O'live Organic Spa LLC v Christos Realty Inc.

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O'live Organic Spa LLC v Christos Realty Inc. 2012 NY Slip Op 32828(U) November 14, 2012 Sup Ct, New York County Docket Number: 103226/2012 Judge: Donna M. Mills 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. SCANNED ON 121312012 [* 1] [* 2] StJPRKMR C;OUR l OF THE STATIC OF NEW YORK COUNTY OF NEW YORK PART 58 D O N N A MILLS. ,I.: In this action regarding the prospective tcriiiiiution o r a coiiimcrcial lease, plaintilli O livc Organic Spa L,I,C (Organic Spa) and Olive Tan Spa, I,l,C: (Olive Tan) iiiove, by order to show cause, to vacatc defendant Christos Rcalty Iiic. s (Christos) 15-day iioticc of clcfault, dated June 27, 201 2 (the Default Notice), to stay cxecution ol tlic Default Notice, and ciijoin C hristos from taking any action to tcrminate Olive s Icase; in bricf, a rccliiesl (or. an iiijunction pursiiant to Firsl Null. S f u i ~ c 11 Yellowxione Shoppirig C lr., 21 NY2d 630 ( 1 Oh#) (Yello~v,s/ont~). s Christos opposes xiid cross-moves to dismiss the complaint, pursuant to CPLR 32 1 1 (a) ( 1 ) and ( 3 ) , or, in the alternativc, impose certain conditions upon thc graiitiiig of the iiijmction. Background Christos is thc Iatidlord of a building located at 1 12 East 23rd Strcct, New York County. Olivc Tan is a tcnant, occupying commercial space kiiowii as Suite 102 (thc Prcmises), pnrsuant to a leasc, dated .luly 15, 201 1 (thc 1,case). Motion, Ex. A. Olivc l a n was operating a taiiniiig i facility in New Jcrscy when it cxecuted the Leasc, ad it forincd Organic Spa whcn it moved into the Preniiscs. IJndcr the tcnns 0 1 the 1,casc 64. A. . . , Permittcd Usc sliall iiican a Itinning spa Lor the applicatiori of aii organic tanning spray on individuals but not thc LISC o l tanning beds. h c I cl-mittcd IJse shall also include thc giving of spa type deep tissue massagcs and l i d s and thc rctail sale of associated tatmiiig products. . . . 1 [* 3] H. . . . 'I'cnant shall procure all licenses and permits required lor Tenant's particu1:ir use or occupancy of the I h n i s c d prciniscs and thc business being concluctcd therein. C. Tenant agrees to observe and obey all laws, ordinaiiccs, rcgulatioiis and orders issued by any goveriunental or administrative agency affccti tig the I'remises and/or 1ciiant's use thereof. . . . 'Tenant agrccs that it shall w e the Premises subjcct to a11 rcquirements of law and to 'I'cnant obtaining at its sole cost and expcnsc a11 riccessary pcriiiits m d licenscs tlicrefbre." On or aboiit JLIM30, 20 12, plaiiitiL1s received tlie Defitrilt Notice l?om the landlord, charging that tlicy arc operating a full scrvicc spa, and otlicrwisc not complying with the terms of the Lease. Id., Ex. t3. 'llic Default Noticc cliargcs that plaintiffs arc brcaching the lease by not complying with all applicable laws and regulations, not having thc prc>pcrljcciiscs, using taiiniiig beds not just tanning spray, opcrating a full service spa instcacl of :I tanning salon, not having registered with Ncw Yoik's nepartment of State, assigning arid/or subletting thc Prcniiscs without the landlord's prior written approval, and not obtaining the proper insurance coverage. Most of the alleged violations arc based on the tcrrns of the 1,casc's paragraph 04. Plaintiffs cotiiiiiciiccd the instant action on July 10, 2012, asserting caiiscs of action ( 1 ) to vacate tlie Default Noticc; (2) lo stay of execution oC the Def:dult Notice; (3) fbr a declaratory judgment on their allcgcd dcfaul t; (4) for rci tnbur-scmcnt of rcasonable attonicy's fccs, costs and disbursements; ( 5 ) f'or aftemptccl rctaliatory lcasc termination and eviction; and (6) for partial and actual eviction. Plaintiff's contciid that Christos instigated this dispute over nonexistent or trivial issues, bccause tlie liuidlord subscquently leased space in tlie smie bidding to another tenant, with ;I noli-compete clause, oLkriiig "similar spa type services." Emad A K , 7 8 . Christos allegedly asked plaintiffs to tiiove, but tliey rehsed when 110 compcnsation was offcrcd them for rclocating. hi'. The llcfault Notice followed soon lhereaf'ter. Plaintifl's argue that the provisions in the Lease thal permit t1wn to offcr massages, facials and retail products vitiate the charge tliat they arc violating tlic Jxasc by operating a f d l service spa. They submit a copy oi'Organic Spa's New York State liccnsc "to operate 2 a11 [* 4] ~ appearancc erdianccnlent business" (Motion, Ex. C), and slate that this "is a copy of all reqirisile licenses for the serviccs being provided by Plainti I'l's" (Emad AfE, 1 10). addition ally, they subiiiit a copy of Organic Spa's certificate of authorization to collect sales arid use taxes. Motion, Ex. 13. Plaintiffs establish that their reiit has been paid consisieiitly by chcclcs fi-om "O'LIVE I OKCiANIC SI'A LLC" at "1 12 E 231CD S I ' . , S ' I E 302," by submitting copies for every moiith h i m November 201 1 through J i m 2012. Id., Ex. E. They niajntaiii tlial, since Olive Tan and Organic Spa ''arc owned a i d opcrated solely" by Monilta Kmad (Emad), lherc has been no assigiiiiicnt ol' lhe Lease. Eniad Aff., 7 12. Finally, they submit 3 copy o l a certiticatc ol' liability insurance, naining Chistos as an additional insured, for a policy issued to Olive Tan Spa LLCI d/b/a O'live Organic Spa LLC', for the period September 22, 201 1 to September 22, 201 2. Motion, fh. F. 'I his certificate is dated June 1 1 , 2012, and is atlaclied to a Icttcr sent to Christos by plaintiffs' foriiier counsel on the same day, rebutting the allcgatioiis in the Ucfault Notice. I d . A filing receipt for Organic Spa's articlcs of organization, clated August 10, 20 1 1, is iiicludcd in this exhibit, but not separately rcfcrcnced by plaintirfs. Christos opposes the instant motion, and offers its cross triotion (or disiiiissal of the coniplaint, on thrcc main grounds: 1. Olive Tan does not have the legal capacity to sue because it is not aulliorizcd to d o business in New York. 2. Olive Tail's placing of Organic Spa into occupancy created a dc facto assignment oftlie I ,ease witliout Christos's consent. 3. Plaintiff's continue to perforni services at tlic Preniises without proper liccnsing Christos claims that it first became aware of irregularities concerniiig thc occ~ipaiicyof the Premises wlien it receivcd a certificatc o l insurance lirom plaititil'l's that icicntitlcd Organic Spa as the only insured at the Premises. Cross Motion, Ex. 13. Then, a check of the Department of Statc's Division of Corporations' web site found a registration for Organic Spa, but not Olive 'I'aii, Id., Exs. F, G. C'hristos argucs that Olive 'I'm, the tenant wider lhe [,case, a business not 3 [* 5] registered in New York, placcd Organic Spa, ;-1 registered business, into occupancy of the Preiiiiscs, creating 3 clc facto assignment without thc prior writteii approval of Clhristos. Meanwhile, nccordjng to C'liristos, plaintills continuc to adverlise ; 1 variety of. serviccs, such as light thcrapy and iiiicroderinahrasioii, not authorized by the J ,case. Additionally, plaintiffs do not display, or give cvidcncc of possessing, valid licenses for the serviccs thcy ofler. Fiiially, Christos claims that plaintiffs appcar to be violating New York C'ity zoning law aiid heallh codes by operating a physical culture establisliiiient (PC'I <)without ;I permit. Christos maintains that it servcd plaintills ;I notice of default oii May 29, 20 12, cuiitaining explicit dctnil of all of thcir dehults. While C'liristos wilhdrew this notice because of an addressing crror, plaintiffs took no action in response to its content, with the exception of ohtainiiig ;L corrected certilicale of iiisiiraiice, an iiidicatioii io Christos that plaintiffs have 110 intention of curing their defaults. Discussion 17Le,d Capacity to SUC Christos notes that New York's 1,iiiiitcd Liability Company Law (C1,C') 5 808 (a) providcs that a "foreign liiiiitcd liability company doing birsiness in this state witlioiit having rcccivcd a certificate of authority to do business in this state may not maintain any action, suit or sped proceeding in any court of this state unless and until such liniited liability company shall liave received a certificate ol'aiitliority in this state ." Christos contends that Olive Tan is not registered in New York, and, thcrcfore, lacks thc capacity lo bring this action for a YLJllows/onr~ unction. ,Sw Pergmwnt ~ I O F MCYrs v Net iiij C Redly HoIding T?.ust, I71 AD2d 736 (2d Dept 1901); RMS Resiu'cnfivl l'i+ops., LLC 11 Nuazc, 28 Misc 3d 841, 849 (13ist C't, Nassau Couiity 2010) ("The court cannot, however, grant any d i c f t o petitioner bccausc petitioner is not a u t h o r i A to conduct business in this state as required by Liiiiiled Liability Company 1,aw 5 808 [a])." Plaintills, in reply, produce a certiiicate o1 authority fbr Olive Tan, dated Sepleinbcr 14, 4 [* 6] 2012, issued under LLC § 805. I:ile A f h i i . , I'x. F. 'This, adniittcdly, is months a k r comciicciiiciit of the instunt action, but mccts the requirement of 1,LC' 9 XOX (a). SCJC Roll Ifot Mjjq, (-'o.11 I 'oronc Equ@. C,'o , 38 A.D.2d 339, 340-341 (.3d I)cpl 1972) ('"1 o be pruhibitcd from maintaining an action, howcvcr, is different from being prohibited from coiiinieiicing an action. Hence, it has bccn licld tliat siich a corporation, alter commencing an action, could obtain authority and, thereafter, maintain a lawsuit"). Coiiscquently, OIj vc Tar; ~ i a s legal capacity to the bring this action. Dc Facto Assigimqgg Christos claims that thcre has bccn a de fiicto assigiuiicnt of lhc L,casc from Olivc Tan to Organic Spa, in violation ol'thc 1,ease. Gciicrally, acceptance of rent by a lancllord m a y waive assertion 01' a default for recognized concluct, in this casc tlic alleged assigninciil of the 1.case. Atkin k Wus/r Mu/crial,v v M ~ i y 34 NY2d 422, 427 (1 074)("Wbcii rent is acceptcd with , lcnowledpe of particular condiict which is claimed to be a clcfault, the acccptarice of sucli rcnt constitutes a waiver by tht: landlord of the defhdt"). Apparently, wcry rent payment to Clliristos was inade by Organic Spa, not Olivc Tan. However, the I ,case parlicillarly barred waivcr under thcsc circunistances. Paragraph 1 1 provides that: "lf this lease be assigncd, or if !lie derniscd prcniises or any part h e r e d ' be underlet or occupied by aiiy body otlicr than 'I'eiiaiit, Owiicr inay, aftel*dcfault by Tenant, collcct relit from the assignee, under-tenant o r occLip;int, atid apply the nct amount collected to the rent licrcin rcserved, but no such assignmcrit, underlcttiiig, occupancy or eo1lcctioii shall be deemcd a waiver ol' this covenant, or thc acceptance 01 the assigiicc, uiiderteiiiiiit c)r occupant as tenant .. .'I See KUme 11 Arito, h c . , 48 A n 3 d 272, 274, (1st Dept 200X) ("Uefendaiit did not waive o1T.jcclion to the Lintiinely renewal by accepting rent; tlic lcase expressly provided that ncccptancc of rent is not a waiver ofthc landlord's rights"). I lerc, C'hristos did riot waive its riglit to give prior approval to ai1 assignment d the I,case by accepting rent from Organic Spa. I Iowever, the court finds that thcre was no assignment of the Lease Kinad signed the Lease for Olive Tail on July 22, 20 I 1. She l l c d tlic articles of organization for Organic Spa 0x1 A u g ~ 10, 201 1. Stic rcccived a certiticate uf'aiithority from t 5 [* 7] New York's J.)cpal-tiiient of' Taxation atid Finance for Organic S p a to collect salcs and use taxes on October 14, 201 1 . Rent checks Ibr the Premises wcrc issued to the landlord by Organic Spa at least Irom November 1, 201 1 througli Junc 1 , 201 2. Christos w i t the llehult Notice 011 Julie 27, 201 2, Plaintirfs Iiled its complaint and brought the instant motion lor a Y~~llowstone injunction on .Iuly 10, 2012. Christos filed its cross iiiotjon to dismiss llie complaint on September 4, 2012. Olivc '1 an was "authorized to do business in this state" on Septcinber 14, 2012, pursuant to 1 , I r § 805. Plaintiffs never expliiin why they are iioiiiirially IWO entities, when Olive 'Tan might have siiiiply sectired a New Yoi-lc ccrtificate of'autliori~ation, it eventually did. C'hristos, on the as other hand, I'ails to establish that Rmad's choice ol'nainc on tho door aucl chcckbook constituted an assigimient ol' the I ease froiii one entity to the other, i n violation ol' thc I ,case. Prudently, Christos repeatcdly rcfcrs to a "de l'aclo assjgiznicnt." I lowever, there was no assigilmcnt here rnercly bccausc Kinad chose one of licr two business names to put on the door. MaiZ K. Expr.es,v Pcri*/ctv. A.xlcs, IIIC, 204 App Div 337, 328 ( I st 13cpt 1923) ("the use o f a riame other ~ M C11 . than the granted or lcgal corporate title o I o w party in an agrccmeiit with another party is wholly iinmaterial to thc validity of a contract betwcen the corporation using the symbol and the othcr party in any suit upon that contract"). In any evcnt, Olivc 'I'an is now auttiol-i/.edto do busincss in New Yolk, and declares that it will pay the rei11 instead o l Orgatiic Spa, if needed. File Reply Al'firin., 7 14. Proper 1,icenses Thc third significant objection to plaiiitifi~s' application for rclief'is thc alleged absence of proper licensing [or the services tlicy pcri'nrm oil the Prcmiscs. 1 he landlord claims that its on-sitc inanagcr inspected the Premises "to determine wliether Olive J I'aii] had postcd valid ip~ licensing. None were apparent." T ~ o i i ~ iAK, 7 2 1. Chrjstos charges that eight cnqdoyccs named oil Organic Spa's web sitc ;is perlbrmiiig specialized services, as of A U ~ L 24, ~ I S 2012 (Cross Motion, Ex. 0),arc not liceiised lo conduct tliese services. 6 [* 8] Indccd, plaintiffs only submit a business license for Emad with tlicir motion (Motion, Ex. C), although they expansively dcscribe thc oiic piccc of paper as "a copy of all rcquisite licciiscs l'or the scrviccs providcd by Plaintiffs" (Eiiiad All., 1 10). I lowever, attached to their rcply papers, plaintiffs submit copies o l N e w York liceiises or rcgjstratiths, for the type oi'services at issue, for four individuals, two of whom were previously nainccl oii Organic Spa's web sitc. File A f h i . , Exs. A, H , C, D. Plaintiffs conclude li-oin this submissioii that "a11 of Plaintiffs' eiiiployecs mniiitaiii thc requisite licenses unclcr New York Statc law." Id,, 7 7. While the web site listed I Imad as "Owner / lteiki Practitioner," oiily her business license is provided lierc; no other o c c u p a h i a l license or registration is subniittcd for her. "A Yellowsionc injunction maintains thc status cpo s o that a coiiiiiiercial tenant, when confronted by a threat of tcmiination of its leasc, may protect its iiivcstiiient in the Icaschold by obtaining a stay tolling thc curc period so that upon an adverse deterinination o thc incrits the tenant may cure the default and avoid a m lorfeiture." Grcriihasu' Mo1lc.n tlorowiir Pormjuwnz & LSlicipirov GOO 7'lzii.d Avc. Assoc., 93 NY2d 508, 5 14 ( I 999). "111 granting ti~llowLstonc injuiictioiis to avoid lorfeiturc of the tenant's interest, courts ; 1 liave generally acceptcd far lcss than the showing norinally rcquired for tlic graiil of preliminary iti.junctivc relief." C;crrlmxl v T i h n W. Assoc., 147 AD2d 304, 307 ( I st Dept 1989). Besides niccting procedural requirements, the commcrcial tenant seeking a Yc./lowslnnc injunction m i s t deiiioiistrate that "it is pl-eparcd atid mainlains the ability to cure the alleged dehult by any secured the iiecessar'y i iwiraiicc coverage, given cvidciicc of bcing properly licensed, not assigiicd the lcasc impropcrly, and argued that other claimcd violations 01-the Lease arc injuiictimi tolling the cure pcriocl so tliat, addressable. 'l'hcrcforc, tlicy arc granted a Y~~/loM~Asronc if thcrc is an adverse deteriniiialioii on the merits, plaintiffs may cure the deh'aults atid avoid a forfeiture . Accordingly, it is 7 [* 9] 01113I~Rb13 plaintiffs O'livc Organic Spa TLC anct Olive Tan Spa, I ,T,C"s that motion is granted lo thc extent that execution ol' defciidari~ Christos Realty Iric.'s notice of default, dated lune 27, 2012, is stayed, and dcfeiidant is liereby cii-joined fimi tnlcing aiiy action to terminatc plaintiffs' leasc, peridiiig a resolution of lhis action on the merits, on the coliclition that plaintiffs continue to iiialce timely payiiiciits of'tlie rent i i s requircd by the parties' Icase; and ORDKRCL) tliat ckkiidant Cliristos Realty Inc.'s cross motion to dismiss the complaint, pursuant to C'PLR 321 1 (a) ( I ) and (3), is denied. DATED: Novcniber #,20 12 ENTER:

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