Stone v W7879 LLC

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Stone v W7879 LLC 2013 NY Slip Op 31377(U) June 26, 2013 Supreme Court, New York County Docket Number: 109621/10 Judge: Joan M. Kenney 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 612812013 [* 1] SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: JOAN M. KENNEY PART Justice __ Index Number: 109621/2010 STONE, JAMES W. vs. MOTION DATE W7879 LLC SEQUENCE NUMBER : 003 MOTION SEQ. NO. ob3 SUMMARY JUDGMENT _ I _ The following papers, numbered 1 to ,were read on this motion to/for Notice of MotionlOrder to Show Cause -Affidavits Answering Affidavits - Exhibits - Exhibits IN W . INo(@. IW s ) . Replying Affidavits Upon the foregoing papers, it is ordered that this motion is MOTION IS DECIDED IN ACCQRDANCE WlTH THE ATTACHED MEMORANDUMDECISiOK .. ..................... ..."*..b-.r...* . l . .... . . . #"" YNFILED JUDGMENT Thk judgment has not been entered by the County Clerk and n ofentry cannot be served based hereon. To obtain entry, counsel or authoriied representative must appear in person a the Judgment Clerk's Desk (Room t 141B ) . ,J.S.C. CASE DISPOSED ..................................................................... 0DENIED 2. CHECK AS APPROPRIATE: .............. MOTION I : 0GRANTED S 3. CHECK IF APPROPRIATE: ................................................ 0SETTLE ORDER I.CHECK ONE: D DO NOT POST - J.S.C. 0 NON-FINAL DISPOSITION 0GRANTED IN PART 0OTHER SUBMIT ORDER FIDUCIARY APPOINTMENT 0REFERENCE -1 - [* 2] SUPREME COURT OF THE STATE OF NEW YORK PART 8 COUNTY OF NEW YORK X _ _ _ l l _ _ _ _ l _ _ _ _ _ _ f _ _ _ - - - - - - - - - - - - - - - - - - - - JAMES W. STONE and LISA J. KIELL, DECISION, ORDER Plaintiffs, & JUDGMENT -against- Index No.: 109621/10 W7879 LLC; N , K a n d S, LLC; West 7 g t h LLC; MN Broadway, LLC; Lisa W. Nagel UNFILED JUDGMENT Irrevocable LLc; DECENDENTS slNGLEThis judgment has not been entered by the County Clerk TRUST u / w NAGEL, Nagehd notice of entry cannot be served based hereon. TO and Trustees; DECENDENTS SINGLEubtain entry, counsel or authorized representative must TRUST u/w NAGEL, FBo STEVEN appear in person at the Judgment Clerk's D8sk (Room NAGEL ET AL., Evelyn Nagel and Alan 141~). Trustees; DECENDENTS SINGLE TRUST U / W MICHAEL NAGEL, FBO EVELYN NAGEL ET AL., Evelyn Nagel and Alan Trustees; DECENDENTS SINGLE TRUST U/W MICHAEL NAGEL, FBO CLAIR NAGEL ET AL., DECENDENTS SINGLE TRUST U/W MICHAEL NAGEL, Clair Nagel Jernick and Alan Nagel Trustees; and DECENDENTS SINGLE TRUST U / W MICHAEL NAGEL FBO ALAN NAGEL ET AL, Alan Nagel and Steven Nagel Trustees, Brier Deutschrneister Urban Popper PELC Counsel for Plaintiffs 21 West 3Eth Street, Floor New York, NY 10018 (212) 791-3900 Krucker & Bruh, LLP Counsel for Defendants 147 T h i r d Avenue New York, New York 1 0 0 1 7 (212) 869-5030 Papers considered in review of these motions: Papers : Notice of Motion, Affirmation, Affidavit, Exhibits, Memorandum of Law Notice of Cross-Motion, Affirmation in Support and Opposition, Affidavit in Support and Opposition, Exhibits, Memo of Law in Support Reply affidavit in Opposition to Cross Motion and Reply Memoranda of Law in Opposition Reply Affirmation in Opposition Numbermd : 1-15 16-25 26-21 20 Defendants move, pursuant to CPLR 3212, for summary judgment [* 3] dismissing the complaint. Plaintiff cross-movesl, pursuant to CPLR 3212, for summary judgment declaring that plaintiffs are rent- stabilized tenants of the apartment they occupy and granting judgment in their favor for their claims of rent ovrcharge and treble damages. FACTUAL BACKGROUND This action involves a landlord-tenant dispute in which the plaintiff tenants seek: (I) a declaration that their apartment is rent-stabilized and that the monthly rents collected by defendant landlords since May, constitute an 1, 2003, are erroneous, unlawful and/or overcharge; (2) declarative relief directing defendants to register the premises as a rent-stabilized unit with the New York State Division of Housing and Community Renewal (DHCR) at the lawful rent; (3) judgment in the amount of the overcharges plus treble damages for all wilful overcharges; and (4) attorneys' fees. This litigation results from the ruling of the Court of Appeals in Roberts v T i s h m a n Speyer P r o p e r t i e s , L.P. ( 1 3 NY3d 270 [20091), which held, receiving tax J-51 in sum benefits and could substance, not that properties deregulate apartments therein, as long as such tax benefits were being received by the landlord of the property. 'The motions were filed simultaneously. The Court is deeming the tenants' "Notice of Motion" a cross motion. 2 [* 4] Plaintiffs are challenging the regulatory status of the apartment known as 54, 229 West 78th Street, a/k/a 230 West 7 g t h Street, New York, New York 10024. In particular, the tenants claim that the subject apartment is rent stabilized, based upon the landlords' receipt of 5-51 tax benefits at the time the tenants first took occupancy of the unit. It is the tenants' position that despite the ruling in the R o b e r t s case, the landlords have refused to abide by the Court of Appeals decision. Defendants do not proffer an explanation as to how plaintiffs' "base rent'' was calculated. The documents from DHCR indicate that from 1998-2009 the apartment appears to be rent-controlled, without stating the registered rent. Nor do the landlords have any explanation o r rationale, for failing to register the apartment as rent stabilized, assuming the rent controlled tenant vacated the unit. The only explanation proffered by the landlords for their failure to register the apartment legally, with the legal rent, is that DHCR, during those y e a r s , did not require that the unit be registered at all. Also, defendants have not adequately explained how plaintiffs' "base rent," of $5,200.00 per month was calculated. Finally, defendants papers a r e silent regarding the conversion of the apartment from being rent-controlled to being rent-stabilized. In support of their cross motion, and in opposition to landlords' motion, plaintiffs' contend that the landlords do n o t dispute any of the facts presented in the complaint, and admit that 5-51 tax benefits were being received, when 3 plaintiffs took [* 5] possession of the apartment in 2003. Further, the lease fails to contain the required J-51 notice, that the apartment remained subject to rent-stabilization, despite the expiration of the J-51 tax period. In opposition to tenants' CKOSS motion, and in reply, the landlords concede that R o b e r t s is retroactive in its applicability, and does not oppose the tenants' request that the apartment be declared rent-stabilized. Defendants' argue that their voluntary, pre-litigation actions, should preclude plaintiffs from obtaining any finding of liability or damages as a matter of law. Moreover, by bringing the instant action plaintiffs' should be held liable for defendants' attorneys' fees. Defendants also contend that they were in compliance with the existing law and t h e guidelines promulgated by DHCR in 2003, as they applied to deregulation of rent regulated apartments, including the apartment at issue. The basis for this argument is that defendants had a good faith belief that plaintiffs' apartment was properly deregulated based "on the existing interpretation of law." Furthermore, the apartment was deregulated by the prior owners of the building, and as far as defendants were concerned, in accordance with the law in effect at the time. Finally, defendants claim that plaintiffs' f r a u d allegations are specious, and cannot extend the undisputed four year statute of limitations (CPLR 213-a)(rent overcharge), rather than the six year statute governing fraud ( C P L R 213 [ 8 ] ) 4 . [* 6] DISCUSSION "The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tend'ering sufficient evidence to eliminate any material issues of fact from the case [internal quotation marks and citation omitted] ." Santiago v F i l s t e i n , 3 5 AD3d 1 8 4 , 185-186 (' 1' Dept 2006). The burden then shifts to the motion's opponent to "present evidentiary facts in admissible form sufficient to raise a genuine, triable issue of fact." Mazurek v M e t r o p o l i t a n Museum of Art, 2 7 A D 3 d 227, 228 ( l s tDept 2006); see Zuckerman v City of New Y o r k , 4 9 NY2d 557, 562 (1980) a If there is any doubt as to the existence of a triable fact, the motion f o r summary judgment must be denied. See R o t u b a Extruders, I n c . v Ceppos, 4 6 N Y 2 d 223, 2 3 1 ( 1 9 7 8 ) . Since the landlords have admitted that the apartment is rentstabilized, this fact has rendered moot any question a s to the apartment's rent regulated status and whether plaintiffs are to be provided with a rent-stabilized lease. However, the issue as to the calculation of the correct stabilized rent remains to be determined. For the purpose of calculating the correct rent, the tenants' rent overcharge claim is subject to a f o u r - y e a r statute of limitations ( s e e Rent Stabilization L a w of 1969 e t a l ) . "The Rent Regulation Reform Act of 1997 'clarified and reinforced the four-year statute of limitations applicable to rent overcharge claims ... by limiting examination of the rental history of housing accommodations prior to 5 [* 7] the four-year complaint' period preceding the filing [internal citations omitted] , " of an Matter overcharge of Cintron v Calogero, 15 NY3d 347, 353 (2010); Gordon v 3 0 5 R i v e r s i d e C o r p . , 93 A D 3 d 590 (1" Dept 2 0 1 2 ) . of plaintiffs' Defendants argue that the sole function fraud allegations, is an attempt to p r o v i d e a subterfuge to circumvent, the well-settled f o u r year statute of limitation applicable to rent overcharge complaints. 213 [8]) (See CPLR . The elements of fraud are a misrepresentation or a material omission of fact which was known to be false by the defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or Omission, and injury Representative Services, (VisionChina LLC, Media Inc. v Shareholder 2 0 1 3 WL 2476558, quoting, Mandarin 0 Trading L t d . v. W i l d e n s t e i n , 16 NY3d 173, 178 [2011]). "[Rleliance must be found to be justifiable under all the circumstances before a complaint can be found to state a cause of action in fraud" (Danann R e a l t y Corp. v Harris, 5 N Y 2 d 3 1 7 , [1959]). What constitutes reasonable reliance is 322 "always nettlesome" because it i s s o fact-intensive ( D D J M g t . , LLC v Rhone Group L.L.C., 1 5 NY3d 147, 155 [ZOlO] [internal quotation marks omitted] ) . All of the elements of a fraud claim "must be supported by factual allegations containing the details constituting the wrong," 6 [* 8] in order to satisfy the pleading requirements of CPLR 3016(b) (Cohen v Houseconnect R e a l t y C o r p . , 289 AD2d 277, 278 [ 2 n d Dept 20011; see also, 6 8 Burns N e w H o l d i n g , Inc. v Burns St. Owners C o r p . , 18 AD3d 857 [ 2 n d Dept 20051 1 . The purpose of this pleading requirement "is to inform a defendant of the complained-of incidents" ( E u x y c l e i a Partnexs, LP v Seward & Kissel, LLP, 12 NY3d 353 [20091). Nonetheless, it may be "almost impossible to state in detail t h e circumstances constituting a f r a u d where those circumstances are peculiarly within the knowledge of [an adverse] party" ( J e r e d C o n t r . Corp. v N e w York City T r . A u t h . , 22 N Y 2 d 187, 194 [19681). "Under such circumstances, the heightened pleading requirements of CPLR 3016(b) may be met when the material facts alleged in the complaint, in light of the surrounding circumstances, 'are sufficient to permit a reasonable inference of the alleged conduct' including the adverse party's knowledge of , or participation in, the fraudulent scheme" ( H i g h T i d e s , LLC v. DeMichele, 8 8 A D 3 d 954, 957 [2nd Dept 20111, quoting Pludeman v. N o r t h e r n L e a s i n g S y s . , Inc., 10 NY3d 4 8 6 , 492 [2008]). In order to determine the correct rent and whether there has been a n y wilful rent overcharge, entitling plaintiffs to both treble damages and attorneys' f e e s , evidence must be presented on these issues. See Matter of Obioxa v New York State Division of Housing and Community R e n e w a l , 7 7 A D 3 d 755 ( 2 d Dept 2010); Matter of Graham Court Owners Corp. v D i v i s i o n of H o u s i n g a n d Community R e n e w a l , 7 1 7 [* 9] A D 3 d 515 ( l s tDept 2010). In light of the landlords' admissions, there is no basis to dismiss plaintiffs' claims. With respect to the rent overcharges, defendants have failed to establish, as a matter of law, that the base rent was calculated properly when the previous rent-controlled tenant vacated the apartment and when plaintiffs took possession, in 2003, or that plaintiffs' base rent was properly calculated. Excluding the issue of the rent-regulated status of the apartment, all of the causes of action are based on what would be the lawful rent for the unit and what, if any, increases from that amount are permissible under rent-regulation law. Since neither party has provided sufficient evidence for the court to make that determination, the following issues are referred to a Special Referee to hear and report, in no particular order: 1. 2. 3. 4. 5. Calculate the legal rent for the apartment DHCR in accordance with applicable regulations et al; Calculate the overcharges, if any, attendant to the apt; Take testimony and evidence in order to be able to recommend, or not, whether defendants wilfully registered an illegal rent for the subject apartment; In the event the Special Referee makes a recommendation that plaintiffs' fraud claim is valid, e.g., the registration was wilfully deceptive, the Special Referee shall apply a 6-year statute of limitations to any damages and/or overcharges that may or may not be recommended; In the event the Special Referee recommends an award of damages for rent overcharge without the presence of fraud, a 4-year statute of limitations is to be applied. 8 [* 10] Accordingly, it is ORDERED that defendant's motion for summary judgment is denied; and it is further ORDERED that the portion of plaintiffs' cross motion seeking a declaration that the apartment is rent-stabilized is granted; and it is further ADJUDGED and DECLARED that the apartment known as 54, 229 West 78th Street, a/k/a 230 West 7 g t h Street New York, New York 10024 is a rent-stabilized apartment; and it is further ORDERED that the issue of calculating plaintiffs' legal rent stabilized rent is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by C P L R 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further ORDERED that the remainder of plaintiff,s cross motion is granted; and it is further ORDERED that defendants motion is denied. Dated: June 26, 2013 ENTER: UNFILED JUDGMENT T i iudgment has m been entered by the County GI@ h s t J.S.C.

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