Opinion
103443/2005.
Decided January 3, 2006.
This action, seeking declaratory, injunctive, and compensatory relief, involves a much publicized challenge by commercial tenants of the Bronx Terminal Market (the Market), to a plan by the City of New York and its agencies to lease the Market to a private developer, allegedly, without submitting to public bidding or obtaining the regulatory approvals which are alleged to be required under New York City Charter § 384(b).
By prior stipulations, the action was dismissed as against defendants David Buntzman, Gabriel Buntzman and Mark Buntzman, and as to plaintiffs LaRouche Imports, Inc., M. Trombetta Sons, Inc., African Market, Inc., and King Asuama d/b/a KK African and Caribbean Wholesale.
Defendants the City of New York (the City), Michael R. Bloomberg, the Department of Small Business Services, Robert W. Walsh, the New York City Economic Development Corporation (EDC), and Andrew Alper (collectively, the Municipal Defendants) move for summary judgment dismissing the second amended complaint, CPLR 3212.
Defendants Strategic Development Concepts, Inc. (Strategic), Glenn Goldstein, Related Retail Corporation, Ana Blumenau, David Newman, BTM Merger Partners, Inc., and BTM Development Partners LLC (collectively, the Related defendants) also move for the same relief. Additionally, Strategic moves for an order (1) entering final judgments of ejectment against plaintiffs on its first counterclaim, and (2) severing Strategic's second, third and fourth counterclaims against plaintiffs for rent, use and occupancy, and attorneys' fees, so that the amounts owed to Strategic by each plaintiff can be separately determined.
Plaintiffs cross-move for partial summary judgment (1) on their first and second causes of action, to the extent of declaring that a 63-month lease for the Market, executed between the City and BTM Development Partners (BTM Development), and a subsequent sublease for the Market, executed between BTM Development and Strategic, are each null and void as a matter of law; and (2) on their third cause of action, to the extent of enjoining defendants from implementing the terms of those instruments and attempting to eject plaintiffs, or otherwise take possession of their respective premises.
BACKGROUND
Plaintiffs are commercial subtenants at the Bronx Terminal Market, located in the West Haven section of the Bronx, on the Bronx waterfront near Yankee Stadium. The Market was built in 1924; it is owned by the City. In 1938, the Board of Estimate designated the Market a public market, pursuant to New York State's then Agriculture and Markets Law ( see Sasanow Affirm., Exh. G). In 1972, the City entered into a 39-year lease for the Market with Arol Development Corporation, now known as Strategic (Old Market Lease). In 1983, the Old Market Lease was amended, restated, and extended for another 30 years.
Plaintiffs each entered into possession of their respective portions of the Market (the Premises) pursuant to subleases with Strategic, and/or one of its one of its predecessors-in-interest. Pursuant to the terms of the subleases, each of the plaintiffs allegedly paid a security deposit to Strategic. Upon the expiration of their respective subleases, each of the plaintiffs have remained in occupancy of their Premises on a month-to-month basis.
Over the years, the Market has deteriorated. The City has spent more than a decade in litigation with the owners of Strategic. The City has long sought to terminate the Old Market Lease and redevelop the property. Towards that end, in 2003, the Related defendants, EDC, and the City entered into negotiations concerning the possibilities for such redevelopment. Plaintiffs allege that these negotiations culminated in a clandestine scheme whereby the City would accept the surrender of the Old Market Lease from Strategic, and then enter into a new long-term ground lease for the property with an affiliate of Strategic, for the purpose of demolishing the Market and developing the property as a mixed-use development. Plaintiffs allege that this plan, which would require that all subtenants be evicted from their premises, was deliberately kept secret from the subtenants and the public generally.
The Relevant Documents:
On April 2, 2004, the City, EDC, BTM Development, and BTM Merger Partners, Inc. (BTM Merger) executed a series of agreements regarding the operation and future development of the Market, beginning with a Memorandum of Understanding (MOU) ( see Koch Aff., Exh. 6). Pursuant to the MOU, and as per the provisions contained in ¶ 1 therein, BTM Merger entered into an agreement with Strategic and David Buntzman, Strategic's then principal shareholder, to merge into Strategic, which became the surviving entity ( see Weissberg Aff., Exh. L). Immediately thereafter, Strategic and the City entered into a surrender and termination agreement respecting the Old Market Lease ( see Sasanow Affirm., Exh. I). Following Strategic's surrender of the Old Market Lease, the City entered into a new, 63-month lease for the entire Market with BTM Development (New Market Lease) ( see Koch Aff., Exh. 7). Although not part of the MOU, it appears that BTM Development on the same date executed an agreement to sublease the entire Market to Strategic ( see Koch Aff., Exh. 8).
In addition to the execution of the above-mentioned agreements, the MOU further contemplated that, subject to securing the requisite approvals, including land use and land disposition approvals required pursuant to sections 384(b)(4) and 197-c of the City Charter, the City would execute a long-term ground lease of the property with EDC. EDC would simultaneously assign the lease to BTM Development, for the purpose of redeveloping the property as a retail complex (the Long Term Lease).
Publication and Announcement of the Agreements:
On April 3, 2004, shortly after the execution of the agreements, memoranda of the MOU and New Market Lease were executed and recorded in the Office of the City Register, Bronx County. In addition, in the following days and weeks, press releases announcing the agreement to redevelop the property and the New Market Lease were issued, and reported in the press ( see Sasanow Affirm., Exhs. N and O; Weissberg Aff., Exhs. EE, FF, and GG; and Sasanow Reply Affirm., Exhs. B and C). For example, on April 29, 2004, a press release from the EDC announced, inter alia, that Related and the City had reached an agreement for Related to lease the property for 63-months while it finalized its long-term plans for development, and that Related had agreed to continue operating the Market for two years, while its development plan for the property underwent public review. The press release further noted that, upon approval of the development plan, the City had agreed to grant Related a 49-year lease for the property, with options to extend to 99 years.
On April 2, 2004, plaintiffs were each notified by letter that future rent checks were to be mailed to Strategic, care of the Related Retail Corporation ( see Weissberg Aff., Exh. S). In June 2004, and again in October 2004, EDC sent letters to plaintiffs inviting them to meet with its representatives to discuss their future plans and relocation options, in light of the proposed redevelopment (Smith Reply Aff., Exhs. A and C). During this same period, plaintiffs apparently were trying to negotiate with BTM Development, in an attempt to persuade it to amend the redevelopment plan to accommodate plaintiffs, and if not, to obtain additional assistance from the City to find a suitable location where all occupants of the Market could be relocated together ( id., Exh. D).
Negotiations and Litigation:
Plaintiffs argue that it was not until early 2005 that it became clear that the City and the Related defendants had no intention of continuing to operate the Market, as they previously had represented, but were intent on demolishing certain structures and evicting plaintiffs.
Plaintiffs received a letter from EDC, dated March 7, 2005, in which EDC presented them with a written proposal which would allow them to remain in their Premises until March 31, 2006. This was conditioned on their executing settlement agreements promising to vacate the Premises by March 31, 2006 ( see Weissberg Aff., Exh. HH). Under the proposal, plaintiffs would be entitled to receive certain assistance and benefits from the EDC and City upon vacating the Premises. The letter additionally informed plaintiffs that all tenants would be receiving a legal notice of termination on or about March 18, 2005, and that, following the stated termination dates, Strategic would commence eviction proceedings, although any subtenant who had signed a settlement agreement would not be evicted.
Plaintiffs rejected EDC's proposal and on March 11, 2005, commenced the instant action against the Related defendants. Plaintiffs commenced a separate action against the Municipal defendants and BTM Development, on March 18, 2005. The actions have since been consolidated into the instant action.
Plaintiffs served a second amended complaint.
The Allegations of the Complaint:
In their first cause of action, plaintiffs seek a declaratory judgment that the MOU, the New Market Lease, and the Long Term Lease are all null and void, because the City executed these agreements without first engaging in a public bidding process, or obtaining the regulatory and administrative approvals allegedly required under City Charter § 384(b).
In the second cause of action, plaintiffs seek a declaratory judgment that the Strategic sublease is likewise null and void, and would be null and void in any event, because the City never consented to the sublease in writing, as required under the terms of the New Market Lease.
In the third cause of action, plaintiffs seek to enjoin defendants from ejecting plaintiffs from the Premises, or implementing any of the agreements.
The second amended complaint additionally alleges, on information and belief, that, as of April 2, 2004, Strategic had possession of plaintiffs' security deposits, totaling approximately $4.5 million, as well as certain insurance escrow accounts, totaling at least $39,000.00. The complaint alleges that, pursuant to the terms of the surrender and termination agreement, Strategic had paid these funds to the City, and that the funds have since been used, improperly, to pay for attorneys' and consultants' fees, engineering work, and demolition at the Market in connection with the redevelopment plan. Based on the claimed transfer and misuse of security deposits, as well as on Strategic's allegedly improper demands for, and receipt of, rent payments, plaintiffs assert a sixth cause of action against Strategic for unjust enrichment, and fourth, fifth, seventh, and eighth causes of action against Strategic and the City for conversion, breach of fiduciary duty, constructive trust, and an accounting.
Plaintiffs allege ninth and eleventh causes of action against the Related defendants for fraud and aiding and abetting fraud, and a tenth cause of action against all defendants for negligent misrepresentation, based on these defendants' allegedly false representations that Strategic was plaintiffs' direct landlord with respect to the Premises. Plaintiffs allege that these false representations were made in order to induce them to pay rent to Strategic, and to believe they had to abandon the Premises. In the twelfth and final cause of action, for breach of contract, plaintiffs allege that Strategic and the City breached plaintiffs' subleases by failing to maintain and repair the Premises. Plaintiffs allege that, as a result these breaches, they suffered lost profits and injured reputations.
The Instant Motions:
The Municipal defendants now move to dismiss the first three causes of action on the ground that these causes of action, insofar as they are based on the City's alleged failure to follow the procedures set forth in City Charter § 384(b) prior to executing the MOU, New Market Lease, and Long Term Lease, are in the nature of an Article 78 proceeding, and thus time barred by the four-month statute of limitations applicable to such proceedings (CPLR 217). In the alternative, defendants argue that dismissal of these causes of action is warranted because the competitive bidding and regulatory approvals required by City Charter § 384(b), are not applicable to these agreements, as (1) the MOU is not a disposition of real property; (2) City Charter § 1301 creates an exemption for leases of public markets, such as the New Market Lease; and (3) the Long Term Lease, although subject to City Charter § 384(b)(4), is exempt from public bidding requirements, and, in any event, has yet to be executed.
Defendants further seek dismissal of all the causes of action that are based on allegations of defendants' wrongful receipt, retention, and misuse of plaintiffs' security deposits, as the documentary evidence establishes that the security deposits were not among the funds transferred to the City under the terms of the surrender and termination agreement. Additionally, defendants argue for dismissal of all the claims sounding in fraud and misrepresentation, because any representations to the effect that Strategic was plaintiffs' direct landlord were true. Finally, defendants argue for dismissal of the breach of contract claim, as plaintiffs' allegations that Strategic and/or the City had a contractual obligation to maintain the Premises are contradicted by the terms of the subleases.
Strategic also moves for summary judgment on its first counterclaim, seeking ejectment. Strategic argues that the record establishes that all plaintiffs' subleases have expired and/or been terminated on notice no later than September 30, 2005.
Plaintiffs argue that the first three causes of action do not seek Article 78 review, but were brought principally to challenge the validity and enforceability of the transaction documents and seek money damages for breach of contract. Plaintiffs further argue that, even assuming that their claims should have been brought as an Article 78 proceeding, the causes of action were timely filed.
Plaintiffs contend that the only way for the City to dispose of real property is by complying with the requirements of City Charter § 384(b), and that, contrary to defendants' contentions, the provisions of this section apply to all such dispositions, including leases for public markets. In any event, plaintiffs argue that, even if this court should hold that the New Market Lease is valid, the court should declare the sublease between BTM Development and Strategic null and void, because the evidence establishes that the City was not aware, and thus could not have consented in writing to such sublease.
Finally, plaintiffs argue that, to the extent that defendants seek dismissal of the breach of contract claim, and those causes of action pertaining to the security deposits, the motions should be denied because issues of fact exist with respect to whether the City and/or Strategic assumed a duty to maintain the common areas of the Market, and with regard to the actual disposition of the security deposits.
DISCUSSION
A motion for summary judgment will be granted only where a movant has made "a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case" ( Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851, 853). Once the movant has made such a showing, the party opposing the motion has the burden of producing facts sufficient to raise triable issues of fact ( see, Zuckerman v. City of New York, 49 NY2d 557). "[M]ere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient" ( id. at 562).
The Statute of Limitations Issue:
The Municipal defendants' motion to dismiss the first three causes of action, as time-barred, is granted. Even though plaintiffs have brought these claims in the form of a declaratory judgment action and included a request for injunctive relief, the applicable Statute of Limitations must be determined by the substantive nature of the claims ( see Solnick v. Whalen, 49 NY2d 224, 229). Thus, when a proceeding has been brought in the form of a declaratory judgment action, for which no specific Statute of Limitations is prescribed, "it is necessary to examine the substance of that action to identify the relationship out of which the claim arises and the relief sought" to determine which Statute of Limitations is applicable ( id., at 229).
Only if there is no other "form of proceeding for which a specific limitation period is statutorily provided" may the six-year catch-all limitations period provided in CPLR 213 (1) be invoked ( 49 NY2d, at 229-230). In other words, if the claim could have been made in a form other than an action for a declaratory judgment and the limitations period for an action in that form has already expired, the time for asserting the claim cannot be extended through the simple expedient of denominating the action one for declaratory relief
( New York City Health and Hospitals Corp. v. McBarnette, 84 NY2d 194, 201).
An Article 78 proceeding is the most common vehicle for challenging the validity of a governmental decision or action. Here, plaintiffs causes of action against the Municipal defendants challenge the validity of the actions taken by the City and the Commissioner of the Department of Small Business Services (Commissioner) in executing certain agreements, and not the substance of the agreements themselves. As an Article 78 proceeding is the appropriate vehicle for such a challenge, the applicable Statute of Limitations is four months ( see CPLR 217).
Plaintiffs argue that, even under a four-month statute, the causes of action were timely filed, because plaintiffs had not sustained any injury until March 2005, when they received the termination and eviction notices from Strategic; and because plaintiffs had no notice that a final decision had been made regarding the transactions at issue until February 2005, when they were first able to obtain copies of the agreements through a FOIL request. Plaintiffs contend that the limitations period did not begin to run upon execution of the agreements at issue, because, they argue, the City appears to have deliberately misled the public, and them, about the nature of these transactions and its intentions for the Market site.
Specifically, plaintiffs contend that, although the City may have announced in late April 2004 that an agreement had been reached with Related to redevelop the Market, the precise terms of that agreement, and the fact that the City had already executed binding instruments to implement that plan, were kept secret from plaintiffs and the general public until the agreements were disclosed in February 2005. Plaintiffs further argue that, by announcing in press releases that Related would continue to operate the Market for the next two years while seeking public review of its development plan, the City misled plaintiffs into believing that the City's deal was final until such approvals were obtained, and that plaintiffs were not in imminent danger of being evicted. Plaintiffs additionally argue that certain statements made by a City spokesman, to the effect that Related had "bought out" Buntzman in a "private transaction," reinforced their belief that no final determination of their status had been reached, and served as a further indication that the Old Market Lease remained in effect.
A defendant may be estopped from pleading the Statute of Limitations where a plaintiff was induced by fraud, misrepresentations or deception to refrain from filing a timely action ( Simcuski v. Saeli, 44 NY2d 442, 448). The doctrine will not apply where a plaintiff possessed timely knowledge sufficient to place it under a duty to make inquiry and ascertain the relevant facts prior to the expiration of the statute ( Contento v. Cortland Memorial Hosp. 237 AD2d 725 [3rd Dept], lv denied 90 N.Y.2d 802).
Here, the record shows that a memoranda of the New Market Lease and MOU were filed and recorded with the City Register's Office shortly after the documents were executed. Additionally, contemporaneous public announcements and news reports set forth sufficient particulars of the City's plans to redevelop the Market, as well as of the fact that Related had been given a new, 63-month lease to operate the Market without public bidding, to have placed plaintiffs on notice of these transactions, or, at the very least, to have placed them under a duty to make inquiry.
Since it is the City's alleged failure to comply with the City Charter in entering into the agreements, for which plaintiffs seek redress, the four-month Statute of Limitations began to run when the agreements were executed and became final and binding. It did not begin to run when plaintiffs received their eviction notices. Because the first three causes of action were interposed more than four months after the agreements were finalized, they are untimely, and are dismissed.
The Issue Relating to the Requirements of City Charter Section 384(b):
In any event, even if these causes of action had been timely interposed, dismissal would still be warranted. This is so since the provisions of City Charter § 384(b)(1) are inapplicable to the MOU or New Market Lease. City Charter § 384 provides:
(a) No real property of the city may be sold, leased, exchanged or otherwise disposed of except with the approval of the mayor and as may be provided by law unless such power is expressly vested by law in another agency. [Emphases added].
(b) Except as otherwise specifically provided by law:
1. The mayor may authorize the sale or lease only for the highest marketable price or rental, at public auction or by sealed bids and after advertisement for at least thirty days in the City Record, of any real property belonging to the city or any interest therein. No such sale or lease shall be authorized until a public hearing has been held with respect to such sale or lease after the publication of notice in the City Record at least thirty days in advance of such hearing. No such lease shall run for a term longer than ninety-nine years. Any conveyance or lease may provide for the restriction of the use of such real property.
* * *
5. Any application for the sale, lease (other than lease of office space), exchange or other disposition of real property of the city shall be subject to review and approval pursuant to sections one hundred ninety-seven-c and one hundred ninety-seven-d. Such review shall be limited to the land use impact and implications of the proposed transaction. [Emphasis added].
Courts have recognized exceptions to the application of City Charter § 384(b) requirements, when "such power is expressly vested by law in another agency," ( see Kenston Management Co., Inc. v. Huerta, 159 AD2d 410 [1st Dept], appeal dismissed 76 NY2d 846).
Here, Section 1301(2) and 1301 (2)(a) of the City Charter expressly vest the authority to lease public markets exclusively in the Commissioner of the Department of Small Business Services. Specifically, section 1301(2) of the City Charter, provides, in part:
The commissioner shall have the power and duty to exercise the functions of the city relating to the development, redevelopment, construction, . . . maintenance, management, administration and regulation of public markets, wharf property, water front property and airports within the city of New York including, without limitation, the following:
a. to have exclusive charge and control of the public markets of the city, to fix fees for services, licenses and privileges in connection therewith, to rent space therein and to enter into leases therefor, and to regulate all facilities in use as public markets for the public health, safety and welfare[.]
Although the New Market Lease is between the City and BTM Development, the lease was executed by and through the Commissioner, pursuant to, and in accordance with, the authority granted by section 1301.
Plaintiffs argue that City Charter § 1301 does not exempt the City from complying with the procedures and review set forth in § 384(b), which, they contend, apply to all dispositions of city real property, including public markets. They argue that, even if the Commissioner has been given the authority "to exercise the functions of the city" relating to public markets, the Commissioner may only exercise these powers and functions in the way the Mayor could, i.e. with the same obligations set forth in Section 384(b). Plaintiffs note that, nowhere in section 1301 does it expressly state that leases of market property are exempt from section 384(b); they argue that, the fact that section 1301 is silent in this respect should not be read as exempting such dispositions from the requirements of 384 (b), but as confirming that section 384(b) is applicable to all real property dispositions, including those under section 1301.
Plaintiffs additionally argue that defendants, by filing an application for Uniform Land Use Review Procedures (ULURP), pursuant to City Charter § 197-c, in connection with the proposed Long Term Lease, have impliedly acknowledged that the New Market Lease was subject to such review, as there is no material difference between the New Market Lease and the proposed Long Term Lease, other than its length.
When all provisions of section 1301 are read and construed together, the opposite conclusion must be reached. Section 1301 grants the Commissioner the power to exercise the functions of the city, not only with respect to public markets, but to wharf property and water front property, as well. However, unlike section 1301(2)(a), relating to the disposition of public market property, those subsections that grant authority to the Commissioner to dispose wharf or water front property expressly require the Commissioner to follow many of the same procedures, and obtain many of the same approvals, as are required under section 384(b). If, as plaintiffs contend, sections 384(b) and 197-c apply to every disposition of real property, such provisions would be unnecessary, and would serve no purpose. Under the rules of statutory construction, a court must assume that no phrase or provision was deliberately placed in a legislative act without purpose, but should interpret each provision as having been intended to serve a useful purpose (McKinney's Statutes § 98). The mere presence of these restrictions with respect to the Commissioner's authority to dispose of some kinds of real property, also supports the interpretation that their absence, with respect to dispositions of market property, was intentional.
For example, section 1301(2)(f) provides that the Commissioner has authority to lease, subject to the approval of the council, any wharf property belonging to the city primarily for purposes of water front commerce or in furtherance of navigation. Such leases may be sold at public auction duly advertised in the City Record for at least ten days prior thereto, and if not so sold the terms of any lease must be approved by the council by a three-fourths vote after a public hearing, notice of which shall be published in the City Record for the six days of publication of the City Record immediately prior thereto. All such leases shall be for such terms and shall contain such conditions as may be provided by law. . . . Additionally, section 1301(2)(g), provides that the Commissioner has authority to lease, pursuant to review and approval pursuant to sections one hundred ninety-seven-c and one hundred ninety-seven-d, any wharf property belonging to the city for purposes other than water front commerce or in furtherance of navigation, including, without limitation, commercial, industrial, residential or recreational purposes. All such leases shall be for such terms and shall contain such conditions as may be provided by law. No such lease may be authorized by the commissioner until a public hearing has been held with respect thereto after the publication of notice in the City Record at least thirty days in advance of such hearing.
Additionally, it appears that, historically, leases of market property were not found to be subject to the provisions of City Charter § 384(b) ( see New Colonial Ice Co. v. Woolley, 181 Misc 473 [Supreme Ct, NY County 1943]). In that case, decided under then existing New York State Agriculture and Markets Law § 261, the court found that a provision in that statute, which gave the commissioner of public markets authority to rent space and enter into market leases, removed such leases from the restrictions of then section 384. The Agriculture and Markets Law has since been amended, and, in its place, the legislature has enacted General Municipal Law § 72-p, which grants municipal corporations a nearly identical authority to lease public markets. It is that authority that has now devolved to the Commissioner under City Charter § 1301. For these reasons, the court finds that the requirements of City Charter 384(b) are not applicable to the New Market Lease.
Nor does the fact that defendants have filed an application seeking review and approval, under ULURP, in connection with the Long Term Lease, establish that such review was required for the New Market Lease, as well. Contrary to plaintiffs' contention, these leases are materially different, not only in length, but in purpose. Under the proposed Long Term Lease, unlike the New Market Lease, BTM Development will be permitted to redevelop the property into a retail complex. As the use of property would change, ULURP review was required. Since the Market property will be leased to BTM Development through the EDC, however, it is subject only to those requirements contained in City Charter § 384(b)(4), which does not require competitive bidding. As the record reflects, the proposed Long Term Lease currently is undergoing such review. In any event, as this proposed lease has yet to be executed, any declaration as to its validity at this time would be premature.
The New Market lease specifically provides that the demised premises "shall be used only for the operation of a wholesale/retail food market, farmers' market" and other accessory uses (Sasanow Affirm., Exh. K: Article 23).
City Charter § 384(b)(4) provides: Notwithstanding the provisions of this charter, or any general, special, or local law to the contrary, the mayor may, with the approval of a majority of the members of the borough board of the borough in which such real property is located, lease or sell any real property of the city, except inalienable property or any interest therein, to a local development corporation without competitive bidding and for such purpose or purposes and at such rental or for such price as may be determined by the mayor to be in the public interest, and no such lease shall run for a term longer than ninety-nine years.
As for the MOU, since that agreement did not dispose of real property, section 384(b) clearly is inapplicable.
Plaintiffs' cause of action to declare Strategic's sublease null and void, on the ground that the City never consented to such sublease in writing, is also dismissed. While section 10.1 of the New Market Lease prohibits BTM Development from "enter[ing] into any Sublease for any portion of the Premises without the prior written consent of Landlord," section 10.2 further provides that "Tenant may sublease all of the Premises to an entity having identical interests in profits, ownership interests and management and control as Tenant, in accordance with the terms of provisions of this lease" ( see Sasanow Affirm., Exh. K). According to the affidavit of Glenn Goldstein, a vice president of Strategic and BTM Development, both companies share common ownership and control within the meaning of this provision (Goldstein Aff., ¶ 5). Therefore, as the sublease between Strategic and BTM was expressly authorized in the New Market Lease, it did not require additional consent. Further, as Strategic became plaintiffs' direct landlord pursuant to this sublease, plaintiffs' causes of action for fraud, aiding and abetting fraud, and negligent representation must also be dismissed.
The causes of action for unjust enrichment, conversion, breach of fiduciary duty, a constructive trust, and an accounting, based on defendants' allegedly improper transfer and misuse of plaintiffs' security deposits, are also dismissed. Paragraph 3 of the surrender and termination agreement specifically provides that,
[s]imultaneously with the execution and delivery of this Agreement, Tenant will transfer to New York City Economic Development Corporation, by wire transfer, all amounts in the Market Escrow Account established under Section 13.8 of the [Old Market] Lease, the amount of which is $4,502,702.28.
(Sasanow Affirm., Exh. I). According to paragraph 13.8 the Old Market Lease, the Market Escrow Account was a depository for compensation from a property damage claim (paragraph 13.7), and proceeds from the exercise of eminent domain by the State (paragraph 14.10) (Sasanow Affirm., Exh. J). Nothing in these provisions remotely suggests that these amounts include tenant security deposits paid to Strategic. Plaintiffs argue that defendants have failed to present documents to substantiate their assertions that funds transferred upon the surrender and termination of the Old Market Lease were not the subtenants' security deposits, and thus there is no way to tell whether this assertion is true. However, as plaintiffs have provided no specific facts that might lend support to their allegations of misappropriation and misuse, much less any evidence to support their assertion that Strategic held nearly $4.5 million of their security deposits, these unsupported causes of action must be dismissed.
The Related defendants note that plaintiffs' written subleases, which recite the amount of each subtenant's security deposit, total less than $300,000.00 ( see Related's Memorandum Of Law in Further Support, p. 23).
Plaintiffs' breach of contract claim is also dismissed. Plaintiffs appear to contend that, under paragraph 10 of their written subleases, Strategic was obligated to maintain the common areas and all exterior and structural components of the Market. As noted by plaintiffs, paragraph 10 does provide that "Landlord shall keep or cause to be kept in good order, repair and condition the Structural Members of the Building. . . ." However, that paragraph further provides, in relevant part, that:
Landlord shall not be required to commence any such repair until after notice from Tenant that the same is necessary, which notice shall be in writing and, except in the case of an emergency, shall by its terms allow Landlord at least 30 days within which to commence such repair. Except as provided in this Section Landlord shall not be obligated to make repairs, replacements or improvements of any kind to or upon the Premises, the Building, or the Market, or any part thereof, or upon any Facilities contained therein or appurtaining thereto, all of which shall be the responsibility of Tenant. If in Landlord's discretion any repairs or replacements Landlord may be required to make might cost more than the Fixed Minimum Rent payable by Tenant hereunder for two (2) months of each 12 month period remaining in the balance of the unexpired initial term of this Lease, Landlord may at its option cancel this Lease by not less than 30 days written notice to Tenant. The giving of such notice by Landlord shall cancel Landlord's obligation to make any repairs and/or replacements and Landlord's responsibility for any damage Tenant may have sustained or may thereafter sustain as a result of Landlord's failure to make repairs or replacements or as a result of said cancellation. . . . Landlord shall not in any event be required to furnish any services or Facilities or make any repairs, replacements, alterations or improvements in or to the Premises, the Building, the Facilities or Common Areas except as herein expressly provided with respect to structural members. . . .
( See Goldstein Aff.: Copies of Leases and Termination Notices, Volumes I and II).
Plaintiffs have produced no evidence that written requests for repairs were made, but not performed. Even if, as plaintiffs allege, Strategic has collected additional rents for common areas of the Market, as permitted by the sublease, the sublease expressly limits Strategic's obligations to repair and maintain those common areas. Therefore, the mere fact of such payments fails to create an issue of fact as to whether Strategic may have assumed a contractual duty to maintain and repair those areas.
Finally, because both the New Market Lease and subsequent sublease are valid and, thus, that Strategic had standing to serve or issue notices terminating plaintiffs' various tenancies and occupancies; and because plaintiffs have agreed not to assert any defense with respect to the service or sufficiency of the notices terminating their various tenancies and other occupancies, other than standing; and because plaintiffs have asserted no other defenses to Strategic's motion seeking summary judgment on its first counterclaim for ejectment; Strategic is entitled to final judgments of ejectment granting it immediate possession of the premises occupied by the various plaintiffs.
In sum, defendants' motions are granted, and plaintiffs' cross-motions are denied.
Settle order.