537 Greenwich LLC v. Chista, Inc., 2008 NY Slip Op 50989(U) (N.Y. Civ. Ct. 5/14/2008), L & T 060683/07.
| Decision Date | 14 May 2008 |
| Docket Number | L & T 060683/07. |
| Parties | 537 GREENWICH LLC, Petitioner/Landlord, v. CHISTA, INC., Respondent/Tenant, and "ABC CORP., "JOHN DOES" and/Or "JANE DOES", Respondents-Undertenants. |
| Court | New York Civil Court |
Petitioner represented by: Sills Cummis & Gross, P.C., New York, NY, by Mitchell D. Haddad, Esq., Scott Murray, Esq., Dacia Cocariu, Esq., and Athena S. Cheng, Esq.
Defendant represented by: Stroock & Stroock & Lavan LLP, New York, NY, by Joseph L. Forstadt, Esq., Kevin L. Smith, Esq., David A. Sifre, Esq., Kathy I. Puzone, Esq., and Jennifer J. Arbuse, Esq.
Respondent Chista, Inc. ("respondent" or "Chista") moves for an order pursuant to CPLR § 3212, granting it summary judgment dismissing this commercial holdover proceeding on the ground that the Notice of Petition and Petition were not served in accordance with the requirements of NY Real Property Actions and Proceedings Law ("RPAPL") § 735. Petitioner 537 Greenwich LLC ("petitioner" or "537 Greenwich") opposes the motion and cross-moves for an order as follows:
(1) pursuant to CPLR § 3212, granting it summary judgment striking and/or dismissing respondent's first, second, third, fourth, fifth, seventh and eighth affirmative defenses and first, third fifth, sixth, ninth, tenth, eleventh, and fourteenth counterclaims;
(2) pursuant to CPLR § 407 and 603, severing or bifurcating "any and all of Respondent's remaining counterclaims or those which have not been dismissed"; and
(3) pursuant to CPLR § 3212, granting it a final judgment of possession.
Respondent opposes the cross-motion. Both the motion and cross-motion are consolidated herein for disposition.
On November 9, 2006, respondent commenced an action against petitioner by summons and verified complaint in Supreme Court, New York County under Index No. 116873/2006 alleging thirteen causes of action including breach of fiduciary duty as a joint venturer, breach of the Lease which "imperil[s] Chista's business and good will", unjust enrichment, lost profits, loss of business and income, fraud, and multiple requests for declaratory judgments that Chista duly exercised its option to renew the Lease and is entitled to a renewal Lease effective January 1, 2007 ("Supreme Court Action"). (Exhibit "A" to the Affirmation of Mitchell D. Haddad dated January 31, 2008 [Haddad Aff.], in opposition to respondent's motion and in support of petitioner's cross-motion). Petitioner interposed an answer to the verified complaint. (Exhibit "B" to the Haddad Aff.).
On March 9, 2007, petitioner commenced this holdover proceeding against respondent based on the alleged expiration of Chista's tenancy on December 31, 2006. Instead of interposing an answer in the holdover proceeding, respondent moved by order to show cause containing an interim stay in the Supreme Court to have this holdover proceeding removed and consolidated with the Supreme Court Action. On April 30, 2007, the Hon. Arthur Engoron, J.C.C., marked the holdover proceeding off-calendar due to the Supreme Court stay. By decision and order dated May 9, 2007, the Hon. Herman Cahn, J.S.C., denied respondent's motion for removal and consolidation, but stayed the Supreme Court Action pending resolution of this holdover proceeding. (Exhibit "D" to the Haddad Aff.). Respondent appealed Justice Cahn's decision and order. On November 15, 2007, the Appellate Division, First Department unanimously affirmed Justice Cahn's decision. Langotsky v. 537 Greenwich LLC, 45 AD3d 405 (1st Dept 2007). (Exhibit "E" to the Haddad Aff.).
On November 28, 2007, petitioner moved to restore this holdover proceeding to the calendar. Respondent opposed the restoration motion. On December 10, 2007, the Hon. Jeffrey Oing, J.C.C., granted petitioner's motion to the extent of restoring the holdover proceeding to the Part 52 calendar on January 14, 2008, and ordered respondent to serve and file an answer by December 31, 2007. Respondent interposed an answer asserting similar defenses and counterclaims that it alleged in the Supreme Court Action.1
Petitioner is the landlord of the building located at 537-545 Greenwich Street, New York, New York ("subject building"). Respondent is the long-term tenant of certain portions of the second, third and six floors of the subject building ("subject premises").
On October 9, 1995, Alon Langotsky ("Langotsky") individually entered into a five year lease to occupy the southern portion of the third floor of the subject building. In December 1996, Langotsky also leased the southerly portion of the sixth floor. Thereafter, Langotsky and his wife, Daphna Dor, as the sole shareholders of the corporation, formed Chista, Inc. In July 2002, Chista was substituted for Langotsky as the named tenant for the southerly portion of the third and six floors. At that time, Chista also leased the easterly portion of the second floor. The parties simultaneously amended the leases so that they would expire on December 31, 2006, unless respondent exercised three successive renewal options to extend the leases through June 30, 2022. The first renewal option was to have been exercised in writing by June 30, 2006 for a term from January 1, 2007 through June 30, 2012; the second renewal option had a deadline of January 1, 2012 for a five year term from July 1, 2012 through June 30, 2017; and the third renewal had a deadline of January 1, 2017 for an additional five year term beginning on July 1, 2017 and expiring on June 30, 2022. The three separate leases for each of the three floors are cross-linked. Chista uses the subject premises as an art studio, showroom and storage facilities.
This case presents the following distinct facts.2 In 1995, the subject premises were in a "profound state of disrepair, and in dire need of rehabilitation." (Langotsky Affidavit sworn to on February 20, 2008 ["Langotsky Aff."], at ¶ 3). Between 1995 and 2004, Langotsky and Chista invested more than $325,000.00 in substantial improvements to the subject premises to create "an attractive and highly appealing place for a designer to do business from a previously run-down space." (Id. at ¶¶ 3-4). The value of the improvements exceeded $1,000,000.00 because Langotsky provided his own professional design skills and expertise as well as personal labor at no cost and secured supplies at deeply discounted prices. (Id.). Langotsky and Chista made the following major improvements:
reintroduction of electricity to the sixth and second floors, installation of a boiler and stove, installation of electrical wiring and fixtures for lighting, laying 16,000 square feet of new terraza floor, sheet rocking ceilings, installation of five bathrooms, installation of two kitchens, installation of washer/dryer, installation of high security doors, and the erection of walls and partitions to shape the expanse of space.
(Id. at ¶ 4). They also made extensive improvements to the common areas such as the "refurbishing of the lobby, stairway, and southern elevator shaft." (Id. at ¶ 5). Langotsky and Chista allegedly intended and expected to amortize the huge cost of the above substantial improvements over the course of the lease term which extended through 2022 based on the renewal options. (Id. at ¶¶ 3 and 5).
In addition, Langotsky and Chista allegedly maintained both their subject premises and the common areas including "making repairs, arranging for deliveries of oil to the [subject] building's boiler, performing cement work, cleaning the building, restoring worn parts of the [subject] building's facade, painting, etc." (Id. at ¶ 6). As an acknowledgment of Chista's efforts to improve the subject building and to attract other high-profile art and design tenants to the subject building, petitioner agreed to pay signage costs and to name the subject building the "Chista Design Center." (Id. at ¶ 7 and Exhibit "1").
In 2005, petitioner and respondent began discussions to develop the subject building as a design center with Jay Dor, Langotsky's father-in-law, together with two possible developers, Peter Moore ("Moore") and David Katz of MacArthur Holdings, LLC ("Katz or "MacArthur"). There were many e-mail communications between the above participants.
Sometime prior to May, 2005, petitioner, Langotsky, Jay Dor, and Moore had preliminary discussions to develop a "hotel condominium" above the subject building. (Id. at ¶ 8 and Exhibit "3"). In particular, Moore proposed a long-term lease with Chista for 20,000 square feet. (Id.). In furtherance of Chista's goal to develop the subject building as a design center with it as the anchor tenant, Chista built a design studio on the second floor in November 2005. (Id. at ¶ 9). It was completed in January 2006, at a cost of $15,000.00. (Id.). Ultimately, Moore's proposal was rejected and Langotsky identified MacArthur as an alternate real estate developer. (Id. at ¶ 10).
On December 8, 2005, Jay Dor provided a written proposal dated November 28, 2005 for a joint venture with petitioner, respondent and MacArthur to develop the subject building. (Id. at ¶ 11 and Exhibit "5"). On December 20, 2005, Katz responded and revised Jay Dor's proposal. (Id. at ¶ 12 and Exhibit "6"). On March 27, 2006, Langotsky circulated his own proposal wherein he clearly articulated that Chista would continue to be the "anchor" tenant for the proposed new design center. (Id. at ¶ 13 and Exhibit "7"). In addition, Langotsky provided for Chista's relocation costs that could exceed $1,000,000.00 during the construction phase. (Id. and Exhibit "7"). Langotsky envisioned occupying a minimum of 10,000 to 14,000 square feet in the new building. (Id. and Exhibit "7"). Chista "would only forgo its favorable lease agreement for the one time payment of $1,000,000 plus any other concessions which other tenants are entitled to, such as free rent and space improvement allowance." (I...
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