Nick & Duke LLC v John Hollings Inc.
Annotate this CaseDecided on January 4, 2006
Civil Court, New York County
Nick & Duke LLC, Petitioner (Landlord),
against
John Hollings Inc., Respondent (Tenant), THE CHELSEA INN CORP., d/b/a CHELSEA INN, MY FIVE GRANDCHILDREN REST. CORP., d/b/a PRIVILEGE, APPLE RADIATOR & BODY SHOP a/k/a APPLE AUTO GROUP, INC., VISTA MEDIA a/k/a VISTA MEDIA GROUP a/k/a VISTA MEDIA GROUP OF NEW YORK INC., "JOHN DOE," and "JANE DOE," Respondents (Undertenants).
89587/05
Barbara Jaffe, J.
By notice of motion dated November 28, 2005, respondents John Hollings Inc. (Hollings) and My Five Grandchildren Rest. Corp. d/b/a Privilege (My Five Grandchildren) move pursuant to CPLR 3211 for an order consolidating their prior motion to dismiss and amended motion to amend their answer to add an affirmative defense, and upon such consolidation and granting of the motion to amend, granting them pursuant to CPLR 3212 summary judgment dismissing the petition. Petitioner opposes the motion and cross-moves pursuant to CPLR 3212 for an order striking respondents' affirmative defenses, granting it a final judgment of possession, and severing and setting down for a hearing the issue of the amount of use and occupancy and attorney fees to which it is entitled. For the following reasons, respondents' motion for summary judgment is denied and petitioner's motion is granted in part and denied in part.
I. ANALYSIS
A. Motions for Summary Judgment
1. Service of notices (first affirmative defense)
Respondents argue that the default notice and the notice of termination served by petitioner violated the terms of the parties' lease as neither notice provided them with 10 days within which to respond. Contending that such predicate notices are given upon delivery and not upon mailing, respondents complain that they received less than 10 days' notice. They also argue [*2]that pursuant to ATM One, LLC v Landaverde, 2 NY3d 472 (2004), an extra five days must be added onto the 10-day period within which they were required to respond.
A lease provision which specifically provides for the method of service of notices between parties is enforceable. (Chumley's Bar and Rest. Corp. v Bedford Ct. Assoc., 174 AD2d 398, 400 [1st Dept 1991]). In the absence of such a provision, a notice is deemed given on the date of its receipt. (Rocket 18 Parking Corp. v Citivan Enterprises Corp., NYLJ, Feb. 28, 2001, at 20, col 4 [Civ Ct, New York County]; Grabino v Howard Stores Corp., 110 Misc 2d 591, 593-594 [Civ Ct, Kings County 1981]).
Here, the parties agreed in paragraph 22 of the lease that all notices "shall be deemed to have been given at the time when so mailed" (Affidavit of Gurdayal P. Kohly, dated Nov. 16, 2005 [Kohly Affid.], Exh. B), and it is undisputed that the default notice was mailed on February 1, 2005 and required a cure by February 11, 2005, and that the notice of termination was mailed on February 12, 2005 and provided for termination on February 22, 2005. Thus, respondents were afforded the requisite 10-days' notice for both predicate notices.
Contrary to respondent's argument, in Landaverde, the Court of Appeals limited its requirement that five days be added to all mailed notices to cure to tenants who are subject to the Emergency Tenant Protection Act (ETPA). In so holding, the Court relied upon the policies and intent underlying the ETPA regulations, and observed that its adoption of the five-day mailing rule "balanc[es] the need for orderly and efficient resolution of lease violations with the stated legislative purposes of the ETPA." (2 NY3d at 478). Given the absence of such considerations in a commercial setting, Landaverde is inapplicable here. (See e.g. West Bushwick N.R.P. Assoc. L.P. v Bushwick Coop. Fed. Credit Union, NYLJ, Nov. 18, 2005, at 24, col 1 [Civ Ct, Kings County] [court declined to extend Landaverde holding to commercial holdover proceeding]).
2. Defective notice of termination (second affirmative defense)
Respondents contend that the court lacks subject matter jurisdiction as the notice of termination served on them does not contain unequivocal advice that a "summary proceeding WILL be commenced." (Affirmation of Domenick Napoletano, Esq., dated Oct. 24, 2005 [Napoletano Aff.], ¶¶ 14-15).
A valid predicate notice is a condition precedent to the maintenance of a summary holdover proceeding (Chinatown Apts. v Chu Cho Lam, 51 NY2d 786 [1980]), and any defects in a predicate notice are not amendable. (Id.). The purpose of a notice to cure is to apprise the tenant of its alleged defaults under the lease and of the forfeiture and termination of the lease if the defaults are not cured within a specific time period. (Filmtrucks, Inc. v Express Industries and Terminal Corp., 127 AD2d 509, 510 [1st Dept 1987]). Predicate notices must therefore be "clear, unambiguous and unequivocal." (Ellivkroy Realty Corp. v HDP 86 Sponsor Corp., 162 AD2d 238 [1st Dept 1990] [notices to cure]); Saab Enterprises, Inc. v Bell, 198 AD2d 342 [2d Dept 1993], lv denied 83 NY2d 756 [1994] [termination notices]). The standard against which the sufficiency of predicate notices is measured is "reasonableness in view of the attendant circumstances." (D.K. Property, Inc. v Mekong Restaurant Corp., 187 Misc 2d 610, 612 [App Term, 1st Dept 2001]).
Here, the default notice provides that upon respondents' failure to timely cure, petitioner "shall enforce its further rights under paragraph 14 of the Lease." (Kohly Affid., Exh. D). The notice of termination provides that pursuant to paragraph 14 of the Lease, upon respondents' [*3]failure to timely cure, the lease will terminate on February 22, 2005, respondents will quit and surrender the premises, and petitioner "shall enforce its rights as provided in the lease, including without limitation, the right to re-enter the Premises and to remove all persons and personal property therefrom either by summary dispossess proceedings, or by any suitable action or proceeding at law or in equity, or by force or otherwise . . ." (Id., Exh. E). Paragraph 14 of the lease contains specific terms upon which petitioner can terminate the lease and recover the premises from respondents.
As each notice referenced paragraph 14, it sufficiently apprised respondents of the legal consequences of their failure to act. (See One Main, LLC v Le K Restaurant Corp., 1 AD3d 365 [2d Dept 2003] [notice to cure found valid where it stated that unless tenant timely cured breach, landlord "shall be entitled to resort to the full battery of rights and remedies available under the Lease."]). Thus, neither predicate notice is defective.
3. Defective service (third affirmative defense)
Respondents argue that service of the notice of petition and petition upon them was defective, as they were not served pursuant to RPAPL 735 and CPLR 311 and that no one authorized to accept service on their behalf was served. Respondent Hollings claims that only its president and vice president are authorized to accept service on its behalf. Respondent My Five Grandchildren alleges that it was informed that a copy of the notice of petition and petition was retrieved by an employee who found it on a bar counter at the premises and the employee then gave it to the manager to give to respondents' attorney.
Service of papers in summary proceedings is governed by RPAPL 735(1). (Manhattan Embassy Co. v Embassy Parking Corp., 164 Misc 2d 977, 978-979 [Civ Ct, New York County 1995]). The service provisions of the CPLR, including CPLR 311, do not apply to summary proceedings, and in the case of a corporate respondent, service pursuant to the RPAPL alone is sufficient without any reference to CPLR 311. (H.R. Neumann Assoc. v New Eagle, Inc., 6 Misc 3d 1027[A] [Civ Ct, Kings County 2005], citing City of New York v Wall St. Racquet Club, Inc., 136 Misc 2d 405, 407 [Civ Ct, New York County 1987]).
RPAPL 735(1) permits service by one of three methods: personal delivery, substitute service, or conspicuous place service. Personal delivery and substitute service are considered equivalent and a party may utilize substitute service without first attempting personal service. (Manhattan Embassy, 164 Misc 2d at 979). Substitute service on a corporate respondent may be effected via delivery to any person of suitable age and discretion employed at the property sought to be recovered. (RPAPL 735[1]). Thus, pursuant to RPAPL 735(1), service may be made on an ordinary employee of suitable age and discretion, rather than on a corporate representative as required by CPLR 311. (Manhattan Embassy, 164 Misc 2d at 980).
A proper affidavit of service constitutes prima facie evidence of the sufficiency of the service. (NYCTL 1998-1 Trust v Rabinowitz, 7 AD3d 459, 460 [1st Dept 2004]). A sworn non-conclusory denial of service is necessary to dispute the veracity or content of the affidavit and warrant the holding of a traverse hearing. (Id.).
Here, petitioner's affidavits of service of the notice of petition and petition on respondents indicate that the process server personally delivered the papers to and left them with Anthony Regino, "Director of Operations," with appropriate follow-up mailings, thus establishing, prima facie, proper service of the pleadings on respondents. Respondent Hollings's conclusory [*4]allegation that petitioner did not properly serve the pleadings upon it is insufficient to controvert the facts alleged in the affidavit of service. (See Hakim v Brownstein, NYLJ, July 6, 1994, at 29, col 3 [Civ Ct, New York County] [no traverse hearing warranted as respondent asserted he was not properly served and did not actually deny receipt of process]). As respondent My Five Grandchildren only submitted an affidavit from its principal containing hearsay information and did not submit a sworn statement from Regino denying receipt, it failed to raise an issue as to the sufficiency of the service upon it. (See Caddlerock Jt. Venture v Alvarez, NYLJ, Aug. 24, 1999, at 32, col 6 [SDNY] [defendant's hearsay statement that other defendant was not properly served held insufficient to support conclusion of improper service]).
4. Filing of affidavit of service (fourth affirmative defense)
Respondents allege that petitioner did not comply with RPAPL 735(2) as it failed to file the affidavits of service of the notice of petition and petition with the clerk of the court within three days after service upon respondents. Petitioner claims that the affidavits were filed with the clerk two days after the mailings to respondents of the notice of petition and petition were sent.
The original affidavits of service contained in the court file reflect that they, along with the petition, were filed with the clerk of the court on September 15, 2005, two days after the mailings were sent to respondents.
5. Ratification and equitable estoppel (fifth affirmative defense)
Respondents argue that as petitioner extended and modified their lease after it had knowledge of the violations raised in the notice of default, it ratified the violations and is thus equitably estopped from maintaining this proceeding.
The original lease between the parties expired in 1994 and the extension and modification was signed in 1997. The default notice relates to violations issued as early as 1989 and to a building destroyed by fire in 1996.
In light of the specific non-waiver clause contained in the parties' lease (see infra I.A.6), this affirmative defense must fail. (See Fashion Bug No. 1200 of Batavia, Inc. v 425 West Main Assoc. (Batavia) LP, 10 Misc 3d 1053 [A] [Sup Ct, Monroe County 2005] [equitable estoppel defense dismissed as tenant was aware of lease provisions and thus any reliance on landlord's actions was unreasonable]).
6. Waiver and laches (sixth affirmative defense)
Respondents argue that petitioner is barred from bringing this proceeding by the equitable defenses of waiver and/or laches, contending that in entering into a modification of the lease, petitioner waived the defaults.
Acceptance of rent with knowledge of conduct that is alleged to be a default under the terms of the lease constitutes a waiver of the default, as "[t]he acceptance of the rent is in effect an election by the landlord to continue the relationship of landlord and tenant." (Atkins Waste Materials, Inc. v May, 34 NY2d 422, 427 [1974]). According to the Court of Appeals in Jefpaul Garage Corp. v Presbyterian Hospital in City of New York, 61 NY2d 442, 460-461 (1984):
Although the intent to waive is usually a question of fact, knowing acceptance of rent without any effort to terminate justifies an inference that the landlord has elected to hold the tenant to the lease. The primary reason for the rule is the inconsistency of the landlord's positions. As one old English case put it, the landlord should not be permitted "to treat a man as a tenant, and then treat him as a trespasser." Undoubtedly, however, the courts have applied the [*5]rule also to prevent a forfeiture of the tenant's estate.
A clear and unambiguous non-waiver clause in a commercial lease will be enforced. (Jefpaul, 61 NY2d at 460; Heartland Assoc. v Adam Oser Inc., 2003 WL 22757714, *2 [App Term, 9th & 10th Jud Dists, Oct. 15, 2003]). However, a general non-waiver clause may not adequately insure against waiver. (TSS-Seedman's, Inc. v Elota Realty Co., 72 NY2d 1024 [1988]; P&D Cards and Gifts, Inc. v Matejka, 150 AD2d 660 [2d Dept 1989]; Lee v Wright, 108 AD2d 678 [1st Dept 1985]; Ginsberg v Lo Bright Mfg. Co., Inc., 2001 WL 1221652 [Sup Ct, Nassau County, July 23, 2001]).
Paragraph 17 of the parties' lease provides, in pertinent part, as follows: The Lessors may as often as they may choose waive any one or more violations or defaults in any one of the covenants and conditions herein set forth, in case any such violations or defaults should occur, without thereby losing or impairing the right subsequently to enforce fully all and every of such covenants and conditions in the manner herein provided in case of a new or continued violation or default in any of such covenants and conditions. The receipt by the Lessors of any rent or other payment with the knowledge of the breach of any covenant or condition contained in this lease shall not be deemed a waiver of such breach, and no waiver by the Lessors of any covenants, conditions or other provision hereof shall be deemed to have been made unless expressed in writing and signed by the Lessors.
This provision effectively precludes the waiver by petitioner of any new or continuing defaults notwithstanding its acceptance of rent with knowledge of any defaults and waiver of any other defaults. (See Excel Graphic Technologies, Inc. v CFG/AGSCB 75 Ninth Ave., L.L.C., 1 AD3d 65 [1st Dept 2003], lv denied 2 NY3d 794 [2004] [landlord's acceptance of rent with knowledge of breach of lease did not constitute waiver of breach as lease contained both general non-waiver provision and non-waiver provision specific to alleged breach]).
The doctrine of laches, which requires a showing of unreasonable and inexcusable delay by one party resulting in prejudice to the other party, does not apply in a commercial summary proceeding. (UBO Realty Corp. v Fulton, NYLJ, Sept. 8, 1993, at 21, col 1 [App Term, 1st Dept]).
7. Inability to cure (seventh affirmative defense)
Respondents contend that the alleged defaults are and remain incapable of cure within the time allotted in the notice, and that petitioner has not acted in good faith in bringing this proceeding as its actions were calculated to deprive respondents of a valuable leasehold. They allege that they cannot cure the violations until petitioner, the owner of the land on which the premises are located, clears up certain environmental issues they allege affect the land. In support of their argument, respondents have annexed a letter dated October 19, 2005 from Tarek Zeid, an employee of the New York City Department of Buildings. According to Zeid, before a new certificate of occupancy may be issued for one of the buildings on the property, the owner of the land on which the building stands must receive from the New York City Department of Environmental Protection (DEP) a declaration reflecting the absence of gasoline products in the underlying soil. (Napoletano Aff., Exh. F).
In response, petitioner argues that the environmental compliance issue has no impact on [*6]respondents' ability to cure the defaults, as the DEP clearance is only required in specific situations not relevant to the alleged defaults. (Kohly Affid., ¶¶ 46-59). Petitioner also claims that it is respondents' obligation under the lease to comply with environmental regulations, and that respondents have known about these particular environmental compliance issues since 1998 and have failed to act on them. (Id.). In support, it has attached a copy of a New York City Department of Buildings Memorandum dated December 23, 2003 and related reference materials, which outline the procedures for obtaining a building permit for work on property that has potential environmental compliance issues. (Id., Exh. I).
In reply, respondents have annexed an affidavit from Zeid, dated November 22, 2005, in which he disagrees with petitioner's position and makes specific factual allegations to the contrary. (Affirmation in Further Support from Domenick Napoletano, Esq., dated Nov. 19, 2005, Exh. B).
Impossibility of performance by one of the parties to a lease may constitute a defense to an action based on breach of the lease. (74 NY Jur 2d, Landlord and Tenant § 109). Here, the parties' submissions raise a triable issue of fact as to whether it is possible for respondents to cure their defaults prior to the resolution of the environmental compliance issues, and as to whether respondents or petitioner are responsible for compliance. (See Wolf v 2539 Realty Assoc., 161 AD2d 11, 16 [1st Dept 1990] [on facts, governmental compliance clause found insufficient to shift burden of abating asbestos condition from landlord to tenant]; Linden Blvd., L.P. v Elota Realty Co., 196 AD2d 808, 810-811 [2d Dept 1993], lv denied 82 NY2d 842 [same]).
8. Statute of limitations (eighth affirmative defense)
Respondents' motion for an order granting them leave to amend their answer to add an affirmative defense of statute of limitations, unopposed by petitioner, is granted.
Respondents argue that as nine years have passed since the premises were destroyed by fire and as many of the violations occurred as early as 1989, the proceeding is partially time-barred. Petitioner maintains that the statute of limitations did not run as respondents' violations are continuing violations.
Pursuant to CPLR 213(2), an action based on a contractual obligation or liability must be commenced within six years of accrual. The general rule that applies to contract actions is that the statute of limitations begins to run when a contract is breached or when one party fails to perform a contractual obligation. (Stalis v Sugar Creek Stores, Inc., 295 AD2d 939 [4th Dept 2002]). Where a tenant violates a lease in a manner that is either illegal or constitutes ongoing interference with the rights of other tenants, the statute of limitations poses no bar to a summary proceeding. (1050 Tenants Corp. v Lapidus, 289 AD2d 145, 146 [1st Dept 2001], citing Westminster Properties, Ltd. v Kass, 163 Misc 2d 773 [App Term, 1st Dept 1995]). In 1050 Tenants Corp., the tenant allegedly installed and operated an air-conditioning unit in violation of the law and of a lease provision that required the tenant to comply with all laws with respect to her occupancy. The court held that the violation constituted a continuous or a recurring wrong and thus that the statute of limitations did not bar the suit.
Here, the alleged default relates to violations issued by various governmental entities that are both alleged violations of the law and of paragraph five of the lease, which requires respondents to comply with all laws, ordinances, regulations, orders, etc. applicable to the premises. Thus, the statute of limitations does not bar these violations. (See 1050 Tenants Corp., [*7]289 AD2d at 146).
However, paragraph 10 of the lease, which requires respondents to rebuild any building destroyed by fire, provides a specific time frame within which respondents are required to commence rebuilding before they may be held in default of the lease and it does not provide that a failure to rebuild constitutes a violation of any law or statute. Moreover, petitioner has not alleged that the failure to rebuild caused any ongoing damage to other tenants. Thus, this alleged default does not constitute a continuing violation, and as it occurred when the building was destroyed and not promptly rebuilt over nine years ago, it is time-barred.
B. Petitioner's motion for a judgment of possession
As there exist triable issues of fact regarding the merit of respondents' seventh and eighth affirmative defenses, petitioner's motion for an order granting it a judgment of possession is denied.
II. CONCLUSION
For all of these reasons, respondents' motion for summary judgment dismissing the petition is denied. Petitioner's cross-motion for summary judgment is granted only to the extent that respondents' first, second, third, fourth, fifth, sixth, and part of the seventh affirmative defenses are stricken.
This constitutes the decision and order of the court.
___________________________
Barbara Jaffe, JCC
DATED:January 4, 2006
New York, New York
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