34-35th Corp. v 1-10 Indus. Assoc., LLC

[*1] 34-35th Corp. v 1-10 Indus. Assoc., LLC 2010 NY Slip Op 50797(U) [27 Misc 3d 1218(A)] Decided on April 26, 2010 Supreme Court, Kings County Rivera, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 26, 2010
Supreme Court, Kings County

34-35th Corp., Plaintiff,

against

1-10 Industry Associates, LLC, Defendant.



17996/01



Attorney for Plaintiff:

James R. Anderson, Esq.

Smith, Buss & Jacobs, LLP

733 Yonkers Ave

Yonkers, NY 10704

(914) 476-0600

Attorney for Defendant

Jonathan D. Lupkin, Esq.

Flemminf, Zulack, Williamson, Zauderer LLP

One Liberty Plaza

New York, NY 10006-1404

(212) 412-9500

Francois A. Rivera, J.

Plaintiff is a tenant under a lease dated May 25, 2000, for the occupancy of a commercial building at 87-34th St. in Brooklyn, New York, known as Building 7/8, D Section (hereinafter "the subject premises"). Defendant, 1-10 Industry Associates, LLC is the landlord and owner of the subject premises.

THE PLEADINGS

Plaintiff's amended verified complaint, dated February 2, 2004, alleges twenty eight allegations of fact in support of two causes of action, one for negligence and one for breach of the lease agreement. Defendants verified answer, dated February 23, 2004, alleges fifty eight allegations of fact in support of fourteen affirmative defenses and three counterclaims. The first affirmative defense is that the plaintiff failed to state a cause of action. The second is that the defendant completed the work set forth in its agreement. The third is that plaintiff intends to use the premises in a manner contrary to its certificate of occupancy in violation of paragraphs 6 and 15 of the 2000 lease agreement. The fourth is that plaintiff failed to [*2]provide requested information and therefore prevented defendant's performance of the lease agreement. The fifth is the plaintiff failed to mitigate damages. The sixth is that the plaintiff's claim for damages are barred by the terms of the lease agreement. The seventh is that plaintiff's claim for lost profits is barred by Article 9 of the lease agreement. The eighth is that plaintiff's claim for negligence is barred by Article 9 of the lease agreement. The ninth is that plaintiff's claim for negligence is barred by its own contributory negligence. The tenth is that plaintiff's claim for negligence is barred by its own comparative negligence. The eleventh is that if defendant is found liable for negligence, that liability is limited to the percentage of fault apportioned to it by the trier of fact. The twelfth is that defendant's negligence is not the proximate cause of plaintiff's damages. The thirteenth is that defendant is not liable for damages resulting from floods due to its prompt steps to remedy the situation. The fourteenth is that plaintiff's damages, if any, arising from defendant's alleged breach of the 2000 lease agreement or the May 18 agreement is limited under paragraph 60 of the 2000 lease agreement to the present value of the rent owed on the lease space.

The first counterclaim is for unpaid rent. The second counterclaim is to recover possession of the subject premises for plaintiff's failure to pay rent. The third is for attorney's fees and costs in connection with the enforcement of the lease agreement.

Plaintiff's verified answer to defendant's counterclaims, dated February 24, 2004, asserts an affirmative defense.

BACKGROUND

The issues to be determined at trial have been narrowed by motion practice as follows. Plaintiff moved for an order granting it leave to amend its complaint. Defendant sought partial summary judgment dismissing plaintiff's request for damages constituting lost profits. Plaintiff cross-moved for partial summary judgment in its favor on liability for breach of contract.

By decision and order of this court dated December 10, 2003, Justice Barasch granted plaintiff s motion for leave to amend its complaint pursuant to CPLR § 3025 (b) with respect to its proposed amended fourth cause of action insofar as it sought to allege that it is the assignee of Automatic and denied the motion in all other respects. By the same decision and order, defendant's motion for partial summary judgment dismissing plaintiff s request for damages constituting lost profits was granted. Plaintiff s cross motion for partial summary judgment in its favor as to defendant's liability for breach of contract, was also granted.

On March 21, 2005, the Appellate Division Second Department issued a decision on the appeal of Justice Barasch's decision and order dated December 10, 2003 which stated in pertinent part as follows:

"It is undisputed that the defendant did not install and activate 600 amp three phase electric service. Therefore, the Supreme Court properly granted the plaintiff partial summary judgment on the issue of liability with respect to that issue."

"It is also undisputed that the defendant failed to block existing openings, provide one [*3]six-inch hollow block mounted horizontally for air circulation and install six windows. The evidence indicates that the defendant made efforts to comply with this requirement but the parties could not agree on a feasible location. The parties' allegations raise triable issues of fact as to whether the plaintiff breached the covenant of good faith and fair dealing implicit in all contracts and whether the defendant made reasonable efforts to comply.

***

"Further, it is undisputed that there were leaks on the premises. The plaintiff contends that those conditions constituted a breach of the defendant's covenant of quiet enjoyment with respect to this commercial lease.

***

There is evidence in the record that the defendant made repairs in an attempt to cure the problems. Whether its efforts were sufficient constitutes a triable issue of fact for the jury to determine." "Accordingly, the plaintiff should have only been granted partial summary judgment as to liability with respect to the failure to install electric service pursuant to the parties' contract and the cross motion should have otherwise been denied."(34-35th Corp. v. 1-10 Industry Associates, LLC, 16 AD3d 579 [2nd Dept., 2005]).

This court is bound by the determinations of law and fact contained within the afore quoted decision and order of the Appellate Division. Consequently, plaintiff's claim that defendant was liable for breaching the lease agreement by not installing and activating 600 amp three phase electric service has already been decided in plaintiff's favor and is not at issue in this trial.

There can thus be no dispute that the parties entered into a lease agreement, that a work order which included electrical work became incorporated into the lease agreement, and that defendant is liable for breaching at least this part of the agreement.

Furthermore, those rulings made by Justice Barasch left undisturbed by the order of the Appellate Division are law of the case in the instant action (See Generally, People v. Evans, supra at 502 [2000] citing Matter of McGrath v. Gold, 36 NY2d 406 [1975]).

The issues to be determined at trial were further narrowed on the morning of opening statements when plaintiff moved, without objection, to withdraw its negligence claim with prejudice. At that time plaintiff also stipulated on the record that it was not seeking any damages to the subject premises or to equipment therein arising out of two floods that occurred in November of 2001 and February of 2002. Plaintiff's stipulation rendered moot the eighth, ninth, tenth, eleventh, twelfth, and fourteenth affirmative defense based on defendant's negligence. The stipulation also rendered moot defendant's thirteenth affirmative defense pertaining to damage caused by the floods.

As a result of the foregoing the issues remaining for trial are whether defendant [*4]breached the agreement in other ways, and if so, what is its liability in damages to the plaintiff for the breach or breaches.

THE TRIALThe issues in this action were tried before Part 52 of this Court without a jury on April 28, 29, and 30; May 4, 5, 6, 7, and 21; June 11, 15, 16, 17, and 18; July 1 and 15; October 13; and December 1, 2009. The plaintiff called the following witnesses to testify. Sheldon Seidman, Isreal M. Stern, David Gold, Andrew Katz and Zew Weintraub. The defendant called the following witnesses to testify. Bruce B. Federman, Ephrain Fruchlhander, Christopher Slocome, Zachary Fruchtander, Walter Levi, Michael Giantasio, Bernard M. Spencer, Jeffrey Buos, and Chester T. Vogel. The parties stipulated to the submission of excerpts of the deposition testimony of several witnesses for the court's consideration.

Pursuant to CPLR § 4213 the parties were afforded an opportunity to submit requests for findings of fact and did so. The court makes the following findings of fact.

FINDINGS OF FACT

Plaintiff 34-35th Corp. is a New York corporation that maintains a principal place of business in Kings County in New York State and rents space at the Bush Terminal. Sheldon Seidman is the sole shareholder and officer of the plaintiff. Defendant is a New York corporation that maintains that its principal place of business is in Kings County, New York State. Defendant owns an industrial complex located in the Sunset Park section of Brooklyn that occupies real property that ranges from 32nd Street and Third Avenue to 41st Street and New York Harbor. It consists of approximately 16 multi-story buildings commonly known as "Bush Terminal".Plaintiff first became a tenant of defendant in 1997, when it leased a basement space in Building 9 of Bush Terminal. At Building 9, plaintiff housed jewelry manufacturing equipment, tools, and dyes. In or about the end of 1999, defendant asked plaintiff to exchange its basement space in building 9 for similar, suitable space elsewhere within the Bush Terminal complex because defendant wanted to convert building 9 into a "smart building," or a "telecommunications hotel," that would attract tenants at high rents.

Mr. Seidman was shown space in the basement of Building 7/8. In considering whether to move, Mr. Seidman inspected the space in Building 7/8 four or five times and had the opportunity to examine the outside perimeter of the space as well. Prior to entering into the Lease, Mr. Seidman sought the recommendations of Joseph Marshall, an engineer with extensive experience in setting up jewelry manufacturing operations. Joseph Marshall examined the space and prepared a letter dated March 1, 2000, setting forth his recommendations to Mr. Seidman. Plaintiff intended to use and occupy the premises for the purposes of warehousing machinery and manufacturing/processing of precious metals.

In his letter to Mr. Seidman, Mr. Marshall documented his concerns regarding the serious water problems in the space. Mr. Marshall also orally advised Seidman that moving the equipment into the space without abating the moisture condition would cause rust to develop on everything solid. Mr. Marshall concluded that plaintiff would require 600 amps of three-phase power to operate its business. Mr. Marshall recommended modifying six of the premises' existing large windows to [*5]18"x 48"size, maintaining two of the existing windows, and installing a row of horizontal cinder block around the premises. With respect to the recommended row of cinder blocks, plaintiff had such a feature at its prior space in the basement of Bush Terminal's building 9. Mr. Marshall's report includes a schematic drawing that sets forth the recommended placement of windows and horizontal blocks. Mr. Seidman gave Mr. Marshall's report, including the schematic drawing, to the defendant. Mr. Marshall's schematic became the basis for the schematic incorporated into the Lease.

On or about May 25,2000, plaintiff and defendant entered into a Lease for the subject premises known as Building 7/8, D Section, located at 87-34th St. in Brooklyn, New York. In connection with this transaction, they executed four documents: a cancellation agreement, which formally terminated the lease at Building 9; the lease itself for the space at Building 7/8; a work letter, and a schematic.

Although defendant takes issue with the claim that the lease agreement included a schematic and indeed claims that the document is a forgery, the court finds to the contrary and credits Seidman's testimony that it was part of the lease agreement.

The work letter set forth 12 tasks that defendant agreed to complete.

[1] "Landlord to bear the cost of Tenant's move."

[2] "Landlord to scrape and paint demised premises standard building white."

[3] "Landlord to demise four office areas as per Landlord's specifications."

[4] "Landlord to block existing openings and provide one six inch hollow block mounted horizontally for air circulation."

[5] "Landlord to install six windows as per Tenant's specifications (48 x 18 max size)."

[6] "Landlord to install sump pump' for drainage."

[7] "Landlord to install two separate bathrooms with a water closet each."

[8] "Landlord to install and activate 600 amp three phase electric service."[9] "Landlord to install electric light fixtures, one per bay and activate outlets one per three bays within the demised premises."

[10] "Landlord shall repair plumbing where necessary."

[11] "Landlord shall repair entrance doors to the premises and restore the elevator door openings to the premises in operational order."

[12] "Landlord shall seal all openings with concrete block to the demised premises."

In July of 2000, Mr. Seidman moved the jewelry manufacturing equipment into Building 7/8 before the work contemplated by the work letter was complete. Defendant paid the expenses associated with moving the equipment, which totaled $30,000.00. Three of the tasks, namely the fourth, fifth and eighth item enumerated in the work letter were not completed.

Mr. Seidman spoke with defendant's representatives on numerous occasions between July and November 2000 about defendant's failure to complete the tasks set forth in the work letter. Defendant did not provide the required windows and row of horizontal-ventilating blocks and did not install an additional sump pump. Instead defendant replaced an existing sump pump with a [*6]smaller unit.

Although the work letter contemplated that the windows would be installed per Tenant's specifications, a dispute arose between plaintiff and defendant regarding their locations. From defendant's perspective, installation in the locations selected by Mr. Seidman was difficult. The dispute culminated in an October 23, 2000 meeting at the premises. The express purpose of the meeting was to discuss the locations of windows and hollow blocking. Present at the meeting were Mr. Seidman, Zachariah Fruchthandler (one of the owners of defendant), and Ephraim Fruchthandler (defendant's Director of Tenant Improvement). At the meeting, defendant explained that the window locations proposed verbally by Mr. Seidman in front of the Post Office's concrete steps, concrete handicap ramp, and loading dock were not feasible. Defendant suggested alternative window locations which plaintiff rejected. The dispute remained unresolved, and neither the windows nor the hollow blocking were installed.The court rejects defendant's contention that plaintiff breached the implied covenant of good faith and fair dealings by failing to designate alternative feasible locations, thereby relieving defendant of its obligations to perform. Defendant failed to demonstrate that the specifications sought by the plaintiff were not doable. Rather, defendant demonstrated that they were difficult to comply with and that as a result defendant chose not to comply with the specifications. Defendant then attempted to shift its responsibility to perform the work letter specifications on the plaintiff by claiming that the plaintiff unreasonably refused to accept alternative solutions. The court therefore finds that defendant breached the lease agreement by not blocking the existing openings in the subject premises; by not providing one six inch hollow block mounted horizontally for air circulation; and by not providing six windows as requested by the plaintiff. The court will address the issue of moisture abatement efforts of defendant separately.

The next issue is the extent to which defendant is liable due to its breach of the lease agreement. The respective duties of the landlord and tenant are established by the terms of their contract (See 150/160 Assocs. v. Mojo-Stumer Architects, Inc. P.C., 174 AD2d 658, 659, [2nd Dept., 1991]). Moreover, it is not for the court to rewrite the terms of the parties' lease agreement; rather, the court should enforce the contract so as to provide a reasonable meaning to all of its terms ( See Tentleff v. Truscelli, 110 AD2d 240, 244-45 [2nd Dept., 1985], aff'd, 69 NY2d 769, 513 N.Y.S.2d 113 (1987). Moreover, "a reading of the contract should not render any portion meaningless, and should be read as a whole, with every part interpreted with reference to the whole." (CNR Healthcare Network, Inc. v. 86 Lefferts Corp., 59 AD3d 486, 489, [2nd Dept., 2009]).

The Building 7/8 lease that Mr. Seidman negotiated on plaintiff's behalf contains the following two provisions, which specifically provided that the plaintiff/tenant agreed to take the premises "as is," subject to the improvements set forth in the work letter: "Tenant has inspected the premises and accepts them as is, subject to the riders annexed hereto with respect to Owner's work, if any. In any event, Owner makes no representation as to the condition of the premises and Tenant agrees to accept the same subject to violations, whether or not of record .

* * * Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition and agrees to take the same as is on the date [*7]possession is tendered and acknowledges that the taking of possession of the demised premises by the Tenant shall be conclusive evidence that said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to latent defects."

This Court finds that the "as is" provisions contained in the lease bar plaintiff's claim of breach resulting from the alleged excessive moisture condition in the space (See Aikido of Manhattan v. 111 West 24th St. Assocs., 294 AD2d 299, 300[1st Dept., 2002]). In addition to the "as is" clauses, the lease specifically absolves defendant from an obligation to make "repairs, replacements and improvements" within the leased space, except for work set out in the work letter.

Because the lease contains unambiguous "as is" clauses, this Court finds that defendant had no obligation regarding moisture abatement beyond those negotiated for in the work letter. This is particularly true here because Mr. Seidman personally viewed the subject premises multiple times before entering into lease negotiations and was fully aware of the water problems in the space prior to executing the lease. Mr. Marshall, Mr. Seidman's own engineer, inspected the space before Mr. Seidman signed the lease, and informed Mr. Seidman that there was a serious water problem that had to be fixed before Mr. Seidman moved the equipment into the space.

Mr. Seidman's decision to move his equipment into the subject premises despite being warned of the water problem and the potential damage that it could do to his equipment meant that he was willing to accept the risk of that damage. Defendant never claimed or warranted that the subject premises was suitable for plaintiff's business. Nor did defendant promise to make the subject premises suitable for the equipment and business that plaintiff had in mind. While the harshness of the common law with respect to landlord and tenant has been ameliorated somewhat as to residential property by statute, it is still the law as to commercial property that, in the absence of proof of fraud or a covenant by the landlord, a landlord does not represent that the premises are tenantable or usable for the intended use (Refrigeration for Science, Inc. v. Deacon Realty Corp.,70 Misc 2d 500 at 503 [N.Y Sup. 1972]).

In addition, as a general rule, the party injured by a breach of the lease is entitled to recover all of his or her damages, including gains prevented as well as losses sustained, provided such damages were fairly within the contemplation of the parties at the time the agreement was made, and that such damages are certain, not only in their nature, but as to the cause from which they proceed (437 Fifth Co. v. Barton Realty Corp., 23 AD2d 168 [1st Dept. 1965]).

Therefore, plaintiff's ability to claim damages for the destruction of the jewelry manufacturing equipment cannot be based merely on the excessive water condition. Rather it must be based, in part, on a showing that the damage was causally linked to the failure to perform the work promised in the work letter. Plaintiff must also demonstrate this damage was one which the parties contemplated at the time the lease agreement was made.

The measure and elements of damages for the breach of a lease or of a covenant in a lease is governed by the general principles which determine the measure of damages for breaches of contracts, generally (NY Jur. 2d Damages §§ 32 et seq.).

A tenant is entitled to compensation for his or her landlord's breach of a covenant in their [*8]lease, precisely as he or she would be for the breach of any other agreement For a breach of covenant by the lessor, the lessee is entitled to recover the difference in value of the leasedpremises as they were to be for the purpose contemplated and their value as they are because of the breach (City of New York v. Pike Realty Corporation, 247 NY 245 [1928]).

On the issue of causation, however, there is no dispute that the subject premises experienced two floods in November of 2001 and in February of 2002 after the equipment was already there. Mr. Seidman was the sole witness to testify as to the condition of the jewelry manufacturing equipment before the floods. Although he testified on direct examination at trial that none of the damage to the equipment was caused by the floods, his 2004 deposition testimony, with which he was confronted on cross-examination, made clear his view that the majority of the damage was caused by the floods. According to Mr. Seidman, after the floods, "the equipment, it became terrible, rusted like crazy." Plaintiff presented no evidence that the equipment was appraised prior to the floods.

Plaintiff's sole appraisal expert, David Gold, appraised the jewelry equipment in 2002, after both floods. In his appraisal report, Mr. Gold concluded that the equipment suffered water damage "due to flooding and consequent damage."

The court finds that it is left to guess between the floods and the moisture condition of the premises as to the cause of the rusting damage to the plaintiff's equipment. The plaintiff has failed to show that the destruction of the jewelry manufacturing equipment was caused by the defendant's breach of the lease agreement and not caused by the two floods.

Therefore, plaintiff's claim for damages due to the destruction of his equipment is denied. The Court further finds that defendant is not liable for breach of the covenant of quiet enjoyment. "In actions for damages for breach of the covenant of quiet enjoyment, a tenant must show an ouster, or if the eviction is constructive, an abandonment of the premises." (Reade v. Reva Holding Corp., 30 AD3d 229 at 237 [1st Dept., 2006] (quoting Dave Herstein Co. v. Columbia Pictures Corp., 4 NY2d 117, 121[1958]).

In this case, plaintiff has not vacated the premises. In fact, as Mr. Seidman has conceded that he currently occupies the space; the equipment is there, and that he has a key to move in and out of the space as he sees fit.

Turning to defendant's first counterclaim, the court finds as follows. According to paragraph 60 of the May 2000 lease agreement, Mr. Seidman's obligation to pay rent did not commence until after he relocated to the subject premise, taken occupancy and the work detailed on the May 18, 2000 work letter had been reasonably completed. That work was never reasonably completed, therefore by the terms of the lease plaintiff's rent obligation never commenced. Therefore, defendant's claim for rent and late fees is denied.

With regard to defendant's second counterclaim for possession, that claim is also premised on the plaintiff's alleged breach of the lease due to non payment of rent. It therefore must be denied for the same reason.

With regard to the third counterclaim seeking reimbursement of defendant's legal cost in seeking enforcement of the lease agreement caused by plaintiff's default, again the claim must be denied for the same reason. Plaintiff did not default on the terms of the lease agreement.

The foregoing constitutes the decision and order of this court.

Enter____________________________________X [*9]

J.S.C.

Enter forthwith____________________________________X

J.S.C.