Superior Rest. NYC, L.P. v 316 Bowery Realty Corp.
2012 NY Slip Op 30905(U)
April 2, 2012
Supreme Court, New York County
Docket Number: 100922/12
Judge: Joan M. Kenney
Republished from New York State Unified Court
System's E-Courts Service.
Search E-Courts (http://www.nycourts.gov/ecourts) for
any additional information on this case.
This opinion is uncorrected and not selected for official
publication.
NNED ON41912012
[* 1]
SUPREME COURT OF THE STATE OF NEW YORK
- NEW YORK
COUNTY
n
PART
MOTION DATE
- v MOTION SEQ. NO.
The following papers, ndnbered 1 to
1
were read on this motion to/for
PAPERS Nyn(ll3ERED
Notice of Motion/ Order to Show Cause
Answering Affidavits
Replying Affidavits
-
-
Affidavits
-
Exhibits
...
Exhibits
-
-
Cross-Motion:
Yes
n No
Upon the foregoing papers, I is ordered that this motion
t
CISION.
APR 09 2012
NkW YORK
COUNTY CLERK'S OFFICE
Dated:
Check one: F I N A L DISPOSITION
Check if appropriate:
n NON-FINAL DISPOSITION
rj DO NOT POST
c1 SUBMIT ORDER/ JUDG.
1
'
-7
1
REFER ENC E
r SETTLE ORDER/ JUDG.
1
[* 2]
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORE:
PART: 8
_
_
_
_
_
_
_
_
_
_
l
_
_
-
-
-
-
l
_
-
-
-
-
-
-
-
-
-
-
-
-
_
-
-
-
-
-
-x
-
Index #
SUPERIOR RESTAURANT NYC, L . P . ,
100922/12
Plaintiff,
-against-
DECISION
& ORDER
316 BOWERY REALTY CORP.,
Kenney, J., M., J.
Roseriberg 6, Es t,i 5 , 1'. C.
Counsel f 01- DcifcndaIit
7 3 3 'Third Avenue
N c w Yor-k, New York 1001'1
(212) 8 6 7 - G O 0 0
P a p e r s considered in review of this motion:
Papers
FILED
Numb e red :
i
U I ~ C ! ~'I'n
.
sliuw miise, ALfii-rnation,
N L i d a v i t , b:xiiihi,t..q,
Ai f irrnat.i on, A f f; i d i i v i t in Opposi tion,
Memorilnduiii 01' l,<iw arid E x h i b i ts
1-9
APR 09 2012
10-22
Hcply Affirmation
NEW YUHK
23
CLEWS O F p
In this l a n d l o r d tenant action, plaintiff, Superior Restaurari
Iric.
( t h e tenant) , moves for a Yellowstone injunction
FACTUAL
On November
commercial lease
&
P R O C E D U M L HISTORY
15, 2007, t h e
parties executed a five year
(the l e a s e ) f o r a restaurant and bar in t h e
premises located at 316 B o w e r y and 2 , 4 , and 6 , Bleecker S t r e e t ,
N e w York, N e w York ( t h e premises).
On or about January 3 , 2012, during t h e pendency of a summary
non-payment proceeding entitled, 316 B o w e r y R e a l t y C a r p . v S u p e r i o r
Restaurant
NYC,
L.P . , L&T
Index #
81388/11
(the non-payment
[* 3]
proceeding)â , defendant, 316 Eowery Realty Corp. (the landlord)
served S u p e r i o r Hestaurant NYC, L.P. (the t e n a n t ) , with a âEâive Day
Notice of Security Deposit Draw and Demand to Replenish Security
Deposit.â
T h i s notice stated that the landlord had âdrawn downâ
the tcnantâs $105,000.00 security deposit and credited the amount
toward the tenantâs alleged outstanding rent arrearaqeu.
landlord a l s o demanded
The
that the tenant replenish the security
deposit within the same five day p e r i o d .
On January 13, 2012, the landlord served a 15 day Notice to
Cure relative to t h e tenantâs alleged failure to r e p l e n i s h t h e
security deposit.
The 15 day notice also stated that in the event
the tenant: did not c u r e the alleged default, the lease would be
The
parties do not dispute that the l e a s e terms
that t h e
landlord can, and may, utilize the tenantâs
terminated.
provide
security deposit to defer any rent, or additional rent a r r e a r s ,
that may accrue during t h e term of the lease.
Furthermore, the
parties do not contest that the security deposit was
not^
held in an
interest bearing bank a c c o u n t in accordance with the terms of the
lease.
âThe tenant has appeared in the non-payment proceeding, and
has pled several affirmative defenses. In particular, the tenant
challenges the landlordâs alleged entitlement to be paid twice
f o r the same rent arrears, which include attorneysâ fees that
have n o t been accounted for with proper supporting documentation.
T h i s C o u r t will only address the specific r e l i e f sought by the
movant in t h i s action, not whether the allegations made by the
parties in the non-payment proceeding have merit.
-2-
[* 4]
DISCUSSION
The
treatment
of money
given
as
a
security
deposit; in
connection with the use or rental of real p r o p e r t y is governed by
GOL §7-103. GOL §7-103 (a) provides, in unambiguous language, as
follows:
money shall be deposited or
advanced on a contract or license agreement
f o r the use or r e n t a l of real property as
security f o r performance of t h e contract or
agreement or to be applied to payments upon
such contract or agreement when due, such
money . . . shall be held in trust by t h e
person with w h o m such deposit or advance
shall be made and shall n o t be mingled w i t h
the personal moneys or become an asset of
the person receiving the same . . . .
Whenever
GOL S7-103 (2) provides, in relevant p a r t :
Whenever t h e person receiving money s o
deposited or advanced shall deposit such
money in a banking organization, such person
shall thereupon notify in writing each of
the persons making such security d e p o s i t or
advance, giving t h e name and address of the
banking o r g a n i z a t i o n in which the deposit of
security money is made, and the amount of
s u c h deposit.
Where a landlord has deposited a security deposit in a bank
and fails to comply with the notice provision of GOL
c o u r t may draw t h e
§ 7 - -103(2),a
rebuttable inference that the landlord has
mingled that s e c u r i t y deposit with the landlord's own money, in
violation of GOL 5 7-103(1), Patelrno v Carroll, 7 5 AD3d 6 2 5
(2""
Dept 2010); Dan K l o r e s Assoc. v Abramoff, 2 8 8 AD2d 121 (l''L
Dept
2001).
The landlord's papers are silent as to where or how t h e
-3-
[* 5]
security deposit was h e l d , or that the security deposit ever made
its way into an interest bearing bank account.
Such commingling constitutes a conversion, as well as a breach
of fiduciary d u t y (LeRoy v S a y e r s , 217 AD2d 63 [lst Dept 1 9 9 5 1 ) ,
and regardless of any noncompliance by the tenant with the terms of
the l e a s e , it entitles the tenant to an immediate return of the
d e p o s i t - . Id. ; accord Tappan G o l f Dr. Range, Inc. v Tappan P r o p . ,
Inc.,
68
AD3d
440
(1"
Dept
2009).
In the
event
of
such
commingling, the landlord may not use any portion of the deposit,
even f o r othcrwise legitimate purposes, e . g .
arrears allegedly due and owing.
The reason f o r this is that GOL
transformed
§
to extinguish rent
Id.; Dan K l o r e s Assoc, s u p r a .
703-1 and its predecessor statute
landlord-tenant
the
I
relationship
with
regard
to
security deposits from a creditor-debtor relationship to one in
which the landlord is the trustee of t h e deposit. A tenant seeking
the return of
a
deposit may
not
"be subject to
setoffs or
counterclaims asserted against him in a different capacity."
Matter of P e r f e c t i o n Tech. S e r v s . Press
[Cherno-Dalecar R e a l t y
Co.rp.1, 22 AD2d 352, 356 ( 2 n d Dept 1965). For t h e reasons set forth
above it is clear that t h e landlord has "drawn down" the tenant's
security deposit in violation of the General Obligations L a w .
F i r s t Nat. Stores, I n c . v. Yellowstone Shopping C t r . , I I I C . ,21
NY2d 6 3 0 (19G8), and its progeny established a four prong t e s t for
determining whether a "Yellowstone" injunction should be g r a n t e d .
-4-
[* 6]
The requirements for obtaining Yellowstone relief a r e as follows:
(1) plaintiff holds a commercial lease, (2) the landlord has served
(3) the r e f e r e n c e d c u r e p e r i o d has n o t expired,'
a notice to c u r e ,
and ( 4 ) p l a i n t i f f has to demonstrate an ability and willingness to
\\cure.''
ERS E n t e r p r i s e s ,
I n c . v E m p i r e Holdings, LLC, 286 Acl2d
206 (1"'
Uept 2001) ; Purdue Pharma LP v A r - d s l e y P a r t n e r s , LP, 5 AD3d
654
(2d Dept 2004)
A Yellowstone injunction maintains the status quo s o t h a t a
commercial t e n a n t , when confronted by a threat of termination of
jks
a
l e a s e , may protect its investment in the leasehold by o b t a i n i n g
stay
tolling
the
cure
period
so
that
upon
an
adverse
d e t e r m i n a t i o n on the merits the tenant may cure the default and
avoid a forfeiture of the lease (Post v 220 E. End Av. C o r p . , 62 NY
2d 19, 26 [1988]). Additionally, the v e r y nature of this kind of
injunction is designed to "forestall the cancellation of a lease to
afford the tenant an opportunity to o b t a i n a judicial determination
of its b r e a c h ,
the measures necessary to c u r e
it, and those
required to b r i n g the tenant in future compliance with the terms of
the lease" ( s e e , Waldbaum, I n c . v. F i f t h A v e . of Long Is. Realty
A s s o c s . , 85 NY2d 6 0 0 , 6 0 6
[1995])
.
Furthermore, "[t]he purpose of
a notice to c u r e is to specifically apprise the tenant of claimed
defaults in its obligations u n d e r the lease and of the forfeiture
'The parties do not dispute that the instant application is
timely.
-5-
[* 7]
and termination of the lease if the claimed default is not c u r e d
within a set period of time 542 Holding COI-p. v. Prince F a s h i o n s ,
I n c . , 4 6 AD3d
309
(1âDept 2 0 0 7 ) .
Thus, the tenant has made a
prima f a c i e showing of entitlement to injunctive relief as a matter
of law, and the landlord has supplied no evidence sufficient to
defear the g r a n t i n g of this m o t i o n .
All arguments or contentions not specifically addressed h e r e i n
have
been
considered
and
determined
to
be
unpersuasive.
Consequently, the motion is granted.
Accordingly, it is
OKDERED that
plaintiffâs time to c u r e u n d e r the Notice to Cure
dated January 13, 2012 is hereby tolled; and it is further
ORDERED that defendant
is directed to segregate and re-credit
plaintiffâs security deposit ( $ 1 0 5 , 0 0 0 . 0 0 )
in an interest b e a r i n g
bank account forthwith; and i + is further
t
ORDERED that within thirLy days of
service of notice of e n t r y
of t h i s O r d e r , defendant is to identify the bank and account number
for- the re-deposited security deposit to t h e tenant.
FILED
Dated: April 2 , 2012
E N T E R :
kion . ~ o a n
pi. K e r i r i e y
-6-
