Opinion
Index No. 2190/2019
12-13-2021
In the MATTER OF the Application of Maria GALICIA, et al., Petitioners, for a Judgment Pursuant to Article 7A of the Real Property Actions and Proceedings and Law, Appointing a Court-Designated Administrator for the Premises Known as 196 Huron Street, Brooklyn, New York, 11222 Block 02533, Lot 0021 (Kings County).
For Petitioner: Christina Jones, Esq., and Rachel Nager, Esq., of Communities Resist Project of Southside United HDFC For Respondent HPD: Jeannine Elise Saglimbeni, of counsel to Martha Ann Weithmann For Respondent: Zachary Hall of Balsamo Rosenblatt and Hall
For Petitioner: Christina Jones, Esq., and Rachel Nager, Esq., of Communities Resist Project of Southside United HDFC
For Respondent HPD: Jeannine Elise Saglimbeni, of counsel to Martha Ann Weithmann
For Respondent: Zachary Hall of Balsamo Rosenblatt and Hall
Jack Stoller, J.
Recitation, as required by CPLR § 2219(a), of the papers considered in the review of this motion:
Pages numbered
Notice of Motion and Supplemental Affirmation and Affidavits Annexed 1, 2, 3, 4, 5
Affirmation and Affidavit In Opposition 6, 7
Upon the foregoing papers, the Decision and Order on this motion are as follows:
Maria Galicia, Leonardo Gonzalez, and Raymundo Miramon, the petitioners in this proceeding ("Petitioners"), commenced this proceeding seeking the appointment of an administrator of 196 Huron Street, Brooklyn, New York ("the subject premises") pursuant to RPAPL § 769 et seq. ("a 7A Administrator"). Petitioners settled this proceeding with the prior owner of the subject premises ("the Prior Owner") and the Department of Housing Preservation and Development of the City of New York ("HPD") by a stipulation dated May 27, 2021 ("the Stipulation"). Petitioners now move for the appointment of a 7A Administrator.
The Stipulation provided, inter alia , at ¶¶3 and 6 that the Prior Owner shall substantially correct extant violations on or before October 26, 2021 ("the Deadline"), conditioned on Petitioners providing the Prior Owner with reasonable access; at ¶14 that the Prior Owner shall retain a Licensed Contractor taken off a list of approved contractors that HPD maintains ("HPD's Contractor List") to correct the hazardous and immediately hazardous violations; at ¶16 that Petitioners may select a contractor to correct the non-hazardous violations from three contractors that the Prior Owner would select from HPD's Contractor List; at ¶22 that counsel for the parties shall arrange access; at ¶23 that Petitioners need not provide access to a contractor who is not taken from HPD's Contractor List; at ¶27 that the Prior Owner shall provide two business days’ email notice to Petitioners’ counsel of any alleged access denial so as to enable Petitioners to cure such a default ("the Notice To Cure"); and that the Prior Owner may not cite a defense of lack of access unless the Prior Owner emailed the Notice To Cure.
The Stipulation, at ¶37, referenced a prior proceeding commenced against the Prior Owner pursuant to New York City Civil Court Act § 110 ("the Prior HP Proceeding") and provided that an order of the Court in the Prior HP Proceeding, dated August 28, 2019 ("the Order To Correct") remained in full force and effect, and at ¶38 provided that Petitioners shall forebear moving for contempt in the Prior HP Proceeding pending the Prior Owner's compliance with the Stipulation.
The Stipulation further provided, at ¶42, that the Prior Owner consented to Petitioners’ prima facie case for the appointment of a 7A Administrator, but that the parties consented to hold such an appointment in abeyance pending the Prior Owner's compliance with the Stipulation; at ¶43 that, upon Petitioner's allegation of a default on the part of the Prior Owner, Petitioners may move for the immediate appointment of a 7A Administrator, subject to the provision that Petitioners must support such a motion with affidavits, documentary evidence, or government records; that the Prior Owner must also support any opposition with affidavits, documentary evidence, or government records; that the Prior Owner's opposition to such a motion would be limited to fact disputes with Petitioners and certain delineated affirmative defenses; and that the Court need only hold a hearing on such a motion upon admissible evidence placing a material fact regarding the Prior Owner's default in dispute.
The Stipulation further provided at ¶46 that the terms of the Stipulation shall be binding on, inter alia , the assigns and/or successors-in-interest to the Prior Owner's property. A draft of a contract of sale between the Prior Owner and 196 Huron Holdings LLC ("Respondent") ensued, stating, inter alia , at § 4.03(h) that the Prior Owner's sale of the subject premises to Respondent was subject to the Stipulation. On June 9, 2021, before Respondent's purchase of the subject premises, Respondent's counsel emailed Petitioners’ counsel and indicated an awareness of the Stipulation. Subsequent email exchanges show that the attorneys spoke on the phone with one another about this matter. By a deed dated July 12, 2021, the Prior Owner conveyed title to the subject premises to Respondent. Petitioners subsequently moved to substitute Respondent for the Prior Owner in this matter, a motion that Respondent and Petitioners resolved by a stipulation dated October 21, 2021 that provided inter alia , that Respondent was to be substituted for the Prior Owner in the Stipulation and that all other provisions of the Stipulation remained in full force and effect.
Petitioners made the instant motion, served by overnight mail on November 12, 2021, alleging Respondent's default on the Stipulation, supported by affidavits of all three Petitioners, photographs, and records from HPD and the New York City Department of Buildings ("DOB"). In its opposition, Respondent does not dispute that it has not corrected the violations by the Deadline. Rather, Respondent argues that Petitioners obstructed its efforts to comply with the Stipulation.
A member of Respondent ("the Member") averred in opposition to the motion that tenants complained to him about a lack of heat and hot water but that when he checked the boiler he found that the boiler had been switched off. The Member goes on to draw the inference that someone in the subject premises had been intentionally shutting the boiler off "to foster an appearance of non-compliance." While an email annexed to the opposition from Petitioners’ counsel dated October 7, 2021 complains to Respondent's counsel about a lack of hot water and Petitioners’ counsel complains about a lack of heat and hot water in another email dated October 27, 2021, after the Deadline, the Member's averment does not actually raise a fact issue with Petitioners’ motion, as neither the violations annexed to the Stipulation nor the violations annexed to the Order To Correct contain a violation relating to heat or hot water.
As noted above, Respondent is an LLC.
The Member averred that he sent exterminators to the subject premises but that Petitioners "refused access to almost every exterminator that we have sent over the last five months." As noted above, the Stipulation was clear that a condition precedent to an interposition of a defense of lack of access was a Notice To Cure. Respondent annexed to its opposition email threads between Petitioners’ counsel and Respondent's counsel, but they do not contain a Notice To Cure.
Indeed, the email threads annexed to the opposition show that Petitioners have mostly taken the lead in demanding dates for Respondent to correct violations. Upon closing on the property, the attorneys had an email exchange on July 13, 2021. On July 23, 2021, Petitioners’ counsel emailed Respondent's counsel stating that she had reached out to Respondent's counsel a number of times that week without a satisfactory response. After some more exchanges, Respondent's counsel emailed Petitioners’ counsel on July 27, 2021, stating that Respondent had been unable to find someone to do work in the subject premises due to unforeseen personal issues he had been dealing with. After more email exchanges, Petitioners’ counsel emailed Respondent's counsel on August 10, 2021 referring to a lack of progress from Respondent about a plan to correct the violations. An email dated August 13, 2021 from Respondent's counsel stated that her client left the country a week after he closed on the subject premises and had not returned yet. Up to this point, Respondent did not request access.
Petitioners’ counsel emailed Respondent's counsel on August 17, 2021 stating that she had not received a request for access from Respondent's counsel but that someone who worked for Respondent showed up at the subject premises with an exterminator without notice and that Petitioners therefore were not available to provide access. Respondent's counsel's response from the same day was that the exterminator was going to treat the common areas of the subject premises but not individual apartments. Not only did Respondent's counsel agree that Respondent did not give notice of any request for access in this instance, Respondent's counsel stated that the exterminator was working in the common areas, where Respondent would not need Petitioners’ access.
The next email regarding access that Respondent annexed to its opposition is dated October 7, 2021, where Respondent's counsel states that Respondent wanted to "commence" work "next week." On October 15, 2021, Petitioners’ counsel emailed Respondent's counsel, stating that Respondent had indicated an intention to come to the subject premises the following week to exterminate. On October 18, 2021, Respondent's counsel emailed Petitioners’ counsel requesting access dates for two apartments in the subject premises, the first specific request for access in the email record, eight days before the Deadline. Respondent's counsel then emailed Petitioners’ counsel on October 19, 2021 stating the name of a contractor that would correct violations. Petitioners’ counsel emailed back the same date stating that the contractor was not on the HPD's Contractor List, which relieves Petitioners of their obligation to provide access. On October 20, 2021, Respondent's counsel emailed back stating that Respondent only wanted to repair the non-hazardous conditions first. On November 1, 2021, after the Deadline, Respondent's counsel emailed asking for one hour of access for contractors working on non-hazardous violations to inspect. Petitioners’ counsel emailed back on November 2, 2021 stating that Petitioners could provide access for the hour that Respondent's counsel requested. On November 4, 2021, Petitioners’ counsel emailed Respondent's counsel, stating that Petitioners reported that someone was working in the basement of the subject premises.
This record does not raise an issue of fact regarding denial of access sufficient to require a hearing.
Respondent's counsel averred that Petitioners’ counsel rejected one contractor, then rejected "two other contractors because they wanted a third option", and then that Respondent "finally" presented Petitioners with three options that Petitioners’ counsel did not respond to. The Member also averred that he was unaware that a contractor he selected for work had to be from a HPD's Contractor List. However, Respondent itself annexed to its opposition an email that Petitioners’ counsel sent Respondent's counsel on August 3, 2021 referencing the Stipulation's requirement that proposed contractors come off HPD's Contractor List, a reference that Petitioners’ counsel repeated in an email dated August 12, 2021. The Member averred that he "finally" found two contractors off of HPD's Contractor List, without stating the date that he found the contractors but that he had to find a third contractor. Again without stating a date that he found a third contractor, the Member averred that Petitioners refused to select a contractor. What the email record shows is that Respondent's counsel emailed Petitioners’ counsel on November 16, 2021, three weeks after the Deadline and four days after Petitioners served this motion, providing Petitioner's counsel with the names of three HPD-approved contractors who could work on non-hazardous violations. Respondent's failure to comply with the Stipulation, both in terms of selecting contractors from HPD's Contractor List and in terms of the timeliness of Respondent's presentation of three contractors, demonstrates that Respondent did not raise an issue of fact sufficient to warrant a hearing.
The Member argued that instead of selecting a contractor, Petitioners filed this motion. In a similar vein, even while implicitly conceding that his selection of a contractor did not comply with the Stipulation, the Member averred that Petitioners "were more concerned with setting up obstacles to the process than actually allowing the building to be repaired." Respondent's counsel similarly argued in her affirmation in opposition that Petitioners’ counsel "decided to service their clients by filing a motion. Meanwhile the repairs could have almost been completed while they were drafting away." The email record reveals that this argument of Respondent's is a non sequitur. First, the Stipulation provides that Petitioners’ ability to select a contractor only applied to non-hazardous violations. If Respondent had otherwise corrected the hazardous and immediately hazardous violations and only non-hazardous violations remained, the parties’ posture on this motion practice would be much different than the facts as the parties concede they exist today. Second, the email exchanges show that Respondent did not even offer Petitioners a choice of three contractors off of HPD's Contractor List until November 16, 2021, three weeks after the Deadline and after Petitioners had already made this motion.
Even setting aside such flaws in Respondent's argument, Respondent does not dispute that the Stipulation conferred upon Petitioners the prerogative to choose the contractor for correction of non-hazardous violations from three that Respondent would obtain from HPD's Contractor List. The Court considers this provision of the Stipulation in the context in which the parties made it. Petitioners agreed to forebear moving for contempt in the Prior HP Proceeding pending what amounted to a five-month extension to correct violations. In addition to that, in a proceeding pursuant to RPAPL § 769 et seq. such as this one, upon a finding of, inter alia , an infestation by rodents, a lack of electricity, or any other condition or combination of conditions dangerous to life, health or safety, which have existed for five days, RPAPL § 770(1), the Court is empowered to, inter alia , direct that rents be deposited with an administrator appointed by the Court pursuant to RPAPL § 778(1) to be used to remedy the conditions. RPAPL § 776(b). Petitioners could have taken the matter to trial and exposed the Prior Owner to the risk of an appointment of a 7A Administrator back then. Petitioners could have moved to hold the Prior Owner in contempt in the Prior HP Proceeding. Rather than take the risk of the appointment of a 7A Administrator or take the risk of a finding of contempt, the Prior Owner, represented by counsel, entered into an extensive, heavily-negotiated, detailed settlement agreement. Petitioners’ ability to choose one contractor for the correction of non-hazardous violations from three selected from HPD's Contractor List constituted a part of the bargained-for valuable consideration therein. To the extent that Respondent now complains that Petitioners did not select a contractor when Respondent admittedly either did not present Petitioners with a choice of contractors from HPD's Contractor List or when Respondent did not provide Petitioners with three such contractors, Respondent essentially quarrels with the Stipulation, not with Petitioners’ conduct. The effect of a settlement of a lawsuit is to substitute mutual promises contained in a prior agreement for the obligations contained in, or arising out of, the subject matter of the lawsuit. Putnam v. Otsego Mut. Fire Ins. Co. , 41 AD2d 981, 982 (3rd Dept. 1973). Respondent's argument therefore remains unpersuasive.
Respondent also argues that enforcement of the Stipulation would be inequitable. Respondent's counsel does not dispute that the Stipulation is enforceable against Respondent, but Respondent's counsel avers that Respondent has "only" been the owner since July of 2021, that Respondent "stepped into damaged goods", that "it is not fair to put [Respondent] in this position in such a short period of time", and that Respondent is a "different owner than [the Prior Owner] and he should not be hurt in this action because of the case history before him." The Member similarly avers that he "just walked into this matter approximately 5 months ago[ ] and should be given a fair opportunity to perform any repairs needed in the subject premises."
As a general matter, to avail oneself of equitable remedies, a party must show a lack of knowledge, whether in the context of an estoppel defense, Lake Valhalla Civic Ass'n v. Bmr Funding , 194 AD3d 803, 805 (2nd Dept. 2021), AQ Asset Mgmt., LLC v. Levine , 119 AD3d 457 (1st Dept. 2014), a laches defense, Kverel v. Silverman , 172 AD3d 1345, 1348 (2nd Dept.), leave to appeal denied, 34 NY3d 904 (2019), Philippine Am. Lace Corp. v. 236 W. 40th St. Corp. , 32 AD3d 782, 784 (1st Dept. 2006), or an equitable defense of mistake. Gitelson v. Quinn , 118 AD3d 403, 404 (1st Dept. 2014). Here, Respondent had actual knowledge of its obligations according to the Stipulation before purchasing the subject premises. The contract of sale rendered the conveyance of the subject premises subject to the Stipulation. Emails in the record showed that Petitioners’ counsel made clear Petitioners’ entitlement to performance by any successor of the Prior Owner and that Respondent's counsel acknowledged as much. Respondent does not state any claim to equitable relief from its contractual obligations when Respondent had actual knowledge of those obligations before making the informed decision to purchase the subject premises.
Moreover, Respondent's actual knowledge of the obligations it was undertaking compels the reasonable inference that Respondent and the Prior Owner discounted the value of the subject premises when setting the price for it in an arms’-length transaction. The record on this motion practice shows that the subject premises is a six-unit building in Greenpoint, Brooklyn, and the real property transfer report annexed to the deed shows that Respondent paid $721,075 for the purchase of the subject premises. Respondent does not show in support of its affirmative plea for equitable relief that this amount did not take Respondent's obligations per the Stipulation into account. Without such support, relieving Respondent from the obligations of the Stipulation would not be equitable, but something more like the opposite of equitable; Respondent would then have received the benefit of a discount in the purchase price of the subject premises without fulfilling the obligations of the condition that accounted for the discount.
Accordingly, Respondent does not show any disputed fact that would establish a defense to Petitioners’ motion sufficient to warrant a hearing. It is therefore ordered that the Court grants the motion and shall appoint a 7A Administrator.
This constitutes the decision and order of this Court.