City of New York v Schmitt

[*1] City of New York v Schmitt 2006 NY Slip Op 50811(U) [11 Misc 3d 145(A)] Decided on May 1, 2006 Appellate Term, Second 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 May 1, 2006
SUPREME COURT OF THE STATE OF NEW YORK
APPELLATE TERM: 2nd and 11th JUDICIAL DISTRICTS
PRESENT:: PESCE, P.J., WESTON PATTERSON and RIOS, JJ
2005-39 Q C. NO. 2005-40 Q C

The City of New York, Appellant,

against

Adele Schmitt, JOHN SCHMITT AND ADAM SCHMITT, d/b/a CHANNEL MARINE SALES SUZUCKI AND SCHMITT'S MARINA AND ADAM SCHMITT d/b/a ADAMS FISHING STATION, CHANNEL MARINE SALES, INC., Respondents. THE CITY OF NEW YORK, Appellant, ADELE SCHMITT, JOHN SCHMITT AND ADAM SCHMITT, d/b/a CHANNEL MARINE SALES SUZUCKI AND SCHMITT'S MARINA AND ADAM SCHMITT d/b/a ADAMS FISHING STATION, CHANNEL MARINE SALES, INC., Respondents.

On the court's own motion, appeals consolidated for purposes of disposition.

Appeals dismissed insofar as asserted against respondent Adele Schmitt on the ground that said respondent died before the commencement of the proceeding, and the petition is dismissed insofar as purportedly asserted against that respondent.

Order (No. 2005-39 Q C), insofar as appealed from and insofar as reviewed, reversed without costs, that branch of petitioner's motion seeking summary judgment granted, and matter remanded to the court below for the entry of a final judgment awarding petitioner possession of the leasehold premises and use and occupancy in the amount of $229 per month from February 1, 2003.

Order (No. 2005-40 Q C), insofar as appealed from and insofar as reviewed, modified by providing that the branch of petitioner's motion seeking summary judgment is granted to the extent of awarding petitioner possession of the squatter premises and use and occupancy at the rate of $1,771 per month for the period beginning February 1, 2003, petitioner's claim for use and occupancy for the period prior to March 6, 2000 is dismissed, and matter remanded to the court below for entry of a final judgment accordingly; as so modified, affirmed without costs.

Petitioner, the City of New York, commenced a commercial holdover proceeding and a squatter proceeding against respondents, the owners and operators of a marina and associated facilities, in May 2003. In the holdover petition (2005-39 Q C), the City alleged that it was the owner of the lot on which respondents' premises were located, an otherwise undeveloped area in Broad Channel. In 1962, the City entered into a lease with respondent Adele Schmitt, for a one-month term (superseding a previous lease between the parties). Respondents remained in possession after the one-month lease expired, and have continued to tender, and the City has continued to accept, the rent called for therein. The City raised the rent from time to time, and, at the time of the petition, the rent was set at $229 per month. [*2]

In the squatter petition (2005-40 Q C), the City alleged that respondents' operations have spilled over onto adjoining land that was not part of the original leasehold. It further alleged that, in a federal court order of March 6, 2000, respondents were directed to pay $2,000 per month, representing use and occupancy of the holdover and squatter premises, $1,771 of which was attributable to the latter, and that they continued to pay this amount in compliance with the federal court order up to the commencement of the squatter proceeding. (Although the payments were ordered as a condition of a stay pending appeal, and the appeal was determined by order dated January 23, 2002 [United States v Schmitt, 28 Fed Appx 63 (2d Cir 2002)], respondents raise no contention that their continued payment after January 2002 and the City's acceptance of their payments created a tenancy in the squatter premises).

Respondents moved to dismiss both proceedings on the sole ground that respondent Adele Schmitt was deceased and the proceedings were therefore improperly commenced. The City opposed the motion, and it was denied, the court (Stephen S. Gottlieb, J.) holding that all of the appropriate respondents had been made parties and that Adele Schmitt (and by extension, her estate's representative) was not a necessary party. Respondents did not appeal this determination in either proceeding, and we do not here review it, but we note that Adele Schmitt sold her interest in the business in 1965. However, inasmuch as Adele Schmitt was deceased prior to the commencement of the proceedings, the court should properly have dismissed the proceedings as against her, and we do so now.
Respondents answered in both proceedings, asserting affirmative defenses including lack of personal jurisdiction over respondent Adam Schmitt, due to alleged failure to serve the petition and notice of petition in accordance with RPAPL 735, and that the proceedings were barred by laches and estoppel. In the squatter proceeding, respondents also alleged that they had occupied and possessed the additional area involved therein adversely to the City's alleged ownership for approximately 60 years, and that all the elements required to find adverse possession were established.

Respondents again moved to dismiss both proceedings based upon the affirmative defense of lack of personal jurisdiction, alleging that Adam Schmitt resides in Rhode Island and that the notices of petition and petitions were not properly served upon him. The City cross-moved in both proceedings to strike the affirmative defenses and for summary judgment, both as to possession and as to the money claimed in each proceeding. In an affirmation, counsel argued that, through the extensive prior litigation, particularly the federal action, "all issues as to legal title to the Premises and the Squatter Premises, and all claims to the legal status of respondents' occupancy thereof, have been fully and fairly litigated, and have been finally determined." This contention forms the basis for the arguments raised by both sides on appeal.

The court below denied both sides' motions in each proceeding in essentially identical orders, finding that respondents had failed to raise their present ground for dismissal in their pre-answer motion and had subsequently appeared and answered (a determination from which respondents did not appeal), and, as pertinent hereto, that triable issues of fact existed as to respondents' affirmative defenses of adverse possession and laches. (Notably, however, respondents did not assert an adverse- possession defense in the holdover proceeding.) The present appeals by the City of New York followed.

The history of the prior litigation alluded to above, as pertinent hereto, is as follows. The [*3]City attempted to evict respondents in 1990 when it allegedly discovered that they had unlawfully entered onto City-owned adjoining land. Respondents commenced a declaratory judgment action in Supreme Court, Queens County to void the notices and compel sale of the property to them, and obtained an injunction staying their eviction. The action was converted into a CPLR article 78 proceeding, the portion of it that sought a writ of mandamus to compel sale of the land was dismissed, and the parties stipulated to transfer the proceeding to federal court and consolidate it with a pending action by the United States against respondents alleging trespass onto lands that had been conveyed to the federal government as part of the Gateway National Recreation Area, and environmental damage.

The respondents herein had previously impleaded the City into the federal action, seeking a declaratory judgment that they were lawfully leasing the property they occupied and that they had a right to purchase the property, as well as a redefinition of the property included in the transfer from the City to the federal government to form the Gateway National Recreation Area and a declaration that their own holdings formed no part of that transfer. The City had interposed counterclaims for use and occupancy, for [*4]
an order that the property be restored to its original condition and any damage from its occupancy be remedied, and a judgment restoring the City to possession.

While the federal action was being tried, respondents commenced another article 78 proceeding in Queens County Supreme Court. This proceeding challenged the City's failure to sell the leased and/or squatter premises to them pursuant to Chapter 239, Laws of 1995. This proceeding was also removed to federal court and consolidated with the pending third-party action.

The federal trial, which included extensive testimony taken over the course of nearly a decade, resulted in a lengthy decision rendered on March 31, 1998 (United States v Schmitt, 999 F Supp 317 [ED NY 1998]). The court (Arthur D. Spatt, J.) made a number of findings pertinent to the present proceedings in light of the res judicata arguments presented herein. First, the court concluded that the City official in charge of conveying land in Broad Channel to its then-tenants made a rationally based determination that the marina property should not be sold to respondents "based on the Schmitt Marina's DEC violations, [an] inaccurate survey, the inability to define the actual boundary of the Schmitt Marina, and the resulting inability to agree on price" (999 F Supp at 341-342). Second, the court found that in 1989, this official recommended that respondents' tenancy be terminated, also due to environmental violations, as well as the expansion of the marina onto other City land and into the Gateway National Recreation Area (id. at 341), and noted that respondents had been warned that they were conducting unauthorized activities on City land at least since 1983 (id. at 345). The court also found that "the only clear delineation of the boundaries of the Schmitt Marina are [sic] in the original City leases which describe the property as at the foot of West 20th Road and 200' x 200' in area" (id.).

The court further found that during the 1960s and 1970s, the City's Real Estate Manager, Edward Smith, who later pleaded guilty to corruption charges in a City disciplinary proceeding, permitted the Schmitts to extend their operations onto approximately 600,000 square feet for a rental of $150 to $299 per month "without valid authority by the City" (id. at 349). The court found that all of the leasehold agreements established a 200 by 200 foot, or 40,000 square foot, area as the sole leasehold, and that there was "no. . . support for the Schmitts' claim of a 600,000 plus square foot [*5]
marina" (id. at 350). Citing a City report that stated that the subject property "comprises 506,089 square feet," the court noted that: "[t]here is much confusion in the City records with regard to the area actually occupied by the Schmitts as differentiated by [sic] the area actually leased to them. This additional area occupied by the Schmitts is the source of the problem. This additional space was never validly leased to the Schmitts. The marina lease was for 40,000 square feet only. The Schmitts occupied the additional massive space without permission and they did so at their own peril" (id. at 355-356).

The court found that "the Schmitts' contention that their 40,000 square foot leasehold has been extended to more than 600,000 square feet by after-the-fact letters and oral representations by City officials. . . is without merit" (id. at 359). It stated: "As a result of a combination of inefficiency, bureaucratic morass and corruption on the part of the City employees and agents, coupled with aggressive trespasses and takings by the Schmitts, [they] substantially increased the size of their marina at Broad Channel from the validly leased 200' by 200' or 40,000 square feet to approximately 600,000 square feet. This represents an increase in their leased property 15 times the original area. The Court concludes that this occupation of the increased land and water was unauthorized" (id. at 360).

The court noted that the Schmitts' cause of action in their third-party complaint against the City, sounding in adverse possession, had been withdrawn. It rejected the remainder of the Schmitts' third-party claims.

On the City's counterclaims, the District Court ruled that the respondents herein and the City had a landlord-tenant relationship "as to the written leasehold, namely the 40,000 square feet at the foot of West 20th Road. The acceptance of rent under the terms of the written lease did not create a new lease, one of claimed 600,000 square feet." The court found that "there was no intentional waiver by the City of the right to contest the Schmitts' improperly occupied additional land" (id. at 371-372). However, it rejected the City's claim for use and occupancy for the additional land because it found that no credible evidence of its rental value had been submitted. The amount of use and occupancy, $2,000, representing both the $229 rent amount on the leasehold parcel and $1,771 in use and occupancy for the squatter premises, was set in a later order, dated March 6, 2000.

The court determined remedies, as pertinent hereto, as follows: "1. The Schmitts have the right to maintain possession of the 200' by 200' 40,000 square foot piece of land at the foot of West 20th Road, until the City properly acts to evict, if desired.2. The City and the Schmitts are directed to survey this 40,000 square foot piece [*6]of land so as to delineate and firmly fix the boundaries. . . .3. The Schmitts are to vacate all the other property in Broad Channel presently occupied by them or as the Schmitt Marina, except as to Dock A and the adjoining dock, within sixty days of the date of this decision.4. The Schmitts have the right to use Dock A and the smaller adjacent dock.5. The Schmitts are not to place, use or maintain any other docks, mooring buoys or piles in the Cove."

Paragraph 3 of the above, ordering the Schmitts to vacate all occupied property beyond the original 200 foot by 200 foot leasehold, was stayed pending their appeal to the Court of Appeals for the Second Circuit. The Second Circuit affirmed the District [*7]
Court (28 Fed Appx 63, supra). Subsequently, the City commenced the instant summary proceedings.

The issue of the nature of respondents' occupancy of the leasehold and squatter parcels was fully and fairly litigated in the course of the prior federal District Court action (see United States v Schmitt, 999 F Supp 317 [SD NY 1998]), which determined that respondents were tenants of the leasehold parcel and that their entry onto the remainder of the area occupied by them, the subject of the squatter proceeding herein, was "unauthorized" (id. at 360). The issue of the parties' rights to the property was squarely before the federal court in the third-party action that the Schmitts commenced against the City with permission of the court. In that action, the Schmitts specifically sought a declaration that they were lawfully leasing the property at issue and had a right to purchase it from the City (see id. at 327). They also alleged that they held the property by adverse possession, but withdrew this cause of action and elected to pursue relief based upon the theory that their occupation of the subject premises was permissive, as tenants, and that respondents had expanded their operations with the apparent permission of the City of New York.

The New York approach to res judicata is transactional, and "once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or seeking a different remedy" (O'Brien v City of Syracuse, 54 NY2d 353, 357 [1981]; see also Matter of Hunter, 4 NY3d 260 [2005]). Whether respondents herein chose to advance a leasehold theory or an adverse-possession theory, their central contention has been that their presence on the land is authorized, either because they were legitimate tenants, their argument in the federal action, or because they are the rightful owners of the property through adverse possession, the argument that they withdrew in the federal action and that they now advance as a defense to the present squatter proceeding (see generally Hyman v Hillelson, 55 NY2d 624 [1981]). The contention that respondents' presence on the land was authorized was adjudicated in the federal action, which found them to be legitimate tenants of the leasehold premises and to have entered and occupied the squatter premises without authorization, and that adjudication has taken final form. [*8]

Although the District Court found that respondents had entered upon the squatter premises without the City's permission and "at their own peril" (see United States v Schmitt, 999 F Supp 2d at 355-356), it is clear from the foregoing that in their legal posture vis-a-vis the City, respondents made no "distinct assertion of a right hostile to the owner and brought home to [it]" (Perez v Perez, 228 AD2d 661 [1996]) until they raised adverse possession as an affirmative defense in the present proceedings, in 2003. By dropping their adverse possession claims in Queens County Supreme Court and in the federal action, and by maintaining at all times in the federal action that they were tenants of the entire premises occupied at that time, respondents wedded themselves to this non-adverse theory of their entitlement to occupy the premises. Under such circumstances, a claim of adverse possession cannot be maintained because the elements of hostility to the record owner's rights and a claim of right to title by the possessor cannot be established (see e.g. Solow v Liebman, 253 AD2d 808 [1998]; Gallea v Hess Realty Corp., 128 AD2d 274 [1987], affd 71 NY2d 999 [1988]). [*9]

The City established, based upon its verified pleadings and the decision in the prior federal action (see United States v Schmitt, 999 F Supp at 361), that respondents are month-to-month tenants of the City in the leasehold premises, that the required 30-day notice of termination was served, and that respondents failed to vacate the premises. This is all that is required pursuant to RPAPL 711 (1) and Real Property Law
§ 232-a and, as respondents have failed to rebut these assertions, the City is entitled to a final judgment of possession as to the leasehold premises, as well as use and occupancy, which it has requested in the amount of the former rent.

Likewise, the City has demonstrated its entitlement to a final judgment of possession of the squatter premises (see RPAPL 713). Occupation of such premises is, as the District Court noted, at the occupant's peril (see United States v Schmitt, 999 F Supp at 355-356; Morillo v New York, 178 AD2d 7 [1992]), and the issue of the legitimacy of respondents' occupancy of the squatter premises was fully and fairly litigated, and resolved against them in the prior federal action through the vehicle of respondents' third-party complaint against the City in that action. In the federal action, the City was awarded use and occupancy for the squatter premises equivalent to $1,771 per month, which respondents paid up to the commencement of the present proceeding. Therefore, an award in that amount from February 2003 is appropriate. The City's application for use and occupancy for the period prior to the March 6, 2000 District Court order is denied, as that issue was fully litigated and determined against the City in the federal action (United States v Schmitt, 999 F Supp at 371-372).

Respondents' assertion that the holdover proceeding is barred by laches is without merit, inasmuch as, inter alia, the tenancy in the leasehold premises continued
through January 2003. Moreover, as to both proceedings, respondents' bare assertions that delay by the City in commencing the proceedings was unreasonable and has operated to their detriment are insufficient to establish these elements of laches (see generally Saratoga County Chamber of Commerce v Pataki, 100 NY2d 801, 816 [2003]). In addition, from the standpoint of their ability to make a profit from their commercial operations, delay in bringing the proceedings actually accrued to their benefit (id.). Nor did they attempt to demonstrate any actual financial loss.

Although respondents repeatedly protest that they are being deprived of land and livelihood without a trial, it must be noted that litigation concerning their occupancy of the premises in question as well as the legality of their marina operations has gone on in state and federal court since approximately 1990. In addition, it was their own motion practice in these summary proceedings (in which the making of motions is generally discouraged in favor of a prompt trial) that provided the opportunity for the present matter to be decided on papers rather than at trial. A motion for summary judgment lays bare the parties' proof and is the functional equivalent of a trial (see S.J.
Capelin Assocs. v Globe Mfg. Corp., 34 NY2d 338, 341 [1974]), and where, as here, the motion is properly made and entitlement to judgment is shown, it would be wasteful of judicial resources to nevertheless demand that the matter go to trial.

Pesce, P.J., Weston Patterson and Rios, JJ., concur.
Decision Date: May 1, 2006