Dance Magic Inc. v. Pike Realty Inc.

• Court: New York Supreme Court — Appellate Division
• Writing for the Court: PETER B. SKELOS, J.P., JOHN M. LEVENTHAL, LEONARD B. AUSTIN, and SANDRA L. SGROI, JJ.
• Citation: Dance Magic Inc. v. Pike Realty Inc., 85 A.D.3d 1083, 926 N.Y.S.2d 588, 2011 N.Y. Slip Op. 5651 (N.Y. App. Div. 2011)
• Decision Date: 28 June 2011
• Parties: DANCE MAGIC, INC., et al., respondents-appellants,v.PIKE REALTY, INC., et al., appellants-respondents(and a third-party action).

85 A.D.3d 1083

926 N.Y.S.2d 588

2011 N.Y. Slip Op. 05651

DANCE MAGIC, INC., et al., respondents-appellants,

v.PIKE REALTY, INC., et al., appellants-respondents(and a third-party action).

Supreme Court, Appellate Division, Second Department, New York.

June 28, 2011.

Kucker & Bruh, LLP, New York, N.Y. (Nativ Winiarsky of counsel), for appellants-respondents.Hilpert Law Offices, Croton–on–Hudson, N.Y. (Steven Felsenfeld and Robert J. Hilpert of counsel), for respondents-appellants.PETER B. SKELOS, J.P., JOHN M. LEVENTHAL, LEONARD B. AUSTIN, and SANDRA L. SGROI, JJ.

In an action, inter alia, to recover damages for breach of a commercial lease and negligence, the defendants appeal, as limited by their brief, from so much of an order of the Supreme Court, Westchester County (Liebowitz, J.), entered August 20, 2010, as denied those branches of the motion of the defendants Davita, Inc., Davita of New York, Inc., TRC of New York, Inc., IHS of New York, Inc., MHS–I, Inc., Peekskill Cortlandt Dialysis Center, Prime Locations, Inc., and Pike Plaza Associates, LLC, which were for summary judgment dismissing the first, second, third, and fourth causes of action insofar as asserted against those defendants and for summary judgment on the first and second counterclaims of the defendant Pike Plaza Associates, LLC, and the plaintiffs cross-appeal, as limited by their brief, from so much of the same order as denied their cross motion for summary judgment on the first, second, third, and fourth causes of action.

ORDERED that the appeal by the defendant Pike Realty, Inc., is dismissed, as that defendant is not aggrieved by the order appealed from ( see CPLR 5511); and it is further,

ORDERED that the order is modified, on the law, (1) by deleting the provision thereof denying those branches of the motion of the defendants Davita, Inc., Davita of New York, Inc., TRC of New York, Inc., IHS of New York, Inc., MHS–I, Inc., Peekskill Cortlandt Dialysis Center, Prime Locations, Inc., and Pike Plaza Associates, LLC, which were for summary judgment dismissing the first, second, and third causes of action insofar as asserted against them, and substituting therefor a provision granting those branches of the motion, and (2) by deleting the provision thereof denying that branch of the motion of the defendants Davita, Inc., Davita of New York, Inc., TRC of New York, Inc., IHS of New York, Inc., MHS–I, Inc., Peekskill Cortlandt Dialysis Center, Prime Locations, Inc., and Pike Plaza Associates, LLC, which was for summary judgment on the first counterclaim of the defendant Pike Plaza Associates, LLC, and substituting therefor a provision granting that branch of the motion, and (3) by deleting the provision thereof denying that branch of the motion of the defendants Davita, Inc., Davita of New York, Inc., TRC of New York, Inc., IHS of New York, Inc., MHS–I, Inc., Peekskill Cortlandt Dialysis Center, Prime Locations, Inc., and Pike Plaza Associates, LLC, which was for summary judgment on so much of the second counterclaim of the defendant Pike Plaza Associates, LLC, as sought an award of an attorney's fee for the cost of litigating the first, second, and third causes of action and its first counterclaim and substituting therefor a provision granting that branch of the motion; as so modified, the order is affirmed insofar as appealed and cross-appealed from, with costs payable to the defendants Davita, Inc., Davita of New York, Inc., TRC of New York, Inc., IHS of New York, Inc., MHS–I, Inc., Peekskill Cortlandt Dialysis Center, Prime Locations, Inc., and Pike Plaza Associates, LLC, and the matter is remitted to the Supreme Court, Westchester County, for further proceedings in accordance herewith.

In March 1997 the defendant IHS of New York, Inc. (hereinafter IHS), entered into a contract with the defendant Pike Realty, Inc. (hereinafter Realty), to lease commercial space on the second floor of a building located at 2050 East Main Street in Cortlandt, New York (hereinafter the subject building). The lease allowed IHS to operate the defendant Peekskill Cortlandt Dialysis Center (hereinafter the dialysis center) at the location. IHS's interest was later assigned to the defendant MHS–1, Inc. (hereinafter MHS), which then assigned the interest to the defendant TRC of New York, Inc. (hereinafter TRC), who was the assignee when this action was commenced. IHS, MHS, TRC, and the defendant Davita of New York, Inc., are wholly-owned subsidiaries of the defendant Davita, Inc. (hereinafter collectively Davita). After the lease was signed, Davita installed plumbing and floor drainage systems to facilitate the operations at the dialysis center.

On July 15, 1997, the plaintiff Dance Magic, Inc. (hereinafter Dance Magic), a dance studio wholly owned by the plaintiff Gretchen Roselli, entered into a contract with Realty to lease 3,384 square feet of space in the subject building directly below the dialysis center (hereinafter the subject premises). In article 9 of the subject lease, the plaintiffs expressly waived their right to surrender possession pursuant to Real Property Law § 227 and agreed that the lease provisions would govern in the event that the demised premises were damaged or rendered partially or wholly unusable. The effective date of the lease was October 1997.

After Dance Magic took possession of the premises, the subject premises was damaged as a result of leaks and floods. The first flood occurred in the lobby of the subject premises on October 3, 1997. The subject premises also experienced leaks in early September 1998, June 1999, and July 1999, as well as “small deluges of fluids and occasional large floods” from 2000 to 2004. “[M]ajor deluge[s]” occurred in the subject premises on June 4, September 19, and September 22, 2005. Between 2006 and 2007, frequent incidents of leaking and falling ceiling tiles occurred in the subject premises. Mold and dampness began forming in sheetrock on the subject premises. Realty was given notice of the leaks at least as early as 2001, when its Vice President received a letter from the plaintiffs' attorney regarding “a persistent leak.”

In mid–2005, the defendant Pike Plaza Associates, LLC (hereinafter Plaza), acquired the subject building and landlord rights from Realty. The defendant Prime Locations, Inc. (hereinafter Locations), a real estate management company, was responsible for the daily operations of the subject building and acted as an agent for Plaza. On March 5, 2007, the plaintiffs and Plaza agreed to a lease modification agreement extending the subject lease for five years, through June 2012.

On August 20, 2007, the “Metropolitan Room” of the subject premises incurred a “major flood” which resulted in damage to the dance floor of the plaintiffs' studio, necessitating repairs. The plaintiffs were forced to shut down operations for several weeks to clean up after the flood. Seepage continued through the beginning of September 2007, though the source of the seepage was unclear.

In September or November 2007, Plaza hired an engineering firm to conduct an investigation in the subject building. The firm determined that three of the five leaks in the ceiling of the subject premises were the result of an inadequate floor drainage system in the dialysis center. The firm's findings were communicated to Davita.

A flooding incident that occurred on October 9, 2007, rendered a portion of the subject premises unusable. On November 8, 2007, a separate flooding incident occurred in the lobby closet and bathroom at the subject premises. The flooding was attributable to a large tank overflowing in the dialysis center. Subsequently, the Town of Cortlandt issued a violation to Davita because of the dialysis center's failure to meet required plumbing guidelines. Temporary repairs undertaken to try to contain the leaks were unsuccessful.

Following the flooding on November 8, 2007, the plaintiffs were again forced to suspend operations at the subject premises. On December 10, 2007, the plaintiffs' attorney sent a notice to Plaza informing it of the plaintiffs' intention to quit the premises. Flooding events purportedly continued after the plaintiffs left the subject premises. On December 27, 2007, the plaintiffs surrendered the keys to the premises. The plaintiffs have not paid rent since November 2007.

The plaintiffs commenced the instant action alleging, inter alia, that the lease was null and void, and that they had no continuing obligation under the lease because they were constructively evicted. The plaintiffs also alleged that they were damaged by the constructive eviction, that the defendants had breached the covenant of quiet enjoyment, and that the defendants were negligent. Locations, Plaza, Davita, and the Dialysis Center (hereinafter collectively the defendants) moved for summary judgment dismissing the complaint insofar as asserted against them and for summary judgment on Plaza's first and second counterclaims for unpaid rent and an award of a attorney's fee. The plaintiffs cross-moved for summary judgment on their first four causes of action. The Supreme Court denied those branches of the defendants' motion which were for summary judgment dismissing the first, second, third, and fourth causes of action insofar as asserted against them and for summary judgment on Plaza's first and second counterclaims, and denied the plaintiffs' cross motion.

In a commercial lease, a commercial tenant may waive the rights provided by Real Property Law § 227 ( see Hudson Towers Hous. Co., Inc. v. VIP Yacht Cruises, Inc., 63 A.D.3d 413, 881 N.Y.S.2d 46; RVC Assoc. v. Rockville Anesthesia Group, 267 A.D.2d 370, 371, 700 N.Y.S.2d 231; Milltown Park v. American Felt & Filter Co., 180 A.D.2d 235, 237, 584 N.Y.S.2d 927; Schwartz, Karlan & Gutstein v. 271 Venture, 172 A.D.2d 226, 568 N.Y.S.2d 72). Where a commercial tenant has waived its rights under Real Property Law § 227, the tenant may not claim...