Court Opinion

ID: 9918931
Source: CourtListenerOpinion
Date Created: 2024-01-16 22:07:53.673201+00
Date Added: 2024-06-11T08:06:49.107717
License: Public Domain

Success Academy Charter Schs., Inc. v Liberty Sq.
                      Realty Corp.
               2024 NY Slip Op 30129(U)
                    January 10, 2024
           Supreme Court, New York County
        Docket Number: Index No. 654728/2018
                  Judge: Andrea Masley
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, including the New
   York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
                                                                                                                        INDEX NO. 654728/2018
  NYSCEF DOC. NO. 328                                                                                             RECEIVED NYSCEF: 01/10/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 48
            ----------------------------------------------------------------------------------- X

             SUCCESS ACADEMY CHARTER SCHOOLS, INC.,                                                 INDEX NO.         654728/2018

                                                          Plaintiff,
                                                                                                    MOTION DATE           N/A
                                                - V -
                                                                                                    MOTION SEQ. NO.       010
             LIBERTY SQUARE REALTY CORP., HENRY
             WEINSTEIN, and BENJAMIN KLEIN,
                                                                                                      DECISION+ ORDER ON
                                                          Defendants.                                       MOTION
            ----------------------------------------------------------------------------------- X

            HON. ANDREA MASLEY:

            The following e-filed documents, listed by NYSCEF document number (Motion 010) 278,279,280,281,
            282,283,284,285,286,287,288,289,290,291,292,293,294,295,296,297,298,299,301,302,
            303,306,307,308,309
            were read on this motion to/for                                                         DISMISS

            Upon the foregoing documents, it is

                         In motion sequence number 010, defendants Liberty Square Realty Corp.

            (Liberty), Henry Weinstein, and Benjamin Klein move to (i) dismiss the first and fourth

            causes of action of the Second Amended Verified Complaint (SAC) pursuant to CPLR

            3211 (a)(1) and (a)(?) and (ii) direct plaintiff Success Academy Charter Schools, Inc.

            (Success) to pay, pendente lite, interim use and occupancy.

            Background

                        The following facts are taken from the SAC (NYSCEF Doc. No. [NYSCEF] 286)

            and are accepted as true for the purposes of the motion to dismiss. (Davis v Boeheim,

            24 NY3d 262, 268 [2014].)

                         Success manages Success Academy Charter School-NYC, an entity that

            operates 47 public charter schools serving 20,000 students in Manhattan, Brooklyn,

            Queens and the Bronx. (NYSCEF 286, SAC ,i 18.) Liberty, formed by defendant
             IYIULIUII l'IIU.   U IU

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            Weinstein, defendant Klein, and nonparty German Gelb in March 1998, owns the

            property located at 878 Brook Avenue, Bronx, New York (Premises). (Id.         ,m 2, 20, 34.)
                   On May 3, 2017, Liberty and Success entered into a lease (Lease) for the

            Premises. (Id. ,I 2.) Success leased the Premises to house one of its charter schools.

            (Id.) During Lease negotiations, Liberty, through Weinstein, represented that it had the

            requisite funds to fulfill its obligations under the Lease. (Id. ,I,I 4, 195.) However,

            Success alleges this was not true as Liberty did not have sufficient funds in its bank

            accounts and had no ability to obtain funding. (Id. ,I 45.) Success paid Liberty advance

            rent (Advance Rent) upon execution of the Lease. (Id. ,I 71.) Under the terms of the

            Lease, Liberty was required to apply a portion of the Advance Rent to the cost of its

            architectural plans and hold the remaining monies in a segregated account in trust until

            the Advance Rent was required to be applied to certain monthly rent payments specified

            in the Lease. (NYSCEF 287, Lease§ 3.1 [d]; NYSCEF 286, SAC ,I 71.) Liberty failed

            to maintain the remaining Advance Rent in a segregated account and spent it for its

            own expenses in violation of the Lease and General Obligations Law§ 7-103.

            (NYSCEF 286, SAC ,I,I 74, 76.)

                   Under the Lease, Liberty was responsible for completing specific work on the

            Premises. (Landlord's Work 1). (Id. ,I 59.) Liberty was required to use best efforts to

            deliver Vacant Possession (i.e., with no occupants or parties having any rights of use or

            1 "Landlord's Work "included work critical to the conversion of the building into a school
            that is safe and suitable for students," i.e., "Completing all exterior work; Installing
            windows and exterior doors; Installing a roofing system; Installing structural steel and
            removing walls; Extending and modifying the grand staircase; Replacing all stairwell
            treads; Fire proofing; Installing a life safety system, including fire detection, fire alarms,
            and sprinklers; Performing plumbing, HVAC, and electrical work." (NYSCEF 286, SAC
            ,I 59.)
             654728/2018 SUCCESS ACADEMY CHARTER vs. LIBERTY SQUARE REAL TY CORP.             Page 2 of 18
             Motion No. 010

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            possession) of the Premises to Success with Landlord's Work substantially completed

            on or before December 1, 2017. (NYSCEF 287, Lease§§ 1.2 [e], 1.3.) Success

            alleges that, if Liberty failed to deliver the Premises with Landlord's Work substantially

            completed by January 1, 2018, Success could pay fifty percent of the agreed upon rent

            and could elect to perform Landlord's Work and apply for reimbursement of the costs

            from Liberty. (NYSCEF 286, SAC ,i 64.) The Lease further obligated Liberty to "pay all

            real property taxes and assessments" and not interfere with Success's right to

            possession and quiet enjoyment. (Id. ,i,i 65, 66; NYSCEF 287, Lease§§ 4.1, 28.)

                   Liberty failed to substantially complete Landlord's Work by December 1, 2017.

            (NYSCEF 286, SAC ,i 90.) Liberty also failed to deliver Vacant Possession of the

            Premises to Success Academy before December 1, 2017 or January 1, 2018, as the

            Premises "'was surrounded by a fence and a pad lock and a chain that [Success] did

            not have access to"' and "Liberty's contractors continued to work in, and have access

            to, the building." (Id. ,i,i 93, 94.) Liberty also "failed to make tax payments due on July

            1, 2018, January 1, 2019, and July 1, 2019, as required by the Lease." (Id. ,i 129.)

            Success paid fifty percent of the rent pursuant to Section 3.4(a) of the Lease from July

            2018 through December 2020. (Id. ,i 153.)

                   On September 20, 2018, Success sought to exercise its right to complete the

            pending Landlord's Work under Section 3.4(b) of the Lease. (Id. ,i 103.) Due to

            Liberty's failure to provide documentation necessary for Success to take over Landlord's

            Work, Success filed this action seeking a declaration that it was entitled to "take over

            and complete the Landlord's Work" and compelling Liberty to produce documentation

             654728/2018 SUCCESS ACADEMY CHARTER vs. LIBERTY SQUARE REAL TY CORP.          Page 3 of 18
             Motion No. 01 0

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            such as construction documents, contracts, invoices, change orders, etc. (NYSCEF 2,

            Complaint ,i 31.)

                   Success filed a first amended complaint (FAC) seeking a declaration that Liberty

            breached the Lease by failing to (i) "complete Landlord's Work;" (ii) "construct the work

            in a good and workmanlike manner;" (iii) "comply with the plans and specifications

            agreed to by the parties;" (iv) "abide by all legal requirements;" and (v) pay real estate

            taxes and that Liberty's breaches entitled Success to terminate the Lease. (NYSCEF

            282, FAC,I,I 111-114.)

                   Liberty moved pursuant to CPLR 3212 and 3211 (a)(7) to dismiss the FAC.

            (NYSCEF 109, Notice of Motion [mot. seq. no. 006].) The court granted Liberty's

            motion to dismiss 2 , in part, "to the extent that the lease prohibits plaintiff from

            terminating the lease because of landlord's failure to complete landlord's work."

            (October 5, 2021 Decision). (NYSCEF 214, Decision and Order [mot. seq. nos. 004,

            006].) Following that decision, Success filed the SAC on consent of the parties.

            (NYSCEF 270, Stipulation and Order.) Success (i) added Weinstein and Klein as

            defendants, (ii) added a claim against defendants for violation of General Obligations

            Law§ 7-103, based on the commingling of the Advance Rent with other funds; (iii)

            added a breach of fiduciary duty claim against defendants based on the commingling

            and spending of the Advanced Rent, (iv) revised its declaratory judgment claim

            2 In motion sequence number 006, Liberty moved pursuant to both CPLR 3211 (a)(7)

            and 3212 to dismiss the FAC. Since there had been no discovery when the motion was
            heard, this courts analyzed the motion under the standard of CPLR 3211 and issued its
            decision pursuant to that standard. (NYSCEF 245, tr at 31 :16-22 [mot. seq. nos. 004,
            006].)
             654728/2018 SUCCESS ACADEMY CHARTER vs. LIBERTY SQUARE REAL TY CORP.               Page 4 of 18
             Motion No. 010

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            regarding defendants' breach of contract; and (v) added a claim for fraudulent

            inducement against defendants. (NYSCEF 286, SAC            ,m 155-202.)
            Discussion

            Legal Standard

                   On a motion to dismiss pursuant to CPLR 3211 (a)(7), the court must "accept the

            facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible

            favorable inference, and determine only whether the facts as alleged fit within any

            cognizable legal theory." (Leon v Martinez, 84 NY2d 83, 87-88[1994] [citation omitted].)

                   To prevail on a CPLR 3211 (a)(1) motion to dismiss, the movant has the "burden

            of showing that the relied-upon documentary evidence resolves all factual issues as a

            matter of law, and conclusively disposes of the plaintiff's claim." (Fortis Fin. Servs. v

            Fimat Futures USA, 290 AD2d 383, 383 [1st Dept 2002] [internal quotation marks and

            citation omitted].) "A cause of action may be dismissed under CPLR 3211 (a)(1) only

            where the documentary evidence utterly refutes [the] plaintiff's factual allegations,

            conclusively establishing a defense as a matter of law." (Art and Fashion Group Corp. v

            Cyclops Prod., Inc., 120 AD3d 436, 438 [1st Dept 2014] [internal quotation marks and

            citation omitted].) For evidence to be considered documentary, it must be unambiguous

            and of undisputed authenticity. (Fontanetta v John Doe 1, 73 AD3d 78, 86 [2nd Dept

            201 O].) Affidavits and deposition testimony do not constitute "the type of documentary

            evidence that may be considered on a motion pursuant to CPLR 3211 (a) (1)." (Correa

            v Orient-Express Hotels, Inc., 84 AD3d 651, 651 [1st Dept 2011] [citations omitted].)

             654728/2018 SUCCESS ACADEMY CHARTER vs. LIBERTY SQUARE REAL TY CORP.          Page 5 of 18
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            Declaratory Judgment Claim

                   Success seeks a declaration that (i) Liberty breached and is in default under the

            Lease due to its failure to use its best efforts to complete Landlord's Work; its failure to

            perform Landlord's Work in a good and workmanlike manner, its failure to comply with

            the plans and specifications agreed to by the parties, and its failure to abide by all legal

            requirements, including the New York City Building Code; its failure to pay real estate

            taxes and assessments; its failure to deliver Vacant Possession of the Premises; and its

            failure to comply with its obligation not to disturb the right to possession and quiet

            enjoyment of the Premises; and (ii) that Success is entitled to terminate the Lease due

            to these defaults. (NYSCEF 286, SAC ,-I,J 174-175.)

            Landlord's Work

                   Defendants argue that this portion of Success's claim is foreclosed by the

            October 5, 2021 Decision, where the court held that the Lease prohibits Success from

            terminating for a failure to complete the Landlord's Work. Success contends that the

            court's ruling was confined to the issue of whether, under the terms of the Lease,

            Success could terminate the Lease because of Liberty's failure to complete the

            Landlord's Work. Thus, Success asserts that it clarified and elaborated on other

            defaults such as Liberty's failure to engage in best efforts to substantially complete the

            Landlord's Work and failure to perform the Landlord's Work in a good and workmanlike

            manner in compliance with legal requirements and the plans set forth in the Lease.

                   In its October 5, 2021 Decision, the court determined that Liberty's failure to

            complete the Landlord's Work is not a ground for Success to terminate the Lease and

            granted Liberty's motion to dismiss in part. (NYSCEF 214, Decision and Order [mot.

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             Motion No. 01 0

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            seq. no. 006].) The court relied on Section 3.4(c) of the Lease, which provides that, "[i]n

            the event that Landlord is not able to deliver to Tenant on or before January 1, 2018

            Vacant Possession of the Premises, whether or not Landlord's Work is substantially

            completed, then in addition to its other remedies under this Lease, at any time prior to

            the Commencement Date Tenant may elect to terminate this Lease .... " (NYSCEF

            287, Lease at 9.) This provision clearly excludes "substantially completed Landlord's

            Work" as a ground for termination of the Lease because, if Liberty delivered Vacant

            Possession of the Premises by January 1, 2018, and the Landlord's Work was not

            complete, Success could not seek to terminate the Lease for a failure to complete the

            Landlord's Work.

                   However, the court did not rule out the possibility that the Lease could be

            terminated for other contractual breaches by Liberty. (NYSCEF 245, tr at 27:23-28:20

            [mot. seq. no. 006].) In fact, the court found that, while Section 3.4(c), excludes the

            completion of the Landlord's Work as a ground to terminate the Lease, Section 3.7(b)

            provides that the Lease can be terminated for Liberty's default in their other obligations

            under the Lease. (Id.) Thus, the court's prior decision does not foreclose these claims

            supporting Success's cause of action for a declaratory judgment.

                   Pursuant to Section 1.3, Liberty "shall use best efforts to deliver Vacant

            Possession of the Premises to [Success] with Landlord's Work substantially completed

            .... " (NYSCEF 287, Lease at 5.) Pursuant to Section 37.1, Liberty is responsible for

            "for constructing in a good and workmanlike manner the Landlord's Work ... and in

            accordance with all Legal Requirements." (Id. at 46.) A failure to adhere to these

            provisions would constitute a breach. Although Section 31.1 provides that the Lease is

             654728/2018 SUCCESS ACADEMY CHARTER vs. LIBERTY SQUARE REAL TY CORP.          Page 7 of 18
             Motion No. 01 0

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            a net lease, which does not give Success a right to terminate, Section 31.1 contains an

            exclusion- "except as otherwise specifically provided herein." (Id. at 42.) Therefore, if

            Liberty failed to meet its obligations to use best efforts to deliver the Premises

            substantially complete, to construct the Landlord's Work in a good and workmanlike

            manner, and to abide by all plans and legal requirements, it breached the Lease.

            Liberty's conclusory sentence that best efforts, good and workmanlike manner, and

            legal requirements are not independent obligations but rather subsumed in the

            completion of the Landlord's Work does not persuade the court otherwise.

                   Completion of work is independent of using quality and adherence to plans and

            laws. Further, in New York, "a 'best efforts' clause imposes an obligation to act with

            good faith in light of one's own capabilities."' (Ashokan Water Servs., Inc. v New Start,

            LLC, 11 Misc 3d 686, 692 [Civ Ct, Kings County 2006], quoting Bloor v Falstaff Brewing

            Corp., 601 F2d 609, 613 [2d Cir 1979].) Not acting in good faith in attempting to

            complete work is also independent from actual completion.

                   When deciding the motion to dismiss the FAC, on the record, the court stated

            that there was a "conflict" in so far as Section 31.1 states that Success could not

            terminate the Lease and Section 3.7(b) states that the Lease can be terminated for

            Liberty's default in their other obligations under the Lease. The court corrects its use of

            the word "conflict." Section 31.1, the "Non-Terminability" provision, clearly provides an

            exception as discussed above and Section 3.7(b) clearly provides that the Lease can be

            terminated if Liberty defaults in its obligations. This does not present a conflict; it

            presents an issue whether Success's allegations of Liberty's failures were actual

            obligations under the Lease, falling within the exception of Section 31.1. After careful

             654728/2018 SUCCESS ACADEMY CHARTER vs. LIBERTY SQUARE REAL TY CORP.            Page 8 of 18
             Motion No. 01 0

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            review of the SAC and Lease, the court answers this in the affirmative. 3 This does not

            alter the court's determination that Section 3.4(c) specifically excludes the completion of

            the Landlord's Work as a ground to terminate the Lease as it clearly does.

            Failure to Timely Pay Real Estate Taxes

                   The court denied dismissal of this portion of the declaratory judgment claim on

            the motion to dismiss the FAC. The supporting allegations remain the same in the SAC.

            Thus, as this is not a motion to renew or reargue, the court declines the invitation to

            relitigate this issue.

            Disturbance of Success Academy's Quiet Enjoyment

                   Section 28.1 provides that "[s]o long as [Success] pays the Rental and performs

            all of its obligations under this Lease, [Success]'s possession of the Premises will not be

            disturbed by [Liberty], its successors and assigns, or anyone acting by or on behalf of

            any of the foregoing." (NYSCEF 287, Lease at 40.)

                   Liberty argues that its alleged interference with Success's quiet use and

            enjoyment of the Premises, based on the allegation that Liberty allowed movie shoots to

            occur within the Premises which interfered with Success Academy's possession of the

            Premises 4 (see NYSCEF 286, SAC        ,m 133-134), cannot be a ground for termination of
            the lease. Liberty directs the court's attention to the following portion of Section 31.1,

            "nor shall the respective obligations of Landlord and Tenant be otherwise affected by ...

            3 On this 3211  motion, the court is not making a determination as to whether the Lease
            was, in fact, breached or considering any defenses Liberty may have.
            4 Success also alleges that the movie shoots prevented delivery of Vacant Possession.
            (See NYSCEF 286, SAC ,i,i 97-99.)
             654728/2018 SUCCESS ACADEMY CHARTER vs. LIBERTY SQUARE REAL TY CORP.           Page 9 of 18
             Motion No. 010

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            the lawful or unlawful prohibition of Tenant's use of the Premises, the interference with

            such use by any persons, corporations or other entities." (NYSCEF 287, Lease at 42.)

                   Section 31.1 lists certain occurrences that shall not affect the parties' obligations:

                   "reason of damage to or destruction of the Premises from whatever cause,
                   any taking by condemnation, eminent domain or by agreement between
                   Landlord and those authorized to exercise such rights, the lawful or
                   unlawful prohibition of Tenant's use of the Premises, the interference with
                   such use by any persons, corporations or other entities, or by reason of
                   Tenant's acquisition of ownership of the Premises otherwise than pursuant
                   to an express provision of this Lease, or by reason of any default or
                   breach of any warranty by Landlord under this Lease or any other
                   agreement between Landlord and Tenant, or to which Landlord and
                   Tenant are parties, or for any other cause whether similar or dissimilar to
                   the foregoing, any present or future law to the contrary notwithstanding."

            (NYSCEF 287, Lease at 42.) The court does not agree that this language prevents

            Success from terminating the Lease based on a default by Liberty of its obligation under

            the Lease to not interfere with Success's quiet enjoyment of the Premises. Again, not

            disturbing Success's quiet enjoyment is one of Liberty's obligations assuming the

            conditions placed on Success are satisfied. (Id. § 28.) A failure to comply with this

            obligation would be a default warranting termination of the Lease.

            Failure to Deliver Vacant Possession.

                   It is undisputed that Success could terminate the Lease if Liberty failed to deliver

            Vacant Possession of the Premises on or before January 1, 2018. (NYSCEF 293,

            Defendants' Memo of Law at 15; NYSCEF 297, Plaintiff's Memo of Law at 5; NYSCEF

            287, Lease§ 3.4 [c].) However, the parties dispute whether Vacant Possession was in

            fact delivered on or before January 1, 2018. Vacant Possession is defined in Section

            1.2 (e) as "no occupants or parties having any rights of use or possession" of the

            Premises.

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                   Success alleges that there was no delivery of Vacant Possession within the

            prescribed deadline as the Premises remained under lock and key, Liberty's contractors

            continued to work in and have access to the Premises, and Liberty even rented out the

            building for movie shoots. (NYSCEF 286, SAC          ,m 94, 96-99.) It cannot be determined
            on this motion to dismiss whether, in fact, Vacant Possession was delivered.

                   Defendants claim that Section 37.4 of the Lease allows both Liberty and Success

            to have joint access to the Premises prior to the completion of Landlord's Work, and

            therefore, the presence of Liberty's contractors on the Premises had no bearing on the

            delivery of Vacant Possession. Section 34.7 provides that

                   "[p]rior to the Delivery Date, Landlord shall notify Tenant when Tenant and
                   Tenant's contractors may have joint access to the Premises with Landlord
                   for the purpose of accomplishing Tenant's Work, if (i) such joint access will
                   not cause unreasonable interference with the work of Landlord's
                   contractor, (ii) there are no delays created thereby in the construction
                   process, (iii) an acceptable schedule of work is agreed upon between
                   Landlord's contractor and Tenant's contractors and (iv) Tenant assumes
                   all liability for furniture and other permitted installations left in the Premises
                   and for any work performed in the Premises by Tenant or its contractors.
                   Access to the Premises by Tenant in accordance with the foregoing
                   and solely for such purposes shall not be deemed to advance the
                   Commencement Date."

            (NYSCEF 287, Lease at 47.) This provision is in regard to accomplishing Tenant's

            Work, not Landlord's Work, and situations where Success's contractors may have joint

            access. The court does not see how this provision precludes Success's claim from

            surviving this motion to dismiss.

            Fraudulent Inducement

                   Success alleges that defendants fraudulently induced it into executing the Lease

            by misrepresenting that it had the financial capacity to do Landlord's Work when it only

            had several hundred dollars in its bank accounts as opposed to the $17.5 million
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            required to undertake Landlord's Work. (NYSCEF 286, SAC             ,m 194-196, 199.)
            Success claims that it reasonably relied on these misrepresentations to its own

            detriment and suffered over $8 million in losses. (Id.     ,m 200-201.)
            Disclaimer and Merger Clause in the Lease

                   Defendants assert that this claim is barred by the Lease's disclaimer and merger

            clauses. (See NYSCEF 287, Lease§§ 2.1, 30.1.) However, defendants' reliance on

            Section 2 .1 is mis placed. Section 2 .1 , entitled 'Title', provides that

                   "Title to the Premises and the appurtenances thereto, as well as all
                   improvements, alterations, changes and additions thereto when made,
                   erected, constructed, installed or placed upon, below or above the
                   Premises shall be and remain in Landlord. Notwithstanding anything
                   to the contrary contained in this Lease, the rights to all images of the
                   Building, other than those created by or on behalf of Tenant in accordance
                   with the subsequent sentence, including but not limited to images in
                   moving, still, virtual, digital, and other media formats, are not demised
                   hereunder and are the property of and are retained by Landlord. Tenant
                   may create and use images of the Building for marketing and similar
                   purposes related to its operation of a school. Tenant represents to
                   Landlord that Tenant has examined the title to and physical condition of
                   the Premises prior to the execution and delivery of this Lease and has
                   found the same to be satisfactory for all purposes hereof, subject to the
                   performance of Landlord's Work and any representations and warranties
                   expressly made by Landlord in this Lease and provided that same
                   shall not limit Landlord's obligations expressly set forth in this Lease,
                   including repair, maintenance and replacement obligations and obligations
                   to cause compliance with legal requirements. Landlord has made no
                   representations express or implied, in fact or by law, except to the
                   extent expressly set forth in this Lease. With respect to the Premises or
                   title or use thereof and Tenant accepts the same "as is", except for the
                   completion of Landlord's Work and any representations and warranties
                   expressly made by Landlord under this Lease and provided that same
                   shall not limit Landlord's obligations expressly set forth in this Lease,
                   including repair, maintenance and replacement obligations and obligations
                   to cause compliance with legal requirements. Landlord shall not be liable
                   for any latent or patent defect in or about the Premises or the Building
                   except for any representations or warranties expressly made by Landlord
                   under this Lease and provided that same shall not limit Landlord's
                   obligations expressly set forth in this Lease, including repair, maintenance
                   and replacement obligations and obligations to cause compliance with
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                   legal requirements. All furniture, trade fixtures and moveable equipment
                   brought onto the Premises by or on behalf of Tenant shall be and remain
                   Tenant's property throughout the Term."

            (NYSCEF 287, Lease at 6 [emphasis added].)

                   The disclaimer language in Section 2.1 must be read in its full context; it plainly

            relates only to representations made about the title and physical condition of the

            Premises and therefore, would not include representations pertaining to Liberty's

            financial condition within its ambit. Nevertheless, a "disclaimer will defeat any allegation

            that the contract was executed in reliance upon contrary oral representations" when the

            disclaimer is specific. (DiBuono v Abbey, LLC, 95 AD3d 1062, 1064 [2d Dept 2012]

            [citations omitted].) If the court accepts Liberty's argument that this disclaimer applies

            also to representations regarding Liberty's finances, this disclaimer would not defeat

            those allegations as it is not specific as to those allegations. (Id.) Further, even if found

            specific, the disclaimer "does not provide a ground for dismissing the fraudulent

            inducement claim" because Success cannot be precluded from claiming reliance on

            "facts peculiarly within defendants' knowledge." (Ohm NYC LLC v Times Sq. Assoc.

            LLC, 170 AD3d 534, 535 [1st Dept 2019] [citations omitted].) The state of Liberty's

            finances are facts peculiarly within defendants' knowledge.

                   Defendants' reliance on Section 30.1 is also unavailing. The merger clause in

            Section 30.1 provides that "[t]his Lease contains the entire agreement between the

            parties hereto and shall not be modified in any manner except by a writing signed by

            Landlord, Tenant and Mortgagees if required by Mortgagees." (NYSCEF 287, Lease at

            41.) "Where a merger clause is 'general and vague,' i.e., merely 'an omnibus statement

            that the written instrument embodies the whole agreement, or that no representations

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            have been made,' the merger does not preclude parole evidence establishing fraudulent

            inducement to enter into the contract. (Laduzinski v Alvarez & Marsal Taxand LLC, 132

            AD3d 164, 169 [1st Dept 2015] [citation omitted].) The "boilerplate language" of this

            merger clause "is too general to bar plaintiff's claim since it 'makes no reference to the

            particular misrepresentations allegedly made here by [defendants]."' (Id. [citation

            omitted].)

            Justifiable Reliance

                   "To state a claim for fraudulent inducement, there must be a knowing

            misrepresentation of material present fact, which is intended to deceive another party

            and induce that party to act on it, resulting in injury." (GoSmile, Inc. v Levine, 81 AD3d

            77, 81 [1st Dept 2010] [citation omitted].) "To be viable, a fraudulent inducement claim

            must demonstrate justifiable reliance on the false representation." (Fed.-Mogul Corp. v

            UTi, United States, Inc., 146 AD3d 468,471 [1st Dept 2017] [citation omitted].) The

            question of what constitutes reasonable or justifiable reliance is not generally a question

            to be resolved as a matter of law on a motion to dismiss. (ACA Fin. Guar. Corp. v.

            Goldman, Sachs & Co., 25 NY3d 1043, 1045 [2015] [citation omitted].) However, if a

            sophisticated party failed to make use of the means of verification available to it to verify

            the alleged misrepresentations, it cannot as a matter of law establish that it entered an

            arm's length transaction in justifiable reliance on these alleged misrepresentations.

            (Tourneau, LLC v. 53rd & Madison Tower Dev. LLC, 896 NYS2d 631, 637 [201 0].) In

            the absence of any allegations that a party attempted to verify the representations by

            which it was allegedly misled during the negotiation of the contract, the claim for

            fraudulent inducement fails to adequately allege justifiable reliance as a matter of law.

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            (Id.) Further, if the facts represented are not peculiarly within the plaintiff's knowledge,

            "and the [plaintiffj has the means available to [it] of knowing, by the exercise of ordinary

            intelligence, the truth or the real quality of the subject of the representation, [the plaintiffj

            must make use of those means, or [it] will not be heard to complain that [it] was induced

            to enter into the transaction by misrepresentations" (ACA Fin. Guar. Corp., 25 NY3d at

            1044 [internal quotation marks and citations omitted].)

                   Tourneau squarely applies to this case. Success is a sophisticated entity and

            had the means to verify the representations by which it was allegedly misled during the

            negotiation of the Lease. Nowhere in the SAC does Success allege that it made any

            effort, either by accessing publicly available documents or requesting Liberty to disclose

            its financials, tax returns, bank statements, or other financial documentation to verify

            Weinstein's statements about Liberty's financial condition. In the absence these

            allegations, Success's claim for fraudulent inducement fails to adequately allege

            justifiable reliance as a matter of law and is dismissed.

            Individual Defendants

                   Defendants assert that Section 32 of the Lease bars the fraudulent inducement

            claim against defendants Weinstein and Klein. However, this claim is dismissed in its

            entirety on other grounds. Defendants also argue that Success has not sufficiently pied

            a piercing the corporate veil theory that would extend liability to the individual

            defendants for Liberty's alleged breaches of its obligations under the Lease.

                   "[P]iercing the corporate veil requires a showing that: (1) the owners exercised

            complete domination of the corporation in respect to the transaction attacked; and (2)

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            that such domination was used to commit a fraud or wrong against the plaintiff." (Morris

            v State Dept. of Taxation & Fin., 82 NY2d 135, 141 [1993] [citations omitted].)

                   "While complete domination of the corporation is the key to piercing the
                   corporate veil, especially when the owners use the corporation as a mere
                   device to further their personal rather than the corporate business, such
                   domination, standing alone, is not enough; some showing of a wrongful or
                   unjust act toward plaintiff is required. The party seeking to pierce the
                   corporate veil must establish that the owners, through their domination,
                   abused the privilege of doing business in the corporate form to perpetrate
                   a wrong or injustice against that party such that a court in equity will
                   intervene."

            (Id. at 141-142 [citations omitted].) Allegations shall not be "conclusory and

            unaccompanied by allegations of consequent wrongs." (UMG Recs., Inc. v FUBU

            Records, LLC, 34 AD3d 293, 294 [1st Dept 2006] [citations omitted].)

                   Here, Success alleges that Weinstein and Klein "use Liberty for their personal

            benefit," that Liberty does not have corporate governing documents, including

            shareholder or operating agreements and by-laws, and Weinstein and Klein "have made

            payments to themselves and their other wholly-owned corporations from Liberty's bank

            account." (NYSCEF 286, SAC        ,m 22-25, 26-27, 142-148.) These conclusory
            allegations are not enough to meet the heavy burden placed on Success. The

            declaratory judgment claim is dismissed against Weinstein and Klein.

            Pendente Lite Rent

                   Defendants claim that Success should be directed to comply with its obligation to

            pay rent under the Lease since Success has occupancy rights to the Premises and the

            Lease has not expired. Success asserts that it paid fifty percent of the applicable rent

            pursuant to Section 3.4(a) of the Lease from July 2018 through December 2020 and

            only ceased rent payments when it discovered Liberty's misappropriation of the

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            Advance Rent. Success further claims that it would be inequitable for it to have to pay

            rent and occupancy fees when it does not have possession of and is unable to use the

            Premises.

                   The court has broad discretion to direct a tenant to pay use and occupancy,

            pendente lite. (Alphonse Hotel Corp. v76 Corp., 273 AD2d 124, 124 [1st Dept 2000].)

                    "The award of use and occupancy during the pendency of an action or
                   proceeding accommodates the competing interests of the parties in
                   affording necessary and fair protection to both and preserves the status
                   quo until a final judgment is rendered. It is manifestly unfair that [a tenant]
                   should be permitted to remain in possession of the subject premises
                   without paying for their use."

            (MMB Assoc. v Dayan, 169 AD2d 422, 422 [1st Dept 1991] [internal quotation marks

            and citations omitted].)

                   It is a disputed issue of fact whether Liberty delivered Vacant Possession of the

            Premises. Further, there is no indication that Success is currently occupying or using

            the Premises. Therefore, it would be inequitable to direct Success to pay rent or use

            and occupancy fees, pendente lite, particularly when Success alleges that Liberty

            commingled its Advance Rent in violation of the provisions of the Lease and General

            Obligations Law§ 7-103. Thus, defendants' motion seeking rent or use and occupancy

            fees, pendente lite, is denied.

                   The court has considered the parties' remaining arguments and finds them

            unavailing, without merit or otherwise not requiring an alternate result.

                   ORDERED that the defendants' motion to dismiss the first and fourth causes of

            action in the Second Amended Complaint and seeking an order directing the plaintiff to

            pay use and occupancy, pendente lite, is granted, in part, to the extent that the fourth

            cause of action (fraudulent inducement) is dismissed in its entirety and first cause of
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            action (declaratory judgment) is dismissed against Weinstein and Klein and otherwise

            denied; and it is further

                    ORDERED that defendants are directed to serve an answer to the Second

            Amended Complaint within 20 days after service of a copy of this order with notice of

            entry; and it is further

                    ORDERED that the parties are to submit a status update to this court (SFC-

            Part48@nycourts.gov) on February 15, 2024.

                     1/10/2024
                       DATE                                                     ANDREA MASLEY, J.S.C.

                                       ~
             CHECK ONE:                    CASE DISPOSED                NON-FINAL DISPOSITION

                                           GRANTED         □ DENIED     GRANTED IN PART          □ OTHER
             APPLICATION :                 SETTLE ORDER                 SUBMIT ORDER

             CHECK IF APPROPRIATE :        INCLUDES TRANSFER/REASSIGN   FIDUCIARY APPOINTMENT    □ REFERENCE

             654728/2018 SUCCESS ACADEMY CHARTER vs. LIBERTY SQUARE REALTY CORP.                  Page 18 of 18
             Motion No. 010

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