Graham Court Owner's Corp. v. TaylorGraham Court Owner's Corp. v. Taylor
APPEARANCES OF COUNSEL
Kucker & Bruh, LLP, New York City (Nativ Winiarsky and Patrick K. Munson of counsel), for respondent.
OPINION OF THE COURT
RENWICK, J.
This appeal concerns a tenant, respondent Kyle Taylor, who successfully defended a holdover proceeding commenced by petitioner, Graham Court Owner’s Corp., in which the landlord sought to recover the leasehold on the ground that the tenant breached the lease by making unauthorized alterations to the premises. After a nonjury trial, Civil Court dismissed the holdover proceeding and awarded the tenant attorneys’ fees pursuant to
The history of this landlord-tenant relationship had an unauspicious start. In May 2004, the tenant and landlord entered into a rental lease for $2,200 a month, for an unregulated apartment in Manhattan. In October 2005, however, the tenant filed a rent overcharge complaint with the New York State Division of Housing and Community Renewal (DHCR), claiming that his $2,200 rent was an overcharge because he was never made aware that the apartment was subject to the Rent Stabilization Law and Code when he took occupancy. In opposition, the landlord claimed that the apartment had become deregulated because $60,000 in renovations were performed to the apartment before the tenant took occupancy. In response, the tenant submitted proof that he—not the landlord—performed renovation work at the apartment.1 In January 2007, DHCR found that there had been an overcharge and that the apartment remained rent-regulated. Supreme Court dismissed the landlord’s
The travails between the tenant and the landlord did not end there. Subsequently, the landlord accused the tenant of making unauthorized alterations to the apartment. Under paragraph 7 of the lease, the tenant is permitted to make alterations only after obtaining the landlord’s “prior written consent.” Paragraph 15 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: .
. . “IV 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 canceled . . . , 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 canceled, or Landlord takes back the Apartment, the following takes place:
“(1) Rent and added rent for the unexpired Term is due and payable.3
“(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 re-renting 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 re-renting the Apartment, including, but not only reasonable legal fees, brokers fees, cleaning and repairing costs, decorating costs and advertising costs.”
On March 30, 2007, the landlord served the tenant with a notice to cure, alleging that the tenant violated paragraph 7 of the lease by “installing an entire new electrical system in the kitchen” without the landlord’s prior written consent. The notice advised that, in the event of the tenant’s failure to cure by April 10, 2007, the landlord would elect to terminate the tenancy in accordance with applicable law. On April 23, 2007, the landlord served a notice of termination of the lease effective May 11, 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.
At the nonjury trial, the tenant testified that in April 2004, he went to the office of the landlord and discussed with the landlord’s principal, Frankel, electrical improvements that would have to be made in order for him to take the apartment. Frankel told the tenant that he could go into the apartment before the lease began and perform the agreed upon work.4 The superintendent gave the tenant access to the apartment before the lease commencement date in May 2004. The tenant had an electrician perform the work, leaving the original wiring in the walls and running new wires and installing new switches and outlets on the outside of the walls.
In May 2004, the tenant wrote to the landlord that the work was completed. The tenant enclosed the electrical bill invoices and requested reimbursement and a five year lease extension. In response, on June 9, 2004, a landlord’s officer, Becker, came to the apartment and verified the electrical work had been done. Becker told the tenant that he would not be reimbursed but that the landlord would agree to extend the lease to a three year term.
In a July 2010 order, Civil Court dismissed the holdover proceeding. The court found that since the landlord’s agents had specifically authorized the tenant to make the alterations, he had not breached the lease by making those alterations. The court found the tenant’s testimony in this regard credible, and it disregarded as “entirely incredible” the testimony of Frankel, who “lied repeatedly and obviously” at trial. The court further
found that
The landlord appealed to the Appellate Term insofar as Civil Court dismissed the proceeding and awarded attorneys’ fees to the tenant under
We now find that, having prevailed in his defense of the landlord’s holdover proceeding, the tenant is entitled to recover attorneys’ fees pursuant to
“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.”
The overriding purpose of the statute is to provide a level playing field between landlords and tenants, by creating a mutual obligation that is an incentive to resolve disputes quickly and without undue expense (Matter of Duell v Condon, 84 NY2d 773, 780 [1995]). As a remedial statute,
In this case, as indicated, the landlord began a holdover proceeding pursuant to paragraph 15 of the lease, predicated upon the factual allegations that the tenant performed unauthorized alterations in the apartment and then failed to cure this default. Specifically, paragraph 15 (A) 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 paragraph 15 (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 paragraph 15 (D) (1), if the landlord “takes back the Apartment, . . . [r]ent and added rent for the unexpired Term is 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 paragraph 15 (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 paragraph 15 (D) (3), “[a]ny rent received by Landlord for the re-renting shall be used first to pay Landlord’s expenses and second to pay any amounts Tenant owes under
We interpret the remedial scheme of paragraph 15 to permit the landlord, in the event of a lease default by the tenant, to cancel the lease and regain possession of the premises via the means of a summary holdover proceeding, and then recoup the attorneys’ fee incurred in the litigation by re-renting the premises. Any new rent received by the landlord after re-renting the apartment would be used first to pay the “Landlord’s expenses,” including “reasonable legal fees.” Paragraph 15, thus, literally fits within the language of
The dissent, however, argues that
To be sure, an attorneys’ fees clause in a lease may be narrowly tailored to permit fees only under certain circumstances, or for particular types of proceedings. Awards of fees under such provisions should be limited to the situations for which they are provided under the lease. This is true whether the landlord is seeking fees, or whether the tenant is seeking fees pursuant to the reciprocal right to fees under
In this case, the dissent cannot seriously dispute that the subject lease provision, paragraph 15, would be triggered by a
Our interpretation of the remedial scheme of paragraph 15, as triggering the reciprocal mandate of section 234, is supported by our holding in Bunny Realty v Miller (180 AD2d 460 [1st Dept 1992]). In that case, this Court held that
“Any rents received by the Landlord for the re-renting 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 re-renting the Apartment, including, but not only reasonable legal fees, brokers fees, cleaning and repairing costs, decorating costs and advertising costs” (id.).
This Court reversed the order of the Appellate Term, First Department, which denied the tenant’s application for an award of attorneys’ fees, reasoning, 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 re-rent the apartment. Acceptance of the Appellate 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, in Casamento (88 AD3d 345 [2011]), the Second Department held that the same paragraph as the one in the lease at issue here (denominated paragraph 16 in the lease at issue in Casamento) triggered
The Second Department’s analysis of paragraph 16 of the lease in Casamento is consistent with our analysis of the similar paragraph (paragraph 15) of the lease at issue in this case, as explained above. Furthermore, we concur with the Second Department’s conclusion: “To deny the tenant’s motion pursuant to [
Indeed, as particularly relevant in this case, where the landlord was found to have engaged in improper retaliation, a contrary conclusion based on the dissent’s narrow construction of
ing
Here, the landlord makes no attempt to distinguish Bunny Realty and Casamento. Instead, the landlord contends that two recent decisions from this Court (i.e. Oxford Towers Co., LLC v Wagner, 58 AD3d 422 [1st Dept 2009], and Madison-68 Corp. v Malpass, 65 AD3d 445 [1st Dept 2009]), overruled Bunny Realty. Neither case, however, cites Bunny Realty. More importantly, Oxford Towers, which denied a tenant an award of attorneys’ fees, is distinguishable. As this Court noted in Oxford Towers, “the action arises out of the 1995 agreement, not the lease” and, the tenants incurred the attorney’s fee in their successful defense of the landlord’s cause of action to rescind the 1995 agreement (Oxford Towers, 58 AD3d at 423). Thus, the attorneys’ fees provision was not triggered by a breach of the lease. Under the circumstances, as pointed out by the Second Department in Casamento, the statement in Oxford Towers that the lease provision at issue was
“ ‘not the type of provision covered by
Real Property Law § 234 ’ cannot be construed literally to hold that any lease provision containing the language quoted in the First Department’s decision and order in Oxford Towers is, as a matter of law, insufficient to trigger the implied covenant under section 234” (Casamento, 88 AD3d at 358).
We concur with the Second Department that, “[t]o the extent that the phrase can be so interpreted, it constitutes dicta which we decline to follow” (id.).
The second case relied upon by the landlord, Madison-68, is equally unavailing. In Madison-68, this Court tersely stated that “it was error for the J.H.O. to determine that [the tenants] were entitled to an award of attorneys’ fees” and that “[i]n Oxford Towers . . . , this Court held that an identical lease provision was not covered by
More importantly, to the extent Madison-68 relies exclusively upon the aforementioned dicta in Oxford Towers, this Court’s
In short, “while judicial interpretation of similarly worded lease provisions has a long and variegated history” (354 E. 66th St. Realty Corp. v Curry, 40 Misc 3d 20, 22 [App Term, 1st Dept 2013], citing Casamento v Juaregui, 88 AD3d at 362), we now hold explicitly what was implicit in Katz Park Ave. That is, we concur with the Second Department in holding that the type of lease clause at issue here is sufficient “to trigger the implied covenant in the tenant’s favor pursuant to [
Accordingly, the order of the Appellate Term, First Department, entered March 1, 2012, which, to the extent appealed from as limited by the briefs, modified an order of the Civil Court, New York County (Jean T. Schneider, J.), entered on or about July 26, 2010, dismissing respondent’s claim for attorneys’ fees pursuant to
DEGRASSE, J. (dissenting). “Legislative enactments in derogation of common law, and especially those creating liability where none previously existed, must be strictly construed” (Vucetovic v Epsom Downs, Inc., 10 NY3d 517, 521 [2008]). On the basis of this bedrock principle of statutory construction, I dissent because, in my view, the lease that is before this Court provides no predicate for the reciprocal attorneys’ fees provision under
“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, and an agreement that such fees and expenses may be recovered as provided by law in an action commenced against the landlord or by way of counterclaim in any action or summary proceeding commenced by the landlord against the tenant. Any waiver of this section shall be void as against public policy.”
Therefore, under the reciprocal provisions of
“15. . . . “(D) If this Lease is canceled, or Landlord takes back the Apartment, the following takes place:
“(1) Rent and added rent for the unexpired Term is due and payable.
“(2) Landlord may relet the Apartment and anything in it. The reletting may be for any term. Landlord may charge any rent or no rent and give allowances to the new tenant. Landlord may, at Tenant’s expense, do any work Landlord reasonably feels needed to put the Apartment in good repair and prepare it for renting. Tenant stays liable and is not released except as provided by law.
“(3) Any rent received by Landlord for the re-renting 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 re-renting the Apartment, including, but not only reasonable legal fees, brokers fees, cleaning and repairing costs, decorating costs and advertising costs.” (Emphasis added.)
Nothing in the above lease provision provides for tenant’s payment of attorneys’ fees. The language merely provides for an offset of rents collected in the event of a reletting. Therefore,
The majority relies on Bunny Realty v Miller (180 AD2d 460 [1st Dept 1992]), in which this Court found that
At common law, attorneys’ fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule (see Hooper Assoc. v AGS Computers, 74 NY2d 487, 491 [1989]). After Bunny Realty was handed down, the Court of Appeals decided Gottlieb v Kenneth D. Laub & Co. (82 NY2d 457 [1993]) where it held that a statute providing for an award of attorneys’ fees should be narrowly construed in light
In Matter of Duell v Condon (84 NY2d 773 [1995]), the Court stated:
“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” (id. at 780).
The result reached by the majority enables tenant to recover attorneys’ fees by virtue of a determination in his favor. At the same time, there can be no doubt that the language of the lease would not have provided for a similar recovery by landlord if it had prevailed. Within the meaning of Duell, the mere possibility of landlord’s offset of reletting expenses can hardly be considered the “same benefit” as today’s outright award of attorneys’ fees to tenant. Today’s ruling makes for the mutuality of a “heads, I win; tails, you still don’t win” coin toss.
I agree with the Appellate Term that there is no basis for an award of attorneys’ fees under
Order of the Appellate Term, First Department, entered March 1, 2012, modified, on the law, respondent’s claim for attorneys’ fees pursuant to