Opinion
301049-20/NY
03-03-2021
SRI ELEVEN 1407 BROADWAY OPERATOR LLC, Petitioner, v. MEGA WEAR INC., Respondent-Tenant, Sun's Global Trading Inc. and XYZ Corp., Respondents-Undertenants.
Law Offices of Kenneth Lieblich, New York City, for Mega Wear Inc., respondent. Rosenberg & Estis, P.C., New York City (Jason R. Davidson of counsel), for SRI Eleven 1407 Broadway Operator LLC, petitioner.
Law Offices of Kenneth Lieblich, New York City, for Mega Wear Inc., respondent.
Rosenberg & Estis, P.C., New York City (Jason R. Davidson of counsel), for SRI Eleven 1407 Broadway Operator LLC, petitioner.
Richard Tsai, J. In this holdover proceeding involving a commercial tenancy, respondent Mega Wear Inc. brings a pre-answer motion to dismiss this summary proceeding on the grounds that the proceeding was commenced in violation of Governor Andrew M. Cuomo's Executive Orders 202.28, 202.48, and 202.57, issued in response to the COVID-19 pandemic, which, among other things, bar the initiation of any proceeding or enforcement of an eviction for nonpayment of rent of a commercial tenant facing financial hardship due to the COVID-19 pandemic. Petitioner SRI Eleven 1407 Broadway Operator LLC opposes the motion, arguing that those executive orders do not apply to commercial holdover proceedings.
The issue presented is whether the moratorium on evictions of commercial tenants contained in Executive Orders 202.28 and 202.48 (as continued by Executive Order 202.57) (collectively, the Executive Orders) applies to commercial holdover proceedings, where the expiration of the commercial lease was pursuant to a conditional limitation based on the nonpayment of rent. Respondent's pre-answer motion to dismiss also presents difficult and novel questions as to how an alleged violation of the Executive Orders would fit into the procedural framework of the Civil Practice Law and Rules and into the substantive framework of summary proceedings under Article 7 of the Real Property Actions and Proceedings Law. I.
According to the petition, petitioner SRI Eleven 1407 Broadway Operator LLC (Landlord) is the landlord of commercial space designated as Suites 2301 and 2300 on the 23rd floor of the building located at 1407 Broadway in Manhattan (the Premises) (see Respondent's exhibit A in support of motion, petition ¶¶ 1-2). Respondent Mega Wear Inc. (Tenant) allegedly entered into a written lease with petitioner, under which Tenant agreed to pay rent for the Premises at the rate of $25,345.25 per month (id. ¶¶ 2, 11). Respondents Sun's Global Trading Inc. and "XYZ Corp." are alleged undertenants, and they have not appeared (id. ¶ 3).
Termination of the Lease
By a "Five (5) Day Notice to Tenant" dated July 7, 2020, Landlord notified Tenant that the lease will be terminated, effective July 15, 2020, "based upon Tenant's failure to pay the Arrears [i.e. rent and additional rent]," as required under the lease (Tenant's exhibit A in support of motion, exhibit B to holdover petition at 5).
Executive Orders and Administrative Orders issued during the COVID-19 pandemic
Meanwhile, on March 7, 2020, in response to the COVID-19 pandemic, Governor Cuomo had declared a disaster emergency in the State of New York pursuant to Executive Order 202 ( 9 NYCRR 8.202 ), and issued additional executive orders to deal with the pandemic. Executive Order 202.8, which was issued on March 20, 2020, provides, in relevant part, "There shall be no enforcement of either an eviction of any tenant residential or commercial, or a foreclosure of any residential or commercial property for a period of ninety days [i.e., until June 18, 2020]" ( 9 NYCRR 8.202.8 ).
The court system also issued a series of administrative orders to deal with the COVID-19 pandemic.
On March 17, 2020, Chief Judge Janet DiFiore issued Administrative Order AO/3/20, which determined that trial courts "shall remain open to handle all essential matters and that the handling of non-essential matters will be postponed to the foreseeable future ..." (http://nycourts.gov/whatsnew/pdf/AO-3-20.pdf [accessed 2/26/2021]). On March 22, 2020, Chief Administrative Judge Lawrence Marks issued Administrative Order AO/78/20, which directed that, "effective immediately and until further order, no papers shall be accepted for filing by a county clerk or a court in any matter of a type not included on the list of essential matters attached as Exh. A. This directive applies to both paper and electronic filings" (http://nycourts.gov/whatsnew/pdf/AO-78-20.pdf [accessed 2/26/2021]). On April 8, 2020, Administrative Order AO/85/20 continued the ban on filings in non-essential matters, stating, "No new nonessential maters may be filed until further notice; nor may additional papers be filed by parties in nonessential matters" (http://nycourts.gov/whatsnew/pdf/AO-85-20.pdf [accessed 2/26/2021]). On May 1, 2020, Administrative Order AO/87/20 authorized the filing of, among other things, motions and cross motions in pending matters, effective May 4, 2020 (http://nycourts.gov/whatsnew/pdf/AO-87-20.pdf [accessed 3/1/2021]).
On May 7, 2020, Governor Cuomo issued Executive Order 202.28, which states, in relevant part,
"There shall be no initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant, for nonpayment of rent or a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage, owned or rented by someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic for a period of sixty days beginning on June 20, 2020 [i.e., until August 19, 2020]"
( 9 NYCRR 8.202.28 ). On July 6, 2020, Governor Cuomo issued Executive Order 202.48, which states, in relevant part,
"The directive contained in Executive Order 202.28, as extended, that prohibited initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant, for nonpayment of rent or a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage, is continued only insofar as it applies to a commercial tenant or commercial mortgagor, as it has been superseded by legislation for a residential tenant, and residential mortgagor, in Chapters 112,
126, and 127 of the Laws of 2020"
( 9 NYCRR 8.202.48 ). On August 5, 2020, Executive Order 202.55 continued the directives contained in Executive Order 202.48, among other executive orders, through September 4, 2020 ( 9 NYCRR 8.202.55 ).
Meanwhile, on June 18, 2020, Chief Administrative Judge Marks issued Administrative Order AO/127/20, which ordered that, effective June 20, 2020, petitions in eviction proceedings involving residential or commercial property pursuant to Article 7 of the Real Property Actions and Proceedings Law (whether brought on the ground that the respondent defaulted in the payment of rent or on some other ground), must include an attorney affirmation or petitioner's affidavit confirming that the summary proceeding comports with the requirements of state and federal directives, including the requirement contained in Executive Order 202.28 (see http://nycourts.gov/whatsnew/pdf/AO-127-20.pdf [accessed 3/1/2021]). On July 7, 2020, Chief Administrative Judge Marks issued Administrative Order AO/143/20, which eliminated the requirement of the attorney affirmation or petitioner's affidavit of compliance in eviction proceedings (http://nycourts.gov/whatsnew/pdf/AO-143-20.pdf [accessed 3/1/2021]).
On August 13, 2020, Chief Administrative Judge Marks issued Administrative Order AO/160A/20, setting forth procedures and protocols for the conduct of residential and commercial eviction matters before the New York State courts. AO/160A/20 states, in relevant part:
"Continued Suspension of Eviction Matters Commenced After March 16, 2020 : Eviction proceedings commenced after March 16, 2020 shall, upon the filing of a petition (if no answer is filed thereafter) or the filing of an answer, be
suspended until further order. Notwithstanding the foregoing, eviction matters in which all parties are represented by counsel shall be eligible for calendaring for virtual settlement conferences"
(http://nycourts.gov/whatsnew/pdf/ao160a20.pdf [accessed 2/22/2021]). Administrative Order AO/160A/20 superseded Administrative Order AO/127/20 (id. ). On August 19, 2020, Administrative Judge of the Civil Court of the City of New York Anthony Cannataro issued Civil Court Directive DRP-214, effective August 19, 2020, which stated, in relevant part:
"Administrative Judges shall be responsible generally for the orderly administration of the courts within the area of their administrative responsibility, as set forth in their orders of designation" (22 NYCRR 80.2 [d]).
" BACKGROUND :
In response to the Coronavirus emergency declared in Executive Order 202, Governor Cuomo imposed several temporary suspensions and modifications of laws, most pertinently here Executive Order 202.28, as amended by Executive Orders 202.38, 202.48, and 202.55. One of the restrictions contained therein stayed commencement and enforcement of commercial eviction matters against tenants facing financial hardship due to COVID-19. According to the time limitations set forth in Executive Order 202.28, many of those restrictions, including the stay of commencement and enforcement of commercial eviction proceedings against tenants facing financial hardship due to COVID-19, are set to expire on August 19, 2020.
In advance of the expiration of those restrictions, the Chief Administrative Judge issued Administrative Order 160A/20 which, among other things, discontinued the affidavit requirement contained in Administrative Order 127/20, and lifted the stay of proceedings imposed on eviction cases commenced before March 17, 2020. However, Administrative Order 160A/20 continued the automatic stay of all eviction cases commenced after March 16, 2020.
Accordingly, the following directives shall apply.
DIRECTIVE :
* * *
Motions : Civil Court is accepting both procedural and dispositive motions in commercial eviction cases"
(http://nycourts.gov/courts/nyc/SSI/directives/DRP/DRP214.pdf [accessed 3/1/2021]). Directive DRP-214 was rescinded on August 21, 2020 (see id. ).
On August 20, 2020, Governor Cuomo issued Executive Order 202.57, which states, in relevant part:
"The directive contained in Executive Order 202.48,
which modified the directive in Executive Order in 202.28 that prohibited the initiation of a proceeding or enforcement of an eviction of any commercial tenant for nonpayment of rent or a foreclosure of any commercial mortgage for nonpayment of such mortgage is continued through September 20, 2020"
( 9 NYCRR 8.202.57 ).
The Instant Holdover Proceeding
On August 21, 2020, Landlord commenced this holdover proceeding against Tenant and the undertenants, alleging that they remain in possession of the Premises without permission after the term of the lease had expired (see Tenant's exhibit A in support of motion, petition ¶ 7).
On September 14, 2020, Tenant moved to dismiss the holdover petition pursuant to CPLR 3211(a) (1), (2), (3), and (7), on the ground that commencement of this holdover proceeding was in violation of the Governor's Executive Orders barring the initiation of proceedings to evict commercial tenants for nonpayment of rent (Tenant's notice of motion, affirmation of Tenant's counsel ¶ 1). Landlord opposed the motion.
Although Tenant moved to dismiss the petition pursuant to CPLR 3211 (a) (1), (2), (3), and (7), Tenant's three-page affirmation in support of the motion did not discuss the applicable standards for a motion to dismiss under those provisions.
On November 2, 2020, this court held oral argument on the motion and asked the parties to submit supplemental papers on the following procedural and substantive issues raised by Tenant's pre-answer motion to dismiss:
•What are the rules of construction applicable to the interpretation of the Executive Orders? Can the court look to public statements by the Governor to interpret the intent of the Executive Orders?
•What is the nature of a violation of Executive Order 202.28? Does it impose a pleading requirement upon landlords, a condition precedent to suit, or an affirmative defense that must be raised?
•Does a CPLR 3211 motion lie for violation of the Executive Orders? Would it be an issue of subject matter jurisdiction, a failure to state a cause of action, or is it something else?
•Does "facing financial hardship due to COVID-19"
require a particularized showing by the tenant? Or can it be determined categorically/per se (i.e., non-essential businesses closed by executive order)? Does the landlord have to engage in any inquiry about whether the tenant is suffering financial hardship before commencing suit?
•If the Executive Orders were interpreted to apply only to nonpayment proceedings, would that create too great an incentive for landlords to terminate a lease to get into court, when the landlord would have only commenced a nonpayment proceeding? Would that be an absurd or unjust result?
•Assuming a violation of Executive Order 202.28 is established, is dismissal the only appropriate relief for the violation? Why not a stay?
The parties declined the opportunity to respond to each other's supplemental papers.
On December 2, 2020, the parties submitted supplemental affirmations, and the motion was marked fully submitted.
II.
The moratorium on the evictions of commercial tenants in Executive Orders 202.28 and 202.48, as extended in subsequent orders, does not fit neatly into any existing ground for dismissal under CPLR 3211 (a). Tenant's pre-answer motion to dismiss raises two intertwined, threshold procedural issues. To determine the applicable legal standards on this motion, this court must determine (1) whether a violation of the moratorium on evictions of commercial tenants in the Executive Orders may be properly brought on a pre-answer motion to dismiss pursuant to CPLR 3211(a) or must be brought as an affirmative defense; and (2) assuming that a tenant may raise the alleged violation on a motion to dismiss, the ground of CPLR 3211 (a) under which the alleged violation falls.
Whether a violation of the Executive Orders falls under CPLR 3211 (a) (7)
Tenant appears to argue that the Executive Orders impose a pleading requirement upon landlords. Tenant takes the position that, in a petition for a summary proceeding pursuant to Article 7 of the RPAPL, a petitioner-landlord must plead and prove at trial that a respondent-tenant was not suffering from COVID-19 financial hardship (supplemental affirmation of Tenant's counsel ¶¶ 17, 21). Tenant argues that the Chief Administrative Judge's administrative orders support its reading that the Executive Orders imposed a pleading requirement upon landlords (id. ¶¶ 22-24).
Tenant additionally argues that, because the Executive Orders "bar[ ] [Landlord] from relying upon the law" that existed pre-pandemic, "the facts as alleged in this summary proceeding do not fit within any currently cognizable legal theory," and so the petition must be dismissed for failure to state a cause of action pursuant to CPLR 3211 (a) (7) (id. ¶ 13).
Landlord argues that placing the burden upon a landlord to ascertain whether a tenant is experiencing financial hardship due to the COVID-19 pandemic is "both onerous and unrealistic," and "places the landlord in the impossible position of trying to solicit financial information from its tenant during an adversarial contractual point" (supplemental affirmation of Landlord's counsel in opposition ¶¶ 31-32). While insisting that the Executive Orders do not apply to holdover proceedings, Landlord maintains that a commercial tenant should raise its financial hardship due to the COVID-19 pandemic either as a defense based upon documentary evidence pursuant to CPLR 3211 (a) (1), or as an affirmative defense pursuant to CPLR 3211 (b), which would require a tenant to answer the holdover petition (see supplemental affirmation of Landlord's counsel in opposition ¶¶ 48-49). Finally, Landlord asserts, "every Court directive and/or Administrative Order requiring commercial landlords to address financial hardship as a pleading requirement has since been rescinded or explicitly superseded -- thereby establishing that, going forward, commercial tenants will have to raise the same as a defense" (id. ¶ 34).
In this court's view, nothing in the Executive Orders explicitly sets forth a pleading requirement, and this court declines to infer a pleading requirement from the language of the Executive Orders (see Gould v. Pollack , 68 Misc. 2d 670, 327 N.Y.S.2d 808 [Civ. Ct., N.Y. County 1971], affd 71 Misc. 2d 344, 335 N.Y.S.2d 840 [App. Term, 1st Dept. 1972] [holdover petition was not required to allege compliance with President's Freeze Order]). A pleading requirement would place the burden of proof upon a landlord; a defense would place the burden of proof upon a tenant. At trial, "[t]he petitioner has the burden of proof with respect to allegations in the petition, and the respondent has the burden of proof with respect to affirmative defenses" (Alan Scherer & Fern Fisher, Residential Landlord Tenant Law in New York § 14:7 [2020] ; see also GMAC Mtge., LLC v. Winsome Coombs , 191 A.D.3d 37, 39-40, 136 N.Y.S.3d 439 [2d Dept. 2020] ["where a defendant seeks to inject into the litigation ‘matters that are not the plaintiff's burden to prove as part of the cause of action,’ those matters must be affirmatively pleaded as defenses"] [internal emendation omitted]). Imposing a pleading requirement effectively adds an allegation that must be proven at trial.
However, as Landlord points out, the relevant information about a tenant's finances is exclusively within the tenant's knowledge, unless that tenant shares this information with its landlord. Thus, being able to prove that a tenant is not suffering financial hardship due to the COVID-19 pandemic would likely require the landlord to conduct discovery of the tenant's finances. However, a party is only entitled to discovery in a summary proceeding upon a showing of ample need (see New York University v. Farkas , 121 Misc. 2d 643, 468 N.Y.S.2d 808 [Civ. Ct., N.Y. County 1983] ).
This court agrees with Landlord that the moratorium on evictions in Executive Order 202.28 for residential tenants was codified into the Tenant Safe Harbor Act (see L 2020 ch 127); Executive Order 202.48 explicitly referred to the Tenant Safe Harbor Act when it indicated that the moratorium was continued only as to commercial tenants (see 9 NYCRR 8.202.48 ). The Tenant Safe Harbor Act codified financial hardship as a defense, not as a pleading requirement (see L 2020 ch 127 § 2 [a]). Additionally, Executive Order 202.66 ( 9 NYCRR 8.202.66 ) "created a new defense in holdover eviction proceedings if the tenant ‘suffered a financial hardship during the COVID-19 covered period’ " (Matter of Cabrera v. Humphrey , 192 A.D.3d 227, 140 N.Y.S.3d 609, 2021 N.Y. Slip Op. 00358, *4 [3d Dept. 2021] [emphasis added]).
This court sees little reason to interpret the Executive Orders in such a way as to create an entirely different framework for commercial tenants than from what the Legislature and Governor envisioned for residential tenants (see Matter of Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comn. , 108 A.D.2d 266, 271, 489 N.Y.S.2d 124 [3d Dept. 1985] ["uniformity in interpretation is desirable"]). Thus, this court declines to infer a pleading requirement from the language of the Executive Orders.
Tenant's reliance upon the Chief Administrative Judge's administrative orders to support its contention that the Executive Orders themselves must be read to impose a pleading requirement is unpersuasive. If the Executive Orders had expressly imposed a pleading requirement, it would have been unnecessary for the administrative orders to reiterate such a requirement. In any event, Administrative Order AO/127/20 did not impose a pleading requirement; it required an affirmation or affidavit of compliance, and Tenant acknowledges that Administrative Order AO/143/20 eliminated that requirement shortly thereafter. Thus, the administrative orders do not constitute persuasive authority as to the intent and interpretation of the Executive Orders.
Contrary to Tenant's assertion, the petition states a cause of action for a holdover proceeding against Tenant (see Matter of Kern v. Guller , 40 A.D.3d 1231, 1232, 835 N.Y.S.2d 764 [3d Dept. 2007] ["To maintain a summary holdover proceeding, the landlord must allege and prove that the tenant remains in possession after the expiration of his or her term"]).
Accordingly, the branch of Tenant's motion to dismiss the petition pursuant to CPLR 3211 (a) (7), on the basis that the petition fails to plead that Tenant was not suffering a financial hardship due to the COVID-19 pandemic, is denied.
Whether a violation of the moratorium on eviction of commercial tenants in Executive Orders 202.28, 202.48 and 202.57 falls under CPLR 3211 (a) (3)
"In general, a party's competence to commence an action is presumed" ( Vasilatos v. Dzamba , 148 A.D.3d 1275, 1276, 49 N.Y.S.3d 194 [3d Dept. 2017] ). The party seeking to dismiss the pleading pursuant to CPLR 3211 (a) (3) bears the burden of demonstrating that petitioner lacked capacity ( id. ; see also Brunner v. Estate of Lax, 137 A.D.3d 553, 553, 27 N.Y.S.3d 148 [1st Dept. 2016] ).
Tenant argues that Executive Orders 202.28 and 202.48 "remove[d] Petitioner's legal capacity to initiate this proceeding" (affirmation of Tenant's counsel ¶ 8). This court disagrees.
" ‘Capacity’ ... concerns a litigant's power to appear and bring its grievance before the court.... Capacity, or the lack thereof, sometimes depends purely upon a litigant's status. A natural person's status as an infant, an adjudicated incompetent or, formerly, a felony prisoner, for example, could disqualify that individual from seeking relief in court. Additionally, the capacity question has often arisen in connection with controversies involving trustees.
Another category of capacity problems ... arises
in the context of suits brought by artificial entities. Business corporations, for example, are creatures of statute and, as such, require statutory authority to sue and be sued"
( Community Bd. 7 of Borough of Manhattan v. Schaffer , 84 N.Y.2d 148, 155, 615 N.Y.S.2d 644, 639 N.E.2d 1 [1994] [internal citations omitted]). "Capacity, unlike standing, does not concern the injury a party suffered, but whether the legislature invested that party with authority to seek relief in court. As such, capacity is a question of legislative intent and substantive state law" ( Matter of World Trade Ctr. Lower Manhattan Disaster Site Litig. , 30 N.Y.3d 377, 384, 67 N.Y.S.3d 547, 89 N.E.3d 1227 [2017] ).
The moratorium on the eviction of commercial tenants in Executive Orders 202.28 and 202.48 (as continued by Executive Order 202.57) was not worded in such a way as to remove the power of landlords to bring suit in court. The moratorium was not expressly directed at landlords. Rather, the focus is on the commercial tenant that is facing financial hardship due to the COVID-19 pandemic.
Accordingly, the branch of Tenant's motion to dismiss the petition pursuant to CPLR 3211 (a) (3), on the basis that Landlord lacks capacity to bring a summary holdover proceeding against Tenant, which allegedly suffers financial hardship due to the COVID-19 pandemic, is denied.
Whether a violation of the Executive Orders falls under CPLR 3211 (a) (2)
Tenant apparently argues that the Executive Orders deprived the Civil Court of subject matter jurisdiction to adjudicate summary proceedings for the eviction of commercial tenants for nonpayment of rent (see supplemental affirmation of Tenant's counsel in support ¶¶ 2-11). According to Tenant, the Governor "has suspended those portions of RPAPL Article 7 which govern the commencement of all summary eviction proceedings predicated on the non-payment of rent" (id. ¶ 6).
" ‘Subject matter jurisdiction concerns a court's competence to entertain a particular kind of application. A court's power to entertain a particular kind of application is conferred by constitution or statute alone.’
By virtue of NY Constitution, article VI, § 15, CCA 204, and RPAPL 701 and 711, the Civil Court ha[s] subject matter jurisdiction over this summary proceeding"
( Efaplomatidis v. Aires Mexicanos Rest. Corp. , 58 Misc. 3d 153(A), 2018 N.Y. Slip Op. 50155(U), 2018 WL 735664 [App. Term, 2d Dept., 2d, 11th & 13th Jud Dists 2018] [internal citations omitted]).
Here, nothing in the Executive Orders refers to the court's jurisdiction. These executive orders are not worded in such a way as to state clearly that courts may not hear such cases. Interpreting the Executive Orders as removing these cases from the Civil Court's subject matter jurisdiction could raise a significant constitutional issue. In People v. Correa, 15 N.Y.3d 213, 907 N.Y.S.2d 106, 933 N.E.2d 705 (2010), the Court of Appeals stated that " ‘a significant constitutional issue would be presented because we have made clear in other contexts that ‘[t]he Legislature cannot by statute deprive [the court] of one particle of its jurisdiction, derived from the Constitution (Art. VI), although it may grant concurrent jurisdiction to some other court’ " ( id. at 229, 907 N.Y.S.2d 106, 933 N.E.2d 705 ). Article VI, Section 15 (b) of the Constitution of the State of New York grants the Civil Court subject matter jurisdiction to hear summary proceedings.
Article VI, Section 15 (b) of the Constitution of the State of New York states, "The court of city-wide civil jurisdiction of the city of New York shall have jurisdiction ... over summary proceedings to recover possession of real property and to remove tenants therefrom and over such actions and proceedings, not within the exclusive jurisdiction of the supreme court, as may be provided by law" (see also Chan v. Adossa , 195 Misc. 2d 590, 594, 760 N.Y.S.2d 609 [App. Term, 2d Dept. 2003] ["Jurisdiction over summary proceedings is conferred upon the Civil Court by the State Constitution (NY Const, art VI, § 15 [b]) and by the State Legislature, acting pursuant to the mandate of this constitutional provision"]).
"[A] statute is to be construed so as to avoid grave doubts concerning its constitutionality" ( Fantis Foods, Inc. v. Std. Importing Co., Inc. , 49 N.Y.2d 317, 327, 425 N.Y.S.2d 783, 402 N.E.2d 122 [1980] ). As discussed below, a violation of the moratorium on evictions of a commercial tenant in the Executive Orders can be classified and understood in a way that does not implicate the subject matter jurisdiction of the Civil Court to hear summary proceedings under Article 7 of the RPAPL. Thus, this court rejects Tenant's argument that the moratorium on evictions in Executive Orders 202.28 and 202.48 (as continued by Executive Order 202.57) deprived the Civil Court of subject matter jurisdiction to hear summary eviction proceedings involving commercial tenants who suffered financial hardship due to the COVID-19 pandemic. However, that is not to say that the defense of financial hardship of a commercial tenant cannot be brought under CPLR 3211(a) (2). "The motion to dismiss for lack of subject matter [jurisdiction] ... has also been used to raise objections that are not jurisdictional at all, but rather addressed to the court's discretion to decline jurisdiction" (7 New York Civil Practice: CPLR ¶ 3211.09 [2020]). One such objection is the assertion of sovereign immunity by a government or its agencies (id. ).
As discussed in greater detail in Section III.A of this decision, the parties agreed that the rules of statutory construction apply to the interpretation of executive orders.
In this court's opinion, the moratorium on eviction of commercial tenants in Executive Orders 202.28 and 202.48 (as continued by Executive Order 202.57) best fits into the substantive framework of summary proceedings in Article 7 of the RPAPL and the procedural framework of the CPLR as granting a commercial tenant a kind of temporary, qualified immunity from suit. Temporary, qualified immunity from suit is consistent with the prohibition of initiation of eviction proceedings contained in Executive Orders 202.28 and 202.48, and it is consistent with the notion that financial hardship due to the pandemic is a defense that belongs to the tenant. The immunity is temporary because it will presumably expire when the executive orders which created the moratorium presumably expire (absent further legislative and/or executive action). The immunity is qualified because it does not belong to all commercial tenants; it applies only to those commercial tenants who have suffered financial hardship due to the COVID-19 pandemic.
This court acknowledges that the moratorium on evictions of a commercial tenant for nonpayment of rent does not neatly fit under CPLR 3211(a) (2) ; it might fit into the procedural framework of the CPLR and substantive framework of Article 7 of the RPAPL in various ways.
Indeed, the moratorium on evictions of commercial tenants suffering financial hardship due to the COVID-19 pandemic has also been viewed as stay on the commencement of those proceedings (see Anthi New Neocronon Corp. , 68 Misc. 3d 813, 815-16, 128 N.Y.S.3d 795 [Suffolk Dist. Ct. 2020] ). However, a stay on the commencement of proceedings impacts a litigant's ability to commence the proceeding within the applicable statute of limitations period. Although Executive Order 202.8 imposed a toll on "any time specific time limit for the commencement ... of any legal action or proceeding" (see 9 NYCRR 8.202.8 ), Executive Order 202.67 extended that toll only until November 3, 2020 (see 9 NYCRR 8.202.67 ).
Perhaps, ironing out how the moratorium on evictions of a commercial tenant might best operate within the procedural framework of the CPLR and the substantive framework of Article 7 of the RPAPL might require further action from the Legislature and/or Governor.
Thus, a violation of Executive Orders 202.28, 202.48 and 202.57 may be properly brought on a pre-answer motion to dismiss pursuant to CPLR 3211 (a) (2). Alternatively, the defense may be brought under CPLR 3211 (a) (1) or as an affirmative defense raised in an answer. Procedurally speaking, a defense under CPLR 3211 (a) (1) is limited to documentary evidence only; a defense under CPLR 3211 (a) (2) is not. A defense under CPLR 3211 (a) (2) rather than an affirmative defense would allow the defense to be raised on a pre-answer motion to dismiss.
Because Tenant's motion to dismiss sought dismissal pursuant CPLR 3211 (a) (2), among other grounds, the pre-answer motion to dismiss was properly brought, and thus this court may reach the merits of the motion.
III.
A.
"In contrast to the many established principles for interpreting legislation, there appear to be few such principles to apply in interpreting executive orders" ( City and County of San Francisco v. Trump , 897 F.3d 1225, 1238 [9th Cir. 2018] [collecting cases]). However, the parties agree that the court should follow the rules of statutory construction when interpreting executive orders (see supplemental affirmation of Landlord's counsel in opposition ¶ 8; see supplemental affirmation of Tenant's counsel in support ¶ 39 ["there is no need for the Court to look beyond the words of the Executive Orders"]).
Landlord quoted the Governor's statements purportedly made at a press briefing on March 30, 2020 (see affirmation of Landlord's counsel ¶ 21 n 1). However, in their supplemental papers, the parties did not address the question posed by the court as to whether the court may look to public statements by the Governor to interpret the intent of the orders. In any event, the Landlord did not submit a transcript or footage of the press briefing in its papers. Thus, this court will not consider those purported statements.
"As is true of interpretation of statutes, the interpretation of an Executive Order begins with its text," which "must be construed consistently with the Order's ‘object and policy’ " ( Bassidji v. Goe , 413 F.3d 928, 934 [9th Cir. 2005] [internal citations omitted]; see also Scheja v. Sosa , 4 A.D.3d 410, 411-12, 771 N.Y.S.2d 554 [2d Dept. 2004] [adopting plain meaning of Executive Order No. 113]).
"This Court's well-established rules of statutory construction direct that the analysis begins with the language of the statute. This is because the primary consideration is to ascertain the legislature's intent, of which the text itself is generally the best evidence. A court should construe unambiguous
language to give effect to its plain meaning. Further, a statute must be construed as a
whole and ... its various sections must be considered together and with reference to each other. The circumstances surrounding the statute's passage are a useful aid in understanding its meaning"
( Colon v. Martin , 35 N.Y.3d 75, 78, 125 N.Y.S.3d 346, 149 N.E.3d 39 [2020] [internal quotation marks, internal citations, and emendations omitted).
To be precise, Executive Order 202.57 was the executive order in effect when this holdover proceeding was commenced. However, because Executive Order 202.57 continued the moratorium on evictions issued under previous executive orders, the relevant provisions to be interpreted are contained in Executive Orders 202.28 and 202.48.
Executive Order 202.28 states, in relevant part,
"There shall be no initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant, for nonpayment of rent or a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage, owned or rented by someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic for a period of sixty days beginning on June 20, 2020"
( 9 NYCRR 8.202.28 ). Executive Order 202.48 states, in relevant part,
"The directive contained in Executive Order 202.28, as extended, that prohibited initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant, for nonpayment of rent or a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage, is continued only insofar as it applies to a commercial tenant or commercial mortgagor, as it has been superseded by legislation for a residential tenant, and residential mortgagor, in Chapters 112, 126, and 127 of the Laws of 2020"
( 9 NYCRR 8.202.48 ).
Executive Orders 202.28 and 202.48 are not models of precision. Generally speaking, Executive Law § 29-a grants the Governor power to issue executive orders and directives to cope with a disaster emergency, and such directives "may provide for the alteration or modification of the requirements of such statute, local law, ordinance, order, rule or regulation suspended, and may include other terms and conditions" ( Executive Law § 29-a [2] [d] ). However, Executive Law § 29-a (2) (c) also provides, "any such suspension order shall specify the statute, local law, ordinance, order, rule or regulation or part thereof to be suspended and the terms and conditions of the suspension." Executive Orders 202.28 and 202.48 do not specifically reference the statutory sections of the RPAPL suspended, modified, or limited by the moratorium on commercial evictions. This court is now in the difficult position of trying to determine whether such specificity can be gleaned from the existing language of Executive Orders 202.28 and 202.48, given the parties’ arguments and the rules of statutory construction.
Tenant appears to argue that Executive Orders 202.28 and 202.48 apply here because "[t]his is a holdover proceeding based upon the Respondent's failure to pay rent" (affirmation of Tenant's counsel in support ¶ 3). In opposition, Landlord argues that the moratorium on evictions of commercial tenants in Executive Order 202.28 applies only to nonpayment proceedings and is inapplicable to commercial holdover proceedings, which is a distinct and mutually exclusive remedy from a nonpayment proceeding (affirmation of Landlord's counsel in opposition ¶¶ 3, 7). Landlord maintains that the termination of the lease was not "obviated" by the Executive Orders, and that nothing in the Executive Orders "relieved Respondent of its obligation to pay rent under the Lease," both of which would violate the Contracts Clause of the United States Constitution ( US Const, art I, § 10 cl 1 ) and the New York Constitution (id. ¶¶ 16, 21).
In reply, Tenant rejects the nonpayment/holdover proceeding distinction as irrelevant (reply affirmation of Tenant's counsel in support ¶ 2). Tenant asserts that this holdover proceeding falls within the ambit and intent of the Executive Orders because it was "predicated upon Respondent's nonpayment of rent" (id. ¶ 3). Tenant contends that the Executive Orders did not limit their directives to nonpayment eviction proceedings (reply affirmation of Tenant's counsel in support ¶¶ 2-5).
In its supplemental papers, Landlord relies on the evolution and circumstances surrounding the issuance of Executive Order 202.28 to support its interpretation that the moratorium on evictions of commercial tenants in the Executive Orders was limited to nonpayment proceedings. Because Executive Order 202.8 prohibited all evictions, Landlord essentially contends that the words "no initiation of a proceeding ... for nonpayment of rent" in Executive Order 202.28 should be read as narrowing the scope of the moratorium on evictions to nonpayment proceedings, citing Anthi New Neocronon Corp. v. Coalition of Landlords, Homeowners & Merchants, Inc., 68 Misc. 3d 813, 813-16, 128 N.Y.S.3d 795 [Suffolk Dist. Ct. 2020] ) (supplemental affirmation of Landlord's counsel in opposition ¶¶ 16-18). Landlord asserts that "[i]f the Governor had intended for the prohibition on evictions contained in Executive Order 202.28 to extend to both nonpayment and holdover proceedings, he would not have limited the applicability of Executive Order 202.48 to commercial tenants" (id. ¶ 24). Landlord also contends that the Tenant Safe Harbor Act (L 2020, ch 127), as originally enacted, does not apply to holdover proceedings (id. ¶ 21).
It is undisputed that "proceeding or enforcement of ... an eviction ... for nonpayment of rent" applies to nonpayment proceedings, pursuant to RPAPL 711 (2). As Landlord points out, the central issue is whether the words, "no initiation of a proceeding or enforcement of ... an eviction ... for nonpayment of rent," in Executive Orders 202.28 and 202.48 also include conditional limitation holdover proceedings, pursuant to RPAPL 711 (1), where the lease was terminated for nonpayment of rent. Landlord concedes that the words of the executive orders are ambiguous and open to interpretation (supplemental affirmation of Landlord's counsel in opposition ¶ 11).
On the one hand, Landlord apparently reads "proceeding or enforcement of ... an eviction" to refer to summary proceedings under Article 7 of the RPAPL, and infers "nonpayment of rent" necessarily limits those summary proceedings to nonpayment proceedings. In essence, under Landlord's interpretation, the words "nonpayment of rent" modify the word "proceeding."
On the other hand, when Executive Order 202.28 is written as if it were in the format of a statute, a different interpretation can be more clearly seen:
"There shall be no initiation of a proceeding or enforcement of either
an eviction of any residential or commercial tenant, for nonpayment of rent
or
a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage,
owned or rented by someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic for a period of sixty
days beginning on June 20, 2020"
( 9 NYCRR 8.202.28 [emphasis and reformatting added]). "Under the last antecedent rule of statutory construction, relative and qualifying words or clauses in a statute are to be applied to the words or phrases immediately preceding, and are not to be construed as extending to others more remote ... unless some compelling reason appears why it should not be so construed" ( Colon v. Martin , 35 N.Y.3d 75, 78-79, 125 N.Y.S.3d 346, 149 N.E.3d 39 [2020] [emendations omitted]).
Thus, as this court construes Executive Order 202.28, "nonpayment of rent" must be read to modify the word "eviction," not the word "proceeding."
Under this interpretation, the Executive Orders would apply to holdover proceedings if the eviction was based on the nonpayment of rent, which is the case here. The plain and ordinary meaning of the word "eviction" includes holdover proceedings, because those proceedings can seek, among other things, the eviction of a tenant who remains in possession after expiration or termination of the lease (see RPAPL 701 [1], 711 [1] ).
This interpretation of Executive 202.28 further its purpose. "The moratorium's references to ‘nonpayment’ of rent or mortgage clearly establishes that its purpose was to protect individuals experiencing financial hardship as a result of the COVID-19 pandemic" ( Shack Collective Inc. v. Dekalb Mkt. Hall, LLC , 69 Misc. 3d 1202(A), 2020 N.Y. Slip Op. 51156(U), 2020 WL 5913744 [Civ. Ct., Kings County 2020] ). Contrary to Landlord's interpretation, use of the word "nonpayment" was not intended to reference a particular type of statutory proceeding, but rather was intended to refer to the basis of the eviction or foreclosure, i.e., "nonpayment of rent" and "nonpayment of mortgage."
This court recognizes that the nonpayment-holdover proceeding distinction has appeal, because the distinction is well understood, and two trial courts have adopted that distinction in interpreting the scope of the moratorium on commercial evictions. As Landlord points out, the court in Anthi New Neocronon Corp. ruled, "Executive Order [No.] 202.28 succinctly narrows the purview of the stay to ‘nonpayment’ proceedings only" ( 68 Misc. 3d at 816, 128 N.Y.S.3d 795 ). Similarly, another court recently stated, "summary eviction holdover proceedings are not subject to the moratorium on evictions" ( Smart Coffee, Inc. v. Sprauer , 71 Misc. 3d 193, 208, 140 N.Y.S.3d 376 [Civ. Ct., Queens County 2021] ). As Landlord correctly points out, a key difference between the holdover proceeding and the nonpayment proceeding is that, in a holdover proceeding, the lease has expired or has been terminated prior to commencement of the holdover proceeding (see Harris v. Timecraft Indus., Inc. , 132 Misc. 2d 386, 389, 503 N.Y.S.2d 987 [Civ. Ct., N.Y. County 1986] ). By contrast, a lease has not been terminated when a nonpayment proceeding is commenced. "The petitioner's goal in a holdover is to secure vacant possession. In nonpayment proceedings, the same need is absent: What a petitioner seeks in a nonpayment proceeding is for the rent to be paid" ( Acquisition Am. v. Diaz , 20 Misc. 3d 1127(A), 2008 N.Y. Slip Op. 51647(U), *2, 2008 WL 2941334 [Civ. Ct., N.Y. County 2008] ).
However, this distinction should be examined more closely where the holdover is based on a conditional limitation due to nonpayment of rent. The issues in a nonpayment proceeding would appear to overlap with the issues in a conditional limitation holdover proceeding involving nonpayment of rent. In both kinds of proceedings, the court must determine whether the tenant defaulted in the payment of rent (cf. Grand Liberte Co-op., Inc. v. Bilhaud , 126 Misc. 2d 961, 964, 487 N.Y.S.2d 250 [App. Term, 1st Dept. 1984] ["since we perceive no factual issue in the papers as to tenant's default (payment is not alleged, nor is any other defense which might excuse nonpayment), we are required to grant landlord a possessory judgment"]).
As the Appellate Term explained:
"A holdover proceeding based upon a landlord's termination of a lease may only be maintained where there is a conditional limitation in the lease providing for its early termination. Where a conditional limitation is set in motion by a tenant's breach, the direct cause of the expiration of the lease is the lapse of time fixed in a notice, not the breach itself. Where a termination pursuant to a lease is by forfeiture for breach of condition and not by lapse of time, a breach would not make a tenant subject to a summary proceeding. Rather, the landlord's remedy would be an ejectment action"
(Fourth Hous. Co., Inc. v. Bowers , 53 Misc. 3d 43, 44-45, 39 N.Y.S.3d 350 [App. Term, 2d Dept., 2d, 11th & 13th Jud Dists 2016] [internal citations, emendation and quotation marks omitted]).
Thus, where a conditional limitation is involved, this court recognizes that the lease is not being terminated. To be accurate, the lease has expired early upon the occurrence of some contingency, "as if the lease by its terms had been limited to that time" (2 Robert F. Dolan, Rasch's Landlord and Tenant—Summary Proceedings § 23:23 [5th ed 2019]).
On this motion, Tenant did not dispute Landlord's assertion that the lease contained a valid conditional limitation (as opposed to a condition subsequent).
Anthi New Neocronon Corp. and Smart Coffee, Inc. , which ruled in favor of the nonpayment-holdover proceeding distinction, are both factually distinguishable. In Anthi New Neocronon Corp. , the term of the leases had expired ( Anthi New Neocronon Corp. , 68 Misc. 3d at 818, 128 N.Y.S.3d 795 ["it is undisputed that both leases terminated by their own terms"]). Smart Coffee, Inc. was an illegal lockout proceeding, and the court considered the issue of whether the tenant could be restored to the premises after finding that the tenant had been locked out illegally. However, the tenant's lease expired while the illegal lockout proceeding was pending ( Smart Coffee, Inc. , 71 Misc. 3d 193, 207-08, 140 N.Y.S.3d 376 ). Thus, neither Anthi New Neocronon Corp. nor Smart Coffee, Inc . involved leases terminated pursuant to a conditional limitation for nonpayment of rent, and thus those courts did not have to squarely address the issues presented here.
Had the Governor intended to limit the moratorium on evictions solely to nonpayment proceedings, the Governor could have easily done so by reference to the particular subsections of RPAPL 711, as in the case of other statutes that were specifically referenced in Executive Order 202.28.
Assuming for the sake of argument that Executive Order 202.28 is ambiguous, as Landlord acknowledged, "[w]here the language of a statute is susceptible of two constructions, the courts will adopt that which avoids injustice, hardship, constitutional doubts or other objectionable results" ( H. Kauffman & Sons Saddlery Co. v. Miller , 298 N.Y. 38, 44, 80 N.E.2d 322 [1948] ; see also Long v. State of New York , 7 N.Y.3d 269, 273, 819 N.Y.S.2d 679, 852 N.E.2d 1150 [2006] ["Although statutes will ordinarily be accorded their plain meaning, it is well settled that courts should construe them to avoid objectionable, unreasonable or absurd consequences"]).
If the moratorium on evictions did not also include conditional limitation holdover proceedings based on nonpayment of rent, this court is concerned that there would be a gaping loophole in Executive Order 202.28's protections. A landlord which is barred from commencing a nonpayment proceeding against a commercial tenant suffering financial hardship due to the COVID-19 pandemic would easily get around the moratorium by invoking a conditional limitation contained in the lease due to nonpayment of rent, thereby transforming a barred nonpayment proceeding into a permissible holdover proceeding. This is not beyond the realm of imagination—indeed, practitioners have already explored alternative avenues to work around the moratorium on summary proceedings. Under Landlord's interpretation, the moratorium to prevent evictions of affected tenants during the COVID-19 pandemic would create a perverse incentive for landlords to terminate the leases of the very tenants whom the moratorium was intended to protect. The Governor could not have intended that absurd result.
See Warren A. Estis & Alexander Lycoyannis, The Rise of Ejectment Actions During the COVID-19 Pandemic , NYLJ, Aug. 4, 2020 ("This state of affairs has prompted renewed interest in the ejectment action, a common-law remedy for real property owners that predates the modern landlord-tenant summary proceeding"); see also Todd Soloway & Rachel E. Shaw, The Pandemic's Impact on Eviction Proceedings , NYLJ, Oct. 27, 2020 ["On the litigation front: for now, rather than risk becoming tangled in continued and fluctuating limitations on eviction proceedings or the enforcement of warrants of eviction in Civil Court, many landlords are commencing plenary actions in State court alleging breach of contract for unpaid rent. Such actions do not threaten lease termination"]).
To the contrary, Executive Order 202.28 should be construed broadly to include conditional limitation holdover proceedings based on nonpayment of rent. First, Executive Order 202.28 was remedial in nature (see Fumarelli v. Marsam Dev., Inc. , 92 N.Y.2d 298, 306, 680 N.Y.S.2d 440, 703 N.E.2d 251 [1998] [a remedial statute "provides a remedy where the common-law either provides no remedy or provides an imperfect or ineffective remedy"]). "Remedial statutes, of course, should be construed broadly so as to effectuate their purpose" ( Matter of Scanlan v. Buffalo Pub. School Sys. , 90 N.Y.2d 662, 676, 665 N.Y.S.2d 51, 687 N.E.2d 1334 [1997] ; see also Machcinski v. Ford Motor Co. , 277 A.D. 634, 639, 102 N.Y.S.2d 208 [3d Dept. 1951] [unemployment compensation statute was "a remedial statute, a humanitarian statute, and should be construed accordingly"]).
As the Court of Appeals expounded almost a century ago:
"There are three points to be considered in the construction of all remedial statutes: The old law, the mischief, and the remedy; that is, how the common law stood at the making of the act, what the mischief was, for which the common law did not provide, and what remedy the Parliament hath provided to cure this mischief. And it is the business of the judges so to construe the act as to suppress the mischief and advance the remedy’ "
(American Historical Socy. v. Glenn , 248 N.Y. 445, 451, 162 N.E. 481 [1928], quoting 1 William Blackstone, Commentaries on the Laws of England at 87 [John L. Wendell ed 1847]).
Landlord's argument that the availability of a Yellowstone injunction (see First National Stores, Inc. v. Yellowstone Shopping Center, Inc. , 21 N.Y.2d 630, 290 N.Y.S.2d 721, 237 N.E.2d 868 [1968] ) would forestall any increase in the terminations of leases due to nonpayment of rent is unpersuasive. Generally speaking, some executive orders issued in response to the COVID-19 pandemic attempted to curb the spread of COVID-19 by limiting the number of people gathering in public spaces, which would also allow for adequate social distancing. To insist that a tenant claiming financial hardship due to the COVID-19 pandemic should seek a Yellowstone injunction would subject that tenant to more litigation, during a time when the State is trying to decrease in-person foot traffic in the courthouse, among other public spaces. This is unreasonable during the COVID-19 pandemic.
See Executive Orders 202.3, 202.4, 202.5, 202.6, 202.7, 202.8, 202.10, 202.11, and 202.13 (9 NYCRR 8.202.3 et seq. ), "which each closed or otherwise restricted public or private businesses or places of public accommodation, and which required postponement or cancellation of all non-essential gatherings of individuals of any size for any reason (e.g. parties, celebrations, games, meetings or other social events)" (Executive Order 202.18 [9 NYCRR 8.202.18 ]).
See Administrative Order AO/267/20 ("all parties are strongly urged to avoid in-person filing and service wherever possible during the ongoing COVID-19 health emergency, and to rely instead on NYSCEF, EDDS, and mail filing and/or service, where permitted") (http://www.nycourts.gov/whatsnew/ pdf/AO-267-20.pdf [accessed 3/1/2021]); see also L 2020, ch 381 § 3 ("The pandemic has further interrupted court operations, the availability of counsel, the ability for parties to pay for counsel, and the ability to safely commute and enter a courtroom, settlement conference and the like").
Landlord's reliance upon the Tenant Safe Harbor Act as evidence of the Governor's intent that Executive Orders 202.28 and 202.48 did not apply to holdover proceedings involving commercial tenants is misplaced. That statute "which was enacted in June 2020, is limited to summary eviction proceedings based on nonpayment and does not apply to holdover proceedings" ( Matter of Cabrera , 192 A.D.3d 227, 232, 140 N.Y.S.3d 609 ). However, in Matter of Cabrera , the Appellate Division, Third Department went on to note that the Governor issued Executive Order No. 202.66 ( 9 NYCRR 8.202.66 ), "[a]pparently to address that disparate treatment of eviction proceedings and to provide greater relief to tenants" ( id. ). "[W]hen the Governor signed that order on September 29, 2020, he created a new defense in holdover eviction proceedings if the tenant ‘suffered a financial hardship during the COVID-19 covered period" ( id. at *3-4 [emphasis supplied]). Thus, the issuance of Executive Order 202.66 belies any contention that the Governor intended the moratorium on evictions to apply only to nonpayment proceedings, at least with respect to residential tenants.
As discussed above, under the rules of statutory construction, the words of Executive Orders 202.28 and 202.48's moratorium on evictions of commercial tenants facing financial hardship due to the COVID-19 pandemic should be interpreted to include holdover proceedings involving nonpayment of rent. Alternatively, assuming the Executive Orders were ambiguous, the Executive Orders must be interpreted broadly to include conditional limitation holdover proceedings involving nonpayment of rent. Under either scenario, the moratorium on evictions of commercial tenants in Executive Orders 202.28 and 202.48 (as continued by Executive Order 202.57) applies in this case. Here, according to the "Five (5) Day Notice to Tenant," the lease was to terminate on July 15, 2020, well after Executive Order 202.28 was issued on May 7, 2020, and after Executive Order 202.48 was issued on July 6, 2020.
This court is concerned with those cases where the landlord invoked a conditional limitation due to nonpayment of rent after Executive Orders 202.28 and 202.48 were issued, when the landlord might have been prompted to do so due to the moratorium on nonpayment proceedings against commercial tenants. The court leaves open the question of whether the moratorium could include conditional holdover proceedings where the lease was terminated due to nonpayment of rent prior to the issuance of the Executive Orders.
This court does not reach Landlord's remaining arguments. In passing, Landlord appears to suggest that the Executive Orders violated the Contracts Clause of the United States Constitution ( US Const, art I, § 10 cl 1 ) and Article 1, Section 6 of the New York Constitution (affirmation of Landlord's counsel in opposition ¶¶ 6, 20). However, counsel's affirmation neither analyzes nor discusses whether the moratorium on evictions in Executive Orders 202.28, 202.48, 202.57 meets the two-step test for a violation of the Contracts Clause (see Sveen v. Melin , ––– U.S. ––––, 138 S.Ct. 1815, 1821-22, 201 L.Ed.2d 180 [2018] ; see also American Economy Ins. Co. v. State of New York , 30 N.Y.3d 136, 150, 65 N.Y.S.3d 94, 87 N.E.3d 126 [2017] ). Neither does the counsel's affirmation discuss the test of whether the State deprived a party to a contract of an essential contract attribute without due process of law, in violation of Article 1, Section 6 of the New York Constitution (see Patterson v. Carey , 41 N.Y.2d 714, 720-21, 395 N.Y.S.2d 411, 363 N.E.2d 1146 [1977] ["Where a statute is challenged on nonprocedural grounds as violative of due process, the test is whether there is ‘some fair, just and reasonable connection’ between the statute and ‘the promotion of the health, comfort, safety and welfare of society’ "]).
Having determined that Executive Order 202.57 applies here, and that financial hardship due to the COVID-19 pandemic is a defense that belongs to Tenant, the court will proceed to determine whether Tenant met the burden on its motion to dismiss of demonstrating financial hardship.
B.
According to Tenant's president, Albert Nigri, Tenant is "a wholesaler of ladieswear that occupies commercial office and showroom space" at the Premises, which
"has had difficulty paying rent due to the Covid 19 pandemic for reasons which include but are not limited to the shutdown of retail businesses that are [Tenant]’s customers and retail businesses that are the customers of [Tenant]’s wholesale customers; the refusal of [Tenant]’s customers, due to Covid fears, to send their buyers to NYC to shop in its showroom; the Executive Orders reducing the [Tenants’] workforce and the ability of others to access [Tenant]’s space"
(Nigri aff ¶ 2). This affidavit is the only evidence of Tenant's financial hardship due to the COVID-19 pandemic. Nevertheless, Tenant contends that, "[g]iven the severe impact of the Covid-19 pandemic and the Governor[’]s Executive Orders on the ability of non-essential businesses to operate," business entities like Tenant's—that were deemed non-essential—"must be considered to be ‘per se’ facing financial hardships from the Covid-19 pandemic" (supplemental affirmation of Tenant's counsel in support ¶ 34).
Landlord argues that the court should evaluate each claim of financial hardship on a case-by-case basis, rather than adopting a categorial approach:
"Determining that a commercial tenant is facing financial hardship simply because it belongs to a certain industry or category of tenants would lead to the absurd result of protecting a tenant that has not been financially impacted by the pandemic. For example, there are many restaurants that have increased their customer capacity through outdoor dining and, as a result, their profits have increased despite the pandemic. Also consider the fact that some commercial tenants have significant cash reserves and assets to sustain them during the pandemic even though there have been months where profits have decreased.
Treating these two types of tenants the same as a tenant that does not have cash reserves and has experienced a loss every month since the onset of
the pandemic merely because they fall within a specific industry is both illogical and inequitable. Indeed, it would have the unintended consequence of depriving a landlord of the ability to enforce the monetary terms of its commercial lease against a tenant who has the financial capability to pay the agreed upon rent"
(supplemental affirmation of Landlord's counsel in opposition ¶¶ 43-44).
The plain and ordinary meaning of "hardship" is "suffering" or "privation" (https://www.merriam-webster.com/dictionary/hardship [accessed on 3/2/2021]; see also Black's Law Dictionary [11th ed 2019] [defining hardship as "[p]rivation; suffering or adversity"]). As Tenant points out, it cannot be seriously disputed that the executive orders—requiring commercial businesses to reduce their occupancy limits or to cease or limit operations—impacted the ability of those businesses to generate revenue. But financial impact is not synonymous with financial hardship. As Landlord points out, a tenant might have access to cash reserves or assets to pay the rent, even in the face of little or no revenue from the business itself.
In its supplemental affirmation, Landlord claims that Tenant "continued to collect rent from its subtenant until October 2020, while refusing to pay [Landlord]" (affirmation of Landlord's counsel in opposition ¶ 40).
Thus, this court agrees with Landlord that the defense of financial hardship requires a particularized showing of a tenant's own financial circumstances. This court rejects Tenant's contention that all non-essential businesses suffered financial hardship per se. A particularized showing of financial hardship furthers the purpose of the Executive Orders to protect, at least temporarily, a particular class of commercial tenants "experiencing financial hardship as a result of the COVID-19 pandemic" ( Shack Collective Inc. , 69 Misc. 3d 1202(A), 2020 N.Y. Slip Op. 51156(U), 2020 WL 5913744 ). This interpretation also balances the countervailing policy concern that landlords should have recourse when tenants who are financially able to pay their rent do not honor their contractual obligation to pay.
As Landlord points out, the Tenant Safe Harbor Act provides,
"In determining whether a tenant or lawful occupant suffered a financial hardship during the COVID—19 covered period, the court shall consider, among other relevant factors:
(i) the tenant's or lawful occupant's income prior to the COVID—19 covered period;
(ii) the tenant's or lawful occupant's income during the COVID—19 covered period;
(iii) the tenant's or lawful occupant's liquid assets; and
(iv) the tenant's or lawful occupant's eligibility for and receipt of cash assistance, supplemental nutrition assistance program, supplemental security income, the New York State disability program, the home energy assistance program, or unemployment insurance or benefits under state or federal law"
(L 2020, ch 127 § 2 [b]). Thus, the determination of financial hardship under the Tenant Safe Harbor Act was not limited solely to an examination of the tenant's income before and after the COVID-19 pandemic.
After the enactment of the Tenant Safe Harbor Act, the Legislature enacted the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 (L2020 ch 381 ["CEEFPA"]), which became effective on December 28, 2020. The intent of the legislation was "to avoid as many evictions and foreclosures as possible for people experiencing a financial hardship during the COVID-19 pandemic or who cannot move due to an increased risk of severe illness or death from COVID-19" (id. § 3).
CEEFPA applies to eviction proceedings relating to a residential dwelling unit. Under the law, a declaration of a residential tenant of financial hardship includes, among other things, "significant loss of household income during the COVID-19 pandemic" (Part A § 1 [4]).
The court is not in a position to make findings about the kinds of non-essential businesses that presumably suffered financial hardship due to the COVID-19 pandemic (see People v. Buyund , 179 A.D.3d 161, 169-70, 112 N.Y.S.3d 179 [2d Dept. 2019], lv denied 35 N.Y.3d 1043, 127 N.Y.S.3d 849, 151 N.E.3d 530 [2020] ["It is a basic rule in the construction and interpretation of statutes that the courts should avoid judicial legislation"]).
Here, the affidavit from Tenant's president was insufficient to meet Tenant's burden of establishing that it suffered financial hardship due to the COVID-19 pandemic (see Bridgecity Capital QOB LLC v. 1717 E. 8 ST LLC , 2021 N.Y. Slip Op. 30406(U), at *5, 2021 WL 495750 [Sup. Ct., Kings County 2021] [denying cross-motion to dismiss on Executive Order 202.28 grounds where the cross-movants’ affidavit "merely attests that the COVID-19 pandemic has ‘severely impacted my income as tenants ... have ceased making rental payments’ "] [emphasis and emendation in original]). For example, Tenant did not submit any financial documents such as balance sheets, profits and loss statements, or any documentation that Tenant received government assistance such as, the Small Business Administration's Paycheck Protection Program.
Because Tenant did not establish that it was suffering financial hardship due to the COVID-19 pandemic, Tenant therefore failed to establish that Landlord commenced this proceeding in violation of Executive Order 202.57. Therefore, the branch of Tenant's motion to dismiss pursuant to CPLR 3211 (a) (2) is denied.
To the extent that Tenant argued that dismissal was appropriate pursuant to CPLR 3211 (a) (1), Nigiri's affidavit, which was prepared for the purpose of litigation of the instant motion to dismiss, may not be considered on a motion to dismiss pursuant to CPLR 3211 (a) (1). "Affidavits are not documentary evidence and are not appropriate proof on a CPLR 3211(a)(1) motion to dismiss" (Johnson v. Asberry , 190 A.D.3d 491, 135 N.Y.S.3d 830 [1st Dept. 2021] ).
Tenant is directed to serve an answer to the petition within 10 days of service of a copy of this order with notice of entry ( CPLR 3211 [f] ). The parties are directed to appear virtually via Microsoft Teams in Part 52 on March 25, 2021 at 9:30 a.m. for all purposes. IV.
Under Executive Order 202.67 (9 NYCRR 8.202.67 ), the suspension of any specific time limit for the service of any legal process expired on November 3, 2020.
Administrative Order AO/160A/20 provides that "[e]viction proceedings commenced after March 16, 2020 shall ... be suspended until further order" (http://nycourts.gov/whatsnew/pdf/ao160a20.pdf [accessed 3/2/2021] [emphasis supplied]). This court was unable to find any subsequent Administrative Order online which lifted the suspension of eviction proceedings commenced after March 16, 2020. However, Directive DRP-215 states, "Commercial holdover eviction proceedings may proceed in the normal course" (http://nycourts.gov/courts/nyc/SSI/directives/DRP/DRP215.pdf [accessed 3/2/2021]).
Tenant argues that dismissal is the appropriate relief for violation of the moratorium on evictions of commercial tenants due to nonpayment of rent in Executive Order 202.28. Tenant reasons that the moratorium was akin to a stay on the commencement of such proceedings, and actions commenced in violation of a stay should be dismissed, analogizing to a bankruptcy stay (see supplemental affirmation of Tenant's counsel in support ¶¶ 25-27). Tenant contends that the court does not have the power to stay its own proceedings because the Civil Court lacks the power to issue injunctive relief (id. ¶¶ 28-29).
Landlord appears to acknowledge that the case could be dismissed without prejudice if the tenant established that it experienced financial hardship due to the COVID-19 pandemic (supplemental affirmation of Landlord's counsel in opposition ¶ 50). Alternatively, Landlord argues that if it demonstrates its prima facie case at trial, and the Tenant establishes the affirmative defense of financial hardship, then court should grant Landlord a judgment of possession, and the warrant of eviction would be stayed until the Executive Orders are lifted or expire (id. ¶ 52).
Generally speaking, the parties should be in the same position as if the Executive Orders had been followed. However, in light of the court's determination denying Tenant's motion to dismiss, this court need not reach the issue of the appropriate relief to be granted for a violation of Executive Orders 202.28 and 202.48, as continued by Executive Order 202.57. Neither does this court address question of whether a stay (rather than a dismissal) might be an appropriate relief for enforcement of a pending eviction proceeding in violation of the Executive Orders.
CONCLUSION
It is hereby ORDERED the motion to dismiss by respondent Mega Wear Inc. (Motion Seq. No. 001) is DENIED; and it is further
ORDERED that respondent Mega Wear Inc. shall serve an answer within 10 days of service of a copy of this decision and order with notice of entry; and it is further
ORDERED that the parties are directed to appear virtually via Microsoft Teams in Part 52 on March 25, 2021 at 9:30 a.m. for all purposes.
This constitutes the decision and order of the court.