Court Opinion

ID: 4447487
Source: CourtListenerOpinion
Date Created: 2019-10-17 15:00:17.281911+00
Date Added: 2024-06-11T14:26:48.407502
License: Public Domain

18-3670
In Re: Bridge Associates

                                   UNITED STATES COURT OF APPEALS
                                      FOR THE SECOND CIRCUIT

                                         SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 17th day of October, two thousand nineteen.

PRESENT:
           JOHN M. WALKER, JR.,
           PIERRE N. LEVAL,
           SUSAN L. CARNEY,
                       Circuit Judges.
_________________________________________

IN RE: BRIDGE ASSOCIATES OF SOHO, INC.,
                   Debtor.

********************************************

BRIDGE ASSOCIATES OF SOHO, INC.,

                     Debtor-Appellant,

                             v.                                        No. 18-3670

NYCTL 1998-2/MTAG, NYCTL 2016-A TRUST,
NYCL 2017-A TRUST,
NEW YORK CITY LOFT BOARD, STEVE
GREENBERG, TRICIA NASH, JOSEPH HASKE,
SUSAN BROWN, RYDER HASKE, ALEXIA BRUE,
ETHAN KLEMPERER, MABLEN JONES,
DAVID LAWRENCE, ANNE LAWRENCE, ELLEN
COLON-LUGO, JANET BURGAN,
JAMES NOLL, MARTIN SHERIDAN, EDWARD
MASLER, CONRAD VOGEL,

           Appellees.
_________________________________________

FOR DEBTOR-APPELLANT:                            PETER KAMRAN (Roy J. Lester, on the
                                                 brief), Lester & Associates, P.C., Garden
                                                 City, NY.

FOR APPELLEES:                                   BRUCE WIENER (Slava Hazin, on the brief),
                                                 Warshaw Burstein, LLP, New York, NY
                                                 (for Steve Greenberg, Tricia Nash, Joseph
                                                 Haske, Susan Brown, Ryder Haske, Alexia
                                                 Brue, Ethan Klemperer, Mablen Jones,
                                                 David Lawrence, Anne Lawrence, Ellen
                                                 Colon-Lugo, Janet Burgan, James Noll,
                                                 Martin Sheridan, Edward Masler, and
                                                 Conrad Vogel).

                                                 DIANA LAWLESS (Aaron M. Bloom, Richard
                                                 Dearing, on the brief), Corporation Counsel
                                                 of the City of New York, New York, NY
                                                 (for New York City Loft Board, NYCTL
                                                 1982-2/MTAG, NYCTL 2016 A-Trust).

       Appeal from a judgment of the Bankruptcy Court for the Eastern District of New
York (Grossman, J.).

       UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment entered on July 2, 2018, is
AFFIRMED.

       Bridge Associates of Soho, Inc. (“Bridge” or “the Firm”) appeals from a decision
entered on July 2, 2018, in the Bankruptcy Court for the Eastern District of New York
(Grossman, J.). The Bankruptcy Court found that Tenant-Appellees who reside on property
owned by Bridge have possessory rights under the New York Loft Law, N.Y. Mult. Dwell.
Law (“MDL”) §§ 280-287 (“Loft Law”), and ruled that Bridge could not sell the property

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“free and clear” of those possessory rights as a part of its bankruptcy proceedings, see 11
U.S.C. § 363(f). We assume the parties’ familiarity with the underlying facts, procedural
history, and arguments on appeal, to which we refer only as necessary to explain our decision
to affirm the Bankruptcy Court’s judgment.

       Bridge holds title to a building (the “Property”) located in Manhattan’s Soho
neighborhood. Neither party disputes that, since Bridge purchased the Property in 2002, the
Firm has not complied with the Loft Law. Bridge has not obtained a certificate of occupancy
for the Property, see N.Y. MDL § 301(1), and thus may not collect rent, id. § 302(1)(b), unless
it establishes compliance with its obligations as the owner of an “interim multiple dwelling”
under the Loft Law, id. § 285(1), which it cannot do. In February 2018, Bridge filed a
voluntary petition for relief under Chapter 11 of the Bankruptcy Code. In May 2018, Bridge
moved under 11 U.S.C. §§ 363(b) and (f) for leave to sell the Property “free and clear” of all
liens, claims, encumbrances, and interests, including rights of occupancy vested in Tenant-
Appellees. Several parties, including Tenant-Appellees and the New York City Loft Board
(“Board”), opposed. Tenant-Appellees argued that Bridge cannot sell the Property “free and
clear” of their occupancy rights. The New York City Loft Board argued that Bridge may not
use the Bankruptcy Code to relieve the Firm of its obligation to bring the Property into
compliance with otherwise valid and controlling statutory regulations.

       On July 2, 2018, the Bankruptcy Court ruled that the Loft Law afforded possessory
rights to Tenant-Appellees, and therefore the Property could not be sold “free and clear”
under 11 USC § 363(f)(1) and (4). Bridge successfully petitioned under 28 U.S.C. § 158(d)(2)
for leave to appeal the Bankruptcy Court’s decision.

       This Court reviews de novo the legal conclusions relied on in a bankruptcy court’s
orders. See In re Barnet, 737 F.3d 238, 246 (2d Cir. 2013). For substantially the same reasons
as set forth in its opinion, we agree with the Bankruptcy Court that New York law gives
Tenant-Appellees a possessory interest in the Property that is unchanged by the pending
Bankruptcy proceedings. Section 286(2)(i) provides in relevant part:

              Prior to compliance with safety and fire protection standards of
              article seven-B of this chapter, residential occupants qualified for

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               protection pursuant to this article shall be entitled to continued
               occupancy provided that the unit is their primary residence, and shall pay
               the same rent, including escalations, specified in their lease or rental
               agreement to the extent to which such lease or rental agreement
               remains in effect or, in the absence of a lease or other rental
               agreement in effect, rent adjustments prior to article seven-B
               compliance shall be in conformity with guidelines to be set by the
               loft board for such residential occupants within six months from
               the effective date of this article.
N.Y. MDL § 286(2)(i) (emphasis added). Tenant-Appellees argue that section 286(2)(i)
conditions their occupancy rights only upon the requirement that the units that they occupy
be their “primary residence.” Bridge, in contrast, takes the position that any occupancy rights
conferred by section 286(2)(i) are conditioned upon the tenants’ satisfaction of both the
primary residence requirement and upon Tenant-Appellees’ payment of rent. While
acknowledging that it is barred from “collecting” rent, Bridge argues that it may nonetheless
receive rent voluntarily paid, and that Tenant-Appellees’ right to continued occupancy
depends on their paying rent. We agree with the Bankruptcy Court that its rejection of
Bridge’s argument is consistent with the text, the statutory scheme, and the purpose of the
Loft Law, which seeks to protect the welfare, health, and safety of tenants while property
owners bring a covered property into compliance with governing statutory, regulatory, and
code requirements for residential occupancy. See N.Y. MDL § 280.

       The New York Court of Appeals’ decision in Chazon LLC v. Maugenest, 19 N.Y.3d
410 (2012), confirms this construction of section 286(2)(i). In Chazon, the Court of Appeals
concluded that tenants under the Loft Law could not be evicted for non-payment of rent
where the owner did not comply with the Loft Law and had not followed the Loft Law’s
procedure, having neglected to obtain an extension of time to bring its property into
compliance. It explained: “Multiple Dwelling Law § 302(1)(b) bars not only an action to
recover rent, but also an ‘action or special proceeding . . . for possession of said premises for
nonpayment of such rent.’” Id. at 416. As the Bankruptcy Court found, and we agree,
Chazon “negates [Bridge’s] argument that the [Tenant-Appellees’] occupancy rights are
conditioned upon the payment of rent, and supports the [Tenant-Appellees’] position that
[Bridge] is not entitled to collect rent or recover possession for nonpayment thereof unless

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the owner is in compliance with the Loft Law.” In re Bridge Assocs. of Soho, Inc., 589 B.R. at
516.

                                              * * *

       We have considered Bridge’s remaining arguments on appeal and conclude that they
are without merit. For the reasons set forth above, the Bankruptcy Court’s judgment is
AFFIRMED.

                                                      FOR THE COURT:
                                                      Catherine O’Hagan Wolfe, Clerk of Court

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