Summary
rejecting the argument that "[s]ince the tenants were in default for many years before the pandemic ... their inability to pay this substantial amount is not as a result of the pandemic," and, "[a]s such, the new statute does not apply"
Summary of this case from Windward Bora LLC v. CohenOpinion
111723/2011
09-15-2021
Kathryn CASEY, Laurie Cagnassola, Gerald Cohen, Betty Furr, Francesa Gagliano, Carolyn Klein, Joseph Morgan, Richard Rose, Jessica Saks, and Kirk Swanson, Plaintiffs, v. WHITEHOUSE ESTATES INC., Kieppel & Koeppel Inc., Duell 5 Management LLC, William Koeppel, and Eastgate Whitehouse Estates, LLC, Defendants.
Himmelstein, McConnell, Gribben, Donoghue & Joseph LLP, New York, NY (Ronald S. Languedoc of counsel), for plaintiffs. Rosenberg & Estis, P.C., New York, NY (Howard W. Kingsley of counsel), for defendants.
Himmelstein, McConnell, Gribben, Donoghue & Joseph LLP, New York, NY (Ronald S. Languedoc of counsel), for plaintiffs.
Rosenberg & Estis, P.C., New York, NY (Howard W. Kingsley of counsel), for defendants.
Gerald Lebovits, J. This class action concerns the proper amount of rent owed by tenants of a residential apartment building in Manhattan. The various defendants held, or now hold, ownership interests in the building. The named plaintiffs brought this action on behalf of a class of present and former tenants to recover alleged rent overcharges imposed by defendants.
Previous orders of the court in this action required the tenants to pay use and occupancy (U & O) pending a final determination of their lawful regulated rents for the periods at issue. On the current motion, defendants contend that two tenants, Gina Chatel and Laurie Cagnassola, have failed to pay the required U & O. Defendants therefore seek (i) money judgments against these two tenants for back U & O plus interest; and (ii) judgments of possession and writs of assistance to enable defendants to recover possession of these tenants’ apartments.
The branch of defendants’ motion seeking money judgments against Chatel and Cagnassola is granted. The branch of the motion seeking judgments of possession and writs of assistance is denied without prejudice.
BACKGROUND
Plaintiffs allege that the class members were rent-stabilized or rent-controlled tenants in defendants’ building; and that defendants illegally deregulated the class-members’ units and assessed them excessive, market-rate rents for several years. (See generally Casey v. Whitehouse Estates, Inc. , 2017 WL 1161744, 2017 N.Y. Slip Op. 33319[U], at *1 [Sup. Ct., N.Y. County Mar. 23, 2017].)
In 2014, defendant Whitehouse Estates, Inc. (the building's former owner), offered the tenants renewal leases at a rent of Whitehouse's choosing, threatening to bring eviction proceedings if the tenants did not accept. (See Eastgate Whitehouse LLC v. Cagnassola , 2020 WL 3277490, 2020 N.Y. Slip Op. 50691[U], at *1 [Sup. Ct., N.Y. County June 16, 2020].) The tenants sought a preliminary injunction against Whitehouse. This court (Anil Singh J.) granted the preliminary injunction. The court held that the proper course was, in effect, for the tenants to pay Whitehouse U & O pending the completion of the action, at the rent set by the tenants’ last expired leases. (See NYSCEF No. 194 at 19-20 [transcript of ruling on the record].)
This action was originally assigned to Justice Singh, and later transferred to the undersigned.
In 2016, defendants asked this court to fix the amounts owed by plaintiffs in U & O, arguing that notwithstanding Justice Singh's 2014 order, defendants had been unable in practice to collect U & O from many of their tenants or to obtain judgments of possession. This court decided defendants’ request for relief in 2017. (See Casey , 2017 N.Y. Slip Op. 33319[U].) This court agreed with defendants that as an equitable matter, "a dispute concerning the amount of rent owed is no reason to allow a tenant to occupy the landlord's property gratis." ( Id. at *17 [internal quotation marks omitted].) But this court concluded the state of the record was such that "there is currently no way for the court to make a complete calculation of the U & O that is due for each apartment from the inception of this action." ( Id. ) The court therefore referred to a special referee the issue of the appropriate amounts of U & O owed by each tenant. Tenants who had not been paying U & O as directed by Justice Singh would be required to post a bond equal to their U & O obligation as determined based upon the special referee's forthcoming report. (See id. at *18.)
As a procedural matter, this court directed defendants, when "submit[ting] their motion to confirm or deny the Special Referee's report," to "include a request that the court issue an order requiring those plaintiffs who have not paid any use and occupancy to post a bond, equal to the amount of use and occupancy specified in Justice Singh's May 21, 2014 order," following this court's decision on the motion to confirm. ( Id. at *21.) Defendants could "thereafter commence an action for ejectment against any plaintiff who fails to post such a bond[,] and request that that action be referred to this court." ( Id. ) The Appellate Division, First Department, recently affirmed this court's order on defendants’ U & O-related request (and on other issues in the case not relevant here). (See Casey v. Whitehouse Estates, Inc. , 197 A.D.3d 401, 153 N.Y.S.3d 6 [1st Dept. 2021].)
Following this court's order, the special referee's hearing on the issue of the legal rent was repeatedly adjourned for a variety of reasons, including settlement negotiations, appellate motion practice, and discovery disputes between the parties. And in 2018, before the matter had been heard by a referee, defendant William Koeppel (the principal of both Whitehouse and Eastgate) filed for bankruptcy. The bankruptcy automatically stayed proceedings against him—including proceedings before a special referee. The bankruptcy court did not lift the stay as to this action until 2020. (See NYSCEF No. 388.)
In late 2019, defendants brought separate actions against Cagnassola and against Daniel Geller (another tenant in the building), seeking money judgments for unpaid U & O, and judgments awarding them possession of Cagnassola's and Geller's apartments. (See Eastgate Whitehouse LLC v. Cagnassola , 2020 WL 3277490 (2020) ; Eastgate Whitehouse LLC v. Geller , 2020 WL 3277739 (2020).) In June 2020, this court granted Cagnassola's and Geller's motions under CPLR 3211 (a) (1) and (a) (4) to dismiss the actions against them. (See Cagnassola , 2020 N.Y. Slip Op. 50691[U] ; Eastgate Whitehouse LLC v. Geller , 2020 WL 3277739, 2020 N.Y. Slip Op. 50692[U] [Sup. Ct., N.Y. County June 16, 2020].)
Defendants now move in this action against Chatel and Cagnassola for (i) money judgments in the amounts of $209,775, and $163,800, respectively, in assertedly owed U & O; and (ii) judgments of possession and writs of assistance based on Chatel and Cagnassola's failures to pay accrued U & O.
DISCUSSION
Defendants contend that they are entitled to money judgments, judgments of possession, and writs of assistance against Chatel and Cagnassola for their respective failures to pay U & O as putatively required by this court's previous orders in this action. Plaintiffs have expressly declined to contest at this time defendants’ arguments about Chatel and Cagnassola's putative failures to have paid required U & O. Instead, they argue that under the COVID Emergency Eviction and Foreclosure Prevention Act (CEEFPA), L 2020, ch. 381, and under L 2021, ch 417, this court may not now consider any part of defendants’ motion. (See NYSCEF No. 465 at ¶ 12.) This court agrees that it may not consider defendants’ requests for judgments of possession and writs of assistance until after the expiration of the stay imposed by chapter 417. But the court sees no bar to considering and determining defendants’ request for money judgments.
I. The Branch of Defendants’ Motion Seeking Judgments for Possession and Writs of Assistance
The first question raised by the current motion is whether chapter 417 bars this court even from considering defendants’ requests for judgments of possession and writs of assistance as against Chatel and Cagnassola. This court concludes that chapter 417 does bar consideration of those requests prior to its expiration in January 2022.
A. Whether this Branch of the Motion Constitutes An "Eviction Proceeding" for Purposes of Chapter 417
Defendants contend first that CEEFPA did not (and chapter 417 does not) even apply to this motion. The statutory restrictions in those statutes, defendants argue, apply only to "eviction proceedings"—not to motions brought in a rent-overcharge action that seek possession based on a tenant's failure to pay court-ordered U & O. This court disagrees.
CEEFPA imposed a moratorium on (most) residential eviction proceedings. It defined "eviction proceeding" to include not only RPAPL article 7 summary proceedings, but also "any other judicial or administrative proceeding to recover possession of real property relating to a residential dwelling unit." (L 2020, ch 381, pt A, § 1 [1] [emphasis added].) In enacting CEEFPA, the Legislature stated that its intent was "to avoid as many evictions and foreclosures as possible for people experiencing a financial hardship during the COVID-19 pandemic." (Ch 381, § 3.)
In Chrysafis v. Marks, ––– U.S. ––––, 141 S.Ct. 2482, 2482-83, 210 L.Ed. 1006 [2021], the U.S. Supreme Court enjoined CEEFPA. The Court held that CEEFPA's limits on a landlord's ability to challenge tenants’ certifications of financial hardship violated due process. The Legislature then enacted chapter 417 to restore a moratorium on (most) residential eviction proceedings while addressing Chrysafis's due-process holding (See L 2021, ch 417, § 2 [legislative findings].) Chapter 417 and CEEFPA define "eviction proceeding" the same way. (See L 2021, ch 417, pt C, subpt A, § 1 [1].) In enacting chapter 417, the Legislature explained that restoring the moratorium was necessary in light of "the ongoing risks posed by residential evictions stemming from non-payment of rent" during the pandemic, "such as the potential to exacerbate the resurgence of COVID-19, the damage significant numbers of evictions would cause to the state's economic recovery, and the deleterious social and public health effects of homelessness and housing instability." (Ch 417, § 2.)Thus, in stringently limiting residential eviction proceedings, chapter 417 employs a broad definition of "eviction proceeding." The legislative findings of chapter 417 and its predecessor CEEFPA make clear, moreover, that this definition should itself be construed broadly to further the Legislature's aim of avoiding public-health, economic, and social harms from residential evictions during the COVID-19 pandemic. (See NYCTL 2016-A Trust v. Neighborhood Youth & Family Servs., Inc. , 71 Misc. 3d 479, 484, 142 N.Y.S.3d 898 [Sup. Ct., Bronx County 2021] [holding, in interpreting "eviction proceeding" in CEEFPA, that the statute's "statement of legislative intent shows that the applicability of CEEFPA is to be broadly construed"]; Jacob Cram Coop., Inc. v. Ziolkowski , 2021 WL 225304, 2021 N.Y. Slip Op. 30174[U], at *1-2 [Sup. Ct., N.Y. County Jan. 22, 2021] [same].)
The holding of Chrysafis is thus unrelated to the scope of the statutory definition of "eviction proceeding." (See 2021 WL 3560766, at *1.)
The parties’ briefing focuses on the applicable provisions of CEEFPA. The recently enacted eviction moratorium in chapter 417, though, contains an identical definition of "eviction proceeding." (See L 2021, ch 417, pt C, subpart A, § 1 [1].) And after enactment of chapter 417, this court afforded the parties the opportunity to file supplemental submissions addressing the new statute's implications for the current motion. The parties have each filed supplemental submissions (see NYSCEF Nos. 493-496 [plaintiffs], 497 [defendants]), which this court has considered in resolving the motion.
Defendants are seeking here to recover possession of Chatel and Cagnassola's apartments based on nonpayment of U & O. If defendants were to seek this relief in a freestanding application—whether in a petition or complaint, in a counterclaim, or by some other means—that application would constitute an "eviction proceeding" for purposes of chapter 417. Defendants ask the court to hold that a different result obtains because they have instead brought their request to recover possession of the apartments within an existing action. In other words, defendants’ reading of chapter 417 is that it makes the presence or absence of statutory eviction protections for tenants suffering financial hardship due to COVID-19 dependent on the particular posture in which the request for eviction happens to arise. This interpretation requires an unduly narrow definition of "eviction proceeding" as used in this statute.
The balance struck by the Legislature in chapter 417 turns on whether a residential tenant is or is not suffering hardship due to COVID-19 (see L 2021, ch 417, pt C, subpart A, §§ 4, 10); and, if she is suffering hardship, whether her eviction proceeding nonetheless should be permitted to continue because the tenant is alleged to have significantly damaged the property or to be engaging in persistent objectionable or nuisance-type behavior (see id. § 7). Neither of these inquiries has anything to do with the particular procedural vehicle by which the landlord seeks to recover possession of the premises. Indeed, these very defendants previously sought to recover possession of Cagnassola's apartment in a separate plenary action. This court dismissed that action in June 2020, in large part because the current action was already pending. (See Cagnassola , 2020 N.Y. Slip Op. 50691[U], at *4-5.) It would make no sense to say that defendants now have the right to evict Cagnassola in this action—although they likely would not have been able to do so in the prior action had it proceeded past the pleading stage—when the underlying substantive arguments for and against eviction have not changed. In short: this court concludes that when a landlord has formally requested a court order granting the landlord recovery of possession of a residential dwelling unit, that request constitutes an "eviction proceeding" for purposes of chapter 417, whether the request has been made within an existing action or as a freestanding application for judicial relief. (See Neighborhood Youth & Family Servs. , 71 Misc. 3d at 484, 142 N.Y.S.3d 898 [holding that a motion for possession of residential premises constituted an "eviction proceeding" for purposes of CEEFPA when made within a tax-lien foreclosure action by nonparties who purchased the premises at foreclosure].)
Defendants also suggest that it would be inequitable to stay or deny their current requests for judgments of possession or writs of assistance. They contend that because plaintiffs’ counsel suggested at oral argument on a prior motion in this case (held two weeks after the effective date of CEEFPA) that the appropriate course for defendants to seek eviction-related relief would be to bring a version of the current motion, waiver or estoppel principles foreclose plaintiffs’ argument here that defendants’ current eviction-related requests for relief are barred by CEEFPA and chapter 417. (See NYSCEF No. 471, quoting NYSCEF No. 454 at Tr. 29-30. NYSCEF No. 454 contains excerpts from the transcript of oral argument; the full transcript can be found at NYSCEF No. 431.) This court concludes that the brief statement by plaintiffs’ counsel during the prior motion argument—about which defendants’ counsel did not raise any objections or concerns (see NYSCEF No. 431 at Tr. 30)—is an insufficient basis to find waiver or estoppel.
B. Whether Chapter 417 Bars this Court from Considering this Branch of Defendants’ Motion
Chapter 417, part C, subpart A, § 4 provides that if the tenant provides a hardship declaration to the court in any pending "eviction proceeding in which an eviction warrant or judgment of possession or ejectment has not been issued," the "eviction proceeding shall be stayed until at least January 15, 2022." It is undisputed that Chatel and Cagnassola have provided hardship declarations to the court in this action. (See NYSCEF Nos. 468, 469.) And defendants do not contend that either Chatel or Cagnassola has caused significant damage to their respective apartments or is engaging in hazardous or nuisance-type behavior, so as to implicate § 7's exception to this stay requirement.
The court therefore may proceed with considering this branch of defendants’ motion only if § 10's separate exception to the stay requirement applies here. Section 10 (a) provides that if the "court finds the respondent's hardship claim invalid," then the court may deny (or vacate) a stay of the eviction proceeding. Defendants’ supplemental submission contends, in effect, that this court should find Chatel and Cagnassola's hardship claims to be invalid, and therefore deny the stay. (See NYSCEF No. 497.) This court is not persuaded.
As an initial matter, § 10 [a] provides that a landlord's challenge to the tenant's claim of hardship should be brought by motion. Defendants have not brought a motion here setting forth their "good faith belief that the respondent[s] ha[ve] not experienced a hardship." (Id. ) And although defendants might fairly assert that they have not had lacked sufficient time since the enactment of chapter 417 to prepare and file a new, freestanding motion on the hardship issue, defendants have not requested an extension of time to enable them to bring that motion, either.
Nor, for that matter, does defendants’ supplemental submission challenge Chatel and Cagnassola's declarations that they have suffered from significantly reduced household income, significantly increased expenses, or both, due to the COVID-19 pandemic. Instead, defendants contend in their supplemental submission that Chatel and Cagnassola do not come within the relevant statutory definition of financial hardship as a legal matter. (See NYSCEF No. 497 at 2.) The statute defines financial hardship to include "an inability to pay rent or other financial obligations due in full pursuant to a lease or rental agreement" due to one of six itemized COVID-19-related causes. (See subpt A, § 1 [5] [a].) Defendants assert that "[s]ince the tenants were in default for many years before the pandemic ... their inability to pay this substantial amount is not as a result of the pandemic," and, "[a]s such, the new statute does not apply." (NYSCEF No. 497 at 2.)
Defendants’ conclusion, however, does not follow. If, as defendants contend, Chatel and Cagnassola have been in default on their rent obligations since 2013, that would establish only that Chatel and Cagnassola did not pay rent that they owed—not necessarily that they were unable to pay that rent. Indeed, there are other plausible reasons for Chatel and Cagnassola not to have paid rent besides an inability to pay, including their prolonged and ongoing dispute with defendants in this very action over what rent is in fact owed. It is thus possible that Chatel and Cagnassola now suffer from a financial hardship consisting of an inability to cover their rental obligations due to COVID-19-related causes, even if they were able to cover those obligations before.
Additionally, even if defendants were correct that Chatel and Cagnassola cannot be understood to have suffered a hardship consisting of "an inability to pay rent or other financial obligations ... in full," that would not end the financial-hardship inquiry. The statute also defines financial hardship to encompass "an inability to ... obtain alternative suitable permanent housing" due to COVID-19-related reductions in income or increases in expenses. (Subpt A, § 1 [5] [a].) Defendants’ supplemental submission does not address that aspect of the statutory definition.
Further, both Chatel and Cagnassola declared that they are also suffering a hardship consisting of "an inability to vacate the premises and move into a new permanent housing because doing so would pose a significant risk of severe illness or death from COVID-19" to them or to members of their household. (Id. § 1 [5] [b]; see NYSCEF Nos. 468, 469.) Defendants do not challenge the veracity or validity of those declarations. Instead, they assert that this second form of hardship "cannot be considered" because the "new statute requires a hardship declaration to be either on financial grounds or because the tenants cannot physically move, not both." (NYSCEF No. 497 at 2 [emphasis in original].) Defendants’ sole basis for this assertion appears to be that the statute lists these two forms of hardship in the disjunctive. But given the context and purpose of this statute, it would make far more sense to interpret this language as making each hardship ground independently sufficient to require a stay of eviction proceedings, rather than treating the two grounds as mutually exclusive. Indeed, the statutorily prescribed hardship-declaration form itself directs tenants to "indicate below your qualification for eviction protection by selecting option ‘A’ or ‘B,’ or both. " (Subpt A, § 4 [b] [emphasis added, block capitalization removed].)
This court does not agree with plaintiffs’ assertion in their supplemental submission that chapter 417 does not permit a landlord to challenge a tenant's declaration that relocation would expose them to a significant health risk. (See NYSCEF No. 493 at 4-5.) Plaintiffs rely on §§ 9 and 10 of part C, subpart A. But § 9 does not foreclose a landlord from rebutting a tenant's significant-health-risk hardship claim made under chapter 417. It merely discusses the effect of a tenant's chapter 417 financial-hardship claim on the financial-hardship defense against eviction provided by the Tenant Safe Harbor Act, L 2020, ch 127. And § 10 permits a landlord to challenge a tenant's "hardship claim" without distinguishing between the financial and significant-health-risk forms of hardship.
Given Chatel and Cagnassola's submission of hardship declarations, and the absence of a meritorious challenge to the legal or factual basis of those declarations, chapter 417 bars defendants’ claims for judgments of possession and writs of assistance from proceeding until at least January 16, 2022. This court concludes that rather than leave the eviction branch of the current motion open-but-stayed for at least the next four months, the more economical course is to deny this branch of the motion, without prejudice to defendants’ again moving for judgments of possession and writs of assistance against Chatel and Cagnassola once the stay imposed by chapter 417 (and any statutory extension of that stay) has been lifted or expires.
II. Whether Defendants May Obtain Money Judgments for Unpaid U & O
The other question raised by the current motion is whether, given chapter 417, this court may properly consider the branch of defendants’ motion seeking money judgments against Chatel and Cagnassola. Plaintiffs’ affirmation in opposition contends that "it is completely improper for Defendants to pursue this motion." (NYSCEF No. 465 at ¶ 12.) And plaintiffs have indicated to this court that they have chosen deliberately to rest their opposition to the motion on that ground, rather than address the substance of defendants’ money-judgment claims. Consistent with that approach, neither plaintiffs’ original motion opposition, nor plaintiffs’ supplemental submissions after the initial round of briefing, contest defendants’ claim that they are entitled to money judgments against Chatel and Cagnassola. This court concludes that the court may consider and determine this branch of defendants’ motion, though it is statutorily barred at this time from considering the eviction branch of the motion. And in the absence of arguments by plaintiffs against the award of money judgments for the U & O that Chatel and Cagnassola assertedly owe, the court concludes that this branch of defendants’ motion should be granted.
Plaintiffs’ argument in favor of a bar on considering the motion is, essentially, that the branch of defendants’ motion seeking the grant of judgments of possession and writs of assistance qualifies as an eviction proceeding. And as discussed above, this court agrees with that argument. On the other hand, had defendants sought only money judgments, that motion clearly would not be an eviction proceeding. This court sees no reason why the fact that defendants have sought both forms of relief here should mean that chapter 417's stay on eviction proceedings necessarily carries over to defendants’ separate request for monetary relief.
On the merits, this court concludes that the extant COVID-19 relief statutes have not affected this court's authority to grant money judgments for unpaid rent as against residential tenants. These statutes are not aimed at eliminating residential tenants’ financial obligations to pay rent (or landlords’ right to collect on those obligations). Rather, the statutes focus on preventing tenants’ evictions should the tenants be unable to pay meet those obligations as a result of financial hardship caused by COVID-19.
Section 1 of the Tenant Safe Harbor Act, for example, bars evictions against tenants suffering financial hardship during the COVID-19 period based on nonpayment of rent coming due during that period. But § 3 makes clear that the Act "shall not prohibit any court from awarding a judgment for the rent due and owing to a successful petitioner in a summary proceeding under article 7 of the real property actions and proceedings law." Similarly, chapter 417 does not stay, or otherwise limit, the award of money judgments for unpaid rent or U & O. To the contrary, the text of the statute's sample hardship declaration expressly acknowledges that tenants "understand that lawful fees, penalties or interest for not having paid rent in full or met other financial obligations as required by my tenancy, lease agreement or similar contract may still be charged or collected and may result in a monetary judgment against me." (See L 2021, ch 417, pt C, subpart A, § 4.)
This provision does not squarely apply to this action, because defendants’ requests for money judgments against Chatel and Cagnassola are being made in a plenary action, not an RPAPL article 7 summary proceeding. But the contrast drawn by the Act between evictions for nonpayment of rent (barred in specified circumstances) and award of money judgments for the same unpaid rent (not barred) is instructive regardless.
The sample hardship declaration provided in CEEFPA was to the same effect. (See L. 2020, ch 381, pt A, § 1 [4] [text of hardship declaration].)
This court may therefore consider the branch of defendants’ motion seeking money judgments against Chatel and Cagnassola, and it may grant the requested money judgments if those requests are meritorious. Defendant has provided evidentiary support for its claim that Chatel and Cagnassola owe the amounts claimed. (See NYSCEF No. 447 [aff. of William W. Koeppel]; NYSCEF Nos. 448, 449 [leases]; NYSCEF Nos. 457, 458 [rent ledgers].) And plaintiff has not identified any legal or factual reason for this court to conclude that defendants’ requests for money judgments against Chatel and Cagnassola in the amounts claimed are unmeritorious. This branch of defendants’ motion is granted.
Accordingly, for the foregoing reasons it is hereby
ORDERED that the branch of defendants’ motion seeking the grant of judgments of possession and writs of assistance as against Chatel and Cagnassola is denied without prejudice; and it is further
ORDERED that the branch of defendants’ motion seeking a money judgment against Chatel is granted, and defendants are awarded a judgment against Chatel in the amount of $209,775, plus prejudgment interest running from March 23, 2017, as a reasonable intermediate date under CPLR 5001 (b) ; and it is further
ORDERED that the branch of defendants’ motion seeking a money judgment against Cagnassola is granted, and defendants are awarded a judgment against Cagnassola in the amount of $163,800, plus prejudgment interest running from March 23, 2017, as a reasonable intermediate date under CPLR 5001 (b).