Henry Modell and Co., Inc. v. Minister, Elders and Deacons of Reformed Protestant Dutch Church of City of New York

• Citation: 68 N.Y.2d 456,502 N.E.2d 978,510 N.Y.S.2d 63
• Parties: , 502 N.E.2d 978 HENRY MODELL AND CO., INC., Appellant, v. MINISTER, ELDERS AND DEACONS OF the REFORMED PROTESTANT DUTCH CHURCH OF the CITY OF NEW YORK, Respondent.
• Decision Date: 25 November 1986
• Court: New York Court of Appeals

Page 63

510 N.Y.S.2d 63

68 N.Y.2d 456, 502 N.E.2d 978

HENRY MODELL AND CO., INC., Appellant, v. MINISTER, ELDERS AND DEACONS OF the REFORMED PROTESTANT

DUTCH CHURCH OF the CITY OF NEW YORK, Respondent.

Court of Appeals of New York.

Nov. 25, 1986.

David Rosenberg and Walter Feldesman, New York City, for appellant.

Philip L. Graham, Jr., and Robert B. Calihan, New York City, for respondent.

OPINION OF THE COURT

TITONE, Judge.

This appeal concerns the application of RPAPL 747(2), which modifies the common-law principles governing the preclusive effects of judgments, to a case in which the losing defendant in a summary holdover proceeding has commenced a new action to recover possession on the basis of a theory not asserted in the first proceeding. Because plaintiff did not commence its second action within 60 days after entry of the Civil Court judgment, as RPAPL 747(2) requires, it cannot now invoke the remedial provisions of the statute. Accordingly, plaintiff is foreclosed from raising its present claim that, as an assignee pro tanto, it is entitled to a renewal lease for the premises it has been occupying.

Plaintiff was a long-term tenant occupying the commercial ground-floor and basement space in a building located at 198 Broadway in Manhattan. In 1959, the building's owner entered into a 21-year lease, to expire at 12:00 noon on January 15, 1980, with Arthur Bienenstock. Bienenstock, in turn, entered into a sublease with plaintiff for the ground-floor and basement premises, for a term coinciding with the term provided in his prime lease. Both the prime lease and the sublease between Bienenstock and plaintiff contained an option to renew for an additional 21-year term.

Between December of 1965 and February of 1966, defendant, the Reformed Protestant Dutch Church (Church), purchased the building, and its wholly owned subsidiary acquired Bienenstock's leasehold interest. The subsidiary thereafter elected not to exercise its option to renew the lease for the entire premises and, as a consequence, notified plaintiff that it was not entitled to renew its sublease for the ground-floor and basement portion of the building.

When plaintiff refused to surrender possession of the premises on January 15, 1980, the date its sublease expired, the Church commenced a holdover proceeding in Civil Court to recover possession. Among the defenses asserted by plaintiff in that proceeding was that the Church and its subsidiary were so closely allied that their interests in the property had merged and the Church was therefore bound to honor plaintiff's renewal option. The Church's motion for summary judgment was denied by the Civil Court but granted on appeal to Appellate Term.

Following Appellate Term's decision, a judgment awarding the Church possession was entered by the clerk of the court on October 30, 1981. The Appellate Term order was subsequently affirmed by the Appellate Division (Minister, Elders & Deacons v. 198 Broadway, 88 A.D.2d 511, 450 N.Y.S.2d 4) and by this court (59 N.Y.2d 170, 464 N.Y.S.2d 406, 451 N.E.2d 164). In affirming, we specifically held that, as a subtenant, plaintiff had no right to renew its sublease for a portion of the premises when the prime tenant, its sublessor, had elected not to renew its lease for the entire building (59 N.Y.2d, at pp. 175-176, 464 N.Y.S.2d 406, 451 N.E.2d 164).

In the course of a barrage of litigation to recover its right of possession, ¹ plaintiff commenced the present Supreme Court action in July of 1983 for declaratory and injunctive relief. The gist of plaintiff's claim was that it was an assignee pro tanto of the portion of the prime lease covering the ground floor and basement of the building, because the term of its sublease was coextensive with the term of the prime lease and its sublessor had neglected to reserve any reversionary interest in the sublet premises. Consequently, plaintiff contended, it was entitled to exercise the renewal option in the prime lease to the extent that it pertained to the premises plaintiff occupied.

The Supreme Court dismissed plaintiff's complaint on two alternative grounds. First, the court held that the claim was barred under traditional res judicata principles. Second, the court determined that the claim was without legal merit because the renewal right of the prime tenant, plaintiff's sublessor, was indivisible and therefore could not be assigned pro tanto to a subtenant whose sublease covered only a portion of the entire premises. The Appellate Division subsequently affirmed, without opinion (114 A.D.2d 751, 494 N.Y.S.2d 594), and we granted plaintiff leave to appeal to this court (67 N.Y.2d 609, 502 N.Y.S.2d 1028, 494 N.E.2d 114).

On this appeal, plaintiff argues, as it did in the courts below, that it became an assignee pro tanto of the prime lease by virtue of the sublessor's failure to reserve any reversionary interest in the ground-floor and basement premises (see, New Amsterdam Cas. Co. v. National Union Fire Ins. Co., 266 N.Y. 254, 194 N.E. 745). Since an assignee pro tanto is ordinarily entitled to enforce against the landlord those covenants that run with the land (see, Gilbert v. Van Kleeck, 284 App.Div. 611, 132 N.Y.S.2d 580, appeal dismissed 308 N.Y. 882, 126 N.E.2d 383) and a renewal option is generally deemed a covenant that runs with the land (see, Leibowitz v. Bickford's Lunch Sys., 241 N.Y. 489, 150 N.E. 525), plaintiff contends, the court should draw the conclusion that plaintiff is entitled to exercise the prime lease's option to renew, even though its leasehold interest covers only a portion of the entire premises. We have no occasion to consider the merits of plaintiff's claim, however, because we agree with the trial court that its assertion in the present action is barred under well-established principles of claim preclusion.

It is elementary that, under the common-law doctrine of res judicata, a tenant who has been adjudged not entitled to possession in an action brought by the landlord cannot subsequently bring an action to recover possession on the basis of claims that could have been asserted in the first action. While New York does not have a compulsory counterclaim rule (see, CPLR 3011), a party is not free to remain silent in an action in which he is the defendant and then bring a second action seeking relief inconsistent with the judgment in the first action by asserting what is simply a new legal theory (see, Israel v. Wood Dolson Co., 1 N.Y.2d 116, 118, 151 N.Y.S.2d 1, 134 N.E.2d 97; Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N.Y. 304, 306-307, 165 N.E. 456; Siegel, N.Y.Prac. § 447, at 591-592; § 452, at 598-599; cf. Batavia Kill Watershed Dist. v. Charles O. Desch, Inc., 83 A.D.2d 97, 444 N.Y.S.2d 958, affd. 57 N.Y.2d 796, 455 N.Y.S.2d 597, 441 N.E.2d 1115; see also, O'Brien v. City of Syracuse, 54 N.Y.2d 353, 445 N.Y.S.2d 687, 429 N.E.2d 1158; Smith v. Russel Sage Coll., 54 N.Y.2d 185, 445 N.Y.S.2d 68, 429 N.E.2d 746). Underlying this rule is the recognition that "it is to the interest of the State that there should be an end to litigation" (Israel v. Wood Dolson Co., 1 N.Y.2d supra, p. 118, 151 N.Y.S.2d 1, 134 N.E.2d 97). Indeed, even a default judgment awarding possession to the landlord has been held to preclude litigation of subsidiary issues necessary to establish the tenant's subsequent claim for separate equitable relief, despite the fact that the equitable claim could not have been resolved in a counterclaim in the first action because of limitations on the court's jurisdiction (Reich v. Cochran, 151 N.Y. 122, 46 N.E. 1151).

Plaintiff's present claim falls squarely within these principles. In the prior Civil Court holdover proceeding, the landlord sought to recover possession, and plaintiff defended, in part, by asserting a right of possession arising from the renewal clause in its sublease. Plaintiff's present claim, although technically based on the renewal clause in the prime lease, is really nothing more than a resuscitated assertion of a right to possession recast in terms of a new legal theory. As such, the claim, which could have been raised as a defense in the first action (see, RPAPL 743) and which now seeks to destroy or impair the "rights * * * established by the first [action]" (see, Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N.Y. supra, p. 307, 165 N.E. 456), is barred. ²

Plaintiff does not seriously dispute the preclusive effect of common-law res judicata principles to its current claim. Instead, plaintiff relies on RPAPL 747(2), which was enacted, at least in part, to overrule the harsh effects of those principles in the limited situation where the...