Matter of Gomez v New York State Div. of Hous. & Community Renewal

[*1] Matter of Gomez v New York State Div. of Hous. & Community Renewal 2009 NY Slip Op 50613(U) [23 Misc 3d 1107(A)] Decided on March 20, 2009 Supreme Court, Kings County Hinds-Radix, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on March 20, 2009
Supreme Court, Kings County

In the Matter of the Application of Isabel Gomez, Petitioner, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules,

against

New York State Division of Housing and Community Renewal, Respondent.



24456/08



Attorneys for Petitioner

Kelley Drye & Warren LLP

101 Park Avenue

New York, New York 10178

Brooklyn Legal Services Corp.

25-260 Broadway

Brooklyn, New York 11211

Attorneys for Respondent

Attorney General of New York

120 Broadway, 24th Fl.

New York, New York 10271

N.Y.S. Div. of Housing and Community Renewal

25 Beaver Street, Room 707

New York, New York 10271

Sylvia O. Hinds-Radix, J.

Upon the foregoing papers, petitioner Isabel Gomez ("Petitioner"), moves pursuant to Article 78 of the CPLR, for an order, reversing the June 27, 2008 determination of respondent [*2]New York State Division of Housing and Community Renewal ("DHCR") which denied her petition for administrative review (PAR) and affirmed a determination of the Rent Administrator's (RA) finding of no rent overcharge.

Background

On September 24, 2007, petitioner, a tenant occupying apartment 6 in a thirty-five-unit apartment building located at 293 Hooper Street in Brooklyn, filed a rent overcharge complaint with the DHCR. In the rider to the overcharge complaint, petitioner stated that she moved into apartment six on January 1, 2001 pursuant a two-year lease agreement with then owner Taipei Realty, Corp. (Taipei Realty), at a rent of $1,100 per month. Petitioner claimed that said rent was forty -one percent higher than the legal rent of $778.96 as registered in July 2000. She alleged that the largest share of that forty-one percent increase is attributed solely to the unilateral and illegal decision by Taipei Realty to treat Apartment six and most of the apartments in the building as permanently exempt from rent stabilization. Petitioner also alleged that in 1997 and 1998 Taipei Realty registered the apartment as rent stabilized with a monthly rent of $728 and $778, respectively; in 1999 it registered apartment six as permanently exempt; it then registered the subject apartment as rent stabilized in 2000; and in 2001, the year that she moved into apartment six, it reported apartment six as permanently exempt. According to petitioner, DHCR's registration records indicate that most of the other units in the subject building were similarly reported as permanently exempt year after year, beginning in the late 1990s, initially by Taipei Realty and later by 301 Hooper Realty LLC (Hooper Realty). Petitioner alleged that Taipei Realty knowingly and willfully perpetrated a fraud against the tenants, the DHCR and the public by reporting apartment six and most of the other units in the building as permanently exempt. As such, petitioner alleged that all rent increases based on that fraudulent rent registration were illegal. Additionally, petitioner claimed that in or about 2003, Hooper Realty acquired the subject building and registered apartment six as permanently exempt.

The records before the court indicate that on August 5, 2004, Hooper Realty filed an application with the DHCR seeking a determination as to whether the subject building was exempt from regulation by virtue of it having undergone a substantial rehabilitation by the prior owner during the period 1982-1983 after the building had been destroyed by fire. In a December 28, 2005 decision, the RA determined that "the owner has not established that at least 75% of the building wide and apartment systems were replaced as part of the major renovation done in 1982-83." On review, the Deputy Commissioner, in March of 2006, affirmed the order of the RA, finding that the subject building remained rent stabilized and had not undergone a substantial rehabilitation so as to exempt it from the Rent Stabilization Law. Petition contends that in April of 2006, following the DHCR's order finding the building remained rent stabilized, the owner filed annual registration statements for apartment six for the years 2003 through 2005 which reflects said apartment as being rent stabilized.

As to petitioner's overcharge complaint, on or about April 2, 2008, the RA issued an order, finding that all rent adjustments subject to the base date were lawful and that there was no overcharge. Petitioner filed a PAR on or about April 30, 2008 challenging the RA's finding of no [*3]rent overcharge. Petitioner relied on the case of Thornton v Baron, 5NY3d 175, 181 [2005] to support her PAR. On June 27, 2008, the Deputy Commissioner issued an order denying petitioner's PAR and affirming the order of the RA. The Deputy Commissioner noted that "the tenant is challenging registration records which pre-date the base date rent which is not subject to examination." The Deputy Commissioner also noted that "the tenant's complaint was filed on September 24, 2007, and therefore, the base date for this proceeding was determined to be September 24, 2003", and further noted that he "found no reason why the tenant could not have challenged the rent within four years of her initial occupancy of the apartment." Further, the Deputy Commissioner determined that the decision in Thornton does not apply to the instant proceeding.

Thereafter, the instant article 78 proceeding ensued. Petitioner seeks an order, pursuant to CPLR 7803 (3), reversing the Deputy Commissioner's findings of no rent overcharge on the grounds that the decision is arbitrary and capricious and based on an error of law. Petitioner also seeks treble damages for the owner's alleged willful collection of rent overcharge, and for attorney's fees. In support of the petition, petitioner asserts, among other things, that the Deputy Commissioner "committed an error of law in dismissing her allegations regarding false registration statements as irrelevant; and the Rent Administrator failed to address her allegation that her base date rent was derived from "many years of fraud and deception" carried out by Taipei Realty in an effort to exempt the subject building from the Rent Stabilization Law.

In opposition to the Article 78 petition, respondent contends, among other things, that the DHCR's order properly limited the review of the subject rent history to four years before the filing of petitioner's rent overcharge complaint in compliance with section 26-5162 (a) of the Rent Stabilization Law, and as such, petitioner's Article 78 petition should be dismissed.

Law

It is well settled that in reviewing a judgment of the DHCR, the court is limited to a review of the record which was before the DHCR and to the question of whether its determination was arbitrary and capricious and without a rational basis (Flagg Court Realty Co. v Holland, 265 AD2d 327 [1999]). If the court finds that a rational basis exists, a court may not substitute its judgment for that of the agency (Tockwotten Assocs. v DHCR, 7 AD3d 453 [2004]); Matter of Purdy v Kreisberg, 47 NY2d 354 [1979]); Indeed, an agency's determination acting pursuant to legal authority and within its area of expertise, is entitled to deference (see Saluati v Eimicke, 72 NY2d 784 [1988]). "It is established that the administrative agency charged with enforcing a statutory mandate has broad discretion in evaluating the pertinent factual data and the inferences to be drawn therefrom, and, its interpretation will be upheld so long as it is not irrational or unreasonable" (Wembly Management Co. v DHCR, 205 AD2d 319 [1994] citing Matter of Ansonia Residents Assn. v DHCR, 75 NY2d 206, 213 [1989]). An action for residential rent overcharge shall be commenced within four years of the first overcharge alleged and no determination of an overcharge and no award or calculation of an award of the amount of any overcharge may be based upon an overcharge having occurred more than four years before the action is commenced (Rent Stabilization Code 9NYCRR section 2526 [a] [2]). Courts faced with this issue have consistently held that the Rent Regulation Reform Act [RRRA] "specifically precludes examination of the rental history of the housing accommodation prior to the four-year period preceding the filing of the complaint" (Pechock v New York State Div. of Housing and [*4]Community Renewal, 253 AD2d 655; [1998];Zafar v Pilkes, 245 AD2d 218, 219; Daniel v New York State Div.of housing and Community Renewal, 179 Misc 2d 452, 463[1998]).

Petitioner compares the facts of the instant case to the facts of the case in Thornton v Baron, 5NY3d 175, 181 [2005] and seeks to have the court apply the rule laid down by the Court of Appeals in Thornton to her overcharge complaint. In Thornton, the "prime tenant" entered into an unlawful, purportedly non-stabilized lease and never actually occupied the apartment, but immediately sublet it at a higher rent so that both the owner and the "prime tenant" earned profits far above what the Rent Stabilization Law allowed. id., at 178. Thereafter, the sub-tenants sued both the "prime tenant" and the landlord for rent overcharge and for adjustment of the legal regulated rent. The Court noted that based on the particular circumstances in Thornton, which included collusion on the part of the landlord and the tenant to remove an apartment from regulation under the rent stabilization laws, the legal regulated rent would be determined by the DHCR-developed default formula. The Court further held that a lease provision purporting to exempt an apartment from rent regulation in exchange for an agreement not to use the apartment as a primary residence is against public policy and is void. Id., at 179. The Court found the tenants' lease was void at its inception, the rent it purported to establish was invalid, and the rent registration statement listing the illegal rent was a nullity. Id., at181. The Court further stated that although the four-year statute of limitations applicable to rent overcharge claims cannot be ignored or set aside, the statute of limitations period must not be applied so as to permit the defendants to reap the reward of their fraudulent conduct. Id., at 181-182. Based on the facts in Thornton, the Court authorized looking beyond the four-year statute of limitations to establish the legal regulated rent for an apartment.

Petitioner asserts that like the owner in Thornton, the prior owner in the instant proceeding "sought to fraudulently remove petitioner's apartment from regulated rent by taking advantage of the expiration of J-51 benefits to report the apartment as permanently exempt, despite not satisfying the statutory requirements for such exemption." Additional, petitioner contends that like Thornton, the rent registration statements filed by the prior owner is a nullity, and since there are no reliable rent records from which to calculate the plaintiff's rent, the court should apply the DHCR's default formula to her overcharge complaint. This court notes that the facts and situation in Thornton differs from the instant case. As noted by the RA, the Thornton case "involved a broad scheme to use leases between illusory tenants and subtenants to bypass the Rent Stabilization Law's prohibition against profiteering." In the instant case, there is no suggestion of a scheme similar to that found by the Court of Appeals in Thornton and no evidence that the petitioner's lease was fraudulent or void at its inception.

Conclusion

Based on a thorough review of the papers submitted on this petition, the court finds that the DHCR's June 27, 2008 order denying the petition for administrative review is based upon the Rent Stabilization Code and is based in reason on the facts at bar. The Deputy Commissioner determined that based on the Rent Stabilization Code, the petitioner challenged registration records which predated the base date rent which was not subject to examination review (Rent Stabilization Code 9NYCRR section 2526 [a] [2]) and, he dismissed petitioner's overcharge complaint. It therefore cannot be said that the DHCR's decision was arbitrary, capricious or improper in any way. An agency's final determination should not be disturbed where the court [*5]finds the determination to be rationally based upon the law and the administrative record (Gracecor Rlty. Co. v Hargrove, 90 NY2d 350, 35 [1997]; Salvati v Eimicke, 72 NY2d 784, 791[1988]).

Accordingly, the instant Article 78 petition for an order reversing the June 27, 2008 determination by the DHCR is denied in its entirety and this proceeding is dismissed.

In light of the above, petitioner's request for treble damages and attorney's fees is denied.

The above constitutes the decision and order of the court.

E N T E R,

J.S.C.