255 Butler Assocs. v. 255 Butler, LLC

2022 NY Slip Op 34306(U)

255 BUTLER ASSOCIATES LLC, Plaintiff, v. 255 BUTLER, LLC, ARIEL AKKAD, NATHAN AKKAD, SOLOMON AKKAD and BENJAMIN AKKAD, Defendants,

Index No. 511560/15

Supreme Court, Kings County

December 5, 2022

Unpublished Opinion

PRESENT: HON. LEON RUCHELSMAN

DECISION AND ORDER

HON LEON RUCHELSMAN JSC

A bench trial was conducted by the court. While the parties were given the opportunity to submit post-trial briefs the Appellate Division rendered decisions in this case. Based upon those decisions the plaintiff has moved seeking to enter judgement in the amount of $38,340,703. The defendants oppose the motion. Papers were submitted by the parties and arguments held. After reviewing all the arguments this court now makes the following determination.

In 255 Butler Associates LLC v. 255 Butler LLC, 208 A.D.3d 831, 173 N.Y.S.3d 672 [2d Dept., 202.2] the Appellate Division struck the answer of the defendants. Specifically the court held that "the defendants' behavior was willful and contumacious. The tenant demonstrated that the defendants 'repeated[ly] fail[ed] to comply with court-ordered discovery' over 'an extended period of time[,]' and the court itself found that the defendants offered 'inadequate explanations for their failures to comply'" (id). The court concluded that "under the circumstances presented here, we find that the court should have granted that branch of the tenant's motion which was pursuant to CPLR 3126. to strike the defendants' answer and counterclaims in its entirety" (id)..

Further, in 255 Butler Associates LLC v. 255 Butler LLC, 208 A.D.3d 834, 174 N.Y.S.3d 730 [2d Dept., 2022]) the Appellate Division affirmed a lower court determination that the plaintiff did not default pursuant to the lease and exercised due diligence converting the property.

Based on those determinations the plaintiff has now sought the entry of a judgement. The plaintiff argues these decisions essentially resolved all factual issues that were explored at trial. The only remaining issue, namely damages, is now sought by the plaintiff. The plaintiff insists the amount they seek was never contested by the defendants at trial, thus the court should enter judgement in the uncontroverted amount of $38,340,703. As noted, the defendants oppose the motion.

Conclusions o£ Law

It is well settled that upon a damages trial where a party's answer' has been stricken, such party may "cross-examine witnesses, give testimony and offer proof in mitigation of damages" (Rokina Optical Co., Inc., v. Camera King, 63 N.Y.2d 728, 480 N.Y.S.2d 197 [1984]). This is true because "a defendant whose answer is stricken as a result of a default admits all traversable allegations in the complaint, including the basic allegation of liability, but does not admit the plaintiff's conclusion- as to damages" (id). In Rokina, (supra) the plaintiff obtained a judgement regarding merchandise it sent the defendant for which defendant never paid. The defendant's answer presented three defenses, that some payments were in fact made, that some payments were offset by advertising plaintiff's merchandise and that some of the merchandise was returned. The defendant's answer was subsequently stricken and a trial concerning damages was conducted. Notwithstanding the stricken answer, the Court of Appeals permitted the defendant to introduce evidence "intrinsic to the transactions at issue that, if proven, will be determinative of the plaintiff's real damages, which cannot be established by the mere fact of the defendant's default" (id). Thus, the court permitted evidence of payments made and credits earned because that evidence "relates to the transactions at the heart of plaintiff's cause of action" (id). The court noted that "the existence or degree of 'fault' on the part of defendant-against whom liability has been conclusively established and who is precluded from asserting setoffs and counterclaims against plaintiff as a result of his default-is of no relevance to the question of plaintiff's real damages" (id).

Thus, upon a damages trial or inquest, liability is not an issue (Haberman v. Weissberg, 131 A.D.2d 331, 516 N.Y.S.2d 925 [1st Dept., 1987]) and no evidence may be introduced tending to defeat the plaintiff's causes of action (Hussein v. Rachter, 272 A.D.2d 446, 708 N.Y.S.2d 337 [2d Dept., 2000]). Indeed, in Hussein, (supra) the court held the referee improperly dismissed the complaint after admitting evidence the referee believed defeated the plaintiff's cause of action.

The defendants argue the plaintiff must prove that the defendant's actually caused the damages allegedly sustained. Therefore, the plaintiff must prove a causal connection between the harms alleged and the damage that resulted. They assert the court may not merely "check the Tenant's math before entry of a $38 million judgment" (see, Affidavit in Opposition, ¶20 [NYSCEF Doc. No. 1115]). Rather, the connection between causation and damages must be proven. The defendants really present two overlapping arguments in support of this theory.

First, the defendants assert that even if the "Landlord acted unlawfully, the Tenant did not suffer any cognizable damages by virtue' of those. unlawful acts" (see. Affidavit in Opposition, ¶21 [NYSCEF Doc. No. 1115]) . This is true because the plaintiff never obtained an SNDA and because the Yellowstone injunction tolled any cure periods so no constructive eviction was possible. Consequently, the defendants: did not and could not have harmed the plaintiffs since in any event the plaintiffs would have been unable to develop the property in conjunction with WeWork.

However, if such evidence were permissible then every defendant who has defaulted on liability could continue to introduce liability and causation evidence on the grounds such evidence merely mitigates the damages. Thus, Castaldini v. Walsh, 186 A.D.3d 1193, 127 N.Y.S.2d 917 [2d Dept., 2020] and Jihun Kim v. S &M Cateres Inc., 136 A.D.3d 755, 24 N.Y.S.3d 743 [2d Dept., 2016] specifically held a defendant participating at a damages trial may not re-litigate issues of causation. It cannot be disputed that if the defaulted defendant is permitted to argue they did not cause any harm they should not be liable for any damages. Nevertheless, issues of causation may not be raised at the damages trial at all (see, Arluck v. Brezinska, 180 A.D.3d 634, 115 N.Y.S.3d 716 [2d Dept., 2020]). The defendants argue those cases involved personal injuries and that in the personal injury "context, it is quite difficult to separate 'causation' from '1iability', and it may make some sense to prevent the defaulting defendant from attempting to relitigate the question of liability in the guise of challenging 'causation.'" (see, Affidavit in Opposition, ¶21 [NYSCEF Doc. No. 1115]). It is true that in many personal injury contexts the issues of negligence and whether the negligence was a substantial factor in causing the incident are so "inextricably interwoven" as to be logically impossible for one finding but. not the other (Schaefer v. Guddemi, 182 A.D.2d 808, 582 N.Y.S.2d 803 [2d Dept., 1992]). However, that does not permit a damages hearing to consider questions of causation. Indeed, in Jihun Kim, (supra) the court specifically prohibited the evidence at the damages trial to consider whether a duty was owed: and whether causation was proven, both elements of any negligence finding. The court explained that "the sole issue to be determined at the inquest was the extent of the damages sustained by the plaintiffs" (id).

The defendants further seek to distinguish the above rules by assuming arguendo the defendants actually committed some wrongdoing, however, that such wrongdoing did not cause any damage, that the wrong committed was not the proximate cause of the damages, and they should be' permitted to so argue at a damages trial. That distinction, whether no wrong was committed, and such evidence is impermissible, or whether a wrong was committed and no damages flowed thereby, where the evidence is permissible, is unpersuasive. There is really no difference between arguing the defendant did not cause the damage, which is impermissible (Castaldini supra) or arguing a wrong may have been, committed but that was not the cause- of any injury. Either way these are both improper attempts to introduce evidence regarding causation. In .essence, the defendants seek to present evidence regarding mitigation of damages by undermining the very claims themselves, arguing that if there are no claims there can be no damages. The defendants cite two cases in support of this theory. The first is Rich-Haven Motor Sales v. National Bank of N.Y. City, 163 A.D.2d 288, 558 N.Y.S.2d 91 [2d Dept., 1990]). In that case the plaintiff sued the defendant bank for refusing to honor checks it had written. The bank defaulted and an inquest was held on damages. The appellate court held the inquest correctly excluded a loan the bank had given the plaintiff because even if the bank had not improperly dishonored checks the plaintiff would still have been required to pay back the loan. Thus, that loan was not included in damages. Notably, the plaintiff sought the inclusion of the loan as potential damages and such request was rejected. This case does not support the defendant's position that it may introduce causation evidence when such evidence will result in a total mitigation of damages owed. The existence of the loan, in that case, was not a cause of the bank's check-dishonoring practices. Rather, the loan was simply not appropriately included within damages. In fact, Rich-Haven further affirmed that "the trial court correctly concluded that the sole: issue at the inquest was to determine the extent of the damages sustained...