Opinion
INDEX NO. 814377-2018
05-05-2020
EAST AURORA COOPERATIVE MARKET, INC., Plaintiff, v. RED BRICK PLAZA, LLC, Defendant.
NYSCEF DOC. NO. 232
DECISION
HON. HENRY J. NOWAK, J.S.C.
Justice Presiding
Plaintiff East Aurora Cooperative Market, Inc. (EACM) is a member-owned cooperative that operates a grocery store in the Village of East Aurora on property leased from defendant Red Brick Plaza, LLC (Red Brick). EACM moves for a judgment against Red Brick for attorneys fees and costs ordered by this court pursuant to an October 30, 2019 decision. Red Brick cross-moves to renew and reargue the motions that led to this court's finding in that decision that EACM was the prevailing party entitled to such fees and costs under the terms of the parties' lease. EACM also moves for summary judgment on its remaining claims. The court has considered the documents filed in the New York State Courts Electronic Filing (NYSCEF) system as documents # 154 through 231, as well as oral argument by counsel for the parties on February 6, 2020.
In 2014, EACM leased an existing building at the subject property from Red Brick and raised and spent over $ 1,000,000.00 for construction costs to improve the building, opening the interior so that it could function as a grocery store. EACM alleges that during the construction, its contractors uncovered damage to the structure of the roof system of Red Brick's building, which had been covered up and was not readily apparent to EACM when it undertook the project. In a separate action filed under Index No. 809806/2018 (the construction action), EACM claims that it incurred additional expense to address that damage. The construction work was completed and EACM ultimately opened the grocery store in 2016.
Pursuant to the terms of the parties' lease, EACM has paid Red Brick both rent as well as a proportionate share (77%) of expenses for common area maintenance (CAM) since April 2015. The CAM expenses are incurred by Red Brick to manage, operate, service and maintain the common facilities at the property. They include landscaping, insurance premiums, repairs, painting, snow removal, garbage, taxes, electricity and significantly, water charges. Under the lease, Red Brick estimates the CAM expenses and uses those estimates to charge EACM its proportionate share as "additional rent" on a monthly basis.
The lease requires Red Brick to reconcile the estimated CAM charges paid monthly by EACM against the actual CAM expenses incurred by Red Brick at the end of each fiscal year. If the estimated CAM charges paid by EACM exceed the actual CAM charges, EACM is entitled to a credit against future CAM charges. Red Brick provided EACM with a CAM invoice and reconciliation in October 30, 2015 for the first fiscal year, but did not provide the required annual CAM reconciliation to EACM as the lease requires for 2016 or 2017.
On July 25, 2018, EACM served Red Brick with the summons and complaint in the construction action. Within two weeks after service, Red Brick issued two invoices to EACM. In the first invoice, sent on August 8, 2018, Red Brick demanded $ 18,463.88 for property taxes allegedly paid by Red Brick since 2016 as a result of the improvements EACM made to the property (NYSCEF # 178). Counsel for EACM promptly disputed the invoice and requested backup documentation (NYSCEF # 180). The second invoice was sent on August 14, 2018, for "unpaid water bills" in the amount of $ 4,386.00, also going back to 2016. In the cover letter accompanying the second invoice, Red Brick's principal, Mark Jaworski, wrote that "failure to timely pay this invoice . . . may result in Red Brick's right to seek termination of the Lease" (NYSCEF # 179). That same day, Red Brick's attorney wrote a letter to counsel for EACM asserting that payment of the first invoice "is due no later than August 22, 2018, with Red Brick's contractual right to terminate the Lease for nonpayment arising ten (10) days later on September 1, 2018" (NYSCEF # 181). To close that letter, the attorney reiterated that EACM's "failure to pay Red Brick Invoice 18-1 within the allotted timeframe will give Red Brick the right to terminate the parties' Lease" (NYSCEF # 181).
EACM communicated with Red Brick to attempt to understand how the invoice for additional taxes was calculated and why the new water charges were separate from the water charges included in its CAM payments. Unable to find answers to its questions and concerned about termination of its lease after it invested over $ 1,000,000.00 to improve Red Brick's property, EACM filed the instant action and immediately sought a Yellowstone injunction to stay any action to terminate the lease. This court granted the Yellowstone injunction and ordered EACM to place $ 12,667.67 in escrow, which was the amount that EACM believed it owed for increased taxes paid by Red Brick for the improvements made to Red Brick's property.
On November 26, 2018, the day before the parties were due in court on the requested injunction, Red Brick provided CAM reconciliations to EACM for 2016, 2017 and 2018. As a result, EACM confirmed that the invoiced water charges pertained to a second water service line, while the CAM charges applied only to one water service line. EACM paid the outstanding water invoice and placed the required funds for increased taxes in escrow.
After granting the Yellowstone injunction, this court engaged in intensive settlement negotiations with the parties and their counsel, to no avail. The parties also conducted discovery, which included Red Brick providing updated CAM reconciliations on May 7, 2019, the day before Mr. Jaworski's deposition. From Mr. Jaworski's testimony, it became clear that despite the fact that the lease required EACM to pay only actual taxes paid as a result of their improvements to the property, Mr. Jaworski had calculated a fictitious tax increase based upon an increase in assessed value, without consideration of a March 2017 business investment exemption for EACM's improvements.
Following discovery, EACM moved for an order modifying the temporary restraining order to permit EACM to pay a portion of property taxes from escrowed funds of $ 12,667.67 previously ordered by the court. That motion was granted. Also, the court interpreted the terms of the parties' lease consistently with the methodology proposed by EACM, ultimately setting additional taxes owed by EACM in the amount of $ 14,370.87. Red Brick cross-moved for summary judgment on EACM's first and second causes of action. The court denied those motions. Each side requested attorney's fees, and the lease provides that "the prevailing party shall be entitled to an award for costs charged to or incurred by such party in connection with such proceeding, including without limitation, reasonable attorney's fees and court costs and other expenses" (NYSCEF # 175, para. 46). Finding EACM to be the prevailing party, the court awarded attorney's fees and expenses to EACM.
EACM now moves for a judgment for the attorney's fees and expenses awarded in that decision. The factors for the court to consider " 'include the time and labor expended, the difficulty of the questions involved and the required skill to handle the problems presented, the attorney's experience, ability, and reputation, the amount involved, the customary fee charged for such services, and the results obtained' " (Matter of In re Estate of Dessauer, 96 AD3d 1560, 1561 [4th Dept 2012], quoting Matter of Talbot, 84 AD3d 967, 967-968 [2d Dept 2011]; see also A&M Global Management Corp. v Northtown Urology Assoc., P.C., 115 AD3d 1283, 1290 [4th Dept 2014]). Counsel for EACM calculated the time spent in this case only to modify the temporary restraining order and respond to Red Brick's cross-motion for summary judgment.
The court has reviewed the time spent and fees incurred and finds them to be reasonable. On EACM's motion to modify the temporary restraining order, the court awards EACM attorney's fees of $ 1,995.00 plus the filing fee of $ 45.00, for a total of $ 2,040.00. Red Brick's cross-motion presented more complex legal and factual issues, and the court finds that the appropriate award of attorney's fees to defend that motion is $ 19,947.70. Consequently, this Court awards EACM total attorney's fees and costs in the amount of $ 21,987.70.
Red Brick cross-moves to renew and reargue the motion seeking attorney's fees. Red Brick reiterates an argument previously made in this action that it never threatened to terminate the lease, thereby making the original Order to Show Cause seeking the Yellowstone injunction unnecessary. The court found otherwise and granted the Yellowstone injunction to prohibit any efforts to terminate the lease, and now finds no reason to revisit that determination.
Second, Red Brick claims that because EACM acknowledged owing some amount of taxes and posted funds in escrow as ordered by the court, EACM cannot be considered the prevailing party, particularly when those funds plus an additional $ 1,703.20 were ultimately ordered to be paid to Red Brick. However, the critical issue on the motion was whether taxes owed by EACM to Red Brick shall be based on actual taxes paid (as the lease provides) or a hypothetical tax based upon an increase in assessed value, which was offset by business investment exemption due to EACM's improvements. On that issue, EACM prevailed.
Third, Red Brick contends that EACM is entitled to no attorneys fees because of an alleged conflict of interest by its attorney, Michael P. McClaren, Esq., who also served on the board of EACM. Red Brick argues that Mr. McClaren developed an independent interest in the outcome of the litigation because of the "prevailing party" clause in the parties' lease. The settlement discussions conducted by this court involved not only the attorneys, but also Mr. Jaworski on behalf of Red Brick and John Andrew Layer, president of the Board of EACM. From those discussions as well as the positions taken throughout this litigation, the court finds no conflict with respect to Mr. McClaren; in fact, Mr. McClaren repeatedly offered to waive his claim for attorneys fees in a series of settlement proposals.
Red Brick also argues that EACM is entitled to no attorney's fees because Mr. McClaren likely would have waived his fee had Red Brick prevailed. However, "an obligation to pay legal fees is incurred as soon as the client retains the attorney and even before the precise contractual arrangement for payment is made between them and not when payment is actually made" (William Manor Mgt. Assoc. v Deutsch, 126 Misc 2d 1006, 1008 [NY City Ct 1984]; see also Maplewood Mgt., Inc. v Best, 143 AD2d 978, 979 [2d Dept 1988]; 313 W. 100th St. Tenants Ass'n v Kepasi Realty Corp., 143 Misc 2d 566, 567 [App Term 1989]; Morningside Studios, Inc. v Lucille Hotel Corp., 70 Misc 2d 760, 763 [Civ Ct, NY County 1972]).
Considering all of Red Brick's arguments, the court does not find that it overlooked any pertinent facts or law in reaching its October 30, 2019 decision, and Red Brick's motion to renew and reargue is denied.
On EACM's motion for summary judgment, the court finds that most of the relief sought in the complaint has been decided or is now moot. EACM's first cause of action seeks "a declaratory judgment setting forth the parties' respective rights and obligations under the lease for any increased taxes resulting from the reassessment of the property in 2016." That relief was granted in EACM's favor as a result of this Court's October 30, 2019 decision. EACM also seeks "a complete and accurate accounting of the property taxes for the period 2015, 2016, 2017, and 2018," which Red Brick ultimately provided through discovery. EACM's additional claims in the first cause of action, for "injunctive relief tolling the due date" for the tax invoice and for "a declaration that any amount owed by EACM be in the form of a credit against amounts" Red Brick owes EACM, are now moot based upon payment of the additional taxes.
In its second cause of action, EACM sought "a declaratory judgment setting forth the parties' respective rights and obligations with respect to the water charges." That claim is now moot, as are the third and fourth claims within that cause of action, due to the payment for the disputed water charges by EACM early in this litigation.
EACM still seeks a "an order compelling a complete and accurate accounting of CAM charges from 2015-2018" from its second cause of action. In support of that request, EACM asserts that the CAM reconciliations initially provided on November 26, 2018 and updated on May 7, 2019 revealed errors including an improper charge for sealing and striping the parking lot, an overcharge as to EACM's monthly management fee, and Red Brick's use of an incorrect commencement date, all resulting in thousands of dollars of overpayments by EACM. The court declines to rule on those claims insofar as they were raised for the first time in the instant motion. Furthermore, the allegations themselves demonstrate that a further accounting of the CAM charges would be unnecessary, and the court therefore denies EACM's request for such an accounting.
The last item of relief sought in EACM's complaint is "interest, costs, attorneys' fees, disbursements and such other and further relief this Court deems just and proper." For the same reasons described in the October 30, 2019 decision, the court finds EACM to be the prevailing party on Red Brick's motion to renew and reargue, and grants EACM summary judgment in that respect. Nonetheless, where recovery of fees is contractually available, courts have discretion to deny an award based on equitable considerations and fairness (see Solow Mgt. Corp. v Lowe, 1 AD3d 135, 136 [1st Dept 2003]). Mindful of the fact that the award of $ 21,987.70 from the motions that led to the October 30, 2019 decision exceeded the amounts in controversy on the tax and water invoices, the court declines to award EACM additional attorney's fees or expenses incurred as a result of the instant motions or other aspects of this litigation.
The court also appreciates that this litigation involved a Yellowstone injunction and requests for accountings that were more significant to EACM than the sums in controversy. --------
Submit order and judgment. Dated: May 5, 2020
/s/_________
HON. HENRY J. NOWAK, J.S.C.