1 BK St. Corp. v Sykorova
Annotate this CaseDecided on September 4, 2018
Civil Court of the City of New York, New York County
1 BK Street Corp., Petitioner/Landlord,
against
Hana Sykorova, Respondent/Tenant, GINA TUTTLE, "JOHN DOE" and/or "JANE DOE", Respondent/Undertenants.
74439/2014
Heela D. Capell, J.
Recitation, as required by CPLR § 2219(a), of the papers considered in the review of the Petitioner's motion for summary judgment or a default judgment against Respondent/Undertenant Gina Tuttle pursuant to CPLR § 3212, including a possessory judgment, warrant, and money judgment for use and occupancy, as well as Gina Tuttle's cross-motion to dismiss this proceeding, or in the alternative to interpose an answer.
Papers/Numbered
Notice of Motion and Affidavits Annexed 1
Notice of Cross-Motion & Affidavits Annexed 2
Answering Affidavits 3
Replying Affidavits 4
Exhibits
Memorandum of law
Upon the foregoing cited papers, the Decision and Order on this motion and cross-motion is as follows:
On August 4, 2014 1 BK Street Corp ("Petitioner") commenced this non-primary residence holdover proceeding against Hana Sykorova ("Sykorova") with respect to 1 Bank Street, No.2A New York, NY 10014 ("Premises"). Petitioner also named Gina Tuttle ("Tuttle") in the proceeding as a respondent-undertenant. Petitioner alleges that Sykorova, the rent stabilized tenant of record for the Premises, illegally sublet the apartment to Tuttle and that Tuttle actually occupies the Premises.
Prior Illegal Sublet Holdover Proceeding
Petitioner commenced a prior holdover proceeding against Sykorova, based upon an illegal sublet, in September 2013, 1 BK Street Corp v. Hana Sykorova and Sarra S. Mumayiz, [*2]Index Number L & T 79864/13. That proceeding was settled by a two attorney stipulation dated October 30, 2013 in which Sykorova acknowledged that she had cured the illegal sublet on October 9, 2013 and agreed to refrain from subletting the Premises for a one year period. In the event of breach, Petitioner was entitled to restore the proceeding to the calendar for a hearing to determine whether Sykorova breached the stipulation, and for the entry of a judgment and warrant if a breach was found. Petitioner subsequently moved to restore that proceeding to the calendar and for the entry of a judgment and warrant against Sykorova based upon her breach of the stipulation, to wit, that she illegally sublet the Premises to Tuttle on or about November 2, 2013. In that motion, Petitioner also sought to add Tuttle to the proceeding. The motion was resolved to the extent of marking the proceeding off of the court's calendar, which Petitioner represents was for the purpose of commencing this proceeding. Petitioner commenced the instant proceeding in or about August 2014.
The Instant Proceeding
Sykorova appeared in this proceeding by Keith S. Barnett as counsel, who filed an answer on her behalf dated September 5, 2014. Sykorova asserted in the answer that she and Tuttle resided at the Premises together as roommates. Sykorova purportedly changed attorneys, from Keith S. Barnett to Helene Hartig ("Hartig") on January 13, 2015. The only copy of a consent to change attorney form in the court file is annexed to Tuttle's cross-motion, signed by Sykorova, Tuttle and Hartig, and dated January 13, 2015. (Tuttle Ex. D). The signature line for Keith S. Barnett, as outgoing attorney, is unsigned. Mr. Barnett never appeared as counsel for Tuttle in this proceeding.
These ast four years, Petitioner and Sykorova engaged in motion practice, which included Petitioner's discovery motion and subsequent motions to compel discovery. Sykorova eventually provided Petitioner with documents responsive to Petitioner's demands and Petitioner conducted Sykorova's deposition. On May 7, 2018, Sykorova and Petitioner entered into an out of court settlement whereby Sykorova surrendered possession of and all tenancy rights to the Premises ("Surrender Agreement"). (Pet Ex. C). Sykorova entered into the Surrender Agreement without Hartig, or any attorney as a signatory. On or about June 19, 2018, Petitioner filed the instant motion seeking summary judgment, and/or a default judgment against Tuttle. The motion was adjourned to July 10, 2018 for Hartig to file opposition to the motion.
On July 10, 2018 Hartig moved to withdraw as counsel for both Tuttle and Sykorova. Tuttle appeared in court on that date as well. The court granted Hartig's motion to withdraw with respect to Sykorova but noted that the branch of the motion seeking to withdraw as counsel for Tuttle was denied as moot as Hartig did not provide the court with any proof that she represented Tuttle. The court also granted Tuttle's application to adjourn the motion so that she could retain counsel. On July 31, 2018, the court granted Tuttle's second application to adjourn the proceeding, so that she could meet with Mobilization For Justice for potential representation. Tuttle subsequently retained Himmelstein McConnell Gribben, Donoghue & Joseph LLP as her attorneys, who filed the instant cross-motion to dismiss the proceeding, or in the alternative, to file an answer.
Tuttle's Cross-Motion
Dismissal of the Proceeding
Tuttle moves to dismiss this proceeding on the basis that Sykorova's surrender of possession of the Premises, in an out of court agreement, resolves this proceeding. Tuttle argues [*3]that Petitioner is obligated to file a new proceeding against her pursuant to RPAPL § 713, under the theory that she occupies the Premises as a licensee, thus Petitioner can no longer pursue this case against her. Tuttle cites the seminal case of (170 West 85th Street Tenants Association v Cruz, 173 AD2d 338 [1st Dept 1991]) where the court held that after a prime tenant's rights to possession of the premises are extinguished, a landlord is required to make the subtenant a party to the proceeding. Id. at 340. However, in accordance with Cruz, Petitioner commenced this proceeding against both prime tenant Sykorova and subtenant Tuttle. The fact that Sykorova surrendered possession of the Premises during the course of the proceeding does not impede Petitioner's rights to seek possession against Tuttle, who was named in this proceeding from the outset.
The other cases cited by Tuttle in support of her motion to dismiss are also inapposite here. (see e.g. Valley Dream Housing Company v Lupo, 11 Misc 3d 130[A] [App. Term 2nd Dept 2006]) (Absent a surrender from tenant of record, landlord could not proceed against daughter in a licensee holdover proceeding); and (SPVUSV5 1540 Broadway, LLC v Whatley, Drake & Kallas, LLC, 2015 NY Misc. LEXIS 221 at 5-6). While these cases hold that a surrender is required in order to seek possession against an undertenant in a licensee holdover proceeding, the cases do not provide, as Tuttle argues, that Petitioner cannot pursue this case against her where she was originally named as a party to the proceeding. Accordingly, the motion to dismiss is denied.
Amendment of the Answer
Petitioner vociferously opposes the next branch of Tuttle's motion, which seeks to file an answer. Petitioner argues that Tuttle purposefully failed to appear in the proceeding for the past four years and should not be relieved of her default. Petitioner maintains that permitting Tuttle to file an answer would be highly prejudicial as Petitioner actively litigated the proceeding with Sykorova while Tuttle chose not to appear. Tuttle argues that she was not aware that she was required to appear in the proceeding and that she should be permitted to file an answer, albeit four years after the first court appearance. See RPAPL § 743.
The CPLR provides the court with the discretion to compel Petitioner to accept Tuttle's late answer. CPLR § 3012(d) states that "[u]pon the application of a party, the court may extend the time to appear or plead, or compel the acceptance of a pleading untimely served, upon such terms as may be just and upon a showing of reasonable excuse for delay or default." CPLR § 2004 also provides that "except where otherwise expressly prescribed by law, the court may extend the time fixed by any statute, rule or order for doing any act, upon such terms as may be just and upon good cause shown, whether the application for extension is made before or after the expiration of the time fixed." Furthermore, CPLR § 3025(b) asserts that motions to amend pleadings shall be freely granted absent prejudice or unfair surprise to the opposing party. Whether to grant leave to amend a pleading is within the sound discretion of the court so far as such amendment is not palpably lacking in merit. (Davis v South Nassau Community Hosp., 26 NY3d 563, 580 [2014]); (see also Kimso Apts., LLC v Gandhi, 24 NY3d 403 [2014]).
However, "[a]n intentional default is ipso facto inexcusable, and should not be vacated." (Wilf v Halpern, 234 AD2d 154, 154 [1st Dept. 1996]; Cipriano by Cipriano v Hank, 197 AD2d 295 [1st Dept 1994]; Kent v Fearless Realty, Inc., 174 AD2d 499 [1st Dept 1991]; Tucker v Rogers, 95 AD2d 960 [3d Dept 1983] ("Having chosen to take no action to protect his interests, defendant should not now be relieved of his default"). Courts will consider the intentionality of a default when determining whether to permit the filing of a late answer. (see Artcorp Inc v [*4]Citrich Realty Corp., 140 AD3d 417 [1st Dept 2016]).
Tuttle maintains that her failure to appear in the proceeding was not intentional. She asserts that she received notice of the proceeding through Sykorova in the fall of 2014 who "was not specific as to the details" and did not provide her with the court papers. Although Tuttle agreed to pay for the retainer of a new attorney, Hartig, "[i]t was not Ms. Tuttle's understanding that she was being represented by Ms. Hartig, but only that it was expected that the funds she paid would hopefully be returned at the time when the case resolved." (Cross-Motion p. 4-5; Tuttle Aff.). Tuttle explains that she informed Hartig that she was subletting from Sykorova and exclusively occupied the Premises. However, she "was not advised of the nature of the case; she was not advised that she was named as a party to the case; and she was never advised that she had any independent right to answer on her own behalf or to assert defenses." Tuttle further states that Hartig never submitted anything on her behalf in the case and that she was not aware that Sykorova pled they were roommates. Tuttle asserts that she finally appeared in the proceeding after being served with the instant motion. (Cross-Motion p. 4-5; Tuttle Aff.).
Petitioner argues that Tuttle's assertions are incredible and urges the court to deny the motion to amend the answer. Petitioner maintains that the facts here are akin to those in (1234 Broadway LLC v Kai Huang, 44 Misc 3d 1 [App. Term 1st Dept 2014]), a non-primary residence holdover proceeding where the prime tenants surrendered possession of the premises after four years and the occupants only appeared thereafter. In Huang, the Appellate Term reversed the Civil Court and found that the occupants, who acknowledged that they knew of the proceeding for four years, were precluded from filing a late answer. However, in Huang, the court made the salient determination that the occupants did not have a reasonable excuse for their delay based upon an established record. Here, Tuttle's representations that she was not aware that she needed to appear in the proceeding, while challenged by Petitioner, are not contradicted by the record. Rather, the nature of Tuttle's relationship with both Sykorova and Hartig are unclear.
Petitioner argues that the fact that Tuttle signed a consent to change attorney form in this proceeding demonstrates that she knew she was obligated to appear. However, when Hartig moved to withdraw as counsel, Petitioner argued otherwise - that Hartig had never actually appeared on Tuttle's behalf and therefore was trying to stall the proceeding by filing her motion. Sykorova's representations about her relationship with Tuttle also fluctuated during the course of the proceeding. She initially asserted that she and Sykorova were roomates, then, at her deposition, that they were close personal friends, and later that they were in a romantic relationship. Indeed, in her order to show cause to withdraw as counsel, Hartig acknowledges that she was unaware of the true nature of Tuttle and Sykorova's relationship, which compromised her ability to advocate for either of the parties. Given the above, it is possible that Tuttle detrimentally relied on Sykorova and Hartig's guidance with respect to her obligation to appear in this proceeding.
Furthermore, it is undisputed that Tuttle was never represented by Sykorova's former counsel, Keith Barnett. Therefore, signing the consent to change attorney form did not act as a formal appearance in the proceeding. It is also clear from the court file that Hartig never actively litigated the proceeding on Tuttle's behalf. Therefore, unlike Huang, the reasonableness of Tuttle's excuse for the delay in appearing cannot be conclusively determined. Additionally, by moving for summary judgment against Tuttle, Petitioner invited Tuttle to lay bear her proof in opposition, which she has done by filing an answer and opposition to the motion. Alfred E. Mann Living Trust v ETIRC Aviation S.a.r.l., 78 AD3d 137, 142 [1st Dept 2010]); (Johnson v [*5]Phillips, 261 AD2d 269, 270 [1st Dept 1999]).
Based on the foregoing and as courts favor resolution on the merits, the court will permit the filing of Tuttle's late answer as follows: Tuttle's answer shall be deemed served and filed nunc pro tunc, solely to the extent that Tuttle shall be permitted to interpose the fourth affirmative defense of illusory tenancy. The remaining defenses may not be interposed for lack of merit. (Davis v South Nassau Community Hosp., 26 NY3d 563). The first and second affirmative defenses are conclusory denials of receipt of the notice of petition and petition and the predicate notice, which do not sufficiently rebut the properly executed affidavits of service. (see NYCTL 1998-1 Trust v Rabinowitz, 7 AD3d 459 [1st Dept. 2004]). The absence of any facts in support of the defenses precludes Tuttle's ability to contest personal jurisdiction. (see American Sav. & Loan Assn. v Twin Eagles Bruce, Inc., 208 AD2d 446, 447 [1st Dept 1994]). Furthermore, since Tuttle is an undertenant and not the prime tenant, Petitioner was not required to serve Tuttle with the Notice of Nonrenewal. (see 170 West 85th Street Tenants Association v Cruz, 173 AD2d 338 [1st Dept 1991]). Lastly, the court already considered the proposed third affirmative defense, that Petitioner effectuated an out of court settlement with Sykorova, and considered it to be unavailing.
Petitioner's Motion
Landlord's motion seeks an award of summary judgment, along with a judgment of possession, and the issuance of the warrant of eviction forthwith pursuant to CPLR § 3212. Petitioner has established that it is the owner of the subject building pursuant to a certified deed dated July 16, 1992 (Pet Ex. J); the Premises are duly registered with HPD and DHCR (Pet Exs K and L); Sykorova is the rent stabilized tenant of record for the Premises (Pet Exs L and M); the lease between the Petitioner and Sykorova expired (Pet Ex. M); and Sykorova surrendered possession of the Premises on May 7, 2018 (Pet Exs C and I). Tuttle does not dispute any of these facts. Tuttle also concedes that she was placed into possession of the Premises by Sykorova and remains in exclusive possession of the Premises. Moreover, the notice of petition and petition have been properly served and filed with the court. Accordingly, Petitioner has established its prima facie case.
The standard for summary judgment is clearly articulated in CPLR § 3212(b) which provides that "the motion shall be granted if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party." The function of summary judgment is issue finding, not issue determination. (Sillman v Twentieth Century Fox Film Corp., 3 NY2d 395, 404 [1957]). Summary judgment should be granted when the moving party makes a prima facie showing of entitlement to judgment as a matter of law, giving sufficient evidence to eliminate any material issues of fact from the case. (Winegrad v New York University Medical Center, 64 NY2d 851, 853 [1985]). Moreover, "when there is no genuine issue to be resolved at trial, the case should be summarily decided, and an unfounded reluctance to employ the remedy will only serve to swell the Trial Calendar and thus deny to other litigants the right to have their claims promptly adjudicated." (Andre v Pomeroy, 35 NY2d 361, 364 [1974]).
As Petitioner has established its claim to possession, Tuttle bears the burden of producing evidence in admissible form to dispute the claim. (Gonzalez v 98 Mag Leasing Corp., 95 NY2d 124, 129 [2000]); (Ceron v Yeshiva Univ., 126 AD3d 630, 632 (1st Dept 2015]). Indeed, Tuttle is required to "lay bare" affirmative proof that supports her defense of illusory tenancy. (Alfred [*6]E. Mann Living Trust v ETIRC Aviation S.a.r.l., 78 AD3d 137, 142 [1st Dept 2010]); (Johnson v Phillips, 261 AD2d 269, 270 [1st Dept 1999]).
Tuttle's Illusory Tenancy Defense
The tenets of an illusory tenancy are that the prime tenant rents the apartment, for the sole purpose of re-letting it, and profits from the arrangement, or otherwise subverts the Rent Stabilization Law. (see Matter of 333 E. 49th Partnership, L.P. v State of NY Div. of Hous. & Community Renewal, 2018 NY Slip Op 05735 [1st Dept 2018]); (Ogisu Corp, v Allen, 25 Misc 3d 135[A], [App. Term 1st Dept 2009]); (Matter of Partnership 92 LP & Bldg. Mgt. Co., Inc. v State of NY Div. of Hous. & Community Renewal, 46 AD3d 425, 429-430 [1st Dept 2007], affd 11 NY2d 859 [2008]). If an illusory tenancy is found, the subtenant will be afforeded a rent stabilized tenancy. (see Avon Furniture Leasing v Popolizio, 116 AD2d 280, 284 [1st Dept 1984]).
Petitioner does not contest Tuttle's position that Sykorova placed her into possession of the Premises pursuant to a sublease agreement, nor that Sykorova charged Tuttle more than the rent stabilized rent amount. Although Petitioner acknowledges that at her deposition Sykorova described her relationship with Tuttle as one of "roommates" and "partners," Petitioner does not vehemently oppose Tuttle's contentions that she never resided at the Premises with Sykorova. The parties even concede that Tuttle moved into the Premises in or about the beginning of November, 2013. However, Petitioner maintains that an illusory tenancy cannot lie here because Petitioner was not complicit in the arrangement, had no prior knowledge of the arrangement, and actively sought to terminate the arrangement the moment it realized that Tuttle was subletting the Premises.
In regard to an illusory tenancy, though no evidence of collusion between the tenant and landlord is required, the tenant must establish "at least constructive knowledge on the part of the landlord of the subleasing arrangement." (Primrose Mgt. Co. v Donahoe, 253 AD2d 404, 405 [1st Dept 1998]; (Matter of 333 E. 49th Partnership, L.P. v State of NY Div. of Hous. & Community Renewal, 2018 NY Slip Op 05735 [1st Dept 2018]); (388 Broadway Owners, LLC v Salaway, 60 Misc 3d 132[A], 2018 NY Slip Op 51010[U] [App. Term 1st Dept 2018].) In (Matter of 333 E. 49th Partnership, L.P. v State of NY Div. of Hous. & Community Renewal, 2018 NY Slip Op 05735), for example, the court examined whether the landlord "knew or should have known of the subterfuge" between the tenant and subtenant. Id. (Landlord had constructive knowledge of the scheme where the prime tenant leased 22 or 23 apartments in the building for a profit); (See also Primrose Mgt. Co. v Donahoe, 253 AD2d at 405-406). In (Bruenn v Cole, 165 AD2d 443, 449 [1st Dept 1991]), the court held that the landlord's exercise of "dominion or control" over the subject premises was a final factor in determining an illusory tenancy.
The court can also examine whether the landlord derived a substantial benefit from the scheme. (Avon Furniture Leasing v Popolizio, 116 AD2d 280). And, the length of the subtenancy can be a factor in the court's determination of of whether an illusory tenancy has been established. (see 545 Eighth Ave. Assoc., L.P. v Shanaman, 12 Misc 3d 66, 67-68, [App. Term 1st Dept. 2006]) (landlord and subtenant's direct dealings with each other over a ten year period supports an illusory tenancy defense). These courts each considered whether the landlord promptly sought to terminate the illegal subtenancy once it became aware, or should have become aware, of the subterfuge.
The facts with respect to Petitioner's knowledge of Tuttle's presence in the apartment are [*7]undisputed: Petitioner commenced an illegal sublet proceeding in or about September 2013 against Sykorova, which was settled by a two attorney stipulation dated October 30, 2013. In that stipulation Sykorova asserted that she had cured a previous illegal sublet on October 9, 2013 and agreed not to "sublet or assign the Premises without the landlord's express permission or in contravention of the law or the lease through October 31, 2014." Accordingly, when its attorneys entered into the stipulation on October 30, 2013, Petitioner believed that Sykorova was not subletting the Premises. Petitioner moved to restore that proceeding to the calendar by motion on February 7, 2014, alleging that Sykorova had breached the stipulation by again subletting the premises, this time to Tuttle. Attached to Petitioner's motion is an affidavit from Sykorova dated March 14, 2014 which acknowledges that Gina Tuttle began residing at the subject premises in November of 2013, a fact that Gina Tuttle confirms in the instant cross-motion. That proceeding appears to have been marked off calendar later that same year, in anticipation of Petitioner commencing the instant proceeding.
It is evident to this court that when Petitioner realized that Sykorova had breached the stipulation in the prior proceeding, it immediately restored the proceeding to the calendar and sought to add Tuttle as a party. Petitioner marked that case off of the calendar in order to commence the instant non-primary residence holdover proceeding against Sykorova because it determined, through the illegal sublet holdover proceeding, that Sykorova was not occupying the Premises as her primary residence. Petitioner then commenced this proceeding and named Tuttle as an undertenant.
Here, as Petitioner actively sought to terminate Sykorova's tenancy the moment once it discovered the arrangement between Tuttle and Sykorova, a finding of "illusory tenancy" cannot lie. Indeed, Petitioner commenced the prior litigation against Sykorova for allegedly illegally subletting her apartment even before Sykorova placed Tuttle into possession of the Premises, and litigation continued during the entirety of Tuttle's occupancy of the Premises. Unlike the cases cited above, Petitioner was not complicit in Sykorova's scheme to sublet the Premises, nor did Petitioner delay in commencing a holdover proceeding against her or Tuttle. (see e.g.Matter of 333 E. 49th Partnership, L.P. v State of NY Div. of Hous. & Community Renewal, 2018 NY Slip Op 05735 [1st Dept 2018]); (545 Eighth Ave. Assoc., L.P. v Shanaman, 12 Misc 3d 66); (but see Vesky v Antunez, 191 Misc 2d 246, 247 [App. Term 1st Dept 2002]) (The illusory tenancy defense was not established where the subtenant paid rent directly to the tenant and concealed the subtenancy from the landlord).
In support of her defense, Tuttle states generally that the building staff knew of her occupancy of the Premises. However, mere conclusions, expressions of hope, or unsubstantiated allegations or assertions are insufficient to defeat summary judgment. (Amatulli v Delhi Constr. Corp., 77 NY2d 525, 533, [1991]); (McGinley v Mystic W. Realty Corp.,117 AD3d 504, 505 [1st Dept 2014]), appeal withdrawn, 23 NY3d 1058 (2014). Furthermore, Petitioner does not dispute that it knew of Tuttle's occupancy of the Premises shortly after she moved in, and in fact sought to add her to the prior proceeding on that basis. "The illusory tenant doctrine can be best understood as a judicial attempt to accomplish what is fundamentally fair." (270 Riverside Dr., Inc. v Wilson, 195 Misc 2d 44, 50 [Civ Ct, New York County 2003].) Here, where Tuttle has not demonstrated that Petitioner has unclean hands, a finding of illusory tenancy would unjustly and impractically force Petitioner into a landlord-tenant relationship with Tuttle.
Accordingly, Tuttle has failed to establish that any issues of fact exist with respect to her claim of illusory tenancy that would require a trial. As all questions of fact have been [*8]eliminated, Petitioner is entitled to an award of summary judgment. The motion is granted to the extent of awarding Petitioner a judgment of possession against Gina Tuttle, along with the forthwith issuance of the warrant of eviction. Execution of the warrant is stayed for thirty days after service of a copy of this decision and order upon Tuttle's attorneys.
The branch of Petitioner's motion seeking a money judgment for use and occupancy is granted to the extent of adjourning the proceeding to October 15, 2018 at 2:30 P.M. in Part H, Room 523 for a pre-hearing conference regarding the amount of use and occupancy due to Petitioner. Any relief requested by Petitioner and not addressed in this decision is denied as moot, and the proceeding is dismissed without prejudice against "John Doe" and "Jane Doe."
Tuttle's cross-motion is granted to the limited extent provided above and otherwise denied.
This constitutes the decision and order of this Court.
Dated: September 4, 2018
New York, New York
__________________________
HON. HEELA D. CAPELL
J.H.C.
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