DHB Indus., Inc. v West-Post Mgt. Co.

[*1] DHB Indus., Inc. v West-Post Mgt. Co. 2005 NY Slip Op 51854(U) [9 Misc 3d 1130(A)] Decided on November 17, 2005 Supreme Court, Nassau County Austin, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 17, 2005
Supreme Court, Nassau County

DHB Industries, Inc., Plaintiff,

against

West-Post Management Company, Defendant.



12587/05



Counsel for Plaintiff

Abrams, Fensterman, Fensterman, Flowers, Greenberg & Eisman, LLP

1111 Marcus Avenue - Suite 107

Lake Success, New York 11042

Counsel for Defendant

Rosenberg & Fortuna, LLP

666 Old Country Road

Garden City, New York 11530

Leonard B. Austin, J.

Plaintiff DHB Industries, Inc. ("DHB"), moves for a Yellowstone injunction.

See, First National Stores, Inc. v. Yellowstone Shopping Center, Inc., 21 NY2d 630

(1968). Defendant, West-Post Management Co. ("West-Post"), cross-moves for an order dismissing the complaint.

BACKGROUND

By written lease dated February 27, 2004, DHB leased office space, known as, Suite 303, at 400 Post Avenue, Westbury, New York from West-Post. By Amendment of Lease dated May 25, 2005, DHB leased additional space from West-Post that was incorporated into Suite 303.

Paragraph 8.02 of the lease obligates West-Post to provide appropriate heat and air conditioning as required by the season.

Paragraph 11.02 of the lease requires West-Post to make the repairs to the plumbing and HVAC system at it's own expense, unless the repairs were made necessary due to some act or omission of DHB. If such repairs are required because of an act or omission of the tenant and West-Post makes the required repairs, the tenant becomes responsible for the reasonable cost of the repairs as additional rent.

Paragraph 21.01 of the lease provides that West-Post would be in default if it failed to perform any obligations required by the lease within a reasonable time, "...but in no event sooner that thirty (30) days (or such shorter period as may be required for public safety) after written notice by TENANT to LANDLORD."

DHB asserts that West-Post violated the terms of the lease by failing to provide sufficient air conditioning for Suite 303. DHB claims that as a result, it has been required to utilize fans and portable air conditioners. DHB further asserts that the lack of air conditioning prevented its employees from performing their jobs and, on occasion, required employees to leave the office before the end of the workday.

The dispute regarding the air conditioning in the building goes back to at least late May or early June 2005.

West-Post claims that its first notice regarding the purported problems with the air conditioning were contained in a letter dated June 2, 2005 sent by David H. Brooks ("Brooks"), CEO and Chairman of DHB, to West-Post. This letter stated that the air quality on the third floor of 400 Post Avenue was substandard. The letter indicated that the owner and managing agent had spoken to Brooks about two weeks earlier and advised him that the air conditioning system in the building was going to be replaced. The Brooks letter further stated that the air filtration system and air conditioning at the building had not worked properly since the inception [*2]of the lease. The letter then requested a full refund of all rent paid to date and a full rent abatement until the condition was remedied.

In response, Brooks received a letter from counsel for West-Post dated June 8, 2005 stating that the existing air conditioning system was fully operational and any problem with the air conditioning in DHB's space should have been resolved when the air conditioning service company had reconnected a feeder to DHB's space. The letter further indicated that West-Post was monitoring the ambient air temperature in DHB's space to confirm that the air conditioning in Suite 303 was operating properly.

In his letter, counsel stated that West-Post would not refund any of the previously paid rent. West-Post also expected that all rent due in the future would be timely and promptly paid.

By memo dated June 21, 2005, Cool Temp, West-Post's air conditioning service company, advised West-Post that the air conditioning in DHB's suite had the correct volume of air flow, air distribution and air temperature. Cool Temp opined that the air conditioning problems about which DHB complained of at the time, resulted from the heat created by the electrical equipment in Brooks office. Brooks had a sixty (60) inch plasma television, an electronic closet adjacent to the television housing various electronic equipment, six 150 watt flood lights, four halogen track lights, six to eight 20 inch flat screen monitors and other electronic equipment in his office. The Cool Temp memo indicated that due to the heat generated by these electronic devises, the temperature in Brooks office was several degrees higher than the temperature in the adjacent offices and the rest of the suite. The memo indicated that the only means available to reduce the temperature in Brooks office was to install supplemental air conditioning units.

West-Post has advised DHB that it is willing to install the required supplemental air conditioning units at it's own expense. However, West-Post refused to do so because DHB has not paid rent since July 1, 2005 and has also requested a rent abatement.

By letter dated July 15, 2005, counsel for DHB advised counsel for West-Post of DHB's problems with the air conditioning. The letter requested a rent abatement.

By letter dated August 17, 2005, counsel for DHB advises counsel for West-Post that the demised premises were unusable due to fumes in the ventilation system cause by the use of non-latex primer by construction crews in the building.

DHB has not paid the rent due on July 1, 2005 or any rent thereafter.

By Notice of Default, Ten Day Notice to Cure ("Notice"), dated September 12, 2005, West-Post advised that its lease would be terminated on September 30, 2005, if DHB did not pay the rent and other charges claimed to be due an payable under the terms of the lease by September 30, 2005.

On August 9, 2005, DHB commenced the within action seeking money damages for breach of contract (first cause of action), breach of implied warranty of fitness (second cause of action), breach of the implied covenant of good faith and fair dealing

(third cause of action) and actual and/or constructive eviction (fourth cause of action).

After receipt of the Notice, by Order to Show Cause dated September 29, 2005, DHB moved for a Yellowstone injunction. West-Post cross-moved to dismiss the complaint.

DISCUSSION

A. Yellowstone Injunction

The purpose of a Yellowstone injunction is to permit a tenant confronted with the threat [*3]of the termination of a lease to obtain a stay, tolling the cure period, so that, after the action has been resolved on its merits, the tenant may cure the defect and avoid the loss the leasehold. Kings Party Center of Pitkin Avenue, Inc. v. Minco Realty, L.L.C., 286 AD2d 373 (2nd Dept. 2001).

In order to obtain a Yellowstone injunction, the tenant must hold a commercial lease and must have received from the landlord a notice of default, a notice to cure or a threat of termination of the lease. The application for a temporary restraining order must be made prior to the termination of the lease and the tenant must establish its willingness and ability to cure the alleged default by means other than vacating the premises. Purdue Pharma, LP v. Ardsley Partners, LP, 5 AD3d 654 (2nd Dept. 2004); and Long Island Gynecological Services v. 1103 Stewart Ave. Assocs. Ltd. Partnership, 224 AD2d 591. (2nd Dept. 1996).

DHB holds a commercial lease, it has been served with a notice of default and the application has been made prior to the termination of the lease. The tenant asserts that it can cure the default by making the payment.

A landlord who has a commercial tenant that is not paying rent may bring a nonpayment proceeding pursuant to Real Property Actions and Procedure Law §711(2). Alternatively, the landlord may chose to treat the tenant's failure to pay rent as a breach of a substantial provisions of the lease, serve the tenant with a notice of default or notice to cure, and if the tenant fails to cure, terminate the lease and bring a holdover proceeding pursuant to Real Property Actions and Procedure Law §711(1). See, Grand Liberte Cooperative, Inc. v. Bilhaud, 126 Misc 2d 961 (App.Term, 1st Dept. 1984).

If the landlord chooses to serve the tenant who has not paid rent with a notice of default or notice to cure, the tenant may obtain a Yellowstone injunction. Lexington Avenue & 42nd Street Corp. v. 380 Lexchamp Operating, Inc., 205 AD2d 421 (1st Dept. 1994). See also, Runes v. Douglas Elliman-Gibbon & Ives, 83 AD2d 805 (1981).

Since West-Post has opted to proceed by serving DHB with a notice of default indicating that the lease would be terminated if DHB did not cure the default on or before September 30, 2005, so as to terminate of the lease and bring a holdover proceeding, DHB can obtain a Yellowstone injunction.

The cases cited by West-Post do not hold to the contrary and are distinguishable. In M.B.F. Love Unlimited, Inc. v. Jaclyn Realty Assocs., 215 AD2d 537 (2nd Dept. 1995) and Top-All Varities, Inc.v. Raj Development Co., 151 AD2d 470 (2nd Dept. 1989), the landlord chose to evict a tenant who was not paying rent by commencing a non-payment proceeding. In such circumstances, the tenant could retain the leasehold by paying the rent at any time up to the issuance of the warrant of eviction. Real Property Actions and Procedures Law §751(1). Since the tenant was not threatened with the termination of the leasehold, a Yellowstone injunction was inappropriate.

In Sal De Enterprises, Inc. v. Stobar Realty, Inc., 143 AD2d 180 (2nd Dept.), the tenant could not obtain a Yellowstone injunction because the landlord had not served the tenant with a notice to cure, a notice of default or threatened to terminate the lease. Since a condition precedent to the issuance of a Yellowstone injunction had not occurred, the relief was not warranted.

In order to obtain a preliminary injunction, the Plaintiff must post an undertaking in an amount fixed by the court. CPLR 6312(b). The amount of the undertaking must be sufficient to pay the damages sustained by Defendant if it is determined that the preliminary injunction was [*4]improvidently granted. CPLR 6312(b).

In this case, the amount of the undertaking should be equal to the rent and other charges due and owing under the terms of the lease. Accordingly, DHB shall pay within ten days of the date of this order all sums stated as due in accordance with Schedule A of the Notice of Default, Ten (10) Day Notice to Cure; to wit: a sum equal to three (3) months rent and all additional rent due for the months of July, August and September 2005 with its attorneys in an interest bearing escrow account. Such sums shall remain in escrow with DBH's attorney until further order of this Court or the written consent of both parties.

Since air conditioning is no longer an issue and DHB has not made any complaints about the heat, DHB shall pay to landlord all rent and additional rent due and owing as of October 1, 2005 and thereafter, pursuant to the lease, without prejudice.

B. Cross-Motion to Dismiss

When deciding a motion to dismiss made pursuant to CPLR 3211(a)(7), the court must determine whether the Plaintiff has a cognizable cause of action, not whether it has been properly plead. Guggneheimer v. Ginzburg, 43 NY2d 268 (1977); Rovello v. Orofino Realty Co., 40 NY2d 633 (1979); and Well v. Yeshiva Rambam, 300 AD2d 580 (2nd Dept. 2002).

The complaint must be liberally construed. Leon v. Martinez, 84 NY2d 83 (1994); and Paterno v. CYC, LLC, 8 AD3d 544 (2nd Dept. 2004). The court must consider all of the facts plead in the complaint as true and must give the pleader the benefit of every favorable inference which can be drawn from the facts. Id., See also, 511 West 232rd Street Owners Corp. v. Jennifer Realty Co., 98 NY2d 144 (2002); and Sokoloff v. Harriman Estates Development Corp., 96 NY2d 409 (2001).

The first cause of action alleges that Defendant has breached the lease by failing to provide a proper and working air conditioning system for the premises. The parties concede that Paragraph 8.02(A) requires West-Post to provide air conditioning in accordance with seasonal requirements.

A lease is a contract. George Backer Mgt. Corp. v. Acme Quilting Co., 46 NY2d 211 (1978); and Martin v. Glenzan Assoc., Inc., 75 AD2d 660 (3rd Dept. 1980). A complaint which alleges the existence of a contract between plaintiff and defendant, performance by plaintiff, breach by defendant and damages resulting from the breach is sufficient to withstand a motion to dismiss. See, Sud v. Sud, 211 AD2d 423 (1st Dept. 1995); and Furia v. Furia, 116 AD2d 694 (2nd Dept. 1986).

West-Post asserts that the cause of action for breach of contract must be dismissed because it has complied with the lease in that the air conditioning is in working order and air conditioning has been provided in accordance with seasonal requirements. West-Post asserts that air conditioning does not cool Brooks office and

the adjoining offices because of extraordinary heat created all of the electronic equipment in Brooks office.

West-Post asserts that it is willing to remedy this condition by installing at landlord's expense, supplemental air conditioning units. West-Post refuses to install this supplemental air conditioning system because DHB has demanded a rent abatement and has not paid rent since June 2005.

DHB's complaint does not seek a rent abatement, it seeks money damages.

West-Post's attacks the merits of DHB's complaint, not it is sufficiency. When deciding a [*5]motion to dismiss made pursuant to CPLR 3211(a)(7), the Court must determine whether Plaintiff has a cause of action, not whether Plaintiff will ultimately prevail. Jacobs v. Macy's East, Inc., 262 AD2d 607 (2nd Dept. 1999). Since the complaint sets forth sufficient facts to sustain a cause of action for breach of contract, the motion to dismiss the first cause of action must be denied.

The second cause of action seeks money damages for breach of the implied warranty of fitness. This cause of action is premised upon 40 Assocs, Inc. v. Katz, 112 Misc 2d 215 (Civil Ct., NY Co., 1981). 40 Assocs. is the only case in which any court in New York has found an implied warranty to habitability for commercial premises. While not specifically overruled, 40 Assocs. has not been followed. See, Bomze v. Jaybee Photo Suppliers, Inc., 117 Misc 2d 957 (App. Term 1st Dept. 1983), which specifically held that the warranty of habitability has not been extended to commercial property. See also, Randall Co. v. Alan Lobel Photography, Inc., 120 Misc 2d 112 (Civil Ct. NY Co. 1983), which held that the implied warranty of habitability has not been extended to commercial property.

Furthermore, to the extent that 40 Assocs. establishes a common law implied warranty of habitability for commercial premise, the warranty is limited to structural or latent conditions. See, Reste Realty Corp. v. Cooper, 53 N.J. 444 (N.J. Sup. Ct. 1969).[FN1] In this case, the alleged defect is neither latent or structural.

Therefore, the second cause of action fails to state a cause of action and must be dismissed.

The third cause of action alleges a breach of the implied warranty of good faith and fair dealing.

All contracts contain an implied covenant of good faith and fair dealing. Dalton v. Educational Testing Service, 87 NY2d 384 (1995); and Rowe v. Great Atlantic & Pacific Tea Company, Inc., 46 NY2d 62 (1978). However, the implied covenant of good faith and fair dealing does not create any obligations beyond those stated in the contract. Sutton Assocs. v. Nexis-Lexis, 196 Misc 2d 30 (Sup.Ct. Nassau Co. 2003). A cause of action for breach of the implied covenant of good faith and fair dealing is duplicative of the breach of contract claim. Jacobs Private Equity, LLC v. 450 Park LLC, -A.D.3d-, 2005 WL 2649924 (1st Dept. 2005); and Cerberus International, Ltd. v. Banctec, Inc., 16 AD3d 126 (1st Dept. 2005). Thus, the third cause of action is duplicative of the first cause of action and must be dismissed.

The fourth cause of action seeks damages for either actual or constructive eviction. Actual eviction occurs when the landlord wrongfully ousts the tenant from physical possession of the premises. Barash v. Pennsylvania Terminal Real Estate Corp., 26 NY2d 77 (1970); and Whaling Willie's Roadhouse Grill, Inc. v. Sea Gull's Partners, Inc., 17 AD3d 453 (2nd Dept. 2005). Constructive eviction occurs when the landlord's wrongful actions substantially and materially deprive the tenant of beneficial use and enjoyment of the leased premises. Barash v. Pennsylvania Terminal Real Estate Corp., supra; 34-35th Corp. v. 1-10 Industry Assoc, LLC, 16 AD3d 579 (2nd Dept. 2005); and Grammar v. Turits, 271 AD2d 644 (2nd Dept. 2000). Additionally, the tenant must abandon possession as a result of the landlord's action for there to [*6]be a constructive eviction. Id. See also, Boreel v. Lawton, 90 NY 293 (1882); Gannett Suburban Newspapers v. El-Kam Realty Co., 306 AD2d 312 (2nd Dept. 2003); and Two Rector St. Corp. v. Bien, 226 App. Div. 73, (1st Dept. 1929).

The complaint does not allege that West-Post's actions deprived DHB of physical possession of the premises. The complaint also does not allege that DHB has abandoned the premises as a result of the actions of West-Post. The complaint and the other papers submitted in connection with these motions establish the exact opposite, that DHB has occupied and continues to occupy these premises. Thus, the complaint

fails to state a cause of action for either actual or constructive eviction and must be dismissed.

Accordingly, it is,

ORDERED, that Plaintiff's motion for a Yellowstone injunction is granted; and it is further,

ORDERED, that the Yellowstone injunction is dependent and conditioned on DHB paying into an interest bearing escrow account to be maintained by Plaintiff's attorney all rent and other charges due pursuant to Schedule A of the Notice of Default within ten (10) days of the date of this order and upon payment of the rent and additional rent due for October and November 2005 within ten days of the date of this order and timely payment of all rent and additional due thereafter. The escrow shall remain in effect until further order of their Court of the written consent of both parties; and it is further,

ORDERED, that Defendant's motion to dismiss the complaint is granted to the extent of dismissing the second, third and fourth causes of action and is denied as to the first cause of action; and it is further,

ORDERED, that counsel for the parties shall appear for a preliminary conference on December 14, 2005 at 9:30 a.m.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY _____________________________

November 17, 2005 Hon. LEONARD B. AUSTIN, J.S.C. Footnotes

Footnote 1:40 Assocs. holding that there is an implied warranty of habitability for a commercial premises is based upon that court's reading of Reste Realty Corp. v. Cooper in which the Supreme Court of New Jersey held such a warranty exists for latent or structural defects.