626 EAST STREET HOUSING DEVELOPMENT FUND CORP v. COLLINS (2000)

In this holdover proceeding, petitioner 626 East 9 Street Housing Development Fund Corp. (“HDFC” or “petitioner”) moves for an order as follows:

1) pursuant to CPLR § 408, granting petitioner leave to conduct an examination before trial (“EBT”) of respondents Richard Collins (“Collins”) and William Connell (“Connell”) and for production of certain documents set forth in Exhibit “H” to the motion;  and

2) pursuant to CPLR § 3211(b), dismissing and/or striking all of respondents' affirmative defenses.1

Respondents oppose the motion and cross-move for an order as follows:

1) pursuant to CPLR § 3025(b), granting respondents leave to amend their answer in the form annexed as Exhibit “1” to the cross-motion;  and

2) pursuant to CPLR § 408, granting respondents limited disclosure of petitioner.

Both the motion and cross-motion are consolidated herein for disposition.

BACKGROUND

Petitioner is a low-income housing corporation organized pursuant to Section 407 of the Private Housing Finance Law. The HDFC issued shares to Collins corresponding to Apartment 1R located at 626 East 9th Street, New York, New York (“subject premises”).  Collins is also allegedly the proprietary lessee of the subject premises pursuant to a proprietary lease issued on the same date.²  Petitioner alleges that Connell is merely an occupant who possesses no tenancy rights.   However, Collins alleges that Connell is the actual tenant of record of the subject premises.

On or about November 23, 1999, petitioner served respondents with a Notice to Cure advising them that Collins was in violation of ¶ 14(b) of proprietary lease because he did not occupy the subject premises as his primary residence.   Petitioner further advised respondents that “․ pursuant [to] ¶ 31(e) of the proprietary lease you are hereby required to cure said default on or before December 31, 1999, such date being at least thirty (30) days after service of this notice on you by certified mail, return-receipt requested pursuant to ¶ 27 of the proprietary lease.”  (Emphasis added.)   By Notice of Termination dated January 7, 2000, petitioner terminated respondents' tenancy effective January 31, 2000.

Petitioner then commenced this holdover proceeding to recover possession of the subject premises.   Respondents interposed an answer, inter alia, containing defenses that Connell “․ is the lawful owner of the apartment [subject premises] ․ based upon the doctrine of adverse possession ․” and Collins cured the default “within the period provided for in the proprietary lease and the notice to cure.”  (See, Answer at ¶ 17 & 18).

MOTION TO DISMISS

 It is well settled that in determining a motion to dismiss pursuant to CPLR § 3211, the courts must liberally construe the pleadings, accept the facts as alleged to be true and interpret them in light most favorable to the non-movant.   See, Leon v. Martinez, 84 N.Y.2d 83, 614 N.Y.S.2d 972, 638 N.E.2d 511 (1994).

ISSUES

This motion presents, inter alia, the following two (2) unique and seemingly paradoxical issues:

1) Can a tenant rely on a lease provision that provides for a cure of a default in not occupying the subject premises as his primary residence, notwithstanding the legion of case law that holds that non-primary residence cannot be cured?

2) Can an alleged occupant and/or subtenant raise an affirmative defense of adverse possession in the context of a holdover proceeding even though the shares and proprietary lease were issued to, and continue to be held by, the alleged tenant of record?

Notice to Cure

In a rent-regulated setting, courts have long held that a tenant has no right to cure non-primary residence.   See 125 East 31st Street Realty Co. v. Watts, N.Y.L.J., Nov. 27, 1987, p. 14, col.   1 (App. Term 1st Dep't);  Duell v. Sasaki, N.Y.L.J., Feb. 23, 1987, p. 15, col.   1 (App. Term 1st Dep't).   This is so because “․ implicit in the regulatory scheme ․ is that the dwelling unit will remain in continuous use as a primary residence.”  Hughes v. Lenox Hill Hosp., 226 A.D.2d 4, 15, 651 N.Y.S.2d 418 (1st Dep't 1996).

 Notwithstanding the above, Collins wishes to avail himself of the cure period provided in ¶ 31(e) of the proprietary lease.   However, the HDFC argues that Collins is not entitled to cure the lease violation of ¶ 14(b) which requires Collins to occupy the subject premises as his primary residence.   Petitioner compares this situation to the line of cases in which courts have held that a rent-regulated tenant who sublets at an unlawful profit forfeits the right to cure the otherwise curable sublet breach.   See, Continental Towers Limited Partnership v. Freuman, 128 Misc.2d 680, 494 N.Y.S.2d 595 (App. Term 1st Dep't 1985);  Golden Properties v. Knox, N.Y.L.J., May 13, 1998, p. 29, col. 1 (Civ.Ct. N.Y. Co.).

Petitioner's argument is unavailing.   While petitioner may be unhappy with the express terms of the proprietary lease, petitioner may not unilaterally withdraw those rights provided for in the proprietary lease that the parties negotiated.   In other words, respondents are entitled to enjoy the “benefit of the bargain” that they struck with petitioner.

 Even in a rent-regulatory setting, the parties may negotiate terms of a lease that provide a tenant with greater rights than are otherwise required by law.  Minick v. Park, 217 A.D.2d 489, 629 N.Y.S.2d 754 (1st Dep't 1995) and Waring Barker Co. v. Santiago, N.Y.L.J., January 23, 1998, p. 25, col. 1 (App. Term 1st Dep't) illustrate this point.

In Minick v. Park, supra, the lease required the landlord to give the tenant a six (6) month notice of termination in order for the landlord to obtain possession of the rent-stabilized apartment for his own personal use and occupancy even though it was not statutorily required.   The landlord argued that Rent Stabilization Code (9 NYCRR) § 2524.2(c)(3) which required lesser notice of not less than 120 days or more than 150 days (“Golub Notice”) prior to lease expiration controlled.   The Appellate Division resoundingly rejected the landlord's argument holding that “․ the statutory scheme simply establishes the minimum rights to be accorded tenants, and does not preclude a contract that gives a tenant greater rights.”  (Emphasis added).  Id., at 490, 629 N.Y.S.2d 754.

Similarly, in Waring Barker v. Santiago, supra, the lease required the landlord to serve a notice to cure prior to terminating the tenancy upon the ground of “objectionable conduct.”   The landlord did not serve a notice to cure, but relied on Rent Stabilization Code § 2524.3(b) which does not require a landlord to serve a notice to cure in a nuisance holdover proceeding.   The Appellate Term also rejected the landlord's argument based on the Appellate Division's holding in Minick v. Park, supra.

As such, Collins may rely on ¶ 31(e) of his proprietary lease which gives him an opportunity to cure his default.³  Accordingly, this Court denies the branch of petitioner's motion to strike respondents' second affirmative defense.

ADVERSE POSSESSION

 Generally, adverse possession is a common law doctrine that extinguishes the rights of an owner to property.   This doctrine is not limited to the recovery of real property, but also necessarily relates to possession of a cooperative apartment.   See, Deering v. 860 Fifth Avenue Corp., 220 A.D.2d 303, 634 N.Y.S.2d 674 (1st Dep't 1995).   Specifically the possession must be:

1) hostile and under claim of right;

2) actual;

3) open and notorious;

4) exclusive;  and

5) continuous.

See, Belotti v. Bickhardt, 228 N.Y. 296, 302, 127 N.E. 239 (1920);  Brand v. Prince, 35 N.Y.2d 634, 364 N.Y.S.2d 826, 324 N.E.2d 314 (1974).   Of course, the adverse possessor must be in continuous possession for the statutory period of ten (10) years.   See, RPAPL ¶ 501, et seq.;   CPLR § 212(a).

 “When possession is permissive in its inception, adverse possession will not arise until there is a distinct assertion of a right hostile to the owner.” Perez v. Perez, 228 A.D.2d 161, 163, 644 N.Y.S.2d 168 (1st Dep't 1996) (Emphasis added).   In addition, where a party recognizes that possession belongs to another party, the required element of hostility under claim of right cannot be demonstrated.  MAG Associates, Inc. v. SDR Realty, Inc., 247 A.D.2d 516, 669 N.Y.S.2d 314 (2d Dep't 1998);  Dittmer v. Jacwin Farms, Inc., 224 A.D.2d 477, 637 N.Y.S.2d 785 (2d Dep't 1996);  The Manhattan School of Music v. Solow, 175 A.D.2d 106, 571 N.Y.S.2d 958 (2d Dep't 1991);   Klein v. Lowy, 265 A.D.2d 380, 697 N.Y.S.2d 80 (2d Dep't 1999).

 In this case, petitioner issued Collins the shares allocated to the subject premises.   Collins admits that Connell has continuously occupied the subject premises with his permission.   Specifically, Collins stated that “․ he gave [his] apartment and [his] shares in the proprietary lease [sic] to Will Connell, Jr. shortly after he moved into that apartment ․ [and] informed the officers of the Tenant's Association of [his] desire at that time.   After that meeting and at other times I repeated my wish that Will Connell, Jr. be the shareholder of record to your board verbally and in writing, to no avail.”  (Exhibit G to motion.)   In addition, petitioner has only permitted Connell to vote by presenting Collins' proxy at an annual shareholder meeting.

Based on this record, it is clear that respondents are attempting to obtain a declaration from this Court that Connell is the tenant of record and is entitled to possession of the subject premises even though the shares and proprietary lease were issued to, and continue to be held by, Collins.   In essence, respondents are affirmatively challenging the “ownership” interest in the subject premises, not the “landlord-tenant relationship.”   While respondents may challenge petitioner's denial to transfer the shares to Connell or to recognize him as the tenant of record, such relief would be appropriate in another forum.   In other words, this Court lacks jurisdiction to decide respondents' disguised declaratory judgment action.⁴

 Accordingly, this Court grants the branch of petitioner's motion to strike respondents' first and sixth ⁵ affirmative defenses without prejudice to commencing the same in proper forum.

Laches

 Respondents' laches defense fails to state a claim.   Indeed, ¶ 26 of the proprietary lease contains an explicit no-waiver clause.   See, Kev Realty Co. v. Goldfarb, N.Y.L.J., November 18, 1993, p. 29, col.   6 (App. Term 1st Dep't);  Rose Associates v. Weisenthal, N.Y.L.J., May 16, 1988, p. 14, col.   1 (App. Term 1st Dep't).

Accordingly, this Court strikes respondents' seventh affirmative defense.

Discovery

 It is beyond cavil that a party moving for leave of court to obtain pre-trial disclosure in a summary proceeding must demonstrate “ample need” for disclosure which must be carefully tailored so as to clarify the disputed facts.   See, CPLR § 408;  New York University v. Farkas, 121 Misc.2d 643, 468 N.Y.S.2d 808 (Civ.Ct., N.Y.Co.1983).

 In this case, it is undisputed that Collins has not resided in the subject premises for more than ten (10) years.   The only disputed fact is whether Collins cured the default “․ within the period provided for cure in the proprietary lease and the notice to cure.”  (See, Answer at ¶ 18).   Thus, there is no need for production of documents concerning Collins' non-primary residence prior to the alleged cure.

Accordingly, this Court grants petitioner's motion to the extent of directing Collins to appear for an examination before trial on June 12, 2000 at 2 P.M. in petitioner's counsel's office or at another mutually convenient time and place as agreed to in writing by counsel for the parties.

CROSS–MOTION

 It is well-settled that a motion to amend a pleading should be liberally granted unless the rights of a party are substantially prejudiced.   CPLR § 3025(b).   However, a motion to amend must be supported by an affidavit from an individual with personal knowledge of the facts of the proceeding especially where the movant seeks to include additional defenses (i.e., fraud and misrepresentation).   See, Clark v. Foley, 240 A.D.2d 458, 658 N.Y.S.2d 429 (2d Dep't 1997) leave to appeal dismissed 91 N.Y.2d 921, 669 N.Y.S.2d 263, 692 N.E.2d 132 (1998);  CFJ Assocs. of New York Inc. v. Hanson Industries, 260 A.D.2d 917, 688 N.Y.S.2d 836 (3d Dep't 1999).

 Here, no supporting affidavit was presented.   Accordingly, this Court denies respondents' cross-motion to amend without prejudice and with leave to renew upon proper papers which shall include a supporting affidavit.   The remaining branch of respondents' cross-motion for discovery based on their previously stricken defense of adverse possession is denied as being moot.

FOOTNOTES

1.   Respondents have not opposed petitioner's motion to the extent that they have withdrawn their third, fourth, fifth, eighth, ninth and tenth affirmative defenses.   Therefore, petitioner's motion is granted to the extent of striking those defenses.

2.   Petitioner's counsel avers that petitioner “does not possess a copy of the proprietary lease executed by Collins.”  (See, Frazer Aff. at Footnote 1.)   He further states that petitioner failed to retain a copy of the lease and/or has lost the same in the intervening twelve (12) years.   However, petitioner's counsel submits a “standard proprietary lease issued to every shareholder.”   Respondents do not deny that the standard proprietary lease governs the rights of the parties.   Indeed, respondents rely on ¶ 31(e) of the standard proprietary lease as one of their affirmative defenses to this proceeding.

3.   A separate and substantial issue remains for trial:  Whether Collin's alleged return to the subject premises within the cure period remedied the default under ¶ 14(b) of the proprietary lease.

4.   While this Court does not make any findings of fact or conclusions of law due to its lack of jurisdiction, it appears that respondents' adverse possession claim may not lie, as the element of hostility is missing.   Specifically, it appears that Connell entered into occupancy with Collins' permission;  and Connell has effectively recognized Collins' “title” to the subject premises by voting with his proxy at a shareholder meeting.   The more persuasive issue is whether petitioner unreasonably withheld its consent to transfer the shares to Connell.

5.   Respondents' sixth affirmative defense is essentially the same argument couched in an estoppel theory.   Moreover, to invoke the principles of equitable estoppel the respondents must demonstrate that the performance was “unequivocally referable” to the alleged oral promise, which appears not to exist herein.   See, L & B 595 Madison v. Ravagnan, 242 A.D.2d 413, 662 N.Y.S.2d 29 (1st Dep't 1997);  Riverside Research Institute v. KMGA, Inc., 108 A.D.2d 365, 489 N.Y.S.2d 220 (1st Dep't 1985) aff'd 68 N.Y.2d 689, 506 N.Y.S.2d 302, 497 N.E.2d 669 (1986).

SHLOMO S. HAGLER, J.