Incurable Tenant Default | Defamation | Judicial Blue Pencil

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Landlord’s Failure to Serve Notice of Default Excused as Default was Incurable

In 159 W. 23rd LLC v. Spa Ciel de NY Corp., a landlord brought a holdover summary proceeding against the tenant of the basement, first floor and second floor of the landlord’s building.  Under the terms of the 15-year lease, Spa (tenant) was obligated to obtain all required approvals and certificates prior to any alterations, additions, installations or improvements to the premises, ensure all contractors and subcontractors carried the insurance required by the landlord as set forth in the lease, and maintain commercial general liability insurance against claims for bodily injury or death or property damage on the premises from the date tenant entered into possession throughout the term of the lease.

Spa leased the premises with the intention of converting it to a high-end day spa, and after work on the conversion was underway, the landlord bought the building from the former landlord.  After its purchase, the landlord discovered that Spa had proceeded with the construction without first obtaining the permits required by the New York City Department of Buildings and had failed to maintain and deliver to the landlord commercial general liability insurance effective from the date the tenant entered into possession of the premises.

The landlord acknowledged that Spa’s alleged failure to procure the required permits was because the landlord refused to sign a form Spa needed to gain DOB approval for the installation of new air conditioner equipment in the premises, but Spa’s failure to obtain the requisite insurance had nothing to do with it.

The landlord sent the tenant a five-day Notice of Cancellation of the Lease under the terms of the lease.  In the Notice of Cancellation, the landlord stated that the tenant was in breach of its obligations under the specific paragraphs of the lease that required it to obtain the required commercial general liability insurance and ensure that all contractors and contractors were properly insured prior to commencing construction at the premises.  When the five days expired and the tenant remained in possession, the landlord commenced the holdover summary proceeding.

There are two basic types of summary proceedings available to landlords against their tenants: “non-payment” and “holdover.”  A non-payment proceeding is the route to take when a tenant fails to pay rent.  A holdover proceeding is brought to remove a tenant which is “holding over” beyond the expiration of term.  How can a term expire?  (1) By the lease term naturally ending; (2) by notice to quit a “month-to-month tenancy” or the like; and (3) by landlord terminating the lease early after tenant’s failure to timely cure a default.

Spa moved to dismiss the proceeding arguing the petitioner failed to serve a notice to cure, among other things.  The petitioner conceded it did not serve a notice of default or notice to cure arguing it was unnecessary as the default was incurable.  The court agreed, finding that Spa’s failure to maintain insurance was an incurable default.

The court reasoned that “‘where a landlord fails to serve a requisite notice to cure, the lease remains in effect and the tenancy cannot be terminated.’  An exception exists, however ‘in circumstances where a cure is impossible.’  The rationale for this exception is that, although a lease or statute provides time for a cure, the existence of such a provision ‘does not necessarily imply that a means or method to cure must exist in every case’ of default.  Where no such means or method of cure exists, ‘to insist upon the service of a formal notice to cure in such circumstances is to compel the performance of a useless and futile act.’”

Faculty Emails Questioning Another Faculty Member’s Doctoral Degree were Protected by Qualified Privilege and not Defamatory

In Udeogalanya v. Kiho, a faculty member of the School of Business at Medgar Evers College, a college of the City University of New York filed an action against her fellow faculty members, alleging that fellow faculty members and staff exchanged emails defaming her by calling into question the legitimacy of her doctoral degree.  The emails included statements that she did not have a recognized Ph.D., that her degree was not genuine, and that it was purchased from a “diploma mill.”

The Supreme Court, Nassau County, granted the fellow faculty members’ motion for judgment during trial, and dismissed complaint. The plaintiff appealed, and the Supreme Court, Appellate Division, held that the alleged statements made by fellow faculty members were protected by “qualified privilege,” and dismissed her appeal.

Defamation is the communication of a false statement that harms the reputation of the party who was the subject of the communication.  In New York, spoken defamation is called “slander” and defamation in other media is called “libel.”  The “common interest privilege,” as explained by the Court of Appeals, New York’s highest Court, holds that one cannot be held liable for defamation, even if the statement is false, if the “communication is made by one person to another upon a subject in which both have an interest.”  This privilege has been applied, for example, to communications among employees of an organization.

There, the Appellate Court determined that the challenged statements “concerned a matter in which the defendants and the recipients of the defendants’ emails had a common interest, namely, the academic reputation and integrity of the School of Business and its faculty.  Contrary to the plaintiff’s contention, accepting her evidence as true and affording her every favorable inference which may be properly drawn from it, that evidence does not support a reasonable conclusion that the challenged statements were motivated solely by malice” – required to overcome the privilege.

Court Properly Severed Agreement’s Illegal Provision

In Aventine Props. v. Branchinelli, the parties had entered into a written agreement where the defendant retained the plaintiff to obtain a tax reduction on the premises he owned.  The plaintiff represented defendant at a Small Claims Assessment Review proceeding and obtained a tax reduction, but the defendant failed to pay the plaintiff’s bill for services rendered and plaintiff sought over $6,600 based on defendant’s breach of contract.

The Small Claims Assessment Review, or SCAR, is a procedure that provides property owners with an opportunity to challenge the tax assessment on their real property as determined by the Board of Assessment Review (in counties outside Nassau and NYC) or the Assessment Review Commission (Nassau County) or the New York City Tax Commission (NYC).  It is a less costly and more informal alternative to a formal Tax Certiorari proceeding, which can be time consuming and expensive.  As outlined in Section 730 of New York’s Real Property Tax Law, property owners may petition the court for review of their property assessment before a specially trained hearing officer for a nominal fee of $30.

The defendant argued the retainer agreement was “void and unenforceable” because “the retainer agreement included language whereunder plaintiff, which is not composed of attorneys, could potentially have represented defendant in a judicial tribunal where representation by a nonattorney is prohibited.”

The District Court granted the plaintiff’s motion for summary judgment, and denied the defendant’s cross-motion.  On appeal, the Appellate Court affirmed under what is often referred to as the “blue pencil” doctrine or rule.  This is a legal concept in common law, where a court finds that portions of a contract are void or unenforceable, but other portions of the contract are enforceable.  The blue pencil rule allows the legally-valid, enforceable provisions of the contract to stand despite the nullification of the legally-void, unenforceable provisions.  However, the revised version must represent the original meaning; the rule may not be invoked, for example, to delete the word “not” and thereby change a negative to a positive.

The Appellate Court stated “Where an agreement consists of a legal and an illegal component, a court may sever the illegal component and enforce the legal one, so long as the illegal aspects of the agreement are merely incidental to the legal aspects and are not the main objectives of the agreement.  ‘Courts will be particularly ready to sever the illegal components and enforce the other components of a contract where the injured party is less culpable and the other party would otherwise be unjustly enriched by using his own misconduct as a shield against otherwise legitimate claims.’  The issue of severability turns also on the ‘question of intention, to be determined from the language employed by the parties.’”

The Court found that the plaintiff, a tax reduction service, is qualified to represent property owners challenging their property tax assessments pursuant to the SCAR procedure referenced in the agreement, but is prohibited from representing the defendant in any other judicial proceeding.  “Consequently, the language of the retainer agreement, which permitted plaintiff to represent defendant in ‘any other proceeding pursuant to New York State Property Tax Law’ is overly broad.  The sole issue presented on this appeal is whether, as defendant contends, the inclusion of such overly broad language renders the entire retainer agreement unenforceable, or whether the District Court properly severed such language and, upon such severance, awarded judgment in favor of plaintiff, as there had been no court proceeding in the SCAR case beyond the SCAR procedure.”

“The fundamental, lawful, objective of the retainer agreement was for plaintiff to procure a tax assessment reduction on the premises by filing all necessary papers and representing plaintiff at town assessment proceedings, in settlement negotiations with the Town Assessor, and in SCAR proceedings.  The language which would have permitted plaintiff to represent defendant in other judicial proceedings where plaintiff was prohibited from appearing was, we find, merely incidental to the main objective of the retainer agreement.  Moreover, the severability provision in the retainer agreement expressed the parties’ intention that, in the event any provision was unlawful, it be severed.  The severance of the unlawful provision did not impair or affect the legality or enforceability of the remaining provisions of the retainer agreement.”

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