Chang Juan Zheng v Mak

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Chang Juan Zheng v Mak 2012 NY Slip Op 30634(U) March 14, 2012 Sup Ct, NY County Docket Number: 112693-2009 Judge: Judith J. Gische 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 311512012 [* 1] [* 2] SUPREME COURT OF THE STATE OF N W YORK E C o u m OF NEW VOW: 1AS PART 10 -- DECISIONI ORDER Index No.: 112893-2009 Seq. No.: 001 Chang Juan Zheng, Plaintiff (s), PRESENT: Hon. Judith J. Gischa J.S.C. Nancy Mak, Chinatown Preservation HDFC, Asian American Housing Development Fund Company, Inc., and Asian Americana for Equality, FILED Defendant (s). -. MAR 15 2012 NEW YORK Recitation, as required by CPLR Q 2219 [a] o the papers considered In t h w ~ t v k V ~ d b K ~ S f OFFICE this (thew) motion(s): Papers Numbered Chinatown Preserrvation, Asian Amencan, AAFE nlm (3211 and 3212) w/STG affirm, HLY, CK ams, exhs . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 PWs opp w/GF afflrm, CJZ affid, other afMs (as exhs), exhs . . . . . . . 2 Chlnatawn, AAHDFC, AAFE mpty w/STG affirm, exh ............. 3 Qr m b GF affirms to adjourn motion (1011711 1, 1 1/8/11) . . . . . . . . . . . . . . . . 4 Steno minutes OA 1/18112 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Upon the hmgohg papers, the ddslon 3nd order ofthe court is as follows: OISCHC J.: This is an action by Chan Juan Zheng ("plaintiff") against varlous defendants, including Chinatown Presetvation HDFC ("Chinatown Presenration"),the current record owner of the bulldings and real property located at Block 277 Lob 43 and 44,also known a8 28-30 Henry Street, New York, New Yo&. PlalntlfF is a tenant and resident of -Page 1 of 15- [* 3] 28 Henry Street ("building"), apartment 2. Each of the defendants has answered the complaint. Defendants Chinatown Presetvatlon, Asian American Housing Development Fund Company, Inc. ("AsIan American? and Asian Americans for Equality ("AAFE? (collectkrsly "moving defendants") now move for the dismissal of the daims against them on the basis of CPLR 321 1 [a] or, in the alternative, summary judgment pursuant to CPLR 3212. Plaintiff opposes the, motion. Although properly served and havlng appeared for oral argument of thfs motion, codefendant Nancy Mak has not oppmed thls motion either in writing or orally. As wlli be 88m, although the moving defendants are moving under CPLR 3211 "or"3212, what they actually w k is summary judgment on their affirmative defenses. Ahhough they have not articulated which subsedion of CPLR 3211 they are movlng under, apparently it is subsection [SI (statute of limitations) (CPLR 3212 [c]; s g-rally, w a, N.Y.2d 276 11982J).In any event, summary judgment 56 Rich v. Lefkov relief is available since the roquirements of CPLR 3212 have been met (CPLR 5 3212; Brill v. ClW of New York, 2 NY3d 648 [2004]). Facta The following facts are established or unrefuted; PlatntH is the new or vacancy tenant of apartment 2 at 28 Henry Street. Her tenancy began Octobr 1,2003 when she signed a one year lease for $1,100.00 per month rent. Plaintiff8 rent history ahows this apartment had, at one time, been rent controlled. There was, however, a tenant between the termination of rent control and plaintiff's tenancy. -Page 2 of 15- [* 4] PlaintiWs bass was with defendant Mak, then the landlord and record owner of the bulldlng. Mak owned the building from August 12, 1907 to September 25,2006 when Malt sold the building and conveyed 8 bargain and sale deed dated September 25,2006 to Asian American. Asian American later sold the building to Chinatown Preservation and conveyed a bargain and sale deed dated February 7,2007, effective as of January 7,2007.Asian American and Chinatown Presenration are each houdng development fund companies (RHDFC7, meaning they are not-for-profit New York State corporations governed by New York State Private Housing Finance Law. Plaintiff contends (and has provided m i p k showlng that) she paid Mak a broker's fee or "key money" of $A, 100,although the apartment is rent stabillzed. PlaintifF also paid $0,800 for "repairs"that she claims were either not necessary or the landlord's mpondbility. Following her initiil lease, plalntiff renewed her lease each year for one year lease - $1,169.81; Octokr 1,2006 renewal lease - $1,219.53; October I, 2007 renewal lease - $1,256-12; October 1,2008 renewal lease - $1,312.65; October 1,2009 renewal lease - not provided: October 1,2010 renewal lease - $1,342.18. The October 2006 terms as follows: October 1,2004 renewal lease $1,138.50; October 1, 2005 mnewal renewal was with A8hn American, then the new owner and landlord. The ensuing renewal leases were with Chinatown Preservation, the current owner. None of the leases worn with AAFE. Plaintiff does not daim any of the increases during t h e years misapplied the guideline increases permitted by law. In June 2009, the New York City Department of Buildings ("DOB') and the New York City Fire Department ("FDNY") inspected the bulldlng and discovered that -Page 3 of 15- [* 5] plaintiffs apartment (and others) had bean lllegjally partitioned to create three bedrooms. In September 2009, Chinatown Pressnratlon commenced w holdover proceeding against plaintiff and, while that was pending, DOE3 issued a vacate order. Chinatown Preservation discontinued the holdover proweding, removed the walls at Is t expense and plafntfff moved back in. The moving defendants have a counterclaim against plalntmfor breach of the lease, alleging h t it wag plaintiff who erectad these a partitions illegally. Plaintlff has asserted seven cause8 of action ("COA'). Chinatown Prasenration has only moved with respect to the 2"6,4m,5'", emand COA agalnst I t Aaian American and AAFE seek the dismissal of all the claims against them. AAFE separately contends it Is not now, nor has It ever k e n , an owner of or held a property interest in the bullding. The GOA Is for bmach of contract based on claims that i October 2003, n plainttff rented a 3 bedroom apartment from Mak that turned out to be a I q p l one bedroom and that in June 2009,she was forced to vacate the aparhnent while partition walls were moved causing her $250,000 i damages. Chinatown Presenration has not n moved with respect to thls cause of actlon. The 2"dCOA is an overcharge cIaim based on plalntHf having paid Mak 8 brokemge fee, being overcharged for rent and havlng been charged for "repaits." Plaintiff contends that the initial rant of $1,100 that Mak charged her was not the h a 1 mnt and therefom, the subsequent rent increases are Iliagal as well. PlaintHPs attorney, Geovanny Femandez, Esq. ("Attorney Femandez") states that he has mpresentd other tenants at the building and that he knows plaintis mnt is illegal because: -Page 4 of 15- [* 6] As o 2007 (4 years afler plaintiff executed [her] vacancy f lease agreement...), o the 20 unlts at [the] subject f premises, 12 have rents below the $1,100 first rent set by prior owner Nancy Mak for [plaintifPs apartment]. Mthe remaining 7 rentdaparbnent (other than subject premises) that have rents over $1,100 set by prior owner Nancy Mak ... on October 2003, your affirmant [has] settled overcharge clalms... Attorney Femandez also provides three stipula~ons settlement he negotiated of for other tenants in housing court as well a8 their rent histories. Plaintiff contends this estabilshes a pattern of fraud that justifii the application of the so called default or Thornton formula (Thornton v . Baron, 5 N.Y.3d 175 [2005]), In deciding her overcharge claim. Thus, plaintiff Seek8 a recalculation of the rent far apartment 2 by having the court go back to 1998, when the apartment was rent controlled. The 3d COA is for diminution of services, the 4thCOA is for amversion and her 6 COA is for deceptfve practices. These claims assert that the m o v a l of the partition walls in apartment 2 reduced the apartment from a 3 bedroom to a legal one bedroom. Plaintiff dalma that she wanted, leased, needed and expected a three (3) bedroom apartment because she has a large famlty. She contends further that by reducing the apartment to a one bedroom, defendants have taken away something of value from her, thereby converting her property (i.e the money aha paid as rent for a three bedroom) for thelr baneft Chinatown Prasarvation has not moved with respect to this causa of action. PlalnWs 5 COA is for fraud and her 7 COA i for unjust enrichment. Plaintiff s alleges in these claims (and also the 6 COA, supra) that the moving defendanb knew, should have known, o could have discovered through due diligence, MaKs prior bad r -Page 5 of 15- [* 7] a&." She claims that having fallad to taken appropriate actions, they stand In Mak's shm. The 8* COA is for illegal lackout. Chinatown Preservation has not moved with respect to this cause of action. Argumenta M E argues that the complaint should be di8missed as to it because, AAFE ha8 never held an ownership interest In the subject building. Although Chrfstopher Kui ("Kui7 ia the president of Asian American and the executive direction of M E , Kui f denies that the companies are alter egos o Chinatown Preservagon or Aslan Amarkan or that M F E had any involvement with the tenants at the building, Including plaintiff. Therefore, M E seeks summary judgment dismissing the entire complalnt ergahst it. All the moving defendants argue that plaintiFfs overcharge d a h (ZndCOA) is time barred insofar as she seeks judicial review of her rent prior back to 1998. The moving defendants contend the court a n only review the rent for apartment 2 for the four (4) year period from September 2005 forward (this action was commenced September 2009). They argue that there is no overcharge during that four (4) year period because only rent guldelinea increases here applied. While acknowledging in reply (and at oral argument) that the court can, in certain sltuations, revlsw plaintiff 8 rent history beyond the four (4) year limitation establtshed by CPLR 213-8, defendants argue that this requires facts supporting plaintiffs fraud claim. Thus, defendants also contend that the fraud claim (51hCOA) is unaupported and unfounded. In additlon to seeking dbmissal of the fraud claim for that reason, defendants also s e e k dismissal of the tort daims (4'h, ¬Im and -Page 6 Of 15- COAs) on the baais [* 8] that they are not pleaded with spadtlcity, 88 required by CPLR 3016. Defendants also contend the conversion dalrn (4" COA) is time barred because this action was I commenced more than 5 years after Mak allegadly c h a m h e r a broker's fee and for repairs and, furthermore, any bad acts by Mak should not to attributed to Azian American or Chinatown Pmenration. AAFE and Asian American contend the, breach of contract ( ' I COA), diminution ofservices (3' COA) and lockout cause of action (8' COA) should be dismissed against them because neither of them owned the building when plaintiff became the vacancy tenant (1" GOA) or when DOB issued it's vacate order. In opposition to the motion, plaintlff argues that the court must establish the M a l rent for the aparbnant and cannot rely on the 4 year look back period because Mak engaged in fraud to drcumvent the Rent Stabilization Law. Plalntlff provides the affidavits of other tenants to support this dah. Each of the tenants states he or she rented a "larger" apariment that later turned out to be a legal one bedroom. Plalnttff also claims that her overcharge claims are timely because this action wa8 commenced within six (6) years. DiscussIan Where a defendant is the proponent of a motion for summary judgment, the defendant must establish that the C B U of ~ action ha8 no merft, sufldent to warrant the court, as a matter of law, to direct judgment in its favor (Bush Y. S. Cl&a 's HOSP.,82 t NY2d 738,739 [lQQ3]; Winearad v, New Y ~ r kJnjv. Med. Ctr., 04 NY2d 851,853 I [1985]). The defendant's motion must be denied If it fails to produce admissible evidence demonstrating the abmnce of any material Issue8 of fact (YVinerrrad v. Nmy -Paw 7 of 15- [* 9] yoh Unh. u., supra; of NOW YO*, 49 NY2d 557,562 [lgSO]; Silverman v. Pedbindec, 307 AD2d 230 [Ist Dapt. 20031). Where an issue of law Is ralsed in a motton for summary judgment, the court may and should resotve them wtthout the need for a testimonial haaring (Hirrdes v. Weiar, 303 AD2d 459 [Zd Dept 20031). Since the moving defendants are also moving under CPLR 3211 [a] [5] (statute of Ilmttatlons), defendants must demonstrate they have that defense park h o y. Crescent Park A s s o c ~ s Inc,, 159 A.D.2d 480 [2"dDept 1QOOD. . The clalmr rgrfnat AAFE AAFE contends it has no ties to the subject premises because it i not now, nor s has it ever been,an owner of, or had an ownership fnterest in, 28 Henry Street. The deed show that the current owner of the building is Chinatown Presenration. W E is not a party to the most recent deed or any of the prior deeds for the applicable time period. The moving defendants have also provided the certificates of incorporationfor each of the corporations which have been sued heroh. AAFE has, therefore, met its burden of proving that it dld not have, nor does it have, an ownershlp Interest in the subject premises and that M E Is a distinct entity from its moving codefendants. In an effort to mise a triable baue of fact, plaintiff &tat- that Kul's Involvement with Chinatown Prasenration, Asian American and AAFE shows that AAFE "completely controb"the other moving defendant$. "Closely associated corporatlona, even one8 that sham directors and offlcem, will not be consldered alter egos of each other if they were formed for different purposes, neither is a subaldjary of the other, thelr finances are not integrated, assets are not commingled, and the prindpals treat the two entities -Page 8 of 15- [* 10] 88 separate and distinct" (Longshore v. Paul Davis S at o m of Capital nist.,304 A.D.2d v 964, 965 [3' Dept 2031). Since plaintm offers no facts to support her claim that AAFE is an alter ego of the other two moving defendants, AAFE's motion for summary Judgmentdismisslng the complaint against it in its entirety is granted. Overcharge claim and etatute of llmltatlons iwue I Under CPLR 5 213-a, an action on a residential rent overcharge "shall be commenced within four years of the flrst overcharge alleged and no determination of an overcharge, and no award or calculation o an award of the amount of any overcharge f may be based on an overcharge having occurred more than four years before the action b commenced." The moving defendants have correctly identifled the statute o f limitations applicable to this dhpute as being 4 years, whether measured under the CPLR or the Rent Stabilization law, nat 6 years, a8 plainttff claima. The 6 year statute of Ilrnttations, however, does apply to plaintws breach of contract claim whlch is discussed later in this ddaion. Therefore, based upon the commencement date of this action in September 2009, the applicable base rent for the overcharge claim Is, September 2005. A court may, however, look beyond the 4 year statutory period where,as here, it I alleged that the standard base date rent la tainted by fraudulent conduct on the part s of a landlord (Matfclr of Grlrnrn v St@ of N.Y. nlv. of Hous. & CQmmunW&)t: wal Off, te Rent A d m 15 N.Y.3d 358 [2010]). In (3rimm, an Article 78 summary p r o d i n g 'I which was appealed to the state's highest court, the Court of Appeals held that DHCR had completely disregarded the petitioner's dalm of fraud by not Investigating tt and, instead, "blindly using the rent charged on the date four years prior to the flllng of the -Page 9 of 15- [* 11] rent overcharge claim" mtter of Grimm v $tat@of N.Y, Dkr. of HOW. R CornRenewal Off. of Rent Adrnin* 1 16 N.Y.3d at 386). The Court of Appeals has held that the default or Thornton" formula is applicable "when no rellable records am available"(Gnrnm, supra a 368; Thomton v, t Baron, 5 N.Y.3d 176 [2005]). Applying these legal prfndplee, this court must first ascertain whether the tenants allegations of fraud warrant the use of the default formula in calculatlng any rent overcharge that may have occurred w r of G r i m V State of N.Y. niv. of &us. & Commwh Renewal Offrn Rant Adrnin, supra at 3 7 . of 6) The 4 year statute oflimitations mnnot, however, be simply circumvented by plaintiff couchlng the claim as one for fraud or whem the fraud allegations am onb Incidentalto the rent overcharge claims [Brinckerhoff v. New York State Div. of Housing and C o w R e n e a 275 A.D.2d 622 [l" 2OOOJ; Dept New York state Dkr. of Housing and Communlh Renews 178 Mtsc.2d 452 [Sup Ct. N.Y. Co. 19981). As with Grimrn, there must be sufficient indicia o fraud in the record. f Asian American and Chlnatown Presenratlon have provided renewal leases showing that allowable reot guideline Increases were taken each year starting with the October 2004 - September 2005 renewal lease. Plalntm does not raise any triabk issue of fact I that regard. She does, however, argue that the court must use the n defautt formula in declding her overcharge claim because Mak's fraud renders the rental history for apartment 2 unmliable. Plaintiff correctly states that for overcharge complaints Rled or overchaqp collected on or after April 1, 1984 "a current owner shall be responsible for all overcharge penalties, Including penaltles based upon overcharges collected by any -Page 10 of 15- [* 12] prior owner (RSC9 2526. I [2][1]). Consequently, any argument by the moving [fJ defendants that they are not liable for Mak's 'prior bad acts" Is inconsistentwith the law and does not satisfy their burden on this motion for summary judgment. The isswe of whether pialntlffs overcharge claim should be restricted to the 4 year llmtbatlon period b closely intertwined with her fraud elajms because, if there is a substantial indicia of fraud, then the rent history for Apartment 2 is unreliable. To state a cause of action for fraud, plaintm must show: (1) that defendants intentionally made a misrepmssntatlon or material omission of fact; (2) that the misrepresentation or material ornlssion of fact was false or known to be false to defendants; (3) pIalntlWs reliance; and (4) that the misreprassntetlon resulted in minjury to plalntlff v. m , 91 N.Y.2d 425 [2d Dept. lSSS]). The fraud alleged by plaintiff is b f o l d : she claims that the jump in rent for apartment 2 from $150.01 In 1998 to $1,100.00 In 2000 is "inconsistent with applicable law." To further illustrate her point, plaintiff provldes the rent history for two other unrelated apartments. The wnt for apartment 6, for example, Increased from $427.29 to $1,200.00 upon becoming vacant and the rent for apartment 19 Increased rent f r m $389.73 to $1,050 upon vacancy. PlaintHI'contends that thls not only 8hows Mak defrauded her tenants, but that the moving defendants could and should have dbcovered this fraud through due diligence. Her second fraud allegation invohraa the size of her apartment. She contends she rented apartment 2 88 a thme (3) bedmom apahent when, in fact, it is only a kqal one (1) bedroom apartment. In m. court observed that them was "subatantlal indicia of fraud on the the record"which DHCR disregarded. Generally, an increase in rent alone will not be -Page 11 of 15- [* 13] sufficient to establish a 'colorable claim of fraud' and a mom allegation of fraud, without more, is Insufficient. There must also be "evidenceof a landlord's fraudulent deregulation scheme to remove an aparbnent from the protections of rent stabilization... and the rental hlstory may be examined for the limited purpose o f determining whether a fraudulent scheme to destabilize the apartment tainted the reliability of the rent on the base date" m m Db. of H o m d Can- I Qffics of Rent A m . , 15 N.Y.3d at 3 ' ) 87. If there is any doubt as to the existence of a triable fact, a motion for summary 46 NY2d 223 [19781). judgment must be denled ( og R-, Here, the movlng defendants have the burden of producing admissible evidence demonstrating the absence of any material Issues o fad with reaped to plainttffs f overcharge and fraud claims w d v. New York Univ, Med. CU., 8UpE4; Zuckerrnan v, CItV of New York, supra: Silverman v. Parlbinder, supra). They have not met their burden and, in any event, plalntlff has pleaded and ralsed triable issues of fact supporting a tenabla daim for fraud, requiring the denial of Aslan American arrd Chinatown PTt8BrvaUon's motion for summary judgment dLmking (or limiting) the overcharge (2M COA) clalm based on the applicable statute of Ilmltationa and the fraud claim (5" COA). In her conversion claim (4" COA), pIaintifF asserts that defendants converted plalntWs fund8 by falling to provlde an apartment with three (3) bedrooms and tbat defendants' agents represented to plaintiff that apartment 2 was a three (3) bedroom apartment. Conversion la the denial or violation of the domlnlon, rights or possession of another's property (Allen v. Murrav House @J nen Corn, , 174 A.D.2d 400 [l' Dept -Page 12 of 15- [* 14] 1QSll). Where, "conversion of funds" is alleged, the claim i thqt the funds were used s for an unintended purpose. Here, plaintiff paid rent pursuant to her base and her daim I that she did not gat the apartment she laasad (Le. bargained for). There is, therefore, s no conversion claim, only a claim for breach of contract. The moving defendants have proved they am entltled to summary judgment dismissing the 4th COA for conversion. The deceptive practices (SmGOA) contains allqations that Mak advertised the apartment as a three (3) bedroom when, i fact, it i a legal one bedroom. Plaintiff n s contends the moving defendants were complicit in these acts and also engaglad In deceptive acts of their own. Presumably, plaint# means the defendants violated GBL 5 349. GSL Q 348 pmvides that " [ d r n t i v e acta or practices fn the conduct of any business, trade or commerce or in the furnishing of any senrice in this state are hereby declared unlawful." It is an intentionally broad statue, applying Yo virtually all economic activrty"(-Life Ins. Cr, of N ew Yo& , 9 8 N.Y-2d 314,324 [2002]). However, to establlsh a violation of GBL 5 349, the conduct complained of must be consumer oriented and have a broad impact on wnsumers at large as compared to a private contract dispute that i unlque or partkular to one of the partias to the lawauit s (Naw_Yorkjtyv. JJ&Of8rS' -on C o m n tal Ins, Co,,87 N.Y.2d 308,324 118851; OwFund v. Marine m n d Bar&, 85 N.Y.2d 20,25 [1995]). The moving defendants have proved they had no involvement with the building at the time plalntm entered into a vacancy lease with Mak. In opposition, plaintiff has failed to come forward wIth a triable issue that these defendants had any invokement in the marketing (if any) of t i apartment or that any of them have engaged in any kind of hs -Page 13 of 1 5 [* 15] deceptive act since becoming involved with the building. Furthemom, the actions alleged only support a breach of contract since the cfalms of deception are personal to her. Therefom, the moving defendants' motion for summary judgment dismbsing the deceptive practices daim (8"' GOA) is granted. PlaintiWs 7b" COA for unjust enrichment ia redundant of her other claims. The principle of unjust enrichment is an equ*hble principle that applies to a situation where someone has received the money or goods of another which is inequitable or against good conscience for him or her to retain (Mlllar v. Sehlw, 218 NY 400,407 [1916]). The remedy for unjust enrichment is restitution, which is essentially mturning the money or property unjustly conferred. Since there is a lease, them I no need to rely on s equitable principles. Furthermore, I plalnWf prevails on her overcharge claims, she has f statutory remedies available. The moving defendants' rnotlon for summary judgment dismlsshg the COA is granted and this claim is ssvemd and dismissed as to them. The breach of contract (1' COA), diminution (3d COA) and lockout (8" COA) daims all arise from actions that took place in June 2009, when DOB b s u d Its vacate order and plaintiff had to vacate her apartment temporarily. Additionally, in the breach of contract COA, plalntlff asserts facts surrounding her execution of the vacancy lease with Mak In October 2003. Atthough Chinatown Preservation does not move wAh respect to them claims, Asian American does (as has AAFE, already dlsmiased from this case by virtue of thb order, supra). Turning to the events of June 2000 first, plaintiff contends she was damaged in the sum of $250,000 because she did not have urn of her apartment and it was converted into a one bedroom. She contends t P was an illegal lockout. None of he -Page 14 of 15- [* 16] these clalma have any supporting fads as they pertain to Asian American. A s h American has established that it did not own the building in June 2009. With respect to the 1" COA for breach of contract, none o the facts alleged involve AsIan American, f but even if they do, fail to state 8 dalm against Asian American because it wa8 neither the owner at that tlme nor is it the current Owner of the building. Therefore, Asian American has met its burden of proving it Is entitled to summary judgment, as a matter of law. Plalntfff has failed to raise issues of fact. Therefore, Asian American's (and AAFE's) motion for summary judgment dismissing the I", and 8thCOAs i granted 3d, s and thoss COAs are dismissed only as to Asian American and AAFE. Recapitulatlon'mdConcluslon The moving defendants' motion for summary judgment dismissing the complaint based upon affirmative defenses pleaded la granted as follow: All claims against AAFE are dismissed. The l", and 8' COAs are dismissed as to Asian American and AAFE Y' The motion to dismiss or limit the 2"dCOA and for dismissal of 5 COA i denied " s The motion to dismiss the 4', 6" and C O h is granted as to all the moving defendants, Any relief requested but not specifically addressed I hereby den\ s This constltutss the decision and order of the court. Dated: New York, New York March 14,2012 -Page 15 of 15-

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