Kraft, Haiken & Bell v. Bell & Co.

(Civ. Ct. N.Y. Cty. 6/9/94)

We represented: Petitioner

Joan A. Madden, J.C.C.

This is a commercial summary non-payment proceeding commenced by the service of the notice of petition and petition on September 10, 1993. Respondent took possession of the subject premises pursuant to a sublease with petitioner's predecessor-in-interest Kraft, Fischman & Associates, for a term beginning May 1, 1990, ending October 30, 1993, in which respondent leased a portion of petitioner's office space. Shortly after the lease term began, respondent entered into a partnership agreement with Kraft, Fischman & Associates, in which the parties agreed to practice as co-partners under the names Kraft, Haiken & Bell. Thus, pursuant to said partnership agreement, the respondent became a partner in the petitioner partners. Paragraph 15.4 of the partnership agreement provided that the operation of the sublease would be suspended during the period in which the partners of Bell & Co. remained in the newly formed partnership, and would be operative in the event that either David Bell or Evan Bell withdrew from the partnership. On or about June 1991, Evan Bell withdrew from petitioner partnership, thereby reinstating the sublease. The petition seeks to recover rent allegedly owed from December 1992 to the present.

By notice of motion originally returnable October 27, 1993, petitioner moved for an order restoring this case to the calendar; dismissing respondent's first, third, fifth and seventh affirmative defenses in their entirety, and dismissing a portion of respondent's second affirmative defense; dismissing respondent's three counterclaims; and striking respondent's jury demand. By decision and order dated December 13, 1993, Judge York granted petitioner's motion to the extent of setting the matter down at Special Term Part II of this Court for a hearing on the issue of service and for final disposition of the motion.

On February 10, 1994, the parties appeared before me for traverse, at which time they stipulated to the facts and the submission of memoranda of law, "on the limited issue of whether service of the notice of petition and petition was proper in view of the fact that process server made no attempt to serve respondent personally before delivering papers to person of suitable age and discretion and doing follow-up mailings."

The first affirmative defense asserts that the Court lacks personal jurisdiction due to improper service of the notice of petition and petition. Respondent stipulated to the truth of the allegations set forth in the affidavit of service which states that service of the notice of petition and petition was effectuated by delivering a copy of the papers to Lori Smith, a secretary employed by respondent at the premises sought to be recovered. Respondent contends that service of process was improper because a process server must attempt personal service before resorting to substituted service and the process server was serving a co-tenant and should not have left the papers with a secretary employed at the premises. Petitioner argues that no attempt at personal service is necessary before resorting to substituted service under RPAPL Section 735.

Section 735(1) of the Real Property Actions and Proceedings Law, states in relevant part, as follows:

Service of the notice of petition and petition shall be made by personally delivering them to the respondent; or by delivering to and leaving personally with a person of suitable age and discretion who resides or is employed at the property sought to be recovered, a copy of the notice of petition and petition, if upon reasonable application admittance can be obtained and such person found who will receive it; or if admittance cannot be obtained and such person found, by affixing a copy of the notice and petition upon a conspicuous part of the property sought to be recovered . . . (Emphasis added.)
Pursuant to the above-cited statute, there are three methods of service available to one seeking to commence a summary proceeding. The first two methods are personal service and substituted service. It is well settled that "the party seeking to effect service may, at his option, unconditionally select either method [personal service or substituted service] without a requirement that any other method first be tried." (Palumbo v. Clark's Estate, 94 Misc. 2d 1 (Civ Ct Bx Co 1978); See Park Avenue Associates v. Kwit, N.Y.L.J., July 15, 1987, p. 11, col. I (App Term 1st Dept); RPAPL Section 735; Service of Process under Section 735 of the RPAPL, Wendt & Benjamin, 60 N.Y.S.B.J. 38 (April 1988).) Contrary to respondent's assertion, there is no support either in case law or in the statue, that a process server must make a "reasonable application" to serve a respondent partnership personally before resorting to substituted service. It is only after a "reasonable application" has been made to effect service by personal delivery or substituted service that conspicuous place service, the third and least desirable method of service, may be employed.

Respondent's contention that the Court must look to CPLR 310 governing service of process on a partnership for guidance and that service on a partnership must be effectuated by personal service on a partner, is unsupported by legal authority. In actions involving service of a partnership under CPLR 310, courts have repeatedly upheld substituted service on a partnership. (See Marton Associates v. Vitale, 172 A.D.2d 501 (2nd Dept 1991); Searing v. Anand, 127 A.D.2d 582 (2nd Dept 1987); Hickey v. Naruth Realty Corp., 71 A.D.2d 668 (2nd Dept 1979); Atkinson v. D.M.A. Enterprises Ltd., 605 N.Y.S.2d 195 (Sup Ct NY Co 1993); Agin v. Krest Associates, 599 N.Y.S.2d 367 (Sup Ct NY Co 1992); Bridgehampton National Bank v. Watermill Heights Associates, 157 Misc. 2d 246 (Sup Ct Suffolk Co 1993).) Cooney v. East Nassau Medical Group, 136 A.D.2d 392 (1st Dept 1988), cited by respondent, in which the Court found that, unlike service upon a corporation, personal delivery to an executive secretary of a partnership was inadequate, has been overruled by the 1991 amendment to CPLR 310, which added subdivision (d).

Similarly, respondent's reliance upon Ilfin v. Benec Industries, 114 Misc. 2d 411 (Civ Ct NY Co), is misplaced. In that case, the court held that service of process under RPAPL § 735 on an employee of a co-tenant of respondent was defective as the person served was not an employee of respondent and therefore not a person of suitable age and discretion. The distinguishing factor between IIfin and the case at the bar is that the person served herein was an employee of the respondent, not of a co-tenant.

Accordingly, the Court finds that the substituted service of the notice of petition and petition upon an employee of respondent at the premises sought to be recovered, was proper. There was no requirement that the process server attempt to serve respondent by personal delivery before resorting to said method of service. Therefore, respondent's first affirmative defense of lack of personal jurisdiction is stricken.

Respondent's second affirmative defense alleges a failure of consideration based in part on petitioner's alleged breach of several covenants of the partnership agreement and in part on petitioner's alleged breach of the sublease. Respondent claims the sublease was such "an integral part of the partnership agreement," and "expressly tied into and made part of [it]," and that, the two documents are so inextricably intertwined and interdependent that they must be interpreted together. The alleged breach of the sublease involves petitioner's failure to provide respondent with telephone lines, offices and other amenities. Respondent argues, based upon the foregoing, that the breach of the partnership agreement as well as the breach of the sublease, are each properly interposed.

Petitioner contends that the portion of respondent's defense alleging breach of the partnership agreement should be stricken as the partnership agreement and sublease are separate and distinct agreements and a breach of the partnership, if any, cannot constitute a defense to the instant non-payment proceeding.

Contrary to respondent's contention, although the partnership agreement modified the sublease, the terms of the sublease were neither merged nor incorporated into the partnership agreement. As previously stated, paragraph 15.4 of the partnership agreement specifically provided for the suspension of the sublease during the period the newly formed partnership remained intact, and its reinstatement if David or Evan Bell withdrew. It is undisputed that Evan Bell withdrew from the partnership in June 1991, triggering the clause in paragraph 15.4 reinstating the sublease. The rent sought herein is for the months from December, 1992 to the present, a period subsequent to the reinstatement of the sublease. Thus, the dispute between respondent and petitioner (and others), concerning the partnership agreement is separate and distinct from petitioner's claim for rent herein. Accordingly, respondent's second affirmative defense is stricken to the extent it alleges that petitioner's breach of the partnership agreement relieves respondent of the obligation to pay rent. That portion of respondent's second affirmative defense that alleges failure of consideration based upon petitioner's alleged breach of the terms of the sublease is not stricken.

Respondent's third affirmative defense alleges that the petition names a non-existing party and fails to join a necessary party. Respondent contends that the partnership of Kraft, Fischman & Associates is a necessary party to this proceeding because said partnership was a party to the relied-upon sublease. However, pursuant to the partnership agreement, Kraft, Fischman & Associates was absorbed into the petitioner partnership when it merged with Bell & Company, CPAs. Respondent further contends that respondent Bell & Company, CPAs is not a proper named respondent inasmuch as the sublease was suspended. However, the partnership agreement specifically provided that the sublease would be reinstated if Evan Bell or David Bell withdrew from the partnership. Therefore, respondent's third affirmative defense is stricken.

Respondent's fifth affirmative defense alleges that petitioner may not maintain the instant proceeding, as the partnership agreement modified the sublease and the terms of the arbitration clause in the partnership agreement requires that arbitration precede the action herein. Petitioner asserts that the sublease contains no provision relating in any way to arbitration, and the partnership agreement is inapplicable to petitioner's right to commence this proceeding for non-payment. As previously set forth, the partnership agreement and the sublease are independent documents. The partnership agreement does not require the parties to arbitrate disputes under the sublease. Indeed, paragraph 15.4 of the partnership agreement provides that respondent is liable for "the performance of all of the terms, provisions and conditions provided in the Sublease." As there is no arbitration provision in the sublease, respondent's fifth affirmative defense is stricken.

Respondent's seventh affirmative defense alleges "estoppel." Respondent contends that because petitioner has acted wrongfully in failing to meet its obligations under its partnership agreement, petitioner is estopped from proceeding in Civil Court in summary proceedings. As indicated above, petitioner's purported breach of the partnership agreement is independent from petitioner's claim for rent under the sublease. Therefore, respondent's seventh affirmative defense is stricken.

Petitioner also moves to strike respondent's three counterclaims and jury demand interposed in this proceeding based upon a waiver provision contained in Article 25 of the lease dated February 4, 1977, ("overlease"), between petitioner's predecessor-in-interest, Kraft, Fischman & Associates and the owner of the subject building's predecessor-in-interest, which was incorporated into paragraph 1 of the sublease between the parties herein. Article 25 of the overlease provides, in pertinent part:

It is mutually agreed by and between Landlord and Tenant that the respective parties hereto shall and they hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Landlord and Tenant, Tenant's use of or occupancy of said premises, and an emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Landlord commences any summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding.
Paragraph I of the sublease between the parties, states in part, as follows:

The parties acknowledge that the Landlord herein is a tenant pursuant to a certain lease dated February 4, 1977 between 551 Fifth Avenue Corporation, as Landlord, and Kraft, Fischman & Associates, as Tenant, and an Extension Agreement dated April 30, 1987 between Cross & Brown Company, as agent for Metropolitan Life Insurance Company, the Landlord, and Kraft, Fischman & Associates, as Tenant, which lease is hereinafter referred to as the Main Lease and the Extension Agreement. A true copy of the Main Lease and the Extension Agreement has been delivered to and initialed by the Tenant. It is expressly understood and agreed that this Sublease is subject to all of the terms, conditions and covenants of the Main Lease and Extension Agreement.
Respondent contends that the jury demand and counterclaims should not be stricken because petitioner has failed to set forth a valid written waiver. Respondent argues that the sublease itself does not contain a jury or counterclaim waiver, and that the overlease containing the waiver provision was never delivered to and initialed by respondent as stated in paragraph I of the sublease set forth above.

Respondent's jury demand is stricken. Petitioner has demonstrated that the provisions of the overlease are binding upon respondent. The sublease explicitly states that the sublease is subject to all the terms of the overlease. Together the overlease and sublease comprise a complete and integrated writing. Respondent's representation that it did not receive or initial the overlease is in direct conflict with. the language of the sublease. Where an agreement is complete upon its face, and the alleged parol evidence contradicts the writing, such evidence is inadmissible. (See NPS Engineers and Constructors, Inc. v. Underweiser, 141 A.D.2d 412 (Ist Dept 1998), mod. on other grounds, 73 N.Y.2d 996 (1989).

Respondent further contends that despite the waiver provision, the counterclaims should not be stricken because they are inextricably interwoven with petitioner's claim for rent. However, respondent's counterclaims all relate to the petitioner's alleged breach of the partnership agreement, and as such are not inextricably intertwined with petitioner's claims herein. In addition, respondent admits that disputes arising out of the partnership agreement must determined by the American Arbitration Association of New York. Accordingly, respondent's counterclaims are stricken from this proceeding.

In sum, petitioner's motion is granted to the extent of striking respondent's first, third, fifth, and seventh affirmative defenses. Respondent's second affirmative defense is stricken part as set forth above. Respondent's jury demand and counterclaims are stricken.