F & T Mgt. & Parking Corp. v Flushing Plumbing Supply Co., Inc.

[*1] F & T Mgt. & Parking Corp. v Flushing Plumbing Supply Co., Inc. 2009 NY Slip Op 50174(U) [22 Misc 3d 1118(A)] Decided on January 23, 2009 Supreme Court, Queens County Kitzes, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 23, 2009
Supreme Court, Queens County

F & T Management & Parking Corp.

against

Flushing Plumbing Supply Co., Inc., et al.



19042008

Orin R. Kitzes, J.

Plaintiff F & T Management & Parking Corp. (F & T) previously commenced an action entitled F & T Management & Parking Corp. v Flushing Plumbing Supply Co., Inc., (Supreme Court, Queens County, Index No. 9034/2004), against Flushing Plumbing, Paul Brown Properties and Chien Yang Development which related a dispute over F & T's right of first refusal with respect to certain property known as 37-25 College Point Boulevard, Flushing, New York (Block 4972, Lot 8, Queens County), 37-15 and 37-19 College Point Boulevard, Flushing, New York, (Block 4972, Lot 10, Queens County), 133-1237th Avenue, Flushing, New York (Block 4972, Lot 20, Queens County), 133-14 37th Avenue, Flushing, New York (Block 4972, Lot 22, Queens County).[FN1] The lawsuit resulted in a stipulation and order of settlement dated June 17, 2005, pursuant to which Lot 8 was sold by 37-25, LLC to F & T. Because the stipulation and order of settlement involved rights and obligations with respect to properties adjoining Lots 8, 10, 20 and 22, it was signed by several nonparties to the action under Index No. 9034/2004, including 37-25, LLC, which had acquired an interest in the subject properties. The stipulation and order of settlement established mechanisms by which F & T could acquire the rights and obligations of Chien Yang Development, as tenant, under an amended long-term ground lease (the amended Chien lease) entered into by Chien Yang Development with Flushing Plumbing and 37-25, LLC, as landlord, or a new lease on the same [*2]terms and provided F & T an option to purchase the demised premises. F & T's option to purchase, however, was made expressly subject to the right of first refusal granted to Chien Yang Development in the amended Chien lease.

The stipulation and order of settlement states that Flushing Plumbing and 37-25, LLC were the owners of the properties 37-15 and 37-19 College Point Boulevard, Flushing, New York (Block 4972, Lot 10, Queens County) and 133-14 37th Avenue, Flushing, New York (Block 4972, Lots 20 and 22, Queens County).[FN2] The stipulation and order of settlement provides that 37-25, LLC agreed to be bound by its terms "as if it were a party to [the action under Index No. 9034/2004]." It prohibits Flushing Plumbing and Paul Brown Properties from modifying or terminating the amended Chien lease without F & T's written consent, and that any modification or termination in violation of the prohibition would be void. Defendant 37-25, LLC allegedly succeeded to the ownership of the premises as successor to Flushing Plumbing and Paul Brown Properties.

Plaintiff F & T alleges that defendants first attempted to sell the entire demised premises to Chien Yang Development, by using a forged release purportedly signed by F & T. Once the forgery was exposed, defendants allegedly abandoned the proposed sale to Chien Yang Development, and instead, by two deeds, each dated December 17, 2007, respectively caused Lot 10 to be conveyed to defendant Shoho, and Lots 20 and 22 conveyed to defendant Leavitt Enterprise, Inc. (Leavitt). In addition, plaintiff F & T alleges that defendants 37-25, LLC, Chien Yang Development and Leavitt entered into an agreement pursuant to which defendant Chien Yang Development purportedly subleased Lots 20 and 22 back to defendant Leavitt. Defendant Shoho allegedly financed its purchase of Lot 10 by a mortgage loan provided by 37-25, LLC, and Leavitt allegedly financed its purchase of Lots 20 and 22 by a mortgage loan provided by Asia Bank, N.A. (Asia Bank). Plaintiff F & T claims that these sales and mortgage transactions and the sublease agreement were made without its prior written consent and constitute breaches and violations of the stipulation and order of settlement.

In the amended complaint, plaintiff F & T seeks, as a first cause of action, to punish defendants Chien Yang Development, 37-25, LLC, Chien Tsang Lin and Paul Brown for civil and criminal contempt and an award of reasonable attorneys' fees, and as a second cause of action to enforce the stipulation and order of settlement by setting aside, as void ab initio, the Shoho deed, the Leavitt deed, the sublease agreement, and the 37-25, LLC and Asia Bank mortgages. As a the third cause of action, plaintiff F & T alleges that Chien Yang Development was granted a right of first refusal in the amended Chien lease and that upon the sale of Lot 10 to Shoho and Lots 20 and 22 to Leavitt, such right was triggered. Plaintiff F & T also alleges that Chien Yang Development nevertheless failed to exercise such right. Plaintiff F & T seeks a declaration that such failure renders the right of first refusal granted to Chien Yang Development in the amended Chien lease to be "no longer in effect." [*3]

Defendants Chien Yang Development, Shoho and Chien Tsang Lin move to dismiss the amended complaint asserted against them. Although the Brown defendants have not amended their notice of motion to dismiss, which was directed to the original complaint, the parties seek to have the motion by the Brown defendants to be considered in relation to the amended complaint (see stipulation dated April 25, 2008). Plaintiff F & T opposes both the motions. Defendants Leavitt, Asia Bank and John Does No.1-10 have not appeared in relation to the motions.

The first cause of action for civil and criminal contempt is asserted only against defendants Chien Yang Development, Chien Tsang Lin, 37-25, LLC and Paul Brown. Chien Yang Development, Chien Tsang Lin, 37-25, LLC and Paul Brown argue that New York does not recognize an independent cause of action for contempt.[FN3]

Contempt must be established to the satisfaction of the court, and to do so, the contemnee must use a motion or proceeding of some kind (see generally Siegel, NY Prac § 484 [4th ed]).[FN4] An application for a contempt punishable civilly pursuant to Judiciary Law § 756 may be commenced by notice of a motion returnable before the court or judge authorized to punish the offense, or by a show cause order before such court, and such application, whether commenced by motion or show cause order, must be noticed and heard in accordance with the motion procedure in such court. An application for a contempt punishable criminally likewise is required to be brought by motion or order to show cause, or by virtue of a separate proceeding that is governed generally by the provisions of the CPLR providing for the initiation of a special proceeding (see CPLR 403; Judiciary Law § 750; 21 NY Jur 2d Contempt § 90; cf. contempt committed in the "immediate view and presence" of the court [Judiciary Law § 750(a)(1)]).

Furthermore, it has been held that a motion to punish for civil contempt should not, as long as the contemnor is a party to the action out of the lawsuit the contempt arises, be deemed a separate special proceeding (see Ortega v City of New York, 11 Misc 3d 848 [2006], affd 35 AD3d 422 [2006], affd 9 NY3d 69 [2007]; but see Sterngass v Town Bd. of Town of Clarkstown, 27 AD3d 550 [2006]). Defendants Chien Yang Development is a party to the action under Index No. 9034/2004, and that action has not been discontinued (see generally Teitelbaum [*4]Holdings Ltd. v Gold (48 NY2d 51 [1979]). Thus, plaintiff F & T improperly sued defendant Chien Yang Development for contempt herein (see Shapiro v Shapiro, 60 Misc 2d 622 [1969]).

To the extent defendants Chien Tsang Lin, 37-25, LLC and Paul Brown are not parties to the action under Index No. 9304/2004, plaintiff F & T was obligated to commence a special proceeding to punish them for contempt (see Long Island Trust Co. v Rosenberg, 82 AD2d 591 [1981]).

Plaintiff F & T asserts that this procedural error may be rectified by converting this action to a special proceeding pursuant to CPLR 103. However, the claims asserted in the amended complaint for injunctive and declaratory relief are not appropriate for resolution in a contempt proceeding brought pursuant to Judiciary Law §§ 750 and 756. Under the circumstances presented, the court, in an exercise of its discretion, declines to convert the action into a special proceeding pursuant to CPLR 103(c).

Furthermore, with respect to the claim of criminal contempt, the purpose of Judiciary Law § 750 is to vindicate an offense against public justice and "is utilized to protect the dignity of the judicial system and to compel respect for its mandates" (McCormick v Axelrod, 59 NY2d 574, 583 [1983]). Section 750(A)(3) of the Judiciary Law authorizes a court to punish as a criminal contempt "[w]ilful disobedience to its lawful mandate." Thus, "[t]he essential predicate for a contempt adjudication is a clear direction to one sought to be punished for disobedience in following it" (see Vacco v Consalvo, 176 Misc 2d 107 [1998]; see also Wheels America New York, Ltd. v Montalvo, 50 AD3d 1130 [2008] ["The imposition of punishment for criminal contempt ... requires a showing that the alleged contemnor violated a clear and unequivocal court mandate"]). A party alleging criminal contempt bears the initial burden of establishing the noncompliance with a court order and that the alleged noncompliance was wilful (see Vacco v Consalvo, 176 Misc 2d 107 [1998], supra; Kuriansky v Feldman, 141 Misc 2d 554 [1988]) or intentionally malevolent (see People v Paperno, 98 Misc 2d 99 [1979]).

Plaintiff F & T has failed to allege facts sufficient to establish a prima facie case to hold defendants Chien Yang Development, Chien Tsang Lin, 37-25, LLC and Paul Brown for criminal contempt. Plaintiff F & T has failed to allege that defendants Chien Yang Development, Chien Tsang Lin, 37-25, LLC and Paul Brown wilfully failed to comply with, or violated, the stipulation and the order of settlement. To the extent plaintiff F & T claims that the sales of the lots constitute criminal contempt, defendants Chien Yang Development, Chien Tsang Lin and Paul Brown were neither sellers nor purchasers of the lots. Although defendant 37-25, LLC was the seller of the lots, plaintiff F & T has failed to cite to any provision of the stipulation and order of settlement barring the sales (see infra at 8-9).

To the extent plaintiff F & T claims that the sublease of Lot 10 constitutes criminal contempt, defendant Chien Tsang Lin and Paul Brown are not parties to the sublease agreement. In addition, plaintiff F & T has failed to cite to any provision of the stipulation and order of settlement barring the subletting of the covered premises or a portion thereof (see infra at 8). [*5]

With respect to the claim that the alleged forgery of the release constitutes criminal contempt, it appears from the submissions that plaintiff F & T asserts defendants 37-25, LLC and Paul Brown were the participants in the forgery, as opposed to defendants Chien Yang Development and Chien Tsang Lin. With respect to the claim that the attempted use of the release by defendants 37-25, LLC and Paul Brown constitutes criminal contempt, the purported forged release was not relied upon in connection with the consummated sales of the lots.

Therefore, the branch of the motions to dismiss that portion of the amended complaint asserted against defendants Chien Yang Development, Chien Tsang Lin, 37-25, LLC and Paul Brown for civil and criminal contempt is granted.

The Brown Defendants asserts that plaintiff F & T improperly seeks to enforce the stipulation and order of settlement by means of this plenary action, and instead, should have brought a motion to enforce within the action under Index No. 9034/2004. Contrary to such assertion, the enforcement of a stipulation may be by a motion in an action, at least until that action has been unequivocally terminated (see Teitelbaum Holdings, Ltd. v Gold, 48 NY2d 51 [1979], supra), or by a new plenary action (see Baumis v General Motors Corp., 102 AD2d 961, 962 [1984]; see also Van Ness v Rite-Aid of New York, Inc., 129 AD2d 931 [1987]). Plaintiff F & T, therefore, was free to proceed to enforce the stipulation and order of settlement by this plenary action.

Defendants Chien Yang Development, Chien Tsang Lin, Shoho, and the Brown defendants argue that the sale of the lots and the subleasing of Lots 20 and 22 are not precluded under the terms of the stipulation and order of settlement, and therefore, plaintiff F & T has failed to state a claim for the purported breach of the stipulation or violation or the order of settlement. In addition, with respect to the third cause of action, defendants Chien Yang Development, Chien Tsang Lin, Shoho, and the Brown defendants argue that the right of first refusal granted to Chien Yang Development in the amended Chien lease is still in effect.

CPLR 3211 provides in relevant part: "(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: 1. a defense is founded on documentary evidence; ...7. the pleading fails to state a cause of action ...." "It is well settled that on a motion to dismiss a complaint for failure to state a cause of action pursuant to CPLR 3211(a)(7), the complaint is to be liberally construed accepting all the facts alleged in the complaint to be true and affording the plaintiff the benefit of every possible favorable inference (see Leon v Martinez, 84 NY2d 83, 87 [1994]; Rotanelli v Madden, 172 AD2d 815, 816 [1991])" (Scott v Cooper, 215 AD2d 368 [1995]). The criterion is whether the proponent of the pleading has a cause of action, not whether it has stated one (see Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]).

To prevail on a CPLR 3211(a)(1) motion, the documentary evidence submitted "must be such that it resolves all the factual issues as a matter of law and conclusively and definitively disposes of the plaintiff's claim ...." (Fernandez v Cigna Property and Casulaty Insurance Co., [*6]188 AD2d 700, 702 [1992]; Vanderminden v Vanderminden, 226 AD2d 1037 [1996]; Bronxcille Knolls, Inc. v Webster Town Center Partnership, 221 AD2d 248 [1995]).

"Stipulations of settlement are essentially contracts and will be construed in accordance with contract principles and the parties' intent" (Serna v Pergament Distribs., 182 AD2d 985, 986 [1992]). In addition, " ... stipulations of settlement are favored and in general will be enforced in accordance with their terms' (Everett D. Jennings Apts., L.P. v Jones, 4 Misc 3d 134[A]; see Hallock v State of New York, 64 NY2d 224, 230 [1984]), pursuant to the well-settled rule that a stipulation's enforcement is subject to the supervision of the courts' (J & H Mgt. Corp. v W.W.R.S Automotive Inc., 7 Misc 3d 134[A] [citing Malvin v Schwartz, 65 AD2d 769 [1978], affd 48 NY2d 693 [1978]) ..." (Ribner v Ribisi, 10 Misc 3d 144[A] [2006]).

Defendants Chien Tsang Lin and Shoho are not signatories of, or parties to, the stipulation and order of settlement (see Estate of Roth v Erhal Holding Corp., 141 AD2d 693 [1988]; see also Blank v Noumair, 239 AD2d 534 [1997]). Nor does plaintiff F & T allege that counsel for Chien Yang Development, in executing the stipulation and order of settlement on behalf of Chien Yang Development, also represented Chien Tsang Lin or Shoho (see CPLR 2104). Plaintiff F & T additionally has failed to allege that defendants Chien Tsang Lin and Paul Brown have any possessory or ownership interest in the properties which would be affected by any judgment to be entered in relation to the second and third causes of action.

Defendant Paul Brown is not a party to the stipulation and order of settlement, although he signed the stipulation as a member of defendant 37-25, LLC. Inasmuch as plaintiff F & T's second cause of action against defendant Paul Brown arises solely by reason of his being a member or acting in such capacity, or participating in the conduct of the business of defendant 37-25, LLC, plaintiff F & T has failed to state a cause of action against him personally for the breach of the stipulation (see Limited Liability Company Law § 609[a]; 16 NY Jur 2d, Business Relationships § 2140).

Defendant Chien Yang Development is party to the stipulation and order of settlement, but is not a purchaser or seller of the lots. Thus, to the extent plaintiff F & T alleges that the stipulation has been breached by virtue of the sale of the lots, it has failed to state a claim against defendant Chien Yang Development. To the extent plaintiff F & T asserts that defendant Chien Yang Development breached the stipulation by entering into the sublease agreement, again, nothing in the stipulation and order of settlement bars the subleasing of the covered premises or a portion thereof, without plaintiff F & T's prior permission. Although plaintiff F & T asserts that the sublease agreement constitutes a merger of the leasehold interest into the fee ownership interest, thereby terminating the amended Chien lease, defendant Chien Yang Development retains a reversionary interest in itself by virtue of the agreement's call for the termination of the sublease one day short of the termination of the main lease (see generally Bostonian Shoe Co. of New York v Wulwick Associates, 119 AD2d 717 [1986]). Thus, the agreement constitutes a sublease, not an assignment of the amended Chien lease, and did not function to terminate the amended Chien lease. [*7]

Furthermore, to the extent defendant Chien Yang Development is prohibited from assigning the amended Chien lease or any part thereof, such prohibition is limited, under the terms of the stipulation and order of settlement, to those instances when Chien Yang Development is in default under the amended Chien lease (see Paragraph 10 of the stipulation and order of settlement). Plaintiff F & T makes no allegation that Chien Yang Development was in default under the amended Chien lease at the time of the subleasing.

Defendants Flushing Plumbing, Paul Brown Properties and 37-25, LLC are parties to the stipulation and order of settlement, and defendants Flushing Plumbing and 37-25, LLC are the alleged sellers of the lots. Defendant Shoho is the purchaser of Lot 10. Defendant 37-25, LLC is a party to the sublease agreement. Nothing in the stipulation and order of settlement precludes the sale of any of the lots, without plaintiff F & T's prior written permission. Furthermore, contrary to the argument of plaintiff F & T, the sale of the lots do not constitute a modification or termination of the amended Chien lease. The purchasers acquired the lots with notice of the existence and the content of the stipulation and order of settlement, and because the stipulation was clearly intended to run with the lots, and "touches and concerns" them, it is a covenant which runs with the land (see generally Stasyszyn v Sutton East Associates, 161 AD2d 269 [1990]).

Moreover, the stipulation and order of settlement does not contain any provision establishing remedies for the breach of its terms (although it permits an award of reasonable attorneys' fees in connection with the enforcement of the terms of the stipulation and order of settlement). It is axiomatic that damages, specific performance and rescission may be awarded as remedies for breach of a stipulation, and a court may vacate an order for "fraud, misrepresentation, or other misconduct of an adverse party" (CPLR 5015[a][3]). Plaintiff F & T, however, makes no claim for damages, specific performance or rescission, and does not seek to vacate the stipulation and order of settlement. Nor does plaintiff F & T seek to compel defendants to perform an obligation under the stipulation and order of settlement. Rather, plaintiff F & T seeks to set aside the sales and mortgage transactions and the sublease agreement as the remedy for the purported breaches and violations. The court is unaware of any basis for its authority to award such relief under the circumstances alleged.

That branch of the motions by defendants Chien Yang Development, Chien Tsang Lin and Shoho, and the Brown defendants to dismiss the second cause of action asserted against them is granted.

With respect to the third cause of action, "... generally the rule in declaratory judgment actions [is] that on a motion to dismiss for failure to state a cause of action, the only question is whether a proper case is presented for invoking the jurisdiction of the court to make a declaratory judgment, and not whether the plaintiff is entitled to a declaration favorable to him [or her]' (Law Research Serv., Inc. v Honeywell Inc., 31 AD2d 900, 901 [1969]; see Nasa Auto Supplies v 319 Main St. Corp., 133 AD2d 265, 266 [1987]; Hallock v State of New York, 39 AD2d 172, 174 [1972], affd 32 NY2d 599 [1973])" (Washington County Sewer Dist. No. 2 v White, 177 [*8]AD2d 204, 206 [1992]). However, when no issue of fact is raised by the pleadings, or if the facts are conceded, a proper case is presented for judgment on the merits on defendant's motion to dismiss the complaint (see generally Law Research Service, Inc. v Honeywell, Inc., 31 AD2d 900, 901 [1969]).

In this instance, the notice of motion caused to be served by defendants Chien Yang Development, Chien Tsang Lin and Shoho alerted the parties that defendants Chien Yang Development, Chien Tsang Lin and Shoho also sought summary judgment pursuant to CPLR 3211(c), and the parties appearing in the relation to the motion have treated it as one, at least with respect to the third cause of action. The court, therefore, in an exercise of discretion, shall do so as well.

The stipulation and order of settlement grants plaintiff F & T an option to purchase the properties leased under the amended Chien lease (Lots 10, 20 and 22), for the purchase price of $10,000,000.00 during the one-year period beginning on August 1, 2052 through and including July 30, 2053 (see paragraph 14). The stipulation and order of settlement provides that such option "shall be exercised, if at all, by F & T by providing written notice to 37-25, LLC and [Flushing Plumbing] ... at any time commencing May 1, 2052 through and including July 30, 2053." The stipulation and order of settlement also provides plaintiff F & T's option to purchase is "expressly subject to [Chien Yang Development]'s right of first refusal, as set forth in Article 28 of the Amended Chien Lease." The stipulation and order of settlement does not include any provision for the forfeiture, extinguishment or waiver of the right of first refusal granted to Chien Yang Development in the amended Chien lease.

Article 28 of the amended Chien lease provides:

"Section 28.1 If Landlord receives a bona fide offer to purchase the Demised Premises which is acceptable to the Landlord (as evidenced by a fully executed contract of sale) the Tenant may purchase the Demised Premises on the same terms and conditions of the bona fide offer upon giving notice to purchase to the Landlord within thirty (30) days of being advised in writing by the Landlord of the bona fide offer. Closing of title shall be held sixty (60) days after the date of the Tenant's notice to purchase has been given to the Landlord."

"In the interpretation of leases, the same rules of construction apply as are applicable to contracts generally (see Backer Mgt. Corp. v Acme Quilting Co., 46 NY2d 211 [1978]" (Tantleff v Truscelli, 110 AD2d 240 [1985], affd 69 NY2d 769 [1987]). An option found in a lease generally runs with the land and, absent unequivocal language to the contrary, may be exercised within the lease term (see Gilbert v Van Kleeck, 284 App Div 611, 616 [1954]). The language employed in the amended Chien lease evinces an intent that the right of first refusal can be exercised in the event the landlord receives a bona fide offer to purchase acceptable to the landlord at anytime during the duration of the lease. The amended Chien lease, however, does not include a provision for the forfeiture, extinguishment or waiver of that right, or any language limiting or restricting the exercise of the right to the situation where Flushing Plumbing and Paul [*9]Brown Properties, as the landlords named in the lease, receive a bona fide offer to purchase (see e.g. Tantleff v Truscelli, 110 AD2d 240 [1985], affd 69 NY2d 769 [1987], supra; McPeady & Co. Inc. v Chestnut Street Properties Inc., 179 AD2d 915 [1992]). Absent such a limitation or restriction, the right of first refusal granted to Chien Yang Development in the amended Chien lease was not rendered ineffective by reason of Chien Yang Development's failure to exercise it at the time of the proposed sale of Lot 10 to defendant Shoho.

Therefore, that branch of the motion by defendants Chien Yang Development, Chien Yang Development and Shoho for summary judgment with respect to the third cause of action is granted to the extent of declaring that the right of first refusal granted to Chien Yang Development in the amended Chien lease was not rendered ineffective by reason of Chien Yang Development's failure to exercise such right at the time of the proposed sale of Lot 10 to defendant Shoho.

That branch of the motion by defendants Chien Yang Development, Chien Tsang Lin and Shoho to cancel the notice of pendency against Lots 10, 20 and 22 is granted.

Dated: January 23, 2009

J.S.C. Footnotes

Footnote 1: The memorandum of the option to purchase and the rights of F & T to succeed to the leasehold interest of defendant Chien Yang Development refers to the property known as 133-14 37th Avenue, Queens, New York as incorporating both Lots 20 and 22.

Footnote 2:see supra n 1.

Footnote 3:Defendants Chien Yang Development and Chien Tsang Lin originally argued in support of their motion, that the court lacked jurisdiction over them because plaintiff F & T purportedly failed to provide the warnings mandated under the Judiciary Law. Counsel for defendants Chien Yang Development and Chien Tsang Lin, however, acknowledges that the mandated warnings in fact appear on the summons (see letter dated September 17, 2008).

Footnote 4:Contempt committed in the "immediate view and presence of the court," such as disorderly, contemptuous or insolent conduct, is summarily punishable (see Judiciary Law § 750[A][1]; Katz v Murtagh, 28 NY2d 234 [1971]).