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538 Morgan Ave. Props. LLC v 538 Morgan Realty LLC 2020 NY Slip Op 32780(U) August 20, 2020 Supreme Court, Kings County Docket Number: 507788/15 Judge: Lawrence S. Knipel Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001 (U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

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Page 1: 538 Morgan Ave. Props. LLC v 538 Morgan Realty LLC · 2 days ago · 538 Morgan Ave. Props. LLC v 538 Morgan Realty LLC 2020 NY Slip Op 32780(U) August 20, 2020 Supreme Court, Kings

538 Morgan Ave. Props. LLC v 538 Morgan RealtyLLC

2020 NY Slip Op 32780(U)August 20, 2020

Supreme Court, Kings CountyDocket Number: 507788/15Judge: Lawrence S. Knipel

Cases posted with a "30000" identifier, i.e., 2013 NY SlipOp 30001(U), are republished from various New York

State and local government sources, including the NewYork State Unified Court System's eCourts Service.

This opinion is uncorrected and not selected for officialpublication.

Page 2: 538 Morgan Ave. Props. LLC v 538 Morgan Realty LLC · 2 days ago · 538 Morgan Ave. Props. LLC v 538 Morgan Realty LLC 2020 NY Slip Op 32780(U) August 20, 2020 Supreme Court, Kings

FILED: KINGS COUNTY CLERK 08/25/2020 03:37 PM INDEX NO. 507788/2015

NYSCEF DOC. NO. 618 RECEIVED NYSCEF: 08/25/2020

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PRES ENT:

HON. LAWRENCE KNIPEL, J11stice.

- - - - - - - - - - - - - - -- - - - - -- - - - - -- -- -X 538 MORGAN A VENUE PROPERTIES LLC ANO NY STONE KITCHEN DEPOT, INC.

Plaintiffs,

- against -

538 MORGAN REALTY LLC, SD ]NT'L INC., DIAN KU! SU, QING MEI ZHAO, AND TIAN FANG SU,

Defendants. - - - - - - - - - -- - - - - - - - -- - - - - -- - - ---X 538 MORGAN REAL TY LLC,

Third-Party Plaintiff,

- against -

HAlDONG WENG AND SI-IUN l(lJAN LIU,

Third-Party Defendants. -- - --- - -- - - - - - -- -- -- - - - - -- - - -- -X The following e-filed papers read herei11: Notice of Motion/Cross, Motion and Affidavit(s) (Aftirn1ations) and Exl1ibits __ _

Atan IAS l'ern1, Part NJ]'RP of the Supreme Court of the State of New York, 11eld in and for the Cotinty of I<ings, at the Courthouse, at Civic Center, Brooklyn, New York, on the 201

h day of Augtist, 2020.

Index No. 507788/15

NYSCEF Doc. Nos.'

Opposing AJlidavit(s) (Affim1ations) and Exhibits __ 582-585 586-590 591-607 608 592-607 6 J 0-614

Reply Affida\1its (Affirmations), _______ _ 609 610-614. 615

1 New York State Courts Electronic Filing Document Numbers

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FILED: KINGS COUNTY CLERK 08/25/2020 03:37 PM INDEX NO. 507788/2015

NYSCEF DOC. NO. 618 RECEIVED NYSCEF: 08/25/2020

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Upon the foregoing e-filed papers read herein, plaintiffs 538 Morgan Avenue

Properties LLC (538 Avenue) and NY Stone Kitchen Depot, Inc. (NY Stone), (collectively,

plaintiffs) 1nove, in 1notion seq1tence (1not. seq.) 32, for an order stril<ing tl1e jury demand of

defendant/third-party plaintiff 538 Morgan Realty LLC (53 8 Realty), and defendants SD Int'!

Inc. (SD), Dian Kui Su (Su), Qing Mei Zhao, and Tian Fang Su (collectively. defendants).

By separate notice of1notio11, plaintiffs move, in 1not. seq. 33, for an order "rnodifying the

preli1ninary injunction as isst1ed in this case regarding the use and occupancy payinents due

in light of the Co\rid-19 crisis." Defendants cross-move, in 1not. seq. 34, for an order: a)

"amending the preli1ninary injtmction issued by the Supreme Court to up\vardly 1nodify and

adjust the use and occupancy payable to the [t]hird-[p]arty [p]laintiff' (538.Realty);2 b)

"con1pelling the Plaintiff and occupants of the pre111ises at issue to correct any and all

property violations and pay the penalties accrued and caused by their misuse"; and c)

"compelling- the Plaintiff and occupants to provide proof of liability insurance coverage."

2 By order dated May 3, 20 l 7, the court, in rnot. seqs. six and eight, granted plaintiffs' n1otion for a preli1ni11ary injunction enjoining defendants froril interferi11g with their tenancy at the subject property at issue (the Property) (see infi·a) on condition that mo11thly use and occupancy in the amount of $21,252 was paid along with the filing of an undertaking of $80,000, and denied defenda11ts' cross motion to obtain unpaid re11t (see NYSCEF Doc. No. 589, Decision and Order dated May 3, 2017 at 5, annexed as exl1ibit A to plaintiffs' mot. seq. 33 papers]).

By ordei" dated November 15, 2017, the cou1t, in 1not. seq. 11, grru1ted defendants' 1notion to renew and reargue the court's May 3, 2017 order and, t1pon renewal m1d reargun1ent, upwardly 111odified plaintiffs' monthly use and occupm1cy starting January 1, 2018 from $21,252 to $22,986, and held that "use and occupa11cy may be adjusted on a yearly basis" (see NYSCEF Doc. No. 590, Decision and Order dated Nove1nber 15, 2017 at 1-2, ru1nexed as exhibit B to plaintiffs' mot. seq. 33 papers). Plaintiffs presumably seek modification of the use mid occupancy as set forth in the November 15, 20 l 7 order.

2

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FILED: KINGS COUNTY CLERK 08/25/2020 03:37 PM INDEX NO. 507788/2015

NYSCEF DOC. NO. 618 RECEIVED NYSCEF: 08/25/2020

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This breach of' contract action involves the sale of defendants' business and real

property to plaintiffs. A concise background history of this matter is set forth in the court's

May 3, 2017 decision and order, i11 n1ot. seqs. six and eight, as follows:

"On March 3, 2015, [plaintiff NY Stone] [] entered into a business sales contract with [defendant SD] []whereby NY Stone purchased SD' s business, including assets, for a total purchase price of $702,793.00. The 'business' refers to the i1nport and sale of stone, 1narble, tiles and counter tops. In association with tl1e purchase of the business, the parties also e11tered into a separate real estate contract dated March 3,2015, whereby [plaintiff 538 Avenue] []purchased from [d]efendant owner [538 Realty] []real property known as 538 Morgan Avenue in Brooklyn, New York ('Property'), the location of the btisiness at all relevant tirnes.3 The real estate sales contract reflects a purchase price of$4,000,000.00.

"According to [p]laintiffs, on March 3, 2015, NY Stone made a $500,000.00 payment to. SD for the purchase of the business. On the same day, [plaintiff 538 Avenue][] madea down payment in the amount of$100,000.00 for the Property. Plaintiffs claim that, on the next day, March 4, 2015, [plaintiff 538 Avenue] [] made a second payment of $1,820,000.00 to [defendant 538 Realty] [], all in cash.

"By letter dated May 8, 2015, [defendant 538 Realty] [] cancelled the real estate sales contract asserting a material breach by [plaintiff 538 Avenue][] for its 'failure to pay the full amount of $202,793.00 as of date.' The letter further stated that '[s]aid payment should have been made on or before 6:00 pm of April 3, 2015, as provided under the Provision 18 of the Rider to the Pre1nises Sale Contract.'

"According to [p ]laintiffs, the $202, 793 .00 figure represented the balance for certain 'goods en route' and is referenced in the business sales contract. PlaintitTs also state that on, March 3, 2015, the parties exectited a \vritten a1nend1nent extending the time to pay for the goods en route to 30 days after t11e last container arrived, which was on April 9, 2015. Ftuiher, that the tin1e to pay for the goods was not made 'time of the essence' and thus, [p]laintiffs

3 Also l<nown as 18 Anthony Street i11 Brooklyn, New York (NYSCEF Doc. No. 593, affidavit of Dian Kui Su, at 1, ~ 1 ).

3

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FILED: KINGS COUNTY CLERK 08/25/2020 03:37 PM INDEX NO. 507788/2015

NYSCEF DOC. NO. 618 RECEIVED NYSCEF: 08/25/2020

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had a reasonable time to tender perfonnance. Plaintiffs contend that, on Apri 1 21, 2015, [they] attempted to tender the full payment of $202,793.00, but that only $90,000.00, in the form of a personal check, was accepted. Plaintiffs further.contend that on May 11, 2015, they procured a certified check for the remaining $112, 793 .00 but [ d]efendants refused to accept payment. Based on the foregoing, it is [p ]laintiffs' position that [ d]efendants were in breach when canceling the contract by letter dated May 8, 2015" (NYSCEF Doc. Nos. 239 and 589, Decision and Order dated May 3, 2017 at 2-3, annexed as exhibit A to plaintiffs' mot. seq. 33 papers).

As noted above, plaintiffs subsequently inoved for a preli1ninary ihjunctio11 enjoining

defendants fro1n interfering with their tenancy at the Property and defendants cross-moved

to recover unpaid rent. Pursuant to the May 3, 2017 order, plaintiffs' motion was gra11ted

on condition that they posted a bond and paid use and occupancy in the amount of $21, 252

per month - the amount of rent plaintiffs had been paying to SD since March 3, 2015 when

the parties entered into the subject agreement. This use and occupancy was payable until the

transfer of ownership of the Property from defendant 53 8 Realty to plaintiff 53 8 Avenoe.

Thereafter, defendants moved to re11ew andreargue the court's May 3, 20 I 7 order and

upon renewal and reargu111e11t for, among other relief, an upward 1nodification of the

plaintiffs' monthly use and occupancy. As indicated, by order dated November 15, 2017, the

court modified plaintiffs' monthly use and occupancy to $22,986 and directed that use and

occupancy "may be adjusted on a yearly basis." Motion practice continued through 2020,

whereupon the parties 1nade the instant motions presently before the court for disposition.

4

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FILED: KINGS COUNTY CLERK 08/25/2020 03:37 PM INDEX NO. 507788/2015

NYSCEF DOC. NO. 618 RECEIVED NYSCEF: 08/25/2020

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Discussion

Plaintiffe' Motion to ModifY Use and Occupancy

"Real Property Law [§] 220 provides that a landlord can recover use and occupancy

for the reasonable value oftl1e pre1nises and for Ltse of those premises" (Adler v Edwards,

6 Misc 3d 1024 [A], 2005 NY Slip Op 50168 [U], 'l [Civ Ct, Kings County 2005]).

Moreover, it is the "the ge11eral judicial policy" to grant" requests to set use and occupancy

pendente lite when a leasehold interest is the subject of civil litigation other than sum1nary

proceedings" (Davis v Cole, 193 Misc 2d 380, 383 [Sup Ct, NY County 2002]).

"A court has broad discretion in awarding use and occupancy pendente lite" ( 43rd St.

Deli, Inc. vParamount Leasehold, L.P., 107 AD3d501, 501 [lstDept2019]). "The award

of ttse and occupancy during the pendency of an action or proceeding accon1rnodates the

con1peting interests of the parties in affording necessary and fair protection to both" (255

Butler Assocs., LLC v 255 Butler, LLC, 173 AD3d 651, 653-654 [2d Dept 2019] [internal

citations and quotation marks omitted]). Moreover, "an occupant's duty to pay the landlord

for its use and occupancy of the premises is predicated upon the theory of quantum meruit,

and is iinposed by law for the purpose of bringing about justice without reference to the

intention of the parties" (id. [internal citations and quotation marks omitted]).

In determining use and occupancy, "the Court has the obligation to appraise the actual

value of the property tal<ing into consideration whatever restrictions apply because of

agreen1ents between the parties, or to governmental decrees, or other factors" ( 438 W J 9tlz

St. Operating Corp. v Metropolitan Oldsmobile, Inc., 142 Misc 2d 170, 173 [ 1989]). Finally,

5

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NYSCEF DOC. NO. 618 RECEIVED NYSCEF: 08/25/2020

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"[ a]lthough the landlord generally has the burden of proving the amount owed by the tenant,"

it is the plaintiffs burden on a motion to 1nodify an order granting use and occupancy to show

that the amount originally awarded "was unjust" (255 Butler Assocs., LLC, 173 AD3d at 654

[internal citations 0111itted]).

In support of their motion to inodify t11eir use and occupancy payments due in light

of the Covid-19 crisis, Haidong Weng, principal of plaintiffs 538 Avenue and NY Stone,

avers in his affidavit that NY Sto11e operates a stone fabrication store where "we work "\vith

various stones to build ite1ns such as kitchen countertops, or inarble tables, or fire places" and

that "[t]he work has to be in done person and cannot be done remotely" (NYSCEF Doc. No.

587, at 1, ~ 3). According to Weng, "[b]ecause of Co[]vid 19 and multiple government

regulations that first decreased and eventually completely forbid [sic] 1ne fro111 having

\Vorkers work on-site, I closed1ny business on March 22, 2020 in compliance witl1 the State's

executive order" which he understands will expire on May 15, 2020 (id. at 2, 114). Weng

states furtl1er tl1at "[t]he current government regulations have prevented me fro1n bei11g able

to operate 1ny business in any way and in fact, would prevent any si1nilar business from being

able to operate" (id. at 2, ~ 5). Thus, he asks the court to "consider modifying the use and

occupancy as previously ilnposed and waive any use and occupancy payme11ts for the period

from March 22, 2020 through May 15, 2020" (id. at 2, ~ 7).

In further support of plaintiffs' 1notion, counsel for plaintiffs notes that Executive

Order 202.8 directed all non-essential businesses statewide to close in-office personnel

fi.mctions effective on 8 PM Sunday, March 22, 2020. Quoting 438 W. 19'" St. Operating

6

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FILED: KINGS COUNTY CLERK 08/25/2020 03:37 PM INDEX NO. 507788/2015

NYSCEF DOC. NO. 618 RECEIVED NYSCEF: 08/25/2020

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Corp. (142 Misc 2d at 173), counsel for Weng asserts that "'[i]n determining the use and

occupa11cy as in landlord and tenant matters, 'the Court has the obligation to appraise the

actual value of the property tal<ing into consideration whatever restrictions apply because of

agreen1ents between the parties, or to governn1ental decrees, or other factors'" (NYSCEF

Doc. No. 588, at 2, ~ 6, annexed to plaintiffs' mot. seq. 33 papers). Counsel contends that

Executive Order 202.8 bars plaintiffs from being able to operate at the Property, and asks the

court to suspend use and occupancy "from March 22, 2020 until such time as [p ]laintiffs are

legally permitted to resume business operations" (id. at 2, 11 9).

In opposition to plaintiffs' motion and in support of that branch of defendants' cross

1notion tO increase plaintiffs' use and occupancy, counsel for defendants asserts that

Executive Order 202.8 only prohibits a landlord from evicting a tenant and assessing late fees

through August 2020, but does not amend the obligations ofa commercial tenant to pay rent,

nor does it substantively change the ter1TI.s of a commercial tenancy or a cominercial

1nortgage-. In this regard, counsel notes that the underlying taxes and t11ortgage obligations

that the co1nmercial property owner must pay continue to accrue. Counsel also points out

that the use and occupancy has never been increased, which is warranted here because tl1e

rate being charged to plaintiffs is unfair to the owner (i.e. defendants).(NYSCEF Doc. No.

592, at 2, 16, annexed to plaintiffs' papers in mot. seqs. 33 and 34).

In his ow11 affidavit in opposition to plaintiffs' motion and in s_upport of that branch

of defendants' cross inotion to increase use and occupancy, Dian Kui Su (Su), managing

member of defendanUthird-party plaintiff 538 Realty and president of SD avers, with respect

to use and occupancy, that the executive order is a deferral of late fees and pay1nents only,

7

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NYSCEF DOC. NO. 618 RECEIVED NYSCEF: 08/25/2020

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and is not ·debt forgiveness or modification; that beginning in or about July, 2016 for

approximately 10 months, plaintiffs had failed to pay use and occupancy; and that plaintiffs'

application is a thinly veiled atten1ptto obtain forgiveness of use and occupancy payments

(NYSCEF Doc. No. 593, at 5, 1] 15, annexed to defendants' papers in mot. seqs. 33 and 34).

Su also states that plaintiffs used the property recklessly resulting in: 1) safety hazards

(referencing NYSCEF Doc. Nos. 264-274, submitted in support of 538 Realty's

reconsideration rnotio11, 1not. seq. 11 ); 2) Department of Buildings violations, accruing fines

and penalties totaling $23,250 as of October 2019 (referencing NYSCEF Doc. Nos. 523-562,

submitted in support of mot. seq. 29 [in part discussing violations] and NYSCEF Doc. Nos.

560, 561, and 555 [his own affidavits purportedly showing violations caused by plaintiffs]),

which plaintiffs must correctthe1nselves and pay; and 3) cancellation of plaintiffs' i11surance

policy (see NYSCEF Doc. No. 593, at 61] l 7). Su further asserts that plaintiffs sublet the

property, in violation of the lease (id. at 5-6, 1] 16), and profited from the.sublease and below

1nark.et value rents (id. at 12i ~ 27); and that under a surviving provision in tl1e business

contract, plaintiffs agreed during the lease period to hold defendants "harmless from and

against all debts, liabilities, claims[] [and] allegations arising after the Closing of this

transaction in connection with the business subject to be transferred within or outside the

Premises or in conne_ction with the Premises during the Lease Period'' (id. at 6-7, ,-i 19,

quoting from business contract, NYSCEF Doc. No. 594, at 1] 4).

Further, Su notes (id. at 7-8, 1]1] 21-22) that pursuant to the court's August 14, 2019

order (see NYSCEF Doc. No. 549 regarding mot. seq. 29), defendants provided a rent study

performed by a license.ct New York State expert appraiser, who concluded that the monthly

8

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NYSCEF DOC. NO. 618 RECEIVED NYSCEF: 08/25/2020

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rent should be $34, 166.67, excluding real estate taxes, insurance, repairs and 1naintenance

(see NYSCEF Doc. No. 600, exhibit G to Su's June 15, 2020 affidavit, NYSCEF Doc. No.

593). Taking into account these expenses (see NYSCEF Doc. No. 593, at 8, ~~ 23-25), Su

asserts that the fair market value of the monthly rent for the property should be $42,151.65,

but that plaintiffs, at the time of this cross motion, were only paying $22,986 per month (id.

at 8, ~ 26).

In reply, counsel for plaintiffs concedes that Executive Order 202.8 does not apply to

plaintiffs because plaintiffs are seeking a 1nodification of use and occupancy, not rent.

Counsel also contends that defendants' cross motion to up\vardly inodifY the use and

occupancy should be denied because defendants previously made this request at a court

appearance held oo January 22, 2020, which was denied by order of that same date. In any

event, counsel argues that defendants have failed to establish their entitlement to an upward

111odification because it is based upon defendants' expert's rent study dated Septe1nber 26,

2019, and therefore does not account for the impact of Covid-19 on New York City (see

NYSCEF Doc. No. 610 at I,~ 3, at 2, ~~ 5-7 and at 2-3. ir~ 10-13).

As plaintiffs note, Executive Order No. 202.8 (9 NYCRR 8.202.8), issued on Ma'.ch

22, 2020, directed all workers employed by nonessential businesses to begi11 vvorl(ing from

home during the coronavirus pande1nic. Specifically, the executive order directed all

nonessential businesses and ·nonprofit organizations to "reduce [their] in-person workforce

at any work locations by 100 percent no later than March 22, 2020 at 8 p.m" (Executive

Order 202.8). Here, plaintiffs seek forgiveness of their use and occupancy for the period of

either"March 22, 2020 until such time as [p ]laintiffs are legally permitted to resume business

9

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operations" (NYSCEF Doc. No. 588, at 2, 1 9) or "for the period from March 22, 2020

through May 15, 2020" (NYSCEF Doc. No. 587, at2, 16) because they were unable to work

at the Property based upon this executive order.

As an initial 1natter, tl1e order in effect on the date plaintiffs filed their instant 1notion

to modify use and occupancy was Executive Order 202.28, which provides that:

"There shall be no initiation of a proceeding or enforcement of either an eviction of any residential or co1n1nercial tenant, for nonpay1nent of rent or a foreclosure of any residential or com1nercial mortgage, for nonpayment of such 1nortgage, owned or rented by so1neone that is eligible for unemploy1nent insurance or benefits Ltnder state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic for a period of sixty days beginning on June 20, 2020" (9 NYCRR § 8.202.28).

Defendants concede that this executive order is entirely silent as to use and occupancy, and

thus. the court is not precluded from addressing plaintiffs' 1notion. Further, vvhile the

executive order does not provide for forgiveness of rent or use and occupancy for a non-

essential business to continue in-person work at its worl( location, the court is einpowered

to modify use and occupancy upon a proper showing. I-Iere, however, plaintiffs have failed

to satisfy their burde11 that their use and occupancy should be 1nodified in the for1n of

forgiveness. While Weng, as principal of plaintiffs 538 Avenue and NY Stone, implicitly

avers that plaintiffs are unable pay use and occupancy for the periods requested because of

Executive Order 202.8, he fails to affirmatively rnal(e this state1nent, despite being in a

positio11 to do so. In .ru1y event~ neither Weng nor plaintiffs' counsel have demonstrated, via-

any competent evidence, such as plaintiffs' financial documentation or an affidavit by an

accountant with supporting evidence, that plaintiffs cannot pay for use and occupancy.

IO

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Notably, counsel merely stales that Executive Order 202.8 bars plaintiffs from being able to

operate at the Pro1Jerty and concludes, without further analysis or sub1nission of con1petent

evidence, that tl1e court sl1ould suspend use and occupancy from March 22, 2020 "until sucl1

time as [p ]lain tiffs are legally permitted to resume business operations" (NYSCEF Doc. No.

588, at 2, ~ 9). Accordingly, plaintiffs' motion is denied.

Defendants' Cross A1otion

As an initial 1natter, contrary to plaintiffs' contention, defendants were not precluded

fro1n bringing this cross n1otion to the extent is seelcs an increase in plaintiffs' use and

o'ccupancy. Wl1ile plaintiffs argue that this branch of defendants' cross motion is in effect

one to rearg11e the court's January 22, 2020 order, that order decided defendants' motion for

conte1npt, mot. seq. 31, not for an upward modification for use and occupancy (see NYSCEF

Doc. No. 579). In fact, the last order addressing use and occupancy was dated August 14,

2019, pursuant to which the court directed the parties to submit "separate expert reports of

inarket analysis by [the] 11ext conference as to use and occupancy" which plaintitTs have yet

to provide (NYSCEF Doc. No. 549, at l, 114, regarding mot. seq. 29). 4

4 In oppositio11 to defendants' motion for contempt, in which defendants alleged that plaintiffs had not provided their rent study to the court, plaintiffs argued that contempt could not be based upon their failure to provide their rent study because the cottrt, in its August 14, 20 I 9 order, had only ordered the parties to provide t11e rent study at the next court conference, which had not yet occtin·ed at the time defendants moved for co11ten1pt. Plaintiffs argued in tl1e alternative that since the matter v.1as set for a pretrial conference on February 11, 2020, the issue of a cl1ange in use and occupancy was moot, stating: "Once t11e trial is concluded, either [p ]laintiffs will prevail, in which case [d]efendants \vould be required to convey the premises, and pay back all tl1e use and occupancy that 11as been collected, or [ d]efendants will prevail, in which case, they wottld 11ave tl1e legal_ right to increase tl1e rent to v.,1hatever amount they so desire'' (NYSCEF Doc. No. 572, affirmation of plaintiil's' counsel, dated Jant1ary 15, 2020, at 2, ~ 11, sub1nitted as part ofplaintifi's' opposition papers in mot. seq. 31).

l 1

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In any event, this branch of defe11dants' cross 1notion is denied. In this regard, in

support of this branch of their cross inotio11, de-fendants rely pri1narily upon their expert's rent

study. However, according to defendants, the expert inspected the property for appraisal

purposes on or about August 30, 2019 (NYSCEF Doc. No. 593 at 7, ~ 22), and the expert's

repo1i is dated September 26, 2019. The inspection and preparation of the report both pre­

date the Covid-19 pandemic. Thus, the report neither takes into account the effect the

pandemic has had upon the local economy in Brooklyn where the Property is located, nor

more specifically the rent prices in that area, nor the effect the pande1nic has had on the

economy ofNevv Yorlc City, New York State, or the national econo1ny in ge11eral. Whil'e

defendants provide evide11ce of other expenses which they used to deter1nine the amount of

use and occupancy, absent an updated rent study, this evidence is insufficient to support an

upward 1nodificatio11 of use and occupancy .

. 'fhe branch of defendants' cross motion to co1npel plaintiffs and the occupants of the

Property to correct all property violations and pay all accrued penalties re1nains. Defendants

had moved on or about June 28, 2019, in mot. seq. 29, for an order "[d]irecting the plaintiffs

to produce proof of proper insurance coverage of no less than $2 1nillion liability, covering

two defendant companies (landlord and assignor), and two plaintiff companies (assignees)

and an;' and all affiliates and subsidiaries of the plaintiff.companies who currently operate

business on the pre1uises"; to "disclose the name[s] of all co1npanies which are affiliated and

subsidiaries of the plaintiff companies and which currently operate business on the

premises"; "'to resolve all violations current/); recorded or noticed on the premises which

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arose during the plaint{ffe' operation of their business (from March 2015 to the present

[June 28, 2019 )"; and "to pay reasonable use and occupancy for their use of the premises"

(emphasis added) (NYSCEF Doc. No. 523, at 2, ~ 3 ).

The motion was granted by order dated August 14, 2019 to the extent of directing

plaintiffs to "provide proof of insurance coverage covering [defendant] as [an] additional

insured" and to "disclose [the] name[s] of all companies operating at [the] premises"; for

"defendant" to "fitrnish [the J court and piaintifft with [a J report to identify [a] re;ponsible

party to resolve violations, details o,fviolations and costs to cure"~· that "[t}he party to cure

will be subject to [the J court['s] further order" and; as noted above, directing the "[p ]arties

to submit to [the] court separate expert reports of market analysis by [the] next court

conference as to use [and] occupancy" (emphasis added) (NYSCEF Doc. No. 549, at 1,, 4).

Jn accordance with the August 14, 2019 order, defendants' attorney and Su submitted

their affinnations of co1npliance_ vvith respect to the building violations i11 Octobet, 2019

(NYSCEF Doc. Nos. 551 and 555). On or about December 26, 2019, defendants moved for

an order of contempt against plaintiffs on the ground that plaintiffs did not comply with the

August 14, 2019 order. The motion for contempt was granted by order dated January 22,

2020, noted above, only to fhe extent that plaintiffs were directed "to provide an affidavit

stating the entities operating at the premises" (NYSCEF Doe. No. 579).

In opposition to mot. sec.1. 33 and in support of this brancl1 of their cross motion, 1not.

seq. 34, defendants annex Su's June 15, 2020 affidavit, which includes an explanation of the

violations imposed and resulting penalties, and Su's other two affidavits (NYSCEF Doc.

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Nos. 560 [June 28, 2019] and 561 [July 9, 2019]) containing supporting documentation,

which had been submitted in support of defendants' June 28, 2019 motion, mot. seq. 29, and

wh'ich purportedly de1nonstrate herein that the violations were caused by plaintiffs' "abusive

use of the property" (NYSCEF Doc. No. 593, at 11, ~ 37).

In opposition to this brancl1 of defendants' cross inotion, counsel for plaintiffs first

notes that defendants concede that ''the violations were issued to [djefendants because

[ d}efendants are currently the named owner in the deed' (NYSCEF Doc. No. 610, at 3, ~

14, submitted as part of plaintiffs' mot. seqs. 33 and 34 papers). Thus, plaintiffs' counsel

argues that"[ d]efendants seek all the benefits of ownership, including collecting of the use

and occupancy, but then also argue[] that they bear no responsibility for the maintenanc.e of

the [p]remises" (id.). Accordingly, plaintiffs' counsel maintains that defendants are either

the landlord "in whicl1 case they bear responsibility for the inaintenance of the [p]re1nises"

or "they should be required to .give up all use and occupancy, in which case [p ]laintiffs

should bear responsibility for the maintenance of the [p ]remises" (id. at 3, ~ 15). The court

notes tl1at plaintiffs' counsel makes no reference to thf: hold harmless clause in the business

contract.

Pursuant to the business contract, plaintiffs are responsible for payi11g for the above-

noted violations and penalties, and for -curing thetn. The business contract provides at

paragraph 4 that:

"After the closing of this transaction, [538 Avenue] [] shall stai1 operating the business on the [p ]remises and form a [t]cnant/[l]andlord relationship with [ 53 8 Realty] [] on a month

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to month basis until the [t]ransfer of [t]i!le of the (p]remises from (538 Realty][] to[ 538 Avenue][] ('Lease Period'). [538 A venue] [] shall pay a monthly rent in the amount of$21,252.00 on the first day of each month starting from March 3, 2015 until the transfer of ownership oftl1e [p]remises from [538 Realty] [] to [538 Avenue] [] and the said rent shall be adjusted for the month iii which the date of the delivery of [the] [b]ill of [s]ale falls in. This paragraph shall survive the closing of this transaction and the delivery of [b ]ill of [ s ]ale.

* * * "During the said [/]ease [p]eriod, [538 Avenue][ ]agrees to hold [538 Realty] [} harmless from and against all debts, liabilities, claims[] [and] allegations arising after the [c]losing oftl1is tra11saction in connectio11 vvith tlze business subject to be trar1sferred within or outside the [p]ren1ises or in connection with the [p]remises during the [/]ease [p]eriad'' (emphasis added) (NYSCEF Doc. No. 594).

With respect to the violations, defendants rely upon Su's affidavit, dated June 14,

2020 (see NYSCEF Doc. No. 593), Su's three other affidavits submitted in support of mot.

seq. 29, dated June 26, 2019 (see NYSCEF Doc. No. 529), July 9, 2019 (see NYSCEF Doc.

No. 537), and October 9, 2019 (see NYSCEF Doc. No. 555), and copies of two violations,

one dated April 16, 2019 (see NYSCEF Doc. No. 533) and the other dated June 27, 2019 (see

NYSCEF Doc. No. 539). In his current affidavit, Su essentially reiterates the state1nents he

had made in his previous affidavits, namely that:

"l'l1e plaintiffs received a violation notice regarding a rotting ceiling as early as April 2019. They never notified us of that, nor responded to the City's inquiry. I received a notice of violation at the beginning of July 2019, dated June 26, 2019 about the violation and a $1,500 civil penalty. As plaintiffs are responsible for it based on the contract, I thought plaintiff had already taken care of it and didn't think twice about it. I then received another letter near the end of July, 2019. It indicated tl1at because \Ve missed a hearing on July 15, 201'9, the violation

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is in default with a penaltyof$6,250. After 1 notified my lawyer i11 regards of this issue, plaintiffs inailed ine a seco11d violation dated June 20, 2019 after a re-inspection. Plaintiffs never gave me the April violation. Plaintiffs held the violation tickets for nearly three i11ontl1s before they sent it to us.

"On August 27th and again September 11th, 2019, I twice tried to enter the [p ]retnises to inspect the site and exa1nine the cited violation location. 1-Iowever, plaintiffs refused to allow me access to the [p ]remises for this inspection. At that time, unknown to 1ne, they had received a third re-inspection ticlcet regarding the violation and kne'v that the violation had been in default. As of the present, two violations are already being executed upon by a collection agency assigned from the NYC Department of Finance.

"On Septe111ber 19, 2019, I received a letter indicating another $1,500 in civil penalty for said violation. It became apparent to me that every time the DOB re-inspects the property to find that the violation was not cured, a civil penalty of $1,500 was i1nposed. These civil penalties are in addition to the violation penalties. However, plaintiffs failed to provide 1ne notice, resulting in another default penalty in the atnount of$ J 2.500.

"The penalties total $23,250 ($6,250 + $4,500 + $12,500) as of October 2019 with additional $1,500 civil penalties every two i11onths. If the tines are not paid and the violation not cured, the city will obtain a legal judgment against defendant subjecting defendant's [sic] funds and property to levy to pay the fine. As of the present, two violations are already being executed upon by a collection agency assigned from the NYC Department of Finance" (NYSCEF Doc. No. 593 at 10-11, 1] 33-36).

Despite the foregoing, the two DOB violations do not indicate whether the violations or

penalties were ever assessed against defendants. In this regard, the April 16, 2019 violation

only sets forth the penalties for failure to comply with the notice, i.e. the penalty for

"Standard" is $1,250, for "Admit" is $1,250 and for "Default" is $6,250 (NYSCEF Doc. No.

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533). Similarly, the violation dated Juoe 27, 2019 contains the same penalty information, but

"Standard" is $3,125, "Admit" is $3,125, and "Default" is $12,500 (NYSCEF Doc. No. 539).

Further, with respect to this branch of their cross 111otion, defendants incorporate by

reference Su's October 9, 2019 affidavit (appearing at NYSCEF Doc. No. 555), in which Su

speculates that"[ a Js civil penalty is accrued 1nonthly, it is believed that t/1e total amount of

potential penalties will [be] $6250+$4500+$/ 2500~$23250 as of October 2019" (id. at 4,

~ 12 [emphasis added]). Moreover, as noted above, Su avers that "[a]s of the present, two

violations are already being executed upon by a collection agency assigned from the NYC

Depaitment ofFinance," yet provides no evidence to support this claim (NYSCEF Doc. No.

593, at 10, ~ 34 and at 11, ~ 36).

Based upon tl1e foregoing, this branch of defendants' cross motion is denied with

leave to renevv ttpon the sub1nission of evidence de1nonstrating that these violations and

accompanying penalties have been assessed against defendants, and is granted to the extent

of directing plaintiffs to provide defendants, within 30 days after service of this order with

notice of entry, with all evidence of violations a11d penalties which have been assessed

against defendants to date.

As to that branch of defendants' cross inotion "compelling the Plaintiff and occupants

to provide proof of liability insurance coverage," counsel for defendants asserts that

-"[p ]laintiffs and occupants 11ave not provided proof of liability insurance coverage and inust

be compelled to do so" (NYSCEF Doc. No. 592, at 2, ii 8). Plaintifts' counsel, in opposition

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to this branch of defenda11ts' cross nlotion, asserts in an afflr1nation that, despite defendants'

repeated de1nands, 11e ft1rniSI1ed defendants' counsel witl1 the "insurance certificate" in an

email correspondence dated July 8, 2019 that was previously filed with the court on January

15, 2020 (see NYSCEF Doc. No. 610, at 3-4, ~ 17). According to plaintiffs' counsel, the

insurance certificate "names [ d]etendant as one of the insured" (id. at 4, 1117). The July 8,

2019 einail states: "Attacl1ed here is a copy of our client's most current insurance agreement

with 538 Morgan Realty LLC listed as additionally insured" (NYSCEF Doc. No. 613,

annexed as exhibit C to affirmation of plaintiffs' counsel regarding mot. seqs. 33 and 34).

Plaintiffs' counsel also annexes the certificate which lists 538 Morgan Realty as an additional

insured. The certificate contains the disclai1ner that it was "isstted as a matter of infor111ation

only and confers no rights upon the certificate holder" and that it did 11not atnend, extend or

alter the coverage" afforded by the policies named in the certificate (see NYSCEF Doc. No.

614, annexed as exhibit D to affir1nation of plaintiffs' counsel regarding tnot. seqs. 33 and

34).

"It is well settled that a ce1iificate of insurance with the aforementioned disclaimer

language is insufficient, by itself, to establish that the certificate holder is insured" (Penslce

Truck Leasing Co. v Home Ins. Co., 251 AD2d 4 78, 4 79 [2d Dept 1998]). Further "a

certificate of insura11ce is evidence of a contract for insurance, but is not conclusive proof

that the contract exists and not, in and of itself, a contract to insure" (id. at 479-480).

Although on its O\vn, the certificate does not establish that plaintiffs obtained

insurance coverage na1ning defendants as additional insureds, the certificate is sufficient to

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raise an issue of fact as to whether plaintiffs obtained the required insurance (id.; cf Horn

Main!. Corp. v Aetna Cas. & Sur. Co., 225 AD2d 443, 444 [!st Dept 1996] [while "[a]

certificate of insurat1ce is 1nerely evidence of a co11tract for insurance, not conclusive proof

that the contract exists ... [ o ]n sum1nary judgment, a certiticate inay be sufficient to raise

an issue of fact, especially where additional factors exist favoring coverage"]). T11efefore,

the court directs plaintiff's to provide adequate proof of insurance, natnely the insurance

contract itself-: in which defendants are na1ned as additional insureds, within 30 days after

service of this order with notice of entry (Adjuva LLCv Williamsburg 39 LLC, 2018 NY Slip

Op 32777[U], *2 [Sup Ct, Kings County 2018]).

Plaintifft' Motion to Strike Defendants' Jury Demand

.111 support of their 1notion to strike, counsel for plaintiffs argues that defenda11ts are

not entitled to a jury trial since the 1nain thrust of this action sounds in equity for specific

performance. In opposition, counsel for defendants contends that defendants would be

prejudiced if the court granted tl1e motion because they would not have enot1gh time to adjust

their trial strategies and to prepare for a bencl1 trial. Defendants also contend that inas1nuch

as their claims "are pri1narily legal in character and money damages affbrds full reliet: their

pleading of incidental equitable claims is no bar to a jury trial" (NYSCEF Doc. No. 608,

affirmation of defendants' counsel in opposition, at 4, ~ 7, submitted as part of defendants'

papers in mot. seq. 32).

PlaintitTs' i11otion is denied. As defendants point out, on or about Marcl128, 2019,

in mot. seq. 27, defenda11ts inoved for an order to vacate plaintiffs' note of issue, to compel

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plaintiffs to provide certain discovery, and to grant their demand for a jury trial (NYSCEF

Doc. No. 491). Plaintiffs opposed the motion, arguing that defendants' demand for a jury

was unti1nely (see NYSCEF Doc. No. 506) affir1nation of plaintiffs' counsel in opposition

at 5, ~~ 30-31). By order dated June 19, 2019, the court granted defendants' motion to the

extent of directing that certain depositions take place, that discovery be co1npleted within 60

days, that a conference be scheduled, and added that the "case [was] set down for jury trial''

(NYSCEF Doc. No. 522, at 2, ~ 6).

'"The doctrine of the Jaw of the case is a rule of practice, an artic1Iiation of sound

policy tl1at,- when an issue is once judicially deter1nined, tl1at should be t11e end of the inatter

as far as Judges and courts of' co-ordinate jurisdiction are concerned" (Matter of Koegel, 184

AD3d 764, 765 [2d Dept 2020], quoting Martin v City of Cohoes, 37 NY2d 162, 165 [ 1975]

[internal quotation marks omitted]). Specifically, [l]aw of the case applies only to legal

deter1ninations that were necessarily resolved on the 1nerits in [a] prior decision, and to the

same qt1estions presented in the same case" (id. [internal citations and quotation marks

omitted]).

Here, t11e issue of whether defendants were entitled to a jury trial was previously

raised in defendants' prior motion, opposed by plaintiffs' opposition, and decided against

plaintiffs in the June 19, 2019 order. Accordingly, reconsideration of this issue is barred by

the la\V of the case doctrine{id). Even assurning that plaintiffs' 1notion inay be viewed as

one for reargument, the 1notion is untimely and, in any e\1ent, provides no basis for granting

reargument (McGill y Goldman, 261 AD2d 593, 594 [2d Dept 1999]).

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In su1nmary, plaintiffs' inotions for an adjust1nent of their use and occupancy, mot.

seq. 33, and to strike defendants' de1nand for a jury trial, 1not. seq. 3·2, are denied. 'fhat

branch of defendants' cross n1otion, 1not. seq. 34, for an order co1npclli11g "the Plaintiff and

occupants" of the pre1nises at issue to correct all property violations and pay the penalties

accrued therefrom is denied with leave to renew upon the submission, fro1n defendants, of

evidence de1nonstrating that these violations and accon1panying penalties have been assessed

against defendants and is granted to the extent of directing plaintiffs to provide defendants,

within 30 d.ays after service of this order with notice of entry, with all evidence of violations

and penalties which have been assessed against defendants to date. That branch of

defendants' cross inotion co1npelling plaintiffs and unna1ned occupants of the property to

provide proof of liability insurance coverage is granted as to plaintiffs only to provide

adequate proof of insurance, namely the insurance contract itself, in which defendants are

na111ed as additional insureds, within 30 days after service of this order with notice of entry.

That branch of defendants' cross motion to upwardly modify plaintiffs' monthly use and

occupancy is denied with leave to renew upon submission of an updated rent analysis report .

. 1'his constitutes the decision and order of the court.

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