173 A.D.3d 651
N.Y. App. Div.2019Background
- In March 2013 plaintiff (255 Butler Assoc., LLC) took a long-term commercial lease for property at 255 Butler Street, Brooklyn; rent schedule totaled over $130 million across 49 years.
- Lease required plaintiff to develop/convert the vacant building; defendant (255 Butler, LLC) later issued notices alleging multiple defaults and a termination of tenancy (July 2015).
- Plaintiff commenced this action on September 22, 2015 and sought a Yellowstone injunction; the court allowed defendant to accept use-and-occupancy payments pending hearing.
- The parties entered a so-ordered November 2015 stipulation: plaintiff would pay pendente lite use-and-occupancy of $111,041.66 monthly plus taxes and impositions.
- More than a year later plaintiff moved to modify the prior order (effectively to modify the November 2015 stipulation) to reduce use-and-occupancy to nominal (effectively $0), relinquish obligations to pay impositions and maintain insurance, and escrow payments pending final adjudication.
- Supreme Court granted the motion and reduced monthly use-and-occupancy to $0 while the Notice of Default remained; defendant appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court should modify the so-ordered November 2015 stipulation to reduce use-and-occupancy to nominal/$0 | The lease is worthless due to improper default/termination notices; plaintiff derives no benefit and cannot obtain financing, so paying full pendente lite rent is unjust | The stipulation is a valid, negotiated court order; plaintiff must show enforcement would be unjust or inequitable to modify it | Denied. Plaintiff failed to show enforcement would be unjust; use-and-occupancy should be based on fair market rental value, not plaintiff's claimed lost development value |
| Proper measure of pendente lite use-and-occupancy | Plaintiff argued its actual inability to benefit from occupancy (because of alleged termination/default) justifies $0 | Defendant argued value is fair market rent a commercial tenant would pay; notices do not render property unrentable | Court held the proper measure is fair market rental value to a prospective commercial tenant, not plaintiff's subjective lost development value |
| Burden of proof on motion to modify stipulation | Plaintiff placed evidence (affidavit of principal) asserting lack of benefit and marketability | Defendant presented evidence of fair rental value and opposed modification | Court held plaintiff bore burden to demonstrate injustice of enforcing stipulation and failed to meet it |
| Consequences if plaintiff prevails at trial | Plaintiff argued pendente lite reduction necessary because lease is worthless | Defendant noted plaintiff could recover damages or rent credits if it prevails at trial | Court noted that plaintiff, if successful, may obtain refund or rent credit, so no basis to nullify pendente lite obligations |
Key Cases Cited
- First Natl. Stores v. Yellowstone Shopping Ctr., 21 N.Y.2d 630 (establishes Yellowstone injunction and practice permitting tenant to remain pending adjudication)
- Town Bd. of Town of Southampton v. R.K.B. Realty, LLC, 91 A.D.3d 628 (so‑ordered stipulations negotiated by parties may be treated as court orders)
- Nationstar Mtge., LLC v. Russo, 167 A.D.3d 913 (court relief from judgment/order is limited to fraud, mistake, inadvertence, surprise, or excusable neglect)
- RCS Recovery Servs., LLC v. Mensah, 166 A.D.3d 823 (courts may relieve enforcement of stipulation where enforcement would be unjust or inequitable)
- Marini v. Lombardo, 79 A.D.3d 932 (use-and-occupancy measured by net value landlord would have received—fair market rental less maintenance costs)
- 43rd St. Deli, Inc. v. Paramount Leasehold, L.P., 107 A.D.3d 501 (tenant who prevails may recover damages including refund or rent credit)