Wendnew LLC, was sued by its landlord -- The Gallery at Fulton Street, LLC -- for monetary damages arising from Wendnew's breach of its commercial lease. Within the context of a New York County Supreme Court case, the tenant disclaimed liability for $514,039.97 (some three years of rent being sought) since it had allegedly suffered a "constructive eviction" which annulled any obligation to remit payments.
Typically, a "constructive eviction" occurs when a landlord's "wrongful acts substantially and materially deprive the tenant of the beneficial use and enjoyment of the premises ... The tenant, however, must abandon possession in order to claim there was a constructive eviction." Barash v. Pennsylvania Terminal Real Estate Corp., 26 NY2d 77 (1970).
In this particular case, both the Supreme Court, and the Appellate Division, First Department, found a few problems with Wendnew's claim.
First, the tenant had an opportunity to raise the "constructive eviction" defense in a previously initiated summary nonpayment proceeding, but failed to do so. In fact, the tenant defaulted in that litigation -- that is, failed to appear in court to oppose the summary proceeding -- and a court-ordered eviction ensued. As a result, both the Supreme Court and the Appellate Division were of the opinion that this inaction prevented or "estopped" the tenant from raising the constructive-eviction defense in the Supreme Court case later filed by the landlord.
Second, since the tenant did not abandon the subject space (prior to the court-ordered eviction), its constructive-eviction defense was not supportable as a matter of law. As the appellate court observed:
The prior summary proceeding, wherein plaintiff's petition for possession was granted, necessarily decided that defendants remained in possession and plaintiff had properly terminated the lease. A default judgment in a summary proceeding for non-payment of rent is conclusive between the parties as to any facts alleged in the petition or affidavit that are required to be alleged as a basis for the proceeding ... Defendants' continued possession was such a fact, and negates their constructive eviction defense.And, finally, although the landlord-tenant relationship had been terminated by the issuance of a warrant of eviction in the nonpayment case, neither that termination nor the language of the parties' agreement relieved the tenant of its continuing liability under the lease.
This particular case clearly demonstrates that turning a blind eye to legal papers one receives -- even within a nonpayment or holdover proceeding -- could have severe consequences and forever foreclose a litigant's ability to wend anew.
For a copy of the Appellate Division's decision in Gallery at Fulton St., LLC v. Wendnew LLC, please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2006/2006_04773.htm