PROSPECT RESOURCES INC v. LEVANT CAPITAL NORTH AMERICA INC (2025)

Order, Supreme Court, New York County (Alexander M. Tisch, J.), entered February 8, 2024, which, to the extent appealed from as limited by the briefs, granted defendants' motion to dismiss the complaint on the grounds that the action was barred by res judicata and granted so much of the motion as requested an inquest to determine defendants' costs and counsel fees, unanimously reversed, on the law, with costs, the motion denied, and the order vacated insofar as it referred the matter for an inquest.

On January 30, 2015, defendant Levant Capital North America leased a commercial space from plaintiff.  In May 2017, plaintiff commenced a summary nonpayment proceeding in Civil Court, seeking eviction, a judgment for rent arrears, any additional amounts of rent that accrued after the date of the petition, and counsel fees.  The Civil Court ultimately awarded plaintiff $34,830.47, which covered the time that the eviction proceeding had been pending, and also awarded a judgment of possession and warrant of eviction.  The court did not award rent arrears sought in the petition.  In February 2018, plaintiff evicted Levant, which eventually paid plaintiff the $34,830.37 judgment.  On August 28, 2021, plaintiff filed a satisfaction of judgment with Civil Court.

This action, in which plaintiff seeks the recovery of rent arrears, is not barred by the doctrine of res judicata, as plaintiff could not have sought relief for its current claims in the Civil Court eviction proceeding.  Although the rent arrears claim arises out of the same transaction as the claim for future rent (see Parker v. Blauvelt Volunteer Fire Co., 93 N.Y.2d 343, 347, 690 N.Y.S.2d 478, 712 N.E.2d 647 [1999];  O'Brien v. City of Syracuse, 54 N.Y.2d 353, 357, 445 N.Y.S.2d 687, 429 N.E.2d 1158 [1981]), res judicata is inapplicable where the plaintiff could not seek a particular remedy in the first action because of a limitation on a court's subject matter jurisdiction, and plaintiff wishes to seek that remedy in the second action (see Parker, 93 N.Y.2d at 349, 690 N.Y.S.2d 478, 712 N.E.2d 647, citing Restatement [Second] of Judgments § 26[1][c];  see also Rostant v. Swersky, 79 A.D.3d 456, 457, 912 N.Y.S.2d 200 [1st Dept. 2010]).

The liquidated damages clause in the lease expressly provided that plaintiff was under no duty to mitigate damages by re-letting the premises and further provided that, even if Levant was evicted, it was to remain liable for its monetary obligations under the lease (see Holy Props. v. Cole Prods., Inc., 87 N.Y.2d 130, 134, 637 N.Y.S.2d 964, 661 N.E.2d 694 [1995];  172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Assn., Inc., 24 N.Y.3d 528, 536, 2 N.Y.S.3d 39, 25 N.E.3d 952 [2014]).  However, Civil Court, which determined the eviction proceeding, is “without authority to address a claim for the balance of rent due” as liquidated damages (172 Van Duzer Realty Corp., 24 N.Y.3d at 534, 2 N.Y.S.3d 39, 25 N.E.3d 952;  see NY City Civ Ct Act § 204).  Thus, once plaintiff had been awarded judgment in the summary proceeding, the parties' relationship as landlord and tenant ended and whatever monetary liability Levant may have had to plaintiff at that point “was no longer in the nature of rent, but was in the nature of contract damages” (Ross Realty v. V & A Fabricators, Inc., 42 A.D.3d 246, 249, 836 N.Y.S.2d 242 [2d Dept. 2007]).

Because defendants have not prevailed on their pre-answer motion to dismiss, they are not entitled to counsel fees and costs at this time.