Church and State/First Amendment | Attorney’s Fees | Holdover Rent

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Divided Court Refused To Rule On Dispute Between A Nun and Priest Over Priest’s Alleged Sexual Misconduct

Church and State

In Russian Orthodox Convent Novo–Diveevo, Inc. v. Sukharevskaya, the Appellate Division, Second Department, citing the First Amendment’s mandate that civil courts not interfere in religious disputes, deemed “non-justiciable” an ejectment action brought by a Russian Orthodox convent against a resident nun who was defrocked and ordered to vacate her convent home after she alleged that a resident priest was sexually harassing and abusing her. The appeal was from a judgment of the Supreme Court, Rockland County that found, after a non-jury trial, in favor of the nun and against the convent, dismissing the summary proceeding for ejectment.

According to the decision, the Russian Orthodox Convent, Novo Diveevo, Inc., operates a church and convent on its property in Nanuet. The defendant nun has resided at the convent since 1999.

In about 2003, the nun complained to her superiors about sexual misconduct by one of the convent’s priests. About two years later, the ruling bishops directed the nun to vacate the convent property. When she refused to do so, an ecclesiastical court in June 2006 disciplined her by making her ineligible to wear religious garb and to receive communion for a two-year period. The nun continued to complain of sexual harassment by the resident priest and in 2008, an ecclesiastical court permanently defrocked the nun and, because of this, disallowed her continued residency at the convent.

In January 2008, the convent commenced a summary proceedings in the Justice Court for the Town of Clarkstown to evict the nun. In May 2008, the convent commenced an action in the Supreme Court, Rockland County, for ejectment and to recover damages for use and occupancy against the nun. In September 2008, the Supreme Court consolidated the action with the summary proceedings and conducted a nonjury trial. The Supreme Court determined that the defendant had established an equitable defense to her eviction and ejectment in that the proceedings and findings of the ecclesiastical court were in retaliation for the sexual misconduct allegations. As a result, the Supreme Court dismissed the summary proceeding and the complaint, and the convent appealed.

The Second Department quoting New York’s highest court held that “The First Amendment forbids civil courts from interfering in or determining religious disputes, because there is substantial danger that the state will become entangled in essentially religious controversies or intervene on behalf of groups espousing particular doctrines or beliefs.” Citing to the United State Supreme Court, it also said that a court may properly preside over a dispute involving a religious body only when the dispute may be resolved utilizing neutral principles of law, but here, it determined “that the summary proceedings for eviction and the action, inter alia, for ejectment are inextricably intertwined with the determinations of the ecclesiastical court, particularly its 2008 determination defrocking the defendant and ordering her to vacate the convent.” The Court reasoned that action involved a “review of an ecclesiastical determination that may not be resolved by resort to neutral principles of law,” and that it did not involve “a purely religious determination” requiring the Court to accept the actions of the ecclesiastical court as final and binding.

One Justice dissented stating that the convent established its entitlement to ejectment because a “cause of action for ejectment may be maintained by the owner of real property against a person who wrongfully remains in possession of the property, or who wrongfully claims superior title to the property,” and here “at trial, the plaintiff established, prima facie, that it is the owner of the property, that it requested the defendant to vacate the property, and that the defendant failed to do so.”

And even assuming the retaliation defense to be true the dissenting Justice concluded that the nun “failed to establish that had she not been defrocked (i.e., if she remained in good status as an ordained nun), she would have enjoyed a legally enforceable right to remain and live at the property in perpetuity. Further, even assuming that the plaintiff acted inequitably toward the defendant in defrocking her, the dissenting Justice concluded that the defendant failed to demonstrate that the plaintiff acted inequitably vis-a-vis its property rights, such that equity should be invoked to deny the plaintiff the right to exclude the defendant from its property,” and that because the right to an ejectment was established, “it is unnecessary to reach the issue of whether the defendant’s defrocking was improper.”

State Statute Implies Reciprocal Right for Consumer to Recover Attorney’s Fees in Successful Defense

In DBCA LLC v. Cohen, plaintiff sued for breach of contract seeking to recover a balance Cohen owed under a credit card agreement, and was awarded a default judgment for $14,926.07 in 2006. On February 26, 2018, some 12 years later, the defendant moved by Order to Show Cause to vacate his default and the resulting money judgment claiming that he defaulted because he was not properly served and, therefore, the court did not have personal jurisdiction over him to award the money judgment.

Personal jurisdiction is a court’s jurisdiction over the parties to a lawsuit, as opposed to subject-matter jurisdiction, which is jurisdiction over the law and facts involved in the suit. If a court does not have personal jurisdiction over a party, its rulings or decrees cannot be enforced upon that party. A court that has personal jurisdiction has both the authority to rule on the law and facts of a suit and the power to enforce its decision upon a party to the suit. The Fifth and Fourteenth Amendment to the United States Constitution preserve the right of the individual to due process. Due process requires that notice be given in a manner “reasonably calculated” to inform a party of the action affecting him. New York has a statute that provides for several methods of service, none of which, Cohen argued, were satisfied.

The matter was set down for a “traverse hearing” to determine if Cohen was served personally or otherwise in accordance with the statute. The Court found Cohen “successfully raised a fact issue if personal jurisdiction was properly obtained,” and his motion to vacate was granted, dismissing DBCA’s action entirely. Cohen then sought reasonable attorney’s fees noting the card member agreement specifically authorized such recovery to DBCA LLC had it prevailed in the action, and arguing that because he was the prevailing party as he successfully asserted and won his lack of personal jurisdiction claim, New York’s General Obligations Law §5-327 created a reciprocal right for his recovery of attorney’s fees on the consumer contract.

In pertinent part, GOL §5-327(2) provides the following:

Whenever a consumer contract provides that the creditor, seller or lessor may recover attorney’s fees and expenses incurred as the result of a breach of any contractual obligation by the debtor, buyer or lessee, it shall be implied that the creditor, seller or lessor shall pay the attorney’s fees and expenses of the debtor, buyer or lessee incurred as the result of a breach of any contractual obligation by the creditor, seller or lessor, or in the successful defense of any action arising out of the contract commenced by the creditor, seller or lessor. Any limitations on attorney’s fees recoverable by the creditor, seller or lessor shall also be applicable to attorney’s fees recoverable by the debtor, buyer or lessee under this section.  Any waiver of this section shall be void as against public policy.

Quoting legal precedent, the Court said that the statute “evens the playing field between a consumer and a creditor, seller, or lessor,” by implying a reciprocal right on behalf of the consumer (the debtor, buyer, or lessee).  “As such, even if not provided for by contract, a consumer may recover its attorneys’ fees in a successful breach-of-contract action against a creditor, seller, or lessor or in the event of a successful defense of an action for breach of contract brought by the creditor, seller, or lessor.”

Relying on the General Obligations Law, the Court set the case down for an inquest to determine the amount of fees to be awarded.

Liquidated Damage Lease Clause Was Not A Penalty

In Carlyle, LLC v. Quik Park Beekman II, LLC, a Landlord brought a holdover summary proceeding against a tenant under a commercial lease, its successor tenant by assignment, and the undertenant. A City Civil Court awarded the landlord, among other things, the holdover use and occupancy liquidated damages as stated in the lease, and the tenant Quik Park Beekman II, LLC appealed.

According to the decision, the underlying 2001 commercial lease agreement for the East 76th Street, multi-level, parking garage at issue, as well as its 2009 extension/modification agreement, contained liquidated damages provisions together providing for use and occupancy at two times the rent plus $25,000 per month in the event of a holdover – what is commonly referred to as a “holdover rate.”

Generally, a party’s freedom to contract includes their freedom to contract for liquidated damages. A liquidated damages provision is an estimate, made by the parties at the time they enter into their agreement, of the extent of the injury that would be sustained as a result of any breach of the agreement. Courts will generally uphold the validity of liquidated damage provisions so long as the damages are neither “unconscionable nor contrary to public policy.”

In determining whether a liquidated damages clause constitutes an unenforceable penalty, the issue is whether the amount liquidated bears a reasonable relationship to the probable harm or whether the amount fixed is “grossly disproportionate” to the probable harm. The lease is to be interpreted as of the date of its execution, not the date of its breach. Thus, a court must look to the anticipated loss discernible at the time of contracting and not the actual loss incurred by the breach to determine whether liquidated damages are reasonable or whether the damages are capable of calculation. The fact that a plaintiff’s damages as a result of defendant’s holdover may be capable of calculation at the time of the wrongful holding over is irrelevant. The only question is whether, at the time the lease was executed, the liquidated damage amount bore a reasonable relationship to the probable harm to be incurred by the landlord in the event that the tenant held over after the expiration of the lease and whether the landlord’s damages were incapable of being precisely fixed at that time. Obviously the parties’ estimation of the fair market value can virtually always be gleaned by the amount specified as the monthly rent for the final month of the lease. But the rental value of the premises is not the only factor in a landlord’s damages, it is merely the only factor capable of a precise estimation at the time the lease is executed. That is precisely why “holdover” rates are calculated based upon a multiple of the last month’s rent which at the time of executing the lease is the amount the parties agreed was their best “guestimate” of what the fair market value of the Lease would be during the last year of the lease. Otherwise, focusing solely on the fair market value of the property during the holdover period would nullify the very purpose of a “liquidated damages” holdover clause. The fair market value, or “use and occupancy,” is already an incident of damages, as a matter of law, for a tenant holding over beyond the expiration of the lease term. Thus, a liquidated damages clause should be seen as something more than merely the usual use and occupancy fee, or fair market value of the property at the time of holding over.

In actuality, there are numerous other factors which may affect the damages incurred by a landlord in the event of a holdover, all of which are incapable of any precise valuation at the time a lease is entered into and which justify the imposition of double rent as liquidated damages. Among damages which might result from a tenant’s holdover, a landlord might be liable to an in-coming tenant for damages in failing to timely deliver possession, or might lose the tenant altogether. A landlord might also be liable for brokerage fees on a subsequent lease even though the tenant has elected to walk away from the lease as a result of the failure to timely deliver possession. Additionally, the landlord’s ability to market the premises would undoubtedly be hindered by uncertainty as to when the landlord will be able to deliver possession and thus the premises may be vacant for a longer period of time than if tenant had vacated timely.

All of these things, among others, may potentially contribute to the damage incurred by a landlord in the event of a holdover. Again, the reasonableness of the double rent provision is to be determined as of the date the lease is entered into, not the date of its breach. Thus, the issue is not whether these damages were actually incurred by plaintiff, the issue is whether, given all of these possible damages, the double rent provision in the Lease bore a reasonable relationship, at the time the lease was negotiated, to the harm likely to be incurred by a landlord as a result of the tenant’s holdover

As for “unconscionability” the Court stated that it “has been defined as the ‘absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party” and is usually accompanied by ‘a gross inequality of bargaining power.’

Here, the Court found that the agreement was “entered into by sophisticated parties as part of a commercial lease agreement setting forth a monthly rent in excess of $100,000 per month,” and because the Tenant failed to establish that damages could have easily been anticipated when the lease and its extension/modification were executed, or that the amount fixed was plainly or grossly disproportionate to the loss, it did not constitute an unenforceable penalty.”

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