EZ-CR Corp. v CR Rest. Rt. 97 Corp.
Annotate this CaseDecided on August 31, 2012
County Court, Sullivan County
EZ-CR Corp., Petitioner,
against
CR Restaurant Rt. 97 Corp., Respondent.
3179-11
Stoloff & Silver, LLP
26 Hamilton Avenue, PO Box 1129
Monticello, NY 12701
By: Richard A. Stoloff, Esq.
Attorney for Petitioner
Marvin Newberg, Esq.
33 North Street
Monticello, NY 12701
Attorney for Respondent
Frank J. LaBuda, J.
This matter consists of two actions, joined by this Court in December, 2011: EZ-CR Corp. v. CR Restaurant Rt. 97 Corp., the County Court eviction proceeding, and Reber and CR Restaurant Rt. 97 Corp. v. Goldring, and EZ-CR Corp., the Supreme Court matter involving numerous issues other than the actual eviction proceeding. This Decision and Order only concerns the County Court summary eviction proceeding and the Respondent's responses thereto, and therefore, for clarity and to minimize confusion, only the County Court caption appears.
The current matters before the Court are: (1) a petition by Petitioner for a final judgment of eviction of Respondent from the subject premises and a warrant to remove Respondent from the subject premises, an award of unpaid rent together with interest thereon, and the costs and disbursements associated with the petition; (2) a motion by Respondent seeking dismissal of the petition, discovery, and requesting a preliminary injunction and restraining order against Richard Goldring from interfering with the Cedar Rapids business; (3) a cross-motion by Petitioner for an order denying Respondent's motion in its entirety, consolidating the two summary eviction petitions and severing them from the Supreme Court action, and appointing a temporary receiver for the subject premises and the businesses operated thereon by CR Restaurant.
[*2]HISTORY
The relationship of the parties is disputed by the parties themselves. Nevertheless, this Court recognizes that Fred Reber (Reber) is a principal of Respondent corporation. Respondent operates a successful, seasonal business in Barryville, New York, involving, amongst other activities, a restaurant, campground, and canoe rentals. Respondent operates said business on property owned by Petitioner. Richard Goldring (Goldring) is a principal of Petitioner corporation and owns the real and tangible personal property leased by Respondent. Reber and Goldring own interests in both of the corporate entities involved in this action.
The corporate parties to this action entered into a one-year lease agreement beginning February 2, 2009 (the "2009-2010" lease), for Respondent to rent the subject property from Petitioner. The lease included not only rental of the real property, but use of all personal and other property located on the premises, use of the existing business name and telephone numbers and other equipment as specified in an attachment to the lease. As per the lease terms, the Respondent was to pay to Petitioner a yearly rent of $55,080.00 in monthly installments of $4,590.00 due on the 2nd of each month. The rent was stated to include the interest on the mortgage, a lump sum due on the mortgage, combined county/town and school taxes, and fire/flood/liability insurance on the subject premises. Attorney Andrew Boyar prepared the 2009-2010 lease and both parties executed the lease.
Respondent failed to make all required payments pursuant to the 2009-2010 lease. Nevertheless, the parties entered into a second lease, dated February 2, 2010 (the "2010-2011" lease). This second lease was also of a one-year duration and terminated on February 1, 2011. The 2010-2011 lease also included not only rental of the real property, but use of all personal and other property located on the premises, use of the existing business name and telephone numbers and other equipment as specified in an attachment to the lease. The yearly rent was $40,920.00 payable to the landlord, EZ-CR Corp, by monthly installments of $3,410.00 due on the 2nd day of each month beginning with February, 2010. As was the case with the 2009-2010 lease, this lease indicated that the rent was to include the interest on the mortgage, a lump sum due on the mortgage, combined county/town and school taxes, and fire/flood/liability insurance on the subject premises. It is undisputed that attorney Andrew Boyar prepared the 2010-2011 lease and both parties executed said lease.
Respondent failed to make all payments as required under the 2010-2011 lease. At the expiration of the 2010-2011 lease, Respondent did not exercise the right to renew the lease, and became a month-to-month tenant under the same terms and conditions as indicated in the written lease. Respondent still continued to fail to pay the rent.
Effective November 1, 2011, Petitioner terminated the month-to-month tenancy by properly serving Respondent with written notice of termination of the month-to-month tenancy on September 26, 2011. Despite being served with a notice to terminate, however, Respondent continued and to date, continues to remain in possession of the subject premises beyond [*3]November 1, 2011, as a holdover tenant without permission of Petitioner.
Although Respondent remained in possession of the premises on a month-to-month basis beginning on February 2, 2011, and then as a holdover tenant after October, 2011, Respondent failed to pay all of the 2011 rental payments due to Petitioner, including the 2010-2011 school taxes. In addition to failing to make monthly payments to Petitioner, Respondent, when it did finally pay some of the property taxes, did not make the payments to Petitioner as required by the lease and tenancy terms.
Petitioner had filed a petition for summary eviction in September, 2011, based on the 2009-2010 lease. At that time, it is alleged that the parties, their current attorneys, and the attorney who prepared both leases, were unaware of the 2010-2011 lease. As unbelievable as that sounds, it is not in dispute!
This Court held a hearing on December 7, 2011. The Respondent asserted, on the record, that in reality, the parties were involved in a "joint venture," were originally represented by the same attorney, Andrew Boyar, Esq., and that the lease Mr. Boyar prepared was a "sham." Therefore, Respondent argued that eviction was not a proper remedy, because there was not a landlord-tenant relationship between the parties. During the hearing, the Respondent alluded to the lease being created for purposes of Respondent being able to obtain a liquor license.[FN1]
After hearing counsel for both parties and considering all prior pleadings, papers and proceedings, this Court reserved decision on the eviction and request for past rent due, and issued an order directing an expedited discovery schedule, requiring all paper discovery to be completed on or before January 28, 2012, and depositions to be completed on or before February 29, 2012. As the parties acknowledged the mortgage was current, the Court further ordered that Respondent bring all of the back taxes up to date by January 31, 2012, and set a trial date for March 21, 2012, to settle all other matters.
Respondent failed to pay all of the back taxes on or before January 31, 2012, although the record indicates Respondent did pay some of the outstanding taxes. The parties did not complete depositions on or before February 29, 2012.
In a final effort to try to resolve the matter, the parties appeared for a pre-trial status and settlement conference in Chambers on March 21, 2012, rather than starting the previously scheduled trial on the Supreme Court action. Andrew Boyar, Esq., also appeared on that date. During the March 21, conference, the Petitioner initially requested a decision on the eviction petition, but as the conference proceeded the parties agreed to try to settle the matter and move [*4]forward with the taking of depositions.
The matter could not be settled. On April 26, 2012, the Court issued a decision and order on the outstanding September, 2011, petition for summary eviction, in addition to Petitioner's motion for contempt, granting all of the relief requested by Petitioner and denying Respondent's cross-motion and other requests for relief.
Respondent requested leave to reargue the April 26, 2012, decision. The Court granted leave. During oral argument on Respondent's motion to reargue, the parties informed the Court they suddenly became aware of the 2010-2011 lease. The Court stayed all further proceedings on the 2009-2010 lease.
Petitioner subsequently filed a second petition for summary eviction on May 18, 2012. On June 6, 2012, Respondent filed a motion to dismiss said petition and for the relief as stated above. The parties submitted additional letters and affidavits in support of their respective positions.
The Court held a lengthy evidentiary hearing on the matter in July and August of 2012, at which evidence was presented by both parties, and testimony was heard from Fred Reber (the operator of CR Restaurant), Richard Goldring (the operator of EZ-CR) and Andrew Boyar, Esq., the attorney and escrow agent for both parties prior to the current litigation. Based on all of the evidence introduced at the hearing, the testimony of the witnesses, the pleading, and the written motions of both parties, the Court makes the following Finding of Fact and Conclusions of Law.
FINDINGS OF FACT
In early 2008, Fred Reber leased the subject property from the owner at that time, Theodore Kulik (hereinafter "Kulik"). In early 2009, Richard Goldring purchased the subject premises from Kulik and the parties herein entered into the 2009-2010 lease, dated February 2, 2009. Simultaneously, the parties executed a "Buy-In Agreement" dated February 2, 2009.
The 2009 Buy-In Agreement allowed for Reber to become a 50% shareholder of Petitioner, EZ-CR Corp., upon paying to Goldring, 50% of the "acquisition and closing costs" associated with the subject premises, i.e., 50% of $323,750.00, which was $161,857.00. The Buy-In was to be made in three annual installments: February 2, 2010—$53,958.33 (no interest), February 2, 2011—$53,958.33 (plus accrued interest on unpaid balance at rate of 4.5%), and February 2, 2012—$53,958.33 (plus accrued interest on unpaid balance at rate of 4.5%). In the event Reber could not make all of the installments, he would be entitled to a proportionate number of shares based on his payment.
The June 16, 2010, Addendum to the 2009 Buy-In Agreement modified the method of payment of the first installment to include means other than cash. Therefore, Reber made the first installment on June 16, 2012, as per the Addendum, and was issued 1/6 of the shares of EZ-CR [*5]Corp., which consisted of five (5) shares (certificate No. 3). The June 16, 2010, Addendum clearly indicated that Andrew Boyar, Esq., the escrow agent holding the EZ-CR shares of stock (Certificates), was not permitted to issue any additional shares of stock or Stock Certificate Nos. 4 and 5, to Reber without express written permission from Goldring on behalf of EZ-CR. In January of 2011, Reber made a partial payment of $30,000.00 in cash toward the second installment due on February 2, 2011. Reber did not complete that payment by the due date.
By letter dated August 22, 2011, Goldring, on behalf of EZ-CR Corp., informed Andrew Boyar, Esq., not to issue any additional shares of stock or stock certificates to Reber. On September 21, 2011, however, Reber presented a check, previously rejected by Goldring, to Andrew Boyar, Esq., who, in violation of the June 16, 2010 Addendum to the Buy-In Agreement and in violation of the August 22, 2011 express written directive of EZ-CR Corp., unlawfully issued the remaining stock to Reber. The check was made payable to EZ-CR Corp., rather than Goldring, and it was for an incorrect amount, less than what was due.
On September 23, 2011, Reber attended an EZ-CR Corp. corporate meeting. Therefore, there was a quorum at said meeting. Reber, however, left the meeting early. After his departure, Goldring voted to terminate the month-to-month tenancy, effective November 1, 2011, and to take action to remove Respondent from the subject premises. Reber's absence from the latter portion of the meeting did not nullify the quorum, and therefore all decisions and votes during said meeting were valid as a matter of law. Contrary to Respondent's assertions, Reber was not a 50% shareholder of EZ-CR Corp. on September 23, 2012.
At all times after November 1, 2011, Respondent has refused to leave the subject premises, claiming the parties were really in a joint venture, and the two leases were not valid.
Andrew Boyar, Esq., who prepared the lease, provided sworn testimony that the lease was intended to be a valid lease and in fact was a legitimate lease between the parties. The lease was created to define the relationship of each business vis-a-vis the subject premises, as well as to limit the protection liability of EZ-CR Corp., which owned most of the assets, should any litigation arise as a result of CR Restaurant's operation of the business on the subject premises. The record of the December, 2011, hearing indicates Respondent took the position that the 2009-2010 lease (the only one purportedly known of at that time), was a sham and was created so Respondent could obtain a liquor license from the New York State Liquor Authority (hereinafter "SLA"). Respondent has correctly pointed out during these proceedings that Petitioner and/or Goldring cannot obtain a liquor license due a Goldring's criminal history. During the December, 2011, hearing and during every hearing and court appearance thereafter, the Court reminded counsel for both parties that defrauding the SLA is a crime and Respondent should carefully consider maintaining the position on the lease.
Regardless of Respondent's assertions, both the 2009-2010 and 2010-2011 leases are valid and enforceable leases as a matter of law. There is nothing in the record, nor was there any sufficient testimony or evidence presented at the July/August 2012 hearing to indicate the leases [*6]were void as a matter of law or voidable for any reason. There is no evidence, other than Respondent's subjective belief, that the parties were engaged in a joint venture, partnership, or other legal relationship that would undermine the validity of either lease. Therefore, there is no reason to look beyond the lease itself, to determine its terms and conditions.
The parties were in a lawful and enforceable landlord/tenant relationship; Petitioner was and continued to be the landlord. Respondent was and continues to be the tenant.
CONCLUSIONS OF LAW
A corporate action to terminate a tenancy, or to file a any legal action must be authorized by a majority of the votes cast in favor of such action at a meeting. BCL §614(b). "Votes cast" means votes actually cast, at the meeting, for or against a resolution; that means the majority of votes cast at the meeting. Bank of New York Co., Inc. v. Irving Bank Corp., 140 Misc 2d 508 [Sup. Ct. NY Co. 1988], affirmed, 143 Ad2d 1070 [1st Dept. 1988]. "The holders of a majority of the votes of shares entitled to vote thereat shall constitute a quorum at a meeting of shareholders." BCL §608(a). "When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders." BCL §608(c). In addition, the President of a corporation has the presumptive authority to institute lawsuits or suits in equity in the name of and on behalf of a corporation, absent any contrary provisions in the bylaws or action of a board of directors. West View Hills, Inc. v. Lizau Realty Corp., 6 NY2d 344 [1959]; TJI Realty, Inc. v. Harris, 250 AD2d 596 [2nd Dept. 1998].
When an escrow agent violates the terms of an escrow agreement and other valid and lawful instructions, and erroneously delivers an instrument to an entity or individual, said delivery is inoperative as a matter of law and confers no rights or title to the holder of the instrument—under the law, there has been no effective delivery of the instrument. Egnotovich v. Katten Muchin Zavis & Roseman LLP, 55 AD3d 462 [1st Dept. 2008]; Clark v. Gifford, 10 Wend 310 [1833]; see also, 55 NY Jur2d Escrow §39. For example, when a deed has been delivered in violation of an escrow agreement, no title passes. TDNI Properties, LLC v. Saratoga Glen builders, LLC, 80 AD3d 852 [3rd Dept. 2011].
Pursuant to RPAPL §711 a special proceeding may be brought to recover possession of real property when a tenant has remained in possession after expiration of the lease term (§711(1)), or the tenant has defaulted in the payment of rent (§711(2)). Any judgment under this provision shall include an award to the successful party for the costs of the proceeding. RPAPL §747(1); CPLR §8101; Hannon v. Keller, 2 Misc 2d 927 [Sullivan Co. Ct. 1956].
In a summary holdover proceeding, "a landlord must allege and prove that, as of the time the proceeding is commenced, the tenant remains in possession beyond the expiration of his term." Kern v. Geller, 40 AD3d 1241 [3rd Dept. 2007]; Perrotta v. Western Regional Off-Track Betting Corp., 98 AD2d 1 [4th Dept. 1983].
At the outset, Petitioner has sufficiently alleged and proved that Respondent was not a lawful and valid holder of Stock Certificates Nos. 4 and 5. Andrew Boyar, Esq., the escrow agent, violated not only the provision of the Buy-In Agreement and its June 16, 2010, Addendum, but he violated the express written directive of Goldring, the President and majority shareholder of EZ-CR that he, Boyar, was not to release any certificates to Reber without express written permission of Goldring on behalf of EZ-CR Corp. Moreover, Boyar released the certificates, even though Reber's check was made payable to the wrong party and was for an incorrect amount of monies due and owing on the installment. Therefore, Reber had no more valid title to any additional shares of stock in EZ-CR Corp. on September 21, 2011, after receiving the certificates from Boyar, than he did prior to that time and had no more voting rights than he had prior the erroneous delivery of said certificates; Reber had no title to the certificates. Egnotovich v. Katten Muchin Zavis & Roseman LLP, supra.
Contrary to Respondent's assertions, Petitioner has sufficiently alleged and proved that Goldring was in his rights to cast his votes at the September 23, 2011, meeting, even after Reber left the meeting; Reber's withdrawal from the meeting did not affect the quorum already established by his presence at the beginning of the meeting. BCL §608(a), (c).
Petitioner has also sufficiently alleged and proved that EZ-CR Corp.'s action to terminate the month-to-month tenancy was a valid act on behalf of the corporation and in the corporation's best interest, and has further proved that the legally necessary number of votes were lawfully cast at the September 23, 2011, corporate meeting to terminate the tenancy and initiate summary eviction proceedings against Respondent. Bank of New York Co., Inc. v. Irving Bank Corp., supra; BCL §608(a), (c). After Reber left the EZ-CR Corp. Corporate meeting on September 23, 2011, Goldring, as majority shareholder, voted accordingly to take action against Respondent. Furthermore, Goldring, as president, acted within his presumptive authority to take action against Respondent in the best interest of the corporation. West View Hills, Inc. v. Lizau Realty Corp.; TJI Realty, Inc. v. Harris, supra.
Petitioner has sufficiently alleged and proved that Respondent unlawfully remained in possession of the subject premises after receiving the valid notice of termination. After the 2010-2011 lease had long expired, Respondent remained on the premises as a month-to-month tenant, and then as a holdover tenant. Petitioner, having not received all of the rent for the period of occupancy during 2011, and there being back taxes due on the property, properly and timely served Respondent with a notice of termination on September 26, 2011, requiring Respondent to vacate the premises on or before November 1, 2011. RPAPL §711(1). Respondent has unlawfully remained in possession of the premises as a holdover tenant since November 1, 2011. Perrotta v. Western Regional Off-Track Betting Corp., supra. Petitioner is therefore entitled to a judgment of eviction under RPAPL §711(1).
Furthermore, Petitioner has sufficiently alleged that Respondent failed to pay the entire rent due and owing in 2011.[FN2] While Respondent made partial payments of rent in 2011, Petitioner has sufficiently alleged and proved that Respondent failed to pay the entire sum due and owing, directly to Petitioner as required in the 2010-2011 lease.[FN3] Therefore, this court finds that Petitioner is entitled to a judgment of eviction pursuant to RPAPL §711(2).
Last, pursuant to RPAPL §747(1) and CPLR §8101 Petitioner is entitled to an award of the costs associated with this special proceeding.
Whether or not the parties have ever been involved in a joint venture, partnership, or other relationship does not affect the validity of the leases involved in this proceeding an does not affect the authority of the Court to grant Petitioner's application for summary eviction on a facially valid lease, the validity of which was testified to by the attorney who prepared it. In addition, since the Court has determined the lease is valid and enforceable, the Court need not address the issue of whether the lease was created in order to defraud the SLA in order for Respondent to obtain a liquor license.
Based on the above, it is
ORDERED that Petitioner's petition for a judgment of eviction based on the 2010-2011 lease is granted in its entirety; and it is further,
ORDERED that Petitioner is hereby awarded the rent for the periods specified in its petition in the amounts specified therein together with interest thereon; and it is further
ORDERED that Petitioner is hereby awarded the costs and attorneys' fees associated with the eviction petition; and it is further
ORDERED that Respondent's motion for dismissal of the petition, discovery, and requesting a preliminary injunction and restraining order against Richard Goldring from interfering with the Cedar Rapids business is denied in its entirety, and it is further
ORDERED that Petitioner's cross-motion for consolidating the two summary eviction petitions and severing them from the Supreme Court action is granted; and it is further
ORDERED that the Court reserves its decision on Petitioner's cross-motion for the appointment of a Receiver; the parties shall submit additional written arguments within ten (10) days of the date of this Decision on the issue of appointment of a Receiver; and it is further.
ORDERED that Petitioner shall submit, within ten (10) days herefrom, and on ten (10) days notice to the Respondent, a proposed judgment in accordance herewith and a warrant.
This shall constitute the Decision of this Court in accordance with CPLR §4213(b).
The original decision and all papers are being filed by this Court with the Supreme Court Clerk for transmission to the Sullivan County Clerk's Office this date.
The signing of this Decision and Order shall not constitute entry or filing under CPLR §2220. Counsel is not relieved from the provisions of that rule regarding filing, entry and notice of entry.
Dated: August 31, 2012
Monticello, New York
____________________________
Hon. Frank J. LaBuda
Acting Supreme Court Justice
Sullivan County Court Judge
and Surrogate
Footnotes
Footnote 1:The Court did not delve further into the nature of the lease or the issues involving the State Liquor Authority at the time of the hearing, leaving that issue to be litigated during the trial. The court did, however, admonish counsel that there could be criminal liability if the Respondent maintained the lease was a sham for purposes of obtaining a liquor license from the SLA.
Footnote 2:Although Respondent has paid outstanding property taxes directly to the taxing authority, Respondent has failed to pay any other rent directly to Petitioner as required under the lease.
Footnote 3:It should be noted that Respondent continues to fail to pay rent in 2012 to Petitioner pursuant to the terms of the written lease.
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