Graham Court Owner's Corp. v. Taylor

115 A.D.3d 50

978 N.Y.S.2d 213

2014 N.Y. Slip Op. 00311

GRAHAM COURT OWNER'S CORP., Petitioner–Respondent,

v.Kyle TAYLOR, Respondent–Appellant.

Supreme Court, Appellate Division, First Department, New York.

Jan. 21, 2014.

Bierman & Palitz LLP, New York (Mark H. Bierman of counsel), for appellant.

Kucker & Bruh, LLP, New York (Nativ Winiarsky and Patrick K. Munson of counsel), for respondent.

SWEENY, J.P., RENWICK, MOSKOWITZ, DeGRASSE, GISCHE, JJ.

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 Real Property Law § 223–b, based upon a finding that this proceeding was retaliatory in nature. The Appellate Term, however, reversed the award of attorneys' fees, but otherwise affirmed. It also rejected the tenant's alternative claim that he is entitled to attorneys' fees pursuant to Real Property Law § 234. We disagree with that view, and modify the order of the Appellate Term, taking this opportunity to examine and reconcile an apparent conflict within this Department with respect to whether a similarly worded lease provision, which permits a landlord to recover attorneys' fees for re-renting an apartment after prevailing in a holdover proceeding, is adequate to invoke the reciprocal mandate of Real Property Law § 234.

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 Article 78 petition challenging DHCR's determination, and this Court affirmed the dismissal.²

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 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 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.

On May 14, 2007, the landlord commenced this summary holdover proceeding in Civil Court alleging that the tenant had continued in possession without the landlord's permission beyond the date set forth in the notice of termination. In its petition, the landlord sought, among other things, an award of possession of the premises and “legal fees in the amount of $3,000.” The tenant filed an answer asserting a defense of retaliatory eviction under Real Property Law § 223–b and counterclaims for attorneys' fees and damages. With respect to the alleged alterations to the apartment, the tenant claimed that the “performance or installation of the alleged work described in the petition [did] not violate the lease between the parties” and that such work “ was performed to remedy hazardous conditions existing in the subject premises.”

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 had commenced the instant proceeding in retaliation for the tenant's successful rent overcharge claim. Finally, the court found that, “[a]lthough [the landlord] correctly points out that the attorneys' fee clause in the lease between these parties is not enforceable under current case law, [the tenant] is entitled to collect his attorneys' fees as part of his damages for retaliatory eviction.”

The landlord appealed to the Appellate Term insofar as Civil Court dismissed the proceeding and awarded attorneys' fees to the tenant under Real Property Law § 223–b(5). The tenant cross-appealed from that portion of the order dismissing his claims for attorneys' fees pursuant to Real Property Law § 234 and compensatory damages for “mental anguish” and other emotional injuries pursuant to Real Property Law § 223–b(5). The Appellate Term modified the order of Civil Court to the extent of denying the tenant attorneys' fees under RPL § 223–b, and otherwise affirmed. The Appellate Term found that the landlord was estopped from enforcing the “no alterations provision” of the lease, based upon the tenant's persuasive showing that the landlord's authorized agents expressly consented to the electrical work and the evidence that the landlord, in connection with prior proceedings before DHCR, falsely asserted that its own contractors had effectuated the electrical work. The court added, “We note that the above-cited provision does not meet the requirement that a statute expressly authorize an award of attorneys' fees.” Finally, the court found that the arguments raised by the tenant in his cross appeal were lacking in merit. This Court granted leave to the tenant, who appeals solely from the denial of attorneys' fees.

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 Real Property Law § 234. That section states that when a lease provides for a landlord's recovery of attorneys' fees resulting from a tenant's failure to perform any covenant under a lease, a reciprocal covenant “shall be implied” for the landlord to pay attorneys' fees incurred as a result of either its failure to perform a covenant under the lease or a tenant's successful defense:

“Whenever a lease of residential property shall provide that in any action or summary proceeding the...