Cooperatives & Condominiums

AppDiv, First Dept.

(3-2 decision; memorandum opinion; dissenting memorandum by Moskowitz, J.)

In an action by co-op corporation against a shareholder seeking injunctive relief and damages for violation of the proprietary lease and house rules, the shareholder appealed from Supreme Court's order denying his request for attorneys' fees. A divided Appellate Division reversed and awarded fees, concluding that tenant was the prevailing party in the underlying litigation.

When neighboring tenants complained to the co-op staff about a stench emanating from tenant's apartment, the staff drilled out shareholder's lock to open the door and discovered that the source of the odor was a pet cat. The staff put in fresh kitty litter and left. When the board contacted shareholder, who was then upstate, he returned to remove the cat. The co-op then brought this action seeking an injunction to remove junk and filth from the apartment, as well as the shareholder's cat. Supreme Court granted an ex parte temporary restraining order (TRO) permitting the co-op to remove all odor-producing garbage and food stuffs. After the removal, the court held a hearing and denied the co-op's request for injunctive relief, noting that the co-op had not provided shareholder the notice and opportunity to cure required by the proprietary lease, and had falsely represented, in the TRO application, that the cat might still be in the apartment.

The court also noted that the preliminary injunction was unnecessary because the co-op had removed the noxious matter, so that there was no continuing harm. Supreme Court also denied shareholder's application for attorneys' fees, concluding that shareholder was not the prevailing party, and not entitled to fees pursuant to RPL Section 234. Shareholder appealed.

In reversing, the Appellate Division majority concluded that shareholder was unquestionably the prevailing party and therefore entitled to fees. Because the court concluded that the co-op was not entitled to the preliminary injunction it sought, the outcome was favorable to the shareholder.

Justice Moskowitz, dissenting for herself and Justice Mazzarelli, concluded that shareholder was not the prevailing party in the litigation. They emphasized that Supreme Court had dismissed because the co-op's action in cleaning the apartment of noxious material made the preliminary injunction unnecessary. The dissent, therefore, agreed with Supreme Court's conclusion that shareholder was not the prevailing party, and emphasized that Supreme Court had appropriately exercised its discretion to deny attorneys' fees based on equitable considerations and fairness.

COMMENT

Real Property Law ' 234 provides that whenever a residential lease entitles a landlord to recover attorneys' fees incurred as the result of litigation arising out of the failure of a tenant to perform any covenant contained in the lease, a reciprocal entitlement to attorneys' fees is implied where the tenant is the prevailing party in such litigation. This statute was passed to “level the playing field” because attorneys' fees clauses that provide protection only for landlords have become standard in leases for residential real estate.

To be considered a prevailing party, the party need only be successful with respect to the central relief sought. For example, the court in Century Apartments v. Yalkowski, 106 Misc.2d 762 awarded attorneys' fees to a tenant who was successful in obtaining abatements on two counterclaims, even though there was a partial judgment against him for rent due to the landlord. Similarly, where the outcome of a proceeding is not substantially favorable to either side, attorneys' fees are not awarded. Thus, in 339-347 E. 12th St. LLC v. Ling, 31 Misc.3d 48, the Appellate Term held that where tenant paid rent arrears in order to advance a breach of the warrant of habitability cause of action, and tenant was awarded only an 11% rent abatement after withholding all rent for an 18-month period, but no recovery on his punitive and treble damages, neither party was the prevailing party entitled to attorneys' fees.

Further, when construing RPL ' 234 where the prevailing party is not clear-cut, the discretion of the trial court is limited. Thus, it is common for the appellate court to overturn the trial court's decision. For example, in 54 Greene Street Realty Corp. v. Shook, the Appellate Division vacated the trial court's award of attorneys' fees to landlord reasoning that while landlord established that tenant violated the Rent Stabilization Code by unlawfully overcharging his roommate, landlord failed to obtain what he truly sought, namely, eviction of the tenant and his roommate. The court held under these circumstances, neither party was a prevailing party entitled to recover attorneys' fees under RPL ' 234. In 54 Greene, the appellate court overturned a trial court's award of fees; sometimes appellate courts overturn a trial court's denial of fees. For example, in 490 Owners Corp. v. Israel, the Appellate Term reversed Civil Court's denial of landlord's motion for attorneys' fees where tenant failed to cure a violation of the lease provision. The Appellate Term held that landlord was the prevailing party because he was awarded a final judgment of possession, the central relief sought, based on the court's determination that tenant was in breach of the lease.

While a tenant's entitlement to attorneys' fees is a matter of statutory right if tenant is the prevailing party, a court is nevertheless likely to deny fees to a successful tenant if it concludes that tenant had materially breached the lease. For example, in Wells v. East 10th Street Assoc., 205 A.D.2d 431, the Appellate Division reversed the Appellate Term and denied attorneys' fees to the prevailing tenant because, although the definition of “family” in the Rent Stabilization Code had recently changed to include unrelated family members, which rendered tenant successful, landlord commenced the action under the then existing definition, where a deceased lessee's gay partner would not have been awarded possession of the property. Similarly, in Beach Haven Apartments No. 1 Inc. v. Cheseborough, 2 Misc. 3d 33, tenants were denied attorney's fees, despite their successful defense of the petition, because tenants conceded that they harbored their dog at the outset of their tenancy, in knowing violation of the terms of their lease, and prevailed solely upon landlord's failure to commence the proceeding within the prescribed three-month period.

How much discretion do trial courts have in deciding whether to award fees to “prevailing” parties? Do appellate courts defer to trial courts in cases where each party has prevailed in part? Or have appellate courts developed clearly established rules that govern trial court behavior?

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Attorneys' Fees

433 Sutton Corp. v. Broder

NYLJ 7/1/13, p. 18, col. 3

AppDiv, First Dept.

(3-2 decision; memorandum opinion; dissenting memorandum by Moskowitz, J.)

In an action by co-op corporation against a shareholder seeking injunctive relief and damages for violation of the proprietary lease and house rules, the shareholder appealed from Supreme Court's order denying his request for attorneys' fees. A divided Appellate Division reversed and awarded fees, concluding that tenant was the prevailing party in the underlying litigation.

When neighboring tenants complained to the co-op staff about a stench emanating from tenant's apartment, the staff drilled out shareholder's lock to open the door and discovered that the source of the odor was a pet cat. The staff put in fresh kitty litter and left. When the board contacted shareholder, who was then upstate, he returned to remove the cat. The co-op then brought this action seeking an injunction to remove junk and filth from the apartment, as well as the shareholder's cat. Supreme Court granted an ex parte temporary restraining order (TRO) permitting the co-op to remove all odor-producing garbage and food stuffs. After the removal, the court held a hearing and denied the co-op's request for injunctive relief, noting that the co-op had not provided shareholder the notice and opportunity to cure required by the proprietary lease, and had falsely represented, in the TRO application, that the cat might still be in the apartment.

The court also noted that the preliminary injunction was unnecessary because the co-op had removed the noxious matter, so that there was no continuing harm. Supreme Court also denied shareholder's application for attorneys' fees, concluding that shareholder was not the prevailing party, and not entitled to fees pursuant to RPL Section 234. Shareholder appealed.

In reversing, the Appellate Division majority concluded that shareholder was unquestionably the prevailing party and therefore entitled to fees. Because the court concluded that the co-op was not entitled to the preliminary injunction it sought, the outcome was favorable to the shareholder.

Justice Moskowitz, dissenting for herself and Justice Mazzarelli, concluded that shareholder was not the prevailing party in the litigation. They emphasized that Supreme Court had dismissed because the co-op's action in cleaning the apartment of noxious material made the preliminary injunction unnecessary. The dissent, therefore, agreed with Supreme Court's conclusion that shareholder was not the prevailing party, and emphasized that Supreme Court had appropriately exercised its discretion to deny attorneys' fees based on equitable considerations and fairness.

COMMENT

Real Property Law ' 234 provides that whenever a residential lease entitles a landlord to recover attorneys' fees incurred as the result of litigation arising out of the failure of a tenant to perform any covenant contained in the lease, a reciprocal entitlement to attorneys' fees is implied where the tenant is the prevailing party in such litigation. This statute was passed to “level the playing field” because attorneys' fees clauses that provide protection only for landlords have become standard in leases for residential real estate.

To be considered a prevailing party, the party need only be successful with respect to the central relief sought. For example, the court in Century Apartments v. Yalkowski, 106 Misc.2d 762 awarded attorneys' fees to a tenant who was successful in obtaining abatements on two counterclaims, even though there was a partial judgment against him for rent due to the landlord. Similarly, where the outcome of a proceeding is not substantially favorable to either side, attorneys' fees are not awarded. Thus, in 339-347 E. 12th St. LLC v. Ling, 31 Misc.3d 48, the Appellate Term held that where tenant paid rent arrears in order to advance a breach of the warrant of habitability cause of action, and tenant was awarded only an 11% rent abatement after withholding all rent for an 18-month period, but no recovery on his punitive and treble damages, neither party was the prevailing party entitled to attorneys' fees.

Further, when construing RPL ' 234 where the prevailing party is not clear-cut, the discretion of the trial court is limited. Thus, it is common for the appellate court to overturn the trial court's decision. For example, in 54 Greene Street Realty Corp. v. Shook, the Appellate Division vacated the trial court's award of attorneys' fees to landlord reasoning that while landlord established that tenant violated the Rent Stabilization Code by unlawfully overcharging his roommate, landlord failed to obtain what he truly sought, namely, eviction of the tenant and his roommate. The court held under these circumstances, neither party was a prevailing party entitled to recover attorneys' fees under RPL ' 234. In 54 Greene, the appellate court overturned a trial court's award of fees; sometimes appellate courts overturn a trial court's denial of fees. For example, in 490 Owners Corp. v. Israel, the Appellate Term reversed Civil Court's denial of landlord's motion for attorneys' fees where tenant failed to cure a violation of the lease provision. The Appellate Term held that landlord was the prevailing party because he was awarded a final judgment of possession, the central relief sought, based on the court's determination that tenant was in breach of the lease.

While a tenant's entitlement to attorneys' fees is a matter of statutory right if tenant is the prevailing party, a court is nevertheless likely to deny fees to a successful tenant if it concludes that tenant had materially breached the lease. For example, in Wells v. East 10th Street Assoc., 205 A.D.2d 431, the Appellate Division reversed the Appellate Term and denied attorneys' fees to the prevailing tenant because, although the definition of “family” in the Rent Stabilization Code had recently changed to include unrelated family members, which rendered tenant successful, landlord commenced the action under the then existing definition, where a deceased lessee's gay partner would not have been awarded possession of the property. Similarly, in Beach Haven Apartments No. 1 Inc. v. Cheseborough, 2 Misc. 3d 33, tenants were denied attorney's fees, despite their successful defense of the petition, because tenants conceded that they harbored their dog at the outset of their tenancy, in knowing violation of the terms of their lease, and prevailed solely upon landlord's failure to commence the proceeding within the prescribed three-month period.

How much discretion do trial courts have in deciding whether to award fees to “prevailing” parties? Do appellate courts defer to trial courts in cases where each party has prevailed in part? Or have appellate courts developed clearly established rules that govern trial court behavior?

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