Matter of Waldman v New York City Dept. of Hous. Preserv. & Dev.
Annotate this CaseDecided on December 30, 2005
Supreme Court, New York County
In the Matter of the Application of Rachel Waldman, Rachel Goldberger, David Goldberger, Leopold Strulovitch, Blimie Strulovitch, Pastora Sanchez, Rose Guttman, Judy Grunwald, Solomon Miller, Esther Miller, Esther Zinger, Carmen Ubiles, Eliezer Zafir, Frady Zafir, Chaya Einhorn and Chaim Einhorn, Petitioners, For a Judgment under CPLR Article 78
against
New York City Department of Housing Preservation and Development and Kent Village Housing Company, Inc., Respondents.
102114/05
Walter Tolub, J.
Motions seq. nos. 001 and 002 are consolidated for disposition.
Petitioners are residents of Brooklyn's Roberto Clemente Plaza, a 532-unit Mitchell-Lama rental housing development managed by respondent Kent Village Housing Company, Inc. ("Kent") and supervised by respondent New York City Department of Housing Preservation and Development ("HPD"). All petitioners acquired their leasehold interest by succeeding tenants of record with whom they resided, and executed leases with Kent as prime tenants for their respective apartments at Roberto Clemente Plaza between 1990 and 1997. Kent recertified the tenancies annually.
Motion seq. no. 001 is petitioners' Article 78 proceeding seeking to vacate and annul HPD's determinations (exhibit G to petition) that petitioners did not have succession rights to their apartments and the ensuing abrogation of their leases with Kent.
In motion seq. no. 002, petitioners seek to enjoin Kent from evicting them from their homes.
Background
Roberto Clemente Plaza, as the Williamsburg section of Brooklyn in which it is located, has been plagued by anti-Semitism and racial strife (see, e.g., "Swastikas Deface Walls & Trouble Tenants," New York Daily News, March 9, 2004). In 1998, respondents were in the throes of a class [*2]action lawsuit alleging rental discrimination against blacks and Hispanics in various subsidized housing projects in Williamsburg including Roberto Clemente Plaza (see history of litigation at Williamsburg Fair Housing Committee v. New York City Housing Authority, n.o.r., 2005 WL 736146, *1-3 [SDNY 2005] and Williamsburg Fair Housing Committee v. Ross-Rodney Housing Corp., 599 F Supp 509, 512-514 [SDNY 1984], and a third-party action brought by the United Jewish Organizations of Williamsburg charging lack of good faith in enforcing tenant selection regulations at Williamsburg Fair Housing Committee v. New York City Housing Authority, 73 FRD 381 [SDNY 1976]). As admitted by HPD in its answer (¶¶ 56-61), Kent Village was and still is having problems in complying with a 1990 stipulation which called for 16 units in Roberto Clemente Plaza to be rented to non-white families by passing over 16 white families on the development's external waiting list. Against this background, HPD decided to conduct an "application and recertification audit" of Roberto Clemente Plaza.
In June 1998, HPD notified Kent that its audit revealed that Kent had "permitted inappropriate succession practices for a number of years" and questioned the succession rights of 26 tenants, all of whom were Jewish (see report at petitioner's exhibit B). Acting on HPD's instructions, Kent subsequently identified ten other apartments in Roberto Clemente Plaza with successor tenancies, some of which were not Jewish. Thereafter, in July 1998, Kent (through Robert E. Paul, Kent's assistant secretary) sent the targeted tenants (who at the time held valid leases) letters denying their applications for succession rights. In several cases, including petitioner Leopold Strulovich, the sole reason given for the denial was Paul's conclusion that the new tenant had not lived in the apartment with the prior tenant for the requisite two-year period based on Paul's assumptions about the Jews' religious beliefs and practices (e.g., in Strulovich's case he would not have shared a kitchen with the original tenant because she was not Jewish [exhibit B to Volume III of respondents' exhibits]).
Rather than appealing Kent's belated denial of succession rights to HPD, thirty one of the tenants affected by HPD's audit sought to avert eviction through judicial recourse and brought suit in Brooklyn Supreme Court, which temporarily enjoined respondents from proceeding with their proposed administrative review of the tenancies in question. Respondents countered by removing the case to federal District Court, where the tenants again sought injunctive relief, alleging violations of federal, state and municipal laws, including deprivation of constitutional due process rights and religious discrimination. After HPD agreed to give the tenants a full review process including full evidentiary hearings, the federal court dismissed the due process claims without prejudice as unripe since the tenants had not yet lost in the administrative review process. The court dismissed the federal equal protection claims with prejudice on the ground that plaintiffs could not prevail on a claim of selective enforcement discrimination because they had not identified any "members of other racial or religious groups ... whose occupancy was not reviewed by HPD to determine the validity of their tenancies" (Adler v. Kent Village Housing Company, Inc., 123 F Supp 2d 91, 99 [EDNY, Block, J., 2000]). The court then declined to exercise jurisdiction over the state and municipal law claims, and remanded these back to Brooklyn Supreme Court.
On the remand, Brooklyn Supreme Court (Theodore T. Jones, J.) dismissed the action upon finding that "[t]he justicibality[sic] of plaintiffs' claims are clearly contingent on an adverse determination by the HPD, an event which has not yet occurred. Therefore, since no administrative determination has yet been taken in these matters, the instant claims are not ripe and must be dismissed" (Adler v. Kent Village Housing Company, Inc., n.o.r., index no. 2632/99, p 3, at exhibit [*3]E to petition). Having found the merits of the tenants' claims not yet ripe for judicial review, Justice Jones went on to observe that the leases issued to petitioners by Kent posed no obstacle to HPD's unilateral re-evaluation of petitioner's eligibility to obtain those leases years after their execution (id., pp 3-4). The Appellate Division upheld the dismissal of the tenants' claims for failure to exhaust administrative remedies without any mention of the Brooklyn court's opinion as to the validity of the leases (Adler v. Kent Village Housing Company, Inc., 306 AD2d 362 [2d Dept 2003]).
Thereafter, HPD held hearings on each petitioner's claim of succession rights. The same administrative hearing officer, Frances Lippa ("Lippa"), presided over all the hearings. Lippa's post-hearing decisions uniformly held against the tenants. This Article 78 proceeding ensued.
Standard of Review
At the outset, the court notes that since the hearings held by HPD were not mandated by law, the question of substantial evidence does not arise (Colton v. Berman, 21 NY2d 322, 329 [1967]; CPLR 7803[4]). "[T]he proper standard of review of determinations by [HPD] is a rational basis' test" (Matter of Fazio [Joy], 58 NY2d 674 [1982]).
In this Article 78 proceeding, petitioners challenge not just HPD's final determination but every step of the process leading thereto, arguing the process itself, not just the determination, was flawed. In other words, this court is not being asked the customary question of whether HPD's determination that petitioners were not entitled to succession rights "was arbitrary or capricious or without rational basis or warrant in the record" (Ista Management v. State Division of Housing and Community Renewal, 161 AD2d 424, 426 [1st Dept. 1990]); nor is it the standard situation, where "DHCR's interpretation of the statutes it administers, if not unreasonable or irrational, is entitled to deference" (Matter of Salvati [Eimicke], 72 NY2d 784 [1988], rearg den 73 NY2d 995 [1989]). Rather, petitioners claim that HPD totally discarded its own regulatory scheme and devised a new, unfair and unauthorized scheme.
Applicable Law
Mitchell-Lama housing projects provide subsidized housing for low-income families, and, as is to be expected, the demand for such apartments far exceeds the available supply. As a result, each housing company maintains waiting lists, and as each unit becomes available it is filled from either an internal waiting list (residents who want to move from one apartment to another) or an external waiting list (people who do not live in Mitchell-Lama housing). Other than from one of these waiting lists, the only way to become the prime tenant of a Mitchell-Lama apartment is to succeed' to the rights of a prior tenant (see Matter of Manhattan Plaza Associates, L.P. [Department of Housing Preservation and Development], ___ Misc 2d ___, 2004 NY Slip Op 24081 [Sup Ct, NY Co, Richter, J, 2004]). This last method is the one at issue in this proceeding.
The rules for succession rights are clearly set forth at 28 RCNY § 3-02(p): The person claiming succession rights must be related to the tenant of record either in one of the ways specified in § 3-02(p)[2](ii)[A], or in a non-traditional manner as defined by § 3-02(p)[2](ii)[B]. Either way, the applicant "must have resided in the apartment with the former legal tenant for two years immediately prior to the tenant's permanent vacatur of the apartment" (Alfred v. Barrios-Paoli, 251 AD2d 659, 660 [2d Dept 1998]) and "appeared on the income affidavits for at least the two consecutive annual reporting periods prior to the [tenant of record]'s permanent vacating of the apartment" (28 RCNY § 3-02(p)[3]; see also Matter of Hampton [DHCR], n.o.r., 2005 NY Slip Op 51433(U) [Sup Ct, NY Co, Madden, J, 2005]). [*4]
Once a tenant applies to the housing company for succession rights, the housing company (in this case Kent) is mandated to act within 30 days of its receipt of the application by choosing one of two options: (I) requesting that HPD approve the application or (ii) denying the application in writing (28 RCNY § 3-02(p)[8]). No other course of action is authorized by HPD's own regulations. If the housing company denies the application, the unsuccessful applicant has 30 days to appeal the decision to HPD, which will review the housing company's determination and the applicant's documentary submissions and render a final determination without conducting an evidentiary hearing (§ 3-02(p)[8][ii]; see also Application of Cadman Plaza North, Inc. [NYC Department of Housing Preservation and Development], 290 AD2d 344 [1st Dept 2002]).
HPD Hearings
As discussed above, with respect to petitioners' applications for succession rights HPD decided to hold evidentiary hearings it was not required to hold. This was done in an attempt to avoid violating petitioners' due process rights since Kent had already issued them leases.
The succession rights claims of all but one petitioner were premised on the existence of non-traditional family relationships with the prior tenant. In all cases, Kent failed to submit any evidence contradicting the evidence presented by petitioners. In all instances, Lippa ignored as evidence the multiple income verification forms listing petitioners as members of the household, and determined that petitioners had failed to establish the requisite "shared financial and emotional commitment and interdependence as defined in 28 RCNY § 3-02(p)(2)(ii)(B)."
In the case of David Goldberger, the one petitioner relying on a traditional family relationship, Lippa based her decision on the finding that Mr. Goldberger's uncontradicted testimony as to his residency at the apartment with his sister was not credible. In order to reach this finding, Lippa spurned all the corroborating evidence, including income certification forms for 1993, 1994 and 1995, and an official letter from the United Talmudic Seminary stating its records reflected that Mr. Goldberger resided at the apartment while he was a student at the Seminary from 1993 to 1995, because the school, in Lippa's words, "did not explain what records were relied on, or how those records were compiled and maintained" (Petition Exhibit G).
All the HPD decisions (at exhibit G to petition), based primarily on Lippa's inferences and deductive reasoning rather than on the review of documentary evidence set forth by 28 RCNY § 3-02[p](8)[ii], denied petitioners' tenancy rights as discussed above and concluded with the same mantra: Brooklyn Supreme Court held that petitioners' valid leases need not be given legal effect.
Import of Brooklyn Supreme Court Decision
The dismissal of the tenants' plenary action for failure to exhaust administrative remedies, affirmed by the Appellate Division, is binding on this court. The net effect of that dismissal is the foreclosure of the tenants' constitutional claims. In this proceeding, the role of this court is thus the limited one of determining whether respondents' actions pass muster under CPLR Article 78.
"Kings County Supreme Court['s] ... comment concerning the merits of [petitioners'] claim[s], however, clearly was dicta and, as such, is not entitled to preclusive effect" (Pollicino v. Roemer and Featherstonhaugh P.C., 277 AD2d 666, 668 [3d Dept 2000]; Donahue v. Nassau County Healthcare Corp., 15 AD3d 332, 333-334 [2d Dept 2005], lv den 5 NY3d 702 [2005]; Allstate Ins. Co. v. Edery, 225 AD2d 571, 572 [2d Dept 1996]). Since "no adjudication on the merits was called for, these observations must be treated as Obiter dicta, and not as the law of the case" (Schumann v. 250 Tenants Corp., 65 Misc 2d 253, 257 [Sup Ct, NY Co, Greenfield, J, 1970]). The Second Department's affirmance does not serve to turn the dicta into law of the case since that was not the [*5]ground on which the decision was affirmed (see People v. Rosano, 69 AD2d 643, 654 [2d Dept 1979], affd 50 NY2d 1013 [1980]). This point is particularly important with respect to the court's comment that petitioners' leases do not preclude their eviction by respondents on the ground that their succession rights are invalid, since HPD used that comment like a banner in all subsequent administrative proceedings.
In point of fact, this court disagrees with that dicta. A written lease agreement is to be treated the same as every other contract (see Farrell Lines v. City of New York, 30 NY2d 76, 82 [1972]). "The inviolability of contracts, and the duty of performing them, as made, are foundations of all well-ordered society, and to prevent the removal or disturbance of these foundations was one of the great objects for which the Constitution was framed" (Murray v. City of Charleston, 96 US 432, 449 [1877]; United States Constitution, article I, § 10; see also Matter of East 56th Plaza, Inc. [NYC Conciliation and Appeals Board], 56 NY2d 544, 546 [1982]). Even when there is a change in the law which would render a signed lease invalid ab initio, the lease cannot be unilaterally abrogated and remains in effect for the duration of its term (Diamond v. State Rent Commission, 24 Misc 2d 160, 162 [Sup Ct, Queens Co, 1960]). "Courts should not be astute to enable a municipal corporation to disavow its just commitments or obligations, or to conduct itself respecting them in a manner violative of fair dealing, which they would not sanction were natural persons the parties involved" (Wa-Wa-Yanda, Inc. v. Dickerson, 18 AD2d 251, 258 [2d Dept 1963], quoting Lowe v. City of New York, 240 App Div 484, 489 [2d Dept 1934] aff'd 265 NY 583 [1934]).
HPD's argument persuasive in Brooklyn that waiver and estoppel do not apply to it is not compelling. "The doctrine of equitable estoppel applies to municipal corporations as it does to individuals" (Entin v. City of Bristol, 368 F2d 695 [2d Cir 1966]).
[I]t can safely be said that equitable estoppel is applicable to all units of local government in exceptional cases to promote the ends of justice.... [W]here a governmental subdivision acts or comports itself wrongly or negligently, inducing reliance by a party who is entitled to rely and who changes his position to his detriment or prejudice, that subdivision should be estopped.... Equitable estoppel is a vital doctrine now more actively invoked than in years past.... It is the principle of estoppel that brings flexibility and justice to the law of municipal corporations.... Its application to these [petitioners] is limited and will prevent a 'manifest injustice.' I can conceive of no more important function of our courts, than shielding our citizens from an overbearing (or as here, a negligent) governmental agency
(Brennan v. New York City Housing Authority, 72 AD2d 410, 412-414 [1st Dept 1980], citations omitted).
Discussion
"The rules of an administrative agency, duly promulgated, are binding upon the agency as well as upon any other person who might be affected" (Matter of Frick [Bahou], 56 NY2d 777, 778 [1982]; Epstein v. Valenti, 97 AD2d 881, 882 [3d Dept 1983], app wdn 63 NY2d 677 [1984]; see also People ex rel. Doscher [Sisson], 222 NY 387, 393-394 [1918]). An agency's decision "to ignore its own published interpretation of the relevant regulations ... constitute[s] arbitrary and capricious action" (Sabol v. Perales, 82 NY2d 685, 687-688 [1993]). The fact that HPD offered petitioners hearings when it was not obligated to do so does not cure the fact that the process laid out in HPD's regulations was not followed. "The administrative appeal process is not a substitute for proper [*6]procedures at the agency level" (Matter of Leon [Wing], 3 Misc 3d 578, 584 [Sup Ct, NY Co, James, J 2003], citing Matter of Benjamin [McGowan], 275 AD2d 290, 292 [1st Dept 2000]).
The applicable regulation, 28 RCNY § 3-02(p)(8), gave Kent only two choices: (I) requesting that HPD approve the application or (ii) denying it in writing. In the case of each petitioner herein, however, Kent apparently chose a third option not provided for by the statute it simply issued leases without prior HPD approval. Years later, HPD through its according to petitioners unprecedented audit, determined that the applications should not have been approved and rescinded petitioner's valid leases by apparent administrative fiat. Petitioners, who relied on the leases issued to them by Kent, are now in the position of being ousted from homes they have settled in, at the height of New York's rental market, simply because Kent failed to comply with the regulations it was obligated to follow and HPD allowed it to do so.
"[O]ccupancy of a subject apartment is conditioned on respondent agency's approval" (Cadman Plaza [HPD], supra, 290 AD2d 344). In this case, it is evident that HPD itself did not approve petitioners' succession rights application directly; Kent did. And for years thereafter HPD, apparently passively content to allow Kent to usurp its duty to maintain oversight over succession rights at Roberto Clemente Plaza, silently acquiesced to the leases issued by Kent.
While to the best of the court's knowledge this situation has not been addressed in prior decisions dealing with Mitchell-Lama apartments, it is a common one in traditional agency cases. It is well established that when a principal's conduct "gives rise to an apparent and reasonable basis by the third party that an agency has been created and the agent possesses the authority to enter into a transaction, ... [that] authority may exist even if the principal did not actually subjectively intend to create an agency relationship, as long as the third party's reliance upon the principal's statement or conduct is reasonable" (Standard Builders Supplies v. Gush, 206 AD2d 720, 721 [3d Dept 1994], citations omitted). "The reason for this rule is that the principal, by virtue of its ability to select its agents and to exercise control over them, is in a better position than third parties to prevent the ... [agent's] misuse of their positions" (Parlato v. Equitable Life Assurance Society of the United States, 299 AD2d 108, 113 [1st Dept 2002], lv den 99 NY2d 508 [2003], citations omitted).
Here, HPD promulgated the applicable regulations, under which all transactions pertaining to leases and succession rights were to be between the residents and the applicable housing company. HPD therefore had the power and the responsibility to craft regulations which provided it with the mechanism to ensure its housing companies acted in furtherance of the statutory intent. Kent was chosen and mantled by HPD as the housing company for Roberto Clemente Plaza, and HPD was in sole position to monitor Kent's compliance with its mandate but chose not to do so. Vis-a-vis petitioners HPD approved their tenancy through Kent, who by diverging from its regulatory mandate with HPD's tacit acquiescence acted as HPD's agent. When political exigencies and legal entanglements caused HPD to finally pay attention to what Kent was doing, it tried to play catch-up ball at petitioners' expense, thereby putting them in an unprecedented predicament. Such conduct cannot be condoned; violating one minority group's due process rights is not the way for a government agency to meet its commitments to another minority group. Petitioners were entitled to presume that their Kent-issued leases had been sanctioned by HPD as provided for in the regulations, especially since so much time elapsed before HPD challenged them.
Because of Kent's decision to ignore its regulatory obligations and HPD's belated attempt to fit Kent's aberrant act into HPD's customary procedures, petitioners were forced to submit to an evidentiary hearing many years after they were lulled by Kent (with the apparent authority to act for [*7]HPD) into thinking they did not need to keep evidence, so they were unable to present the evidence they would have presented had the HPD hearings been held on the regulatory timeframe (compare amendment of NYC Admin Code § 26-516[a] to spare landlords the onerous burden of maintaining records for more than four years). Not surprisingly, petitioners did not fare well at the hearing. This injustice cannot be what the Legislature intended when it created the Mitchell-Lama housing projects. HPD's remedy and indeed its obligation is to take action against Kent in accordance with the regulations it enacted, not to illegally rescind petitioner's leases because of Kent's dereliction of duty. The possibility that some of the petitioners might not have been able to establish their bona fides even if the HPD hearings had been held promptly upon their initial application for succession rights does not entitle Kent or HPD to create a process which circumvents the applicable regulations and the legislative intent to the detriment of the public at large. As our Chief Judge recently reminded us, in deciding matters such as this affecting the availability of affordable housing to the public especially the financially disadvantaged public it is of no import that "one wrongdoer may benefit at the expense of another ... [what is important is] that no wrongdoer may benefit at the expense of the public" (Thornton v. Baron, 5 NY3d 175, 182 [Kaye, J, 2005]).
In accordance with the foregoing, HPD's conduct and determinations cannot be deemed to be rational. As one of this court's most articulate jurists aptly put it a half-century ago, "The argument that the administrator makes his own regulations and thus can waive or ignore them in any particular case is as hazardous as it is unwarranted. A proper rule is promulgated to be observed, not to be broken. To ... [hold otherwise] would at best enthrone fitful fiat as the basis of administrative determination, and at worst would lead to administrative discrimination and favoritism. The administrator's foot of late has been stretched ..., but it still cannot be used to give the boot to his own lawful and reasonable rules" (609 Holding Corp. v. McGoldrick, 204 Misc 26, 30 [Sup Ct, NY Co, Matthew M. Levy, J, 1952]).
Accordingly, petitioners' motion (seq. no. 002) to enjoin Kent from evicting them from their homes before final resolution of this matter is denied as moot. The petition (seq. no. 001) is granted only to the extent that the Deputy Commissioner's decision is hereby vacated and the matter is remanded to HPD for reconsideration in accordance with this decision.
This decision constitutes the order and judgment of the court.
DATED: December 30, 2005
_________________________
Hon. Walter B. Tolub J.S.C.
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