Opinion
Decided January 13, 2004.
Recitation, as required by CPLR 2219(a), of the papers considered in the review of this motion to: vacate the stipulation of settlement.
Papers Numbered 1-2 3-4 7 8 5-6
Order to Show Cause and Affidavits Annexed .............................. Notice of Cross-Motion and Affidavits Annexed............................ Answering Affidavits .................................................... Replying Affidavits ..................................................... Exhibits ................................................................ Other.................................................................... Upon the foregoing cited papers, the Decision/Order on this motion is as follows:
This non-primary residence holdover proceeding was commenced by Petitioner to recover possession of rent controlled apartment No. 3R located at 526 West 46th Street in Manhattan. This matter was settled pursuant to a two-attorney Stipulation dated February 14, 2002, wherein final judgment of possession was granted in favor of the landlord with execution of the warrant stayed through August 31, 2002. The stay was conditioned upon respondents' tender of all unpaid rent due through the tenancy termination date and payment of use and occupancy thereafter.THE PROCEDURAL HISTORY
Respondent Zorka Bujas moved by order to show cause to vacate the Stipulation on the basis that she does not understand English and that she did not have an attorney-client relationship with William Madonna, the attorney that negotiated the Stipulation, contending that counsel Madonna had no authority to act on her behalf. Petitioner cross-moved for a judgment for unpaid use and occupancy. In opposition, Petitioner argued that the Stipulation must be upheld because Respondent's counsel unquestionably had actual and/or apparent authority to bind Respondent to the terms of the Stipulation.
By Decision/Order dated November 1, 2002, this Court found that counsel Madonna lacked apparent authority to represent Ms. Bujas. Citing Hallock v. State of New York, 64 NY2d 224 (1948), this Court held that Respondent Zorka Bujas did not imbue counsel Madonna with apparent authority to represent her. There was no showing of words or conduct communicated by Respondent to Petitioner or its counsel that would have reasonably given rise to the appearance or belief that counsel Madonna had authority to enter into the Stipulation relinquishing Respondent's rights to possession of the rent controlled apartment. Because Respondent signed the Stipulation, this Court set the matter down for a hearing to determine whether an attorney/client relationship existed; and, if so, whether counsel Madonna had actual authority to enter into the Stipulation.
THE STIPULATION
The Stipulation is five pages, single spaced with a total of twenty-five paragraphs and an attachment. The agreement provides, inter alia, that Respondent waives all defenses and withdraw all counterclaims and affirmative defenses. If Respondent desired to extend the surrender date, she was required to pay $900.00 per month through November 30, 2002, and $1200 per month for the period beginning November 25, 2002, through February 28, 2003. Compliance with the Stipulation was "time is of the essence" and contained a provision that if Respondent died before the Stipulation was fully complied with, the warrant could be executed without further notice to the estate. Respondent was prohibited from bringing any ex parte applications to any court and agreed to withdraw with prejudice any and all complaints filed with the DHCR and all other administrative agencies.
THE FACTS
Respondent's Understanding of the Stipulation
Respondent Zorka Bujas is 71 years old. She has resided at the rent-controlled premises for thirty-eight years. She pays $85.00 dollars per month in rent. Respondent testified that she signed the Stipulation on February 14, 2002, while she was staying in the Bainbridge Nursing Home for rehabilitative services after an acute attack of arthritis. Respondent stayed in the nursing home from August 17, 2001 through March 11, 2002.
Respondent Bujas' native language is Croatian. She barely understands or speaks English. Her nephew, Bren Raste, testified that he has known Ms. Bujas all of his life and that she does not speak English well. Marianne Bujas, the wife of Ms. Bujas' stepson, testified pursuant to subpoena. Her testimony was that Zorka Bujas' husband clarifies and explains documents to her whenever she does not understand English.
The Stipulation was presented to Respondent Bujas by her stepson, Anthony Bujas. Respondent credibly testified that she understood from her stepson that she had to sign the Stipulation in order to receive keys to a new lock that had been installed at the apartment while she was rehabilitating in the nursing home. Ms. Bujas further testified that her stepson did not explain the Stipulation. He directed her to sign the agreement in front of Dana Feliciano, the Admissions Director of the nursing home and a notary public.
The Court does not find Anthony Bujas credible when he testified that he explained the terms of the Stipulation to Respondent in Croatian. When asked by the Court to read two paragraphs of the Stipulation and explain it in Croatian, it was all too apparent that even he did not understand the terms of the complex document and did not have the ability to translate the terminology into Croatian. Thus, the Court determines that Anthony Bujas was unable to explain the Stipulation in a manner that would have apprised Respondent Bujas of the import of what she was signing.
Respondent's testimony that she understood the Stipulation to be necessary to obtain keys to her apartment was corroborated by the testimony of her nephew, Bren Raste. He testified that when Respondent showed him a copy of the Stipulation after the Marshal had come to evict her she told him it was related to obtaining a new key to her apartment. In fact, Ms. Bujas did receive a new set of keys to the subject premises from her stepson who testified that he had received same from counsel Madonna. Notably, Anthony Bujas testified that his father, co-respondent Romano Bujas, told him later that he also thought the Stipulation was to obtain keys to the apartment.
Counsel Madonna testified that he read the five-page Stipulation to Ms. Bujas when he spoke to her over the telephone on the day she signed the Stipulation. He claims that he read the Stipulation verbatim to her and explained the sum and substance of each paragraph to Ms. Bujas. His testimony is incredible.
Ms. Bujas testified that she spoke to Mr. Madonna only one time over the phone for one minute after she signed the Stipulation. The Admissions Director testified that the duration of the phone call was at most four minutes. Anthony Bujas testified that he did not remember if Respondent spoke with counsel before signing the Stipulation. This Court determines that it was impossible to read the complicated Stipulation within four minutes and/or explain the sum and substance of the agreement within this time frame. More importantly, counsel Madonna does not speak Croatian. Thus, any explanation of the Stipulation in English was an exercise in futility given the length and complexity of the document. Finally, counsel Madonna testified that he did not know if the person on the other end of the phone was the Respondent; and, if so, whether she had the Stipulation in front of her during the time he attempted to explain the document.
The Existence of an Attorney-client Relationship
As to the existence of an attorney-client relationship between Zorka Bujas and counsel William Madonna, the Court finds that none existed.
Respondent testified that she never met William Madonna and that she did not retain him to represent her. Further, Ms. Bujas never signed a retainer agreement. She did not pay for the legal services rendered or reimburse her stepdaughter for the legal fees paid to counsel. Marianne Bujas testified that she personally paid the legal fees.
Most shocking to the Court was the fact that Ms. Bujas never knew a summary holdover proceeding was pending against her. Respondent testified that she never received the termination notice nor the subsequent pleadings commencing this proceeding. There was no testimony that Anthony Bujas notified her of the proceeding and/or showed her a copy of the pleadings. Counsel Madonna did not notify her of the proceeding or erroneously assumed that she had been given notice by her stepson. Dana Feliciano testified that she vaguely remembered receiving "official looking papers" but did not remember if they were actually delivered to Ms. Bujas. If so, she testified that they had no one on staff who could translate the legal documents into Croatian.
Based on the foregoing, this Court determines that Respondent did not have notice of the proceeding. Thus, she was incapable of giving counsel Madonna authority to negotiate the Stipulation settling the instant summary proceeding. It is also clear that Respondent misapprehended the import of the document, believing the Stipulation pertained to obtaining new keys to her apartment.
Respondent's Intent to Return to the Subject Premises
Petitioner asserts that Respondent signed the Stipulation because she did not intend to return to the apartment after her physical recovery, but intended on moving to an assisted-living facility. This factual question is also central to the underlying nonprimary residence holdover proceeding.
Respondent testified that as soon as she entered the nursing facility, she told people that she did not want to move out of her apartment. Dana Feliciano testified that when talking to Ms. Bujas about her plans after leaving the nursing facility, Ms. Bujas stated that she wanted to go back to her apartment in Manhattan. Although there were discussions concerning moving both Respondents to an assisted-living facility, Anthony Bujas testified that no one ever completed an application for admission to any assisted-living facility and those discussions never came to fruition because Respondents had too many assets to be covered by Medicaid or Medicare and insufficient assets to pay the cost of an assisted-living facility by themselves.
In any event, Dana Feliciano testified that just prior to Ms. Bujas leaving the nursing facility, she indicated that she was going back to her apartment in New York City. Bren Raste testified that when discussing with Ms. Bujas her living situation, she always had the intention to return to her apartment of thirty-eight years, located in a neighborhood where all of her life-long friends also resided. Ms. Bujas swears, "Why would I sign away my rights to such an apartment that anyone in his or her right mind would want to keep forever especially when the petitioner was offering nothing as a buyout?" See affidavit of Zorka Bujas ¶ 4. The Stipulation did not provide any payment to Respondent for recovery of the subject premises. Her stepson indicated that he believed it would be illegal to ask the landlord to pay Respondent to give up possession of the apartment.
Counsel Madonna testified that he never discussed with Respondent the desire to return to the subject premises after her rehabilitation. In fact, he never inquired about her objectives regarding the pending litigation. He also failed to confirm the status of her physical condition and Anthony Bujas' assertions that she "had enormous problems going up and down the steps." Notably, Dana Feliciano testified that Ms. Bujas could navigate steps with the use of walker and walked out of the nursing facility without assistance.
Therefore, this Court determines that Ms. Bujas had the requisite intent to return to her apartment after her rehabilitation and, in fact, did so once released by her physician.
LEGAL ANALYSIS
Stipulations of settlement are favored by the courts and not lightly cast aside. Matter of Galasso, 35 NY2d 319 (1974). A stipulation made by a party in the presence of the court, touching the subject matter of the litigation, is a contract with the court as well as the adverse party, which the court is bound to enforce for the protection of the latter. Banks v. American Tract Society, 4 Sand.Ch. 438 (Chancery Ct. NY 1847). Where there is a cause sufficient to invalidate a contract, such as fraud, collusion, mistake or accident, a party will be relieved from the consequences of a stipulation made during litigation. Hallock v. State of New York, 64 NY2d 224 (1948)
In Hallock, the Court of Appeals held that from the nature of the attorney-client relationship itself, an attorney derives authority to manage the conduct of litigation on behalf of a client, including authority to make certain procedural or tactical decisions. "But that authority is hardly unbounded. . . . Without a grant of authority from the client, an attorney cannot compromise or settle a claim and settlements negotiated by attorneys without authority from their clients have not been binding." Hallock, supra at 230; Countryman v. Breen, 241 AD 392, aff'd 268 NY 643 (1935).
For actual authority to exist, the principal's manifestation of consent, by either his words or conduct, must be made to the agent. (Restatement [Second] of Agency § 7). Actual authority is expressed when the principal specifies exactly what the scope of the authority bestowed upon the agent consists of and any limitations imposed thereon. (Id. at Comment c).
The Court finds that there was no attorney-client relationship between counsel Madonna and Respondent Zorka Bujas.
It is clear from the testimony in this case that Ms. Bujas neither by words nor conduct manifested any consent to have counsel Madonna act on her behalf. Respondent never met counsel Madonna or signed a retainer agreement. She did not direct her stepson to hire counsel on her behalf. It was Respondent's stepdaughter who paid for counsel's legal services and was never reimbursed by Respondent.
It cannot be gainsaid that Respondent never communicated to Mr. Madonna what she wanted him to do concerning the instant holdover proceeding since she did not know it was pending. Thus, Ms. Bujas did not and could not give counsel Madonna actual authority to represent her interests in and enter into the Stipulation which settled the instant summary proceeding of which she had no knowledge.
Having previously determined that counsel Madonna had not been imbued with apparent authority, the finding as to the non-existence of actual authority requires this Court to vacate the Stipulation. Where a client never authorized or approved a settlement, it cannot be enforced. Mazzella v. American Home Construction Co., Inc., 12 AD2d 910 (1st Dept 1961).
Alternatively, the Court may relieve a party from a stipulation if it appears that either party has inadvertently, inadvisably or improvidently entered into an agreement which will take the case out of the due and ordinary course of proceeding in the action, and in so doing may work to her prejudice. Van Nuys v. Fitsworth, 57 Hun 5 (Sup.Ct. NY 1890). For such relief, the equities between the parties must be carefully weighed by the court. Where both parties can be restored to substantially their former positions, and the circumstances reveal that the stipulation should not be enforced in order to promote justice and prevent wrong, the court may relieve a party from the terms of the agreement. In re Frutiger, 29 NY2d 143 (1971). The tenant must establish that she has been deprived of a substantial right to her disadvantage. Lee v. Winans, 99 AD 297 (1st Dept. 1904); Donovan v. Twist, 119 AD 734 (3rd Dept. 1907); Santolo v. La Porte, 89 NYS2d 114 (City Ct. Mt. Vernon 1949).
Respondent clearly has a viable defense to the proceeding: her intent to primarily reside in the subject premises after her rehabilitation. During the instant hearing, Respondent proved that she had every intention to return to the subject premises after her convalescence. See Cohen Zerenowitz Realty Corp. v. Asero, NYLJ, November 21, 1991, at p 26, col 4, NYLJ, November 29, 1991, at p 26, col 5 (App Trm 1st Dept); Behette v. Brosnan, NYLJ, July 12, 1988, at p 26, col 1 (App Trm 2nd Dept).
The fact that there is an agreement that has been signed by Respondent and was "so ordered" by the court is important. However in this case, it is not dispositive for the following reasons.
First, the Stipulation was never translated into Croatian or explained to her by counsel. Thus, Respondent could not form the requisite intent to be bound to the terms of the agreement. See Kenol v. Nelson, 181 AD2d 863 (2nd Dept. 1992); Sherman Assocs. v. Fulgencio, NYLJ, October 29, 1996, at p 26, col 1 (App Trm 1st Dept); Nunzio v. Hughes, 162 AD2d 518 (2nd Dept. 1990).
Second, if the Court were to enforce this Stipulation it would undoubtedly deprive Ms. Bujas of a substantial right to her disadvantage. Respondent would lose the apartment in which she has lived for the past 38 years.
Third, counsel Madonna entered into the Stipulation inadvertently, inadvisably and improvidently, taking the case out of its due and ordinary course. Counsel Madonna testified that he did not file a written answer preserving Respondent's affirmative defenses. In fact, this proceeding was settled before the parties ever made one appearance in court, so that the Stipulation was not made by Respondent in the presence of the Court. Matter of Galasso, 35 NY2d 319 (1974).
Counsel Madonna also failed to inquire as to when and where Respondent would relocate after relinquishing her rights to the apartment or whether she had the financial ability to pay the use and occupancy if she elected to exercise her option to prolong her occupancy in the subject premises. To the amazement of this Court, counsel testified that he never sent Ms. Bujas a copy of the signed Stipulation relinquishing her rights to possession of the subject premises.
Respondent has already returned to the subject premises and has been paying the rent controlled rent pursuant to the directive of this Court. Petitioner has no viable claim predicated on non-primary residence. Thus, the parties can be restored to substantially their former positions. To promote justice and prevent wrong, the Court hereby vacates the Stipulation dated February 14, 2002. Moreover, based on the finding of facts after the parties had a full and fair opportunity to litigate the issue central to this nonprimary residence holdover proceeding, the Court hereby dismisses the petition.
ADMONITION TO COUNSEL
Taking this opportunity to analyze the issues and challenges that actual and apparent authority may raise in Housing Court, especially if the case involves an elderly or infirm person, the Court admonishes counsel as follows.
When you take an oath, it is at the bare minimum to zealously represent your client. The Disciplinary Rules state "a lawyer shall not intentionally fail to seek the lawful objectives of his client through reasonably available means." (Code of Professional Responsibility DR7-101 [a] [1] [ 22 NYCRR 1200.32 (a)(7)]). A lawyer should know the objectives, goals, desires and intentions of his client and use best efforts to achieve them.
Especially when dealing with an elderly or infirm client, more careful inquiry is required. This may take extra time, but in the end it will benefit all parties involved. Faced with the facts of the instant proceeding, counsel would have benefitted from:
1) reducing his grant of authority to a writing, i.e., a written retainer agreement. Effective March 4, 2002, attorneys in this State are mandated to enter into written retainer agreements and provide clients with a statement of their rights. (Code of Professional Responsibility DR 1-102[a][4] [ 22 NYCRR 1215.1(a) and (c)]); see also In the Matter of Rosenkrantz, 305 AD2d 13 (1st Dept 2003);
2) speaking directly to Respondent and apprising her of the status of the legal proceedings and inquiring as to her objectives and desires going forward;
3) since counsel was allegedly retained by someone other than Respondent, requesting to see a power of attorney which vests authority in the agent to make decisions concerning pending litigation, specifically related to real estate and/or landlord/tenant proceedings; and
4) retaining an interpreter when meeting with Respondent to ensure that she understands her options and counsel understands Respondent's directives concerning the pending litigation. The interpreter should sign and/or initial any documents that are translated to the non-English speaking Respondent.
The more difficult question is the obligation of opposing counsel when a party does not appear or otherwise vouch for the authority of his/her counsel. The generally applicable New York rule is that "[a] party who relies on the authority of an attorney to compromise an action in his client's absence deals with such attorney at his own peril. Melstein v. Schmid Laboratories, Inc., 116 AD2d 632 (2nd Dept 1986); Fennell v. TLB Kent Company, 865 F2d 498 (2nd Cir 1989).
If an attorney has any basis to question the authority of his adversary, he/she might find the following steps useful:
1) requesting that counsel allow the court to conduct an in camera inspection of the written retainer agreement with the non-appearing client;
2) requesting to see a power of attorney if counsel has knowledge that opposing counsel was not hired directly by the client; and
3) requesting counsel bring his client to the court so that any stipulation can be allocuted and/or signed in open court before court personnel.
While the above suggestions might seem to be in conflict with zealous representation, they in fact further the objectives of the client and accord with the ethical requirement to use "all reasonably available means" to ensure that any settlement agreement reached by the parties is enforceable by the court. Moreover, this initial due diligence will potentially avoid the costs of post-settlement litigation.
The Court shall mail courtesy copies of its decision/order to counsel.