AOM 1703 Lexington Ave. LLC v Malik
Annotate this CaseDecided on August 16, 2006
Supreme Court, New York County
AOM 1703 Lexington Avenue LLC et al., Plaintiffs,
against
Akbar Malik, Defendant.
115718/05
Marylin G. Diamond, J.
In this action, plaintiffs, as tenants, claim that the defendant, as landlord, breached two written net lease agreements which they entered into on September 8, 2005 with respect to properties located at 215 East 118th Street and 1703 Lexington Avenue in Manhattan. The leases give plaintiffs a right of first refusal and the option to purchase the properties three years after the leases are in effect. The complaint alleges that the plaintiffs took possession of the properties on October 1, 2005 and paid the first month's rent, which the defendant accepted. According to the complaint, at a meeting between parties on or about October 4, 2005, the defendant repudiated the leases, rejecting plaintiffs' right to purchase the two properties. The complaint alleges that the defendant thereafter evicted the plaintiffs from the two properties by, inter alia, forbidding them from entering the premises, changing the locks and directing the buildings' tenants not to pay rent to the plaintiffs. The complaint also alleges that the defendant made various defamatory statements about the plaintiffs. The complaint asserts causes of action for breach of contract and for libel and slander. It seeks declaratory, injunctive and monetary relief.
In March, 2006, subsequent to the commencement of this action, there was a fire at the 118th Street building which caused substantial damage to the property and made the premises uninhabitable. Under the leases, if the premises are damaged by fire, it is the plaintiffs who are obligated to repair the damage. The leases also provide that all insurance monies recovered by the landlord on account of such damage shall be applied to the payment of the restoration and shall be paid out from time to time, upon the plaintiffs' written request, as the restoration progresses.
The plaintiffs have now moved, by order to show cause, for a preliminary injunction which would restrain the defendant from dissipating any of the insurance proceeds she receives on account of the fire. They also seek an order compelling her to provide them with information and documents relating to the fire and to her casualty insurance policy for the 118th Street property. On May 31, 2006, the parties signed a stipulation in which the defendant agreed that pending the determination of this motion, she will not disburse any insurance funds resulting from the fire and that, upon [*2]receipt, will safeguard any such proceeds.
Discussion
It is well settled that in order to obtain a preliminary injunction, the movant has the burden of demonstrating (1) a likelihood of ultimate success on the merits, (2) irreparable injury if the requested provisional relief is withheld and (3) a balance of the equities in its favor. See Aetna Ins. Co. v. Capasso, 75 NY2d 860, 862 (1990).
As to the first prong of this test, the court finds that plaintiffs are likely to succeed on the merits of their breach of contract claim. Defendant does not deny that she signed the two leases at issue and that she did so while represented by counsel. In opposing the motion, she and her counsel nevertheless claim that they never intended to give the plaintiffs an option to purchase the property and never agreed during the parties' negotiations to do so. She and counsel contend that they never read the final drafts which she signed because they were assured by one of plaintiffs' principals that the final drafts only reflected revisions to which they had previously agreed.
It is well settled that a party who signs a document is conclusively bound by its terms absent a valid excuse for having failed to read it. See Arnav Industries, Inc. Retirement Trust v. Brown, Raysman, Millstein, Felder & Steiner, LLP, 96 NY2d 300, 304 (2001); Gillman v. Chase Manhattan Bank, 73 NY2d 1, 11 (1988); Maines Paper and Food Service, Inc. v. Adel, 256 AD2d 760, 761 (3rd Dept 1998). Given the financial magnitude of the transactions and the fact that defendant and her counsel were told, as they now claim, that the final draft contained some revisions, it was clearly incumbent upon them to at least review the two leases before she signed them. Neither the defendant nor her counsel has suggested that the plaintiffs discouraged them from doing so. Under the circumstances, their alleged failure to read the leases before signing them and, indeed, before the parties met again a month later in early October, 2005, would amount to gross negligence. See Gillman v. Chase Manhattan Bank, 73 NY2d at 11. The court is thus not persuaded that the defendant is likely to establish that she had a valid excuse for having failed to read the leases which she signed.
As to irreparable injury, the plaintiffs argue that if the defendant dissipates the insurance proceeds she receives on the claim she filed with respect to the fire at the 118th Street property, the value of the property, as well as its use and viability, will be substantially diminished. In opposition, the defendant cites a number of cases which hold that a plaintiff seeking monetary damages is not entitled to a preliminary injunction prohibiting a defendant from transferring or dissipating her assets, even if doing so would render the judgment ultimately obtained ineffectual. See Credit Agricole Indosuez v. Rossiyskiy Kredit Bank, 94 NY2d 541 (2000); Dinner Club Corp. v. Hamlet on Olde Oyster Bay Homeowners Assoc., Inc., 21 AD3d 777,778 (1st Dept 2005); 39 College Point Corp. v. Transpac Capital Corp., 12 AD3d 664 (2nd Dept 2004). The problem with the defendant's argument is that the plaintiffs herein seek not only monetary relief, but also injunctive relief in the form of an order of specific performance enforcing the terms of the contract. In this respect, the cases on which defendant relies have expressly recognized that a plaintiff may obtain a preliminary injunction where the assets sought to be restrained are specific funds which can rightly be regarded as "the subject of the action." See 39 College Point Corp. v. Transpac Capital Corp., 12 AD3d at 665. See also Credit Agricole Indosuez v. Rossiyskiy Kredit Bank, 94 NY2d at 545, 548: Dinner [*3]Club Corp. v. Hamlet on Olde Oyster Bay Homeowners Assoc., Inc., 21 AD3d 778. "Subject of the action" typically involves a specific property in which the plaintiff claims to have a preexisting interest. Id. at 778.
Here, the subject of the action is the two leases which the parties executed. In contending that the leases are valid, the plaintiffs seek to enforce the terms thereof, including the provision which entitles them to the insurance proceeds which the defendant receives on a claim involving a fire. Thus, the insurance proceeds are clearly specific funds which are a subject of this action and, as such, the plaintiffs will suffer irreparable harm if they are dissipated by the defendant. See Parker v. Parker, 196 Misc 2d 672, 676 (Sup Ct Nassau Co 2003).
Finally, a balance of the equities weighs in favor of the plaintiffs. The defendant has notably failed to indicate that she intends to use whatever insurance proceeds she receives to restore the building and repair the damage which it suffered by reason of the fire. On the other hand, the plaintiffs have forcefully argued that it is critical that any such proceeds be used to repair the building and that their contractual interests in the property will be substantially diminished and compromised if the monies are spent elsewhere. Under the circumstances, the court concludes that plaintiffs are entitled to a preliminary injunction which prevents the defendant from dissipating the proceeds at issue.
Accordingly, the plaintiffs' motion is granted to the extent that it is hereby ordered that the defendant and/or her agents are hereby directed to deposit with the court (1) within 5 days of defendant's receipt of a copy of this order with notice of entry, any monies which they have already received from any insurance company relating to the fire at the 118th Street property and (2) any monies which they thereafter receive from any insurance company relating to the fire at the 118th Street property, within five days of such receipt. Within five days of any such deposit, the defendant shall provide the plaintiffs with notice thereof. If the defendant wishes to use any such insurance proceeds for the restoration of the property and repair of the fire damage, she may make a motion to the court for leave to do so. The plaintiffs' motion is otherwise denied. Insofar as plaintiffs seek the production of documents and information, as well as access to the 118th Street property, this discovery-related request will be addressed and resolved at a conference before the court.
Within ten days of notice by the defendant that she or any agent has deposited with the court any of the insurance proceeds at issue herein, the plaintiffs shall post an undertaking in the amount of any such deposit on the condition that if it is finally determined that the plaintiffs were not entitled to an injunction, they will pay to defendants all damages and costs which may be sustained by reason of this injunction.
The parties shall appear before the court in Room 248, 60 Centre Street, New York, New York on September 12, 2006 at 11:00 a.m. for a preliminary conference.
ENTER ORDER
Dated:8/16/06MARYLIN G. DIAMOND, J.S.C.
Check one:[ ] FINAL DISPOSITION[X ] NON-FINAL DISPOSITION
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