Monday, April 9, 2012

Decision of Interest: TRO in Park West Village case.

2012 NY Slip Op 50598(U)

MAGGI PEYTON ET AL., Plaintiffs,
Index No.: 111379/11.
Supreme Court, New York County.
Decided April 5, 2012.

Catherine A. Grad, Esq., GRAD & WEINRAUB, LLP, for plaintiffs.
Deborah E. Riegel, Esq., ROSENBERG & ESTIS, P.C., for defendants.


Plaintiffs are tenants at Park West Village in Manhattan. The riders to their leases give them assigned parking spaces in outdoor parking lots at 97th and 100th Streets.

On July 21, 2011, many of the plaintiffs received notices from their landlord, defendant PWV Acquisition LLC ("PWV"), that their cars were being relocated to an underground parking garage located at 808 Columbus Avenue. On September 26, 2011, PWV advised the tenants that the landlord had the right to change assigned parking spaces under a rider to the leases. The tenants were urged to contact management to make final arrangements for the transfer without the need for legal action.

PWV seeks possession of the 97th Street parking lot as part of a real estate transaction with defendant Jewish Home Lifecare ("Jewish Home"). Under the deal, the 97th Street parking lot will be conveyed to Jewish Home. A new nursing home and elder care center will be constructed on the 97th Street parking lot. In exchange, Jewish Home will transfer its property located on 106th Street, which has valuable development rights, to defendant PWV Owner LLC ("PWV Owner"). PWV Owner intends to construct a high-rise residential building on the property it will receive from Jewish Home.

Plaintiffs move to enjoin defendants from terminating their parking lease riders and right to park in their current parking spaces or to eliminate or relocate plaintiffs' parking spaces to the underground parking garage at 808 Columbus Avenue. Defendants oppose the granting of injunctive relief. In the event injunctive relief is granted, defendants seek a bond of at least five million dollars for the first year or, alternatively, a hearing on the amount of the bond.

To be granted injunctive relief, plaintiffs must establish a likelihood of success on the merits and irreparable injury in the event the injunction is not granted (U.S. Re Companies, Inc. v. Scheerer, 41 A.D.3d 152, 154 [1st Dept., 2007]). The equities must balance in favor of the plaintiffs (Nobu Next Door, LLC v. Fine Arts Housing, Inc., 4 N.Y.3d 839, 840 [2005]). The purpose of an injunction is to maintain the status quo to prevent the dissipation of property so as not to render any judgment ineffectual (Gluck v. Hoary, 55 A.D.3d 668, 668 [2d Dept., 2008]). Injunctive relief is not appropriate where money damages will make plaintiffs whole (Somers Associates, Inc. v. Corvino, 156 A.D.2d 218, 219 [1st Dept., 1989]). A bond is necessary where injunctive relief is granted as to secure defendants' damages if it is ultimately determined that an injunction should not have been granted (Ithilien Realty Corp. v. 180 Ludlow Development LLC, 80 A.D.3d 455, 455 [1st Dept., 2011]).

I. Likelihood of Success on the Merits
The three buildings at issue in this lawsuit — 784 Columbus Avenue, 788 Columbus Avenue, and 792 Columbus Avenue — have had parking since their construction as reflected in the respective certificates of occupancy issued in the late 1950s. Promotional material for Park West Village from the early 1960s touts the availability of optional on-site parking.

Today, only two lots remain — the 97th Street lot abutting 784 Columbus Avenue, and the 100th Street lot in front of 792 Columbus Avenue. The third parking lot bordering 788 Columbus Avenue was utilized in 2006 to construct 808 Columbus Avenue. It is the site of the underground lot where PWV seeks to relocate plaintiffs.
Plaintiffs allege that they are rent-stabilized tenants with written and oral leases for assigned parking spaces at the 97th and 100th Street parking lots. They contend that the parking spaces are a required ancillary service and cannot be modified or substituted without first obtaining the approval of the Division of Housing and Community Renewal ("DHCR").

The Rent Stabilization Code ("RSC") defines an ancillary service as "those required services not contained within the individual housing accommodations which the owner was providing on the applicable base dates.... These may include, but are not limited to, garage facilities" (RSC Section 2520.6 [r][3]). Garage service provided to tenants in conjunction with the leasing of their apartments that is building-wide and not a service provided to an individual tenant is an ancillary service (Matter of Netherland Operating Corp. v. Eimicke, 135 A.D.2d 352, 352-353 [1st Dept., 1987]).
Plaintiffs have established that the parking spaces provided to them at the 97th and 100th Street lots are a required ancillary service. Parking spots were available to tenants in the late 1950s and the early 1960s. The service was provided prior to the base date of May 31, 1968. RSC Section 2522.5(e) provides that a landlord may not modify or substitute a required service without first receiving approval by DHCR.

Plaintiffs contend that the change PWV seeks to impose is a radical shift in the manner by which the landlord delivers parking services to the tenants. They lose their convenient aboveground lots, which are available to them on a twenty-four hour basis. Instead, they will be required to move to a less convenient underground location accessible by elevator or stairwell. Plaintiffs maintain that the room where the elevator and stairwell is located is not secure. In the event the elevator is not functioning, the garage is accessible only by stairs. The lot is operated by Quik Park, an independent contractor which provides valet parking. Plaintiffs contend that they will have to wait for an hour to retrieve their cars and that valet service will increase their costs.

Additionally, plaintiffs urge that under their current rent-stabilized lease riders, PWV is required to provide parking. However, the underground parking lot is owned by 808 Columbus, a condominium. Under its condominium declaration, residents of 808 Columbus Avenue have a preference. The parking spaces of non-residents can be terminated upon thirty days notice. Therefore, plaintiffs could lose their spaces and be without legal recourse against 808 Columbus, which is not their landlord.
Defendants urge that the parking space riders give PWV the express right to relocate the parking spaces. Therefore, the tenants' current spaces may be lawfully moved to the underground garage, and such a move does not constitute a reduction in service. In fact, plaintiffs will be provided an upgraded secure parking facility upon the same terms and conditions as their existing lease riders. Defendants urge that complaints by the plaintiffs are de minimus. The minor inconvenience plaintiffs may experience does not give rise to a reduction of service. Accordingly, DHCR intervention is not warranted.

I disagree. Plaintiffs are likely to succeed on their claim that their current parking on outside lots cannot be modified without prior DHCR approval. RSC Section 2522.5[e][3] explicitly requires that an owner may not modify or substitute a required service without first obtaining approval from DHCR.

In Charles H. Greenthal & Co. v. 301 E. 21st St. Tenants' Assn., 91 A.D.2d 934, 935 (1st Dept. 1983), the landlord and managing agent sought a preliminary injunction to compel tenants to grant access to their apartments to allow the landlord to convert electricity from master to individual metering. The court held that the "initial determination of what constitutes an essential service, relevant to the issue here of whether the conversion from master to individual metering should be approved, is a matter appropriately reserved to the administrative agencies, which have the necessary expertise and are best equipped to dispose of the issue (citation omitted)."

Both parties cite to DHCR administrative determinations on the issue of whether an owner's attempt to change from a self-park system to valet parking, or to alter the location of parking spots, constitutes a modification of an essential service. Similarly, here, a full administrative record must be developed before DHCR, the agency with expertise and regulatory authority, to determine whether PWV's attempt to move the tenants from their current aboveground parking lots to an underground facility at a different location constitutes an impermissible modification of services, or whether it is a minor inconvenience authorized by the lease riders.
Plaintiffs will suffer irreparable injury if a preliminary injunction is not granted. Defendants intend to move plaintiffs to the underground parking facility to consummate the real estate swap with the Jewish Home. Jewish Home intends to build its new facility on the 97th Street lot.

If DHCR ultimately determines that PWV may not modify the parking service it provides to plaintiffs by moving the tenants to the underground lot at a different location, plaintiffs may not be able to repossess their outdoor parking spots. When bulldozers start plowing through pavement and construction begins, the parking spaces will be gone forever. The legal right to a parking space as part of a rent-stabilized lease in Manhattan is a valuable service. Money damages will not suffice, as the tenants' current outdoor parking convenient to their homes cannot be replaced.

The sworn affidavits exhibited by plaintiffs clearly describe an irreparable injury.
Plaintiff Hillel Hoffman states in a sworn affidavit that the elevator from the vestibule to the 808 Garage is often out of service. His wife is 69 years old, and he is 71 years old. His wife has had two hip replacements. Although they can both currently walk the stairs to the garage from the ground level, Hoffman is concerned that they may not be able to do so in the future, as walking up and down stairs becomes more difficult.

Hoffman is worried about crime. He asserts that the door to the elevator and stairwell is not locked. There are no security personnel or any other personnel posted there. According to Hoffman, the arcade is desolate at night. Anyone entering the elevator/stair room is "trapped" there and vulnerable to muggers.
Plaintiff Mary Lee Baranger states that she is 81 years old and lives alone. She does not want to surrender her designated parking space in the nearby outdoor lot because she uses her car frequently to bring her son and daughter-in-law and her two grandchildren to her home. This involves transporting several people and many things that go along with children aged four and nine. Accordingly, she needs to have her parking space just outside her building. When the elevator in the garage is out of order, it will be hard for her to walk on the ramp used by cars, especially in bad weather.

Plaintiff Maggi Peyton states in a sworn affidavit that she investigated access to the garage. She contends that the elevator was out of service; that the stairwell was deserted; and that she did not feel safe walking to the garage in the stairwell. When she sought access by the ramp used by cars for ingress and egress, she found that the ramp has a very steep incline that would be impossible for a person to navigate using a walker.

The equities balance in favor of plaintiffs. On the one hand, granting an injunction might delay construction of buildings that are, at best, in the planning stage at this point. The delay and uncertainty is caused in part by PWV. Prior to entering the land swap with Jewish Home, PWV could have brought administrative proceedings before DHCR seeking a modification of the ancillary parking service provided to plaintiffs. On the other hand, denying an injunction would result in the immediate loss of the tenants' assigned parking spaces to which they have a present lawful possessory right. Plaintiffs only seek to maintain the status quo pending DHCR's determination as to whether PWV can modify the current parking service.

Finally, we turn to the bond issue. "The fixing of the amount of an undertaking is a matter within the sound discretion of the court, and will not be disturbed absent an improvident exercise of discretion" (Lelekakis v. Kamamis, 303 A.D.2d 380 [2d Dept., 2003]). The amount of the undertaking must be rationally related to the defendants' potential damages if the preliminary injunction later proves to have been unwarranted (Madison/Fifth Associates LLC v. 1841-1843 Ocean Parkway, LLC, 50 A.D.3d 533, 534 [1st Dept., 2008]). "Its sufficiency depends upon the circumstances of the particular case" (67A N.Y.Jur.2d Injunctions 172). The amount of the undertaking must not be excessive, and the court must not consider defendants' speculative or conclusory claims of potential financial losses (Ujueta v. Euro-Quest Corp., 29 A.D.3d 895, 896 [2d Dept., 2006]; Shaffer v. Shaffer, 44 A.D.2d 725 [2d Dept., 1974]); 7th Sense v. Liu, 220 A.D.2d 215, 217 [1st Dept., 1995]).

"It is improper to require, as a condition of a preliminary injunction, an undertaking in an amount which would result in a denial of the relief to which the plaintiffs show themselves to be entitled" (67 N.Y.Jur.2d Injunctions 172, citing Zonghetti v. Jeromack, 150 A.D.2d 561 (holding that plaintiffs were required to post only $100,000 undertaking as prerequisite to granting injunctive relief, not $740,000 undertaking originally required by trial court); see also Modugno v. Merritt-Chapman Scott Corp., 17 Misc.2d 679 [Supreme Ct., Special Term, Queens Cty., 1959], and Barouh Eaton Allen Corp. v. International Business Machines Corp., 1980 WL 4693 [Supreme Ct., Special Term, Kings Cty., 1980]).

By the same token, the amount of the bond must not be insufficient. For example, in Weitzen v. 130 E. 65th St. Sponsor Corp., 86 A.D.2d 511 [1st Dept., 1982], the trial court entered an order granting plaintiff's motion for a preliminary injunction prohibiting demolition of premises known as 130 East 65th Street in Manhattan and construction of a 17-story building on the site, and directed that plaintiff file an undertaking in the sum of $20,000. The First Department modified the order, finding that the amount of the undertaking fixed by the trial court was inadequate and should be increased to $150,000.

In the instant matter, defendants exhibit the sworn affidavit of Jeffrey Davis, who states that he is the property manager for Columbus Square Management. He contends that an injunction would block defendants' development and construction of a residential high-rise building, thereby causing defendants more than $297 million in lost profits, resulting in "concrete losses of approximately $625,000 in expenses already incurred" (Davis. Aff., p. 2, para. 4).

It is important to note that a significant amount of regulatory work must take place before construction can begin. Several entities, including the Department of Buildings, the City Planning Commission, and the New York State Department of Health, must approve the project and issue permits. Jewish Home must also obtain a bank loan or other financing before the project can move forward.

In short, we find that it would be completely speculative to require a bond in the sum of $5 million per year in light of the fact that regulatory approval and financing have not yet been finalized.

We must bear in mind that plaintiffs do not have unlimited financial resources. The astronomical amount sought by defendants would, in effect, deny plaintiffs injunctive relief. The Court must be careful to fix the bond in an amount that will not result in the denial of the equitable relief to which the tenants have shown themselves to be entitled.

Under the totality of the circumstances, plaintiffs shall post a bond in the amount of $75,000. No issue of fact is raised requiring a hearing on the amount of the bond at this time.

Accordingly, it is
ORDERED that pending the final resolution of this action, defendants, their agents, servants, employees and all other persons acting under the jurisdiction, supervision and/or direction of defendants, are enjoined and restrained from terminating plaintiffs' parking lease riders and right to park in their current parking spaces or to eliminate or relocate plaintiffs' parking spaces to the underground parking garage at 808 Columbus Avenue; and it is further

ORDERED that plaintiffs within 30 days shall post with the Clerk of the Court a bond in the sum of $75,000 with sufficient surety to secure the damages incurred by defendants for the vacating of the preliminary injunction, if they succeed in vacating the preliminary injunction.


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