Opinion
8182/08.
Decided May 25, 2011.
Plaintiff was represented by Michael A. Serpico, Esq. of Everett J. Pertersson, P.C.
Defendant 40-50 Brighton First Road Apartments Corp. was represented by Marianna L. Picciocchi, Esq. of Finder Novick Kerrigan LLP.
At its inception, this action concerned an alleged right to occupancy of a cooperative apartment located at 50 Brighton First Road, Brooklyn. All issues but one have been resolved in Civil Court and a subsequent Stipulation among the parties dated May 16, 2011. The history is important, however, for proper context.
Plaintiff Craig Himmelberger, as administrator of the estate of his deceased mother, Frances Himmelberger, and on his own behalf, commenced this action against defendant 40-50 Brighton First Road Apartments Corp. (the "Corporation") and defendants Deborah E. Henderson and Jennifer H. Campbell, record shareholders/lessees of Apartment 8M at 50 Brighton First Road. His Amended Verified Complaint alleges that, in March 2007, his mother transferred her interest in the shares and Proprietary Lease related to Apartment 8M to defendants Henderson and Campbell, to be held as joint tenants with right of survivorship. Plaintiff alleges that the transfer was made "with the understanding and upon the promise" of the joint tenants that Plaintiff "would be allowed to continue to occupy said residence for the reminder [ sic] of his life" ( see amended verified complaint ¶ 15.)
The Corporation answered, asserting no counterclaim or cross-claim. Defendants Henderson and Campbell answered, alleging as a counterclaim against Plaintiff that "[b]y improperly remaining in occupancy of the subject apartment, Plaintiff has forced Defendants to incur damages in the form of legal fees and other sundry items that are owed, or will become owed, to the cooperative" ( see verified answer ¶ 39.)
Frances Himmelberger died in September 2007. With a Notice of Cure dated November 6, 2007, the Corporation notified defendants Henderson and Campbell that they were in violation of the Proprietary Lease "because neither of you occupy the Apartment and you have allowed a person other than a Permitted Occupant to occupy the Apartment, whose name is unknown to Lessor but who is believed to be the son of the deceased Frances Himmelberger." The shareholders/lessees were further notified that, upon their failure "to cure said unauthorized occupancy" by November 30, 2007, the Corporation would terminate the tenancy, and the shareholders/lessees would be "responsible for all costs, including attorneys' fees, incurred by [the Corporation] with regard to instituting legal proceedings based upon [the] aforesaid default under the Proprietary Lease."
With a Notice of Tenancy Termination dated December 4, 2007, the Corporation advised the shareholders/lessees that the Proprietary Lease would expire on December 26 "for the reason that [they had] failed to comply with the Notice to Cure, dated November 10 [ sic], 2007." On January 15, 2008, the Corporation commenced a summary holdover proceeding in Civil Court under index number L T 52308/08 to recover possession of Apartment 8M, naming the shareholders/lessees and incorrectly naming "Gregory Himmelberger."
Here in Supreme Court, Plaintiff moved for a temporary restraining order. In an order dated May 1, 2008, Hon. Sylvia O. Hinds-Radix denied the motion to the extent it sought to halt the holdover proceeding, but ordered that "the subject property corresponding shares of stock may not be transferred, conveyed, sold or otherwise disposed of until resolution of the instant matter or further order of the court."
In a Decision/Order dated October 9, 2008, Hon. Inez Hoyos granted a final judgment of possession in favor of the Corporation, "warrant to issue forthwith and execution stayed 10 days after service of this decision with the notice of entry for respondents Henderson and Campbell to cure so as to remove occupant Himmelberger from the subject premises in accordance with RPAPL § 753(4)." (The statutory reference is to a mandated 10-day stay and cure period.) On or before December 19, 2008, Marshall Robert J. Barsch executed the warrant, and delivered possession of Apartment 8M to the Corporation. In a Decision/Order dated October 2, 2009, Hon. Cheryl J. Gonzalez gave judgment to the Corporation for attorneys' fees in the amount of $17,500.00.
With this motion, Plaintiff initially sought, among other things, to modify Justice Hinds-Radix's May 1, 2008 order, so as to allow sale of Apartment 8M, with the proceeds to be placed in escrow pending final resolution of this action. In the meanwhile, this action had been transferred from Justice Hinds-Radix to this Court. Because the motion sought a modification of another judge's order, it was referred to Justice Hinds-Radix. ( See CPLR 2221 [a].) In an order dated December 7, 2010, "pursuant to a settlement agreement dated October 12, 2010" between Plaintiff and defendants Henderson and Campbell, Justice Hinds-Radix "lifted the stay" in the May 1, 2008 order, and referred the motion to this Court for resolution of remaining issues.
A Stipulation dated May 16, 2011 and "so ordered" on that date resolves all remaining issues but one, i.e., whether the Corporation is entitled to be reimbursed from the proceeds of the sale of Apartment 8M for the "additional costs" it allegedly sustained for security guard services because of Plaintiff's occupancy of the apartment ( see stipulation ¶ 5.) Although the Corporation's claim is not the subject of any counterclaim or cross-claim asserted in this action, if the Corporation is correct that it is entitled to reimbursement under the Proprietary Lease, it appears to be within the scope of the counterclaim asserted against Plaintiff by defendants Henderson and Campbell.
In support of its entitlement to reimbursement for security costs in the amount of $42,912.33, the Corporation submits copies of two affidavits submitted in connection with prior motions, i.e., an Affidavit in Support of Order to Show Cause of Rimma Bon, President of the Board of Directors of the Corporation, dated April 17, 2008; and an Affidavit of Dawn White, a supervising security officer employed by FJC Security Services Inc., a private security firm retained by the Corporation, also dated April 17, 2008. The Corporation also submits an Affidavit in Response to Motion of Rimma Bon dated August 17, 2010. In short, Ms. Bon asserts that the Corporation "was forced to incur the significant expense of hiring twenty-four hour security personal in an attempt to protect the occupants of the Building, including elderly people and children, from [Plaintiff's] conduct," characterized as "an unrelenting pattern of dangerous and menacing conduct which in fact resulted in a deadly drug overdose by his guest, his brutal beating of his girlfriend with a bat to the head, a Federal drug investigation, and numerous arrests for drug trafficking and domestic abuse." ( See affidavit in response to motion ¶¶ 10, 14.)
The Corporation relies on two paragraphs of the Proprietary Lease for its assertion of entitlement to reimbursement for the alleged additional security guard charges. Paragraph 32 (c) provides that upon a sale of shares after termination of the Proprietary Lease, the Corporation as Lessor "shall apply the proceeds . . . towards payment of the Lessee's indebtedness hereunder (including interest, attorneys' fees and other expenses incurred by the Lessor)." Paragraph 19 provides that if the Lessee "shall fail for 30 days after notice to make repairs to any part of the apartment, . . . or shall fail to remedy a condition which has become objectionable to the Lessor for reasons above set forth," the Corporation as Lessor "may make such repairs . . . or remove such objectionable condition," and the Lessor "shall be entitled to recover from the Lessee all expenses incurred or for which it has contracted for hereunder, such expenses to be payable by the Lessee on demand as additional rent." (Emphasis added.)
Simply stated, the Corporation's contention, at least initially, is that since it may deduct from the proceeds of any sale after termination "expenses incurred," and since "expenses incurred" to remove an objectionable condition become "payable . . . on demand as additional rent," the Corporation may deduct any expenses of remedy from sale proceeds. Specifically, defendants Henderson and Campbell "allowed an unauthorized occupant, plaintiff Himmelberger, to reside in the Apartment and create an objectionable condition"; despite the Notice to Cure "to terminate Himmelberger's unauthorized occupancy," the shareholders/lessees "failed to take any steps to terminate Himmelberger's unauthorized occupancy"; and "[a]s a result," the Corporation "had to bear the expense of protecting the occupants of the building from Himmelberger's dangerous criminal behavior." ( See affirmation in support of claim of defendant 40-50 Brighton First Road Apartments Corp. to recover certain expenses ¶¶ 16-19.)
In reply to Plaintiff's opposition, which charges that the Corporation ignores the emphasized phrase in the quoted language from Paragraph 19, i.e., "for reasons above set forth," the Corporation points to Paragraph 18 (b) of the Proprietary Lease: "The Lessee shall not permit or suffer any unreasonable noises or anything which will interfere with the rights of other lessees or unreasonably annoy them or obstruct the public halls or stairways."
Neither Plaintiff nor the Corporation cite any legal authority to support their respective positions as to the meaning of the Proprietary Lease, except that Plaintiff cites Rentways, Inc. v O'Neill Milk Cream Co.( 308 NY 342) for the proposition that "where there is ambiguity in the terms of a contract prepared by one of the parties, it is consistent with both reason and justice that any fair doubt as to the meaning of its own words should be resolved against such party" ( see id. at 348.) The Corporation rejects the applicability of the proposition with the somewhat disingenuous argument that the Corporation "had nothing to do with the preparation of the form of proprietary lease," which was "prepared by the sponsor of the Offering Plan pursuant to which the Building was converted to cooperative ownership in 1983." ( See reply affirmation in further support of claim of defendant 40-50 Brighton First Road Apartments Corp. to recover certain expenses ¶¶ 19, 20.) Defendants Henderson and Campbell, although parties to the May 16 Stipulation, have not otherwise appeared on this motion, and have submitted no papers.
The Proprietary Lease contains no definitions for the operative language upon which the Corporation relies for its claim to additional security guard costs. For example, there is no definition of "objectionable condition" in Paragraph 19 such as to clearly include the conduct of an occupant, and no definition of "remedy" as used in that paragraph so as to clearly include costs incurred for prevention of harm. The Lease must thus be interpreted and applied according to general principles.
A shareholder's/lessee's relationship with the cooperative corporation is sometimes analyzed by reference to corporate law principles ( see 40 W. 64th St. v Pullman, 100 NY2d 147), and sometimes according to landlord/tenant law principles ( see Anderson v Nottingham Vill. Homeowner's Assn. , 37 AD3d 1195 [4th Dept 2007].) In Zilberfein v Palmer Terrace Corp. ( 18 AD3d 742 [2d Dept 2005]), for example, the Second Department enforced an attorneys' fee provision in a "proprietary lease/occupancy agreement," even though the dispute was resolved on corporate law principles ( see id. at 744-45.) No reason appears for not applying the provisions of the Proprietary Lease at issue here according to their terms.
"It is settled that the interpretation of the provisions of a lease is governed by the same rules of construction applicable to other agreements . . ., and in those instances where the intent of the parties is clear and unambiguous from the language employed on the face of the agreement, the interpretation of the document is a matter of law solely for the court." ( Horowitz v 1025 Fifth Ave., Inc. , 34 AD3d 248 , 249 [1st Dept 2006]; see also George Backer Mgt. Corp v Acme Quilting Co., 42 NY2d 211, 217; Star Nissan, Inc. v Frishwasser, 253 AD2d 491, 492 [2d Dept 1998].) Where, however, a lease is ambiguous, evidence of "events leading up to the execution of the lease [is] admissible as extrinsic evidence of the parties' intent to resolve the ambiguities" ( see Coliseum Towers Assocs. v County of Nassau , 2 AD3d 562, 564 [2d Dept 2003]), as is the parties' "course of conduct" under the lease ( see Citibank, N.A. v 666 Fifth Ave. Ltd. P'ship , 2 AD3d 331 , 332 [1st Dept 2003].)
Here, the parties have presented the provisions of the Proprietary Lease to the Court for interpretation as a matter of law, notwithstanding Plaintiff's characterization of the allegedly operative language as ambiguous for purposes of the rule of interpretation against the drafter ( see affirmation in opposition ¶¶ 6, 7.) The only extrinsic evidence in the record are the affidavits described above, which do not purport to address the parties' understanding of the cited provisions of the Lease, and the history of the holdover proceeding. As will appear, that evidence favors Plaintiff.
There is no dispute that a cost-shifting provision in the proprietary lease of a cooperative apartment, such as Paragraph 19 here, is proper and enforceable. ( See Batsidis v Wallack Mgt. Co., Inc., 65 AD3d 332, 333 [1st Dept 2009]; Duane Reade v York Towers, Inc. , 22 AD3d 246 , 247 [1st Dept 2005].) But like other contracts, a party's duty to perform under a lease arises only if conditions to its performance are satisfied. ( See Farrell Lines v City of New York, 30 NY2d 76, 82; 380 Yorktown Food Corp. v Great Atl. Pac. Tea Co., Inc. , 30 AD3d 403 , 406 [2d Dept 2006]; Top Mkts., Inc. v S R Co., 275 AD2d 988, 989 [4th Dept 2000].) "A condition precedent is an act or event, other than a lapse of time, which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises." ( Argo Corp. v Greater NY Mut. Ins. Co. , 4 NY3d 332 , 337.) "Express conditions precedent, which are those agreed to and imposed by the parties themselves, must be literally performed." ( Kerwin Bldg. Co., Inc. v Heritage Plumbing Heating, Inc. , 42 AD3d 559, 560 [2d Dept 2007] [internal quotation marks and citations omitted].)
Paragraph 19 here expressly conditions the Corporation's right to "remove [an] objectionable condition" at the Lessee's expense only "[i]f the Lessee shall fail for 30 days after notice . . . to remedy a condition which has become objectionable to the Lessor for reasons above set forth." There is no such 30-day notice in the record on this motion. The only notices in the record are the Notice to Cure dated November 6, 2007, which references only Paragraphs 14 and 31 (c) of the Proprietary Lease related to unauthorized occupancy, and the Notice of Tenancy Termination dated December 4, 2007, based solely upon the Notice to Cure. There is no reference to Paragraph 18 (b), which the Corporation now relies upon as the "objectionable condition." Nor is there any reference to Paragraph 31 (f) of the Lease, which would have allowed termination "upon the affirmative vote of two-thirds of [the Corporation's] then Board of Directors . . . because of objectionable conduct on the part of . . . a person dwelling or visiting in the apartment, repeated after written notice from Lessor." (Emphasis added.)
Assuming that the Corporation might have terminated the Proprietary Lease in accordance with Paragraph 31 (f) ( see Trump Plaza Owners, Inc. v Weitzner , 47 AD3d 525 , 525-26 [1st Dept 2008]), it could not do so on the basis of the Notice to Cure and Notice of Tenancy Termination that were served ( see Chinatown Apts. v Chu Cho Lam, 51 NY2d 786, 787-88; 49 W. 12 Tenants Corp. v Seidenberg , 6 AD3d 243 , 244 [1st Dept 2004].) Indeed, there is nothing in either the 2008 Decision/Order of Judge Hoyos or the 2009 Decision/Order of Judge Gonzales that indicates that Plaintiff's allegedly objectionable conduct was in any way at issue in the holdover proceeding.
Judge Gonzales's award of attorneys' fees to the Corporation was made pursuant to Paragraph 28 of the Proprietary Lease, which provides that "[i]f the Lessee shall at any time be in default . . . and the Lessor shall incur any expense . . . in performing acts which the Lessee is required to perform, . . . the expense thereof to the Lessor, including reasonable attorneys' fees and disbursements, shall be paid by the Lessee to the Lessor, on demand, as additional rent." Like the attorneys' fees awarded as "additional rent," Paragraph 19 designates the Lessor's expenses in remedying objectionable conduct as "additional rent." Those remedy expenses, therefore, would appear to have been recoverable in the summary proceeding. ( See River View Assoc. v Sheraton Corp., 33 AD2d 187, 190 [1st Dept 1969], aff'd 27 NY2d 718; Birmingham Hous. Auth. v Douglas, 217 AD2d 897, 898 [3d Dept 1995].)
Generally, where additional rent is recoverable in a summary proceeding, and a summary proceeding is pursued, any additional rent owed must be sought in that forum. ( See Landmark Props. v Olivo , 62 AD3d 959 , 960-61 [2d Dept 2009].) Because Plaintiff has not raised the question, and the issue of security guard expenses was put before the Court on agreement of all parties through the Stipulation, the Court will not address whether such expenses, if covered by Paragraph 19 as "additional rent," could yet be recovered in an action. The Court does note, however, that the Corporation did not seek to recover those expenses as "additional rent" in the holdover proceeding, though it sought attorneys' fees as "additional rent," suggesting that the interpretation of Paragraph 19 that it offers on this motion was only recently discerned.
Although the Court concludes that Paragraph 19 is not available to the Corporation as a basis for deduction of security guard expenses from the proceeds of the sale of the apartment, there is still the language of Paragraph 32 (c) itself. Again, "The Lessor shall apply the proceeds received from the issuance of [new] shares . . . towards the payment of Lessee's indebtedness hereunder (including interest, attorneys' fees and other expenses incurred by Lessor)." It is clear, however, that the "other expenses incurred by Lessor" must be part of the Lessee's "indebtedness hereunder," which most-broadly read would mean under any provision of the Proprietary Lease, and not an additional category or basis for deduction.
The Court stresses that the question now before it is not whether an action in contract or tort will lie by a landlord against a tenant for recovery of damages arising from the tenant's maintenance of a nuisance in breach of the lease. The question is whether the express provisions of the Proprietary Lease here allow the Corporation to deduct an amount from the proceeds of a sale after breach to reimburse itself for particular expenses incurred.
Plaintiff's motion is finally resolved, therefore, in accordance with the Stipulation dated May 16, 2011, as supplemented with respect to paragraph 5 by this Decision and Order.