Opinion
LT–103–17/CO
01-31-2018
RENSSELAER HOUSING AUTHORITY, Petitioner–Landlord, v. Natasha BEVERLY, Respondent–Tenant.
Thuillez, Ford, Gold, Butler & Monroe, LLP, (Molly C. Casey, Esq. of counsel) Albany, for Petitioner–Landlord. Legal Aid Society of Northeastern New York (Bryan Bergeron, Esq. of counsel), for Respondent–Tenant.
Thuillez, Ford, Gold, Butler & Monroe, LLP, (Molly C. Casey, Esq. of counsel) Albany, for Petitioner–Landlord.
Legal Aid Society of Northeastern New York (Bryan Bergeron, Esq. of counsel), for Respondent–Tenant.
Thomas Marcelle, J. Rensselaer Housing Authority ("RHA") alleges that Natasha Beverly ("Beverly") breached their lease agreement by removing smoke detectors. On November 8, 2017, RHA served Beverly with notice of the breach indicating that Beverly had to vacate the apartment no later than December 15, 2017. Beverly had a right to an administrative hearing to contest the grounds for termination of the lease—she did not avail herself of this option. Rather, Beverley, on the advice of counsel, tendered December's rent, which under circumstances that will be explained later, was accepted by RHA. Beverley did not vacate the apartment and RHA commenced a holdover proceeding under the authority of RPAPL § 711(1).
The court held a trial on January 2, 2018. Before the commencement of the trial, the court allowed Beverly to provide an oral answer to the petition ( RPAPL § 743 ; 22 NYCRR § 210.7 ). Beverley defended on two grounds. First, RHA's acceptance of the rent occurred before the commencement of the holdover proceeding and therefore requires this action to be dismissed with prejudice and, second, she never removed or otherwise tampered with the smoke detectors.
The trial testimony established the following: During a routine inspection of Beverly's apartment, RHA maintenance employees testified that they found three smoke detectors disabled. On November 8, 2017, RHA informed Beverly that having three smoke detectors disabled was a breach of the lease. Further, RHA notified Beverly that because she breached the lease, RHA was terminating her tenancy on Friday December 15, 2017.
From RHA's perspective, the tenancy expired on December 15, 2017. Beverly had not vacated by the 15th, so on Monday December 18, 2017, at its first opportunity, RHA prepared a petition seeking to have Beverly evicted as unlawfully holding over after the expiration of her lease. The petition was given to Laurie Mooney ("Mooney") who is an occupancy specialist at RHA. Mooney's duties include, among other things, the collection of rent and the filing of petitions.
On December 18, before Mooney had filed the petition with the Rensselaer City Court Clerk, Beverly presented a money order for $280 which Mooney accepted. The details of this transaction give rise to a dispute over the legal ramifications of Mooney accepting Beverly's money order.
When Beverly gave the money order to Mooney, Mooney "auto-distributed" the payment. Auto distribution of a payment is a chronologically based system—the system credits the tenant's oldest outstanding balances first and newest balances last. On December 18, Beverly had an outstanding balance which was derived from four items: (1) $56.41 arrears for November 2017 rent; (2) $75.00 in fines for smoke detector violations from November 2017; (3) $38.00 from two work orders in November 2017; and (4) $223.00 for December 2017's rent. Mooney auto-distributed the $280 which paid the outstanding November charges and left a balance of $87 for December's rent. She generated a receipt that showed a balance owing for December's rent and presented it to Beverly (exhibit 5).
This did not go over well with Beverly. Beverly's intent was to pay off November's arrears and December's rent and she was displeased that Mooney had applied her money to other outstanding items. She wanted a receipt that reflected the purpose for which the check was offered—the payment of rent and rent only. According to Mooney, Beverly became "very irate" at which point Mooney relented in order to pacify Beverly and issued a new receipt that reflected November's arrears and that December's rent had been paid in full (exhibit 4). After completing her transaction with Beverly, Mooney then filed the holdover petition with the Rensselaer City Court Clerk.
Beverly argues that RHA's acceptance of the rent after the date noticed for termination of the lease but before the commencement of a summary proceeding vitiates the notice of termination and waives the underlying breach allegedly committed by the tenant. RHA defends on three grounds.
Frist, RHA argues that Mooney accepted the full amount of December's rent under duress. The argument goes that since Mooney initially accepted Beverly's payment in accordance with RHA's auto-distribution policy, she had no intent to accept Beverly's payment for December's full rent. Rather, Mooney capitulated to Beverly's demand that her payment be applied to pay off December's rent only after Beverly became irate. In other words, Mooney consented to accept payment of December's rent only out of duress. Therefore, RHA concludes that it never accepted December's rent from Beverly.
RHA is correct about this much. Duress is a defense to the formation of a contract. Voluntary assent to a transaction is required to make the transaction valid. Thus, a person involuntarily accepts terms of an offer (in this case payment of December's rent), if the acceptance was induced by an improper threat by the other party that leaves the victim (Mooney) no reasonable alternative but to manifest her assent ( Kovian v. Fulton Cty. Nat. Bank & Tr. Co. , 857 F.Supp. 1032, 1037 [N.D.N.Y. 1994] ). "To constitute the coercion or duress which will be regarded as sufficient to make [ ] [assent] involuntary, there must be some actual or threatened exercise of power possessed, or believed to be possessed, by the party exacting or receiving [the assent] over the person or property of [the victim], for which the [victim] has no other means of immediate relief than by [indicating assent]" ( Kilpatrick v. Germania Life Ins. Co. , 183 N.Y. 163, 170, 75 N.E. 1124 [1905] [internal citation and quotations omitted] ).
Here, while Mooney says that Beverly became irate, Mooney never says that Beverly threatened her or that she felt threatened. Mooney had a disgruntled customer which equates not with duress (see Lane–The Real Estate Dep't Store, Inc. v. Muchnick , 145 A.D.2d 469, 535 N.Y.S.2d 105 [2d Dept. 1988] [holding that being under a lot of pressure "and merely want[ing] to be rid of the pressure, does not constitute duress so as to void the agreement"] ). Since Beverly applied no actual coercion to Mooney, Mooney's acceptance of December's rent was voluntary.
Later in the opinion, the court will deal with what exactly it was Mooney assented to; but for now, it suffices that Mooney assented to the payment of December's rent.
Next, RHA says that it had a right to accept Beverly's rent without consequences. Under certain circumstances, this is a perfect argument. RPAPL § 711(1) creates a safe harbor for the acceptance of rent when a tenant holds over after the expiration of her lease. RPAPL § 711(1) in relevant part, provides: "Acceptance of rent after the commencement of the [holdover] proceeding ... shall not terminate such proceeding nor effect [sic] any award of possession to the landlord ...." However, the timing in this case does not comply with the statute. Mooney, who had authority to accept rent payments, accepted Beverly's money order prior to filing this proceeding. Thus, the safe harbor provision of RPAPL § 711(1) provides no help for RHA.
Finally, RHA argues that since it had a valid claim on Beverly's payment, the court should not construe the acceptance of the payment as an agreement to extend her tenancy or waive its right to evict Beverly for violating her lease. This argument has some force to it.
It is true that Beverly's December's rent was due no later than December 5, 2017 (exhibit 1). Likewise, it is undisputed that Beverly's lease, under the notice provided by RHA, did not expire until December 15, 2017 (exhibit A). Moreover, the evidence established that, on the very morning that Mooney accepted Beverly's payment (December 18), Mooney had been tasked with filing the holdover petition. Mooney frequently files eviction proceedings and accordingly she reasonably and accurately anticipated that matter would not be heard by the court until early January—meaning that Beverly would have use and occupancy of the apartment for the entire month of December. Consequently, RHA was entitled to be compensated by Beverly for such use and occupancy. RHA concludes that since it only accepted what Beverly owed and nothing more, the acceptance of December's rent should have no bearing on this proceeding.
The scenario laid out by RHA—the landlord's acceptance of rent after the expiration of the term contained in the landlord's notice of the breach of the lease, but before the commencement of a hold over proceeding ("the window period")—has been the source of decisions from the courts from the First and Second Departments. The courts have reached various and inconsistent results. The First Department rule is that the acceptance of the rent in the window period vitiates the notice of termination and requires the petition to be dismissed ( 205 East 78th St. Assocs. v. Cassidy , 192 A.D.2d 479, 598 N.Y.S.2d 699 [1st Dept. 1993] ; 184 W. 10th Corp. v. Westcott , 8 Misc.3d 132[A], 2005 NY Slip Op. 51150[U], 2005 WL 1712215 [App. Term, 1st Dept. 2005] ; Esplanade Gardens, Inc. v. Simms , 51 Misc.3d 1228[A], 2016 NY Slip Op. 50851[U], 2016 WL 3152675 [Civ. Ct., N.Y. County 2016] ). The Second Department has concluded that the Court held that a landlord's acceptance of unsolicited rent checks from a tenant during the window period does not vitiate a landlord's nonrenewal notice, unless acceptance of the check "unmistakably manifest[s] ... [an] intent to relinquish [the landlord's] rights to pursue a ... holdover claim" ( Matter of Georgetown Unsold Shares, LLC v. Ledet , 130 A.D.3d 99, 104, 12 N.Y.S.3d 160 [2d Dept. 2015] ) (but see Matter of Nicolaides v. State of New York Div. of Hous. & Community Renewal, 231 A.D.2d 723, 647 N.Y.S.2d 866 [2d Dept. 1996] [reaching the opposite conclusion] ).
Cassidy stands for the proposition that a notice of termination is nullified when the landlord accepts and retains the tenant's payment of rent after termination of the tenancy but prior to commencement of the holdover eviction proceeding. Cassidy was a non-primary residence case where the landlord had deposited a rent check after serving the tenant with a notice of termination the tenancy. Though the landlord immediately told the tenant a that the acceptance of the payment was "inadvertent", it did not return the rent payment. The Appellate Division dismissed the petition "for the reasons stated by McCooe, J. at the Appellate Term" (id. ). Justice McCooe reasoned that since the landlord did not explain the inadvertence nor did it return the payment; therefore, "the landlord's acceptance and retention of the August rent nullified the termination date [of the notice]" and required dismissal of the petition for lack of an adequate notice (205 East 78th St. Assocs. v. Cassidy , NYLJ, Sept. 27, 1991 at 21, col 4 [App. Term, 1st Dept. 1991] ). Cassidy has not been overturned or otherwise repudiated and is still binding precedent in the First Department (see 184 West 10th Corp. v. Westcott, 8 Misc.3d 132[A], 2005 NY Slip Op. 51150[U], 2005 WL 1712215 (App. Term, 1st Dept., 2005) ).
Since the First and Second Departments have differing views and the Third Department has yet to articulate a theory in these types of situations, the court is without binding precedent. There is, however, a case that has tread similar ground— Scarborough Manor Owners Corp. v. Robson , 57 Misc.3d 24, 59 N.Y.S.3d 877 (App. Term, 2d Dept., 9th & 10th Jud. Dists. 2017). In Robson , the court found that "the landlord's board of directors had instructed its managing agent to terminate the tenancy and not to accept any rent payments from tenant; that tenant had deposited the unsolicited check into a bank lockbox; and that neither landlord nor its managing agent knew of the deposit. In these circumstances, there was no knowing acceptance of rent ( Id. at 28, 59 N.Y.S.3d 877 )." The Robson court framed the issue as "whether the payment and acceptance of the rent gave rise to a month-to-month tenancy requiring the service of a 30–day notice ( Id. at 25, 59 N.Y.S.3d 877 )." The court concluded that without authorization to accept rent and without the knowing acceptance of the rent by the manager, no additional notice was required to prosecute a holdover petition ( Id. at 28, 59 N.Y.S.3d 877 ).
Robson's facts, while close to the ones in this case, are distinguishable in two important ways. In Robson , unlike the facts presented here, the board instructed its manager not to accept rent and the manager never knowingly accepted the rent. These factual differences render Robson 's logic unpersuasive in the context of this case. Without a controlling statutory mandate or binding precedent, the case boils down to basic contract law. Beverly offered December's rent; Mooney had the authority to accept rent and did. Although each party had unspoken intentions—Beverly to have RHA waive the violation by accepting the rent and RHA accepting the offer only for the limited purpose of getting paid what it was lawfully entitled to—the unspoken internal intent of an offer or an acceptance has no binding effect on the other party. The essence of an agreement is mutual assent—a meeting of the minds as to the nature of the terms—and without it, no term of a contract is enforceable. All that was done by Beverly's offer of December's rent and its acceptance by RHA was to give Beverly the right to possess the apartment until December 31, 2017.
RPL § 232–c does provide that "the acceptance of such rent shall [create] a tenancy from month to month commencing on the first day after the expiration of such term unless an agreement either express or implied is made providing otherwise." Since the lease expired pursuant to a conditional limitation (i.e., notice of a breach of the lease), RPL § 232–c is available to Beverly as a defense only if she concedes that she breached the lease as described in the notice of termination (exhibit A). Beverly has never made such a concession; to the contrary, she has flatly denied disabling the smoke detectors. Moreover, if Beverly employed RPL § 232–c, it would mean that Beverly must waive important rights under both the lease and under the Section 8 voucher program of the Housing Act of 1937 (42 U.S.C.§ 1437 ). There is no basis for the court to conclude that Beverly intended to waive her rights either under the lease or Section 8. Thus, RPL § 232–c is inapplicable here.
Before reaching the consequences of extending Beverly's right to possession, it is necessary to define the circumstances which gave rise to the holdover action. This is not a case where the lease agreement had run its course and the tenant was staying beyond the agreed upon term of the tenancy. Rather, RHA is prosecuting its case under a theory of a conditional limitation. That is, based upon Beverly's breach of the lease, RHA served her with a notice fixing a time after the lapse of which the lease would expire (exhibit 1 at ¶ 20). Thus, in this case, the notice of the breach meant that the lease expired on December 15 (exhibit A) as opposed to the breach terminating the lease at the time of occurrence of the breach (i.e., on November 3 when the smoke detectors were found disabled) (see Maia v. Castro , 139 Misc.2d 312, 527 N.Y.S.2d 154 [Nassau County Dist. Ct. 1988] ). Given the posture of the case, the court finds that the ramifications of RHA's accepting December's rent are twofold. First, since the acceptance of the rent meant that Beverly had the right to possess the apartment until December 31, 2017 and since the holdover proceeding was commenced before that date, the proceeding was commenced prematurely (see Trivell v. Arnold , 39 Misc.2d 422, 240 N.Y.S.2d 545 [Civ. Ct., N.Y. County 1963] [concluding that holdover proceeding was premature when tenant had right to possession at the time the petition was brought] ).
Significantly, the landlord could have chosen any date for the expiration of the lease that was more than 30 days after RHA served Beverly with the notice of termination. RHA picked December 15, 2017 for the expiration of the lease, but RHA could have notified Beverly it was terminating the lease at some later date.
Second, although RHA had served Beverly with a notice of termination ending her lease on December 15, 2017, accepting December's rent and allowing the tenant possession of the apartment beyond December 15 was an act inconsistent with the notice. This inconsistent act renders the conditional limitation of the lease created by the notice no longer operative. Consequently, the termination notice (exhibit A) has become void. Therefore, the petition is void ab initio and Beverly is restored to her lease as if this proceeding had never been commenced.
The last question in the case is whether the dismissal of the petition should be with or without prejudice. In other words, should RHA be permitted to file a new holdover proceeding based upon a new notice of termination. The parties have cited conflicting authorities (compare B.G. Smith Real Estate v. Byrne , 3 Misc.2d 559, 112 N.Y.S.2d 893 [App. Term, 1st Dept., 1952] [holding "[t]he acceptance of rent after giving notice of termination of tenancy pursuant to a conditional limitation clause in a lease and before the institution of summary proceedings waives the alleged breach and the tenant is not holding over without the permission of the landlord"] with Culhane v. Patterson , 54 Misc.3d 10, 13, 43 N.Y.S.3d 663 [App. Term, 2d Dept., 2d, 11th & 13th Jud. Dists. 2016] [holding that since "the first proceeding was a nullity, they cannot now be heard to assert the existence of that [prior] proceeding to bar the maintenance of the instant proceeding"] ).
The proper doctrine to resolve the issue is the doctrine of waiver. Waiver is the intentional and voluntary relinquishment of a legal right which, but for the waiver, would have been enforceable. Contractual rights may be waived if they are knowingly, voluntarily and intentionally abandoned ( Nassau Trust Co. v. Montrose Concrete Prods. Corp. , 56 N.Y.2d 175, 184, 451 N.Y.S.2d 663, 436 N.E.2d 1265 [1982] ). Such abandonment "may be established by affirmative conduct or by failure to act so as to evince an intent not to claim a purported advantage" ( General Motors Acceptance Corp. v. Clifton—Fine Cent. School Dist., 85 N.Y.2d 232, 236, 623 N.Y.S.2d 821, 647 N.E.2d 1329 [1995] ). While the RHA's Board gave Mooney authority to accept rent, it never gave her the power to waive contractual rights. Here, the evidence establishes that RHA had no intention at any time to waive a breach of the lease. Therefore, the court dismisses the petition without prejudice for RHA to file a new notice of termination (if it should so choose).
The foregoing constitutes the Order of the Court.