1319 Third Ave. Realty Corp. v Chateaubriant Rest. Dev. Co. LLC

[*1] 1319 Third Ave. Realty Corp. v Chateaubriant Rest. Dev. Co. LLC 2006 NY Slip Op 52437(U) [14 Misc 3d 1207(A)] Decided on November 21, 2006 Civil Court Of The City Of New York, New York County Jaffe, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 21, 2006
Civil Court of the City of New York, New York County

1319 Third Avenue Realty Corp., Petitioner-Landlord,

against

Chateaubriant Restaurant Development Company LLC 1319 Third Avenue Ground Floor and Basement New York, New York 10021, Respondent-Tenant, John Does 1-100, Respondent-Undertenant.



L&T 90147/06



For petitioner:

Avrom R. Vann, Esq.

420 Lexington Ave., Suite 2400

New York, NY 10170

For respondent:

Bruce Levinson, Esq.

Law Offices of Bruce Levinson

747 Third Ave., 4th Floor

New York, NY 10017-2803

Barbara Jaffe, J.

By notice of motion dated September 19, 2006, respondent moves pursuant to RPAPL

§ 701 for an order dismissing this commercial nonpayment summary proceeding and awarding it costs, disbursements, and attorney fees. For the following reasons, the motion is denied.

On August 31, 1998, petitioner and respondent entered into a 10-year lease for the premises at issue. (Affidavit of Bruce Levinson, Esq., dated Sept. 19, 2006 [Levinson Affid.], Exh. B). Paragraph 17(1) of the lease provides as follows: If Tenant defaults in fulfilling any of the covenants of this lease including the covenants [*2]for the payment of rent or additional rent . . . then, in any one or more of such events, upon Owner serving a written thirty days notice upon Tenant specifying the nature of said default and upon the expiration of thirty days, if Tenant shall have failed to comply with or remedy such default . . . then Owner may serve a written five days notice of cancellation of this Lease . . .

(Id.).

Paragraph 17(2) provides: If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any other payment herein required; then and in any such events Owner may without notice, re-enter the demised premises, and dispossess Tenant by summary proceedings or legal proceedings . . .

(Id.).

By letter dated August 31, 1998, and simultaneously with the parties' execution of the lease, respondent was given the option to purchase the building, including the leased premises, upon written notice after the first day of the third year of the lease term and no later than 120 days before the end of the fourth year of the term. (Reply Affidavit of Bruce Levinson, Esq., dated Oct. 27, 2006 [Reply Affid.], Exh. B). Respondent timely exercised the option on April 23, 2002. (Id).

On or about September 2, 2002, petitioner commenced a proceeding against respondent in New York Supreme Court seeking an order declaring that respondent's option to purchase the building is void. (Levinson Affid., Exh. C). Respondent interposed a counterclaim seeking specific performance of the option and cross-moved for an order granting it summary judgment on it, which Supreme Court granted on or about October 6, 2004. On June 16, 2005, the Appellate Division affirmed that order to the extent of directing the parties to enter into a contract of sale for the property. (Id., Exh. D).

Pursuant to the order, on September 28, 2005, the parties entered into a contract of sale that provides, in section 17.02, as follows: "This contract embodies and constitutes the entire understanding between the parties with respect to the transaction contemplated herein, and all prior agreements, understandings, representations and statements, oral or written, are merged into this contract . . ." (Reply Affid., Exh. B). The contract does not contain a provision requiring respondent to perform within 90 days of its execution.

On August 12, 2006 petitioner served respondent with a 15-day notice of default of payment of rent and additional rent. Petitioner's president, Ahmed Qasemi, personally served the notice on Guillaume Magnani, the general manager of respondent, and sent it to respondent by registered mail, return receipt requested, and ordinary mail. (Levinson Affid., Exh. A). The notice advises that respondent violated Article 1 of the parties' lease by failing to pay real estate taxes, annual rent increases, and, commencing in August 2006, monthly rent. (Id.).

On September 12, 2006, Qasemi served the notice of petition and petition on respondent [*3]by delivering the pleadings to Emile Jack Boulay, respondent's sole member and manager, and on the same day, by taping a copy of the pleadings to the exterior door of the premises and mailing them to respondent by certified and regular mail.

Respondent claims that petitioner's predicate notice is deficient as it does not comply with paragraph 17(1) of the lease, and that the petition fails to state a cause of action because petitioner never terminated the lease pursuant to its 15-day notice. Respondent asserts that this court lacks jurisdiction over it as Qasemi is a party to the action and is thus barred by statute from serving process, and that his affidavit of service is defective as it was prepared after the action was commenced and does not indicate the entity served, that service was made upon respondent, that it was executed in this state, or that the additional mailing was sent from this state. (Id.).

Respondent also argues that this court has no subject matter jurisdiction as the issue of past rent due, if any, presently pends before the state Supreme Court in the declaratory action proceeding. According to counsel, Supreme Court indicated that it would consider respondent's request for an order relieving it from paying rent. Finally, respondent contends that as the parties are scheduled to close on respondent's purchase of the building on November 20, 2006, petitioner's standing to maintain the instant proceeding will be extinguished as of that date. (Id.).

Petitioner contends that although it gave respondent 15 days' notice of default, it was not required to give respondent more than three days as it commenced a non-payment proceeding pursuant to paragraph 17(2) of the lease, and not a holdover proceeding, which is governed by paragraph 17(1). (Affirmation of Avrom R. Vann, Esq., dated Oct. 13, 2006 [Vann Aff.]). It denies that Qasemi was not authorized to serve process or that its affidavits of service are defective. Petitioner also denies that Supreme Court intends to address the issue before this court. (Id.).

In reply, respondent submits correspondence between the parties in which they argued to the Supreme Court their positions regarding rent arrears. (Reply Affid., Exh. B). It maintains that when the parties executed the contract of sale, the lease merged into it and terminated their landlord-tenant relationship. Respondent also asserts that petitioner is estopped from demanding rent, contending that but for petitioner's attempt to prevent it from purchasing the property, it would have already owned the property and would owe no rent to petitioner. (Reply Aff.).

Pursuant to CPLR 3211, a party may move for an order dismissing one or more causes of action asserted against it on the ground that the court lacks subject matter or in personam jurisdiction (CPLR 3211[a][2], [8]), or that the pleading fails to state a cause of action (CPLR 3211[a][7]). On such a motion, the court must liberally construe the pleading, accept the facts as true as alleged, and accord the non-moving party the benefit of every possible favorable inference. (Leon v Martinez, 84 NY2d 83, 87 [1994]). However, where documentary evidence "flatly contradicts" the factual claims set forth in a cause of action, the presumption that such claims are true and any favorable inferences arising from them are rebutted. (Scott v Bell Atlantic Corp., 282 AD2d 180, 183 [1st Dept 2001]).

A motion to dismiss pursuant to CPLR 3211(a)(7) should be granted when, even viewing the allegations in the pleading as true, the opposing party still cannot establish a cause of action. (McGuire v Sterling Doubleday Enterprises, LP, 19 AD3d 660 [2d Dept 2005]). The standard of review is "whether the proponent of the pleading has a cause of action, not whether he has stated one." (Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]; Biondi v Beekman Hill House [*4]Apartment Corp., 257 AD2d 76, 80-81 [1st Dept 1999]). Dismissal is warranted only when the evidence submitted conclusively establishes a defense to the asserted claims as a matter of law. (Leon, 84 NY2d at 88).

A special proceeding to recover real property must be maintained in a court with proper subject matter jurisdiction (Real Property Actions and Proceedings Law [RPAPL] 701), and pursuant to RPAPL 711, a landlord may only commence a nonpayment or holdover proceeding where there exists a landlord-tenant relationship between the parties. (89 NY Jur 2d Real Property, Possessory Actions §§ 108, 122 [2d ed]).

A landlord-tenant relationship may be extinguished where the landlord and tenant enter into a contract of sale for the leased premises. In such circumstances, the relationship merges into the contract and the relationship becomes one of contract vendor-vendee. The parties may, however, expressly agree in their contract to preserve the landlord-tenant relationship, or do so implicitly by their conduct, such as when the contract vendee continues to pay rent to the contract vendor following the execution of the contract. Under those circumstances, the landlord-tenant relationship is said to co-exist with the contract vendor-vendee relationship. (See 89 NY Jur 2d Real Property, Possessory Actions §§ 108, 122 [2d ed]; Barbarita v Shilling, 111 AD2d 200, 201 [2d Dept 1985] [parties must clearly intend to continue landlord-tenant relationship to avoid merging of it into vendor-vendee relationship; Secretary of Housing and Urban Development v Lemaire, 4 Misc 3d 137[A], 2004 NY Slip Op 50837[U], * 1 [App Term, 9th & 10th Jud Dists 2004] [where prior month-to-month tenant exercised option to purchase premises, tenancy dissolved and vendor-vendee in possession relationship created]). However, pursuant to subdivision nine of RPAPL 713, a special proceeding may nonetheless be maintained by the contract vendor against the contract vendee where the contract requires complete performance within 90 days after its execution, the vendee remains in possession of all or part of the premises without permission of the vendor, and it has defaulted in its performance of the contract.

Here, although the parties' contract of sale contains a merger clause and reflects no indication that the parties intended to preserve their landlord-tenant relationship, it is undisputed that respondent continued to pay rent to petitioner from the time it executed the contract until August 2006 and petitioner has not invoked RPAPL 713(9). As the evidence submitted by respondent does not flatly contradict the evidence of the continued existence of the parties' landlord-tenant relationship, it affords an insufficient basis for dismissal. (See Walker v Espinal, 4 Misc 3d 136[A], 2004 NY Slip Op 50832[U], *1 [App Term, 1st Dept 2004] [civil court had jurisdiction to entertain holdover petition where conduct of parties after contract execution, including payment of rent, confirmed intent to preserve landlord-tenant relationship]; Osborne v Moutafis, 7 Misc 3d 32 [App Term, 9th & 10th Jud Dists 2005] [merger did not result where tenant continued to pay rent]; Sid Farber Hempstead Corp., 65 Misc 2d 237, 240 [Dist Ct, Suffolk County 1970] [parties intended relationships to co-exist where respondent continued to pay and petitioner continued to accept rent after exercise of purchase option]).

Respondent's other contentions in support of dismissal lack merit. First, paragraph 17(2) of the lease gives petitioner the right to commence a nonpayment summary proceeding against it without any notice other than the three-day notice required by RPAPL 711. As petitioner served respondent with a fifteen-day notice of default and commenced a summary nonpayment proceeding, paragraph 17(2) of the lease pertains. Thus, respondent was not entitled to receive a [*5]30-day notice to cure. Second, while CPLR 2103(a) prohibits a party from serving process absent a court order, an officer of a corporate party is not prohibited from effecting service as it is the corporation, not the officer, who is the party. (Alexander, Practice Commentaries, McKinney's Cons Laws of NY, C2103:2; Grid Realty Corp. v Gialousakis, 129 AD2d 768 [2d Dept 1987]).

I also observe that petitioner's affidavits of service reflect that service was effected on respondent restaurant at its correct address and indicate on whom service was made and the relationship to respondent of the individual served, and respondent does not deny receipt of process or knowledge of the identity of the people served. The other claimed defects are meritless and, in any event, respondent has failed to establish how they impact this court's jurisdiction. Finally, while Supreme Court may have been asked to determine whether respondent owes rent to petitioner, there is no indication as to whether that court has done or intends to do so.

Accordingly, respondent's motion to dismiss is denied. Respondent is directed to serve and file its answer within 20 days of the date of this decision and order.

This constitutes the decision and order of the court.

___________________________

Barbara Jaffe, JCC

DATED:November 21, 2006

New York, New York