This is a motion by defendant landlord seeking to amend the answer to add a counterclaim for rescission of the lease and the addition of recently discovered facts to add to the counterclaim for breach of contract. For the reasons discussed infra, the motion is granted.

Defendant also requests an order requiring compliance with its second Notice of [*2]Discovery and Inspection.The Demand was served simultaneously with this motion . A status conference is scheduled for March 28, 2012, which can deal with this issue. Moreover, the issue was not ripe for a determination as at the time the motion was made,

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the response was not due and, therefore, no dispute or disagreement had developed needing the Court's intervention.

Background

In a previous decision, the Court determined that the apartment was subject to rent stabilization and the plaintiff was the rent-stabilized tenant of the apartment.

At the time plaintiff rented the apartment, he gave the defendant a reference letter indicating that he made a salary of $168,000, per annum and he stated in his application that he had an annual salary of $170,000. He also explained that he needed such a large apartment because he and his fiancé, who was to move in with him, were planning to have a large family and both needed their own individual office space to pursue their careers.

Subsequent discovery revealed that the purported fiancé never moved in. The letter of reference was fraudulent as plaintiff had not been employed by that company for about five months and at the time of entering the lease, the plaintiff was unemployed without the means to pay the rent.

When he acquired possession of the apartment, plaintiff advertised and rented out the various rooms in the apartment as a bed and breakfast at rental rates far in excess of the rental amount he was paying. All of these facts are undisputed as plaintiff never submitted his own Affidavit in Opposition to the motion.

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Plaintiff's Contentions

The Affidavit in Opposition to this motion is that of plaintiff's attorney. He argues that the counterclaim for rescission is barred by res judicata because it would deprive the plaintiff of his rights as a rent stabilized tenancy granted by the Court's prior decision. He also contends that the rent stabilization code is the exclusive basis for terminating the tenancy of plaintiff and there is no basis for such termination or refusal to renew a lease by rescission for fraudulent inducement. Finally, he asserts that defendant cannot rely on rescission as a counterclaim because there was no reliance by defendant on plaintiff's untruthful statements.

Decision

Both parties have misconstrued the meaning of res judicata and collateral estoppel. Both concepts fall under the rubic of claim preclusion. It means once an issue or a claim has been litigated to a final conclusion culminating in a judgment, it cannot be relitigated in [*3]another action or proceeding (Siegel's NY Prac §444 [5th ed 2011]). The law of the case, on the other hand, refers to non-final orders in an ongoing action. It restricts any judge of coordinate jurisdiction, other than the one in the pending action, from changing that decision (People v Somerville, 3 Misc 3d 593, 771 NYS2d 866 [Sup Kings Cty 2004], aff'd 33AD3d, 733 [2d Dept 2006]). We know that such non-final determinations can be changed by the judge who made them, e.g., motion to reargue, renew, change in circumstances, etc. Because, there has been no final judgment in this action, the law of the case is the principle

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determining whether the Court can change plaintiff's rent control status. Accordingly, the prior decision declaring plaintiff a rent stabilized tenant can be modified based on plaintiff's fraudulent representations which defendant was not aware of at the time he rented the apartment to the plaintiff. While plaintiff's attorney states that defendant cannot plead fraudulent inducement because he did not rely on the fraudulent representations of plaintiff, by contrast, the factual record in the form of the deposition and reply affidavit of the defendant very clearly establishes that it was in reliance on those untruthful statements that caused him to rent to plaintiff. Thus, there is a sufficient basis for the defendant to plead rescission, and if the defendant's counterclaim is successful, the lease is a nullity. Therefore, from the very beginning, there would not have been a landlord-tenant relationship and the Rent Stabilization Law would not apply (Sokolev v Dunaud, Mercandier & Carreras v Lacher, 299 AD2d 64, 70, 747 NYS2d 441 [1st Dept 2002]). ["These allegations state a viable claim for rescinding the agreement based on fraudulent inducement " [citation omitted].

Contrary to plaintiff's assertion that the RSC does not create a remedy for rescission or termination of the tenancy, §2524.3(a) of the code provides that after a ten-day notice to cease the violation of a substantial obligation of its tenancy, an action or proceeding may be commenced to recover possession of the premises. Although there is no need to invoke this clause because the counterclaim for rescission should be sufficient to nullify the landlord-

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tenant relationship (220 W 93rd Street, LLC v Stavrolakes, 33 AD3d 491, 623 NYS2d 44 [1st Dept 2006]) [occupancy of apartment by transient students, rather than roommates, constituted violation of rent controlled tenancy resulting in the termination of the tenancy]. In Continental Towers v Freuman, 128 Misc 2d 680, 494 NYS2d 595 [App Term, 1st Dept], the Appellate Term found that on facts similar to the instant matter, a Notice to Cure the illegal subletting by the tenant did not result in a stay of his eviction, the holding being that application of the cure provision would not in all instances serve the public interest. [*4]

Accordingly, it is

ORDERED that the portion of defendant's motion to add the counterclaim to a second amended complaint asserting fraudulent inducement and rescission is granted; and it is further

ORDERED that the portion of the defendant's motion to enhance its breach of lease counterclaim to a second amended complaint to include the additional information revealed by the plaintiff in his deposition is granted; and it is further

ORDERED that within 25 days of the entry of this order, defendant shall serve a copy of this order with Notice of Entry along with a copy of the second amended answer on plaintiff's attorney; and it is further

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ORDERED that plaintiff shall have 20 days to reply to the second amended answer.

Dated: March 23, 2012Enter:

_______________________

Louis B. York, J.S.C.