Scott E. Mollen

Commercial Landlord-Tenant—Fire—Tenant Alleged That Landlord Would Only Permit Tenant to Resume Occupancy If Tenant Would Renegotiate Terms of Its Lease—More Than a Year Later, With No New Agreement, Landlord Cancelled the Lease—Breach of Contract—Breach of the Covenant of Quiet Enjoyment—Interference With Contract – RPAPL 853

The plaintiff commercial tenant had signed a ten-year lease dated Oct. 1, 2011, with defendant landlord “A.” The tenant operated a laundromat. A fire occurred on July 18, 2013, in an upstairs residential unit. Electric and gas (utility) service in the building was terminated and the tenants were required to vacate the premises.

The city required “A” to make certain repairs before the building could be reoccupied and had issued violation notices (violations). The violations referred to necessary “electrical repairs,” removal of fire damaged debris and repair of certain structural problems. Although “A” applied for a permit to do “minor alterations/repairs on July 26, 2013” and a city agency (City) had issued a permit, the required repair work had not been completed. On April 15, 2014, “A” sold the building to defendant landlord “B.” Defendant “C” is the sole principal of “B.”

Shortly after “B” purchased the building, the City issued an order of condemnation dated April 25, 2014. By letter dated May 5, 2014, “B” advised the plaintiff that it was terminating the plaintiff’s lease as of July 7, 2014, pursuant to paragraph 13 of the lease.

The plaintiff alleged that “B” had thereafter suggested that “B” would permit the plaintiff to resume occupancy once the work was completed, “if plaintiff would renegotiate the terms of the lease.” More than a year later, the defendants advised the plaintiff that the defendants had “decided to cancel the lease as pursuant of its terms.” The plaintiff asserted that the cancellation followed a breakdown in negotiations with respect to new proposed lease terms.

The plaintiff had not paid rent since July 2013. At some point, the required repairs were completed. A City witness testified that after utility service had been restored and debris was removed, “the landlord could have sealed off” the fire damaged apartment, where more structural repairs were needed, and could have allowed the tenants back into the other leased units.” He further testified that the City gave the landlord “verbal permission to have other tenants return to the building….”

“Certifications of Completion” were issued by the City on Feb. 18, 2016. The plaintiff alleged that “B” thereafter leased the plaintiff’s laundromat facility to a new tenant, “including all of plaintiff’s laundromat…and equipment, and changed the locks…which prevented plaintiff from retrieving its property. The new tenant also operated a laundromat.”

The plaintiff commenced the subject action on Feb. 16, 2016, against “A” for breach of the contract for failure to “timely make repairs, breach of the covenant of quiet enjoyment, intentional interference with contract and violation of RPAPL 853.” The plaintiff sued “C,” based on a “piercing the corporate veil” theory. A judgment had been entered against “A” on default. Defendants “B” and “C” filed answers.

The plaintiff moved “for partial summary judgment as to liability against [‘B’]” on its claims for breach of the covenant of quiet enjoyment for violation of RPAPL 853. “B” and “C” moved for summary judgment dismissing the claims for breach of contract based on the failure to make timely repairs, breach of the covenant of quiet enjoyment, intentional interference with contract, violation of RPAPL 853, conversion, and the piercing of the corporate veil claim against “C.”

Essentially, the plaintiff argued that “B,” had wrongfully terminated the lease and improperly prevented the plaintiff from resuming possession of the leased premises.

The court found that the lease did “not authorize termination based on partial destruction of another part of the building, or a municipal order requiring all the tenants to vacate.” With respect to the alleged breach of the covenant of quiet enjoyment, the court explained:

“If a landlord…keeps a tenant out, the latter may sue the landlord for breach of the covenant of quiet enjoyment”.… “To make out a prima facie case…, a tenant must establish that the landlord’s conduct substantially and materially deprived the tenant of the beneficial use and enjoyment of the premises.… It may be established by either an actual or constructive eviction.… “[W]here the landlord barred the tenant from entering the premises it has been held a partial actual eviction.… Similarly, where the landlord changes the lock, or padlocks the door, there is an actual eviction”….

The plaintiff argued, inter alia, that the defendants had “purposefully elected not to make the repairs necessary for the lifting of the condemnation order in an effort to convince plaintiff to voluntarily abandon the lease or coerce plaintiff to renegotiate the terms of its lease.” The court found that the plaintiff’s claim that “B” could have completed the repairs to permit the plaintiff to reoccupy its premises, but had chosen not to, was “not established as a matter of law by the submissions.” Thus, the court denied the plaintiff’s motion for summary judgment on its claim for breach of the covenant of quiet enjoyment.

“B” had argued that the covenant of quiet enjoyment claim should be dismissed, because the plaintiff had not paid rent since July 2013. “B” contended “breaches of the covenant by the landlord are breaches of an independent covenant” and “do not exonerate a refusal or failure to pay rent.” The plaintiff countered that “the rule requiring payment of rent in order to claim breach of quiet enjoyment is limited to leases where the covenant of quiet enjoyment is expressly conditioned on payment of rent.” The plaintiff noted that “such explicit lease provisions were present” in cases cited by “B.” The court observed that other cases applying such rule did not rely on explicit lease provisions. Here, the plaintiff claimed “actual rather than constructive eviction,” it was uncontested that the plaintiff had been out of possession of the premises and there was no evidence that “A” or “B” had made a claim for continued payment of rent.

The court explained that based on the plaintiff’s “actual involuntary ouster and inability to return to its leased premises, allegedly due to defendants’ conduct and choices, the termination letter [‘B’] sent plaintiff…just…weeks after it took ownership, and [‘B’s’] apparent position that plaintiff would only be permitted to re-take possession of the leased premises upon renegotiation of the lease, defendants cannot establish as a matter of law that plaintiff is precluded from making a claim for breach of the covenant of quiet enjoyment, based on its failure to continue paying rent after its continued dispossession.” The court further noted “under the circumstances [‘B’] may have waived any such claim.” Thus, the court denied the defendants’ motions to dismiss the breach of the covenant of quiet enjoyment claim.

With respect to the plaintiff’s motion for summary judgment on its RPAPL 853 claim and the defendants’ motion for summary judgment dismissing such claim, the court observed “[i]f a person is…ejected, or put out of real property in a forcible or unlawful manner, or, after he has been put out, is…kept out by force or by putting him in fear of personal violence or by unlawful means, he is entitled to recover treble damages….”

The court found that the issue of whether “B’s” alleged keeping the plaintiff out of its leased premises constituted an “unlawful means” as contemplated by RPAPL 853, could not be determined as a matter of law based on the present record. Although the plaintiff asserted that repairs were completed well in advance of “B’s” efforts to have the condemnation order lifted, the plaintiff had not provided clear evidence establishing that assertion as a matter of law. Thus, the court was “unable to determine…whether [‘B’s’] manner of purportedly terminating the lease amounted to ‘unlawful means’ of ousting plaintiff under RPAPL 853.” The court noted that “[a]lthough termination was not authorized by the lease, mere erroneous reliance on paragraph 13, in itself, does not establish ouster by ‘unlawful means’ as a matter of law.” There was also “a question of fact as to exactly when the cause of action accrued for purposes of determining whether the claim was timely made within the applicable one year limitations period….” The moment when “B” denied plaintiff’s right to return was “currently unclear: while there was a termination letter dated May 5, 2014, there is evidence of subsequent negotiations, as well as a later termination letter of Dec. 10, 2015, which support, but do not require, a determination that the May 5, 2014 letter was implicitly rescinded.” Thus, the court denied each motion for summary judgment as to RPAPL 853.

With respect to the landlord’s alleged failure to make timely repairs, the defendants argued that “the lease did not require it to make any repairs to the leased premises; the only lease provisions concerning repairs related to the building roof, walls and foundation.” The defendants also noted that “the lease did not require the landlord to provide [utility] service.” The court explained that the plaintiff’s claim was not that defendants failed to comply with a lease requirement to make repairs. Rather, the plaintiff argued that the defendant was obligated under the lease “to make the repairs required by the City’s violation notices within a reasonable period of time so that the condemnation order could be lifted and the tenants restored to possession.” The court held that this presented “an issue of fact requiring the denial of defendants’ motion for summary judgment.”

Additionally, the plaintiff had alleged that “B” and “C” “intentionally interfered with plaintiff’s contract with [‘A’].” The court dismissed this claim, since “[‘B’] simply undertook [‘A’s’] contractual obligations, and there is no basis for a claim that [‘B’] or [‘C’] did something to prevent [‘A’] from making repairs he would otherwise have made.” The plaintiff also alleged that “C” may have interfered with the plaintiff’s contract with “B.” In rejecting that argument, the court state that “C” made decisions on behalf of “B” and if “[‘C’] induced [‘B’] to breach its contract with plaintiff, he did so as [‘B’s’] representative, not as a separate entity.”

The court sustained the conversion claim based on the allegation that the defendants locked the plaintiff out of the premises and prevented it from retrieving its machinery and equipment. Finally, the court stated that New York did “not recognize a separate cause of action to pierce the corporate veil” and dismissed that claim. However, the court noted that those allegations would remain part of the complaint as “an assertion of…circumstances which [may] persuade the court to impose the corporate obligation on its owner[].”

Wheeler Ave. Laundry v. Modern Yonkers Realty, Sup. Ct. Westchester Co., Index No. 51931/2016, decided Nov. 1, 2017, Ruderman, J.

 

Landlord-Tenant—Contempt For Failure to Make Required Repairs—Landlord Claimed Tenant Intentionally Damaged the Apartment—Landlord’s Assertions Were Incredible, Unproven and Speculative—Civil Penalties of $33,515 Awarded—Conduct Also Constituted Harassment

A tenant moved to hold a landlord in contempt of court based on the landlord’s alleged failure to comply with the court’s prior order to correct all Class B and Class A violations of the Housing Maintenance Code. The Class B violations involved “hazardous conditions, infestation of mice;…broken defective surfaces and doors of…cabinets; broken, defective…floor tiles;…non-functioning refrigerator; defective plaster and paint; leak and…water damage . . .; and repair broken, defective floor tiles,” as well as conditions in the building’s common areas, e.g., an “unsecured entrance door,” “non-functioning bell/buzzer system, and dirty hallways….” The tenant sought a finding of contempt, civil penalties and imprisonment.

At a hearing, the tenant produced, inter alia, photographs, prior rent reduction orders issued by the NYS Division of Housing and Community Renewal (DHCR) based on reduction of services, DHCR orders requiring the landlord to offer the tenant a renewal lease and two holdover cases brought against the tenant, both of which had been discontinued. The tenant had testified “credibly” that the landlord had “been offered numerous opportunities to repair conditions in his apartment, but refused to do so.” The tenant asserted that only after “the trial had commenced,” the landlord corrected “the years-long leak at the front bedroom ceiling and the entrance door to the apartment.” The tenant also noted that a landlord employee tried to repair “a broken bathroom door, but it quickly fell off its hinges.” The tenant further asserted that the landlord had sued him twice to acquire possession of the apartment and both cases lacked merit. The landlord had discontinued one case with prejudice.

The landlord testified that he is “rarely at the building and the super is in charge.” The landlord claimed that the tenant “intentionally” caused damage in his apartment, the tenant “illegally operates a nightclub out of his apartment causing excessive wear and tear in violation of the lease” and that HPD had not removed violations after repairs had been made.

The court found that the landlord’s defenses were “incredible and unproven” and his allegations that the tenant intentionally caused damage to the apartment were “purely speculative.” The landlord claimed that the tenant was “purposely allowing [sewage] to pour into the basement….” The landlord asserted that the tenant set up a “water gun to spray water at the ceiling in the bathroom to cause the leak and the damage based upon finding a water gun in the tub once.” The landlord testified that the tenant “hits the walls with a hammer and possibly burns them to cause damage to the paint and plaster.” The landlord noted that the walls “look black under missing/defective paint and the apartment was never painted black.” The only evidence of the purported nightclub, were “grainy video stills from 2012.” The video did “not definitively show anyone coming from or going into [the tenant’s] apartment.”

The court found that the landlord’s testimony lacked credibility. His testimony was “often rambling, evasive and non-responsive” and there was “[n]ot one piece of evidence regarding a single repair allegedly made in this apartment….”

The court awarded the NYC Department of Housing Preservation and Development (HPD) “a civil penalties judgment in the amount of $33,515,” based on a failure to correct the Class B violations. The court held that the testimony also established “a claim of harassment.” The aforementioned civil penalties include $5,000 for harassment pursuant to NYC Admin. Code §§ 27-2005(d) and 27-2004(a)(48). The court also ordered the landlord “to repair all violations of record and to immediately cease all behavior which constitutes harassment under the NYC Administrative Code.” The court directed the landlord “to make all necessary repairs within 30 days of first access” and specified that access was to be arranged through the tenant’s counsel, “providing at least 48 hours’ notice.” Access had to be between regular business hours, i.e., 8 a.m.—6 p.m., Monday through Friday, unless the parties agreed otherwise. The court further directed that “[w]orkers shall arrive at the apartment by 11 a.m., with materials and ready to work” and that “[w]orkers shall work in a professional manner and leave premises clean and useable at the end of the work day.” The court required the tenant to “prepare work areas in advance of worker’s arrival,” and directed that “workers shall take care to avoid damage to [tenant’s] personal property.”

Additionally, the court directed that common area conditions be corrected within 30 days of service of the court’s order. The court further warned that a failure “to complete, or substantially complete, repairs as directed, is grounds for additional contempt sanctions and civil penalties.”

The tenant had “no interest in [the landlord] going to jail, given his advanced age and poor health.” The court shared the tenant’s concern, but noted “the violations represent a danger to his health and safety and require correction.” Therefore, the court stated that a “continued failure to repair violations, shall be grounds for [tenant] to make, or cause to be made, all necessary repairs and to seek reimbursement for the reasonable cost of repairs.” The court stated that “[t]his is [the landlord’s] last opportunity to make the repairs on his terms.”

Finally, the court noted that the subject decision was without prejudice “to DHPD’s comprehensive proceeding” and that “[a]ny civil penalties awarded…shall be deducted from the final award” in DHPD’s comprehensive proceeding, where appropriate.

Pinchback v. Foreman, Civ. Ct., Kings Co., Index No. 3178/16, decided Nov. 13, 2017, Chinea, J.

Scott E. Mollen is a partner at Herrick, Feinstein and an adjunct professor at St. John’s University School of Law.