Scott E. Mollen
Scott E. Mollen ()

Commercial Landlord-Tenant—Law Firm Tenant’s Claims for Partial and Constructive Eviction Rejected, Based on Lease Provision Which Permitted Landlord to Make Repairs Without Any Rent Abatement

A receiver of an office building moved for summary judgment against a respondent law-firm tenant, for the sum of $415,932.30 and to dismiss the tenant’s counterclaims. The tenant asserted affirmative defenses, including actual partial eviction, constructive eviction, that the tenant had been barred and excluded from the parking lot, failure of consideration, that the receiver and its predecessors failed to take reasonable action to prevent damage to the parking garage, which resulted in an improper and illegal actual or partial eviction, that the obligation to pay rent ended when a town “ordered the closing of the…parking lot,” alternatively, that the tenant is “entitled to a rent abatement,” the “statute of frauds, equitable estoppel and unclean hands.”

The garage had allegedly been closed by the Town in March, 2014. The receiver had been appointed on Sept. 17, 2012. The tenant alleged that the receiver waited 15 months before assuming his duties on Dec. 23, 2013. The tenant argued that the receiver “could have collected almost $10,000,000 in rent which could have been used to repair…the…garage” and that if such repairs had been done, the town would not have closed the garage. The tenant, a law firm, asserted that its “loss of parking ha[d] caused it to reduce the size of its law firm….”

The receiver argued that the tenant’s claims were barred by the lease, the doctrines of waiver and estoppel, that the tenant had the use of the garage through a valet system, the receiver had not wrongfully ousted the tenant, the garage had been closed pursuant to “governmental orders” and the tenant currently occupies the premises.

The receiver explained that the 15-month delay in qualifying had been attributable to a request by the lender and landlord, because those parties had been trying to negotiate a settlement. The receiver asserted that he had immediately qualified as a receiver once he was notified that the settlement negotiations had failed. The receiver also argued that the parking spaces were not part of the “demised premises.” However, the court held that the “parking was an integral part of the lease between the owner…and [tenant.]“

The lease provides that the tenant was “not entitled to any rent abatement; nor can the landlord be held liable for any inconvenience, annoyance or injury to tenant’s business resulting from repairs.” The court held that since the lease authorized “repairs without abatement of rent, there can be no claim for actual partial eviction nor for constructive eviction.” The court noted that the lease terms are “broad and…favor the landlord” and do “result in some harsh consequences to the tenant.” However, the court “cannot re-write the parties’ agreement.”

Since the tenant had remained in possession and continued to use available on-site parking, the court held that there had not been a constructive eviction. In order to prevail on a claim for constructive eviction the “tenant must vacate the premises….” The court further stated that the tenant cannot avoid its rental obligation by claiming that “there was a diminution of the beneficial enjoyment of the property, i.e., less parking, when [tenant] remains in possession and uses the parking provided.” Thus, even if the usage of the parking was “greatly diminished,” the constructive eviction claim had to be rejected. The tenant therefore remained liable for the rent owed.

Additionally, the court held that the tenant’s counterclaim was “inextricably intertwined” with the rent claim and therefore, were permitted. The counterclaim was “allowed as a set off against the receiver without leave of court, as a reduction to the rent owed; no claim is being made that the receiver is individually liable.” The court opined that there was a question of fact as to whether the receiver had “breached the lease concerning the repair of the…garage….”

The court further stated that although the receiver had been “ordered to close the…garage for repairs, the totality of the circumstances presented by [tenant] raise questions of fact as to whether [receiver] acted promptly in repairing the…garage and the extent of the repairs.” Although the tenant had not vacated the premises and had continued to use the services provided, the court held that the tenant was “entitled to offset the damages….” Thus, the court held that the town’s order closing the garage, was not a defense to the tenant’s claim for damages.

Thus, the court explained that the tenant cannot establish a constructive eviction and had continued use of the limited parking facilities, the tenant could still “recover the difference between the value of the leased premises as they were intended and the value as a result of the breach.” The court noted that all consequential damages were excluded by the lease, which barred the tenant from recovering “any losses except for general (direct) damages by expert testimony.” The court set the matter down for a settlement conference. If the matter is not settled, the parties will proceed to trial as to an assessment of damages for the rent due to the receiver.

Garry v. Ryan & Henderson, P.C., LT-001617-15, NYLJ 1202762386397, at *1 (Dist., NA, Decided June 29, 2016), Fairgrieve, J.


Condemnation—Three Year Statute of Limitations Embodied in EDPL 401(A)(3) Did Not Run From Date of Appellate Division Order Confirming EDPL Art. 2 Condemnation Determination—It Ran From Date of Court of Appeals’ Decision Denying and Dismissing Property Owners’ Motions for Leave to Appeal and Purported Appeal as of Right

This decision involved the issue of “whether the city timely commenced this proceeding” pursuant to Eminent Domain Procedure Law (EDPL), Article 4. The Appellate Division, First Department (court) affirmed a trial court decision that held that the proceeding had been commenced “within the applicable time limitation set forth in section 401(A)(3), which provides that the condemnor must commence such proceedings within three years after the latest of, inter alia, ‘entry of the final order or judgment on judicial review,’….”

In June 2009, the city “published a determination and findings authorizing the takings of 10 parcels (…) in connection with” a municipal development project (project) and Urban Renewal Plan. The public purpose and benefit of the project was “to eliminate blight” and to redevelop a neighborhood. In July 2009, certain parties “commenced an original proceeding in this court, pursuant to [EDPL] section 207(A)” and “to annul the determination.” On Oct. 12, 2010, the court had denied the petition, confirmed the determination and dismissed the EDPL §207 proceeding.

On Nov. 12, 2010, the petitioners filed “a notice of appeal to the Court of Appeals as of right pursuant to CPLR 5601(b), on the ground that a substantial constitutional question had been raised.” On Nov. 30, 2010, the Court of Appeals advised the parties that it would consider “its subject matter jurisdiction with respect to whether a substantial constitutional question is directly involved to support an appeal as of right.” The Court of Appeals asked the parties to submit letter briefs on that issue and stated that “pending its inquiry,” the time for filing briefs on the merits would “be held in abeyance.”

The petitioners’ brief addressed the issues of whether the takings conformed with “federal and state constitutions and whether a public use, benefit or purpose will be served by the acquisition.” The petitioners argued that the taking would only be constitutional if it occurred “pursuant to a carefully formulated and integrated comprehensive development plan to which a developer is contractually bound.” The petitioners contended that the Court of Appeals had “never squarely addressed the issue.” The petitioners also asserted that the Appellate Division failed to address whether the record contained “a rational basis for the determination of blight….” The city countered that the appeal did not involve a substantial constitutional question and that the petitioners were unable to “show that the…takings were ‘not rationally related to a…public purpose’ or that the determination was ‘baseless, corrupt or palpably without reasonable foundation.’” The city emphasized that “the finding of blight was ‘both rational and amply supported by the evidence’….”

On Feb. 17, 2011, the Court of Appeals dismissed the appeal, “sua sponte, upon the ground that no substantial constitutional question is directly involved.” On Feb. 12, 2014, the city commenced the subject proceeding pursuant to EDPL Article 4 in the Supreme Court, “seeking to acquire the subject properties via eminent domain.”

The respondents asserted that the city’s right to proceed under the EDPL accrued on Oct. 12, 2010, the date of the Appellate Division’s denial of the EDPL 207 petition. The respondents contended that “the petition, filed in February 2014, was untimely under the applicable three-year statute of limitations [SOL], with the underlying determination being deemed abandoned.” The city argued that its petition was timely since “it was brought within three years of the date of the Court of Appeals’ decision dismissing the appeal as of right….” The city had moved to dismiss the respondents’ affirmative defenses and counterclaims.

The trial court granted the city’s motion, to the extent of striking most of respondents’ affirmative defenses and counterclaims, and denied the appellants’ motions to dismiss the petition. On the salient issue of “‘whether the accrual date of EDPL 401(A)(3) runs from the Appellate Division order on October 12, 2010,’ or was ‘extended by the Court of Appeals’ dismissal of the appeal on February 17, 2011,’” the trial court held that it was bound by a Fourth Department decision in J.C. Penney v. Carousel Ctr. Co., (32 AD3d 1332 [4th Dept 2006], lv denied 7 NY3d 714 [2006]. J.C. Penney held that the three-year SOL embodied in EDPL 401(A)(3) runs from the date of “the Court of Appeals’ decisions denying and dismissing the property owners’ motions for leave to appeal and purported appeal as of right….” Thus, the trial court held that the petition had been timely filed on Feb. 12, 2014, “‘within the three year [SOL] set forth in EDPL [] 401(A)(3).’” The court agreed and affirmed.

The court explained:

Section 401(A) provides that the condemnor may commence such proceedings “up to three years” after the latest of “(1) publication of its determination and findings pursuant to [EDPL 204], or (2) the date of the order or completion of [an exemption procedure under EDPL 206], or (3) entry of the final order or judgment on judicial review pursuant to [EDPL 207]” (EDPL 401[A][1]-[3]). Section 401(B) provides that if the condemnor does not commence EDPL article 4 proceedings within the specified time, “the project shall be deemed abandoned, and thereafter, before commencing [EDPL article 4 proceedings,] the condemnor must again comply with the provisions of article two” (EDPL 401[B]).

The court reasoned that “[t]he plain and common-sense interpretation of the statute is that ‘the final order or judgment on judicial review’ is the final order or judgment disposing of any EDPL 207 challenge and terminating judicial review.” The court’s Oct. 12, 2010 decision did not finally end judicial review, since the “challengers filed a notice of appeal which entailed further review by the Court of Appeals. The decision of the Court of Appeals could not be known until such time as it issued its order dismissing the appeal.”

The court asserted that “[n]othing in the statute supports an interpretation that ‘the final order or judgment on judicial review’ entails a determination on the merits.” The court reasoned that “[i]f the Legislature so intended, it could have appended the language ‘on the merits.’” The court also opined that Section 207(B)’s provision that the Appellate Division order “shall be final subject to review by the court of appeals’ would otherwise be superfluous, contrary to familiar precepts of statutory construction.”

The court stated that “while an appellate division order denying a Section 207 challenge is a final order under Section 207(B) and CPLR 5611, subject to review by the Court of Appeals, it is not ‘the final order or judgment on judicial review’ unless it in fact is the final order that disposes of the section 207 challenge.”

The court further noted that to interpret the subject language as meaning “the final order or judgment disposing of a section 207 challenge is…the only practical and common-sense means of applying the statute, allowing for a consistent point from which to determine the running of the [SOL].” Under the appellants’ interpretation, “the parties would not know whether the three-year [SOL] had begun running until after the Court of Appeals acted on a motion for leave.” A respondent had admitted that “the pendency of an appeal or leave application to the Court of Appeals will cast ‘an inchoate shadow’ over the proceedings, until the court ‘dissipate[s]‘ the shadow by deciding whether to take the appeal.”

The court rejected the appellants’ argument that “the Court of Appeals does not engage in ‘judicial review’ when it determines that it will not hear an appeal,” because such position “ignores the extensive review which such determinations in fact entail.” The Court of Appeals “retains extensive control over the case, including the power to issue stays as appropriate (…), up until the moment it issues its decision.” Moreover, “[t]he determination to deny leave entails a thorough review of the issues presented in the case.” The Court of Appeals’ rules, which provide that “leaveworthy cases are ones in which ‘the issues are novel or of public importance, present a conflict with prior decisions of this court, or involve a conflict among the departments of the Appellate Division’….” Thus, “far from being pro forma, the Court of Appeals’ determination of whether a case merits granting leave—i.e., is ‘leaveworthy’—entails a careful analysis of the issues presented by the case.” Moreover, “whether a constitutional issue is ‘substantial,’” depends upon “an analysis very similar to the leaveworthiness analysis performed on motions for leave to appeal.”

Additionally, the Court of Appeals had undertaken a “‘substantiality’ analysis in dismissing the appeal as of right,” with one Judge taking the uncommon step of writing a concurrence explaining that the constitutional issues raised by the…Petitioners (…) were insubstantial because they were governed by well-settled precedent….” Accordingly, the court affirmed the denial of the appellants’ motion to dismiss the petition on the ground that it was untimely.

Matter of City of New York v. 2305-07 Third Ave., LLC, 450370/14, NYLJ 1202762179909, at *1 (App. Div., 1st, Decided July 5, 2016) Before: Mazzarelli, J.P., Andrias, Richter, Manzanet-Daniels, Kahn, JJ. Opinion by Manzanet-Daniels, J. All concur.

Commercial Landlord-Tenant—Law Firm Tenant’s Claims for Partial and Constructive Eviction Rejected, Based on Lease Provision Which Permitted Landlord to Make Repairs Without Any Rent Abatement

A receiver of an office building moved for summary judgment against a respondent law-firm tenant, for the sum of $415,932.30 and to dismiss the tenant’s counterclaims. The tenant asserted affirmative defenses, including actual partial eviction, constructive eviction, that the tenant had been barred and excluded from the parking lot, failure of consideration, that the receiver and its predecessors failed to take reasonable action to prevent damage to the parking garage, which resulted in an improper and illegal actual or partial eviction, that the obligation to pay rent ended when a town “ordered the closing of the…parking lot,” alternatively, that the tenant is “entitled to a rent abatement,” the “statute of frauds, equitable estoppel and unclean hands.”

The garage had allegedly been closed by the Town in March, 2014. The receiver had been appointed on Sept. 17, 2012. The tenant alleged that the receiver waited 15 months before assuming his duties on Dec. 23, 2013. The tenant argued that the receiver “could have collected almost $10,000,000 in rent which could have been used to repair…the…garage” and that if such repairs had been done, the town would not have closed the garage. The tenant, a law firm, asserted that its “loss of parking ha[d] caused it to reduce the size of its law firm….”

The receiver argued that the tenant’s claims were barred by the lease, the doctrines of waiver and estoppel, that the tenant had the use of the garage through a valet system, the receiver had not wrongfully ousted the tenant, the garage had been closed pursuant to “governmental orders” and the tenant currently occupies the premises.

The receiver explained that the 15-month delay in qualifying had been attributable to a request by the lender and landlord, because those parties had been trying to negotiate a settlement. The receiver asserted that he had immediately qualified as a receiver once he was notified that the settlement negotiations had failed. The receiver also argued that the parking spaces were not part of the “demised premises.” However, the court held that the “parking was an integral part of the lease between the owner…and [tenant.]“

The lease provides that the tenant was “not entitled to any rent abatement; nor can the landlord be held liable for any inconvenience, annoyance or injury to tenant’s business resulting from repairs.” The court held that since the lease authorized “repairs without abatement of rent, there can be no claim for actual partial eviction nor for constructive eviction.” The court noted that the lease terms are “broad and…favor the landlord” and do “result in some harsh consequences to the tenant.” However, the court “cannot re-write the parties’ agreement.”

Since the tenant had remained in possession and continued to use available on-site parking, the court held that there had not been a constructive eviction. In order to prevail on a claim for constructive eviction the “tenant must vacate the premises….” The court further stated that the tenant cannot avoid its rental obligation by claiming that “there was a diminution of the beneficial enjoyment of the property, i.e., less parking, when [tenant] remains in possession and uses the parking provided.” Thus, even if the usage of the parking was “greatly diminished,” the constructive eviction claim had to be rejected. The tenant therefore remained liable for the rent owed.

Additionally, the court held that the tenant’s counterclaim was “inextricably intertwined” with the rent claim and therefore, were permitted. The counterclaim was “allowed as a set off against the receiver without leave of court, as a reduction to the rent owed; no claim is being made that the receiver is individually liable.” The court opined that there was a question of fact as to whether the receiver had “breached the lease concerning the repair of the…garage….”

The court further stated that although the receiver had been “ordered to close the…garage for repairs, the totality of the circumstances presented by [tenant] raise questions of fact as to whether [receiver] acted promptly in repairing the…garage and the extent of the repairs.” Although the tenant had not vacated the premises and had continued to use the services provided, the court held that the tenant was “entitled to offset the damages….” Thus, the court held that the town’s order closing the garage, was not a defense to the tenant’s claim for damages.

Thus, the court explained that the tenant cannot establish a constructive eviction and had continued use of the limited parking facilities, the tenant could still “recover the difference between the value of the leased premises as they were intended and the value as a result of the breach.” The court noted that all consequential damages were excluded by the lease, which barred the tenant from recovering “any losses except for general (direct) damages by expert testimony.” The court set the matter down for a settlement conference. If the matter is not settled, the parties will proceed to trial as to an assessment of damages for the rent due to the receiver.

Garry v. Ryan & Henderson, P.C., LT-001617-15, NYLJ 1202762386397, at *1 (Dist., NA, Decided June 29, 2016), Fairgrieve, J.


Condemnation—Three Year Statute of Limitations Embodied in EDPL 401(A)(3) Did Not Run From Date of Appellate Division Order Confirming EDPL Art. 2 Condemnation Determination—It Ran From Date of Court of Appeals’ Decision Denying and Dismissing Property Owners’ Motions for Leave to Appeal and Purported Appeal as of Right

This decision involved the issue of “whether the city timely commenced this proceeding” pursuant to Eminent Domain Procedure Law (EDPL), Article 4. The Appellate Division, First Department (court) affirmed a trial court decision that held that the proceeding had been commenced “within the applicable time limitation set forth in section 401(A)(3), which provides that the condemnor must commence such proceedings within three years after the latest of, inter alia, ‘entry of the final order or judgment on judicial review,’….”

In June 2009, the city “published a determination and findings authorizing the takings of 10 parcels (…) in connection with” a municipal development project (project) and Urban Renewal Plan. The public purpose and benefit of the project was “to eliminate blight” and to redevelop a neighborhood. In July 2009, certain parties “commenced an original proceeding in this court, pursuant to [EDPL] section 207(A)” and “to annul the determination.” On Oct. 12, 2010, the court had denied the petition, confirmed the determination and dismissed the EDPL §207 proceeding.

On Nov. 12, 2010, the petitioners filed “a notice of appeal to the Court of Appeals as of right pursuant to CPLR 5601(b) , on the ground that a substantial constitutional question had been raised.” On Nov. 30, 2010, the Court of Appeals advised the parties that it would consider “its subject matter jurisdiction with respect to whether a substantial constitutional question is directly involved to support an appeal as of right.” The Court of Appeals asked the parties to submit letter briefs on that issue and stated that “pending its inquiry,” the time for filing briefs on the merits would “be held in abeyance.”

The petitioners’ brief addressed the issues of whether the takings conformed with “federal and state constitutions and whether a public use, benefit or purpose will be served by the acquisition.” The petitioners argued that the taking would only be constitutional if it occurred “pursuant to a carefully formulated and integrated comprehensive development plan to which a developer is contractually bound.” The petitioners contended that the Court of Appeals had “never squarely addressed the issue.” The petitioners also asserted that the Appellate Division failed to address whether the record contained “a rational basis for the determination of blight….” The city countered that the appeal did not involve a substantial constitutional question and that the petitioners were unable to “show that the…takings were ‘not rationally related to a…public purpose’ or that the determination was ‘baseless, corrupt or palpably without reasonable foundation.’” The city emphasized that “the finding of blight was ‘both rational and amply supported by the evidence’….”

On Feb. 17, 2011, the Court of Appeals dismissed the appeal, “sua sponte, upon the ground that no substantial constitutional question is directly involved.” On Feb. 12, 2014, the city commenced the subject proceeding pursuant to EDPL Article 4 in the Supreme Court, “seeking to acquire the subject properties via eminent domain.”

The respondents asserted that the city’s right to proceed under the EDPL accrued on Oct. 12, 2010, the date of the Appellate Division’s denial of the EDPL 207 petition. The respondents contended that “the petition, filed in February 2014, was untimely under the applicable three-year statute of limitations [SOL], with the underlying determination being deemed abandoned.” The city argued that its petition was timely since “it was brought within three years of the date of the Court of Appeals’ decision dismissing the appeal as of right….” The city had moved to dismiss the respondents’ affirmative defenses and counterclaims.

The trial court granted the city’s motion, to the extent of striking most of respondents’ affirmative defenses and counterclaims, and denied the appellants’ motions to dismiss the petition. On the salient issue of “‘whether the accrual date of EDPL 401(A)(3) runs from the Appellate Division order on October 12, 2010,’ or was ‘extended by the Court of Appeals’ dismissal of the appeal on February 17, 2011,’” the trial court held that it was bound by a Fourth Department decision in J.C. Penney v. Carousel Ctr. Co., (32 AD3d 1332 [4th Dept 2006], lv denied 7 NY3d 714 [2006]. J.C. Penney held that the three-year SOL embodied in EDPL 401(A)(3) runs from the date of “the Court of Appeals’ decisions denying and dismissing the property owners’ motions for leave to appeal and purported appeal as of right….” Thus, the trial court held that the petition had been timely filed on Feb. 12, 2014, “‘within the three year [SOL] set forth in EDPL [] 401(A)(3).’” The court agreed and affirmed.

The court explained:

Section 401(A) provides that the condemnor may commence such proceedings “up to three years” after the latest of “(1) publication of its determination and findings pursuant to [EDPL 204], or (2) the date of the order or completion of [an exemption procedure under EDPL 206], or (3) entry of the final order or judgment on judicial review pursuant to [EDPL 207]” (EDPL 401[A][1]-[3]). Section 401(B) provides that if the condemnor does not commence EDPL article 4 proceedings within the specified time, “the project shall be deemed abandoned, and thereafter, before commencing [EDPL article 4 proceedings,] the condemnor must again comply with the provisions of article two” (EDPL 401[B]).

The court reasoned that “[t]he plain and common-sense interpretation of the statute is that ‘the final order or judgment on judicial review’ is the final order or judgment disposing of any EDPL 207 challenge and terminating judicial review.” The court’s Oct. 12, 2010 decision did not finally end judicial review, since the “challengers filed a notice of appeal which entailed further review by the Court of Appeals. The decision of the Court of Appeals could not be known until such time as it issued its order dismissing the appeal.”

The court asserted that “[n]othing in the statute supports an interpretation that ‘the final order or judgment on judicial review’ entails a determination on the merits.” The court reasoned that “[i]f the Legislature so intended, it could have appended the language ‘on the merits.’” The court also opined that Section 207(B)’s provision that the Appellate Division order “shall be final subject to review by the court of appeals’ would otherwise be superfluous, contrary to familiar precepts of statutory construction.”

The court stated that “while an appellate division order denying a Section 207 challenge is a final order under Section 207(B) and CPLR 5611 , subject to review by the Court of Appeals, it is not ‘the final order or judgment on judicial review’ unless it in fact is the final order that disposes of the section 207 challenge.”

The court further noted that to interpret the subject language as meaning “the final order or judgment disposing of a section 207 challenge is…the only practical and common-sense means of applying the statute, allowing for a consistent point from which to determine the running of the [SOL].” Under the appellants’ interpretation, “the parties would not know whether the three-year [SOL] had begun running until after the Court of Appeals acted on a motion for leave.” A respondent had admitted that “the pendency of an appeal or leave application to the Court of Appeals will cast ‘an inchoate shadow’ over the proceedings, until the court ‘dissipate[s]‘ the shadow by deciding whether to take the appeal.”

The court rejected the appellants’ argument that “the Court of Appeals does not engage in ‘judicial review’ when it determines that it will not hear an appeal,” because such position “ignores the extensive review which such determinations in fact entail.” The Court of Appeals “retains extensive control over the case, including the power to issue stays as appropriate (…), up until the moment it issues its decision.” Moreover, “[t]he determination to deny leave entails a thorough review of the issues presented in the case.” The Court of Appeals’ rules, which provide that “leaveworthy cases are ones in which ‘the issues are novel or of public importance, present a conflict with prior decisions of this court, or involve a conflict among the departments of the Appellate Division’….” Thus, “far from being pro forma, the Court of Appeals’ determination of whether a case merits granting leave—i.e., is ‘leaveworthy’—entails a careful analysis of the issues presented by the case.” Moreover, “whether a constitutional issue is ‘substantial,’” depends upon “an analysis very similar to the leaveworthiness analysis performed on motions for leave to appeal.”

Additionally, the Court of Appeals had undertaken a “‘substantiality’ analysis in dismissing the appeal as of right,” with one Judge taking the uncommon step of writing a concurrence explaining that the constitutional issues raised by the…Petitioners (…) were insubstantial because they were governed by well-settled precedent….” Accordingly, the court affirmed the denial of the appellants’ motion to dismiss the petition on the ground that it was untimely.

Matter of City of New York v. 2305-07 Third Ave., LLC, 450370/14, NYLJ 1202762179909, at *1 (App. Div., 1st, Decided July 5, 2016) Before: Mazzarelli, J.P., Andrias, Richter, Manzanet-Daniels, Kahn, JJ. Opinion by Manzanet-Daniels, J. All concur.