Caldwell v American Package Co., Inc.

[*1] Caldwell v American Package Co., Inc. 2006 NY Slip Op 51076(U) [12 Misc 3d 1166(A)] Decided on June 6, 2006 Supreme Court, Kings County Lewis, J. 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 6, 2006
Supreme Court, Kings County

John Caldwell, et ano., Plaintiffs,

against

American Package Company, Inc., Defendant.



24241/05



Plaintiff Attny: margaret Sandercock, Esq

Goodfarb & Sandercock

Defendant's Attny: Borah, Goldstein, Altschuler Schwartz & Nahins

Yvonne Lewis, J.

Plaintiffs John Caldwell & Desiree Konian move, by order to show cause, for an order 1) granting them a Yellowstone injunction staying and enjoining defendant from terminating plaintiffs' tenancies in their respective units at 226 Franklin Street in Brooklyn or taking any action to recover possession of the subject units, and allowing plaintiffs a reasonable opportunity to cure any alleged defaults and 2) consolidating this action with an action entitled American Package Company, Inc. v Kocik (Index No. 29825/02)(the "Kocik action")[FN1] and with Forrester v American Package Company, Inc. (Index No. 11143/05)(the "Forrester action"). Defendant American Package Company, Inc. (APC) cross-moves for an order, pursuant to 3211 and/or 3212, dismissing the complaint, pursuant to RPL § 601, ejecting plaintiffs from the premises, awarding APC a judgment of possession, and awarding APC attorneys' fees in connection with this proceeding. By separate order to show cause, APC moves for an order, pursuant to RPL § 220, RPAPL § 749(3) and the report of Hon. Dominic J. Lodato, J.H.O. in the Kocik action, directing that plaintiffs must pay rent due as of the date of commencement of this action, plus use and occupancy pendente lite through the date of plaintiffs' surrender of the premises.

On January 28, 2003, plaintiffs executed a commercial loft lease for a space in the subject premises for the term March 1, 2003 through February 28, 2008. The lease specified that the space was to be used for "computer services and design studio." Despite the fact that [*2]the subject building had no residential certificate of occupancy, plaintiffs utilized the space as a residence in violation of the lease terms. On or about July 13, 2005, APC served plaintiffs with a notice to cure stating that plaintiffs were in default of the lease as a result of 1) performing alterations to the unit without the written consent of APC and without necessary permits and in violation of the building code, 2) failing to maintain liability insurance for the space in the amount of $1,000,000/$3,000,000 and property damage insurance in the amount of $300,000, 3) using the space as a residence in violation of the lease, 4) residing in the premises in violation of applicable laws, and 5) failing to pay rent since April 1, 2005. Plaintiffs thereafter commenced the instant action which seeks declarations that the space is subject to the Rent Stabilization Law and that APC may not recover rent since the space is being used residentially in violation of the certificate of occupancy, an order requiring APC to address a nuisance problem involving the unit below plaintiffs and/or granting a rent abatement or damages, and an award of legal fees.

As explained in the decisions issued by this court herewith in the Forrester and Kocik actions, plaintiffs' space, as an illegal residential conversion of a commercial loft, is not covered by rent stabilization. Accordingly, plaintiffs' first, third and sixth [FN2] causes of action are hereby dismissed.

With respect to plaintiffs' second cause of action which alleges that APC may not collect rent from plaintiffs so long as there is no residential certificate of occupancy, this court had referred this identical issue in the Kocik action to a referee to hear and report. The referee determined that APC was entitled to use an occupancy in part because it was in the process of legalizing the building for residential use. In the Kocik action, this court confirmed the referee's report and ordered that use and occupancy be paid to APC. This decision followed those cases wherein the court permitted a landlord as a matter of equity to collect rent or use and occupancy absent a conforming certificate of occupancy based upon landlord's proof of substantial conformity to building code standards and conditioning such payments on the landlord's actual procurement of the requisite certificate (Zane v Kellner, 240 AD2d 208, 209 [1997]; Lipkis v Pikus, 99 Misc 2d 518, 521 [1979] affd 72 AD2d 697 [1979] appeal dismissed 51 NY2d 874 [1980]). In this matter, plaintiffs contend that the report of the referee is not binding upon them as they were not involved in the hearing. It is noted that the referee considered evidence only as pertaining to the units subject to the Kocik and Forrester actions, including the affidavit of an architect who inspected only those units and found no conditions detrimental to residential use. Generally, pursuant to Multiple Dwelling Law §§301, 302, and 325, no rent or use and occupancy may be collected where an owner has failed to obtain a proper certificate of occupancy or multiple dwelling registration (Jalinos v Ramkalup, 255 AD2d 293, 294 [1998]; 99 Commercial Street, Inc. v Llewellyn, 240 AD2d 481, 483 [1997]; 468-470 Ninth Ave. Corp. v Randall, 199 AD2d 13 [1993]; Hornfeld v Gaare, 130 AD2d 398, 400 [1997]). However, this court finds no [*3]impediment in examining and adopting the testimony and evidence adduced at the referee's hearing regarding the physical and legal status of the building, particularly the affidavit of Mr. Kocik's architect which establishes that the subject building, as a whole, conforms to code standards with respect to residential use and that the legalization of the building for residential use is imminent, in making its own determination with respect to use and occupancy in this matter. While it is true that the architect did not personally inspect plaintiffs' space, there is no allegation by plaintiffs that the loft is unsuitable for use as a residence or that the space poses a threat to their health and safety (see Zane, 240 AD2d at 209). Accordingly, plaintiffs' second cause of action is dismissed and that part of APC's motion for use and occupancy is granted to the extent that it may collect rent from plaintiffs pursuant to the lease terms, prospectively from the date of this decision, pending the resolution of this matter.

With respect to plaintiffs' claims stemming from the alleged noxious activities of their downstairs neighbor, APC argues that these claims must be dismissed pursuant to CPLR 1003 for failure to join the lessees/occupants of the alleged problem space. CPLR 1001 requires joinder of "persons who ought to be parties if complete relief is to be accorded between the persons who are parties to the action or who might be inequitably affected by a judgment," and failure to join such necessary parties is grounds for dismissal without prejudice under CPLR 1003. Here, APC has not shown that complete relief may not be accorded the parties in the absence of the downstairs occupants as parties, or that a judgment in this action would necessarily "inequitably" affect those individuals. If APC is concerned that it may be found liable for breach of the quiet enjoyment provisions of lease on account of the activities of the downstairs occupants, then it is free to implead said individuals to recover contribution or indemnification (CPLR 1007).

Accordingly, APC's motion for summary judgment dismissing plaintiffs' fourth and fifth causes of action is denied.

The purpose of a Yellowstone injunction is to permit a tenant confronted with the threat of the termination of a lease to obtain a stay, tolling the cure period, so that, after the action has been resolved on its merits, the tenant may cure the defect and avoid the loss the leasehold (Kings Party Ctr. v Minco Rlty., 286 AD2d 373 [2001]). In order to obtain a Yellowstone injunction, the tenant must hold a commercial lease and must have received from the landlord a notice of default, a notice to cure or a threat of termination of the lease. The application for a temporary restraining order must be made prior to the termination of the lease and the tenant must establish its willingness and ability to cure the alleged default by means other than vacating the premises (Purdue Pharma, LP v Ardsley Partners, 5 AD3d 654 [2004]; Long Island Gynecological Servs. v 1103 Stewart Ave. Assocs., 224 AD2d 591 [1996]).

Unlike the tenants in the Forrester and Kocik actions, defendants' lease has not yet expired, and APC's counterclaim for ejectment is based on the alleged lease defaults, not on the expiration of the lease. Plaintiffs have expressed a willingness to cure any defaults [*4]without vacating the premises. Under the circumstances, this court finds a Yellowstone injunction is appropriate in order to afford plaintiffs the opportunity to cure the alleged defaults (with the exception of payment of past rent/use and occupancy) pending the resolution of this matter.

Accordingly, plaintiffs' motion for a Yellowstone injunction is granted. The remainder of APC's motion for an order of ejectment and attorneys fees is denied.

That part of plaintiffs' motion seeking consolidation with the Kocik and Forrester actions is denied as those cases have been dismissed.

Settle order.

E N T E R,

________________________

J. S. C. Footnotes

Footnote 1: In their moving papers, plaintiffs mistakenly identify this action as "American Package Company, Inc. v Kocik, Inc., Index No. 24874/03." However, said index number identifies another action entitled American Package Company, Inc. v Gavin Anderson and Anton Vojacek which was consolidated with the Kocik action. It is presumed that plaintiffs seek consolidation with the Kocik action.

Footnote 2: This cause of action is labeled "seventh" in the complaint.