325 E. 14th St. Corp. v Marie France Realty Corp.

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325 E. 14th St. Corp. v Marie France Realty Corp. 2018 NY Slip Op 31002(U) May 18, 2018 Supreme Court, New York County Docket Number: 651074/2014 Judge: Marcy Friedman Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 05/22/2018 03:37 PM 1] NYSCEF DOC. NO. 234 INDEX NO. 651074/2014 RECEIVED NYSCEF: 05/22/2018 SUPREME COURT OF THE STA TE OF NEW YORK COUNTY OF NEW YORK-PART60 PRESENT: HQn,__ Mi!n~:~J;'ri~~filJ.an, J.S.C, ·--················------------------------------------~""""""""""""""""""""""'~'~"""""""'" x 325 EAST 14TH STREET CORPORATION, Plaintiff, lndex No.: 65107412014 - aaainst ···· b MARIE FRANCE REALTY CORP. and MARIE PERUGrN!, Defendants. DECISION/ORDER This is an action arising out of a corrn:nercial lease, dated August 19, 2003 (Lease), for a bar and restaurant knmvn as the Crocodile Lounge. The action was brought in response to a "Thirty (30) Days Notice of Cancellation of Lease,'' dated February 24, 2014 (Notice of Cancellation or Notice). The Notice of Cancellation alleged violations ofthe Lease by Tenant, 325 East 14th Street Corporation, consisting primarily of unauthorized uses of the premises and alterations that were allegedly performed without the consent of Landlord, Marie France Realty Corp., and without required Departrnent of Buildings (DOB) pem1its. The Notice stated that the Lease would be terminated on a specified date - 30 days from the mailing of the Notice------ unless Tenant cured the defaults enumerated in the Notice. By decision on the record on December 11, 2014, this court granted Tenant a Y~.Lh"1W~t9.l.l~ injunction. Afler a four-day bt~nch trial, the court issued a decision, dated February 3, 2018 (Decision After Trial), which awarded a judgment affording Tenant an opportunity to cure specified conditions at the premises. Tenant now moves for an order awarding Tenant its attorney's fees in the amount of $42.720,00, plus costs and disbursements, as the prevailing party in this action, (Order to Show Cause, dated Mar. 12, 2018 [Motion. Seq. No. 003]; Tenant's l\tlemo. ln Supp. of Tenant's l\/Iotion, 2 of 6 [*FILED: NEW YORK COUNTY CLERK 05/22/2018 03:37 PM 2] NYSCEF DOC. NO. 234 INDEX NO. 651074/2014 RECEIVED NYSCEF: 05/22/2018 at 2.) Landlord also moves for an order finding that it is the prevailing party and awarding it reasonable attorney's foes and "professional fees" in an amount to be determined by a Special Reforee. (Order to Show Cause, dated Mar. 12, 2018 [Motion Seq. No. 004].) As the Court of Appeals has explained, "[u]nder the general rnle, attorney's fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule." ([!QQf'siJ:j1_$.§Q$2!ibJ,,1~t:tJ'\GS ~~mrm~.IJ~I§,Jrt£~., 74 NY2d 487, 491 [1989] [internal citations omitted].) "In order to justify an award of contractual attorneys' fees, the court need not adopt each claim raised in a lawsuit. Rather, lhe claimant must simply be the prevailing party on the central claims advanced, and receive substantial relief in consequence thereo{" (U9gr.g_9.fJ\1.gr5_, __Qf_~-~--_\,V;;ilJ\t;L~t,"~~ggg2.c..Y...\~b1lk~L~L LLC, 6 AD3d 279, 280 [1st Dept 2004], citi11g ~W1_f:., __ ~1th __$t,_.R~<11_1y__CQ~_, __L_L_(~"y__QI~..P.0..~Di~rn., Inc,, 304 AD2d 310, 311 [lst Dept 2003] [other internal citations omitted]; .Syh~~--y__RfP_Thint ~:1x£~.L/J,§§Qf§_,;JLC. 39 AD3d 279, 279 [1st Dept 2007] [same]; §~-~-AL~9-N~~1Qr__y __ M~J!_q_Yf~I.J, 81 NY2d 410, 416 [1993], r~m:g denied 82 NY2d 750 [holding that plaintiff was not entitled to attorney's foes because plaintiff had "not prevailed with respect to the central relief sought"].) A paiiy is not required to have prevailed on all of its claims in order to be considered a prevailing party. (M0.1t~r..!:}f.}Yj_~g~rh9rKtY..M~rhiD, 98 AD3d 859, 863 [1st Dept 2012], lv denied 20 NY3d 855 [2012]0) "To detennine \.Vhether a party has 'prevailed' for the purpose of awarding attorneys' foes, the court must consider the "true scope' of the dispute litigated and \Vhat was achieved vvithin that scope." (Svkes, 39 AD3d at 279, citing }~_~(;~A~,1Qr_~:Z~h __CQ!J\_Y_\Vi_pJyr§, 227 AD2d 146, 147 [I st Dept 1996].) 2 3 of 6 [*FILED: NEW YORK COUNTY CLERK 05/22/2018 03:37 PM 3] NYSCEF DOC. NO. 234 INDEX NO. 651074/2014 RECEIVED NYSCEF: 05/22/2018 In the Decision After Trial, the court fmmd that Tenant made specified alterations to the premises, which constituted a substantial violation of the Lease. (Decision After Trial, at 4-5, 19; see also id., at 6-180) The court found, hovvever, that Landlord waived the no-waiver and noalterations provisions of the Lease" (Id", at 19-24.) In particular, the court found that the overwhdming evidence at trial established complicity on Landlord's part in permitting the illegal alterations to be made, that virtually all of the alternations \Vere made at the outset of the tenancy, and that Land.lord's long-standing forbearance from objecting to the alterations was not "passive acquiescence," as Landlord claimed, but acquiescence that amounted to active involvement in illegally altering tbe premises" (kL, at 5, 21-23.) The court further held that, although Landlord waived Tenant's violations of the Lease, Landlord could not effectively waive compliance with DOB regulations enacted for the protection of the publico (kL, at 24-25.) The comi concluded that Tenant was entitled to an opportunity to cure (i.e< legalize) the conditions identified in the Decision After Trial. (Id., at 25~3 l .) Under the circumstances, neither party obtained substantial relief on its claims and therefore neither is the prevailing party. Although Tenant was afforded the opportunity to legaLize numerous alterations to the premises, the central relief sought by Tenant \Vas a determination that it was not in substantial violation of the Lease and that it was not obligated to repair the conditions it alleged were "caused by the m.vner." (See CompL, ~ 20, first, second, & third bullet points.) Landlord also did not obtain the central relief it sought in its Notice of Cancellation l ______ that is, termination of the Lease upon Tenant's failure to cure the alleged violations within the 30-day 1 The parties dispute whether the Lease in fact provides for attorney's fees to Landlord under the circumstances ofthis case. Tenant relies on section 20 of the Lea:;e and claims that it only permits Landlord to obtain attorney's foes if it institutes an action and is a "prevailing party." (Aff of Joseph Altman [Tenant's Atty.] Jn Reply,~ ! 5.) Landlord 3 4 of 6 [*FILED: NEW YORK COUNTY CLERK 05/22/2018 03:37 PM 4] NYSCEF DOC. NO. 234 INDEX NO. 651074/2014 RECEIVED NYSCEF: 05/22/2018 period specified in the Notice. ,1.\s the court. held that Landlord \Vaived its objection to Tenant's violations of tenancy (Decision After Trial, 5, 21-24» Landlord also did not prevail on its counterclaims, which sought a declaration that the various alleged unauthorized uses of, and alterations to, lhe premises were "default[s] under the Lease,"2 Moreover, although Landlord's counterclaims sought an· injunction directing Tenant to legalize the alterations and uses (Arn. Ans., ~ri: 37, 44, 69, 77, 91, 98, \Vherefore Clause), Landford eifoctively abandoned these claims at trial, taking the position that the tenancy must be tenninated. Landlord did not prevail on this relief, as the court held that Tenant was entitled to an opportunity to legalize specified conditions. (Decision After Trial, at 3CL) Finally, 42P Qv~11~I~..CQLL..YJ~r~~) (189 Misc 2d 34, 35 [App Term, 2d Dept 2001 ]), on which Landlord relies, is not to the contrary, There, the Court held that the fact that the tenant was gramed a cure period did not alter the landlord's status as the prevailing party, In that case, the court found that the residential tenant had breached the lease, awarded a judgment of possession to t.be Landlord, and granted the tenant the 10-day statutory cure period, Here, the court did not find that Tenant was in default, based on the court's separate finding that Landlord waived its right to claims attorney's foes under section 5 ! of the Rider to the Lease, which provides for attorney's fees in the event any "action or inaction by Tenant causes Landlord to incur reasonable attorneys' fees.'" {Lease, annexed as Ex. A to the Complaint.} The comi assumes for purposes of these motions that attorney's fees would be available to Landlord under section 51 if it were the prevailing party. The comt notes that Landlord does not contest that the prevailing party standard applies to this section. (~~Landlord's Memo. ln Opp. to Tenant's Motion, at 5 ['"Rider paragraph 5 l ... doe5. not require that Landlord have actually instituted a proceeding in order to be entitled, as a prevailing party, to attorneys' fees''.].) 2 Although the court found that Tenant made numerous alterations to the pt'emises with Landlord's knov.rledge and acquiescence but without necessary pennits, the court rejected nurnerous other claims by Landlord as to illegal alterations or unauthorized uses. {See Decision After Trial, at 6- l 8.) 4 5 of 6 [*FILED: NEW YORK COUNTY CLERK 05/22/2018 03:37 PM 5] NYSCEF DOC. NO. 234 INDEX NO. 651074/2014 RECEIVED NYSCEF: 05/22/2018 enfr)rce the no-alterations dause of the Lease, The court, however, ordered Tenant to cure the alterations because Landlord could not waive compliance with DOB regulations. It is accordingly hereby ORDERED that the motion of 325 East 14th Street Corporation for an order awarding it its attorney's foes is denied; and is further ORDERED that the motion of Marie France Realty Corp. for an order awarding it its reasonable attorney's and professional foes is denied, Dated: New York, New York May 18, 2018 5 6 of 6

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