Badler v Best Equities, LLC

[*1] Badler v Best Equities, LLC 2006 NY Slip Op 50987(U) [12 Misc 3d 1161(A)] Decided on May 26, 2006 Supreme Court, Richmond County Gigante, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 May 26, 2006
Supreme Court, Richmond County

Stuart Badler, BUCKINGHAM BADLER ASSOCIATES, INC. and 286 RICHMOND VALLEY ROAD LLC, Plaintiffs,

against

Best Equities, LLC, MARVIN BEINHORN and BENJAMIN STOLZBERG, Defendants.



100691/05

Robert Gigante, J.

Upon the foregoing papers, plaintiffs' motion (No. 245) for a preliminary or Yellowstone injunction is denied, as is defendants' cross motion (No. 544) for summary judgment and to quash a certain subpoena duces tecum.

In this action, plaintiffs assert various causes of action predicated upon defendants' repudiation and breach of an alleged oral agreement between the parties pursuant to which defendant Best Equities, LLC ("Best Equities"), after acquiring title to a certain parcel of real property on Staten Island, would re-convey to plaintiffs a portion thereof containing a commercial building for 1.4 million dollars. It is undisputed that said commercial building is presently occupied by plaintiff Buckingham Badler Associates, Inc. ("BBA") pursuant to a written lease with the prior owner of record. To the extent applicable, it is further alleged that the parties agreed that BBA would (1) bear a portion of the costs of sub-dividing the property, (2) pay the "carrying charges" allocable to its sub-parcel until the date of closing, [*2]and (3) reimburse Best Equities for its proportionate share of the closing costs and its ratable share of the mortgage payments. Finally, movants maintain that BBA's part performance of the parties' oral agreement renders it enforceable notwithstanding the Statute of Frauds. As evidence of their part performance, plaintiffs cite, inter alia, (a) the draft "Purchase and Sale Agreement" dated July 20, 2004; (b) lump sum payments by BBA to Best Equities commencing November 5, 2004 and ending on February 24, 2005, representing "money on account" of "carrying charges" until the closing on the BBA parcel [FN1], (c) an environmental assessment report prepared for BBA at a cost of $7,500.00, (d) a mortgage commitment letter from Park Avenue Funding and BBA's corresponding payment of a $5,000.00 commitment fee, (e) a title report dated February 3, 2005 from the Madison Title Agency issued to defendants' attorney in connection with the proposed purchase, (f) BBA's payment of $600 for a survey, and (g) its further payment of $20,500 in miscellaneous expenses for, e.g., an appraisal, accounting services, SBA filing fees and an insurance policy.

Although Best Equities acquired title to the entire parcel on June 29, 2004, the purported agreement to sub-divide and re-convey to BBA the sub-parcel containing the commercial building was allegedly repudiated by defendants in February 2005 when their attorney, Louis Tratner, Esq., informed plaintiffs' attorney, Jacob Steiner, Esq., that "the deal was off." This lawsuit followed.

In moving for a preliminary injunction barring Best Equities from commencing a summary proceeding to evict them based upon a "FIFTEEN (15) DAY NOTICE" claiming $119,610.41 in unpaid rent, "additional rent", interest and legal fees, plaintiffs maintain, in the alternative, that they are entitled to a Yellowstone injunction in order to toll the running of the cure period and permit the issue of the rents and credits due or payable by or to the respective parties to be judicially determined. Plaintiffs further propose that this injunctive relief be conditioned upon its payment to Best Equities during the pendency of this action of (1) monthly rent of in the amount of $10,429.33 (effective September 1, 2005), and (2) estimated electric charges of $1,500.00 per month. However, plaintiffs ask that Best Equities be compelled, in return, to comply with so much of the lease as they claim requires it to pay the entire Con Edison bill and obtain a comprehensive insurance policy covering [*3]the subject building.

In support of their motion, plaintiffs maintain that injunctive relief is necessary in order to maintain the status quo pending the outcome of this litigation. More particularly, it is argued that since the seminal issue in this action is whether the parties' verbal agreement superceded and/or modified BBA's lease to the extent that plaintiffs' lump sum payments (which are alleged to be the pro rata carrying charges on the proposed BBA sub-parcel) were tendered in lieu of rent. From this perspective, it is claimed that the issue of how much rent may be due cannot be determined in landlord-tenant court until this Court determines whether there is a legally enforceable contract between the parties.

Although they dispute that any rents are due, plaintiffs argue, in the alternative, that if their payment of carrying charges and utility bills [FN2] are applied toward their alleged rental obligations, a balance of only $23,000 would be due and owing through December 2005. They further allege that said sum has been tendered to the landlord and rejected. Finally, plaintiffs maintain that it is Best Equities which has breached the lease by failing to procure the required insurance, and that defendants' default required BBA to pay nearly $10,000.00 in insurance premiums in July 2005.

In cross-moving for summary judgment, defendants maintain that BBA's purchase of the sub-parcel was intended to be simultaneous with Best Equities' purchase of the entire property, and that there was never any waiver, curtailment or deferment of BBA's obligation to pay rent under the pre-existing lease. In support, defendants have submitted the affidavits of both real estate brokers involved in the subject transaction, as well as the affidavit of defendant Marvin Beinhorn, an officer of Best Equities. Proceeding upon plaintiffs' claim that their payments to Best Equities were made in partial performance of the alleged oral agreement and not as "rent", defendants argue that a landlord should not be prohibited from commencing summary proceedings to evict a tenant that, admittedly, has not paid rent. Moreover, since none of the payments in question were made by Stuart Badler individually, defendants argue that plaintiffs are precluded from claiming that said payments are uneqivocally referable to his alleged verbal agreement with defendants. In the alternative, defendants claim that the sums received by Best Equities prior to the commencement of this action were substantially less than the rental payments due under the lease.

Finally, defendants contend that it is well settled that an oral agreement for the sale of realty will not be removed from the Statute of Frauds by, e.g., obtaining a mortgage commitment, ordering a title report, hiring an engineer and/or securing a building permit, as none of these acts are "unequivocally referable" to a purported [*4]purchase agreement. Rather, it is claimed that such acts are equally explicable as preliminary steps taken in contemplation of negotiating a contract of sale with the owner of the desired parcel. Consonant with this principle, defendants maintain that the payments made by BBA should be viewed as rent for the building which it occupied, and that any monies expended for architectural fees, an environmental review and/or to secure financing, should be viewed as steps taken in preparation of the consummation of a future agreement to purchase the so-called BBA parcel.

Turning first to plaintiffs' request for a preliminary injunction, the law is well settled that such relief is a drastic remedy which will not be granted unless a clear right thereto is established by the motion papers, and that the burden of making such a showing rests upon the moving party (see Icy Splash Food & Beverage v Henckel,14 AD3d 595, 596 [2nd Dept 2005]; Peterson v Corbin, 275 AD2d 35, 36 [2nd Dept 2000], app dismissed 95 NY2d 919). More specifically, it is incumbent upon the party seeking a preliminary injunction to demonstrate (1) a probability of success on the merits, (2) the danger of irreparable harm in the absence of an injunction, and (3) a balancing of the equities in his or her favor (see CPLR 6301; Aetna Ins. Co. v Capasso, 75 NY2d 860, 862).

Applying these principles to the instant matter, plaintiffs have failed to adduce sufficient evidence of any of the foregoing elements to warrant such drastic relief. In view of the sharp factual dispute presented by the papers, it is not clear which party is more likely to prevail on the merits. Moreover, it does not appear that the denial of injunctive relief will render any final judgment in this action ineffectual (cf. State of New York v City of New York, 275 AD2d 740, 741 [2nd Dept 2000]) or result in the forfeiture of BBA's leasehold interest, and that it is not necessary to preserve the status quo (cf. Melvin v Union College, 195 AD2d 447 [2nd Dept 1993]; Mr. Natural, Inc. v Unadulterated Food Prods., 152 AD2d 729 [2nd Dept 1989]; US Ice Cream Corp. v Carvel Corp., 136 AD2d 626 [2nd Dept 1988]; Gresser v Princi, 128 AD2d 752 [2nd 1987]). In this context, it has yet to be established that plaintiffs cannot be fully compensated monetarily for any damages that might occur (see Melvin v Union College, 195 AD2d at 448).

As for plaintiffs' alternate request for a Yellowstone injunction, such relief has generally been granted to toll the running of the cure period upon a landlord's service of a notice of default for the purpose of avoiding a forfeiture of the tenant's leasehold interest (see Post v 120 East End Ave. Corp., 62 NY2d 19, 24-25). While a Yellowstone injunction may be granted upon a lesser showing than that required for a preliminary injunction (see Post v 120 E. End Ave. Corp., 62 NY2d at 25), it has been held to be unwarranted where the notice is served as a predicate for the commencement of a statutory nonpayment proceeding (see RPAPL 711[2]; M.B.S. Love Unlimited v Jaclyn Realty Assoc., 215 AD2d 537, 538 [2nd Dept 1995]) rather than a holdover proceeding, as the latter threatens the termination of the lease if a cure is not effected within a specified (usually brief) period of time (see Purdue Pharma, LP v Ardsley Partners, LP, 5 AD3d 654, 566 [2nd Dept 2004]; cf. 3636 Greystone Owners v Greystone Bldg., 4 AD3d 122 [1st Dept 2004] [alleged rent [*5]arrears pursued through service of a notice to cure]; Lexington Ave. & 42nd St. Corp. v 380 Lexchamp Operating, 205 AD2d 421, 423-424 [1st Dept 1994] [same]).

In the instant matter, the only violations alleged in the notice served upon plaintiffs devolve from the alleged nonpayment of rent and/or "additional rent", which charges are disputed on the ground, inter alia, that the landlord improperly failed to offset electric charges and/or insurance premiums paid by the tenant against any rents that might be due under the lease. Such violations do not require the protection of a Yellowstone injunction, since statutory proceedings for the nonpayment of rent have specific cure provisions which operate as a safeguard against forfeiture (see RPAPL 751[1]; Top-All Varieties v Raj Dev. Co., 151 AD2d 470, 471 [2nd Dept 1989]; Hollymount Corp. v Modern Bus. Assoc., 140 AD2d 410 [2nd Dept 1988]). Accordingly, since the Civil Court can afford these parties a speedy determination of their landlord-tenant dispute without prejudice to the claims asserted by plaintiffs in this action (see Parksouth Dental Group v East River Realty, 122 AD2d 708, 708-709 [1st Dept 1986]), movants have failed to make the necessary showing for a Yellowstone injunction.

With regard to the cross motion for summary judgment, it is defendants' burden to demonstrate, inter alia, that the alleged partial performance upon which plaintiffs purport to rely is insufficient as a matter of law to avoid the bar to enforcement posed by the Statute of Frauds (compare General Obligations Law 5-703[1] with [4]; see Jonestown Place Corp. v 153 W. 33rd St. Corp., 53 NY2d 847, 849; Lilling v Slauenwhite, 145 AD2d 471 [2nd Dept 1988]; Onorato v Lupoli, 135 AD2d 693 [2nd Dept 1987]; Uskokovic v Radunovich, 127 AD2d 830 [2nd Dept 1987]). Consonant with the foregoing, it is the opinion of this Court that defendants have failed to make the requisite showing in support of summary judgment (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851). In this regard, defendants have failed to adduce sufficient evidence of a factual nature to demonstrate prima facie that plaintiffs' alleged part performance was (1) equivocal, i.e., undertaken merely in preparation of a future agreement (see Francesconi v Nutter, 125 AD2d 363 [2nd Dept 1986]; see also Anostario v Vicinanzo, 59 NY2d 662, 664) or (2) "reasonably explained by the possibility of other expectations" (see Anostario v Vicinanzo, 59 NY2d at 664). Moreover, a further issue exists as to whether the parties intended to be bound in the absence of a formal contract (see RAJ Acquisition Corp. v Atamanuk, 272 AD2d 164 [1st Dept 2000]; Kniffen v Kniffen, 223 AD2d 686 [2nd Dept 1996]).

Turning to that branch of defendants' cross motion which is to quash the non-party subpoena duces tecum issued to defendants' attorney, it is counsel's contention that the subpoena is facially defective and unenforceable because it fails to comply with the requirement in CPLR 3101(a)(4) that a nonparty subpoena include a notice stating the circumstances or reasons such disclosure is sought or required. The court disagrees.

As reiterated recently in Velez v Hunts Point Multi-Serv. Ctr. (__ AD3d __, 811 NYS2d 5, 9 [1st Dept 2006]), "[t]he purpose of such requirement is presumably [*6]to afford a nonparty who has no idea of the parties' dispute or a party affected by such request an opportunity to decide how to respond." Viewed in this context,

the facial defect of the subpoena duces tecum in this case can be seen to be of no consequence, since it was issued to the attorney representing defendants both here and in the underlying real estate transaction. Moreover, the subpoena in question seeks to compel the production of specific documents and materials that pertain solely to the named defendants in this action, and not Mr. Tratner, individually. Finally, defendants' attorney has failed to meet his burden of demonstrating that the requested documents and records are either privileged or "utterly irrelevant to any proper inquiry" (New Hampshire Ins. Co. v Varda, Inc., 261 AD2d 135 [1st Dept 1999] citing Ayubo v Eastman Kodak Co., 158 AD2d 641, 642 [2nd Dept 1990]). Therefore, that branch of defendants' cross motion which is to quash the subpoena duces tecum dated January 12, 2006 must be denied (see Velez v Hunts Point Multi-Services Ctr., Inc., __ AD3d __, 811 NYS2d 5, supra ).

Accordingly, it is

ORDERED, that plaintiffs' motion for injunctive relief is denied; and it is further

ORDERED, that all temporary stays are vacated; and it is further

ORDERED, that defendants' cross motion for, inter alia, summary judgment is denied in its entirety; and it is further

ORDERED, that defendants' attorney, Louis Tratner, Esq., is directed to comply with the subpoena duces tecum in the form annexed to defendants' moving papers within twenty days of service upon him of a copy of this Order with notice of entry.

E N T E R,

S/

Dated: May 26, 2006__________________________

Robert J. Gigante, J.S.C.

Footnotes

Footnote 1: According to plaintiffs, these payments include one payment of $42,000.00 constituting BBA's pro rata share of the points incurred by Best Equities on its mortgage; two subsequent monthly payments of $14,000; and seven monthly payments of $2,200 to Con Edison. Plaintiffs also claim that there was to be an accounting between the parties at the closing on the BBA parcel, which was planned for February 2005, and that rent was never demanded since it was agreed that the above payments to Best Equities "were all inclusive." Plaintiffs' further maintain that BBA's lump sum payments for carrying charges ($14,000.00 per month) pending the closing of the sub-parcel exceeded the monthly rental obligation of $9,125.00 under its pre-existing lease, and that its monthly payments of $2,200.00 to Con Edison exceeded its ten per cent share of the electric charges ($1,500.00) for which it was liable under said lease.

Footnote 2: Plaintiffs allege that subsequent to defendants' repudiation of the oral agreement for the sale of the BBA parcel and in order to avoid a "shut-off", plaintiffs paid nearly $100,000 in Con Edison charges for the entire parcel, which far exceeds the tenant's ten per cent share of electric charges under the terms of the lease.