Opinion
No. 709221/2014.
06-01-2015
RIESENBURGER PROPERTIES, LLLP, Plaintiff, v. PI ASSOCIATES, L.L.C., James Pi, 3909 Main Street, LLC and Caret & Co., Inc., Defendants.
Clark & Gentry, P.L.L.C. by Edgar C. Gentry, Jr., Esq., New York, NY, for the Plaintiff. Wu & Kao, PLLC by Stephen Brodsky, Esq., New York, NY, for the Defendants Pi Associates L.L.C., James Pi and 3909 Main Street, LLC. Sperber Denenberg & Kahan, P.C. by Steven B. Sperber, Esq., New York, NY, Co–Counsel For the Defendants Pi Associates, L.L.C., James Pi and 3909 Main Street, LLC. Michael P. Berkley, P.C. by Sherry L. Lin, Esq., Garden City, NY, for the Defendant Carat & Co., Inc.
Clark & Gentry, P.L.L.C. by Edgar C. Gentry, Jr., Esq., New York, NY, for the Plaintiff.
Wu & Kao, PLLC by Stephen Brodsky, Esq., New York, NY, for the Defendants Pi Associates L.L.C., James Pi and 3909 Main Street, LLC.
Sperber Denenberg & Kahan, P.C. by Steven B. Sperber, Esq., New York, NY, Co–Counsel For the Defendants Pi Associates, L.L.C., James Pi and 3909 Main Street, LLC.
Michael P. Berkley, P.C. by Sherry L. Lin, Esq., Garden City, NY, for the Defendant Carat & Co., Inc.
Opinion
MARTIN E. RITHOLTZ, J.
The following papers numbered E28 to E89 read on this motion by defendant 39–09 Main Street LLC for a temporary restraining order and preliminary injunction tolling and enjoining the running of the alleged termination period set forth in plaintiff's notices of termination dated December 1, 2014; enjoining the plaintiff from terminating the defendant's lease; enjoining the plaintiff from removing defendant from its lawful possession of the subject premises; and enjoining the plaintiff from commencing eviction proceedings against the defendant pending the determination of this action and/or otherwise disturbing defendant's right to the use and quiet enjoyment of the premises.
| Papers | Numbered |
|---|---|
| Order to Show Cause–Emergency Affirmation–Exhibits– | |
| Memorandum of Law | E28–52 |
| Memorandum of Law | E66 |
| Memorandum of Law | E67 |
| Affirmation–Exhibits | E68–71 |
| Reply Affirmation | E77 |
| Reply Memorandum of Law | E78 |
| Memorandum of Law | E79 |
| Affidavit | E82 |
| Affirmation | E83 |
| Affirmation–Exhibit | E85–86 |
| Affirmation | E89 |
Upon the foregoing papers, the motion is determined as follows:
On July 1, 1994, Alkus I. Riesenburger (“Riesenburger”), as owner, and The Wiz Distributors of Flushing Inc., (“The Wiz”), as tenant, entered into a commercial lease for the building consisting of two-stories, and a basement, known as 39–09 Main Street, Flushing, New York, commencing on January 1, 1995, and for the building consisting of two-stories, a partial third floor, and a basement known as 39–11 Main Street, Flushing, Queens County, New York, commencing August 1, 1996. At the time said lease was entered into, The Wiz was currently leasing 39–11 Main Street from Riesenburger, and that lease would remain in effect until July 31, 1996. The lease agreement provided that commencing August 1, 1996, both properties would be considered the leased and demised premises under the July 1, 1994 lease. The lease term ended on July 31, 2011. Some time in the 1990s, The Wiz filed for bankruptcy and went out of business by the early 2000s.
On April 25, 2003, Alkus I. Riesenburger, as lessor, and Pi Associates L.L.C. (“Pi Associates”), and James Pi, as tenant, entered into lease agreement for the real properties known 39–09 Main Street and 39–11 Main Street, Flushing, New York. Said agreement acknowledged that there was an existing lease for said premises in effect, dated July 1, 1994, and that Pi Associates and Mr. Pi wished to enter into a new lease agreement whereby Pi Associates will become the lessee of said commercial premises. Pursuant to the new lease agreement, Pi Associates would take possession of said properties effective August 1, 2011, for a period of 19 years and 10 months, ending on May 31, 2031. The 2003 lease incorporated the terms of the 1994 lease, except as otherwise modified thereunder. Mr. Pi agreed to personally guaranty the 2003 lease.
Pi Associates entered into an Assignment and Assumption of Lease, dated May 1, 2011, with 3909 Main Street, LLC, whereby it assigned all of its rights under the April 25, 2003 lease with Riesenburger to 3909 Main Street LLC and the assignee assumed all of the obligations imposed on the tenant under the April 25, 2003 agreement. Said assignment was executed by James Pi, as the manager of Pi Associates, and James Pi as the manager of 3909 Main Street LLC. Said assignment was entered into prior to the date Pi Associates took possession of the subject premises, and states that the assignment was for “tax purposes.”
On June 17, 2011, 3909 Main Street LLC entered into a sublease agreement with Carat & Co, Inc. for the entire premises, for a period of ten years commencing August 1, 2011, with options to renew, so that the lease term could end on July 31, 2021. Said lease agreement identified 3909 Main Street LLC as the “landlord,” and was executed by James Pi as manager of 3909 Main Street LLC, and Allan Mon as president of Carat & Co. Inc.
Prior to entering into the assignment agreement, Pi Associates did not seek the consent of the landlord, and the landlord has not given written consent to the assignment. The landlord contends that it first learned of said assignment when its counsel received a letter from counsel for Pi Associates, dated December 16, 2011, which made reference to the Assignment and Assumption of Lease Agreement between Pi Associates and 3909 Main Street LLC. A copy of the assignment agreement, as well as a letter from a bank pertaining to 3909 Main Street LLC, was enclosed in said letter. Neither Pi Associates nor 3909 Main Street LLC informed the landlord of the sublease agreement with Carat & Co., prior to the execution of the sublease agreement.
On October 7, 2014, plaintiff served eight separate default notices on Pi Associates 3909 Main Street Associates LLC and James Pi, and required Pi Associates and James Pi to cure each default within 15 days of receiving said notice. Said defaults pertain to the assignment of the lease to 3909 Main Street LLC; the sublease between 3909 Main Street LLC and Carat & Co. Inc.; the merger of the properties into a single tax lot; the failure to pay the landlord 70% of the sublet rent received by Pi Associates that was in excess of their payments to the landlord; and the failure to provide the landlord with certificates or policies of insurance and failing to provide the landlord with substantial financial and operating information required under the lease.
In a letter dated October 17, 2014, counsel for the tenant, identified as 3909 Main Street Associates, objected to each of the eight default notices, and asserted, in essence, that no default had occurred.
On December 1, 2014, four notices of termination of the lease requiring the surrender of the premises on or before December 6, 2014, were served on Pi Associates, James Pi, and 3909 Main Street LLC.
Plaintiff Riesenburger Properties, LLLP, commenced the within action on December 2, 2014 and alleges causes of action for breach of contract, quantum merit, unjust enrichment, to recover possession of the premises, indemnification, and enforcement of the guaranty. Defendants have served an answer. Pi Associates and James Pi have each interposed counterclaims in their answer, and plaintiff has served a reply to the counterclaims.
A proposed unsigned order to show cause for a Yellowstone injunction and a Request for Judicial Intervention was efiled by defendant 3909 Main Street LLC on December 4, 2014. On December 5, 2014, the parties appeared in this Part and, pursuant to a so-ordered stipulation, the effective date of cancellation was extended to January 26, 2015, the order to show cause for the Yellowstone injunction was held in abeyance, and a settlement conference was scheduled for January 26, 2015. On January 29, 2015, pursuant to a so-ordered stipulation, the settlement conference was adjourned to February 25, 2015, and a schedule was set forth with respect to the service of papers relating to the order to show cause and extending Carat & Co. Inc.'s time to serve an answer to the complaint.
This Court signed the subject order to show cause on March 13, 2015. Defendant 3909 Main Street LLC seeks a temporary restraining order and a “Yellowstone ” injunction (see, First Natl. Stores v. Yellowstone Shopping Ctr., 21 N.Y.2d 630 [1968] ). Although not designated as the movants in the order to show cause, counsel for defendants states in his emergency affirmation that the within motion is made on behalf of defendants Pi Associates, James Pi, and 3909 Main Street LLC.
At the outset, the Court finds that, contrary to defendants' assertions, Riesenburger Properties LLLP, has established that it is the owner of the subject real property, pursuant to a deed dated August 11, 2003 and recorded on October 8, 2004.
“A Yellowstone injunction maintains the status quo so that a commercial tenant, when confronted by a threat of termination of its lease, may protect its investment in the leasehold by obtaining a stay tolling the cure period so that upon an adverse determination on the merits the tenant may cure the default and avoid a forfeiture” of the lease (Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Ave. Assoc., 93 N.Y.2d 508, 514 [1999] ).
“To obtain a Yellowstone injunction, the tenant must demonstrate that (1) it holds a commercial lease, (2) it received from the landlord either a notice of default, a notice to cure, or a threat of termination of the lease, (3) it requested injunctive relief prior to both the termination of the lease and the expiration of the cure period set forth in the lease and the landlord's notice to cure, and (4) it is prepared and maintains the ability to cure the alleged default by any means short of vacating the premises” (Barsyl Supermarkets, Inc. v. Avenue P Assoc., LLC, 86 AD3d 545, 546 [2011] ; see JT Queens Carwash, Inc. v. 88–16 N. Blvd., LLC, 101 AD3d 1089, 1089–1090 [2d Dept 2012] ; Trump on the Ocean, LLC v.. Ash, 81 AD3d 713, 716 [2011] ; Korova Milk Bar of White Plains, Inc. v. PRE Props., LLC, 70 AD3d 646, 647 [2010] ; see generally Graubard Mollen Horowitz Pomeranz & Shapiro v. 600 Third Ave. Assoc., 93 N.Y.2d at 514 ).
Essential to obtaining a Yellowstone injunction is a demonstration by the movant that the motion is timely. Defendants assert that the eight default notices and the four termination notices were procedurally defective, in that they were addressed and delivered to the former address of Pi Associates. Defendants assert that, in an email dated June 19, 2013, plaintiff received written notice that Pi Associates had relocated to 136–18 39th Avenue, 12th Floor, Flushing, New York.
It is asserted that all eight notices of default were erroneously addressed to Pi Associates at 57–06 39th Avenue, Woodside, New York. It is further maintained that Article 8 of the 2003 lease governing notices specifically provides, in pertinent part, that: “All notices ... required or permitted hereunder shall be in writing and shall be deemed delivered ... to the last known address of the parties thereto.” Defendants, therefore, assert that the purported service on Pi Associates of the default notices was procedurally defective. It is also asserted that service of the default notices failed to comply with the provisions of RPAPL section 735(1).
Defendants make the identical arguments with respect to the December 1, 2014 notices of termination, and assert that the service of said notices was procedurally defective.
Plaintiff, in opposition, asserts that the notices of default were properly served, pursuant to the terms of the lease. It is undisputed that the notices of default were served on the moving defendants by FedEx at 57–08 39th Avenue, Woodside, New York, 11377. It is also undisputed that the FedEx delivery person appeared at the Woodside address, on October 8, 2014, and was informed by an employee of the Pi defendants that these defendants current address was 136–18 39th Avenue, 12th Floor, Flushing, New York. FedEx completed delivery of the default notices to the Pi defendants on October 9, 2014 at the Woodside address and, on October13, 2014, at the Flushing address. Plaintiff further assert that the terminations notices were properly served on the defendants by FedEx, at their last known address and at their actual place of business. Plaintiff has submitted copies of FedEx's proof of delivery.
Defendants' counsel, in reply, does not claim that Pi Associates, James Pi, and 3909 Main Street LLC did not receive the notices of default which were served by FedEx. Rather, it is asserted that it is irrelevant whether FedEx ultimately delivered said notices at the Flushing address, as the notices still listed erroneous addresses, and, therefore, they were procedurally invalid.
Contrary to defendants' assertions, the provisions of RPAPL section 735 are inapplicable here, as this is not a commercial summary holdover proceeding (see generally, Bogatz v. Extra Touch Int'l, 179 Misc.2d 1029 [Civ Ct, Kings County 1999] ). Therefore, the issue to be determined is whether notice was properly given to the defendants pursuant to the terms of the April 25, 2003 lease. Paragraph 8 of said lease the provides that: “All notices and other communications required or permitted hereunder shall be in writing and shall be to have been duly given if delivered by hand or overnight delivery service or mailed, postage prepaid, certified or registered mail, return receipt requested, to the last known address of the parties hereto. Notices by facsimile shall be sufficient if properly sent and confirmed as received. Notices or communications shall be deemed delivered on the date actually delivered if by hand delivery or delivery service or 72 hours after deposit in the U.S. Mail, if by registered or certified mail, or upon confirmation if by facsimile.” Contrary to defendants' assertion, the notice provision contained in the lease does not require that notices be served by in hand delivery when served by overnight delivery.
It is undisputed that plaintiff used FedEx's overnight delivery service in order to serve the eight notices of default on defendants Pi Associates, James Pi, and 3909 Main Street LLC. Said notices were addressed to Pi Associates, attention James Pi, at the Woodside address, the last known address of the parties to the 2003 lease agreement.
Contrary to defendants' assertion, the email dated June 19, 2013, did not constitute written notice of a change of address by Pi Associates or James Pi. Rather, said email was sent by Pi Capital Partners LLC and only informed the plaintiff that said entity had moved to the Flushing address. The email does not identify Pi Capital Partners LLC as the agent for Pi Associates or James Pi and does not set forth a new address for Pi Associates, James Pi, or 3909 Main Street LLC.
The Court, therefore, finds that the notices of default requiring defendants to cure within 15 days of its receipt, as well as the notices of termination, were properly addressed under the terms of the lease, and were not procedurally defective.
As the notices of default were served no later than October 13, 2014, the 15–day period in which to cure or move for a Yellowstone injunction expired on October 28, 2014. It is undisputed that the defendants did not seek to cure the defaults, and did not file the motion for Yellowstone injunction, until December 4, 2014.
With respect to assignment of the 2003 lease by Pi Associates to 3909 Main Street LLC, it is undisputed that Pi Associates did not seek the landlord's consent to said assignment. Contrary to defendants' assertions the provisions of the 2003 lease do not permit Pi Associates or Mr. Pi to assign the lease without the landlord's consent. Paragraph 12 of said lease provides that: “Neither Company nor Mr. Pi shall assign its or his rights and obligations under this Agreement without the consent of Lessor, which consent shall not be unreasonably withheld. Nothing in this paragraph shall prevent Mr. Pi from transferring his interest in this Agreement and Lease by Will or inheritance or by gift to a spouse or other family member, subject to the terms and obligations of this Agreement and Lease.”
Thus, although the landlord could not object to Mr. Pi's transferring his interest in the lease by either the stated means and could not object to transfers to restricted group of individuals, the lessee was still required to seek the landlord's consent prior to assigning the lease.
The failure to obtain the landlord's prior consent to the assignment is not capable of being cured by the defendants.
As defendants are not entitled to the relief requested, the Court need not determine the remainder of the defendants' claims on this motion.
Therefore, as the within motion is untimely, and defendants did not take any steps to cure the default prior to the expiration of the 15–day cure period set forth in the lease and notice, the motion for a Yellowstone injunction is, in all respects, denied.
The foregoing constitutes the decision, order, and opinion of the Court.