Casamento v. JuareguiCasamento v. Juaregui
Steven De Castro, New York City, for appellant.
Santo Golino, New York City, for respondent.
ANGIOLILLO, J.
Factual and Procedural Background
Luis Juaregui (hereinafter the tenant) entered into a lease for an apartment in Queens in a building owned by Dominic Casamento (hereinafter the landlord).1 Under paragraph 7 of the lease, the tenant is permitted to make alterations only after obtaining the landlord‘s “prior written consent.” Under paragraph 10 of the lease, the tenant is liable for damages sustained and expenses incurred by the landlord “relating to any claim arising from any act or neglect of” the tenant. Paragraph 16 of the lease contains detailed provisions regarding the landlord‘s remedies in the event of the tenant‘s default. In pertinent part, that paragraph provides:
“A. Landlord must give Tenant written notice of default stating the type of default. The following are defaults and must be cured by Tenant within the time stated: . . .
“(5) Failure to comply with any other term or Rule in the Lease, 10 days.
“If Tenant fails to cure the default in the time stated, Landlord may cancel the Lease by giving Tenant a cancellation notice . . . Tenant continues to be responsible as stated in this Lease. . . .
“C. If (1) the Lease is cancelled . . . , Landlord may, in addition to other remedies, take any of the following steps: (a) peacefully enter the Apartment and remove Tenant and any person or property, and (b) use eviction or other lawsuit method to take back the Apartment.
“D. If this Lease is cancelled, or Landlord takes back the Apartment, the following takes place:
“(1) Rent and added rent for the unexpired Term becomes due and payable.
“(2) Landlord may relet the Apartment and anything in it . . . Tenant stays liable and is not released except as provided by law.
“(3) Any rent received by Landlord for the rerenting shall be used first to pay Landlord‘s expenses and second to pay any amounts Tenant owes under this Lease. Landlord‘s expenses include the costs of getting possession and rerenting the Apartment, including, but not only reasonable legal fees, brokers fees, cleaning and repairing costs, decorating costs and advertising costs.”
The term “added rent,” as set forth in paragraph 16, is defined in paragraph 3 of the lease as “other charges to Landlord under the terms of this Lease” which the tenant “may be required to pay.”
On March 10, 2007, the landlord served the tenant with a notice to cure, alleging that the tenant violated paragraphs 7 and 10 of the lease “by physically assaulting landlord and making alterations to the bathroom and kitchen without the landlord‘s prior written consent.” The notice advised that, in the event of the tenant‘s failure to cure by March 22, 2007, the landlord would elect to terminate the tenancy in accordance with applicable law. The notice further advised: “pursuant to your lease you are responsible for legal fees incurred by the landlord with regard to the preparation and service of this Notice to Cure and any and all work done prior to and subsequently thereto, based upon your default under the lease.” On March 29, 2007, the landlord served a notice of termination of the lease effective April 12, 2007, citing the tenant‘s failure to cure, and advising the tenant that failure to quit would result in the commencement of appropriate proceedings to recover possession.
On April 18, 2007, the landlord commenced this summary holdover proceeding in the Civil Court, Queens County, alleging that the tenant had continued in possession without the landlord‘s permission beyоnd the date set forth in the notice of termination. The tenant filed an answer alleging that he had not assaulted the landlord, but that the landlord had intentionally assaulted him with a truck and was facing criminal charges.
The Civil Court (Katz, J.) deemed the issue of assault not within its jurisdiction and, in October 2007, held a trial on the sole issue of the tenant‘s alleged unauthorized alterations. On February 7, 2008, the Civil Court issued a written decision and order. According to the Civil Court‘s summary of the testimony, the landlord denied that he had failed to make necessary repairs, and claimed that he learned from a neighbor that the tenant was undertaking a complete renovation of the bathroom, not merely repairs, without his permission. The tenant testified to the contrary that, in 1999, the bathroom was complеtely damaged by a leak from above, and that the landlord had ignored several requests to make repairs. The Civil Court took judicial notice of a prior proceeding between the parties from 2001, which established the existence of 10 building code violations, including damage to the walls and ceiling of the bathroom and kitchen. The Civil Court found that the tenant “had conditions in his apartment in 2001 that the landlord failed and refused to repair and, over the passage of time, the conditions became so bad the tenant had no choice but to do the repairs himself.” Accordingly, the Civil Court dismissed the landlord‘s petition, holding that “[t]he landlord cannot use his own failure to make repairs as a sword to evict the tenant.”
In the same mоnth that the Civil Court issued its determination, February 2008, the tenant commenced a separate action against the landlord in the Supreme Court, Queens County, to recover damages for personal injuries he allegedly sustained as a consequence of the landlord‘s assault. In July 2008 the parties reached a settlement, pursuant to which the landlord paid the tenant the sum of $10,000, and the tenant agreed to release the landlord “from the personal injury and assault action only of Index Number 4885/2008 filed in Supreme Court, Queens County” and “[i]n particular for bodily injuries sustained on February 27, 2007.”
On January 27, 2009, the Civil Court (Badillo, J.) denied the tenant‘s motion, holding that the language of paragraph 16 (D) (3) of the lease “is triggered by the vacatur of the apartment and the expenses involved in a reletting” and that the “lease does not contain any language for legal fees for broad breach circumstances.” The tenant appealed from that order and, on January 29, 2010, the Appellate Term affirmed, writing:
“After prevailing in this holdover summary proceeding, tenant sought an award of attorney‘s fees based on
Real Property Law § 234 and paragraph 16 (D) of the lease, which provides that the landlord may deduct his costs of getting possession and rerenting the apartment, including attorney‘s fees, from the rents received upon a reletting following a cancellation of the lease. As the subject clause ‘is not the type of provision covered byReal Property Law § 234 ’ (Oxford Towers Co., LLC v Wagner, 58 AD3d 422, 423 [1st Dept 2009]; see Madison-68 Corp. v Malpass, 65 AD3d 445 [1st Dept 2009]; Hamilton v Menalon Realty, LLC, 14 Misc 3d 13 [App Term, 2d
& 11th Jud Dists 2006]; Morris v Flaig, 511 F Supp 2d 282 [ED NY 2007]; see also Gannett Suburban Newspapers v El-Kam Realty Co., 306 AD2d 312 [2d Dept 2003]; but see Stephen LLC v Zucchiatti, 24 Misc 3d 1203[A], 2009 NY Slip Op 51245[U] [Civ Ct, NY County 2009]), the Civil Court‘s order denying tenant‘s motion for attorney‘s fees is affirmed” (Casamento v Juaregui, 26 Misc 3d 136[A], 2010 NY Slip Op 50154[U], *1 [2010]).
The Appellate Term denied the tenant‘s motion for leave to reargue or, in the alternative, for leave to appeal to this Court, and we subsequently granted the tenant‘s motion for leave to appeal.
Analysis
Under the well-established general rule in New York, “attorneys’ fees are deemed incidental to litigation and may not be recovered unless supported by statute, court rule or written agreement of the parties” (Flemming v Barnwell Nursing Home & Health Facilities, Inc., 15 NY3d 375, 379 [2010]; see Hooper Assoc. v AGS Computers, 74 NY2d 487, 491 [1989]). In the appeal before us, the tenant bases his request for an award of an attorney‘s fee on the interplay between paragraph 16 of the parties’ lease and section 234, which provides, in pertinent part:
“Whenever a lease of residential property shall provide that in any action or summary proceeding the landlord may recover attorneys’ fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease, or that amounts paid by the landlord therefor shall be paid by the tenant as additional rent, there shall be implied in such lease a covenant by the landlord to pay to the tenant the reasonable attorneys’ fees and/or expenses incurred by the tenant as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease” (
Real Property Law § 234 [emphasis added]).
“This statute established the reciprocal right of a tenant to recover an attorney‘s fee and expenses when the same benefit is
Section 234, as initially enacted in 1966, governed leases of residential property in New York City, and it was subsequently amended in 1969 to encompass residential leases in the entire state (see L 1966, ch 286, amended by L 1969, ch 297). The Court of Appeals expounded upon the genesis and legislative purpose of section 234 in Matter of Duell v Condon (84 NY2d 773 [1995]). Discussing legislative materials from 1966, the Court stated that “[t]he remedial nature of the Legislature‘s action to equalize the power of landlords and tenants is evident from both the language of the statute as well as historical documents (see Bill Jacket, L 1966, ch 286)” (id. at 783). This remedial purpose is also evident in the legislative materials from the 1969 amendment, where the bill sponsor noted,
“given thе disparity of bargaining power normally existing between the parties, it has become common practice for landlords to prepare leases and present them to tenants on a take-it or leave-it basis . . .
“The proposed legislation will cure this inequity and insure uniform treatment of all tenants residing in New York State” (Mem of Senator John R. Dunne in Support of L 1969, ch 297, 1969 NY Legis Ann at 357).
As the Court of Appeals explained:
“The overriding purpose of
Real Property Law § 234 was to level the playing field between landlords and residential tenants, creating a mutual obligation that provides an incentive to resolve disputes quickly and without undue expense. The statute thus grants to the tenant the same benefit the lease imposes in favor of the landlord. An additional purpose, particularly relevant in cases in which thetenancy is governed by the emergency rent laws, is to discourage landlords from engaging in frivolous litigation in an effort to harass tenants, particularly tenants without the resources to resist legal action, into terminating legal occupancy” (Matter of Duell v Condon, 84 NY2d at 780).
Thus, section 234 “contains no limitation, stating that its terms apply [w]henever a lease of residential property’ includes an attorney‘s fees and expenses clause in favor of the landlord” (id. at 783).
Here, we are called upon to determine whether paragraph 16 of the parties’ lease gives rise to the implied covenant in the tenant‘s favor pursuant to section 234. Initially, applying principles of contract interpretation, we discern the meaning of paragraph 16 by reаding all clauses of this provision together and in context with the lease as a whole to determine its purpose and intent (see W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]; Bailey v Fish & Neave, 8 NY3d 523, 528 [2007]; J.W. Mays, Inc. v Snyder Fulton St., LLC, 69 AD3d 572, 573 [2010]). Subparagraph 16 (A) (5) recites that, if the tenant fails to cure the default in the time stated, the landlord may cancel the lease and the tenant “continues to be responsible as stated in this Lease.” Under subparagraph 16 (C) (1) (b), if the lease is cancelled, the landlord “may, in addition to other remedies . . . use eviction or other lawsuit method to take back the Apartment.” Under subparagraph 16 (D) (1), if the landlord “takes back the Apartment, . . . [r]ent and added rent for the unexpired Term becomes due and payable.” The term “added rent” is defined in paragraph 3 as “other charges to Landlord under the terms of this Lease” which the tenant “may be required to pay.” Further, under subparagraph 16 (D) (2), if the lease is cancelled, the landlord “may relet the Apartment” and the tenant “stays liable and is not released except as provided by law.” Finally, under subparagraph 16 (D) (3), “[a]ny rent received by Landlord for the rerenting shall be used first to pay Landlord‘s expenses and second to pay any amounts Tenant owes under this Lease. Landlord‘s expenses include the costs of getting possession and rerenting the Apartment, including, but not only reasonable legal fees.”
We interpret this remedial scheme to permit the landlord to recoup any attorney‘s fee he incurs in an eviction proceeding against a defaulting tenant under circumstances in which the premises are relet prior to the defaulting tenant‘s satisfaction of
Given this interpretation of paragraph 16, we must determine whether it triggers the implied covenant in the tenant‘s favor under section 234. While paragraph 16 is not an all-inclusive attorney‘s fee provision, it does permit the landlord, under the circumstances described, to recover an attorney‘s fee incurred in litigation occasioned by the tenant‘s failure to perform an obligation set forth in a covenant of the lease. Paragraph 16, thus, literally fits within the language of the first prong of section 234, since it does “provide that in any action or summary proceeding the landlord may recover attorneys’ fees and/or expenses incurred as the result of the failure of the tenant to perform any covenant or agreement contained in such lease.”3 Use of the permissive word “may” in section 234 indicates that an attorney‘s fee provision in the lease will trigger the implied covenant even if it does not mandate the landlord‘s full recovery of his or her attorney‘s fee under every set of circumstances in which the parties litigate the tenant‘s alleged default under the lease. The word “recover” in section 234 indicates that the triggering lease provision must simply establish a method by which the landlord may recover his or her attorney‘s fee; the lease provision need not expressly require a court order awarding the
Our conclusion is supported by the “basic tenet of statutory construction that the ‘mischief to be corrected’ and the spirit and purpose of the statute must be considered” in construing the statutory language (Nestor v McDowell, 81 NY2d 410, 414 [1993], quoting Matter of Toomey v New York State Legislature [Assembly], 2 NY2d 446, 448 [1957]). The remedial purpose of section 234 is to “level the playing field” (Matter of Duell v Condon, 84 NY2d at 780), “‘redress the recognized inequality at the bargaining table between landlord and tenant, and . . . protect the public interest involved‘” (Kuttas v Condon, 290 AD2d at 493, quoting Cier Indus. Co. v Hessen, 136 AD2d 145, 150 [1988]). As the sponsor of the bill that became section 234 stated, it was intended that
“by giving tenants the potential right to recover such legal expenses, [section 234] would act as a deterrent to overreaching practices by landlords who now rely upon their tenants’ inability to bear the cost of legаl proceedings required to redress [the] landlord‘s improper acts” (Mem of Senator Harrison J. Goldin, Bill Jacket, L 1966, ch 286, at 1; see Matter of Duell v Condon, 84 NY2d at 784).
The implication of a covenant in favor of the tenant here is consistent with the Legislature‘s remedial purpose of effecting mutuality in landlord-tenant litigation and helping to deter frivolous and harassing litigation by landlords who wish to evict tenants. It is no secret that landlords have a financial motivation to terminate a tenancy where the possibility exists of rerenting the premises at a higher rate (see Matter of Duell v Condon, 84 NY2d at 781 [“the landlords had an obvious incentive to terminate” a rent-controlled tenancy]). The lease in the record before us consists of a preprinted form which is generally in
Significantly, in 1992, the Appellate Division, First Department, construed a similarly worded lease provision to give rise to the implied covenant (see Bunny Realty v Miller, 180 AD2d 460 [1992]). A portion of the lease provision at issue in that case was quoted in the reported decision as follows:
“Any rents received by the Landlord for the rerenting shall be used first to pay Landlord‘s expenses and second to pay any amount Tenant owes under this lease. Landlord‘s expenses include the cost of getting possession and rerenting the Apartment, including, but not only reasonable legal fees, brokers fees, cleaning and repairing costs, decorating costs and advertising costs” (id. at 462).
The First Department reversed an order of the Appellate Term, First Department, whiсh denied the tenant‘s application for an award of an attorney‘s fee, holding, in pertinent part:
“Thus, while the subject lease clearly permits the landlord to recover legal fees for obtaining possession of the apartment, the Appellate Term has interpreted the section to mean that because it does not specifically contain the words ‘due to the tenant‘s default‘, it somehow limits the latter‘s reciprocal rights thereunder. Yet, this clause is sufficiently broad to allow the landlord to procure counsel fees for any reason, including breach of lease, so long as the ultimate result would be to take possession or rerent the apartment. Acceptance of the Appеllate Term‘s argument in this respect would enable, if not encourage, landlords to undermine entirely the effectiveness of
Real Property Law § 234 through artful draftsmanship” (id. at 462-463).
More recently, the First Department issued decisions in two cases which some courts have interpreted as being at odds with the holding in Bunny Realty. In the order under review on this appeal, the Appellate Term cited these cases for the proposition that paragraph 16 “is not the type of provision covered by
“The motion court properly denied defendants’ [tenants‘] request for attorneys’ fees. Paragraph 23 (D) (3) of the lease, on which defendants rely, provides that in the event the lease is cancelled, the landlord may rerent the apartment, and any such new rent received ‘shall be used first to pay Landlord‘s expenses . . . [which] expenses include the costs of getting possession and rerenting the Apartment, including . . . reasonable legal fees.’ This is not the type of provision covered by
Real Property Law § 234 . Furthermore, the action arises out of the 1995 agreement, not the lease (cf. Peck v Wolf, 157 AD2d 535, 536 [1990] . . .)” (Oxford Towers, 58 AD3d at 423).
As quoted above, the small portion of the lease quoted in Oxford Towers appears to be nearly identical to the portion quoted in Bunny Realty. However, Oxford Towers was not the kind of action governed by section 234. The tenants did not incur their attorney‘s fee “as the result of the failure of the landlord to perform any covenant or agreement on its part to be performed under the lease or in the successful defense of any action or summary proceeding commenced by the landlord against the tenant arising out of the lease” (
In the subsequently decided case, Madison-68, the First
The holdings in Oxford Towers and Madison-68, however, have led some courts to conclude that Bunny Realty is not good law. Although one Civil Court Judge sitting in the First Department has concluded that Bunny Realty has not been overruled (see Stephen LLC v Zucchiatti, 24 Misc 3d 1203[A], 2009 NY Slip Op 51245[U], *3 [2009] [“(w)ithout a clear signal from the Appellate Division, First Department, that it has decided to undo 17 years of precedent and one of its more prominent decisions regarding attorneys’ fees, this court will continue to follow Bunny“]), the Appellate Term, First Department, declined to follow Bunny Realty.
“[T]he attorneys’ fees provision in the subject initial written lease agreement did not trigger the reciprocal right to attorneys’ fees pursuant to
Real Property Law § 234 [citing Oxford Towers and Madison-68]. To the extent [Bunny Realty] suggests a contrary conclusion, we decline to apply it” (303 E. 37th Sponsors Corp. v Goldstein, 29 Misc 3d 131[A], 2010 NY Slip Op 51880[U], *1 [2010]).
To further complicate matters, in the order dated January 29, 2010, the Appellate Term relied upon our decision in Gannett Suburban Newspapers v El-Kam Realty Co. (306 AD2d 312 [2003]) to support its conclusion that section 234 does not govern lease provisions like paragraph 16 here. Gannett Suburban was a breach of contract action based on a commercial lease in which Gannett Suburban Newspapers was the tеnant and El-Kam Realty was the landlord. Because a residential lease was not involved, section 234 was not applicable and we did not cite it. We held, in pertinent part:
“[T]he Supreme Court properly denied that branch of El-Kam‘s [the landlord‘s] motion which was for summary judgment on its fourth counterclaim [for an attorney‘s fee] . . . We note that section 27.01 of the lease, on which El-Kam relies, only permits El-Kam to deduct its attorney‘s fee when calculating any credit to which Gannett [the tenant] would be entitled if El-Kam relets the premises. Notwithstanding the foregoing, the lease expressly provides that El-Kam is not obligated to mitigate damages by reletting” (id. at 314 [citations omitted]).
Upon an initial reading, it would appear that the lease provision paraphrаsed in Gannett Suburban bore some similarity to paragraph 16 with respect to the landlord‘s method of recouping an attorney‘s fee. However, the lease at issue in that case was a commercial lease, and a commercial tenant does not have an implied right to an attorney‘s fee even where the commercial lease contains such a clause in the landlord‘s favor (see Reade v Stoneybrook Realty, LLC, 63 AD3d 433 [2009]). Moreover, to the extent that, notwithstanding its commercial nature, the courts
We further note that the Appellate Term has permitted a landlord tо recover an attorney‘s fee in a holdover proceeding pursuant to a lease provision which was similar to paragraph 16 (see 490 Owners Corp. v Israel, 189 Misc 2d 34 [2001]). The same result occurred in the Appellate Term, First Department, which cited Bunny Realty and 490 Owners Corp. in upholding an award of an attorney‘s fee to a landlord (see Halle v Adbuljaami, 24 Misc 3d 143[A], 2009 NY Slip Op 51776[U] [2009]). The incongruous result is that the Appellate Terms in both the First and Second Departments, in cases involving lease provisions similar to paragraph 16 here, have allowed landlords to collect an attorney‘s fee, but have not allowed tenants to invoke the implied covenant pursuant to section 234 (compare 303 E. 37th Sponsors Corp. v Goldstein, 29 Misc 3d 131[A], 2010 NY Slip Op 51880[U] [2010] [against tenant], with Halle v Adbuljaami, 24 Misc 3d 143[A], 2009 NY Slip Op 51776[U] [2009] [for landlord]; and compare Hamilton v Menalon Realty, LLC, 14 Misc 3d 13 [2006] [against tenant], with 490 Owners Corp. v Israel, 189 Misc 2d 34 [2001] [for landlord]). Allowing the landlord but not the tenant to recover an attorney‘s fee in such circumstances is contrary to the legislative intent of section 234 to level the playing field.
Finally, we again stress that the outcome of every motion for an award of an attorney‘s fee pursuant to section 234 must be based upon a review of the complete lease provision at issue,
Consequently, the order dated January 29, 2010, is reversed, on the law, the order of the Civil Court, Queens County, entered January 27, 2009, is reversed, the motion of Luis Juaregui for an award of an attorney‘s fee is granted, and the matter is remitted to the Civil Court, Queens County, for a hearing, to be held forthwith, to determine the amount of the attorney‘s fee to be awarded to Luis Juaregui.
COVELLO, J.P., DICKERSON and ROMAN, JJ., concur.
Ordered that the order dated January 29, 2010, is reversed, on the law, with costs, the order of the Civil Court, Queens County, entered January 27, 2009, is reversed, the motion of Luis Juaregui for an award of an attorney‘s fee is granted, and the matter is remitted to the Civil Court, Queens County, for a hearing, to be held forthwith, to determine the amount of the attorney‘s fee to be awarded to Luis Juaregui.