Caton v Grand Mach. Exch. Inc.

[*1] Caton v Grand Mach. Exch. Inc. 2010 NY Slip Op 50796(U) [27 Misc 3d 1218(A)] Decided on April 23, 2010 Supreme Court, New York County Kenney, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 April 23, 2010
Supreme Court, New York County

Nancy J. Caton, Michael S. Jurewicz, Hrafnhildur Arnardottir, and C Productions LLC, Plaintiffs,

against

Grand Machinery Exchange Inc., and Paul Merandi, Defendants,



101480/09



Appearances

Michael Stepper, Esq.

Attorneys for Plaintiffs

12 East 88th Street

New York, New York 10128

(212) 722-0296

Kolodny, PC

Attorneys for Defendants

338-A Greenwich Street

New York, New York 10013

(212) 249-7771

Joan M. Kenney, J.

In this action seeking a declaratory judgment, defendants, Grand Machinery Exchange Inc., (GME) and Paul Merandi (Mr. Merandi), seek an Order, pursuant to CPLR 3212, dismissing the complaint and granting defendants a judgment of possession (defendants' 3rd counterclaim for an ejectment).[FN1]

FACTUAL AND PROCEDURAL BACKGROUND

On February 9, 2004, the corporate defendant, GME executed a five year lease (the lease) with plaintiff C Production LLC (CP) for the rental of the of the 3rd floor north side loft (the premises) located at 211-215 Centre Street, New York, NY 10013 (the building). The lease expired by its own terms on February 8, 2009. Just days before the lease was to expire, plaintiffs filed the instant action against defendants. [*2]

The Rider to the lease makes several references to the "business," that was to be conducted by CP at the premises (see, Rider to the lease ¶2). Further, CP was to comply with all applicable laws regarding the conduct of its business at the premises (see, Rider to the Lease ¶17). Neither the lease, nor its Rider, refers to the use of the premises for residential purposes. Yet, the verified complaint seeks a declaration that plaintiffs are residential tenants at the premises. Plaintiffs claim the premises are housing accommodations subject to rent stabilization laws, because there are six or more units in the building being used for residential purposes (1st cause of action). Plaintiffs allege that defendants had notice of the intended residential use of the premises at the time the lease was executed. Soon after executing the lease, plaintiffs assert that they began to renovate the space and the renovation/construction has unjustly enriched defendants (2nd cause of action). Additionally, plaintiffs aver that the premises is located in an M1-5B zoning district wherein "artists may occupy joint living-work quarters as an industrial use in loft buildings" (see, plaintiffs' verified reply to amended answer, ¶ 6). Plaintiffs state the New York City Department of Cultural Affairs issued an "Artist Certificate" for the premises and such issuance demonstrates that the premises may be used for residential purposes (see also, ¶ 7 of plaintiffs' verified reply to amended answer).

The complaint specifies that a portion of the premises is occupied as a residence by plaintiff, Hrafnhildur Arnardottir (identified as the President of CP) and spouse plaintiff, Michael S. Jurewicz, along with their children. Plaintiffs allege that the other portion of the premises is occupied as a residence by plaintiff, Nancy J. Caton, identified as a principal of CP. Plaintiffs further allege in their complaint that Louis Yoh, his wife Sam and their four year old son, reside on the second floor of the building; that Hope Athenrton, resides on the second floor of the building; that John Ferguson, resides on the third floor of the building; that the fourth floor of the building is occupied as residences by Sia Furler and a Daniel Fries (collectively, the tenants).

In support of their assertion that the premises can be used for residential purposes, plaintiffs submit an affidavit from a registered architect licensed by the State of New York, Leslie M. Good (plaintiffs architect). Plaintiffs' architect avers, that although the building is located within an M1-5B zoning district, which prohibits the use of the premises for residential purposes, the building falls within an exception to this zoning restriction. Specifically, plaintiffs' architect states that plaintiffs have artist certifications and the building meets the square footage requirements needed to fall within the exception to the M1-5B zoning restriction (see, Leslie M. Good affidavit dated January 15, 2010).

Defendants contend that when the lease was executed by plaintiff, Nancy Caton (Ms. Caton) on behalf of plaintiff corporation, CP, Ms. Caton expressly represented that the premises would be used for her garment and design business, known as Nancy Whisky and The Sewing Factory (the garment and design business). In fact, plaintiff CP and the garment and design business, lists the premises as its service of process address (see NYS, Department of State, Division of Corporation for defendant CP; Exhibit "F" to the moving papers). Mr. Merandi, the treasurer of defendant corporation GME, admits that he was aware that the premises was going to be renovated by Ms. Caton, and was going to use the space for her garment and design business (see, ¶ 13 of Mr. Merandi's affidavit, dated November 12, 2009).

Defendants contend that the construction and conversion of the premises from commercial space to residential space was done without their express knowledge, permission or consent. In fact, defendants are unaware of any other tenants in the building using their space for residential purposes. [*3]Defendants submit affidavits from almost all the tenants [FN2], and other lessees of the premises not specifically named in the complaint (the tenant affidavits). The tenant affidavits state that they are not using the leased commercial space in the building for residential purposes. Rather, the tenants affirm that they reside elsewhere and specify their place of residence (see, the tenant affidavits dated October, 2009, annexed to moving papers).

Defendants also submit an affidavit from an architect licensed by the State of New York, Steven Zalben (defendants' architect), attesting that the premises lies within the M1-5B zoning district, which prohibits the use of the premises for residential purposes. Defendants' architect also adds that the premises does not fall within any exception that would permit the use of the premises for residential purposes. In fact, a building located within an M1-5B zoning district may be used for residential purposes provided the building coverage is not more than 5,000 square feet, and the premises is used as joint living-working quarters, for artists as certified by the New York City Department of Cultural Affairs. Neither of these requirements for permissible residential use within an M1-5B zoning district is applicable to the premises at issue, according to defendants' architect, because the building is approximately 8,000 square feet.

ARGUMENTS

Defendant, GME argues that this action must be dismissed because: (1) the building cannot be legally occupied for residential purposes by plaintiffs; (2) six or more units in the building are not occupied as residences, and therefore the premises are not subject to the rent stabilization laws; and (3) plaintiffs' cause of action for unjust enrichment is precluded, pursuant to paragraph 3 of the lease. Finally, defendant argues that since plaintiffs have come to court with unclean hands, having illegally converted a commercial space to a residential space, plaintiffs may not avail themselves of the equitable remedy of unjust enrichment. Defendants' maintain that an Order of Ejectment is appropriate and should be granted.

The individually named defendant, Paul Merandi, seeks dismissal of this action on grounds that he cannot be held personally liable, as a mere officer of defendant GME.

Plaintiffs contend that defendants' motion must be denied because: (1) factual disputes exist that preclude the summary relief sought; and (2) the legality of an apartment does not affect the applicability of the rent stabilization laws. Plaintiffs also maintain that the premises are subject to the rent stabilization laws.

DISCUSSION

In order to grant summary judgment, the movant must proffer admissible evidence to make a prima facie showing of entitlement to judgment as a matter of law by producing sufficient evidence to show the absence of any material issue of fact (Giuffrida v Citibank Corp., 100 NY2d 72, 81 [2003]; Zuckerman v City of New York, 49 NY2d 557 [1980]).

The burden of production as well as the burden of persuasion always rests with the proponent of the motion (Alvarez v Prospect Hospital, 68 NY2d 320 [1986]). Consequently, the proponent must tender sufficient evidence to demonstrate the absence of any material issues of fact. Once the [*4]moving party has made this showing, the burden is on the opposing party to demonstrate "evidentiary facts in admissible form sufficient to raise a genuine, triable issue of fact" (Mazurek v Metropolitan Museum of Art, 27 AD3d 227, 228 [1st Dept 2006]; Zuckerman, 49 NY2d at 560).

Defendants have set forth its prima facie entitlement to judgment. There is no dispute that the premises is located within an M1-5B zoning district, which prohibits use of the premises for residential purposes, except if the premises is less than 5,000 square feet and the persons occupying the space are "certified artists" by the New York City Department of Cultural Affairs. After certification, the space may be used as living-work quarters for artists. There is also no dispute that a pre-requisite to entitlement to reside in a live-work space, within an M1-5B zoning district, is a showing that the tenants are certified artists.

In this case, only one of the three individually named plaintiffs has presented an artist certification from the New York City Department of Cultural Affairs. Additionally, the one plaintiff who did present the necessary artist certification, Hrafnhildur Arnardottir, failed to demonstrate that at the time he occupied the premises as a residence, prior to commencement of the instant litigation, he was certified as an artist. Plaintiffs, have failed to demonstrate that they have standing to commence this action as "certified artists" who may be entitled to a live-work space at the premises. Plaintiffs cannot benefit from the late acquisition of an artist certification form obtained from the New York City Department of Cultural Affairs.

Plaintiffs' contention that they are duly certified "artists" qualifying them as "artists [who] may occupy joint living-work quarters as an industrial use in loft buildings" located in an M1-5B zoning district, lacks merit. Nothing constituting admissible proof was submitted confirming the other named plaintiffs are "certified artists," who could qualify to occupy the premises for residential purposes. It is the burden of the party opposing summary judgment to "assemble, lay bare and reveal his proof in order to show that claims are real and capable of being established on trial" (Sony Corporation of America v. American Express Company et al., 115 Misc 2d 1060 [Civ Ct, NY County, 1982]). Plaintiffs did not present any proof that they were certified artists prior to commencement of this action.

This Court need not address the factual dispute regarding whether or not the building falls within the maximum square footage requirements of the zoning district's exception. The square footage dispute, is moot since the square footage alone does not trigger the exception (see also, Beam-Rich, Inc. v. Department of City Planning, 118 AD2d 409 [1st Dept, 1986]). The artist certification from the New York City Department of Cultural Affairs, is required. Any supposed "approval" by defendants regarding the conversion of the commercial space, within the M1-5B zoning district, to a residential space would have been voidable absent the artist certification.

Plaintiffs' complaint alleges that the loft is a work-live premises. Yet, plaintiffs assert that the lease between the parties was not a commercial lease, and the lease did not contain a provision requiring that the premises be used solely for commercial purpose (see,¶ 3 of the Verified Reply to Amended Answer). Such argument is unpersuasive to the extent that the live-work premise, as asserted by plaintiffs, requires that work be performed at the premises as well. None of the plaintiffs allege that they are working in the space. Given plaintiffs' arguments, it appears to this Court that plaintiffs may be using the space solely for residential purposes - which is impermissible even if artist certifications were produced for all the named plaintiffs. Plaintiffs have not affirmatively stated what "artistic" endeavors are being performed at the premises, and such an omission is fatal to their contention as to [*5]what constitutes an "artist" within the meaning of the multiple dwelling laws and its applicability to zoning districts and the loft laws (Mason v. Dep't of Bldgs., 307 AD2d 94 [1st Dept, 2003]).

Plaintiffs have been unable to come forward with any evidence that the renovation of the premises, from a commercial space to a residential space, was ever approved by GME or Mr. Merandi. Plaintiffs' self serving statements that there was an understanding/consent between the parties that plaintiff would renovate the space for residential purposes, lacks merit and documentary support. Plaintiffs admit that the premises was delivered in an "uninhabitable" condition (see, ¶ 9 of Verified Reply). This admission demonstrates that the defendants and/or the landlord did not convert a residential premises, and supports plaintiffs contentions that defendants were aware construction would be done to accommodate the corporate tenants' business. Notably, plaintiff has not proffered any documentation that the living space created, in this commercial premises, was done with the approval of the New York City Department of Buildings, or any other city agency, much less with the approval of the defendants herein. Moreover, plaintiffs have failed to set forth any details specifying how, when or where this alleged "understanding/consent" was obtained from defendants.

It should also be noted that the assertions made in the complaint that there are six or more residential units in the building, have been denied by the very individuals plaintiffs alleged were residential tenants (see the tenant affidavits annexed to the moving papers). There is no basis, factually or otherwise, for plaintiffs' self-serving statement that defendants induced false affidavits from these tenants.

Plaintiffs' second cause of action which alleges unjust enrichment, is also dismissed. The terms of the lease preclude defendants/landlord from being unjustly enriched by the improvements made by plaintiffs because the parties agreed that all fixtures and other improvements made by the tenant(s) would become part of the premises and the property of the landlord (see, ¶ 3 of the lease).

Lastly, plaintiffs have not set forth any legal or factual basis to support a claim against the individually named defendant, Mr. Merandi. As an officer of the defendant corporation who performed his duties in his corporate capacity, Mr. Merandi is not personally liable for any of the alleged causes of action. In sum, plaintiffs' failed to come forward with any fact necessitating a trial of this matter. It is well settled that absent a showing of evidence, in an admissible form, to demonstrate the presence of triable issues of fact. Consequently, plaintiffs' have failed to defeat defendants' application seeking dispositive relief.

This Court further finds that the lease terminated by its own terms on February 8, 2009 and that plaintiffs have no right to remain in possession. Defendants' counterclaim seeking an Order of Ejectment, is granted.

Accordingly, it is

ORDERED, that defendants' motion for summary judgment, is granted; and it is further

ORDERED, that the Clerk of the Court shall enter judgment in favor of defendants and against plaintiffs, dismissing this action; and it is further

ORDERED, that the Clerk of the Court shall enter judgment in favor of defendants and against plaintiffs, on defendants counterclaims for an Order of Ejectment and for Use and Occupancy; and it is further

ORDERED, that plaintiffs continue to pay use and occupancy in the amount of $6,190.40, on [*6]a timely basis, going forward until judgment in entered and/or plaintiffs vacate and/or are evicted in accordance with this Court's decision and Order herein; and it is further

ORDERED and ADJUDGED that defendant, Grand Machinery Exchange Inc., is entitled to possession of the 3rd floor north side loft located at 211-215 Centre Street, New York, NY 10013 as against plaintiffs Nancy J. Caton, Michael S. Jurewicz, Hrafnhildur Arnardottir, and C Productions LLC and the Sheriff of the City of New York, County of New York, upon receipt of a certified copy of this Order and Judgment and payment of proper fees, is directed to place Grand Machinery Exchange Inc. in possession accordingly, and it is further

ORDERED and ADJUDGED that immediately upon entry of this Order and Judgment, defendant Grand Machinery Exchange Inc. may exercise all acts of ownership and possession of the 3rd floor north side loft located at 211-215 Centre Street, New York, NY 10013, including entry thereto, as against plaintiffs, Nancy J. Caton, Michael S. Jurewicz, Hrafnhildur Arnardottir, and C Productions LLC.

Dated: April 23, 2010ENTER:

_________________________

Joan M. Kenney, J.S.C. Footnotes

Footnote 1:Defendants also seek an award of use and occupancy (defendants' 2nd counterclaim). Said relief was granted by decision and order of this Court, dated January 13, 2010 and remains in effect.

Footnote 2: An affidavit from Louis Yoh (Mr. Yoh), whom plaintiffs claim occupies the second floor of the building as a residence, was not annexed to defendants' papers.