East 77 Owners Co, L.L.C. v King Sha Group, Inc.
2013 NY Slip Op 51049(U) [40 Misc 3d 1205(A)]
Decided on July 2, 2013
Supreme Court, New York County
Schoenfeld, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 2, 2013
Supreme Court, New York County

East 77 Owners Co, L.L.C., Plaintiff,



King Sha Group, Inc., Third-Party Plaintiff,


Richard J. Zaloum, P.E., Third-Party Defendant.

S.T.A. Parking Corp., Third-Party Plaintiff,


Richard J. Zaloum, P.E., Third-Party Defendant.

S.T.A. Parking Corp., Third-Party Plaintiff,


Golden Vale Construction Corp., Third-Party Defendant.


Plaintiff is represented by Simon Block of Quinn MaCabe LLP

STA by Russell M. Wolfson of Baritz & Colman LLP

Martin Schoenfeld, J.


Plaintiff, East 77 Owners CO, L.L.C, owns the apartment building at 436 East 77th Street, New York, NY ("the apartment building" or "building"). At all times relevant here, the property adjacent to Plaintiff's apartment building at 434 East 77th Street was a parking garage ("the parking garage") owned by Defendant, S.T.A. Parking Corp. (STA). In late 2004, STA began construction work on the parking garage, including excavation to create a sub-basement. It hired as its general contractor Defendant King Sha Group, Inc. (King Sha) to do this work. King Sha's subcontractor for foundation, underpinning and concrete work was Defendant Golden Vale Construction Corp. (Golden Vale).

On March 8, 2005, the New York City Department of Buildings (DOB) issued a Notice of Violation stating that STA was in violation of the Administrative Code of New York City § 27-1031(b)(1) for failure to properly carry out excavation work at more than 10 feet below grade and to protect the adjoining property. Affidavit of Allen F. London, sworn to 9/27/12 Exhibit I. The citation stated that STA excavated to 16 feet, and in doing so, failed to protect adjacent structures resulting in "substantial cracks & separation on various floors of adjacent properties." Id. DOB ordered STA "to stop all excavation work. Immediately stabilize & protect adjacent structures." Id. Again on March 18, 2005, DOB issued a Notice of Violation of § 27-1031(b)(1) indicating that there was "major structural damage to adjoining structure." Affidavit of Allen F. London, Exhibit J. It ordered STA to "Make safe immediately!" Id.

STA challenged this second violation in an administrative hearing held on June 30, 2005. After hearing evidence, the Administrative Law Judge found that the lack of structural support

created dangerous conditions and that the work that was done constituted "unsafe excavation." Affidavit of Allen F. London, Exhibit K. The Administrative Law Judge upheld the Notice of Violation. Id.

Beginning in April 2005, due to the structural damage caused by the excavation of the garage, Plaintiff was forced to commence vacating the apartment building, which was fully rented at the time. As a result, Plaintiff had to hire counsel to aid in the process of buying out and relocating tenants. There were ten rental units in the building bringing in $16,116.48 per month. The building was completely vacated by December 2005 and remained vacant for four years until December 2009.

In addition, Plaintiff hired engineers and consultants to determine the damage to the building. Between 2005 and 2006 Plaintiff hired experts to make emergency repairs, which included underpinning, shoring and support work on the apartment building.

Despite these efforts, extensive work on the building was required to rebuild structural [*2]elements. Settlement of the building had caused, among other things, beams to twist, brick walls to become destabilized, and windows to become misaligned. Plaintiff relied on various consultants including members of engineering companies to evaluate the building and to recommend further remedial measures. By early 2007 Plaintiff's engineers had prepared repair plans. These were sent out for contract bids by Spring 2007. Work began on the building around November of 2007. The work done included adjusting joists, replacing floors, and repairing plumbing. In total, between 2005 and 2010, Plaintiff incurred more than $2 million in construction costs.[FN1]

Plaintiff asserts that to finance this work it had to take out a $2 million loan in 2010, and as a result incurred $484,290.81 in closing costs and interest. In addition, because of the damage to the building, Plaintiff's insurance company did not renew its coverage. The replacement insurance coverage Plaintiff was able to procure during the period the building was vacant and under construction cost substantially more than its prior costs. Plaintiff claims to have incurred $551,953.18 in excess premium costs during that time.

Plaintiff received $800,093.97 from its insurer Interstate Insurance Company (Interstate) for property damage and lost rental income under its first party insurance program. According to Plaintiff, in April 2011 it entered into an agreement with Interstate as a means of settling its claims against the insurer, in which Interstate assigned its rights related to the damage caused by the excavation to Plaintiff, including subrogation rights against STA. Plaintiff, however, has not provided this agreement to the Court, explaining that it is subject to a confidentiality provision.


The legal history of this case is long and complex. Plaintiff filed suit on October 11, 2007 against STA, its general contractor King Sha, the subcontractor for foundation work, Golden Vale, and two other entities. STA asserted cross claims against Golden Vale for indemnification and contribution, alleging that it relied completely on Golden Vale's expertise for the foundation, excavation and underpinning work. Golden Vale failed to answer the complaint and cross claims.

In March 2010, Plaintiff moved for a default judgment against Golden Vale. However, this motion was denied by Justice Kenny as untimely, pursuant to CPLR 3215(c), and Plaintiff's case against Golden Vale was dismissed.

On July 2, 2010, STA commenced a third party action against Golden Vale for indemnification and contribution. Golden Vale again failed to answer, and on September 12, 2011 the court found Golden Vale had defaulted, and ordered an inquest for an assessment of damages. STA, however, did not pursue an inquest immediately as the main action against it was still being litigated.

In the spring of 2012, the remaining defendants (except for Golden Vale) entered into a partial settlement of the case with Plaintiff herein. Pursuant to the agreement, the remaining three defendants, other than STA, cut checks in various amounts payable jointly to the attorneys of Plaintiff and of STA. These checks were then endorsed over to Plaintiff's attorneys. A fourth check in the amount of $291,667 was cut by STA and given directly to Plaintiff's attorney. In [*3]total, the settlement amount was $1.4 million. Under the settlement, all defendants other than STA and Golden Vale were released from further liability.[FN2]

Subsequently, STA's damage assessment against Golden Vale was placed on this Court's calendar for inquest. When the case was called, STA's counsel appeared along with Plaintiff's counsel. They both requested that this Court resolve all remaining issues in the case, namely: 1) STA's liability as to Plaintiff; 2) the amount of damages owed by STA to Plaintiff; and 3) STA's assessment of damages in its default case against Golden Vale. Both parties have submitted papers. STA's papers focus on its claim against Golden Vale. It does not take a position regarding Plaintiff's request for judgment against it, or the amounts requested by Plaintiff. Instead, it argues that any amount adjudged against it for Plaintiff's damages should then be added to STA's assessment of damages against Golden Vale.

The Court now renders the following decision.


Under Administrative Code of the City of New York § 27-1031(b)(1), if an excavation was undertaken at a depth of more than ten feet below the legal curb level "the person who causes such excavation to be made shall, at all times and at his or her own expense, preserve and protect from injury any adjoining structures." In Yenem Corp. v. 281 Broadway Holdings, 18 NY3d 481, 490-91 (2012), the Court of Appeals recently found that this law imposes strict liability on an owner of property whose violation proximately caused damage to an adjoining building.[FN3]

Here, DOB issued two violations of § 27-1031(b)(1), specifically finding that the excavation was more than ten feet and that it had caused "substantial cracks & separation on various floors of adjacent properties." Moreover, an Administrative Law Judge, after a full hearing, affirmed the second Notice of Violation finding that the excavation caused structural damage to the adjoining properties.

Therefore, in accordance with Yenem, STA is strictly liable to Plaintiff for the damage caused to the apartment building by the excavation of the parking garage.


[*4]Where a building is damaged by the negligent removal of lateral support by its neighbor, as here, the proper measure of damages is "reasonable cost of restoration," including the cost of repairs and "reasonable value of the services of engineers employed to ascertain the extent and cause of the injury." 1 NY Jur.2d Adjoining Landowners § 33 (2013). Owners are also entitled to loss in rental value during the time repairs are being made. 36 NY Jur.2d Damages § 77.

Plaintiff asks for damages totalling over $5 million dollars, including the costs of repairing structural damage, lost rent, and professional fees. Plaintiff submits numerous exhibits to prove its damages, including cancelled checks and hundreds of invoices. Particularly helpful to the Court was Affidavit of Allen F. London, Exhibit A, which contains a breakdown of Plaintiff's various expenses, the year they were incurred, and any insurance payments it received. As discussed below, the Court finds that Plaintiff's submissions are sufficient to prove that many of its damage claims are recoverable reasonable restorations costs. The Court, however, finds that some of the damages claimed have not been proven on the submitted papers. The latter require a hearing should Plaintiff wish to continue to pursue those claims above the amounts awarded today.

Construction Costs

According to Plaintiff's papers, it incurred $2,180,684.28 in construction costs between 2005 to 2010. These expenses include both emergency remedial work and long term work to permanently remedy the structural problems caused by STA's excavation. It also includes an additional $15,060 paid to STA pursuant to a court ordered licensing agreement. This order by Justice Stallman, pursuant to RPAPL §881, allowed plaintiff to work from the roof of STA's garage for the purpose of completing its remedial work on the apartment building.

Between 2005 and 2008, Plaintiff received $663,574.97 in payments from its insurance carrier Interstate as reimbursement for a portion of these expenses. The total construction damages requested therefore, less insurance payments received, is $1,517,109.31. Considering the extent of the damage to the apartment building and the amount of work required to remedy the problem, the Court finds these damages to be reasonable. The Court also awards, as part of the professional fees discussed below, a counsel fee of $8,479.75 as this relates to obtaining the court ordered license to complete the remedial work.

Lost Rent

According to Plaintiff's documents, between 2005 and 2009, it lost a total of $888,023.69 in rental income. Of that amount, Plaintiff received $136,519 in insurance payments from Interstate in 2005 and 2006. Thus, the total lost rent Plaintiff is requesting at this time is $751,504.69. As Plaintiff was unable to rent its building for almost five years as a result of STA's negligence, the Court finds this sum to be reasonable damages.

Tenant Relocation/Buy Outs and Broker's Fee

Plaintiff is also asking for the amount of $31,150 for costs associated with buying out the leases of its tenants and relocating them in 2005. In addition, Plaintiff paid a broker $16,200 to relet the apartment building in 2010. It also paid $22,668.62 to landlord/tenant counsel in 2005 with regard to relocation of the tenants. As these expenses reasonably flow from the necessity to vacate the apartment building in order to undergo repairs, the Court grants additional damages in the amount of $70,018.62 for tenant relocation and brokers' fees.

Professional Fees

The damage to the apartment building caused by STA's excavation necessitated Plaintiff to hire several different professional experts for advice on how to remedy the problems. These [*5]experts included architects, engineers, a project manager and others. In this regard, Plaintiff spent $366,065.11 over the five or so years on such professional services, which it now seeks as damages. Again, considering the extent of the damage and complexity of restoring the building, the Court deems these to be reasonable professional fees in furtherance of remedying the damage to the apartment building which now may be collected as damages against STA. Also, collectable is the $8,479.75 legal fee for obtaining a license to enter onto STA's property. Thus, the total allowable fee for professional services is $374,544.86.

Increased Insurance Premiums

Plaintiff asks for $551,953.18 to cover the increase in its insurance premiums from 2005 to 2009 as a result of the damage done to the apartment building from STA's excavation. The Court has found no authority supporting the proposition that such expenses are collectable as damages in this type of case and, therefore, without further proof cannot rule on this request at this time.

Interest on Construction Loan and Legal Financing Fee

Plaintiff also asks for the amount it paid in closing costs in 2010, $200,052.08, and interest paid in 2010 and 2011 of $284,238.73 on the $2 million construction loan it obtained in 2010 to pay for the work on the apartment building. Not only do the closing costs and interest requested here seem somewhat high, but Plaintiff does not provide authority for the proposition that interest and closing costs on a loan should be included in assessing the reasonable costs of restoring a building. Nor has it been shown that any part of this loan, taken out in 2010, was used to pay for the restoration of the apartment building, which was completed by December 2009 when Plaintiff relet the building. If Plaintiff desires to pursue these damages further, it must present legal authority and evidence at a hearing as to why these expenses should be passed on to STA.

Further, Plaintiff seeks $121,755.08 for money paid to "Financial Counsel" from 2007 to 2010. It does not, however, give a breakdown of services rendered, nor cite to any authority allowing the Court to consider such fees as a reasonable part of the damages in this case. Without more, this Court will not grant such request.

Subrogation Claim

Finally, Plaintiff asks for $800,093.97 in damages, the amount Interstate paid Plaintiff for its losses, plus statutory interest. Plaintiff argues entitlement to this amount pursuant to its confidential agreement with Interstate, by which Plaintiff supposedly was given Interstate's subrogation rights to its claims against STA. However, the Court cannot enforce a side agreement between Plaintiff and its insurance company, the existence of which has not been shown. Moreover, awarding this sum would provide Plaintiff with a double recovery, to which no party is entitled. If Plaintiff intends to pursue this matter further, it must do so with proof in hand that such a recovery is legally proper and appropriate.

Summary of Damages for Plaintiff Against STA

For the reasons stated above, the Court finds that on the submitted papers Plaintiff has proven the following damages against STA: $1,517,109.31 (construction costs), $751,504.69 (lost rent); $70,018.62 (relocation and buyout expenses); $374,544.86 (professional fees paid) for total

damages in the amount of $2,713,177.48. However, Plaintiff has already received $1.4 million as a partial settlement in this case, a sum which it concedes must be subtracted from the total damage award. Therefore, the total amount of damages awarded at this time to Plaintiff is [*6]$1,313,177.48.

Plaintiff requests prejudgment interest on its damage award, which the Court grants. The damages occurred at various times between 2005 and 2010. The Court in its discretion has determined "a reasonable intermediate date" of January 1, 2007 from which interest shall run. See CPLR 5001.

With regard to all other requests for damages made by Plaintiff, if it chooses to pursue them further, it must do so at a hearing in which it presents relevant legal authority and evidence to support its claims.


STA asks for an assessment of damages against Golden Vale on it's indemnification claim [FN4] as follows: 1) $1,400,000 — the amount paid to Plaintiff pursuant to the partial settlement agreement and 2) the amount of the judgment for Plaintiff against it as discussed above.

As to the claim of $1.4 million, the Court sees no reason why it is entitled to the entire amount of this settlement money. Nor has STA provided any explanation to support its request. The settlement was paid by four separate parties to the litigation. STA's portion was $291,667. Why the checks from the three other parties were made out to both Plaintiff's and STA's counsel was not explained. Yet, there is no doubt that the checks were meant for and endorsed to Plaintiff. STA is, of course, entitled to be indemnified for that portion of the settlement amount it paid to Plaintiff. Therefore, the Court awards STA a total of $291,667 against Golden Vale on default for indemnification of its partial settlement payment.

With regard to Plaintiff's judgment against STA as determined here, the Court awards a default judgment to STA against Golden Vale in the further amount of $1,313,177.48 plus interest as stated above. The Court also orders that any other amounts adjudged against STA as between it and Plaintiff after a hearing before this Court, if so advised, will be added to this judgment.


Therefore, in accordance with the foregoing, it is

ORDERED that Plaintiff East 77 Owners Co., L.L.C. may enter judgment against Defendant S.T.A. Parking Corp. in the amount of $1,313,177.48 plus statutory interest commencing as of January 1, 2007, and it is further

ORDERED that Defendant S.T.A. Parking Corp. may enter judgment against Defendant Golden Vale Construction Corp in the amounts of $1,313,177.48 plus statutory interest commencing as of January 1, 2007, and $291,667 plus statutory interest commencing as of May 1, 2012, and it is further

ORDERED that today's decision is without prejudice to any subrogation claim that Interstate Insurance Company may have, and it is further

ORDERED that, if so advised, and upon a showing of relevant legal authority, Plaintiff may seek an evidentiary hearing for further monetary damages in accordance with today's [*7]decision, such hearing to be held on August 20, 2013, or on another date if more convenient for respective counsel.

This constitutes the decision and order of the Court

___/s MS_________________


Dated:New York, New York

July 2, 2013


Footnote 1:Apparently, pursuant to an agreement between the contractor hired in 2007 and Plaintiff, which was not provided to this Court, a portion of these costs, $110,545 were deferred and not paid by Plaintiff until 2012.

Footnote 2:According to STA's papers, Plaintiff and STA entered into a separate agreement, which was not provided to the court. This agreement apparently allowed Plaintiff to proceed with its claim against STA while giving certain protections to STA that would allow it to stay in business even if Plaintiff received a judgment against it. In its papers STA explains that it entered into this agreement because it "no longer had insurance coverage" and "as a last resort and to save its business." Affidavit of Michael Zacharias, sworn 10/9/12 in Support of S.T.A. Parking Corps.'s Inquest for Final Judgment, at 6.

Footnote 3:Section 27-1031(b)(1) was repealed effective July 1, 2008 and was replaced with an equivalent provision in the New York City Construction Code. The question of whether a violator of this new provision is strictly liable for damage proximately caused by a violation was not addressed by the Court of Appeals in Yenem and is not before this Court. It is interesting to note, however, that at least one court citing the reasoning in Yenem has found that strict liability does attach to this new provision. See American Security Insurance Co. v. Church of God of St. Albans, 38 Misc 3d 274 (Sup. Ct. Queens Cnty 2012).

Footnote 4:STA indicates in its papers that it has withdrawn its contribution claim.