Supermarket Creditors Tried to Intervene in Landlord’s Eviction of a Supermarket Tenant with Replevin Action
Resnick Supermarket Equipment, Corp., and Krasdale Foods, Inc., et. al. v. Tradewise on Fulton Street, Inc., Jose Peralta, and Diana Realty, LLC, et. al.
(Supreme Court, State of New York, Sullivan County, February 2015)
Itkowitz PLLC represented Diana Realty, LLC
In May 2013, Diana Realty, LLC, as landlord, entered into a ten year supermarket lease with an individual, as tenant, in Clinton Hill, Brooklyn. A nonpayment proceeding was initiated in April 2014 in Kings County Civil Court when the tenant failed to pay rent. In June 2014, the tenant entered into a stipulation of settlement, which included a judgment of possession and a warrant of eviction held in abeyance. The tenant later defaulted under the stipulation, and the landlord executed on the judgment of possession.
As all this was happening, the tenant had two other creditors of note, Resnick Supermarket Equipment, which leased Supermarket Equipment to tenant, and Krasdale Foods, which sold supermarket food inventory to tenant (collectively the “Super Market Creditors”). The Super Market Creditors had financed the original tenant by providing about $100,000.00 dollars in fixtures, such as walk-in refrigerators and powerful HVAC equipment, and allegedly about $200,000.00 in construction costs to install the fixtures. The Supermarket Creditors purported to maintain valid UCC liens against the fixtures and food inside the supermarket. The Landlord never signed a “consent to assignment of the lease”. The tenant stopped paying the Super Market Creditors, likely around the same time he stopped paying landlord.
As the Marshal was about to evict the tenant, the Super Market Creditors brought a motion to intervene in the Brooklyn proceeding, claiming that they had an interest in the leasehold due to the assignment and the UCC liens. We defeated the Super Market Creditor's attempt to intervene, and a stay on eviction was granted only so long as use and occupancy was paid by tenant.
Rather than paying the ordered use and occupancy, the Super Market Creditors brought an action in upstate New York against landlord, along with an order to show cause, for an immediate order of replevin and an order to seize the chattels in the supermarket (i.e. to recover the supermarket fixtures and foods) and enjoining the eviction until the replevin occurred. The apparent goal of the Super Market Creditors in bringing the replevin action in upstate New York was to exhaust the landlord and pressure him to sign a lease with a new supermarket operator, a lease that would benefit the interests of the Super Market Creditors.
Landlord, understandably, was only willing to allow another supermarket tenant to occupy the premises if the new tenant paid the current market rate rent. The property was located in a prime neighborhood that had become more desirable since the lease was signed. The landlord also wanted to be paid the back rent, including all attorneys’ fees.
Thus, there was a standoff. The Supermarket Creditor’s replevin action, however, was subject to several defects.
The following is a list of items that any supermarket defendant in a replevin matter should always be on the lookout for:
• Check the description of chattels subject to seizure, in both the UCC agreements and in supporting affidavits – are they specific or vague? If they are vauge descriptions, then they are likely insufficient to subject defendant to the extreme provisional remedy of seizure.
• If the items sought by replevin are fixtures (not chattels) they cannot be the subject of replevin.
• Check if the UCC agreements are void as per the applicable lease. Also check who, pursuant to the lease, owns the trade fixtures such as condensers, sliding doors, and walk-in freezers. The lease might not trump the security agreement, but at the very least, this argument should be considered.
• If the Court grants a supermarket creditor’s application for replevin it should also be ordered to post a bond and submit a complete and detailed list of the chattels intended for seizure.
In any event, we gave the Supermarket Creditors a thing or two to think about and, after extensive negotiations, the lease was assigned to a new supermarket operator. Our landlord-client got the market rent, all arrears, and all attorney’s fees.