Scott E. Mollen

Contracts—Time of Essence Letter Providing an Additional 20 Days Held to be Legally Sufficient

A plaintiff moved for summary judgment in connection with his breach of contract claim. The parties had entered into a contract for the sale of a commercial real estate property and the plaintiff had given a deposit. The contract provided that the closing would take place on or "sixty (60) days from the purchasers' receipt of a fully executed contract." The contract was signed on Aug. 26, 2016. On Sept. 20, 2016, the plaintiff sold his previously owned property. On Sept. 25, 2016, the defendants received two Housing Code violations and an Environmental Control Board (ECB) violation. The defendants cured the ECB violation. The Housing Code violations had not been cured.

The contract provided that the "seller shall comply with all… notices of violations of law or municipal ordinances…as of the date hereof by any governmental department … The premises shall be conveyed free of them at [c]losing." The plaintiffs had rejected the defendants' offer to deposit money in escrow with respect to the violations.

On Nov. 1, 2016, the plaintiff sent a "time is of the essence" (TOE) letter giving notice that the closing on the property was scheduled for Nov. 21, 2016. The defendants waited until two days prior to Nov. 21, 2016, i.e. Nov. 19, 2016, a Saturday, to respond that they would not be ready to close on Nov. 21, 2016. The defendants did not appear at the closing on Nov. 21, 2016.

On Nov. 23, 2016, the plaintiff demanded return of the down payment. The down payment was never returned. The plaintiff alleged that the purchase of the property was intended as a "1031 exchange" and since the defendants failed to close on the "law date," and had thereby breached the contract, the plaintiff could not complete the "1031 exchange" and had incurred additional tax liabilities amounting to $627,891.

The court explained, inter alia, that "even where time is not made of the essence in the original contract and the closing date set forth therein has passed, either party can declare time of the essence by giving a clear, distinct, and unequivocal notice of (1) a new closing date; (2) giving the other party a reasonable time in which to act; and (3) informing the other party that if he does not perform by the designated date he/she will be considered in default." The Appellate Division had held that a three (3) day of TOE notice was sufficient.

The defendants opposed the plaintiff's motion and argued that 20 days was "inadequate notice." They did not cite any law to support such contention. Based on the Appellate Division decision which held that as "little as three days is sufficient," the court held that the plaintiff's TOE "letter (constituted) reasonable notice to the defendants."

The defendants also argued that the location of the closing differed from the location set forth in the contract. An appellate decision was cited for the proposition that "the closing location cannot differ from the one set forth in the contract." However, such case had not even addressed a closing location issue and the defendants had "never objected to the location set forth in the (TOE) letter until now."

Since the TOE letter was adequate and the defendants had breached the contract by failing to appear at the closing, the court held that the plaintiff was entitled to summary judgment and referred the matter to a JHO/referee to determine the amount of damages.

Comment: There is no rigid rule as to how much additional time is a "reasonable time" for a party to set a TOE date, when the original contract did not embody a TOE closing date. Generally, courts will look at the totality of the circumstances, e.g., how complicated was the transaction, had the closing been adjoined several times, what were the reasons for adjournments, etc.

Dilauro v. Johns, Supreme Court, Kings Co., Case No. 523222/2016, decided July 22, 2019, Baily-Schiffman, J.

Landlord-Tenant—Nuisance Holdover Proceeding—Tenant Granted Discovery as to Information and Video Tapes Which Would Show the Alleged Misconduct—Court Concerned That Certain Video Tapes Were Erased and Certain Documents Were No Longer Available

The landlord commenced a nuisance holdover proceeding on the grounds that the respondent had engaged in "nuisance conduct contrary to Sections 2524.3 and 2524.3(b) of the Rent Stabilization Code." The landlord had served a notice of termination and a notice of petition which in part provided that:

You are committing and/or permitting a nuisance to exist based upon your actions and conduct which are set forth in detail below. ….Approximately five years ago the Owner installed a camera/security system in the building. ….There is a camera on each floor. There is a camera covering every entrance and exit in the building. The camera is monitored centrally…. Many of these incidents which will be set forth below occur after business hours and primarily in the early morning. Tenants call the office after these nuisance incidents occurred to complain. Management then watches the video and determines what occurred and who is involved.

The notice of termination cited 43 incidents which allegedly took place between May 10, 2017 through June 20, 2018 (relevant period). None of the alleged incidents involving objectionable behavior involved the tenant of record (tenant).

The tenant is approximately 60 years old. The landlord had delayed commencing this holdover proceeding because the tenant had advised management that he intended to leave the building because family members who resided there took advantage of him. Based on recent incidents, management alleged that it was compelled to bring the subject proceeding and many residents in the building are "suffering as a result of" the tenant's conduct.

The landlord alleged that the tenant's daughter-in-law resided in the apartment with her son, the tenant's grandson (relatives). The landlord asserted that these were "dangerous individuals" who are gang affiliated. "They are inviting non-residents…into the building to loiter, carry on, smoke, drink, party, fight, and damage the building at all hours of the night."

The tenant had moved for discovery. The tenant sought the names and addresses of individuals who had complained about the alleged nuisance conduct which had allegedly occurred during the relevant period. The tenant also sought production of all documents, video or audio tapes, including transcripts relating to the alleged complaints during that same time period. Additionally, the tenant sought to depose the managing agent and any employee of the landlord who had information pertaining to the alleged nuisance conduct.

The tenant argued that absent such information, he would suffer prejudice, since he cannot adequately prepare for trial without such information. The tenant emphasized that he was not present for most of the alleged incidents and the landlord had "sole control over the videos and documentary evidence of the complaints."

The tenant had also argued that he had cured the condition prior to the notice of termination. The relatives had allegedly vacated the apartment in the summer of 2018. The tenant argued that the discovery was "narrowly tailored to permit (tenant) to prepare his defense, clarify disputed issues prior to trial, and promote efficiency" and that the landlord "presumably has these records which were used in preparing the notice of termination…and would be used for trial."

The court explained that discovery is appropriate in eviction proceedings "where the petitioner alleges objectionable conduct," and allowing witness' and records maintained by the petitioner to be discovered "would clarify the facts and directly impact (the) defense, thereby promoting judicial efficiency." The tenant cited CPLR §3101(1), which provides that "there shall be full disclosure of any… photographs, video tapes or audio tapes, including transcripts, or memoranda thereof…rather than only those portions the party intends to use." The New York Court of Appeals has held that parties seeking disclosure of items specified under CPLR §3101(1) "need not make a showing of 'substantial need,' and 'undue hardship,' given these concerns about the reliability of video evidence because a respondent has 'ample need' to get video and audio recordings which can be altered."

The landlord countered that the discovery request was a "delay tactic, overly broad, burdensome, not narrowly tailored, unnecessary, and a form of harassment." The landlord also argued that the tenant's request was untimely, since the events had occurred last year, the videos are periodically erased in the ordinary course of business, the details of the complaints "are no longer in petitioner's possession, [and] (tenant) already has the necessary materials to determine the pattern of nuisance and details of the complaints." The landlord further asserted that the tenant had not asserted any facts "denying the allegations in the petition and that the (relatives) are the only ones who can contest whether the events occurred."

Discovery is "unavailable as a matter of right in summary proceedings" and leave of court must be obtained to conduct such disclosure. CPLR §408. Where a party demonstrates "ample need" for discovery, it should be granted. Courts have held that "discovery is appropriate in holdover proceedings such as where the petitioner alleges objectionable conduct since facts are often unique and sharply contested." In determining ample need, courts consider whether "the movant has asserted facts to establish a cause of action or meritorious defense," "the movant has demonstrated a need to determine information directly related to the cause of action," "the information requested is carefully tailored and is likely to clarify the disputed facts," "granting disclosure would lead to prejudice," the court "can alleviate the prejudice," and "the court can structure discovery to protect pro se tenants against any adverse effects of a discovery request."

The subject court found that the tenant had demonstrated "ample need" for discovery. Although the notice of termination cited more than 43 alleged incidents of objectionable conduct, it did not state names and addresses of those who complained or the names of employees who had received the complaints. It opined that the information requested was directly related to the landlord's claims and to the tenant's defenses and are exclusively in landlord's possession and that the tenant would be prejudiced absent disclosure, since the tenant would not be able to adequately prepare for trial. The discovery request was neither overly broad nor unduly burdensome nor dilatory. Moreover, the court was "disturbed by petitioner's counsel's statement…, that copies of complaints and the video tapes upon which petitioner has based this preceding are no longer available." It questioned how the landlord could "plan on proving their case at trial?"

The court reasoned that the discovery requested would "clarify the facts," allow the tenant "to prepare proper defense to the allegations, be prepared for trial, and promote judicial efficiency." Furthermore, the landlord would not be prejudiced, since the information requested was used to prepare the notice of termination and "should have been preserved by petitioner for trial." Thus, the court granted the tenant's motion for discovery and since the landlord claimed that certain information in the video tapes were no longer available, it granted the tenant's motion to depose the landlord's managing agent.

2438 Realty LLC v. Vasquez, Civil Court, Bronx Co., Case No. 55914/18, decided July 26, 2019, Jennings, J.

Landlord-Tenant—Illegal Activities—Landlord Awarded Final Possession—Tenant Denied Lengthy Stay of Warrant Execution—Danger to Other Tenants—Although the "Grim Realities of our Bail System are Well Documented," Courts Must Accept Pleas on their Face as an Admission on the Part of the Tenant

A landlord commenced a holdover proceeding against the rent-stabilized tenant of record (tenant), as well as against other occupants. The landlord sought possession pursuant to Real Property Actions and Proceedings Law (RPAPL) §711(5) and Real Property Law (RPL) §231(1), on the grounds that the tenant permitted the apartment to be utilized for the sale of drugs and other illegal purposes. The tenant denied the allegations and claimed that he was "unaware of any guns located in the premises and was only aware of drugs for personal use found in his bedroom."

The building includes apartments for individuals with "psychiatric disabilities" and "low-income, non-disabled families." The subject apartment was occupied by individuals who were not disabled.

A police officer had executed a search warrant and testified that one of the occupants had "turned a gun on [him] and attempted to kill [him]," during an altercation which had occurred several days earlier in a separate location. The apartment is a two bedroom apartment, with the living room converted to a third bedroom. The tenant, his girlfriend and another occupant (occupant) were in the apartment when the search warrant was executed. The tenant and his girlfriend were in one bedroom and the occupant was in the living room. There were two locked safes in each of the rooms.

The police found "scales; hundreds of packaging materials consisting of plastic and glass capsules, vials, and baggies; multiple…cellphones; and third-party identification cards in the living room. The police found a pouch with cocaine and a large clear bin with drug paraphernalia in (tenant's) bedroom." Pursuant to a second search warrant, the safes were unlocked and searched. The police found two handguns with…ammunition and illegal drugs in the living room safes. "A handgun, jewelry, personal identification, a…knife and illegal drugs… were found in the (tenant's) safes."

The tenant was arrested and indicted on multiple felony drug and other weapons charges. The tenant plead guilty to a Class B felony for criminal possession of a controlled substance and to a D felony for attempted criminal possession of a weapon.

The tenant allegedly knew one of the occupants from college and had allowed him to stay in the apartment. The tenant claimed that he never saw narcotics or weapons during such time and lacked any knowledge as to illegal activity at the apartment. He knew that the occupant had two safes in the living room, but denied knowing the contents of the safes or asking the occupant what was inside. The tenant had previously been convicted for criminal trespass and attempted criminal possession of a controlled substance and had been in prison for 90 days.

The tenant admitted that there were two safes in his bedroom, one of which contained jewelry and one had a knife. He acknowledged that he had used drugs for personal use, but denied that his safes held the handgun and narcotics. The tenant "inferred that these were placed there by the police."

The tenant testified that he had been held at Rikers Island and could not make bail. After 18 months, he pled guilty to a "B Felony Criminal Possession of a Controlled Substance" and a "D Felony of Attempted Criminal Possession of a Weapon." He claimed that he only pled guilty because he knew based on his "time served," he would only serve a few additional months.

Pursuant to RPAPL §711(5) and RPL §231(1), the landlord had to "prove by a preponderance of the credible evidence that the subject premises were to be used to facilitate trade in drugs and that the tenant knew or should have known of the activities and acquiesced in the illegal activity in the apartment." It is not necessary that a tenant actually participate in an illegal activity in order to justify an eviction. Rather, it is "sufficient that the acts and conduct complained of warrant the inference of acquiescence."

Prior case law held that "from the uncontroverted evidence of large amount of drug paraphernalia, cash, and several firearms, bags containing more drugs and drug paraphernalia, and the arresting officer's depiction of the premises of a 'packaging location' and 'drug factory,' [that] the tenant must have known. There comes a time when one must look, and when one looks, he must see. Convenient indifference should not be confused with pardonable ignorance."

The tenant had the responsibility to "exert authority over the premises which he leases and where he resides." Based on all of the evidence, the tenant "should have been aware that the premises were used…for illegal activity." This tenant was not "unsophisticated or naïve." He had "[grown] up in New York City, attended college, used illegal drugs on a casual basis and was arrested and convicted of a drug related crime in 2015." Moreover, he had pled guilty to various charges and had been "fully allocuted." The court stated that although the "grim realities of our bail system are well-documented, the court must accept said plea on its face as an admission on the part of the respondent."

The court then explained that "[j]ustice requires that the other tenants in the building and the people living in the surrounding area not be subjected to having in their midst a premises that is used for the preparation and sale of narcotics." It noted that many apartments were "occupied by severely disabled individuals who may not be fully able to report any drug activity."

Thus, the court held that the landlord had demonstrated that the apartment had been used for the sale of drugs in violation of RPAPL §711(5). It further noted that as set forth in RPAPL §753(3) stay provisions "shall not apply to proceedings… to recover possession upon the ground that an occupant is holding over and is objectionable if the landlord shall establish to the satisfaction of the court that such occupant is objectionable." Based on the recent amendment of RPAPL §753, the court lacked "guidance in the form of precedent."

Here, there was no allegation that the tenant was currently engaging in illegal conduct or in activity that endangered the health, safety and welfare of others. The tenant had lived in the apartment his entire life and given his criminal record, it will be difficult for the tenant to relocate. However, given "the nature of the proceeding" and "the vulnerability of the other tenants in the building," the court viewed a lengthy stay as inappropriate. Accordingly, the it stayed execution of the judgment and warrant through October 31, 2019, i.e., for a period of approximately 90 days, provided that the rent is timely paid.

258 E. 4th St. LLP v. Gibbs, Civil Court, New York Co., Case No. 53644/17, decided July 31, 2019, Elsner, J.

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