Kingsbridge Ct. Assoc., L.P. v Hamlette

[*1] Kingsbridge Ct. Assoc., L.P. v Hamlette 2009 NY Slip Op 52486(U) [25 Misc 3d 1238(A)] Decided on December 8, 2009 Civil Court Of The City Of New York, Bronx County Madhavan, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 8, 2009
Civil Court of the City of New York, Bronx County

Kingsbridge Court Associates, L.P., Petitioner,

against

Marion Hamlette, Respondent.



L & T 44408/09



Rosenblum and Bianco

100 Merrick Road, Suite 306 East

Rockville Centre, NY 11570

Attorneys for Petitioner

Marion Hamlette

2710 Sedgewick Avenue, Apt. 3E

Bronx, NY 10468

Respondent Pro Se

Jaya K. Madhavan, J.

This is a summary holdover proceeding. Petitioner seeks to recover possession of Apartment 3E at 2710 Sedgwick Avenue in Bronx County ("Apartment") on the ground that respondent has committed fraud in violation of federal regulations governing her Section 8 tenancy. Specifically, petitioner alleges that, from 2004 - 2008, respondent concealed her Social Security income from petitioner and the US Department of Housing and Urban Development (HUD) by not disclosing it in her annual income recertifications forms. Respondent, appearing without counsel, denies petitioner's allegations and claims that she "didn't understand what was going on with [her] income." (Answer, ¶ 2.) The court held a trial and now makes the following findings of fact and conclusions of law.

Respondent moved into the Apartment on April 25, 1981. (Pet. Exh. 6.) The Apartment is located in a development subsidized by HUD under its Section 8 Substantial Rehabilitation Program. (Id.; Petition, ¶ 6.) Among respondent's obligations under federal law and her lease is to timely and accurately report her annual income to HUD and petitioner in HUD prescribed recertification forms. (24 CFR § 880.607[b][3][ii]; Pet. Exh. 3, ¶ 15.)

In this vein, petitioner's first witness was Paula Fray, petitioner's property manager for the past nine years. Ms. Fray was largely credible. Her duties include, among other things, processing annual and interim recertifications.Ms. Fray testified that respondent always timely completed her recertifications, but that she did not report Social Security income for the years 2004 - 2009. However, Ms. Fray also could not recall the details of the contents of respondent's recertifications for those years with any degree of specificity.

Significantly, Ms. Fray testified that the impetus for this proceeding was an investigation initiated by HUD regarding possible fraud being committed by a number of tenants in the building. As a result of that investigation, on or about May 5, 2009, Ms. Fray received a letter from the HUD Office of the Inspector General (OIG). (Pet. Exh. 4.) That letter stated, in pertinent part, that respondent had

failed to report her income during the recertifications for 2004 through 2008. It was determined through Employment Income Verification and a [sic] interview that [respondent] has [*2]been receiving [S]ocial [S]ecurity payments of approximately $1000 per month. It was surmised through a HUD OIG investigation that [respondent] defrauded the Section 8 Program by only reporting income from her job and intentionally hid her income from [S]ocial [S]ecurity." (Id, emphasis added.)

The letter then instructed petitioner to "...follow the procedures found 4350.3 HUD Handbook Chapter 8 to pursue action against tenants who have been found to have committed fraud." (Id.)

On May 26, 2009, Ms. Fray wrote to respondent. (Pet. Exh. 5.) Ms. Fray quoted the excerpt above and instructed respondent to vacate the Apartment by June 30, 2009. (Id.)

The court then heard from Special Agent Michael Gross who was mostly credible. Agent Gross is a criminal investigator for HUD. His principal duty is to "detect fraud, waste and abuse" for HUD—OIG. Accordingly, he conducts Employment Income Verifications (EIVs) by comparing recertification information with outside wages and income. He conducts 20 - 25 such investigations each year.

Between January and March 2009, Agent Gross began his investigation of respondent's recertifications. He reviewed petitioner's tenant file and respondent's 2008 recertification. (Pet. Exh. 7.) On or about May 5, 2009, Agent Gross, Ms. Fray and respondent met in Ms. Fray's office. Agent Gross testified that he "asked [respondent] about the Social Security discrepancy." According to Agent Gross, respondent replied that she did not know that she had to report it. She then conveniently stated that she did not report her Social Security income because her rent would increase. Based on this interview and his EIV review, Agent Gross concluded that respondent had intentionally concealed income from HUD for the years 2004 through 2009, in violation of Section 8 program rules. He then sent Ms. Fray a letter instructing petitioner to "pursue action." (Pet. Exh. 4.)

Prior to affording respondent the opportunity to testify in her own behalf, the court informed her of the privilege against self—incrimination and her rights generally under the Fifth Amendment to the US Constitution. Respondent elected not to testify. Nor was respondent called as a witness by petitioner. Instead, respondent called a neighbor, Patricia Woods, to testify in her behalf. Ms. Woods lacked personal knowledge of any facts relevant to this proceeding. Her testimony is therefore of no probative value and is disregarded by the court.

Discussion

Regulations governing respondent's Section 8 tenancy permit petitioner to terminate the parties' Section 8 lease for material noncompliance with its terms. (24 CFR § 880.607[b][1][i][FN1].) United States Department of Housing and Urban Development Handbook 4350.3, REV—1 ("Handbook") defines material noncompliance to include fraud; that is, "knowingly provid[ing] incomplete or inaccurate information" to HUD in its income recertification forms. (Ch 8, ¶ 8—13 [*3][A] [3], emphasis in original; see also ch 8, ¶ ¶ 8—13[A] [1] [b]; 8—18 [D] [1].)[FN2] Thus, fraud requires an intentional misstatement or withholding of information which can be substantiated through documentation. (Id., ch 8, ¶ 8—17 [C] [2].) Absent documentation, "...the owner must treat the case as an unintentional program violation" for which termination of the tenancy does not lie. (Id., emphasis in original; see also Handbook, ch 8, ¶ 8—17 [E] [3], owners must substantiate incidents through documentation before pursuing them as fraud.)

When an owner suspects a tenant of committing fraud, he/she "must investigate and document the tenant's statements and any conflicting information the owner has received." (Handbook, ch 8, ¶ 8—17 [C] [1].) Suggested approaches include confronting the tenant with the discrepancy; obtaining additional information from other persons or agencies; and taking other actions to verify either the tenant's information or the conflicting information. (Id., ch 8, ¶ 8—17 [C] [1].) If the suspected fraud is documented, the owner must then "notify the tenant in writing of the error and identify what information is believed to be incorrect." (Id., ch 8, ¶ 8—17 [D] [1].) The owner must also provide the tenant with "an opportunity, within 10 days, to meet with the owner and discuss the allegations" on pain of possible termination of the tenancy. (Id., ch 8, ¶ 8—17 [D] [2] [a], emphasis in original.) During that meeting, the owner must be represented by someone who was "not involved in any manner with the review of the allegedly false information." (Id., ch 8, ¶ 8—17 [D] [2] [b].)

Following this meeting, the owner must determine whether the tenant committed fraud or an unintentional program violation. (Handbook, ch 8, ¶ 8—17 [E].) The owner must then give the tenant a "written final decision, based solely on the facts presented and discussed at the meeting...within 10 days of the date of the meeting. The decision must also state the basis for the determination." (Id., ch 8, ¶ 8—17 [D] [2] [c], emphasis in original.) "When fraud is present, the authorized course of action for owners to take is termination of tenancy." (Id., ch 8, ¶ 8—18 [D] [1].) The owner must then serve a separate 10 day notice of termination upon the tenant. (24 CFR §§ 880.607[b][1][i]; 880.607[c][1]; Handbook, ch 8, ¶¶ 8—13 [B] [2]; 8—13 [B] [4].)

Petitioner has failed to comply with many of these regulatory requirements. First, petitioner did not conduct any pre—termination investigation of respondent's alleged fraud. (Handbook, ch 8, ¶ 8—17 [C] [1].) Agent Gross testified that he investigated respondent's 2008 recertification between January and March 2009. As a result of Agent Gross' investigation and at his direction, Ms. Fray then met with Agent Gross and respondent on May 5, 2009.

Second and relatedly, petitioner neither alleged nor proved that it notified respondent in writing of the suspected fraud. (Handbook, ch 8, ¶ 8—17 [D] [1].) Nor did petitioner allege or prove that it gave respondent 10 days notice to meet with it to discuss possible termination of her tenancy. (Id., ch 8, ¶ 8—1[D][2][a].)

Third, however the May 5, 2009 meeting may have occurred, it was deficient for yet another reason. Petitioner was required to be represented at that meeting by someone who was [*4]"not involved in any manner with the review of the allegedly false information." (Handbook, ch 8, ¶ 8—17 [D] [2] [b].) As petitioner was represented by Ms. Fray who alone processed respondent's recertifications, the meeting violated this provision of the HUD Handbook as well.

Fourth, following the May 5, 2009 meeting, petitioner was required to give respondent a "written final decision, based solely on the facts presented and discussed at the meeting...within 10 days of the date of the meeting." (Handbook, ch 8, ¶ 8—17 [D] [2] [c], emphasis in original.) Instead, petitioner mailed a letter to respondent on or about May 26, 2009—more than 21 days after the meeting.

Petitioner's failure to comply with these conditions precedent is fatal to the commencement of this proceeding. For example, in Impac Associates v. Robinson, 9 Misc 3d at 1067, the court held that petitioner's failure to send the tenant a 10 day pre—termination letter, as here, required dismissal of the proceeding. Petitioner's omissions however extend well beyond providing respondent with the required 10 day pre—termination letter. By not complying with several HUD mandated requirements, petitioner eviscerated the procedural safeguards intended to prevent improper termination of respondent's federally subsidized tenancy.

The substantive impact of these procedural omissions is manifested in the woefully inadequate proof petitioner adduced at trial.Petitioner offered no documentary evidence to permit the court to draw even the slightest inference that respondent had committed fraud, let alone for it to conclude that petitioner had proven fraud by a preponderance of the evidence. Conspicuously absent from petitioner's case was any evidence that respondent actually received Social Security benefits for any period of time between 2004 and 2008. (See Handbook, ch 8, ¶ 8—17 [C] [1], owner investigation of suspected fraud may include obtaining information from other persons or agencies.) Petitioner did not even offer respondent's recertifications for the years 2004 - 2007. At best, petitioner offered the testimony of Agent Gross who only reviewed respondent's income recertification for 2008. Yet Agent Gross was somehow able to conclude from this one recertification that respondent had intentionally concealed Social Security income from HUD for the years 2004 through 2009. Even worse, Agent Gross' testimony is inconsistent with HUD—OIG's own letter to petitioner in which HUD stated that "[i]t was surmised through a HUD—OIG investigation that [respondent] defrauded the Section 8 program by only reporting income from her job and intentionally hid her income from [S]ocial [S]ecurity." (Pet. Exh. 4.) Collectively, this proof hardly establishes that respondent "knowingly provided incomplete or inaccurate information" to HUD. (Handbook, ch 8, ¶ 8—13 [A] [3].)

Accordingly, the petition is dismissed with prejudice. Petitioner is directed to recover its exhibits from the Part T Clerk in Room 470. This constitutes the Decision/Order of the court, copies of which are being mailed today to the parties as set forth below.

Dated:December 8, 2009

Bronx, NY

_______________________________________

Hon. Jaya K. Madhavan [*5]

Rosenblum and Bianco

100 Merrick Road, Suite 306 East

Rockville Centre, NY 11570

Attorneys for Petitioner

Marion Hamlette

2710 Sedgewick Avenue, Apt. 3E

Bronx, NY 10468

Respondent Pro Se Footnotes

Footnote 1:Management of apartments in the Section 8 Substantial Rehabilitation Program are governed by the regulations governing apartments in the Section 8 New Construction Program. 24 CFR § 881.601.

Footnote 2:HUD Handbook 4350.3, REV—1 is binding upon this court. (Nelson v. Roberts, 304 AD2d 20, 21 [1st Dept 2003], [HUD Handbook sets forth the procedures for implementing the Section 8 program]; Impac Associates Redevelopment Company v. Robinson, 9 Misc 3d 1065, 1067 [Civ Ct NY County 2005], [same].)