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174 Mott Group, LLC v Lucky 168 Rest. Corp. Published Decision Jan 2, 3 and 7, 2008

By Adam Leitman Bailey


OCIVIL COURT OF THE CITY OF NEW YORK
COUNTY OF NEW YORK : PART 52BU/68

L&T Index No. 085184/07

Trial: Jan. 2, 3, and 7, 2008

174 MOTT GROUP, LLC,

Petitioner,

-against-

LUCKY 168 REST. CORP.,
370 Broome Street
New York, NY 10012
A Restaurant known as “Jazzi Wok” Running 24 Feet along Broome Street and 30 feet along Mott Street and the basement thereat

Respondent

BARBARA JAFFE, J.:

In this commercial nonpayment summary proceeding, petitioner seeks a final judgment awarding it possession of the above-listed premises and a judgment for rent and additional rent arrears, attorney fees, costs, and disbursements.

I. PROCEDURAL BACKGROUND
In a three-day rent demand dated August 17,2007, petitioner notified respondent that it owed $54,225.35 in rent and additional rent for the subject premises for the period from June 2006 through August 2007, including real estate taxes and late fees. On or about September 5, 2007, petitioner commenced the instant proceeding.

In its answer, respondent denied the allegations set forth in the petition, interposed five affirmative defenses (inaccurate description of the subject premises contained in the pleadings, improper service of the predicate demand, no additional rent owed as to the basement premises, petitioner’s failure to present it with bills for the real estate taxes, and constructive eviction), and a counterclaim for constructive eviction, seeking $250,000.

II. TRIAL EVIDENCE
Testifying for petitioner were two of its principals, Jenny Haim and Hesky Haim. Testifying for respondent was Ken Chin, respondent’s owner’s husband and general manager.

A. Petitioner’s direct case
On June 22, 2005 and June 30, 2005, Funky Broome, Inc. assigned to respondent, with the consent of petitioner’s predecessor in interest, leases it held to the store and basement premises at 176 Mott Street, New York, New York, respectively dated December 16, 1999 and June 8, 2000, each to expire November 30,2009. (Pet. Exhs. 2, 3). Respondent took the premises, pursuant to paragraphs 46 and 45 of the respective riders to the leases, “as is” and without any representation or warranty with respect to the fitness of the premises for their intended uses or purposes. (Jd.).

Pursuant to paragraph 41 of the rider to the store lease, the monthly rent for the store was $6,083.26 from December 1,2005 to November 30,2006, $6,326.59 from December 1, 2006 to November 30,2007, and $6,579.65 from December 1, 2007 to November 30,2008. (Pet. Exh. 2). Pursuant to paragraph 41 of the rider to the basement lease, the monthly rent for the basement was $2,552.56 from June 1, 2005 to May 31, 2006, $2,680.19 from June 1, 2006 to May 31, 2007, and $2,814.20 from June 1,2007 to May 31,2008. (Pet. Exh. 3). In paragraph 44 of the rider to the store lease, respondent agreed to pay, annually and in advance, 10 percent of the annual increase in real estate taxes above the 1999/2000 base year ($60,826.16), as assessed for the entire premises. (Pet. Exh. 2).

Pursuant to paragraphs 27 of the store lease and basement lease, bills, statements, notices or communications from petitioner to respondent “shall be deemed sufficiently given or rendered if, in writing, delivered to [respondent] personally or sent by registered or certified mail addressed to [respondent] …” In paragraphs 42 of the riders to the store lease and basement lease, all sums and charges required to be paid in addition to the base rent are deemed additional rent and must be paid “within ten (l0) days after presentation of a bill therefore [sic] by [petitioner] to [respondent].” Additionally, respondent agreed to include with each late payment a $100 late fee. (Pet. Exhs. 2, 3).

Respondent also agreed, in paragraphs 56 and 54, respectively, of the riders to the store lease and basement lease, that it would make, at its own cost and expense, all repairs within the premises to the plumbing and drainage system, and perform all work necessary for their proper maintenance as determined by petitioner. (Pet. Exhs. 2, 3). Further, in paragraphs 67 and 64, respectively, of the two riders, petitioner agreed to repair structural defects only, which the parties agreed would not include the sewer pipe from the main premises to the leased premises if any damages to it needing repair are caused by respondent’s use only. (Jd.). Thus, although respondent is assigned the duty of repairing the plumbing and draining system within its premises, it is not responsible for repairs to the sewer pipe leading into its premises from the main premises unless it is the sole cause of the damage necessitating such repairs.

In paragraphs 66 and 63, respectively, of the two riders, respondent agreed that “[i]n the event the landlord successfully brings an action or special proceeding … [it] will pay to the landlord, as a consequence of such action or proceeding, the reasonable attorney’s fees incurred by the landlord, but in no event less than $600.00 for each action or special proceeding.” (Pet. Exh. 2)

By quitclaim deed dated November 27, 2006, petitioner purchased the demised premises. (Pet. Exh. 1). However, by letter dated February 14, 2006, which respondent acknowledges receiving, petitioner notified respondent that it was the new owner of the building as of February 13, 2006, and that all rent due was assigned to it as of February 1, 2006. (Pet. Exh. 7).

Jenny Haim testified that she last received rent from respondent for the basement in April 2007 and for the store in March 2007, that respondent stopped paying rent increases for the basement in June 2006 and real estate tax increases since February 2006. In support thereof, petitioner offered in evidence a statement of past due rents previously prepared by Haim’s assistant and then corrected and updated for trial by Haim on December 31,2007. (Pet. Exh. 4).

Although it is well-settled that records which are prepared solely for the purpose of litigation are inadmissible (People v Foster, 27 NY2d 47 [1970]; Natl States Elec. Corp. v LFO Constr. Corp., 203 AD2d 49, 51 [1 st Dept 1994 D, Haim’ s testimony that the statement was initially prepared in the ordinary course of business by her assistant sufficed to establish the statement’s essential nature as petitioner’s office record notwithstanding Haim’s correction of it in anticipation of trial. In any event, I credit Haim’s testimony as to the rent arrears.
Admitted in evidence as business records were five invoices for real estate tax increases dated March 29, 2006, July 5, 2006, two for November 5,2006, and December 31, 2007. (Pet. Exh. 5). While Haim does not recall mailing respondent the March 29 invoice for $2,606, she recalls preparing it as it was the first one she prepared, and it was her practice to send the invoices the day she prepared them. She also recalls preparing and sending by regular mail the July 5 and November 5 invoices for, respectively, $3,085.10, $3,085.10, and $4,305.25. She also Haim, although she did not personally observe it. According to Haim, the December 31 invoice for $4,305.25 was prepared and sent to respondent by her assistant, although Haim checked it for accuracy. The November 5 and December 31 invoices, each for $4,305.25, are not included in the rent demand, although according to her recollection, the November 5 invoice was also billed sometime earlier.

Although Haim reported that respondent incurred 28 late fees for failing to pay rent or by paying it late, the statement reflects 26 instances of late or no payments, not including respondent’s failure to pay five invoices for tax increases. She also testified that petitioner incurred more than $20,000 in legal fees as a result of this case. Haim thus calculated that as ofJanuary 2,2008, respondent owes $110,386.70 consisting of rent arrears in the amount of$90,226, $2,800 in late fees, and $17,386.70 in real estate tax increases from 2006 through the first half of 2008, plus the reasonable value of legal fees to be determined at a hearing.

B. Respondent’s motion to dismiss
At the close of petitioner’s direct case, respondent moved for an order dismissing the proceeding, arguing that the predicate notice is inaccurate and thus defective, and that absent admissible evidence that the invoices for the real estate tax increases were mailed by certified or registered mail or personally delivered, it may not be held liable for them. It also maintains that petitioner lacks standing to seek sums due before November 27,2006, the date on which petitioner executed the deed for the premises.

In opposition, petitioner argues that the rent demand need not be accurate, that paragraph and that its present status as owner of the premises is sufficient to establish its standing to seek all sums due.

Respondent’s motion is hereby granted only to the extent that the petition is dismissed in so far as petitioner seeks reimbursement for the real estate tax increases. Paragraph 44 of the store rider does not supersede paragraph 27 of the store lease. Rather, it complements it as the latter provision governs the manner in which bills must be sent while the former governs when respondent is to pay such bills. Absent admissible evidence that the invoices were sent by certified or registered mail or personally delivered, the condition precedent to payment, namely, the presentation of the invoices in the manner set forth in paragraph 27, liability does not attach.

I thus find that petitioner has established, prima facie, its entitlement to a judgment of possession and, according to my calculations based on accurate figures, a money judgment in the amount of $92,459.22 representing: seven months of unpaid rent increases for the basement ($893.41 [$2,680.19 minus $2,552.56, times seven]), store rent arrears from April 2007 through January 2008 ($63,772.02), basement rent arrears from May 2007 through January 2008 ($25,193.79), and 26 months of late fees ($2,600).

C. Respondent’s direct case
According to Chin, respondent commenced operation at the premises of its Cantonese restaurant on June 30,2005, and in the latter part of2005, after renovating the premises, respondent began using the basement for private parties and for storage. Then, in October 2005, it began experiencing leaks and flooding in the basement storage area. After excavating the ceiling and discovering an uncapped pipe, Chin capped it, only to find that water in the kitchen in January 2006. The toilet also overflowed several times in 2005. Chin testified that he hired a plumber who snaked the floor and toilet drains. Chin admitted that the toilets were respondent’s responsibility.

In February 2006, respondent notified petitioner of the kitchen drain backup which lessened over the next few months, only to then increase in July 2006 at which time petitioner agreed to clear out the main trap. As a result of these conditions, in August 2006, respondent
ceased using the basement for private parties as the water did not drain properly and the air-conditioning unit, ice machine, and wet bar were unusable. From November 2006 to December 2006, notwithstanding these problems, respondent conducted further unspecified renovations.

Based on Chin’s determination that a decrease in water usage would alleviate the problem, in December 2006, respondent converted its menu from Cantonese cuisine, which Chin believes requires great amounts of water for cleaning fresh seafood and vegetables, to Thai cuisine, which according to Chin incorporates smaller amounts of fresh seafood thus requiring less water usage. Chin estimated that as a result of the menu change, respondent lost approximately $20,000 a month.

Further, as a result of the problem with the toilet, Chin testified that customers complained about slow service which resulted from the diversion of wait staff to clean the toilet, and that several of his employees quit as they were unwilling to clean the toilet. Chin also testified that in 2007, he noticed a change in the use of the building above the ground floor, and that the basement sump pump, which ceased functioning, emitted an odor of sewage. The odor of ink, which Chin had noticed in 2005, remained strong and he learned from his decorator, and sensed himself, that it came from the adjacent print shop after 6 pm when it closes and shuts off its ventilating fan. Respondent had complained to petitioner about the ink odor since January 2007 and threatened in February 2007 to file an official complaint with the appropriate municipal agency. At Chin’s request, petitioner purchased for placement in the print shop a new fan with a timer that would automatically stop the fan at 11 pm.

As the new fan was never installed, Chin decided to further modify respondent’s business by changing to a primarily take-out format commencing August 2007 or September 2007. He estimated that respondent’s income thereby decreased by $5,000 to $6,000 a month.

Chin also testified that on March 10,2007, the kitchen drain backed up with sewage and water and that petitioner did nothing about it until Hesky Haim went to the premises on April 10, 2007. On April 18, 2007, petitioner’s plumber went to the premises and allegedly agreed with Chin’s recitation of his own plumber’s view that the backup in the drains resulted from the use of the wrong elbow joints. (Resp. Exhs. G, H, I, J, K). He also reported that the basement flooded on May 2,2007 due to the burn-out ofthe sump pump. The water permanently stained the dry wall (Resp. Exh. L) and its aftermath is also reflected on a paint can (Resp. Exh. M). Petitioner made the necessary repairs that day, and Chin admitted that respondent bore the responsibility for those repairs.

D. Petitioner’s rebuttal In rebuttal, petitioner called Hesky Haim who also served as respondent’s construction manager. Haim testified that petitioner purchased the building in February 2006.

From mid-2006, Haim visited the building weekly to address various management issues and in 2007, even more frequently. He testified that in January 2007, petitioner refused respondent’s various requests to be released from the leases or to reduce the rent.

In January 2007, Haim learned that respondent’s toilet and the main drain had backed up. Haim testified that he observed food and cloth come up from the floor drain in the kitchen. (Pet. Exh. 9A, 9B). He had petitioner’s superintendent monitor the drain, purchase a snake, and use it in the main drain which serves the entire building, and over the next few months, in all of the pipes from the kitchen to the main drain, comprising some 75 feet. (pet. Exh. 10).

In Haim’s opinion, assertedly based on his plumber’s advice, the backup and flooding resulted from respondent’s failure to put a filter in the kitchen floor drain. He denied that the problems had anything to do with the day care center or commercial tenant upstairs, and
observed that respondent continued to use the kitchen.

In February 2007, respondent called Haim about a leak in the basement vault under the sidewalk. According to Haim, the origin of the leak was a sidewalk crack. He had the sidewalk repaired, cleaned up the vault space, spackled and painted it, and removed from it eight bags of
trash, all at petitioner’s expense.

Haim also responded to respondent’s complaints of the ink odors. He testified that it took two days for petitioner’s workers to plug all of the openings through which any odors could travel from the print shop to respondent’s premises. When respondent continued to complain about the ink odor, Haim purchased a new fan for $400, although he never installed it due the print shop owner’s refusal to permit it him to do so.

Respondent reported more flooding to Haim at the end of March to April 2007. After discovering that the sump pump had ceased working, he replaced it for $250 to $300 and cleaned up the space.

Haim testified that four of respondent’s rent payments were returned for insufficient funds, although the documentation offered by petitioner in support thereof (Pet. Exh. 11) is inadmissible. While petitioner may have laid the requisite evidentiary foundation for the admission in evidence of the deposit slips as its own business records, it failed to do so for the uncertified bank advice slips which constitute the sole documentary evidence that respondent’s checks were returned for insufficient funds.

III. CONTENTIONS
Respondent argues that it has no obligation to pay rent as it was substantially deprived of the use of the premises resulting from the flooding and backup of the kitchen floor drain, the toilet backups and overflows, the basement flooding, and the sewage and ink odors. It claims entitlement to a rent abatement and damages in the amount of $20,000 per month from December 2006, when it converted to a less lucrative Thai menu, and $5,000 to $6,000 per month from August 2007 when it further reduced its business to take-out service. It asserts that petitioner is responsible for the plumbing problems, having positioned the pipes coming from the main premises in contravention of the Administrative Code of the City of New York, Title 27, section PI08, and for using the wrong elbow joints.

Petitioner maintains that absent expert testimony, respondent failed to sustain its burden of coming forward with evidence establishing that it was responsible for the plumbing problems or that it failed to make needed repairs. It thus claims that respondent may not rely on the Administrative Code. In any event, petitioner denies responsibility for the ink odor although it did its best to address it, and observes that respondent never shut down business due to it. Petitioner also notes that it fully addressed the two leaks in 2007 by replacing the sump pump eviction as an attempt to shift responsibility to petitioner for the downturn in its business as evidenced by respondent’s efforts to obtain releases from petitioner of its obligations under the leases.

Petitioner also argues that absent an abandonment of commercial premises, there can be no constructive eviction, and that paragraphs 46 and 45 of the respective riders relieve it of any liability for respondent’s changes in its menu or for the ink odor which must have been apparent when respondent was assigned the leases.

IV. ANALYSIS AND FINDINGS
A tenant may be deemed constructively evicted from premises when its landlord commits wrongful acts which substantially and materially deprive the tenant of the beneficial use and enjoyment of the premises. (Barash v Pennsylvania Terminal Real Estate Corp., 26 NY2d 77,83 [1970)). Where the tenant has abandoned only a portion of the premises as a result of the landlord’s wrongful acts, it is deemed partially constructively evicted. (See Johnson v Cabrera, 246 AD2d 578,578-79 [2d Dept 1998]; Minjak Co. v Randolph, 140 AD2d 245,248-450 [1st Dept 1988]; County Holding Corp. v Brati Inc., 2002 NY Slip Op 40204[U] at *2 [App Term, 2d & lith Jud Dists 2002]; Oceana Holding Corp. v Atlantic Oceana Corp., 4 Misc 3d 1029[A], 2004 NY Slip Op 51122[U] [Civ Ct, Kings County 2004]; Manhattan Mansions v Moe’s Pizza, 149 Mise 2d 43, 45-46 [Civ Ct, NY County 1990].) In such circumstances, the landlord may not recover the full amount of the rent. (Manhattan Mansions, 149 Misc 2d 43, 44). Rather, the rent will be proportionately abated, even for commercial premises. (Minjak, 140 AD2d 245,248; Arbern Realty Co. v Clay Craft Planters Co., Inc., 188 Misc 2d 314, 316 [App Term, 2d Dept portion of the premises. (74 NY Jur 2d, Landlord and Tenant ยง 287).

Here, absent respondent’s abandonment of any portion of the premises, it is not entitled to a rent abatement. Moreover, given the parties’ agreements that petitioner made no representation or warranty as to the fitness of the premises for the use intended by respondent, respondent’s claim that it incurred losses when forced by the plumbing problems to reduce its water usage and cease using the basement for private parties, is precluded, as is the claim that the odor emanating from the print shop also resulted in losses, which claim fails for the additional reason that respondent took the premises “as is” and such a condition would have been apparent when the leases were executed.

I also observe that absent any expert plumbing testimony, there is an insufficient factual basis upon which to credit Chin’s opinions or respondent’s other assertions. And even if the pitching of the pipes violates the Administrative Code, which would constitute some evidence of negligence (see Elliott v City o/New York, 95 NY2d 730, 734 [2001]) attributable to petitioner, such negligence does not establish the requisite causation. The same holds true for the flooding of the basement and the overflow of the toilets which, Chin conceded, were respondent’s responsibility.

Moreover, respondent’s failure to offer any documentation or explanatory detail supporting Chin’s estimate as to the value of respondent’s business losses precludes an accurate determination of damages, were one appropriate in these circumstances, nor did respondent quantify the loss incurred as a result of the departure of its employees or the value of the basement as a party space.

For all of these reasons, I find that respondent has failed to establish, prima facie, its affinnative defense or counterclaim based on an asserted constructive eviction. And, given the possibility that the backup was caused by the debris discovered in the kitchen floor drain, a proposition that is comprehensible to a non-expert, I also find that respondent failed to prove, by a preponderance of the credible evidence, that petitioner caused the plumbing problems or failed to take reasonable steps to remedy them.

v. CONCLUSION
Accordingly, petitioner is granted a possessory judgment and a money judgment in the amount of$92,459.22, plus costs and disbursements; the counterclaim is dismissed. Issuance of the warrant is ordered forthwith, with execution stayed for five days. A hearing is ordered with respect to petitioner’s reasonable attorney fees. The parties are directed to jointly contact this court to schedule the hearing.

This constitutes the decision and order of the court.

Barbara Jaffe, JCC,
HON Barbara Jaffe
DATED: January 15, 2008 New York, New York

Adam Leitman Bailey, P.C.

NEW YORK REAL ESTATE ATTORNEYS