23-35 Bridge St. v. Excel Auto. Tech Ctr.

• Decision Date: 10 April 2023
• Docket Number: Index No. 11088/2003
• Citation: 23-35 Bridge St. v. Excel Auto. Tech Ctr., 2023 NY Slip Op 50344(U), Index No. 11088/2003 (N.Y. Sup. Ct. Apr 10, 2023)
• Parties: 23-35 Bridge Street LLC, Plaintiff, v. Excel Automotive Tech Center, Inc., Defendant.
• Court: New York Supreme Court

2023 NY Slip Op 50344(U)

23-35 Bridge Street LLC, Plaintiff, v. Excel Automotive Tech Center, Inc., Defendant.

Index No. 11088/2003

Supreme Court, Kings County

April 10, 2023

Unpublished Opinion

Attorneys for Plaintiff Dunnington, Bartholow & Miller LLP Samuel Blaustein, Esq. Clark Hill, PLC Jordan S. Bolton Esq.

Attorneys for Defendant Rosenberg & Estis, P.C. Norman Flitt, Esq.

Katherine A. Levine, J.

The following papers numbered 1 to 8 read herein:

Papers Numbered

Notice of Motion/Order to Show Cause/Petition/Cross Motion and Affidavits (Affirmations) Annexed 1-45-7

Opposing Affidavits (Affirmations) 6-7

Reply Affidavits (Affirmations) 8

These motions arise from a decision rendered by this court on a declaratory judgment action in 25-35 Bridge St. LLC v Excel Auto Tech Ctr Inc., 63 Misc.3d 269 (Sup. Ct Kings Co. 2018). Plaintiff 23-35 Bridge Street LLC ("Plaintiff" or "Bridge Street") now moves for a money judgment to reimburse it for: (1) its costs, disbursements and attorney's fees, as provided for under the parties' lease, and (2) "the loss of market rents from the time the lease expired [on April 29 2005] to the present (during which Defendant was in possession of the Premises paying only below-market rents)..."

Defendant Excel Automotive Tech Center, Inc. ("Excel") cross-moves for an order: (1) vacating the court's October 29, 2018 trial decision and order, pursuant to CPLR 5015 (a) (3) and in the interest of justice, "on the grounds that Bridge Street is now regarding Excel's late written exercise of the purchase option afforded Excel under its lease with Bridge Street (the 'Lease') as a default under the Lease rather than... a forfeiture of Excel's option rights[,]" and (2) sanctioning Bridge Street and its attorneys for making the instant motion and awarding Excel costs, disbursements and attorney's fees, pursuant to 22 NYCRR § 130-1.1 (Part 130).

History of Declaratory Judgment Action

The underlying action arises from a disputed option to purchase contained in a commercial lease which defendant Excel admittedly failed to exercise in a timely manner. On March 26, 2003, plaintiff the owner of the commercial real property at 27-35 Bridge Street in Brooklyn (Property), commenced this action against its tenant Excel, seeking a declaration that a disputed purchase option in a commercial lease entered into between Joseph Vitarelli ("Vitarelli"), the plaintiff's deceased predecessor in interest, and Excel, was unenforceable on the ground that the option clause had been stricken or, in the alternative, that Excel had failed to timely exercise as required by the lease. In its answer Excel asserted counterclaims seeking an order: (1) declaring that Excel may enforce the Option to purchase the Property, although it admittedly failed to timely exercise the Option, and (2) permanently enjoining plaintiff from selling the Property or otherwise interfering with Excel's occupancy of the Property.

In 2004, the parties filed their respective motion and cross motion for summary judgment, and each of the parties requested attorney's fees. By decision and order dated April 14, 2005, the court (Garson, J.) denied that branch of plaintiff's motion seeking a declaration that Excel had failed to exercise its Option to purchase the Property, and that branch of Excel's cross motion seeking a declaration that it validly exercised the Option. The court held that "a question of fact exists regarding whether Excel would suffer a forfeiture were it not allowed to exercise the option" and whether Excel had "recouped and/or depreciated [the value of its expenditures] during the term of the lease." However, the court granted that branch of Bridge Street's motion dismissing Excel's second counterclaim for an injunction. The court denied those branches of the parties' motion and cross motion seeking attorney's fees, and held that:

"In the instant case, section 20 of the lease provides for attorneys' fees in plaintiff's favor only if Excel was in default for the rent due pursuant to the lease. Thus, it does not facially appear that an award of attorney fees would be warranted in this case. Moreover, as there has been no decision rendered granting either party the relief requested, any award of attorneys' fees would be premature. Accordingly, those branches of the motion and cross motion requesting attorneys' fees are denied."

Under the Lease, Bridge Street's predecessor-in-interest rented the Property to Excel for $7,000.00 per month for a six-year term, which commenced on March 1, 1999, and terminated (during the pendency of this action) on April 29, 2005. In May 2005, at the conclusion of the Lease term, Excel remained in possession of the Property as a month-to-month tenant, with a monthly rent of $7,000.00. Notably, Bridge Street accepted the $7,000.00 monthly rent from Excel without reserving its right to seek additional rent.

By interim order dated September 14, 2011, the court (Schmidt, J.) directed, in relevant part, that "Excel shall remain in possession of the property as a month-to-month tenant of the LLC, subject to the provisions of the expired lease... through the final determination of this Supreme Court action." Thus, Justice Schmidt ordered, and the parties agreed, that Excel would remain in possession of the Property as a month-to-month tenant until the conclusion of this action, with monthly rent of $7,000.00. Once again, Bridge Street failed to object or reserve its right to seek additional rent. As will be set forth below, Justice Schmidt's decision on the rent constitutes the law of the case.

Decision and Order After Trial

Eventually this court presided over a bench trial in this action, and thereafter issued a comprehensive and lengthy decision which analyzed all the factual and legal issues presented by the parties. See 25-35 Bridge St. LLC; supra. More than half of the trial, and much of the 2018 decision addressed various motions in limine, which predominantly concerned whether CPLR 4519 (the Dead Man's Statute) precluded the admission of certain evidence due to the death of the principal of petitioner Joseph Vitarelli, and whether the defendant's principal Han, who was an interested party, could testify about the lease.

In sum and substance, this court found that the Dead Mans Statute did not preclude the introduction into evidence of the lease that Vitarelli signed since the lease was authenticated by a source other than Han concerning a transaction or communication with the deceased. Furthermore, the Statute was never intended to completely foreclose a party from putting on a defense but rather was created to insure an equal playing field. Vitarelli, while alive, initiated a lawsuit and submitted affidavits averring that the original version of the lease redacted the purchase option, annexed a copy of said lease to the complaint, and then died leaving defendant without the ability to mount a defense. Therefore, Bridge Street could not assert the Statute as a blanket sword against defendant by contending that the purchase option had been removed while arguing that defendant could not mount a defense by presenting its version of the lease into evidence. 63 Misc.3d at 277- 281. Nor did CPLR 4519 bar limited testimony from Han authenticating defendant's proffered version of a commercial lease entered into between Excel and the decedent where the parties disputed whether the version of the lease they executed contained a purchase option or whether the option was stricken. The Statute, did, however, preclude the principal from testifying about any conversations he had with decedent concerning the contents or meaning of the lease. Id. at 281- 83. Finally, the court held that the real estate broker was not an interested party and thus could authenticate Vitarelli's signature and offer other testimony about the lease. Id at 281-282 See generally, Id at 283-88.

The remainder of the 2018 decision (63 Misc.3d at 288-299) addressed the ultimate issue of whether equity should allow Excel to exercise the expired option to purchase the Property, despite its 11 month delay in notifying plaintiff about its desire to exercise the option. Under the seminal case of J.N.A. Realty Corp. v Cross Bay Chelsea, Inc., 42 N.Y.2d 392 (1977) ("J.N.A"), the Court of Appeals held that a commercial tenant's failure to timely exercise an option to purchase or renew a lease may be excused where (1) such failure was the result of "inadvertence," "negligence" or "honest mistake"; (2) the nonrenewal would result in a "forfeiture" by the tenant due to his substantial improvements on the property; and (3) the landlord would not be prejudiced by the tenant's failure to send, or its delay in sending, the renewal notice. See, Baygold Assoc., Inc. v Congregation Yetev Lev of Monsey, Inc., 19 N.Y.3d 223, 225 (2012), citing to J.N.A supra, 42 N.Y.2d at 397-98 . See also, Waterfalls Italian Cuisine, Inc. v Tamarin, 149 A.D.3d 1141, 1142 (2nd Dept. 2017). All three prongs must be satisfied for equitable relief to be granted; if any of the criterion are not met then relief must be denied. Baygold Assoc., Inc. v Congregation Yetev Lev of Monsey, Inc., 2010 NY Slip Op 50525[U], 27 Misc.3d 1202[A] *5 (Sup. Ct., Rockland Co. 2010) aff'd 81 A.D.3d 763 (2d Dept. 2011) aff'd 19 N.Y.3d 223 (2012). In short, equity will intervene to relieve a tenant who, due to inadvertence or neglect, failed to timely exercise an option in the lease if it would cause the tenant to suffer a substantial forfeiture and the landlord/seller is not prejudiced . J.N.A., supra, 42 N.Y.2d at 397-398.

This court initially found that Excel's oral notice that it intended to exercise the option was ineffective given the lease's specific requirement that a written notice...