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Chuang v. Quezada

Civil Court of the City of New York, Kings County
Feb 16, 2005
2005 N.Y. Slip Op. 50166 (N.Y. Civ. Ct. 2005)

Opinion

56875/04.

Decided February 16, 2005.


In this commercial holdover proceeding, petitioner Gary K. Chuang has moved for possession of premises occupied by respondent Salvadore Quezada at 67 Wilson Avenue, Brooklyn. Petitioner's motion (actually two motions, as will appear) is based upon Respondent's alleged failure to comply with a Stipulation of Settlement dated May 21, 2004. Because the motions raised issues of fact that could not be fairly resolved solely on argument, the Court held a compliance hearing ( see Teitelbaum Holdings, Ltd. v. Gold, 48 NY2d 51, 55 n2, 56 [1979]) on November 1 and December 13 and 14, 2004.

Mr. Quezada occupies the "ground floor store front" at 67 Wilson Avenue pursuant to a Lease providing for a term commencing September 1, 1998 and ending August 31, 2008. The Lease describes the use as a "fruit market", but Mr. Quezada's store would probably be described in common speech as a "bodega". At the time Mr. Quezada took possession of the storefront, his business shared the ground floor with a one bedroom apartment in the rear. The most current Certificate of Occupancy for the building, issued in 1941, shows the proposed occupancy of the total building as "5 families and store", with a "store 1 family" on the ground floor.

Approximately one year after Mr. Quezada took possession of the storefront under the Lease, he took possession of the rear apartment. There was no written amendment to the Lease or additional writing reflecting the parties' agreement with respect to the apartment, and the parties dispute both the original intention as to Mr. Quezada's proposed use and structural access as it then existed between the two portions of the ground floor. Based upon the evidence, the Court finds that, over time from 1998 through 2000, Mr. Quezada removed most of the wall separating the storefront from the apartment, as well as walls within the apartment, to incorporate, what had been, the apartment, into the "storefront".

The Court also finds that the alterations to the ground floor of the building that resulted in the expansion of the space for commercial use and the loss of any space for residential use were made with Petitioner's knowledge and acquiescence. Both Mr. Chuang and his wife, Judy Chuang, testified that Mr. Quezada was allowed to make the alterations that he did, but that their assent was conditioned upon Mr. Quezada's obtaining whatever permits, and taking whatever other action was necessary, so that there was compliance with legal requirements, and that Mr. Quezada agreed to do so.

There is no dispute that Mr. Quezada did not obtain any permits for alterations he made to the ground floor, or otherwise apply for any governmental approval. Nor is there any dispute that, as of the conclusion of the compliance hearing, no citation or other governmental action has resulted by reason of the alterations notwithstanding that citations have been issued for other violations on the premises.

There was no evidence that Mr. or Ms. Chuang ever asked Mr. Quezada for any permits, or that they made any investigation to determine whether, in fact, the alterations had been made with necessary governmental approval. For a period of at least three years from Mr. Quezada's completion of the alterations sometime in 2000 until the service of a Ten Day Notice to Cure in December 2003 the Chuangs apparently made no objection to Mr. Quezada about the lack of governmental approval. A deterioration in the landlord/tenant relationship for other reasons, including an Environmental Control Board citation for another violation, changed that.

On December 16, 2003, Mr. Chuang served the Ten Day Notice to Cure, specifying a number of ways in which Mr. Quezada was "violating a substantial obligation of [his] tenancy." The most pertinent for present purposes were that he had "knocked down the wall partition between the store and the bedroom of the rear apartment", "knocked down the wall partition between the bedroom and the kitchen of the rear apartment", and "removed the entire bathroom of the rear apartment", all allegedly without "request[ing] permission for the . . . construction." The Notice cited Articles 2 and 3 of the Lease and paragraphs 5 and 6 of a Rider to the Lease, and demanded cure no later than December 26 or "the Landlord will elect to terminate your tenancy in accordance withe ( sic) applicable provision of law."

On December 31, 2003, Mr. Chuang served a Thirty Day Notice of Termination, advising Mr. Quezada that he was "elect[ing] to terminate [the] tenancy" on January 31, 2004, "the day on which [the] term expires". The Notice also advised that Mr. Chuang was "elect[ing] to terminate [Mr. Quezada's] tenancy of the . . . premises . . . held by [him] under monthly hiring", presumably intended to address Mr. Quezada's occupancy of the rear portion of the ground floor, formerly the apartment. The Notice cited "paragraph 6 of [the] lease" and § 232-a of the Real Property Law.

The Holdover/Business Petition was filed on February 11, 2004, seeking to recover the "First Floor Store Space A/K/A Ground Floor Store Front, Basement and Rear Apartment" (Petition, ¶ 7), and asserting that the "premises were rented and are used for commercial purposes exclusively." (Petition, ¶ 8.) On the first court date, February 25, the case was adjourned to March 15, then to April 7, then to April 28, then to May 20, all on consent of the parties, both of whom were represented by counsel.

On May 20, 2004, the parties executed the Stipulation of Settlement that is the primary basis for the pending motions. (The Stipulation is dated, however, May 21.) In the Stipulation, Mr. Quezada agreed to "remove [an] illegal rolling gate" that had been the subject of an ECB citation, and to "remove all sneakers and other merchandise from the cellar", in both cases by May 31. The evidence at the compliance hearing established that Mr. Quezada has substantially complied with these two requirements of the Stipulation, although perhaps not by the specified deadline. There was no evidence that Mr. Chuang suffered any damage or prejudice by reason of any delay, and these two requirements will not be addressed again here.

The heart of the Stipulation is Mr. Quezada's agreement to "restore the rear portion of the premises to its original condition when rented or, in the alternative, to obtain permits for and fully legalize the work done in that space so as to comply with all Building Code requirements and certificates of occupancy by 8/31/04". The Stipulation provides further that Mr. Quezada "may move for extension upon good cause shown", and that he was to "produce architect's plan or proposal on or before June 11, 2004." In event of any default, Mr. Chuang could "restore case for a hearing solely on the issue of whether there has been a breach", presumably of the Stipulation. A judge of this court "so ordered" the Stipulation.

With a Notice of Motion dated and filed June 23, 2004, Mr. Chuang moved to restore the case to the calendar "for hearing and Issuance ( sic) of warrant". On the return date for the motion, July 7, it was adjourned to August 2 "for respondent to provide Architect letter or plans as required under stipulation of 5-21-04". On August 2, it was adjourned until September 7, when it was adjourned until October 18. A second Stipulation of Settlement was executed on September 7, providing for Mr. Chuang's inspection of the premises to "check compliance" with the May 21 Stipulation, including "restore rear of property into residential space or legalize work and provide c of o to that effect". No mention was made of the architect's "letter or plans" that should have been provided by August 2.

On October 18, the matter was adjourned to October 25, and then to November 1. On that date, this Court commenced the compliance hearing. After a break taken well into Mr. Chuang's presentation of evidence, Mr. Chuang informed the Court that he was dissatisfied with his attorney, and he requested a continuance so that he might obtain new counsel. The Court granted the application, continuing the hearing until November 18, but issued an order that Mr. Quezada "need not take any further action to comply with the Stipulations dated May 21 and September 7, 2004 until the adjourned date, and shall not be prejudiced by his failure to do so." The Court notes that on November 1 Mr. Quezada intended to offer the testimony of his architect, Michelle Borde, who was present for that purpose.

Prior to November 18, Mr. Chuang moved by Order to Show Cause for an order awarding possession of the premises and other relief, and Mr. Chuang's former counsel moved for an order permitting his withdrawal. Both motions were returnable on November 18. On that date, in a Decision/Order of the Hon. Ann Elizabeth O'Shea, counsel's motion to withdraw was granted, and "Petitioner's new motion for possession" was adjourned until December 6, when this judge would be available to resume the compliance hearing. Judge O'Shea also directed Mr. Quezada to "continue to pay as may be due under the terms of the lease". The Court notes that Mr Quezada has continued to pay rent during the pendency of this proceeding, although, again, not always timely. Payment of rent, however, is not what the parties' dispute is about.

After another adjournment, the compliance hearing resumed on December 13 and 14. The Court heard testimony from Mr. Chuang, Ms. Chuang, Mr. Quezada, and Ms. Borde, the architect. Ms. Borde testified concerning her discussions with Mr. Quezada, who retained her after he signed the May 21 Stipulation, and the practicabilities of the two options given Mr. Quezada in the Stipulation.

Concerning the option that the premises be "legalized" so as to permit commercial use of the entire ground floor, Ms. Borde's opinion, as characterized in Mr. Chuang's post-hearing submission, was that such "legalization" was "technically and legally impossible to achieve". (Petitioner's Written Submission at 2.)

Concerning the option that the rear portion of the ground floor be restored to residential use, Ms. Borde was more optimistic. She testified, however, that not only would the residential portion of the ground floor be required to meet the current Building Code, but probably so would the entire building. Ms. Borde stressed that she told Mr. Quezada that she could do nothing to help him without the active participation of the owner of the building, not only because Mr. Chuang's signature would be necessary for the permit application, but because his involvement on decisions about what would be done, on the ground floor and elsewhere, would be necessary.

The uncertainties concerning the ultimate scope of the project were such that Ms. Borde could not offer an opinion as to the likely cost.

On these points, Mr. Quezada testified that, although he retained Ms. Borde so that he could comply with the May 21 Stipulation, he was not able to proceed because Mr. Chuang would not cooperate. There was no evidence to contradict this, and, given the animosity that has developed between the parties, as observed by the Court, Mr. Quezada's testimony as to this is credible. The Court should also note, however, that, based upon the many apparent issues of financial consequence that will require resolution if the effort is to be successful, formal participation by Mr. Chuang will not make the process easy.

For present purposes, the Court need not determine whether Mr. Quezada was in violation of one or more of the substantial obligations of his tenancy so as to warrant its termination. The Court understands the May 21 Stipulation as foreclosing the examination of those issues, and the Court notes that Mr. Quezada did not challenge the Notice to Cure in an action for a Yellowstone injunction. ( See First National Stores, Inc. v. Yellowstone Shopping Center, Inc., 21 NY2d 630; see also Purdue Pharma, LP v. Ardsley Partners, LP, 5 AD3d 654, 655 [2nd Dept 2004].)

"Stipulations of settlement are essentially contracts and will be construed in accordance with contract principles and the parties' intent." ( See Charter Realty Development Corp. v. New Roc Associates, L.P., 293 AD2d 438, 439 [2nd Dept 2002] [ quoting Serna v. Pergament Distributors, Inc., 182 AD2d 985, 986 [3rd Dept 1992]; see also McKenzie v. Vintage Hallmark, PLC., 302 AD2d 503, 504 [2nd Dept 2003]; Baisley Park Gardens Associates v. Brown, 2003 NY 51367[U] [App Term, 2d and 11th Jud Dists].) "Only where there is cause sufficient to invalidate a contract, such as fraud, collusion, mistake or accident, will a party be relieved from the consequences of a stipulation made during litigation." ( Davis v. New York City Housing Authority, 300 AD2d 531, 532 [2nd Dept 2002] [ quoting Hallock v. State of New York, 64 NY2d 224, 230; see also M.H. Kane Construction, Inc. v. Byrd, 284 AD2d 509, 509 [2nd Dept 2001].)

The Court has no motion by Mr. Quezada to set aside or reform the May 21 and subsequent Stipulations because of either mutual or unilateral mistake as to the practicability of compliance generally or within the time periods specified in the Stipulations. ( See Gould v. Board of Education of Sewanhaka Central High School District, 81 NY2d 446, 453; Culver Theisen, Inc. v. Starr Realty Co., 307 AD2d 910, 910-11 [2nd Dept 2003]; William E. McClain Realty, Inc. v. Rivers, 144 AD2d 216, 217-18 [2nd Dept 1988]; Persaud v. Exxon Corp., 867 FSupp 128, 137-38 [EDNY 1994].) For purposes of determination of Mr. Chuang's motions, therefore, the Court will assume that there is no sufficient basis for rescision or reformation.

The Court will also assume, for purposes of these motions, that Mr. Quezada is in breach of the Stipulation, even though he testified without contradiction that Mr. Chuang's lack of cooperation hindered his compliance. ( See Sunshine Steak, Salad Seafood, Inc. v. W.I.M. Realty, Inc., 135 AD2d 891, 892-93 [3rd Dept 1987]; see also 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144, 153-54; A.H.A. General Construction, Inc. v. New York City Housing Authority, 92 NY2d 20, 31; Hidden Meadows Development Co. v. Parmelee's Forest Products Inc., 289 AD2d 642, 644 [3rd Dept 2001]; Spiegelman v. Gordon, 212 AD2d 775, 775 [2nd Dept 1995].)

Even so, however, the Court finds neither in the May 21 Stipulation, nor any that follows, a provision that upon Mr. Quezada's breach Mr. Chuang shall be entitled to judgment of possession of the premises and issuance of a warrant of eviction. ( See Rockaway One Co., LLC v. Williams, 3 Misc 3d 25, 27 [App Term, 2nd Dept 2004].) Indeed, nowhere in any of the Stipulations, drafted and signed by counsel to the parties, is there any provision specifying a remedy for Mr. Quezada's breach.

The Court cannot read into the Stipulations a forfeiture of Mr. Quezada's leasehold interest. "Because equity abhors forfeitures of valuable leasehold interests, courts have required strict compliance with the termination provisions of leases." ( Metropolitan Transp. Authority v. Cosmopolitan Aviation Corp., 99 AD2d 767, 768 [2nd Dept], aff'd 64 NY2d 223; see also Lerner v. Johnson, 167 AD2d 372, 375 [2nd Dept 1990].) "Forfeitures are abhorrent to the law and will not be declared if there is any other reasonable theory upon which a case can be settled . . . The continuation rather than the extinction of grants is favored." ( 220 West 42 Associates v. Cohen, 60 Misc 2d 983, 985 [App Term, 1st Dept 1969].)

The Court's unwillingness to read into the May 21 Stipulation a provision for possession and warrant upon breach is also supported by important jurisdictional considerations. There is at least a serious question as to whether a holdover proceeding could be sustained based upon Mr. Quezada's alteration of the premises without necessary governmental approval. A review of the Lease and its Rider, the Notice to Cure and the Notice of Termination indicate that "[s]uch a claim is not an appropriate ground for an RPAPL article 7 proceeding but, instead, states a cause of action for ejectment which must be asserted in an action pursuant to RPAPL article 6." ( See Watervliet Housing Authority v. Bell, 262 AD2d 810, 811-12 [3rd Dept 1999].)

The question goes to the court's subject matter jurisdiction ( see id., at 811), and turns on an age-old distinction between a "conditional limitation" and a "condition merely". ( See Beach v. Nixon, 9 NY 35, 36.) As a local federal court has noted, New York cases making the distinction "have been far from consistent." ( See Matter of Family Showtime Theatres, Inc., 72 BR 38, 42 [EDNY], aff'd 818 F2d 1130 [2d Cir 1987].) In this case, the Court would be reluctant to read the operative documents as ending the lease term on a conditional limitation, "because to do so would violate acceptable cannons of landlord and tenant law which require strict construction of language in written instruments that could work a forfeiture." ( See Lerner v. Johnson, 167 AD2d at 375; see also Perrotta v. Western Regional Off-Track Betting Corp., 98 AD2d 1, 6 [4th Dept 1983].)

A lease provision will be deemed a "conditional limitation" if, after a notice of default in accordance with the lease, the lease will "automatically expire on the happening of a specified continency, the arrival of the termination date fixed in the notice." ( See TSS-Seedman's, Inc. v. Elota Realty Co., 72 NY2d 1024, 1026.) "[I]t is not the tenant's conduct which, at the option of the lessor, operates on the lease to effect its termination . . . Rather, it is by the passage of time the period of time specified in the termination notice that the lease automatically comes to an end." ( Id., at 1027.) Even if, however, a lease provision is deemed a "conditional limitation", the landlord must call it into operative effect in attempting to bring the lease to an end. ( See Perrotta v. Western Regional Off-Track Betting Corp., 98 AD2d at 6-7.)

Mr. Chuang's Notice to Cure states that Mr. Quezada is in violation of obligations of his tenancy found in Articles 2 and 3 of the Lease and paragraphs 5 and 6 of the Rider. In Article 2 Mr. Quezada agrees to "execute and comply with all laws, rules, orders, ordinances and regulations at any time issued or in force (except those requiring structural alterations), applicable to the demised premises or to the Tenant's occupation thereof, of the Federal, State and Local Governments, and of each and every department, bureau and official thereof." In Article 3, he agrees that he "will not, without the written consent of the Landlord first obtained . . . make any alterations in the demised premises, [or] use the demised premises . . . in violation of any law or ordinance."

The Rider to the Lease specifies a number of "conditions of rental", among them two that were cited in the Notice to Cure. Paragraph 5 provides: "Tenant will maintain the Storefront and Basement up to all applicable City, State, and/or Federal Codes over the term of this agreement." Paragraph 6 provides: "The Landlord must grant permission, in writing, to all modification to the Storefront and Basement before work begins . . . [A]ll applicable City, State, and/or Federal Codes must be met; any violations must be corrected at the Tenant's expense."

To the extent that Article 3 of the Lease and paragraph 5 of the Rider required that Mr. Chuang's consent to the alterations made by Mr. Quezada be in writing, the requirements cannot be enforced in light of the clear concession by both Mr. Chuang and Ms. Chuang that permission was granted. ( See Matisoff v. Dobi, 90 NY2d 127; Bono v. Cucinella, 298 AD2d 483, 484 [2nd Dept 2002]; Design Concepts Ltd. v. Walsh, 293 AD2d 605, 606-07 [2nd Dept 2002].) Permission for the alterations, however, was conditioned on Mr. Quezada's obtaining necessary governmental approval, and, assuming that the condition has not been waived ( see Residential Board of Managers of the Columbia Condominium v. Alden, 178 AD2d 121, 123 [1st Dept 1991]; Haberman v. Hawkins, 170 AD2d 377, 377-78 [1st Dept 1991]), the matter devolves again into a determination of the consequences of his failure to do so.

As to remedy, Article 6 of the lease provides that, "if Tenant shall make default in fulfilling any of the covenants of this lease, . . . the Landlord may give to the Tenant ten days' notice of intention to end the term of this lease, and thereupon at the expiration of said ten days' ( sic) (if said condition which was the basis of said notice shall continue to exist) the term under this lease shall expire as fully and completely as if that day were the date herein definitely fixed for the expiration of the term." Article 6 creates a "conditional limitation" ( see Perrotta v. Western Regional Off-Track Betting Corp., 98 AD2d at 5), but neither the Notice to Cure nor the Notice of Termination refers to Article 6, and neither "makes . . . reference to the violation of any . . . code provision or any other applicable enactment and such meaning may not be read into it" ( see id., at 6-7).

The Notice of Termination, rather, refers to paragraph 6 of the Rider, concerning the requirement for code compliance for alterations, and the Rider states that "[f]ailure to meet any of the . . . conditions will result in Tenant's forfeiture of the security deposit and immediate termination of the Lease." Considered in light of the "election" language used in the Notice to Cure and Notice of Termination, the Rider would create a "forfeiture for breach of condition and not by lapse of time, so that a breach would not make [Tenant] a holdover tenant subject to a summary proceeding." ( See id., at 4-5.)

Having concluded that the May 21 Stipulation should not be read to include a provision calling for a judgment of possession and warrant upon Mr. Quezada's breach, the Court must yet determine whether the Stipulation may be enforced. The Court emphasizes that it is not holding that the court lacked subject matter jurisdiction to "so order" the Stipulation; that determination would appear to appropriately rest with the judge who signed it. ( See CPLR 2221[a].) Assuming, however, that subject matter jurisdiction existed, this Court may determine whether it has the jurisdiction to enforce the Stipulation in this proceeding, and the Court concludes that it does not.

A court retains "supervisory power over enforcement of so-ordered stipulations." (See 1781 Riverside, LLC. v. Quinones, 4 Misc 3d 137[A], 2004 NY Slip Op 50844[U], *1-*2 [App Term, 1st Dept]; see also Teitelbaum Holdings, Ltd. v. Gold, 48 NY2d 51, 53; Markovits v. Mitrany, 12 AD3d 574, 574 [2nd Dept 2004]; Everett D. Jennings Apartments, L.P. v. Jones, 4 Misc 3d 134[A], 2004 NY Slip Op 50773[U], * 2 [App Term, 2nd Dept].) But, here, enforcement of the May 21 and later Stipulations would require the exercise, in effect, of equitable powers that are beyond the subject matter jurisdiction of Civil Court. ( See Goldstein v. Stephens, 118 Misc 2d 614, 615 [App Term, 1st Dept 1983]; Arroyo v. Rosenbluth, 115 Misc 2d 655, 660-61 [Civ Ct, Kings County 1982]; Lieber v. Wexler, 82 Misc 2d 387, 389 [Civ Ct, Queens County 1975]; see also Trump Village Section 3, Inc. v. Sinrod, 219 AD2d 590, 592 [2nd Dept 1995]; compare Chan v. 60 Eldridge Corp., 129 Misc 2d 787, 789 [Civ Ct, NY County 1985].)

Enforcement of the Stipulations would almost certainly require a series of orders, equitably balancing a number of considerations as information developed over time. Although a landlord may not waive use of the premises in violation of law ( see Village of Tarrytown v. Tappan Airways, Inc., 283 AD 803 [2nd Dept 1954]; 220 West 42 Associates v. Cohen, 60 Misc 2d 983, 987 [App Term, 1st Dept 1969]), "the final order will be withheld pending a reasonable time for the tenant to act and successfully remove the violation" ( id. [ quoting 2 West 32nd St. Corp. v. Levine, 199 Misc 1020, 1021-22 (App Term, 1st Dept 1951)]).

No violation has as yet been cited against the building because of Mr. Quezada's alteration of the premises or his use of them ( see Al-El Corp. v. Rapaport, 203 Misc 908, 912 [Mun Ct, Borough of Manhattan 1953]), even though inspectors have been there for other reasons. Judicial enforcement of the Stipulations will necessarily be influenced by the Department of Buildings and other agencies responsible for the enforcement of laws, codes, and other regulations ( see 117 127 West 48th St. Corp. v. Gould, 9 Misc 2d 414, 414-15 [App Term, 1st Dept 1957]; Al-El Corp. v. Rapaport, 203 Misc at 910-11); by any potential danger resulting from noncompliance ( see Herbert v. 52 Enterprises, 23 Misc 2d 1032, 1033, 1036 [Sup Ct, NY County 1960]; Rehearsal Centre, Inc. v. 89 Building Corp., 13 Misc 2d 18, 20 [Sup Ct, NY County 1958]; H. Casabianca, Inc. v. Connobbio, 205 Misc 380, 384-85 [Mun Ct, Borough of Brooklyn 1952]); by the difficulty of correction ( see Herbert v. 52 Enterprises, 23 Misc 2d at 1034; Rehearsal Centre, Inc. v. 89 Building Corp., 13 Misc 2d at 20); by the extent to which correction is difficult because of the landlord's derelictions ( see H. Casabianca, Inc. v. Connobbio, 205 Misc at 383-84); and by the nature and cost of the landlord's cooperation ( see Trustees of Columbia University in City of New York v. Rogally, 281 AD 485, 486 [1st Dept 1953]; Herbert v. 52 Enterprises, 23 Misc 2d at 1034-35.)

Whatever "unique ability" Civil Court has in resolving landlord/tenant issues so as to make it the "preferred forum" for resolution ( see 44-46 West 65th Apartment Corp. v. Stvan, 3 AD3d 440, 441 [1st Dept 2004]), if not limited to residential disputes, appears inadequate to properly address the issues raised by this proceeding and the Stipulations.

The two pending motions are denied. Although it appears that the May 21 Stipulation was intended to resolve this holdover proceeding, for now the proceeding will be marked off the calendar. If it is not restored by motion served within 30 days after entry of this order, the proceeding shall be dismissed. In either event, Mr. Chuang may commence an action in ejectment or for enforcement of the Stipulations, or both.


Summaries of

Chuang v. Quezada

Civil Court of the City of New York, Kings County
Feb 16, 2005
2005 N.Y. Slip Op. 50166 (N.Y. Civ. Ct. 2005)
Case details for

Chuang v. Quezada

Case Details

Full title:GARY K. CHUANG, Petitioner/Landlord, v. SALVADORE QUEZADA, FIRST FLOOR…

Court:Civil Court of the City of New York, Kings County

Date published: Feb 16, 2005

Citations

2005 N.Y. Slip Op. 50166 (N.Y. Civ. Ct. 2005)