1557 Realty Corp., LLC v Reiff

[*1] 1557 Realty Corp., LLC v Reiff 2008 NY Slip Op 52475(U) [21 Misc 3d 1141(A)] Decided on December 9, 2008 Civil Court Of The City Of New York, New York County Kraus, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 9, 2008
Civil Court of the City of New York, New York County

1557 Realty Corp., LLC, Petitioner-Landlord,

against

David Reiff, Respondent-Tenant.



L & T 73614/08



GREEN & COHEN, P.C.

Attorneys for Petitioner

BY: MICHAEL COHEN, ESQ.

319 East 91st Street - Professional Suite

New York, NY 10028

(212) 831-4400

MFY LEGAL SERVICES, INC

Attorneys for Respondent

JON BURKE ESQ., Of Counsel299 Broadway - 4th Floor

New York, New York 10007

Sabrina B. Kraus, J.

BACKGROUND

This summary non-payment proceeding was commenced by 1557 Realty Corp., LLC ("Petitioner") and sought to recover possession of Apt. 4B at 1557 SECOND AVENUE , NEW YORK, NEW YORK 10028 ("Subject Premises") based on allegations that DAVID REIFF ("Respondent"), the rent-stabilized tenant of record of the SRO unit owed $4975.00 in rental arrears through June 2008. Respondent paid the exact amount sought in the petition, on the same date that the notice of petition was filed.

Incredibly, another six months of litigation followed.

Respondent, after satisfying the petition amount, moved for dismissal of the proceeding and sanctions. The Motion Court issued a decision on October 17, 2008, granting the motion to dismiss as unopposed [FN1], and granting the balance of the motion to the extent of setting the matter down for a hearing on November 13, 2008 in Part E at 9:30 a.m..

On November 13, 2008, Respondent made an application for the matter to be referred back to the Motion Court for the hearing. The Motion Court exercised its' discretion to decline to accept the referral of the hearing.[FN2]

While both parties' attorneys had checked in on November 13, 2008, after being advised that the Motion Court had declined referral of the matter, Respondents made an application for the balance of the motion to be marked submitted, the Court agreed to mark the matter [*2]submitted and reserved decision.

After reviewing the papers later in the day, the Court learned that in fact there was no remaining portion of the motion to be determined, other than to proceed with the hearing that had been scheduled pursuant to the October 17, 2008 decision of the Motion Court.

The Court rescheduled the hearing, on consent of both parties, for November 19, 2008, in Part S at 9:30 a.m.. Respondent defaulted in appearing, and based on the default the Court issued a decision declining to award any sanctions or costs against Petitioner and its counsel.

Respondent subsequently moved to vacate its default, which motion was granted on consent on December 1, 2008, and the hearing was rescheduled for December 2, 2008 at 2:15 p.m. After the conclusion of the hearing the Court reserved decision.

PRIOR PROCEEDING INDEX NO. 82672/07

At the December 2, 2008 hearing, on consent of both parties, the Court took judicial notice of the contents of the file of this proceeding, as well as a prior proceeding between the parties under Index Number 82672/07.

Index No. 82762/07 was a non payment proceeding commenced by Petitioner on or about August 2007. Both parties were represented by the same counsel in the prior proceeding.

On November 29, 2007, the parties settled the proceeding pursuant to a stipulation. Pursuant to the stipulation, Respondent withdrew his claim for an abatement and agreed to pay $3795.00 by January 18, 2008, representing arrears acknowledged due through the date of the stipulation, plus current rent which would come due between November 29, 2007 and January 18, 2008. Respondent agreed that no repairs were needed in the Subject Premises.

On February 26, 2008, Petitioner moved to restore the proceeding to the calendar, as Respondent had defaulted on its obligations under the November 29, 2007 stipulation.

On March 18, 2008, the parties entered into a stipulation resolving the motion. Pursuant to the stipulation, Respondent consented to the entry of a final judgment in the amount of $2995.00, as all rent due through March 15, 2008. Issuance of the warrant was to be forthwith, and execution was stayed through April 17, 2008 for payment. The stipulation did not contain a current rent provision.

On April 9, 2008 Petitioner applied for a warrant.

On April 16, 2008 Respondent sent a check for $2995.00 in full satisfaction of the March 18, 2008 stipulation, which Petitioner acknowledged receiving on April 17, 2008. Petitioner did not cash the check.

Apparently, Petitioner's counsel took the position that despite receipt of that check it was still entitled to execute on the warrant of eviction, based on Respondent's failure to pay the current rent that had accrued between March 15, 2008 and April 16, 2008.

On April 18, 2008, Respondent's counsel sent a letter to Petitioner's counsel specifically warning that, as there was no current rent provision in the stipulation, the judgment had been satisfied, and there was no basis for Petitioner to execute on the warrant of eviction.

On April 28, 2008 the court signed the judgment, pursuant to the March 18, 2008 stipulation, and on April 29, 2008 the warrant of eviction issued. On May 20, 2008 Respondent was served with a Marshall's notice.

On or about June 5th, 2008 Respondent moved for sanctions, based on the above events, as well as events in prior litigation between the parties going back to 2006. Petitioner cross moved for sanctions. On June 5th, 2008, the parties entered into a stipulation settling the motion.

The stipulation provided that Respondent's motion for sanctions was withdrawn, in [*3]consideration for a $330.00 rent credit, which was to be applied to rent due for the period subsequent to March 15, 2008. The stipulation also provided that Respondent was to reissue a check for the $2995.00, on or before June 30, 2008. It was acknowledged that payment of the $2995.00 was for all rent due through March 15, 2008, and that Respondent had timely tendered payment of same in accordance with the parties March 18, 2008 stipulation. The stipulation did not specify any specific remedy in the event Respondent failed to issue a replacement check by June 30, 2008.

Petitioner's cross motion for sanctions was denied as moot.

SCOPE OF THIS HEARING

The parties do not agree as to the scope of the hearing that was ordered pursuant to October 17, 2008 decision. Respondent argued that the decision had conclusively determined that Petitioner and its attorneys were to be sanctioned, and that the only issue for this Court to determine at the hearing was the amount of attorneys fees, costs, and sanctions to be awarded.

Petitioner took the position that it was within this Court's discretion to determine, at the conclusion of the hearing, that no sanction was appropriate. For the reasons stated below, the Court agrees with Petitioner's interpretation of the October 17, 2008 decision.

22 N.Y.C.R.R. 130-1.1(a) provides that its is within a court's discretion whether to award a party costs, attorneys fees or financial sanctions as a result of frivolous conduct.

Moreover, pursuant to 22 N.Y.C.R.R. 130-1.1(d) only where the issue of sanctions is raised on the court's own initiative is the court required to afford the party against whom sanctions are sought a "reasonable opportunity to be heard". Where sanctions are sought by motion from an adversary, the party's opportunity to be heard is deemed satisfied by the opportunity to address the issue in the motion papers, and be heard on the return date of the motion. Minister, Elders and Deacons of the Reformed protestant Dutch Church of the City of New York v. 198 Broadway, Inc., 76 NY2d 411(1990); Curtis v. Scherer, 261 AD2d 158 (1st Dept., 1999).

Finally, it has been held improper to bifurcate the issue of finding behavior sanctionable, and require that a different judge of concurrent jurisdiction determine the amount of the sanction. Bruckner v. Jaitor Apartments Co., 147 Misc 2d 796 (1990).

This holding is based on the statutory requirements governing the elements that must be included in decision finding conduct sanctionable. 22 N.Y.C.R.R. 130-1.2 provides in pertinent part: The court may award costs or impose sanctions or both only upon a written decision setting forth the conduct on which the award or imposition is based, the reasons why the court found the conduct to be frivolous, and the reasons why the court found the amount awarded or imposed to be appropriate.

Id. "The clear import of the Rule is that the Judge who determined the sanctions be imposed also fix the amount of the sanction and that this be set forth in one written decision. Under this Rule, the decision must be in writing and must contain all three findings, namely, the conduct found to be frivolous, the reasons therefor, and the rationale to sustain the appropriateness of the amount awarded or imposed." Bruckner, supra at 800. [*4]

Given the foregoing, this Court holds that the decision of October 17, 2008 setting the matter down for a hearing, to allow Petitioner an opportunity to be heard, in conjunction with the Motion Court's exercise of its discretion in declining referral of the actual hearing, can only be interpreted to mean that the Motion Court found a presumption of frivolous conduct based on the motion papers submitted, but was reserving a conclusive determination on the issue until after the hearing was conducted, and Petitioner and its counsel were afforded an opportunity to be heard.

To hold otherwise would be to interpret the Motion Court's decision as depriving this Court of exercising its own discretion in addressing the issue of sanctions, and would be contrary to the rules governing what must be included in a written decision determining that a sanctioning is warranted..

FACTS OF THIS PROCEEDING

On June 10th, 2008, Petitioner issued the rent demand that served as a predicate for this proceeding. Pursuant to the testimony of Petitioner's attorney, Michael Cohen Esq., at the December 2, 2008 hearing, the rent demand was prepared by a paralegal no longer employed by his office. The rent demand is signed by Petitioner's agent Mark Mentovai.

The predicate notice demanded payment of $4975.00 for rent pursuant to an attached schedule "A". On the bottom of the rent demand, in handwriting identified to be that of the paralegal, was written "Including the $2995 from the 82672/07 stipulation, before subtracting the credit of $330." Attached as Schedule "A" to the rent demand was a rent history from Petitioner dating back to April 1, 2006.

It is not disputed by Petitioner that pursuant to the terms of the June 5th, 2008 stipulation in Index No. 82672/07, Respondent had until June 30, 2008 to pay the $2995.00 by submitting a replacement check. Therefore, $2995.00 of the $4975.00 was prematurely included in the predicate notice.

The premature inclusion of this sum in the predicate notice is the only conduct by Petitioner or its counsel that can be considered improper in this proceeding.

The rent demand was served by conspicuous place service on Respondent on June 16, 2008. On June 23, 2008 the petition was filed, and the petition and notice of petition were served on Respondent on June 26, 2008 by conspicuous place service.

On June 27, 2008 the notice of petition and affidavit of service were filed.[FN3] On that same day, Respondent met with his attorney for over one hour to discuss the proceeding. At the end of said meeting Respondent, under advice of counsel decided to pay the entire amount sought in the petition. Respondent's counsel sent a letter to Petitioner's counsel dated June 27, 2008, enclosing a check made payable to Petitioner for the full $4975.00 sought in the petition. The letter referenced both the index number of the current proceeding, as well as the index number of the prior proceeding, and offered said sum in full satisfaction of both cases. In the letter, counsel for Respondent further stated that "payment is tendered without prejudice to Mr. Reiff's right to move for sanctions, contempt, or any other relief he may deem appropriate, against you, your [*5]firm, or your client, in connection with either Index L & T 82672 or L & T 73614/08."

After satisfying all amounts due, Respondent engaged in motion practice in both proceedings. On or about July 17, 2008, Respondent moved for criminal contempt, civil contempt, and fines as against Petitioner and its attorneys under Index No. 82672/07. This motion was denied based on improper service.

Respondent then inexplicably moved for dismissal of the instant proceeding, based on the alleged defect in the rent demand, after having satisfied the petition in full. But for Respondent's decision to make said motion, there would have been no litigation in this proceeding, as the petition had been satisfied. Respondent's motion also sought sanctions, and to said extent is the subject of this hearing.

In determining whether sanctions are appropriate in this proceeding the Court has considered in detail the entire litigation in Index No. 82672/07. However, the parties entered into a stipulation of settlement, which was so ordered in that proceeding on June 5, 2008. The stipulation addressed all of the same alleged sanctionable behavior that Petitioner and its counsel were accused of through said date, and Respondent accepted and the Court approved in full satisfaction of said claims a rent credit of $330.00.

Thus, while the Court has taken the history of said proceeding into account, the Court does not find it appropriate to impose any further monetary sanctions on Petitioner or its attorneys based on any conduct occurring between the parties through and including June 5, 2008..

That leaves only the issue of whether the service of the rent demand and the petition in this proceeding was frivolous conduct by Petitioner and or its counsel such as to warrant imposition of sanctions.

APPLICABLE LAW

Pursuant to 22 N.Y.C.R.R, 130-1.1:

conduct is frivolous if:

(1) it is completely without merit in law ...;

(2) it is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or

(3) it asserts material factual statements that are false.

Additionally, the rules require that the court consider " ...the circumstances under which the conduct took place, including time available for investigating the legal or factual basis of the conduct, and whether or not the conduct was continued when its lack of legal or factual basis was apparent, should have been apparent, or was brought to the attention of counsel or the party." Id.

In this case, the Court unquestionably finds that to the extent the predicate notice prematurely sought the amount due from the previous proceeding, it was not an intentional act by counsel, but rather an error from not paying sufficient attention to detail to the prior stipulation, the preparation of the notice and subsequent pleading. This conclusion is soundly supported by the fact that the three day demand, on its face, acknowledged that $2995.00 of the [*6]arrears sought was from the parties' stipulation pursuant to Index No. 82672/07, and that pursuant to said stipulation, Respondent was entitled to a credit of $330.00.

As the stipulation in the prior proceeding did not specify a remedy in the event of a default, the amount could have properly been subject to a subsequent proceeding. Counsel's error was in overlooking the fact that Respondent had an additional 20 days to submit the $2995.00 in arrears pursuant to the parties' June 5, 2008 stipulation.

In addition to not being an intentional or malicious act, the three day demand can not be said to have been completely frivolous or without merit at law. In fact, at the time the demand was issued, there were arrears totaling $4975.00. Respondent's weekly rent is $165.00. Aside from the $2995.00 in arrears that Respondent was entitled to an additional 20 days to pay, Respondent had defaulted in his obligations on the payment of rent for an additional 12 weeks. Respondent admittedly had no defense to the nonpayment of said funds.

Nor did Respondent, at any time prior to satisfying the petition in its entirety, raise any objection to the defective demand, ask the Petitioner not to proceed with a petition or even call the error to the attention of Petitioner's counsel. The first time Respondent raised any objection to the defect in the demand was at the time he submitted payment in full pursuant to said demand, and then the objection was only raised to preserve his ability to seek sanctions, contempt and attorneys' fees.

The appropriate test in determining the adequacy of a predicate notice is reasonableness under the circumstances. Hughes v. Lenox Hill Hosp., 226 AD2d 4 (1st Dept., 1996), lv denied in part 90 NY2d 829 (1997). A proper rent demand has been held to require to state the periods applicable as well as a good faith approximation of the sums due for said period. Schwartz v. Weiss-Newell, 87 Misc 2d 558 (1976). The Motion Court did not directly rule on whether the rent demand was so defective as to require dismissal of the underlying proceeding. Rather, the Motion Court held that the motion was granted without opposition, and that the dismissal was with prejudice as Respondent had admittedly paid the entire sum sued for.

This Court finds that the defect in the demand was not so severe that it would have otherwise required the dismissal of the proceeding or been an act that was completely without merit in law. The inclusion of improper sums in a rent demand is no longer considered a jurisdictional defect preventing the substantive determination of the entire claim at trial. See e.g. Brusco v. Miller, 167 Misc 2d 54 (App. Term, 1st Dept., 1995); 501 Seventh Ave. Associates, LLC v. 501 Seventh Ave. Bake Corp., 7 Misc 3d 137 (A) (App. Term, 1st Dept., 2005)(dispute over proper amount due based on interpretation of prior stipulation did not constitute defect in demand requiring dismissal); John Washington, Ltd. v. Gulbreath, 171 Misc 2d 337 (App. Term, 2nd Dept., 1997)(assuming arguendo that $1,343.78 out of $3,649.22 was not properly included in demand, demand was still valid as to balance).

The Court further finds that Respondent was in no way confused by the demand, and in fact elected to pay the amount sought rather than litigate over the defect.

Additionally, despite the fact that Respondent did not incur any actual charges as far as legal fees are concerned in this proceeding, Respondent requested that this Court assess a total of $7,609.84 against Petitioner and its attorneys for costs, sanctions and attorneys' fees. In considering this request, the Court notes that other than the initial meeting at which Respondent and his counsel decided to submit payment in full pursuant to the demand, the entire amount of attorneys fees and costs sought by Respondent in this proceeding were unnecessary and only "incurred" out of Respondent's desire to proceed on the issue of sanctions. [*7]

Given that the Court finds that Petitioner's conduct was not completely without merit in law, that it was not taken to delay or prolong the litigation or to harass Respondent, and that no one brought the defect to Petitioner's attention prior to paying the sum in full, the Court finds that Petitioner's conduct in this proceeding does not merit any sanction being imposed.

CONCLUSION

Based on the forgoing, the Court finds that Petitioner's conduct in this proceeding was not frivolous as defined by 22 N.Y.C.R.R 130-1.1 and thus awards no sanctions, attorneys' fees or costs against Petitioner or its attorneys, after conclusion of the hearing.

This constitutes the decision and order of this Court.

Dated: New York, New YorkDecember 9, 2008Hon. Sabrina B. Kraus

To:GREEN & COHEN, P.C.

Attorneys for Petitioner

BY: MICHAEL COHEN, ESQ.

319 East 91st Street - Professional Suite

New York, NY 10028

(212) 831-4400

MFY LEGAL SERVICES, INC

Attorneys for Respondent

JON BURKE ESQ., Of Counsel299 Broadway - 4th Floor

New York, New York 10007 Footnotes

Footnote 1: Petitioner's counsel submitted an affirmation in opposition stating he had no opposition to the proceeding being discontinued as the petition had been satisfied.

Footnote 2: The motion was originally returnable in Part E. The Judge who issued the October 17, 2008 decision was no longer assigned to Part E. This Court was assigned to cover Part E on the return date in the absence of Judge Lebovits who is assigned to Part E for this term.

Footnote 3: Petitioner never applied for a default judgment in this proceeding nor took any action to pursue this proceeding after the notice of petition was filed.