In this summary proceeding for nonpayment of rent, petitioner moves for dismissal of respondent's counterclaims, based upon the lease provision barring counterclaims in summary proceedings. Petitioner further argues that since it withdrew the nonpayment petition upon respondent's payment prior to a hearing, respondent's counterclaims do not fall into the exception of being inextricably bound to a nonpayment because the proceeding has been withdrawn.

Respondent argues for summary judgment based upon documentary evidence that petitioner overcharged respondent in applying respondent's rental payments to legal/attorney fees [*2]and other allegedly improper miscellaneous charges that were not due. Specifically, respondent alleges that it was overcharged for attorney fees in the amount of $3,900.00, which represents legal/attorney fees of $450.00 for each of the several nonpayment proceedings where petitioner was not the prevailing party and where petitioner did not request fees and costs from the court. In addition, respondent avers that they were improperly charged late fees of $75.00 even though no rent was outstanding and that they were also billed for other fees that they were not obligated to pay. Respondent also argues that petitioner has improperly applied respondent's rental payments toward the payment of the improperly charged legal fees/costs which, in turn caused the rent history to incorrectly reflect that respondent was in arrears. Respondent further contends that the overcharge counterclaims go right to the essence of the nonpayment proceeding insofar at the claim affects the ultimate findings with respect to the amount (if any) ultimately owed by respondent.

As a threshold issue, the Court must decide whether it has jurisdiction to hear respondent's counterclaims when petitioner's petition has been withdrawn. It is well settled that upon the filing of an answer, issue is joined. Once issue is joined, a petition may not be withdrawn except upon leave of court. CPLR § 3217(a)(1); (b). In this case, issue was joined prior to petitioner's oral application to withdraw its petition in court and, to the extent that the petitioner now requests to withdraw its petition so that the Court cannot hear the counterclaims, the Court declines to grant its consent. Issue is joined and this case is ripe for determination.

Next the Court must decide whether to enforce the "no counterclaim" provision in the lease. Petitioner argues that the lease clearly prohibits the tenant from filing a counterclaim in a summary proceeding and that such a condition is enforceable. LRHC Flatbush, NY v Aftor Realty, 282 AD2d 577, 578 (2d Dept 2001). Petitioner also argues that the only exception to this rule, where the counterclaim is inextricably intertwined with the nonpayment of rent, does not apply in this case because the petitioner has withdrawn the nonpayment proceeding. Thus, respondent's counterclaims cannot be "inextricably intertwined" with a nonexistent claim for nonpayment.

Additionally, as set forth above, however, since issue has been joined, this Court has not permitted petitioner to withdraw its petition. Courts are vested with the discretionary power to decide whether to enforce a "no counterclaim" lease clause. RPAPL � 743 provides in pertinent part that "[t]he answer may contain any legal or equitable defense, or counterclaim." Moreover, New York courts have routinely declined to enforce such "no counterclaim" clauses where the issues raised in the counterclaim are "inextricably intertwined." 601 West Realty v Chapa,19 Misc 3d1133(A)(Civ Ct New York County 2008), 50 Court Company v Wild, NYLJ, Feb. 21, 1978 at 13, col 1 [App Term, 1st Dept]; see also, 384 Hotel Corp v. Café Comedy, Inc., 1992 NY Misc Lexis 700, citing Haskell v. Surita, 109 Misc 2d 409 at 413-14 (1981).

In this case, the Court notes that the issue of the amount actually owed by respondent, if any, cannot be separated from the initial nonpayment claim. Specifically, the amount of legal fees set forth in the original nonpayment claim has not been waived and continues to be applied to respondent's rental balance on an ongoing basis; thus causing an ongoing dispute potentially without end. Issues of equity, fundamental fairness and judicial economy preclude dismissal of the counterclaims and demand judicial review. The petitioner herein has instituted a new nonpayment proceeding against respondent without resolving the issues raised by respondent's [*3]underlying counterclaims, thus providing the perfect of example of what the Court finds particularly troublesome.

Claim of overcharge for legal fees and expenses

"[I]t is well settled in New York that a prevailing party may not recover attorneys' fees from a losing party except where authorized by statute, agreement or court." U.S. Underwriters Insurance Company v City Club Hotel, LLC, 3 NY3d 592, 597 (2004). The court will grant attorney fees only if the party "prevailed with respect to the central relief sought." Nestor v McDowell, 81 NY2d 410, 416 (1993) (emphasis added). In Nestor, the trial court granted tenant the right to cure and the tenant did, in fact, cure. The Court of Appeals noted that "[i]nasmuch as plaintiff has not prevailed with respect to the central relief sought that is, a possessory judgment, we conclude that she is not entitled to attorney's fees under the facts and circumstances of this case." Nestor at 416.

In the case at bar, landlord instituted several nonpayment proceedings against respondent. It is uncontroverted that it never obtained a possessory judgment against respondent. Insofar, as the lease provides for payment of legal fees, payment is not automatic, as only a court can grant legal fees and costs to the prevailing party in excess of the statutory amount, even where authorized by lease. However, the party seeking such payment must submit competent evidence of the lease provisions, as well as evidence that it actually incurred the fees and costs requested.

Miscellaneous charges of $2,930.00

Respondents also asserts that it was improperly charged late fees of $75.00 even though no rent was outstanding. In fact, respondent claims that the improper charges for legal fees and expenses caused his rent to be misapplied to these improper legal fees and costs, rather than to rent, resulting in the alleged arrears. Other fees contested by respondent are "credit card," "conv fee," "scheduler move in" and "court fee of $750.00."

Based upon the facts presented, the Court permits the respondent's counterclaims to proceed as part of the original summary proceeding. The Court finds that the counterclaims are "inextricably intertwined" with the nonpayment claim and that a determination of same would promote principles of fundamental fairness and judicial economy, as the amount allegedly owed and petitioner's proper application of respondent's payments received, goes to the core issue of a summary proceeding.

Summary Judgment

Summary judgment is available only where the movant has demonstrated that there are no material issues of disputed fact. Stillman v Twentieth Century Fox Film Corp., 3 NY2d 395 (1957). In the case at bar, there are a number of sharply disputed factual issues such as the validity of the charges for attorney fees/costs and other various miscellaneous charges.

Based upon the foregoing, the Court hereby (1) denies petitioner's motion to withdraw its petition and respondent's counterclaims; and (2) denies respondent's motion for summary judgment. The instant matter is restored to the Court's calendar for March 21, 2013, at 9:30 a.m., for a hearing to determine petitioner's entitlement to attorney fees/costs as well as its entitlement to miscellaneous charges. [*4]

This constitutes the Decision and Order of the Court.

Dated: February 15, 2013

New Rochelle, New York

Hon. Susan I. Kettner

City Court Judge