25-35 Bridge St. LLC v. Excel Auto. Tech Ctr. Inc.

• Decision Date: 29 October 2018
• Docket Number: 11088/2003
• Citation: 87 N.Y.S.3d 823
• Parties: 25-35 BRIDGE STREET LLC, Plaintiff, v. EXCEL AUTOMOTIVE TECH CENTER INC., Defendant.
• Court: New York Supreme Court

87 N.Y.S.3d 823

25-35 BRIDGE STREET LLC, Plaintiff,
v.
EXCEL AUTOMOTIVE TECH CENTER INC., Defendant.

11088/2003

Supreme Court, Kings County, New York.

Decided October 29, 2018

87 N.Y.S.3d 826

Attorneys for Plaintiff, DUNNINGTON, BARTHOLOW & MILLER LLP. 250 Park Avenue, Suite 1103, New York, NY 10177, CLARK HILL, PLC, 151 S. Old Woodward, Suite 200, Birmingham, Michigan 48009.

Attorneys for Defendant, ROSENBERG & ESTES, P.C., 733 Third Avenue, New York, NY 10017.

Katherine A. Levine, J.

This action arises from a disputed option to purchase ("option") contained in a commercial lease ("lease") which defendant Excel Automotive ("Excel" or "defendant") admittedly failed to exercise in a timely manner. The preliminary issue introduced at trial was whether the Dead Man's Statute, as contained in CPLR § 4519 ("Statute"), precluded the introduction into evidence of the lease and or testimony about the lease, because it related to personal transactions and conversations with Bridge Street's deceased predecessor in interest, Joseph Vitarelli ("Vitarelli"). The ultimate issue tried before this court was whether equity should allow defendant to exercise the expired option to purchase the property under the seminal case of J.N.A. Realty Corp. v. Cross Bay Chelsea, Inc. , 42 N.Y.2d 392, 397 N.Y.S.2d 958, 366 N.E.2d 1313 (1977) (" J.N.A. "), which held that "equity will intervene to relieve a tenant or mortgagor who, due to inadvertence or neglect, fails to timely exercise an option if the default will cause it to suffer a substantial forfeiture and there is no prejudice to the landlord or seller." Fordham Paradise, LLC v. ABI Prop. Partners, LP XXVI , 306 A.D.2d 178, 178-179, 763 N.Y.S.2d 547 (1st Dept. 2003) citing to J.N.A. , supra , 42 N.Y.2d at 397-98, 397 N.Y.S.2d 958, 366 N.E.2d 1313.

As will be set forth below, this Court reaffirms its rulings that the Statute does not bar documentary evidence or sworn testimony or affidavits by the deceased from coming into evidence, and its admission into evidence of the lease between Vitarelli and Excel and various affidavits of Vitarelli. It also reaffirms its decision permitting Han and Richard Mauro to testify about the signing of the lease and how defendant attempted to exercise the option. However, this Court finds that defendant has failed to meet its burden of proving

87 N.Y.S.3d 827

that it is entitled to the equitable relief of avoiding the consequences of its untimely attempt to exercise the option and the forfeiture of its investments.

PROCEDURAL HISTORY

It is undisputed that Excel and Vitarelli initially entered into a written commercial lease, dated March 1, 1999, whereby Excel rented the subject property located at 23-35 Bridge Street in Brooklyn (‘property") for use as an auto garage and repair shop for a term of six years, expiring on April 29, 2005. Defendant claims that paragraph 61 of the lease¹ included an option granting Excel the right to purchase the property from plaintiff for $950,000 at the end of the fourth year of the lease, provided that Excel give written notice to Vitarelli of its intent to exercise the option by certified mail within 90 days prior to the end of the fourth year; i.e. November 30, 2002. The lease provision further required that Excel be "ready, willing, and able" to close before the end of February 2003, and that the written notice exercising the option set a time and location for closing.

It is also undisputed that Excel did not timely tender written notice of its intent to exercise the option in writing by the required date. On March 19, 2003, Joseph Vitarelli commenced this action seeking a judgment "declaring the option to be unenforceable and of no further force or effect" ( Complaint ¶ 13) since paragraph 61 of the lease was removed when executed by the plaintiff (Id. at ¶ 8-9)² or alternatively, that Excel failed to properly provide notice of exercise of the option in the time period and manner required in the Lease; i.e. 90 days prior to the expiration of the fourth year of the lease which was February 23, 2003. (Id. at ¶ 10-11). Thus, Vitarelli sought to preempt any attempt by Excel to affirmatively obtain equitable relief in court by seeking a declaration, while the lease was still in effect, that when the tenant did seek to exercise the option, that it was precluded from doing so.

By answer dated October 20, 2003, Excel submitted its answer and counterclaimed seeking an order granting equitable relief and directing that the property to be conveyed to it for the price of $950,000. Excel averred that it orally informed Vitarelli of its intent to exercise its rights under the option in February 2002 and at other times in Fall 2002 and that Vitarelli's response was to file the lawsuit in March 2003 "within days after the date" that Bridge Street alleges the sale to Excel should have closed. Excel also averred that plaintiff "disaffirmed" the existence of any purchase option, making it clear to the tenant that any written exercise would be futile (¶ 31). Excel asserted that it entered into the lease because of the option to purchase, that it undertook extensive improvements in the amount of approximately $150,000 in anticipation of becoming the purchaser, and that it was still in the process of expending money.

For some inexplicable reason, Excel did not inform Vitarelli in writing of its election to exercise its option to purchase the property until October 17, 2003, three days before it filed its counterclaims, and eleven months after it should have tendered its written notice. The letter states that the

87 N.Y.S.3d 828

tenant was "ready, willing and able" to purchase the premises for $950,000 on or three months after the date of the notice, and that this written notice "reiterates and confirms" the tenant's prior oral exercise of the option which Han had "personally conveyed to" Vitarelli prior to December 31, 2002, at which time Vitarelli rejected the oral exercise and stated that there was no option provision in the lease (Pl. Exh "W").

For reasons still unknown to this Court, it took almost eleven years for this case to come to trial. The eleven years were consumed with numerous motions and a change in plaintiff's attorneys. Germane to this case are two decision of Justice Michael J. Garson, dated April 21, 2004 and April 14, 2005, which respectively addressed whether Excel's prior attorney had the authority to enter into a stipulation of settlement, and which denied both parties' motions for summary judgment in their entirety. In both decisions, Justice Garson noted that the action arose from "a disputed provision in a lease by which Excel rented property from plaintiff and that the provision at issue, paragraph 61, provided that Excel would have the right to purchase the property after the completion of the fourth year provided that it gave timely written notice of its intent to exercise said option."

In his April 14th decision, Justice Garson, upon reviewing Excel's arguments that it was entitled to equitable relief based upon J.N.A. and its progeny, found that in order to validly exercise an option to purchase real property "one must strictly adhere to the terms and conditions of the option agreement" (P.5) citing to Weissman v. Adler , 187 A.D.2d 647, 648, 590 N.Y.S.2d 241 (1992). Based upon Han's affirmation that he had orally advised plaintiff on several occasions that Excel intended to exercise the purchase option, Justice Garson found that it was clear that Han was aware of the existence of the purchase option and should have known that he was required to give written notice in a timely fashion. Moving on to the other prongs of J.N.A., Justice Garson found that he was unable to ascertain from the numerous receipts that Han submitted "what the money was expended on and who made the purchases." Id. at 5. As such, "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." Id. at 5. Therefore, the court denied that portion of plaintiff's summary judgment motion seeking a declaration that Excel had failed to exercise its option to purchase the premises and that branch of Excel's cross motion seeking a declaration that it validly exercised said option.³ See , Vitarelli v. Excel Automotive Tech, Ctr. , 25 A.D.3d 691, 811 N.Y.S.2d 689 (2d Dept. 2006) (aff'g J. Garson's decision denying motion for summary judgment).

By Order dated September 11, 2011, the Hon. David I Schmidt substituted 23-35 Bridge Street LLC ("Bridge Street" or "plaintiff")⁴ as the plaintiff following Vitarelli's death in October 2010. Justice Schmidt also removed the non-payment proceeding from Civil Court and consolidated it with the DJ action and directed Excel to make certain payments. Finally,

87 N.Y.S.3d 829

the court ruled that Excel will remain in possession of the property as a month to month tenant of the LLC, subject to the provisions of the expired lease including the purported option to purchase, until the final determination of this action.

THE TRIAL - DEAD MAN'S STATUTE

More than half of the trial was consumed with various motions in limine brought by...