Court Opinion

ID: 5732709
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:27:47.423792+00
Date Added: 2024-06-11T08:40:54.481267
License: Public Domain

McGuire, J., dissents
in a separate memorandum as follows: Pursuant to a lease executed in January 1992, plaintiff leased a rent stabilized apartment from defendant 85th Estates Company (the Company), the net lessee of the building in which the apartment is located. According to plaintiff, defendant Perlbinder, a principal of the Company, demanded that plaintiff pay $50,000 as a condition to obtaining the lease. The $50,000 payment would also serve as consideration for defendants’ promise continually to renew the lease for additional terms. Plaintiff allegedly paid this $50,000 “fee” to Perlbinder in early February 1992, thereby entering into the alleged agreement which is at the center of this appeal.
By a notice dated September 16, 2003, the Company notified plaintiff that it did not intend to renew plaintiffs previously renewed lease that was to expire on January 31, 2004. The Company claimed that it would not renew the lease because plaintiff was not using the apartment as his primary residence. In February 2004, the Company commenced a nonprimary resi*739dence holdover proceeding in the Civil Court of the City of New York, seeking possession of the premises and use and occupancy from plaintiff for the period of the holdover.
On April 30, 2004, plaintiff commenced this action against defendants asserting four causes of action. The first cause of action sought to enjoin the Company from prosecuting the holdover proceeding and specific performance of the agreement, i.e., defendants’ promise to renew the lease. The second and third causes of action, which are materially indistinguishable, sought damages for defendants’ breach of the agreement, i.e., defendants’ failure to renew the lease. The fourth cause of action sought damages based upon defendants’ violation of the rent stabilization laws prohibiting excessive rents and overcharges. Defendants moved to dismiss the complaint pursuant to CPLR 3211, asserting that plaintiffs cause of action seeking specific performance of the agreement should be litigated in the holdover proceeding and that the remaining causes of action seeking damages were time-barred. Supreme Court granted the motion in its entirety and dismissed the complaint. Plaintiff appeals, as limited by his brief, from those portions of the order which dismissed his second and third causes of action.
I agree with the majority’s tacit conclusion that the second and third causes of action cannot be addressed by the Civil Court in the context of the holdover proceeding. “The only issue before the court [in a holdover proceeding] is the right of possession as of the time of the commencement of the proceeding” (2 Dolan, Rasch’s Landlord and Tenant—Summary Proceedings § 30:3, at 419 [4th ed] [“Tenant Wrongfully Holding Over”] [emphasis added], citing Jones v Gianferante, 305 NY 135, 139 [1953] [“(A) summary proceeding under (former) article 83 of the Civil Practice Act is of purely possessory character, and the only issue before the court was as to the right of possession]).1 While the court in the holdover proceeding can also award the landlord any rent that may be unpaid and, for a period of occupancy during which no rent is due, the fair value of use and occupancy of the premises (RPAPL 741 [5]), it has no jurisdiction over any other claims between the parties (see Allyn v Markowitz, 83 Misc 2d 250, 252 [Rockland County Ct 1975] [“In a special proceeding pursuant to (RPAPL) article 7 . . . , a court has no jurisdiction to adjudicate a monetary claim (by lessor against lessee for damage to the *740demised premises)”]; Carver v Crowe & Co., Inc., 202 Misc 899, 899 [App Term, 1st Dept 1952] [civil court in summary proceeding “had no jurisdiction to adjudicate as to the alleged indebtedness of the tenant to the landlords for fuel, which was no part of the rental obligation”]; 2 Dolan, Rasch’s Landlord and Tenant—Summary Proceedings § 29:7, at 406-407 [4th ed]; 89 NY Jur 2d, Real Property—Possessory Actions § 3; see also Romea v Heiberger & Assoc., 163 F3d 111, 116 [2d Cir 1998] [“The landlord may also recover unpaid rent owed by the tenant in an Article 7 proceeding. But it can only do this as a matter ancillary to the court’s jurisdiction to hear a claim to recover possession”]; see generally Ross Realty v V & A Fabricators, Inc., 42 AD3d 246 [2d Dept 2007]).
While the issue of whether the apartment is plaintiffs primary residence must be adjudicated in the holdover proceeding in Civil Court, that court is without jurisdiction to adjudicate plaintiffs claims seeking damages for the alleged breach of the agreement, the only claims before us on this appeal (i.e., the second and third causes of action). Civil Court can only pass on the issue of whether the apartment is plaintiffs primary residence. Although Civil Court’s finding on that issue would preclude the parties from relitigating it in Supreme Court, such finding by Civil Court would not have any impact on plaintiffs action in Supreme Court for damages stemming from the alleged breach of the agreement. For this reason, there is no impermissible splitting of a single claim.2
In any event, the agreement is unenforceable on the ground *741that it is void as a matter of public policy. Initially, while the majority correctly notes that defendants did not raise this issue before Supreme Court, we may nevertheless consider it (Matter of Niagara Wheatfield, Adm’rs Assn. [Niagara Wheat field Cent. School Dist.7, 44 NY2d 68, 72 [1978] [“Where a contract provision is arguably void as against public policy, that issue may be raised for the first time at the Appellate Division by a party, or by the court on its own motion”]; Matter of Maiore v City of Buffalo, 78 AD2d 979 [1980]; see People v Knowles, 88 NY2d 763 [1996]).
Turning to the substance of this argument, the public policy underlying the Rent Stabilization Law “is to provide an adequate supply of affordable housing in the City of New York” (Drucker v Mauro, 30 AD3d 37, 40 [2006], appeal dismissed 7 NY3d 844 [2006]), “so as to ameliorate . . . dislocations and risk of widespread lack of suitable dwellings” (390 W. End Assoc, v Harel, 298 AD2d 11,15 [2002] [internal quotation marks omitted]). Thus, “[i]t is well settled that the parties to a lease governing a rent-stabilized apartment cannot, by agreement, incorporate terms that compromise the integrity and enforcement of the Rent Stabilization Law. Any lease provision that subverts a protection afforded by the rent stabilization scheme is not merely voidable, but void” (Drucker v Mauro, 30 AD3d at 39 [citations omitted]).
In Drucker, the parties entered into a lease and rider pursuant to which the plaintiffs rented an apartment from the defendant. The lease and rider included provisions setting the rent at a rate in excess of that established by the Division of Housing and Community Renewal (DHCR) and entitling the plaintiffs to perpetual renewal of the lease. The pertinent provisions of the rider represented the settlement of a dispute regarding the defendant’s failure timely to offer the plaintiffs a renewal lease and claims involving the rent and repairs and renovations. In response to the defendant’s efforts to obtain luxury decontrol of the apartment, the plaintiffs commenced an action seeking a declaration that the lease and rider were enforceable and to enjoin the defendant from applying for luxury decontrol of the apartment.
In reversing an order of Supreme Court declaring that the lease and rider were enforceable, this Court determined that the lease and rider were unenforceable and void as a matter of public policy. The Court, citing the well-established rule that landlords and tenants are prohibited from entering into agreements that effectively deregulate rent stabilized apartments, found that the plaintiffs waived impermissibly the protections *742afforded by the Rent Stabilization Code because the rider provided for rent that exceeded the amount established by DHCR and allowed for perpetual, unconditional renewal of the lease. The Court reasoned that judicial recognition and enforcement of such agreements could “adversely affect both the legal rent and the regulated status of . . . dwelling unit[s] for future occupants” (id. at 40) and concomitantly undermine and “erode the entire statutory scheme of the Rent Stabilization Law” (id. at 42).
While the agreement at issue here did not impose upon plaintiff monthly rental obligations in excess of the legal regulated amount, it did involve a one-time $50,000 payment that served as both a condition to obtaining the lease and consideration for the promise continually to renew the lease for additional terms. The agreement violates the public policy underlying the Rent Stabilization Law because it purports to allow plaintiff to rent the apartment regardless of whether it serves as his primary residence (see Rocky 116 v Weston, 284 AD2d 139 [2001]; Park Towers S. Co. v Universal Attractions, 274 AD2d 312 [2000]; see also Thornton v Baron, 5 NY3d 175 [2005]; Draper v Georgia Props., 94 NY2d 809 [1999]; 390 W. End Assoc, v Harel, supra; 390 W End Assoc, v Baron, 274 AD2d 330 [2000]).3 Thus, the agreement is void and plaintiffs right to remain in possession of the apartment, i.e., right to renewal of the lease, hinges on the outcome of the nonprimary residence holdover proceeding. Since the entire agreement is *743void, plaintiffs second and third causes of action, both of which seek damages for breach of the agreement, were properly dismissed.
390 W. End Assoc. v Baron (supra), cited by the majority, affords no support for its position. In Baron, plaintiff landlord commenced an action against defendant tenant seeking a declaration that the defendant’s apartment was exempt from rent regulation because the defendant was not using the unit as his primary residence. The parties entered into a consent judgment pursuant to which the defendant acknowledged that the apartment was not his primary residence, that the unit was exempt from the Rent Stabilization Law, and that any subsequent lease between the parties would similarly be exempted from rent stabilization. The parties then entered into a lease that provided for automatic renewals and allowed the defendant to sublease the unit to any person who did not use it as his or her primary residence. Rent for the unit was set at an amount several times the rent-stabilized rate. The defendant subsequently subleased the unit, at a rent in excess of the rent the defendant was charged under the prime lease, to a couple, the Thorntons, who did use the unit as their primary residence. Three years after they entered into the sublease, the Thorntons brought a rent overcharge action against the defendant on the ground that they were charged and paid rent well in excess of the legal rent as established by the Rent Stabilization Law. The plaintiff, which was not a party to the overcharge action, moved to vacate the consent judgment and rescind the prime lease so that it could offer the Thorntons a rent-stabilized lease.
This Court, reversing an order of Supreme Court denying the motion, determined that the prime lease was invalid since it violated the public policy underpinning the Rent Stabilization Law. Specifically, the Court noted that the lease, which permitted the defendant to lease the unit on the condition that he not use it as his primary residence, had the effect of deregulating the unit. For this reason, the Court granted the plaintiffs motion to vacate the consent judgment. In addition, because it was “concerned that plaintiff may have benefited unjustly at the Thorntons’ expense” (id. at 333), it did so “without prejudice to the assertion of any claims among the parties and/or the Thornton tenants with respect to profits obtained in violation of the Rent Stabilization Law” (id.). Thus, the Court did nothing more than acknowledge that rent paid by the Thorntons over the legal rent could potentially be recovered.
I would not, of course, want to prejudge either the merits of the claim or the statute of limitations issue that would arise, *744but it may be that plaintiff, like the Thorntons in Baron, has a viable claim to recover all or some portion of the $50,000 payment. Plaintiffs second and third causes of action, however, do not seek to recover the $50,000 payment. Indeed, plaintiffs fourth cause of action seeks that relief and, as the majority notes, plaintiff does not “appeal from the dismissal of the fourth cause of action for recovery of an alleged $50,000 illegal rent overcharge.” The second and third causes of action—the only claims before us—seek damages stemming from the breach of the agreement. In sum, Baron provides no support for the majority’s conclusion that plaintiffs second and third causes of action are viable.
Accordingly, I would affirm the order insofar as appealed from.

. RPAPL 711 was derived from, among other things, former article 83 of the Civil Practice Act. Since the RPAPL did not change the Civil Practice Act in this respect, Jones remains valid precedent (see 2 Dolan, Rasch’s Landlord and Tenant—Summary Proceedings § 29:7, at 406 n 36 [4th ed]).

. I agree with Justice Tom’s assertion that plaintiff “may assert his purported contract right to [perpetual] renewal of his lease in defense to the holdover proceeding,” however meritless that defense may be (see infra). That such a defense may be raised in the holdover proceeding, however, does not compel the conclusion that plaintiffs causes of action to recover damages for the alleged breach of the agreement must be raised in the same proceeding. As this Court stated in a related context, “the ‘narrow doctrine’ prohibiting the splitting of a cause of action (see Murray, Hollander, Sullivan & Bass v HEM Research, 111 AD2d 63, 66 [1985]) does not preclude the tenant from seeking damages in an action separate from that in which he had sought to be restored to possession” (Rodriguez v 1414-1422 Ogden Ave. Realty Corp., 304 AD2d 400, 401 [2003]; see Wood v Chenango County Natl. Bank & Trust Co., 282 App Div 283, 286 [1953] [“There should be one action only to settle the rights of the parties, when all rights can be properly determined in a single action” (emphasis added, internal quotation marks and citation omitted)]; Gilbert v Village of Larchmont, 280 App Div 1000 [1952] [same]). The majority asserts that I “seek to prejudge” the issue of plaintiffs potential defense in the holdover proceeding based on his alleged right, under the agreement, to perpetual renewal of the lease. To the contrary, however, I am judging in this action an issue of law that is properly before us: whether the agreement is void as a matter of public policy.

. The agreement may violate public policy for a separate reason. Some portion of the $50,000 payment—whatever that portion may be—was paid to obtain the lease and would appear to be, in substance, additional rent (see Munro v Syracuse, Lake Shore & N. R.R. Co., 200 NY 224,'232 [1910] [“Rent is the compensation for the use of land”]; 1 Dolan, Rasch’s Landlord and Tenant—Summary Proceedings § 12:1, at 523-524 [4th ed] [“Rent”] [“Rent is the compensation to be paid by a tenant for the use and occupation of land, or for the right thereto” (footnotes omitted)]; Black’s Law Dictionary 1322 [8th ed 2004] [defining “rent” as “ (consideration paid ... for the use or occupancy of property”]). Under one possible approach, whether the agreement resulted in rent charges exceeding the lawful rent would depend upon both the amount of the monthly rent plaintiff actually was paying relative to the maximum monthly rent that lawfully could be charged and whether there is some coherent basis for considering some portion of the $50,000 payment to represent additional payments of monthly rent. Alternatively, the inherent difficulties of making such calculations might support a prophylactic rule invalidating such a lump-sum payment on the ground that it threatens a core purpose of the legislative scheme (see Drucker, 30 AD3d at 40, quoting Estro Chem. Co. v Falk, 303 NY 83, 87 [1951] [“The obtaining of excessive rents strikes at the very purpose of the act”]). Happily, I need not wrestle with these issues given my conclusion that the agreement violates public policy for an independent reason.