District Court of Nassau County, First District, September 7, 2018

Certilman Balin Adler & Hyman LLP, East Meadow, for petitioner.

Falcon, Jacobson & Gertler LLP, Rockville Centre (Kenneth J. Falcon of counsel), for respondents.

This is a nonpayment proceeding regarding the commercial property located at 126 Henry Street in Hempstead, New York. Petitioner, landlord Betty Cater, is claiming $319,200 in rental arrears dating back to June 2011. However, the parties here are currently involved in litigation in Nassau County Supreme Court.

In 2014, respondent 126 Henry Street Inc. doing business as Village Auto Clinic (Village Auto) commenced an action against Cater in the Nassau County Supreme Court (index No. 9000/2014), alleging breaches of its lease agreement and requesting specific performance of a contract for Cater to sell the subject property to Village Auto. Cater then filed suit against Village Auto and Clarence Murray in this court for nonpayment of rent (index No. LT-005215/2014). The two actions were joined for trial before Nassau County Supreme Court Justice Anthony L. Parga, by order dated March 6, 2015.

By short order dated July 20, 2015, Justice Parga relieved Cater's former attorney and stayed the proceeding for 60 days to give her the opportunity to retain new counsel or proceed pro se. The order also gave notice to Cater that her failure to appear at the next scheduled conference would result in a default judgment against her. After failing to appear on three separate occasions, Justice Parga granted Village Auto's motion for a default judgment and dismissed Cater's nonpayment claims (Village Auto's notice of mot, exhibit C; 2016 NY Slip Op 32933[U] [Sup Ct, Nassau County 2016]). In addition, that order granted specific performance of the sale of the property located at 126 Henry Street to Village Auto within 90 days (id.).

Cater appealed the judgment. Said appeal is still pending, preventing the sale of the subject property to Village Auto.

Meanwhile, Cater commenced this summary proceeding at bar.

Village Auto now moves to dismiss the instant claims on the ground of collateral estoppel, or in the alternative, requests a stay of this proceeding pending the outcome of Cater's appeal of the order of the Supreme Court, Nassau County. In opposition,{**61 Misc 3d at 551} Cater argues that the principle of collateral estoppel does not apply to the present circumstances because the prior action was determined by a default judgment, rather than a decision on the merits.

The doctrine of collateral estoppel has two requirements. "[F]irst, the identical issue necessarily must have been decided [upon] in the prior action and be decisive in the present action, and second, the party to be precluded must have had a full and fair opportunity to contest the prior determination" (Matter of Abady, 22 AD3d 71, 81 [1st Dept 2005]). The matter must be actually litigated and determined in a prior action for collateral estoppel to apply (id. at 83). "An issue is not actually litigated if 'there has been a default, a confession of liability, a failure to place a matter in issue by proper pleading or even because of a stipulation' " (id., quoting Kaufman v Eli Lilly & Co., 65 NY2d 449, 456-457 [1985]).

However, there is an exception to this rule, which applies when the party has appeared in the prior action and has deliberately refused to defend or litigate the claims that are the subject of the preclusion request (Matter of Abady, 22 AD3d at 83-84). This exception directly applies to the case at bar. Cater appeared and raised the issue of rental arrears in the prior proceeding. She was given three opportunities to appear after Justice Parga's short form order explicitly instructing her to do so. This court notes that Justice Parga made a specific finding that Cater failed to establish a "reasonable excuse" for her failure to appear at the scheduled conferences (2016 NY Slip Op 32933[U], *3). Consequently, Cater's failure to litigate the rental arrears she brought against Village Auto and Clarence Murray in the prior action results in her estoppel to litigate the rental arrears claimed in the prior summary proceeding which was joined for trial (see 73A NY Jur 2d, Judgments § 339).

Cater moved in the Appellate Division, Second Department, for a stay of the order of Justice Parga granting specific performance, pending her appeal thereof. The Second Department granted the stay. However, the issue of rent and/or use payments by Village Auto during the appeal was neither raised before nor addressed by the Second Department order, dated October 25, 2017 (2017 NY Slip Op 90352[U] [2d Dept 2017]).

Based upon the foregoing, Village Auto's motion is denied, in its entirety. Justice Parga's dismissal only applies to the claims for rent contained in the summary proceeding joined for trial in the Nassau County Supreme Court. Same does not apply to{**61 Misc 3d at 552} any claim by Cater which occurred thereafter for rent and/or use and occupancy due from respondents.

The facts demonstrate that Village Auto has occupied the premises without paying rent and for the taxes due. The document dated July 16, 2018, from the Office of the Nassau County Treasurer, states that $176,718.62 is owed for taxes. As such, the property is in danger of being sold for nonpayment of taxes.

A case on point is London v Joslovitz (279 App Div 280 [3d Dept 1952]). In London, the plaintiff tenant leased the commercial premises at a monthly rate of $373.33. The lease contained a clause with an option to buy. A conflict arose over the meaning of the option. The plaintiff tenant sought specific performance of the option, contending that the option was absolute. The defendant landlord maintained that the option was conditional, and only amounted to a "first refusal." The Third Department noted that the plaintiff tenant was using the leased premises without paying any rent. On the other hand, the defendant landlord was liable for taxes, insurance and other expenses. The Court held that the plaintiff tenant was required to pay rent during the pendency of the litigation. In so doing, the Third Department noted that the plaintiff tenant would be liable for the rent if the plaintiff tenant lost the case, and would receive a credit toward the purchase price if victorious. Thus, the plaintiff tenant would not be prejudiced by the Court's decision.

This court notes that landlord-tenant relationships continue until issuance of a warrant of eviction, which terminates the obligation to pay rent (see Licini v Graceland Florist, Inc., 32 AD3d 825 [2d Dept 2006]). See also 14 Carmody-Wait 2d § 90:201, wherein the following is stated:

"The issuing of a warrant for the removal of a tenant cancels the agreement under which the person removed held the premises and annuls the relationship of landlord and tenant. Thus, issuance of a warrant of eviction in a landlord's action against a tenant terminates the landlord-tenant relationship and the tenant's obligation to pay rent. However, under the rent stabilization laws, the tenancy continues until actual eviction."

There has been no issuance of a warrant in the case at bar terminating Village Auto's obligation to pay rent. Given same, Cater is entitled to collect rent from Village Auto to pay for taxes and other expenses in maintaining the premises.