RING v. ARTS INTERNATIONAL INC (2004)

In this nonpayment proceeding to recover possession of leased commercial premises, petitioner landlords have moved for summary judgment on respondent's liability for the rent and additional rent claimed in the petition, but leaving determination of the amounts for trial.  C.P.L.R. § 3212(b) and (e).   Petitioners also have moved to dismiss respondent tenant's five remaining affirmative defenses, C.P.L.R. § 3211(b), and three remaining counterclaims for failure to state a claim, C.P.L.R. § 3211(a)(7), or as impermissible in this proceeding.  C.P.L.R. § 3211(a)(6).   For the reasons explained below the court grants petitioners' motion to dismiss respondent's remaining defenses only as to its eighth defense and remaining counterclaims only as to the first and fourth counterclaims, to the extent delineated below, and otherwise denies petitioners' motion.

I. FIRST AFFIRMATIVE DEFENSE

Respondent's first affirmative defense of failure to state a claim is not subject to a motion to dismiss, as this defense remains open to respondent throughout the action, until petitioners prevail through summary judgment or trial.  Cromwell v. Le Sannom Bldg. Corp., 177 A.D.2d 372, 576 N.Y.S.2d 125 (1st Dep't 1991);  Salerno v. Leica, Inc., 258 A.D.2d 896, 685 N.Y.S.2d 368 (4th Dep't 1999);  D'Agostino v. Harding, 217 A.D.2d 835, 836, 629 N.Y.S.2d 524 (3d Dep't 1995).   Therefore the court denies petitioners' motion to dismiss respondent's first defense.  C.P.L.R. § 3211(b).

II. FIFTH THROUGH EIGHTH AFFIRMATIVE DEFENSES

Respondent's fifth through eighth affirmative defenses all center around the claim that respondent is not obligated to pay rent and additional rent until petitioners have repaired the premises.   A condition precedent to this claim is notice to petitioners that respondent was availing itself of this remedy under ¶ 9 of the lease.   The crux of the dispute is whether respondent complied with ¶ 9 and ¶ 28, governing notices.   Paragraph 9 provides:

(a) If the demised premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Owner ․ (c) If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent and other items of additional rent ․ thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner․ After any such casualty, Tenant shall cooperate with Owner's restoration by removing from the premises as promptly as reasonably possible, all of Tenant's salvageable inventory and movable equipment, furniture, and other property.

Aff. of Frank Ring, Ex. A.  Paragraph 28 provides:

Except as otherwise in this lease provided, a bill statement, notice or communication which Owner may desire or be required to give to Tenant, shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises form a part or at the last known residence address or business address of Tenant or left at any of the aforesaid premises addressed to Tenant, and the time of rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed, or left at the premises as herein provided.   Any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner may designate by written notice.

Id.

Petitioners concede that they received a notice from respondent dated January 16, 2004, by regular mail, entitled “Flood Damage to 5th Floor, 251 Park Avenue South, New York, New York (the “Demised Premises”), and stating:

As you are aware from your inspection of the Demised Premises on Tuesday, January 13, 2004, the bursting of the sprinklers on January 11, 2004 has flooded the entire Demised Premises.   As of January 12, 2004, Tenant cannot and is not using the Demised Premises for any purpose.   In addition, the lack of operational sprinklers and intermittent heat has rendered the Demised Premises wholly unusable.   We shall abate all rent and additional rent until the Demised Premises has been fully restored to operation.

Id., Ex. H.  Petitioners further concede that they responded to respondent's notice by specifically referring to lease ¶ 9, objecting to the notice because they claimed the premises were fully usable, but never specifically objecting to the regular rather than registered or certified mailing.   Petitioners' response does state:

Finally, even if your alleged conditions existed, and especially as they did not, your failure to notify the owner in the manner provided for in the lease precludes you from applying for relief provided for in paragraph 9 of the Lease.   Your premises were never unusable and certainly they are not now.

Id., Ex. I.

 The question thus boils down to whether respondent's use of regular rather than registered or certified mailing to notify petitioner of the premises' condition bars the tenant's substantial rent abatement claim for a condition that rendered the premises wholly unusable.   For a combination of reasons, as explained below, the lease's mailing requirement does not bar respondent's rent abatement claim.

A. Waiver of the Registered or Certified Mailing Requirement

While petitioners in their response to respondent's notice may have had lease ¶ 28's registered or certified mail provision in mind, their failure to refer to that provision by either its paragraph number or its contents at best leaves respondent guessing.   At worst, by both preceding and following the objection with refutations of respondent's alleged conditions, petitioners' response misleads respondent into believing that their objection pertains to the absence of the requisite conditions for respondent's notice to be applicable.

To the extent lease ¶ 28's registered or certified mail requirement governs ¶ 9's requirement for immediate notice of damage from a casualty, petitioners' failure to object promptly and specifically to the means by which respondent transmitted its notice, while objecting to its substance, waived any defect in the mailing.  Rower v. West Chamson Corp., 210 A.D.2d 7, 619 N.Y.S.2d 40 (1st Dep't 1994);  Dean v. Tappan Wire & Cable, Inc., 2002 N.Y. Slip Op. 40377, 2002 WL 2008229 at *1 (App. Term 2d Dep't June 7, 2002).   See Miller v. MMT Corp., 182 Misc.2d 670, 673-74, 700 N.Y.S.2d 388 (Civ.Ct. N.Y. Co.1999).   This case is not one where petitioners received no notice of the casualty or received notice too late to respond effectively.  Mlcoch v. Smith, 173 A.D.2d 443, 444-45, 570 N.Y.S.2d 70 (2d Dep't 1991).   See Milltown Park v. American Felt & Filter Co., 180 A.D.2d 235, 237-38, 584 N.Y.S.2d 927 (3d Dep't 1992);  Marina Towers Assoc. v. Stacy's Landing, 2003 N.Y. Slip Op. 51361, 2003 WL 22519603 at *1 (App. Term 1st Dep't Oct. 27, 2003).   Although respondent did not observe all the formalities of ¶ 28's requirements for notice, petitioners admit not only that they received the written notice dated January 16, 2004, but that they also inspected the premises Monday, January 12, and were immediately made aware the sprinklers had burst Sunday, January 11, 2004, Ring Aff., Exs. H and I, “causing a water leakage” in the premises.  Id., Ex. I.  Petitioners thus received notice immediately, at least the next business day after the claimed casualty, in person, and also in writing by mail, and responded as necessary, rendering any defective service academic.  Rower v. West Chamson Corp., 210 A.D.2d 7, 619 N.Y.S.2d 40;  Mlcoch v. Smith, 173 A.D.2d at 444-45, 570 N.Y.S.2d 70.   See Miller v. MMT Corp., 182 Misc.2d at 671, 674, 700 N.Y.S.2d 388.

Significantly, petitioners neither claim nor show any adverse effect from noncompliance with ¶ 28's authorized means of mailing.  Miller v. MMT Corp., 182 Misc.2d at 674, 700 N.Y.S.2d 388.   Thus any noncompliance was technical and insufficient to invalidate respondent's exercise of the remedy under lease ¶ 9. Mlcoch v. Smith, 173 A.D.2d at 445, 570 N.Y.S.2d 70;   Dean v. Tappan Wire & Cable, Inc., 2002 WL 2008229 at *1.

B. Application of the Registered or Certified Mailing Requirement

 Even if petitioners' response to respondent's notice did not waive any defect in the mailing, under a reasonable construction of the lease, ¶ 28's registered or certified mail requirement does not govern ¶ 9's notice requirement.   Paragraph 9 simply requires that the “Tenant shall give immediate notice to Owner” of damage to the leased premises from a casualty.   The notice must be immediate, but need not be in writing or mailed by any particular means to any particular address.   The requirement for immediacy, but not for a writing or cumbersome mailing procedures, is consistent with the exigent circumstances being addressed, where both time and conditions likely would render such requirements unrealistic.  Wallace v. 600 Partners Co., 86 N.Y.2d 543, 547-48, 634 N.Y.S.2d 669, 658 N.E.2d 715 (1995);  Farrell Lines v. City of New York, 30 N.Y.2d 76, 82-83, 330 N.Y.S.2d 358, 281 N.E.2d 162 (1972);  Tri-Messine Constr. Co. v. Telesector Resources Group, 287 A.D.2d 558, 731 N.Y.S.2d 648 (2d Dep't 2001).   Immediate notice alone triggers the remaining provisions regarding a casualty, if the premises are in fact damaged by a casualty.  Vermont Teddy Bear v. 538 Madison Realty Co., 1 N.Y.3d 470, 476, 775 N.Y.S.2d 765, 807 N.E.2d 876 (2004).

Lease ¶ 28 requires the tenant to give any notices to the owner by registered or certified mail.   Paragraph 28's preceding provision, setting forth the requirements for the owner's notices to the tenant, is introduced by the qualifying phrase, “Except as otherwise in this lease provided.”   Ring Aff., Ex. A ¶ 28.   That preceding provision includes other qualifying phrases not repeated in the immediately following provision regarding the tenant's notices to the owner, e.g.:  notice “which Owner may desire or be required to give,” shall be “deemed sufficiently given or rendered if,” “in writing,” and “the time of ․ the giving of such notice or communication shall be deemed to be the time when the same is ․ mailed ․ as herein provided.”  Id. Yet all these qualifiers are implicit in the provision regarding the tenant's notices to the owner;  if explicitly added, none would change the provision's meaning.   Petitioners offer no logical or legal reason why the phrase, “Except as otherwise in this lease provided,” does not similarly carry over to qualify the tenant's notice to the owner and thus except ¶ 9's notice requirement from ¶ 28's application.  Id.

More importantly, to permit lease ¶ 28, regarding the tenant's notices to the owner generally, to supersede ¶ 9, regarding the tenant's notice to the owner in the specific exigent circumstances of a casualty, would completely negate ¶ 9's notice requirement and impose writing and mailing requirements absent from¶ 9's plain terms.  Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d at 475, 775 N.Y.S.2d 765, 807 N.E.2d 876;  Reiss v. Financial Performance Corp., 97 N.Y.2d 195, 199, 738 N.Y.S.2d 658, 764 N.E.2d 958 (2001);  Rowe v. Great Atlantic & Pacific Tea Co., 46 N.Y.2d 62, 72, 412 N.Y.S.2d 827, 385 N.E.2d 566 (1978).   Paragraph 9 may reasonably be read in isolation from ¶ 28's written notice obligations.  Vermont Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d at 476, 775 N.Y.S.2d 765, 807 N.E.2d 876;  Wallace v. 600 Partners Co., 86 N.Y.2d at 548, 634 N.Y.S.2d 669, 658 N.E.2d 715.   For the owner's notices to the tenant of either an election to terminate the lease or the premises' readiness for reoccupancy, ¶ 9 imposes its own “written notice” requirements, and in the former instance a time requirement, “within 90 days” after the casualty, as well as the writing requirement.   Ring Aff., Ex. A ¶ 9(d).  See Vermont Teddy Bear v. 538 Madison Realty Co., 1 N.Y.3d at 476, 775 N.Y.S.2d 765, 807 N.E.2d 876.   For the tenant's notice to the owner of damage from a casualty, ¶ 9 distinctly omits the writing requirement, but imposes a time requirement, “immediate.”   Ring Aff., Ex. A ¶ 9(a).   To impose writing and mailing requirements would engraft a different procedure not specifically intended for the circumstances of a casualty.   Wallace v. 600 Partners Co., 86 N.Y.2d at 548, 634 N.Y.S.2d 669, 658 N.E.2d 715;  Farrell Lines v. City of New York, 30 N.Y.2d at 82-83, 330 N.Y.S.2d 358, 281 N.E.2d 162;  Tri-Messine Constr. Co. v. Telesector Resources Group, 287 A.D.2d 558, 731 N.Y.S.2d 648.   Had the parties intended the writing requirements in ¶¶ 9(d) and 28 and the registered or certified mailing requirement in ¶ 28 to impede notice to the owner of a casualty, the parties could have negotiated and included these explicit terms.  Vermont Teddy Bear v. 538 Madison Realty Co., 1 N.Y.3d at 476, 775 N.Y.S.2d 765, 807 N.E.2d 876;  Rowe v. Great Atlantic & Pacific Tea Co., 46 N.Y.2d at 72, 412 N.Y.S.2d 827, 385 N.E.2d 566.

 In construing the lease, the court must seek to avoid an interpretation that would render a provision ineffective.  Two Guys from Harrison-N.Y. v. S.F.R. Realty Assoc., 63 N.Y.2d 396, 403-404, 482 N.Y.S.2d 465, 472 N.E.2d 315 (1984);  Helmsley-Spear, Inc. v. New York Blood Ctr., 257 A.D.2d 64, 69, 687 N.Y.S.2d 353 (1st Dep't 1999);  Yoi-Lee Realty Corp. v. 177th St. Realty Assocs., 208 A.D.2d 185, 190, 626 N.Y.S.2d 61 (1st Dep't 1995);  17-19 W. 34th St. Realty v. Cremsen Tide, N.Y.L.J., Jan. 12, 2000, at 27 (Civ.Ct. N.Y. Co.).   According to petitioners' interpretation of ¶ 28, ¶ 9's requirement, that the tenant give the owner immediate notice of the damage, in any form and by any means feasible, would be of no effect.

Paragraph 28 does not pertain to casualties and thus does not constrict the tenant's notice of a casualty to the time and resource consuming procedures entailed in registered or certified mail.   Paragraph 28 excepts the circumstances provided for in ¶ 9 insofar as it pertains to both the tenant's notice of damage from a casualty and the owner's “written notice to Tenant, given within 90 days” after the casualty, of an election to terminate the lease or “written notice” of the premises' readiness for reoccupancy.   Ring Aff., Ex. A ¶ 9(d).  This interpretation gives effect to both paragraphs.  Two Guys from Harrison-N.Y. v. S.F.R. Realty Assoc., 63 N.Y.2d at 404, 482 N.Y.S.2d 465, 472 N.E.2d 315;  17-19 W. 34th St. Realty v. Cremsen Tide, N.Y.L.J., Jan. 12, 2000, at 27.   It is neither contradictory nor implausible to require:  (1) that notice of a casualty be immediate but not necessarily in writing, while (2) after the conditions have been assessed, that notice of termination be within 90 days and in writing, and (3) after the conditions have been repaired, that notice of readiness for reoccupancy be in writing but not within any time frame.   Ring Aff., Ex. A ¶ 9.   It is similarly consistent and plausible to require, in less exigent circumstances:  (1) that notices be in writing but not within any time frame, (2) that the owner's notices be by any of various means but if mailed, by registered or certified mail, and (3) that the tenant's notices be by registered or certified mail.  Id. ¶ 28.   See Vermont Teddy Bear v. 538 Madison Realty Co., 1 N.Y.3d at 476, 775 N.Y.S.2d 765, 807 N.E.2d 876;  Wallace v. 600 Partners Co., 86 N.Y.2d at 548, 634 N.Y.S.2d 669, 658 N.E.2d 715;  Farrell Lines v. City of New York, 30 N.Y.2d at 82-83, 330 N.Y.S.2d 358, 281 N.E.2d 162.

C. The Premises' Condition

 Petitioners maintain that even if respondent's notice was effective, the leased premises were never unusable so as to trigger a rent abatement.   The court may dismiss a claim or defense where extrinsic evidence conclusively disproves pleaded facts critical to the claim or defense.  Leon v. Martinez, 84 N.Y.2d 83, 87-88, 614 N.Y.S.2d 972, 638 N.E.2d 511 (1994);  Ark Bryant Park Corp. v. Bryant Park Restoration Corp., 285 A.D.2d 143, 150, 730 N.Y.S.2d 48 (1st Dep't 2001);  Ladenburg Thalmann & Co. v. Tim's Amusements, 275 A.D.2d 243, 246, 712 N.Y.S.2d 526 (1st Dep't 2000).   The court may not rely on facts alleged by petitioners to defeat defenses unless the evidence demonstrates the absence of any significant dispute regarding those facts and completely negates the answer's allegations.  Muhl v. Ambassador Group, 251 A.D.2d 130, 673 N.Y.S.2d 310 (1st Dep't 1998);  Nahrebeski v. Molnar, 286 A.D.2d 891, 730 N.Y.S.2d 646 (4th Dep't 2001);  Warwick v. Cruz, 270 A.D.2d 255, 704 N.Y.S.2d 849 (2d Dep't 2000);  Abney v. Lunsford, 254 A.D.2d 318, 678 N.Y.S.2d 292 (2d Dep't 1998).

 Respondent's amended answer alleges that a sprinkler in the leased premises burst January 11, 2004, flooding the premises, and forcing respondent to cease all business there.   Although the water eventually was removed, the premises remained unusable due to the substantial damage that the flooding caused and that petitioners have never repaired.   The damage forced respondent to remove its personal property from the premises and operate elsewhere.   While these allegations are under the heading “COUNTERCLAIMS,” which follow the conclusory defenses, respondent's pleading, liberally construed most favorably to the pleader, permits the inference that the premises were unusable.   Ring Aff., Ex. D at 4-5, ¶¶ 1-4, 7.   See Corcoran v. National Union Fire Ins. Co. of Pittsburgh, 143 A.D.2d 309, 311, 532 N.Y.S.2d 376 (1st Dep't 1988);  Corcoran v. Becker, 140 A.D.2d 62, 67, 532 N.Y.S.2d 371 (1st Dep't 1988);  Warwick v. Cruz, 270 A.D.2d 255, 704 N.Y.S.2d 849;  Abney v. Lunsford, 254 A.D.2d 318, 678 N.Y.S.2d 292.

 Petitioner Frank Ring's allegations that the sprinkler was repaired January 20, 2004, and the leak did not render the premises unusable, although supported by photographs, do not conclusively disprove respondent's pleaded facts.   The photographs do not necessarily depict, for example, the presence or absence of unsafe structural conditions.   Ring's alleged facts, rather than negating any significant dispute regarding those facts, simply cast the answer's allegations into sharp dispute.   The court may not resolve these inconsistencies in parties' allegations in the context of a motion to dismiss defenses.  Nahrebeski v. Molnar, 286 A.D.2d 891, 730 N.Y.S.2d 646;  Harrison v. State of New York, 262 A.D.2d 833, 834, 692 N.Y.S.2d 757 (3d Dep't 1999);  Connelly v. Warner, 248 A.D.2d 941, 943, 670 N.Y.S.2d 293 (4th Dep't 1998).

In addition to Ring's own observations and his photographs, Ring relies on an adjuster's unsworn inspection report that the premises were habitable.   Even were the court to look to these facts to defeat a pleading, see Leon v. Martinez, 84 N.Y.2d at 87-88, 614 N.Y.S.2d 972, 638 N.E.2d 511;  Ladenburg Thalmann & Co. v. Tim's Amusements, 275 A.D.2d at 246, 712 N.Y.S.2d 526;  IMO Indus. v. Anderson Kill & Olick, 267 A.D.2d 10, 11, 699 N.Y.S.2d 43 (1st Dep't 1999), the report is hearsay and therefore not a vehicle for facts that might support dismissing the pleading.  Arriaga v. Laub Co., 233 A.D.2d 244, 649 N.Y.S.2d 707 (1st Dep't 1996);  Nahrebeski v. Molnar, 286 A.D.2d 891, 730 N.Y.S.2d 646;  Woods v. Kurz, 258 A.D.2d 932, 685 N.Y.S.2d 361 (4th Dep't 1999).   Ring does not lay a foundation for the report's admissibility as a business record or as another exception to the rule against hearsay.   E.g., C.P.L.R. § 4518(a);  Matter of Leon RR, 48 N.Y.2d 117, 123, 421 N.Y.S.2d 863, 397 N.E.2d 374 (1979);  Holliday v. Hudson Armored Car & Courier Serv., 301 A.D.2d 392, 396, 753 N.Y.S.2d 470 (1st Dep't 2003).   See Republic W. Ins. Co. v. RCR Bldrs., 268 A.D.2d 574, 575, 702 N.Y.S.2d 609 (2d Dep't 2000).

Finally, Ring alleges that respondent failed to remove its

“salvageable inventory and movable equipment, furniture, and other property” from the premises.   Ring Aff., Ex. A ¶ 9(a).   Again, petitioners' alleged facts, rather than conclusively disproving that respondent removed its personal property, as the amended answer alleges, simply dispute respondent's pleaded facts.

D. The Eighth Defense's Specific Legal Theory

Respondent's eighth affirmative defense claims petitioners' “unclean hands.”   Ring Aff., Ex. D at 3.   Respondent's allegations as to petitioners' continued insistence that the damage was minimal and refusal to make effective repairs, preventing the premises' use for an extended period, and violating petitioners' lease obligations, while respondent complied with its own lease obligations, make out a claim of unconscionable conduct by petitioners.  390 W. End Assocs. v. Baron, 274 A.D.2d 330, 332, 711 N.Y.S.2d 176 (1st Dep't 2000).   See Boman & Co. v. Professional Data Mgt., 218 A.D.2d 637, 638, 631 N.Y.S.2d 19 (1st Dep't 1995).

 The defense of “unclean hands,” however, would bar petitioners' claims only if petitioners have breached a fiduciary duty to respondent.  Ross v. Moyer, 286 A.D.2d 610, 611, 730 N.Y.S.2d 318 (1st Dep't 2001);  Cohen v. Katz, 242 A.D.2d 448, 662 N.Y.S.2d 40 (1st Dep't 1997);  Rooney v. Slomowitz, 11 A.D.3d 864, 867, 784 N.Y.S.2d 189 (3d Dep't 2004).   Because the parties' landlord-tenant relationship on which this proceeding is based is distinctly not a fiduciary relationship, but an arm's length business transaction, that defense does not pertain here.  Id.

E. Conclusion

Since application of the lease requirements and the facts as alleged by respondent support its fifth through seventh affirmative defenses, the court denies petitioners' motion to dismiss these defenses.   In the context of the parties' undisputed non-fiduciary relationship, respondent's eighth affirmative defense is inapplicable and therefore dismissed.  C.P.L.R. § 3211(b).

III. FIRST AND SECOND COUNTERCLAIMS

Respondent's first counterclaim for breach of contract mirrors the fifth and seventh affirmative defenses.   In addition to lease ¶ 9, respondent relies on ¶ 4, which requires that:

Tenant shall give Owner prompt notice of any defective condition in any plumbing, heating system or electrical lines located in the demised premises and following such notice, Owner shall remedy the condition with due diligence․ Except as specifically provided in Article 9 or elsewhere in this lease, there shall be no allowance to the Tenant for a diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner ․ failing to make any repairs, alterations, additions or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof.   It is specifically agreed that Tenant shall not be entitled to any set off or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this lease.   Tenant agrees that Tenant's sole remedy at law in such instance will be by way of any action for damages for breach of contract.   The provisions of this Article 4 with respect to the making of repairs shall not apply in the case of fire or other casualty with regard to which Article 9 hereof shall apply.

Ring Aff., Ex. A.  In addition to a rent abatement for diminution of rental value, this counterclaim alleges damages of $89,039.93.   Respondent's second counterclaim for constructive eviction alleges damages only for diminution of rental value, in the form of a rent abatement.

Although the first counterclaim does not specify precisely what the $89,039.93 is for, the second counterclaim is limited to a rent abatement and specifies no figure, and the $89,039.93 does not match petitioners' rent claims in any discernible respect.   As the first counterclaim refers to estimated repair and restoration costs, which the second counterclaim omits, the court infers that the $89,039.93 is not the abatement amount, but is attributable to repair and restoration costs.

 Petitioners seek to dismiss respondent's counterclaims based on a waiver of its right to counterclaim in lease ¶ 26:

in the event Owner commences ․ a summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding including a counterclaim under Article 4 except for statutory mandatory counterclaims.

Id.  Although R.P.A.P.L. § 743 as well as 22 N.Y.C.R.R. § 208.42(b) permit an answer to “contain any legal or equitable defense, or counterclaim,” the statute does not mandate respondent's counterclaim for breach of contract or for constructive eviction.   The determination of most counterclaims in a summary proceeding is relegated to a plenary action, preserving the summary proceeding as a vehicle for the efficient resolution of landlord-tenant disputes.  Titleserv, Inc. v. Zenobio, 210 A.D.2d 310, 311, 619 N.Y.S.2d 768 (2d Dep't 1994);  Bomze v. Jaybee Photo Suppliers, 117 Misc.2d 957, 958, 460 N.Y.S.2d 862 (App. Term 1st Dep't 1983).   Therefore lease conditions precluding tenants from interposing counterclaims in summary proceedings are enforceable.   E.g., LRHC Flatbush, N.Y. v. Aftor T. Realty, 282 A.D.2d 577, 578, 722 N.Y.S.2d 910 (2d Dep't 2001);  Titleserv, Inc. v. Zenobio, 210 A.D.2d at 311, 619 N.Y.S.2d 768;  Mid-Island Shopping Plaza Co. v. Cutler, 112 A.D.2d 405, 408, 492 N.Y.S.2d 63 (2d Dep't 1985);  Amdar Co. v. Hahalis, 145 Misc.2d 987, 988, 554 N.Y.S.2d 759 (App. Term 1st Dep't 1990).

 The only exception is a counterclaim so “inextricably intertwined” with petitioner's claim that joint resolution of the claims will “expedite disposition of the entire controversy, avoid multiplicity of other lawsuits between the parties to accomplish the same result, do speedy justice for all and eliminate greater delay and expense.”  Haskell v. Surita, 109 Misc.2d 409, 414, 439 N.Y.S.2d 990 (Civ.Ct. N.Y. Co.1981).   The principal example of a counterclaim within this exception in a commercial nonpayment proceeding is respondent's second counterclaim of actual or constructive eviction, to offset the obligation to pay rent, because the claim is inextricably entwined with the nonpayment of rent.  Johnson v. Cabrera, 246 A.D.2d 578, 579, 668 N.Y.S.2d 45 (2d Dep't 1998).

 Respondent's first counterclaim for damages caused by petitioner's breach of the lease, insofar as this counterclaim seeks damages for respondent's repair or restoration costs and not just a rent abatement for diminished rental value, does not fit within the exception.   Findings in this proceeding that petitioners breached the lease by failing to make repairs may support respondent's claim that the breach forced the tenant to incur repair or restoration costs, but once the findings are applied under collateral estoppel, the proof of necessary costs is unrelated to a rent abatement for being out of possession or unable to use the premises.   See, e.g., Ryan v. New York Telephone Co., 62 N.Y.2d 494, 502, 478 N.Y.S.2d 823, 467 N.E.2d 487 (1984);  Kanat v. Ochsner, 301 A.D.2d 456, 458, 755 N.Y.S.2d 371 (1st Dep't 2003);  Bell v. Alden Owners, 299 A.D.2d 207, 208, 750 N.Y.S.2d 27 (1st Dep't 2002);  Sam v. Metro-North Commuter R.R., 287 A.D.2d 378, 379, 731 N.Y.S.2d 459 (1st Dep't 2001).   The calculation of necessary repair or restoration costs does not depend on the extent of respondent's possession or use of the leased space, diminish its rental value, or reduce respondent's obligation to pay rent for the premises.   Litigation of repair or restoration costs may be accomplished separately from the rent dispute without duplication of effort, while litigating those damages in this proceeding would only bog down its disposition.

In sum, respondent's second counterclaim is inextricable from petitioners' rent claims, but respondent's first counterclaim is extricable in part.   Respondent's second counterclaim states a claim that is permissible in this proceeding.  C.P.L.R. § 3211(a)(6) and (7).   Respondent's first counterclaim states a claim, but it is impermissible in part.  Id. Therefore the court denies petitioners' motion to dismiss respondent's second counterclaim and denies petitioners' motion to dismiss respondent's first counterclaim insofar as it seeks damages for diminution of rental value or a rent abatement.  85 John St. Partnership v. Kaye Ins. Assocs., 261 A.D.2d 104, 105, 689 N.Y.S.2d 473 (1st Dep't 1999);  Dinicu v. Groff Studios Corp., 257 A.D.2d 218, 224, 690 N.Y.S.2d 220 (1st Dep't 1999);  Scolamiero v. Cincotta, 128 A.D.2d 224, 226, 516 N.Y.S.2d 334 (3d Dep't 1987);  County Holding Corp. v. Brati Inc., 2002 N.Y. Slip Op. 40204, 2002 WL 1275031 at *1 (App. Term 2d Dep't Mar. 15, 2002).   The court grants petitioner's motion to dismiss respondent's first counterclaim insofar as it seeks damages for repair or restoration costs or other costs unrelated to a rent abatement or diminished rental value, without prejudice to a claim for those costs in another action.

IV. FOURTH COUNTERCLAIM

Respondent's allegations as to petitioners' conduct supporting respondent's fourth counterclaim for breach of the covenant of good faith and fair dealing largely mirror the eighth affirmative defense. In addition to petitioners' persistent refusal to make effective repairs to the premises based on a bad faith claim of minimal damage, respondent alleges petitioners' refusal was based on a bad faith claim of late notice of the alleged casualty.

 Unlike the defense of “unclean hands,” this counterclaim does not depend on the parties' fiduciary relationship.   The claim depends only on their undisputed contractual relationship.   All contracts imply a covenant of good faith and fair dealing in their performance.  511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153, 746 N.Y.S.2d 131, 773 N.E.2d 496 (2002);  Dalton v. Educational Testing Serv., 87 N.Y.2d 384, 389, 639 N.Y.S.2d 977, 663 N.E.2d 289 (1995).   The contracting parties pledge not to injure each other's right to receive the benefits of the bargain.   511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d at 153, 746 N.Y.S.2d 131, 773 N.E.2d 496;  Dalton v. Educational Testing Serv., 87 N.Y.2d at 389, 639 N.Y.S.2d 977, 663 N.E.2d 289;  Chemical Bank v. Stahl, 272 A.D.2d 1, 14, 712 N.Y.S.2d 452 (1st Dep't 2000);  Rooney v. Slomowitz, 11 A.D.3d at 867, 784 N.Y.S.2d 189. This pledge does not imply obligations inconsistent with the contract's express terms, but it does encompass any promises a reasonable person would understand to be included.  511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d at 153, 746 N.Y.S.2d 131, 773 N.E.2d 496;   Dalton v. Educational Testing Serv., 87 N.Y.2d at 389, 639 N.Y.S.2d 977, 663 N.E.2d 289.

 Thus a claim that petitioners acted in bad faith and dealt unfairly with respondent might, as they urge, duplicate its breach of contract claim.   A breach of the covenant of good faith and fair dealing may include conduct, however, that does not violate an express term of the parties' lease, but constitutes arbitrary, irrational, or manipulative action in exercising discretion otherwise permitted under the contract.  Id.;  Chemical Bank v. Stahl, 272 A.D.2d at 14, 712 N.Y.S.2d 452;  LaBarte v. Seneca Resources Corp., 285 A.D.2d 974, 975, 728 N.Y.S.2d 618 (4th Dep't 2001);  Times Sq. Stores Corp. v. Bernice Realty Co., 141 A.D.2d 536, 529 N.Y.S.2d 148 (2d Dep't 1988).

 Having received immediate notice of a casualty and immediately viewed it, petitioners, according to respondent, insisted the damage was minimal and hence refused to make complete repairs.   The lease imposes no strict speediness requirement or time limit on the owner's repair and restoration of the premises, however, other than “due diligence,” Ring Aff., Ex. A ¶ 4, and “all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Owner's control.”  Id. ¶ 9(d).  Although petitioners are entitled to act in their own interests rather than as fiduciaries to respondent, assuming the need for far more extensive repairs that respondent alleges, implicit in the lease, viewed as a whole, is a reasonable expectation that petitioners will not purposefully prevent the premises' use more extensively or longer than necessary.  Dalton v. Educational Testing Serv., 87 N.Y.2d at 390, 639 N.Y.S.2d 977, 663 N.E.2d 289;  Rowe v. Great Atlantic & Pacific Tea Co., 46 N.Y.2d at 69, 412 N.Y.S.2d 827, 385 N.E.2d 566;  Chemical Bank v. Stahl, 272 A.D.2d at 14, 712 N.Y.S.2d 452;  Tapps of Nassau Supermarkets v. Linden Blvd., 269 A.D.2d 306, 307-308, 704 N.Y.S.2d 27 (1st Dep't 2000).   A reasonable tenant would not have entered a lease that permits the owner to prevent the tenant's use of the premises indefinitely, arbitrarily, or unreasonably and to deprive the tenant of the very benefits of the lease.  511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d at 153, 746 N.Y.S.2d 131, 773 N.E.2d 496;  Dalton v. Educational Testing Serv., 87 N.Y.2d at 389, 639 N.Y.S.2d 977, 663 N.E.2d 289;  Rowe v. Great Atlantic & Pacific Tea Co., 46 N.Y.2d at 69, 412 N.Y.S.2d 827, 385 N.E.2d 566;  LaBarte v. Seneca Resources Corp., 285 A.D.2d at 974-75, 728 N.Y.S.2d 618.

 Furthermore, even if petitioners technically might claim respondent's noncompliance with lease ¶ 28's mailing requirement, given their undisputed receipt of immediate first-hand as well as written notice, reliance on respondent's regular rather than registered or certified mailing, to obliterate a substantial rent abatement claim, may have been unjustified.  Chemical Bank v. Stahl, 272 A.D.2d at 14-15, 712 N.Y.S.2d 452;  Tapps of Nassau Supermarkets v. Linden Blvd., 269 A.D.2d at 307-308, 704 N.Y.S.2d 27.   Petitioners may not rely on a technical lease provision to insulate them from potential liability for preventing the continued tenancy.  Id.;  Times Sq. Stores Corp. v. Bernice Realty Co., 141 A.D.2d 536, 529 N.Y.S.2d 148.   If petitioners disputed their obligation to repair because of either the regular mailing or their dispute as to the premises' condition, petitioners could have reserved their rights, assessed the need more thoroughly, made the repairs respondent sought in any event, collected rent, and sought recovery from respondent in the event the work was the tenant's responsibility.   Assuming in the context of petitioners' motion to dismiss that the work was the owner's responsibility, petitioners may have unjustifiably thwarted respondent's use and occupancy, the payment of rent, and the lease's salient purposes.   Chemical Bank v. Stahl, 272 A.D.2d at 14-15, 712 N.Y.S.2d 452;  LaBarte v. Seneca Resources Corp., 285 A.D.2d at 974-75, 728 N.Y.S.2d 618.

Thus the court might find no breach of the narrow contractual “due diligence” or “reasonable expedition” requirement, Ring Aff., Ex. A ¶ ¶ 4 and 9(d), but find a breach of the broader covenant of good faith and fair dealing.   On the other hand, the court might find a breach of a narrow contractual requirement, but nothing broader.   E.g., Van Valkenburgh, Nooger & Neville v. Hayden Pub. Co., 30 N.Y.2d 34, 40, 330 N.Y.S.2d 329, 281 N.E.2d 142 (1972).   In further contrast, while the court might find a breach of a narrow contractual requirement causing specific damages, the court also might find actions “so manifestly harmful” to respondent as to breach the covenant of good faith and fair dealing and cause broader damages.  Id.

Respondent's fourth counterclaim alleges damages for diminution of rental value, in the form of a rent abatement, and for the same $89,039.93 in costs alleged in respondent's first counterclaim and attributed to repair or restoration costs.   Although the fourth counterclaim is equally imprecise as to what this amount is for, since this counterclaim similarly refers to estimated repair and restoration costs, the court infers that the $89,039.93 is again attributable to those costs.   Therefore, insofar as respondent's fourth counterclaim also seeks damages for repair or restoration costs or other costs unrelated to a rent abatement or diminished rental value, the court grants petitioners' motion to dismiss the fourth counterclaim, again without prejudice to a claim for those costs in another action.  C.P.L.R. § 3211(a)(6).

Although the damages may be limited in this proceeding, the facts as alleged by respondent make out a claim of petitioners' breach the covenant of good faith and fair dealing.   Therefore, other than the limitation on damages imposed above, the court denies petitioners' motion to dismiss the fourth counterclaim.  C.P.L.R. § 3211(a)(7).

V. DISPOSITION

The court grants petitioners' motion to dismiss respondent's affirmative defenses only as to its eighth defense and respondent's counterclaims only as to its first and fourth counterclaims, insofar as they seek damages for respondent's repair or restoration costs or other costs unrelated to a rent abatement or diminished rental value. C.P.L.R. § 3211(a)(6)-(7) and (b).  This partial dismissal is without prejudice to a claim for those costs in another action.  C.P.L.R. § 3211(a)(6).   The court otherwise denies petitioners' motion.  C.P.L.R. § 3211(a)(7) and (b).

LUCY BILLINGS, J.