City of New York v Seguine Bay Estates LLC

[*1] City of New York v Seguine Bay Estates LLC 2016 NY Slip Op 51844(U) Decided on December 29, 2016 Supreme Court, Richmond County Straniere, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 29, 2016
Supreme Court, Richmond County

The City of New York and THE LANDMARKS PRESERVATION COMMISSION, Plaintiff

against

Seguine Bay Estates LLC, LEO TALLO and THE LAND and BUILDING THEREON KNOWN AS 509 SEGUINE AVENUE, A/K/A BLOCK 6666 LOT 1., Defendants.



100740/13



Attorney For PlaintiffsZachary W. Carter

Corporation Counsel of the City of New York

100 Church Street

New York, NY 10007

Attn:Michelle Goldberg-Chan

Karen B Selvin

Rachel Moston

Attorney or Defendants:Howard M. File

260 Christopher Lane, Suite 102

Staten Island, NY 10314
Philip S. Straniere, J.

LyricNo.1:The city council met last night,

The vote was four to three.

To tear the home town depot down

And build a factory.

To take that stretch of history

And tear it off the map

And to take old engine number nine

And turn it into scrap.[FN1]

Lyric#2:They took all the trees

And put them in a tree museum

And they charge all the people

A dollar and a half to see 'em

Don't it always seem to go

That you don't know what you got

'Till it's gone

They paved paradise and put up a parking lot.[FN2]

Lyric#3:Ain't gonna need this house no longer

Ain't gonna need this house no more

Ain't got time to fix the shingles

Ain't got time to fix the floor

Ain't got time to oil the hinges

Nor mend the window pane

Ain't gonna need this house no longer

I'm getting ready to meet the saints.

This old house is gettin' shaky

This old house is gettin' old

This old house lets the rain in

This old house lets in the cold[FN3]

Lyric#4:There's an old old house that once was a mansion

On a hill overlookin' the town

Where time's left a wreck where once was a beauty

And soon the old house will tumble down.[FN4]

The above four lyrics set the tone for this litigation-the continuing battle between preservationists and developers-with the first two by the advocates of landmarking and the second two reflecting the position of the defendants.

Plaintiffs, City of New York (City) and The Landmarks Preservation Commission [*2](Landmarks), commenced this action to compel the defendants, Seguine Bay Estates LLC (Seguine), Leo Tallo (Tallo), and the Land and Buildings thereon known as 509 Seguine Avenue, a/k/a Block 6666 Lot 1 in the County of Richmond, City and State of New York, to comply with the order of the Landmarks Commission issued pursuant to Title 25 Chapter 3 of the New York City Administrative Code (NYCAC) to maintain in good repair the building known as 509 Seguine Avenue, Staten Island, New York. Defendants have opposed that application alleging that the premises is not capable of generating a reasonable economic return, is in an unsafe condition, and should be demolished. All parties are represented by counsel.

Defendant Leo Tallo's name actually is Leonard Tallo.

The matter proceeded to trial on March 21, 22, 24 & 29, 2016. Both sides were represented by counsel. A final written decision was delayed because the trial transcripts were not timely available to the parties.

Background:

The premises in question is known as the "Manee-Seguine Homestead." It was constructed about 1680 and is one of the six oldest buildings in New York City. It is an example of New World-Dutch architecture. The Manee and Seguine families are French Huguenots who settled on Staten Island beginning in the second half of the 17th Century. During its early life the building served as a single family home. It was later known as the Old Homestead Hotel and Purdy's Hotel.

In 1965 the New York City Council adopted the statute creating landmarks preservation and historic districts both as an integral fiber of the City. The statute provides at NYCAC §25-301:

b. It is hereby declared as a matter of public policy that the protection, enhancement, perpetuation and use of improvements and landscape features of special character or special historical or aesthetic interest or value is a public necessity and is required in the interest of the health, prosperity, safety and welfare of the people. The purpose of this chapter is to (a) effect and accomplish the protection, enhancement and perpetuation of such improvements and landscape features and of districts which represent or reflect elements of the city's cultural, social, economic, political and architectural history; (b) safeguard the city's historic, aesthetic and cultural history as embodied and reflected in such improvements, landscape features and districts; (c) stabilize and improve property values in such districts; (d) foster civic pride on the beauty and noble accomplishments of the past; (e) protect and enhance the city's attractions to tourists and visitors and the support and stimulus to business and industry thereby provides; (f) strengthen the economy of the city; and (g) promote the use of historic districts, landmarks, interior landmarks and scenic landmarks for the education, pleasure and welfare of the people of the city.

On October 1, 1981, John Spankovich and Patricia Spankovich conveyed the property to Thomas Barbato, William Peper and Brian Fabrizzi.

On April 10, 1985, Barbato, Peper and Fabrizzi transferred title to Barbato and Fabrizzi.

On September 11, 1984, Landmarks, after having held public hearings on October 12, 1982, designated the Manee-Seguine Homestead as a Landmark. The designation and the restrictions included thereby covered not only the building, but because it faced Lower New York Bay, also the property, a lot approximately 135 feet by 150 feet. The plot is on the corner of Purdy Place and Seguine Avenue with the front of the house facing Purdy Place. The designation of the building and property as a landmark clearly was within the purview and authority of the Landmarks Commission as set forth in the statute above.

On October 16, 1989, Landmarks caused to be filed with the Richmond County Clerk a "Notice of Designation" which was recorded against the property and gave the public notice that the block and lot had been declared a "landmark" pursuant to the NYCAC. Such designation remains in full force and effect.

On September 2, 2008, the New York City Department of Buildings (DOB), after having made an inspection on August 28, 2008 issued an Emergency Declaration authorizing a demolition order finding that the building was unsafe and should be demolished to the ground. That document indicates that four years earlier an unsafe buildings notice was issued but dismissed when the then owner, Thomas Barbato, effectively sealed the building.

On October 29, 2008, the Emergency Declaration, after intervention by Landmarks, was withdrawn by the DOB and amended to require only that the windows be sealed and a chain link fence installed around the perimeter.

On September 11, 2009, Intrepid Construction LLC, purchased the premises for $465,000.00. The grantors were Barry W. Frost, as trustee in Bankruptcy for Brian Fabrizzi and Joan Fabrizzi, and Thomas Barbato, each as to a one-half interest.

Also on September 11, 2009, a second deed, was executed from Intrepid Construction LLC, to Seguine Bay Estates, LLC., apparently for no consideration. Defendant Tallo is the principal member of Seguine Bay. At trial he indicated that his wife is also a member of the LLC but that he was the sole individual making decisions concerning the property.

At some point Seguine, entered into negotiations with Landmarks, to develop the property for residential purposes. The prior owners had sought to build houses facing Seguine Avenue, but never completed the approval process. Because of the landmark designation for the entire plot, limitations were placed upon the height and location of any prospective buildings on the lot. During the period of their ownership defendants have made little or no repairs to the structure.

On October 6, 2013, the DOB conducted an inspection at the premises and issued a "Commissioner's Order to Correct Violations." This was followed by an "Emergency [*3]Declaration" from DOB on October 16, 2013 which required Seguine to repair the open chain link fence; remove loose bricks from the 3 chimneys; install shoring and bracing in the attic and floor and grade level of the west wing; seal up hole in the roof and all openings and holes on the ground floor. Defendants took no steps to comply with this order and have not since its issuance.

In May 2013, after determining that the defendants had ignored the "Commissioner's Order" plaintiffs commenced this action to compel the defendants to maintain the property as required by the Landmarks Preservation Law. Defendants answered and filed a counterclaim to which the plaintiffs replied.

At a court appearance on September 27, 2013, defendants indicated that they planned to make a "hardship application" to Landmarks [NYCAC §25-309] in which that they would seek to establish that it was not economically feasible to maintain the premises as a landmark. Defendants never filed such application so there never was any determination made by Landmarks as provided by the NYCAC that the premises is "capable of earning a reasonable return" [NYCAC 25-§302(c)].

On November 6, 2013 an Order to Show Cause was made returnable before Justice Maltese. The defendants in that application sought to restrain the City from taking steps to make repairs to the premises as set forth in the DOB notice of violation and Emergency Declaration and then bill the cost to the defendants. The appearance on that date resulted in a "so ordered" stipulation which provided that the DOB would not make any emergency repairs to the premises until the defendants exhausted their administrative remedies before the Environmental Control Board. At that time a hearing was scheduled for December 4, 2013. That hearing was adjourned and actually took place on January 8, 2014.

The ECB hearing resulted in a finding that the defendants were in violation NYCAC §28-301.1 for failing to properly maintain the building. The Administrative Law Judge assessed a $1,000.00 fine but noted that the ECB lacked the authority to determine whether the building should be repaired or demolished. There is no indication as to whether the defendants have sought to appeal this finding or otherwise exhaust their administrative remedies in that regard. Presumably they have not.

Issues Presented:

Does Either Defendant Qualify as a Person in Charge?

Plaintiffs argue that the statutory definition of a "person in charge" means not only the entity in title but also a "natural person" such as the "person" clearly described in "Adelaide's Lament" from Frank Loesser's "Guys and Dolls." Defendants on the other hand contend that if the entities listed in the statute happen to be "legal persons" existing only in a corporate kit on a lawyer's shelf next to the elf, then that alone is the "person in charge" and no individual is responsible no matter what is that individual's role in the [*4]entity.

In order to be responsible for the maintenance of a landmarked premises, a person must meet the statutory definition of a "person in charge" [NYCAC §25-302(t)]. It provides:

"Person in charge." The person or persons possessed of the freehold of an improvement or improvement parcel or a lesser estate therein, a mortgagee or vendee in possession, assignee of rents, receiver, executor, trustee, lessee, agent, or any other person directly or indirectly in control of an improvement or improvement parcel.

Defendant Seguine as the owner of the property qualifies as a "person in charge" under the terms of the statute. Tallo is named as a defendant as well. Is he also a "person in charge?" Because of the broad language of the statute it must be concluded that Tallo, individually also is a "person in charge" as he is either directly or indirectly in control of the improvement and the parcel as the managing member of the Seguine Bay Estates, LLC. There has been no evidence to rebut the conclusion that he is the managing member of the limited liability company and as such is subject to all the duties and liabilities of a manager [Limited Liability Company Law Article IV] and is the person with sole authority and control of the assets and management of Seguine.

The question must be asked whether the term "person" applies only to individuals or whether entities such as corporations, limited liability companies and similar entities can be a "person in charge." Owing to the constant battle between preservationists and developers, there is some support that only an individual can be a person in charge. It is common for developers to form corporations whose sole asset is the real estate. If corporations are permitted to be a person in charge the Landmarks Commission and the City would be reduced to the remedy of obtaining only the property owned by the entity in satisfaction of any judgments or monetary penalties assessed for violating the preservation statute or pursuing an action to pierce any corporate veil to pursue a claim against the principals of the entity.

Also NYCAC §25-302(s) is a separate definition of an "owner" under the statute. It provides:

"Owner." Any person or persons having such right to, title to or interest in any improvement so as to be legally entitled, upon obtaining the required permits and approvals from the city agencies having jurisdiction over building construction, to perform with respect to such property any demolition, construction, alteration or other work as to which such person seeks the authorization or approval of the commission pursuant to section 25-309 of this chapter.

The fact that Title 25 differentiates between an "owner" and a "person in charge" leads to the conclusion that the purpose of the law is to ensure that there is an individual responsible for the maintenance of the landmark irrespective of how title to the property is held. Otherwise the term "owner" would have been sufficient to ensure compliance with the statute. The use of the term "person in charge" means that the legislature wanted an individual to be responsible for the maintenance of landmarked premises.

An analogous situation exists with multiple dwellings covered by NYCAC Title 27 where the statute mandates that the "managing agent" for a multiple dwelling in New York City be a "natural person over the age of twenty-one" who either resides within the city or customarily or regularly attends to business in the city [NYCAC §27-2098(a)(3)]. A similar requirement exists for one or two-family dwellings not owner occupied [NYCAC §27-2098(a)(5)]. It is obvious that to ensure that there is someone responsible for maintaining the multiple and non-owner occupied one and two family dwellings that there be a human being designated. In fact, the Manee-Seguine Homestead is a one or two-family dwelling not owner occupied requiring a natural person to serve as its managing agent. No documentation has been placed into evidence as to whether defendants have complied with this requirement of the administrative code.

A similar need to have a responsible party exists with regard to landmarks. Both statutes refer to the need to identify a person "in control" so as to have someone responsible for the maintenance of the property. Tallo meets the description as someone directly or indirectly in control of the premises and therefore along with the LLC is a "person in charge."

Another issue exists. Is a "limited liability company" a "legal person?" General Construction Law §37 defines "person" only to include "a corporation and a joint-stock association." The definition has never been amended to include new business entities recognized by the legislature. If Seguine as an llc is not a "person" then it cannot be a "person in charge" and only Tallo as a natural person would be responsible. However, because Limited Liability Company Law §202 enumerates all the powers of an llc, many the same as those given to corporations and individuals, Seguine will also qualify as a legal person which can be a "person in charge."

As persons in charge both the Seguine and Tallo may have liability for maintenance of the property. Because the court has determined that Tallo is a "person in charge" there is no need to address the issue raised by plaintiff that the court should "pierce the corporate veil" in order to hold Tallo personally liable [City of New York et al v 598 Broadway Realty Associates et al, Index #401531/11, Supreme Court New York County (unreported decision Judge Jaffe].

B. What Is the Responsibility of a "Person in Charge"?

NYCAC §25-311 sets forth what is the responsibility of a person in charge of a landmarked property. It provides:

Maintenance and repair of improvements.

a. Every person in charge of an improvement on a landmark site or an historic district shall keep in good repair (1) all of the exterior portions of such improvement and (2) all interior portions thereof which, if not so maintained, may cause or tend to cause the exterior portions of such improvement to deteriorate, decay or become damaged or otherwise fall into a stateof disrepair.

b. Every person in charge of an improvement containing an interior landmark shall [*5]keep in good repair (1) all portions of such interior landmark and (2) all portions of the improvement which, if not so maintained, may cause or tend to cause the interior landmark contained in such improvement to deteriorate, decay or become damaged or otherwise fall into a state of disrepair....

d. The provisions of this section shall be in addition to all other provisions of law requiring any such improvement to be kept in good repair.

Because Seguine and Tallo both qualify as a "person in charge" under the statute they both have a statutory duty to maintain the exterior portion of the Manee-Seguine Homestead and all the interior portions of the house which if not maintained will cause the overall condition of the exterior of the Manee-Seguine Homestead to "deteriorate, decay or become damaged or otherwise fall into a state of disrepair."

Defendants allege that they have only done a minimal amount of maintenance on the premises because the condition of the structure prior to Seguine going into title was so bad that any such efforts are either useless or so costly that the property does not justify the expenditure of monies to achieve that end.

Defendants' contentions in this regard are not supported by the language of the statute and applicable case law. If defendants believed that is the factual situation, the NYCAC establishes procedures to be followed to challenge any determination by Landmarks. The intent of Article 25 is to protect the landmarked parcel while at the same time offering a process to be followed to contest the action of Landmarks. By ignoring the statutory procedure and acting unilaterally, defendants run the risk of being held liable for failing to keep a landmarked property in good repair. Defendants made a business decision to follow a path not authorized by Article 25 and thereby as a person in charge, each runs the risk of being subject to potential penalties.

Defendants have not complied with their statutory responsibilities as a person in charge and have failed to maintain the property in a manner required by the statute and in addition have failed to utilize the procedures available to them to protect their interests.

C. Does the Court Have the Authority to Grant the Relief Sought by the Defendants?

Defendants allege that because the plaintiffs have commenced this action seeking to compel the defendants to maintain the property, the defendants have the right to defend this action on the ground that the building should be demolished as it is unsafe and no reasonable return is economically feasible owing to the condition of the building. Defendants assert that to require the defendants to expend the monies needed to (1) shore up the building as required by the DOB to make it safe and remove the violation, and (2) to maintain the building while defendants go through the hardship process, is unreasonable whether the repairs are done by plaintiffs and billed to defendants or done by the defendants, in that defendants would be "throwing good money after bad" because the building should be demolished.

Plaintiffs assert that the defendants must exhaust their administrative remedies before seeking redress of the court system. Plaintiffs contend that the law sets forth a specific process to be followed when a property owner believes that a landmarked property cannot generate a reasonable economic return [NYCAC§25-309]. Plaintiffs argue that the defendants have owned the property since September 2009 and at no time have either applied for or sought to complete the "hardship" process. Plaintiffs point out that the property has been a landmark since 1984 and that the landmark status has been part of the public record as to this block and lot since 1989, so that the defendants were well aware of the property's status when they purchased it.

The existence of a "hardship" process in the law ensures that the property owner of a landmark purchased not for a person's own residential use can generate a fair return on the property and the government has not engaged in a "taking" by landmarking the property. NYCAC §25-309 provides:

Request for certificate of appropriateness authorizing demolition, alteration or reconstruction on ground of insufficient return.

a. (1) Except as otherwise provided in paragraph two of this subdivision a, in any case where an application for a permit to demolish any improvement located on a landmark site or in an historic district or containing an interior landmark is filed with the commission, together with a request for a certificate of appropriateness authorizing such demolition, and in any case where an application for a permit to make alterations to or reconstruct any improvement on a landmark site or containing an interior landmark is filed with the commission, and the applicant requests a certificate of appropriateness for such work, and the applicant establishes to the satisfaction of the commission that:

(a) the improvement parcel (or parcels) which includes such improvement, as existing at the time of the filing such request is not capable of earning a reasonable return; and

(b) the owner of such improvement:

(1) in the case of an application for a permit to demolish, seeks in good faith to demolish such improvement immediately (a) for the purpose of constructing on the site thereof with reasonable promptness a new building or other income-producing facility, or (b) for the purpose of terminating the operation of the improvement at a loss;....

(2) the commission, if it determines that the request for such certificate should be denied onbasis of the applicable standards set forth in section 25-307 of this chapter, shall within ninety days after the filing of the request for such certificate of appropriateness, make a preliminary determination of insufficient return.

b. In the case of an application made pursuant to paragraph one of subdivision a of this the section by an applicant not required to establish the conditions specified in paragraph two of such subdivision, as promptly as is practicable after making a preliminary determination as provided in paragraph one of such subdivision a, the commission, with the aid of such experts as it deems necessary, shall endeavor to devise, in consultation with the applicant, a plan whereby the improvement may be (1) preserved or perpetuated in such manner or form as to effectuate the purpose of this chapter, and (2) also rendered capable of earning a reasonable return.

c. Any such plan may include but shall not be limited to, (1) granting of partial or complete tax exemption, (2) remission of taxes and (3) authorization for alterations, [*6]construction or reconstruction appropriate for and not inconsistent with the effectuation of the purposes of this chapter.

d. In any case where the commission formulates any such plan, it shall mail a copy thereof to the applicant promptly and in any event within sixty days after giving notice of its preliminary determination of insufficient return. The commission shall hold a public hearing upon such plan.

Plaintiffs also allege that the fact that in September 2008 a demolition order was issued by DOB against the building is of no import because it was subsequently withdrawn, and was not in effect when the defendants purchased the premises in September 2009. This has been established by the Buildings Department records and the testimony of the witnesses. In fact, the procedure to be followed in regard to landmark buildings is for DOB to notify Landmarks. The purpose of the statute obviously is to give Landmarks the opportunity to determine the validity of any such order or direction. NYCAC §25-312 provides:

Remedying dangerous conditions.

a. In any case where the department of buildings, the fire department or the department of health, or any officer or agency thereof, or any court on application or at the instance of any such department, officer or agency, shall order or direct the construction, reconstruction, alteration or demolition (emphasis added) of any improvement on a landmark site or in an historic district or containing an interior landmark, or the performance of any minor work upon such improvement for the purpose of remedying conditions determined to be dangerous to life, health or property, nothing contained in this chapter shall be construed as making it unlawful for any person, without prior issuance of a certificate of no effect on protected architectural features or certificates of appropriateness or permit for minor work pursuant to this chapter to this chapter, to comply with such order or direction.

b. The department of buildings, fire department or department of health, as the case may be, shall give the commission as early as is practicable, of the proposed issuance or issuance of any such order or direction.

This chapter of the NYCAC is structured to give Landmarks supervision over landmark sites beyond those given to other agencies. NYCAC §25-304 provides:

Scope of commission's powers

b. (T)he commission may, in exercising or performing its powers, duties, or functions under this chapter with respect to any improvement in a historic district or on a landmark site or containing an interior landmark, or any landscape feature of a scenic landmark, apply or impose, with respect to the construction, reconstruction, alteration, demolition or use of such improvement or landscape feature or the performance of minor work thereon, regulations, limitations, determinations or conditions which are more restrictive than those prescribed or made by or pursuant to other provisions of law applicable to such activities, work or use.

This means that Landmarks has the authority to review the actions of another [*7]agency such as the Buildings Department and impose limitations on the findings of that agency if it would adversely affect a landmark.

Borough Commissioner Gluckman testified that the Memorandum from Michael Alacha, Assistant Commissioner for Engineering & Emergency Services to Vito Mustaciuolo, Associate Commissioner for HPD, indicating that he had declared an "Immediate Emergency Condition" based on his inspector's report was a mistake. The court noted that the memorandum contained the following statement: "the condition described on the attached emergency declaration form be made safe by demolition, repair, sealing or by whatever means necessary to protect the public safety." This statement contradicts the requirement for demolition based on the inspection and gives the option of remedying the situation without resorting to demolition.

This memorandum coupled with the statutory requirement to notify Landmarks, gave Landmarks the right to intervene, and have Buildings rescind the demolition order and require only sealing the building. It should be noted that this building which was allegedly in danger of collapse in 2008 is still standing although somewhat worse for its wear and tear because of the failure of the defendants to comply with their statutory duties or the plaintiffs to intervene and take the necessary steps to protect the landmark.

The evidence is clear. When defendants purchased the property in September 2009, the demolition order had been rescinded for almost one year. Because this was an "arms length" transaction, defendants are charged with either actual or constructive knowledge that the property was a landmark and that the demolition order had been rescinded. A title search would have disclosed the recorded landmark designation in October 1989. A Buildings Department search also would have revealed the premises was landmarked.

After having heard the testimony of the witnesses, reviewing the submissions of the parties including reports and photographs, and having viewed the site with their consent and in their presence, there are several conclusions that can be reached.

First, the plaintiffs have established that the building is of both historical and architectural importance, was appropriately landmarked and in theory is worth being preserved. Trial testimony revealed that both the land and the exterior of the building have been landmarked. An "exterior architectural feature" for landmarking purposes is described in the NYCAC §25-302(g). The statute does not describe "exterior" whereas "interior" and "interior architectural feature" are both defined at NYCAC §25-302(k) and (l) respectively. This has some significance because the testimony at trial was concerned with interior issues many of which were cosmetic, but a substantial amount of which concerned the stability of rafters and support beams which hold-up the roof and walls. Plaintiffs assert that these elements are sound while defendants contend that they are unsafe and failing which is causing the exterior to deteriorate. The facts and credible testimony support the plaintiffs' contentions.

Second, the defendants have no intention of formally engaging in the process to [*8]obtain approval of development plans for the site. Other than some preliminary negotiations and filings, they have not undertaken to complete the steps necessary to do so in the more than seven years of their ownership. Although Article 25 establishes a process for a landmark owner to seek a hardship exemption, defendants have sought not to avail themselves of that process. This leaves the court to decide if and "on whose dime" the building is going to be preserved.

It is almost hornbook law that where there is an administrative process to be followed, the court should refrain from interfering until that procedure is complete. In fact, there is case law which has held that initially it is the function of Landmarks to determine whether the property should be demolished and that the court should refrain from acting until that determination has been made [St. Paul and St. Andrew v Barwick, 67 NY2d 510 (1986)].

In an action with many similarities to the fact pattern of this case and with the issue of whether a landmark has been kept in good repair, it was concluded that the matter is initially to be determined by Landmarks. Courts generally defer to the determination of an administrative agency when the decision falls within the scope of the agency's expertise and will only intervene when the agency's determination is unreasonable [City of New York v 10-12 Cooper Square, Inc., 7 Misc 3d 253 (2004)]. In the current matter, Landmarks has determined that the structure is of historic significance, needs to maintained in good repair, and that the defendants have failed to do so. There is nothing in the record produced by defendants to lead to the conclusion that Landmarks has not been acting in good faith in carrying out its official duties. Defendant must produce "substantial evidence" to overcome the presumption of legality [Cooper Square @255]. No such substantial evidence has been produced by the defendants.

The reality is that no matter which side prevails in the administrative forums, this or some other court, will be left to decide whether the building should be demolished or if the defendants can generate a reasonable return on their investment. But as noted above the defendants have made a business decision not to engage in the statutory process. Defendants allege that to require them to exhaust the administrative process runs the risk of having the building collapse during that time or having the defendants expend money unnecessarily to maintain the building when it should be demolished. The validity of this argument is irrelevant because Article 25 makes the defendants responsible for the maintenance of the landmark at all times during the period of defendants' ownership and control. Once the property is deemed a landmark, the statutory protections requiring the maintenance of the property attach. Defendants knew of the landmark status when they bought the property in 2009. They are bound by the law. In fact, defendant Tallo, is a sophisticated land developer/investor with numerous properties on Staten Island and is familiar with requirements imposed by NYC in regard to property development and management.

D. Do the Actions of the Plaintiffs Constitute a Taking?

Defendants have alleged that the actions of plaintiffs in preventing defendants from developing the real property in the way defendants want to and would be permitted if the site was not landmarked, constitutes a taking by the government without just compensation.

Defendants rely on Lutheran Church in America v City of New York, 35 NY2d 121 (1974). This case found that:

Government interference with an owner's use of private property under the police power runs the gamut from outright condemnation for which compensation is expressly provided to the regulation of the general use of land remaining in private ownership so that the use might harmonize with other uses in the vicinity. No compensation is awarded in the latter situation since there is no taking .Such government interference is based on two concepts—either the government is acting in its enterprise capacity, where it takes unto itself private resources in use for the common good, or in its arbitral capacity, where it intervenes to straighten out situations in which the citizenry is in conflict over land use or where one person's use of his land is injurious to others .Where government acts in its enterprise capacity, as where it takes land to widen a road, there is a compensable taking. Where government acts in its arbitral capacity,...there is simply noncompensable regulation.

The court in Lutheran found that the landmark designation severely limited the right of the church to "freely and economically" use the premises for its charitable purposes and that it the property owner's proof of economic hardship was substantially unchallenged.

The Lutheran decision is distinguishable from the facts of the case at bar. Lutheran deals with an organization being restricted in being able achieve its charitable purposes because of the landmark designation and that there was a showing that the designation created an economic hardship. Defendants' are not a charity, they are engaged in a profit making enterprise and although they presented information concerning the economic hardship, they presented no information to substantiate their claim that the property is not economically viable either by renovating the building for a commercial purpose or developing the surrounding land in conformity with local zoning regulations. Article 25 provides a method for a property owner to obtain development rights for landmarked property by applying to Landmarks for a certificate of appropriateness. A party seeking to show that an otherwise reasonable land use regulation constitutes a deprivation of due process of law must demonstrate affirmatively that the regulation eliminates all reasonable return [Mary Chess, Inc. v City of Glen Cove, 18 NY2d 205 (1966)]. Defendants have not met that criteria.

The NYC Landmarks Law and the process of reviewing applications for hardship exemptions has been held to be constitutional [Penn Central Transportation Company v City of New York, 42 NY2d 324 (1977)]. It recognized that a landmark designation is different from zoning and historic districting in that the burden of the limitation is borne by a single owner [Penn Central @ 330].

There is a process to protect the interests of the owners of landmarked properties that enables them to establish that the designation prevents them from obtaining a reasonable return on their investment. Defendants have failed to avail themselves of that process and have not presented sufficient evidence from experts to enable this court to set aside the need to go through the hardship application where the expertise of the agency can come into play and work with the defendants to devise a plan which would maintain the historic nature of the property and permit a reasonable return to the defendants.

E. Are the Defendants' Claims Ripe?

Unlike plums in the Schmidt-Jones musical, "The Fantasticks," which can be too ripe, litigation may only "ripe" or "not yet ripe."

Plaintiffs argue that defendants' claim that the actions of the plaintiffs constitute a taking without just compensation is not ripe for judicial review because there has not been a final determination by the agency in regard to defendants' plans to develop the property.

In the Church of St. Paul & St. Andrew v Barwick, 67 NY2d 510 (1986), the Court of Appeals discussed the issue of "ripeness" in regard to the actions of Landmarks. The test to be applied is to first determine whether the issues tendered are appropriate for judicial resolution and second to assess the hardship to the parties if judicial relief is denied. There must be a showing that agency has arrived at a definitive position on the issue that inflicts an actual concrete injury. A controversy cannot be ripe if the claimed harm may be prevented or significantly ameliorated by further administrative action or steps available to the complaining party.

The facts of this case lead to the conclusion that any claim by defendants that a taking has occurred is not ripe because the defendants have failed to avail themselves of the statutory procedure to seek a hardship determination or to work with Landmarks to arrive at viable, acceptable comprise use of the property which preserves the structure. "Until the Commission acts, it simply cannot be said that the administrative agency has taken a definitive position 'that inflicts an actual, concrete injury'" (citations omitted) [Church of St. Paul & St. Andrew @ 522].

Defendants' may renew any claim for relief once they have received a final determination as to the appropriateness of their plans for development or demolition of the site.

F. Do Defendants Have to Exhaust Their Administrative Remedies?

As pointed out in Church of St. Paul & St. Andrew @ 521, exhaustion of administrative remedies is not the same as "ripeness."

Ripeness pertains to the administrative action which produces the alleged harm ; the focus of the inquiry is on the finality and effect of the challenged action and whether the harm from it might be prevented or cured by administrative means available to the [*9]plaintiff. The focus of the "exhaustion" requirement, on the other hand, is not on the challenged action itself, but on whether administrative procedures are available to review that action and whether those procedures have been exhausted.

It is uncontroverted that the defendants made a business decision not to avail themselves of any of the administrative procedures available to them in Article 25 to have Landmarks review either the appropriateness of defendants' allegation that the structure is unsafe and should be demolished or that some middle ground could be achieved to save the historic building and allow development of the property so as to produce a fair return on defendants' investment.

Defendants' should have availed themselves of the administrative process and did not. Therefore, any claims for damages arising from the plaintiffs' actions are premature and should not be before the court. Defendants must exhaust their administrative remedies.

G. Are Plaintiffs Entitled to a Permanent Injunction?

Plaintiffs are asking the court to permanently enjoin the defendants from continuing their deliberate decision to ignore the statutory requirement that the property be kept in "good repair." As pointed out above, defendants are either an "owner" or a "person in charge" under the statute. The property was purchased with the landmark status in existence. Defendants are required to maintain the property in "good repair" whether they intend to utilize the property in its current condition, or make alterations consistent with the guidelines of Landmarks. Defendants' do not have to take any steps to develop the property; that is their choice. But they are required by the statute to maintain it. They have not done so.

Plaintiffs' application to permanently enjoin the defendants' from continuing their policy of "demolition by neglect" and requiring defendants to keep the structure in "good repair" consistent with the Landmarks guidelines is granted. Defendants will take steps to secure the premises to the satisfaction of Landmarks on or before January 31, 2017. If defendants fail to act, plaintiffs may take the necessary steps to protect the structure and assess any costs therefrom to the defendants as is their right under the current law and has been their right to do since defendants became the owners and began their practice of neglect.

H. Are Defendants Subject to Civil Penalties?

Plaintiffs' allege that the defendants' are liable for civil penalties because defendants have failed to maintain the landmarked premises in good repair as required by NYCAC §25-311. Civil penalties are set forth in NYCAC §25-317.1 which provides:

Any person who violates any provision of sections 25-311 of this chapter or an order issued by the chair with respect to such provisions shall be liable for a civil penalty [*10]which may be recovered by the corporation counsel in a civil action in any court of competent jurisdiction. Such civil penalty shall be determined as follows:

The defendant shall be liable for a civil penalty of up to the fair market value of the improvement parcel, with or without improvements, whichever is greater, where in violation of such provision or order:

(b) work has been performed or a condition created or maintained which significantly impairs the structural integrity of an improvement on a landmark site or

(d) the defendant has failed to take action to prevent any condition described in subparagraph a, b, or c of this paragraph from occurring

(3) All other violations. The defendant shall be liable for a civil penalty of not more than five thousand dollars.

(4) For the purposes of this subdivision, each day during which there exists any violation of the provision of subdivision a, b, or c of section 25-311 of this chapter shall constitute a separate violation.

Plaintiffs contend that the penalties should accrue every day since March 2, 2012 when Landmarks issued an order directing the defendants to repair the premises. Assessing a fine of $5,000.00 a day means in one year the penalties would be $1,825,000.00. The four years from March 2, 2012 to December 2, 2016 would bring the total penalty to more than $8,500,000.00.

Defendants assert that the plaintiffs are misreading the statute and that the maximum penalty cannot exceed $5,000.00 [NYCAC §25-317.1(a)(3)]. Defendants are not correct. Defendants' are in violation of §25-311 which triggers the application of §25-317.1(a)(1)(b) and (d). Defendants' exposure is not limited to a penalty of only "up to $5,000.00."

Defendants allege that any other penalties may only be assessed in an administrative proceeding. Defendants are not correct. NYCAC §25-317.1(b) clearly states that the administrative proceeding is "(i)n addition to or as an alternative to any of the remedies or penalties provided in this chapter." This does not preclude Landmarks from seeking redress in the court system. NYCAC §25-317.2(d) "Violations of Landmarks Law: enforcement." provides:

Enforcement proceedings.

(1) Upon the violation of any provision of this chapter, or when any person is about to engage in or is engaging in any act or practice that may constitute a violation of any provision of this chapter, the chair may request the corporation counsel to institute all necessary actions and/or proceedings to restrain, correct or abate such violation or potential violation to compel compliance with such order and/or to seek civil penalties pursuant to this chapter. The corporation counsel may institute such actions or proceedings as may be necessary and appropriate for such purposes.

(2) Such action and proceedings may be instituted by the corporation counsel in the name of the city in any court of appropriate jurisdiction. In such actions or proceedings, the city [*11]may apply for restraining orders, preliminary injunctions or other provisional remedies with or without notice.

A check with the "market value" history maintained by the NYC Department of Taxation and Finance discloses that the market value of Lot 6666 Block 1 for 2016-17 is $445,000.00. This is a decrease of $201,000.00 since 2012-13. If the court were to assess the maximum fine based on a daily penalty of $5,000.00, the total due would be almost 20 times the current market value. Because the statute uses the word "shall" and not the word "may" in regard to the assessment of the penalties and the purpose of the law is to remedy an evil, the rules of statutory construction lead to the conclusion that the penalties are mandatory [Statutes §171] and continue to be assessed until the defendants remedy the situation.

Based on the language of §25-317.1, the question must be asked as to whether the maximum penalty is the fair market value of the property or can the penalty be assessed at $5,000.00 a day to an amount is excess of the property value? The statute does not seem to contemplate a situation where a person would take no action in regard to the property for almost five years and incur penalties of $5,000.00 a day for the entire period to an amount which far exceeds the fair market value of the property. Or maybe the drafters were thinking of Manhattan real estate prices when the statute was written where the market value would be significantly higher?

Because the statute applies to "any person" a civil violation may be imposed against the owner, the person in charge, or any person who commits a violation such as a contractor. This being the case, the fair market value cap would apply against each defendant found to be in violation of the statute. In this matter both Seguine and Tallo have exposure up to the fair market value. The penalty may be in excess of that amount, but the amount to be collected is limited to the fair market value.

This raises another issue. Defendants contend that the property is more valuable with the structure demolished so it can be developed as vacant land. No testimony was offered as to the market value of the property as vacant land or the profit that the defendants could generate if developed as housing to the maximum extent under current zoning laws. NYCAC §25-317.1(a)(1) permits the penalty to be assessed as the greater of the market value of the property with improvements or without improvements. Although the court has a current market value with improvements based on the tax records, there is no evidence as to the market value as unimproved property which may be substantially greater than $445,000.00.

Each defendant is responsible for the civil penalty which to December 2, 2016 is $8,550,000.00. The civil penalty continues to accrue each day. However, the statute limits the amount to the market value of the property from each defendant.

Problems Inherent with the Landmarks Law.

As the law is currently structured, "demolition by neglect" is a recurring problem. This is the landmark law's equivalent of "Nero fiddling while Rome burns" and occurs when a landowner, who is more interested in the "land" rather than the "landmark," does little or no maintenance on a landmarked property and relies on either "mother nature" or vandalism or a "fortunate fire" to continue to cause the building to deteriorate in the hope that the building will fall into such disrepair that it will either "self-destruct" or have to be demolished. Either scenario would then free the owner to develop the property in a more profitable manner. This often takes place while the statutory "hardship" process instituted by the owner, or DOB enforcement proceedings brought by the City, drags itself through the administrative and legal systems. In recent memory the inability to have cooperative property owners of historic sites has been responsible for the loss of numerous properties on Staten Island.

The law seems to work off the presumption that the world is full of people who are willing to use their own resources to restore and maintain landmark properties as did the owner of the Seguine Mansion which is across the street from Manee-Seguine Homestead. When in fact, there are an equal, if not a greater number of persons such as the defendants, who are businesspersons and developers looking to maximize the profit they can obtain from a particular property and could care less that in theory John Adams, Benjamin Franklin and Edward Rutledge could have stopped at the Manee-Seguine Homestead for a game of cribbage after having concluded peace talks at the Billop House in Tottenville on September 11, 1776.

Plaintiffs have established that the defendants are in violation of the NYCAC and are incurring monetary penalties on a daily basis. The calculation as to what the total amount of these fines are at this time is far in excess of the fair market value of the property and even outstrips the cost of restoration of the property. If that is the case, then perhaps the resolution of this issue is to transfer title to the property to the City in exchange for being released from the civil or criminal penalties potentially being imposed on defendants if the plaintiffs prevail.

There is another troubling aspect of this litigation. The plaintiffs have had the statutory authority to take all steps necessary to secure and maintain the premises and to bill the defendants for these services. Plaintiffs have failed to do so. Is that because that the property really does not have the historic significance plaintiffs allege so as not to warrant the outlay of public money? The Landmarks law wants private dollars to maintain the property for the public good because of its historic value. However, even the shoring and securing of the property is nothing more than a "Band-Aid." The property is an eyesore and is in desperate need of repair. What public good is having a 300-year old building boarded up and surrounded by a fence? Are tourists going to stop and take pictures? Just because something is old, does not mean it is worth saving. Something my wife and I discuss every time she wants to throw-out my 50-year old Curtis High School sweatshirt.

The defendants have no interest in maintaining the building as a landmark and do not want to put any money into it. Plaintiffs' want the property maintained for its historic [*12]value and the public benefit that is recognized as a reason for preserving landmarks, but plaintiffs do not want to spend any money either. Putting the parties in the middle of the preservationist's version of Joni Mitchell's "Circle Game." Unfortunately, the law is clear that the obligation to maintain the property belongs to the defendants and that they have created the dilemma by not availing themselves of the statutory procedures designed to find a solution. It also appears that NYC does not even provide property tax relief to the owners of landmarks so as to encourage them to maintain the property for the public good.

Earlier in the litigation and on subsequent occasions the court has proposed the following solutions all to no avail.

1. Moving the building across the street to Lemon Creek Park and donating it to the City. Defendants would bear the expenses of the move and of initially securing the building with the intent that public or private monies be accessed to permanently maintain the building. In return, the landmarking of the property would be removed and the defendants would be able to construct as many houses a zoning will permit on the now vacant land.

2. Moving the building either to Richmond Town or the Conference House Park under the same terms and conditions as set forth in #1.

3. Defendants conveying title to the property to plaintiffs and taking a tax deduction for a charitable donation.

4. Trading the site for another piece of City owned property of equivalent value which the defendants could develop.

5. Locating a preservation organization which may be interested in purchasing the property from the defendants and maintaining it for public use.

It should be noted that in 2014, the court made the following ruling: "To insure that there is a fund to secure the premises, defendants are to post either in cash or by a bond, the sum of $250,000.00 to be used by the plaintiffs as a fund to secure the structure in the event plaintiff prevails on its claim and the defendants abandon the property or refuse to act." The defendants ignored the order and never posted the money and the plaintiffs never sought the intervention of the court to enforce its own order. As a result, the court negated the need for the bond and held the hearing.

Conclusion:

Plaintiffs' have established by the credible evidence that the Manee-Seguine Homestead was designated a landmark in 1984 and is a structure of historical significance and should be preserved.

Plaintiffs' have established that defendant Seguine is the owner of the landmarked property having acquired it in September 2009, after the property was so designated.

Defendants' have failed to establish that the property is in such a state of disrepair that it should be demolished. The fact that the Buildings Department determined the structure unsafe in 2008 is of no import. Such determination was removed by Landmarks by a process set forth in the applicable statutes and designed to give Landmarks an opportunity to review such actions.

Plaintiffs have established that such determination was removed prior to defendant Seguine acquiring title to the property.

Plaintiffs have established that both defendant Tallo and defendant Seguine are a person in charge as defined in the applicable statute and have responsibility to maintain the structure.

Plaintiffs have established that the defendants have failed to maintain the premises in a manner required by the statutes and have failed to comply with an order from Landmarks to do so.

Defendants' have failed to avail themselves of the statutory procedure either to acquire permission to demolish the premises or to seek a hardship determination or to file plans with Landmarks to see if a mutually acceptable development alternative is available.

Defendants are in violation of the statute and each is subject to a penalty of $5,000.00 which for the period March 2, 2012 to December 2, 2012 totals $8,550,000.00.

Judgment in favor of plaintiffs in the amount of $8,550,000.00. together with costs and disbursements. The court will not assess interest on the judgment as the penalty of $5,000.00 a day continues to accrue.

The parties will appear for a hearing in Part 19 at 11:00 AM on Monday February 6, 2017 at the Courthouse, 927 Castleton Avenue, Staten Island, New York for the purpose of determining the fair market value of the property with or without improvements. Expert witnesses will be produced to assist the court in fixing the fair market value.

Plaintiffs are entitled to an injunction enjoining the defendants from continuing their practice of ignoring the order of the Commissioner and their legal obligation to maintain the property. Defendants have until January 31, 2017 to comply with the order or plaintiffs will take all steps necessary to secure and maintain the property and bill the cost to the defendants.

The foregoing constitutes the decision and order of the court.

ENTER,

DATED:December 29, 2016_____________________________

Philip S. Straniere

Acting Justice of the Supreme Court Footnotes

Footnote 1: "Blue Water Line" music and lyrics by The Brothers Four.

Footnote 2: "Big Yellow Taxi" music and lyrics by Joni Mitchell.

Footnote 3: "This Old House" music and lyrics by Stuart Hamblen

Footnote 4: "The Old Old House" music and lyrics by Paul Clayton, Larry Ehrlich, David Lazar, Tom Six