47 Thames Realty, LLC v Kreiling

[*1] 47 Thames Realty, LLC v Kreiling 2007 NY Slip Op 51397(U) [16 Misc 3d 1112(A)] Decided on July 16, 2007 Supreme Court, Kings County Harkavy, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 16, 2007
Supreme Court, Kings County

47 Thames Realty, LLC, Plaintiff,

against

Amy Kreiling and Roy Williams, "John and/or Jane Doe," Defendants.



23062/2006



Plaintiff Attorney:

Kucker & Bruh, LLP

747 Third Avenue

New York, New York 10017

Defendant Attorney:

Beranbaum Menken Ben-Asher & Bierman, LLP

80 Pine Street -32nd Floor

New York, New York 10005

Ira B. Harkavy, J.

Upon the foregoing papers, plaintiff 47 Thames Realty, LLC (Thames Realty) moves for an order, pursuant to CPLR 3212, granting it summary judgment on its first and second causes of action; and/or, pursuant to CPLR 3211, striking all of defendants' affirmative defenses and defendants' first, second, fourth, fifth, sixth, seventh, and eighth counterclaims; and/or awarding plaintiff use and occupancy for the subject premises pendente lite; and/or awarding plaintiff attorneys' fees pursuant to their lease agreement; and imposing sanctions on defendants and defendants' counsel. Defendants Amy Kreiling, Roy Williams and John and/or Jane Doe (Kreiling/Williams) cross-move for an order, pursuant to CPLR 3212, granting them summary judgment on their affirmative defenses. Kreiling/Williams also seek, pursuant to CPLR 3126, an order striking the complaint, prohibiting plaintiff from producing any evidence concerning the issues herein, or conditionally precluding plaintiff from producing any evidence concerning the issues herein in the event that plaintiff fails to supply the requested items; and, pursuant to CPLR 602 (a), an order consolidating this action with two related actions for the purposes of determining the motions and cross-motions in this action and those under submission in the related actions, and otherwise joining the actions for trial.[FN1]

Background

This case arises from plaintiff-landlord's action to eject the defendant-tenant. Thames [*2]Realty is the fee owner of a loft building located at 47 Thames Street in Brooklyn, New York ("the building"). According to the parties, as well as zoning maps, the building is located in an M1-1 zoning area, which is designated for light manufacturing. In or around March 2001, defendants Amy Kreiling and Roy Williams, as tenants, and Thames Realty, as landlord, entered into a lease for the rental of unit 301 of the building ("the premises"). The lease, which expired on November 15, 2004, provided that the unit was to be used exclusively as a Studio, and contained a covenant stating that the tenant was to use the premises "solely for business purposes and only during business hours from 8:00 a.m. to 6:00 p.m."

Ms. Kreiling contends that she and Mr. Williams were shown apartment 301 as a residential loft apartment in or about late October 2001. Ms. Kreiling contends that the apartment was being used, at the time, for residential purposes by another couple. Ms. Kreiling further contends that they made clear their intentions to reside in the apartment to a representative of the building's managing agent, and that the same agent said that they would be given a commercial lease, but assured them that they could reside in the apartment just as the previous tenants had. Ms Kreiling alleges that unit 301 was "clearly set up for residential use" when she and Mr. Williams moved in, with a full bathroom and a kitchen area with a gas hook-up for a stove. Ms. Kreiling asserts that from the time they moved in, there have been at least fourteen separate residential apartments in the building and the defendants attach explicitly residential leases for two other units in the building.[FN2] Moreover, Ms. Kreiling asserts that the building contains "residential amenities," such as a trash chute and a laundry room, presumably maintained by the landlord.

Kreiling/Williams also submit a New York City Department of Buildings (DOB) document indicating that the DOB issued a temporary residential Certificate of Occupancy for the premises, effective from July 27, 2005 to October 25, 2005, which states that the building may contain as many as 28 dwelling units. Furthermore, according to documents submitted by Kreiling/Williams, Thames Realty sent an application, on or about May 11, 2006, to the Attorney General to "test the market" for 47 Thames Street. Within that application, Perry Finkelman, as managing member of Thames Realty, states that it "intends to effect material alterations to the building so as to create commercial lofts and residential units on said parcel of land . . . and to submit same to the provisions of the Condominium Laws of the State of New York."

According to evidence submitted by Kreiling/Williams, various tenants began receiving notices in the spring of 2006 demanding that they move out of the building. They further allege that, around that time, the laundry room and trash chute were sealed off, and the building's cleaning and maintenance were severely curtailed. On or about August 21, 2006, a notice was issued advising the tenants that the trash compactor was "no longer in service" and, on or about December 11, 2006, a notice was issued advising the tenants that the laundry facility was closed indefinitely. Kreiling/Williams assert that Thames Realty is attempting to empty the building of its residential tenants in connection with efforts to convert the building to condominium [*3]ownership, and allege that Thames Realty is "engaged in a scheme to defraud" the tenants of their rights.

Thames Realty argues that Kreiling/Williams have used and continue to use the premises as a residence, "[n]otwithstanding the expiration of the Lease, and illegal nature of the residential occupancy of the Defendants in an M-1 manufacturing zone." Thames Realty states that it sent defendants a "Thirty [30] Day Notice to Termination" dated June 27, 2006, informing them that the landlord "elects to terminate your tenancy" at the premises, and stating that "unless you remove from [the] premises on or before July 31, 2006 . . . the Landlord will commence an ejectment action or summary proceeding to remove you from [the] premises for holding over after the expiration of your term."

Kreiling/Williams did not vacate the premises and, on August 2, 2006, Thames Realty brought the instant action against defendants in Kings County Supreme Court. The complaint asserts that plaintiff "is entitled to immediate possession of the apartment," and that defendants "continue in possession of the subject premises without the permission of the Plaintiff after the expiration of said term." The complaint seeks possession of the premises and to evict and eject Kreiling/Williams therefrom, as well as money for unpaid rent or use and occupancy of the premises.

Thames Realty's Motion for Summary Judgment

In its affirmation in support of its motion and accompanying memorandum of law, Thames Realty makes no specific argument in favor of its motion for summary judgment on its first and second causes of action (for possession of the premises and ejectment of defendants from same). Instead, Thames Realty asserts that "inasmuch as the defenses and counterclaims as interposed herein by Defendants have no merit in fact or law, summary judgment should be granted the Plaintiff." As little discovery has been completed,[FN3] there are disputed questions of fact, and Thames Realty has failed to demonstrate that there are no valid affirmative defenses or counterclaims raised by Kreiling/Williams (discussed below), Thames Realty's request for summary judgment is denied.

Thames Realty's Motion to Dismiss the Affirmative Defenses and Counterclaims

In their verified answer, Kreiling/Williams raises eleven affirmative defenses and nine counterclaims. Thames Realty seeks to dismiss all of Kreiling/Williams' affirmative defenses [FN4] as well as their first, second, fourth, fifth, sixth, seventh, and eighth counterclaims.

On a motion to dismiss affirmative defenses pursuant to CPLR 3211 (b), the plaintiff bears the burden of demonstrating that the defenses are without merit as a matter of law (see e.g. Vita v New York Waste Servs., LLC, 34 AD3d 559, 559 [2006]; Town of Hempstead v Lizza Indus., 293 AD2d 739, 740 [2002]). In determining a motion to dismiss a defense, "a defendant [*4]is entitled to the benefit of every reasonable intendment of the pleading, which is to be liberally construed. If there is any doubt as to the availability of a defense, it should not be dismissed" (Warwick v Cruz, 270 AD2d 255, 255 [2000] [internal citation omitted]). A defense should not be stricken where there are questions of fact requiring trial (see e.g. Atlas Feather Corp. v Pine Top Ins. Co., 128 AD2d 578, 578-579 [1987]).

Similarly, on a motion to dismiss a counterclaim, the question is whether the counterclaim states a cause of action (Jackal Holdings, LLC v JSS Holding Corp., 23 AD3d 435, 435 [2005]; CPLR 3211). A counterclaim is to be liberally construed, and the court shall accept as true any facts alleged in the answer and in any submissions in opposition to the motion to dismiss, and accord the nonmoving party the benefit of every possible favorable inference (Jackal Holdings, LLC, 23 AD3d at 435). The motion must be denied if factual allegations are discerned which, taken together, manifest any cognizable cause of action (id.).

The "No Counterclaims" Lease Provision

Thames Realty argues that all of Kreiling/Williams' counterclaims must be dismissed pursuant to paragraph 26 of their lease, which provides, in relevant part: "It is further mutually agreed that in the event Owner commences any proceeding or action for possession, including a summary proceeding for possession of the demised premises, Tenant will not interpose any counterclaim of whatever nature or description, in any such proceeding . . . except for statutory mandatory counterclaims."

Thames Realty contends that the provision is enforceable in this proceeding; however, the cases it cites deal with summary proceedings (see e.g. Mid-Island Shopping Plaza Co. v Cutler, 112 AD2d 405 [1985]).[FN5] Moreover, even within the context of summary proceedings, a counterclaim that is "inextricably intertwined" with the claims themselves will not be dismissed (see e.g. All 4 Sports & Fitness, Inc. v Hamilton, Kane, Martin Enters., Inc., 22 AD3d 512, 514 [2005]).

This is not a summary proceeding; moreover, certain issues raised by the counterclaims appear to be inextricably intertwined with Thames Realty's claims. In addition, Thames Realty has argued that the lease is no longer in effect. Accordingly, the court will not dismiss all of Kreiling/Williams' counterclaims in this action based upon waiver, but will instead address the affirmative defenses and counterclaims individually.

Failure to State a Cause of Action

Kreiling/Williams' first affirmative defense, raised by their answer, is that the complaint fails to state a cause of action. "In this judicial department, a defense that a complaint does not state a valid cause of action cannot be interposed in an answer, but must be raised by appropriate motion pursuant to CPLR 3211 (a) (7)" (Staten Is.-[*5]Arlington, Inc. v Wilpon, 251 AD2d 650, 650 [1998], quoting Propoco, Inc. v Birnbaum, 157 AD2d 774, 775 [1990]). Accordingly, Kreiling/Williams' first affirmative defense is stricken.

Failure to Register Building

Kreiling/Williams' second affirmative defense is that Thames Realty failed to register the building with the New York City Department of Housing Preservation and Development (HPD) as required by law. Thames Realty argues that "given the fact that the Defendant's residential use of the unit is prohibited by law, there exists no requirement to register the building" with HPD. Thames Realty also asserts that any alleged failure to register the building "would have no bearing on the Plaintiff's entitlement to recover possession of this illegal tenancy."

The owner of any multiple dwelling, which is defined as one which is rented or leased or occupied as the residence of three or more families living independently of each other, must file a notice concerning that dwelling (Multiple Dwelling Law §§ 4 [7]; 325 [1]). Kreiling/Williams assert that there are at least three families living independently of each other at the premises. Further, the DOB violation sheets submitted by Thames Realty indicate that there appears to be numerous residential units in the building. Therefore, there is at least a question of fact as to whether the building in question constitutes a de facto multiple dwelling. "An owner of a de facto multiple dwelling who fails to obtain a proper certificate of occupancy or comply with the registration requirements of the Multiple Dwelling Law cannot recover for rent or money for use and occupancy," both of which Thames Realty seeks in this case (Jalinos v Ramkalup, 255 AD2d 293, 294 [1998]).Accordingly, Thames Realty has failed to show that, as a matter of law, there is no merit to this defense, and so the defense is not stricken.

Documentary Evidence

Kreiling/Williams' third affirmative defense asserts that the complaint is barred in whole or part by documentary evidence. Thames Realty contends that Kreiling/Williams have failed to allege what document would bar relief in this case. Thames Realty also asserts that the lease is the only relevant document and that, in addition to having expired, the lease had limited Kreiling/Williams' use of the unit to commercial purposes, thereby demonstrating that Kreiling/Williams are illegal tenants.

Kreiling/Williams do not directly address this argument in opposition, or identify what documentary evidence they rely upon for their defense. As the lease in question has expired and, by its explicit terms, it prohibited residential use, the court finds that Kreiling/Williams have not demonstrated what documentary evidence, if any, provides them a defense here. Thus, Kreiling/Williams' third affirmative defense is dismissed.

Rent Stabilization and Emergency Tenant Protection Act

Kreiling/Williams' fourth affirmative defense alleges that the complaint is barred by Rent Stabilization Law (RSL), the Rent Stabilization Code (RSC), and the Emergency Tenant Protection Act (ETPA). Thames Realty argues that the tenancy in question does not fall under the protection of the Loft Law or the ETPA.[FN6] [*6]

Where a locality has declared a housing emergency, the ETPA applies to regulate residential rents of all housing units that are not expressly exempted, including previously unregulated accommodations (Wolinsky v Kee Yip Realty Corp., 2 NY3d 487, 491 [2004]; McKinney's Uncons. Laws of NY §§ 8623; 8625). The ETPA was enacted to: "prevent exaction of unjust, unreasonable and oppressive rents and rental agreements and to forestall profiteering, speculation and other disruptive practices tending to produce threats to the public health, safety and general welfare [and] prevent uncertainty, hardship and dislocation" (McKinney's Uncons. Laws of NY § 8622).

The Loft Law (Multiple Dwelling Law Article 7-C) permits conversion of Interim Multiple Dwellings, which are defined as any building once used for commercial, manufacturing, or warehouse purposes and that lack a residential certificate of occupancy (Multiple Dwelling Law § 281). However, the Loft Law is generally limited to buildings that, on December 1, 1981, had been occupied for residential purposes by three or more families living independently of each other since April 1, 1980 (Multiple Dwelling Law § 281). The parties appear to agree that the Loft Law is not applicable to this building. Thames Realty argues that, because the Loft Law does not apply here, the protections of the ETPA do not apply.

In Wolinsky, plaintiff tenants, who had illegally converted their commercially-leased units at their own expense, over a decade after the Loft Law's eligibility period ended, brought suit against their landlord seeking a declaration "that, notwithstanding their illegal use of the space, they [were] protected by the Rent Stabilization Law and Rent Stabilization Code through the ETPA" (Wolinsky, 2 NY3d at 490). The Wolinsky court found that, reading the Loft Law and the ETPA together, the "tenants' illegal conversions do not fall under the ambit of the ETPA," noting that if the previously-enacted ETPA "already protected illegal residential conversions of manufacturing space, significant portions of the Loft Law would have been unnecessary" (id. at 493). Thereafter, in Gloveman Realty Corp. v Jefferys (18 AD3d 812 [2005]), the Appellate Division, Second Department, citing Wolinsky, held that defendant-tenants' cross motion for summary judgment dismissing the first cause of action for an ejectment "should have been denied" in as much as the tenants "illegally-converted lofts" were not eligible for protection under the Loft Law or the ETPA, even though the landlord knew and approved of the tenants' conversion of the commercial space to residential space (Gloveman, 18 AD3d at 813).[FN7]

In Wolinsky, the Appellate Division had stated that the ETPA does not apply to residential "tenancies that are illegal and incapable of becoming legal" (Wolinsky, 2 [*7]NY2d at 419). Later cases have stated that Wolinsky requires a blanket finding that the ETPA does not apply where the premises are not subject to the Loft Law, even where the residential tenancy may be capable of becoming legal (see e.g. Corastor Holding Co. Inc. v Mastny, 12 Misc 3d 13, *18 [App Term, 2d Dept 2006] ["illegal loft conversions [in an M-1 zoning district] that were not made subject to the Loft Law are not subject to the ETPA"]; Forrester v American Package Co., Inc., 12 Misc 3d 1166(A), *3 [Sup Ct, Kings County 2006]; cf. Duane Thomas LLC v Wallin, 35 AD3d 232, 233 [App Div, 1st Dept 2006] [unit may be subject to rent stabilization where "unit is capable of being legalized"]). However, in a recent case, the Appellate Division, Second Department, held that the ETPA may apply where, among other things, the applicable zoning law "generally permits residential use" (Matter of 315 Berry St. Corp. v Hanson Fine Arts, 39 AD3d 656, 657 [2007]).

The parties agree that the building is in an M1-1 zoning area. New York City Zoning Resolution § 41-11 provides that M1 is a light manufacturing district and that "[n]ew residential development is excluded from these districts, except for joint living-work quarters for artists in M1-5A and M1-5B Districts, dwelling units in M1-5M and M1-6M Districts, and dwelling units in M1-1D, M1-2D, M1-3D, M1-4D and M1-5D Districts, where authorized by the City Planning Commission . . . ." However, the parties dispute whether the zoning laws in question allow this residential use and/or whether residential use of this building could become legal. Thames Realty contends that the zoning laws do not allow residential use as of right. In opposition, Kreiling/Williams contend, among other things, that Thames Realty was able to and did obtain a zoning variance and a temporary residential certificate of occupancy, and he argues that Thames Realty could have had the certificate renewed. In addition, Thames Realty itself has stated that it could get a variance allowing for residential use of the building, although such a variance is not guaranteed, and admits that it is planning to seek a variance allowing for residential use.

A defense should not be dismissed if there is any doubt as to its availability or if there are any questions of fact requiring trial (see e.g. Warwick, 270 AD2d at 255; Atlas Feather Corp., 128 AD2d at 578-579). Given the evidence and arguments raised by Kreiling/Williams, including the fact that the owner had previously obtained a residential certificate of occupancy, the court finds that Thames Realty has not demonstrated, as a matter of law, that this defense is without merit. Among other things, Kreiling/Williams have raised questions as to whether the existing zoning laws may allow the residential use of this building and/or whether such residential use may become legal, and whether the protection of the ETPA should apply to their tenancy.

Moreover, in this case, unlike in Wolinsky, Gloveman, or Corastor, it was Thames Realty itself (or its predecessor) who allegedly converted many of the units in the building to residential use (see e.g. Otus v Northside Dev., L.L.C., 12 Misc 3d 1186(A), *4 [Sup Ct, Kings County 2006] [ETPA may apply where, among other things, conversion to residential use preceded tenancy in question]). According to affidavits [*8]submitted by Kreiling/Williams, they and at least one other tenant in the building found that their units were fully set up for residential use when they moved in. As it was the owner, not the tenants, who allegedly converted the units to residential use in this case, it is difficult to see how giving tenants the protection of the ETPA in this case would "foster future illegal conversions," as was one of the policy concerns underlying the decision in Wolinsky (Wolinsky, 2 NY3d at 493).

Furthermore, Thames Realty's admission that it intends to try to convert the building to residential use indicates that applying the ETPA to these tenants would not "undermine legitimate municipal zoning prerogatives" (Wolinsky, 2 NY3d at 493), as the building may well become residential whether or not the ETPA applies here. Thames Realty's stated intention to attempt to convert the building to residential use also undermines its own claimed concern for upholding the integrity of the manufacturing zoning designation.

Given all of the circumstances and considering the broad purpose of the ETPA, Kreiling/Williams have demonstrated that there is at least a question as to whether the ETPA and the RSL may apply in this case (see e.g. Matter of 315 Berry St. Corp., 39 AD3d at 657 [unit was subject to the protection of ETPA and RSL where landlord "knew of and acquiesced in the unlawful conversion, at the expense of the occupants, of the unit from commercial to residential use, [where] the applicable zoning generally permits residential use, and [where the landlord] sought legal authorization to convert the premises to such use during the pendency of this proceeding"]; Otus, 12 Misc 3d 1186(A), *4 [ETPA may apply where zoning laws permitted residential use, conversion to residential use preceded tenancy in question, and where owner had commenced process of converting building into condominiums]; 480-486 Broadway LLC v No Mystery Sound, Inc., 11 Misc 3d 1056(A), **3-4 [Civ Ct, NY County 2006] [premises may be subject to protection of ETPA, even where Loft Law does not apply, if residential tenancy is capable of becoming legalized]).

Accordingly, Kreiling/Williams' fourth affirmative defense is not dismissed.

Failure to Exhaust Administrative Remedies

Kreiling/Williams' fifth affirmative defense asserts that Thames Realty failed to pursue and exhaust its administrative remedies. Thames Realty complains that Kreiling/Williams fail to specify what administrative remedy it failed to exhaust and asserts that they "can point to no bar that would bar the Plaintiff from commencing this action." Kreiling/Williams argue that a landlord is required to file an application with the New York State Division of Housing and Community Renewal (DHCR) in order to remove an apartment from rent stabilization (Rent Stabilization Code § 2524.50). As noted above, Kreiling/Williams have demonstrated that there is at least a colorable claim that the tenancy in question may be subject to rent stabilization and so this regulation may apply. Hence, this affirmative defense is not dismissed.

General Business Law § 352-eeee

Kreiling/Williams' sixth affirmative defense asserts that Thames Realty's claims are barred by General Business Law § 352-eeee, which is part of the Martin Act. General Business Law § 352-eeee deals with the conversion of a building to a cooperative, and provides, in relevant part: "It shall be unlawful for any person to engage in any course of conduct, including, [*9]but not limited to, interruption or discontinuance of essential services, which substantially interferes with or disturbs the comfort, repose, peace or quiet of any tenant in his use or occupancy of his dwelling unit or the facilities related thereto" (General Business Law § 352-eeee [4]).

Thames Realty argues that this affirmative defense must be dismissed because there is no private cause of action pursuant to the Martin Act (CPC Intl. v McKesson Corp., 70 NY2d 268, 276 [1987]).

Kreiling/Williams do not raise the Martin Act as a counterclaim, but rather as an affirmative defense. They assert that Thames Realty has taken steps to convert the building to condominium ownership by filing the application to test the market with the Attorney General, and allege that, in that application, Thames Realty concealed the residential use of many units in the building, and is attempting to empty the building of its residential tenants. As courts have allowed the Martin Act to be raised as an affirmative defense in Housing Court proceedings (see e.g. Arkansas Leasing Co. v Gabriel, 3 Misc 3d 46, 47-48 [App Term, 2d Dept 2004]), this defense is not dismissed.

Tenant Rightfully in Possession

Kreiling/Williams'seventh affirmative defense states that they are tenants rightfully in possession and that hence there is no basis for ejectment. Thames Realty argues that the illegal nature of Kreiling/Williams' tenancy demonstrates that there is no merit to this defense.[FN8] However, as discussed throughout, Kreiling/Williams have raised questions of fact here as to whether they are lawfully in possession of the apartment. Accordingly, this defense is not dismissed.

Unclean Hands

As their eighth affirmative defense, Kreiling/Williams allege that Thames Realty's claims are barred by the doctrine of unclean hands. "The doctrine of unclean hands applies when the complaining party shows that the offending party is guilty of immoral, unconscionable conduct and even then only when the conduct relied on is directly related to the subject matter in litigation and the party seeking to invoke the doctrine was injured by such conduct" (Kopsidas v Krokos, 294 AD2d 406, 407 [2002] [internal quotation marks and citations omitted]). Thames Realty argues that this defense must be stricken as Thames Realty is "certainly not guilty of immoral, unconscionable conduct."

Kreiling/Williams argue that Thames Realty has engaged in such conduct by, among other things, attempting to "defraud the tenants out of their tenancies." A reasonable fact-finder could find that a landlord's knowingly converting units for residential use, and inviting and allowing residential use of those premises, and then attempting to evict its residential tenants for, among other things, using their premises as a residence, is immoral and unconscionable. Accordingly, this defense is not stricken.

[*10]Retaliatory Eviction

As their ninth affirmative defense and eighth counterclaim, Kreiling/Williams assert that the current action was taken in retaliation against them in violation of Real Property Law § 223-b, which provides, in relevant part: "No landlord of premises or units to which this section is applicable shall serve a notice to quit upon any tenant or commence any action to recover real property or summary proceeding to recover possession of real property in retaliation for:"a. A good faith complaint, by or in behalf of the tenant, to a governmental authority of the landlord's alleged violation of any health or safety law, regulation, code, or ordinance, or any law or regulation which has as its objective the regulation of premises used for dwelling purposes or which pertains to the offense of rent gouging in the third, second or first degree; or"b. Actions taken in good faith, by or in behalf of the tenant, to secure or enforce any rights under the lease or rental agreement, under section two hundred thirty-five-b of this chapter, or under any other law of the state of New York, or of its governmental subdivisions, or of the United States which has as its objective the regulation of premises used for dwelling purposes . . . ."

Thames Realty argues that this affirmative defense (as well as Kreiling/Williams' eighth counterclaim) must be dismissed as Kreiling/Williams have failed to state that they undertook any activity as outlined in the statute.

In opposition, Kreiling/Williams fail to offer any evidence that they made a good faith complaint or took any action which could have prompted a retaliatory eviction, and which would raise a question of fact. Accordingly, Kreiling/Williams' ninth affirmative defense and eighth counterclaim, both alleging retaliatory eviction, are hereby dismissed.

Fraud and Misrepresentation

In their tenth affirmative defense, Kreiling/Williams assert that Thames Realty's complaint is barred by fraud and misrepresentation as Thames Realty has no immediate right to possession of the premises. In their sixth counterclaim, Kreiling/Williams assert that Thames Realty engaged in fraudulent business activity in violation of General Business Law § 349 et seq.

Thames Realty argues that Kreiling/Williams have failed to state a cause of action for fraud, pursuant to CPLR 3016 (b), which requires any pleading alleging a cause of action based upon misrepresentation or fraud to state the "circumstances constituting the wrong" in detail. In their opposition, Kreiling/Williams allege that Thames Realty made misrepresentations to the Attorney General and this court that the building in question contains only commercial tenants. However, Kreiling/Williams have failed to allege any misrepresentations that were made to either of themselves, that they relied on those misrepresentations, or that they were injured by those misrepresentations (see e.g. Ozelkan v Tyree Bros. Envtl. Servs., Inc., 29 AD3d 877, 878 [*11][2006] [fraud cause of action requires, among other things, reasonable reliance on the misrepresentation and injury]).[FN9]

Accordingly, Kreiling/Williams' tenth affirmative defense and sixth counterclaim are dismissed.

Predicate Notice

As their eleventh affirmative defense, Kreiling/Williams assert that Thames Realty failed to serve them the proper notice required by law to terminate their tenancy. Thames Realty asserts that it served a 30-day notice of termination in compliance with Real Property Law § 232-a (notice to terminate monthly tenancy). Kreiling/Williams does not dispute that Thames Realty served them with a 30-day notice of termination, as described above. However, they allege that they are rent stabilized tenants, not month-to-month tenants, and assert that the notice failed to meet the requirements for failure to renew a rent stabilized lease, pursuant to Rent Stabilization Code §§ 2524.2-2524.3. Moreover, Kreiling/Williams argue that even if the premises are not subject to rent stabilization, Thames Realty was required to provide them with six months notice, as it had accepted rent from them after the end of the lease period (see Kosa v Legg, 12 Misc 3d 369 [2006]).

As Kreiling/Williams have demonstrated that there is an issue of fact as to whether their apartment is subject to rent regulation, there is a question of fact as to whether the notice served in this case comports with the requirements of the Rent Stabilization Code. There is also a question as to whether Thames Realty was required to serve them with six months notice. Accordingly, this defense is not dismissed.

Covenant of Quiet Enjoyment

Kreiling/Williams' first counterclaim asserts that Thames Realty has "breached the covenant of quiet enjoyment." Thames Realty argues that this claim cannot be maintained because the tenant has not been evicted. "To establish a breach of the covenant of quiet enjoyment, a tenant must show actual or constructive eviction" (34-35th Corp. v 1-10 Indus. Assoc., LLC., 16 AD3d 579, 580 [2005]). "A constructive eviction occurs where the landlord's wrongful acts substantially and materially deprive the tenant of the beneficial use and enjoyment of the leased premises" (Grammar v Turits, 271 AD2d 644, 645-646 [2000]).In this case, Kreiling/Williams are still in possession of the apartment, and have failed to plead any facts indicating that they has been deprived of the beneficial use or enjoyment of the premises. Accordingly, their first counterclaim is dismissed.

Covenant of Good Faith and Fair Dealing

Kreiling/Williams' second counterclaim asserts that Thames Realty has breached their lease as well as the covenant of good faith and fair dealing implied in all contracts. Thames Realty argues that "this claim fails since, in the matter herein, the lease has expired pursuant to its terms." Kreiling/Williams argue, on the other hand, that the lease "in fact continues by virtue of the rent stabilization laws." As Kreiling/Williams have made a colorable claim that the rent stabilization laws apply, their second counterclaim is not dismissed.

[*12]Malice

As a fourth counterclaim, Kreiling/Williams assert that Thames Realty's conduct was "motivated solely by malice or a desire to inflict injury by unlawful or wrongful means as required to force Defendants into surrendering tenancy rights thereby causing Defendants damage."[FN10] In their opposition, Kreiling/Williams do not explicitly address this claim, and doe not explain what legal cause of action is implicated by this counterclaim or what facts would support such a claim. Accordingly, the fourth counterclaim is dismissed (see CPLR 3013).

Racketeer Influenced and Corrupt Organizations Act (RICO)

As a fifth counterclaim, Kreiling/Williams assert that Thames Realty has conspired to use "illegal activities of fraud and false claims to deprive [] others of property." In their answer, Kreiling/Williams elaborate that Thames Realty and unidentified co-conspirators "entered into an agreement, by which Plaintiff agreed to assist the co-conspirators in the removal of tenants so that the Plaintiff and its co-conspirators could empty apartment units of tenants in occupancy" and secure financial gain by increasing the building's sales price while affording the co-conspirators rental units free from rent regulation. Kreiling/Williams allege that, on information and belief, Thames Realty and the co-conspirators have engaged in at least two unlawful acts as part of its racketeering enterprise within the last ten years. Kreiling/Williams further assert that Thames Realty and its principals or members and co-conspirators and other persons have used the United States Postal Service "on several occasions in April, May, June, July and August of 2006 to further their fraudulent activities" of forcing tenants out of the building. Kreiling/Williams allege that Thames Realty "threatened to cause" tenants to suffer loss if they did not relinquish their leaseholds, and that Thames Realty "did cause the tenants to suffer harm."

Kreiling/Williams further assert that Thames Realty and co-conspirators made false filings with the Attorney General, and that they have committed mail fraud "by mailing correspondence to Defendant, other tenants or persons, and the Attorney General in or about April, May, June, July and August of 2006." Kreiling/Williams also allege that Thames Realty and the co-conspirators furthered their racketeering enterprise by asserting false claims against Defendants and other tenants and with the Attorney General's office. Kreiling/Williams say that they have suffered and will suffer financial loss as a result of Thames Realty's conduct, and charges that Thames Realty has violated 18 USC § 1962 (b), (c), and (d). Thames Realty argues on several grounds that Kreiling/Williams' complaint fails to properly plead a civil RICO violation

The RICO statutes were enacted to make it unlawful for someone to earn income from a pattern of racketeering activity to be used to: (1) acquire an interest in, establish or operate an enterprise involved in interstate commerce; (2) acquire or maintain an interest in such enterprise through a pattern of racketeering activity; (3) conduct or participate in the conducting of such enterprise through racketeering activity; and (4) conspire to do any of the foregoing acts [*13](Simpson Elec. Corp. v Leucadia, Inc., 72 NY2d 450, 453 [1988]).[FN11]

Although civil liability may be predicated upon a violation of the RICO statute (see 18 USC § 1964 [c]), civil RICO claims are subject to heightened pleading requirements (Besicorp Ltd. v Kahn, 290 AD2d 147, 151 [2002] [civil RICO claims subject to heightened pleading requirements because RICO claims are the "litigation equivalent of a thermonuclear device"] [internal quotation marks and citations omitted], lv denied 98 NY2d 601 [2002]; see also CFJ Assoc. of NY v Hanson Indus., 274 AD2d 892, 896 [2000]). Kreiling/Williams have failed to meet these heightened standards.

Kreiling/Williams appears to base their RICO claim on mail and wire fraud. However, among other things, their complaint does not specifically identify the allegedly fraudulent statements, or when they were made, or identify those responsible for them "as required under [*14]the heightened RICO pleading requirements" (CFJ Assoc. of NY, 274 AD2d at 896). Kreiling/Williams do provide further details in their opposition, indicating that they are referring to: (1) the June 8, 2006 submission by Thames Realty to the Attorney General which they allege falsely states that the building was empty except for a few commercial tenants; and (2) "false and fraudulent termination notices" sent to Kreiling/Williams. However, the allegations are still bereft of details. For example, Kreiling/Williams "failed to specify what defendants allegedly obtained as a consequence of the fraud . . . and how the purpose of each such mailing fit within defendants' fraudulent scheme. Moreover, the complaint failed to allege how there was reliance on the allegedly fraudulent representation or that such reliance caused [Kreiling/Williams] injury" (Besicorp Ltd., 290 AD2d at 151 [internal citations omitted]). Indeed, as Kreiling/Williams apparently knew that all of the allegedly false misrepresentations were in fact false, it is difficult to understand how they could have relied on any of the alleged misrepresentations. In addition, Kreiling/Williams do not identify any of the alleged co-conspirators. Thus, "[w]ith these allegations subject to a heightened pleading requirement, the lack of particularity in asserting the claim [is] fatal" (id.), and so the RICO counterclaim is dismissed.

Warranty of Habitability

As their seventh counterclaim, Kreiling/Williams assert that Thames Realty "breached the warranty of habitability in failing to maintain the premises in a habitable condition" (see Real Property Law § 235-b). Thames Realty argues that this claim is not properly raised because this action is one primarily for possession and because there is no valid lease in this case. While courts have held that breach of the warranty of habitability is not a defense in a holdover proceeding, the claim has been allowed to provide a defense where, as here, the landlord seeks money for use or occupancy of the premises (see e.g. King Enter. Ltd. v Mastro, 2001 NY Slip Op 40162 [U] [Hous Part, Civ Ct, NY County 2001]; City of New York v Candelario, 156 Misc 2d 330, 332 [App Term, 2d Dept 1993], affd in part and revd in part on other grounds, 223 AD2d 617 [2006]). Moreover, given Kreiling/Williams argument that there is an ongoing lease pursuant to the rent stabilization laws, Thames Realty has failed to establish as a matter of law that there is no valid lease in this case. Accordingly, this counterclaim is not dismissed.

Other Relief

Thames Realty also seeks to order Kreiling/Williams to pay use and occupancy pendente lite, and to pay attorneys' fees pursuant to the lease and as a sanction for raising a frivolous RICO claim. Regarding attorneys' fees, the lease in this case provided that: "If the Tenant shall default in the observance or performance of any term or covenant on Tenant's part to be observed or performed under, or by virtue of, any of the terms or provisions in any article of this lease . . . Owner may immediately . . . perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing, or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations . . . including but not limited to reasonable attorneys' fees, in instituting, prosecuting or defending any action or proceeding, and prevails in any such action or proceeding, then Tenant will reimburse Owner for such sums . . . . If Tenant's lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner as damages."[*15]

As Thames Realty has not established that Kreiling/Williams have defaulted on the lease, and as it has not prevailed in this action, it has not established that it is due attorneys' fees pursuant to the lease at this time.

Thames Realty has also not established that Kreiling/Williams' assertion of the RICO claim was entirely frivolous or undertaken in bad faith, and so the court, in its discretion, declines to award costs or sanctions (see e.g. Broich v Nabisco, Inc., 2 AD3d 474, 475 [2003]; W.J. Nolan & Co., Inc. v Daly, 170 AD2d 320, 321 [1991]).

As to Thames Realty's request for use and occupancy, Kreiling/Williams have raised various defenses, such as failure to register a multiple dwelling and breach of the warranty of habitability, which may affect Thames Realty's right to recover money for use and occupancy of the apartment. Thus, pending the final determination of this action, and without prejudice to either side's mutual legal claims, Kreiling/Williams are directed to deposit with the Clerk of the Court the sum of $1,573.04 per month during the pendency of this action.[FN12]

Kreiling/Williams' Cross-Motion

Summary Judgment on the Affirmative Defenses

That portion of the Kreiling/Williams' Cross-Motion which seeks Summary Judgment on the Affirmative Defenses is denied. As previously discussed herein, the court has found reason to dismiss Kreiling/Williams' first, third, ninth and tenth affirmative defenses and questions of fact as to their second, fourth, fifth, sixth, seventh, eighth and eleventh affirmative defenses.

Consolidation

That portion of the Kreiling/Williams' Cross-Motion which seeks consolidation of the instant action with the two related actions, 47 Thames Realty, LLC v Shillingburg, et al (Index No. 23061/06) and 47 Thames Realty, LLC v Robinson, et al (Index No. 22227/06) is granted to the extent the parties have executed a stipulation, dated June 6, 2007, consenting to consolidation.

Discovery

That portion of the Kreiling/Williams' Cross-Motion which seeks relief pursuant to CPLR 3126 is denied without prejudice to renew. To date, a preliminary conference has not been held in any of the three actions consolidated herein. Accordingly, the court is directing all of the parties to the consolidated action to appear for a preliminary conference on August 1, 2007, 9:30 am, in the Intake Part of this courthouse.

Conclusion

Accordingly, Thames Realty's motion is granted only to the extent that: (1) Kreiling/Williams' first, third, ninth and tenth affirmative defenses are dismissed; (2) Kreiling/Williams' first, fourth, fifth, sixth and eight counterclaims are dismissed; and (3) Kreiling/Williams are ordered to deposit with the Clerk of the Court the sum of $1,573.04 per month for the period commencing August 1, 2006 and continuing during the pendency of this action. Thames Realty's motion is otherwise denied.

Kreiling/Williams' Cross-Motion is denied to the extent that: (1) that portion of the Kreiling/Williams' Cross-Motion which seeks Summary Judgment on the Affirmative Defenses [*16]is denied; (2) that portion which seeks consolidation is granted to the extent that the parties have stipulated to consolidation, and (3) that portion which seeks relief pursuant to CPLR 3126 is denied without prejudice to renew.

The Clerk of Kings County is directed to consolidate the file of Index No. 23061/06 and Index No. 23062/07 into Index No. 22227/07; the pleadings in each action shall stand as the pleadings in the consolidated actions; and the new caption shall read as follow: -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - -X

47 Thames Realty, LLC,

Plaintiff,

- against -Index No. 22227/2006

Ellen Robinson, Don Shillingburg,

Amy Kreiling, Roy Williams,

et al.,

Defendants. -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X

This constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1: The two related actions are 47 Thames Realty, LLC v Shillingburg, et al (Kings County Supreme Court, Index No. 23061/06) and 47 Thames Realty, LLC v Robinson, et al (Kings County Supreme Court, Index No. 22227/06). The referenced cross-motions in those actions were determined by separate decisions of this court dated June 25, 2007.

Footnote 2: One of the leases is for tenant Ellen Robinson, who is the defendant in one of the other suits initiated by Thames Realty, 47 Thames Realty, LLC v Robinson et al. (Kings County Supreme Court, Index No. 2227/06).

Footnote 3: Further, Kreiling/Williams allege that Thames Realty has failed to fully respond to their requests for discovery.

Footnote 4: Thames Realty argues that all of the defenses are deficient as a matter of pleading because they are all "categorically mere conclusions of law, which are overly broad, and fail to provide the Plaintiff with any facts upon which it can defend against these affirmative defenses." Notwithstanding this argument, the adequacy of each such defense shall be examined in turn.

Footnote 5: Waivers of counterclaims are enforceable in summary proceedings because "the character of summary proceedings, which are designed to expeditiously resolve disputes between landlord and tenant, would be undermined if tenants were permitted to litigate complex counterclaims in the context of summary proceedings" (Bomze v Jaybee Photo Suppliers, 117 Misc 2d 957, 958 [1983]; see also e.g. Titleserv, Inc. v Zenobio, 210 AD2d 310, 311 [1994]). However, "the tenant is not deprived of a remedy. The tenant is merely relegated to asserting the cause of action in a separate plenary action" (Titleserv, Inc., 210 AD2d at 311).

Footnote 6: In its reply papers, Thames Realty also argues that the ETPA does not apply because the building in question was renovated after 1974. However, in addition to not raising this argument prior to its reply, Thames Realty has not proven the date the building was substantially rehabilitated for residential use.

Footnote 7: The court, however, upheld the denial of plaintiff-landlord's motion for summary judgment because "questions of fact remain[ed] as to whether the leases between the plaintiff and the defendants were entered into to effect an illegal end" (Gloveman, 18 AD3d at 813). Thus, the court notes that even if the ETPA does not apply to this case, the dismissal of this defense would not necessarily warrant summary judgment in plaintiff's favor as there is also a question here as to whether plaintiff and defendants entered into a lease "to effect an illegal end."

Footnote 8: Thames Realty address this affirmative defense in connection with Kreiling/Williams' third affirmative defense.

Footnote 9: While General Business Law § 349 does not require proof of reliance, a plaintiff must still show, among other things, that a defendant's material deceptive act caused the plaintiff actual injury (see e.g. Stutman v Chemical Bank, 95 NY2d 24, 29 [2000]).

Footnote 10: Thames Realty does not seek to dismiss Kreiling/Williams' third counterclaim.

Footnote 11: 18 USC § 1962 provides:

"(a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. A purchase of securities on the open market for purposes of investment, and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so, shall not be unlawful under this subsection if the securities of the issuer held by the purchaser, the members of his immediate family, and his or their accomplices in any pattern or racketeering activity or the collection of an unlawful debt after such purchase do not amount in the aggregate to one percent of the outstanding securities of any one class, and do not confer, either in law or in fact, the power to elect one or more directors of the issuer.



"(b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.



"(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.



"(d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section."

Footnote 12: Thames Realty also asserts that there are back sums owing on the apartment. However, said claim will not be decided in the absence of a factual hearing.