L. Charney 1410 Broadway, LLC v BSD, Inc.

[*1] L. Charney 1410 Broadway, LLC v BSD, Inc. 2009 NY Slip Op 50547(U) [23 Misc 3d 1102(A)] Decided on March 31, 2009 Civil Court Of The City Of New York, New York County Singh, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 March 31, 2009
Civil Court of the City of New York, New York County

L. Charney 1410 Broadway, LLC, as successor to L.H. CHARNEY ASSOCIATES, LLC, Petitioner,

against

BSD, Inc., and "ABC CORPORATION" and/or "XYZ CORPORATION," Respondent.



55839/08



The appearance of petitioner's attorney is:

Stephen L. Simmons

Law Office of Leon Charney

1441 Broadway 31st Floor

New York NY 10018

212-391-0123

The appearance of respondent's attorney is:

Moshe Assis

485 7th Ave Ste 777

New York NY 10123

212-944-7654

Anil C. Singh, J.

This is a commercial non-payment summary proceeding. Petitioner moves by order to show cause pursuant to RPAPL section 745(2)(c)(i) for an order dismissing all defenses and counterclaims interposed by respondent and entering judgment in favor of petitioner: 1) for possession of the premises and a warrant of eviction; and 2) a money judgment for the full amount demanded in the petition and for rent and additional rent through the date of termination, and fair value of the use and occupancy through the date of eviction. Respondent opposes the motion.

The parties entered into a written lease agreement dated February 25, 2004, for [*2]commercial premises located at 1410 Broadway in Manhattan. Petitioner commenced this proceeding by serving a petition and notice of petition in February 2008.

The trial on this nonpayment proceeding has progressed slowly over several months. The primary legal issue to be decided is the interpretation of an agreement by the parties which modified the cost-of-living escalation provision of the lease. A second issue is the amount of late fees, if any, that petitioner is entitled to recoup. The only portion of the trial remaining is petitioner's rebuttal.

On August 21, 2008, the undersigned issued a decision/order that states in part as follows:

Respondent BSD, Inc., shall pay use and occupancy in the sum of $15,004.83 plus electric on the date rent and additional rent is due under the lease on a monthly basis until the completion of this nonpayment summary proceeding.

Petitioner exhibits the sworn affidavit of Robert Essex, the Chief Financial Officer of L.H. Charney Associates, Inc., the managing agent for the building. Mr. Essex contends that in violation of the order, respondent has paid rent late each month since the order was issued. He contends further that respondent has paid no rent for January, February and March of 2009. Finally, he contends that respondent presented a check drawn on nonsufficient funds.

In opposition, respondent exhibits the sworn affidavit of Eli Barsheshet, a principal of respondent BSD, Inc. According to Mr. Barsheshet, he and his partner spent over $200,000 to renovate the premises and make improvements. Mr. Barsheshet contends that he is behind on the rent as a result of the current economic recession, but also in part due to alleged CPI overcharges by petitioner. However, he does not dispute owing the use and occupancy.

Respondent's counsel asserts that the petition should be dismissed on the grounds that petitioner lacks standing to maintain this proceeding for failure to publish in compliance with Limited Liability Law section 206(b)(3). Moreover, counsel contends that petitioner's request for a judgment for the full amount demanded can be reached only after a trial is concluded. According to counsel, a violation of RPAPL section 745 should result in an immediate trial or a continuation of the ongoing trial.

Discussion

Section 745(2) of the RPAPL provides that in the Civil Court of New York City, upon the respondent's second request for an adjournment or after a thirty day period, whichever comes first, the court "shall direct" that the respondent post "rent or use and occupancy accrued from the date the petition and notice of petition [were] served upon the respondent" and all sums as they become due (RPAPL 745(2); Lang v. Pataki, 271 AD2d 375 [1st Dep't 2000], appeal dismissed, 95 NY2d 886 [2000]).

The remedy for a failure to pay court-ordered use and occupancy depends upon whether the respondent has failed to comply with the initial payment requirement or has failed to make subsequent payments. If the respondent fails to make the initial payment of use and occupancy, then the court may "dismiss without prejudice the defenses and counterclaims interposed by respondent and grant judgment for petitioner" (RPAPL section 745(2)(c)(i); Planned System Installers Co. v. Network American Systems, Inc., 175 Misc 2d 958 [Civ.Ct., NY Cty, 1998]). On the other hand, should the respondent fail to make subsequent payments, then the court "shall order an immediate trial of the issues raised in the respondent's answer" (RPAPL 745(2)(c)(ii)). [*3]Such an interpretation of RPAPL 745(2)(c) comports with section 14:451 of the treatise Landlord and Tenant Practice in New York by Finkelstein and Ferrara.

RPAPL 745 is not a model of clarity. However, there is some case law that sheds light on the meaning and application of the provision.

Two cases illustrate the different factual scenarios under RPAPL 745(2)(c). In Houston Essex Realty Corp. v. Club Old Banque Corp., 2 Misc 3d 138(A) (App. Term, 1st Dep't, 2004), a tenant appealed from an order of the Civil Court granting landlord's motion to strike the answer and for a judgment of possession in a holdover proceeding. The Appellate Term affirmed, writing:

Upon the commercial tenant's failure to timely comply with two prior orders for payment of interim use and occupancy, and its tender of a check which was returned for insufficient funds, Civil Court properly granted judgment for landlord (see, RPAPL section 745[2][c][i] ). The court was not authorized to extend the time for payment without consent (see, RPAPL section 745[2][c][iii] ), and landlord's acceptance of a belated occupancy payment did not waive its rights under the statute.

The Appellate Term reached a different conclusion under RPAPL 745 in La Fabrique Owners Corporation v. La Fabrique LLC, 16 Misc 3d 130(A) [App. Term, 1st Dep't, 2007]). There, the tenant appealed an order of the Civil Court which directed the tenant to pay rent pendente lite, granted landlord's motion to strike tenant's answer and counterclaims, and entered final judgment which awarded landlord possession and rent arrears. The Appellate Term reversed, holding that an immediate trial was the proper remedy where the tenant made the second payment. The Court wrote:

Although Civil Court properly directed tenant to pay ongoing rent pursuant to RPAPL 745(2), tenant's brief delay in tendering the second payment due warranted, at most, an "immediate trial" (RPAPL 745[2][c][ii] ), and not, as landlord sought, the ultimate relief of a possessory judgment.

Id.

Here as in La Fabrique the respondent initially complied with the court's order to pay use and occupancy but defaulted on subsequent payments. In light of this fact, the proper remedy pursuant to RPAPL 745 and the case law is an immediate resumption of the trial. This interpretation of the statute is consistent with the language in the Notice of Petition, which states as follows:

TAKE NOTICE ... that under section 745 of the Real Property Actions and Proceedings Law, you may be required to make a rent deposit, or a rent payment to the petitioner, upon your second request for an adjournment or if the proceeding is not settled or a final determination has not been made by the Court within 30 days of the first court appearance. Failure to comply with an initial rent deposit or payment order may result in the entry of a final judgment against you without a trial. Failure to make subsequent required deposits or payments may result in an immediate trial on the issues raised in your answer.

(Petitioner's Order to Show Cause, Exhibit C, p. 2)

For the above reasons, petitioner's motion by order to show cause to dismiss respondent's [*4]defenses and counterclaims and for judgment in its favor is denied.

The trial will resume immediately on Monday, April 6, 2009, at 2:30 p.m. in Courtroom 421.

The foregoing constitutes the decision and order of the court.

Date:March 31, 2009______________________________

New York, New YorkAnil C. Singh