations to "reduce [their] in-person workforce at any work locations by 100 percent no later than March 22, 2020 at 8 p.m" (Executive Order 202.8). Here, plaintiffs seek forgiveness of their use and occupancy for the period of either "March 22, 2020 until such time as [p]laintiffs are legally permitted to resume business operations" (NYSCEF Doc. No. 588, at 2, ¶ 9) or "for the period from March 22, 2020 through May 15, 2020" (NYSCEF Doc. No. 587, at 2, ¶ 6) because they were unable to work at the Property based upon this executive order.
As an initial matter, the order in effect on the date plaintiffs filed their instant motion to modify use and occupancy was Executive Order 202.28, which provides that:
"There shall be no initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant, for nonpayment of rent or a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage, owned or rented by someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic for a period of sixty days beginning on June 20, 2020" (9 NYCRR § 8.202.28).Defendants concede that this executive order is entirely silent as to use and occupancy, and thus, the court is not precluded from addressing plaintiffs' motion. Further, while the executive order does not provide for forgiveness of rent or use and occupancy for a non-essential business to continue in-person work at its work location, the court is empowered to modify use and occupancy upon a proper showing. Here, however, plaintiffs have failed to satisfy their burden that their use and occupancy should be modified in the form of forgiveness. While Weng, as principal of plaintiffs 538 Avenue and NY Stone, implicitly avers that plaintiffs are unable pay use and occupancy for the periods requested because of Executive Order 202.8, he fails to affirmatively make this statement, despite being in a position to do so. In any event, neither Weng nor plaintiffs' counsel have demonstrated, via any competent evidence, such as plaintiffs' financial documentation or an affidavit by an accountant with supporting evidence, that plaintiffs cannot pay for use and occupancy. Notably, counsel merely states that Executive Order 202.8 bars plaintiffs from being able to operate at the Property and concludes, without further analysis or submission of competent evidence, that the court should suspend use and occupancy from March 22, 2020 "until such time as [p]laintiffs are legally permitted to resume business operations" (NYSCEF Doc. No. 588, at 2, ¶ 9). Accordingly, plaintiffs' motion is denied.
Defendants' Cross Motion
As an initial matter, contrary to plaintiffs' contention, defendants were not precluded from bringing this cross motion to the extent is seeks an increase in plaintiffs' use and occupancy. While plaintiffs argue that this branch of defendants' cross motion is in effect one to reargue the court's January 22, 2020 order, that order decided defendants' motion for contempt, mot. seq. 31, not for an upward modification for use and occupancy (see NYSCEF Doc. No. 579). In fact, the last order addressing use and occupancy was dated August 14, 2019, pursuant to which the court directed the parties to submit "separate expert reports of market analysis by [the] next conference as to use and occupancy" which plaintiffs have yet to provide (NYSCEF Doc. No. 549, at 1, ¶ 4, regarding mot. seq. 29).
In opposition to defendants' motion for contempt, in which defendants alleged that plaintiffs had not provided their rent study to the court, plaintiffs argued that contempt could not be based upon their failure to provide their rent study because the court, in its August 14, 2019 order, had only ordered the parties to provide the rent study at the next court conference, which had not yet occurred at the time defendants moved for contempt. Plaintiffs argued in the alternative that since the matter was set for a pretrial conference on February 11, 2020, the issue of a change in use and occupancy was moot, stating: "Once the trial is concluded, either [p]laintiffs will prevail, in which case [d]efendants would be required to convey the premises, and pay back all the use and occupancy that has been collected, or [d]efendants will prevail, in which case, they would have the legal right to increase the rent to whatever amount they so desire" (NYSCEF Doc. No. 572, affirmation of plaintiffs' counsel, dated January 15, 2020, at 2, ¶ 11, submitted as part of plaintiffs' opposition papers in mot. seq. 31). --------
In any event, this branch of defendants' cross motion is denied. In this regard, in support of this branch of their cross motion, defendants rely primarily upon their expert's rent study. However, according to defendants, the expert inspected the property for appraisal purposes on or about August 30, 2019 (NYSCEF Doc. No. 593 at 7, ¶ 22), and the expert's report is dated September 26, 2019. The inspection and preparation of the report both pre-date the Covid-19 pandemic. Thus, the report neither takes into account the effect the pandemic has had upon the local economy in Brooklyn where the Property is located, nor more specifically the rent prices in that area, nor the effect the pandemic has had on the economy of New York City, New York State, or the national economy in general. While defendants provide evidence of other expenses which they used to determine the amount of use and occupancy, absent an updated rent study, this evidence is insufficient to support an upward modification of use and occupancy.
The branch of defendants' cross motion to compel plaintiffs and the occupants of the Property to correct all property violations and pay all accrued penalties remains. Defendants had moved on or about June 28, 2019, in mot. seq. 29, for an order "[d]irecting the plaintiffs to produce proof of proper insurance coverage of no less than $2 million liability, covering two defendant companies (landlord and assignor), and two plaintiff companies (assignees) and any and all affiliates and subsidiaries of the plaintiff companies who currently operate business on the premises"; to "disclose the name[s] of all companies which are affiliated and subsidiaries of the plaintiff companies and which currently operate business on the premises"; "to resolve all violations currently recorded or noticed on the premises which arose during the plaintiffs' operation of their business (from March 2015 to the present [June 28, 2019]"; and "to pay reasonable use and occupancy for their use of the premises" (emphasis added) (NYSCEF Doc. No. 523, at 2, ¶ 3).
The motion was granted by order dated August 14, 2019 to the extent of directing plaintiffs to "provide proof of insurance coverage covering [defendant] as [an] additional insured" and to "disclose [the] name[s] of all companies operating at [the] premises"; for "defendant" to "furnish [the] court and plaintiffs with [a] report to identify [a] responsible party to resolve violations, details of violations and costs to cure"; that "[t]he party to cure will be subject to [the] court['s] further order" and; as noted above, directing the "[p]arties to submit to [the] court separate expert reports of market analysis by [the] next court conference as to use [and] occupancy" (emphasis added) (NYSCEF Doc. No. 549, at 1, ¶ 4),
In accordance with the August 14, 2019 order, defendants' attorney and Su submitted their affirmations of compliance with respect to the building violations in October, 2019 (NYSCEF Doc. Nos. 551 and 555). On or about December 26, 2019, defendants moved for an order of contempt against plaintiffs on the ground that plaintiffs did not comply with the August 14, 2019 order. The motion for contempt was granted by order dated January 22, 2020, noted above, only to the extent that plaintiffs were directed "to provide an affidavit stating the entities operating at the premises" (NYSCEF Doc. No. 579).
In opposition to mot. seq. 33 and in support of this branch of their cross motion, mot. seq. 34, defendants annex Su's June 15, 2020 affidavit, which includes an explanation of the violations imposed and resulting penalties, and Su's other two affidavits (NYSCEF Doc. Nos. 560 [June 28, 2019] and 561 [July 9, 2019]) containing supporting documentation, which had been submitted in support of defendants' June 28, 2019 motion, mot. seq. 29, and which purportedly demonstrate herein that the violations were caused by plaintiffs' "abusive use of the property" (NYSCEF Doc. No. 593, at 11, ¶ 37).
In opposition to this branch of defendants' cross motion, counsel for plaintiffs first notes that defendants concede that "the violations were issued to [d]efendants because [d]efendants are currently the named owner in the deed" (NYSCEF Doc. No. 610, at 3, ¶ 14, submitted as part of plaintiffs' mot. seqs. 33 and 34 papers). Thus, plaintiffs' counsel argues that "[d]efendants seek all the benefits of ownership, including collecting of the use and occupancy, but then also argue[] that they bear no responsibility for the maintenance of the [p]remises" (id.). Accordingly, plaintiffs' counsel maintains that defendants are either the landlord "in which case they bear responsibility for the maintenance of the [p]remises" or "they should be required to give up all use and occupancy, in which case [p]laintiffs should bear responsibility for the maintenance of the [p]remises" (id. at 3, ¶ 15). The court notes that plaintiffs' counsel makes no reference to the hold harmless clause in the business contract.
Pursuant to the business contract, plaintiffs are responsible for paying for the above-noted violations and penalties, and for curing them. The business contract provides at paragraph 4 that:
"After the closing of this transaction, [538 Avenue] [] shall start operating the business on the [p]remises and form a [t]enant/[l]andlord relationship with [538 Realty] [] on a month
to month basis until the [t]ransfer of [t]itle of the [p]remises from [538 Realty] [] to[ 538 Avenue] [] ('Lease Period'). [538 Avenue] [] shall pay a monthly rent in the amount of $21,252.00 on the first day of each month starting from March 3, 2015 until the transfer of ownership of the [p]remises from [538 Realty] [] to [538 Avenue] [] and the said rent shall be adjusted for the month in which the date of the delivery of [the] [b]ill of [s]ale falls in. This paragraph shall survive the closing of this transaction and the delivery of [b]ill of [s]ale.
* * *
"During the said [l]ease [p]eriod, [538 Avenue][ ]agrees to hold [538 Realty] [] harmless from and against all debts, liabilities, claims[] [and] allegations arising after the [c]losing of this transaction in connection with the business subject to be transferred within or outside the [p]remises or in connection with the [p]remises during the [l]ease [p]eriod" (emphasis added) (NYSCEF Doc. No. 594).
With respect to the violations, defendants rely upon Su's affidavit, dated June 14, 2020 (see NYSCEF Doc. No. 593), Su's three other affidavits submitted in support of mot. seq. 29, dated June 26, 2019 (see NYSCEF Doc. No. 529), July 9, 2019 (see NYSCEF Doc. No. 537), and October 9, 2019 (see NYSCEF Doc. No. 555), and copies of two violations, one dated April 16, 2019 (see NYSCEF Doc. No. 533) and the other dated June 27, 2019 (see NYSCEF Doc. No. 539). In his current affidavit, Su essentially reiterates the statements he had made in his previous affidavits, namely that:
"The plaintiffs received a violation notice regarding a rotting ceiling as early as April 2019. They never notified us of that, nor responded to the City's inquiry. I received a notice of violation at the beginning of July 2019, dated June 26, 2019 about the violation and a $1,500 civil penalty. As plaintiffs are responsible for it based on the contract, I thought plaintiff had already taken care of it and didn't think twice about it. I then received another letter near the end of July, 2019. It indicated that because we missed a hearing on July 15, 2019, the violation
is in default with a penalty of $6,250. A Iter I notified my lawyer in regards of this issue, plaintiffs mailed me a second violation dated June 20, 2019 after a re-inspection. Plaintiffs never gave me the April violation. Plaintiffs held the violation tickets for nearly three months before they sent it to us.Despite the foregoing, the two DOB violations do not indicate whether the violations or penalties were ever assessed against defendants. In this regard, the April 16, 2019 violation only sets forth the penalties for failure to comply with the notice, i.e. the penalty for "Standard" is $1,250, for "Admit" is $1,250 and for "Default" is $6,250 (NYSCEF Doc. No. 533). Similarly, the violation dated June 27, 2019 contains the same penally information, but "Standard" is $3,125, "Admit" is $3,125, and "Default" is $12,500 (NYSCEF Doc. No. 539).
"On August 27th and again September 11th, 2019, I twice tried to enter the [p]remises to inspect the site and examine the cited violation location. However, plaintiffs refused to allow me access to the [p]remises for this inspection. At that time, unknown to me, they had received a third re-inspection ticket regarding the violation and knew that the violation had been in default. As of the present, two violations are already being executed upon by a collection agency assigned from the NYC Department of Finance.
"On September 19, 2019, I received a letter indicating another $1,500 in civil penalty for said violation. It became apparent to me that every time the DOB re-inspects the property to find that the violation was not cured, a civil penalty of $1,500 was imposed. These civil penalties are in addition to the violation penalties. However, plaintiffs failed to provide me notice, resulting in another default penalty in the amount of $12,500.
"The penalties total $23,250 ($6,250 + $4,500 + $12,500) as of October 2019 with additional $1,500 civil penalties every two months. If the fines are not paid and the violation not cured, the city will obtain a legal judgment against defendant subjecting defendant's [sic] funds and property to levy to pay the fine. As of the present, two violations are already being executed upon by a collection agency assigned from the NYC Department of Finance" (NYSCEF Doc. No. 593 at 10-11, ¶ 33-36).
Further, with respect to this branch of their cross motion, defendants incorporate by reference Su's October 9, 2019 affidavit (appearing at NYSCEF Doc. No. 555), in which Su speculates that "[a]s civil penalty is accrued monthly, it is believed that the total amount of potential penalties will [be] $6250+$4500+$12500=$23250 as of October 2019" (id. at 4, ¶ 12 [emphasis added]). Moreover, as noted above, Su avers that "[a]s of the present, two violations are already being executed upon by a collection agency assigned from the NYC Department of Finance," yet provides no evidence to support this claim (NYSCEF Doc. No. 593, at 10, ¶ 34 and at 11, ¶ 36).
Based upon the foregoing, this branch of defendants' cross motion is denied with leave to renew upon the submission of evidence demonstrating that these violations and accompanying penalties have been assessed against defendants, and is granted to the extent of directing plaintiffs to provide defendants, within 30 days after service of this order with notice of entry, with all evidence of violations and penalties which have been assessed against defendants to date.
As to that branch of defendants' cross motion "compelling the Plaintiff and occupants to provide proof of liability insurance coverage," counsel for defendants asserts that "[p]laintiffs and occupants have not provided proof of liability insurance coverage and must be compelled to do so" (NYSCEF Doc. No. 592, at 2, ¶ 8). Plaintiffs' counsel, in opposition to this branch of defendants' cross motion, asserts in an affirmation that, despite defendants' repeated demands, he furnished defendants' counsel with the "insurance certificate" in an email correspondence dated July 8, 2019 that was previously filed with the court on January 15, 2020 (see NYSCEF Doc. No. 610, at 3-4, ¶ 17). According to plaintiffs' counsel, the insurance certificate "names [d]efendant as one of the insured" (id. at 4, ¶ 17). The July 8, 2019 email states: "Attached here is a copy of our client's most current insurance agreement with 538 Morgan Realty LLC listed as additionally insured" (NYSCEF Doc. No. 613, annexed as exhibit C to affirmation of plaintiffs' counsel regarding mot. seqs. 33 and 34). Plaintiffs' counsel also annexes the certificate which lists 538 Morgan Realty as an additional insured. The certificate contains the disclaimer that it was "issued as a matter of information only and confers no rights upon the certificate holder" and that it did "not amend, extend or alter the coverage" afforded by the policies named in the certificate (see NYSCEF Doc. No. 614, annexed as exhibit D to affirmation of plaintiffs' counsel regarding mot. seqs. 33 and 34).
"It is well settled that a certificate of insurance with the aforementioned disclaimer language is insufficient, by itself to establish that the certificate holder is insured" (Penske Truck Leasing Co. v. Home Ins. Co., 251 AD2d 478, 479 [2d Dept 1998]). Further "a certificate of insurance is evidence of a contract for insurance, but is not conclusive proof that the contract exists and not, in and of itself, a contract to insure" (id. at 479-480).
Although on its own, the certificate does not establish that plaintiffs obtained insurance coverage naming defendants as additional insureds, the certificate is sufficient to raise an issue of fact as to whether plaintiffs obtained the required insurance (id.; cf. Horn Maint. Corp. v Aetna Cas. & Sur. Co., 225 AD2d 443, 444 [1st Dept 1996] [while "[a] certificate of insurance is merely evidence of a contract for insurance, not conclusive proof that the contract exists . . . [o]n summary judgment, a certificate may be sufficient to raise an issue of fact, especially where additional factors exist favoring coverage"]). Therefore, the court directs plaintiffs to provide adequate proof of insurance, namely the insurance contract itself, in which defendants are named as additional insureds, within 30 days after service of this order with notice of entry (Adjuva LLC v Williamsburg 39 LLC, 2018 NY Slip Op 32777[U], *2 [Sup Ct, Kings County 2018]).
Plaintiffs' Motion to Strike Defendants' Jury Demand
In support of their motion to strike, counsel for plaintiffs argues that defendants are not entitled to a jury trial since the main thrust of this action sounds in equity for specific performance. In opposition, counsel for defendants contends that defendants would be prejudiced if the court granted the motion because they would not have enough time to adjust their trial strategies and to prepare for a bench trial. Defendants also contend that inasmuch as their claims "are primarily legal in character and money damages affords full relief, their pleading of incidental equitable claims is no bar to a jury trial" (NYSCEF Doc. No. 608, affirmation of defendants' counsel in opposition, at 4, ¶ 7, submitted as part of defendants' papers in mot. seq. 32).
Plaintiffs' motion is denied. As defendants point out, on or about March 28, 2019, in mot. seq. 27, defendants moved for an order to vacate plaintiffs' note of issue, to compel plaintiffs to provide certain discovery, and to grant their demand for a jury trial (NYSCEF Doc. No. 491). Plaintiffs opposed the motion, arguing that defendants' demand for a jury was untimely (see NYSCEF Doc. No. 506, affirmation of plaintiffs' counsel in opposition at 5, ¶¶ 30-31). By order dated June 19, 2019, the court granted defendants' motion to the extent of directing that certain depositions take place, that discovery be completed within 60 days, that a conference be scheduled, and added that the "case [was] set down for jury trial" (NYSCEF Doc. No. 522, at 2, ¶ 6).
"The doctrine of the law of the case is a rule of practice, an articulation of sound policy that, when an issue is once judicially determined, that should be the end of the matter as far as Judges and courts of co-ordinate jurisdiction are concerned" (Matter of Koegel, 184 AD3d 764, 765 [2d Dept 2020], quoting Martin v City of Cohoes, 37 NY2d 162, 165 [1975] [internal quotation marks omitted]). Specifically, [l]aw of the case applies only to legal determinations that were necessarily resolved on the merits in [a] prior decision, and to the same questions presented in the same case" (id. [internal citations and quotation marks omitted]).
Here, the issue of whether defendants were entitled to a jury trial was previously raised in defendants' prior motion, opposed by plaintiffs' opposition, and decided against plaintiffs in the June 19, 2019 order. Accordingly, reconsideration of this issue is barred by the law of the case doctrine (id). Even assuming that plaintiffs' motion may be viewed as one for reargument, the motion is untimely and, in any event, provides no basis for granting reargument (McGill v Goldman, 261 AD2d 593, 594 [2d Dept 1999]).
In summary, plaintiffs' motions for an adjustment of their use and occupancy, mot. seq. 33, and to strike defendants' demand for a jury trial, mot. seq. 32, are denied. That branch of defendants' cross motion, mot. seq. 34, for an order compelling "the Plaintiff and occupants" of the premises at issue to correct all property violations and pay the penalties accrued therefrom is denied with leave to renew upon the submission, from defendants, of evidence demonstrating that these violations and accompanying penalties have been assessed against defendants and is granted to the extent of directing plaintiffs to provide defendants, within 30 days after service of this order with notice of entry, with all evidence of violations and penalties which have been assessed against defendants to date. That branch of defendants' cross motion compelling plaintiffs and unnamed occupants of the property to provide proof of liability insurance coverage is granted as to plaintiffs only to provide adequate proof of insurance, namely the insurance contract itself, in which defendants are named as additional insureds, within 30 days after service of this order with notice of entry. That branch of defendants' cross motion to upwardly modify plaintiffs' monthly use and occupancy is denied with leave to renew upon submission of an updated rent analysis report.
This constitutes the decision and order of the court.
ENTER
/s/
J. S. C.