Papers Considered: 1. Respondent-Tenant Armonk Snack Mart’s Notice of Motion to Release Bond (Sept. 13, 2018) 2. Affirmation of Kenneth Stenger in Support (Sept. 12, 2018) with Exhibits A-G 3. Affidavit of Sharafat Baloch in Support of the Release of the Undertaking Funds (Sept. 13, 2018) with Exhibits A-D 4. Affidavit of Musa Eljamal in Support of the Motion for the Release of the Undertaking Funds (Sept. 13, 2018) with Exhibits A-B 5. Petitioner-Landlord Zeidan Realty Corp.’s Notice of Motion to Disburse Respondent’s Undertaking (Feb. 11, 2019) 6. Affirmation in Support of Edward Phillips (Feb. 11, 2019) with Exhibits 1 through 40 7. Affidavit of Rabee Nesheiwat in Support of Motion to Disburse Respondent’s Undertaking (Feb. 8, 2019) with Exhibits 1-8 8. Petitioner-Landlord Zeidan Realty Corp.’s Memorandum of Law in Support of Motion to Disburse Respondent’s Undertaking (Feb. 11, 2019) 9. Affirmation in Opposition and Reply of Kenneth Stenger (Apr. 15, 2019) with Exhibits A-E 10. Reply Affirmation of Edward Phillips in Further Support (Apr. 25, 2019) 11. Letter of Kenneth Stenger dated January 24, 2020 12. Transcript of oral argument conducted January 31, 2020 13. Letter brief of Kenneth Stenger dated February 11, 2020 14. Letter brief of Edward Phillips dated February 11, 2020 15. Letter brief of Edward Phillips dated February 12, 2020 16. Email exchange with Messrs. Stenger and Phillips dated February 24, 2020 Decision and Order Petitioner-Landlord Zeidan Realty Corp. (“Zeidan”) and Respondent-Tenant Armonk Snack Mart, Inc. (“Armonk”) separately submitted motions seeking relief pursuant to CPLR Rules 2606 and 2607 relating to $369,000.00 submitted to the Justice Court (“Undertaking”) as a condition of staying the enforcement of a judgment of Possession and Warrant of Eviction entered in the Justice Court. Armonk seeks a release of the entirety of the Undertaking to the sources1 of the funds: $300,000 from Musa Eljamal, personally and $69,000 from Armonk. Zeidan seeks a release of the entirety of the Undertaking as reimbursement of the costs to Zeidan for the categories contemplated by the Undertaking. This commercial landlord tenant matter has been pending in the Justice Court for several years and has yielded several decisions and orders as well as appeals to the Appellate Terms. The parties consent and the Justice Court determines that the matter is now ripe for review and determination.2 This Decision and Order will dispose of the motions and direct the disposition of the Undertaking, which is the last remaining issue pending in the Justice Court. Since the prior court decisions painstakingly and carefully detailed each issue litigated, a full recitation of the procedural history is unnecessary, and frankly not relevant to the motions currently pending before the Justice Court. Nevertheless, it is important to recount the following relevant and material procedural events. The Justice Court awarded possession of the subject property to Zeidan by Judgment3 entered on May 9, 2017, and further awarded “the fair value of the use and occupancy in the same monthly amount as the rate of rent set forth in the 2002 lease [i.e., $6,767.59 per month], up to and including the actual date on which [Armonk] vacates the gasoline station and convenience store portion [of the subject premises].” Other than possession and the fair value of the use and occupancy, the Judgment did not award Zeidan any other monetary relief. On May 12, 2017, Armonk appealed the Judgment to the Appellate Term, which issued a temporary stay and ordered an undertaking in the amount of $50,000 pursuant to CPLR §5519(a)(6) pending the Justice Court’s determination of an undertaking to be posted by Armonk for the duration of the appeal process. As a result, in the July 25, 2017 Decision and Order the Justice Court, with recommendations by Zeidan and Armonk, ordered that the Judgment and Warrant of Eviction be stayed pursuant to CPLR 5519(a)(6) pending the determination by the Appellate Term. The Justice Court directed4 that the stay be conditioned on Armonk posting the Undertaking and continuing to pay the monthly rent of $6,767.59. The purpose of the undertaking is clearly set forth by the Justice Court in the July 25, 2017 Decision and Order While the undertaking normally includes the fair value of use and occupancy, and any additional amount to prevent potential damages to [Zeidan] and/or waste by [Armonk] during the pendency of the appeal, the fixing of an undertaking is not a precise science. It is established within the sound discretion of the Court, on a conjectural basis, guided by the parties’ usually divergent estimates of damages and by the trial judge’s own experience and knowledge. Nonetheless, its amount must be rationally related to the damages which the non-moving party establishes it may potentially suffer, and the Court must decline to consider speculative claims of damages. In the July 25, 2017 Decision and Order, the Justice Court5 established the following categories of potential damage6 as a basis for calculating the Undertaking: Amount Category of Potential Claim $200,000 Representing roughly six months of lost profits from petroleum sales $40,000 Representing roughly six months of the lease rate of rent $100,000 For indemnification of any oil spills $50,000 Non-Structural Repairs $29,0007 $8,500 (all taxes); $15,000 (all utilities): $5,000 (all insurance) $419,000 By So Ordered Stipulation dated July 31, 2017 the total amount of the Undertaking was reduced to $369,000 $369,000 Total amount of Undertaking By Order dated May 7, 2018, the Justice Court vacated the stay pursuant to CPLR 5519(a)(6) due to Armonk’s failure to comply with the insurance requirements set forth in the July 25 and July 28, 2017 Orders. The Justice Court did not make a determination in connection with the Undertaking. On May 17, 2018, the Westchester Marshal’s Office evicted Armonk from the subject premises. CPLR 5519(a)(6) requires the Court to make a considered determination based on the particular facts of the case before it, of the amount of money that will prevent “waste” to the property in possession of the appellant pending the appeal. It has been held that, notwithstanding the “imprecise nature” of similar analyses under CPLR 6312(b), the undertaking fixed should be “rationally related to the amount of the potential damages.” Clover Street Associates v. Nilsson, 244 A.A.2d 312, 665 N.Y.S.2d 537 (2nd Dept. 1997) The jurisdiction of the Justice Court is set by statute. UJCA §201 limits the jurisdictional claim to money damages to $3,000.00 unless the claims are made within a summary proceeding pursuant to UJCA §204 where the Court may render judgment for use and occupancy without a monetary limit. In the instant matter, there is no current dispute in connection with any rent that may be due to Zeidan by Armonk8. However, the Undertaking included categories for environmental damage and lost profit which are separate and apart from any claim for rent pursuant to UJCA §204. CPLR 5519(a)(6) sets forth the procedural vehicle by a Court directs monies may be paid to a court as an undertaking. CPLR Rules 2606 and 2607 set forth the procedure by which monies paid into a Court may be distributed. Specifically, CPLR Rule 2606 states that one seeking to obtain an “order for the payment of property out of court” can proceed either as provided in subdivision 1, “on motion with notice to all parties who have appeared or filed a notice of claim to such property;” or pursuant to subdivision 2, by a special proceeding. As the July 25, 2017 Decision and Order clearly states, the amounts of the various categories in the Undertaking were not precise, but merely estimates of potential damage. Therefore, the Undertaking was not calculated as a result of a judicial determination of accuracy of the amounts or entitlement. Further, a fair reading of the So-Ordered Stipulation dated July 31, 2017 which was made part of the August 1, 2017 Amended Judgment — Holdover, the specific categories in the Undertaking were not agreed to between Zeidan or Armonk as liquidated sums. Accordingly, as Armonk properly claims in the motion, Zeidan’s claim to the Undertaking has never been adjudicated. In Estate of Doris Dashew, 105 Misc.2d 391, 432 N.Y.S.2d 325 (Surrogates Court, Bronx County 1980), the wife of the distributee of decedent’s estate moved for withdrawal of funds deposited for the benefit of distributee. The Court’s interpretation of the statutory framework of CPLR Rule 2606 illustrates how fundamental fairness directs the manner in which an undertaking which has yet to be adjudicated may be determined. The Surrogates Court held: …CPLR 2606 is construed as leaving it to the discretion of the Court whether the application is to be made by motion or a special proceeding. Implicit in the Legislature having provided for the same relief by motion or proceeding is the duty of the Court to mandate a proceeding where one is appropriate. If the Court did not have this authority then clearly, every claimant would select the less onerous procedure in CPLR 2606(1) rather than commencing a proceeding pursuant to CPLR 2606(2). To conclude that the statute confers on movant a right to proceed by motion would deny fundamental due process to parties who may be adversely affected by the motion which presents issues involving them and on which they will not have the opportunity to be heard on a motion. [Id. at 396-395] Given the complexities of the categories which constitute the Undertaking, to fully adjudicate entitlement to the Undertaking, the parties may avail themselves of the panoply of discovery devices authorized by the CPLR, which are not authorized by the UJCA. Accordingly, it is in the Court’s discretion that fundamental due process mandates that a special proceeding be commenced pursuant to CPLR 2602(2) to fully adjudicate the disposition of the Undertaking. Inasmuch as the entitlement to the Undertaking must be adjudicated, the Court declines to grant the requests by Zeidan or Armonk to release the Undertaking. (See, e.g., 2339 Empire Mgt., LLC v. 2329 Nostrand Realty, LLC, 71 A.D.3d 998, 897 N.Y.S.2d 241 (2nd Dept. 2010) [Because the undertaking is a defendant's basis for damages, discharging the undertaking without deciding the issue of the plaintiff's liability upon the undertaking has been held to be error]). On March 22, 2020, Chief Administrative Judge Lawrence K. Marks directed that no papers may be filed with the County Clerk for filing in light of the COVID-19 outbreak. Within fifteen (15) days of the cessation of the aforementioned order, either Zeidan or Armonk must commence a special proceeding in the Supreme Court for a disposition of the Undertaking pursuant to CPLR 2602(2). Within ten (10) days of the commencement of such special proceeding, Zeidan or Armonk must undertake all necessary measures to transfer the Undertaking from the Justice Court to the Westchester County Clerk. Until the above directives are fully complied with the Undertaking will remain with the Justice Court. This shall constitute the decision and order of the Court. Dated: March 30, 2020
