Gellis v Marshak

[*1] Gellis v Marshak 2007 NY Slip Op 51911(U) [17 Misc 3d 128(A)] Decided on October 5, 2007 Appellate Term, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on October 5, 2007
APPELLATE TERM OF THE SUPREME COURT, FIRST DEPARTMENT
PRESENT: McCOOE, J.P., SCHOENFELD, HEITLER, JJ
570076/07.

Denise Gellis and Arlene Gail Schneiderman, -Appellants- Cross-Respondents,

against

Harvey Marshak, Defendant-Respondent- Cross-Appellant.

Plaintiffs appeal and defendant cross appeals from 1) a judgment of the Civil Court of the City of New York, New York County (Eileen A. Rakower, J.), entered May 17, 2006, in favor of defendant in the principal sum of $71,646; and 2) an order (same court and Judge), dated December 20, 2005, which granted defendant partial summary judgment on his first counterclaim and denied plaintiff's cross motion for summary judgment. Plaintiffs further appeal from an order (same court and Judge), dated March 3, 2006, which granted their motion for reargument to the extent of reducing the amount of the judgment.

Per Curiam.

Judgment (Eileen A. Rakower, J.), entered May 17, 2006, reversed, with $25 costs, defendant's motion for summary judgment denied, plaintiffs' cross motion for summary judgment granted to the extent of striking those portions of defendant's first counterclaim seeking recovery of liquidated damages under Article 41 of the parties' sublease agreement and attorneys' fees pursuant Article 45 of the sublease, and matter remanded for further proceedings. Appeal from orders (Eileen A. Rakower, J.) dated December 20, 2005 and March 3, 2006, dismissed, without costs, as subsumed in the appeal from the judgment.

Article 41 of the parties' short-term residential sublease, providing for an increase in plaintiff-tenants' monthly rent from $8,000 to $24,000 in the event that they held over after the expiration of the sublease term, constitutes an unenforceable penalty. As of the commencement date of the sublease, the parties could not reasonably have believed that the stipulated sum would be fair compensation for plaintiffs' failure to timely surrender possession, and thus the true purpose of the provision was to secure performance "by the compulsion of the very disproportionate" (Truck Rent-A-Center v Puritan Farms 2nd Inc., 41 NY2d 420, 424 [1977]), "rather than to provide a reasonable assessment of probable damages" (Motichka v Cody, 5 [*2]AD3d 185, 187 [2004]). The amount of actual damages sustained by defendant as a result of plaintiffs' breach of the sublease agreement is easily ascertainable, providing further support for the conclusion that the damages clause is a penalty (see Quaker Oats Co. v Reilly, 274 AD2d 565 [2000]).

We find issues of fact precluding summary judgment on defendant's conversion counterclaim. Finally, we agree that paragraph 45(c) of the governing sublease agreement - limiting defendant's right to attorneys' fees to certain actions or proceeding "instituted" by defendant - provides no basis for defendant's recovery of attorneys' fees incurred in defending the prior holdover proceeding commenced by the over-landlord.

THIS CONSTITUTES THE DECISION AND ORDER OF THE COURT.
Decision Date: October 5, 2007