Lomnitz v. 61 East 86th Street Equities Group

• Decision Date: 08 August 1985
• Parties: Eric LOMNITZ, as Executor and Distributee of the Estate of Gunther Lomnitz, Plaintiff, v. 61 EAST 86TH STREET EQUITIES GROUP, Time Equities, Inc. and 61 East 86 Owners Corp., Defendants.
• Court: New York Supreme Court

Page 915

492 N.Y.S.2d 915

129 Misc.2d 157

Eric LOMNITZ, as Executor and Distributee of the Estate of Gunther Lomnitz, Plaintiff, v. 61 EAST 86TH STREET EQUITIES GROUP, Time Equities, Inc. and 61 East 86 Owners Corp., Defendants.

Supreme Court, Special Term,

New York County, Part I.

Aug. 8, 1985.

Cadwalader, Wickersham & Taft, New York City (Edward E. Klein, New York City, of counsel), for plaintiff.

Jacobs, Sieratzki & Zinns, New York City (Jay Zinns, New York City, of counsel), for defendants.

FELICE K. SHEA, Justice:

The question presented by the motion and cross-motion herein is whether an estate has the right to buy cooperative shares allocated to the apartment of a tenant who died prior to acceptance for filing by the New York State Attorney General of the cooperative offering plan.

Plaintiff, executor of the estate of Dr. Gunther Lomnitz, moves for a preliminary injunction: 1) enjoining defendants (the owner of the building, the selling agent and the cooperative corporation) a) from selling the stock certificates evidencing ownership of shares in the cooperative corporation allocated to apartment 1, 61 East 86 Street, New York, N.Y., and b) from dispossessing plaintiff from the apartment pending final determination of this action; 2) tolling the running of time during which plaintiff is required to vacate the apartment pursuant to a Notice to Quit. Defendants cross-move for an order awarding summary judgment in their favor dismissing the complaint.

Dr. Gunther Lomnitz occupied the apartment at issue for approximately 40 years until his death on October 14, 1983. On December 8, 1983, a non-eviction offering plan for the sale of shares in the cooperative corporation was accepted for filing by the Attorney General of the State of New York and defendants offered all tenants in the building the right to purchase their allocated shares at the insider price. In July, 1984, plaintiff submitted two copies of a duly executed subscription agreement and a down payment for purchase of the shares allocated to apartment 1. On September 14, 1984, defendants rejected plaintiff's subscription agreement and deposit on the ground that the estate was not a tenant in occupancy entitled to purchase the shares.

In the underlying action, plaintiff seeks the right to purchase the subject apartment and requests a permanent injunction, declaratory relief and specific performance of its subscription agreement. Defendants interpose affirmative defenses and assert a counterclaim for possession of the apartment and a second counterclaim seeking a declaration of their right to reject plaintiff as a purchaser.

It is not disputed that if the deceased tenant had occupied the apartment pursuant to a professional lease, existing or expired, neither he nor his estate would have the right to purchase under the terms of the offering plan. Nor does plaintiff dispute that if the decedent had been a residential tenant living on a month-to-month basis, the tenancy would have expired at his death. Yates v. Kaplan, 75 Misc.2d 259, 347 N.Y.S.2d 543. The parties agree also that if decedent had occupied the apartment for combined residential and professional purposes, the apartment could have been subject to the Rent Stabilization Law. Zeitlin v. N.Y.C. Conciliation and Appeals Board, 46 N.Y.2d 992, 416 N.Y.S.2d 233, 389 N.E.2d 828; Park Towers South v. A-Lalan, 103 Misc.2d 565, 430 N.Y.S.2d 188. The critical disagreement of fact is over whether, at the time of his death, Dr. Lomnitz was a rent stabilized tenant living under an existing lease.

Plaintiff argues that the tenant occupied the apartment as a residence at the time of his death, that the apartment was regulated by the Rent Stabilization Code, and that the estate of a rent stabilized tenant inherits all the rights of the decedent including the right to purchase the apartment at the insider price.

It is defendants' position that the apartment was leased to Dr. Lomnitz as a doctor's office, that the last lease expired in June, 1966, and that the apartment never became subject to the rent stabilization laws. They argue further that even had Dr. Lomnitz been a rent stabilized tenant, his estate cannot buy the apartment since the rights of an estate can be no greater than those of a deceased tenant and Dr. Lomnitz died before his right to purchase could vest on the date the offering plan was filed.

The parties have submitted voluminous papers in an effort to establish the status of the apartment at the date of decedent's death. They agree that Dr. Lomnitz initially entered into possession of the subject premises under federal rent regulations pursuant to a written lease dated September 25, 1941 covering both apartment 1 and apartment 4C on the same floor. The 1941 lease indicated that the space was to be occupied as a private dwelling and doctor's office. In 1948 the two units were separated, apartment 4C became subject to residential rent regulation and apartment 1, identified as a doctor's office, came under commercial rent control. ¹

Defendants have submitted Dr. Lomnitz's next lease which was for apartment 1 only. It covered the period May 1, 1949 through September 30, 1951 and specified that the apartment was to be occupied solely as a doctor's office. Defendants assert that after the expiration of commercial rent control Dr. Lomnitz continued to occupy apartment 1 as a professional tenant, using it as a doctor's office under a lease running from July, 1963 through June, 1966. Defendants maintain that Dr. Lomnitz was a month-to-month tenant from the time the 1963-66 lease expired until his death. In support of this assertion, defendants submit, inter alia, a copy of a letter to Dr. Lomnitz dated October 22, 1982 in which defendant Time Equities, Inc. informed him that it had purchased the property, and confirming that Dr. Lomnitz was a month-to-month tenant in apartment 1. Defendants also submit a copy of a letter to Dr. Lomnitz dated August 31, 1983 in which Time Equities, Inc. stated they were discontinuing his month-to-month tenancy and were offering him a one-year lease at a four-fold increase in rent.

Plaintiff responds that the October, 1982 and August, 1983 letters are self-serving and that Dr. Lomnitz may have had a lease for the apartment in effect at the time of his death. Plaintiff submits a copy of the 1984 registration for the apartment in which defendants list the apartment as "stabilized--pending determination of case currently before DHCR[enewal]."

The landlord of a rent stabilized property is obligated to maintain rental histories (Rent Stabilization Code § 42(a); 303 East 207th St. Corp. v. N.Y.C. Conciliation and Appeals Board, Index No. 01433/84 aff'd, 107 A.D.2d 1096, 485 N.Y.S.2d 672, Lv. to app. den., 64 N.Y.2d 609, 478 N.E.2d 210) and has the burden of establishing that an apartment is not covered by statute. Towers Hotel Invest. v. Davis, 85 Misc.2d 451, 454, 379 N.Y.S.2d 228, aff'd, 54 A.D.2d 730, 387 N.Y.S.2d 676, aff'd, 42 N.Y.2d 923, 397 N.Y.S.2d 1006, 366 N.E.2d 1360. Neither party has submitted complete records showing the apartment's status. There has been no opportunity for discovery. Upon the conflicting claims of the parties and the fragmented documentation submitted, it cannot be said that no issues of fact exist as to the rental status of the apartment and the existence of a lease at the time of Dr. Lomnitz's death.

Plaintiff contends that if no written lease existed when Dr. Lomnitz died, nonetheless he occupied the apartment pursuant to a lease implied by law because he had been entitled to a lease. ² This argument is without merit under the facts at bar. A lease gives a tenant a possessory right--the right to live in the premises upon agreed to terms. There is no authority for holding that a tenant's estate may retroactively assert the right to a lease after the tenant's death.

Plaintiff could not prevail even if it were to be demonstrated that a lease existed at the time of the tenant's death. No statute or case law or policy consideration supports a right to purchase shares of a cooperative apartment at the insider price by the estate of a dead tenant when the right arose after the tenant's death.

It is well established that a lease is not terminated by the death of a lessee but passes as personal property to the estate. EPTL 13-1.1; 2 Rasch, New York Landlord and Tenant § 1016; Schnee v. Jonas Equities, 109 Misc.2d 221, 222, 442 N.Y.S.2d 342; Putch v. Jacard Realty Co., 44 Misc.2d 177, 253 N.Y.S.2d 335. The estate's legal representative has the obligation to settle the estate and distribute the assets of the decedent. 41 N.Y.Jur.2d, Decedents' Estates § 1550; EPTL 11-1.1, subd. par. Cl. Young v. Carruth, 113 Misc.2d 586, 452 N.Y.S.2d 978, aff'd, 89 A.D.2d 466, 455 N.Y.S.2d 776.

It is not fruitful to attempt to characterize the nature of an estate's possession of a decedent's leased premises as "representative" or as something more. In Rosefan Constr. v. Salazar, 114 Misc.2d 956, 960, 452 N.Y.S.2d 1016, the court stated: "The executors of an estate may occupy a premises in possession of an estate but only in their representative capacities, not as tenants under the lease." Accord, Joint Properties Owners, Inc. v. Deri, 127 Misc.2d 26, 488 N.Y.S.2d 948; Remford Corp. v. Rosenfeld, 274 App.Div. 769, 79 N.Y.S.2d 756. But in Young v. Carruth, 113 Misc.2d 586, 587, 452 N.Y.S.2d 978, aff'd, 89 A.D.2d 466, 455 N.Y.S.2d 776, an estate was denominated "the real party in interest", and in Bunim v. 300 Central Park West Apartments Corp., N.Y.L.J., June 30, 1982, p. 6, col. 3 (S.Ct., N.Y.Co.), an estate was said to have "succeeded to all the rights which decedent had to the apartment ..." With the housing shortage and the profits to be realized from the sale of cooperative apartments has come assertion by estates of ever broader rights--the right to assign (see, e.g., Joint Properties Owners, Inc. v. Deri, supra); the right to evict (...