Opinion
112451/2009
03-07-2011
Gioia Equities, Inc., Plaintiff, v. ONC Development LLC, Byung H. Chung, and Heather Kim, Defendants.
For Plaintiff Howard Stern Esq. For Defendants Chung and Kim. Byung H. Chung, Pro Se. Heather Kim, Pro Se.
For Plaintiff Howard Stern Esq.
For Defendants Chung and Kim.
Byung H. Chung, Pro Se.
Heather Kim, Pro Se.
Lucy Billings, J.
Plaintiff sues defendants based on breach of a lease between plaintiff, the owner of commercial premises, and defendant ONC Development LLC, the tenant. Defendant Chung, a member of ONC Development, executed the lease, which he and defendant Kim, Chung's wife, each personally guaranteed. Plaintiff moved for a default judgment against defendants after they failed to answer the complaint. C.P.L.R. § 3215(e). Upon oral argument, for the reasons explained below, the court grants plaintiff's motion insofar as it seeks a judgment on liability against ONC Development and Kim, but denies the motion against Chung.
I.APPLICABLE STANDARDS
To obtain a default judgment against non-answering defendants, plaintiff must support its motion with evidence of the facts constituting its claim. C.P.L.R. § 3215(f); Woodson v. Mendon Leasing Corp., 100 NY2d 62, 70 (2003). An affidavit, a personally verified complaint, or other admissible evidence establishing a viable claim satisfies this requirement. Wilson v. Galicia Contr. & Restoration Corp., 10 NY3d 827, 830 (2008); Woodson v. Mendon Leasing Corp., 100 NY2d at 71; Mejia-Ortiz v. Inoa, 71 AD3d 517 (1st Dep't 2010); Al Fayed v. Barak, 39 AD3d 371, 372 (1st Dep't 2007). To defeat a default judgment, defendants must show a reasonable excuse for defaulting and a meritorious defense. Johnson v. Deas, 32 AD3d 253, 254 (1st Dep't 2006); ICBC Broadcast Holdings-NY, Inc. v. Prime Time Adv., Inc., 26 AD3d 239, 240 (1st Dep't 2006); Estrella v. Herrera, 23 AD3d 320, 321 (1st Dep't 2005); 114 W. 26th St. Assoc. LP v. Fortunak, 22 AD3d 346 (1st Dep't 2005).
II.PLAINTIFF'S EVIDENCE
Plaintiff's president has personally verified its complaint, which plaintiff shows it served with a summons on defendant limited liability company (LLC) September 21, 2009, by delivery to the New York Secretary of State, NY Ltd. Liab. Co. Law § 303, and on the individual defendants October 1, 2009. C.P.L.R. § 308(1) and (2). Plaintiff further shows that it mailed the summons and complaint to the LLC October 7, 2009, and to the individual defendants January 14, 2010, to comply with the statutory second mailing requirements. C.P.L.R. § 3215(g)(3) and (4). Defendants did not answer.
Along with the verified complaint, the affidavit of plaintiff's president, Richard Gioia, attests that under the lease defendant LLC executed for commercial premises commencing February 1, 2009, for a term of 10 years, and guaranteed by the individual defendants, defendants failed to pay rent as of April 2009 as well as late fees of $820.00 per month. Plaintiff re-let the premises for a rent lower than the $8,200.00 per month defendants agreed to pay. Under the lease, if plaintiff re-let at a lower rent, defendants are obligated to pay the difference. Aff. of Howard Stern, Ex. A ¶ 18. Plaintiff thus supports its claim against defendants. C.P.L.R. § 3215(f).
III.DEFENDANTS' DEFENSES
The individual defendants rely on two letters to the court, dated June 14 and July 21, 2010, each signed but not sworn to by both Chung and Kim. At an appearance August 3, 2010, Chung swore to the truth of each letter in open court. The June 14 letter states that defendants leased the premises from plaintiff to operate a cafeteria-style restaurant, but requested to terminate the lease when defendants could not secure the permit necessary to operate that business. Defendants claim plaintiff agreed to terminate the lease and return $20,000.00 of the $38,000.00 deposit and then changed the lock and erected a sign advertising the premises for rent.
If Chung's evidence supports a surrender, it terminates the parties' obligations under the lease. Riverside Research Inst. V. KMGA, Inc., 68 NY2d 689, 691-92 (1986); Sandra's Jewel Box v. 401 Hotel, 273 AD2d 1, 3 (1st Dep't 2000); Bay Plaza Estates v. New York Univ., 257 AD2d 472, 473 (1st Dep't 1999). A surrender may be accomplished by the parties' express agreement or impliedly by operation of law. A surrender by agreement requires that the landlord accept the premises and waive its right to recover damages pursuant to the lease. Banc of Am. Sec. LLC v. Solow Bldg. Co. II, L.L.C., 77 AD3d 533, 534 (1st Dep't 2010); Ring v. Printmaking Workshop, Inc., 70 AD3d 480, 481 (1st Dep't 2010). See Hudson Towers Hous. Co., Inc. v. VIP Yacht Cruises, Inc., 63 AD3d 413, 414 (1st Dep't 2009); Connaught Tower Corp. v. Nagar, 59 AD3d 218 (1st Dep't 2009); Sandra's Jewel Box v. 401 Hotel, 273 AD2d at 2. A surrender by operation of law occurs when the parties to the lease act inconsistently with the landlord-tenant relationship, indicating an intent to consider the lease terminated. Riverside Research Inst. v. KMGA, Inc., 68 NY2d at 691-92; Forty Four Eighteen Joint Venture v. Rare Medium, Inc., 18 AD3d 237, 238 (1st Dep't 2005); Bay Plaza Estates v. New York Univ., 257 AD2d at 473.
Of course the lease's prohibition against oral modification, Stern Aff., Ex. A ¶ 98, well may pose a barrier to demonstrating the parties' agreement for a surrender of the premises. NY Gen. Obligs. Law § 15-301(1); Eujoy Realty Corp. v. Van Wagner Communications, LLC, 73 AD3d 546, 548 (1st Dep't 2010); Aris Indus. v. 1411 Trizechahn-Swig, 294 AD2d 107 (1st Dep't 2002); Gottlieb v. Newton, 253 AD3d 383, 384 (1st Dep't 1998). Chung's evidence, however, if proved true, does show actions by plaintiff as well as defendants consistent with such an agreement and inconsistent with a continuation of their lease, to establish a surrender by operation of law. See Eujoy Realty Corp. v. Van Wagner Communications, LLC, 73 AD3d at 548; Connaught Tower Corp. v. Nagar, 59 AD3d 218 (1st Dep't 2009); Aris Indus. v. 1411 Trizechahn-Swig, 294 AD2d 107; Joseph P. Day Realty Corp. v. Lawrence Assoc., 270 AD2d 140, 141-42 (1st Dep't 2000).
Plaintiff may claim also that defendants' request to terminate the lease amounted to its repudiation, entitling plaintiff to lock out defendants and re-rent the premises, but this version of events only raises a dispute for trial. Banc of Am. Sec. LLC v. Solow Bldg. Co. II, L.L.C., 77 AD3d at 534; Sandra's Jewel Box v. 401 Hotel, 273 AD2d at 2-3. See Joseph P. Day Realty Corp. v. Lawrence Assoc., 270 AD2d at 142; Ford Coyle Props., Inc. v. 3029 Ave. V Realty, LLC, 63 AD3d 782 (2d Dep't 2009). Defendants' version indicates simply a request to terminate the lease that plaintiff accepted and, particularly in the absence of conclusive evidence regarding the sequence of the alleged oral termination agreement, lock-out, re-letting, and nonpayment, not necessarily any acts of repudiation or breach before plaintiff acted entirely incompatibly with the tenant's continued tenancy. See Carlin v. Jemal, 68 AD3d 655, 656 (1st Dept 2009); Richardson & Lucas, Inc. v. New York Athletic Club of City of NY, 304 AD2d 462, 463 (1st Dep't 2003); O'Reilly v. NYNEX Corp., 262 AD2d 207, 208 (1st Dep't 1999). Defendants thus demonstrate a meritorious defense of surrender of the premises, whether by law or an oral modification of the lease providing for the surrender, through evidence, albeit partially disputed, of both the landlord's and the tenant's actions consistent with a surrender and inconsistent with a continuing lease.
IV.DEFENDANTS' EXCUSES FOR DEFAULTING
A.Chung
The letter of July 21, 2010, explains that Chung traveled to Korea in August 2009 and remained there until he returned to the United States in February 2010, when he discovered the mail notifying defendants of this action and moving for a default judgment. This explanation furnishes a reasonable excuse for Chung's failure to answer. Obermaier v. Fix, 25 AD3d 327 (1st Dep't 2006); Wilson v. Sherman Terrace Coop., Inc., 14 AD3d 367 (1st Dep't 2005). His reasonable excuse for failing to respond to the complaint until after he received plaintiff's motion also constitutes grounds to deny a default judgment against him. Spira v. New York City Tr. Auth., 49 AD3d 478 (1st Dep't 2008); Guzetti v. City of New York, 32 AD3d 234 (1st Dep't 2006); Rodriguez v. Dixie N.Y.C., Inc., 26 AD3d 199, 200 (1st Dep't 2006); Terrones v. Morera, 295 AD2d 254, 255 (1st Dep't 2003). See Mayerson Stutman, LLP v. Most, 30 AD3d 261 (1st Dep't 2006); Tulley v. Straus, 265 AD2d 399, 401 (2d Dep't 1999).
B.Kim
In an unsworn letter dated August 12, 2010, Kim explains that she did not open the mail received while Chung was in Korea because she had "no intention to sign with him." Reviewing any of the multiple copies of the summons and complaint, mailed or personally delivered, to her individually as well as to her husband and to his LLC, would have notified Kim that the action was against her in addition to defendants Chung and ONC Development. She does not dispute that the summons and complaint were personally delivered to her October 1, 2009. C.P.L.R. § 308(1); Koutrakos v. Vernon Sutton Realty, 40 AD3d 355, 356 (1st Dep't 2007). Her suggestion that she ignored the mailings of the pleadings because they concerned the leased premises is belied by defendants' affidavits that the mailings were in envelopes marked "personal and confidential" and not indicating "the communication was from an attorney or concerned and alleged debt". Stern Aff., Ex E at 4; C.P.L.R. § 3215(g)(3)(1).
Nor does Kim deny that the signature on the guaranty is hers or furnish any other defense to her liability based on the guaranty. While she signed the June 14 letter raising the surrender and oral modification defenses, she never swore to it, despite repeated instructions that her response be sworn, and never appeared in court where the oath could have been administered. In this inadmissible form, the letter does not provide her a meritorious defense. Banco Popular N. Am. v. Victory Taxi Mgt., 1 NY3d 381, 384 (2004); Merrill/New York Co. v. Celerity Sys., 300 AD2d 206, 207 (1st Dept 2002). Assuming she presented a defense through the unsworn letter, since she was served by personal delivery, C.P.L.R. § 308(1), her failure to present an excuse for her default is fatal in any event to defeating plaintiff's entitlement to a default judgment against her. C.P.L.R. § 3012(d); Brayan v. 520 W. 158 St. Hous. Dev. Fund Corp., 74 AD3d 651 (1st Dep't 2001); Estrella v. Herrera, 23 AD3d at 321; C & H Import & Export, Inc. v. MNA Global, Inc., 79 AD3d 784, 786 (2d Dep't 2010); Maspeth Fed. Sav. & Loan Assn., 77 AD3d 889, 890 (2d Dep't 2010). See C.P.L.R. § 317.
C.ONC Development LLC
As a limited liability company, ONC Development was required to appear through an attorney. Michael Reilly Design, Inc. v. Houraney, 40 AD3d 592, 593 (2d Dep't 2007). See C.P.L.R. § 321(a). Although the court afforded defendants repeated opportunities for ONC Development to retain an attorney, it never did so and thus defaulted. Jimenez v. Brenilee Corp., 48 AD3d 351, 352 (1st Dep't 2008); Mail Boxes Etc. USA v. Higgins, 281 AD2d 176 (1st Dep't 2001); Pisciotta v. Lifestyle Designs, Inc., 62 AD3d 850, 853 (2d Dep't 2009); Lohmann v. Castleton Gallery, 252 AD2d 482 (2d Dep't 1998). The individual defendants were unqualified to answer on ONC Development's behalf. Id. at 483. See Gonzalez v. New York City Tr. Auth., 294 AD2d 130 (1st Dep't 2002); Johnson v. Marriott Mgt. Serv. Corp., 262 AD2d 141 (1st Dep't 1999); Drawhorn v. Iglesias, 254 AD2d 97 (1st Dep't 1998). ONC Development thus has failed to furnish a reasonable excuse for the LLC's default. Jimenez v. Brenilee Corp., 48 AD3d at 352; Pisciotta v. Lifestyle Designs, Inc., 62 AD3d at 853; Lohmann v. Castleton Gallery, 252 AD2d at 483.
Even if the letter of June 14, 2010, raised a potential defense of surrender or oral modification that would apply with equal force to ONC Development, the defense is of no consequence due to ONC Development's failure to present any excuse for its default. See American Tr. Ins. Co. v. Wilfred, 296 AD2d 360, 361 (1st Dep't 2002); Montoya v. Richmond County Ambulance Serv., Inc., 30 AD3d 385, 386 (2d Dep't 2006). Its failure to appear through an attorney, its only means of appearing, is again fatal to defeating a default judgment against it. Jimenez v. Brenilee Corp., 48 AD3d at 352; Mail Boxes Etc. USA v. Higgins, 281 AD2d 176; Pisciotta v. Lifestyle Designs, Inc., 62 AD3d at 853; Lohmann v. Castleton Gallery, 252 AD2d at 483.
V.CONCLUSION
On the grounds set forth, the court grants plaintiff's motion for a default judgment insofar as the motion seeks a judgment on liability against defendants Kim and ONC Development LLC, but denies plaintiff's motion against defendant Chung. Chung's explanation for failing to answer timely, absent any discernible prejudice to plaintiff, also satisfactorily excuses his late answer. Gazes v. Bennett, 70 AD3d 579 (1st Dep't 2010); Verizon NY Inc. v. Case Constr. Co. Inc., 63 AD3d 521 (1st Dep't 2009); Cirillo v. Macy's, Inc., 61 AD3d 538, 540 (1st Dep't 2009); Jones v. 41 Equities LLC, 57 AD3d 65, 81 (1st Dep't 2008). Further, even though a meritorious defense against plaintiff's claims is unnecessary to support acceptance of a late answer, Chung nonetheless presents evidence demonstrating the merit of his defense. Verizon NY Inc. v. Case Constr. Co. Inc., 63 AD3d 521; Guzetti v. City of New York, 32 AD3d 234; Nason v. Fisher, 309 AD3d 526 (1st Dep't 2003). See Cirillo v. Macy's, Inc., 61 AD3d at 540; Jones v. 41 Equities LLC, 57 AD3d at 81; Terrones v. Morera, 295 AD2d at 255; Vines v. Manhattan & Bronx Surface Tr. Operating Auth., 162 AD2d 229 (1st Dep't 1990). Although he does not expressly move to extend his time to answer, C.P.L.R. § 3012(d), particularly in the context of a motion for a default judgment, the court may extend the time to answer absent a cross-motion for that relief. Id.; Vines v. Manhattan & Bronx Surface Tr. Operating Auth., 162 AD2d 229; Willis v. City of New York, 154 AD2d 289, 290 (1st Dep't 1989); Mufalli v. Ford Motor Co., 105 AD2d 642, 643 (1st Dep't 1984). See Spira v. New York City Tr. Auth., 49 AD3d 478; Tulley v. Straus, 265 AD2d at 401. On these grounds, the court extends his time to answer to the date he swore to the answer, August 3, 2010, having previously delivered it to plaintiff and the court.
Since plaintiff's re-rental of the leased premises may continue for the balance of the lease term, the issue of damages against the two defaulting defendants is reserved until the trial or other disposition of the action against defendant Chung. C.P.L.R. § 3215(d). E.g., Dunne v. Village Commons Health & Racquet Club, 252 AD2d 535, 536 (2d Dep't 1998). Upon disposition of the action against Chung, and after serving on defendants and filing a note of issue accompanied by a certificate of readiness, plaintiff may proceed to an assessment of damages against defendants ONC Development and Kim. 22 N.Y.C.R.R. § 202.21(a).
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LUCY BILLINGS, J.S.C.