Opinion
SP 2094/08.
Decided August 21, 2008.
Gabriel A. Leventhal, Esq., of Counsel to Gleich, Siegel Farkas, Attorneys for Petitioner, 36 South Station Plaza, Great Neck, New York 11021, 516-482-4436; William C. Thomas, Esq., of Counsel to Manners Associates, P.C., Attorney for Respondent, 950 Jericho Turnpike, Suite 100, Westbury, New York 11590, 516-942-3900.
Petitioner Purmil Company, LLC has commenced this non-payment proceeding against Respondent Chuk Dey India Too, Inc. to recover possession of property located at 3334 Hillside Avenue, New Hyde Park, New York, and the sum of $3,815.00 representing rent owed for the month of April, 2008, April's late fee, costs and reasonable attorney's fees as additional rent . On May 13, 2008 the parties signed a stipulation whereby the petition was amended to include the rent for May, 2008. Respondent has interposed an answer containing an affirmative defense predicated upon fraud in the inducement and a violation of General Business Law § 349, and a counterclaim for return of the security deposit of $20,000.00. As part of the affirmative defense, Respondent incorporates by reference the causes of action set forth in the Nassau County Supreme Court complaint which pleads fraud in the inducement as a first cause of action and violation of General Business Law § 349 as a second cause of action.
By motion dated May 20, 2008, Petitioner Purmil Co., LLC moves to dismiss the affirmative defense and counterclaim set forth in the answer of Respondent Chuk Dey India Too, Inc. on the grounds that 1) identical claims are already pending in a Nassau County Supreme Court action; 2) the affirmative defense incorporating a claim of fraud was improperly pleaded; 3) the affirmative defense incorporating a violation of General Business Law is inapplicable to this summary proceeding; and 4) the counterclaim for return of the security deposit was waived by provisions of the lease. In addition, Petitioner seeks to amend the Petition to include attorneys fees in the amount of $3200.15.
BACKGROUND
On March 1, 2003, Petitioner-Landlord Purmil entered into a lease agreement for the subject premises with the prior tenant, Heritage Express Café LLC. Article 2 of the lease provided that the premises were to be used as an Indian restaurant with the right to change the use to another type of restaurant. On or about June 13, 2003, Heritage received a cease and desist order from the Town of North Hempstead disallowing alteration of the premises without approval. Heritage then made an application appealing the order and requesting permission to renovate the premises. On or about September 10, 2003, the town zoning board denied this request.
Thereafter, on October 15, 2003, the Petitioner and prior tenant amended the lease's use clause to read "Tenant shall use and occupy the demised premises for a bagel café and deli and for no other purpose . . . except, Tenant shall have the right to operate an Indian restaurant in the premises, provided the Town approves the occupancy."
On or about October 24, 2003, the town issued a notice of disapproval in response to Heritage's application for a permit to convert the premises into a bagel café with seats. Then, on or about January 29, 2004, the town issued another notice of disapproval in response to Heritage's application for a permit to convert the premises into a deli-eating and drinking establishment.
On January 23, 2008, Heritage sold the business to the Respondent herein and made an assignment of the lease. On January 30, 2008, Petitioner Purmil, Respondent Chuk Dey, and the prior tenant Heritage signed a second amendment of the lease, which added the security deposit totaling $20,000. Respondent Chuk Dey took over operation of the premises and soon thereafter received a cease and desist order from the Town of North Hempstead.
On April 16, 2008, Respondent filed an action in Supreme Court against Purmil, the Petitioner herein, and Heritage, the prior tenant. The complaint alleged fraud and violation of § 349 of General Business Law and sought damages, return of the security deposit, and rescission of the lease and lease assignment. Soon thereafter, on April 21, 2008, Petitioner Purmil filed the instant summary proceeding for the nonpayment of rent against Respondent Chuk Dey. Respondent filed an answer which alleged identical claims as in the pending Supreme Court action, as described above.
APPLICABLE LEASE PROVISIONS
The 2003 lease had several clauses outlining the respective responsibilities of the parties:
Article 15 provides that the Tenant accepts the premises "as-is" and Landlord made no representation as to the condition of the premises. Furthermore, Tenant took possession of the premises subject to any violations no matter if same are of record or not.
Article 20 of the 2003 lease provides:
Neither Owner nor Owner's agent have made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the demised premises, the rents, leases, expenses of operation, or any other matter or thing affecting or related to the demised premises, except as herein expressly set forth, and no rights, easements or licenses are acquired by Tenant by implication or otherwise, except as expressly set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition, and agrees to take the same "as-is", and acknowledges that the taking of possession of the demised premises by the Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to latent defects. All understanding and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant, and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought.
Article 41 of the 2003 lease provides:
The Landlord has not made and does not make any representations as to the physical condition, layout, expense, operation, use (including the use provided for in this Lease), or any other matter or thing affecting or related to the demised premises or the Property, neither party relying upon any statement or representations made by the other not embodied in this Lease, and the Tenant hereby expressly acknowledges that no such representations have been made. The Tenant acknowledges that it has inspected the premises, is fully familiar with the condition and status thereof and further agrees (except as is otherwise provided herein) to take the premises "As Is".
The 2003 lease was modified by the first amendment of lease, dated October 15, 2003, between Purmil Company and Anil Rai Bhatia. The use clause Article 2 of the original lease was amended to provide that:
1. Article 2 of the Lease shall be deleted and the following inserted in its place:
2.Tenant shall use and occupy the demised premises for a bagel café and deli and for no other purpose, except, Tenant shall have the right to operate an Indian Restaurant, in the premises, provided the Town approves the occupancy. Tenant shall at all times conduct its business in a high grade and reputable manner, shall not violate Article 37 hereof, and shall keep show windows and signs in a neat and clean condition.
Paragraph 5 of the first amendment provided that:
Except as otherwise provided herein, all of the terms, conditions and provisions of the Lease shall remain unmodified and in full force and effect.
By the instrument dated January 2008, the Tenant assigned the original lease as amended by the said first amendment and the second amendment (described further herein) to Chuk Dey India Too, Inc. Pursuant to the assignment, Respondent agreed to be bound by the lease as if it had originally executed same.
The second amendment, dated January 30, 2008, provides that the Petitioner consented to the assignment and that $20,000.00 of security was being held by Petitioner. The second amendment also reaffirms that the lease as modified shall be in full force and effect.
PENDING PRIOR SUPREME COURT ACTION
Respondent moved to dismiss the affirmative defense and counterclaim on the grounds that the same claims are already pending in a prior action in Nassau County Supreme Court. Pursuant to CPLR § 3211 (a)(4), "[a] party may move for judgment dismissing one or more causes of action asserted against him on the ground that there is another action pending between the same parties for the same cause of action in a court of any state or the United States; the court need not dismiss upon this ground but may make such order as justice requires." (emphasis added)
It is clear from the wording of the statute that dismissal of the Respondent's causes of action is within the Court's discretion. In addition, it is well settled that "[t]he District Court . . . is the preferred forum for the resolution of landlord-tenant disputes where the tenant may obtain full relief in a pending summary proceeding." ( All 4 Sports Fitness, Inc. v. Hamilton, Kane, Martin Enterprises, Inc., 22 AD3d 512, 513, 802 NYS2d 470, 471 [2d Dept 2005]; See also, Post v. 120 E. End Ave. Corp., 62 NY2d 19, 475 NYS2d 821[1984]; 44-46 W. 65th Apt. Corp. v. Stvan , 3 AD3d 440 , 772 NYS2d 4 [1st Dept 2004]; Spain v. 325 W. 83rd Owners Corp, 302 AD2d 587, 755 NYS2d 303 [2d Dept 2003]; DiGeronimo v. Amrod, 248 AD2d 652, 673 NYS2d 914[2d Dept 1998]; Scheff v. 230 E. 73rd Owners Corp, 203 AD2d 151,610 NYS2d 251 [1st Dept 1994]; Amoo v. Eastlake Realty Co., 133 AD2d 657, 519 NYS2d 831 [2d Dept 1987]; Kanter v. E. 62nd Street Assoc., 111 AD2d 26, 488 NYS2d 692 (1st Dept 1985); Cohen v. Goldfein, 100 AD2d 795,488 NYS2d 692 [1st Dept 1984]).
Respondent's counterclaim for return of the security deposit is within the discretion of this Court, as is its affirmative defense incorporating claims of fraud and violation of General Business Law § 349. "Fraud . . . is a legal defense as well as an equitable defense" and therefore a municipal court has "jurisdiction to pass upon the validity of the assignment of the lease, and to dismiss the petition if the evidence showed that the assignment had been made fraudulently or illegally." Woods v. Garcewich, 67 AD 53, 56, 73 NYS 472, 473-4 (1st Dept 1901). In addition, the provision of General Business Law dealing with deceptive acts and practices generally applies to a wide variety of business, trade or commerce, including commercial tenancies, and even to the residential landlord-tenant relationship ( see, Frazier v. Priest, 141 Misc 2d 775, 534 NYS2d 846 [Watertown City Ct 1988]). Therefore, the Respondent could obtain full relief on both claims in this proceeding even absent the prior action in Supreme Court.
Despite the fact that the pending Supreme Court action was filed first, the District Court's jurisdiction over disputes between a landlord and tenant takes precedence. Therefore, the prior related action does not bar Respondent's counterclaim and affirmative defense in this proceeding.
WAIVER OF COUNTERCLAIMS
Generally, lease provisions which preclude tenants from alleging counterclaims in commercial landlord tenant summary proceedings are enforceable (see, Lucas v. Florent Inc. , 19 Misc 3d 760 , 860 NYS2d 813 [Civ Ct, NY County 2008]; Amdar Co. v. Hahalis, 145 Misc 2d 987, 988, 554 NYS2d 759 (App Term 1st Dept 1990). However, an exception exists "where a counterclaim is so inextricably intertwined' with petitioner's claim that joint resolution of the claims will expedite disposition of the entire controversy, avoid multiplicity of other lawsuits between the parties to accomplish the same result, do speedy justice for all and eliminate greater delay and expense.'" Lucas, 19 Misc 3d at 762 (citing Ring v. Arts International, Inc. , 7 Misc 3d 869 , 880,792 NYS2d 296,305 [Civ Ct, NY County 2004]).
As the return of the security deposit is inextricably intertwined with this landlord tenant proceeding for nonpayment of rent, as well as the affirmative defense of fraud, the waiver of counterclaims is ineffective and the counterclaim is permissible (see, All 4 Sports Fitness, Inc. V. Hamilton, Kane, Martin Enterprises, Inc. 22 AD3d 512[2d Dept 2005], supra).
FRAUD IN THE INDUCEMENT
This Court grants summary judgment in favor of Petitioner dismissing Respondent's fraud in the inducement claim. The above lease provisions demonstrate that the Respondent had the responsibility to comply with all zoning of the Town of North Hempstead. There was no provision making the lease assignment contingent upon the Respondent obtaining approvals from the Town of North Hempstead.
The second amendment to the lease and the assignment of the lease make clear that the terms and conditions of the lease and the amendments thereto are in full force and effect. The said agreements make clear that Petitioner made no representation concerning the use of the demised property. In fact, it appears to the Court that Respondent never checked or investigated the uses which the Town of North Hempstead permitted or allowed. New York does not allow recovery based upon fraudulent inducement where the party had opportunity to conduct an independent investigation, but fails to do so.
In Culver Theisen v. Starr Realty Company, 307 AD2d 910, 763 NYS2d 84 (2d Dept 2003), the court barred the fraudulent inducement claim because plaintiff failed to investigate the zoning and the uses that could be conducted at the demised premises. The Appellate Division stated:
It is well settled that with respect to a real property contract, unless the facts represented are matters particularly within one party's knowledge, the other party must make use of the means available to learn, by the exercise of ordinary intelligence, the truth of such matters "or he [or she] will not be heard to complain that he [or she] was induced to enter into the transaction by misrepresentation" ( Danann Realty Corp. v. Harris, 5 NY2d 317, 322, 184 NYS2d 599, 157 NE2d 597; Schumaker v. Mather, 133 NY 590, 596, 30 NE 755; Esposito v. Saxon Home Realty, 254 AD2d 451, 679 NYS2d 152). Here, the plaintiff had ample time to conduct an independent investigation, since the lease gave it a six-month time-limited right to cancel the agreement if it was unable to obtain the permits to erect the billboard. The plaintiff's failure to ascertain for itself the restrictions of the zoning resolution precludes its first cause of action alleging fraudulent inducement ( see DiFilippo v. Hidden Ponds Assoc., 146 AD2d 737, 738, 537 NYS2d 222[1989]) ( Culver at 910).
In Zazu, Inc. v. Manor, 148 AD2d 400, 539 NYS2d 348 (1st Dept 1989), the court granted the plaintiff/landlord summary judgment where the lease provided that the landlord made no representations concerning the demised premises and the respondents took the premises as is. This case is directly applicable to the case at bar, because Purmil Company made no representations concerning the use of the premises and, further, the respondent, Chuk Dey India Too, Inc. took the premises as is.
The rationale of Fabozzi v. Coppa , 5 AD3d 722 , 774 NYS2d 555 (2d Dept 2004) is directly on point. The fraudulent claims were dismissed because of the contractual language indicating no representations were being made and that the defendant took the property as is. Furthermore, the Court noted that the fraud claims were barred because the plaintiffs had the means of properly investigating the status of the property. These principles of law bar Respondent's counterclaim of misrepresentation.
In Sugar Creek Stores, Inc. v. Pitts, 198 AD2d 833, 604 NYS2d 407 (4th Dept 1993), the claim of fraud in the inducement asserted as a defense and counterclaim was barred because the lease and franchise agreement disclaimed representations as to the matters encompassed within the fraud claims. This holding is directly applicable to the case at bar because the lease and the amendments thereto make it sufficiently clear that Petitioner took no responsibility as to the use or conditions of the premises and placed responsibility on the Respondent herein.
Having applicability to this action are sections 2:16 and 2:21 in 1 Dolan, Rasch's Landlord and Tenant-Summary Proceedings [4th ed].
Section 2:16 at 122-123 states in part:
The rules discussed in the preceding sections applied to instances where the leases provided for a use which provisions of law then existing or thereafter enacted made unlawful under all possible circumstances. Such rules have no application to the instant situation where a lease provides for a use which the tenant knows, or should know, will be lawful only if a governmental authority exercises legal discretion in favor of such use. In one case, in which this rule was applied, the lease provided that the premises were to be used as a dance hall. To conduct a dance hall it was necessary to procure a license, the granting of which rested in the discretion of the licensing board. The court found that the tenant and landlord were cognizant of this fact. After entering into possession, the tenant was unable to obtain the license, and thereupon brought suit for the return of the deposit money and the first month's rent he had paid in advance. The court refused to grant the tenant any recovery; for, as the court said, "The parties in making the contract of lease did not intend that the premises should be used for an illegal purpose. They intended that the demised premises should be used as a dance hall only when the lessee had obtained a license. A contract so made is not unlawful." They knew, the court held, that the granting of the necessary license was within the discretion of the public officer, and therefore they could have conditioned the lease on the license being granted. "We may not now imply a condition in their contract, nor hold that the anticipated grant of a license constituted the foundation of the contract, when both parties knew that the grant of a license depended on the discretion of a public officer." Since the tenant had failed to condition the lease on the procuring of the license, the lease was not thereby voided.
1 Dolan, Rasch's Landlord and Tenant — Summary Proceedings, § 2:21, at 128 [4th ed] further states in part:
However, where a lease limits the use of demised premises, and expressly makes the lease subject to the zoning laws, that clearly indicates, it has been held, that it was the intent of the parties that the risk of failure to secure a variation of the zoning law from the board of appeals was assumed by the tenant. Therefore, if, because the use is prohibited by the zoning laws, the tenant cannot use the premises, the tenant is precluded from asserting the illegality of the lease.
The above quotes apply because use of the property as an Indian restaurant was made subject to the zoning laws of the Town of North Hempstead. Use of the property was at the Respondent's risk based upon the agreement of the parties. Respondent did not insert any language which protected it if the Town of North Hempstead refused to allow the contemplated use and hours of operation. Respondent failed to properly investigate the applicable zoning and cannot translate said failure into a fraud claim.
Based upon the above, the Respondent's counterclaim based upon fraud is dismissed.
CLAIM FOR SECURITY DEPOSIT
The Court dismisses the claim for return of the security deposit because no basis exists to support such a claim (see, Raner v. Goldberg, 244 NY 438).
GENERAL BUSINESS LAW
As to the other branch of its affirmative defense, Respondent alleges that Petitioner violated § 349 of the General Business Law in exercising deceptive business practices. Generally, § 349 has been applied to the landlord-tenant relationship, both residential and commercial. However, a cause of action for deceptive business practices under General Business Law § 349 must include "a consumer-oriented act or practice that is misleading in a material way" which causes injury to the party seeking relief. Citipostal Inc. v. Unistar Leasing, 283 AD2d 916, 918, 724 NYS2d 555, 558 (4th Dept 2001).
"Parties claiming the benefit of the section must, at the threshold, charge conduct that is consumer oriented. The conduct need not be repetitive or recurring but defendant's acts or practices must have a broad impact on consumers at large; [p]rivate contract disputes unique to the parties . . . would not fall within the ambit of the statute.'" New York University v. Continental Ins. Co., 87 NY2d 308,320, 639 NYS2d 283, 290 (citing Oswego Laborer's Local 214 Pension Fund v. Marine Midland Bank, 85 NY2d 20, 25, 623 NYS2d 529, 532).
The deceptive business practices alleged by Respondent have to do with representations allegedly made regarding the use of the premises. The matter is a private contract dispute over a specific commercial transaction between business entities and has no bearing on the general public.( Citipostal, 283 AD2d at 918; Wells Fargo Bank Northwest v. Taca Intern. Airlines, 247 F.Supp.2d 352). Therefore, Respondent's affirmative defense is dismissed insofar as the portion of the claim incorporating a violation of General Business Law § 349.
AMENDMENT OF PETITION FOR ATTORNEYS FEES
The Petitioner's application to amend the petition to include additional attorneys fees in the amount of $3,200.15 is hereby granted, making the total claim of attorney fees $4,200.15, which includes the $1,000.00 for attorney fees demanded in the petition.
CONCLUSION
The Petitioner's motion to dismiss is granted. Respondent's affirmative defense and counterclaim are dismissed with prejudice based upon the foregoing discussion.
This matter is set down for trial for September 2, 2008 at 9:30 a.m., in the Landlord/Tenant Part, Room 280, First District Court, Nassau County, 99 Main Street, Hempstead, New York.
So Ordered: