N.Y. Tile Wholesale Corp. v. Thomas Fatato Realty Corp.
| Decision Date | 22 February 2012 |
| Docket Number | No. 49320/01.,49320/01. |
| Citation | 35 Misc.3d 1206,951 N.Y.S.2d 87,2012 N.Y. Slip Op. 50595 |
| Parties | NEW YORK TILE WHOLESALE CORP., Plaintiff, v. THOMAS FATATO REALTY CORP. and Garden Estates LLC, Defendants. |
| Court | New York Supreme Court |
OPINION TEXT STARTS HERE
Feder Kaszovitz, New York, for Plaintiff.
Delbello, Donnellan, Weingarten, White Plains, for Defendant.
The following papers numbered 1 to 13 read herein:
+-----------------------------------------------------------------------------+
¦Papers ¦Numbered ¦
+--------------------------------------------------------------+--------------¦
¦Notice of Motion/Order to Show Cause/Petition/Cross Motion and¦1–27–9 ¦
¦Affidavits (Affirmations) Annexed ¦ ¦
+--------------------------------------------------------------+--------------¦
¦Opposing Affidavits (Affirmations) ¦10–11 ¦
+--------------------------------------------------------------+--------------¦
¦Reply Affidavits (Affirmations) ¦3 ¦
+--------------------------------------------------------------+--------------¦
¦Affidavit (Affirmation) ¦ ¦
+--------------------------------------------------------------+--------------¦
¦Other Papers Memoranda of Law ¦4–512–13 ¦
+--------------------------------------------------------------+--------------¦
¦Plaintiff's attorney's letter dated November 8, 2011 ¦6 ¦
+-----------------------------------------------------------------------------+
Upon the foregoing papers, in this action by plaintiff New York Tile Wholesale Corp. (plaintiff) alleging breach of a lease agreement and seeking specific performance and damages, plaintiff moves for an order, pursuant to CPLR 3212, granting it summary judgment on the issue of liability on the first, second, and third causes of action of its complaint, and severing all remaining issues as to damages. Defendants Thomas Fatato Realty Corp. (Fatato Realty) and Garden Estates LLC (Garden) (collectively, defendants) cross-move for an order granting them summary judgment dismissing plaintiff's first, second, and third causes of action as against them.
Fatato Realty is a real estate management company that owns and manages commercial and residential properties in Brooklyn, New York. Ronald Fatato is the president of Fatato Realty, and he owns a majority of Fatato Realty's shares. Prior to October 2000, Fatato Realty was the record owner of real property located at 283–301 Fourth Avenue, in Brooklyn, New York (the property). The property is improved with three buildings, which total approximately 51,000 square feet. The buildings include a warehouse which is connected to a one-story brick garage and a two-story medical center.
Fatato Realty, as the owner and landlord of the property, entered into a lease, dated September 23, 1986, with plaintiff (whose name was then Marble Flooring, Inc.), as the tenant, wherein Fatato Realty leased a portion of the property to plaintiff for storage and warehousing for a term of five years. The lease was executed by Ronald Fatato, on behalf of Fatato Realty, and by Milton Zuckerbrod, on behalf of plaintiff. The lease superseded a prior lease for the property entered into between Fatato Realty and plaintiff (in the name of Marble Flooring Corp.) on or around December 18, 1981 and which had commenced on January 1, 1982. A rider to the lease, in paragraph 42, provided that “[i]n the event of a sale of this property, the tenant has the first right of refusal.” The lease was continually renewed and extended with the last lease extension expiring on April 30, 2002, and, as amended, the lease continued to contain the same right of first refusal.
On October 12, 2000, Fatato Realty sold the property for $2.295 million to Garden. Plaintiff claimed that Fatato Realty never notified it that it was about to sell the property and that Fatato Realty did not give it an opportunity to exercise its right of first refusal under the rider to the lease. Plaintiff asserted that it was completely unaware of this sale for more than one year after the sale since Fatato Realty continued to bill it for the rent and kept up the appearance that it remained the owner of the property.
On December 18, 2001, plaintiff filed this action against Fatato Realty and Garden. Plaintiff's first cause of action seeks a judgment rescinding the sale of the property from Fatato Realty to Garden and directing Fatato Realty to specifically perform its obligation under the rider to the lease to offer the property to it for sale and to transfer the property to it. Plaintiff's second cause of action seeks damages against Fatato Realty for breach of the lease. Plaintiff's third cause of action alleges that Garden was aware of its right of first refusal, and asserts a claim of tortious interference with its contractual rights by Garden. Plaintiff's fourth, fifth, and sixth causes of action allege that Fatato Realty overstated the square footage of the property leased by it, and, respectively, seek damages for overpayment of rent and other charges and expenses, reformation of the lease, and a return of the overpayment of its security deposit.
By a decision and order dated May 7, 2002, Justice Melvin S. Barasch granted a cross motion by plaintiff insofar as it sought a preliminary injunction enjoining Garden and Fatato Realty, during the pendency of this action, from transferring or encumbering the property or interfering with its tenancy. Justice Barasch based that decision and order upon the fact that the rider to the lease contained a right of first refusal, plaintiff's showing that the property was sold to a third party, Garden, and plaintiff's assertion that it had never received notice of the sale.
Subsequently, plaintiff moved for summary judgment in its favor on its first, second, and third causes of action, and defendants cross-moved for summary judgment dismissing plaintiff's first, second, and third causes of action. In support of their cross motion, defendants submitted evidence showing that Garden was formed as a limited liability company on July 25, 2000, that its members were (and continue to be) R & I Garden Corp. (R & I), which owns a two-thirds interest in Garden, and Shaya B. Developers, Inc. (Shaya), which owns a one-third interest in Garden. Fatato Realty pointed out that since it owns 90% of R & I, and Itzhak Katan (Katan) (who is a real estate developer with expertise in construction), owns the remaining 10% interest in Garden, this gave it a majority interest of 60% in Garden.
Fatato Realty, in its cross motion, further explained that in 2000, it had decided to develop the property by constructing residential rental apartments, and that, in order to do so, it formed Garden, in which it joined with Katan and Jeshayah Boymelgreen (Boymelgreen) (who had construction expertise and a construction company). Fatato Realty asserted that it had previously worked with Katan and Boymelgreen in developing other properties and that, by forming Garden, it joined with them so that they would provide the financing and construction expertise needed for the development of the property.
Fatato Realty, in support of its cross motion, pointed to the fact that Garden's operating agreement provided that the members' capital contributions were those amounts necessary to acquire and develop the property, and that to the extent that any member contributed funds to the project in excess of that member's proportionate share of the capital contributions due, that excess would be considered a loan owed to such contributing member. Fatato Realty claimed that its capital contribution to Garden, through R & I, was the property, which it transferred to Garden on October 12, 2000. Fatato Realty asserted that since the market value of the property (which plaintiff had claimed was approximately $8,250,000) greatly exceeded the value of its proportionate capital contribution to Garden, Garden, in accordance with its operating agreement, agreed to repay Fatato Realty the sum of $2,295,000. In addition, Fatato Realty claimed that plaintiff, through its principals, Edward Zuckerbrod and Milton Zuckerbrod, were well aware of its plans to develop the property in 2000 and of its intent to transfer title to the property in order to do so, and it submitted affidavits and other proof supporting this claim. Plaintiff, however, claimed that Fatato Realty never gave it written notice of the transfer of the property by it to Garden.
By a decision and order dated May 15, 2003, Justice Barasch, before any discovery in this action took place, denied plaintiff's motion and granted defendants' cross motion. Justice Barasch found, as a matter of law, that the transfer of the property to Garden did not constitute a “sale” that triggered the right of first refusal based upon the fact that Fatato Realty indirectly held a 60% interest in Garden.
Following an appeal by plaintiff, the Appellate Division, Second Department, by a decision and order dated December 13, 2004 (New York Tile Wholesale Corp. v. Thomas Fatato Realty Corp., 13 AD3d 425, 426 [2004] ), modified Justice Barasch's May 15, 2003 decision and order by denying defendants' cross motion with leave to renew plaintiff's motion and/or defendants' cross motion upon completion of discovery, and reinstating plaintiff's first, second, and third causes of action. It also reversed an order dated November 12, 2003, which had granted a motion by defendants to vacate the preliminary injunction dated May 7, 2002 and reinstated it ( id.). In so ruling, the Appellate Division, Second Department, found that plaintiff's motion and defendants' cross motion were premature since no discovery had yet taken place, and because neither party, at that early stage...
To continue reading
Request your trial