Supreme Court, Monroe County, June 16, 2021

Mark Cianca, Rochester, for defendants.

Andrew J. Dick, Rochester, for plaintiff.

In this plenary action plaintiff LC Apartments LLC seeks unpaid rent and other damages arising from the breach of an apartment lease agreement between LC Apartments, as landlord, and its tenants, the defendants Anthony Trovato and Samantha Trovato (father and daughter) (the Trovatos). The defendants have moved to dismiss on multiple grounds, but the main point of contention is whether a warrant of eviction issued by a town court cuts off any right of LC Apartments to unpaid rent that accrued after the date of the warrant.

The court has reviewed the filings in the NYSCEF (New York State Courts Electronic Filing) system numbered 1 through 97.

The undisputed facts, and the relevant procedural history, are as follows.

The Trovatos agreed to lease an apartment from LC Apartments for a term running from October 2017 through December 2018. They vacated the premises in June 2018, informing LC Apartments that they could no longer afford the rent.

LC Apartments brought a summary proceeding in the Town of Gates for eviction and for a judgment under article 7 of the Real Property Actions and Proceedings Law. The Town of Gates granted the warrant of eviction and awarded LC Apartments a judgment for the months of June and July 2018, but none for the remainder of the lease term. The Trovatos paid that judgment. The warrant of eviction was dated July 10, 2018.

LC Apartments then brought a plenary action in New York Supreme Court in March 2019 which sought a judgment for rents from August through December 2018 as well as for damage done to the apartment. The defendants did not appear, and LC Apartments requested and received an entry of judgment in the amount of $7,072.95 from the Monroe County Clerk pursuant to CPLR 3215 (a).{**72 Misc 3d at 778}

LC Apartments then moved in this court pursuant to CPLR 2308 for a finding of contempt against Samantha Trovato for failure to respond to an information subpoena, and "confining [her] to jail if she persists in disobeying the subpoena."

The court, upon review of the entire record, sua sponte vacated the judgment, having concluded that the proof presented to the Monroe County Clerk was not the "requisite" proof (CPLR 3215 [a]) and did not justify the entry of a default judgment (see LC Apts. LLC v Trovato, 72 Misc 3d 429 [Sup Ct, Monroe County 2020]; CPLR 3215 [f]). The court also denied the motion for contempt and jail.

LC Apartments then filed a stipulation of discontinuance of that supreme court action by serving on the defendants, six months after the court had vacated the judgment, a "Notice of Discontinuance" pursuant to CPLR 3217 (a) (1).

LC Apartments then commenced in January of 2021 the instant action by filing and service of a summons and complaint, which pleaded the "bare bones" factual allegations as in the prior supreme court action.

The Trovatos filed an answer, denying the allegations and interposing several affirmative defenses, including that the plaintiff's voluntary discontinuance of the prior supreme court action was with prejudice. They also pleaded counterclaims, including return of the security deposit of $980 and return of $564.54 seized from an income execution pursuant to the subsequently vacated supreme court judgment.

Following service of the answer, the Trovatos moved to dismiss pursuant to various paragraphs of CPLR 3211 (a), including (7), arguing that the bare pleadings, previously having been ruled inadequate to support a default judgment, failed to state a cause of action; and (5), that the relief requested is "barred by the doctrines of Payment, Res Judicata, Collateral Estoppel, Statute of Frauds, Laches and by RPAPL § 749."

LC Apartments then filed an amended complaint which fleshed out the allegations regarding the lease. It stated that the defendants vacated early the premises leased to them by LC Apartments, made no payments thereafter and did not leave the apartment in its original condition, resulting in damages of "$5,509.73, with interest from July 1, 2018." The amended complaint also included causes of action for account stated and unjust enrichment. LC Apartments followed that with a motion pursuant to CPLR 3211 (a) (1) and (7) dismissing the counterclaims.{**72 Misc 3d at 779}

The Trovatos filed an amended answer, then moved for a "default judgment" on the ground that LC Apartments never filed an "amended Reply" in response to their "Amended Answer with counterclaims."

LC Apartments responded by filing a motion for leave to file an amended verified reply "nunc pro tunc."

Discussion

As noted above, the Trovatos have moved to dismiss under various theories, but the one that has the most currency is that when LC Apartments brought its eviction action, the landlord-tenant relationship terminated, and it could no longer seek future rents.

It is well-settled law that a warrant of eviction terminates the relationship and bars the landlord from pursuing a judgment for unpaid rents after the date of the eviction (see Matter of Lazy Acres Park, LLC v Ferretti, 118 AD3d 1406 [4th Dept 2014], lv denied 120 AD3d 1612 [4th Dept 2014], lv dismissed 25 NY3d 965 [2015]; Matter of First Citizens Natl. Bank v Koronowski, 46 AD3d 1474, 1475 [4th Dept 2007]; Weichert v O'Neill, 245 AD2d 1121 [4th Dept 1997]; see further RPAPL 749 [3]).

An exception to the rule is where the landlord can recover future rents if the tenants have so agreed in their lease (see West Flatt Assoc. v Maggiulli, 66 AD3d 1450 [4th Dept 2009], citing Holy Props. v Cole Prods., 87 NY2d 130 [1995]).

In Holy Props., which involved a commercial lease, the Court of Appeals held that "[a]lthough an eviction terminates the landlord-tenant relationship, the parties to a lease are not foreclosed from contracting as they please . . . If the lease provides that the tenant shall be liable for rent after eviction, the provision is enforceable" (Holy Props. v Cole Prods., 87 NY2d 130, 134 [1995]).

Although there is less than unanimity across courts as to whether the holding in Holy Props. applies to residential leases (see generally 29 Holding Corp. v Diaz, 3 Misc 3d 808, 810 [Sup Ct, Bronx County 2004]), the Appellate Division, Fourth Department has held that under the holding in Holy Props., a residential landlord can collect future rents and has no duty to mitigate damages by reletting the tenancy (Clearview Farms LLC v Fannon, 145 AD3d 1556, 1557 [4th Dept 2016]), even where there has been an eviction.

Nonetheless, the Court affirmed the lower court's determination awarding no damages despite the tenant's eviction on the{**72 Misc 3d at 780} ground that the rent acceleration clause at issue, which the plaintiff Clearview Farms sought to enforce, "constituted an unenforceable penalty" and limited damages to "actual damages proven" (Clearview Farms LLC v Fannon, 145 AD3d 1556, 1556-1557 [4th Dept 2016] [internal quotation marks omitted], citing 172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Assn., Inc., 24 NY3d 528, 536 [2014]).

The "unenforceable penalty" at issue was not typical in any way. It did not, for example, award the landlord liquidated damages that are "disproportionate to the amount of actual damages" incurred (see e.g. 172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Assn., Inc., 24 NY3d 528, 536 [2014]). Nor did it provide for the acceleration for rents for a breach of a "trivial or inconsequential" term, which is prohibited (see 172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Assn., Inc., 24 NY3d 528, 535 [2014]). What it did purport to do was allow the landlord to collect a liquidated damages amount—the amount of unpaid rent—and collect rents from a new tenant for the same period. This, the court ruled, was a form of "double dipping," and to allow it would violate "common[ ] sense, reasonable expectations of public policy, and notions of justice an[d] equity" (Sup Ct, Monroe County, July 8, 2015, Odorisi, J. [bench verdict]), and thus the landlord needs to prove "damages."

Turning now to the acceleration clause at issue here, the lease entered into by the Trovatos reads as follows: "Payment of rent in monthly installments is for Tenant's convenience only. If tenant defaults, Landlord may give notice to Tenant that the Tenant may no longer pay rent in installments. The entire rent for the remaining part of the Term will then be due and payable" (emphasis added).

This treatment of monthly rent payments as a "convenience" is unenforceable because it violates RPAPL 702 (as added by L 2019, ch 36, § 1, part M, § 11).

RPAPL 702, added effective June 14, 2019, provides that in a proceeding relating to a residential dwelling or housing accommodation, the term " 'rent' shall mean the monthly or weekly amount charged in consideration for the use and occupation of a dwelling pursuant to a written or oral rental agreement."

Thus, LC Apartments' definition of rent as a lump sum due and payable at the inception of the lease, and its provision that it is allowing the tenant to pay monthly as a "convenience," is void as a matter of law as violative of RPAPL 702.{**72 Misc 3d at 781}

Plaintiff argues that RPAPL 702 does not apply to the lease at issue here, because it ran and expired prior to the effective date of section 702, which was June 14, 2019. However, this action was not commenced until 2021. Nothing in the statute limits its applicability to tenancies created (and terminated) prior to the effective date of the statute. Even so, RPAPL 702 appears to be a codification of the common law's understanding of rent ("Rent is a normal incident of the relationship of landlord and tenant. The term implies a fixed sum to be paid at certain times for the use of property" [74 NY Jur 2d, Landlord and Tenant § 342]) so that the offending clause here would be void as violative of due process, as it is inherently contradictory, vague and misleading.

Besides finding that the offending clause here violates RPAPL 702 and fails as well for vagueness, the court also holds that the clause renders the contract one of "adhesion," and is therefore "unconscionable and against public policy" and unenforceable (Chili Venture LLC v Stahl, 54 Misc 3d 461, 466 [Rochester City Ct 2016], citing Molino v Sagamore, 105 AD3d 922, 923 [2d Dept 2013], quoting Matter of Love'M Sheltering, Inc. v County of Suffolk, 33 AD3d 923, 924 [2d Dept 2006]; see further 15-79 Corbin on Contracts § 79.1 ["The law has a long history of recognizing the general rule that certain contracts, though properly entered into in all other respects, will not be enforced, or at least will not be enforced fully, if found to be contrary to public policy"]).

While it is true that leases, in particular, are known for the rights that tenants often waive within the four corners of the documents (see 159 MP Corp. v Redbridge Bedford, LLC, 160 AD3d 176, 188 [2d Dept 2018] [overturned due to legislative action], affd 33 NY3d 353 [2019]), here the parties were not equally "sophisticated entities that negotiated at arm's length" (160 AD3d at 189), but rather, were grossly disproportionate in their relative bargaining power. LC Apartments is an arm or subsidiary of Mark IV Enterprises, well-known to be one of the area's largest developers, managers and owners of multiunit apartments.

Additionally, the moratorium in New York on evictions (2020 NY Senate-Assembly Bill S9114, A11181, enacted as L 2020, ch 381), and the executive orders issued by the Governor of New York that followed extending those protections, reflect a public policy that implicitly recognizes the fundamental right to shelter and sees a societal benefit to protecting the ability of{**72 Misc 3d at 782} tenants to acquire housing (see e.g. President Franklin Roosevelt, State of the Union Address on Tuesday Jan. 11, 1944 [in which he proposed a "Second Bill of Rights," which included the recognition of a "right of every family to a decent home"]; see also Universal Declaration of Human Rights art 25 [UN Gen Assembly Resolution 217 A]).

New York, for at least the foreseeable future, has substantially tipped the legal playing field in favor of tenants, and implicitly rejects the view of tenants as merely equal players in a world of freely contracting parties (see e.g. Baltimore & Ohio Southwestern R. Co. v Voigt, [*5]176 US 498, 505-506 [1900]), and rather, lays substantial emphasis, in any proceeding involving the rights of residential tenants vis-à-vis landlords, on the relevance of a fundamental human right.

Acceleration clauses such as the one at issue herein, which treats the rent as due and payable in one lump sum but allowed to be in monthly installments for the "convenience" of the tenant, are then void as against public policy.

Accordingly, the motion to dismiss is granted.^[FN*]

Defendants have brought two counterclaims that merit attention. One is for recovery of amounts that were collected pursuant to an income execution before the supreme court judgment was vacated by this court. LC Apartments claims that the money is an offset against sums owed to it for unpaid rent. Since the plaintiff's action has been dismissed, the application by the Trovatos for recovery of that money is granted. Even aside from the dismissal, LC Apartments had no right to continue to hold that money after its judgment had been vacated and its action on which the judgment was predicated had been dismissed.

The defendants' second counterclaim is for the recovery of their security deposit. LC Apartments claims it never collected a security deposit from the Trovatos, and to prove the point, counsel for LC Apartments affirms that he knows from "personal knowledge" that LC Apartments stopped collecting security deposits from its tenants in 2014. He also presents other leases from other tenants as a way of proving that LC{**72 Misc 3d at 783} Apartments no longer accepts security deposits. Thus, it says that the lack of a security deposit has been proved "beyond a reasonable doubt," and that the claim by the Trovatos that they paid a security deposit in the amount of $905 "is rapidly approaching frivolity." He directs the court to the definition of frivolous in subpart 130-1 of the Rules of the Chief Administrator of the Courts (22 NYCRR).

Actually, it is the plaintiff's claim that borders on frivolity, and in particular, its argument that evidence of other leases entered into by LC Apartments somehow proves its point "beyond a reasonable doubt." The assertion by the Trovatos that they in fact paid a security deposit, which is set forth in an affidavit and thus admissible, is not frivolous and merely creates an issue of fact to be determined at a trial.

Finally, the Trovatos moved for dismissal of the complaint on the ground that the Town of Gates court proceeding and judgment barred any further plenary action. The court rejects that argument as a basis for dismissal (see 172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Assn., Inc., 24 NY3d 528, 534 [2014] ["As an initial matter, we reject defendants' res judicata argument because the Civil Court was without authority to address a claim for the balance of rent due under the acceleration clause in Van Duzer's holdover proceeding"], citing Ross Realty v V & A Fabricators, Inc., 42 AD3d 246 [2d Dept 2007]; Marketplace v Smith, 181 Misc 2d 440, 442-443 [Henrietta Just Ct, Monroe County 1999]).

Conclusion

Accordingly, the motion (No. 1) to dismiss the complaint is granted.

The motion (No. 2) to dismiss the first counterclaim for return of the security deposit and double damages and attorney fees is denied.

The motion (No. 2) to dismiss the second counterclaim in the answer, which is to recover the money seized from an income execution that was later vacated, is denied.

The motion (No. 3) by the defendant Trovatos for a default judgment for plaintiff's failure to serve a reply to the counterclaims is denied, and the motion (No. 4) by the plaintiff LC Apartments for leave to serve and file an amended reply is granted. The plaintiff shall serve its amended reply within 20 days of the date of entry of this order.

The alternative relief in the same motion for summary judgment as to each of the counterclaims is denied with leave to{**72 Misc 3d at 784} renew with respect to the claim for a security deposit, upon LC Apartments serving an amended reply.

With respect to the claim for money wrongfully retained, the plaintiff LC Apartments is directed to return the money immediately, and the defendants' motion for summary judgment on that issue is granted.