737 Park Ave. Acquisitions, LLC v Eastside Comprehensive Med. Servs., LLC
Annotate this CaseDecided on May 30, 2014
Civil Court of the City of New York, New York County
737 Park Avenue Acquisitions, LLC, Petitioner-Landlord,
against
Eastside Comprehensive Medical Services, LLC, Respondent-Tenant.
84725/12
For Petitioner:
Melissa Ephron-Mandel, Esq.
299 Broadway, Suite 1615
New York, N.Y. 10007
For Respondent:
Peter Pruzan, Esq.
48 Wall Street, 26th floor
New York, N.Y. 10005
Nancy M. Bannon, J.
In this commercial nonpayment proceeding, the petitioner 737 Park Avenue Acquisitions, LLC ("737 Park"), owner of the subject premises located at 737 Park Avenue in Manhattan, seeks a judgment of possession and money judgment for unpaid rent and additional rent against respondent Eastside Comprehensive Medical Services, LLC ("Eastside"), the tenant of a ground floor commercial unit operated as a medical office. The respondent asserted several affirmative defenses, including partial constructive eviction arising [*2]from renovation work being performed by the petitioner on the premises. The trial in this matter was held over the course of four days, after which the parties submitted post-trial memoranda.
FINDINGS OF FACTPrior to trial, the parties entered into a written stipulation dated June 13, 2013, which established the elements of the petitioner's prima facie case, including that petitioner owned the premises. They agreed that the subject premises is comprised of five commercial units and approximately 70 to 100 residential units over twenty floors. It was agreed that the parties had entered into a written lease agreement on January 19, 2001, for Unit 1A, a commercial unit, and the respondent has been in possession for more than twelve years. The parties agreed to admit into evidence the complete lease agreement, which provides in relevant part as follows.
Paragraph 4 of the lease provides:
There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or others making repairs, alterations, additions or improvements in or to any portion of the building or the demised premises, or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof. It is specifically agreed that Tenant shall not be entitled to any setoff or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this lease. Tenant agrees that Tenants's sole remedy at law in such instance will be by way of an action for damages for breach of contract.
Paragraph 20 of the lease provides in part:
Owner shall have the right at any time without the same constituting an eviction and without incurring liability to Tenant therefor, to change the arrangement and/or location of public entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other public parts of the building, and to change the name, number or designation by which the building may be known. There will be no allowance to Tenant for diminution of rental value and no liability on the part of the Owner or other Tenants making any repairs in the building or any such alterations, additions and improvements.
Paragraph 29(f) of the lease provides:
Owner reserves the right to stop services of the heating, elevators, plumbing, air-conditioning, electric, power systems or cleaning or other services, if any, when necessary by reason of accident, or for repairs, alterations, replacements or improvements necessary of desirable in the judgment of the Owner, for as long as may be reasonably required by reason thereof.
Paragraph 73 of the rider to the lease provides as follows:
Tenant hereby agrees not interpose any counterclaim or set-off of whatever nature or description in any action or summary proceeding by the Landlord against the Tenant for non-payment of rent, damages or deficiency whether such proceeding is brought under this Lease or any renewal, extension or holdover or modification thereof.
Pursuant to the same stipulation, the parties agreed that for the months of October 2012 through and including June 2013, the rental arrears total $103,006.37. This sum is comprised of the base rent which equals $10,000.00 plus additional rent for real estate tax in the amount of $2,780.01 per month for the months of July 2012 through and including June 2013. The parties further agreed that the respondent made two payments of $10,000.00 each thereby reducing the base rent for the period from October 2012 to June 2013 to $70,000.00 and, with regard to the additional rent, the respondent has a credit in the amount of $353.75, leaving $33,006.37 due for the period from July 2012 through June 2013.
The parties further agreed that the respondent has deposited the sum of $20,000.00 with the New York City Department of Finance pursuant to a order of this court (Kotler, J.) dated March 13, 2013.
The parties also stipulated to the fact that prior to July 2012 the petitioner commenced demolition and construction work to renovate, repair and alter various portions of the building and that, attendant to that work, an exterior hoist was erected in the rear court yard of the building.
The parties stipulated into evidence notices from petitioner to the respondent of interruption of building services in particular water service, and correspondence from respondent to petitioner dated October 2, 2012, detailing the effects of the ongoing construction on their practice.
In addition to the arrears agreed upon in the stipulation, the petitioner seeks to recover arrears which continued to accrue from August through the time of trial in November 2013.
The petitioner rested upon the stipulation.
The respondent asserted the affirmative defenses of actual partial eviction and partial constructive eviction. It claims that the petitioner is not entitled to the full base rent as the ongoing construction has caused them to disrupt their medical practice and has rendered portions of their office space unuseable. In support of its affirmative defense, the respondent presented testimony from two witnesses, Sonia Pizarro, the office manager and clinical research coordinator and Dr. Ram K. Shrivastava, a principal of Eastside Comprehensive, as well as documentary evidence including photographs.
Sonia Pizarro, who has been employed by the respondent for ten years, explained that Eastside Comprehensive's primary business is to develop and oversee clinical trials in conjunction with various pharmaceutical companies. Part of that practice involves patient care, interviewing patients concerning their conditions and making psychiatric assessments. In addition to patient care, the respondent's practice also involves meeting with pharmaceutical representatives in order to gain approval to conduct new pharmaceutical trials or studies. [*3]Eastside Comprehensive's two principals are Dr. Ram K. Shrivastava, the primary investigator and Dr. Patel, the sub-investigator. In addition, and there are three coordinators who are pharmaceutical representatives entrusted with the task of monitoring and reviewing the data collected.
Ms. Pizzaro testified as to the day to day business practices of Eastside Comprehensive, her own job duties, as well as the layout of the office space and how each of the rooms were used. In particular, she testified as to the use of the four offices in the rear of the suite which she believed to be most affected by the demolition and noise from construction project. These four rear offices consisted of Dr. Shirvastava's office, Dr. Patel's office, an extra room which is used for patients to conduct interviews in a private, quiet space, and a restroom.
Ms. Pizzaro further testified that once the construction started, in or about the summer of 2012, a construction hoist was erected in the rear courtyard just outside Dr. Shrivastava's office. According to Ms. Pizzaro, this hoist was being used continuously throughout the day and the noise and vibrations generated by the hoist were exceedingly loud and made it impossible to use the rear offices of the suite in the same manner they had been used prior to the start of the construction. For example, Ms. Pizzaro testified that Dr. Shrivastava was unable to conduct patient interviews in his office and the extra office where patients previously conducted telephone interviews with a representative from the pharmaceutical company was no longer useable for that purpose because of the noise generated by the hoist. However, she testified that Dr. Patel still worked in her office every day, but sees patients in a consultation room.
Ms. Pizzaro also testified to disruptions in water service and electricity to the office. She recalled that the water supply was intentionally shut off by the landlord for the entire day from 9:00 AM to 4:00 PM on approximately thirty-four separate occasions between January and September 2013. The tenants, including the respondent, received written notices that were admitted into evidence. She further testified that interruptions to the water supply made it impossible to see patients or conduct examinations on those days because there was no water to be used for the bathroom facilities or in the collection of blood and/or medical samples. She also testified that the electrical power was shut off for short periods of time on three days in September of 2013. The building manager informed her it was an emergency service interruption due to the construction and they were working to restore the power.
Ms. Pizarro testified that there were several leaks into the offices which resulted in damage to the walls, cabinetry, hallway carpet as well as some of the medical equipment. However, the petitioner did respond to the respondent's calls regarding water leaks and promptly made all repairs without any cost to the respondent.
When asked about each of the various rooms and spaces in the office suite, she testified that nearly all spaces, including offices, bathrooms, closets and storage areas, were still being used and were being used in the same manner as they were before the construction began in 2012. The exception was two consultation rooms which were no longer being used the evaluate patients.
Ms. Pizzaro testified that since the commencement of the construction in the summer of 2012, Eastside Comprehensive has applied for but has not been approved for any of the clinical trials or drug tests. She explained that prior to being awarded a study, the sponsor visits the office and assesses the facilities as part of a site review process. She did not identify any [*4]particular application that was declined on the basis of inadequate facilities. There were six ongoing studies at the time of trial, including one that was awarded at the end of 2012. Pizzaro estimated that normally there are twice as many trials going on at any one time.
Dr. Ram K. Shrivastava also testified in regard to the noise generated from the construction, the damage to the office and office equipment from several water leaks, and the disruption to his practice due to the repeated water shutoffs, which forced them to cancel numerous appointments. With regard to the construction and the resulting noise, Dr. Shrivastava explained that the hoist was just three inches outside the window of his consultation office. As a result of the vibrations and the noise from the hoist as well as the workers Dr. Shrivastava has not been able to use the consultation office, which is his primary office, to see patients and had to see patients in the conference room. Dr. Shrivastava further testified that the window in the employees' bathroom, which provided ventilation, had been covered over with plywood by the construction workers. Dr. Shrivastava also testified that the workers at the site shouted and used profanities while working, and could be overheard in the back offices.
There were also problems with the remaining windows in the office. These original windows were replaced with new windows as part of the renovation but, as of the time of trial, the workers had yet to return to finish the installation. Dr. Shrivastava testified that he spoke with the managing agent concerning the ongoing problems sometime in 2012, but after that only communicated his concerns to the building super, his "contact." However, he never had to close the office due to these problems. It was closed only on weekends and holidays.
At the close of respondent's case, petitioner moved to dismiss respondent's affirmative defense of actual partial eviction. That application was granted by this court on the record on October 28, 2013, as that affirmative defense was not supported by the evidence. As such, the respondent's sole remaining defense was partial constructive eviction.
The trial continued and petitioner presented testimony from two rebuttal witnesses - William Unger, president of McGraw Hudson Corporation, a construction consulting group hired to supervise the developers, general contractor and consultants on the construction project, and Frank Clemente, a labor foreman with Hailey Construction, a contractor currently working on the site.
Mr. Unger testified that duties of McGraw Hudson include supervising the developers, general contractors and other consultants on the project. He has been involved with the project for over two years and has been in the premises hundreds of times. He testified that the construction hoist was erected in the rear outside courtyard as this was the optimal location to give the workers the best access to the building. Mr. Unger further testified that on the occasions he has been inside the apartments adjacent to the construction hoist he was able to hear the hoist in operation. The hoist makes a rumbling sound when it is in operation which becomes more pronounced as the hoist approaches the apartment and then diminishes as it passes. Mr. Unger described this hoist as no more or no less noisy than any other construction hoist of that configuration, and testified that he was able to carry on a conversation in a normal tone of voice even when the rumbling from the hoist was at it's loudest.
In addition to his testimony regarding the hoist, Mr. Unger also testified about the replacement of the plumbing in the building. According to him, the plumbing lines in the building are over seventy years old and have reached the end of their useful life, as such they [*5]need to be replaced as part of the renovation work. In order to replace the plumbing lines it is necessary to turn off the water supply and drain the lines before work can be done to remove or replace the existing plumbing lines. Tenants were advised of planned shut downs to the water supply in advance via the building manager. However, there were also emergency situations, such as water leaks, which required the water to be shut down without notification to the tenants.
The petitioner also presented the testimony of Frank Clemente, a labor foreman for Hailey Construction, a contractor working at the site. Mr. Clemente's duties include cleaning the building, moving materials throughout the building and overseeing the general day-to-day cleaning of the building. He responded respond to two complaints regarding leaks inside the respondent's unit. On each of those occasions, workers from Hailey Construction determined the source of the leak, rectified the problem and made repairs to the areas damaged by the water. Those repairs included spackling, plastering, and painting as well cleaning any furniture and carpeting damaged by the leak.Mr. Clemente also testified that the old windows in the respondent's office needed to be replaced because they were in poor condition. While the windows had been replaced, there still remains finishing work to be done to the wall area surrounding the windows, which suffered damaged during the removal and installation processes.
As a supervisor, he responded to a complaint of excessive shouting by his workers by instructing them to keep their voices down.
CONCLUSIONS OF LAW
The respondent's position is that there was a partial constructive eviction as a result of the ongoing construction project at the premises which suspended its obligation to pay rent. The petitioner maintains that various terms of the lease preclude the respondent's affirmative defense of partial constructive eviction and that, in any event, the defense has not been established by the respondent at trial.
"To establish constructive eviction, a tenant need not prove physical expulsion, but must prove wrongful acts by the landlord that substantially and materially deprive the tenant of the beneficial use and enjoyment of the premises.'" Pacific Coast Silks, LLC v 247 Realty, LLC, 76 AD3d 167, 172, (1st Dept., 2010) citing Barash v Pennsylvania Term. Real Estate Corp., 26 NY2d 77, 83 (1980). "The tenant, however, must abandon possession in order to claim that there was a constructive eviction." 428 Camera Corp. v Tandy Corp., 272 AD2d 72, 73 (1st Dept., 2000). But a constructive eviction may be partial, rather than total, in which case the tenant must have abandoned only the portion of the premises affected. See Minjak Co. v Randolph, 140 AD2d 245, 248-50 (1st Dept. 1988). If the tenant continues to use the unuseable portions, even if the usage is greatly diminished, then a constructive eviction defense will fail. See Arpino v Cicciaro, 38 Misc 3d 129(A) (App. Term, 2d Dept, 9th & 10th Jud Dists 2012).That is, "a defense of constructive eviction is not available to a tenant who continues to occupy the demised premises." Barile v Cartwright Tents & Party Rentals, Inc., 4 Misc 3d 134(A) (App Term, 9th and 10th Jud Dists 2004); see Barash v Pennsylvania Term. Real Estate Corp., supra; Bostany v Trump Organization LLC, 88 AD3d 553 (1st Dept 2011); Genovese Drug Stores, Inc. v William Floyd Plaza, LLC, 63 AD3d 1102 (2nd Dept. 2009); Theatre East, Inc. v Zorro Productions, Inc., 2002 [*6]NY Slip Op 50183U (App Term 1st Dept 2002). As such, the measure of damages in a constructive eviction case depends upon whether the tenant is evicted from the entire premises or only a portion of the premises. See Minjak Co v Randolph, 140 AD2d 245 (1st Dept. 1988); see also Johnson v Cabrera, 246 AD2d 578 (2nd Dept. 1998); Minjak Co v Randolph, 140 AD2d 245 (1st Dept. 1988).Here, the court finds that the respondent has not meet its burden of proving, by a preponderance of the evidence, that it was constructively evicted from any portion of the leased premises. The respondent did offer credible testimony as to the impact of the noise levels and the interruptions to their daily medical practice as a result of the ongoing construction. However, it was not demonstrated that either the noise nor any other condition rose to the level of a partial constructive eviction. The evidence elicited demonstrated that, although the rear office spaces were not being used for the same purposes as before, they were nevertheless used during the construction. Dr. Shrivastava testified that even when meeting with patients in the front conference room, he would return to his office to consult the clinical trial books to determine whether the patient was an appropriate candidate for a particular study. Nor did the evidence offered during trial demonstrate any particular amount by which the respondent had experienced a reduction in its day to day business operations. While there was testimony that respondent was not awarded any new clinical trials for which they applied there was no testimony as to how this failure to obtain new clinical trials affected their business. The evidence also showed that the office was never closed.
In any event, as noted above, the petitioner argues that, even assuming the respondent's established its defense of a partial constructive eviction, no relief can be granted since the terms of the parties' lease preclude it. The petitioner's argument is correct, and the respondent has offered no persuasive argument to the contrary.
In Winston Churchill Owners Corp v Churchill Operating Corp., 193 AD2d 396 (1st Dept. 1993), the First Department, citing Barash v Pennsylvania Term. Real Estate Corp., 26 NY2d 77 (1980), held that "since the lease between the parties specifically authorizes the landlord to enter the premises to make repairs and specifically precludes a rent abatement based upon such entry, and since there was no showing that the entry in this case was for reasons other than to make repairs, Civil Court's finding that the entry did not constitute a partial eviction should have been sustained."
Indeed, the terms of the instant lease give the landlord broad authority to enter the premises to make repairs or perform renovations, alterations or additions to any part of the building as desired, and to shut down water, air conditioning or electric systems for that purpose, and to do so "for as long as may be reasonably necessary" to complete the desired work. The lease also insulates the landlord from all liability for any such work, precludes the tenant from seeking any rent abatement or damages for injury to business or even for "inconvenience or annoyance" from the work, and limits the tenant's remedies to a lawsuit fo breach of contract.
It has been held that "exculpatory" lease clauses such as those present in Winston Churchill Owners Corp v Churchill Operating Corp., supra, and in the subject lease "specifically authorized [the landlord] to perform the work in question without abating [the tenant's] obligation to pay rent." Cut-Outs, Inc. v Man Yun Real Estate Corp., 286 AD2d 258, 260 (1st Dept. 2001). In that case, the First Department went on [*7]to explain that the tenant's "argument that the exculpatory provisions do not protect acts that would otherwise constitute a partial actual eviction or constructive eviction, if accepted, would largely read them out of the lease." Id at 260; see also Jackson v Westminster House Owners, Inc., 24 AD3d 249 (1st Dept. 2005); Huron Assocs, LLC v 210 East 86th Street Corp., 18 AD3d 231 (1st Dept. 2005); Two Rector Street Corp. v Bein, 226 App Div 73 (1st Dept. 1929).
Indeed, it is well settled that "when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms." W.W.W. Assoc., Inc. v Giancontieri, 77 NY2d 157, 162 (1990). The courts will not rewrite a commercial contract, including a lease agreement, which is negotiated at arm's length by sophisticated counseled parties. See Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d 470 (2004). In Pacific Coast Silks v 247 Realty, LLC, 76 AD3d 167 (1st Dept. 2010), the First Department explained that "while residential tenants require protection from nonnegotiable form leases ... commercial tenants, such as plaintiff, that are able to negotiate the terms of their leases, require no such protection." Further, "if the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity" (Greenfield v Philles Records, Inc., supra at 569), even if this results in an economically harsh result to one of the parties. See Soldiers', Sailors', Marines' and Airmen's Club, Inc. v Carlton Regency Corp, 95 AD3d 687 (1st Dept. 2012); Murray Hill Mews v Rio Restaurant Assocs., 92 AD3d 453 (1st Dept 2012); CBS, Inc. v P.A. Building Co., 200 AD2d 527 (1st Dept. 1994). Thus, while application of the above-mentioned terms of the subject lease, which are quite broad and clearly favor the landlord, does result in some harsh consequences to the tenant, this court cannot re-write the parties' agreement.
Finally, the court notes that Paragraph 4 of the lease expressly states that the tenant's sole remedy for any alleged breach by the landlord is an action for damages. The respondent commenced no such action.
Based upon the foregoing, the court finds that the petitioner is entitled to recover from the respondent base rent in the amount of $70,000.00 for the period from October 2012 to June 2013, and additional rent for real estate taxes in the amount of $33,006.37 for the period from July 2012 through June 2013. The court further finds that the petitioner is also entitled to base rent in the amount of $40,000.00 which has accrued for the period from August through November 2013.
Any further relief sought by the parties not expressly granted herein is denied.
Accordingly, it is
ORDERED that the petitioner is awarded a judgment of possession of the subject premises with a warrant of eviction, the issuance and execution to be stayed for ten days from entry of said judgment; and it is further,
ORDERED that the petitioner is awarded a money judgment against the respondent in the amount of $143,006.37; and it is further,
ORDERED that the Clerk shall enter a judgment of possession of the subject premises with a warrant of eviction, thus issuance and execution to be stayed for ten (10) days from entry of said judgment, and a money judgment in favor of the petitioner and against the respondent in the sum of $143,006.37; and it is further,
ORDERED that the New York City Department of Finance, Treasury Division, Client Services, located at 66 John Street, 12th floor, NY, NY, 10038, is directed, upon receipt of a certified copy of this order, a Certificate of Deposit duly issued by the Department of Finance, and any other forms required by the Department, to turn over to the petitioner, 737 Park Avenue Acquisition LLC, the funds deposited by the defendant, Eastside Comprehensive Medical Services, LLC, in the sum of $20,000.00, as reflected in the Certificate, less the fee of the Department, and it is further,
ORDERED that the parties shall retrieve their trial exhibits from the court file within 60 days.
This constitutes the Decision and Order of the court.
Dated: May 30, 2014Nancy M. Bannon __________________________NANCY M. BANNON, J.S.C.
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