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149-05 Owners Corp. v. Phillips

Civil Court of the City of New York, Queens County

October 31, 2013

149-05 Owners Corp., Petitioner,
Ira Phillips, D.D.S. — Tenant, PHYLLIS PHILLIPS — Occupant, JEDARI, LLC — Occupant, ALBERT FUZAILOF, D.D.S., A/K/A JEDARI DENTAL, PLLC d/b/a CENTRAL QUEENS DENTAL — Occupant, "JOHN AND JANE DOE"-Occupant., Respondent.

Unpublished Opinion

Attorneys for Plaintiff 149-05 Owners Corp. Gutman, Mintz, Baker & Sonnenfeldt, PC

Attorneys for Defendant Ira Phillips, D.D.S and Phyllis Phillips Weisberg & Weisberg

Attorneys for Defendant Jedari, LLC and Albert Fuzailof, D.D.S. a/k/a Jedari Dental, PLLC d/b/a Central Queens Dental Lawrence G. Nusbaum.



On March 24, 2010, the Petitioner, 149-05 OWNERS CORP., prepared and had served on the above named Respondents a 30-Day Termination Notice without the assistance of counsel. Subsequently, the Petitioner retained the law office of Gutman, Mintz, Baker & Sonnenfeldt, P.C., as counsel. Based on the failure of the Respondents to vacate, a Notice of Petition and Petition was prepared and served on the Respondents seeking to recover possession of the premises known as 149-05 79th Avenue, Apt. A, Kew Gardens, New York on the ground that the Respondents held over at the end of their lease agreement and were month to month tenants. The Petition was noticed to be heard on June 1, 2010 in Commercial Part 52 under L & T Index No. 063289/2010.

By Notice of Motion returnable on July 27, 2010, the undertenant, ALBERT FUZAILOF, D.D.S., JEDARI LLC, JEDARI DENTAL, PLLC d/b/a CENTRAL QUEENS DENTAL, moved to dismiss the petition on the grounds that the court lacks personal jurisdiction over the Respondents based on improper service of process and the 30 Day Termination Notice was facially defective in that it did not contain a termination date in contravention of well settled case authority.

By Notice of Cross Motion, the prime tenants, IRA PHILLIPS, D.D.S. and PHYLLIS PHILLIPS, moved to dismiss the petition on the grounds of improper service of process and that a nonpayment proceeding was pending between the same parties which would defeat the holdover proceeding.

In a Decision and Order, dated November 23, 2010, the Hon. Joseph J. Esposito granted both motions and dismissed the holdover proceeding without prejudice.

By Notice of Petition and Petition, dated July 29, 2010 and filed on August 3, 2010, the prime tenant, PHYLLIS PHILLIPS, commenced a summary proceeding for non-payment of rent in the amount of $34, 498.46 against her sub-tenant, ALBERT FUZAILOF, D.D.S., JEDARI, LLC., JEDARI DENTAL, PLLC d/b/a CENTRAL QUEENS DENTAL under L & T Index No: 70918/10.

On August 11, 2009, the Respondent appeared by counsel and interposed an answer which alleged various affirmative defenses and counterclaims. The Clerk noticed the Petition for September 14, 2010.On that date, the Respondent moved to dismiss the petition asserting that the pleadings were defective and the court lacked in personam jurisdiction over the Respondents since service of process was not in conformity with the law. (The record shows that there was a second motion made by the subtenant in which he also sought to vacate a default judgment pursuant to §5015(a)(5) but the record did not dispose of this motion; presumably it was disposed of by the attorneys).

The parties engaged in motion practice; both parties agreeing that opposition papers and reply papers would be served and filed by dates certain.

On January 18, 2011, the Hon. Joseph J. Esposito in a Decision and Order denied the Respondents' Motion to dismiss. The court found that the pleadings were sufficient to state a cause of action and deemed service was proper to "confer jurisdiction on the court".

After a court conference, on January 26, 2011, the parties entered into a stipulation in which they agreed to these terms and conditions: the case was adjourned for a final trial date to March 22, 2011; all subpoenas were required to be served by a date certain; the Respondents were required to serve and file an answer by February 18, 2011; and agreed to pay rent for January, February and March 2011 by personal delivery to Petitioner's attorney's office by the tenth day of each month with the exception of January 2011, which was to be paid by February 3, 2011. This aforesaid case between the prime tenant and subtenant was on the court calendar simultaneously with the instant holdover proceeding.

The Petitioner commenced this second Holdover proceeding in or about November 29, 2010 by the service of a 30 Day Termination Notice terminating the alleged month-to-month tenancy of the prime tenants and undertenants. The prime tenants and undertenants were required to surrender possession on or before December 31, 2010 and on their failure to surrender possession, the Petitioner would serve a Notice of Petition and Petition. Suffice it to say, the Respondent failed to vacate and the Petitioner served the petition made returnable on February 1, 2011 at 2 o'clock p.m. in Commercial Part 52.

The Respondents, IRA PHILLIPS and PHYLLIS PHILLIPS, appeared by counsel and interposed an answer with five affirmative defenses, namely, improper service of process of the pleading (stricken as stated below), the option to renew was properly exercised by the Respondents without objection by the Petitioner, waiver of any defects in the option to renew by the acceptance of rent prior to and subsequent to the termination notice and equitable estoppel.

The Respondents elected to defend this summary proceeding instead of commencing an action in Supreme Court for declaratory and for injunctive relief. The answer by the prime tenant asserts equitable defenses, and it is well-settled that the Civil Court and the Housing Part of the Civil Court may entertain equitable defenses in a summary proceeding (see RPAPL §743).

The undertenant, JEDARI, LLC, ALBERT FUZAILOF, D.D.S., JEDARI DENTAL, PLLC d/b/a CENTRAL QUEENS DENTAL also appeared by counsel and interposed an answer alleging that the Petitioner failed to name and serve a necessary party, failed to state a cause of action, improper service of process (stricken as stated below), partial constructive eviction and related counterclaim of $42, 000.00, negligent operation of the boiler by the Petitioner and related counterclaim for $42, 000.00, waiver of objection to the option by the acceptance of rent from the prime tenant and no prejudice to the landlord, and a third party beneficiary claim with claims of a wrongful rejection of the option by the Petitioner. The answer also alleges three cross claims by the undertenant against the prime tenant, namely, asserting all claims against the prime tenant alleged in the above nonpayment proceeding by the prime tenant against the undertenant for $42, 000.00; breach of contract for the same claim; and for $500, 000.00 for the failure to properly exercise the option to renew. In addition to these claims and cross claims by the undertenant, it appears that the undertenant served a demand for a jury trial.

It appears that the holdover proceeding was mistakenly placed on the residential Housing Part calendar and on the return date of February 1, 2011, the case was transferred to Commercial Part 52 and adjourned to February 18, 2011. On February 18, 2011, this case was adjourned to March 22, 2011.

On March 22, 2011, the Petitioner, by Notice of Motion, moved to strike the Jury Demand and the affirmative defense of the improper service of process of both the prime tenant and undertenant. After oral argument on the Motion date, this court issued a third Order striking the Jury Demand and the defense of improper service of process of both tenants and granted the parties a trial date for May 3, 2011.

It was uncontrovertible that all of the rights, title and interest in the leasehold was transferred from IRA PHILLIPS to his wife, PHYLLIS PHILLIPS, pursuant to an assignment and assumption of lease, dated September 22, 2005, with the written consent of the Petitioner. Thus, the Order also provides that the Petitioner withdrew all claims in this proceeding against IRA PHILLIPS, D.D.S. (deceased). All other parties remained in the case. Additionally, the Respondents were ordered to pay use and occupancy by the 7th day of each month until there was a final determination in this proceeding.

All parties including this court were in accord that the holdover proceeding under L & T Index No: 51616/2011, as more fully discussed below, should proceed to trial prior to the nonpayment proceeding between the prime tenant and the undertenant.

For several months, this court exhausted a considerable amount of time in a good faith effort to resolve the underlying proceeding between the parties. The trial date was adjourned from May 3, 2011 to May 13, 2011; then from May 13, 2011 to May 25, 2011 for a continued court conference. From that date, the parties stipulated to adjourn the case to June 9, 2011 and then subsequently to July 21, 2011 for a continued conference. On July 21, 2011, the court conference was then adjourned to September 21, 2011. From September 21, 2011, to a final adjourn date on November 2, 2011. After a lengthy conference with the court, the parties were unable to resolve this matter amicably and the parties insisted on a trial in this matter. A trial date was set for November 17, 2011 and November 18, 2011. After several consent adjournments, the parties proceeded to trial on March 21, 2012.

TRIAL ON THE MERITS On March 21, 2012, the Petitioner commenced its case-in-chief. The Petitioner admitted into evidence the first lease agreement involving the subject premises, dated August 1, 1984, between 149-05 OWNERS CORP., as the Landlord and N.A.H. Realty Corporation, as the Tenant, for the premises known as 149-05 79th Avenue, Professional Apt. A, Kew Gardens, New York for a term of 25 years which commenced on September 1, 1984 and terminated "to the end on the [blank] day of August 2009 * 19 [blank], upon the conditions and covenants " as stated in the lease (the court intentionally left these spaces blank exactly as it appears on the lease agreement). A review of the lease shows that there is a small * between 2009 and 19 (The parties apparently did not delete 19 from the lease.) The asterisk directs the parties to the bottom of the page which states:

" * with a renewal option on the part of the tenant for an additional twenty-five (25) years upon the same terms and conditions as are contained herein, such option to be exercised no later than sixty (60) days prior to the expiration date." (Petitioner's Exhibit "1" in evidence).

Subsequently, by assignment and assumption of lease, dated March 16, 1987, N.A.H. Realty Corporation transferred all rights, title and interest in the aforementioned lease, dated August 1, 1984, to IRA PHILLIPS, D.D.S. for the sum of $55, 000.00. The assignment provides, in pertinent part, as follows: "$27, 500.00 in cash paid this date to assignor; the balance by the giving of a note to assignor by assignee in the form attached hereto " (There was no promissory note attached to the assignment.) (Petitioner's Exhibit "2" in evidence.) The assignment further stated that "IRA PHILLIPS, D.D.S., successors and assigns from the 19 day of March, 1987 for all the rest of the term of the lease and option period years mentioned in the said lease, subject to the rents, conditions and provisions therein also mentioned." (this language is handwritten on the assignment in the space provided in the Blumberg Form). 147-05 OWNERS CORP., on February 12, 1987, consented to said assignment (Petitioner's Exhibit "3" in evidence).

Again, the lease was assigned by IRA PHILLIPS, D.D.S., to PHYLLIS PHILLIPS, his wife, pursuant to an assignment and assumption of lease, dated September 22, 2005. (Petitioner's Exhibit "4" in evidence). In correspondence, dated September 22, 2005, the Board of Directors of the Petitioner corporation acknowledged that no Board approval was required for this assignment between husband and wife. (Petitioner's Exhibit "5" in evidence).

Lastly, PHYLLIS PHILLIPS on September 22, 2005, afterwards changed to September 27, 2005, executed a Sublease Agreement which transferred all rights, title and interest in the leasehold from PHYLLIS PHILLIPS to JEDARI, LLC. and ALBERT FUZAILOF, D.D.S. (Petitioner's Exhibit "6" in evidence). Provision 7 of the Sublease Agreement states, in relevant part, that the "SubLessee shall have the right to renew said lease for five (5) successive five (5) year terms following the expiration of the initial term of this sublease provided that the exercise of each option shall be exercised in writing by the Sub-Tenant no later than ninety (90) days prior to the expiration of the term of the sublease currently in effect". The Board of Directors of the 149-05 OWNERS CORP. consented to the assignment of the Sublease Agreement from PHYLLIS PHILLIPS to Dr. ALBERT FUZAILOF, D.D.S. and JEDARI, LLC. on September 6, 2005, prior to the assignment (Petitioner's Exhibit "7" in evidence.)

According to the Petitioner's business records, the Respondent owed monthly rent at $951.95 from January 1, 2007 through April 1, 2008. Notwithstanding the claims for late fees, the Petitioner's records did not prove that late fees were assessed against the Respondent's account for this time period. A copy of the rent ledger and written rent demand from the Petitioner were admitted into evidence as Petitioner's Exhibit "10" and Petitioner's Exhibit "8", respectively. Petitioner's Exhibit "10", a rent ledger from the registered managing agent, First Management Corporation, dated June 7, 2011, shows payments and nonpayment of the monthly maintenance, late charges and other additional rent for the subject premises from December 1, 2004 to May 11, 2011. The balance on the account is $10, 471.45.

Lastly, the Petitioner offered into evidence a certified copy of the deed of ownership for the subject premises, dated July 17, 1984, showing a transfer of ownership from Roy Alpert, as executor of the Will of Edward Albert, as Grantor to 149-05 OWNERS CORP., as Grantee. (Petitioner's Exhibit "9" in evidence.)

The aforementioned evidence was admitted by the Petitioner without objection by either Respondent.

The Petitioner called Zinodkumar Shangwani, the Property Manager for 10 years for the subject premises. He was very familiar with the case at hand and testified that the basis for the commencement of the holdover proceeding against Dr. IRA PHILLIPS and his wife, PHYLLIS PHILLIPS, was their failure to exercise the option set forth above. He testified that notwithstanding the service of a Notice of Petition and Petition, the Respondents remained in possession and the landlord sought a final Judgment of Possession and a Warrant of Eviction in the underlying proceeding.

On cross-examination, the witness testified that he started working for the company in 2001 and worked for various departments at the company. He is a licensed real estate broker and has held the license for over 30 years. He is involved in the everyday management of the building and affirmed that he has custody and control over the business records of the co-op as their authorized agent.

He further testified that Felix Langer, President of the Board of Directors, and the other Board members authorized and retained counsel in this proceeding to commence a lease expiration holdover against the Respondents. He concluded that the prime tenant, PHYLLIS PHILLIPS, had to exercise the option on or before June 30, 2009 and he affirmed that he never gave notice to PHYLLIS PHILLIPS about the exercise of the option.

At the conclusion of his testimony, the Petitioner rested and asserted that the Petitioner had sustained its prima facie case. At that juncture, the prime tenant, PHYLLIS PHILLIPS, moved to dismiss the petition on the grounds that the option has been properly exercised, albeit, untimely, and claimed that PHYLLIS PHILLIPS is not a month-to-month tenant. The Petitioner, on the contrary, argued that the Petitioner has substantiated the elements of RPAPL §741 and asserted that the option to renew was untimely and was not properly exercised. After argument, this court ruled that the motion to dismiss was premature and directed a continuation of the trial.

PHYLLIS PHILLIPS testified in her case-in-chief as a fact and material witness. PHYLLIS PHILLIPS testified that she was a New York City school teacher for many years. She was promoted to the Director of Math and Science within the New York City Board of Education. She was married to Dr. IRA PHILLIPS, D.D.S., for 52 years until his death, approximately 2 years ago. To the best of her knowledge, she testified that her husband had a small office at the subject premises as early as 1955 or 1956. She acknowledged that "he was there before her by a few years". She was familiar with the various transactions regarding the lease but was not, herself, involved except as stated above. She was involved intimately with the transfer from herself to her subtenant, Dr. FUZAILOF. She testified that she had obtained the prior approval of the co-op board before ...

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