Opinion
160778/2014
06-26-2019
Barrie SHACKMAN and Steven Shackman, Plaintiffs, v. 400 EAST 85TH STREET REALTY CORP., Defendant.
Thomas C. Lambert, Esq., attorney for the plaintiffs, Lambert & Shackman, PLLC, 274 Madison Avenue, New York, NY 10016 Arthur P. Xanthos, Esq., attorney for the defendant, Gartner + Bloom, PC, 801 Second Avenue, New York, NY 10016
Thomas C. Lambert, Esq., attorney for the plaintiffs, Lambert & Shackman, PLLC, 274 Madison Avenue, New York, NY 10016
Arthur P. Xanthos, Esq., attorney for the defendant, Gartner + Bloom, PC, 801 Second Avenue, New York, NY 10016
Lillian Wan, J.
In this bench trial, the central issue relates to damages sustained by the plaintiffs, Barrie and Steven Shackman, as a result of alleged water leaks in their co-operative apartment. The plaintiffs are tenant-shareholders and proprietary lessees of Apartment 6E/6F, a three-bedroom apartment on the sixth floor of the co-operative building located at 400 East 85th Street in Manhattan. The plaintiffs' verified complaint alleges that leaks occurred in July 2009, May 2010 and June 2014, and that said leaks came from pipes located in the walls of their apartment that are connected to a wall-mounted heating, ventilation and air-conditioning unit (HVAC), which is part of a building-wide central system. The complaint alleges that the defendant negligently maintained the premises; committed trespass by permitting water to infiltrate into the plaintiffs' living space; created a nuisance that rendered living spaces unusable; breached the terms of the proprietary lease and Real Property Law (hereinafter RPL) § 235 (b) ; and constructively evicted plaintiffs from portions of living spaces of their apartment, thereby entitling plaintiffs to a rent abatement. The complaint also seeks punitive damages and reimbursement of attorneys' fees.
On March 30, 2017, the Hon. Nancy Bannon (hereinafter the motion court) issued an order granting partial summary judgment to the plaintiffs with respect to the claims pertaining to the 2009, 2010 and 2014 leaks, caused by the faulty HVAC system. See Shackman v. 400 East 85th Street Realty Corp. , 2017 NY Slip Op 30618(U) (Sup Ct, NY County 2017) (NYSCEF Doc. No. 173). The motion court granted plaintiffs' motion for summary judgment as to liability on the negligence, constructive eviction and rent abatement claims, leaving the issue of damages for trial. The motion court denied summary judgment as to plaintiffs' trespass and nuisance causes of action, finding that there was a triable issue of fact as to whether the 2009 and 2010 leaks were time barred. The motion court also denied the punitive damages claim, finding that there was a triable issue of fact as to whether the defendant's omissions and failure to act were willful, and denied plaintiffs' claim for attorneys' fees pending a determination at trial. On May 3, 2018, the Appellate Division, First Department affirmed the motion court's decision.
The Appellate Division, First Department modified the motion court's decision on other grounds that have no bearing on the issues presented at trial. See Shackman v. 400 East 85th Street Realty Corp. , 161 AD3d 438 (1st Dept 2018).
On or about August 15, 2018, the plaintiffs filed a supplemental bill of particulars asserting that subsequent leaks occurred in May of 2017 and February of 2018. At the commencement of trial, the defendant submitted in limine motions seeking, inter alia , to strike the plaintiffs' supplemental bill of particulars, and to preclude the plaintiffs from introducing evidence pertaining to the leaks that occurred in 2017 and 2018. The Court denied the defendant's motion based on its failure to reject the supplemental bill of particulars prior to trial. The Court also found that there was no prejudice to the defendant because it had notice that the plaintiffs intended to seek permission to amend their pleadings to conform with the proof, pursuant to CPLR § 3025, at the conclusion of their case-in-chief.
Prior to trial, the parties entered into a stipulation of settlement of $25,000.00, discontinuing with prejudice all claims and damages arising from the 2009 and 2010 leaks, including the trespass claim. Thereafter, upon the conclusion of the plaintiffs' direct case, the Court granted defendant's motion to dismiss plaintiffs' claim for punitive damages, pursuant to CPLR § 4401, finding that the plaintiffs did not meet the requisite burden of proof. Specifically, the Court found that plaintiffs failed to establish that the defendant's conduct rose to the level of the requisite malice, spite, or evil motive. See Marinaccio v. Town of Clarence , 20 NY3d 506 (2013) ; Schwartz v. Hotel Carlyle Owner Corp. , 132 AD3d 541 (1st Dept 2015) ; National Broadcasting Co., Inc. v. Fire Craft Services, Inc. , 287 AD2d 408 (1st Dept 2001) ; Walker v. Sheldon , 10 NY2d 401 (1961).
In light of the foregoing, the issues presented for determination following this bench trial include: (1) whether the plaintiffs suffered a diminution in value of their co-operative unit based on the defendant's negligence in causing recurring systemic leaks in the building in 2014; (2) whether the defendant created a private nuisance with respect to all of the claimed leaks; (3) whether the plaintiffs are entitled to rent abatement based on defendant's constructive eviction of the plaintiffs from the apartment, and a breach of the warranty of habitability as a result of the 2014 leak; (4) whether there is liability and damages with respect to the 2017 and 2018 leaks; (5) the amount of damages to be reimbursed to plaintiffs resulting from water damage to the apartment caused by the leaks, as well as other incidental damages; (6) whether the plaintiffs are entitled to reimbursement of their attorneys' fees; and (7) whether the defendant is entitled to reimbursement of its attorneys' fees and expenses.
Diminution of Value
The central issue in this case is whether the defendant's negligence caused a diminution in the value of the plaintiffs' shares in their co-operative unit and, consequently, a diminution in the resale value of their apartment. Plaintiffs contend that the diminution in value is $230,000.00, while the defendant argues that it is $0. For the reasons set forth below, the Court finds that the plaintiffs have failed to meet their burden of proof on this issue, and therefore are not entitled to an award based on a diminution in the value of their co-operative apartment.
Both parties presented expert testimony in support of their claims. David M. Shlosh testified for the plaintiffs as an expert in real estate appraisals. Mr. Shlosh is a certified general real estate appraiser in New York and Connecticut and a licensed real estate broker. He has been self-employed since 2013. Mr. Shlosh has approximately 25 years of appraisal experience, and has performed approximately 24 diminution of value appraisals. Mr. Shlosh testified that he performed a diminution in value appraisal on the subject property on November 17, 2017. He stated that such an appraisal is very different from a specific appraisal of the property itself. As part of his appraisal, Mr. Shlosh reviewed the motion court's summary judgment decision.
Mr. Shlosh testified that his diminution of value appraisal involved both a quantitative, mathematically based analysis, and a qualitative analysis, which he admitted was "more subjective." Mr. Shlosh indicated that in evaluating diminution of value, it was necessary to determine whether there was any "taint" on the plaintiffs' unit and the building as a whole. Mr. Shlosh defined the term "taint" as "something negative that a prospective buyer into the co-op would consider in making their purchase." He further explained that when he does an appraisal he eliminates as many adjustment factors as possible when comparing one unit to another, or one building to another.
In formulating his conclusion in the instant matter, Mr. Shlosh first used the mathematically based sales comparison approach, in which he compared sales in the plaintiffs' building to sales in 11 comparable buildings over the course of a two-year period, specifically 2015-2017. Mr. Shlosh explained that the plaintiffs reside in the Upper East Side of Manhattan, also known as Yorkville, which he described as being among the most affluent neighborhoods in New York City. Mr. Shlosh looked for buildings that had the same amenities as the plaintiffs' building, such as a doorman, superintendent, storage, and laundry facilities, as well as buildings similar in age, views, and location. Mr. Shlosh testified that "not every comparable had everything," but as a group they were considered competitive with the subject building. Mr. Shlosh was trying to "wash out" all other factors in comparing buildings so he could narrow it down to one variable: the impact of a taint on the plaintiffs' building. Mr. Shlosh included studios, one-bedroom, two-bedroom, and three-bedroom apartments in his analysis to determine what effect a taint had on the Shackmans' building. Mr. Shlosh referred to real estate websites such as Property Shark and Street Easy to verify the sale date and price, number of rooms, and price per square foot of the comparable properties. He then looked at the range of sale prices, considering the high, low, median, and average prices of the comparable properties, and did the same for the subject building over the same time period. After aggregating all the data, Mr. Shlosh calculated that the average sale price in the plaintiffs' building was $919.00 per square foot, while the average sale price in other buildings on the market was $968.00 per square foot. Mr. Shlosh concluded that the difference in value is approximately 5.0%, or $50.00 per square foot. When asked to determine the cause of this lower value, Mr. Shlosh stated the following:
I could speculate as to the causation. But, I was more interested in showing the difference. But, I suspect that it has to do with the taint on the building due to the board's actions in the past.
When defense counsel explored this assertion further on cross-examination, Mr. Shlosh acknowledged that he could not actually pinpoint the cause of the 5.0% differential, and testified that "you can only make assumptions as to what's the causation."
Mr. Shlosh further explained that in addition to the quantitative analysis, the second part of his analysis entails the consideration of subjective, qualitative issues. He opined that the reputation of the co-operative board is an important consideration for prospective buyers because the board can control what can be done in the units. He further stated that a board with a "difficult reputation" can affect the value of the shareholder's unit. Therefore, if the board has a poor reputation in a market that is not particularly strong, the marketing period would become extended, and it would take longer to sell a property. Mr. Shlosh also identified "ongoing litigation" as another subjective factor. Mr. Shlosh testified that an owner would have a duty to tell a prospective buyer about the pending litigation and any leaks in the unit. He added that he Googled the litigation concerning the plaintiffs' unit, and that this case came up as the top search result.
Finally, Mr. Shlosh stated that a potential buyer would have to consider any future liability related to the unit, including the possibility that the co-operative could assess shareholders for the costs to remediate any problem in the building. Mr. Shlosh concluded that the qualitative issues related to the apartment would cause an additional diminution in value of $70.00 per square foot resulting in a total diminution in value of $120.00 per square foot. Mr. Shlosh then multiplied $120.00 per square foot by the size of the plaintiffs' unit, which he determined to be 1,916 square feet, and arrived at a figure of $229,920.00, rounded up to a total loss of value of $230,000.00. Mr. Shlosh estimated that $130,00.00 of the loss in value was attributed to subjective considerations.
Upon further examination by defense counsel, and upon inquiry by the Court, Mr. Shlosh acknowledged that there was "overlap" in his analysis. He testified that the reputation of the board was part of both his subjective, qualitative measurement and his objective, quantitative measurement, but he was unable to estimate a dollar amount on this overlap. Mr. Shlosh acknowledged that it was possible that another appraiser could reach a completely different number. In reaching his conclusion that the reputation of the board in plaintiffs' building was "not good," Mr. Shlosh admitted that he did not know who was on the board and had not interviewed any board members other than Mr. Shackman. He also did not speak to any brokers in the community about the reputation of this specific board. Additionally, Mr. Shlosh stated that his calculation of the diminution in value could change if there was only one leak in the building as of 2014. He testified that the numbers are not permanent and are only intended as a calculation as of November 17, 2017, the date he inspected the unit. He further indicated that even if a leak was repaired to the satisfaction of the board and shareholders, there would be no impact on the diminished value of the apartment. Mr. Shlosh found the living room, dining room and apartment in general to be "in average market condition" at the time he observed the apartment on November 17, 2017.
To rebut plaintiffs' diminution of value claim, the defendant presented its own expert in real estate appraisals, Eric Haims. Mr. Haims is the president of Jerome Haims Realty Incorporated, a real estate appraisal company founded by his father in 1968. Mr. Haims is licensed as a general real estate appraiser in New York, New Jersey and Connecticut, and his career as a real estate appraiser has spanned over 27 years. He has appraised many co-operative units and has experience assessing diminution of value. Mr. Haims is also a member of the Real Estate Board of New York, and is on the board of directors for the Appraisal Institute, a national organization. Mr. Haims was formerly an adjunct lecturer at Baruch College, and has testified approximately 20 times as a real estate appraiser in various state and federal courts in New York and New Jersey. Mr. Haims' testimony was clear and unequivocal.
Mr. Haims prepared two reports in connection with this litigation, the first dated April 6, 2016, and the second, a review of Mr. Shlosh's appraisal, dated November 17, 2017. Mr. Haims did not review the motion court's decision or the Appellate Division's affirmance in connection with his reports. For the first report, Mr. Haims was asked to review the affidavit of real estate broker, David Chi. Mr. Haims testified that the value of a property is always linked to a date because the condition of a property, as well as market conditions, can change. In Mr. Haims' opinion, appraisers are supposed to put themselves in the shoes of the buyer on the date of value, and the focus should be on transactions that occurred prior to that date. Mr. Haims explained that a damages analysis is a "before and after" analysis, and that in this case it involved subtracting the value of the property without the history of floods from the value of the property with the history of floods.
Mr. Chi's affidavit is annexed as an exhibit to the plaintiffs' summary judgment motion filed on April 7, 2016. (NYSCEF Doc. No. 85).
Mr. Haims conducted an inspection of the plaintiffs' property on May 12, 2016 and concluded that the property was "in very good condition." Mr. Haims explained that this is an objective metric, and that an appraiser typically uses the words "poor," "fair," "good," "very good," and "excellent" to describe the condition of a property. Mr. Haims went on to describe the plaintiffs' apartment as an 1,800 square foot, three-bedroom, three-bathroom unit located in the "good family neighborhood" of Yorkville. On the date that Mr. Haims inspected the apartment, he did not see any flooding or damage.
Mr. Haims performed a paired data analysis to determine potential damage. Mr. Haims explained that a paired data analysis is used regularly by appraisers, and that it entails finding two match pairs where everything is the same except for one variable, and looking for a certain trend for that one variable in reaching a conclusion. In this instance, Mr. Haims testified that he compared six pairs of sales of co-operative units. Specifically, Mr. Haims compared the sale of Apartment 7G, a one-bedroom, one-bathroom apartment in the subject building, with other one-bedroom unit sales in six other nearby residential co-operative buildings, each of which sold on or about August 20, 2015. The comparable units in the nearby co-operative buildings did not have a history of leaks. Mr. Haims testified that he did a comparison of one-bedroom unit sales because he could not find any recent sales of three-bedroom units in the subject building, and he wanted to "compare an apple to an apple." Mr. Haims opined that the sale price of the unit should be affected if the subject building had a history of floods.
After analyzing the data, Mr. Haims found that there was no discernible trend between the sale of units in the plaintiffs' building and the sale of comparable units in the six nearby co-operative buildings. He concluded that "[d]ifferences in the price per square foot of comparable sales range from -38.4% to 22.8%, with an average of -2.6% and a median of 1.3%." Mr. Haims explained that some units in the comparable co-operative buildings sold for more than the units in the subject building and some sold for less. Mr. Haims' report documents the paired sales analysis clearly, and demonstrates that in four out of six pairings, the unit in the plaintiffs' building actually sold for more than comparable units in nearby buildings.
Mr. Haims also explained that part of an appraiser's due diligence is to interview brokers in the area because they specialize in the neighborhood and its buildings, as well as in marketing specific units. While Mr. Shlosh did not interview any brokers as part of his analysis, Mr. Haims did interview two brokers with units in contract in the building, Wendy Stark at Corcoran and Shelly Bleier at Douglas Elliman. Neither broker was aware of any history of leaks or flooding in the plaintiffs' building. Ms. Stark spoke of the building in the highest regard, identifying the building as having low maintenance fees and providing clients with a great deal of value for their money. Ms. Bleier informed Mr. Haims that she had used "due diligence" to investigate whether the plaintiffs' building had a history of flooding or leaks, and she had not found any such history. She further stated that, in any event, she did not believe the leaks would be significant in terms of a diminution of value of the co-operative apartment.
Mr. Haims also employed the sales comparison approach to value the plaintiffs' unit. Mr. Haims testified that this involves finding sales that are similar to the subject property and then adjusting for differences such as market conditions, location, floor height, amenities, view, condition, number of bedrooms, numbers of bathrooms, and size. Mr. Haims indicated that an appraiser must search the market to find comparables that are substitutes for the subject unit, but often the comparables are not a perfect match. The purpose of making the adjustments is to make the comparable sale as close to the subject as possible. After those adjustments are made, an appraiser reaches a conclusion on either a price per square foot basis or a whole dollar basis.
According to Mr. Haims, an appraisal analysis that does not make adjustments is a flawed analysis. In conducting the sales comparison analysis, Mr. Haims selected three comparable sales in three different buildings in the Yorkville neighborhood. All the sales took place in 2015. Mr. Haims explained that he first made an adjustment for market conditions because the market was trending upwards on April 6, 2016, the date of value. Adjustments were also made for location, floor level, exposures, unit size, condition, number of bedrooms, and number of bathrooms. Mr. Haims further explained that the sales comparison approach requires a minimum of three sales and more than likely includes four or five sales. He noted that hundreds of sales would not be used to ascertain the value of a single unit. Mr. Haims testified that while a statistical analysis might use hundreds of sales to prove diminution of value, he preferred the matched paired data analysis because it is more accurate.
Mr. Haims concluded that as of April 6, 2016, the market value of the plaintiffs' unit, without the history of floods, was $1,200.00 per square foot, which when multiplied by the unit size of the apartment, which he determined to be 1,800 square feet, totals $2,160,000.00. Further, Mr. Haims calculated that with the history of floods, the market value of the plaintiffs' unit at that time remained at $2,160,000.00, and he concluded that the diminution of value was therefore $0. This determination was made based on his interviews of the two brokers and the findings of the paired data analysis, which indicated there was no discernible trend in value between the sale of units in the subject building and the sale of units in comparable buildings. Mr. Haims' report noted that on May 12, 2016, the plaintiffs' apartment was well-maintained and in excellent overall condition, and that "[t]he damages caused by the flooding have been remedied and the subject property has been restored to its pre-flood condition."
Mr. Haims was also retained by defense counsel to critique Mr. Shlosh's report. Mr. Haims reviewed both Mr. Shlosh's report and trial testimony. Mr. Haims questioned Mr. Shlosh's entire analysis. Mr. Haims disagreed with Mr. Shlosh's usage of subjective measures in arriving at a conclusion, and testified that there was no evidentiary support for Mr. Shlosh's determination that there was a diminution of value of $70.00 per square foot. Mr. Haims explained that while "appraising isn't all science" and involves opinion and judgment, an appraiser still needs to do a proper analysis, and use proper due diligence to reach a credible and reliable conclusion. Mr. Haims testified that there was "really nothing there to support" Mr. Shlosh's number. Mr. Haims explained that he had never heard of "board reputation" being an element in an appraisal, and that this is not generally considered by a buyer since the makeup of the board changes. He opined that buyers are more concerned with the financial health of the co-operative and the underlying mortgage. Additionally, Mr. Haims questioned Mr. Shlosh's usage of the history of flooding in reaching his conclusion, as the brokers he interviewed were not aware of any leaks or floods in the plaintiffs' building. Furthermore, he noted that the leaks were repaired, and everything "went back to normal and it was back in its normal condition." Mr. Haims did acknowledge that certain conditions could potentially result in a "taint" or "stigma" associated with a building, such as the existence of asbestos, mold, or water infiltrating the façade of a building, but that none of those conditions are present in the instant case.
Mr. Haims testified that Mr. Shlosh's statistical analysis, concluding that there is a 5% or $50.00 per square foot diminution in value, is also problematic. Mr. Shlosh used hundreds of comparable sales from 11 different buildings, each with different locations, conditions, amenities, floor heights, and views, without employing an adjustment process. Mr. Haims was critical of the massive sample selection size that Mr. Shlosh used. Mr. Haims unequivocally stated that there is no taint that affects this building. He further testified that the 5% differential could be a result of many different factors, not necessarily the history of floods or any taint. Mr. Haims asserted that Mr. Shlosh is not "comparing an apple to an apple" in his analysis because his sample group of 11 buildings contains studios, one-bedroom, two-bedroom, three-bedroom, and four-bedroom apartments, and the subject property is a three-bedroom apartment. Mr. Haims concluded that the various differences in the group led to so many variables that Mr. Shlosh was unable to pinpoint the taint.
With respect to Mr. Shlosh's claim of an extended marketing period for the subject property, Mr. Haims testified that the exposure time at this building is similar to other buildings in the Yorkville area, and that he did not believe that the exposure time had been affected by any taint or history of floods. Mr. Haims discounted Mr. Shlosh's claim that future assessments of the board need to be factored in, noting that there is always potential for future assessments for anything in any building, such as a new roof, a new boiler, or installation of a new gym. Finally, Mr. Haims concluded that Mr. Shlosh was "overreaching" in coming up with two numbers, $50.00 per square foot and an additional $70.00 per square foot, in his diminution of value calculation. Mr. Haims stated that he would be concerned that it was a "double count" since the elements considered in the subjective analysis would have already been taken into account in the initial statistical analysis. Mr. Haims' ultimate conclusion was that there was no diminution of value of the plaintiffs' unit.
While both Mr. Shlosh and Mr. Haims were both qualified as experts in their respective fields, the Court is not compelled to credit an expert's reliability and can reject an expert's testimony. See Festino v. State , 40 AD2d 915 (3d Dept 1972). Where competing experts present different or conflicting conclusions, the finder of fact is charged with assessing the credibility of the witnesses and the weight to be accorded to each expert. See Matter of Highbridge Dev. BR, LLC v. Assessor of the Town of Niskayuna et al. , 121 AD3d 1324 (3d Dept 2014) (holding that motion court's decision to credit the finding and conclusions set forth in respondents' appraisal was not against the weight of the evidence); see also Gray v. McParland , 255 AD2d 359 (2d Dept 1998) (the credibility of witness testimony and the weight accorded to such testimony are issues which are properly left to the trier of fact).
The fact that Mr. Haims did not read Justice Bannon's decision on the summary judgment motion, or the Appellate Division, First Department's affirmance of that decision, does not detract from Mr. Haims' credibility. In fact, when confronted on cross-examination with the motion court's decision, Mr. Haims pointed out that Justice Bannon's decision only speaks to a leak that occurred in 2014, which caused damage to the apartment in that year. Mr. Haims' valuation and subsequent report from May 2016 valued the property as of April 2016, when the apartment was repaired and restored to "very good" condition. Mr. Haims conceded that if he had appraised the plaintiffs' property in July 2014, after the flood event, his number would be different. An appraiser may be asked to quantify rent loss or loss of use of the unit during the relevant period of time, but that is different from a permanent loss in value. Mr. Haims noted that "[a] temporary diminishment in value is measured in rent loss or rent opportunity."
Plaintiffs assert that they should be awarded $230,000.00 for the diminution in resale value of their co-operative apartment. Plaintiffs further contend that this Court is required to find that the property suffered a diminution in value based on the motion court's summary judgment decision. To the contrary, while the plaintiffs prevailed as to liability on their negligence cause of action, the motion court simply stated that the defendant raised a triable issue of fact as to the precise valuation of the apartment and the diminution of value arising from the water damage that occurred in 2014. This finding does not mandate the trial judge to determine that the plaintiffs are entitled to a specific amount in damages. The type and amount of damages, if any, were issues left to be determined at trial. The burden of proof remains on the plaintiffs to establish their entitlement to diminution of value damages.
Plaintiffs' main argument is that the water leaks created a taint that caused apartments in the subject building to sell for 5% less than apartments in comparable buildings on the market. The defendant's expert used the terms "taint" and "stigma" interchangeably, and caselaw on the issue also supports the conclusion that the two are synonymous. In Farrell v. Lane Residential, Inc. , 13 Misc 3d 1239 (A), 2006 NY Slip Op 52173(U), *6 (Sup Ct, Broome County 2006), the court noted that while the principle of market stigma is typically discussed within the context of environmental contamination, damages may be proper for the diminution in the fair market value of real property caused by fear of past contamination or past construction defects, even after said defects are corrected. "However, market stigma is a recoverable element of damages only if the plaintiff can demonstrate that repairing the damage will not restore the property to its original market value." Id. at *6. The Farrell court further found that the plaintiffs failed to establish that the stigma was permanent, as the condition involving extensive construction defects had been completely remediated and cured with no residual deficit.
The Court further finds Fusco v. State Farm Fire and Cas. Co. , 57 AD3d 939 (2d Dept 2008) instructive in this matter. Fusco involved an oil spill from a neighbor's pool heater which stained the liner of the plaintiffs' swimming pool. The defendant paid for the full remediation of the oil spill, including the replacement of plaintiffs' pool, excavation of plaintiffs' backyard, and installation of an aquifer on the plaintiffs' property to monitor the ground water. At trial, the plaintiffs argued that the value of their property was diminished due to the stigma of the oil leak, and they presented evidence from a real estate appraiser to establish that the stigma was a further measure of the damages suffered. Significantly, the Appellate Division, Second Department, noted that the plaintiffs' appraiser "did not provide evidence of sales of properties that had oil leaks compared to properties that did not, rendering her opinion of diminution of value due to stigma highly speculative and conclusory." Id. at 940-941. Furthermore, the court found that the evidence at trial demonstrated that the plaintiffs had been made whole for their loss, and that no permanent damages were sustained. No diminution of value of the property remained after the remediation.
Similarly, in Putnam v. State , 223 AD2d 872 (3d Dept 1996), the Appellate Division, Third Department, found that the claimant failed to establish that the injury to the property (an oil spill which was later traced to a broken underground pipeline) was permanent in nature or affected by stigma. The court further noted that there was temporary injury to the property, and that the claimant was entitled to compensation for his loss of use, measured by the decrease in the rental value during the pendency of the injury. See Fisher v. Qualico Contr. Corp. , 98 NY2d 534, 539 (2002), quoting Jenkins v. Etlinger , 55 NY2d 35 (1982) (holding that evidence of alternative measures of property damages are permissible at trial, allowing a defendant to prove that "a lesser amount than that claimed by [a] plaintiff will sufficiently compensate for the loss").
In Criscuola v. Power Auth. of State of NY , 81 NY2d 649 (1993), a Court of Appeals case involving an eminent domain proceeding, claimants sought consequential market value damages for a high voltage power line that was installed over their property. Claimants asserted that "cancerphobia" and the public's perception of a health risk from exposure to electromagnetic emissions from power lines had a negative impact on the market value of their property. The Court of Appeals set forth the evidentiary burden for establishing diminution of value damages:
Claimants should have to connect the market value diminution of the property to the particular fear in much the same manner that any other adverse market effects are shown, e.g., by proffering evidence that the market value of property across which power lines have been built has been negatively affected in relation to comparable properties across which no power lines have been built.
Turning to the instant case, the Court finds that the plaintiffs have failed to meet their burden of proof on the issue of diminution of value. Having assessed and weighed the testimony of both experts, the Court credits the testimony of Mr. Haims and finds his analysis to be credible, persuasive, and supported by the evidence and relevant caselaw. The Court further finds that the testimony of plaintiffs' expert, Mr. Shlosh, was speculative, and that his analysis was flawed. Mr. Shlosh did not establish the existence of a stigma or taint on the building since there were many factors that could have led to the 5% differential in price per square foot.
Mr. Shlosh acknowledged that he could only "speculate as to causation" and "suspect" that it had something to do with the taint on the building based on the poor reputation of the board. The comparable sales analysis performed by Mr. Shlosh did not compare apartments with leaks in the subject building to apartments without leaks in other buildings. Mr. Shlosh did not speak with any brokers in the community who were familiar with this building. In contrast, Mr. Haims spoke with two brokers who were familiar with the building and had apartments in contract there. Neither broker had knowledge of leaks in the building, and both spoke positively of the building's reputation. Further, no evidence was presented that a potential buyer refused to buy a unit in the building because of the leaks.
Additionally, although Mr. Shlosh acknowledged that not all the comparable properties had the same amenities as the plaintiffs' building, Mr. Shlosh failed to make the necessary adjustments in his evaluation of the comparable properties. See Latham Holding Co. v. State , 16 NY2d 41 (1965) (noting that real estate expert cannot reach a valuation conclusion by simply averaging front footage sales prices of properties having obvious differences from another without adjusting for the prices of those that are more similar or dissimilar to the property in question). Mr. Shlosh simply used the average price per square foot of hundreds of comparable sales from 11 different co-operative apartment buildings that differed from the plaintiffs' apartment in, among other things, unit size, number of bedrooms, and number of bathrooms.
On cross examination, Mr. Shlosh testified that 7 out of 11 of the comparable buildings had an exercise room, but he did not include that observation in his report. He also stated that from reviewing his report, there is no way to ascertain which of the comparable buildings had facilities similar to the subject building. Mr. Shlosh stated that "almost all" of the buildings in the pool of comparable sales had a doorman, but that is also not discernible from his report, and there is no way of differentiating which buildings did not have a doorman.
Significantly, plaintiffs never attempted to sell their co-operative apartment, and there was no evidence presented that any of the 11 apartments that were sold from the subject building (as part of Mr. Shlosh's analysis) had leaks. Even if the plaintiffs' property suffered a temporary diminution in value in 2014 because of the leak and damaged floor boards, the property was restored to its original condition, and the evidence established that there is no current leak condition in the apartment.
With respect to Mr. Shlosh's claim that the lawsuit concerning this apartment comes up as the first result in a Google search, it is significant to this Court that plaintiffs were responsible for initiating this lawsuit and making the issues with the building public. Therefore, they are not entitled to the benefit of this argument. Furthermore, Mr. Haims clarified that he did not find litigation concerning the building in his own internet search, and that Mr. Shlosh was only able to find the instant litigation by conducting a Google search using the specific terms "400 East 85th Street litigation."
While the Court recognizes that the appraisal of property is not an exact science, Mr. Shlosh's conclusions lacked support. In summary, he failed to speak with other real estate brokers about their knowledge of the subject building, and the method by which he arrived at a diminution in value was speculative and duplicative, thereby casting doubt on Mr. Shlosh's entire opinion.
Nuisance
The plaintiffs claim that the 2014, 2017 and 2018 leaks constitute a nuisance. In Domen Holding Co. v. Aranovich , 1 NY3d 117, 123-124 (2003) the Court of Appeals stated:
To constitute nuisance the use of property must interfere with a person's interest in the use and enjoyment of land. The term use and enjoyment encompasses the pleasure and comfort derived from the occupancy of land and the freedom from annoyance. However, not every annoyance will constitute a nuisance. Nuisance imports a continuous invasion of rights—a pattern of continuity or recurrence of objectionable conduct.
Furthermore, in order to prevail on a nuisance cause of action, a plaintiff must also show that the defendant's interference was intentional. "An interference is intentional when ‘the actor (a) acts for the purpose of causing it; or (b) knows that it is resulting or is substantially certain to result from his conduct.’ " Berenger v. 261 W. LLC , 93 AD3d 175, 183 (1st Dept 2012).
The building superintendent, Mr. Eugene Terriberry, unequivocally testified that the 2017 leak originated from a steam radiator in the wall by the kitchen, and the 2018 leak was the result of an "old steam radiator," where hot steam came out of the pipe and caused loosening of tiles behind the bathroom toilet. He testified that the 2017 and 2018 leaks were unrelated to the HVAC unit, which was the cause of the leaks in 2014. The plaintiffs have failed to establish that the "leaks were a recurrence of objectionable conduct." Id. at 182 ; see Duane Reade v. Reva Holding Corp. , 30 AD3d 229 (1st Dept 2006). Nor have the plaintiffs established that the leaks resulted from intentional conduct of the landlord. Based on the facts and circumstances presented here, the plaintiffs have failed to establish that the leaks constituted a nuisance and, accordingly, plaintiffs' cause of action for nuisance is dismissed.
Plaintiffs' Rent Abatement Damages—Warranty of Habitability and Constructive Eviction
The plaintiffs claim that the leaks that occurred in 2017 and 2018 were the result of "further intrusions of water." NYSCEF Doc. No. 325. Plaintiffs appear to suggest in their Proposed Findings of Fact and Conclusions of Law that the 2017 and 2018 leaks constitute a continuing negligence on defendant's part. To the contrary, the evidence presented at trial established that these leaks were not caused by the HVAC system. The plaintiffs did not present any expert testimony concerning the cause of the leaks, or more specifically that the leaks were caused by the defendant's failure to properly maintain the steam radiator or steam pipes in the apartment. Likewise, no expert testimony was presented to establish that the 2017 and 2018 leaks were caused by the HVAC system. Further, the plaintiffs failed to show that the defendant had prior notice of any condition leading to the 2017 and 2018 leaks, or prior notice relating to any defect in the steam radiator and steam pipe. As such, the plaintiffs have not established that the 2017 and 2018 leaks were caused by the failure of the defendant to properly maintain the premises, or that the leaks constituted a "further intrusion of water" from the HVAC system.
Nonetheless, the plaintiffs did establish that they were deprived of the use and enjoyment of portions of the apartment for periods of time as a result of these leaks, and that plaintiffs are therefore entitled to rent abatement. The plaintiffs claim rent abatement damages based on constructive eviction and breach of the implied warranty of habitability for the 2014, 2017 and 2018 leaks, pursuant to RPL § 235-b and paragraph 4 (b) of the proprietary lease. Defendant concedes that a rent abatement is appropriate for the 2014 leak in the sum of $4,792.03, in accord with the plaintiffs' supplemental bill of particulars dated August 15, 2018. Defendant argues that the plaintiffs are not entitled to a rent abatement for the 2017 and 2018 leaks because they do not fall within the ambit of the warranty of habitability. This contention is without merit.
Damages in the form of rent abatement may be awarded when the landlord is found to have breached the implied warranty of habitability imposed by RPL § 235-b, which requires the landlord to maintain the premises in a condition fit for habitation; fit for the uses reasonably intended by the tenant; and free of conditions which could endanger or be detrimental to the life, health, or safety of the tenants. Witherbee Ct. Assoc. v. Greene , 7 AD3d 699 (2d Dept 2004). Likewise, rent abatement damages are appropriate based on paragraph 4 (b) of the proprietary lease, which imposes an obligation on the landlord to proportionally abate the rent of a tenant whose apartment has been rendered "partly or wholly untenantable" by virtue of damage to the apartment not caused by the tenant. As such, the landlord who is "vested with the ultimate control and responsibility for the building has a corresponding nondelegable and nonwaivable duty to maintain it." Park W. Mgt. Corp. v. Mitchell , 47 NY2d 316, 327 (1979) cert denied 444 US 992 (1979).
"The obligation of the tenant to pay rent is dependent upon the landlord's satisfactory maintenance of the premises in habitable condition." Id. at 327. The standard for determining whether there has been a breach of the implied warranty of habitability is whether "in the eyes of a reasonable person, defects in the dwelling deprive the tenant of those essential functions which a residence is expected to provide" Id. at 328 ; see Suarez v. Rivercross Tenants' Corp. , 107 Misc 2d 135 (1st Dept 1981).
Ms. Shackman testified that in May 2017, she was in the "back office" area of the apartment when she noticed that she could not open the closet because the floor was "buckled." Ms. Shackman testified that she immediately put in a work order, but no action was taken by the defendant until late December 2017. Ms. Shackman further stated that the property manager found a steam pipe that was leaking water into the back office, and that the condition was repaired by the defendant seven months later. Ms. Shackman also testified that in February 2018, she was using the bathroom and noticed that a tile behind the toilet was bulging out, and put in another work order. Ms. Shackman stated that the problem derived from a corroded pipe that was attached to the steam unit in the bathroom. The defendant eventually repaired the condition one month later.
The evidence demonstrates that the 2017 and 2018 leaks damaged the plaintiffs' apartment, and as a result they were deprived of the use and enjoyment of portions of the apartment. For seven months in 2017, the floor remained significantly buckled and the plaintiffs were unable to close the closet door. Similarly, the plaintiffs were unable to use the bathroom for one month in 2018.
The plaintiffs have also established their entitlement to a rent abatement based on constructive eviction for the 2014, 2017 and 2018 leaks. To establish constructive eviction, a tenant "must prove wrongful acts by the landlord that ‘substantially and materially deprive the tenant of the beneficial use and enjoyment of the premises.’ " Pacific Coast Silks, LLC v. 247 Realty, LLC , 76 AD3d 167, 172 (1st Dept 2010), quoting Barash v. Pennsylvania Term. Real Estate Corp. , 26 NY2d 77 (1970). As such, a cause of action for constructive eviction may arise when a landlord's failure to make repairs deprives the tenant of the use or enjoyment of the premises. Shapiro v. 350 E. 78th St. Tenants Corp. , 85 AD3d 601 (1st Dept 2011) ; see also Dinicu v. Groff Studios Corp. , 257 AD2d 218 (1st Dept 1999).
As the defendant concedes, the plaintiffs established that rent abatement is appropriate with respect to the 2014 leaks which caused damage to the apartment, rendering plaintiffs unable to reside in the apartment for various periods of time and having to seek alternative housing. Moreover, plaintiffs were unable to make use of portions of the apartment even when they remained there. While rent abatement damages are not subject to a precise determination, the award may be calculated based on "the severity of the violation and duration of the conditions giving rise to the breach as well as the effectiveness of steps taken by the landlord to abate the condition." Park W. Mgt. Corp. v. Mitchell , 47 NY2d at 329.
According to the plaintiffs' corrected supplemental bill of particulars dated September 4, 2018, the plaintiffs seek rent abatement damages in the amount of $5,053.08 for the 2014 leaks; $1,068.84 for the 2017 leaks; and $153.62 for the 2018 leaks, for a total rent abatement of $6,275.54. Therefore, in light of the foregoing, the plaintiffs are entitled to rent abatement damages in the sum of $6,275.54, for the 2014 and 2017 and 2018 leaks.
Collateral Source Offset and Other Damages Relating to the Leaks
Under CPLR § 4545, the defendant is entitled to mitigate any damages by offering evidence that such damages have been reduced by a collateral source. Johnson v. New York City Transit Authority , 88 AD3d 321 (1st Dept 2011) ; see also Oden v. Chemung County Indus. Development Agency , 87 NY2d 81 (1995). The defendant has the burden of establishing entitlement to a collateral source offset by clear and convincing evidence. Johnson at 328. Further, CPLR § 4545 (a) provides that any collateral source deduction shall be made by the trial court after the rendering of the verdict. "[A]n application for a collateral source hearing may be timely made any time before the judgment is entered." Firmes v. Chase Manhattan Automotive Finance Corp. , 50 AD3d 18, 32 (2d Dept 2008). In Firmes , at the close of defendant's evidence, the court granted the defendant's request to amend its answer to assert a collateral source offset as an affirmative defense, finding there was no prejudice or surprise to the plaintiff. Id. at 33 ; see also Wooten v. State of New York , 302 AD2d 70 (4th Dept 2002) (permitting post-trial amendment of defendant's answer to include affirmative defense of CPLR § 4545 absent prejudice or surprise to the claimant). In the instant matter, the parties have stipulated to waive a collateral source hearing, and to leave the determination of the offset to the Court's discretion based on the evidence and exhibits introduced at trial.
The records of the plaintiffs' homeowners insurance carrier, The Chubb Insurance Company of New Jersey (hereinafter Chubb records), were introduced at trial. The "Statement of Loss" itemizes the plaintiffs' damages based on the 2014 leaks as well as the reimbursement by the insurance carrier for those damages. According to the Chubb records, the total amount of reimbursable expenses owed to the plaintiffs for the 2014 leaks was $25,419.72. However, plaintiffs' insurance policy had a $5,000 deductible, and therefore the net amount reimbursed to the plaintiffs by their insurance carrier was $20,419.72. Specifically, the Chubb records show that the plaintiffs were reimbursed for apartment repairs from water damage in the amount of $22,277.70, which included painting and repairs to the floors; $2,709.16 in moving and storage costs; and "additional living expenses," such as meals and one night's lodging at a hotel, in the amount of $432.86.
In addition to the costs and expenses reimbursed to plaintiffs by their insurance carrier, the plaintiffs established at trial that the 2014 leaks resulted in additional unreimbursed incidental damages. Such expenses include $498.00 to Renotex, a carpet cleaning company, to shampoo and clean area rugs and chairs, and repair torn carpet. The payment was made in two installments. According to the Renotex invoice, on November 20, 2014 a payment was made in the sum of $299.00. (Plaintiffs' Exhibit 7). Ms. Shackman testified that the plaintiffs made a second payment to Renotex in the amount of $199.00 for these services. With respect to the 2018 leak, Ms. Shackman testified that the plaintiffs received an estimate from RMD Floors of $2,950.00 to repair the buckling floor in the room used as an office. However, as of the time of trial, the plaintiffs had not yet repaired the floor.
Plaintiffs also seek a credit of $2,143.00 based on premiums paid to their insurance carrier from July 2012 through June 2014. CPLR § 4545 permits a credit for premiums paid by the plaintiffs for two years preceding the accrual of the action. See Sternfeld v. Forcier , 248 AD2d 14 (3d Dept 1998) (holding that health insurance premiums paid by the plaintiffs for the two-year period immediately preceding the accrual of the action should be considered in determining credit due to plaintiffs). The plaintiffs' prorated homeowners insurance premium for two years prior to the accrual of the action, i.e. June 2014, amounts to $2,143.00.
Based on the foregoing, the total amount of repair costs and incidental damages incurred by the plaintiffs for the 2014, 2017 and 2018 leaks is $28,867.72. The sum of $20,419.72 was previously reimbursed to the plaintiffs by Chubb, their insurance carrier, leaving $8,448.00 in expenses related to water damage caused by the leaks. Additionally, the plaintiffs are entitled to a credit of $2,143.00 based on homeowners insurance premiums they paid for two years prior to the accrual of the action in June 2014. As such, the plaintiffs are awarded the sum of $10,591.00, representing unreimbursed repair costs, incidental damages, the estimated cost to repair the floor based on the 2018 leak, and two years of homeowners insurance premium credit.
Plaintiffs' Claim for Attorneys' Fees
Plaintiffs' claim for attorneys' fees and expenses rests primarily on Paragraph 28 of the proprietary lease, which permits a landlord to recover reasonable attorneys' fees and disbursements from tenants in any action based on default, or in defending an action brought by the tenant. Plaintiffs argue that RPL § 234 provides for a reciprocal right of the tenant to entitlement of attorneys' fees and expenses. RPL § 234 states that:
[T]here shall be implied in such a lease a covenant by the landlord to pay to the tenant the reasonable attorneys' fees and/or expenses incurred by the tenant as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease ...
The plaintiffs' claim that this reciprocal right to recover attorneys' fees and expenses from the landlord, coupled with their anticipated status as the prevailing party in this action, requires a finding that they are entitled to reimbursement of attorneys' fees and expenses. They also rely on the sixth cause of action alleged in the complaint which seeks attorneys' fees and expenses.
Plaintiffs have failed to establish their entitlement to attorneys' fees and expenses in this action. In order to succeed in obtaining reimbursement of attorneys' fees and expenses, a party must demonstrate that it has substantially prevailed in the action, even when the recovery is authorized by statute or contract. Nestor v. McDowell , 81 NY2d 410 (1993). Fundamental considerations as to whether a party is a prevailing party are whether it has prevailed with respect to the central relief sought, and whether it has received substantial relief relating to those claims. See Board of Mgrs. of 55 Walker St. Condominium v. Walker St. , 6 AD3d 279 (1st Dept 2004) (awarding attorneys' fees upon finding that the court had validated the theory of recovery in several categories, thereby granting substantial relief); 501 E. 87th St. Realty Co. v. Ole Pa Enters. , 304 AD2d 310, 311 (1st Dept 2003) ("plaintiffs prevailed upon the central litigated issues and obtained substantial relief fully justifying the conclusion that they were prevailing parties"); see also Chainani v. Lucchino , 94 AD3d 1492, 1494 (4th Dept 2012) (finding plaintiffs were not the prevailing party because they "obtained only a small measure of the overall relief they sought").
The Court must determine the "true scope" of the dispute litigated and what was achieved within that scope. Sykes v. RFD Third Ave. I Assoc., LLC , 39 AD3d 279, 279 (1st Dept 2007). This determination must be followed by a "comparison of the amount actually sought by the tenant, as determined by the pleadings, offers of proof, or other means with the actual recovery, bearing in mind that the statutory reciprocal provision [of Real Property Law § 234 ] for attorneys' fees was not intended to confer a windfall." Solow v. Wellner , 205 AD2d 339, 340 (1st Dept 1994), affd 86 NY2d 582 (1995) ; see also Mosesson v. 288/98 W. End Tenants Corp. , 294 AD2d 283 (1st Dept 2002) (denying the award of attorneys' fees where the abatement award was far less than the amount sought in the complaint); Excelsior 57th Corp. v. Winters , 227 AD2d 146 (1st Dept 1996) (finding the petitioner-landlord was the prevailing party, upon the court's determination of entitlement of approximately 50 of 54 months of rent arrearages from the tenant, and tenant having received only four and a half months of rent abatement after having sought 24 months).
In the instant case, the gravamen of the plaintiffs' complaint is the diminution of value in the shares of stock of their unit and an award of punitive damages. At trial, plaintiffs and defendant presented extensive testimony concerning the alleged diminished value of the co-operative unit. Plaintiffs' expert opined that the diminution of value was approximately $230,000.00, and defendant's expert opined that there was no diminution of value. Further, the complaint alleges a diminution of value estimated to be 15% of market value, or not less than $330,000.00. As the Court has determined that plaintiffs failed to meet their burden of proof on the issue of diminution of value, they have not prevailed on this claim.
Similarly, plaintiffs have not prevailed on their claim for punitive damages, another central issue in this case. Although punitive damages were not pled as a separate cause of action in the plaintiffs' complaint, it was sought by the plaintiffs in all but the sixth cause of action. In total, the plaintiffs sought more than $1,000,000.00 in punitive damages in the form of treble damages. Moreover, Mr. Shackman testified at trial that the relief plaintiffs ultimately sought to obtain in this action was an award of punitive damages. Specifically, when Mr. Shackman was asked what relief the plaintiffs sought, he responded "[w]e're looking for punitive damages from the building." Similarly, when Ms. Shackman was asked about the relief sought in this action, she responded, "we're looking for punitive damages," and also stated several times that the defendant "shouldn't be able to get away with it." Additionally, it should be noted that the testimony at trial established that up to the time of trial, the plaintiffs had not paid any of the legal bills issued by their attorneys in this action, Lambert & Shackman, PLLC, the law firm of which plaintiff, Steven Shackman, is a managing partner. Accordingly, as plaintiffs have not substantially prevailed in the action, they are not entitled to an award of attorneys' fees.
Defendant's Claim for Attorneys' Fees Pursuant to CPLR § 3220
The defendant seeks reimbursement of its attorneys' fees and expenses for trying the issue of damages, based on a written offer of settlement pursuant to CPLR § 3220 which was served upon the plaintiffs prior to trial. Plaintiffs have not addressed this argument in their post-trial Proposed Findings of Fact and Conclusions of Law.
The defendant's offer under CPLR § 3220 states that it offers the plaintiffs the sum of "Fifty Thousand ($50,000.00) Dollars, plus costs as defined in Article 82 of the CPLR as accrued to date, in exchange for a discontinuance of this action with prejudice and a release for the claims asserted in this action." The offer was never accepted by the plaintiffs. CPLR § 3220 provides that:
[A]t any time not later than ten days before trial, any party against whom a cause of action based upon contract, express or implied, is asserted may serve upon the claimant a written offer to allow judgment to be taken against him for a sum therein specified, with costs then accrued, if the party against whom the claim is asserted fails in his defense ... If the offer is not so accepted and the claimant fails to obtain a more favorable judgment, he shall pay the expenses necessarily incurred by the party against whom the claim is asserted, for trying the issue of damages from the time of the offer.
The defendant is not entitled to expenses and attorneys' fees based on its § 3220 offer because the plaintiffs have recovered damages in the sum of $60,143.26, an amount in excess of the defendant's written offer of settlement of $50,000.00. More specifically, the damages awarded to the plaintiffs are comprised of $28,867.72 for repair costs and incidental damages relating to the water damage caused by the leaks, $6,275.54 in rent abatement, and $25,000.00 based on the pre-trial settlement of the 2009 and 2010 claims. The settlement amount of $25,000.00 is properly included in the calculation as it involved the resolution of some of the claims alleged in the action, and limited the issues presented for adjudication at trial. "A stipulation of settlement limiting the issues, discontinuing a cause of action or withdrawing a claim is an agreement to which the courts are [a] party." In re Hofmann , 287 AD2d 119, 122 (1st Dept 2001). Moreover, "courts have long favored and encouraged the fashioning of stipulations as a means of expediting and simplifying the resolution of disputes." Id. (internal quotations omitted).
In any event, the defendant's CPLR § 3220 offer is improper as the statute only applies to a breach of contract cause of action. The plaintiffs' complaint does not set forth a cause of action based on breach of contract, but rather seeks recovery under other theories, including negligence and nuisance. As stated by the motion court, "[t]he court may not rewrite the complaint to imply a breach of contract cause of action or read such a cause of action into the complaint." See Shackman v. 400 East 85th Street Realty Corp. , 2017 NY Slip Op 30618(U) (Sup Ct, NY County 2017) (NYSCEF Doc. No. 173); see also Halkedis v. Two East End Ave. Apartment Corp. , 137 AD2d 452 (1st Dept 1988). The plain language of the defendant's § 3220 offer is not limited to breach of contract, but unequivocally refers to all causes of action and claims contained in the complaint.
Based on the foregoing, the defendant's reliance on Abreu v. Barkin & Assoc. Realty, Inc. , 115 AD3d 624 (1st Dept 2014) and Reinhard v. Connaught Tower Corp. , 150 A.D.3d 431, 51 N.Y.S.3d 412 (1st Dept. 2017) is misplaced, and the defendant is not entitled to reimbursement of its attorneys' fees and expenses pursuant to CPLR § 3220.
The parties are directed to settle judgment.