CAVEAT EMPTOR APPLIES TO COMMERCIAL LEASES

ERMENEGILDO ZEGNA CORP. v. L&M 825 LLC, 2022 NY Slip Op 30578 - NY: Supreme Court 2022:

"Plaintiff Ermenegildo Zegna Corporation (plaintiff or Zegna), a commercial tenant, commenced the instant action on or about September 30, 2016 seeking to rescind the lease between it and the defendant-landlord L&M 825 LLC (defendant) on the grounds of mutual mistake (first cause of action). The complaint also asserts breach of contract in the second and third causes of action for the defendant's failure to deliver the premises as described in the lease and failure to cooperate with plaintiff in obtaining required permits and a certificate of occupancy. In the fourth and fifth causes of action, plaintiff asserts claims alleging breach of the implied covenant of good faith and fair dealing and unjust enrichment.

Defendant filed and served an answer asserting affirmative defenses and three counterclaims for plaintiff's breach of the lease in failing to pay rent and additional rent; a declaratory judgment that plaintiff breached the lease and must comply with the same; and attorneys' fees (see NYSCEF Doc No. 6). Plaintiff replied to the counterclaims, asserting various affirmative defenses (see NYSCEF Doc No. 10).^[1]

A nonjury trial was conducted on November 21, 2019 and January 28, 2020 before the Hon. Carol Ruth Feinman. The lease and other documents were admitted into evidence during the trial. Robert Aldrich, plaintiff's Chief Executive Officer for the Americas region and Giovanni Ballielo, Zegna's Corporate Store Planning Director, testified on November 21, 2019. Theodore Bodnar of Bodnar Architecture P.C., the defendant's architect, and William Friedland, a principal of Friedland Properties, testified on January 28, 2020.^[2] The matter was administratively re-assigned to the undersigned in January 2021 and, after conference with the Court, the parties stipulated to having the trial decided on the record rather than re-try the case (see NYSCEF Doc No. 102).

The Court credits the testimony of the witnesses and the documentary evidence to the extent indicated in the following findings of fact.

FINDINGS OF FACT

In late 2012, plaintiff began searching for a location in Manhattan to lease space for a retail store. In December 2012, plaintiff learned of retail space located at 823 Madison Avenue. At the time, the retail space on the first, second, and third floors of that location was combined with 825 Madison as a single space. Defendant advertised the retail space as two separate spaces, divided by a wall — a wall that did not yet exist and needed to be erected (the Wall). Plaintiff's representatives visited the location on two occasions and negotiated the terms of the lease between December 2012 and April 2013. Plaintiff was represented by the law firm Cleary Gottlieb Steen & Hamilton LLP for the lease negotiations and execution.

On April 12, 2013, the parties executed a lease for the space at 823 Madison, comprised of three levels on the first (ground), second, and third floors, totaling 5,225 square feet of space (the retail space), and part of a basement (together, the premises). The lease term commenced August 1, 2013 for a term of 10 years, expiring July 31, 2023, with annual base rent at $2.5 million per year in 2014 with annual increases until 2023. The lease contains relevant provisions as follows:

• The premises are leased for the purpose of the retail sale of goods and no other purpose;

• Plaintiff inspected the premises and takes the premises in its "as-is" condition;

• Defendant made no representation as to the condition of the premises, or fitness or sufficiency of the premises for "Tenant's use or requirements";

• Plaintiff assumed responsibility for costs and expenses for the plaintiff's work "necessary to enable Tenant to be open same for business in accordance with the Legal Requirements" and provisions of the lease;

• Such legal requirements included provisions related to the Certificate of Occupancy (CO) of the building;

• Plaintiff's work included constructing the demising Wall, constructing customer stairways and building exits such as fire exists or fire stairs in accordance with "Legal Requirements";

• Plaintiff acknowledged it reviewed and is familiar with the CO for the building; and

• Defendant shall cooperate with plaintiff in connection with obtaining required permits and CO.

Plaintiff admittedly had not reviewed the CO prior to signing the lease and failed to provide testimony as to any due diligence performed with respect to the CO, or alterations and work plaintiff assumed under the lease (Aldrich at 63-65). After signing the lease on April 12, 2013, plaintiff hired Space 4 as an architect and Code LLC was hired as a permit expediter.

At this time, it appears as though the parties believed that a CO dated November 6, 2003 governed the premises (Aldrich at 26; Bodnar at 29), which listed retail use of the first, second, and third floors (see pltf ex 5) (the 2003 CO).

In June of 2013, plaintiff's architect Space 4 and defendant's architect/expeditor, Bodnar, coordinated on an application for a permit to construct the Wall. The parties discussed what type of application should be filed. In e-mail correspondence dated June 19, 2013, Space 4 e-mailed Bodnar noting that "the current [CO] 823 Madison Avenue accessible on the BIS indicates retail use of the ground floor only"; and that the landlord should be responsible for establishing the retail use of the two upper floors, which could be done with an Alt 1 application (deft ex A, L&M 739-740 [emphasis in original]). Ultimately, following a meeting between Space 4 and Bodnar, plaintiff decided to submit an Alt 2 application. An Alt 2 application is filed by a professionally certified architect and implies that the work to be performed does not itself affect egress. As recapped in a June 21, 2013 e-mail by Space 4: "The application [for the Wall] will depict solely the partitions to be installed for the purpose indicated; it will not include or dictate the proposed layout of the tenant's space, nor illustrate egress, which will be addressed in the individual applications filed by the tenant's appointed professionals" (deft ex A, L&M 728). In other words, plaintiff's professionals would address the issues of "[e]gress, use, occupation" and "would need design drawings, construction drawings in order to ... address that" (Bodnar at 57). The Wall was subsequently constructed in August of 2013.

Around September or October 2013, plaintiff's expediter Code LLC advised plaintiff that the 2003 CO may have only governed 825 Madison and the prior COs for 823 Madison permitted retail use only on the first/ground floor but not the second or third floors. Further, the Wall had now cut 823 Madison off from 825 Madison, leaving only one code-compliant means of egress at the premises.

Plaintiff requested a meeting with defendant, which took place on or about October 30, 2013.^[3] Plaintiff advised defendant it was having problems obtaining permits for retail use of the second and third floors and requested defendant's assistance. Plaintiff claims that the defendant was dismissive of its concerns or requests and advised that plaintiff should be able to get the permits based on the 2003 CO (Aldrich at 39; see pltf ex 8). Following the meeting, plaintiff planned to submit two alternate applications, hoping that if the Department of Buildings (DOB) accepted the approach with the existing 2003 CO, then plaintiff might be able to avoid delays (see pltf ex 8). Plaintiff's experts also filed for three "determinations" with the DOB requesting permission for certain items in plaintiff's applications. The applications were either denied, or approved if certain conditions were met, such installing sprinklers (see pltf exs 12-14). Plaintiff appealed those determinations but was unsuccessful.

Plaintiff was unable to open its store in January 2014 as expected; rather plaintiff opened a temporary Zegna "pop-up" store on the first floor in July 2014.

About a year later, plaintiff requested a meeting with defendant, which was held on April 15, 2015. Plaintiff explained the impasse with respect to the DOB and defendant offered Bodnar to help. By November 2015, Bodnar was able to obtain approval regarding one of the objections from the DOB, permitting the use of the shared hallway and staircase as a required means of egress from the second and third floors (Bodnar at 35). Plaintiff would still have to "add[] fire resistance ratings, upgrad[e] fire resistance ratings and sprinklers throughout the building" (Aldrich at 49), which plaintiff understood to mean the residential apartment spaces located above the commercial floors. Ballielo testified that the additional work would have taken approximately a year to complete and would cost approximately $3 million (Ballielo 147-148).

Plaintiff vacated on September 30, 2016 because the required alterations would be too costly (Aldrich 50-52), and it commenced this action on the same day. Defendant refused to accept plaintiff's surrender and terminate the lease. Plaintiff has not paid rent since it vacated.

CONCLUSIONS OF LAW

I. RECISSION DUE TO MUTUAL MISTAKE

Plaintiffs complaint alleges that "[p]rior to and at the time Landlord and Zegna entered into the Lease, both Landlord and Zegna mistakenly believed that Zegna would be able to use floors 1, 2, and 3 of the Premises for retail sales immediately upon commencement of the Lease" (NYSCEF Doc No. 1 at ¶ 42).^[4]

"As a general rule, where a mistake in contracting is both mutual and substantial, there is an absence of the requisite `meeting of the minds' to the contract and relief will be provided in the form of rescission" (County of Orange v Grier, 30 AD3d 556, 556-57 [2d Dept 2006], quoting Sunlight Funding Corp. v Singer, 146 AD2d 625, 626 [2d Dept 1989] [internal quotation marks omitted]). "The mutual mistake must exist at the time the contract is entered into and must be substantial" (County of Orange, 30 AD3d at 557 [2d Dept 2006], quoting Matter of Gould v Board of Educ. of Sewanhaka Cent. High School Dist., 81 NY2d 446, 453 [1993]).

A party bears the risk of a mistake when (a) the risk is allocated to him by agreement of the parties, or (b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient (Restatement [Second] of Contracts § 154 [1981]).

The evidence suggests that the "mistake" was that both sides apparently believed that the 2003 CO governed not only 825 Madison but 823 Madison as well and that retail use of the space was permitted on the upper floors, and not just the ground floor.

Even if the "mistake" was mutual, the Court first finds that the risk of the putative mistake was allocated to the plaintiff. The lease states that the plaintiff takes the space "as is"; and that it had reviewed the CO and that it was responsible for its use of the space, including construction of basic building exits in accordance with legal requirements, including obtaining DOB permits, approval and compliance with the CO and related issues. Notably, there is nothing in the lease that states the defendant had reviewed the applicable CO, or made any representations of the same, or that defendant was responsible for any of the work/alternations that plaintiff needed to do to legally use the space for retail use (see generally Kosher Konvenience, Inc. v Ferguson Realty Corp., 171 AD2d 650, 651 [2d Dept 1991] ["The lease will be considered a valid contract if the bar to legal use of the premises is readily correctible and the language used in the lease indicates that the parties intended that the defect be corrected and the premises legally occupied"]; cf. P.K. Dev. v Elvem Dev. Corp., 226 AD2d 200, 201-02 [1st Dept 1996] [where there was no express provision and the court allocated the risk of the mistake regarding occupancy to the defendant-landlord, who was in the best position to ascertain the existence of the fact]).

Additionally, the doctrine of mutual mistake "may not be invoked by a party to avoid the consequences of its own negligence" (P.K. Dev., 226 AD2d at 201; see Restatement [Second] of Contracts § 154[b] [1981]). Thus "[w]here a party `in the exercise of ordinary care, should have known or could easily have ascertained' the relevant fact[,] ... that party is deemed to have been `[c]onscious[ly] ignoran[t]' and barred from seeking rescission or other damages" (Eisenberg v Hall, 147 AD3d 602, 604-05 [1st Dept 2017] [internal citations omitted], quoting P.K. Dev., 226 AD2d at 202). "Even where a party must go beyond its own efforts in order to ascertain relevant facts (such as obtaining experts' reports), courts have held that the party must bear the risk of mistake if it chooses to act on its otherwise limited knowledge" (P.K. Dev., 226 AD2d at 202).

Thus, the Court finds that the plaintiff is also barred from rescinding the lease based on the putative mistake due to its own lack of due diligence. Plaintiff admittedly testified it did not do any due diligence prior to signing the lease. The fact that the 2003 CO did not apply to demised premises, i.e., 823 Madison, could have been discovered prior to signing the lease. Notably, it could have been looked up on the DOB website and, indeed, Space 4 found and shared links to the CO which appeared to be applicable to 823 Madison as early as June 2013. Further, when a wall is put up in between a space, it is not unreasonable to expect that legally compliant egress may be at issue and might change the legal or permitted occupancy.

Moreover, there is nothing in the record to infer that plaintiff should have reasonably relied on Bodnar or his Alt 2 application to the extent plaintiff suggests. The plaintiff's architect was coordinating on the Wall application with Bodnar and recognized the differences in the types of applications it could submit. Both sides are highly sophisticated and were represented by counsel in the lease negotiation and execution (cf. Lakshmi Grocery & Gas, Inc. v GRJH, Inc., 138 AD3d 1290, 1292-93 [3d Dept 2016] ["Supreme Court credited [plaintiff-tenant's representative's] testimony that a level of trust existed between them [defendant's representatives] and found that plaintiffs exercise of due diligence, although minimal, was reasonable"]).

Had plaintiff reasonably inquired as to the applicable CO for the premises it leased and realized the implications of the obligations it assumed in the lease, prior to signing the lease, as it had done in June of 2013 after hiring an architect and expeditor, the confusion may have been avoided. Even knowing in June of 2013 that the construction of the Wall may change the legal use of the space, and plaintiff's actions in proceeding on the hope that the DOB would approve plaintiff's plans to use the premises for retail use on the upper floors, irrespective of such apparent conflict with the applicable CO, falls on the plaintiff (see generally P.K. Dev., 226 AD2d at 202 ["The failure of events to develop or continue as expected — no matter how well-founded the expectation — does not entitle the disappointed party to rescission or avoidance of the contract"] [internal citation omitted]; In re Schenck Tours, Inc., 69 BR 906, 914 [Bankr EDNY 1987], affd 75 BR 249 [EDNY 1987] ["Contract avoidance on the grounds of mutual mistake is not permitted just because one party is disappointed in the hope that the facts accord with his wishes"]).

II. BREACH OF LEASE: FAILURE TO DELIVER PREMISES

To sustain a cause of action for breach of contract, plaintiff must prove the existence of a contract, plaintiff's performance, defendant's breach, and damages (see Harris v Seward Park Hous. Corp., 79 AD3d 425, 426 [1st Dept 2010]).

Plaintiff's second cause of action alleges that defendant failed to deliver the premises. Plaintiff claims that the lease defines the premises as the first, second and third floors, and that those spaces could only be used for "the sale at retail" and "no other purpose whatsoever." In asserting that the 2003 CO did not permit retail use of the upper floors, plaintiff claims that defendant failed to deliver the premises.

The Court finds that defendant did not breach its obligation to deliver the premises. Plaintiff began occupying the space as the parties intended. That the plaintiff had to comply with various legal requirements to use the space for retail is clearly set forth in the lease as part of plaintiff's obligation(s). The Court declines to construe a reading of the lease that essentially negates or undermines what the parties explicitly set forth in the lease as to each party's respective obligations (see Greenfield v Philles Records, Inc., 98 NY2d 562, 569 [2002] ["`The best evidence of what parties to a written agreement intend is what they say in their writing.' Thus, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms"], quoting Slamow v Del Col, 79 NY2d 1016, 1018 [1992]; Greenfield, 98 NY2d at 569-70 ["if the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity"]).

III. BREACH OF LEASE: FAILURE TO COOPERATE

Plaintiff's third cause of action asserts that defendant failed to cooperate with plaintiff in violation of the lease which states that defendant "shall cooperate with [plaintiff] in connection with [plaintiff] obtaining the required permits and a Certificate of Occupancy for [plaintiff s] alterations."

The additional findings of fact relating to this claim are as follows:

Aldrich testified that Friedland "was not cooperative, he didn't offer to assist us"; rather Friedland believed that they could all move forward with the 2003 CO, which was "obviously ... the wrong prescription for the problem" (Aldrich at 112). Aldrich also believed that defendant was in the better position to know more about the building "to at least shed some light to point [plaintiff] in the right direction" (Aldrich at 112-113).

Friedland testified that after the October 2013 meeting and until April 2015, defendant was not aware of any request for help or assistance in working with the DOB (Friedland at 100-101).

Aldrich and Friedland both testified that defendant never refused to sign off on anything requested by plaintiff, including e.g., plans submitted by plaintiffs design professionals (Aldrich at 61; Friedland at 115).

Plaintiff references its request for an easement in October of 2014, citing Friedland's testimony at 101-103, wherein he testified that an easement between 825 Madison and 823 Madison was requested by plaintiff and received two months later, but there is no apparent reason why it took two months. The other document plaintiff cited in support, exhibit 34, is an October 16, 2014 internal e-mail between plaintiff and its agents indicating that an easement was going to be requested. There is no proof as to when the easement was granted, whether it was two months, more, or less, or any proof as to why two months would or would not be reasonable under the circumstances.

During the April 15, 2015 meeting, Ballielo testified that defendant asked Bodnar to help and that defendant "would support [plaintiff] in obtaining a favorable outcome of the determination" before the DOB (2019 tr at 139). Bodnar allegedly represented it would be "quick" because he had good relations with the DOB. Plaintiff contends that Bodnar's failure to move on the request for "help" was a lack of cooperation. Although plaintiff contends that Bodnar had come up with excuses for failing to move on the request, and only ultimately did so under a threat of litigation in November of 2015, plaintiff submits no evidence that this delay was unreasonable. Rather Bodnar testified that, once he was requested to help in April of 2015, he began researching and analyzing how to approach the objection; met with the borough commissioner in July of 2015; created drawings as requested by the commissioner that verified information that was previously missing in plaintiff's application; went back in twice to verify additional items; and ultimately requested an emergency appointment, which took place in November, to get the approval on the objection (Bodnar at 35, 39-41).

Although the parties failed to provide case law as to what "cooperate" means under a lease,^[5] the Court finds that under this record, the Court cannot say that defendant failed to "cooperate" with plaintiff — plaintiffs idea of cooperation would impose burdens that go well beyond what is contemplated in the clear terms of the lease (see generally Greenfield, 98 NY2d at 569-70). Notably, plaintiff conceded that the permitted use for retail sales by plaintiff as set forth in the lease was conditioned upon plaintiff complying with the legal requirements including the CO (Aldrich at 102, 109). Plaintiff also conceded that if the tenant could not comply with the existing CO, it would have to apply for a new CO or a temporary CO (Aldrich at 109-110). Nowhere does it state that defendant is supposed to be doing it for them. Further, once the approval on the objection regarding egress was obtained by Bodnar, plaintiff would have to address the remaining items of the application, which plaintiff failed to do (see Bodnar at 35-36).

IV. IMPLIED COVENANT OF GOOD FAITH & FAIR DEALING

"Implicit in every contract is a promise of good faith and fair dealing that is breached when a party acts in a manner that ... would deprive the other party of receiving the benefits under their agreement" (Sorenson v Bridge Capital Corp., 52 AD3d 265, 266 [1st Dept 2008]). The implied covenant will be enforced "only to the extent it is consistent with the provisions of the contract" (Phoenix Capital Invs. LLC v Ellington Mgt. Group, L.L.C., 51 AD3d 549, 550 [1st Dept 2008]). To the extent the claim "merely restates [a] breach of contract claim," it will be dismissed (Brook v Peconic Bay Med. Ctr., 152 AD3d 436, 438 [1st Dept 2017]).

The Court finds that this claim is duplicative of the breach of contract claim for failing to cooperate. In any event, it is without merit given the same facts above. To be sure, plaintiff's contentions that defendant incorrectly represented to plaintiff that the 2003 CO would still govern after constructing the Wall and Bodnar's filing for the Wall would not impact egress from the premises are untenable as those issues fall squarely within plaintiff's lease obligations. "The covenant of good faith and fair dealing cannot be construed so broadly as to effectively nullify other express terms of the contract, or to create independent contractual rights" (National Union Fire Ins. Co. of Pittsburgh, Pa. v Xerox Corp., 25 AD3d 309, 310 [1st Dept 2006]).

V. UNJUST ENRICHMENT

Unjust enrichment is "the receipt by one party of money or a benefit to which it is not entitled, at the expense of another" (Abacus Fed. Say. Bank v Lim, 75 AD3d 472, 473 [1st Dept 2010]). To state a claim for unjust enrichment, "plaintiff must show that (1) the other party was enriched; (2) at that party's expense; and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered" (Kramer v Greene, 142 AD3d 438, 442 [1st Dept 2016] [internal quotation marks and citation omitted]). Plaintiff may plead both breach of contract and quasi-contract as alternative theories of recovery where "there is a bona fide dispute as to the existence of a contract, or where the contract does not cover the dispute at issue" (Hochman v LaRea, 14 AD3d 653, 654-655 [2d Dept 2005]). However, where a valid and enforceable written contract governing the subject matter exists, plaintiff is precluded from recovery on a quasi-contract claim (see Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]). Although plaintiff contends that it is inequitable to permit defendants to benefit from plaintiff's rent paid for the entire premises when it was only able to use the first floor for retail use, the claim is precluded by the existence of the lease and its applicable remedies (see Wachovia Sec., LLC v Joseph, 56 AD3d 269, 271 [1st Dept 2008] ["The record does not support Wachovia's allegations of injustice or unjust enrichment, but only supports a finding that Wachovia made a costly error due to its own conduct"]).

Accordingly, all of plaintiff's claims are dismissed.

VI. DEFENDANT'S COUNTERCLAIMS

Defendant asserted three counterclaims: breach of lease in failing to pay rent; declaratory judgment; and attorneys' fees.

The Court finds that defendant must prevail on its counterclaim for declaratory judgment that the lease remains in full force and effect, particularly in light of the Court's finding that plaintiff is not entitled to rescind the lease.

As for the breach of lease counterclaim, defendant must show "(i) the existence of a valid, binding lease, (ii) landlord's performance thereunder, (iii) tenant's failure to pay rent (or other breach), and (iv) damages suffered by landlord as a result of the breach" (A/R Retail LLC v Hugo Boss Retail, Inc., 149 Misc 3d 627, 637 [Sup Ct, NY County 2021]; see Markov v Katt, 176 AD3d 401, 402 [1st Dept 2019]).

It is undisputed that plaintiff stopped paying rent after it vacated the premises on September 30, 2016. However, in its post-trial brief, plaintiff requests that the Court conform its pleading to the evidence presented at trial to assert a constructive eviction, impossibility of performance, and frustration of purpose.

An application pursuant to CPLR 3025(c) to conform the pleadings to the evidence is "a matter within `the sound discretion of the court and should be determined in the same manner and by weighing the same considerations as upon a motion to amend pursuant to subdivision (b), except that under (c) the possibly increased effect on orderly prosecution of the trial might be a factor to be taken into account' (Loomis v Civetta Corinno Const. Corp., 54 NY2d 18, 23 [1981], quoting Murray v City of New York, 43 NY2d 400, 405 [1977]). "Prejudice, of course, is not found in the mere exposure of the defendant to greater liability. Instead, there must be some indication that the defendant has been hindered in the preparation of his case or has been prevented from taking some measure in support of his position" (Loomis, 54 NY2d at 23).

The Court first notes that no formal application has been made to amend the pleadings before the trial justice. Even if an application had been made, the defendant has not been given an opportunity to oppose it. The Court declines to amend the pleadings sua sponte as, upon review of the record, the proposed defenses and potential claim do not appear to have been brought up before (see generally DuBose v Velez, 63 Misc 2d 956, 957-59 [Civ Ct, NY County 1970] ["why insist upon pleadings at all? Why not try the case first and write the pleadings later? ... Self-evidently, we need pleadings — so that litigants may know what claims or defenses they must prepare to meet, so that issues are defined for trial, so that parties will be discouraged from tempering their testimony to meet the needs of the occasion"]). The last-minute attempt to bring in new defenses and a claim for constructive eviction are interposed so late that the Court finds there would be prejudice to the defendant if the Court permitted it, particularly now in 2022, nearly 6 years after the action was filed and 2 years since being tried (cf. Padro v Bertelsman Music Group, 278 AD2d 61, 62 [1st Dept 2000]).

Plaintiff did not otherwise sufficiently contest the defendant's counterclaim for money due under the lease, nor the provision for attorneys' fees. The parties stipulated to submit a document setting forth the back rent due under the lease and the Court issues its judgment accordingly.

CONCLUSION

It is hereby ORDERED that judgment is granted in favor of the defendant on the plaintiff's complaint, and the complaint is dismissed in its entirety; and it is further

ORDERED that defendant's second counterclaim for declaratory judgment is granted; and it is further

ORDERED and ADJUDGED that the parties' lease is not rescinded and remains in effect; and it is further

ORDERED that defendant is granted judgment on its first counterclaim for rent and additional rent and fees due under the lease through November 30, 2019 and shall recover from plaintiff the amount of $13,242,279.80 together with costs and disbursements as taxed by the Clerk upon submission of an appropriate bill of costs; and it is further

ORDERED that that defendant's third counterclaim for attorneys' fees is severed and the issue of the amount of reasonable attorney's fees that defendant may recover against the plaintiff pursuant to the lease is referred to a Special Referee to hear and report; and it is further

ORDERED that counsel for the defendant shall, within 30 days from the date of entry of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet,^[6] upon the Special Referee Clerk in the General Clerk's Office (Room 119), who is directed to place this matter on the calendar of the Special Referee's Part for the earliest convenient date; and it is further

ORDERED that such service upon the Special Referee Clerk shall be made in accordance with the procedures set forth in the Protocol on Courthouse and County Clerk Procedures for Electronically Filed Cases.^[7]

[1] Plaintiff's post-trial memorandum requests that the Court conform the proof to the pleadings so that plaintiff may assert affirmative defenses that were not originally plead, which is discussed infra (see NYSCEF Doc No. 97 at 42, n 4).

[2] Citations to the witnesses' testimony is referred by the witnesses' last name and transcript page, without the transcript date as it is understood that the four witnesses testified on the above-referenced dates.

[3] Additional findings of fact related to the failure to cooperate and breach of the implied covenant of good faith and fair dealing are set forth in the legal discussion infra.

[4] Although the complaint states "for retail sales immediately upon commencement of the Lease," the lease commenced when plaintiff took possession in August of 2013 and it has been plaintiff's position that it would not actually engage in retail sales until January 1, 2014 because the work had to be performed (e.g., erection of the Wall and other alterations to fit the space to plaintiff's specifications).

[5] Plaintiff's post-trial brief cites Long Term Capital Holdings v United States, 330 F Supp 2d 122, 168 [D Conn 20041), which concerned a taxpayer's statutory obligation to "cooperate" with the government's request for information. The District Court there noted that there was no definition of the term in the statute, but referred to a dictionary definition, stating that the "ordinary meaning of the word is `to act or operate jointly with another or others— (id., citing Webster's New International Dictionary 585 [2d ed. (Unabridged) 1961]).

[6] Available on the court's website at www.nycourts.gov/supctmanh under the "References" link on the navigation bar.

[7] The Protocol is accessible at the "E-Filing" page on the court's website: www.nycourts.gov/supctmanh."

MOURNING COMES LITIGATION

Reese v. OWENS FUNERAL HOME, INC., 2021 NY Slip Op 21374 - Bronx Supreme Court 2021:

"Plaintiff moves pursuant to CPLR 3212 for partial summary judgment on the issue of liability on their first cause of action for loss of sepulcher, and the second cause of action for violation of Public Health Law 4201 and for dismissal of defendants second, fourth, sixth and seventh affirmative defenses pursuant to CPLR 3211 (b) and 3212. Tracy Reese is a registered domestic partner of decedent, Charlene Wimbush, and the remaining plaintiffs, Daran Porter, Cherry Porter, Stevie Porter and Lisa Porter are siblings.

Plaintiffs, Tracy Reese, (Reese), and Daran Porter, (D. Porter), aver that they spoke to nonparty, Isiah Owens, (Owens), the president and owner of defendant, Owens Funeral Home, Inc., about decedent, Both Reese and D. Porter aver that they did not authorize defendant to take possession of the body of decedent, nor did they authorize defendant to embalm her. After decedent was embalmed by defendant, another undertaker, Unity Funeral Chapel, retrieved decedent's body from defendant.

In contrast, Owens avers that "Mr. Reese verbally authorized the retrieval of Ms. Wimbush's remains,"^[1] and avers that "Mr. Reese requested embalming and funeral arrangements and burial-services for the decedent."^[2] "At his request, Mr. Reese viewed the remains of the decedent after we had retrieved the body, and he did not have any complaints at the time."^[3]

Plaintiffs argue that summary judgment should be granted to them pursuant to Public Health Law 4201 (7), arguing that defendant was required to have a written contract before taking control of the body. The pertinent part of PHL 4201(7) states as follows:

No funeral director, undertaker, embalmer or funeral firm shall be held liable for actions taken reasonably and in good faith to carry out the directions of a person who represents that he or she is entitled to control of the disposition of remains, provided that such action is taken only after requesting and receiving written statement that such person:

(a) is the designated agent of the decedent designated in a will or written instrument executed pursuant to this section; or

(b) that he or she has no knowledge that the decedent executed a written instrument pursuant to this section or a will containing directions for the disposition of his or her remains and that such person is the person having priority under subdivision two of this section.

(Public Health Law § 4201(7))

"It is fundamental that a court, in interpreting a statute, should attempt to effectuate the intent of the Legislature" (Patrolmen's Benevolent Assn. v. City of New York, 41 NY2d 205, 208, 391 N.Y.S.2d 544, 359 N.E.2d 1338; see also, Longines—Wittnauer v. Barnes & Reinecke, 15 NY2d 443, 453, 261 N.Y.S.2d 8, 209 N.E.2d 68). As the clearest indicator of legislative intent is the statutory text, the starting point in any case of interpretation must always be the language itself, giving effect to the plain meaning thereof. As we have stated:

"In construing statutes, it is a well-established rule that resort must be had to the natural signification of the words employed, and if they have a definite meaning, which involves no absurdity or contradiction, there is no room for construction and courts have no right to add to or take away from that meaning" (Tompkins v. Hunter, 149 NY 117, 122-123, 43 N.E. 532; see also, Matter of Raritan Dev. Corp. v. Silva, 91 NY2d 98, 667 N.Y.S.2d 327, 689 N.E.2d 1373).

(Majewski v. Broadalbin-Perth Cent. Sch. Dist., 91 NY2d 577, 583 [1998]).

It is clearly stated in Public Health Law 4201(7) that if a funeral home has written authorization to follow the directions of an authorized person regarding the "disposition of the remains," and carries out those directions "reasonably and in good faith," then the funeral home cannot be held liable. However, what Public Health Law does not say is that in the absence of written authorization, a funeral home is liable for handling a decedent.

Owens avers that "[w]hile the document was not signed by Mr. Reese, it is customary for customers such as Mr. Reese, to provide verbal authority at the time of consultation and to return later to execute the documents at the time of payment of the funeral services fees."^[4] This averment of Owens' is unopposed by any evidence that funeral home practice is any different and is an issue of fact for factual determination by a finder of fact. Furthermore, whether defendant received plaintiffs' authorization to retrieve decedent's body and embalm it is a factual issue that cannot be resolved on a summary judgment motion.

On a summary judgment motion the "court should draw all reasonable inferences in favor of the non-moving party and should not pass on issues of credibility." (Dauman Displays Inc. v. Masturzo, 168 AD2d 204 [1st Dept. 1990]). "It is settled that the function of a court on a motion for summary judgment is issue finding, not issue determination." (Clearwater v. Hernandez, 256 AD2d 100 [1st Dept. 1998]).

Reese avers that "[a]fter picking up Charlene's remains. Unity Funeral Chapel sent me a post-embalming photograph of Charlene and based on how she looked, the next-of-kin decided we could not have an open casket funeral."^[5] Another issue of fact is whether defendant is liable for the decedent's body's condition that warranted a closed casket as Owens avers as follows:

The Funeral Home embalmed the remains of the decedent. The remains were properly embalmed based on accepted standards and practices in the industry. Any physical changes of the decedent's remains were due to the natural changes of the remains, between the date of death, February 10, 2021 and February 19, 2021, the date upon which the Funeral Home took possession of the remains from the Department of Health and Mental Hygiene Office of Chief Medical Examiner, and not due to improper embalming.^[6]

Plaintiffs cite to Turner v Owens Funeral Home, Inc., Sup Ct, Bronx County, November 22, 2013, Douglas, J., Index No. 20229/2012/E. Arguing that summary judgment was granted to plaintiffs on the same facts.^[7] However, the Turner decision awards summary judgment to plaintiffs on the following grounds:

Owens has failed to raise any triable issue of fact with respect to its improper possession of the decedent's body. Owens concedes that it did take possession of the body but does not put forth any evidence or testimony to rebut Turner's contention that Owens was never authorized to retrieve the body and embalm it. Such evidence would be in Owen's possession. Owens has not demonstrated what further discovery is necessary to defend on this claim. Accordingly, it is undisputed that Owens possessed the body and embalmed it without permission.^[8]

In contrast to Turner, the defendant herein submitted Owen's affidavit as evidence that that defendant had authorization to possess and embalm decedent's remains.

Plaintiffs' argue for dismissal of defendant's affirmative defenses on grounds of unauthorized taking of decedent's remains and embalming them without permission, and for defendants failure to comply with Public Health Law 4201. Plaintiff has not established these grounds for dismissal of defendant's affirmative defenses as a matter of law.

Accordingly, plaintiff's motion is denied.

The foregoing constitutes the decision and order of the Court.

[1] Owens' affidavit dated September 1, 2021, paragraph, 7.

[2] Owens' affidavit dated September 1, 2021, paragraph, 6.

[3] Owens' affidavit dated September 1, 2021, paragraph 9.

[4] Owens' affidavit dated September 1, 2021, paragraph 18.

[5] Reese's affidavit dated July 21, 2021, paragraph 29.

[6] Owens' affidavit dated September 21, 2021, paragraph 21.

[7] Rothstein's affirmation dated July 22, 2021, paragraph 4.

[8] Turner v Owens Funeral Home, Inc., Sup Ct, Bronx County, November 22, 2013, Douglas, J., Index No. 20229/2012/E."

A CHEEKS HEARING

Having just completed one, the court did review the proposed settlement and required a modification of one of the terms.

HYSENI v. ZIA MARIA LITTLE ITALY INC., Dist. Court, SD New York 2022:

"The Final Report of the Mediator filed on January 5, 2022 indicates that the court-ordered mediation in this case was held and agreement was reached on all issues. [ECF No. 32]. Because Plaintiff's Complaint asserts claims under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., judicial approval is required before settlement. See Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 206 (2d Cir. 2015) (holding that FLSA settlements require the approval of either the district court or the United States Department of Labor). "In deciding whether to approve a stipulated settlement, the Court must scrutinize the settlement for fairness." Boucaud v. City of New York, No 07-cv-11098 (RJS), 2010 WL 4813784, at *1 (S.D.N.Y. Nov. 16, 2010).

IT IS HEREBY ORDERED that, on or before February 2, 2022, the parties shall submit a joint letter to the Court explaining why the proposed settlement reflects a "fair and `reasonable compromise of disputed issues rather than a mere waiver of statutory rights brought about by an employer's overreaching.'" Wolinsky v. Scholastic Inc., 900 F. Supp. 2d 332, 335 (S.D.N.Y. 2012) (quoting Mosquera v. Masada Auto Sales, Ltd., No. 09-cv-4925 (NGG), 2011 WL 282327, at *1 (E.D.N.Y. Jan. 25, 2011)). Specifically, the parties should address the following factors:

(1) the plaintiff's range of possible recovery; (2) the extent to which "the settlement will enable the parties to avoid anticipated burdens and expenses in establishing their respective claims and defenses"; (3) the seriousness of the litigation risks faced by the parties; (4) whether "the settlement agreement is the product of arm's-length bargaining between experienced counsel"; and (5) the possibility of fraud or collusion.

Id. (quoting Medley v. Am. Cancer Soc., No. 10 Civ. 3214, 2010 WL 3000028, at *1 (S.D.N.Y. July 23, 2010)). The letter must also address whether there is a bona fide dispute as to the number of hours worked or the amount of compensation due and how much of the proposed settlement Plaintiff's attorney shall be seeking as fees. Cheeks, 796 F.3d at 203, 206. Absent special circumstances, the Court will not approve any settlement agreement that is filed under seal or in redacted form. Id. at 206. The parties should also include a copy of the settlement agreement with their submission."

ERAP AND STAYS IN HOLDOVER - ANOTHER VIEW

CAROUSEL PROPS. v. Valle, 2022 NY Slip Op 50168 - NY: Dist. Court, Suffolk County, 6th Dist. 2022:

"JAMES F. MATTHEWS, J.

And after due deliberation it is hereby

ORDERED, that petitioner's motion to vacate the automatic stay granted by state law to tenants who file for rental assistance benefits pursuant to the Emergency Rental Assistance Program ("ERAP") is denied. Petitioner made this application to the court orally on January 26, 2022, which was orally opposed by counsel for respondents. The court denied the motion but granted petitioner leave to file a written motion seeking the same relief. That motion was submitted to the Court on February 9, 2022. Counsel for respondents again orally opposed the motion for the same reasons that the court now denies the motion on the same grounds the oral motion was denied on January 26, 2022.

This is a holdover petition. Petitioner avers that he seeks to occupy the subject property as his principal residence. The respondent has applied for ERAP funds. The application is pending. Petitioner states that he does not want any ERAP money nor any money from respondent. As stated, he seeks only to regain possession of the property for the purpose of residing there as his primary residence. While acknowledging that in general there is a stay of evictions in effect for all residential evictions where an application for ERAP is pending, petitioner claims that there is an exception to the ERAP automatic stay for owners of one to four single family homes where the owner or an immediate family member intends to reside in the unit in issue.

Any pending summary proceeding against a tenant is stayed once that tenant has applied for ERAP benefits. The stay remains in effect pending a final determination of eligibility. L.2021, c. 417, Part A, §4. A landlord does not possess the right to dissolve the stay be refusing to accept ERAP funding and/or refusing to provide required input for the application to be complete. If the landlord refuses to accept tendered payment of ERAP funds, the tenant would be entitled to a credit for the ERAP grant that the landlord refused to accept. See Harbor Tech LLC v. Correa, 73 Misc.3s 1211(A), 2021 N.Y.Slip Op. 50995(U) (Kings Co. Civil Court). See also Sea Park East L.P. v. Foster, 74 Misc 3d 213, 2021 NY Slip Op. 21347 (Civ. Ct. N.Y. Co.).

Upon acceptance of ERAP funds, the landlord becomes bound to certain conditions. The law provides as follows:

(d) Acceptance of payment for rent or rental arrears from this program or any local program administering federal emergency rental assistance program funds shall constitute agreement by the recipient landlord or property owner: (i) that the arrears covered by this payment are satisfied and will not be used as the basis for a non-payment eviction; (ii) to waive any late fees due on any rental arrears paid pursuant to this program; (iii) to not increase the monthly rent due for the dwelling unit such that it shall not be greater than the amount that was due at the time of application to the program for any and all months for which rental assistance is received and for one year after the first rental assistance payment is received; (iv) not to evict for reason of expired lease or holdover tenancy any household on behalf of whom rental assistance is received for 12 months after the first rental assistance payment is received, unless the dwelling unit that is the subject of the lease or rental agreement is located in a building that contains 4 or fewer units, in which case the landlord may decline to extend the lease or tenancy if the landlord intends to immediately occupy the unit for the landlord's personal use as a primary residence or the use of an immediate family member as a primary residence; and (v) to notify the tenant of the protections established under this subdivision. L.2021, c. 417, Part A, §5.

A plain reading leads to the inescapable conclusion that this exception only applies to continued occupancy after payment of ERAP funds. Simply stated, a tenant who is approved for ERAP rent benefits which the landlord accepts may not be evicted due to an expired lease or as a holdover but is entitled to continue the tenancy for a period of 12 months following the tender of ERAP rent payment to the landlord at the same rent that was previously due. If the tenant defaults in these payments then a non-payment proceeding may be commenced. After expiration of the 12 months, the landlord is under no obligation to continue the tenancy but may seek eviction as provided by law. In all cases, pre and post ERAP, the landlord can seek to evict based upon the nuisance exception (intentionally causing substantial damage or for persistent and unreasonable behavior that infringes on the use and occupancy of others or which causes a substantial safety hazard to others). L.2021, c. 417, Part A, §6. The exception relied upon by the petitioner is available only after a tender of ERAP funds. A landlord of a one to four family dwelling who intends to occupy the unit at issue (either personally or by an immediate family member) is not required to allow the tenants the additional 12 months occupancy but can seek to evict immediately upon payment of the ERAP benefits. There is nothing in the statute that authorizes the Court to disregard the automatic stay of eviction triggered by a pending ERAP application and grant a judgment of possession and warrant of eviction before a final determination of eligibility for ERAP funds.

It is important to note that the ERAP law does not require a landlord to accept the funding. In that case, the landlord would not be bound by the conditions of acceptance noted above with respect to continued occupancy. The Court finds nothing in the legislation that mandates a landlord to accept tendered ERAP money. Therefore, any landlord regardless of their intention to personally occupy the leased premises as their primary residence would be able to continue with eviction proceedings in the event they refused to accept proffered payment. The only landlord who may both accept the ERAP funds and evict forthwith after acceptance of the payment are those who desire to occupy the demised premises as their primary residence (either personally or by an immediate family member), which would have to be proven as part of the landlord's case. Furthermore, in such case the landlord's pending petition could be the vehicle for a hearing on the petition. In such instance, the petition would not be subject to dismissal because of the acceptance of ERAP funds. The petition would only be dismissed if they failed to prove at the hearing that they truly intended to occupy the premises as their primary residence (either personally or by an immediate family member), or if the tenant had another valid defense as provided by law. Again, as noted, the landlord who refuses the tendered ERAP funds may seek immediate eviction based upon the pending petition without any intention to occupy the premises as their primary residence.

Furthermore, a petitioner may not request a hearing challenging the eligibility of a tenant for ERAP benefits. There is a statutory procedure for making this determination without any provision for the courts to make such determinations. There is a procedure established for application and determination of eligibility. The Court in Harbor Tech LLC, supra, analyzed the due process issues that petitioner makes now. The Court agrees with this analysis. The ERAP stay is distinct from the hardship stay in effect, which was struck down by the United States Supreme Court in Chrysafis v. Marks, 141 S.Ct. 2482 (2021). The Court ruled that landlords' due process rights were violated because they were not able to request a hearing to challenge the tenant's self-certification of a covid-related hardship. The New York legislature responded to this ruling in September of 2021 by enacting amendments that provided for the right of landlords to challenge the tenant's declaration of financial hardship. The ERAP mandatory stay presents an entirely different scenario. The purpose of ERAP is to provide compensation to landlords for past rent. This burden of the time necessary to make an eligibility determination is outweighed by the financial benefit that ERAP is designed to provide directly to landlords.

The Court is of the opinion that in the event of a credible allegation of fraud, a landlord could request a hearing. It would be at the discretion of the court to determine whether the allegation rises to the level of intentional fraud that would permit the court to proceed with a hearing on the merits of the petition notwithstanding the pendency of an ERAP application. The petitioner would have to prove respondent's fraud by clear and convincing evidence. In Abuelafiya v. Orena, 73 Misc 3d 576, 155 N.Y.S.3d 715, 2021 NY Slip Op. 21247 (Dist. Ct. Suffolk Co.), the court found that the evidence established the tenants had a second home that was available for them to occupy. While the court did not explicitly ruled that the tenant had engaged in conduct with the intent to defraud, the evidence was of that nature. There was no dispute that the tenant had a second home that was available for their occupancy. Further, the evidence established that the intent of the tenants to remain in the demised premises was so their children could graduate from the local high school.

Examples of fraud requiring a hearing could be the intentional falsification of information and/or documents submitted to obtain the ERAP benefits or the filing of an ERAP application with the sole intention of harassing the landlord and/or without any intention on the part of the tenant to occupy the premises. The court could also grant a judgment of possession in the event a tenant has voluntarily vacated the premises.

Petitioner's oral application on February 9, 2022 for a hearing on the eligibility of the respondents to receive ERAP benefits is denied for the reasons set forth herein. This Court does not possess the jurisdiction to make this determination absent clear and convincing evidence of fraud. Without such proof, the court can neither issue a ruling denying or granting ERAP benefits. To do so would upend a state-wide process put in place pursuant to statutory authorization.

A status conference is set for April 13, 2022 at 10:30 a.m."

DIVORCE, VENUE AND TWO "RESIDENCES"

 

Fisch v. Davidson, 2022 NY Slip Op 1442 - NY: Appellate Div., 2nd Dept. 2022:

"LASALLE, P.J.

Introduction

The parties to this divorce action primarily resided in New York County, while maintaining a seasonal second home in Suffolk County. In March 2020, when the COVID-19 pandemic first reached New York City, the defendant retreated to the Suffolk County residence along with her pregnant and immunocompromised daughter and began spending more time there in order to assist the daughter during the pregnancy and after the child's birth. In August 2020, the plaintiff commenced this action for a divorce and ancillary relief in Suffolk County, on the ground that the parties were residents of Suffolk County. The defendant moved pursuant to CPLR 510 and 511 for a change of venue, and the Supreme Court denied the motion.

This case presents the issue of whether sheltering in place in a seasonal home creates a sufficient degree of permanence to establish residency at that location. We hold that it does not under the circumstances of this case. Because the parties' stays in Suffolk County were only seasonal and temporary, we hold that neither of them were residents of Suffolk County at the time of the commencement of the action. Accordingly, the Supreme Court should have granted the defendant's motion pursuant to CPLR 510 and 511 to change the venue of the action from Suffolk County to New York County.

Factual and Procedural Background

The parties met while attending Columbia Law School and were married in 1985. After graduating law school, they moved to New Jersey, where they raised their three daughters. The defendant ultimately became a Superior Court Judge in Newark, while the plaintiff is a real estate developer with an office in Manhattan as well as a trustee of the Metropolitan Museum of Art and the chairman of that museum's Acquisitions Committee.

Beginning in the late 1990s, the parties rented an apartment on the Upper West Side as a pied-a-terre. In 2010, the parties purchased an apartment at the Beresford, located at 81st Street and Central Park West in Manhattan. After the parties' youngest daughter graduated high school in 2011 and after the defendant retired in 2013, the parties spent increasing amounts of time at the Beresford and less time at their New Jersey residence. Beginning in 2014, the parties filed tax returns showing that they resided in New York City and paid New York City income taxes. In 2014, the parties contracted to buy a second apartment at the Beresford, with the plan of combining the two units into one large duplex apartment, measuring more than 4,700 square feet, with four bedrooms. The cost of that renovation is projected to be more than $8 million. The contract called for title to the second apartment to transfer upon the death of the owner of the second apartment, and the parties closed on the second apartment in 2018. According to the defendant, after the parties separated in April 2019, the plaintiff began renting an apartment near East 79th Street and Fifth Avenue in Manhattan. The parties sold their New Jersey residence in 2020. The entirety of the parties' collection of Old Master paintings, insured at $177 million, hangs at the Beresford apartment or the plaintiff's apartment in New York City, except for one painting that has been consigned for auction.

Meanwhile, in 2012, the parties purchased property in Southampton. In 2016, the parties demolished the existing house on the property and built a new house that cost more than $4 million. During a portion of the construction, the parties rented another house in Southampton. According to the defendant, the parties only used the Southampton house for summer weekends, with limited exceptions. The defendant explained:

"For most summers beginning in 2013, some combination of [the plaintiff], [the defendant], and our three daughters would use the house on weekends. Some weekends the kids went without us. For example, [the plaintiff] always traveled to London for Old Master Week in early July. Some summers, the family used the house less often. In 2016 we did construction on the house and took a summer rental, which I hardly saw as I spent most of that summer in Los Angeles taking care of my father, who had suffered a stroke. In July 2017 our oldest daughter had surgery, resulting in missed weekends. In the summer of 2018, one of our daughters got married and my father suffered another stroke, so again the house was used less often. Until our separation, the only time [the plaintiff] and I stayed in the Southampton house outside of the summer season was a few days over the Christmas holiday break in 2018."

When the COVID-19 pandemic reached New York in March 2020, the defendant and the parties' oldest daughter, Elizabeth, retreated to the Southampton house from their respective apartments in Manhattan. According to the defendant:

"Elizabeth was pregnant with her first child — our first grandchild — and is immunocompromised due to a medication she takes to treat Crohn's disease. She and I and her husband felt that staying in the house would be safer for her — and, ultimately, for the baby after his birth because he would also be immunocompromised for his first six months until her medication was out of his system — than remaining in the City. Her husband had been exposed to family members of his who had contracted Covid-19, so after he quarantined for three weeks in their Manhattan apartment, he joined us at the Southampton house. I then left the Southampton house on April 5, and except for spending our last Passover holiday with my other children in our New Jersey home (which has since sold), I remained in my Manhattan apartment from April 5 until May 28, when I returned to Southampton to help Elizabeth who was then in the late stages of pregnancy. Throughout, Elizabeth drove back to Manhattan for all of her doctors' appointments between March and the birth in June.

* * *

"When our daughter went into labor on June 11, I drove her and her husband to Manhattan, where she gave birth. I returned to my New York City apartment and was in the City to help her after the baby was born. I stayed in New York City for about a week and a half. Later, we all returned to Southampton, where our other two daughters and their husbands, having completed a strict two-week quarantine, joined us.

"Despite [the plaintiff's] knowingly false claim that I reside in Southampton, my stay here is so impermanent that [the plaintiff] has thought nothing of booting me out at will. On July 26, [the plaintiff] announced by text that he would be coming to the Southampton house for a week from September 9 through 16. He understood that, in addition to my leaving, my oldest daughter, her husband, their baby, my youngest daughter and her husband would also all have to leave in order to avoid being exposed to him."

On August 11, 2020, the plaintiff commenced this action against the defendant in the Supreme Court, Suffolk County. In the complaint, the plaintiff sought a judgment of divorce that declared the separate property of the parties, equitably distributed the marital assets and debt, and awarded the Southampton house to the plaintiff. On or about September 2, 2020, the defendant served a demand to change the venue of the action to New York County on the ground that Suffolk County was an improper venue.

By notice of motion dated September 10, 2020, the defendant moved pursuant to CPLR 510 and 511 to change the venue of the action from Suffolk County to New York County. The defendant contended that Suffolk County was an improper venue because the parties' primary, permanent residence was in New York County and that although the parties owned a summer house in Southampton, neither party resided there on the date of the commencement of the action with the requisite degree of permanence. The defendant further contended that Suffolk County would be inconvenient for the testifying witnesses in the case, as none of the witnesses lived in Suffolk County and the assets themselves, except for the vacation house, were all located elsewhere.

The plaintiff opposed the defendant's motion, arguing that the parties did reside at the house in Southampton and that the defendant failed to demonstrate that the convenience of material witnesses and the ends of justice would be promoted by a change in venue to New York County.

The Supreme Court denied the defendant's motion to change the venue of the action from Suffolk County to New York County. The court concluded that Suffolk County was a proper venue pursuant to CPLR 503(a) and 510(1) because the defendant was a resident of Suffolk County. The court further concluded that the defendant did not establish her entitlement to a discretionary change of venue pursuant to CPLR 510(3) because she failed to demonstrate that the convenience of material witnesses and the ends of justice would be promoted by the change. The defendant appeals.

Analysis

CPLR 510(1) provides that the court, upon motion, may change the place of trial of an action where "the county designated for that purpose is not a proper county." CPLR 503(a) provides that except where otherwise prescribed by law, "the place of trial shall be in the county in which one of the parties resided when it was commenced" (emphasis added).

The requirement that the venue of an action shall be predicated on where a party resided when the action was commenced has been present in the CPLR and its predecessor statute for more than 100 years (see Civ Prac Act § 182). However, the term "resided" has never been defined in those statutes. Accordingly, courts applying the statutes have applied the common-law definition of "resided," which has developed over time on a case-by-case basis (see e.g. Katz v Siroty, 62 AD2d 1011, 1012; Hammerman v Louis Watch Co., 7 AD2d 817, 818).

The leading Court of Appeals case on the issue of the meaning of "reside" is Yaniveth R. v LTD Realty Co. (27 NY3d 186), which involved a New York City ordinance requiring landlords to remove lead-based paint in any dwelling unit in which a child six years of age and under "reside[d]" (id. at 191 [internal quotation marks omitted]). In that case, the Court of Appeals concluded that a child who did not live in the subject apartment but spent approximately 50 hours per week there with a caregiver did not "reside" in the apartment (see id. at 194). In doing so, the Court of Appeals reviewed, among other things, venue cases interpreting CPLR 503(a) and its predecessor, and synthesized from them the following definition of "residence":

"[r]esidence means living in a particular locality, even if a person does not intend to make that place a fixed and permanent home, i.e., a domicile. . . . [A] person's `residence' entails something more than temporary or physical presence, with some degree of permanence and [an] intention to remain. Thus, [a]lthough it is true that a person may have more than one residence[,] . . . to consider a place as such, he [or she] must stay there for some length of time and have the bona fide intent to retain the place as a residence with at least some degree of permanency" (id. at 193 [emphasis, citations, and internal quotation marks omitted]; see Dean v Tower Ins. Co. of N.Y., 19 NY3d 704, 708; Matter of Newcomb, 192 NY 238; Kelly v Karsenty, 117 AD3d 912).

This Court has held that "[r]esidence requires more stability than a brief sojourn for business, social or recreational activities" (Katz v Siroty, 62 AD2d at 1012). Thus, in Doe v Hall (36 AD3d 651), this Court held that the affidavit of the plaintiff's son, who stated that at the time of the commencement of the action the plaintiff maintained a residence at her son's apartment in Queens County and would "reside" there when she came back to Queens County during holidays and other times, was insufficient to establish that the plaintiff resided in Queens County at the time the action was commenced (id. at 652 [internal quotation marks omitted]). Similarly, in Stern v Epstein (29 AD3d 778), this Court held that the plaintiffs' use of their medical office in Kings County to sleep over for convenience a couple of nights a week did not render them residents of Kings County for venue purposes (see id. at 779). And in Katz v Siroty (62 AD2d 1011), the plaintiff, whose primary residence was in Scarsdale, retained the exclusive use of a bedroom in his sister and brother-in-law's home in Brooklyn, where he slept between 50 and 100 times per year when he visited his Manhattan law office or when he had to see people in localities such as Patchogue, Long Island (see id. at 1011-1012). This Court concluded that the plaintiff's "occasional use of a bedroom in his sister and brother-in-law's home when he transacts business in the New York metropolitan area does not support his contention that he has a second residence in Brooklyn" (id. at 1012).

By contrast, in Kelly v Karsenty (117 AD3d 912), this Court held that the plaintiff established that he had a bona fide intent to establish an additional residence in Queens with some degree of permanency by submitting a copy of a three-year lease for a cooperative apartment in Queens, which recited that the apartment was to be occupied by the plaintiff, along with several documents listing the apartment in Queens as his address, including a New York State tax bill, a bank account statement, and a union membership card (see id. at 912-913).

This case presents two issues relating to the parties' residence: (1) whether the parties' seasonal use of the Southampton house on weekends prior to March 2020 made them residents of Suffolk County; and (2) whether the defendant's retreat to the Southampton house at the outset of the COVID-19 pandemic made her a resident of Suffolk County. We conclude that neither of these things made the parties residents of Suffolk County.

The defendant clearly established that the parties primarily resided in New York County. The defendant submitted, among other things, copies of: the parties' income tax returns, listing their address in New York County as their residence and reflecting their payment of New York City income taxes; the defendant's voter registration showing that she was registered to vote in New York County; the defendant's driver license listing her address in New York County; motor vehicle records showing that the parties' cars were all registered in New York City or were in the process of having the registration transferred from New Jersey to New York City; an email from the plaintiff to the parties' art insurance carrier stating that the parties did not have any intention of adding any art to the Southampton house; and bank statements listing the Beresford apartment and the plaintiff's Manhattan office as the parties' addresses.

Although a person may have more than one residence, as in, for example, "a joint custody situation or other shared living arrangement" (Yaniveth R. v LTD Realty Co., 27 NY3d at 194), contrary to the plaintiff's contention, the defendant demonstrated that neither party resided in Suffolk County at the time of the commencement of the action.

With respect to the parties' use of the Southampton house prior to 2020, as the defendant notes, a highly instructive case is Daley v Daley (257 AD2d 593). In that case, the plaintiff moved out of the marital residence on Roosevelt Island and into another apartment in Manhattan, and commenced an action for a divorce in New York County (see id.). The Supreme Court, New York County, granted the defendant temporary exclusive occupancy of the marital residence, and the plaintiff was granted temporary exclusive occupancy of a house in Cutchogue, Long Island, which was previously used by the parties during the summer (see id. at 594). The plaintiff later served a notice discontinuing the New York County action and, immediately thereafter, he commenced a new action for a divorce in Suffolk County (see id.). The defendant moved to change the venue of the action to New York County, and this Court affirmed the grant of that motion, explaining that the plaintiff

"did not provide documentary evidence to support his claim regarding the permanent nature of his residence in Cutchogue, and he admitted that he `frequently' resided in the Manhattan apartment during the work week. Moreover, we note that the plaintiff seeks exclusive occupancy of the marital residence on Roosevelt Island in this action. The defendant offered documentary evidence to support her contention that the Cutchogue residence was seasonal in nature and that the defendant continued to reside in Manhattan" (id.).

This Court further stated that "[i]n addition to the plaintiff's failure to establish that Suffolk County was his residence for venue purposes, we agree with the Supreme Court that the plaintiff's tactic in discontinuing the previous action and commencing this action in Suffolk County amounted to forum shopping" (id. at 594-595).

The plaintiff contends that Daley "is neither `Second Department authority' nor does it hold that a seasonal residence is not a basis for venue" because: (1) it has never been cited on the issue of whether a seasonal home is a basis for venue; and (2) it is distinguishable from this case because "the overriding issue in Daley was the husband's bad faith tactics and attempts to forum shop." Notwithstanding the fact that Daley has not been subsequently cited for the proposition that a seasonal residence is not a basis for venue, that case did in fact hold a seasonal residence was not sufficient to establish a party's residency for venue purposes, at least where the party frequently resided in another location during the workweek (see id. at 594). And while this Court in Daley cited the plaintiff's bad faith tactics and attempts to forum shop, this Court indicated that this was an additional, independent ground for granting the defendant's motion to change venue that was separate from its primary conclusion that the plaintiff failed to establish that Suffolk County was his residence. This Court stated that "[i]n addition to the plaintiff's failure to establish that Suffolk County was his residence for venue purposes, we agree with the Supreme Court that the plaintiff's tactic in discontinuing the previous action and commencing this action in Suffolk County amounted to forum shopping" (id. at 594-595 [emphasis added]).

Here, in her affidavit submitted in support of her motion, the defendant averred that prior to 2020, the Southampton house was only used by the parties on weekends in the summertime, with limited exceptions, and that the only time the parties stayed in the Southampton house outside of the summer season was a few days over the Christmas holiday break in 2018. The plaintiff's affirmation submitted in opposition to the motion does not contain anything disputing these averments. The plaintiff stated in that affirmation that "[f]rom 2012 until we separated, we split our time between our residences in New Jersey, Manhattan, and Southampton. We used the Southampton Residence during summers and on other occasions. We have used it extensively in every year since we purchased it." Since it is undisputed that, prior to 2020, the parties only stayed in the Southampton house on weekends in the summer, with limited exceptions, contrary to the plaintiff's contention, neither party resided in Suffolk County at any time prior to 2020 (see id. at 594; see also Doe v Hall, 36 AD3d at 652; Stern v Epstein, 29 AD3d at 779; Katz v Siroty, 62 AD2d at 1011-1012).

Further, contrary to the Supreme Court's conclusion, the time the defendant spent in the Southampton house in 2020 during the COVID-19 pandemic was not enough to make her a resident of Suffolk County. In Morreale v 105 Page Homeowners Assn., Inc. (64 AD3d 689), the relevant testimony revealed that on or about December 31, 2005, the plaintiff moved to her son's apartment in Brooklyn from her house in Staten Island after a "diabetic episode," in March or April 2006, she entered into a contract to purchase a house in New Jersey, and on August 8, 2006, three days after commencing the subject action, she "took over" her new house in New Jersey, which she moved into in November 2006 (id. at 690 [internal quotation marks omitted]). This Court concluded that the appellants demonstrated that the plaintiff was only temporarily staying at the Brooklyn apartment at the time she commenced the action without the bona fide intent to retain the place as a residence for some length of time and with some degree of permanency (see id.). Similarly, in Ray-Ollenu v Kaufman Mgt. Co. (107 AD3d 476), the Appellate Division, First Department, concluded that the evidence in the record did not demonstrate the plaintiff's intent to reside in Bronx County with some degree of permanency because it showed only that the plaintiff stayed with her mother in Bronx County for a brief period of time while she was having marital problems with her husband. Finally, in Sibrizzi v Mount Tom Day School (155 AD2d 337), the First Department concluded that the plaintiffs' occupancy of a relative's home in the Bronx while their Westchester County home was being renovated indicated a lack of intent to remain in the Bronx (see id. at 338).

Here, although the defendant retreated to the Southampton house in March 2020, it is undisputed that the defendant planned only to stay there temporarily to assist her immunocompromised daughter and newborn grandchild when the COVID-19 pandemic was at its zenith in New York City. Under the circumstances of this case, the defendant did not "have the bona fide intent to retain [Suffolk County] as a residence with at least some degree of permanency" (Yaniveth R. v LTD Realty Co., 27 NY3d at 193 [internal quotation marks omitted]; see Morreale v 105 Page Homeowners Assn., Inc., 64 AD3d at 690; see also Ray-Ollenu v Kaufman Mgt. Co., 107 AD3d 476; Sibrizzi v Mount Tom Day School, 155 AD2d at 338).

Accordingly, because Suffolk County was not a proper venue, the Supreme Court should have granted the defendant's motion pursuant to CPLR 510 and 511 to change the venue of the action from Suffolk County to New York County. In light of our determination, we need not reach the issue of whether the defendant established her entitlement to a discretionary change of venue pursuant to CPLR 510(3) on the ground that the convenience of material witnesses and the ends of justice would be promoted by such a change.

Conclusion

For the foregoing reasons, the order is reversed, on the law, the defendant's motion pursuant to CPLR 510 and 511 to change the venue of the action from Suffolk County to New York County is granted, and the Clerk of the Supreme Court, Suffolk County, is directed to deliver to the Clerk of the Supreme Court, New York County, all papers filed in this action and certified copies of all minutes and entries (see id. § 511[d]).

CONNOLLY, IANNACCI and WOOTEN, JJ., concur.

ORDERED that the order is reversed, on the law, with costs, the defendant's motion pursuant to CPLR 510 and 511 to change the venue of the action from Suffolk County to New York County is granted, and the Clerk of the Supreme Court, Suffolk County, is directed to deliver to the Clerk of the Supreme Court, New York County, all papers filed in this action and certified copies of all minutes and entries (see id. § 511[d])."

ERAP AND STAYS IN HOLDOVER - ONE VIEW

ACTIE v. Gregory, 2022 NY Slip Op 50117 - NY: City Court, Civil Court 2022:

"This is a holdover proceeding in an unregulated unit where Petitioner seeks possession of the premises. Respondent filed an ERAP application and Petitioner moves to vacate the automatic ERAP stay imposed by Chapter 417(A)(B3) of Chapter 56 of the laws of 2021. In this matter Petitioner was notified that an ERAP application was submitted by respondent Tawana Gregory, a tenant who has vacated since the filing of the application, and of the stay provided pursuant to the statute that remains in place pending a determination of the ERAP application. Kawan Mack, an undertenant named in the petition, remains in possession of the premises and opposes Petitioner's motion challenging the stay and seeking its vacatur. Mack asserts that "there is nothing in the four corners of the statute" that permits a challenge to the automatic stay that is triggered when an individual files an ERAP application and that petitioner's motion is somehow "inappropriate and thus should be automatically denied."

In support of his motion, Petitioner argues that the automatic ERAP stay is a due process violation akin to the stay discussed in Chrysafis v. Marks, Sup. Ct., U.S., S.Ct., L.Ed.2d, 2021 WL 3560766 (8-12-21), where the United States Supreme Court found that a tenant's ability to self-certify financial hardship and unilaterally stay a proceeding via the filing of a Hardship Declaration ultimately led to the decision that fully enjoined Part A of CEEFPA and prompted the legislature to revise that statute to permit a challenge to a Hardship Declaration. Here, with ERAP, there is no substantive or meaningful distinction in the mechanics or logistics of how ERAP works and how CEFFPA worked prior to the Chrysafis decision.

Pursuant to Chapter 417(A)(B3) of Chapter 56 of the laws of 2021, once a tenant or occupant files an ERAP application, the proceeding is stayed with limited exceptions enumerated by the statute and the case remains stayed until a determination of the application is made. The statute provides no mechanism for a challenge to the stay and there appears to be either indefinite or inchoate timeframes within which an application must or may be processed. If a petitioner is precluded from challenging the stay, the outcome is the same as existed with CEEFPA prior to Chrysafis, supra. An occupant may file an ERAP application, whether eligible or not, an intended beneficiary of the program or not, in good faith or bad, and significantly where the outcome will not result in the preservation of a tenancy. In this scenario the occupant will have unilaterally invoked a stay while precluding the petitioner in the action from engagement or participation in the process to which they are a party. This is the outcome that influenced the decision in Chrysafis, supra, where the Court enjoined the enforcement of Part A of CEEFPA.

CPLR Section 2201 provides "[e]xcept where otherwise proscribed by law, the court in which an action is pending may grant a stay of proceedings in a proper case, upon such terms as are just." In the ordinary course of a proceeding a court has significant discretion as to whether, when and upon what terms this typically interim form of relief may be granted. Traditionally the individual seeking a stay has the burden of demonstrating why it should be granted and while it is commonly and permissibly sought ex parte and may in some instances be automatically triggered, the party opposing the application is entitled to a hearing on its merits. While the COVID-19 pandemic prompted the Legislature to enact the statute and provide this sweeping relief en masse, to deny a party-in-interest an opportunity to challenge a stay if it can demonstrate the futility of the stay in a particular context or that it should otherwise not apply, would contravene most of our legal framework and fundamental ideas of fairness.

In this matter, petitioner argues that even if the ERAP monies become available and respondents are approved, it would be a prejudicial exercise in futility to continue the stay as petitioner seeks to recover possession of the apartment for his use and for that of his immediate family. It is undisputed that the subject premises is in an unregulated residential building with four or fewer units. There is no current lease for the premises. Petitioner has notified respondents that he does not intend to and will not renew the lease. The remaining occupant, the undertenant, does not have succession rights to the premises nor any other independent possessory right or interest and resides in a unit where a termination notice has been served. Section 8(iv) of the Act provides that a landlord or property owner who accepts ERAP payment for rent or arrears "may decline to extend the lease or tenancy if the landlord intends to immediately occupy the unit for the landlord's personal use as a primary residence or the use of an immediate family member as a primary residence." This court finds it would be counterintuitive and prejudicial to preclude Petitioner from challenging an ERAP stay where approval of the application will not result in the preservation or creation of a tenancy.

In summary proceedings courts may examine the question of restoration to possession in the context of a lockout proceeding, even where a party may have been illegally locked out. The courts in the Second Department do not grant or require restoration in proceedings where restoration would be "futile." See, eg. Bernstein v. Rozenbaum, 20 Misc 3d 128(A), AT, 2nd Dept. 2008), Parkash 2125 LLC v. Galan, 61 Misc. 502, 84 NYS3d 724, 2018 NY Slip. Op. 28273 (Civ Ct. Bronx County 2018) and Cordova v. 1217 Bedford Realty LLC, 67 Misc 3d 1206(A) (Civ Ct Kings 2020). Here, under the specific facts of this case, even if respondents' ERAP application is approved and petitioner accepted the funds, the payment of funds through the ERAP program would not reinstate the landlord-tenant relationship. Consequently, allowing the stay to continue is an exercise in futility and prejudicial to petitioner.

Based on the foregoing, the Court grants petitioner's motion to the extent of vacating the ERAP stay. The matter will be restored to the Calendar for a conference on the merits. The clerk will notify the parties of the date and time."

CHILD CUSTODY - DENYING PARENTAL ACCESS NOT ALWAYS PARENTAL ALIENATION

MATTER OF BURKE v. Squires, 2022 NY Slip Op 861 - NY: Appellate Div., 2nd Dept. 2022"

"The parties are the unmarried parents of one child, born in 2011. Prior custody proceedings resulted in a so-ordered stipulation of settlement dated June 27, 2016 (hereinafter the stipulation), awarding the parties joint legal custody, with primary physical custody to the mother and certain parental access to the father. The stipulation provided, inter alia, that, if any party consistently violated the stipulation by denying access to the child, that action would be deemed a change in circumstances and the injured party could petition the Family Court for a change of custody.

In January 2018, the father filed a petition to modify the stipulation so as to award him sole custody of the child, based upon the mother's alleged violations of the stipulation in failing to comply with his parental access. The mother thereafter filed a petition seeking to modify the stipulation so as to award her sole custody of the child and to eliminate the father's weekday parental access. A hearing was held on both petitions. In an order dated October 15, 2020, the Family Court, inter alia, in effect, denied the father's petition. The father appeals.

Modification of a court-approved stipulation setting forth the terms of custody or parental access is permissible only upon a showing that there has been a sufficient change in circumstances such that modification is necessary to ensure the best interests and welfare of the child (see Baraz v Polyakov, 198 AD3d 853, 854; Sukul v Sukul, 196 AD3d 661, 662). "The paramount concern when making such a determination is the best interests of the child under the totality of the circumstances" (Matter of Cabano v Petrella, 169 AD3d 901, 902; see Eschbach v Eschbach, 56 NY2d 167, 171; Baraz v Polyakov, 198 AD3d at 854). "Inasmuch as custody determinations depend to a great extent upon an assessment of the character and credibility of the parties and witnesses, deference is accorded to the hearing court's findings in this regard" (R.K. v R.G., 169 AD3d 892, 894), and "[t]he court's findings will not be disturbed unless they lack a sound and substantial basis in the record" (id. at 894; see Eschbach v Eschbach, 56 NY2d at 173-174; Sukul v Sukul, 196 AD3d at 662).

Here, the mother's admitted violations of the stipulation of settlement in failing to comply with the provisions concerning the father's parental access established a sufficient change in circumstances to permit the father to seek sole custody under the terms of the stipulation (see Matter of Epstein v Soler-Epstein, 188 AD3d 1052, 1053). However, the father failed to establish that such a change of custody would be in the best interests of the child.

"Parental alienation of a child from the other parent, including willful interference with his or her [parental access] rights, is `an act so inconsistent with the best interests of the children as to, per se, raise a strong probability that the [offending party] is unfit to act as custodial parent'" (E.V. v R.V., 165 AD3d 736, 737, quoting Entwistle v Entwistle, 61 AD2d 380, 384-385; see Pandis v Lapas, 176 AD3d 837, 839). Here, however, while the mother failed to comply with the father's parental access on multiple occasions, many of the other violations alleged by the father appear to have been caused by the parties' confusion over the parental access schedule, which was remedied when the parties agreed to a specific schedule of alternate weekends during the proceedings. The child wished to continue her parental access time with the father, undermining the father's claim of alienation. Moreover, the father's own actions, including his failure to exercise four weeks of extra parental access in the summer of 2019, which he was awarded in settlement of his separate violation petition, contributed to the father's failure to have more parental access with the child and any resulting alienation.

Furthermore, the child had always lived primarily with the mother, and wished to continue to do so, and the father had been uninvolved with the child's medical appointments and schooling. While a child's expressed preference is not determinative, it is some indication of what is in the child's best interests (see Matter of Masiello v Milano, 180 AD3d 683, 685). Maintenance of status quo, while also not decisive, is a positive value entitled to great weight (see Matter of Newton v McFarlane, 174 AD3d 67, 82). Finally, although the parties exhibited difficulty in effectively communicating concerning the child, the Family Court's determination that the parties' relationship was not so acrimonious so as to warrant a change of custody (cf. Paruchuri v Akil, 156 AD3d 712, 713), and that a change of custody would further inflame the relationship between the parents and not be in the child's best interests, was supported by a sound and substantial basis in the record.

The contention of the attorney for the child that the matter should be remitted to the Family Court for a reopened hearing on the mother's petition for sole custody of the child, and to determine whether the father should be awarded any parental access at all in light of new developments, is not properly before this Court, as neither the mother nor the child cross-appealed from that portion of the order which denied the mother's petition."