Opinion
L & T 92407/2014
09-25-2015
150 West End Owners Corp., Petitioner-landlord, v. Chestnut Holdings of N.Y. Inc., & WEST END CO. as their interests may appear, Respondent-Tenant
Attorneys for Petitioner: Horing Welikson & Rosen P.C. 11 Hillside Avenue Williston Park, N.Y. 11596 Attorney for Respondent: Law Office of Lauren K. Popper 7 Penn Plaza a/k/a 370 7th Ave., Suite 720 New York, N.Y. 10001
Attorneys for Petitioner:
Horing Welikson & Rosen P.C.
11 Hillside Avenue
Williston Park, N.Y. 11596
Attorney for Respondent:
Law Office of Lauren K. Popper
7 Penn Plaza a/k/a 370 7th Ave., Suite 720
New York, N.Y. 10001
Katherine A. Levine, J.
This case addresses the issues of whether a defendant in a summary nonpayment proceeding waives all jurisdictional defenses as a consequence of interposing counterclaims which are "unrelated," and what constitutes a "related" or "unrelated" counterclaim in such a proceeding.
Petitioner 150 West End Owners Corp. ("petitioner" or "West End") commenced this nonpayment proceeding in September 2014 against respondent tenant Chestnut Holdings of NY Inc. & West End Co. ("respondent" or "Chestnut"), alleging nonpayment of $50,583.06 on the subject property located at 150 West End Ave., Brooklyn ("subject property"). Respondent served an answer which included the affirmative defense of lack of personal jurisdiction based upon of improper service of the petition, notice of petition and five day rent demand, and that the amount of rent sought was not correct. Respondent also brought counterclaims alleging loss of income due to the subject property being "untenantable;" damages for being locked out of and illegally evicted; unspecified conditions and housing code violations; breach of the warranty of habitability; rent abatement, repair costs, et al. Petitioner contends that respondent waived its jurisdictional defenses by bringing unrelated counterclaims, and seeks an order striking respondent's jurisdictional defenses and counterclaims and setting this matter for trial.
When a respondent interposes a counterclaim that is unrelated to a plaintiff's claim, it waives any personal jurisdiction defense it may have had since it is taking affirmative advantage of the court's jurisdiction. Textile Technology Exch., Inc. v. Davis, 81 NY2d 56, 58-59 (1993).In Textile, the counterclaims at issue were not related because they concerned a transaction distinct from that described in the complaint. In keeping with Textile, when a respondent asserts lack of personal jurisdiction as an affirmative defense in a nonpayment proceeding and simultaneously asserts a counterclaim that is unrelated to nonpayment of rent, any objection as to personal jurisdiction by the respondent is waived. See, ROL Realty Co. LLC v Gordon, 2010 NY Slip Op 52048(U), 29 Misc 3d 139(A) (App. Term 1st Dept. 2010) (Tenant waived jurisdictional defense because it introduced counterclaims for harassment, discrimination and overcharge, regardless of the fact that it stipulated to withdraw two unrelated counterclaims); 390 Park Avenue Associates, LLC v. Sopher, 2009 NY Slip Op 31134(U), 2009 NY Misc. LEXIS 5687 (Sup. Ct. NY Co. 2009) (Tenant of a commercial garage space waived personal jurisdiction defense by interposing unrelated counterclaim for unpaid parking fees). See also, 405 East 56th St., LLC v Steginsky, 2013 NY Slip Op 30427(U), 2013 NY Misc. LEXIS 848 (Civ. Ct. NY Co. 2013); 374 E. Parkway Common Owners Corp. v Albernio, 2011 NY Slip Op 51654(U), 32 Misc 3d 1240(A), 1240A (Civ. Ct. Kings Co. 2011). The assertion of even one unrelated counterclaim out of many will result in a waiver of the defense of lack of personal jurisdiction. See, Textile, supra, 81 NY2d at 58-59 ("Asserting an unrelated counterclaim does waive such defense because defendant is taking affirmative advantage of the court's jurisdiction"); N.A.S. Holdings, Inc. v. Pafundi, 12 AD3d 751, 752 (3d Dept. 2004).
A counterclaim is "related" to a nonpayment proceeding when it must be asserted to avoid the risk of preclusion under principles of collateral estoppel, i.e., "where the issues in the plaintiff's claims are potentially identical and decisive of issues raised in the counterclaims." Textile, supra, 81 NY2d at 59; N.A.S. Holdings, supra, 12 AD3d at 752. As a corollary, if the Civil Court lacks jurisdiction to hear a particular counterclaim because it cannot be litigated in the first instance, that counterclaim is unrelated because it could not be barred by collateral estoppel in a later proceeding. Halberstam v Kramer, 2013 NY Slip Op 50408(U), 39 Misc 3d 126(A), 126A (App. Term 2nd Dept. 2013); 374 E. Parkway, supra.
Respondent's counterclaims for its alleged loss of income, and damages for breach of warranty of habitability, cost of repairs, and attorney's fees are unrelated either because the Civil Court does not have jurisdiction to hear them or because they have no bearing on the nonpayment issue, while respondent's counterclaim for damages due to being evicted is related.
Pursuant to § 208 of the Civil Court Act ("CCA"), the Civil Court shall have jurisdiction "of any counterclaim the subject matter of which would be within the jurisdiction of the court if sued upon separately." Civil Court is a court of limited jurisdiction and it may exercise jurisdiction over only those types of actions specifically granted to it by article VI (§ 15) of the NY State Constitution, as implemented by the CCA. Jimenez v Nunez, 2014 NY Slip Op 50341(U), 42 Misc 3d 145(A) (App. Term 2d Dept. 2014). See also, 93 Ralph, LLC v New York City Hous. Auth. Law Dept., 41 Misc 3d 692, 700 (Civ. Ct. Ki. Co. 2013). Pursuant to CCA § 204, the Civil Court shall have jurisdiction over summary proceedings only to "recover possession of real property located within the city of New York, to remove tenants therefrom, and to render judgment for rent due without regard to amount." The Civil Court does not have jurisdiction to hear a counterclaim for loss of income as it is not relevant to nonpayment of rent. See, 537 Greenwich LLC v. Chista, Inc., 2008 NY Slip Op 50989(U); 19 Misc 3d 1133(A), 1133A (Civ. Ct. NY Co. 2008) (Even if respondent had viable personal jurisdictional defense based on improper service of the notice of petition and petition, it effectively waived such defense by asserting unrelated counterclaims, including loss of business and income). Therefore, respondent's unrelated counterclaim for loss of income is stricken by the Court.
Respondent's counterclaim for legal fees is unrelated because there is no statutory authority for respondent to recover legal fees in this commercial holdover proceeding and the lease does not provide for recovery of fees. Pursuant to Real Property Law ("RPL") § 234, attorney's fees may be awarded, in appropriate circumstances, to a tenant who is a prevailing party in a controversy; however, RPL § 234 is applicable only in the residential setting and not in the commercial context. 537 Greenwich LLC, supra; 111 On 11 Realty Corp. v. Norton, 191 Misc 2d 483, 486 (Civ. Ct. Kings Co. 2002). Accordingly, in the absence of a lease provision, this Court is without jurisdiction to hear respondent's counterclaim for legal fees, and it is stricken.
Similarly, respondent's counterclaim for breach of the warranty of habitability is unrelated because the Civil Court has no jurisdiction to hear a breach of warranty of habitability claim in a commercial proceeding. Disunno v WRH Props., LLC, 97 AD3d 780, 781 (2d Dept. 2012); Polak v. Bush Lumber Co., 170 AD2d 932 (3d Dept. 1991); Semans Family Ltd. Pshp. v. Kennedy, 177 Misc 2d 345, 350 (Civ. Ct. NY Co. 1998). The warranty of habitability contained in Real Property Law § 235-b applies only to residential tenants. Id. Accordingly, respondent's counterclaim for breach of warranty of habitability is stricken by this Court. Similarly, respondent's counterclaim seeking damages for repair costs is unrelated to nonpayment of rent. See, Prakhin v. Fulton Towers Realty Corp., 122 AD3d 601, 603 (2d Dept. 2014) (Obligation of a commercial tenant to pay rent does not end if the tenant remains in possession even if the landlord fails to make essential repairs); Ring v. Arts Int'l, Inc., 7 Misc 3d 869, 881 (NY Civ. Ct. 2004) (Tenant's counterclaim for costs of repairing leased premises damaged by flood was not permissible in a commercial nonpayment summary proceeding). Therefore, respondent's unrelated counterclaim for repair costs is stricken by this Court.
Although respondent is precluded from asserting counterclaims for damages for its alleged loss of income, legal fees, breach of warranty of habitability, and repair costs in this summary proceeding, respondent is not deprived of a remedy. It is merely relegated to asserting these claims in a separate plenary action. Titleserv, Inc. v. Zenobio, 210 AD2d 310, 311 (2d Dept. 1994); 985 Merrick Realty, LLC v Matt's Station, Inc., 2011 NY Slip Op 30345(U), 2011 NY Misc. LEXIS 358 (Sup. Ct. Nass. Co. 2011). See also, Ain v Vasquez, 2013 NY Slip Op 51006(U), 40 Misc 3d 1202(A) (Dist. Ct. Nass. Co. 2013) (Provision in commercial lease precluding a tenant from asserting a counterclaim upheld because tenant was not deprived of a remedy in plenary action).
On the other hand, respondent's counterclaim for damages due to being actually or constructively evicted is inextricably entwined with petitioner's nonpayment of rent claim, and is therefore related. See, Joylaine Realty Co., LLC v Samuel, 100 AD3d 706, 706-707 (2d Dept. 2012) (Commercial tenant may be relieved of its obligation to pay full rent where it has been actually or constructively evicted from either the whole or a part of the leasehold); 737 Park Ave. Acquisition LLC v Robert B. Jetter, M.D., PLLC, proceeding); See also, Johnson v. Cabrera, 246 AD2d 578, 578-579 (2d Dept. 1998); Ring, supra, 7 Misc 3d at 880. Furthermore, respondent's eviction claim could be decisive of the subject of the action, i.e., the nonpayment of rent; and should, if supported factually, be asserted in the current action to avoid the risk of preclusion under principles of collateral estoppel.
Since respondent has asserted unrelated counterclaims, the Court grants petitioner's motion to strike respondent's affirmative defenses of lack of personal jurisdiction and counterclaims insofar as they seek damages for respondent's loss of income, legal fees and repair costs, and petitioner's breach of warranty of habitability. This partial dismissal is without prejudice to claims for those damages in another action. The Court otherwise denies petitioner's motion. This case shall proceed to trial solely on the issue of respondent's nonpayment of rent and its related counterclaim for actual or constructive eviction.
This constitutes the decision and order of the Court.
Dated: March September 25, 2015
_______________________________
HON. KATHERINE A. LEVINE
Acting Justice Supreme Court