Civil Court - Part 52 - Judge Schack

Part 52

Judge Schack

Decision of Interest

BETHLEHEM BAPTIST CHURCH v. THE TREY WHITFIELD SCHOOL - This commercial landlord-tenant summary proceeding considers the issue of the reasonable period of time to stay proceedings for the appeal of a denial of an interlocutory motion and whether interim use and occupancy can be ordered to be paid during pendency of the proceeding.

Factual Background

This action is between petitioner, hereinafter "Church" and respondent, hereinafter "School." The School is located on Church property. By my February 8, 2002 Order, I denied the School's discovery motion, and the School appealed to the Appellate Term of Supreme Court. On May 10, 2002, the Church moved for judgment on the petition, and on June 5, 2002 the School cross-moved for a stay pending further proceedings. By my June 24, 2002 Order, I stayed all proceedings pending a determination of the appeal by the Appellate Term of Supreme Court, holding that:

[T]he imposition of a stay avoids the risk of inconsistent adjudications, duplication of proof, and the potential waste of judicial resources. El Greco, Inc. v. Cohn, 139 AD2d 615 (2d Dept 1988); Zonghetti v. Jeromack, 150 AD2d 561 (2d Dept 1989).

To date, while the Appellate Term of Supreme Court has heard oral arguments on the appeal, it has not issued a decision on the School's appeal of my February 8, 2002 Order.

Petitioner's counsel, in her affirmation in support of the order to show cause, claims that the continuance of the stay during the pendency of the appeal to the Appellate Term is highly prejudicial to the Church. The Church moves for the stay to be vacated and judgment granted for petitioner-Church on the petition; or, modified for the respondent-School to pay reasonable use and occupancy during the pendancy of this action.

The School was founded in 1983 by the late Pastor Roland Nyman of the Church "to provide students with a solid academic education combined with teachings of religious and moral values [paragraph 8 of Church Trustee Henry Pearson's reply affidavit in Exhibit 5 of order to show cause]." Mr. Pearson, in paragraph 3 of his reply affidavit, stated:

[I]n order to obtain government funding and private donations, religion has been taken out of the school, and the name of the school has been changed, all without the Church's permission. The Church does not want the school operating on the Church's premises under these circumstances, and accordingly commenced the instant eviction proceeding.

Janie Whitney, Chief Executive Officer of the School, in her October 23, 2001 affidavit in support of the School's discovery motion [Exhibit 7 of order to show cause] conceded that the School operates on Church grounds. Ms. Whitney admitted that the School gave the Church $25,000 during the school year [paragraph 8 of Janie Whitney affidavit of October 23, 2001]. Further, in paragraph 8, she alleged that the Church treated these payments as donations, not rent. Then, in paragraph 18, she asserted that the School will continue to pay $25,000 per year to the Church if the discovery motion is granted. Defense counsel in paragraph 7 of his affirmation in opposition concedes that the School continues "to tender the same monthly financial contribution to the Church, as it was doing at the time the Court issued the June Order, as the School has always done.

The Church has refused to accept these checks and has returned them to maintain its holdover claim against the School. Exhibit 8 of the order to show cause includes a December 10, 2001 letter of Henry Pearson to Janie Whitney in which the Church has returned six uncashed tendered checks to the Church dated from August 21, 2001 to December 3, 2001 "pending resolution of Church and School matters." Also, in this exhibit, are checks tendered by the School to the Church from December 17, 2001 and February 28, 2002, and then returned by the Church to the School.

The Church, if the Court does not vacate the stay and grant judgment on the petition, requests that this Court modify the stay and order the School to pay use and occupancy in excess of the $2,500 per month proposed by the School. The Church in Exhibit E of its order to show cause, submits an appraisal, dated April 12, 2002, in which the Church's appraisers concluded that $8.60 per square foot annually is the market rental value of the property for the 29,754 square feet occupied by the School. Using this appraisal the Church contends that the annual market rental value for the School's premises is $255,884 or $21,324 per month.

Modification of Stay

This Court on June 24, 2002 stayed proceedings in the instant action, pending the Appellate Term's determination of the appeal of my denial of the School's discovery motion, pursuant to CPLR 2201, on terms this Court decided at the time were just to avoid inconsistent adjudications; duplication of proof; and the potential waste of judicial resources. In Joseph v. Cheeseboro, 42 Misc2d 917, 919 (Civ Ct, New York County), rev'd on other grounds, 43 Misc2d 702 (App Term, 1st Dept 1964) the court observed that the "only limitation on a stay, therefore, is the court's own sense of discretion, prudence and justice." If an issuing court finds that a stay becomes unjust, the issuing court may vacate or modify the stay pursuant to CPLR 5519 ( c), which provides:

The court…of original instance may stay all proceedings to enforce the judgment or order appealed from pending an appeal…or may grant a limited stay or may vacate, limit or modify any stay imposed by…this subdivision…

For the reasons to follow, this Court finds that the instant stay, now more than ten months old, is no longer just or reasonable. It is prejudicial to the Church that its right to use its property, as it deems appropriate and/or to receive rental income from its property has been impaired for this extent of time. Therefore, the stay is modified to require respondent-School to pay fair market value use and occupancy during the pendancy of this action.

Summary proceedings may be stayed for a reasonable period of time. Spotless Stores, Inc. v. Smith, 279 AD 26 (1st Dept 1964), taking into consideration of a Civil Court stay in a summary proceeding, the court held, at 428, that a stay of five months was not reasonable and "[s]tays granted should not be for an eternity." In 64 B Venture v. American Realty Co., 179 AD2d 374 (1st Dept 1992), appeal denied, 79 NY 2d 757 (1992), a stay of eviction in a holdover proceeding for six months was appropriate with respect to the facts of the case, but, as the court held at 375:

It was an improvident exercise of the court's discretion to leave open the possibility of a further extension. As this court had occasion to remark in determining that a five-month stay of eviction was unreasonably long. "Stays granted should not be for an eternity." (Matter of MacLeod v. Shapiro, 20 AD.2d 424, 428, 247 N.Y.S.2d 423.)

In Eskandar Corp. v. Vells, 110 Misc2d 193 (App Term, 1st Dept 1981), the landlord appealed from the portion of a final judgment that granted commercial tenants a stay for an indeterminate period. The Appellate Term found at 195, that his indeterminate stay in excess of six months, was "imprudent, unjust, and, to borrow from another profession, contra-indicated."

Courts have found that lengthy stays, pursuant to the specific facts of a case, may be justified. In City of New York v. Falcone, 160 Misc2d 234 (App Term, 2d Dept 1994), the Civil Court, in a commercial holdover proceeding stayed a warrant of eviction for one year to allow tenant to remove from the premises building materials, including more than three million bricks and sheetrock. The Appellate Term found at, 236, that "[u]nder the particular and unusual circumstances presented, the action of the court below was not an abuse of discretion." In the instant case, it's clear that the Church has not received rent or use of occupancy for the School's premises during the pendency of this proceeding. The duration of the stay has become unjust and unreasonable to the Church.

Hearing to determine reasonable use and occupancy

In 1400 Broadway Associates v. Henry Lee & Co. of NY, Inc., 161 Misc2d 497 (Civ Ct. New York County 1994) the court recognized, at 499, that:

In a holdover proceeding, the petitioner is entitled to seek use and occupation for the fair and reasonable value of the premises during the period of such use and occupancy. RPL Sec. 220, RPAPL Sec. 749(3); see Beacway Operating Corp., v. Concert Arts Society, Inc., 123 Misc2d 4522, 474 N.Y.S.2d 227 (lease amount probative but not conclusive).

Furthermore, in a holdover proceeding, an occupant's duty to pay the landlord for use and occupancy of the premises is predicated upon the theory of quantum merit. Phillips v. Cohen, 2002 NY Slip Op 40235 (L), (App Term, 2d Dept April 2, 2002), citing Eighteen Associates, LLC v. Nanjim Leasing Corp., 257 AD2d 559 (2d Dept 1999). In Eighteen Associates, LLC, a case involving a landlord seeking use and occupancy from sublessees of office space, the court at 559-560 held that:

The obligation to pay for use and occupancy does not arise from an underlying contract between the landlord and occupant…Rather, an occupant's duty to pay the landlord of the premises is predicated upon the theory of quantum merit, and is "imposed by law for the purpose of bringing about justice without reference to the intention of the parties" (Rand Products Co. v. Miniz, 72 Misc2d 621, 340 N.Y.S. 2d 444; quoting Willston Contracts 3A, at 13 (3d ed 1961).

It is undisputed from the papers in the instant case that respondent has continually operated the School since the Notice to Quit was served in July, 2001. In the August 3, 2001 letter from Joseph H. Wilkinson, Chairman of the School's Board, to counsel for the church, the School claims to have 540 students (part of Exhibit 5 of order to show cause). These students provided the School with revenue, while the Church has been denied revenue for the use and occupancy of the School's premises since the summer of 2001. Mr. Wilkinson, in the above-named letter concedes that "Bethlehem Baptist Church has every right to use the School buildings for whatever purpose it deems appropriate," but requests "that you take into full consideration of the devastating effect this drastic action will have on our students."

Payment of the fair market value for the use and occupancy of the premises during the pendency of this action from the summer of 2001 to the present will, to quote the Second Department in Eighteen Associates, LLC, "is predicated upon the theory of quantum merit, and is 'imposed by law for the purpose of bringing about justice without reference to the intention of the parties…' " This will fairly balance the needs and concerns of the Church with the needs and concerns of the School's students and their parents.

In Gordon v. Town of Esopus, 107 AD2d 114 (3d Dept 1985), appeal denied, 65 NY2d 609 (1985), Ulster County Court awarded the landlord use and occupancy for the premises until the issuance of a warrant of eviction and return of possession to the landlord. The Third Department affirmed, finding, at 115, that the lower court could hold a hearing to determine use and occupancy while a stay was in place during an appeal by the respondent of the denial of a motion to dismiss. In the instant case, a hearing to determine the reasonable value of the use and occupancy of the premises is not a matter that will be affected by my February 8, 2003 Order denying discovery, from which the School appealed. Therefore, a hearing can be conducted to determine the reasonable use and occupancy despite the pending appeal.

It is within this Court's discretion to award the Church reasonable use and occupancy of the premises occupied by the School during the pendency of the appeal. In Montbatten Equities v. Tabard Press Corp., 87 Misc2d 865 (Civ. Ct. New York County 1976) aff'd, 88 Misc2d 731 (App Term, 1st Dept 1976) the court issued a stay to give either side an opportunity to appeal. In so doing, at 868, the court ordered that "in the interim and thereafter until further Order of the Court, Tenant shall pay Landlord as and for reasonable use and occupancy…" In 61 West 62nd Owners Corp. v. Harkness Apartment Owners Corp., 173 AD2d 372, (1st Dept 191) appeal dismissed, 78 NY2d 1123 (1991), Supreme Court, New York County granted a Yellowstone injunction to respondents on condition that they post an undertaking and pay future use and occupancy to the landlord. The First Department, at 372-373 held:

Nor did the court err in granting judgment, for "use and occupancy…or in conditioning the issuance of the Yellowstone injunction upon future payment of "use and occupancy" Calvert v. Le Tam Realty Corp., 118 AD2d 426, 499 N.Y.S.2d 89…The amount of the undertaking was not excessive, but was rationally related to the quantum of damages the plaintiff would sustain in the event that defendant is later determined to not have been entitled to the injunction.

Conclusion

Therefore, the stay issued by my Order of June 24, 2002 is modified to require respondent-School to pay fair market value for interim use and occupancy of the premises to petitioner-Church during the pendency of this action. As petitioner's counsel explicitly stated on page 12 of her Reply, "[R]espondent has had a free ride at the Church's expense for way too long. It should end here."

To determine the fair market value for interim use and occupancy of the premises during the pendency of this action, it is ordered that a hearing will be held on Monday, June 2, 2003, before me. Counsel on both sides shall report to my chambers, room 703, at 9:30A.M. on June 2, 2003 for a conference. If the matter cannot be resolved in a conference, the hearing will commence forthwith. Each side shall be prepared to present evidence in the hearing as to the fair market value of the premises and shall have appraisers and experts testify if they are deemed necessary.

This constitutes the decisions and order of the court.

Copr.© West 2001 No Claim to Orig. U.S. Govt. Works