Opinion
Index No.: L&T 82754/2013
01-03-2014
INVESTEC BANK PLC (f/k/a INVESTEC BANK, (UK) LIMITED), Petitioner v. ELITE INTERNATIONAL FINANCE, LTD KRISHNAMURTHY CHANDRA, LAKSHMI CHANDRA, "JOHN DOE" "JANE DOE" and "R. Doe, INC." 12 WEST 107TH STREET - APT 2C NEW YORK, NEW YORK 10025 Respondents
DECISION & ORDER
HON. SABRINA B. KRAUS
BACKGROUND
The underlying summary holdover proceeding was commenced by INVESTEC BANK PLC (f/k/a INVESTEC BANK, (UK) LIMITED) (Petitioner) against ELITE INTERNATIONAL FINANCE, LTD (Respondent), KRISHNAMURTHY CHANDRA, and LAKSHMI CHANDRA (collectively "Occupants"), seeking to recover possession of Unit PH-3-AB at 2000 Broadway, New York, New York, 10023, a/k/a The Copley Condominium and Club (Subject Premises) based on the allegation that Respondent is the former owner of the Subject Premises, which was sold to Petitioner at a public auction.
PROCEDURAL HISTORY
Petitioner issued a Notice to Quit dated September 16, 2013. The petition is dated October 7, 2013, and the proceeding was initially returnable October 16, 2013.
Respondent has never answered or appeared. Occupants appeared by counsel on the initial return date, and after a conference, the proceeding was adjourned to November 19, 2013 for trial and inquest. Occupants agreed to pay $10,000 use and occupancy in consideration for the adjournment.
On November 13, 2013, Occupants filed a Notice of Appearance and Answer and on November 22, 2013, Occupants filed an amended answer. On November 19, 2013, Petitioner moved for Summary Judgment, and Occupants cross-moved for dismissal based on a failure to comply with RPAPL § 713(5). On November 26, 2013, Occupants also cross-moved for dismissal for failure to comply with RPAPL § 1305.
On November 26, 2013, the court heard limited oral argument and reserved decision.
The motions are consolidated for disposition herein.
ALLEGED FACTS
The petition assets the following facts. Petitioner is a bank and a foreign corporation and the owner of the Subject Premises, pursuant to a purchase at public auction held on May 15, 2013. Respondent is a corporation, the prior owner of the Subject Premises and in possession of the Subject Premises, which is a condominium. Occupants are licensees or squatters. Respondent mortgaged the Subject Premises to Petitioner in 2008, and the mortgage was recorded on May 14, 2008. On June 21, 2012, Petitioner, on default, obtained an Order in a Supreme Court action under Index Number 652120/10 which named Respondents and Occupants as defendants. The order provided that the Subject Premises would be sold, that the purchaser be let into possession, that the rights of the named Defendants would be foreclosed after filing of a notice of pendency and that the sale would be subject to inter alia "Any rights of tenants under leases for or other persons in possession ... (order annexed as Exhibit A to petition)".
The petition further asserts that pursuant to the deed (annexed as Exhibit B to the petition) Petitioner became the owner of the Subject Premises and that said deed was delivered pursuant to the May 15, 2013 public auction sale.
Occupants' answer asserts the following defenses. Petitioner failed to exhibit the deed as required by statute, and that said defect requires dismissal of this proceeding. The predicate notice and petition were improperly served. Petitioner failed to assert it is authorized to do business in New York State. Occupants are in occupancy pursuant to a lease and Petitioner failed to provide notice as required by RPAPL §1305. Petitioner failed to name a necessary party.
Occupants assert that Krishnamurthy Chandra (Chandra) originally leased the Subject Premises from Respondent pursuant to a written lease dated September 18, 2003, which was amended on January 1, 2007, to provide for a three year term through 2010, and was subject to renewal at the election of Occupant for two additional periods of (3) years subject to termination. Occupants assert Chandra exercised her right to both renewals and is currently in the second renewal period, which she asserts runs through December 2015. Chandra further asserts she has lived in the Subject Premises since 2001, and has spent over one million dollars on renovations for the Subject Premises.
DISCUSSION
The proceeding is brought pursuant to RPAPL § 713(5) which provides that a special proceeding may be maintained after service of a notice to quit, subject to RPAPL §1305, where the property has been sold in foreclosure and a copy of the deed has been exhibited.
RPAPL §1305 provides in pertinent part that "... a tenant ... shall have the right to remain in occupancy ... where he or she resides ... for the greater of :(a) a period of ninety days from the date of the mailing of such notice; or (b) for the remainder of the lease term
RPAPL 1305 parallel's the Protecting Tenants at Foreclsoure Act enacted by congress, and seeks to protect tenants in foreclosed rental properties against abrupt evictions by ensuring they can remain in their homes for the duration of their lease or that they receive notice and sufficient time to relocate (see eg Bank of America NA v Owens 28 Misc3d 328).
The statute is intended to afford protections to bona fide tenants in possession pursuant to a valid lease, where the lease provides for payment of rent not substantially lower then the market rate. As noted in the Governor's Program Bill Memorandum, 2009, Extraordinary Session #7, Program Bill # 46 RR:
The Joint Center for Housing Studies of Harvard University has found that in 2007, 20% of all foreclosures filings across the country were in non-owner occupied properties. New York University's Furman center for Real Estate and Urban Policy conservatively estimates that 15,000 renter households or about 38,000 New York City residents were impacted by foreclosure. Often renters have been unaware that their landlords are in default until utilities are shut off or an eviction notice appears on their door.
This bill would establish protections for tenants in foreclosed residential real property. The bill would require that the plaintiff deliver a notice to the tenant informing the tenant that a foreclosure action has been commenced and advising the tenant of certain rights to remain in the property. The provision will allow tenants to be fully aware of the status of the property and allow them to make informed decisions about whether they should remain in such property.
Occupants assert that Petitioner never issued any such notice and that therefore the proceeding must be dismissed. Petitioner argues that the notice requirements of RPAPL §1305 are inapplicable to tenants named in a foreclosure action, and that such notice requirement is only applicable to tenants not named in a foreclosure action. Petitioner cites no legal authority for this proposition.
RPAPL § 1305 defines tenant as:
.... any person who at the time ... appears as a lessee on a lease of one or more dwelling units of a residential property that is subordinate to the mortgage on such residential property; or who at such time is a party to an oral or implied rental agreement with the mortgagor and obligated to pay rent to the mortgagor or such mortgagor's representative, for the use or occupancy of one or more dwelling units of a residential real property.
Chandra has submitted two directly contradictory affidavits in support of Occupants' cross-motions. The November 15, 2013 affidavit submitted by Chandra in support of the first cross motion contains the following sworn statement " I am not a party to any lease or rental agreement for the Subject Premises ...". However, a few days later in an affidavit dated November 21, 2013, Chandra alleges exactly the opposite stating " Most importantly, I currently hold a lease to the subject premises.....", and annexes a copy of the original lease and amendment.
Petitioner argues that the lease is irrelevant because it was terminated in the foreclosure proceeding and its terms provided it was subordinate to the mortgage. Petitioner also argues that the last alleged renewal is asserted to have taken place on November 29, 2012, after the entry of the Judgment in foreclosure on June 21, 2012.
Petitioner's arguments miss the point. The fact that the lease provides it is subordinate to the mortgage is not a disqualifying factor for protection under RPAPL §1305, which by its very terms only applies to leases which are subordinate to the mortgage. Moreover, the relevant time under the statute for determining whether Occupant is a bona fide tenant is not the date of the judgment in foreclosure, but whether such lease existed within 10 days of the service of the summons and complaint pursuant to RPAPL§ 1303(4).
The verified complaint in the foreclosure action (annexed as Exhibit C to Occupants' cross-motion) is dated November 30, 2010. There is no indication in the motion papers as to when it was served. The amendment to Occupants' lease is dated January 1, 2007 and goes for an initial term through January 2010. There appear to be questions of fact as to what if any lease was in effect at the applicable time period and whether Occupants are tenants as defined by RPAPL § 1305.
However, if Occupants meet the definition of Tenant under an actual or implied agreement as provided for in RPAPL § 1305 they are entitled to a 90 day notice, notwithstanding the claim by Petitioner to the contrary. Petitioner acknowledges no 90 day notice has been served.
The second primary basis for Respondent's cross-motion for dismissal is that Petitioner has failed to exhibit the deed to Occupants as required by RPAPL § 713(5).
Petitioner alleges it has satisfied this requirement by annexing a certified copy of the deed to the Notice to Quit herein, which the affidavits of service assert were served by conspicuous place delivery on September 20, 2013 at 10:35 am, with only one prior attempt having been made, less then 24 hours earlier on September 19, 2013 at 6:31 pm.
Petitioner acknowledges that there is an Appellate Term decision directly on point which holds that said service is defective as a matter of law. In Home Loan services, Inc. v Moskowitz 31 Misc.3d 37 the Appellate Term, Second Department held that conspicuous place delivery, after four attempts at personal service had been made, was insufficient as a matter of law to comply with the statutory requirement in RPAPL 713(5) that the deed be "exhibited " to the respondents. The court held in pertinent part:
While this statute provides that a notice to quit may be served in the same manner as a notice of petition and petition, it does not make the same provision for the referee's deed. Instead the statute specifically requires that the deed be "exhibited' to the respondent. In our view, and in light of the strong policy prohibiting unlawful evictions (see generally Bill Jacket L 1981, Ch 467), attaching a copy of the referee's deed to a 10-day notice toPetitioner argues that this court should disregard the decision in Moskowitz, and instead follow a lower court decision finding said holding inapplicable. In Hudson City savings Bank v Lorenz (39 Misc3d 538) the district court held that service of a notice to quit and deed by nail and mail was sufficient to comply with the requirements of RPAPL 713(5). However, the holding in that case was limited to the particular facts of the case, which were that the respondent had been excluded from the subject premises s by virtue of an order of protection and petitioner had no knowledge of same, and respondent acknowledged that he was no longer residing at the Subject Premises.
quit served by "nail and mail" was insufficient to satisfy the requirement of exhibition of the deed pursuant to RPAPL 713(5).
Additionally, the doctrine of stare decisis makes Moskowitz binding on this court. Moreover, it is not clear that two attempts in less then 24 hours constitutes even a reasonable application, much less a valid attempt at personal service (see also US Bank National Association v Eichenholtz 37 Misc3d 536 service of deed and notice to quit by delivery to a person of suitable age and discretion insufficient to meet requirement of exhibiting deed pursuant to RPAPL 713(5); Colony Mortgage Bankers v Mercado 192 Misc2d 702 substituted delivery insufficient to comply with RPAPL 713(5) requirement to exhibit the deed ).
Based on the foregoing, Occupants' cross- motion to dismiss the proceeding for failure to comply with RPAPL § 713(5) is granted.. The other issues raised in the motions are not reached by the court as they are rendered moot by the dismissal.
This constitutes the decision and order of this court. Dated: January 3, 2014
New York, New York
________________
Hon. Sabrina Kraus
JHC
TO: LAMBERT & SHACKMAN, PLLC
Attorneys for Petitioner
274 Madison Avenue
New York, NY 10016-0701
212.370.4040
DAVID A KAMINSKY & ASSOCIATES, PC
Attorney for Occupants
325 Broadway - Suite 504
New York, New York 10007
212.571.1227