Mauray Realty Co. v Advantage Plastics, Inc.

[*1] Mauray Realty Co. v Advantage Plastics, Inc. 2012 NY Slip Op 51413(U) Decided on July 16, 2012 Supreme Court, New York County Kapnick, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 16, 2012
Supreme Court, New York County

Mauray Realty Co., Plaintiff,

against

Advantage Plastics, Inc., Defendant.



406619/07



Plaintiff was represented by Joshua N. Krellen, Esq. DOLLINGER, GONSKI & GROSSMAN, One Old County Road, Carle Place, New York 11514; Tel. 516-747-1010.

Defendant was represented by Michael A. Valentine, Esq., ALTMAN SCHOCHET, LLP, 225 Broadway, 39th Floor, New York, New York 10007; Tel. 212-344-8000.

Barbara R. Kapnick, J.

Plaintiff Mauray Realty Co. ("Mauray" or "Owner" or "Landlord") is a New York partnership. Defendant Advantage Plastics, Inc. ("Advantage" or "Tenant") is a corporation that sells and supplies hardware.

The property at issue is known as 2306 Amsterdam Avenue, a/k/a 500 West 175th Street, New York, New York (the "Building"). Def.'s Rule 19-A Statement, ¶ 1. The Building consists of residential space and commercial space; the demised premises is part of the commercial space.

Background

On or about June 15, 2005, Mauray and Advantage entered into a fifteen (15) year Lease (the "Lease") for the demised premises. Pursuant to a February 2005 Management Agreement entered into between Mauray and Langsam Property Services Group ("Langsam"), Langsam was to serve as the Managing Agent for the Building. Krellen Affirmation, ¶ 17.

The Lease provides in paragraph 3 that the "[t]enant shall make no changes in or to the demised premises of any nature without Owner's prior written consent." The Lease also provides in paragraph 17, in relevant part, as follows:

If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent . . . upon Owner serving a written fifteen (15) day notice upon Tenant specifying the nature of said default, and upon the expiration of said fifteen (15) days, if [*2]Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said fifteen (15) day period, and if Tenant shall not have diligently commenced curing such default within such fifteen (15) day period, and shall not thereafter with reasonable diligence and in good faith proceed to remedy or cure such default, then Owner may serve a written five (5) days notice of cancellation of this lease upon Tenant, and upon the expiration of said five (5) days, this lease and the term thereunder shall end and expire as fully and completely as if the expiration of such five (5) day period were the day herein definitely fixed for the end and expiration of this lease . . . .

The Lease further provides, in paragraph 31, in relevant part:

Tenant has deposited with Owner the sum of $15,600 as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this lease; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this lease, including, but not limited to, the payment of rent and additional rent, Owner may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent, or any other sum as to which Tenant is in default, or for any sum which Owner may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this lease...

. . . In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this lease, the security shall be returned to Tenant after the date fixed as the end of the lease and after delivery of entire possession of the demised premises to Owner.

Upon signing the Lease and paying the security deposit, Advantage received the keys to the demised premises and took possession. Def.'s Rule 19-A Statement, ¶ 3.

In February 2006, defendant filed a building permit application with the New York City Department of Buildings (the "DOB"). The building permit was issued February 28, 2006. Thereafter, defendant commenced construction on the demised premises without obtaining prior approval from plaintiff.

On March 9, 2006, the DOB issued a Notice of Violation (the "Stop Work Order") stating:

FAILURE TO CARRY OUT DEMOLITION OPERATIONS IN A SAFE AND PROPER MANNER. AT TIME OF INSPECTION DEMO OF STORE FRONT HAS LEAD TO THE LOSS OF STRUCTURAL SUPPORT. TEMPORARY SUPPORT DANGEROUSLY INADEQUATE (2 X 4s) (WITH JOIST STRADDLED [sp] ALONG PERMANENT JOISTS).

STOP ALL WORK EXCEPT!!!: PROVIDE ENGINEERS REPORT TO SHOW STRUCTURAL INTEGRITY AND PROVIDE ADEQUATE SUPPORT.

(emphasis in original). [*3]

Prior to receiving notice of the Stop Work Order, plaintiff had no knowledge defendant was performing work at the demised premises. Krellen Affirmation, ¶ 46. Langsam retained a structural engineering firm to inspect the demised premises. Id. at ¶ 54. The inspection revealed deficiencies in the construction work, including that the newly installed concrete structural support piers were hollow. Id. at ¶ 58.

In an email to defendant's lawyer, Zalman Schochet, Esq., dated January 10, 2007, plaintiff informed defendant that:

. . . Since this is a construction site and in order to protect [Mauray's contractor's] equipment, the contractor is changing the locks for your client's space.

I will forward a new key for the tenant's premises to you upon my receipt which should occur in the next few days . . . .

Defendant responded to plaintiff's counsel in a letter sent via email, dated February 1, 2007, stating:

. . .[Mauray's] refusal to expeditiously complete the repairs or allow [Advantage] to complete same is a material breach. [Mauray] has effectively blocked [Advantage's] use of the premises. At this juncture, we have no choice but to terminate the lease as a consequence of [Mauray's] conduct and demand the immediate return of [Advantage's] security deposit, rent paid and funds expended on the premises . . . .

By letter dated February 9, 2007, plaintiff's counsel notified defendant's counsel that the locks had been changed the prior day, that plaintiff received the new key on February 9, 2007, and that plaintiff would FedEx a new key to defendant. The letter also stated: "As major structural work is proceeding, anyone entering the premises must be notified of such work and wear the appropriate protective equipment."

In a letter dated May 1, 2007, defendant's counsel wrote to plaintiff's counsel as follows:

Enclosed please find the key to the premises you previously sent to my attention. Mauray Realty breached/terminated the lease and effectively evicted my client. As a consequence, [Advantage] has lost hundreds of thousands of dollars. At this juncture, in an effort to amicably resolve this matter, we simply want Mauray Realty to refund [Advantage] its security deposit, rent paid and funds expended in renovation. [Advantage] has no[] intention of remaining a tenant by [Mauray].

On or about February 29, 2008, Langsam transferred defendant's security deposit from an escrow account to the Building's operating account. Pl.'s Rule 19-A Statement, ¶ 8. Despite defendant's demands, its security deposit has not been returned.

Prior to commencing this action, Mauray did not serve Advantage with any written notice [*4]stating that Advantage was in breach of the Lease; nor did Mauray serve Advantage papers commencing a summary eviction proceeding. Id. at ¶ 7.

On or about July 7, 2006, Mauray filed the original Complaint in this action, alleging that Advantage had violated several terms and conditions of the Lease. On or about August 10, 2006, plaintiff filed and served an Amended Complaint. The Amended Complaint asserts eight causes of action to recover for:

(1)breach of the Lease for failure to submit renovation plans and specifications to the Landlord for Landlord's approval prior to commencing work on the premises;

(2)attorney's fees in accordance with the Lease provision, wherein Tenant agreed to pay all of the counsel fee expenses incurred by Landlord as a consequence of any breach of the Lease by tenant;

(3)costs of repairing damage to the premises caused by Tenant's improper demolition and construction work;

(4)losses due to the serious damage caused by Tenant to the Landlord's building;

(5)losses due to Tenant's substantial structural changes and alterations to the premises in violation of the lease;

(6)losses due to Tenant's wrongful, reckless and illegal conduct, in violation of Landlord's right of reasonable refusal to Tenant's proposed alterations;

(7)all rent and "additional rent" provided for in the Lease; and

(8)declaration that Landlord is entitled to immediate use of Tenant's security deposit in order to offset and reduce Landlord's expenditures to correct the damages and deficiencies caused by Tenant.

On or about July 25, 2006, Advantage filed its Answer and Counterclaims to the original Complaint. Advantage then filed a second Answer and Counterclaims dated September 22, 2006, in response to the Amended Complaint.

Defendant now moves for an order:

(1)pursuant to CPLR 3025(b), granting it leave to file an amended verified answer and counterclaims [FN1] (and to deem it filed as of the date of the instant motion);

(2)pursuant to CPLR 3212, dismissing the complaint with prejudice for lack of standing, failure to serve requisite notices as required under the Lease, and for wrongfully evicting defendant from the premises, thereby releasing defendant from any further obligation under the Lease;

(3)granting defendant partial summary judgment on its seventh counterclaim for wrongful eviction; and

(4)granting defendant partial summary judgment on its eighth counterclaim for [*5]conversion.[FN2]

Plaintiff cross-moves for an order pursuant to CPLR 1018, granting plaintiff's motion to add Mauray Realty USA, LLC as a plaintiff.

The Court heard oral argument on the motion and cross-motion on the record on September 26, 2011. At that time, the Court granted plaintiff's cross-motion to add Mauray Realty USA, LLC as a plaintiff (Tr. 24:20-22), and denied defendant's motion for summary judgment dismissing the complaint with prejudice for lack of standing, failure to serve proper notices as required under the Lease, and for wrongfully evicting defendant from the premises. Tr. 24:3-11, 28:22. The Court also granted defendant's motion for leave to amend the Answer insofar as defendant sought to add a ninth affirmative defense that plaintiff no longer exists as a legal entity and thus does not have the capacity to sue defendant. Tr. 12:21-22. The Court reserved on the issue of whether defendant may amend its Answer to add additional affirmative defenses and counterclaims. Tr. 28:22-24.

The proposed additional affirmative defenses are: (1) failure to serve the required predicate Notices and unlawful eviction ("sixth affirmative defense"); and (2) that plaintiff breached defendant's rights to quiet enjoyment of the property as the property was in complete structural disrepair which threatened defendant's person and property, as well as by illegally evicting defendant from the premises ("seventh affirmative defense").

The additional counterclaims seek: (1) a declaration that the lease is terminated as a result of plaintiff's breach and/or illegal eviction and an order directing the immediate return of defendant's security deposit, rent paid and funds expended on the premises ("seventh counterclaim"), and (2) an award of treble damages and attorneys' fees for plaintiff's failure to return the security deposit after plaintiff illegally evicted defendant from the premises ("eighth counterclaim").

Defendant argues that because the proposed Third Amended Answer sets forth meritorious claims, plaintiff cannot satisfactorily demonstrate it would be prejudiced or surprised by the contents therein.

Plaintiff argues in opposition that the proposed amendments to the Answer lack merit, have been waived under CPLR 3015,[FN3] and if allowed at this stage after the Note of Issue has been filed, [*6]would be unfairly prejudicial to the plaintiff.

In addition, plaintiff contends that defendant failed to annex a full and complete copy of its proposed pleading and thus defendant's motion to amend must be denied. Plaintiff further claims that, as a matter of fairness, it cannot be expected to respond without the ability to fully address the counterclaims. However, it appears that defendant has rectified this problem by annexing a full copy of the proposed "Third Amended Answer & Counterclaims" to his reply papers.

Finally, plaintiff claims that granting defendant's motion to amend at this juncture, after the Note of Issue has been filed, would cause plaintiff substantial prejudice as it no longer has the opportunity to conduct discovery and defendant has failed to proffer an explanation for its delay in moving for this relief.

In reply, defendant argues that plaintiff's claim of prejudice is unfounded, as plaintiff has not been foreclosed from discovery concerning the proposed affirmative defenses or counterclaims. Specifically, defendant claims that its proposed sixth affirmative defense in the Third Amended Answer, setting forth plaintiff's failure to provide a Notice to Cure, is but a factual amplification of the fifth affirmative defense in its Second Amended Answer.

Defendant argues that plaintiff has, in fact, had substantial opportunity to conduct discovery concerning this affirmative defense, and that whether or not plaintiff provided a written notice to cure, a notice of termination, a written rent demand and papers showing plaintiff had commenced summary eviction proceedings and obtained an eviction warrant are all issues within plaintiff's knowledge since the commencement of this action.

Similarly, defendant argues that plaintiff would not need discovery concerning the proposed eighth counterclaim, for conversion of defendant's security deposit, since, again, whether or not plaintiff converted defendant's security deposit is information clearly within plaintiff's knowledge and possession.

Discussion [*7]

Permission to amend pleadings should be "freely given upon such terms as may be just." CPLR 3025(b); see also Bishop v. Maurer, 83 AD3d 483, 485 (1st Dep't 2011) ("A motion for leave to amend the complaint pursuant to CPLR 3025(b) should be freely granted unless the proposed amendment is palpably insufficient to state a cause of action or is patently devoid of merit.") (citing Smith-Hoy v. AMC Prop. Evaluations, Inc., 52 AD3d 809, 811 [1st Dep't 2008]). Whether to allow or disallow an amendment is "committed to the court's discretion." Edenwald Contr. Co. v. City of New York, 60 NY2d 957, 959 (1983).

While lateness alone will not be a barrier to the amendment, where lateness is coupled with "significant prejudice to the other side" leave to amend should be denied. Id.

Where prejudice to the nonmoving party has not been shown, and where the amendment is not entirely lacking in merit, a motion for leave to amend should be granted. See McCaskey, Davis & Assoc. v. New York City Health & Hosps. Corp., 59 NY2d 755, 757 (1983) (finding it was an abuse of discretion for the Trial Court to deny defendant's motion to amend its answer when there was "nothing in the papers indicative of prejudice to or surprise of plaintiff"); see also Maloney Carpentry, Inc. v. Budnik, 37 AD3d 558 (2d Dep't 2007) (finding plaintiff could not claim prejudice or surprise when the proposed amendments arose out of the same facts as those underlying the plaintiff's cause of action).

With regard to defendant's proposed sixth affirmative defense for failure to serve a Notice to Cure and other predicate notices, it is undisputed that plaintiff did not serve defendant written notice stating defendant was in breach, or written notice stating plaintiff was terminating the Lease.

Similarly, with respect to the seventh affirmative defense and the seventh counterclaim, it is undisputed that prior to commencement of this action, the demised premises became uninhabitable, and plaintiff retained a contractor to perform "major structural work." Moreover, it is undisputed that on February 8, 2007 the locks to the demised premises were changed, and for a brief time thereafter defendant was not in possession of the new key.

Based on these undisputed facts, the Court will grant defendant leave to amend its Answer to add the sixth and seventh affirmative defenses and the seventh counterclaim, since they arise out of the same facts as those underlying plaintiff's case and they are not plainly lacking in merit.

The Court, however, denies the motion for leave to amend insofar as it seeks to add the proposed eighth counterclaim for conversion. Any right defendant may have to a return of its security deposit is covered by the Lease and, therefore, a claim for conversion is duplicative. In fact, breach of the Lease and a demand for a return of the security deposit is already pled as part of the seventh counterclaim in paragraph 172 of the proposed Third Amended Answer.

The parties shall meet and confer in the next 45 days to discuss any limited discovery which may be required as a result of these amendments. The parties shall then appear for a conference in [*8]IA Part 39, 60 Centre St - Room 208 on September 5, 2012 at 10:30 a.m. to discuss any such discovery requests and to set a date for trial.

This constitutes the decision and order of this Court.

Dated: July 16, 2012

________________________

BARBARA R. KAPNICK

J.S.C. Footnotes

Footnote 1: Defendant mislabeled its proposed Third Amended Answer annexed to its motion papers as the "Second Amended Answer & Counterclaims," but corrected the title to "Third Amended Answer & Counterclaims" in its reply papers.

Footnote 2: Defendant asks the Court to grant its motion for leave to amend the Answer to add affirmative defenses and counterclaims and to simultaneously grant summary judgment on its proposed counterclaims. The Court finds that that portion of the motion seeking summary judgment on counterclaims that are not as of yet in the Answer is premature. Defendant's motion for partial summary judgment on its proposed counterclaims is, therefore, denied without prejudice to renew at a later time.

Footnote 3: CPLR 3015(a) provides as follows:

Conditions precedent. The performance or occurrence of a condition precedent in a contract need not be pleaded. A denial of performance or occurrence shall be made specifically and with particularity. In case of such denial, the party relying upon the performance or occurrence shall be required to prove on the trial only such performance or occurrence as shall have been so specified.

Plaintiff fails to elaborate on this argument in its opposition papers, and only briefly mentioned it on the record. (Tr. 25:17-18, 25:24-25.) Moreover, plaintiff cites to no case law to support its proposition that a denial of performance or occurrence of a condition precedent that has not been pled in the initial Answer cannot later be pled in a subsequently amended Answer. Thus, the Court finds plaintiff's argument that defendant's proposed affirmative defenses and counterclaims have been waived pursuant to CPLR 3015 to be without merit.