In re Bayside Marina, Inc.

Decision Date13 August 2002
Docket NumberAdversary No. 800-8013-478.,Bankruptcy No. 899-81123-478.
Citation282 B.R. 285
PartiesIn re BAYSIDE MARINA, INC., Debtor. Bayside Marina, Inc., and Lawrence Digiacomo, Plaintiff, v. LDI Holding Corp., Jesse Cromer, and Ivor Jacobson, Defendants.
CourtU.S. Bankruptcy Court — Eastern District of New York

Zinker Gelfand & Hertzberg, by Jeffrey Herzberg, Smithtown, NY, for plaintiff.

Steven M. Nachman, New York City, for defendants, LDI Holding Corp. and Ivor Jacobson.

Neil H. Ackerman, Warshaw, Burstein, Cohen, Schlesinger & Kuh, LLP, New York City, Chapter 7 Trustee.

MEMORANDUM DECISION AWARDING LDI HOLDING CORP. USE AND OCCUPATION PAYMENTS AND FIXING THE PROOF OF CLAIM OF LDI HOLDING CORP.

DOROTHY EISENBERG, Bankruptcy Judge.

This Court has been called on to resolve ongoing disputes over the rights of various parties in and to certain real property located at 151-19 Powells Cove Boulevard, Whitestone, New York (the "Property"). Pursuant to a written decision dated June 5, 2002, the Court made certain findings and directed that pursuant to an award of specific performance, LDI Holding Corp. ("LDI") sell the Property to Bayside Marina, Inc. (the "Debtor") for the original contract price of $350,000. This Court left open certain issues to be resolved: chiefly, whether the Debtor is entitled to offset the use and occupation payments made by the Debtor during the pendency of this matter against the remaining purchase price, whether any of the parties are entitled to damages because of this adversary proceeding, and the fixing of LDI's prepetition claim. The following constitutes the Court's findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052.

FACTS

For a complete recitation of the facts pertinent to this adversary proceeding, refer to this Court's memorandum decision dated June 5, 2002 (the "June Decision"). In the June Decision, the Court found that the Debtor and LDI entered into a contract dated April 2, 1998 to sell the Property to the Debtor for $350,000 (the "Stipulation"). The parties entered into the Stipulation to resolve several disputes which had arisen between LDI as landlord and the Debtor as tenant. Prior to entry of the Stipulation, the parties had entered into a Lease dated as of March 15, 1995 (the "Lease"), which granted to the Debtor an option to purchase the Property from LDI only if "at the Closing (as defined in the Purchase Agreement), Tenant shall pay in full all outstanding Fixed Rent and Additional Rent." (Section 35.01(i) of Lease). This section further provides that "all provisions of this Lease pursuant to which Tenant is obligated to pay any sum of money to Landlord, or to indemnify, defend and/or hold Landlord harmless from any cost, claim, expense, action, damage or liability shall survive the Closing and the termination of this Lease."

The Stipulation, which created a new contract between the Debtor and LDI, does not specifically state that all of the Lease terms are cancelled and deemed a nullity. The Stipulation further identifies the Debtor as "Tenant" and LDI as "Landlord," and provides that in the event of a default by the Debtor, execution on a warrant of eviction is to be had and LDI is to be granted a judgment in the amount of $115,000. On execution of the warrant of eviction, credit is to be given for all nonrefundable deposits paid by the Debtor towards the $115,000 judgment. The Stipulation further provides that a portion of the purchase price of the Property may be allocated to back rent owed by the Debtor. This indicates that the Lease terms and sale pursuant to the Stipulation were not to merge.

According to LDI's principal, Mr. Ivor Jacobson, the figure of $115,000 was arrived at based on a rough estimate of rent due and owing by the Debtor to LDI through the proposed closing date plus accrued interest, legal fees and taxes. (12/27/01 Tr. at 151-52). Mr. DiGiacomo, the Debtor's principal, did not contradict this testimony, but he did not recall what this amount was based on. (12/04/01 Tr. at 109).

As of June 29, 1998, the Debtor had, inter alia, made payments totaling $100,000 towards the purchase price. One day prior to the date of sale, Jesse Cromer commenced litigation and filed a lis pendens against the Property, claiming that he had ownership of a portion of the Property and an easement running over the remainder of the Property to enable him to reach that portion. As a result of Cromer's actions, LDI breached the Stipulation because it could not provide marketable, clear title to the Property to the Debtor, and the nature of this breach excused the Debtor from tendering the $250,000 owed under the Stipulation on the closing date.

LDI participated in the state court litigation commenced by Cromer by filing an answer and counterclaim. In other papers filed by LDI in connection with the Cromer litigation, LDI referred to Cromer's claims as "baseless" and challenged Cromer's easement and ownership claims. Nonetheless, Judge Lisa signed an Order dated December 8, 1998 granting a preliminary injunction enjoining LDI, the Debtor and Lawrence DiGiacomo, the Debtor's principal, from interfering with Cromer's use of the Property pending resolution of Cromer's claims, provided that Cromer post a bond in the amount of $250,000 by January 8, 1999.

Prior to expiration of the preliminary injunction issued by Judge Lisa, LDI did request relief against the Debtor in Landlord/Tenant court, seeking entry of a judgment of possession of the Property. By written decision dated December 18, 1999, Judge Gottlieb determined that the Cromer Litigation affected the ability of the parties to close on the sale of the Property. (Deft's Exh. QQ). Notwithstanding this finding, Judge Gottlieb "revisited" the non-payment proceeding giving rise to the parties' entry into the Stipulation, and held that while the Cromer litigation was underway, the Debtor was obligated to pay to LDI monthly use and occupancy of $4,166.67 beginning from July 1998 and a judgment was to be entered against the Debtor and in favor of LDI in the amount of $115,000. This $115,000 figure appears to be based on the unpaid rent, taxes and costs owed by the Debtor which had accrued to the date of the scheduled closing on June 30, 1998. Upon determination of the issues arising from the Cromer Litigation, Judge Gottlieb directed that the parties are permitted to "resume their contractual positions." (Deft's Exh. QQ).

LDI's breach of the Stipulation continued until this Court resolved Cromer's claims and found that a) Cromer did not own any portion of the Property, and b) Cromer did not have an easement over any portion of the Property, by deed or by prescriptive easement. This Court directed that the lis pendens filed by Cromer against the Property be removed, thereby removing the cloud from title to the Property. Cromer did not participate in this adversary proceeding after the summary judgment stage, and an order was entered on June 28, 2001 which precluded him from introducing any discovery-related evidence in support of his claims since he defaulted on his obligation to respond to discovery requests served by LDI.

In its written decision, this Court requested additional briefs on the issue of whether LDI is entitled to retain the monthly payments the Debtor has made as use and occupancy of the Property since June 30, 1998 or whether the payments are to be applied towards the purchase price of the Property. The total amount of monthly payments made to LDI for post petition use and occupancy of the Property equals in excess of $100,000. The Court also sought additional papers on whether the Debtor is entitled to indemnification from LDI for the costs and expenses incurred in connection with resolving the cloud on title to the Property created by the commencement of litigation by Cromer. Pursuant to a motion filed by LDI, the Court is also called on to fix LDI's prepetition claim which LDI filed in this case in the amended amount of $55,073.09. LDI's total prepetition claim is comprised of the $115,000 judgment awarded by Judge Gottlieb, use and occupancy from July 1998 through February 1999, plus taxes in the amount of $6,739.83, less $100,000 credit for the down payment made by the Debtor. LDI also seeks an administration claim in the amount of $78,640.64 for rent due from March 1999 through August 1999 and November 2001 through July 2002, and interest on the prepetition claim to date and on the administration claim for the period March 1999 through August 1999 totaling $23,497.47.

DISCUSSION

Treatment of monthly payments made by the Debtor to LDI

In order to fix the amount that the Debtor still owes to purchase the Property, the Court must determine whether the monthly use and occupation payments made by the Debtor are to be credited to the sale price or whether these payments are meant to cover the Debtor's use and occupation from June 30, 1998 to the present. In general, when a landlord and tenant enter into contract for the sale of real property, or the tenant exercises an option to purchase real property pursuant to a lease, the relationship between the parties is converted to that of vendor and vendee and the landlord-tenant relationship "merges" with the vendor-vendee relationship. Barbarita v. Shilling, 111 A.D.2d 200, 201, 489 N.Y.S.2d 86 (2d Dep't 1985). Consequently, where merger has occurred and the lessor/lessee relationship is extinguished, the former landlord may not bring summary proceedings against the lessee for failure to pay rent during the time period between entry of the contract of sale and actual closing. N.Y.Jur.2d. Landlord and Tenant § 696 (1999). Generally, this practice is appropriate because the parties have created a new relationship which precludes either party from enforcing rights based on the prior relationship of landlord and tenant.

However, if the contract of sale reflects a clear manifestation by the parties to the contrary, or if the...

To continue reading

Request your trial
3 cases
  • In re Robinson
    • United States
    • U.S. Bankruptcy Court — Northern District of Georgia
    • February 22, 2017
    ...judgment rate best promotes equality, fairness, and predictability in the distribution of creditors' claims); In re Bayside Marina, Inc. , 282 B.R. 285, 294 (Bankr. E.D.N.Y. 2002) (finding that bankruptcy cases, which originate in many jurisdictions, need to be governed by one uniform rate ......
  • Blackburn Food Corp. v. ARDI, Inc.
    • United States
    • New York Supreme Court
    • October 25, 2017
    ...to that of a vendor and vendee, and the landlord-tenant relationship merges with the vendor-vendee relationship ( In re Bayside Marina, Inc., 282 B.R. 285, 289 ; see also, Kaygreen Realty Co., LLC v. IG Second Generation Partners, L.P., supra). When a merger has occurred, the owner of the p......
  • Blackburn Food Corp. v. Ardi, Inc.
    • United States
    • New York Supreme Court
    • October 25, 2017
    ...converted to that of a vendor and vendee, and the landlord-tenant relationship merges with the vendor-vendee relationship (In re Bayside Marina, Inc., 282 BR 285, 289; see also, Kaygreen Realty co., LLC v IG Second Generation Partners, L.P., supra). When a merger has occurred, the owner of ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT