Opinion
Index No. 653300/2020 Motion Seq. No. 002
07-13-2023
PARAMOUNT LEASEHOLD, LP., Plaintiff, v. IMBESI LAW GROUP P.C., IMBESI LAW PC, VINCENT IMBESI, LORI IMBESI, Defendants.
Unpublished Opinion
MOTION DATE 02/15/2022
DECISION + ORDER ON MOTION
ARTHUR F. ENGORON, JUSTICE
The following e-filed documents, listed by NYSCEF document number (Motion 002) 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 61, 62, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86 were read on this motion for SUMMARY JUDGMENT.
Upon the foregoing documents, and for the reasons stated hereinbelow, plaintiffs motion for partial summary judgment is granted to the extent indicated below.
Background
On February 12, 2019, plaintiff, Paramount Leasehold, L.P. ("Landlord"), as landlord, entered into a lease (the "Lease") with defendants Imbesi Law Group, P.C. ("ILG"), and Imbesi Law P.C. ("IL," collectively with ILG, "Tenant"), as tenants, for certain office space on the 19th floor of 1501 Broadway, New York, New York (the "Premises"). NYSCEF Doc. No. 50.
Article 8 of the Lease states, as relevant, that "Owner or its agents shall not be liable for ... any injury or damage to persons or property resulting from any cause of whatsoever nature, unless caused by, or due to, the negligence of Owner, its agents, servants or employees." NYSCEF Doc. No. 50.
Article 17 of the Lease states that, upon Tenant's default, Landlord had to serve a 15-day notice to cure before it could serve a 5-day notice of cancelation. NYSCEF Doc. No. 50.
Article 27 of the Lease states that Tenant's duty "to pay rent hereunder and perform all of the other covenants and agreements ... shall in no way be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this lease." NYSCEF Doc. No. 50.
Article 37(g) of the Lease states that Tenant is obliged to pay rent, "without any set-off or deduction whatsoever." NYSCEF Doc. No. 50.
Article 62 of the Lease states that if Tenant holds over after the Lease is terminated, then the monthly rent would be 2.5 times the highest fixed rent in the Lease (or $5,591.38 x 2.5 = $13,978.45) plus "Additional Rent," as defined in the Lease ("Holdover Rent"). NYSCEF Doc. No. 50.
On February 7, 2019, defendants Vincent Imbesi and Lori Imbesi (collectively, "Guarantors") signed an "absolute and unconditional ... guaranty of payment and performance" as an inducement for Landlord to lease the Premises to Tenant. NYSCEF Doc. No. 51.
On May 19, 2021, Landlord sent Tenant a Notice to Cure, asserting that Tenant was in default of Article 47 of the Lease, by failing to obtain and maintain insurance, and demanding "proof of Tenants' insurance coverages ... and showing that such coverages have been maintained and in place during the Lease term to date." NYSCEF Doc. No. 70.
Article 47(a) of the Lease requires that Tenant procure and maintain a primary commercial general liability insurance policy with, as relevant, a minimum limit of $2,000,000 for personal injury and a minimum limit for umbrella coverage of $5,000,000. NYSCEF Doc. No. 50.
According to a Certificate of Liability Insurance ("Certificate") filed by Tenant, Tenant obtained coverage for the Premises with a minimum limit $1,000,000 for personal injuries for the period from June 5, 2021, through June 5, 2022, well after the Lease went into effect. NYSCEF Doc. No. 68. The Certificate also shows Tenant obtained umbrella coverage with a minimum limit per occurrence of $200,000,000 for the period from July 1, 2021, through July 1, 2022, also after the Lease went into effect. Id. Tenant has proffered no proof of prior insurance.
On June 15, 2021, Landlord sent Tenant a Notice of Cancelation, pursuant to Articles 17 and 47 of the Lease, which terminated the Lease effective June 30, 2021. NYSCEF Doc. No. 71.
On July 22, 2020, plaintiff sued defendants, asserting 16 causes of action: (1-2) breach of contract against Tenant; (3-4) breach of contract against Guarantors; (5-6) unjust enrichment against Tenant; (7-8) unjust enrichment against Guarantors; (9-10) account stated against Tenant; (11-12) account stated against Guarantors; (13-16) legal fees against Tenant and Guarantors. NYSCEF Doc. No. 1.
On August 25, 2020, defendants answered with general denials, sixteen affirmative defenses, discussed infra, and two counterclaims alleging: (1) breach of contract and (2) negligence. NYSCEF Doc. No. 6.
The crux of Tenant's counterclaims is that, over eight months in 2020, Landlord, through its agents, performed various construction projects in the building, including in the hallway outside the Premises, which included putting "a compressor and giant leaking yellow tube" that was difficult to walk over and allegedly emitted an "unknown chemical substance" causing, inter alia, Vincent Imbesi "damage to his throat and lungs" (the "Construction Work"). Id.
Between March 1, 2020, and February 1, 2022, Tenant paid Landlord twice: $10,970 on May 26, 2020, and $11,554.75 on September 29, 2020. NYSCEF Doc. No. 56.
Pursuant to a stipulation filed January 28, 2022, and so-ordered by Justice Verna L. Saunders, Tenant agreed to vacate and deliver possession of the Premises to Landlord by January 31, 2022 (the "Vacancy Date"). NYSCEF Doc. No. 60.
Also on January 28, 2022, Landlord moved, pursuant to CPLR 3212(e), for partial summary judgment: granting judgment on its first, second, third, fourth, thirteenth, fourteenth, fifteenth, and sixteenth causes of action for breach of contract, breach of guaranty, and attorneys' fees; dismissing defendants' first counterclaim for breach of contract and its affirmative defenses; and severing the remaining causes of action for account stated and counterclaim for negligence. NYSCEF Doc. No. 46. Landlord seeks $155,105.74 in damages plus interest. Id.
Landlord argues, inter alia, that: Tenant breached the Lease by failing to obtain and maintain the requisite insurance; the Landlord properly terminated the Lease on June 30, 2021; any rent due after that date is holdover rent; and that Tenant further breached by failing fully to pay rent and additional rent. Accordingly, Landlord argues Guarantors breached the Guaranty, and furthermore, pursuant to the Lease and the Guaranty, it is entitled to attorneys' fees.
In opposition, Tenant submits the Certificate as proof it "had insurance," and argues that summary judgment is premature because the Construction Work constituted constructive eviction. NYSCEF Doc. Nos. 65 and 67. Tenant also disputes the amount of damages Landlord asserts, arguing that, pursuant to Article 39(c) of the Lease, additional rent for real estate tax escalations are not due until 30 days after Landlord delivers "to Tenant a statement setting forth the amount of Tenant's Proportionate Share and the basis therefor" which can include statements from tax authorities. Tenant alleges it received no such statement.
Tenant also argues the Guarantors are protected by the New York City Administrative Code § 22-1005 (the "Guaranty Law"), a law passed by the New York City Council that protects certain individual guarantors of commercial leases under specific circumstances related to the global COVID-19 pandemic. NYSCEF Doc. No. 65.
Discussion
In order to obtain summary judgment, the "movant must establish its defense or cause of action sufficiently to warrant a court's directing judgment in its favor as a matter of law. The party opposing the motion, on the other hand, must produce evidentiary proof in admissible form sufficient to require a trial of material questions of fact on which the opposing claim rests' [M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient' for this purpose." Gilbert Frank Corp. v Fed. Ins. Co.. 70 N.Y.2d 966, 967 (1988).
Breach of Lease Causes of Action
For Landlord to prevail on its breach of lease causes of action it must show that a lease existed, that Landlord performed, that Tenant breached, and Landlord sustained damages from that breach.
Here, Tenant admits the Lease and Landlord's performance (Tenant clearly took possession of the Premises). NYSCEF Doc. No. 67. Tenant's argument that Landlord breached the Lease with the Construction Work is unpersuasive as a reason to obviate Tenant's obligation to pay rent. Universal Communications Network, Inc. v 229 W. 28th Owner, LLC, 85 A.D.3d 668, 669 (1st Dept 2011) ("[T]he obligation to pay rent pursuant to a commercial lease is an independent covenant, and thus, cannot be relieved by allegations of a landlord's breach, absent an express provision to the contrary.").
The Construction Work alleged, occurring in the hallway outside the Premises, is neither a partial actual eviction (a large yellow tube in the hallway, although allegedly difficult for some to step over, did not actually bar access to the Premises) or a constructive eviction (work in the hallway did not substantially and materially deprive Tenant of the beneficial use and enjoyment of the leased Premises themselves). See Barash v Penn. Term. Real Estate Corp., 26 N.Y.2d 77, 83 (1970). Tenant's allegations of noxious fumes in the hallway, while serious and unsettling, are better suited to Tenant's negligence counterclaim.
Tenant breached the Lease by failing to pay rent and, as relevant to Landlord's holdover claims, by failing to obtain and maintain the requisite insurance, and, therefore, the Lease was properly terminated on June 30, 2021. Rui Qin Chen Juan v 213 W. 28 LLC, 149 A.D.3d 539, 540 (1st Dept 2017)("[F]ailure to obtain insurance is a material breach that may not be cured by the purchase of prospective insurance, as such insurance 'does not protect defendant [owner] against the unknown universe of any claims arising during the period of no insurance coverage'") (citation omitted); Three Amigos SJL Rest., Inc. v 250 W. 43 Owner LLC. 144 A.D.3d 490, 491 (1st Dept 2016) ("[F]ailure to procure retroactive umbrella coverage was a material breach allowing for termination of the lease.").
As the Lease was terminated on June 30, 2021, Landlord is entitled to holdover rent from that date until Tenant exited the Premises at the end of January 2022.
Finally, Landlord proves Tenant's arrears by submitting an affidavit from non-party Mabel Marin, Landlord's Managing Agent's Managing Director, and the Tenant Ledger (the "Ledger") for the Premises kept in the ordinary course of business. NYSCEF Doc. Nos. 48 and 56. However, the Ledger includes $13,978.45 in Holdover Rent for February 2022, after the Vacancy Date, and $1,033.80 in real estate tax estimates, which Landlord has failed to support with statements or tax bills explaining how those numbers were calculated. Therefore, Tenant owes Landlord arrears of $140,093.49 (the Ledger's total balance of $181,471.59 - $26,365.85 security deposit - $13,978.45 February 2022 Holdover Rent - $1,033.80 unsupported real estate tax escalations).
Therefore, this Court must grant summary judgment on Landlord's first and second causes of action, for breach of lease, against IL and ILG in the amount of $ 140, 093.49, plus interest.
Guaranty Causes of Action
In their affirmative defense, defendants argue that they are not obligated to pay Landlord pursuant to the Guaranty Law. Defendants are incorrect.
The Guaranty Law only applies when a tenant satisfies one of three conditions: (1) it was required to stop serving food or beverages on-site due to Executive Order 202.3; (2) it was a non-essential retail establishment limited by Executive Order 202.6; or (3) it was required to close to members of the public due to Executive Order 202.7. New York City Administrative Code § 22-1005. Here, Tenant did not serve food, was not a retail establishment, and was not required to close to the public, only required to reduce its in-person workforce to 75%.
Therefore, this Court must grant summary judgment on Landlord's third and fourth causes of action, for breach of guaranty, against Vincent Imbesi and Lori Imbesi in the amount of $140,093.49, plus interest.
Attorneys' Fees Causes of Action
As Tenant and the Guarantors are liable for breach of contract, and as both the Lease and the Guaranty include attorney's fees clauses, defendants are liable for attorneys' fees in an amount to be determined. NYSCEF Doc. No. 42, 51.
Defendants' Breach of Contract Lease Counterclaim
Landlord also seeks summary judgment dismissing defendants' first counterclaim, for breach of lease, which alleges that, due to the Construction Work, the Premises were made unfit for their purpose, causing injury to Vincent Imbesi.
Here, defendants' first counterclaim is precluded by the clear language of Article 8 of the Lease, supra, and therefore must be dismissed. Defendants' second counterclaim, asserting negligence on the part of Landlord, remains.
Affirmative Defenses
Finally, Landlord correctly seeks the dismissal of defendants' affirmative defenses.
Defendants' first affirmative defense, for laches, equitable estoppel, and/or unclean hands, must be dismissed as there is no pleading of laches and as the record "does not show that defendant was induced to enter into the agreement due to misrepresentations by plaintiff." E. Eur. Trading, Corp. v Knaust, 128 A.D.3d 589 (1st Dept 2015).
Defendants' second, fifth, and fifteenth affirmative defenses, for failure to allege sufficient facts of damages, to establish interest, and to establish recovery of legal fees, should be dismissed as plaintiff properly plead such facts.
Defendants' third affirmative defense, that they were not the proximate cause of any damages, should be dismissed, as defendants were, in fact, the proximate cause of Landlord's damage by not paying their rent or obtaining proper insurance.
Defendants' fourth affirmative defense, that plaintiff failed to mitigate its damages, must be dismissed, as Landlord was not obligated to do so under the Lease or under the law.
Defendants' sixth, seventh and tenth affirmative defenses, asserting that defendant did not act in, inter alia, bad faith, did not engage in "illegal, fraudulent or oppressive conduct," and "is entitled to absolute immunity based on good faith," must be dismissed as irrelevant to the causes of action brought by Landlord.
Defendants' eighth and ninth affirmative defenses, alleging plaintiff failed to establish irreparable harm or a likelihood of success on the merits, must be dismissed as plaintiff did not seek any injunctive relief.
Defendants' 11th and 16th affirmative defenses, arguing that the complaint is against public policy and the Guaranty Law, must be dismissed as the Guaranty Law does not apply in this case, supra.
Defendants' 12th and 14th affirmative defenses, relying on Article 7 of the RPAPL, must be dismissed, as the RPAPL does not apply here and, further, defendants fail even to defend their 14th affirmative defense.
And, finally, defendants' 13th affirmative defense, alleging that this Court lacks subject matter jurisdiction, must be dismissed, as the amount in issue exceeds this Court's jurisdictional threshold.
This Court has considered defendants' other arguments and finds them to be unavailing and/or non-dispositive.
Conclusion
Therefore, the motion of plaintiff, Paramount Leasehold L.P., for partial summary judgment on its first, second, third, and fourth causes of action is granted; defendants first counterclaim and sixteen affirmative defenses dismissed; and the Clerk is directed to enter judgment against defendants Imbesi Law Group, P.C., Imbesi Law P.C., Vincent Imbesi, and Lori Imbesi, jointly and severally, in the amount of $140,093.49 plus statutory interest from January 31, 2022 (the "Vacancy Date").
It is further ordered that plaintiffs thirteenth, fourteenth, fifteenth, and sixteenth causes of action, for attorneys' fees, are hereby granted as to liability, and those causes of action are hereby severed, and plaintiff may obtain an hearing into said fees by presenting the Clerk with a Note of Issue, a copy of this Decision and Order, and any necessary fees. Plaintiff must file such Note of Issue within 30 days from the date of this Decision and Order, and plaintiffs failure to do so timely shall result in automatic disposal of this action. Plaintiff is further directed, within 15 days of filing the Note of Issue, to contact chambers to schedule the inquest date.