Fisk Bldg. Assoc. L.L.C. v Integrity Tit. Agency, Inc.

[*1] Fisk Bldg. Assoc. L.L.C. v Integrity Tit. Agency, Inc. 2005 NY Slip Op 50094(U) Decided on January 6, 2005 Supreme Court, New York County Kornreich, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 6, 2005
Supreme Court, New York County

FISK BUILDING ASSOCIATES L.L.C., Plaintiff,

against

INTEGRITY TITLE AGENCY, INC. and COLUMBUS ABSTRACT, LLC, Defendants.



104647/04

SHIRLEY WERNER KORNREICH, J.

This action arises from the alleged nonpayment of rent by Integrity Title Agency, Inc. ("Integrity" or "Tenant") to Fisk Building Associates L.L.C. ("Fisk" or "Landlord") for space in The Fisk Building, located at 250 West 57th Street, New York, NY (the "Building" or "Fisk Building"). The complaint set forth three causes of action for: (1) unpaid rent, with interest thereon from November 1, 2003, as well as attorney's fees and disbursements (against defendant Integrity); (2) damages (against defendant Integrity); and (3) use and occupancy (against defendant Columbus Abstract, LLC ("Columbus")).

Plaintiff now moves for summary judgment on its causes of action as against Integrity; to dismiss defendants' counterclaims and affirmative defenses; and to sever the action as to the attorney's fees claim against Integrity and the third cause of action against defendant Columbus. In support of its motion, plaintiff submits the affidavit of George P. Fabian, the Building's manager and copies of: the verified complaint; the answer and counterclaims, verified by counsel; the Lease between Fisk Building Associates (plaintiff's predecessor-in-interest) and Integrity; the Certificate of Conversion of Fisk Building Associates to Fisk Building Associates L.L.C.; correspondence from Brett S. Rovner of Coldwell Banker Commercial Properties, Integrity's real estate broker; and Integrity's security deposit check, payable to plaintiff.

Defendants oppose the motion, submitting the affidavit of James Gavrity, Senior Vice President for defendants' parent company; the affidavit of non-party Brett Rovner, Integrity's real estate broker, as well as copies of newspaper articles regarding the Fisk Building. Plaintiff has replied and has submitted the affirmation of counsel and affidavit of non-party Bradley Lewart, Vice President of Jerrick Waterproofing Co., Inc. ("Jerrick"), and copies of: a news article from Real Estate Weekly; faxed correspondence from Debbie Newman, Integrity's Human Resource Director; applications to the New York City Department of Buildings ("DOB"); the Certificate of Eviction against Integrity; and invoices from Jerrick for work performed at the Fisk Building.

I.Statement of Facts

A.Pleadings [*2]

Plaintiff alleges the following in its complaint. On or about November 7, 2002, plaintiff and Integrity entered into a lease, which commenced on December 1, 2002, and would expire on November 30, 2008 (the "Lease"). See Compl. at ¶ 4; Lease. The Lease provided for the letting of rooms 729-30 (the "Premises") in the Fisk Building. Id. The annual rent was set at: $35,520.00 per year ($2,960.00 per month) for the first two years; $37,740.00 per year for the next two years; and $39,960.00 per year for the last two years of the Lease term. See Lease at Art. 2(A). The Lease also provided that, if Integrity were to default and Fisk to reenter the Premises by summary proceedings, Fisk could re-let the Premises and: Tenant shall pay Landlord any deficiency between the rent herein reserved and the net amount of any rents collected by Landlord for the remaining term of this lease, through such re-letting. Such deficiency shall become due and payable monthly, as it is determined. Landlord shall have no obligation to re-let the premises, and its failure or refusal to do so, or failure to collect rent on re-letting, shall not affect Tenant's liability hereunder. In computing the net amount of rents collected through such re-letting, Landlord may deduct all expenses incurred in obtaining possession or re-letting the premises, including legal expenses and fees. . .If Tenant shall at any time default hereunder, and if Landlord shall institute an action . . . against Tenant based upon such default, then Tenant will reimburse Landlord for the legal expenses and fees thereby incurred by Landlord.

Lease, Art. 6 (emphasis supplied). As of October 7, 2003, Integrity was in arrears for monthly rents due from June 2003 through August 2003. Compl. ¶ 5; Ex. A. Plaintiff commenced a summary proceeding [FN1] against Integrity, and a warrant of eviction was issued against Integrity by the Civil Court. Id. at ¶ 6.

Defendants answered in the instant action, generally denying the facts set forth in the complaint and asserting a series of counterclaims. However, defendants have since withdrawn their counterclaims for fraud and equitable estoppel, as such claims are barred by Article 25 of the Lease.[FN2] See Memorandum of Law in Opposition at 7-8, fn.2; Lease, Art. 25 (tenant shall not impose counterclaims in action by landlord for recovery of rent). As such, the Court need not address that portion of plaintiff's motion seeking dismissal of defendants' counterclaims as they have been rendered moot.

B.Summary Judgment Submissions [*3]

In or around September 2002, Integrity hired Brett Rovner, a real estate broker, to procure office space for Integrity in the Fisk Building. See Aff. of James Gavrity at ¶ 4. Mr. Rovner had previously worked as the Fisk Building's assistant building manager, under the supervision of George Fabian. See Aff. of Brett Rovner at ¶ 3. After contacting Mr. Fabian, Mr. Rovner was directed to Roger Schumacher, then the Building's assistant manager. Id. at ¶ 4. Mr. Schumacher accompanied Mr. Rovner on a tour of the Building, and Mr. Rovner decided upon "a space on the seventh floor of the Fisk Building that was, to [his] estimation, ideal for Integrity Title's needs." Id.

While Mr. Rovner was aware that the Fisk Building had been planning a capital improvement project, he knew neither the status, details or stage of completion of that project, and Mr. Schumacher did not, during the tour, inform Mr. Rovner "that the capital improvement project was years away from completion or that the lobby work was about to begin soon." Id. at ¶¶ 6-8. Mr. Rovner has "no present recollection as to whether scaffolding was around the perimeter of the Fisk Building on the day [of the tour.]" Id. at ¶ 5. James Gavrity, an officer of defendants' parent company, avers that before the Lease was executed, he too visited the Fisk Building to see the space that Integrity might lease and, during his visit, "there was no scaffolding around the perimeter of the building and there were no obvious signs of construction work present. See Aff. of James Gavrity at ¶ 5.

Thereafter, on or about October 29, 2002, Mr. Rovner sent a letter with an offer for the seventh floor office space, viz., suites 729-30, setting forth specific terms, as authorized by Integrity. See Fabian Aff. at Ex. E, Letter dated October 29, 2002; see also Rovner Aff. at ¶¶ 11, 12. Plaintiff sent Integrity a copy of the Lease, to review, and Integrity executed the Lease on or about November 7, 2002. See Rovner Aff. at ¶¶ 11, 12; Lease. Mr. Rovner claims that, at that time, there was no ongoing construction on the seventh floor as the capital improvement program had been completed on that floor. See Rovner Aff. at ¶ 11. Mr. Rovner avers that if he had been aware "of the facts that Mr. Schumacher omitted . . . [he] would not have recommended that Integrity Title lease office space in the Fisk Building on the terms and conditions reflected in the lease." Id. at ¶ 12.

In December 2002, after Integrity had executed the Lease, it began to relocate into the Premises. See Gavrity Aff. at ¶ 8. Mr. Gavrity avers that, on the day that Integrity moved into the Building, "there was no scaffolding around the perimeter of the building[,] there were no obvious signs of construction in the common areas of the building [and the] elevators were functioning." Id. Mr. Gavrity claims that, subsequently, a scaffold was erected around the Building; a "massive" construction project began in the Building's lobby, appearing as if "a bomb had exploded [there]"; dust and debris were "everywhere"; and the elevators no longer ran regularly. Id. at ¶ 9. Although he allegedly complained to Mr. Schumacher and his staff, Mr. Gavrity contends that Fisk employees "would only say that the work would be completed in a few weeks." Id. at ¶ 10.

In response to Integrity's complaints to him, Mr. Rovner visited the Building and "observed construction crews performing various tasks [and does] not recall whether there was scaffolding up at that time." Rovner Aff. at ¶¶ 15-16. To find out the scope of the construction work, Mr. Rovner spoke with Mr. Schumacher who told him that "he had no idea, but it should be done in a few weeks" and did not tell him that Integrity would be unable to "operate [*4]peacefully due to the capital improvement program[.]" Id. at ¶ 17.

Integrity claims that, in or around May 2003, it vacated the Building as a result of the "deplorable, unsafe, unsanitary and uninhabitable conditions[.]" Gavrity Aff. at ¶11. Mr. Rovner further avers that Integrity left as a result of its constructive eviction by plaintiff. Rovner Aff. at ¶ 18. Integrity contends that it paid rent from December 2002 to April 2003 in the amount of approximate $18,000. Gavrity Aff. at ¶ 12. However, Integrity's claim that it vacated the Premises in April, is disputed by plaintiff. Plaintiff has submitted a copy of a letter faxed to it from Debbie Newman, Integrity's Human Resource Director, dated October 2, 2003, which states that "[t]his letter serves as permission to have a copier/fax machine removed from our premises on Friday, October 3, 2003." See Sternbach Aff. at Ex B (emphasis supplied). Additionally, a delivery receipt dated October 3, 2003, lists a "pick up" from the Premises with delivery to "Title Edge," Integrity's parent company. See id. On October 7, 2003, the Civil Court issued a warrant to evict Integrity from the Premises, and the City Marshal issued a Certificate of Eviction dated November 28, 2003. See Compl. at ¶ 6; Sternbach Aff. at Ex. D.

Defendants' contentions regarding the presence, or lack thereof, of the scaffolding are flatly disputed by plaintiff. George Fabian, the Fisk Building manager, states that the construction work on the Building began in August 2002, and that the work, which included the construction of a "440 foot long, heavy scaffold[] around the perimeter [of the Building,]" was conducted in open view at all times. See Aff. of George P. Fabian at ¶¶ 17-19. Mr. Fabian avers that Integrity was represented by counsel during lease negotiations, a contention that Integrity does not dispute, and that Integrity, as a "sophisticated business entity," should have known that the construction work was long term, and could not reasonably be completed in a matter of weeks. Id. at ¶¶ 36-37. Moreover, Bradley Lewart, an officer of Jerrick, avers that on August 27, 2002, Jerrick "erected and installed a 440-foot long, heavy-duty sidewalk scaffolding and shed that extended around all three sides . . . of the Fisk Building" and that such scaffolding remains in place to date. Aff. of Bradley Lewart at ¶¶ 3, 4. Invoices dated August 27, 2002, also reflect the installation of a scaffold and shed on all three sides of the Fisk Building, as does application data from the DOB. See id. at Ex. 1; see also Aff. of Robert A. Sternbach at Ex. C.

Defendants' answer states that Integrity did not tour the building until December 2002 and, at that time, its agent observed jackhammers, scaffolding, foul odors and high noise levels in and around the Building. Answer at ¶¶ 36-39. The answer further alleges that Mr. Schumacher, "in his capacity as the building's manager and agent for purposes of letting space, told [Integrity's] agent that each of the projects were short term projects that would be completed in a matter of weeks[,]" and that he made such false allegations in order to induce Integrity to lease the Premises. Id. at ¶ 40, 43. Integrity claims that, "[i]n reliance on [Mr.] Schumacher's representations that the construction was temporary and would be completed in the short term," Integrity entered into the Lease. See id. at ¶¶ 45-49. However, these "facts" as set forth by defendants in their unverified answer are altogether different from the facts asserted in the sworn statements of Mr. Gavrity and Mr. Rovner submitted by the defendants and as demonstrated by documentary evidence, viz., the Lease and correspondence from Mr. Rovner to plaintiff.

II.Conclusions of Law

To prevail on a motion for summary judgment, the movant must establish a prima facie showing of entitlement to judgment as a matter of law by producing sufficient evidence to [*5]demonstrate the absence of any material issue of fact. Giuffrida v. Citibank Corp., 100 NY2d 72, 81 (2003). Once a prima facie showing is made, the burden then shifts to the non-moving party to produce evidentiary proof in admissible form sufficient to establish the existence of material issues that require a trial. Zuckerman v. New York, 49 NY2d 557, 560 (1980).

Here, plaintiff has demonstrated its entitlement to judgment as against defendant Integrity. Integrity claims that it has paid rent only through April 2003, contending that it vacated the Premises in April 2003. The evidence does not support this contention. Indeed, Integrity's own Human Resources director arranged for the pick-up of equipment from the Premises, which she referred to as "our premises," in October 2003 long after Integrity stopped paying rent to plaintiff.

Integrity argues that this summary judgment motion is premature and that it still needs time to conduct discovery in support of its fraud defense. The Court disagrees. The elements of fraud are: (1) a false representation; (2) made with the intent to defraud; (3) reasonable reliance on the representation; and (4) damages as a result of his reliance. Swersky v. Dreyer & Traub, 219 AD2d 321, 326 (1st Dept. 1996). Additionally, where there is no fiduciary relationship that would impose a duty to disclose, a party's "mere silence, without some act which deceived [the other party], cannot constitute a concealment that is actionable as fraud[.]" Mobil Oil Corp. v. Joshi, 202 AD2d 318 (1st Dept. 1994).

Here, plaintiff did not owe any fiduciary duty to defendants. See Stambovsky v. Ackley, 169 AD2d 254, 261 (1st Dept. 1991) (seller of real property under no duty to speak when parties deal at arm's length). With further discovery, Integrity will not be able to sustain a claim for fraud as it does not, nor can it, allege that plaintiff owed it any fiduciary duty. The sum of Integrity's fraud defense is that plaintiff's agent omitted to inform it of the scope of the construction project at the Fisk Building. All affirmative statements alleged to have been made by Mr. Schumacher, plaintiff's agent, were made after the Lease was signed.

Notably, plaintiff has submitted a news article published prior to the execution of the Lease, which indicated that the Fisk Building was undertaking a $20 million major capital improvement project, with work to be done on windows, elevators, corridors and the lobby. See Sternbach Aff. at Ex. A. Moreover, the Jerrick affirmation and invoices have demonstrated that scaffolding surrounded the Building's perimeter since August 2002. Defendants can hardly contend that plaintiff concealed the construction when the 440 foot scaffold was present on the multiple separate occasions, prior to signing the Lease, when Mr. Rovner and Mr. Gavrity visited the Fisk Building.

Indeed, defendants themselves argue that if scaffolding had been erected when Mr. Rovner toured the Building, "[he] would have certainly noticed it[.]" See Defendants' Memorandum of Law in Opposition at 16. Since documentary evidence demonstrates that the scaffolding was in place when Mr. Rovner toured the Building prior to the Lease's execution, and Mr. Rovner does not deny that scaffolding was present during that tour,[FN3] it stands to reason that Mr. Rovner was aware of scaffolding before his client, Integrity, even signed a Lease for office [*6]space in the Fisk Building.

Additionally, Integrity is now barred from rescinding the Lease. The alleged fraud occurred in or around November 2002, when plaintiff allegedly failed to inform Integrity of the ongoing construction; Integrity was aware of the alleged misrepresentation in December 2002 as, it admits, construction was ongoing when it moved in; and Integrity first claimed fraud in the inducement in its answer dated May 18, 2004. Since Integrity delayed for well over a year before raising a claim of fraud in the inducement then only doing so upon being sued and has taken no other action to rescind the Lease, Integrity has waived such a claim for such relief. See R & A Food Servs. v. Halmar Equities, Inc., 278 AD2d 398, 399 (1st Dept. 2000) (party fraudulently induced into lease waived relief of rescission because it waited more than one year after it learned of alleged fraud to seek said relief).

Defendants, via the affidavit of their real estate broker, Brett Rovner, and in their memorandum of law, claim that they have asserted as their third affirmative defense "plaintiff's breach by constructive eviction[.]" Memorandum of Law at 7. However, contrary to this claim, defendants' answer fails to make any mention of constructive eviction as the third affirmative defense or anywhere else.[FN4] Nevertheless, even if such a claim of constructive eviction had been set forth, it is entirely unsupported by either documentary or testimonial evidence. As evidenced by the letter from Debbie Newman, Integrity's human resource director, it remained in possession of the Premises as recently as October 2, 2003. A claim for constructive eviction requires that a party actually vacate the premises; here, Integrity did not vacate the Premises and, therefore, may not now claim constructive eviction. Barash v. Pennsylvania Terminal Real Estate Corp., 26 NY2d 77, 83 (1970) (tenant must abandon possession to claim that there was constructive eviction).

The purported defense of failure to mitigate damages is similarly without merit. There is no dispute that the pursuant to the terms of the Lease plaintiff is not obligated to re-let the premises and its failure to do so does not affect Integrity's liability to it. See, supra, Lease at Art. 6. While defendants' eviction terminated the landlord-tenant relationship, the Lease's provision that Integrity is liable for rent after eviction is enforceable. See Holy Properties Ltd., L.P. v. Kenneth Cole Prods., 87 NY2d 130, 134 (1995); see also 85 John St. Pshp. v. Kaye Ins. Assocs., L.P., 261 AD2d 104, 105 (1st Dept. 1999) (where lease so provides, landlord "owe[s] no duty to re-let the premises to mitigate damages, either in law, or under the lease[]") (internal citations omitted).

Integrity's primary argument is, apparently, that it needs time to conduct additional discovery; however, it lacks any evidence to support that argument. The "mere chance that somehow, somewhere . . . [a party] will uncover something which might add to [its] case but obviously of which now they have no knowledge, is mere speculation and conjecture and is not sufficient[.]" Meath v. Mishrick, 120 AD2d 327, 329-30 (1st Dept. 1986) aff'd 68 NY2d 992 (1986) (recitation of "bare allegations and speculation" as to what discovery may yield is insufficient to warrant denial of summary judgment). While Integrity argues that evidence in [*7]plaintiff's possession "may shed light on whether the totality of the facts presented in this case support a finding that plaintiff had a duty to mitigate its damages," this argument is speculative, conclusory and fails to identify evidence that might yield such a result.[FN5]

Integrity's claim that plaintiff possesses "documents that will bolster the nexus between the material omissions of fact and false statements by [Schumacher] and the events that resulted in [the execution of the Lease]" is similarly unavailing. As discussed above, even were additional discovery to prove that Schumacher made material omissions of fact, as defendants allege despite the ongoing and public nature of the construction at the Building, viz., the 440 feet of scaffolding surrounding the Building, as well as the published article regarding the construction project these omissions would be insufficient to support a claim of fraud in the inducement since the parties were dealing at arm's length; thus, plaintiff had no duty to inform defendants of the Building's construction project. See, supra, Stambovsky. In any event, Integrity's arguments seeking discovery of such evidence consist merely of expressions of hope and of speculation, and are insufficient to warrant denial of plaintiff's motion for summary judgment. See Bachrach v. Farbenfabriken Bayer AG, 36 NY2d 696, 697 (1975) ("Hope alone will not raise a triable issue"). Accordingly, it is

ORDERED that plaintiff's motion for summary judgment is granted as to liability only as against defendant Integrity; and it is further

ORDERED that defendant Integrity's counterclaims for damages are withdrawn; and it is further

ORDERED that the remainder of the action as against defendant Columbus Abstract, LLC shall continue; and it is further

ORDERED that damages, including attorney's fees, as against defendant Integrity shall be assessed at the trial of this matter; and it is further

ORDERED that the plaintiff and defendant Columbus are to appear before the Court (Part 54) for a preliminary conference at 9:30 a.m. on January 20, 2005 at Part 54, 111 Centre Street, Room 1227, New York, NY

The foregoing constitutes the decision and order of the Court.

Date:January 6, 2005

New York, New York SHIRLEY WERNER KORNREICH Footnotes

Footnote 1: The parties have failed to submit any papers from the summary proceeding in Civil Court. Without the papers the Court can not draw any conclusions from the eviction proceeding. However, it would appear that defendant Integrity may be estopped from asserting any defense of constructive eviction in the instant action as such a defense was either brought and rejected in the Commercial Landlord-Tenant Part or ought to have been raised in that proceeding.

Footnote 2: The defendants contend that fraud and equitable estoppel provide them with defenses to the formation of a contract, viz., the Lease. The Court, therefore, will consider the facts asserted in the counterclaims as affirmative defenses.

Footnote 3: Mr. Rovner merely states that he "ha[s] no present recollection as to whether scaffolding was around the perimeter of the Fisk Building on the day [he] visited it looking for office space for Integrity[.]" Rovner Aff. at ¶ 5.

Footnote 4: Although neither party has submitted papers demonstrating the substantive nature of the Civil Court proceeding by which Integrity was evicted from the Premises, such proceeding would have been the proper action in which to assert such an affirmative defense.

Footnote 5: Defendants' claim that contractors' time records demonstrating the hours during which construction occurred would show that "plaintiff had a duty to mitigate its damages[,]" is without merit. Defendants fail to submit any proposition, case law or statute by which this evidence would impose a duty mitigate in the fact of the Lease's specific provision exempting plaintiff from such a duty. See, supra, Lease at Art. 6.