Robinson v. Robles

OPINION OF THE COURT

While at first glance this is merely an action to recover rent allegedly due for the period from May through September of 2006, this small claims case raises several significant issues which should be addressed. Rather than render a concise one-page opinion, a longer explanation of the court’s rationale and the limits of this court’s purview will be provided in the hopes that more than a simple judgment will flow from this decision wherein the court finds plaintiff landlord Cathaline Robinson1 is entitled to recover some back rent.

Findings of Fact

On March 31, 2005, the defendant tenant signed a one-year written lease for $425 per month on an apartment co-owned by the plaintiffs. When that agreement lapsed, the tenant remained “lease-less” in the apartment on a month-to-month basis until she left on October 31, 2006. While it is clear from the landlord’s testimony that her tenant fell behind in rent as early as June 2005, it is also apparent she accepted a small shortfall through January 2006 when the total back rent owed by the tenant amounted to $84. That amount increased dramatically, however, when the tenant paid no rent for the next two months and only $300 towards her rent for April 2006. Nonetheless, the landlord did not demand the $1,234 due at that point nor did she commence a summary eviction proceeding.2 Instead, she allowed the tenant to remain in the property and accepted various amounts of rent until Halloween of 2006.

Six weeks after Ms. Robles left the apartment, the landlord began this small claims action. The complaint she filed seeks to recover $1,734 alleging that “FROM MAY - SEPT 2006 PLAINTIFF HAS MONEY DUE FOR RENT AT 950 BAY *870STREET APT 14. ”3 Importantly, the landlord did not sue for any rent owed prior to May 2006 or after September 2006. Since the court is holding the landlord to the time frame set forth in her lawsuit, it is also substantially just for the court to consider the entire amount of rent due during that specific period.4 5Ap-plying that analysis, it is clear from the evidence before the court that the tenant underpaid her rent by $750 for those months. Accordingly, Ms. Robinson is entitled to a judgment in that amount.

Substantial Justice Delayed

While the landlord filed her action in a timely manner,6 the record clearly shows that she was much less prompt in pursuing the claim. Pursuant to the practice of the Rochester City Court, Civil Division, on the day the landlord filed her small claims action she selected February 6, 2007 for appearance before a hearing officer to arbitrate this matter. The clerk’s office promptly sent notice to the tenant which was received at her place of employment within a week. Even though the landlord had chosen the hearing date, she filed a letter with the court six weeks later requesting an adjournment. Her request was denied. The tenant appeared on the scheduled date but the landlord did not. On February 7, 2007, the hearing officer rendered a default decision in favor of the tenant.

The landlord then waited over a month before contacting an attorney regarding the filing of an order to show cause to vacate the default. Thereafter, she waited another three months until she signed the affidavit in support of the motion. The order to show cause was not filed with the court until more than three additional months had elapsed.

Next, a City Court judge scheduled argument of the motion for October 18, 2007 — 253 days after the default was entered. On the return date, however, counsel for the landlord withdrew the motion because the tenant had apparently not been served. *871A second City Court judge signed a second order to show cause on November 13, 2007 returnable 15 days later. That case was also withdrawn because the tenant still had not been served. The next affirmative court action taken by the landlord regarding her default was nine months later when she signed an exact copy of her 2007 affidavit. A third City Court judge signed an order to show cause two days later on August 29, 2008. Before that motion was to be heard in court, a fourth City Court judge signed yet another order to show cause to be argued on September 19, 2008 — more than 18 months after the landlord’s default. A fifth City Court judge granted the motion to vacate on that date and directed both parties to appear before this court on the merits of the claim. Amazingly, it took the landlord 558 days from her default to secure the court appearance during which the judge vacated the default and scheduled the case for a hearing two weeks out.

The Equitable Doctrine of Laches

As noted by the Court of Appeals, laches is “an equitable bar, based on a lengthy neglect or omission to assert a right and the resulting prejudice to an adverse party.”6 Although an appellate judge found this court improperly invoked the doctrine of laches when the case was first heard,7 the procedural history of this case clearly highlights the need for legislative reform.

Had the landlord sought this money as an ancillary request for relief in a timely summary proceeding to evict the defendant, her tenant would have been entitled to raise the defense of laches since statutorily her summary action “answer may *872contain any legal or equitable defense, or counterclaim.”8 The tenant could also have raised such a defense had she been sued in the regular civil part of this court. Yet, the landlord did not bring either action in April 2006, when her tenant still lived in the apartment and presumably was more cognizant of the current status of her rent payments as well as the physical condition of the apartment. Instead, the landlord waited over a year and a half from the date the tenant was first significantly short on her obligations to commence this small claims action for back rent. Once in a sheltered arena where the defense of laches was unavailable to the tenant, the landlord delayed another 18 months before this case was first heard on the merits. While the law allows for such a result, the question remains: is such an outcome substantially just?

In communities where there is significant poverty, transient tenancies subject to summary proceedings are the rule rather than the exception.9 As this case demonstrates, the longer a landlord waits to pursue a prior tenant for back rent, the greater the likelihood of problems relating to proper service and a tenant’s possible default in cases involving substitute service. While the record is not clear where the tenant resided during that period, throughout the almost 19 months between the landlord’s default and her first appearance on the merits of her lawsuit (which included at least three hiatuses of several months with no apparent activity on the landlord’s part) the tenant worked at the same nursing home located less than two miles from this courthouse. What possible public purpose is fostered by such delay? If a tenant was allowed to raise laches as a defense in small claims court, a court would be permitted to answer that question10 and decide whether the tenant had demonstrated any prejudice due to the delay.

The Need for a Written Rent Receipt

This case also illustrates another troubling aspect of many landlord-tenant cases — the apparent presumption that courts should accept each of the myriad creative accounting customs *873adopted by landlords. Summary eviction petitions before this court routinely lump “added rent” sums (such as late fees, attorney’s fees and utilities) with past-due rent. They also denominate as “rent” undisclosed security deposits or damage estimates. Perhaps the most pernicious patterns, however, are those in which current payments are applied toward amounts past due without acknowledging the portion so allocated. Such facts often come to light only when a court is called upon to hold a hearing in cases with such revolving landlord ledgers. At that point, the parties are usually unprepared to provide the court with reliable proof assigning specific payments to particular periods under the rented agreement. It is rare that a party provides this court with copies of the written rent receipt required by New York law in all residential leases.11

During the hearing in this case, the court admitted a ledger from the landlord purporting to show how she applied money received from her tenant.12 Critically absent on the issue of past-due rent, however, were the landlord’s copies of written rent receipts required by Real Property Law § 235-e. That statute provides that

“(a) Upon the receipt of rent for residential premises in the form of cash or any instrument other than the personal check of the tenant, it shall be the duty of the landlord to provide the payor with a written receipt containing the following:

*874“1. The date;

“2. The amount;

“3. The identity of the premises and the period for which paid; and

“4. The signature and the title of the person receiving the rent.”13

While the ledger was offered to show monthly payments made, it doesn’t suitably apprise the court of the time frame covered by each payment. While the court does not doubt the testimony of the landlord regarding how she applied the payments, there is no proof before the court that the tenant shared her opinion. There is no proof that there was any meeting of the minds concerning application of the payment to their verbal contract to lease residential premises. Had the landlord complied with her statutory responsibility to identify on a written receipt her allocation of the funds received each month to specific periods of occupancy this problem would have been solved. In this day of readily available carbonless-copy receipt books, failure to note at the bottom of a rent receipt how much of the money received goes to current rent and the amount applied to a specific prior period is inexcusable.

Significantly, such uncertainty is the precise problem Real Property Law § 235-e was designed to alleviate. Its proponents prescribed it as a means of “avoiding any discrepancies between landlords and tenants.”14 In urging the Governor to approve the bill, Attorney General Robert Abrams suggested that the law “affords tenants who pay their rent by cash increased protection in the form of a legible payment record to protect against a landlord’s possible harassment or faulty record keeping.”15 This view was echoed three years later by the Consumer Protection Board which observed that since “[t]enants facing eviction for non-payment must prove full payment of rent to keep their apartments . . . [the] bill would provide the necessary documen*875tation rather than leave tenants dependent on personal, and often inadequate, record keeping.”16

This landlord duty under Real Property Law § 235-e to note the rental time frame represented by the tenant’s payment contrasts with the general common-law rules that “the debtor may direct the application of his payments, but if he fails to do so, then the creditor is permitted to apply the payments as he sees fit” and the “presumption . . . that a payment is to be applied to that portion of the debt first becoming due.”17 The statute implicitly recognizes that with all forms of payment other than a personal check, the tenant will not have a negotiated instrument to present to the court indicating how the payment was to be apportioned. Thus, this court finds such a statutory departure in the context of residential leases is reasonable given recognized disparities between most landlords and tenants.

Consistent with the decision to rent property as an investment, most landlords understand they are subject to a number of special tax, health and safety rules. If they rent to low-income tenants, they also find themselves subject to various additional government regulations. Such responsibilities are part of the cost of doing business for a residential landlord. On the other hand, many tenants, especially those on low or fixed incomes, rent because their financial situation precludes them from owning a home. Most tenants are conscientious when it comes to paying rent. There are a few, however, who seem content to cycle through housing court by being chronically short on their rent payments. Assigning the landlord the responsibility for noting that part of the payment made is for past-due rent is not unreasonable in such situations, especially when the payment made approximates the sum due for one month’s rent. The question then arises: what remedy does a tenant have or should the court employ when a landlord fails to comply with Real Property Law § 235-e?

The Attorney General considered the absence of “a specific penalty for a landlord’s breach of the created duty” in the statute to be a defect, but urged that the problem be remedied later.18 Unfortunately, after the passage of almost 30 years and two amendments expanding the scope of Real Property Law § 235-*876e,19 we are still without statutory sanctions for a landlord’s failure to provide a written receipt.20 During that time, this statutory vacuum has been filled by court decisions imposing various judicial remedies.21

One court has held that failure to comply with the statute “may be considered in weighing the testimony of the landlord . . . and where the landlord has clearly violated Real Property Law § 235-e, the doubt should be resolved in favor of the tenant.”22 Another found that “where the only evidence before the court is the contradictory statements given under oath by the respective parties, and where the landlord has clearly violated section 235-e of the Real Property Law, the doubt should be resolved in favor of the tenant.”23 A third judge has ruled that a “rebuttable presumption in favor of the tenant as to payment of rent is an appropriate judicial response to a violation of Real *877Property Law Section 235-e by the landlord.”24 One judge awarded back rent finding there had been substantial compliance with the statute as the landlord gave the tenant monthly statements and the tenant did not deny owing rent or contradict the landlord’s testimony.25 Although none of these remedies have yet to be considered by an appellate court, the issue was recently briefed before the Appellate Division, First Department. The court seems to have implicitly acknowledged the statutory violation while the judges found it unnecessary to consider any remedy for the landlord’s “misconduct”26 due to the tenant’s conflicting testimony.

In each of those cases, however, both parties appeared. In this case, while the tenant did testify in October 2008, she defaulted when the case was reheard following the landlord’s successful appeal. Thus, there is no testimony before the court contesting the application of the payments made. The tenant has also failed to offer proof as to habitability issues as she did when she testified previously. In addition, there are no written rent receipts pursuant to Real Property Law § 235-e in evidence. Therefore, on the record before it, this court finds it is substantially just to give the tenant credit for the amount of money the landlord admits was paid during the period in question while applying those funds only to the period covered by this lawsuit.

Conclusion

This case highlights an all too common dilemma for citizens seeking sensible solutions from a court system that can only be resolved through targeted legislative action. How can our neighbors use a small claims court as the people’s court where substantial justice is the goal when case law precludes judges from recognizing equitable defenses such as laches? How can laches be recognized as a statutory defense in a summary eviction proceeding based on failure to pay back rent or in the regular civil part of the court and yet not be allowable in a small claims action wherein the landlord seeks the same relief?27 While the legislature has already recognized the need for a small *878claims court to be able to “condition the entry of judgment upon such terms as the court shall deem proper,”28 it is now time to give the court the tools it needs to accomplish substantial justice by making it clear that during the proceeding the court can consider certain defined equitable claims, counterclaims and defenses.

Moreover, after 30 years of differing judicial approaches imposing sanctions for the widespread failure of landlords to provide statutorily required written rent receipts and the needless chaos such conditions create in courts across the state, it is time to make a meaningful adjustment to Real Property Law § 235-e to provide landlords with an incentive to comply with this 30-year-old consumer protection law. Otherwise, how can courts claim to fully protect the rights of both landlords and tenants, most of whom appear pro se?

While many tenants have college or advanced degrees, some do not. Instead, a number of our poorest neighbors have not finished high school. Nonetheless, they come to court armed *879with a sense of right and wrong and expect a system that will allow them a meaningful day in court. Over the past 11 years, litigants before this court have often expressed concern that they would have had the witnesses or documentary proof needed to prevail if only the case had been brought earlier. While the case law may be clear and the statutory scheme self-evident, it doesn’t mean the present state of affairs is just or that it is not in need of reevaluation.

“Substantial Justice” — the standard of review in small claims court — must mean something. A small claim is not simply a civil suit for $5,000 or less! For those litigants who want all the rights and responsibilities provided for in the Civil Practice Law and Rules, City Court already has regular civil jurisdiction for lawsuits valued at $15,000 or less. For those not represented by counsel who want a more user-friendly forum where the court is not “bound by statutory provisions or rules of practice, procedure, pleading or evidence,”29 small claims is the place to be. Small claims court originated during the great depression “to insure swift and equitable poor man’s justice in the State. In the words of a commentator at the time, the government had at last recognized ‘the plight of the poor litigant. . . whose demand, though small, was just and vital.’ ”30 As noted by Professor Siegel, “Small Claims Court may be the only contact many people will ever have with the court system.”31 The court system and the legislature have an obligation to New Yorkers to make sure they feel they’ve been fully accorded the substantial justice to which they are statutorily entitled.

In hopes of fostering spirited discussion regarding the small claims issues raised by this case, the court respectfully suggests some possible solutions:

*880Amend the Small Claims Acts to Allow the Court to Consider Limited Equitable Claims, Counterclaims and Defenses

The legislature should amend the various uniform local court acts to make it clear that judges in small claims cases can consider equitable claims, counterclaims and defenses32 (e.g. laches, quantum meruit,33 clean hands34) only in the context of awarding a money judgment. This could be accomplished by adding the following sentence to the end of section 1804 in the various local court acts:35

“In every small claims action, the judge or arbitrator may consider equitable claims and counterclaims including, but not limited to, unjust enrichment and quantum meruit, and equitable defenses including, but not limited to, laches and equitable estoppel within the context of awarding a money judgment pursuant to section 1801 of this act.”

As crafted, this provision would fulfill the legislative promise to provide substantial justice while precluding a judge or arbitrator from straying from the substantive law or considering equitable relief such as an injunction36 or declaratory relief.37

*881Amend Real Property Law § 235-e to Provide a Meaningful Sanction for Noncompliance

The legislature should finally provide for a statutory remedy and insure consistency in application of its provisions statewide by establishing a six-month statute of limitations on actions for past-due rent in cases where the landlord has failed to provide appropriate written rent receipts38 by adding the following language to Real Property Law § 235-e: “(c) Any action for residential rent under this or any other provision of law wherein the landlord has failed to provide the written receipts required above must be commenced within six months of the alleged default.” This amendment would serve as an incentive to provide such proof of payment since landlords who fully comply with Real Property Law § 235-e would be able to avail themselves of the full six-year statute of limitations.39

Establish Logical and Consistent Burdens of Proof Regarding Unpaid Rent

The legislature should amend the court acts and Real Property Actions and Proceedings Law regarding allocation of the burden of proof in unpaid rent cases. The laws should assign to the tenant the burden of proving why rent wasn’t paid during the three months immediately preceding filing of the action. For periods earlier than that, the laws should require the landlord *882to demonstrate why he or she is entitled to rent owed from four or more months before judicial intervention was sought.40 For instance, RPAPL 711 could be amended as follows:

“3. In any proceeding to recover residential rent under this or another provision of law, as long as the landlord has provided written rent receipts pursuant to Real Property Law § 235-e, the tenant shall bear the burden of proof regarding rent for the three months immediately prior to the filing of the action and the landlord must demonstrate entitlement to rent for any earlier period.”41

Such a statewide allocation of responsibility would bring consistency to proceedings now subject to various judicial remedies. This approach would also assist courts in distinguishing between those tenants attempting to live rent-free by playing the system and those tenants who have fallen on hard times. Importantly, by allowing landlords to explain why they accepted less than a month’s rent, this rubric would acknowledge the good will and caring exhibited by the majority of landlords, like those in this case, who try to work with their tenants until they can get back on their feet.

After due deliberation and careful consideration of the evidence before the court, taking into account the demeanor and *883nonverbal communication of each witness42 and consistent with the court’s responsibility under section 1804 of the Uniform City Court Act “to do substantial justice between the parties according to the rules of substantive law,” it is hereby held that plaintiff Schouten is in default and that claim is dismissed. And it is further held that plaintiff Robinson may have a judgment for the portion of rent for the months of May through September 2006 which was not paid by the defendant tenant. And it is further ordered that the plaintiff is entitled to a judgment for $750. And it is further ordered that, in addition to any other copies provided, the clerk’s office is to furnish the plaintiff with a certified copy of this decision. And it is further ordered that given the service of process history of this case (including the defendant’s default when this case was heard on appeal and her failure to appear when this matter was heard on remand) and consistent with this court’s authority under UCCA 1805 and CPLR 2201, the judgment ordered in this case is stayed until 45 days after the plaintiff has served the certified copy of this order directly into the hands of the defendant. And it is further ordered that defendant pay the plaintiff the amount of $750 within 30 days of receiving hand delivery of the certified copy of this order to allow the defendant to pay the amount ordered without a judgment being entered. And it is further ordered that if payment is not made within 30 days of the hand delivery of the certified copy of this order to the defendant, the judg*884ment shall be entered in favor of the plaintiff once 45 days have passed from the hand delivery of the certified copy of this order and after receipt of plaintiff’s written request for entry of a judgment accompanied by a notarized affidavit dated after the 45 days have elapsed indicating that no appeal of this order has been taken by either party and that payment was not made by the defendant as ordered. And it is further ordered that if the defendant is not directly served with the certified copy of this order within six months of the date of this order, then the judgment may not enter without further order of the court.