Opinion
55783/2008.
Decided May 8, 2008.
Sperber, Denenberg Kahan, P.C., By: Jacqueline Handel-Harbour, Esq., Of Counsel, Attorneys for petitioner.
Samy Beshay, Esq., Attorneys for respondent.
Upon a reading of the foregoing cited papers on this motion and cross motion, it is the decision and judgment of this court that the motion for summary judgment is denied, the motion to dismiss the counterclaims is granted, the motion to dismiss the affirmative defenses is granted to the extent of dismissing the First, Third, Fourth, Fifth, Sixth, Seventh, Eighth and Tenth Affirmative defenses, the cross motion is denied in its entirety.
FACTUAL BACKGROUND
Respondent and petitioner's predecessor, Goodman and Riskin Associates, LLC., on July 1, 2006 entered into a commercial lease that was to take effect on July 1, 2006 and end on June 30, 2013. The lease was for two separate premises, a store and an apartment. In accordance with the lease terms the premises rented are " Store on ground floor at 118 Ninth Avenue and basement storage space opposite elevator on left and Apt. 5J in the building 364 West 18th Street, NY NY 10011 to be used and occupied by the tenant as a Delicatessen and/or Grocery store, no on premises consumption of food to sold and for no other purpose. . . ." A Rider to the lease, signed by both parties, calls for a combined payment of rent for the premises and contains certain conditions that must be observed by the tenant, a violation of which would cause the tenant to be in default of the lease. The pertinent conditions on this motion are the ones contained in the Rider at (D) "Tenant, at his own cost and expense, will renovate his store at a cost of not less than $50,000.00; and (E) Tenant will change his refrigeration system so that it no longer requires the constant use of running water." [see Lease moving papers Exh. B].
The tenant obtained possession of the premises and paid the combined rent on a monthly basis. On November 8, 2007 the property was sold to petitioner herein and on December 13, 2007 petitioner mailed Respondent a notice to cure dated December 12, 2007, notifying Respondent that he was in violation of paragraphs (D) and (E) of the Rider to the lease and, if the violations were not cured by December 29, 2007, the "Landlord will elect to terminate your tenancy in accordance with paragraph sixth of the aforesaid lease." On January 3, 2008 Petitioner mailed Respondent a notice of Termination dated January 2, 2008 terminating the tenancy effective January 18, 2008 for failure to cure the violations contained in the December 12, 2007 Notice to Cure. [Seemoving papers Exh. A, C D].
Respondent alleges that he cured the violation with respect to paragraph (E) of the Rider and retained an architect to cure the violation with respect to paragraph (D). On January 22, 2008 the architect mailed Respondent's attorneys a Department of Buildings application and forms to be forwarded to Petitioner for its review and signature. Respondent's attorney forwarded these documents to Petitioner's attorney by fax, however, there is no date indicated on the fax cover sheet accompanying the documents. [See moving papers Exh. I]. According to Petitioner's counsel these documents were not received by his office until January 30, 2008 and Petitioner refused to sign the application because the tenancy had terminated on Respondent's failure to cure the violation within the prescribed time. Respondent did not request an extension or stay of the cure period at any time either by communicating with Petitioner or by filing for a Yellowstone injunction in the Supreme Court.
On February 13, 2008 Petitioner initiated this Commercial Summary Holdover proceeding by causing a Notice of Petition and Petition to be served upon Respondents both at the Store and storage area and at the apartment sought to be recovered. On February 20, 2008 by his attorney, Respondent served and filed his verified answer. In his answer Respondent raised ten Affirmative defenses and two counterclaims. Petitioner now moves to dismiss all the affirmative defenses, the counterclaims and for summary judgment. Respondent cross moves for an injunction, for damages as a result of business loss and to dismiss without prejudice this Holdover proceeding with respect to apartment 5J.
LEGAL ANALYSIS
Petitioner moves to dismiss the First Affirmative defense which alleges that service was not in accordance with RPAPL § 735 because the process server "failed to effectuate personal or substituted service prior to his resort to conspicuous place service." A party denying service must raise some question of fact. Conclusory or bald denials of service, lacking specific rebuttals of the contents of the affidavit of service, are inadequate to trigger a jurisdictional hearing (Manhattan Savings Bank v. Kohen, 231 AD2d 499, 647 NYS2d 256 [2nd. Dept. 1996]; Fairmount Funding Ltd., v. Stefansky, 235 AD2d 213, 252 NY S. 2d 14 [1st. Dept. 1997]) and insufficient to establish the Respondent's affirmative defense of lack of jurisdiction (Davis v. City of New York, 248 AD2d 427, 668 NYS2d 947 [2nd. Dept. 1998]). A reading of the affidavits of service herein evince that they were served by substituted service, by serving a person of "suitable age and discretion" and by personal service upon Respondent. [see moving papers Exh. F].
Additionally, Respondent has raised two counterclaims at least one of which is not related to the claims of petitioner herein, more specifically the second counterclaim seeking recovery for "fees, costs and expenses in preparing the improvement plans and hiring a licensed architect." When a party interposes an unrelated counterclaim, that party invokes the jurisdiction of the court and waives any jurisdictional objections (Textile Technology Exchange, Inc., v. Davis, 81 NY2d 56, 595 NYS2d 729, 611 NE2d 770; Prezioso v. Demchuk, 127 AD2d 576, 511 NYS2d 375 [2nd. Dept. 1987]; Liebling v. Yankwitt, 109 AD2d 780, 486 NYS2d 292 [2nd. Dept. 1985]).
Accordingly, the First Affirmative defense is dismissed.
Petitioner seeks to dismiss the second affirmative defense which alleges that "the petition is jurisdictionally defective pursuant to RPAPL 741 (defective content of the petition)" In its opposition to the motion to dismiss Respondent alleges that the petition is defective because apartment 5J is used for residential purposes and the petition alleges in its paragraph 9 that " The premises are not subject to the City Rent Law ("Rent Control") or the Rent Stabilization Law of 1969, as amended, because the subject premises were leased as and are actually used for solely business purposes."
The rent regulation laws were promulgated to address housing shortages that have existed since World War II and are primarily designed to protect the individual and the public. Where a law seeks to protect the public as well as the individual, such protection cannot be waived by an individual (57 NY Jur. 2d § 78; In re Hill's Will, 264 NY 349, 191 N.E. 12, 93 A.L.R. 1380). The rent regulation laws cannot be circumvented by the landlord merely calling residential premises "commercial" (Blank v. Buehr, 26 Misc 2d 224, 206 NYS2d 339 [NY Mun. Ct. 1960]). Any agreement by a tenant to waive the benefit of any provision of the Rent Stabilization Law or Rent Control Law is void (Georgia Properties, Inc. V. Dalsimer, 39 AD3d 332, 835 NYS2d 41 [1st. Dept. 2007]).
A tenant cannot sign a commercial lease for commercial premises and unilaterally and surreptitiously change their character to residential and a landlord cannot rent premises under a commercial lease with full knowledge that the premises will be used for residential purposes, knowingly permit such use and thereafter seek to avoid the protections afforded residential tenants under the Rent Stabilization Law (Metzendorf v. 130 West 57 Co. 132 AD2d 262, 522 NYS2d 533 [1st. Dept. 1987]). When an apartment rented under a commercial lease is used for Commercial and Dwelling purposes the Rent Stabilization Code still applies (Park Towers South Co., v. A-LaLan Imports, Inc., 101 Misc 2d 507, 421 NYS2d 282 [Civ. Ct NY 1979]).
Simply calling these premises "Commercial" when their nature and its use may be for residential purposes does not take them outside the ambit of the Rent Control and Rent Stabilization laws.
Accordingly, the motion to dismiss the Second affirmative defense is denied.
Petitioner seeks to dismiss the third affirmative defense which alleges that "the petition fails to set forth a cause of action upon which relief may be properly granted." In its opposition to the motion Respondent alleges that "there is no cause of action to recover residential premises in the petition."
Pleading allegations are to be most liberally construed in favor of the pleader (Cophn v. Lionel Corp., 21 NY2d 559[1968]; Barry v. Wackman, 36 NY2d 371, 368 NYS2d 497, 329 NE2d 180; Matco Electric Co., v. Plaza del Sol Construction Corp., 82 AD2d 979, 440 NYS2d 407 [3rd. Dept. 1981]). A complaint is deemed to allege whatever can be reasonably implied from its statements and not whether the allegation can be established considering the complaint as a whole (Terry v. County of Orleans, 72 AD2d 925, 422 NYS2d 826 [3rd. Dept.1979]). Failure to state a cause of action cannot be raised in an answer but rather by way of a motion to dismiss (Charnis v. Shohet, 195 Misc 2d 188, 757 NYS2d 671 [App. Term 2nd. Dept. 2002]).
Whether the premises are residential and used for residential purposes is a factual issue that will be determined at trial. A review of the petition herein evinces a cause of action being plead by petitioner due to Respondent's failure to cure lease violations.
Accordingly, the Third affirmative defense is dismissed.
Petitioner seeks to dismiss the Fourth affirmative defense which alleges that the court does not have jurisdiction over apartment 5 J which is rent regulated residential premises, and the Eighth affirmative defense which alleges that "the proceeding lacks subject matter jurisdiction."
When premises are subject to the Rent Stabilization Code the court will acquire subject matter jurisdiction when the termination notice is served in accordance with the Code, and commercial use of the space will not exempt the petitioner from the notice requirements (30 Pilot Street Corp. V. Williams, 140 Misc 2d 688, 531 NY S. 2d 848 [Civ. Ct. 1988]; Meloh v. Harari, N.Y.L.J. May 4, 1988, p. 7 col. 1 [App. Term, 1st. Dept]). The Code provides a 10 day opportunity to cure a substantial lease violation before an eviction proceeding may be commenced (Residential Landlord Tenant Law in NY § 8:56; 9 NYCRR § 2524.3 (a)). Petitioner served Respondent with a 10 day Notice to cure the violations prior to terminating the tenancy, this is sufficient under the code and under the lease.
Contrary to 3849 Associates v. Bonime, 137 AD2d 448, 524 NYS2d 710 [1st. Dept. 1988] where premises were rented for commercial and residential purposes and the court, in reversing the Appellate Terms's order remanding the proceeding to the Civil Court for a fact finding on the question of use, held that "where there is a question of fact concerning whether the premises at issue are being utilized solely for commercial purposes or for mixed residential and commercial purposes the matter must be referred to the consideration of DHCR for an order of decontrol prior to bringing a summary proceeding; When the premises, as is the case herein, are rented for commercial purposes only, the absence of an order of decontrol will not be fatal to the maintenance of a summary proceeding against a commercial tenant (see Berkley Associates v. Jordon, N.Y.L.J. Feb. 1, 1980, p. 5 col 1, Affd. 78 AD2d 782, 435 NYS2d 203).
It is well established that the civil court has subject matter jurisdiction over summary proceedings for the recovery of real property (Brocros Realty Corp., v. Daniel Perry photography, N.Y.L.J. April 19, 1995, p. 27 col. 1[Civ. Ct. NY]; 22 NYCRR § 208.43 (j)).
Respondent was served with a 10 day Notice to Cure the lease violations, following this he was served with a lease Termination notice. Since this lease is for Commercial premises only, the fact finding function on the question of use may remain in the Civil Court which has jurisdiction over this summary proceeding for the recovery of real property.
Accordingly, the Fourth and Eighth Affirmative defenses are dismissed.
Petitioner seeks to dismiss the Fifth Affirmative defense which alleges that the managing agent for the subject premises is not properly named. Petitioner points to Exhibit H in the moving papers which contain the Multiple Dwelling Registration statement listing the registered managing agent as Rick Elezi. This is the same person listed in the petition. There is nothing in Respondent's papers opposing this part of the motion.
Accordingly, the Fifth Affirmative defense is dismissed.
Petitioner seeks to dismiss the Sixth Affirmative defense which alleges that petitioner has refused to sign and approve the construction drawings to obtain approvals and permits for the renovations, thereby curing the lease violations, and the Seventh Affirmative defense which alleges estoppel. Respondent in his papers alleges that it should be given an opportunity to cure the lease violations because it acted on them prior to the lease termination. He also alleges that the prior owner, by accepting rent from Respondent knowing of the existence of the lease violations, waived them and this new owner cannot seek possession of the premises on the basis of these violations.
A waiver is the voluntary abandonment or relinquishment of a known right. Generally there is an inference that a Landlord's acceptance of rent after knowing of a lease violation will waive the violation and the landlord will be estopped from seeking possession of the premises on this basis. In that case waiver is a matter of intent which must be proved and left to the trier of fact; However, when there is a non-waiver clause in the lease acceptance of rent may not be inferred, as a matter of law, to frustrate the reasonable expectations of the parties embodied in a lease when they have expressly agreed otherwise. (See Jefpaul Garage Corp., v. Presbyterian Hosp. In City of New York, 61 NY2d 442, 474 NYS2d 458, 462 NE2d 1176).
A waiver will be found in spite of the lease's non-waiver clause when the landlord is actively involved with the tenant in the non-performance of a lease obligation (Simon Son Upholstery, Inc., v. 601 West Associates, LLC, 268 AD2d 359, 702 NYS2d 256 [1st. Dept. 2000], despite lease's non-waiver clause new landlord required to provide tenant with elevator service after normal business hours, where prior landlord consented to tenant's using part of premises as photography studio, had been involved in the photography studio modifications, including approving the renovations, providing tenant parking, accepting payment from the photography tenant and using the premises in a sale brochure). In Simon Son Upholstery, Supra, the court held "here in distinction to Jefpaul, there are sufficient indicia that the reasonable expectations of both parties under the original lease were supplanted by subsequent actions."
Parties to a commercial lease may mutually agree that conduct, which might otherwise give rise to an inference of waiver, shall not be deemed a waiver of specific bargained for provisions of a lease. A written agreement that is complete clear and unambiguous on its face must be enforced according to the plain meaning of its terms (Excel Graphics Technologies, Inc., v. CFG/AGSCB 75 Ninth Avenue, LLC., 1 AD3d 65, 767 NYS2d 99 [1st. Dept. 2003] "Commercial Landlord's acceptance of rent with knowledge of tenant's breach of lease requirement of landlord's prior written consent to subletting did not constitute waiver of that requirement, in light of clear and unambiguous general non-waiver clauses in commercial lease).
Similarly herein the lease between the parties contains a clear and unambiguous non-waiver clause (See Exhibit "B", lease Paragraph 8). This court is constrained to enforce this clause in accordance with the plain meaning of its terms.
After a tenant receives a notice to cure if it finds that cure cannot be accomplished during the cure period, it must seek an extension of the cure period from the landlord, or an injunction in Supreme Court under Yellowstone to extend the cure period and stay the termination of the lease (See First National Stores, Inc., v. Yellowstone Shopping Centers, Inc., 21 NY2d 630, 290 NYS2d 721, 237 NE2d 868; Wilen v. Harridge House Associates, 94 AD2d 123, 463 NYS2d 453 [1st. Dept. 1983]). Yellowstone is intended only to preserve the status quo until the parties rights can be fully adjudicated while the tenancy remains in effect without consideration of the merits of the parties contentions (Ameurasia International Corp., v. Finch Realty Co., 90 AD2d 760, 455 NYS2d 900; Physicians Planning Service Corp., of Connecticut v. 292 Estates, Inc., 88 AD2d 852, 451 NYS2d 425; Podolsky v. Hoffman, 82 AD2d 763, 441 NYS2d 238; Wuertz v. Cowne, 65 AD2d 528, 409 NYS2d 232; Madison Avenue Specialties, Inc., v. Seville Enterprises, Inc., 40 AD2d 784, 337 NYS2d 590).
In the absence of an injunction, the court cannot afford a breaching tenant an opportunity to cure the breach because the lease and the tenancy terminate pursuant to the landlord's notice and it is beyond the power of the court to revive (See First National Stores, Inc. V. Yellowstone Shopping Centers, Inc., 21 NY2d 630, Supra; Wilen v. Harridge House Associates, 94 AD2d 123, Supra; S.E. Nichols, Inc., v. American Shopping Centers, Inc., 115 AD2d 856, 495 NYS2d 810 [3rd. Dept. 1985], "tenant in shopping center not entitled to preliminary injunction enjoining shopping center from terminating lease, where tenant failed to seek preliminary injunction during cure period, but instead sought relief only after shopping center had served a notice of termination.").
Respondent did not seek an extension or a stay of the cure period. He did not seek to have the landlord review the construction drawings and permit applications until 12 days after the period in the notice of Termination had expired. Knowing that he would be unable to cure the lease violations prior to the end of the cure period he should have sought a Yellowstone injunction in Supreme Court. Respondent failed to act until the lease had terminated and this court is powerless to revive it.
Accordingly, the Sixth and Seventh Affirmative defenses are dismissed.
Petitioner seeks to dismiss the Ninth Affirmative defense which alleges that "the premises are not accurately described in that it appears petitioner is seeking to recover residential premises, specifically apartment 5-J." Petitioner argues that the commercial lease contains two premises and apartment 5-J is merely an extension of the business aspect of the lease, The rent is charged and paid for under one lease and removal of Respondent from both premises is permitted within one proceeding.
At common law a landlord could not dispossess a tenant of a part only of his premises held under a single tenancy (Morgenroth v. Emert, 118 Misc. 260, 193 N.Y.S. 305). Where the entire premises occupied by a tenant are commercial or business space, and they are not divisible, the landlord generally cannot evict the tenant from only a portion of the premises (C.J.S. Landlord Tenant §§ 1411, 1410; Broadway 58th St. Corp., v. Botwinick, 10 Misc 2d 1012, 171 NYS2d 220 [Mun. Ct. 1958]; Morse Grossman, Inc., v. Acker Co., Inc., 297 NY 304, 79 NE2d 258, denying landlord possession of part of premises leased, when tenant had leased six buildings at one rental, landlord sold buildings to different purchasers who sought to recover their part of the premises, court dismissed petition holding "partial dispossession is not permitted landlord must own tenant's entire rental area"). (See also Campfire Girls Inc., v. Jensen, 200 Misc. 540, 105 NYS2d 107 [Mun. Ct. 1951],) denying landlord a final order for only part of the demised space where the original demise was for the entire seventh floor. (Farrow v. Martin, 195 N.Y.S. 244 [Mun. Ct. 1922]) denying landlord recovery of possession of premises not used for dwelling purposes when the house was not suitable for division.
Where part of the premises is occupied for business purposes and part put to residential use, the landlord may be permitted to recover the part used for business purposes, giving the tenant the protection of the rent laws as to that part of the premises used for dwelling purposes (C.J.S. Landlord Tenant § 1410; Farrow v. Martin, 195 N.Y.S. 244, Supra.).
A landlord may elect to seek possession of two spaces upon a single petition even though they are leased under separate leases, which expire at different times, when they are occupied as one integrated unit (NRP LLC II v. La casa Elegante Corp., 180 Misc 2d 300, 689 NYS2d 851 [App. Term 1st. Dept.]; Hudson Waterfront Associates IV, LP v. MTP 59 St. LLC., 8 Misc 3d 136 (A), 803 NYS2d 18 [App. Term 1st. Dept.]), and when they are under the same lease and in close proximity to one another (Vornado Two Penn Property LLC, v. XLPC Corp., 18 Misc 3d 1119(A), 2008 WL 199574 [Civ. Ct. NY 2008] petition brought to recover two separate newsstands separated by the entrance to the LIRR railroad).
The premises sought to be recovered here are rented under the same lease, to the same tenant, in the same building, but they are not part of an integrated unit [the store is in the ground floor, the storage area is in the basement and the apartment is on the fifth floor], or in close proximity to each other.
When landlords are denied recovery of possession for a part of the premises when the premises are indivisible, and are granted recovery of part of the premises when the premises are divisible, it can be safely concluded that the landlord may elect to seek possession of part of the premises when they are divisible or to seek possession of all of the premises whether they are divisible or not. Despite the fact the premises herein are divisible, it is landlord's prerogative whether to seek all of the premises or part of the premises. Landlord herein has chosen to seek recovery of possession of all of the premises that were demised under a single lease, to the same tenant, charging a single rent and for a single commercial purpose. The cases cited above are not to the contrary. The Landlord may seek to recover under a single proceeding these two premises rented for commercial purposes.
The second aspect of the affirmative defense deals with the nature of the premises which Petitioner alleges were rented for commercial purposes and Respondent alleges were rented and are used for residential purposes. As stated in Metzendorf v. 130 West 57 Co., 132 AD2d 262, Supra, the Rent Stabilization Law will apply to residential premises rented under a commercial lease when landlord is fully aware of the use being given by tenant (See 7 Dunham Place Realty Inc., v. Arndt, 189 Misc 2d 710, 734 NYS2d 825; U.B.O Realty Corp., v. Mollica, 257 AD2d 460, 683 NYS2d 532 [1st. Dept. 1999] where court found after trial "despite commercial nature of leases finding that landlord knew of or acquiesced in tenant's residential use of premises has sufficient support on record and petition was properly dismissed.").
The issues raised in this aspect of the affirmative defense are best left for the trier of fact .
Accordingly the motion to dismiss the Ninth Affirmative defense is denied.
Petitioner moves to dismiss the Tenth Affirmative defense which alleges that Respondent received permission from the prior landlord to install the PVC piping. Respondent does not oppose the motion.
Accordingly the Tenth Affirmative defense is dismissed.
Petitioner seeks to dismiss the First and Second Counterclaims which are for Legal fees and for Fees and Expenses incurred in preparing improvement plans and hiring an architect.
In a commercial lease situation such as here, there is no reciprocal implied entitlement to attorney's fees unless it is contained in the parties lease agreement (NSC Abatement Services, Inc., v. Detailing Café, 801 NYS2d 237 {7 Misc 3d 1025(A)}; Gracie Tower Realty Assocs. V. Danos Floral Co., Inc., 142 Misc 2d 920, 538 NYS2d 680 [Civ. Ct. NY1989]). Since the lease between the parties does not contain a reciprocal clause entitling the tenant to attorney's fees the First Counterclaim should be dismissed. RPL § 234 does not apply.
The Second Counter Claim to recover fees and expenses incurred in preparing improvement plans and hiring of an architect is not inextricably intertwined with the proceedings and will not be entertained by this court despite the absence of a Counterclaim waiver clause in the lease. This Counterclaim will be severed and dismissed without prejudice to Respondent's raising this issue in a plenary action.(See Residential Landlord Tenant Law in NY § 10:63).
Accordingly the First and Second Counterclaims are dismissed.
Petitioner's motion for summary judgment and Respondent's cross motion to dismiss are denied. There are issues of fact that preclude the granting of summary judgment, more specifically the nature and use of apartment 5J. These issues are best left to the trier of fact. It is improper for the motion court to resolve material issues of fact. These should be left to the trial court to resolve (Brunetti, v. Musallam, 11 AD3d 280, 783 NYS2d 347[1st Dept. 2004]). Furthermore, the Civil Court lacks authority to issue a declaratory judgment declaring rights of parties to a lease as well as power to grant specific performance (Wilen v. Harridge House Associates, 94 AD2d 123, 463 NYS2d 453, Supra; NYCCCA § 209(b), 212-a).
Accordingly for the foregoing stated reasons the motion is granted to the extent of dismissing the First, Third, Fourth, Fifth, Sixth, Seventh, Eighth and Tenth Affirmative defenses and the First and Second Counter Claims. The Motion for Summary judgment and the Cross motion for an injunction, damages and to dismiss are respectively denied.
The parties shall appear on May 22, 2008 at 9:30 A.M., in Part 52 Room 1166 of this courthouse located at 111 Centre Street NY NY for further proceedings.
This constitutes the decision and order of the court.