Leeber Realty LLC v. Trustco Bank
| Decision Date | 08 February 2019 |
| Docket Number | No. 17-CV-2934 (KMK),17-CV-2934 (KMK) |
| Parties | LEEBER REALTY LLC and BERNARD COHEN, both individually and in his capacity as Trustee of the Bernard Cohen Revocable Trust, Plaintiffs, v. TRUSTCO BANK, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Appearances:
Michael A. Freeman, Esq.
Greenberg Freeman, LLP
New York, NY
Counsel for Plaintiffs
Adam K. Kurland, Esq.
Fenster & Kurland LLP
New City, NY
Counsel for Defendant
Plaintiffs Leeber Realty LLC ("Leeber") and Bernard Cohen ("Cohen" and collectively, "Plaintiffs") brought this Action against Trustco Bank ("Trustco" or "Defendant"), alleging that Defendant breached a commercial lease contract. Defendant counterclaimed that Plaintiffs breached the contract by failing to make necessary repairs and that Defendant was constructively evicted. (Am. Answer to Am. Compl. with Counterclaims ("Am. Answer") 4-7 (Dkt. No. 42).) On June 4, 2018, Plaintiffs' Motion for Summary Judgment, fees and costs, and dismissal of the counterclaims was granted in part and denied in part, and Defendant's counterclaims were dismissed. Before the Court is Defendant's Motion To Vacate the Summary Judgment Opinion Pursuant to Rule 60(b), and to dismiss for lack of subject matter jurisdiction (the "Motion"). For the reasons discussed below, Defendant's Motion is denied.
The following facts are taken from Defendant's Memorandum of Law in Support of its Motion and supporting declarations, , Plaintiffs' Opposition and supporting declaration, ( ) ( ) , Defendant's Reply and supporting declaration, , Plaintiffs' Sur-Reply and supporting declaration, ( ) ( ) , and Defendant's Response, . The Court assumes familiarity with the facts underlying the Court's June 4, 2018 Summary Judgment Opinion. (See Summary Judgment Opinion 7-15.)
On or about December 5, 2005, Plaintiffs granted a mortgage of $550,000 (the "Mortgage") on real property known as 21 Route 59, Nyack, New York 10960 (the "Property")to Flushing Bank ("Flushing Bank"), which is not a party in this Action. (See Def.'s Mem. 1.) Section 1.15 of the Mortgage Agreement stated:
The Rents of the Mortgaged Property are hereby transferred and assigned to the Mortgagee, and the Mortgagee shall have the right to enter upon the Mortgaged Property for the purpose of collecting the same and to let and operate the Mortgaged Property or any part thereof and to apply the Rents, either in whole or in part, as the Mortgagee elects, to the payment of all charges and expenses of the Mortgaged Property or in reduction of any part of the Debt or other sums due under the Note or this Mortgage. This assignment and grant shall continue in effect until the Debt and all other obligations secured by this Mortgage are paid in full. The Mortgagee hereby waives the right to enter upon the Mortgaged property for the purpose of collecting the Rents and the Mortgagor shall have a license to collect and receive the Rents until an Event of Default hereunder, but such license of the Mortgagor may be revoked by the Mortgagee upon any such Event of Default. From and after the occurrence of an Event of Default hereunder all Rents collected or received by Mortgagor shall be accepted and held for Mortgagee in trust and shall not be commingled with the funds and property of Mortgagor, but shall be promptly paid over to Mortgagee. The Mortgagee may apply all Rents or any part thereof so received hereunder, after the payment of all of its expenses including costs and attorneys' fees, to the Debt in such manner as it elects or at its option the entire amount or any part thereof so received may be released to the Mortgagor.
(Def.'s Decl. Ex. C ("Mortgage Agreement") § 1.15.) On June 6, 2012, Leeber transferred the Property to the Bernard Cohen Revocable Trust (the "Trust"), (see Pls.' Sur-Reply Decl. ¶ 5; Pls.' Sur-Reply Decl. Ex. 8 ("Deed")), and on July 23, 2012, the Trust assigned the lease between Leeber and Trustco back to Leeber, (see Pls.' Sur-Reply Decl. ¶ 5; Pls.' Sur-Reply Decl. Ex. 9 ("Assignment of Lease")).
On March 28, 2017, Plaintiffs received a letter from Defendant, a tenant of the Property, stating that, due to "hazardous environmental conditions," it planned to terminate its lease as of March 31, 2017 and claim constructive eviction. (See Summary Judgment Opinion 13.) From April 1, 2017, Defendant paid no further rent on its lease, and Leeber was thus unable to pay its Mortgage. (See Pls.' Mem. 5.) On April 21, 2017, Leeber initiated the instant Action to recover damages from Defendant for breach of the lease. On July 13, 2017,Flushing Bank commenced a foreclosure action in New York Supreme Court, Rockland County against Plaintiffs, captioned Flushing Bank v. Leeber Realty LLC et al., Index No. 033167/2017 (the "Foreclosure Action"). (See Pls.' Mem. 5; Pls.' Decl. ¶ 5; Pls.' Decl. Ex. 2 ("Foreclosure Action Docket").) In an email on August 28, 2017, Flushing Bank informed Plaintiffs that it was aware of this Action against Defendant, (see Pls.' Decl. ¶ 5; Pls.' Decl. Ex. 1 ("Aug. 28, 2017 Email"), and on September 8, 2017, Defendant's counsel asked Cohen in his deposition about the Foreclosure Action commenced by Flushing Bank, (see Pls.' Decl. Ex. 5 ("Cohen Dep. Excerpt")).
On November 5, 2017, Flushing Bank applied for the appointment of a receiver (the "Receiver") in the Foreclosure Action, which was granted on March 26, 2018. (See Def.'s Mem. 2; Def.'s Decl. Ex. E ("Order Appointing Receiver"); Maria Aff.) On June 1, 2018, this Court granted summary judgment in favor of Plaintiffs on Defendant's claim of constructive eviction, finding that Defendant failed to provide notice of the alleged hazardous condition. (See Summary Judgment Opinion 31-33.) Defendant did not raise any arguments based on the Foreclosure Action or the Receiver in its summary judgment papers.
On June 21, 2018, Defendant substituted its counsel in this Action. (See Consent Order Granting Substitution of Attorney ("Substitution") (Dkt. No. 82).) On July 17, 2018, the Receiver filed his oath and bond with the state court, , and on the same day Leeber filed for Chapter 11 bankruptcy protection, (see Pls.' Decl. Ex. 6 ("Bankruptcy Petition")). On July 18, 2018, the Receiver filed an affidavit in connection with Defendant's Motion To Vacate asserting that he is the true party in interest and the only entity entitled to collect rents on the Property. (See Maria Aff. ¶¶ 4-5.)
As noted, Leeber initiated this Action on April 21, 2017. (See Compl.) On October 6, 2017, Plaintiffs filed an Amended Complaint adding Cohen as a Plaintiff. (See Am. Compl.) Plaintiffs filed a Motion for Summary Judgment and accompanying papers on December 26, 2017. (See Dkt. Nos. 53, 54, 55, 56, 57.) Defendant filed an Opposition on January 22, 2018, (see Dkt Nos. 58, 59), and Plaintiffs filed a Reply on February 5, 2018, (see Dkt Nos. 65, 55). On June 4, 2018, the Court granted summary judgment in favor of Plaintiffs on Defendant's constructive eviction claim, as well as on Plaintiffs' claim that Defendant failed to notify Plaintiffs of the defective conditions at issue. (See Summary Judgment Opinion 25-26, 31-33.) With respect to the calculation of damages, the Court agreed with Plaintiffs that the acceleration clause in the disputed lease was enforceable, but found for Defendant regarding whether Plaintiffs were entitled to accelerated rent for the five-year renewal term the Parties agreed to in 2008. (See id. 36-37, 40-41.)
On June 25, 2018, Defendant's new counsel filed a pre-motion letter requesting a conference in advance of filing a motion to vacate the Summary Judgment Opinion. (See Dkt. No. 83.) With leave of the Court, (see Dkt. No. 89), Defendant filed the instant Motion on July 18, 2018, (see Def.'s Mot.; Def.'s Decl.; Maria Aff.; Def.'s Mem.). Plaintiffs filed an Opposition to Defendant's Motion on July 25, 2018. Defendant filed a Reply on August 1, 2018. (See Def.'s Reply; Def.'s Reply Decl.)
On August 10, 2018, with leave of the Court, Plaintiffs filed a Sur-Reply, , and Defendant filed a Response on August 20, 2018, (see Def.'s Resp.). On October 25, 2018, Plaintiffs filed a letter requesting an expedited decision on the pending motion and leave to supplement the record with an order issued in Plaintiff Leeber'sbankruptcy case, and attached an order from the bankruptcy court lifting the automatic stay pursuant to 11 U.S.C. § 362(a) on Flushing Bank's Foreclosure Action against Plaintiffs, but declining to modify the stay with respect to this litigation. (" ") Defendant responded requesting that the Court decline to consider the submission or be granted permission to respond to it. (See Dkt. No. 108.) On October 30, 2018, the Court...
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