Miller v New York State Div. of Hous. & Community Renewal
Annotate this CaseDecided on July 14, 2011
Supreme Court, New York County
Joan Miller, Petitioner, 1
against
New York State Division of Housing and Community Renewal and 982 Realty Corp., Respondents,
116332/10
ATTORNEY FOR THE PLAINTIFF :
Firm: JOHN D. GORMAN
Address : 33 WHITEHALL STREET 16TH FLOOR
NEW YORK, NEW YORK
10004
Email :
Phone : (212) 509-8664
Fax:
ATTORNEY FOR THE DEFENDANT :
Firm: BELKIN BURDEN WENIG/GOLDMAN
Address : 270 MADISON AVENUE - 5TH FL.
NEW YORK, NEW YORK
10016
Email :
Phone : 1-212 867-4466 335 Fax: 1-212-867-0709
ATTORNEY FOR THE DEFENDANT :
Firm: NYS DIV. HOUSING COMM. RENEWAL
Address : 25 BEAVER STREET - 7TH FLOOR
NEW YORK, NEW YORK
10004
Email :
Phone : 1-212 480-6707
Fax:
ATTORNEY FOR THE DEFENDANT :
Firm: NYS ATTORNEY GENERAL
Address : 120 BROADWAY
NEW YORK, NEW YORK
10271
Email :
Phone : 1-212 416-8000
Fax:
Judith J. Gische, J.
PapersNumbered
Notice of Petition, Verif Pet, JDG affirm, exhs1
982 Realty's Verif Answer2
982 Realty opp w/ SSS affirm, exh3
DHCR's Verif Answer4
Return5
DHCR's opp6
Pet's reply7
GISCHE, J.:
This is an Article 78 proceeding brought by petitioner Joan Miller ("Miller") who seeks a [*2]judgment reversing, annulling and vacating the Order and Opinion by the Division of Housing and Community Renewal (DHCR) dated October 20, 2010 denying her petition for administrative review (PAR). Respondent 982 Realty Corp., the building's owner (owner) and DHCR have separately answered and oppose the petition. This summary proceeding was commenced timely.
Arguments and Background
Miller and her husband are tenants of apartment 2E, a rent controlled apartment located at East 52nd Street in New York City (building). In March 1998, a fire broke out which affected Miller's second floor apartment and all the other apartments in the building. According to Miller, the fire was due to a faulty, unmaintained furnace in the building. A fire report, however, suggests the fire started on the third floor.
In the course of repairing the fire damage to the building, the owner reduced the size of Miller's apartment by lowering the ceiling and decreasing the square footage. The owner also installed new doors, windows, electric and plumbing systems in the apartment as well as provided her with new phone jacks. The kitchen was fitted with new cabinets, counter-tops, sink, stove and microwave oven. A new video intercom system was also installed servicing the entire building. Although apartment 2E had previously had a communal bathroom, when the apartment was restored, a private bathroom was built inside the apartment.
On February 15, 2002, four (4) years after the fire in March 1998, Miller filed an application for a rent reduction based upon decreased services (QB420054S) alleging that the owner had refused to restore the apartment to its former condition and that she "[did] not want a rent reduction, only the space that I rented . . ." Miller alleged the owner had decreased the size of her apartment to "[create] an office next door for himself utilizing the space that once was part of my apartment." DHCR's inspector found "evidence that the total [square] footage of this studio apartment is 315 sq ft.
Following submissions by each side and the physical inspection, The rent administrator issued an Order Reducing Rent for Rent Controlled Tenant dated, January 23, 2003 (2003 rent reduction order) reducing the rent for the apartment by 25% stating the reason as being that the "studio apartment square footage is reduced by 25.0% ..." The 2003 rent reduction order further provides that it is effective February 1, 2003 and that "If there is a decrease in essential service as indicated above by an asterisk (*), the owner may not collect any increases until a restoration order is issued. Future MCI increases may not be collected if there is any decrease in service until a rent restoration order is issued. If none of the decreased services is an essential service, the owner is entitled to MBR and Fuel rent increases less the above amount. . ." There is no asterisked item appearing on that order. In addition to the rent reduction, the owner was directed to restore services within 30 days of the order. The 2003 rent reduction order reduced Miller's rent to $47.12 per month.
Following the 2003 rent reduction order, Miller filed a PAR with DHCR. In the PAR filed on February 20, 2003 (RB420052RT), Miller not only asks for a retroactive rent reduction, but also that her apartment be restored to its pre-fire size. According to Miller, the apartment was supposed to be a one bedroom, not a studio, apartment and that it had previously been 550 - 650 square feet. Thus, Miller claimed the apartment had been reduced by significantly more than 25%. Miller's PAR of the 2003 rent reduction order was denied in the Order and Opinion of the [*3]rent administrator dated April 7, 2004 (2004 PAR denial order). In its 2004 PAR denial order, the deputy commission wrote the following:
"[the] Administrator is authorized by law to direct the restoration of services and grant a rent reduction where it is determined that essential services have not been provided. The tenant's PAR does not establish any basis to modify or revoke the Administrator's determination based on an inspection report which found the apartment was 325 square feet. As the owner had acknowledged, though the report of an architect, that the apartment was previously 425 square feet, the Administrator properly reduced the rent by 25% to correspond to the approximate percent reduction in space . . . "
The deputy commissioner specifically considered and rejected claims by Miller that the ceiling had been lowered 18 inches, noting that in earlier submissions she had estimated the reduction between 6 and 12 inches and that the owner's architect had stated there had been no reduction in the ceiling height at all. The deputy commissioner found that the rent administrator had "properly focused on the reduction of floor space rather than the lowering of the ceiling since there was no way to verify if the ceiling had been lowered . . . " or that the ceiling, if lowered, had any impact on the tenant.
In denying Miller's application for a retroactive rent reduction, the commissioner stated that "[the] effective date of the rent reduction was properly set for the month following the issuance date of the [2003 rent reduction order] ..." and that pursuant to Section 2202.2 of the Rent and Eviction Regulations, the adjustment of rent "may not be retroactive (except in limited circumstances not relevant here). Had tenant not waited 2 ½ years upon her return before filing the complaint, the reduction would have been closer in time to when the space was actually taken away." Addressing Miller's claim, that the owner had not yet restored the space taken away from apartment 2E, the commissioner stated that if the owner failed to restore the space taken, "the tenant may file an Affirmation of Non-Compliance..."
On June 24, 2004, Miller filed a Tenant Affirmation of Non-Compliance (SJ420004NC), stating that the owner had failed to restore apartment 2E to the original square footage. Beginning in May 2007, the DHCR notified the parties of a hearing scheduled in the non-compliance matter. The hearing was adjourned several times (and for different reasons) with the the last date being set for October 16, 2007. In its notifications, DHCR notifications stated that the purpose of the hearing was to examine the "failure to maintain services, to wit: 1) studio apartment square footage has been reduced from 425 square feet to 315 square feet."
While Miller's non-compliance matter was pending, the owner, on July 20, 2007, filed an application with DHCR for permission to permanently reduce the size of the unit (VG-420001-OD). In support of that application, the owner stated all the improvements that had been made to the apartment (i.e new kitchen, new bathroom, all fixtures, appliances, etc) and set forth the history of Miller's prior rent reduction application which resulted in the 2003 rent reduction order. Although the owner stated that it "takes issue with DHCR's 25% rent reduction and contends the newly created unit is merely 4.7% smaller than Tenant's previous space" the owner requested that the 25% rent reduction be made the new maximum collectible rent (MCR) in return for a permanent reduction of the space. Citing sections 2202.21 and 2201.2, the owner [*4]also argued the renovation work to the apartment had not been a reduction in services at all, but actually an improvement which more than compensated Miller for any de minimus loss in floor space. Furthermore, the owner argued that, by law, it had the right to seek an increase in rent for work done in rehabilitating the damaged apartment, but it was voluntarily agreeing to forego such increase. Finally, the owner argued that given the "practicalities" of the situation, it was simply impossible to comply with any order to increase or restore apartment 2E to its former size.
In her August 17, 2007 answer and response to the owner's application, Miller argued that the owner was estopped from challenging the 2003 rent reduction order due to the passage of time and the expiration of the statute of limitations. Miller also argued that it would be easy to increase the square footage of her apartment by simply adding a door leading into the owner's office which she claimed was "illegal commercial space." In the "wherefore" clause of her answer, Miller asks that the "Owner's Rent Modification Application be dismissed and that the Owner be required to comply with the previously issued Order and restore the services to the Premises, wherein the Premises are returned to the Tenant, undiminished in size."
On September 12, 2007, the DHCR granted the owner's application (order granting space reduction). In its order granting space reduction, the rent administrator recited the facts of the underlying rent reduction application (QB-420054-S) that Miller had filed in 2002 and the resultant 2003 rent reduction order. The rent administrator also recited subsequent events, including Miller's PAR (RB-420052-RT). In granting permission to decrease the dwelling space permanently, the rent administrator noted that tenant's prior PAR had been denied and that the apartment had been substantially renovated with tenant receiving new amenities. The rent administrator also stated that in affirming the 2003 rent reduction order, the legal rent for the apartment was $62.83 less 25% effective February 1, 2003.
In view of DHCR's decision, granting the owner to permanently decrease the size of apartment 2E, the owner made a written application on notice dated September 18, 2007 that "the non-compliance hearing scheduled for October 16, 2007 be cancelled and the proceeding terminated as the issue of non-compliance is moot." In response to the application, the attorney for DHCR's compliance unit (Steven E. Breitman, Esq.) wrote the following to the Administrative Law Judge for the Hearings Unit and the parties:
[the] scheduled non-compliance concerns the owner's failure to restore the subject apartment to its pre-fire dimensions. The Compliance Unit agrees with owner's counsel's contention that Order No. VG-420001-OD) which granted owner's application to permanently reduce the dwelling space of the above referenced premises with a corresponding permanent rental decrease indeed makes the issue of non-compliance moot at this time. It is specifically noted that the permanent rent decrease was made retroactive to February 1, 2003, the effective date of the original service reduction order (No. QB-420054-S). It should be noted that the tenant has the opportunity to file a Petition for Administrative Review of the [September 12, 2007] order. Accordingly, the Compliance Unit hereby withdraws its request for a hearing on non-compliance under Notice of Hearing dated May 10, 2007, without prejudice to renewing the hearing request only if the tenant is successful in reversing Order VG-420001-OD.
(emphasis in original) [*5]
The ALJ provided the tenant and owner an opportunity to respond and Miller also agreed to withdrew her request for a non-compliance hearing, without prejudice and the hearing was adjourned to November 6, 2007 for additional comments in writing. In April 2008, the commissioner determined that "[neither] tenant nor respondent filed comments to petitioner's motion to withdrew its request for a hearing and dismissed the "charges against respondent [owner] without prejudice."
Prior to that order, on October 17, 2007, however, Miller had filed a PAR [VJ-420039-RT], seeking to reverse the September 12, 2007 ruling granting the owner's application and an order directing the owner to return the space undiminished in size (Ex. E-1). In sum and substance, Miller argued that by failing to obtain permission to reduce the size of apartment 2E before actually doing so, the owner had violated NYCRER § 2202.21 and, therefore, was precluded from making an application after the fact for a permanent decrease in space and rent. Miller raised other arguments, including that her apartment was now significantly diminished, cramped and disrupted by the "noisy" owner's office next door. According to Miller, the reduction in rent was not sufficient compensation and that "the only remedy here would be to restore the Premises undiminished in size." Miller also raised the legal doctrine of res judicata, arguing that in its 2003 rent reduction order, the rent administrator had ordered the premises restored to its original size but the owner had not done so, instead opting to file an application to permanently reduce the size of the apartment.
By order and opinion dated October 20, 2010, DHCR denied Miller's October 17, 2007 PAR (Ex. E-8) and it is this denial which Miller seeks a review of. In its October 17, 2007 order and opinion the commissioner recounted the extensive history of the parties' dispute over the reduction in the square footage of apartment 2E. In denying the PAR, the commissioner wrote the following:
"The provision of dwelling space within an apartment is required to be maintained pursuant to Section 2201.2 of the Rent and Eviction Regulations (Regulations). However, the Division may permit a decrease in dwelling size upon application to the Division..."
". . . It is not disputed that apartment 2E and other apartments in the premises had to be reconstructed after a fire in 1998 had damaged the apartments, whereby the dwelling space of apartment 2E was reduced..."
While noting that the owner had "unilaterally reduced the tenant's apartment space during apartment reconstruction prior to applying ... for permission to decrease the dwelling space..." DHCR observed that the owner had been penalized by rent reduction for failure to provide that service. The commissioner found that the 2003 rent reduction order "does not bar the owner from applying to the Division, pursuant to Section 2201.21 of the Regulations, to allow a reduction in apartment space for a reduction in rent, if facts so warrant." DHCR noted further that the determination to grant or allow a reduction is made on a case by case basis and although the amount of space taken from apartment 2E was not de minimus, Miller had been "properly compensated" not only through a permanent rent reduction but also the new fixtures, etc., provided. DHCR discredited Miller's claim that the space removed was taken for the owner's personal use. [*6]
The first cause of action in the petition alleges that the DHCR's denial of Miller's October 16, 2007 PAR contravenes 9 NYCRR 2202.21 and is, therefore, arbitrary and capricious. Miller argues that, under the regulation, an owner must first apply for permission before reducing a tenant's dwelling space but here, the owner reduced the size of apartment 2E and then sought permission. The second cause of action states that DHCR's 2003 rent reduction order has a preclusive effect, and that under the doctrines of res judicata and collateral estoppel, the owner was precluded from applying for permission to reduce the size of apartment 2E. The third cause of action asks for a reversal of the DHCR's finding in the October 20, 2010 order, that Miller failed to establish that the owner had used space taken from her unit to enlarge its on-site realty office.
Discussion
Since an Article 78 proceeding is a special proceeding, it may be summarily determined upon the pleadings, papers, and admissions to the extent that no triable issues of fact are raised (CPLR § 409 [b]; CPLR §§ 7801, 7804 [h]). Thus, much like a motion for summary judgment, the court should decide the issues raised on the papers presented and grant judgment for the prevailing party, unless there is an issue of fact requiring a trial (CPLR § 7804 [h]; York v. McGuire 1984, 99 AD2d 1023 aff'd 63 NY2d 760 [1984]; Battaglia v. Schumer, 60 AD2d 759 [4th Dept 1977]).
In order for the court to find that an agency's determination is arbitrary and capricious, it would have to find that the action taken was without sound basis in reason and taken without regard to the facts. The question for the court is generally whether the agency determination has a rational basis (Pell v. Board of Education of Union Free School District No. 1 of Towns of Scarsdale and Mamaroneck, 34 NY2d 222 [1974]). While pure issues of law should be determined by the court, issues concerning the interpretation of a statute or regulation by the agency responsible for its administration should be upheld, if they are not irrational or unreasonable (Madison-Oneide Board of Compaartive Educational Services v. Mills, 4 NY3d 51 [2004]); Allstate Ins. Co. v. Libow, 106 AD2d 110 [2nd Dept. 1984] aff'd 65 NY2d 807 [1985]).
For the reasons that follow, the court finds that Miller has failed to establish that the Order and Opinion dated October 20, 2010 denying her PAR was without a rational basis.
In its 2003 rent reduction order, DHCR ordered a rent reduction until such time as the diminished services were restored and a rent restoration order was issued. Subsequently DHCR granted the owner's application for a permanent reduction in square footage of the apartment with a concomitant permanent reduction in rent. The September 12, 2007 order granting the owner's application for a permanent reduction in space recited the undisputed facts of this case, which are that: 1) there was a fire at the premises, 2) the apartments in the building were damaged, 3) in restoring apartment 2E, not only was it completely renovated, an internal bathroom was installed and 4) the apartment was made 25% smaller. Prior to the fire apartment 2E had used a communal bathroom off the second floor public hallway. Thus, the rent administrator decided that Miller was adequately compensated for the reduction in the size of her apartment, not only by the permanent rent reduction bringing the rent for the apartment to just $47.13 per month, but also the new and improved amenities which included a private bathroom, new appliances, an intercom, etc.
In affirming the rent administrator and denying Miller's October 17, 2007 PAR, the [*7]commissioner wrote that the rent administrator "properly permitted the 25% decrease in apartment space and properly determined that a 25% permanent rent decrease [compensates] for the loss in the apartment." The commissioner addressed each of Miller's objections, including that the: 1) 25% reduction in space makes the premises virtually unlivable; 2) extreme degree of loss of space is contrary to rent control laws; 3) owner waited eight years since taking the space to file the application to reduce the space; 4) owner took space from her apartment to enlarge a real estate office next to her apartment; 5) reduction in dwelling space interferes with her comfort, peace and quiet; 6) real estate office can be made a part of her apartment and; 8) rent reduction is not sufficient to compensate for the loss of space. DHCR also considered Miller's other objection to the September 17, 2007 order, including that owner's application was time-barred, the owner had decreased the square footage without permission; that the rent regulations were misapplied, in that they do not permit the interchange of new services for the reduction in space; that the owner seized the opportunity after the fire to reduce her space to enlarge his on site office; and that the Owner was already under an order to restore the dwelling space.
The commissioner also addressed each of the owner's responses to those objections, including: the need to restore the apartment due to a fire, the extensive work done, that the apartment was upgraded from a class B type apartment to a class A type [FN1], and that the reduction in rent is sufficient compensation for the loss of space.
Section 2202.21 of the NYCRER pertains to decrease of services subsection (a) thereof provides as follows:
(a) Until the accommodations become vacant, the landlord shall maintain the same dwelling space, essential services, furniture, furnishings and equipment as are required under section 2201.2 of this Title, unless and until he has filed an application to decrease the dwelling space, essential services, furniture, furnishings or equipment and an order permitting such decrease has been entered thereon by the administrator
Subdivision (d) of the regulation states that an application under subdivision (a) may require an appropriate decrease in the maximum rent, as per section 2202.16.
In reviewing an order of the DHCR, the only questions that may be considered by the court are whether a determination was made in violation of lawful procedure, was effected by an error of law or was arbitrary and capricious or an abuse of discretion (CPLR § 7803). "Arbitrary action is without sound basis in reason and is generally taken without regard to the facts" (Pell v Board of Educ. of Union Free School Dist. No. 1 of the Towns of Scarsdale and Mamaroneck, Westchester County, supra). Where the determination is rationally based upon evidence in the administrative record, it should not be disturbed (Elgart v New York State Div. of Hous. and Community Renewal, 2 AD3d 218, 218 [1st Dept 2003]). DHCR's interpretation of the statutes that it administers, if not unreasonable or irrational, is entitled to deference (Matter of Salvati v Eimicke, 72 NY2d 784, 791 [1988]). A court may not substitute its judgment for that of an agency, even if the court could have reached different conclusions because of conflicting evidence (Matter of Partnership 92 LP and Bldg. Mgt. Co., Inc. v State of New York Div. of Hous. and Community Renewal, 46 AD3d 425, 429 [1st Dept 2007], affd 11 NY3d 859 [2008]). [*8]
Miller claims that "unless and until" (9 NYCRR 2202.21) means that the Owner should have applied for permission to reduce her apartment space before he actually did so. The DHCR's October 20, 2010 decision acknowledged that the owner had reduced the square footage before seeking permission to do so, but noted the extenuating circumstances in which this had occurred (a fire) and that the reconfiguration of Miller's unit was part of the extensive reconstruction necessitated by the fire. Moreover, the DHCR did not retroactively approve the application for a decrease in services. Miller had been given a remedy for the decrease in services before approval of the owner's application in the form of the rent reduction order. The approval of the owner's application prospectively made that rent reduction order permanent. Thus, consistent with the regulation, the owner was penalized for not providing essential services before the DHCR made an order approving such a decrease. This satisfied the requirement that essential services must be provided until an application to decrease services is made.
Miller urges the application of the doctrines of res judicata and collateral estoppel. These doctrines prevent parties from relitigating matters decided in a previous action. Under res judicata, a claim that has been adjudicated, and all other claims arising out of the same transaction or series of transactions as the original claim, may not be readjudicated, even if based upon different theories, or if seeking a different remedy (O'Brien v City of Syracuse, 54 NY2d 353, 357 [1981]; Coliseum Towers Assoc. v County of Nassau, 217 AD2d 387, 389-390 [2d Dept 1996]). To rephrase, the rule applies not only to claims actually adjudicated, but also, to those that could have been adjudicated in the same proceeding (Coliseum, 217 AD2d at 389).
The concept of collateral estoppel is somewhat narrower. It requires "that an issue in the present proceeding be identical to that necessarily decided in a prior proceeding, and that in the prior proceeding the party against whom preclusion is sought was accorded a full and fair opportunity to contest the issue" (Allied Chem., an Operating Unit of Allied Corp. v Niagara Mohawk Power Corp., 72 NY2d 271, 276 [1988], cert denied 488 US 1005 [1989]). Under either doctrine, the burden of establishing the first element is upon the proponent of preclusion, and the burden of establishing the second is upon the opponent (Miller Mfg. Co. v Zeiler, 45 NY2d 956, 958 [1978]; Sucher v Kutscher's County Club, 113 AD2d 928, 929-930 [2d Dept 1985]).
Miller has failed to prove that the 2003 rent reduction order collaterally estopped or precluded the owner from applying for a permanent decrease in the size of apartment 2E or that, as claimed by her, that the 2003 rent reduction order and the 2007 order granting a permanent reduction in the size of apartment 2E are inconsistent. The 2003 rent reduction order only reduced the rent for apartment 2E as a consequence for services not maintained and for as long as they were not restored. Although the 2003 rent reduction order also directed the owner to restore the apartment, the issue of a permanent reduction in size of the apartment was not before the DHCR in connection with the rent reduction petition.
On the other hand, in connection with the owner's application for a permanent decrease, the issue of whether the tenant could be properly compensated for making her apartment smaller was squarely before the rent administrator and the parties fully litigated the issue of whether the reduction in the square footage of the apartment should be (prospectively) made permanent. Thus, while the earlier 2003 rent reduction was temporary, the September 12, 2007 order made the rent reduction permanent based upon the totality of the circumstances, including the [*9]impracticality of restoring the apartment to its former size.
Determinations to grant or deny an application for permission to decrease dwelling space or essential services are made by DHCR on a case-by-case basis, taking into consideration all relevant factors, including the amount of space the owner wants to remove and the effect of the loss of the dwelling space on the tenant's use of the apartment (Lite View, LLC v. New York State Div. of Housing and Community Renewal, 30 Misc 3d 1224(A) [Sup Ct., NY Co. 2011]). The decision by DHCR to grant the owner's application for a permanent reduction in the size of apartment, although not de minimus, is not in contravention of the rent laws. Moreover, DHCR is empowered by the Rent Stabilization Code to determine what constitutes a required service, and whether curtailment of such service is an evasion of stabilized rents (Lite View, LLC v. New York State Div. of Housing and Community Renewal, supra [citing In re Car Barn Flats Residents' Ass'n v. New York State Div. of Housing & Comm. Renewal, 184 Misc 2d 826 (Sup.Ct. NY Co. 2000)]. The commissioner's denial of the PAR seeking to reverse or otherwise annul the rent administrator's decision dated September 17, 2007 satisfies these requirements and there is a rational or reasonable basis for the agency's determination which is firmly supported by the record (See, Sewell v. New York, 182 AD2d 469 [1st Dept.1992]). Since petitioner has failed to meet her burden of proof to establish the merits of this petition by showing there is an issue of fact requiring a trial (Koch v. Dyson, 85 AD2d 346 [2nd Dept 1982]), the petition is summarily denied on the submissions made and this summary proceeding is dismissed.
Conclusion
Upon the foregoing papers and in accordance with the court's decision and order, it is hereby:
ORDERED and ADJUDGED, that this Article 78 petition is hereby DENIED and this summary proceeding dismissed; and it is further
ORDERED that this constitutes the decision, order and Judgment of the court.
Dated:New York, New York
July 14, 2011ENTER:
___________________
Hon. Judith J. Gische, J.S.C. Footnotes
Footnote 1: (Multiple Dwelling Law § 4 [8] [a])
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