25 35 LLC v. Excel Automotive Tech Center Inc., Defendant.

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Supreme Court, Kings County, New York.

25-35 Bridge Street LLC, Plaintiff, v. Excel Automotive Tech Center Inc., Defendant.


Decided: October 29, 2018

APPEARANCES Attorneys for Plaintiff DUNNINGTON, BARTHOLOW & MILLER LLP. 250 Park Avenue, Suite 1103 New York, NY 10177 CLARK HILL, PLC 151 S. Old Woodward, Suite 200 Birmingham, Michigan 48009 Attorneys for Defendant ROSENBERG & ESTES, P.C. 733 Third Avenue New York, NY 10017

This action arises from a disputed option to purchase ("option") contained in a commercial lease ("lease") which defendant Excel Automotive ("Excel" or "defendant") admittedly failed to exercise in a timely manner. The preliminary issue introduced at trial was whether the Dead Man's Statute, as contained in CPLR § 4519 ( "Statute"), precluded the introduction into evidence of the lease and or testimony about the lease, because it related to personal transactions and conversations with Bridge Street's deceased predecessor in interest, Joseph Vitarelli ("Vitarelli"). The ultimate issue tried before this court was whether equity should allow defendant to exercise the expired option to purchase the property under the seminal case of J.N.A. Realty Corp. v Cross Bay Chelsea, Inc., 42 NY2d 392 (1977) ("J.N.A."), which held that "equity will intervene to relieve a tenant or mortgagor who, due to inadvertence or neglect, fails to timely exercise an option if the default will cause it to suffer a substantial forfeiture and there is no prejudice to the landlord or seller." Fordham Paradise, LLC v. ABI Prop. Partners, LP XXVI, 306 AD2d 178,178-179 (1st Dept. 2003) citing to J.N.A., supra. 42 NY2d at 397-98.

As will be set forth below, this Court reaffirms its rulings that the Statute does not bar documentary evidence or sworn testimony or affidavits by the deceased from coming into evidence, and its admission into evidence of the lease between Vitarelli and Excel and various affidavits of Vitarelli. It also reaffirms its decision permitting Han and Richard Mauro to testify about the signing of the lease and how defendant attempted to exercise the option. However, this Court finds that defendant has failed to meet its burden of proving that it is entitled to the equitable relief of avoiding the consequences of its untimely attempt to exercise the option and the forfeiture of its investments.


It is undisputed that Excel and Vitarelli initially entered into a written commercial lease, dated March 1, 1999, whereby Excel rented the subject property located at 23-35 Bridge Street in Brooklyn ('property") for use as an auto garage and repair shop for a term of six years, expiring on April 29, 2005. Defendant claims that paragraph 61 of the lease  1 included an option granting Excel the right to purchase the property from plaintiff for $950,000 at the end of the fourth year of the lease, provided that Excel give written notice to Vitarelli of its intent to exercise the option by certified mail within 90 days prior to the end of the fourth year; i.e. November 30, 2002. The lease provision further required that Excel be "ready, willing, and able" to close before the end of February 2003, and that the written notice exercising the option set a time and location for closing.

It is also undisputed that Excel did not timely tender written notice of its intent to exercise the option in writing by the required date. On March 19, 2003, Joseph Vitarelli commenced this action seeking a judgment "declaring the option to be unenforceable and of no further force or effect" ( Complaint ¶ 13) since paragraph 61 of the lease was removed when executed by the plaintiff (Id. at ¶ 8-9)2 or alternatively, that Excel failed to properly provide notice of exercise of the option in the time period and manner required in the Lease; i.e. 90 days prior to the expiration of the fourth year of the lease which was February 23, 2003. (Id. at ¶ 10-11). Thus, Vitarelli sought to preempt any attempt by Excel to affirmatively obtain equitable relief in court by seeking a declaration, while the lease was still in effect, that when the tenant did seek to exercise the option, that it was precluded from doing so.

By answer dated October 20, 2003, Excel submitted its answer and counterclaimed seeking an order granting equitable relief and directing that the property to be conveyed to it for the price of $950,000. Excel averred that it orally informed Vitarelli of its intent to exercise its rights under the option in February 2002 and at other times in Fall 2002 and that Vitarelli's response was to file the lawsuit in March 2003 "within days after the date" that Bridge Street alleges the sale to Excel should have closed. Excel also averred that plaintiff "disaffirmed" the existence of any purchase option, making it clear to the tenant that any written exercise would be futile (¶31). Excel asserted that it entered into the lease because of the option to purchase, that it undertook extensive improvements in the amount of approximately $150,000 in anticipation of becoming the purchaser, and that it was still in the process of expending money.

For some inexplicable reason, Excel did not inform Vitarelli in writing of its election to exercise its option to purchase the property until October 17, 2003, three days before it filed its counterclaims, and eleven months after it should have tendered its written notice. The letter states that the tenant was "ready, willing and able" to purchase the premises for $950,000 on or three months after the date of the notice, and that this written notice "reiterates and confirms" the tenant's prior oral exercise of the option which Han had "personally conveyed to" Vitarelli prior to December 31, 2002, at which time Vitarelli rejected the oral exercise and stated that there was no option provision in the lease (Pl. Exh "W").

For reasons still unknown to this Court, it took almost eleven years for this case to come to trial. The eleven years were consumed with numerous motions and a change in plaintiff's attorneys. Germane to this case are two decision of Justice Michael J. Garson, dated April 21, 2004 and April 14, 2005, which respectively addressed whether Excel's prior attorney had the authority to enter into a stipulation of settlement, and which denied both parties' motions for summary judgment in their entirety. In both decisions, Justice Garson noted that the action arose from "a disputed provision in a lease by which Excel rented property from plaintiff and that the provision at issue, paragraph 61, provided that Excel would have the right to purchase the property after the completion of the fourth year provided that it gave timely written notice of its intent to exercise said option."

In his April 14th decision, Justice Garson, upon reviewing Excel's arguments that it was entitled to equitable relief based upon J.N.A. and its progeny, found that in order to validly exercise an option to purchase real property "one must strictly adhere to the terms and conditions of the option agreement" (P.5) citing to Weiss v. Adler, 187 AD2d 647, 648 (1992). Based upon Han's affirmation that he had orally advised plaintiff on several occasions that Excel intended to exercise the purchase option, Justice Garson found that it was clear that Han was aware of the existence of the purchase option and should have known that he was required to give written notice in a timely fashion. Moving on to the other prongs of J.N.A., Justice Garson found that he was unable to ascertain from the numerous receipts that Han submitted "what the money was expended on and who made the purchases." Id at 5.As such, " a question of fact exists regarding whether Excel would suffer a forfeiture were it not allowed to exercise the option and whether Excel had "recouped and/or depreciated...[the value of its expenditures] during the term of the lease." Id. at 5. Therefore, the court denied that portion of plaintiff's summary judgment motion seeking a declaration that Excel had failed to exercise its option to purchase the premises and that branch of Excel's cross motion seeking a declaration that it validly exercised said option.3 See, Vitarelli v. Excel Automotive Tech, Ctr., 25 AD3d 691 (2d Dept. 2006) (aff'g J. Garson's decision denying motion for summary judgment).

By Order dated September 11, 2011, the Hon. David I Schmidt substituted 23-35 Bridge Street LLC ("Bridge Street" or "plaintiff")4 as the plaintiff following Vitarelli's death in October 2010. Justice Schmidt also removed the non-payment proceeding from Civil Court and consolidated it with the DJ action and directed Excel to make certain payments. Finally, the court ruled that Excel will remain in possession of the property as a month to month tenant of the LLC, subject to the provisions of the expired lease including the purported option to purchase, until the final determination of this action.


More than half of the trial was consumed with various motions in limine brought by plaintiff and arguments over the authenticity of numerous documents.  5 The predominant motion in limine, which plaintiff raised ad nauseam throughout the trial, concerned whether CPLR § 4519 - the " Dead Man's Statute" - precluded certain evidence from coming into evidence. Since plaintiff preserved its right to challenge the court's interim rulings on the Statute until the end of the trial, the Statute will be discussed herein.

Plaintiff first put into evidence the death certificate of Joseph Vitarelli, dated October 15, 2010, through Vitarelli's grandson, Mr. Robertelli, who also is the property manager of Bridge Street LLC. Plaintiff also submitted a series of three deeds certified by the County Clerk conveying the three lots from Joseph Vitarelli to plaintiff Bridge Street LLC ("LLC") (Pl. Exh. "3") prepared on August 20, 2010, and recorded on September 3, 2010. Each of the conveyances contained a page commencing with the term "This Indenture" and included Joseph Vitarelli's signature written by two different attorneys. Plaintiff then rested and argued that it had proven through admissions that the lease term had expired, the lease was not renewed, and that it was the property owner.

Defendant requested that the case be dismissed or that the Court declare that plaintiff had failed to make a prima facie case that either the option did not exist or was unenforceable. The Court denied this request because plaintiff had not even raised the specter of the option, but permitted defendant to proceed on its claim that the option existed and was enforceable and that it was entitled to equitable relief under J.N.A. Plaintiff retorted that defendant could not prove its case because any lease that it might attempt to put into evidence with paragraph 61 intact would be inadmissible under the Dead Man' Statute, and that in any event, as averred in para. 9 of its complaint, the terms of the option had been removed from the lease.

The Court then permitted Excel to proceed on its counterclaim and defendant put its principal, Joke Han on the stand. Han testified that he first became aware of the Bridge Street property in the early part of 1999, while looking for property so he could expand his existing auto repair business that was located on Fulton Street. Richard Mauro, a real estate agent, showed him the Bridge Street property and he immediately commenced negotiations with Mauro to obtain a lease, which ultimately led to the signing of the lease with Mr. Vitarelli. Han testified that when he first saw the building it was "empty...no lights, minimum lights, no heating." (Tr. 6/03 at 38) . Han testified that the lease was signed at a pizzeria on Front Street in DUMBO, Mauro and Vitarelli were already there when he arrived for the signing, and that Vitarelli handed him a copy of the lease and rider. Han identified his own signature, as well as Vitarelli's and Mauro's signatures, since they each signed the document in front of him. Mauro notarized their signatures. His sister Hwee Lan Han was only present to sign as the guarantor but was not a witness to the signing of the lease by Han and Vitarelli; Mauro notarized her signature as well. Han identified the lease that contained the option in paragraph 61 as the complete copy of the lease and rider that he and Vitarelli signed at the pizzeria.

Han testified that after the lease was signed, three original copies where distributed to him, Vitarelli, and Mauro. Han made a copy of the original but gave the actual original to his attorney Mr. William King. Han contacted King before coming to testify at trial but King could not find the original lease. Han kept a copy of the of the lease in his filing cabinet at Excel. Defendant then attempted to admit the lease that Han had signed into evidence ( Def. Exh. A)  6 . Plaintiff contended that this lease was barred under the Dead Man's Statute because it related to personal transactions and conversations with Bridge Street's deceased predecessor in interest, Vitarelli. Plaintiff further argued that Han and Mauro, as interested witnesses, could not proffer or authenticate either version of the Lease.

CPLR § 4519 provides in pertinent part that "Upon the trial of an action..., a party or a person interested in the event...shall not be examined as a witness in his own behalf or interest...concerning a personal transaction or communication between the witness and the deceased person...except where the executor, administrator...or person so deriving title or interest is examined in his own behalf, or the testimony of the ...deceased is given in evidence, concerning the same transaction."

The Dead Man's Statute " prevent[s] the living from testifying to certain personal transactions with the dead." In re Estate of Wood, 52 NY2d 139, 144 (1981)."One of the main purposes of the rule was to protect the estate of the deceased from claims of the living who, through their own perjury, could make factual assertions which the decedent could not refute in court." Mtr of Zalk, 10 NY3d 669, 678 (2008). See also Sepulveda v. Aviles, 308 AD2d 1, 10 (1st Dept. 2003). The Statute thus prevents anyone "interested in the underlying event" from testifying about a personal transaction or communication with the deceased unless the representative of the deceased waives the protection of the statute by either testifying himself or introducing the testimony of the decedent into evidence at trial. Mtr. Of Wood, supra 52 NY2d at 144; Sepulva, supra 308 AD2d at 18. See, Miller v Lu-Whitney, 61 AD3d 1043, 1045 (3d Dept. 2009) citing to Mtr. Of Rosenblum, 284 AD2d 820, 821 (3d Dept. 2001), Klugman v. Laforest, 138 AD3d 1185, 1186 (3d Dept. 2001). The Statute's exclusion of testimony is "specifically limited to testimony received upon the trial of an action or proceeding." Mtr of Estate of Lockwood, 234 AD2d 782, 782 (3d Dept. 1996). See also, In re Estate of Thomas, 124 AD3d 1235 (4th Dept. 2015). The Statute should only be used as a shield to protect the dead man so that no one could take advantage of his estate or reap a benefit when he was not there to defend himself, and the protection is waived if the estate's representative elicits testimony from an interested party that would otherwise fall within the statute's bar, Klugman v. Laforest, 138 AD3d 1185, 1186 (3d Dept. 2016) citing to CPLR 4519. See, Mtr. of Wood, 52 NY2d 139, 145 (1981).

However, the commentaries to CPLR § 4519 state that it is inapplicable to documentary evidence, and that an adverse party's introduction of a document written by the decedent does not, by itself, constitute "testimony" against the estate. McKinneys C4519.1 See, Miller v. Lu-Whitney, supra, 61 AD3d at 1046; Acevedo v. Audobon Mgmt Inc., 280 AD2d 91, 95 (2d Dept. 2001). Introduction of documentary evidence signed by a decedent does not run afoul of the statute "as long as the document is authenticated by a source other than an interested witness's testimony concerning a transaction or communication with the deceased." Mtr. Of Press, 30 AD3d 154, 156-57 ( 1st Dept. 2006) citing to Acevedo, supra, 280 AD3d at 95.

Based upon the above precedent, this Court issued a preliminary ruling allowing Exhibit A into evidence, and stated that "(t)he few cases that I've seen mean that if somebody could authenticate a document independent of what he said to somebody, it can be outside of the dead man's statute" (Tr. 6/03 at 81-82). The Court explained that at this juncture, Han was just authenticating a document and not testifying about communications he had with Vitarelli as to the meaning of the lease, which would be precluded under the Dead Man's Statute (Tr. 6/03 at 81-83).  7

Counsel for plaintiff replied that the only issue before the Court was whether there was an option and queried how the lease with the option could be admitted into evidence since Vitarelli was dead and his client Bridge Street LLC was not in a position as a successor in interest to testify about the authenticity of anything (Tr 6/03 at 42-43). Defendant contended that plaintiff was improperly using the Dead Mans Statute as a sword, rather than as a shield ,by affirmatively bringing an action seeking a declaration that the option did not exist or was unenforceable, or in the alternative, that Han never exercised it, which itself relied upon the assertions of the dead man - i.e. Vitarelli. It also asserted that prior pleadings in the same action were always before the Court and that the statements included therein were judicial admissions. Specifically, ¶¶ 9 and 10 of the complaint averred that paragraph 61 of the lease was removed when the lease was executed by plaintiff, and that regardless of whether paragraph 61 was contained in the lease, defendant failed to properly exercise the option rights "contained therein" by failing to timely provide a notice of exercise to plaintiff.

The Court requested that the parties provide cases on the unique issue presented by this case: whether affidavits signed by the decedent, while living, in support of a lawsuit he had brought against an adverse party, was akin to "testimony" rendered by the decedent before his death, which would vitiate the need for the Statute.

Court's Final Rulings on the Dead Man's Statute

After four days of hearing, the Court made definitive rulings on the Dead Man's Statute which it reaffirms herein. The Court then identified three issues pertaining to the Dead Man's Statute: (1) whether the lease and other documentary evidence could be admitted into evidence; (2) whether Han could be permitted to testify about the circumstances surrounding the execution and exercise of Excel's rights under the Lease; and (3) whether Mauro was an "interested party" who must be barred from testifying about the signing of the lease (Tr. 9/16 at 7).

This Court first affirmed its preliminary ruling that Def. Exh. "A" - the version of the Lease with Paragraph 61 intact - could remain in evidence so long as Mauro or another disinterested witness could authenticate Vitarelli's signature on the lease (Tr. 9/16 at 7-8, 30, 32). See, Acevedo v. Audubon Mgt., 280 AD2d 91 (1st Dept. 2001); Yager Pontiac, Inc. v. Fed A. Danker & Sons, 41 AD2d 366 (3d Dept. 1973); Kiser v. Bailey, 92 Misc 2d 435 (Civ. Ct., NY Co. 1977). In Acevedo, supra, the plaintiff's decedent died of injuries sustained during a fire in his apartment. The plaintiff, administratrix of the decedent's estate, commenced a wrongful death action against the defendant owners alleging that their failure to install smoke detectors caused the death. The defendants moved for summary judgment, claiming that it was the tenant's responsibility to install a smoke alarm and that the apartment had been equipped with a smoke detector on the day of the fire, as evidenced by a copy of a receipt signed by the deceased acknowledging its installation. The court noted that while the Statute would bar the owners, as interested witnesses, from expressing an opinion as to the "genuineness of the deceased's handwriting," it would not "by its terms, prohibit the introduction of documentary evidence against a deceased's estate." 280 AD2d at 95. Since the deceased's daughter conceded that the signature on the receipt was that of her father, and this did not constitute testimony concerning a transaction of communication with the deceased, said receipt was admissible into evidence. Id.

In Kiser v. Bailey, supra, the court highlighted the difference between testimony and tangible evidence. It found that "the "common law's distrust of testimony offered by a witness who has some direct interest in the result of the litigation," which is the underlying basis of the Statute, is not implicated when otherwise authenticated documentary evidence is introduced into evidence. 82 Misc 2d at 437. Therefore the court permitted the plaintiff, an attorney who had performed legal work for the deceased, to put into evidence a check signed by the deceased and made payable to plaintiff as evidence of the retainer agreement between the plaintiff and the deceased. 82 Misc 2d at 438-39. However, the court precluded any testimony by the plaintiff as to the underlying transaction between him and the deceased. See also, Miller v. Lu-Whitney, 61 AD3d 1043 ( 3d Dept. 2009) (agreement signed by decedent which gave plaintiffs a one half interest in his sculptures in return for their paying him a monthly stipend, admitted into evidence since decedent's wife, a party defendant and one not adverse to the interests of the deceased or estate, conceded in deposition testimony that the signature on the agreement was authentic); ROI, Inc. v. Hidden Valley Communications, 45 AD3d 1010 (3rd Dept. 2007) ( the plaintiff sought specific performance of a stock agreement and lease between it and decedent. While these two documents were allowed into evidence, any testimony from plaintiff concerning his transactions, interactions or written and oral communications with the deceased were prohibited); Yager supra ( letter signed by decedent creating an easement admissible against plaintiff although no testimony permitted regarding any conduct, or communication with the decedent).

This Court then ruled that the Dead Man's Statute was never intended to completely foreclose someone from putting on a defense but rather was created to "insure ...an equal playing field" (Tr. 9/16 at 28-29). Vitarelli, while alive, initiated a lawsuit and submitted affidavits which averred that the original version of the lease redacted the option to purchase, annexed a copy of said lease to the complaint, and then died leaving the defendant without the ability to mount a defense (Id at 28-29). Thus, "but for that lease you couldn't come in ...and say that no option existed... That was the whole predicate for your case." (Tr. 6/03 at 42). Therefore, Bridge Street could not assert the Statute as a blanket sword against defendant by contending that paragraph 61 of the lease had been removed and at the same time arguing that defendant could not mount a defense by presenting its version of the lease into evidence.

Plaintiff then argued that Richard Mauro should be precluded from authenticating, or discussing the lease since he qualified as interested witness under the Statute as he stood to obtain a brokerage commission upon the sale of the property. Plaintiff identified a letter dated October 31, 2006 from Mauro to Vitarelli in which he claimed a six per cent commission of the $950,000 proposed sale because Joke Han of Excel had exercised his option to purchase. Mauro also allegedly wrote that by State law he was entitled to the commission, regardless of whether Vitarelli chose to sell or not. (Tr/ 10/08 at 73-76). The Court rejected plaintiff's argument that Mauro was an interested party because his ability to collect on the commission was ancillary to the outcome of this case and dependent upon his suing Vitarelli or his estate, which might now be barred by the statute of limitations Furthermore, Mauro took the position in the letter that he was entitled to the commission based upon his bringing the parties together and regardless of whether Han ultimately became the owner, thus negating plaintiff's argument that it was in Mauro's interest that defendant prevails in the instant matter. Finally, since plaintiff never introduced this letter into evidence or even questioned Mauro about it, there simply no evidence in the record to support the claim that Mauro had a "present, settled invested interest." (Tr. 10/28 at 59. See generally, Id. at 57-64).

The Court re-affirmed that the lease was in evidence and that Han's limited testimony authenticating the lease could stand. The Court precluded Han from testifying about any conversations he had with Vitarelli concerning the contents of the lease. This decision is consistent with precedent that have barred the application of the Statute where "to apply the rule is to effectively nonsuit the plaintiff". Kiser v. Bailey, supra, 92 Misc 2d at 437. See also, French v. O'Donohue, 239 AD2d 903, 903 (4th Dept. 1997) . The Court also allowed Mauro to authenticate the lease and to testify about conversations he had with Mr. Vitarelli pre-existing the signing of the lease (10/8 at 79-80) and about his interactions with Han after the lease was signed. However, the Court precluded Mauro from disclosing what, if any discussions he heard between Han and Vitarelli about the oral request to exercise the option (10/8 at 77).

Richard Mauro is a licensed real estate broker and developer and, in 1999, was just starting a commercial real estate practice and was looking for "owners and deals"(Tr. 10/08 at 81). In 2003 he wanted to become an "owners rep," which is the person who becomes the "eyes and ears" of the owner at the site and supervises the construction on the site. Mauro had used Han as his mechanic for 25 years. He met Vitarelli in 1999 in the Dumbo neighborhood and Vitarelli subsequently indicated that he wanted to 'market the property" and asked Mauro whether he knew someone who was well established and could be relied upon to pay the rent. Mauro took Vitarelli over to Joke Han's place wherein Joke and Vitarelli discussed the property and Vitarelli ultimately had his attorney draw up a lease. Mauro identified Def. Exh. A as the lease that was on the table and the one he notarized. He observed both Han and Vitarelli sign the lease. Mauro testified that he remembered the events surrounding this lease very well because this was the first deal he ever closed as a commercial broker (Id at 83).

The Court reaffirms this ruling. A party claiming that a witness is "interested in the event" and therefore precluded from testifying under the Statute, has the burden to prove that the witness is interested. Fireman's Fund Ins. Co. v. Wilner, 2012 U.S. Dist. LEXIS at*11-12 (E.D.NY 2012); Tenuto v. Lederle Labs. 27 Misc 3d 506 (Sup. Ct. NY Co. 2010). Here, Bridge Street offered no proof beyond the bare allegation that Mauro might receive a commission from the sale of the property, and never introduced the letter into evidence or questioned Mauro about the terms of the letter. Even had Bridge Street introduced the letter into evidence, a contingent claim for a brokerage commission is not an interest that would preclude an individual from testifying in this case. In In Re Zalk, 10 NY3d 669, 679 (2008), the Court of Appeals found that the Dead Man's Statute did not preclude testimony by attorney Zalk about his conversations with his deceased client in a proceeding before the Disciplinary Committee investigating charges that he had misappropriated funds from an escrow account. Zalk was not an interested witness, even though his testimony might ultimately affect how much money the executors of the deceased's estate could recover from the Lawyers fund for Client Protection, because his testimony was "not against the executor administrator or survivor.." The Statute "does not foreclose testimony that potentially cuts against these parties' interests in a contingent future proceeding." 10 NY3d at 679. Similarly, here, Mauro's only interest in the transaction is his potential right to collect a commission against the estate, which is not before and will not be decided by this Court. Parenthetically, any potential lawsuit between Mauro and the estate will not be dependent upon Mauro's testimony in this matter since the Court precluded Mauro from testifying about any communications he had with Vitarelli over the meaning of the lease and or Excel's attempt to exercise the option.

Finally, on October 6th the Court allowed into evidence two affidavits written by Vitarelli: one sworn to on May 23, 2003 in support of "plaintiff's request for entry of a declaratory judgment on default that any purchase which may have been contained in the original lease is no longer viable" and has not been exercised (¶2 of affidavit), and one sworn to on November 8, 2003, in opposition to defendant's motion seeking to vacate its default in answering the complaint. Both affidavits reveal that plaintiff clearly anticipated and then actually addressed and refuted defendant's arguments as why it should be awarded equitable relief under J.N.A.

Vitarelli averred in both affidavits that the original version of the lease redacted the purchase option included in paragraph 61. He then asserted in both affidavits that assuming arguendo that the purchase option was not deleted, that he never received written notice of the intent to exercise the option within 90 days before the expiration of the fourth year of the lease, as required by paragraph 61; and that notice was a condition precedent to the exercise of the lease, the absence of which rendered the paragraph inoperative (¶ 5 and ¶3 respectively). In paragraph 5 of the May 23rd affidavit, Vitarelli asserted that the "closing" provisions of paragraph 61 required defendant to show that he was "ready, willing and able " to close and must close title within three months following the appropriate notice of intent to exercise. In paragraph 6, Vitarelli detailed how the "uncertainty surrounding "defendant's claimed rights to purchase the premises have adversely impacted his rights because he has been unable to negotiate with any prospective purchaser of the premises or new tenant."

In his November 8th affidavit, Vitarelli distinguished between Han's claims that he "expressed" an intention to exercise the option and actually exercising the option, which Han never did in a timely fashion. He then pointed out that defendant failed to give "the slightest relevant details that would undoubtedly have been available...had he actually exercised the option;" i.e., time, date, places and the method by which the alleged notice was given (¶5). Furthermore defendant failed to allege that he ever requested a closing date or place and admitted that he was "immediately put on notice that Plaintiff disputed the very existence of any option." (¶7). Vitarelli then claimed that defendant's claim of expenditures of $150,000 were unsupported and vague (¶ 8).

Since Vitarelli had already given sworn statements refuting defendant's counterclaims, the Court ruled that Han could testify about what he did to exercise the option, but that he could not discuss Vitarelli's response to his action (Tr. 10/06 at 73-76, 80-81). Specifically, the Court allowed Han to testify about his understanding of when he was supposed to exercise the option and why he believed that the option existed The court also permitted Han to respond to Vitarelli's allegations that he did not receive notice of Excel's intent to exercise the option and permitted to testify when and where he allegedly orally informed Vitarelli of his intent to exercise the option. Finally, since defendant bore the burden of proving the three J.N.A. factors, and since Vitarelli had anticipated defendant's J.N.A. arguments in his affidavits, the Court allowed Han to testify in support of his claim for equitable relief under J.N.A.

In reaching this conclusion, the Court noted that while the Statute prohibited the introduction of affidavits or pretrial depositions at trial of persons other than the deceased since he could not offer a rebuttal, the statute would not be implicated in the instant matter by the admission of the complaint and affidavits sworn to by the decedent while he was alive, since he authored them and while alive could promote his version of the events (Tr. 10/6 at 77-78). The decedent's affidavits also constituted an admission against interest since in addition to asserting that paragraph 61 was crossed out, Vitarelli also asserted that even had the option existed, the time in which Han could exercise the option had long since passed. Finally, between 2003 and 2011, the year when he died, Vitarelli vigorously pursued the arguments contained in his affidavits and, in response to Excel's J.N.A. counterclaim, argued on multiple occasions that he was prejudiced by Excel's failure to provide notice of its intention to exercise.

The Court reaffirms its decision. The closest case law on point is Ward v. Kovacs. 55 AD2d 391 (2d Dept. 1977), a medical malpractice lawsuit brought by a plaintiff patient against the defendant doctor who died prior to the trial. One of the grounds for malpractice was the doctor's alleged failure to properly respond to the plaintiff's phone call on a Friday evening. The trial court permitted the plaintiff to introduce the deposition taken of the doctor wherein he discussed his treatment of the plaintiff, and allowed plaintiff to testify about the alleged Friday night telephone conversation she had with the doctor. At issue on appeal was whether this testimony fell within the Statute's exception for testimony offered to rebut the admission of prior testimony of the deceased concerning the same transaction or communication, where the deposition was offered not by the decedent's estate but by the plaintiff herself. 55 AD3d at 400, citing to 5 Weinstein-Korn-Miller, NY Civ. Prac. ¶4519.23.

After exhaustively reviewing the fallacies of the Statute and recognizing the need for its fairer application, the Second Department allowed the plaintiff to testify against the decedent's estate, limited only to the transactions actually discussed in the deposition. Id at 403-04. See also, Hermann v. Sklover Group, Inc., 2 AD3d 307, 307 (1st Dept. 2003). Plaintiff could respond to the assertions in the deceased's deposition even though the successor in interest had not "opened the door" by introducing prohibited testimony or evidence concerning the transaction. Id at 403-04. To preclude plaintiff's testimony just because she, rather than the decedent's representative introduced the deposition, would constitute an expansion of CPLR § 4519 by implication. Id. at 403. The court explained that the protections afforded by the Statute against exposing the estate to claims that it could not defend were not present in the case at hand since the decedent had the chance, and in fact expressed his version of the incident for the record, under oath. Id. at 403-404. Thus despite the deceased's unavailability for cross examination before the jury, the surviving adverse party who gave testimony in contradiction of the deposition, would be available for cross-examination at trial and subject to the scrutiny of the finder of fact, thus ensuring that the decedent's interests would not be compromised. Id. Finally, the court warned against permitting a trial to be a "contest of strategies" as opposed to the quest for truth. Id. at 404. Thus, counsel for the decedent should not be placed in the position of determining whether it is more beneficial for his client to admit the deposition into evidence, thus "opening the door" to survivor testimony, or to suppress the deposition, thus leaving the door closed. This decision should be made by the court. Id at 404 See also Bernard v. Hyman, 155 AD2d 403 (2d Dept. 1989); Tepper v. Tannenbaum, 65 AD2d 359 (1st Dept. 1978).

There appears to be only one case which addresses the applicability of the Dead Man's Statute to affidavits authored by a deceased who had commenced the action while alive and was subsequently substituted by his executors, Friedman, v. Sills, 112 AD2d 343 (2d Dept. 1985). The action arose out of a dispute between former partners concerning the return of distributed profits accrued by the medical partnership. The Second Department found that CPLR § 4519 "has no applicability" to affidavits prepared by the defendant former medical partner ( Dr. Wolff) in support of his motion for summary judgment since it consisted of the now decedent's "personal knowledge" and not testimony of any transactions or communications with him. Id. at 345.8

This Court finds that the rationale of Friedman and Ward is equally availing here, since Excel attempted to depose Vitarelli prior to his death ( Tr. 6/2/ at 21) and submitted at least two sworn two affidavits by Vitarelli concerning the execution of the lease and option which were addressed in at least two prior decisions. As summarized above, Justice Garson twice addressed the conflicting arguments as to whether the option to purchase even existed and noted that while plaintiff (then Vitarelli) submitted a copy of the lease with paragraph 61 crossed out, Excel presented a copy of the lease with paragraph 61 intact. He also noted that plaintiff claimed that he never received the original lease from the broker who facilitated the transaction. Thus, the very arguments expressed by Vitarelli in his affidavits were memorialized in court decisions.

These prior two decisions also constitute the "law of the case." In both state and federal court, a judicial decision concerning an issue of law made at one stage of the a litigation becomes the "law of the case," i.e. "binding precedent to be followed in subsequent stages of the same litigation." Firestone v. Barrios, 42 F. Supp. 3d 403, 411 (E. D.NY 2013), citing Scottish Air Intern, Inc. V. British Caledonian Group, PLC., 152 F.R.D. 18, 24 (S.D.NY 1993); Leber-Krebs, Inc. V. Capitol Records, 1985 U.S. Dist. LEXIS 22325 at 10 (S.D.NY 1985). Despite colloquial meanings given to this doctrine over the years, it is now recognized as a "concept regulating pre-judgment rulings made by courts of coordinate jurisdiction in a single litigation."People v. Evans, 94 NY2d 499, 502 (2000); 10-5011 NY Civil Practice: CPLR P 5011.09.9 See, Collins v. Indart Etienne, 50 Misc 3d 1026, 1043-44 ( Sup. Ct. Kings. Co. 2018). The very issues before this Court were known to and addressed by Vitarelli over a period of eight years prior to his death, so that plaintiff cannot now argue that they are being ambushed or being denied an opportunity to address Han's limited testimony concerning his signing of the lease.


Under J.N.A., a court may relieve a commercial tenant's failure to timely exercise an option to purchase or renew a lease where (1) such failure was the result of "inadvertence," "negligence" or "honest mistake;" (2) the nonrenewal would result in a "forfeiture" by the tenant due to his substantial improvements on the property; and (3) the landlord would not be prejudiced by the tenant's failure to send, or its delay in sending, the renewal notice. See, Baygold Assoc., Inc. v Congregation Yetev Lev of Monsey, Inc., 19 NY3d 223, 225 (2012), citing to J.N.A. Realty Corp. v Cross Bay Chelsea, Inc., 42 NY2d 392, 397-98 (1977). See also, Waterfalls Italian Cuisine, Inc. v Tamarin, 149 AD3d 1141, 1142 (2nd Dept. 2017); Vitarelli v Excel Auto. Tech. Ctr., Inc., 25 AD3d 691 (2nd Dept. 2006). All three prongs must be satisfied for equitable relief to be granted; if any of the criteria are not met then relief must be denied. Baygold Assoc., Inc. v Congregation Yetev Lev of Monsey, Inc., 2010 NY Slip Op 50525[U], 27 Misc 3d 1202[A] *5 (Sup. Ct., Rockland Co. 2010), aff'd 81 AD3d 763 (2d Dept. 2011), aff'd 19 NY3d 223 (2012). The Second Department has explicitly placed the burden on the party seeking equitable relief to show that it has met all three J.N.A. prongs.. Mtr of 221-06 Merrick Blvd. Assoc., LLC v Crescent Elec. Acquisition Corp., 79 AD3d 896, 897 (2nd Dept. 2010); Temple Emanu-El v AG, 240 AD2d 752 (2nd Dept. 1997).

The underlying principle of J.N.A. is that equity allows a court to intervene to protect a tenant from his failure to strictly comply with a relatively inconsequential requirement of an option clause "because he might suffer a forfeiture if he has made valuable improvements on the property." 135 E. 57th St. LLC v. Daffy's Inc., 91 AD3d 1, 5 (1st Dept. 2011) citing J.N.A., supra, 42 NY2d at 397-98. Equitable relief must always depend upon the facts of a particular case, and should be granted only where the tenant's failure was slight, and the loss suffered by the landlord was small when compared to the hardship that would result to the tenant. Bank of NY v Ulster Hgts. Props., Inc., 114 AD2d 431, 434 (2nd Dept. 1985); 149-05 Owners Corp. v Phillips, 2013 NY Slip Op 51818[U], 41 Misc 3d 1223[A], *12 (Civ. Ct., Queens Co., 2013). "Substantial noncompliance with the terms of an option clause cannot be rewarded by a judicial forgiveness that redounds to the detriment of the other party to the contract." McVey v. Simone, 73 AD2d 959, 960 (2d Dept. 1980).

Where a lease specifically requires written notice to exercise a renewal or purchase option, a tenant's oral notice that he intends to exercise the option is ineffective and insufficient on its own to warrant equitable relief. Oppenheimer & Co. v Oppenheim, 86 NY2d 685, 687 (1995); Redlyn Elec. Corp. v Louis Shiffman, Inc., 81 AD3d 621, 622 (2nd Dept. 2011). However, such oral communications, if supported by the record, may be evidence that the lessee knew or should have known that the tenant intended to exercise the option. Pepe's Shamrock, Inc. v Vecchio, 128 AD2d 599, 600 (2nd Dept. 1987); Tritt v. Huffman & Boyle Co., 121 AD2d 531, 532-533 (2nd Dept. 1986).

Excel concedes that it failed to exercise the option until 11 months after the deadline, including more than seven months after plaintiff's initiation of this action. Nevertheless, it contends that it is entitled to equitable relief because its delay was inadvertent and that Han orally informed Vitarelli on multiple occasions from February through October 2002 that he intended to exercise the purchase option. Excel further claims that it stands to suffer a substantial forfeiture because it made significant and costly improvements to the property totaling more than $130,000 in anticipation of purchasing the property, which it would not have expended otherwise. Finally, Excel argues that there is no prejudice to plaintiff since neither Vitarelli nor Bridge Street ever negotiated to sell or lease the property to another party and they had no intention to do so.

Bridge Street argues that equitable relief should be denied because Excel fails to satisfy any of the J.N.A. criteria. It argues that Excel's delay was inordinate, as no court has ever excused an 11-month delay resulting wholly from the tenant's negligence, and that Excel's delay was willful and therefore not excusable. It also argues that Excel failed to prove that it made the claimed improvements, or that it did so with the specific intention of purchasing the property rather than utilizing it during the lease term. Finally, Excel has failed to meet its burden of showing an absence of prejudice to Bridge Street. As explained herein, Excel has failed to satisfy the first two prongs, and thus, equitable relief must be denied.

Reasonable Delay

In all J.N.A. cases, the court's central concern is the length of the tenant's delay, and the reason for it. The courts are much more likely to excuse a shorter delay caused by an innocuous reason. Nearly all cases where equitable relief was granted involved a delay of less than six weeks, and the tenant's failure to timely exercise was cured immediately or soon after notice was given by the landlord. See e.g.,St. Beat Sportswear, Inc. v Waterfront Realty Co., 6 AD3d 693 (2nd Dept. 2004) (11 days); Nanuet Bank v. Saramo Holding, 153 AD2d 927 (2nd Dept. 1989) (six days); Am. Power Indus., Ltd. v Rebel Realty Corp., 145 AD2d 454 (2nd Dept. 1988) (six weeks); Chrysler Realty Corp. v Urban Inv. Corp., 100 AD2d 921, 923 (2nd Dept. 1984) (three weeks); Eva Donut Shop, Inc. v. Pace, 54 AD2d 575 (2nd Dept. 1976) (tenant's six week delay was excused because it was immediately cured by the tenant upon notice by the landlord with ten weeks remaining before the lease's expiration). Equitable relief is less likely to be granted if the delay exceeds six weeks, although in limited instances, courts have excused a tenant's delay more than three months. See Popyork, LLC v 80 Ct. St. Corp., 23 AD3d 538 (2nd Dept. 2005) (two-and-one-half months); Souslian Wholesale Beer & Soda, Inc. v 380-4 Union Ave. Realty Corp., 166 AD2d 435 (2nd Dept. 1990) (six-and-one-half months); Nichols v Didas, 137 AD3d 1495 (3rd Dept. 2016) (four months).

While there is no actual outer limit, equitable relief has been denied where the delay exceeded eight months and the delay was caused solely by the tenant's negligence. See, e.g., Dan's Supreme Supermarkets v. Redmont Realty Co., 216 AD2d 512 (2nd Dept. 1995) (nine months); 149-05 Owners Corp., supra, 2013 NY Slip Op 51818[U] at *20 (16 months). There appear to be only two cases where a court excused delays beyond eight months, and then only because of exceptional circumstances where the landlord contributed to the tenant's delay. In Hunt v. Carlson, 136 AD2d 853 (3rd Dept 1988), the court excused a tenant's year-long delay in exercising a purchase option because of an ambiguity in the lease as to the date when the option had to be exercised, causing the tenant to reasonably miscalculate the option deadline. In Harlington Realty Corp. v Farmiloe-Burke Corp., 108 Misc 2d 690 (Civ. Ct., Kings Co. 1981), the court excused a commercial tenant's 17-month delay after the expiration of the lease to exercise the option due, in part, to the landlord's role in sowing confusion as to the appropriate deadline. The court found that the landlord contributed to the tenant's negligence by sending out rent notices, and accepting rent at the old rate as opposed to the renewal rate after the lease had expired. After 17 months, the tenant commenced sending the increased rent amount set forth in the option, which immediately spurred the landlord to send a 30 day notice to terminate. The court allowed the tenant to retroactively exercise the option.

Here, Excel's 11 month delay in providing the landlord with written notice of its intent to exercise the option in writing far exceeds the outer limit of reasonable delay, particularly since Excel was put on notice that the option deadline had passed and then still waited another seven months before submitting its written notice. In practically all cases where the delay was excused, the tenant cured its delay immediately upon learning that it had defaulted.

The Court must also assess the reason for the delay in determining whether a party has met the first prong of the J.N.A. test. Without providing actual definitions,10 the courts have applied a spectrum ranging from minor inadvertence (commonly referred to as "venial inattention") to substantial negligence to gross negligence. Courts will excuse a short delay resulting from a nominal technical defect or venial inattention which usually takes the form of exercising the option in a manner different from what is described in the lease. See, e.g., Sy Jack Realty Co. v Pergament Syosset Corp., 27 NY2d 449 (1971) (notice was mailed but never delivered); Mass Props. Co. v 1820 NY Ave. Corp., 152 AD2d 727 (2nd Dept. 1989) (notice exercising the option was sent to the landlord, but not the landlord's attorney as required by the lease); Pitkin Seafood, Inc. v. Pitrock Realty Corp., 146 AD2d 618 (2nd Dept 1989) (option was exercised by a corporate officer rather than the corporate entity); Grunberg v. George Associates, 104 AD2d 745 (1st Dept. 1984) (notice not sent by certified mail as required by the lease); United Skates of Am., Inc. v Kaplan, 96 AD2d 232 (2nd Dept. 1983) (option was negligently exercised using a standard contract of sale forms that did not strictly conform with the precise terms of the lease); Bank of New York, supra, 114 AD2d at 434 (tenant's delay resulted from ambiguity in lease).

However, once the tenant fails to exercise the option at all, and does not immediately cure the default after learning that the time to exercise the option has expired, the courts will ipso facto find that substantial negligence defeated any claim for equitable relief. See, e.g. Soho Development Corporation v. Dean & Deluca Inc., 131 AD2d 385, 387 (1st Dept 1987) (tenant's delay involved excessive negligence because it attempted to exercise option three and a half months late and refused to renegotiate the rent upon exercising the option); Cooper v. Number 535 Park Ave., 2009 NY Slip 31490(U), 2009 NY Misc. LEXIS 5991 (Sup. Ct. NY Co. 2009); 149-03 Owners Corp., supra, 2013 NY Slip Op. 51518(U).Moreover, regardless of the length of the delay, equitable relief will be denied where a tenant's delay was willful or the result of his own gross negligence. See Marina Tower Assoc., L.P. v 325 Southend Corp., 40 Misc 3d 51, 52 (App. Term, 1st Dept., 2013) (tenant's delay was an intentional attempt to renegotiate renewal terms); Nobu Next Door, LLC v Fine Arts House., Inc., 3 AD3d 335, 336 (1st Dept 2004) (tenant's delay was a deliberate business decision); 95 Main St. Serv. St.,lnc. v. H & D All Type Repair , Inc., 162 AD2d 44- 441 (2d Dept. 1990) (tenants deliberately delayed exercising option while they looked for another location and considered selling or assigning the lease).

Here, the sole reason for Excel's failure to tender written notice of its intent to exercise the option for over 11 months was Han's negligence. Han claimed that he had limited time to attend to his business affairs because he was consumed by personal matters during the period leading up to and following the November 30, 2002 option deadline. Han testified that he worked six days a week and was dealing with overwhelming "family and personal problems in that time frame" (Tr. 10/7 at 9-10). Han also testified that he "lost track of time" and had "no thoughts" about the option during that time period (Tr. 10/7 at 9-12, 61, 64-66). In particular, Han was preoccupied with securing employment for his brother Ricky, who had been incarcerated from 1993 until early 2003 when he was granted supervised release provided that he found a job. Han repeatedly testified that his brother started working in a deli in February or March 2003 and that this work was a condition of his probation. Han spent five to six months prior to February 2003 seeking work for Ricky. He did this on Sundays as he was working six days a week. Additionally, Han was having marital difficulties during this period; he and his wife ultimately separated. Finally, Han blamed his delay in writing the letter on his prior attorney. He was served papers in July 2003 and then retained an attorney who was not "giving the proper advice" (Tr. 10/7 at 8-9). Only then did he retain Rosenberg and Estis whereupon he tendered the letter attempting to exercise the option .

This Court cannot excuse Han's inordinate delay in sending written notice of his intent to exercise the option, despite his salutary preoccupation with taking care of his brother. Had Han attempted to cure his delay by submitting a written notice to Vitarelli immediately after finding work for Ricky in February 2003, which coincided with the expiration of the 90 day period in which the parties should have closed on the option, the Court might rule otherwise. However, Han offered no legitimate reason for why he waited another seven months after February 2003 in which to tender his letter of intent to exercise. Having continuous marital difficulties or not trusting his attorney do not justify this delay.

Furthermore, Han's testimony that he was sidelined by other issues and lost track of time is contradicted by his other testimony that he "lived and breathed" the lease ( (Han Dep. 1/30/08 at 83), and was very familiar with the terms of the option and understood its requirements. He also testified that he was aware that the fourth year of the lease expired at the end of February 2003, and that 90 days prior thereto would be November 30th, but then stated that he lost track of time and did not have any consciousness of the deadline date of November 30, 2002. Id. at 61-62. Han offered blanket excuses as to why he did not send written notice in March through September 2003: "It didn't occur to me, but the date was expired already....I lost track of time." Id. at 63-65.

Han also confirmed that he was aware of the option by testifying that he orally told Vitarelli that he was going to buy the building "every time" that Vitarelli came down to the building. He testified that he saw Vitarelli about five to six times and mentioned that he would be exercising the option to purchase on each of these occasions. Furthermore, in support of his claim that he was prepared to close, Han stated that prior to and within the three month option period he sought financial assistance from his family members in order to raise the $950,000 required as the option price, and also spoke to a loan officer to secure financing for the purchase. Thus, it is clear that Han was fully aware of his responsibility to exercise the option in writing and the lease requirement to be "ready, willing and able" to purchase the property at that time.11

Furthermore, Han repeatedly testified that Excel was a family business, and that his sister Hwee Lan Han was a director of Excel and intimately involved with how to proceed with this lawsuit. He also admitted that she was aware of the lease and option terms, was involved in discussions regarding this action, and, of greatest import, that she had authority to exercise the option and could have done so on Excel's behalf. Id.

Based upon the above, it is clear that Excel has failed to prove that its failure to timely exercise the option in writing was the result of "inadvertence," "negligence" or "honest mistake." Excel's delay was not due some procedural or technical mishap and paragraph 61 of the lease was quite clear as to what steps Han had to take to exercise the option. Moreover, Han was entirely responsible for his delay and the evidence reveals that he was aware of the option deadline. Unlike cases where the tenant was notified of its tardiness and took corrective action almost immediately, Han failed to cure his default for several more months. In sum, Excel's delay constitutes inexcusable gross negligence and does not warrant the granting of equitable relief.


In denying summary judgement, Justice Garson found that there was an issue of fact as to whether Excel would suffer a forfeiture if equitable relief was denied. Excel claimed that it expended more than $130,000 in improvements with the intention of exercising the option, and submitted a significant number of invoices and receipts, which Han testified were proof of those improvements. However, Justice Garson was unable to ascertain whether Excel in fact made the purchases, when exactly it made them, what exactly the money was expended on, and whether those expenditures actually went towards improvements at the Bridge Street property; these issues were addressed during trial.

A forfeiture results when a tenant, who neglected to timely exercise an option to renew or purchase, made valuable improvements to the property with the intention of exercising the option. J.NA., supra, 42 NY2d at 397. See also, Baygold Assoc., Inc. v Congregation Yetev Lev of Monsey, Inc., 81 AD3d 763, 765 (2nd Dept. 2011); 5 E. 41 Check Cashing Corp. v Park & Fifth Owner, LLC, 44 AD3d 373 (1st Dept. 2007); American Power Industries, Ltd., 145 AD2d 454 (2nd Dept. 1988). Even where the tenant made substantial improvements, equitable relief will not be granted unless the tenant can show that such improvements were made with the specific intention of exercising an option. See,, Trieste Group, LLC v Ark Fifth Ave. Corp., 13 AD3d 207 (1st Dept. 2004). See also, 5 East 41 Check Cashing Corp. v. Park & Fifth Owner, 44 AD3d 373 (1st Dept. 2007); 221-06 Merrick Blvd. Assn. v. Crescent Electrical Acquisition Corp., 2009 NY Slip Op. 515 86 (U), 24 Misc 3d 138(A) (App. Term, 2d Dept. 2009). Furthermore, expenditures for nonpermanent fixtures do not count towards a forfeiture as they can be removed and do not indicate a tenant's intent to exercise a renewal or purchase option. J.N.A. supra, 42 NY2d at 402-403; Oriental Buffet & Grill Inc. v Vornado Gun Hill Rd. LLC, 33 AD3d 436, 437 (1st Dept. 2006); Soho Development Corp., supra, 131 AD2d at 387 (large shelving units and display cases associated with a supermarket can be removed and relocated).

The most significant factor in determining a tenant's intent to exercise an option is when during the leasehold the improvements were made. Where improvements made by the tenant are towards the beginning of the lease term, and are necessary for the utilization of the premises, the courts will typically find that the tenant has not evinced an intent to exercise a renewal or purchase option. See Soho Dev. Corp. v. Dean & De Luca, Inc., supra, 131 AD2d at 500; 135 East 57th St. LLC v. Daffy's Inc.,91 AD3d 1 (1st Dept. 2011); Wayside Homes, Inc. V. Purcelli, 104 AD2d 650 (2d Dept.1984); 149-05 Owners Corp., supra, 2013 NY Slip Op 51818[U], 41 Misc 3d 1223[A], at *16. In such cases, the improvements are deemed to have been amortized and/or depreciated by the time of the exercise of the renewal, so that the tenant has "reaped the benefits of any initial expenditure." 135 East 57th Street, supra, 91 AD3d at 5, citing to Wayside Homes, Inc., supra, 104 AD3d at 651. See, e.g., Trieste Group, LLC, supra, 13 AD3d at 207 (no forfeiture even where tenant expended $67,000 because improvements were made between three and five years before the lease term expired and were therefore "recouped and/or depreciated in value during the term of the lease"); Soho Development Corporation, supra, 131 AD2d at 386 ("major costs of improvements" to retail supermarket made during first two years of a six-and-one-half year lease term did not amount to a forfeiture). On the other hand, substantial improvements made close to or after the expiration of a renewal or purchase option indicate a tenant's intent to exercise it. J.N.A., supra, 42 NY2d at 396. See also, e.g., Bench 'N' Gavel Rest., Ltd. v Time Equities, Inc., 169 AD2d 755 (2nd Dept. 1991) (commercial tenant took over lease with fewer than two years remaining until the option's expiration and expended more than $200,000 on improvements during that time); 537 Greenwich LLC, supra, 2008 NY Slip Op 50989[U], 19 Misc 3d 1133(A) at *9 (tenant made significant renovations to property within months of the lease's expiration).

Excel claims that it meets the forfeiture prong of J.N.A. because it made significant improvements to the Bridge Street property with the specific intention of exercising the purchase option. In early 1999, Han began searching for a property to expand his existing auto-mechanic business and sought a property in close proximity to his operational repair shop located on Fulton Street. He ultimately leased the Bridge Street property on behalf of Excel, but could not operate any business there until he made significant improvements. Both Mauro and Han testified that at the outset of the lease term, the Bridge Street property was an empty building with no lights or heating, and the premises were in a "horrific" state, and "empty." (Tr. 6/3 at 38, 95-98; Tr. 10/8 at 102). Han testified that it was always his intention to eventually own the Bridge Street property, and that he therefore made significant improvements to the property, including opting for more expensive or higher functioning equipment. Excel installed a new heating system, a ventilation system, new skylights, a transparent cube on the side of the building for additional light, a new bathroom including additional plumbing add-ons and a wheelchair ramp, a gas line, an air compressor line, two hydraulic lifts, a new window for the office, a new garage door motor, lighting throughout the premises, a wall around the loading dock for safety, as well as patchwork on the floor and sheet rock work to correct holes in the walls.

Han recruited Mauro to oversee these improvements while he conducted business at Excel's other location on Fulton Street. Mauro managed the work and sent a monthly statement of the work that was done at the premises and the materials that were used, and Han then made payments to him by cash and check. Mauro testified that it was his understanding that Han intended to purchase the property, and corroborated Han's expenditures and numerous invoices and receipts submitted by Excel as evidence of the improvements. Those expenditures totaled between $130,000 and $150,000, about half of which were Mauro's labor costs. All of the receipts were dated between June 1999 and December 2000, within the first two years of the lease term; none of Excel's claimed expenditures were made during or after 2001. Excel never gave a reason for its failure to make additional expenditures after 2001.

In opposition, Bridge Street argues that Excel's expenditures on the Bridge Street property do not rise to the level of forfeiture required under J.N.A. It contends that the expenditures cannot be independently verified because Mauro is an interested witness, as he was intimately involved with Han's efforts and stood to benefit from any sale of the building to Han.12 It also argues that the total amount that Excel expended was less than claimed. Finally, Bridge Street points out that since Excel performed all of the improvements within the first two years of the six-year lease term, it recouped its expenses, thus negating any argument that it intended to exercise the option.

The record remains unclear as to the total amount spent on labor, materials and supplies at the Bridge Street property. Many of the expense-related documents put in evidence by Excel, including receipts and invoices, are handwritten, undated, or simply refer to a month and year in which they may have been incurred, and do not specify the nature of the expenditures beyond general or vague descriptions.13 A significant number of the receipts also do not include any address, while others reference both the Fulton and Bridge Street addresses.14 Han admitted to financial co-mingling between Excel's various entities and locations, so it is difficult to ascertain whether some of the claimed expenditures were actually made for the Bridge Street location as opposed to the Fulton Street location. Furthermore, Mauro admitted that during the period in question he assisted Han with his operations at both the Bridge Street and Fulton Street locations, bringing into question from where his labor charges emanated. Mauro also testified that a portion of the expenses listed were allocated to materials that were used at the Fulton Street property. Finally, many of the expenditures made by Excel were for removable trade fixtures that did not affect the value of the premises, and thus, would not count towards a forfeiture.15

Alternatively, a forfeiture may be found even in cases even where no substantial expenditures were made if the tenant shows that the business location itself is a "valuable asset" and the tenant stands to lose customer goodwill associated with that location. J.N.A., supra, 42 NY2d at 398. In such instances, "a long-standing location for a retail business is an important part of the good will of that enterprise" and the loss of earned customer good will can constitute a forfeiture. 537 Greenwich LLC, supra, 2008 NY Slip Op 50989[U], 19 Misc 3d 1133(A) at *9; See also, Sy Jack Realty Co., supra, 27 NY2d at 453; 135 East 57th Street LLC, supra, 91 AD3d at 6.

However, this alternative basis upon which to find forfeiture is inapplicable to the instant matter as Excel has neither claimed nor offered evidence in support of a loss of goodwill associated with the property. In fact, Han testified that Excel was denied a Certificate of Occupancy for the Bridge Street property and that he could only use the property as an adjunct location to his primary operation at Fulton Street. He utilized the Bridge Street property for the limited purpose of storing cars until he was read to work on them at Fulton Street. While he did occasional repair work at Bridge Street, no customers ever visited the premises.

Based upon the above, this court finds that Excel failed to satisfy the first two J.N.A. criteria. Therefore, it cannot succeed in this action even if it were able to demonstrate that there was a lack of prejudice to Bridge Street. It is therefore unnecessary to rule upon this prong.Plaintiff's request for declaratory judgement is granted and the court issues a final judgment of possession to plaintiff; warrant to issue forthwith, execution to be stayed for 10 days. Defendant's petition for equitable relief is denied .

This constitutes the Decision and Order of the Court.

DATED: October 29, 2018



Justice Supreme Court


1.   As will be discussed infra, a good portion of the trial centered on plaintiff's claim that paragraph 61 was stricken from the lease and that defendant was precluded from testifying about the lease or introducing its version of the lease under the Statute.

2.   Plaintiff attached a copy of the Lease to its Complaint in which the two lines of paragraph 61 on page 5 of the lease are intact, followed by a page 6 which appears to be out of sequence since it contains a guaranty clause, followed by a last page which contains the remainder of paragraph 61 which is crossed out.

3.   Justice Garson also denied Excel's second counterclaim which sought to permanently enjoin plaintiff from selling the premises or otherwise interfering with Excel's occupancy since Excel had failed to demonstrate irreparable harm

4.   Bridge Street is a domestic limited liability company formed on October 28, 2009 prior to Vitarelli's death. Its members consist of Vitarelli's widow and his two daughters.

5.   Most of these motions had no bearing on the J.N.A. issue and will not be discussed herein.

6.   Defendant sought to introduce two of the exact same leases containing paragraph 61 into evidence - a stand alone lease (Exh. "A") and a lease annexed to a prior complaint brought by Vitarelli against Excel (Exh. "B") which will be discussed in fn 7 infra. These two leases differ from the lease annexed to the complaint brought by Vitarelli in March 2003, where most of paragraph 61 crossed out. Plaintiff subsequently stated that it did not intend to rely on this document at trial since neither plaintiff nor its counsel could authenticate the document. (See Plaintiff's Trial Memorandum at 1).

7.   The convoluted history of this case was exemplified by the parties dispute as to which lease was even attached to a prior lawsuit brought by Vitarelli against Bridge Street in 2001. This dispute resulted in plaintiff filing a motion in limine to preclude from evidence the lease with paragraph 61 intact attached to the 2001 complaint with a court stamp on it that defendant sought to introduce into evidence (Def. "B" for ID) and plaintiff's attorney's filing an affidavit declaring that its search of the County Clerk's file revealed that no lease was ever attached to that complaint.(Pl. Exh. 4a) Plaintiff then introduced as Exhibit 4b a certified copy of the summons and complaint filed in court on July 6, 2001 which did not have a copy of the lease attached. The court ultimately permitted both of these exhibits into evidence.

8.   Ultimately, the Second Department found that the executors to Wolff's estate could not introduce the affidavits at trial because they were "self serving hearsay" on the part of the decedent and lacked the "prime and essential requirement" of admissibility - that the opponents have had a meaningful opportunity to cross examine the witness at the time of his former testimony. 112 AD2d at 344. Obviously, the paradigm is different here since it is the defendants - the opponent to the deceased, who seek to introduce the affidavit

9.   By decision dated September 14, 2011 Justice David Schmidt directed that Excel remain in possession of the property as a month to month tenant subject to the provisions of the expired lease, "including the purchase option at issue in this action" and subsequently, by decision date July 18, 2012 denied defendants motion for summary judgment

10.   No court has defined gross negligence, or precisely articulated what differentiates substantial from gross negligence

11.   In addition to including the option deadline, the lease required that Excel be "ready, willing, and able" to close. Neither party disputes that this required Excel to have $950,000 on hand at the time of closing to purchase the property. Han testified that he "always" had the funds available from the Han family and, as a fallback, a loan from Chinatown Federal Savings Bank, and would have been ready, willing, and able to purchase the property in 2002 and 2003 (Tr. 10/7 at 19, 10/8 at 53-62).

12.   This Court has already ruled that Han is not an interested witness . See pp 9-10 supra.

13.   Numerous handwritten invoices from Mauro indicate "labor" and "supplies" expenses, but in most instances, there is no specification as to the location or the nature of the work performed.

14.   For example, at the top of an invoice for August 2000, "27 Bridge Street" is written, however, the expense listed below for supplies refers to "Heating 27 Bridge + Fulton."

15.   Excel submitted into evidence invoices for fixtures, including $9,000 for used hydraulic lifts, $1,350 for a compressor, and $8,500 for heating units, all of which Han admitted could be removed.

Katherine A. Levine, J.

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