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Landlord-Tenant—Service Defective—Landlord Knew Tenants Were in Africa—New York and Federal Courts Authorized Email Service of Process as Appropriate Alternative When Statutory Methods are Ineffective

A landlord had commenced a nonpayment proceeding. The tenant had allegedly failed to pay rent between the months of January through March 2016. An affidavit of service stated that the tenant had been served by “conspicuous-placed service and mailing to the subject premises.” The tenant did not appear on the return date and a default judgment was entered against her, awarding the landlord possession and approximately $7,600 dollars in rent. The tenant and her husband were then evicted pursuant to the final judgment.

The tenant thereafter moved to vacate the final judgment, arguing that service was defective and her husband, a co-tenant on the lease, was not named in the petition. A trial court vacated the monetary award against the tenant, but did not vacate the award of possession on the ground that possession was “moot since tenant was not seeking to be restored to possession.” The tenant appealed from the order, to the extent that it did not vacate the possessory award.

Real Property Actions and Proceeding law (RPAPL) 735 “Permits conspicuous-placed service only when the petitioner has attempted personal delivery or service upon a person of suitable age and discretion and failed after having made a 'reasonable application,' which means that there must be 'at least a 'reasonable expectation of success' in finding a person on the premises to whom delivery may be made for that.”

The tenant claimed that at the time when the petition was served, the landlord knew that the tenant and her husband were in Africa. The tenant cited several email exchanges between her and her landlord.

The Appellate Term (court) found that at the time of service of the notice of petition, the landlord “was aware the tenant was residing outside of the country” and therefore, the landlord's attempts at service “at the unoccupied premises do not constitute a 'reasonable application'…prior to resorting to conspicuous-place service, and, thus, this service was defective….”

The court further observed that the landlord could have pursued an alternative method of service and that both federal and New York have “authorized e-mail service of process as an appropriate alternative method when statutory methods have proven ineffective….” Here, the parties “had been communicating via email between the United States and a foreign country….”

The court found that the husband, as a co-tenant on the lease who had not been named in the notice of petition application and who had not been served, “was a necessary party to the nonpayment proceeding, and it an error for the court to enter a final judgment and to issue a warrant without having obtained personal jurisdiction over him….”

Finally, based on the subject facts, the court held that the trial court erred by denying “as moot the branch of tenant's motion seeking to vacate the award of possession.” The court explained that although “a motion to vacate a nonpayment default final judgment by an out-of-possession tenant who does not seek to be restored may be denied without prejudice when the final judgment awards only possession and the tenant has commenced a collateral wrongful-eviction action in which the issue of whether personal jurisdiction over the tenant was obtained can be raised…, this rule does not apply here, where the default final judgment awarded both possession and arrears.” The court further stated that the tenant's claims against the entry of a final judgment “cannot be relegated to a separate action, as the tenant would be entitled, where the circumstances warrant that relief, to the vacatur of the final judgment's monetary award.”

Thus, the court held that “[s]ince the jurisdictional issue had to be determined in this summary proceeding, it necessarily had to be passed upon with respect to the entire judgment.” Accordingly, the court reversed and granted the tenant's motion to vacate that part of the final judgment that awarded the landlord possession.

225 Huguenot St. Corp. v. Rwechungura, App. Term, 2nd Dept., 9th and 10th Dist., Case No. 2017-1422WC, decided Oct. 11, 2018, Brands, J.P., Marano and Tolbert, JJ., concur

Co-ops—Water Damage—Negligence—Warranty of Habitability—Failure to Remedy the Situation Since 2005—Abatement Reduced Due to Tenant Denying Access

A plaintiff cooperative shareholder commenced an action against the defendant cooperative corporation (cooperative) and its Board of Directors (board) based on alleged “mold and water damage” to the plaintiff's apartment. The plaintiff asserted claims for injunctive and declaratory relief, breach of the Warranty of Habitability (WOH), breach of quiet enjoyment, actual and/or constructive eviction, “diminution of value of plaintiff's shares in the cooperative,” disparate treatment, negligence and attorney fees and costs.

The plaintiff sought a 100 percent abatement for the period between August 2007, when she ceased paying maintenance fees, to the present time, as well as additional damages. The cooperative counterclaimed for an injunction enjoining the plaintiff from denying access to the apartment, unpaid maintenance, assessment and utility charges and attorney fees. A trial court previously dismissed all the plaintiff's claims, except for the WOH claim against the cooperative, the breach of quiet enjoyment and diminution of value, the negligence against the board and the claims for fees and costs against the cooperative and board. The trial court had dismissed the defendants' claim for injunctive relief, finding that the Civil Court lacked jurisdiction.

After conducting a trial, the subject court (court) dismissed the plaintiff's claims for negligence and attorney fees against the board and the plaintiff's breach of quiet enjoyment and diminution of value claims against the cooperative. The court found for the plaintiff with respect to part of the WOH claim and for the cooperative for part of its counterclaim for maintenance fees. The court dismissed each parties' claims for attorney fees.

The lease provided that the cooperative was “responsible for anything inside the walls.” The plaintiff was responsible for “monthly maintenance charges and a pro rata share of any assessments or special maintenance charges…'without any deduction on account for any set-off or claim which the Lessee may have against the lessor.'” The lease embodied a penalty for late payments.

Water began “infiltrating the apartment in late 2005 and continued until approximately 2016, from various sources….” The plaintiff had “complained promptly about the leaks….” The plaintiff vacated the apartment in 2006 and spent 2006 through 2007, “mostly in…China partly for work” and “partly because-what was happening” in the apartment. She thought “maybe this is a good opportunity to get out of the way of the problem, report it and let them take care of it.”

In 2008, she lived in Connecticut or in an adjacent apartment. In 2014 she lived in Connecticut. In 2015 she also lived in Connecticut. The plaintiff had periodically monitored the apartment's condition.

Although the plaintiff did not “personally witness every instance of infiltration,” the court found that she had “credibly” determined that “the water originated from…the ceiling, the terrace, the HVAC system….” The water damaged “wood floors, appliances, furniture, and many of Plaintiff's personal items.”

HVAC (heating ventilation air conditioning) repairs began in the fall of 2007 through 2009. Although the leaks decreased in frequency, an HVAC leak occurred in 2016. However, the cooperative “remedied those leaks,…and replaced the floor within approximately one week….”

In 2007, the plaintiff observed “mold…in various areas of the apartment….” In 2008, she obtained an environmental report which disclosed “toxic mold growth.” The cooperative retained an environmental firm that the plaintiff had hired, to do additional testing. Although such firm indicated that remediation was successful, it recommended that the apartment be rebuilt.

The cooperative thereafter submitted a July 2009 proposal from a contractor, which requested access to the apartment to commence work “immediately.” The plaintiff denied “specific knowledge of her attorney having provided explicit consent to access at that time…..”

The plaintiff observed further leaks and had refused to permit repairs until the leaks were resolved to her satisfaction. She also requested changes to the scope of work and limited the contractor's access to that necessary to prepare “an amended proposal….” The contractor thereafter provided a similar, but revised proposal. The revised proposal added some items. Again, the contractor requested immediate access. Although there were follow up requests for access, there is no record of the plaintiff providing access for repairs until 2016.

The cooperative had not entered the apartment because it did not believe the circumstances “constituted an emergency permitting entrance into the apartment under the bylaws, particularly because plaintiff had already commenced litigation….” After the plaintiff consented to access, work began in February 2016 and ended shortly after April 2016.

The plaintiff had stopped paying maintenance in August 2007, with the exception of three maintenance payments. She sought a full abatement from the time she ceased payments, August 2007 to December 2017. After the work was completed, the plaintiff listed her apartment for sale on Sept. 5, 2017.

The court held that the plaintiff may not recover damages for loss or diminution in value of personal property, personal injury, or pain and suffering based on the WOH claim. The “proper measure of damages for a (WOH claim) is the difference between the fair market value of the premises in fully habitable condition, as measured by the rent reserved under the lease, and the value of the premises during the period of the breach….” The court noted that “[c]omplete vacatur is not necessary to receive an abatement; it is sufficient to have been constructively evicted from a portion of the premises….” The courts must “weigh the severity and duration of the breach as well as the effectiveness of steps taken by the landlord to abate those conditions” and courts “need not require any expert testimony.”

The court found there was “profound damage to the Apartment rendering it materially uninhabitable from the time that the leaks began in 2005 to April 2016 when the Corporation completed…repairs.” Thus, the court initially held that the plaintiff was entitled to a “full abatement.”

However, the court found that to a certain extent, the plaintiff failed to mitigate her damages by impeding efforts to inspect and repair the apartment by denying access. Although the plaintiff contended that the lease empowered the cooperative to enter the apartment and the cooperative had a key, the court found that the plaintiff had “actively impeded the exercise of the right of re-entry.” Moreover, the WOH only applies to “areas that are 'within the landlord's control'.”

Although the cooperative had the plaintiff's key and was permitted to enter the apartment upon notice, the lease did not necessarily obligate the cooperative to exercise the right of entry. Under the circumstances, at some point the cooperative was obligated to exercise the right entry to make the repairs. The court held that the “right of re-entry,” the cooperative's knowledge of the apartment's condition and its obligation to repair it, created liability. However, when the cooperative attempted to exercise its right of re-entry, its access “was actively impeded by Plaintiff's denial of access.”

Although the cooperative had certain limited access, “in an abundance of caution given the acrimony and pending litigation,” the cooperative requested access to the apartment to make the repairs. The plaintiff had either “refused or demurred until 2016, when the work was ultimately completed.” Furthermore, the repairs done “were nearly identical to those which she would not allow for several years, thus diminishing” the plaintiff's argument that the cooperative's “proposal was somehow deficient.” If the repairs had been deficient, the plaintiff “could have sought recovery for the result of any deficiencies..”

Thus, the court held that the “failure to correct the conditions in the apartment were attributable to plaintiff, therefore the abatement which would have otherwise been justified must be denied for the period after the corporation first sent the (contractor) proposal to plaintiff.” Although the parties argued over the scope of the contractor's proposal, which lead to a revised proposal (a year after the initial proposal), the plaintiff failed to establish that the “additions to the scope of work were necessary to make the apartment habitable….” In sum, the plaintiff had failed to justify the substantial delay. Thus, the court held that the plaintiff was “entitled to a full abatement from the time maintenance payments ceased in 2007, until July 2009.”

The court explained that based on the prior trial courts denial of the cooperative's request of injunctive relief to force the plaintiff to grant access, the “fault” at that point “could be ascribed solely to plaintiff.” The court noted that the cooperative's “reasonable justification for declining to enter apartment without plaintiff's consent dissipated” when the prior trial court advised the parties that the court lacked jurisdiction to grant the relief the defendant sought.

Thus, the court opined that it was “sound public policy to seek redress promptly rather than allow the condition to worse.” When the corporation failed to appeal the prior court's order or seek injunctive relief in the Supreme Court, the parties “became equally responsible for the stalemate…..” Therefore, the court held that the plaintiff was entitled to a 50 percent abatement “from October of 2013 until the plaintiff granted access and repairs which began at February 2016.” Between February and April 2016, after the plaintiff granted access, but before the apartment was rendered habitable, the plaintiff was also entitled to a full abatement because she permitted access and “therefore mitigated damages while the apartment remained uninhabitable.” After April 2016, and the completion of the repairs, the apartment was again habitable and the abatement should cease. Although one leak had occurred after such period, it had been quickly repaired.

In a WOH case, “punitive damages may be awarded only where 'landlord's actions or inactions were intentional or malicious….'” Here, since the plaintiff was “substantially responsible for the lengthy delay,” the court denied the punitive damages claim. The court also denied the claim for breach of covenant of quiet enjoyment since payment of rent is a condition precedent to the covenant and the plaintiff had withheld almost all the rent dating from 2007 to the present.

The court denied the diminution of value claim because such claim cannot be based on the WOH claim. The plaintiff had also failed to provide “credible evidence…of diminution….” The court noted that the plaintiff had placed the apartment “on the market for a substantial sum.”

The court denied the plaintiff's claim for counsel fees. The plaintiff had recovered “roughly half of the abatement sought” and the “net recovery represents a relatively small portion of the seven-figure damages sought in plaintiff's complaint….” Moreover, several claims had been dismissed against the board, as were the negligence and punitive damage claims against the cooperative.

The court then held that the cooperative was entitled to recover maintenance and utility charges, subject to the payments that the plaintiff had made and the abatement awarded to the plaintiff.

The court also found that certain additional charges appeared to be inappropriate and were stricken. Additionally, the court denied the cooperative's claim for attorney fees. The cooperative received approximately half of the amounts that it sought and its counterclaim for injunctive relief had been denied.

Thus, the plaintiff received a 100 percent abatement from August 2007 to July 2009, a 0 percent abatement from August 2009 to September 2013, a 50 percent abatement from October 2013 to January 2016, a 100 percent abatement from February 2016 to April 2016 and 0 percent abatement from May 2016 going forward. The cooperative is entitled to maintenance fees, assessments and utility charges as currently set forth in its ledger, subject to certain abatements which had been paid by the plaintiff. The cooperative was also entitled to $50 late fees and a 1.5 percent monthly interest from May 2010 onwards subject to the aforementioned abatements and neither party was entitled to attorney fees.

Comment: As this case illustrates, there are instances where co-op shareholders delay a co-op's effort to do remedial work because the shareholders disagree with the scope and or quality of the proposed remedial work. Generally, cases will be decided based on the language of the proprietary lease and other governing documents and whether the parties acted in a reasonable manner, given the specific circumstances. Co-op boards are not generally required to meet a shareholder's subjective standards and personal preferences, provided that the boards act in good faith and within scope of their authority. In most cases, in order to avoid costly litigation and to minimize damage to a building's reputation in the brokerage community, co-op boards try to confer with the shareholder's experts and reach a mutually agreeable plan for restoration.

de Socio v. 136 E. 56th St. Owners Inc., Civil Court, NY Co., Case No: TS-300481-09, decided Oct. 5, 2018, Ramseur, J.

 Scott E. Mollen is a partner at Herrick, Feinstein.