363 Grand Ave. Tenants Assn. v Ali
Annotate this CaseDecided on December 8, 2017
Supreme Court, Kings County
363 Grand Avenue Tenants Association, WINNETTE BROWN, DELPHENA CLAXTON, COLUMBUS GAMBLE, NINA GARLAND, LINDA HARPER, ROGER LEGENDRE, BREE WHITLOCK, Plaintiffs,
against
Azad Ali, MIRACULOUS SOLUTIONS INC., FARRELL REALTY CORP., 363 GRAND VENDOME ASSOCIATES LP, VENDOME RESTORATION CORP., 363 GRAND VENDOME INC., 363 GRAND ASSOCIATES, LP, FREEDOM TAX CREDIT PLUS LP, NYC PARTNERSHIP HDFC, NEW YORK CITY DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT, THE CITY OF NEW YORK, NYS HOUSING AND COMMUNITY RENEWAL, NYS AFFORDABLE HOUSING CORPORATION, NYS HOUSING FINANCE AGENCY, Defendants.
9121/2015
Attorney for Plaintiff
Brooklyn Legal Services, Inc.
900 Fulton Street, 2nd Floor
Brooklyn, NY 11238
Wenig Saltiel, LLP
Attorneys for Defendants Azad Ali and Miraculous Solutions, Inc. 26 Court Street, Suite 1200
Brooklyn, New York 11242
Angelyn D. Johnson, Esq.
Attorneys for the Defendant Farrell Realty Corp.,
188 Montague Street, Suite 500
Brooklyn, New York 11201
Zachary W. Carter
Corporation Counsel for the City of New York
Attroenys for the Deefnedant NYC HPD
100 Church Street, Room 5-144
New York, New York 10007
Francois A. Rivera, J.
Recitation in accordance with CPLR 2219 (a) of the papers considered on the order to show cause filed on July 31, 2017, by the City of New York and the New York City Department of Housing Preservation and Development (hereinafter HPD and jointly the City Defendants) for an order: (1) lifting the automatic stay on discovery regarding the cross-claims asserted by the City Defendants; and (2) enjoining Miraculous Solutions Inc. (hereinafter Miraculous) from leasing any of the units within the building located at 363 Grand Avenue, Brooklyn, New York, Block 1969, Lot 93 (hereinafter the subject premises) to renters that do not qualify as low or moderate income households pursuant to the Land Disposition Agreement (LDA) recorded against the subject premises and from entering into a lease with a tenant until HPD has verified the tenant's household income pending resolution of the City Defendants cross-claims; and (3) providing HPD inspectors and staff reasonable access to the subject premises.[FN1]
-Order to show cause
-Affirmation in support
Exhibits A—O
Miraculous's Affirmation in Opposition
Reply memorandum of law in support
BACKGROUND
On July 22, 2015, plaintiffs commenced the instant action for a declaratory judgment and injunctive relief by filing a summon and verified complaint (hereinafter the commencement papers) with the Kings County Clerk's office (KCCO). The plaintiffs filed and served an amended complaint dated June 28, 2017. The plaintiff 363 Grand Avenue Tenants Association hereinafter the Tenants Association) is an organization comprised of tenants of 363 Grand Avenue, Brooklyn, New York. All other named plaintiffs are individual tenants of units contained in a twenty four unit building located at 363 Grand Avenue, Brooklyn, New York (hereinafter the subject premises). The subject premises is known as the Vendome Apartments and is described as a landmark Romanesque Revival structure in the Clinton Hill neighborhood of Brooklyn. The subject premises was constructed in 1887 and is the first apartment building in Clinton Hill.
Miraculous is the current record deed holder of the subject property. Farrell Realty Corp. (hereinafter Farrell) is the current record mortgage holder on the subject premises. Azad Ali (hereinafter Ali) is an affiliate of both Farrell and Miraculous.
The amended complaint alleges sixty-eight allegations of fact in support of three causes of action seeking, among other things, declaratory and injunctive relief. The amended complaint alleges the following salient facts, among others. The individual plaintiffs are third-party beneficiaries to certain regulatory agreements that the City defendants entered into with affordable housing developers. In the early 1980s, the City took ownership of the subject premises after a fire to preserve the building as affordable housing instead of tearing it down. In or about 1989, the property was transferred to the NYC Partnership HDFC under the NYC Partnership New Homes Program under which City owned properties are transferred with the goal of turning the units into low-income, co-operative apartments. In 1989 the City and NYC Partnership HDFC entered into a Land Disposition Agreement (hereinafter the LDA), a City Assistance Agreement and a NYS Affordable Housing Corporation Grant Agreement. The City extended a $373,000.00 purchase money mortgage to NYC Partnership, which was considered the sponsor under the agreements. NYC Partnership paid $12,000.00 for the property and obtained a mortgage from Dime Savings Bank for $1,788,000.00.
The LDA required NYC Partnership to work with private builders to rehabilitate the property and market the apartments as condominium units to bona fide purchasers. The LDA also required that the subject premises be conveyed to the Tenants Association, to be maintained as a cooperative or regulated-rental housing or sold to individual tenants pursuant to a condominium plan. The agreements forbid transfer of the deed before the affordable housing plan was implemented without HPD's permission.
On December 30, 1991, NYC Partnership HDFC assigned its interest to 363 Grand [*2]Vendome LP. In March of 2008 Washington Mutual as successor in interest to Dime Savings Bank commenced a foreclosure action against 363 Grand Vendome Associates LP. In January of 2011, 363 Grand Vendome Associates LP deeded the subject premises to Miraculous. In December of 2012, Farrell was substituted as plaintiff in the foreclosure action.
In the instant action the plaintiff alleges that Miraculous, the current owner, and Ferrel, the mortgage holder of the subject premises, have engaged in activities to circumvent the regulatory agreements and the protections afforded to the plaintiffs. Plaintiffs contend that the defendants are in breach of their obligations under the regulatory agreements to the plaintiffs' detriment.
Plaintiffs seek a declaratory judgment that the defendants engaged in conduct which violated the LDA; that the plaintiffs are rent stabilized tenants; and that the rents that they have been charged and have paid are the legal regulated rents. Plaintiffs also seek an injunction requiring the defendants to perform their obligations under said agreements and an award of reasonable attorney's fees.
By joint answer with cross claims dated June 28, 2016, the City Defendants answered the plaintiff's complaint. The City Defendants asserted two cross claims against Miraculous. The first seeks an order directing that Miraculous specifically perform the LDA and cure their breach of the LDA. The second seeks specific performance regarding the mortgage agreements. By verified answer to cross claims dated August 31, 2016, Miraculous replied to the City Defendants' cross claims. As of the date of the filing of the instant order to show cause, the City Defendants have not interposed an answer to the amended complaint.
The City Defendants' Cross Claims
The City Defendants have asserted two cross claims against Miraculous. In support of the first cross claim for specific performance of the LDA, the City Defendants allege the following salient facts. Miraculous allowed the subject premises to accumulate 218 Housing Code violations since 2011 of which 158 were classified as hazardous. By allowing the Housing Code violations to accumulate, Miraculous allegedly breached section D (5) of the Urban Renewal Plan by failing to maintain the subject premises in compliance with the City's Housing and Building Codes. Since 2011, Miraculous has kept six of the twenty four (24) units of the subject premises vacant. By doing so Miraculous has allegedly breached sections C (2) (a) (1) and (E) of the Urban Renewal Plan by failing to maintain the subject premises as a residential building for low and moderate income families. Based on the foregoing, HPD sent Miraculous a notice of default on May 19, 2016, with a thirty day time limit to cure the default. The notice apprised Miraculous that the City Defendants would take enforcement action and other remedies under the LDA if the default was not cured. Miraculous did not cure the default. The City Defendants seek an order and judgment pursuant to Section 5.03 of the LDA requiring Miraculous to cure all outstanding violations and to rent the vacant units [*3]to low and moderate income households.
In support of the second cross claim denominated as "Specific Performance Regarding Mortgage Agreements" the City Defendants have alleged the following additional facts. Miraculous allegedly breached several pertinent provisions on several mortgages encumbering the subject premises by not paying taxes when due, by not paying principals and interest when due, and by not maintaining the subject premises in good condition.
Miraculous interposed an answer to the City Defendants' cross claims which asserts five affirmative defenses. The first affirmative defense alleges that the City Defendants' claims are barred by the statute of limitations. The second affirmative defense is denominated as detrimental reliance. The third affirmative defense alleges laches. The fourth affirmative defense alleges waiver. The fifth affirmative defense alleges in pari delicto.
LAW AND APPLICATION
The City Defendants seek a preliminary injunction enjoining Miraculous from leasing any of the units of the subject premises to renters that do not qualify as low or moderate income households pursuant to the LDA and from entering into a lease with a tenant until HPD has verified the tenant's household income.
CPLR 6301 sets forth the grounds for a preliminary injunction and for a temporary restraining order as follows:
A preliminary injunction may be granted in any action where it appears that the defendant threatens or is about to do, or is doing or procuring or suffering to be done, an act in violation of the plaintiff's rights respecting the subject of the action, and tending to render the judgment ineffectual, or in any action where the plaintiff has demanded and would be entitled to a judgment restraining the defendant from the commission or continuance of an act, which, if committed or continued during the pendency of the action, would produce injury to the plaintiff. A temporary restraining order may be granted pending a hearing for a preliminary injunction where it appears that immediate and irreparable injury, loss or damage will result unless the defendant is restrained before the hearing can be had.
On a motion for a preliminary injunction, the movant must demonstrate (1) a likelihood of success on the merits, (2) irreparable injury absent the granting of the preliminary injunction, and (3) a balancing of the equities in the movant's favor (Putter v Singer, 73 AD3d 1147, 1148-1149 [2nd Dept 2010] citing, Doe v Axelrod, 73 NY2d 748, 750 [1988]; Automated Waste Disposal, Inc. v Mid-Hudson Waste, Inc., 50 AD3d 1072 [2nd Dept 2008]). A preliminary injunction is a drastic remedy and the respondents, to be entitled to injunctive relief, "must establish a clear right . . . under the law and the undisputed facts" (Putter v Singer, 73 AD3d 1147, 1148-1149 [2nd Dept 2010] citing, [*4]Omakaze Sushi Rest., Inc. v Ngan Kam Lee, 57 AD3d 497 [2nd Dept 2008]). The purpose of any preliminary injunction is to maintain the status quo between the parties, not to determine their ultimate rights (Putter v Singer, 73 AD3d 1147, 1148-1149 [2nd Dept 2010] citing, Moody v Filipowski, 146 AD2d 675 [2nd Dept 1989]).
The City Defendants contend that without the preliminary injunction Miraculous may rent the vacant units of the subject premises to tenants who are not income eligible. In that case, Miraculous would reduce the already scarce affordable housing stock in New York City and render it difficult and highly unlikely to recover the units once occupied.
Miraculous does not dispute the authenticity and validity of the covenants contained in the LDA, the City Assistance Agreement or the NYS Affordable Housing Corporation Grant Agreement. Rather, Miraculous contends that the motion for injunctive relief should be denied because the City Defendants are in default in answering the amended complaint and the preliminary injunction improperly seeks ultimate relief.
Contrary to the contentions of Miraculous, the City Defendants are not in default in answering the amended complaint and the relief sought by the preliminary injunction are narrowly tailored and not for ultimate relief. It is noted that affirmative defenses asserted by Miraculous do not contest the merits of the aforementioned agreements. Rather, Miraculous contends that the City Defendants should be equitably barred from enforcing the covenants because of the lengthy delay, or lack of vigilant efforts by the City Defendants in enforcing the covenants.
The City Defendants argument has merit. They have demonstrated the validity of the covenants in the aforementioned agreements and, therefore, the likelihood of success on the merits of their claim. They have also established that the loss of affordable housing units would be a harm with no adequate remedy at law. Finally, they have demonstrated that the equities balance in their favor. Accordingly, the City Defendants' motion is granted.
CONCLUSION
The order to show cause by the City of New York and the New York City Department of Housing Preservation and Development for an order pursuant to CPLR 6301 enjoining Miraculous Solutions Inc. from entering into a lease with a tenant until the New York City Department of Housing Preservation and Development has verified the tenant's household income pending resolution of their cross claims is granted.
The order to show cause by the City of New York and the New York City Department of Housing Preservation and Development for an order pursuant to CPLR 6301 enjoining Miraculous Solutions Inc. from leasing any of the units within the subject premises to renters that do not qualify as low or moderate income households pursuant to the Land Disposition Agreement pending resolution of their cross claims is granted.
The foregoing constitutes the decision and order of this Court.
December 8, 2017 Footnotes
Footnote 1:By decision and order issued on September 28, 2017, the Court determined that there is no automatic stay of discovery on the City Defendants' cross claims against co-defendant Miraculous and granted the City Defendants' application for reasonable access to the subject premises.
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