Trump Vil. Apts. One Owner v New York State Div. of Hous. & Community Renewal

[*1] Trump Vil. Apts. One Owner v New York State Div. of Hous. & Community Renewal 2014 NY Slip Op 51077(U) Decided on July 18, 2014 Supreme Court, Kings County Schack, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 18, 2014
Supreme Court, Kings County

In the Matter of Trump Village Apartments One Owner; C/O APARTMENT MANAGEMENT ASSOCIATES, LLC,, 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.



37344/13



Appearances:Petitioner Randi G. Gilbert, Esq.

Horing Welikson and Rosen, PC

Williston Park NYRespondent:

Jack Kuttner, Esq.

GARY R. CONNOR

NYS Division of Housing and Community Renewal

NY NY
Arthur M. Schack, J.

The following papers numbered 1 to 5 read herein:Papers Numbered

Amended Order to Show Cause/Petition/

Affidavits (Affirmations) Annexed1

Opposing Affirmation/Answer2Reply Affirmation3Record Before DHCR4

Memorandum of Law5

________________________________________________________________________

Petitioner TRUMP VILLAGE APARTMENTS ONE OWNER; C/O APARTMENT MANAGEMENT ASSOCIATES, LLC (TRUMP ONE), in this CPLR Article 78 proceeding, seeks to annul an order, Docket No. ZF-210050-RO, issued on January 11, 2013, by the Deputy Commissioner of respondent NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL (DHCR). This order denied TRUMP ONE's Petition for Administrative Review (PAR) and affirmed the May 3, 2011 decision by the Rent Administrator (RA), Docket No. ZA-210004-RP, pursuant [*2]to a certain update to a DHCR Operational Bulletin, which reduced the rents of tenants in rent regulated apartments in petitioner's building because the building converted from master electricity metering to individual metering of electricity.

Background

Petitioner TRUMP ONE is the owner of 2940 Ocean Parkway, Brooklyn, New York, which has 433 rent regulated apartments. On January 25, 2006, petitioner TRUMP ONE filed an application with respondent DHCR for permission to terminate the inclusion of electrical service in the rent of rent regulated tenants, in contemplation of the conversion from master metering to individual apartment submetering, whereby each tenant would be billed directly for his or her individual apartment's electrical usage, as opposed to having electrical service included in the rent.

The RA, on June 30, 2006, issued an order granting permission to terminate inclusion of electricity as a service provided in the rent and change from master metering to submetering. The order provided for a reduction in rent in accordance with the schedule set forth in DHCR's Operational Bulletin 2003-1. Thereafter, a PAR was filed by "Various Tenants for Equitable Submetering" in which these tenants argued, among other things, that the RA used an outdated rent reduction schedule adversely affecting these tenants. The Deputy Commissioner of DHCR, by order dated April 18, 2008, denied these tenants' PAR, stating that "[a]s for the claim that the rent reduction formula is outdated, the Commissioner notes that the Operational Bulletin 2003-1 schedule of rent reductions is the most current Operational Bulletin pertaining to electrical conversions."

Subsequently, these tenants commenced an Article 78 proceeding. (MICHAEL KNEE AND THE CONCERNED TENANTS FOR EQUITABLE SUBMETERING v NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Index No. 17540/08 [Sup Ct, Kings County]). This proceeding was assigned to me as the IAS judge. In this proceeding, petitioner tenants argued that under the Rent Stabilization Code, 9 NYCRR § 2522.4 (d) (3) (iv), and DHCR's Operational Bulletin 2003-1, DHCR must update and apply new rent adjustment schedules based upon updated electricity costs every three years. Further, petitioner tenants argued that the results of the 2005 Housing and Vacancy Survey had been available since the Spring of 2006, yet DHCR failed and refused to update their rent schedules even though the updated figures were obtainable by a search of the New York City Rent Guidelines Board website and DHCR was presented with a copy of the 2005 table, along with a comparable table for 2002, at the PAR stage of the proceeding. This information showed that the median monthly cost of electricity for 2002 was $47 per month, while the median for 2005 was $59 per month, an increase of 26%. Petitioner tenants argue that the new data should have been applied to all pending cases and DHCR's failure to apply this new and readily available electric cost information to pending cases, in light of the sharp increases in electricity costs over the previous three years, is arbitrary and capricious.

On November 14, 2008, I issued an order granting the Article 78 petition "to the extent of remanding this proceeding to the DHCR for issuance of a new determination [*3]applying the most recent operational bulletin concerning electrical conversions and related rent adjustments to the subject premises, in an amended order permitting the termination of rent inclusion of electricity." This order also directed that the caption of the proceeding is amended "to eliminate Concerned Tenants for Equitable Submetering' leaving tenant Michael Knee as the sole petitioner."

Pursuant to my order, the Deputy Commissioner of DHCR remanded the proceeding to the RA for a new determination. On May 3, 2011, the RA issued an order stating, in part:

Based on all the evidence in the record, the Rent Administrator finds

that the order issued on June 30, 2006 . . . should be modified to apply

Update No. 1 to Operational Bulletin 2003-1 which was issued on

September 3, 2008. This is in compliance with the Court Order issued

by Judge Arthur Schack on November 14, 2008 who ordered the

"remanding of this proceeding to the DHCR for issuance of a new

determination applying the most recent operational bulletin concerning

electrical conversions and related rent adjustments to the subject

premises, in an amended order permitting the termination of rent

inclusion of electricity." This order is applicable to all rent regulated

tenants in the subject premises. The judge's instruction that the caption

in the proceeding be amended to exclude Concerned Tenants for

Equitable Submetering leaving Michael Knee as the sole petitioner was

procedural and not meant to exclude the other tenants.

In the instant proceeding, petitioner TRUMP ONE challenges the RA's remand order by way of PAR, arguing that: because Michael Knee was the only named petitioning tenant, the RA's order should have been applied to him only rather than all tenants at 2940 Ocean Parkway; the original 2006 order was in accordance with applicable law; there is no basis in the Rent Stabilization Code or Operational Bulletins for adjustments of rent reductions originally ordered based upon an updated Operational Bulletin; and, the reductions imposed by the RA's May 3, 2011 remand order would result in financial hardship to the owner. The Deputy Commissioner, in his January 10, 2013 order, denied petitioner's PAR, stating, at page 3:

The Commissioner finds that the owner's allegations are

insufficient to revoke the Rent Administrator's determination under

consideration. The Rent Administrator's order was based on the order of

the Supreme Court which mandated that the proceeding be remanded to

the agency for a determination in accordance with "the most recent

operational bulletin concerning electrical conversions and related rent

adjustments." As the order of the Supreme Court was issued on

November 14, 2008, the Agency, in the remanded proceeding leading to

the order under consideration herein, properly applied Update 1 to OB

[Operational Bulletin] 2003-1, which was the Operational Bulletin in

effect at the time that the Supreme Court issued the order remanding

the proceeding and mandating application of "the most recent operational

bulletin."

The owner is not required to make multiple rent reductions for

the change in electrical metering at issue. The owner is required only

to make such rent reductions in accordance with OB 2003-1. This

is correct as explained above.

Finally, as explained in the Rent Administrator's order under

consideration herein, the Supreme Court's instruction that the caption

in the proceeding before said Court be amended to include only the

name of a single tenant was only a procedural directive. This instruction

was not meant to exclude other tenant from the mandate of the Supreme

Court that the Agency calculate the rent reductions herein pursuant to

the most current Operational Bulletin in effect at the time of issuance of

said Court's order.Petitioner TRUMP ONE, in the instant Article 78 proceeding, reiterates its previous arguments that my November 14, 2008 order in Index No. 17540/08, directing that the caption be amended to delete "Concerned Tenants for Equitable Submetering," limited my order's directives to reduce the rent according to the most recent operational bulletin only to tenant Michael Knee. Further, petitioner TRUMP ONE argues that the application of Update

1 to Operational Bulletin 2003-1 was improper because: the RA's original 2006 order was issued before a new Operational Bulletin was or should have been issued by the DHCR (thus the RA properly used the Operational Bulletin then in effect); and, there is no foundation in either the Rent Stabilization Code or the Operational Bulletins for a rent reduction order to be adjusted where an updated Operational Bulletin is subsequently issued.Discussion

The Court in an Article 78 proceeding has to determine whether the action of respondent has a rational basis or was arbitrary and capricious (see Pell v Board of Educ. of Union School District No.1 of the Towns of Scarsdale and Mamaroneck, Westchester County, 34 NY2d 222, 230-231 [1974] ). "Arbitrary action is without sound basis in reason and is generally taken without regard to the facts." (Pell at 231). A rational basis exists where the determination is "[supported] by proof sufficient to satisfy a reasonable [person], of all the facts necessary to be proved in order to authorize the determination" (Ador Realty, LLC v Division of Housing and Community Renewal, 25 AD3d 128, 139-140 [2d Dept 2005]), quoting Pell at 231. A reviewing court will not substitute its judgment for that of the agency unless the agency's determination is arbitrary, capricious, or contrary to law. (See Pell at 231; Matter of Brockport Cent. School Dist. v New York [*4]State & Local Employees' Retirement System, 270 AD2d 706, 707-708 [3d Dept 2000])."[I]n reviewing a determination made by an administrative agency such as the DHCR, the court's inquiry is limited to whether the determination is arbitrary and capricious, or without a rational basis in the record and a reasonable basis in law." (Matter of 508 Realty Assoc., LLC v New York State Div. of Hous. & Community Renewal, 61 AD3d 753, 754-755 [2d Dept 2009]). (See Matter of Peckham v Calogero, 12 NY3d 424, 431 [2009]; Matter of Gilman v New York State Div. of Hous. & Community Renewal, 99 NY2d 144, 149 [2002]; Matter of Acevedo v New York State Div. of Hous. & Community Renewal, 67 AD3d 785, 786 [2d Dept 2009]; Matter of Dominguez v Vanamerongen, 56 AD3d 667, 668 [2d Dept 2008]). "An action is arbitrary and capricious when it is taken without sound basis in reason or regard to the facts" (Matter of Peckham, 12 NY3d at 431).

My November 14, 2008 order amending the caption to leave Michael Knee as the sole petitioner was merely procedural and did not operate to preclude the DHCR from applying the new determination to all affected tenants of the building. If I had intended to so limit my

determination in the November 14, 2008 order I would have clearly spelled out such intent in the order. Thus, DHCR did not act arbitrarily or capriciously when it applied rent reductions

at 2940 Ocean Parkway to all tenants rather than just to tenant Michael Knee.

DHCR's use of Update 1 to Operational Bulletin 2003-1 in the instant proceeding is not arbitrary or capricious. DHCR adhered to my November 14, 2008 order, directing DHCR to apply the most recent Operational Bulletin in imposing rent reductions. Thus, DHCR's determination has a rational basis.

Further, petitioner TRUMP ONE did not appeal my November 14, 2008 order remanding the proceeding to DHCR or otherwise bring a timely motion for reargument. Petitioner TRUMP ONE is, in effect, improperly seeking to reargue this court's order in the prior proceeding by way of the instant Article 78 petition. This is barred by collateral estoppel, which prevents a party from "relitigating an issue which has necessarily been decided in a prior action and is determinative of the issues in the present action, provided that there was a full and fair opportunity to contest the decision now alleged to be controlling" (Capellupo v Nassau Health Care Corp., 97 AD3d 619, 621 [2d Dept 2012]). (See Zanani v Schvimmer, 117 AD3d 941 [2d Dept 2014]).

Judge Cardozo, for a unanimous Court of Appeals, in Schuylkill Fuel Corp. v B & C Nieberg Realty Corp. (250 NY 304, 306-307 [1929]), instructed that "[a] judgment in one action is conclusive in a later one not only as to any matters actually litigated therein, but also as to any that might have been so litigated, when the two causes of action have such a measure of identity that a different judgment in the second would destroy or impair rights or interests established by the first . . ." In O'Brien v City of Syracuse (54 NY2d 353, 357 [1981]), Chief Judge Cooke, also for a unanimous Court of Appeals, noted that [*5]"once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy . . ." (See Coliseum Towers Associates v County of Nassau, 217 AD2d 387 [2d Dept 1996]; Yerg v Board of Educ. of Nyack Union Free School District, 141 AD2d 537 [2d Dept 1988]).

Collateral estoppel or "issue preclusion," as observed by Prof. Siegel, in NY Prac §443, at 748-749, [4th ed], "scans the first action and takes note of each issue decided in it. Then if the second action, although based on a different cause of action, attempts to reintroduce the same issue, collateral estoppel intervenes to preclude its relitigation and to bind the party, against whom the doctrine is being invoked, to the way the issue was decided in the first action." In Ryan v New York Telephone Company (62 NY2d 494, 500 [1984]), the Court of Appeals, held that "[t]he doctrine of collateral estoppel, a narrower species of res judicata, precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same [Emphasis added]." Two prerequisites must be met before collateral estoppel can be raised. The Court of Appeals, in Buechel v Bain (97 NY2d 295 [2001], cert denied 535 US 1096 [2002]), instructed at 303-304, that:

There must be an identity of issue which has necessarily been decided

in the prior action and is decisive of the present action, and there

must have been a full and fair opportunity to contest the decision now

said to be controlling (see, Gilberg v Barnieri, 53 NY2d 285, 291

[1981]). The litigant seeking the benefit of collateral estoppel must

demonstrate that the decisive issue was necessarily decided in the prior

action against a party, or one in privity with a party (see, id.). The

party to be precluded from relitigating the issue bears the burden of

demonstrating the absence of a full and fair opportunity to contest

the prior determination. [Emphasis added]

(See D'Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659, 664 [1990]; Gramatan Home Investors Corp. v Lopez, 46 NY2d 481, 485 supra; Westchester County Correction Officers Benevolent Ass'n, Inc. v County of Westchester, 65 AD3d 1226, 1227 [2d Dept 2009]; Franklin Dev. Co. Inc. v Atlantic Mut. Ins. Co., 60 AD3d 897, 899 [2d Dept 2009]; Luscher ex. rel Luscher v Arrua, 21 AD3d 1005 [2d Dept 2005]; David v American Bio Medica Corp., 299 AD2d 390 [2d Dept 2002]).

Petitioner TRUMP ONE had the opportunity to fully argue the issue of whether Operational Bulletin 2003-1 or an updated Operational Bulletin should be applied in determining rent reductions. This issue was determined by this court in my November 14, 2008 order in the previous Article 78 proceeding. Therefore, petitioner TRUMP ONE is precluded from now challenging this determination in the instant Article 78 proceeding.

Conclusion

Accordingly, it is hereby

ORDERED, that the petition of TRUMP VILLAGE APARTMENTS ONE OWNER;

C/O APARTMENT MANAGEMENT ASSOCIATES, LLC, to annul an order, Docket No. ZF-210050-RO, issued on January 11, 2013, by the Deputy Commissioner of respondent NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL (DHCR), is denied; and it is further

ORDERED, that the instant CPLR Article 78 proceeding is dismissed.

This constitutes the Decision and Order of the Court.

ENTER

___________________________HON. ARTHUR M. SCHACK

J. S. C.