Paterno v. Carroll

• Decision Date: 27 July 2010
• Citation: 905 N.Y.S.2d 653,75 A.D.3d 625
• Parties: John PATERNO, respondent-appellant, v. John CARROLL, et al., appellants-respondents.
• Court: New York Supreme Court — Appellate Division

905 N.Y.S.2d 653

75 A.D.3d 625

John PATERNO, respondent-appellant,

v.John CARROLL, et al., appellants-respondents.

Supreme Court, Appellate Division, Second Department, New York.

July 27, 2010.

Neal J. Roher, Garden City, N.Y., for appellants-respondents.

Fine & Bassik, Great Neck, N.Y. (Patricia N. Reich of counsel), for respondent-appellant.

PETER B. SKELOS, J.P., RANDALL T. ENG, L. PRISCILLA HALL, and PLUMMER E. LOTT, JJ.

In an action to recover damages for breach of a lease, the defendants appeal from so much of an order of the Supreme Court, Nassau County (Lally, J.), dated October 19, 2009, as denied those branches of their motion which were for summary judgment dismissing the complaint and on their counterclaims to recover their security deposit and to recover damages for breach of the lease, and the plaintiff cross-appeals from so much of the same order as denied those branches of his cross motion which were for summary judgment on the complaint and dismissing the defendants' counterclaims and to strike the defendants' answer pursuant to CPLR 3126.

ORDERED that the order is modified, on the law, by deleting the provision thereof denying that branch of the defendants' motion which was for summary judgment on their counterclaim to recover their security deposit, and substituting therefor a provision granting that branch of the motion; as so modified, the order is affirmed insofar as appealed and cross-appealed from, without costs or disbursements.

In July 2006 the defendants, John Carroll and Lisa Heberley Carroll (hereinafter together the Carrolls), entered into a one-year lease with the plaintiff landlord, John Paterno, for a three-floor, three-bedroom condominium in Manhasset (hereinafter the condo), and gave Paterno the sum of $18,000, representing a $12,000 security deposit, plus the first month's rent in the sum of $6,000. The lease provided the Carrolls with an option to extend the lease for one year with rent in the sum of $6,100 per month, and that the Carrolls must exercise the option by written notice on or before April 30, 2007. The Carrolls did not exercise their option by April 30, 2007, but on May 17, 2007, Paterno wrote the Carrolls to ask them whether they wished to renew the lease for rent in the sum of $6,100 per month. The defendant Lisa Heberley Carroll (hereinafter Lisa) faxed Paterno a signed statement asserting thatshe wished to "renew the option" for the period commencing August 1, 2007.

On or about July 25, 2007, Lisa allegedly discovered mold on the ceiling of the master bedroom in the condo. She subsequentlyhired an environmental testing company, which informed the Carrolls that testing had revealed the presence of Aspergillus fumigatis, a "toxic" mold, in the master bedroom, and recommended measures for remediation. On August 16, 2007, Lisa faxed Paterno a letter informing him that because of the mold, she and John Carroll would be forced to vacate the premises as soon as possible, and that " [g]iven this untenable living situation, we believe that our financial obligation under this lease should cease today." Thereafter, the Carrolls entered into a lease for an apartment in Manhattan, and moved in on or about September 2, 2007. The Carrolls moved their belongings out of the condo on or about September 15, 2007, but left personal property in the master bedroom, and told Paterno that they wished to have those items checked for mold contamination, and cleaned if necessary.

Subsequently, the Carrolls requested the return of their security deposit. When Paterno failed to return it, the Carrolls commenced an action in the District Court, Nassau County, alleging that Paterno had commingled their security deposit with his personal funds in violation of General Obligations Law § 7-103. Paterno asserted a counterclaim to recover damages in the sum of $70,470 for breach of the lease, including unpaid rent and damages incurred in removing the Carrolls' personal property from the premises and making repairs.

In January 2008 Paterno commenced this action in the Supreme Court, Nassau County, alleging causes of action that were substantially the same as his counterclaims in the District Court action. The Carrolls asserted counterclaims alleging, inter alia, that Paterno had improperly commingled their security deposit with personal funds and breached the warranty of habitability.

In April 2008 the parties entered into a stipulation to discontinue the District Court action "with prejudice." According to Paterno's deposition testimony, that action was discontinued because the parties wanted to "continue" the action in the Supreme Court, as the amount sought in his counterclaim exceeded the District Court's jurisdiction.

In June 2009 the Carrolls moved, inter alia, for summary judgment dismissing the complaint in this action and on their counterclaims to recover their security deposit and to recover damages for breach of the lease. Paterno cross-moved for summary judgment on the complaint and dismissing the counterclaims and to strike the Carrolls' answer pursuant to CPLR 3126 for failure to comply with discovery orders. In the order appealed from, the Supreme Court, inter alia, denied the motion and the cross motion. We modify.

The Carrolls correctly contend that the Supreme Court should have awarded them summary judgment on their counterclaim to recover their security deposit. Their showing that Paterno failed to give them written notice of the banking institution that held the deposit, in violation of General Obligations Law § 7-103, permitted an inference that Paterno violated General Obligations Law § 7-103 by commingling security deposit moneys with his own personal funds, and Paterno failed to rebut this inference ( see Dan Klores Assoc. v. Abramoff, 288 A.D.2d 121, 733 N.Y.S.2d 388; LeRoy v. Sayers, ...