Case Name: Graubard Mollen Horowitz Pomeranz & Shapiro, Appellant, v. 600 Third Avenue Associates, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1998-07-23
Citations: 252 A.D.2d 453
Docket Number: 
Parties: Graubard Mollen Horowitz Pomeranz & Shapiro, Appellant, v 600 Third Avenue Associates, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 252
Pages: 453–456

Head Matter:
Graubard Mollen Horowitz Pomeranz & Shapiro, Appellant, v 600 Third Avenue Associates, Respondent.
[675 NYS2d 599]

Opinion:
—Order and judgment (one paper), Supreme Court, New York County (Elliott Wilk, J.), entered June 12, 1997, insofar as it awarded defendant landlord the sum of $526,650.68 in interest on escrowed rent payments, reversed, on the law, to the extent appealed from as limited by the briefs, without costs, the interest award vacated, and the matter remanded to Supreme Court for a computation of the interest due.
In connection with plaintiffs application for a Yellowstone injunction, the parties established a joint escrow account in which disputed rent was deposited pursuant to court order. Upon granting partial summary judgment in favor of defendant landlord, Supreme Court held that defendant was entitled to interest on the escrowed funds at the statutory rate of 9 percent per annum, as provided in the subject lease for late rent payments. On appeal, plaintiff argues that its liability is fixed by the order, which directed that the funds be placed in an interest-bearing account, and that defendant landlord is therefore limited to the interest actually paid on the deposited funds for the duration of the Yellowstone injunction.
While landlord is correct in its assertion that the limited purpose of a Yellowstone injunction is to preserve the status quo by tolling the period within which a breach of a material condition of the lease must be cured, it is incorrect in its conclusion that the lease provision automatically entitles it to collect interest at the statutory rate for the time during which the injunction was in effect. The purpose of a Yellowstone injunction is to avoid forfeiture of the leasehold by tolling the period during which the tenant must cure a default, thus avoiding termination of the lease according to its terms (First Natl. Stores v Yellowstone Shopping Ctr., 21 NY2d 630, 637; Post v 120 E. End Ave. Corp., 62 NY2d 19, 26). Its purpose is to preserve the status quo until such time as the rights of the parties can be adjudicated (Wilen v Harridge House Assocs., 94 AD2d 123, 127). In the exercise of its equitable powers, the court is vested with considerable discretion in placing conditions upon the grant of the injunction (e.g., Physicians Planning Serv. Corp. v 292 Estates, 88 AD2d 852 [tender of rent as it becomes due]; Wuertz v Cowne, 65 AD2d 528 [undertaking in the amount of $100]). The obligations of the parties are therefore determined by reference to the order granting injuncr tive relief. Furthermore, it is well within the discretion of the court to modify its order to accommodate a change in circumstances, as the parties are well aware (see, 234 AD2d 49, lv dismissed 89 NY2d 1086).
It is undisputed that the order directing the deposit of rent provides for deposit of accrued rent in a joint, interest-bearing escrow account and was later modified to provide for payment of 75 percent of accrued rent directly to the landlord (supra). Given the purpose of the Yellowstone injunction in preserving the status quo by preventing a default under the lease, it is hardly logical for landlord to assert that plaintiff tenant was in default in the payment of rent during the entire period the injunction was in effect. Implicit in landlord's position is that tenant was in violation of not only the lease but also the court's order and, thereby, in default of a condition of the stay. However, it would appear that the payments required as a condition of the injunction were timely made, landlord's primary complaint being that the payments were held in escrow and not received directly for its benefit.
As for the express terms of the provision relied upon by landlord, the lease obligates the tenant for interest at the statutory rate on monies "paid more than ten (10) days after the date such monies are payable pursuant to the provisions of this Lease". It need only be observed that the rent deposits at issue were paid by tenant pursuant to the terms of the court order, not the lease, and the lease provision is simply inapposite. In this regard, it should be noted that a Yellowstone injunction supersedes the lease for the purpose of preventing termination on account of default. Secondly, as noted above, tenant made timely payments as required under the lease; it simply made them to the escrow account provided for in the court order and not directly to defendant. Finally, if defendant landlord had any objection to the terms of the order, landlord was obliged to make prompt application to the court for relief (CPLR 5015) and not surprise the tenant with a belated demand for interest extending over a period of several years. Concur — Rubin, Williams, Tom and Saxe, JJ.