Solow Bldg. Co. II, L.L.C. v Banc of Am. Sec. L.L.C.

[*1] Solow Bldg. Co. II, L.L.C. v Banc of Am. Sec. L.L.C. 2005 NY Slip Op 50836(U) Decided on April 11, 2005 Civil Court Of The City Of New York, New York County Kenney, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 11, 2005
Civil Court of the City of New York, New York County

Solow Building Company II, L.L.C., Petitioner-Landlord,

against

Banc of America Securities L.L.C., Respondent-Tenant, and "JOHN DOE", "JANE DOE" AND "XYZ CORP.", Respondent-Undertenants,



L&T 105656/04

Joan M. Kenney, J.

Respondent, Banc of America Securities L.L.C., (BAS), moves for an Order, dismissing the pleadings in the captioned proceeding, pursuant to, CPLR 404, 3211(a)(4) and (7). Respondent also [*2]seeks alternative relief, pursuant to CPLR 2201 and 3041; as well as sanctions pursuant to 22 NYCRR 130-1.1.

PROCEDURAL POSTURE

This commercial summary dispossess proceeding was commenced with the service of a notice of petition and petition (pleadings), in or about, December 2004. The pleadings allege, inter alia, that petitioner is entitled to possession of the premises pursuant to RPAPL §715, because respondent's lease is void (RPL §231[1]). Respondent served the instant motion in lieu of a responsive pleading.

FACTUAL BACKGROUND

The following facts are undisputed. Respondent [FN1] took possession of the premises sought to be recovered, pursuant to a written lease dated, April 16, 1996, as amended. As of this writing, respondent currently leases approximately 640,000 square feet of space from petitioner.

On or about March 14, 2003, Theodore Sihpol III (Sihpol), a former broker employed by BAS, surrendered himself for arraignment on a 40 count indictment, which alleges multiple felony charges and violations of securities law. Simultaneously, the United States Securities and Exchange Commission (SEC), filed a civil complaint against Sihpol, BAS and another former employee.

The indictment alleges that Sihpol helped a hedge fund, Canary Capital Partners (Canary), gain special trading opportunities, through a practice known as late trading. Whereby, mutual fund shares were purchased and sold by Canary through BAS, after the close of the market at 4:00PM ET, but for the previous day's price. The indictment states, among other things, that late trading, in this form, is prohibited by New York State and federal laws, as well as, SEC regulations. By comparison, ordinary investors who place late orders, must pay the following day's price. The indictment also alleges that in exchange for late trading privileges, Canary agreed to make large long-term investments in specific BAS funds.

On March 15, 2004, Sihpol moved to dismiss the indictment, contending that he was being prosecuted for activities that were never allegedly considered criminal, nor prohibited by the securities laws, nor deemed improper by the SEC, prior to his arrest in September 2003. On March 14, 2005, Supreme Court Justice James A. Yates held, after reviewing the grand jury minutes, that the New York State Attorney General Office's presentation to the grand jury, was legally sufficient, and scheduled Siphol's trial for April 2005.

Coincident to Sihpol and BAS' aforedescribed legal problems, the parties' bitingly hostile landlord/tenant relationship began to fester. Most of the acrimony apparently emanated from, among other things, alterations made to the premises by respondent, and electricity charges billed by petitioner. Consequently, these disputes gave rise to the service of a series of notices to cure, and a termination notice. BAS's response to the notices was to commence a plenary action in Supreme Court, New York County, Commercial Division, entitled Banc of America Securities L.L.C. v. Solow Building Compay II L.L.C., Index #

600759 (the Supreme Court action). BAS seeks injunctive and declaratory relief, specific performance, damages for petitioner's alleged breach of contract, and a cause of action for money [*3]had and received. Issue was joined, and petitioner interposed counterclaims, including a cause of action alleging breach of contract, as well as, recission and/or specific performance, declaratory relief, and a claim for attorneys' fees.

Discovery is ongoing in the Supreme Court action, pursuant to a 12 page stipulation and preliminary conference Order, dated, June 9, 2004. The foregoing stipulation and Order, resulted from a "Yellowstone" application brought by BAS, on or about May 21, 2004. The stipulation and Order refer to the withdrawal of the Yellowstone motion, wherein, "the parties desire[d] to resolve the issues relevant to the Yellowstone Application without prejudice to their respective rights and positions on the merits [of the notices dated March 11, 2004, March 12 2004 and BAS' letter dated April 19, 2004]." Essentially, the parties agreed to toll BAS' cure period, while litigating the case-in-chief and counterclaims. The stipulation and Order also contained a provision stating that neither party waived any of its rights under the lease.

ARGUMENTS

Respondent argues in support of its motion: (1) the petition should be dismissed because the Supreme Court action was commenced prior to the captioned proceeding, and is still pending (CPLR 3211 [a][4]); (2) the petition fails to state a cause of action (CPLR 3211 [a][7]); (3) alternatively: (a) the proceeding should be stayed pending a disposition of the Supreme Court action, or (b) in lieu of staying this proceeding, the matter should be transferred to the Commercial Division of the Supreme Court, New York county, and (c) in the event this Court finds for BAS, awarding sanctions against petitioner's counsel.

In opposition, petitioner argues: (1) the Supreme Court action is unrelated to the proceeding at bar, and therefore CPLR 3211(a)(4) is inapplicable; (2) the petition sets forth a viable cause of action; and (3) sanctions are unwarranted because the legal theory supporting the petition is well-grounded.

DISCUSSION

The movant's arguments shall be addressed seratim.

1.CPLR 3211(a)(4)

CPLR 3211(a)(4) states in its entirety as follows:

Rule 3211. Motion to dismiss

(a) Motion to dismiss cause of action. A party may move for judgment dismissing one or more causes of action asserted against him on the ground that:

4. there is another action pending between the same parties for the same cause of action in a court of any state or the United States; the court need not dismiss upon this ground but may make such order as justice requires.

The mere fact that two pieces of litigation share common parties, is not sufficient to dismiss the instant proceeding, nor does this fact, in and of itself, preclude and/or presumptively bar petitioner from bringing the instant eviction proceeding (Montgomery Ward & Company, Inc. v Robert E. Othmer et al., 127 AD2d 913 [3rd Dept 1987]).

Respondent relies on , Kent Development Co. v Liccione (37 NY2d 899 [1975]) for its authority to support the argument that petitioner's inclusion of "ficticious" respondents cannot defeat the herein motion pursuant to CPLR 3211(a)(4). Liccone held that "there is good reason for the [*4]separate existence of [another action, where] the nature of the relief sought is not the same or substantially the same" (see also, Marie D. Walsh v Goldman Sachs & Co., 185 AD2d 748 [1st Dept 1992]; and Ernst Boyer v New York Property Insurance Underwriting Association, 120 AD2d 363 [1st Dept 1986]). A close examination of the amended pleadings in the Supreme Court action reveals that the bulk of the relief sought by BAS is equitable in nature. The Civil Court of the City of New York is a court of limited jurisdiction, and consequently is not the proper forum to adjudicate such claims (see, New York Civil Court Act § 201).

Moreover, the requisite identity of issues needed for entitlement to relief under CPLR 3211(a)(4) does not exists here (see, Reliance Insurance Company v American Electric Power Company, Inc., 244 Ad2d 235 [1st Dept 1996]). The Supreme Court action concerns itself with different facets of an alleged breach of the lease relating to non-payment of electrical bills, alterations and/or construction at the premises. In the matter before this court, the breach alleged emanates from the allegation that the premises are being used for an illegal purpose.

Respondent's contention that the Commercial Division of the Supreme Court, New York county "possesses greater expertise in evaluating the merits of the alleged violations of both state and federal law underlying the [p]etition," is unpersuasive. The Civil Court has primary jurisdiction to hear dispossess proceedings (New York Civil Court Act § 204). Furthermore, BAS concedes that the claims brought in the Supreme Court action, have their bases in completely different legal theories, which differ from the arguments proffered by the petitioner in this case.

For the reasons set forth, this branch of BAS' motion is denied.

2.CPLR 3211(a)(7)

The second branch of BAS' motion to dismiss contends that the pleadings fail to state a cause of action because they fail to plead the essential elements of an "illegal business/use" proceeding, i.e., that the fundamental nature of BAS' business is not illegal, and that the allegations in the indictment are attributable only to Sihpol.

Rule 3211(a)(7)states that: "[a] party may move for judgment

dismissing one or more causes of action asserted against [it] on the ground that . . . the pleading fails to state a cause of action." The viability of a pleading is generally dependent upon whether or not the pleading substantially complies with CPLR 3013, (Foley v D'Agostino, 21 AD2d 60, 62-63 [1st Dept 1964), which provides: "[s]tatements in a pleading shall be sufficiently particular to give the court and parties notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved and the material elements of each cause of action or defense."

The essential facts required to give appropriate notice must be stated. Pleadings should not be dismissed nor ordered amended, unless the allegations therein, are not sufficiently particular to apprise all concerned of the subject matter of the controversy (id). It is uncontested that this Court's inquiry is restricted to determining whether the complaint states any cause of action, not whether there is evidentiary support for it (Rovello v Orofino Realty Co., 40 NY2d 633; and, Mangia v Minchew Santer & Brenner LLP, 788 NYS2d [2nd Dept 2005]).

It is well established that in determining whether to grant a CPLR 3211 motion, the pleading is to be afforded liberal construction (CPLR 3026), and the court should accept as true, the facts alleged in the petition, accord petitioner the benefit of every possible inference, and only determine whether the facts, as alleged, fit within any discernible legal theory (Rovello v Orofino Realty Co., [*5]supra ). The question is limited to whether the pleading, when considered as a whole, states a cause of action known to our law (In the Matter of Stefanel Tyesha C., 157 AD2d 322 [1st Dept 1990], citing, Dulberg v. Mock, 1 NY2d 54, 56 (1956]). Consequently, the petition must be liberally construed in the light most favorable to the petitioner (Guggenheimer v Ginsburg, 43 NY2d 268 [1977]).

RPAPL §715(1) states in pertinent part as follows:

Whenever the lessee or occupant other than the owner of any building or premises, shall use or occupy the same, or any part thereof, for any illegal trade, manufacture or other business, the lease or agreement for the letting or occupancy of such building or premises, or any part thereof of shall thereupon become void, and the landlord of such lessee or occupant may enter upon the premises so let or occupied.

The allegations and legal averments contained in the pleadings could not be more specific, nor anymore clear and concise - petitioner seeks to expand the application of RPAPL §715 and RPL §231.

The parties acknowledge that RPAPL §715 and RPL §231, have traditionally concerned tenants involved in illegal activities concerning alcohol and narcotics, prostitution and gambling (see, Lloyd Realty v Rosario Albino et al., 146 Misc2d 841 [Civ Ct, NY County 1990]; City of New York v Reuben Goldman et al., 78 Misc2d 693 [Civ Ct, NY County 1974]; and, 410 Lenox Ave Apts. Inc., v Community II Supermarket Inc., 135 Misc2d 628 [Civ Ct, NY County 1987]).

More recently, the application of RPL §231(1) and RPAPL §715 have been utilized to recover premises involved in the sale and/or manufacture of counterfeit trademarked goods (1165 Broadway Corp. v Dayana of NY Sportswear, Inc., 166 Misc2d 939 [Civ Ct 1995]).[FN2] In light of 1165 Broadway Corp., supra , it is not a leap in logic to suggest that the crimes Sihpol is accused of, as well as BAS' acquiescence, if any, to the alleged late trading scheme, could trigger the provisions of RPL §231(1) and RPAPL §715, thereby creating a forfeiture of BAS' lease as a matter of law.

This court's research indicates that petitioner's attempt to void BAS' tenancy, based on the criminal allegations that have been levied against Sihpol, and BAS' apparent acquiesence, is an audacious proposition. Such business practices may provide the requisite legal bases for BAS' eviction; however, the question of whether such an application is appropriate, can only be determined after a trial.

Based upon the foregoing, in the absence of any case law discovered by this Court holding to the contrary, this Court cannot conclude that petitioner has failed to state a cause of action, warranting dismissal of the instant proceeding.

3. CPLR 2201

BAS alternatively seeks to stay this proceeding "pending the outcome of the ongoing litigation between BAS and Solow." This court finds respondent's argument in support of this [*6]branch of its application to be of no moment.[FN3] Notwithstanding the foregoing, CPLR 2201 states in its entirety as follows:

Except where otherwise prescribed by law, the court in which a [proceeding] is pending may grant a stay of proceedings in a proper case, upon such terms as may be just.

Until Siphol's criminal case has been heard to verdict, Sihpol must be presumed innocent as a matter of law (The People of The State of New Yrk v Harry Shapolsky, 8 Ad2d 122 [1st Dept 1959]). The New York State Attorney General's indictment is merely an accusatory instrument (see, People v Johnson, 189 Misc2d 637), and for purposes of this proceeding, must be treated as such. Consequently, the trial of this case is stayed pending a verdict being rendered in the criminal case against Sihpol.

4.CPLR 3041 - Discovery

This branch of BAS' motion is granted pursuant to CPLR 3041 and CPLR 408. BAS has demonstrated ample need for discovery in this matter (NYU v Shelley Farkas et al., 121 Misc2d 643 [Civ Ct, NY County 1983]; and, Frederick Harris v Charles G. Bigelow, III, 135 Misc2d 331 [Civ Ct, NY County 1987]). Petitioner shall serve a response to BAS' demand for a Bill of Particulars, within 30 days of service, of notice of entry of this decision.

Finally, this court has considered the balance of BAS' arguments regarding transfer and sanctions, and find them to be without merit.

Accordingly, it is

ORDERED that, respondent's motion is denied in part and granted in part; and it is further

ORDERED that, petitioner shall serve a response to BAS' demand for a Bill of Particulars, within 30 days of service, of notice of entry of this decision; and it is further

ORDERED that, the trial of this proceeding is stayed pending a verdict in PSNY v Sihpol, Supreme Court, New York County, Indictment #

1710/04; and it is further

ORDERED, that respondents' request for costs and sanctions, is denied; and it is further

ORDERED that, Part 59 of this Court, shall retain jurisdiction over this matter for all purposes, including trial.

Dated: April 11, 2005

E N T E R:

_________________________________

Hon. Joan M. Kenney

J.C.C. Footnotes

Footnote 1:BAS is the predecessor-in-interest to Montgomery Securities L.P. and Sheldon H. Solow, d/b/a Solow Building Co. is the predecessor-in-interest to Solow Building Co II L.L.C..

Footnote 2:The discussion of the legislative history attendant to RPL RPAPL §715 and §231(1) is noteworthy, and will not be repeated in this decision.

Footnote 3:See also, discussion of BAS' argument in support of dismissal pursuant to CPLR 3211(a)(4).