Opinion
Index No. 152241/2016
04-19-2018
304 EAST 52ND STREET HOUSING CORPORATION and ARSR SOLUTIONS, LLC, Plaintiffs, v. JAMES P. KENNELLY, Defendant.
NYSCEF DOC. NO. 39 Motion Sequence 001 Decision and Order CARMEN VICTORIA ST. GEORGE, J.S.C. :
The parties in this action are plaintiff 304 East 52nd Street Housing Corporation (Housing Corp), plaintiff ARSR Solutions, LLC (ARSR) and defendant James P. Kennelly. The complaint states that Housing Corp owns the building located at 304 East 52nd Street (East 52nd), that ARSR owns the proprietary leases for the four cooperative units in the building, along with all the issues and outstanding shares of Housing Corp.
On March 16, 2010, according to the complaint, Kennelly substantially owned and controlled Housing Corp. Kennelly admits that he owned at least 51% of the shares of Housing Corp on the date in question. On that date, the complaint asserts, Housing Corp executed and recorded a grant of easement to Kennelly, its owner (Grant of Easement, Exh C to Aff in Support of Motion [the grant]). The easement grants Kennelly
(I)a perpetual exclusive, non-terminable easement, privilege and right of way . . . in, to and through all portions of [Housing Court's] Property including . . . the air space in Grantor's Property, except for the air space currently occupied by the building . . . for the exclusive use and enjoyment of [Kennelly] and [his] successors and assigns; (II) a perpetual exclusive, non-terminable easement,
privilege and right of way for support in and to all structural members, footings and foundations. . .; (III) a perpetual exclusive, non-terminable easement, privilege and right of way for commercially reasonable ingress, egress and access through the ground floor of [the building] . . .(id.) The grant also sets forth certain covenants, limitations, and additional terms to the parties' agreement (id.). Mr. Kennelly signed the easement on behalf of Housing Corp and on his own behalf.
An easement lies with the owner of a dominant estate and creates the right of the dominant estate's owner to use the adjacent servient estate's land in a specific, limited way (Ironwood, L.L.C. v JGB Properties, LLC, 99 AD3d 1192, 1193-94 [4th Dept 2012]). According to the complaint, this easement does not have a dominant or servient estate, as there is only one property involved in the quoted arrangement. The complaint describes the grant as "an attempt by Kennelly to improperly interfere with the Premises to the detriment of the lenders who, at the time, had security interests and mortgages on the Premises" (Complaint, ¶ 10). Thus, the complaint asserts that the document purporting to be a grant of easement has no legal weight. The complaint seeks 1) to quiet title, and 2) to obtain a declaratory judgment that the grant of easement is void. It additionally seeks to file a cancellation of the lien with the office of the City Register.
Currently, plaintiffs move for summary judgment. William Thornton, a senior vice president at Arbor Realty Trust, Incorporated (ART), which is an authorized signatory and member of plaintiff ARSR Solutions (ARSR), submits an affidavit which gives the grant more context. He explains that sometime around May 8, 2007, Kennelly, through his company East 51st Street Development Company, LLC (East 51st) executed and delivered three promissory notes to ART, for $39,489,253.20; $3,704,275; and $2,444,428.80, respectively. Simultaneously, Kennelly executed and delivered a Pledge and Security Agreement (the pledge) which pledged those of Kennelly's shares in East 52nd which correlated to units 2, 3, and 4, and Housing Corp and ARF signed a recognition agreement which acknowledged that ARF had a valid lien on the shares Kennelly pledged to it in the pledge agreement.
Thornton further states that by early 2010, East 51st had defaulted on its obligations under the three notes, and Kennelly had defaulted under his obligations under the pledge agreement and the security agreement. This entitled ARF - and through it, ARSR - to units 2, 3, and 4 in East 52nd Street as well as Housing Corp. ARSR obtained ownership and control of the units and of Housing Corp on April 15, 2010, following a UCC foreclosure. Before this, however, on March 16, 2010 Kennelly - who then was still in control of Housing Corp - signed the easement agreement described above, which purportedly gave him, his successors, and his assigns broad rights to use the property. Thornton contends that when the easement was granted, neither Housing Corp nor Kennelly owned any abutting or adjacent property. Therefore, he reiterates plaintiffs' position that no easement is possible.
Plaintiffs argue that they have satisfied their burden of showing that there is no triable issue of fact, and for this reason summary judgment is proper. They contend that the grant of easement here purports to create a perpetual, exclusive, non-terminable easement and right of way, and this type of grant is only possible in the context of an easement appurtenant which is "(1) conveyed in writing, (2) subscribed by the creator, and (3) burdens the servient estate for the benefit of the dominant estate" (Seven Springs, LLC v Nature Conservancy, 95 AD3d 867, 870 [2nd Dept 2012] [citations and internal quotation marks omitted]). Although the easement here "arguably" satisfies the first two requirements, they state, it fails to satisfy the third because it does not mention a dominant estate or an appurtenant one (Mem. of Law, p 5 [citing Matter of Soho 54 LLC v Bergman, 81 AD3d 410, 410 [1st Dept 2011]). As Exhibit G, they annex a tax map which shows that none of the appurtenant properties are owned by defendant.
In opposition, defendant does not dispute that he granted himself an easement on March 16, 2010 in his capacity as president of Housing Corp. He also acknowledges that the easement does not refer to a dominant estate. He states that the easement is nonetheless enforceable as an easement in gross, which creates a "mere personal, nonassignable, noninheritable privilege or license" (citing Loch Sheldrake Assoc. Inc. v Evans, 306 NY 297 [1954]). Furthermore, although he contends that an easement in gross exists, defendant states there are issues of fact as to the existence of an easement appurtenant because at the time of the grant he had an ownership interest in several abutting or appurtenant properties.
In reply, plaintiffs point to a provision in the recognition agreement which states that Housing Corp had to recognize ARF's rights to the units as lienor, including its rights against the net proceeds of any sale (Section 2 [e]). Section 3 (b) of the agreement, that ARF had the right to dispossess Housing Corp or otherwise satisfy its security. Although ARF had no right to transfer the units without Housing Corp's approval, the agreement stated that such "APPROVAL SHOULD NOT BE UNREASONABLY WITHHELD OR DELAYED" (Section 5 [capitalization in original]). They explain that when ARF foreclosed on the lien, ARSR purchased the units and the units were assigned to it. When Housing Corp would not honor the recognition agreement and transfer the shares to ARSR, ARSR commenced ARSR Solutions, LLC v 304 East 52nd Street Housing Corp. (Sup Ct, Nassau County, Driscoll, J., index No. 10271/2010), to enforce it. In his order in that case dated March 17, 2014, Justice Driscoll found in favor of ARSR and directed Housing Corp to cancel Kennelly's shares in the units in dispute and issue new stock certificates to ARSR. On this basis as well, plaintiffs contend, defendant has no overarching right to the property. Furthermore, they state, as the recognition agreement and promissory notes predate the alleged easement and thus would take priority over it even if it were valid - a point which plaintiffs vigorously deny.
Discussion
"[A]n easement in gross is a mere personal, nonassignable, noninheritable privilege or license, . . . while an easement appurtenant provides for a transferrable interest in land" (Niceforo v Haeussler, 276 AD2d 949, 950 [3rd Dept 2000] [citations and internal quotation marks omitted]). Here, defendant attempted to combine both - that is, assigning an assignable, inheritable privilege not related to a dominant property. The easement at issue does not create a viable easement in gross for several reasons. As stated, the document impermissibly creates a right to the property in perpetuity which extends to Kennelly's heirs and assigns.
The Court concludes that the purported easement does not create an easement appurtenant. Defendant argues that he may have created an easement appurtenant because when he executed the easement he owned several nearby properties, but the easement does not refer to any of these appurtenant properties (see Goldberg v Zoning Board of Appeals of City of Long Beach, 79 AD3d 874, 877 [2nd Dept 2010] [stating that the terms of an easement govern]). Furthermore, an easement appurtenant entitles the servient property for the benefit of the dominant one (see GDG Realty, LLC v 149 Glen St. Corp., 155 AD3d 833, 835 [2nd Dept 2017]) and the benefit must be particularized and limited (see Ironwood, LLC, 99 AD3d at 1193-94). Here, the easement does not create a benefit for any of the appurtenant properties but for Kennelly himself. An easement appurtenant remains with the dominant property upon its transfer to another owner, and thus defendant would have lost his easement upon the sale of the appurtenant properties. Finally, the Court notes that any easement appurtenant would have remained with the property. Thus, when defendant sold or otherwise transferred the property he would have lost his easement.
Defendant's argument that he has an easement in gross also lacks merit. In addition to the fact that it impermissibly creates a perpetual easement which extends to his heirs and assigns, there are other troubling issues. As principal shareholder in Housing Corp, defendant signed the document as both transferor and transferee, and thus this was a self-dealing transaction. Moreover, Kennelly did so just as he and ARSR were in Nassau County Supreme Court litigating his obligations to turn over Housing Corp to ARSR. As such, it appears to be an attempt to evade the impact of an adverse ruling by the Nassau court.
In addition, the purported easement essentially gives Kennelly unfettered access to the property forever. This contravenes the recognition agreement as well as the security interest Kennelly had given to ARF; despite the transfer of shares and ownership to ARSR, Kennelly assertedly can remain in the apartment units he sold without paying rent to ARSR, and that his heirs and assigns also may exercise this right. This effectively deprives ARSR and Housing Corp of the benefits of ownership.
Although the Court is not bound by the Nassau County, moreover, it finds the court's findings persuasive. The decision found that ARSR had "performed all of [its] respective obligations under those agreements," and that Housing Corp - which, at the time, was controlled by Kennelly - "neither rebutted the credible testimony and evidence. . . nor provided credible evidence and testimony" (ARSR Solutions, LLC v 304 East 52nd Street Housing Corp. (Sup Ct, Nassau County, March 17, 2014, Driscoll, J., index No. 10271/2010). Here, too, the Court finds that defendant is neither credible nor persuasive in his assertions. Defendant has neither provided law in support of the easement he gave to himself nor otherwise provided a reasonable justification for the transfer. Accordingly, it is
The Court also found the testimony of Kennelly and Charles McKinnis, who served as secretary of Housing Corp and resided in one of the units, to lack all credibility with respect to the dispute over ownership of Housing Corp. --------
ORDERED that the motion for summary judgment is granted; and it is further
ORDERED and DECLARED that the easement in question, recorded as CRFN 2010000090575 in the Office of the City Register of the City of New York, is void; and it is further
ORDERED that, upon the filing of a copy of this order with notice of entry upon the Office of the City Register, the City Register shall cancel the easement; and it is further
DECLARED that defendant and his heirs and assigns have no rights under the purported easement. Dated: 4/19/2018
ENTER:
/s/_________
CARMEN VICTORIA ST. GEORGE, J.S.C.