315 E. 72nd St. Owners, Inc. v New York State Div. of Hous. & Community Renewal
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315 E. 72nd St. Owners, Inc. v New York State Div. of Hous. & Community Renewal 2012 NY Slip Op 30137(U) January 18, 2012 Supreme Court, New York County Docket Number: 109077/11 Judge: Joan B. Lobis Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. SCANNED ON 112012012 [* 1] SUPREME COURT OF THE STATE OF Nl3W YORK N'EW YORE COUNTY PRESENT: hbs PART Jurdlcr 6 Y. FILED JAN 1 9 2012 NEW YORK COUNTY CLERKS OFFICE Ditad: s IIIcdx1 2. CHECK A8 APPROPRIATE: ..,&&~&!,T!WBN J.S.C. IS: 3. CHECK IF APPROPRIATE: .......l....ll.l..l..ll....lll.....l..........~~ Q m D &ED ORDER DO NOT POST ORANTED IN PART 0 OTHER OSUBMIT ORDER I PIWCIAF~V wPoiNTAnetn J CIREFERENCE [* 2] SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY. IAS PART 6 X In the Matter of the Application of 315 EAST 72nd STREET OWNERS,INC., l..-___ll-____ll.__l_IIIc-IIyIIIycI---yI-- Index No. 109077111 Petitioner, For a Judgment Pursuant to Article 78 of thc Civil Practice Law and Rules - against NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, , FILED MORTON DROSNES, JAN 1 9 2012 Respondents. X _1___._11-_--1----------------11__--__1------1-11------------ JOAN B LOBIS, J.S.C.: . NEW YORK COUNTY CLERKS OFFICE Petitioner 3 15 East 72nd Street Owners, Inc. (the Ow& ) brings this petition under Article 78 of the C.P.L.R., seeking an order revoking the determination of respondent New York State Division of Housing and Community Renewal ( DHCR ) dated June 6,201 1, denying the Owner s petition for administrative review ( PAR ). Respondent-tenant Morton Drosncs and DHCR each answer the petition and ask that the petition be denied on the basis that DHCR s detennination was rational. Mr. Drosnes is the rent-stabilized tenant ofrccord of aunit (the Unit ) located at 3 15 East 72nd Street, a building owned by the Owner. The Unit is subject to the Rent Stabilization Code ( RSC ) N.Y.C.RR $9 2520.1-253 1.0) and the Rent Stabilization Law (, R! ) (9 (Administrative Code of the City of New York 26-501-26-520). On or about M r h 3,2009, the Owner s w d ac ee M .Drosnes with an income certification form ( ICF ). Admin Code Q 26.504.3&); 9 N.Y.C.R.R r 4 253 1.2. On the ICF,Mr.Drosnes was required to list the names of all tenants and [* 3] all other persons who occupy [the Unit] as a primary residence on other than a temporary basis as of the date [the ICF]was sewed on [him]by the [Owner], or who occupicd [the Unit] as a primary residence on other than a temporary basis at any time during the period f o January 1,2007 through the date [the ICF]was served rm upon [him] the [Owner] by (include children and other relative). Mr. Drosnes was required to certify whether the total annual income for the persons listed w s more a than $175,000 in each of the two preceding calendar years, or w s $175,000 or less in either of the a two preceding calendar years. Mr.Drosnes listed himself and Brendi Drosnes (his wife), and certified that their annual income was $175,000 or less in the two preceding years. Mr.Drosnes returned the ICE: the Owner. to On or about April 27,2009, the Owner petitioned DHCR to deregulate the rent for the Unit due to high income ( Petition to Deregulate ), based on the Owner s belief that in addition to Mr.and Mrs. Drosncs, Carrie Drosncs (Mr. Drosnes adult daughter) also occupied theunit. The Owner requested verification from DHCR. Accordingly, on October 15, 2009, DHCR mailed a notice ( Notice to Answer ) to Mr. Drosnes, informing him that the Owner had filed the Petition to Deregulate and asking him to answer the petition within sixty(60) days. In his answer to the petition a ( Answer to Petition ), Mr.Drosnes w s required to list the tenants and, in language similar to the ICF, all other persons who occupied [the Unit] as a primary residence on other than a temporary basis as of the date the 2009 [ICF] served was upon Fim] by the [Owner], or who occupied it aa a primary residence on other than a temporary basis at any time during the period from January 1,2008 through the date that the [ICF] w s served upon him a by the [Owner] . . * . Carrie Drosneswas mistakenly identifled as Carey Drosnes In the Petition to Deregulate. -2- [* 4] Mr. Drosnes w s also required to submit information sufficient for DHCR to veri@ the income tax a records of the pcrsons listed above. Mr. Drosncs listed himself and his Wife in the Answer to Petition, and provided copies of the first pages of their New York State income tax retwns. He did not list or provide information as to his daughter. Accordingly, as the Owner had listed Mr. Drosnes daughter as a tenant or occupant on the Petition to Deregulate, by notice dated December 7,2009, DHCR informed Mr. Drosnes that his Answer to Petition was incomplete and requested that he provide either Carric Drosnes s income tax information or, if she had vacated the Unit, the vacancy date. In response, M .Drosnes wrote a letter to DHCR dated December 15,2009, stating that his r daughter is not, and was never, a tenant. He stated that she w s an occupant on a temporary basis a and permanently vacated the [Vnit] on or about April 21,2008. He explained that he did not list her in the Answer to Petition because she was never an occupant on anything other than a temporary basis and he understood that her income would not be included in calculating the household a income. He hrther stated that if he was mistaken and income information about his daughter w s actually required, he would submit his daughter s income tax returns. On or about July 20,2010, the Owner responded to Mr. Drosnes submissions by asking DHCR to issue an order of deregulation based on the fact that M .Drosnes hiled to comply r with RSC $4 253 1.4(b)(3) and 253 1.6 because he failed to provide infomation to DHCR about his daughter in the Answer to Petition within sixty (60) days of receiving the Notice to Answer. RSC 8 253 1.4(b)(3) sets forth that a tenant must provide an Answer to Petition within sixty (60) days of service of DHCR s Notice to Answer, and that the Notice to Answer must set forth hat failure to respond by not providing any information requested by thc DHCR shall result in an order being issued by the DHCR providing that such housing accommodation shall not be subject to the provisions of the RSL and [the RSC]. Section 253 I .6 sets forth that in the event the tenant [fails] to provide the information required pursuant to section 253 1,4 of this Part,the DHCR shall, on or before the next December 1st, issue an order providing that such housing accommodation shall not be subject to the provisions of the RSL and [the RSC] upon the expiration of the current lease. -3- [* 5] On or about December 15,2010, DHCR issued its verification of income for the tenantdoccupants of the Unit, stating that it had found that the total annual income was $175.000 or less in 2007 and 2008 for those persons occupying the Unit, Morton M. and Brcndi 0. Drosnes. In comments dated January 19, 201 1, the Owner contended that DHCR had failed to verify the income for Mr. Drosnes daughter and again argued that because Mr. Drosncs had failed to provide a complete Answer to Patition within sixty (60) days of service of the Notice to Answer, DHCR was required to issue an order of dcrcgulatian. On or about February 3,201 I, DHCR issued an order denying the Petition to Dercgulatt ( Denial Order ), Anding that, after having considered all the evidence in the rcwrd and based upon an income tax returns search, the sum of the annual incomes of the tenants and those who occupied the Unit as their primary residence on other than a temporary basis did not exceed S 175,000. On or about March 4,20 1 1, the Owner filed a PAR, contending that the Denial Order contained substantive and procedural errors because DHCR failed to investigate the nature and duration of the occupancy of Mr. Drosnes daughter and failed to verify her income. It also contended that DHCR had erred in failing to issue an order of deregulation after Mr. Drosnes failed to submit income verification. In opposition to the Owner s PAR, Mr.Drosnes argued that the Owner offered no evidence that Carrie Drosnes resided in the Unit on the date the ICF was served, March 3,2009, m that the Owner had failed to challenge Mr. Drosnes statement that his daughter d had permanently vacated the Unit long before the ICF was served. Mr.Drosnes M e r argued that he had properly filled out tha Answer to Petition by not listing his daughter Carrie because shu only resided in the Unit on a temporary basis, and thc explicit language of the Answer to Petition elicits 4 [* 6] income information only for those who occupy the housing accommodation residence nn_athcrmotcm~orruv b . a9 their primary (Emphasis in original). On or about June 6,201 1, Deputy Commissioner Woody Pascal of the DHCR issued a determination on the PAR (the Determination ). The Deputy Commissioner noted that the effective date for determining tenants and permanent occupancy is the date an ICF is served on a tenant. In this case, M .Drosnes affirmatively stated that Carrie was only tver a temporary occupant r and that she had permanently vacated on or about April 2 1,2008, prior to the service of the ICF.The a Deputy Commissioncr pointed out that this fact w s never challenged or rebutted by the Owner. Therefore, C h e was not a qualified occupant for the purposes of the Petition for Deregulation. Deputy Commissioner Pascal noted that when a tenant asserts that a specified individual has vacated a unit, the owner has the burden of producing at least some evidence in support of its m e d o n that the person was occupying the unit at the relcvant time period in order for there to bc a joinder of issue wt respect to this factual question and before DHCR will further investigate the issue. The ih Owner came forward with no evidence of any kind. Therefore, the Deputy Commissioner contended that DHCR did not err by declining to perform an income tax rchun search on Carrie Drosncs or by declining to include her income for the purposes of determining the Petition for Deregulation. Further, the Deputy Commissioner addressed the Owner s contention that Mr. Drosnes defaulted in answering the Petition to Regulate by failing to include his daughter s infomation in the Answer to Petition. Deputy Commissionar Pascal found that Mr.Drosnes had adequately responded to the Petition to Dcrcgulate in light of his uncontested statements that Carrie Drosncs had permanently vacated the prior to the service of the ICF.Finally, the Deputy Commissioner noted that the income tax search yielded findings that M .and Mrs. Drosnes income was below the statutory threshold for r -5- [* 7] deregulation, and that thase findings were unchallenged by the Owner. Thus, the Deputy Commissioner found that the Owner had presented no issues of law or fact warranting reversal or modification of the Denial Order, and denied the PAR. This proceeding to challenge the denial of the PAR followed shortly thereafter. In the instant petition, the Owner argues that DHCR had no authority to excuse Mr. DTosnes purported default in providing income information. Additionally, the Owner asserts that the tenant bears the burden of proof to establish an allcgation of temporary residency, citing v. vcrb~~lisNew Y e Divaof b Bt Cm. & 1 A.D.3d 101,107 (1 st Dep t 2003). The Owner asserts that in V e r u , the First Department held that a rent administrator s determination not to investigate an allegation of temporary occupancy and e x c w a tenant s default in failing to provide income w s without rational basis or was arbitrary and capricious. Thus, the a Owner contends that here, as in V e r b DHCR s failure to investigate Mr.Dmsnes claim that Carrie Drosnes w s a temporary occupancy and that she vacated the Unit before the I F w89 served a C was arbitrary and capricious. The Owner argues that Mr.Drosnes failure to document the temporary occupancy should have triggered a negative inference. Further, it argues that DHCR s determination to accept Mr.Drosnes assartions without additional inquiry WEIS arbitrary and capricious. For these reasons, the Owner asks this court to reverse the Determination or remand the matter for further proceedings on the issue of whether C a d e Drosnes w s a temporary occupant and/or whether she a vacated prior to M r h 3,2009. ac Respondents DHCR and Mr. Drosnes answer separately but assert similar arguments in support of upholding the Determination as rationally based on the administrative record. -6- [* 8] Respondents maintain that Carrie Drosnes income w s not a factor under the RSC s definition of a total annual income, and thus her income was properly neither required nor submitted for verification. As to the alleged default, respondents argue that Mr. Drosnd initial Answer to Petition and his subsequent response to DHCR s request for more information satisfied DHCR s inquiry. As to the claim that DHCR failed to investigate Carrie Drosnes occupancy status, respondents a maintain that DHCR w s not required to investigate this issue because Mr.Drosnes, an individual with personal knowledge, had submitted an affirmative statement on the issue; his statement was found to be credible; and there wm no rebuttal or challenge to the statement by t e Owner. As to h the issue of burden of proof, DHCR sets forth that the burden of proof is on the party who initiates the proceedings, citing State Administrative Procedure Act 6 306( I). In this case, DHCR maintains that the Owner did not meet the burden because it did not provide any proof regarding Carrie Drosnes occupancy status. Accordingly, respondents maintain that the Determination has a rational basis in the administrative record and should be upheld. In reply, the Owner reasserts its arguments that Mr. Drosnes failed to disclose that his daughter occupied the Unit in 2007 and 2008, and failed to submit any evidence to support his conclusory statement that his daughter had vacated or that she was only a temporary resident; that the tenant bears the burden of proof to establish occupant s statuses;and that DHCR should consider Mr. Drosnes failure to include information about his daughter on his Answer to Petition a default, thus entitling the Owner to deregulation. In an Article 78 proceeding, the court s review of an administrative action is limited to a determination of whether that administrativu decision was made in violation of lawful -7- [* 9] procedures, whether it is arbitrary or capricious, or whether it was affected by an error of law. Pel1 v. R U E d u c , 34 N.Y.2d 222,23 1 (1 974). The arbitrary or capricious test chiefly relates to whether a particular action should have heen taka or is justified e * and whether the administrative action is without foundation in fact. Id, (citation omitted). A determination is considered arbitrary when it is made without sound basis in reason and is generally taken without regard to the facts. lQ, [Aln agency s interpretation of the operational practices attendant to the statute that it administers is entitled to deference. v. New Y m Di v, ofHws, & 16 A.D.3d 72,79 (1st Dep t 2009). This is simply not a case where DHCR abused its discretion or made arbitrary and capricious determinations. First, the fact that Mr. Drosnes Answer to Petition did not contain information about his daughter is consistent with the explicit instructions on the form. DHCR s determination to solicit M e r information from Mr. Drosnes after his Answer to Petition comported with DHCR s discretion to accept late fllings. & v. New Y u Div. ofjlous, & w, 359,373 (1999). Accordingly, DHCR sdetermination not to issue an 94 N.Y.2d order of deregulation based on default was rational. Second, the Owner docs not dispute DHCR s assertion that petitions for deregulation are governed by State Administrative Procedures Act Q 306( 1)1 which puts the burden of proof on the person or entity bringing the proceeding. DHCR s requirement that an owner bringing a proceeding for rent deregulation must submit some proof in opposing a tenant s assertion of household tenancy and occupancy for the purposes of determining deregulation is, thus,rational. Third, the Owner submitted no proof that Carrie Drosncs lived in the Unit on a permanent basis on the date of service of the ICF or in the two years prior except its own [* 10] conclusory slatement in thc Petition Cur Dcregulatioii that she was an occupant. Esscntially7 [vi thout proof othonvise, Mr. Drosiics' stntcmcnts regarding thc stntus of Carrie Drosiws' occupancy were unchallenged. Fourth. innsnitich ns thc Owner ihilcd to submit proof rcbutting Mr. Drosncs' mtemcnts rcgarding Carric Drosncs' occupancy status, L31 ICR's dctcrmination not to further investigate the issue was mtional. 'I'hus, it was not arbitrury and capricious for DHCR to detcrminc Lhat Carric Drosnes' incornc should not be included in the total annual incomc or the household mctnbcrs of the Unit. Finally, thc c o w l tiotcs that the only casu that the Owner ciles in its petition, Vej-halls v. Ncw Ynrk St ;xtc Div. 01' I-IOIJS. QL Cmly. ReIicw& I A.D.3d I O 1 (I st Dcp9 20031, has no bearing whnlsoever on this CLISC. In Verbalis, the First Department upheld DHCll's tlcterminatioti to trcat pctitioner's claim as B rcnt overcharge rather lliiin n fair market rent appcal. Id.at107. vcrbalis docs 1101 support the Owner's claim thal DHCR's hilure to requirc M r . Drosncs to submir evidcncc of his daughter's occupancy slatus was arbitrary arid capricious. Accordingly, it is hercby ORDERED and ADJUDGED that h c petition is denied and thc procceding is dismissed in its entirety. Dated: I F* FILED / g ,2012 EN'rER: NEW YORK COUNTY CLERKS OFFICE JOAN B&OBIS, J.S.C. -9-
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