M & E Christopher LLC v GodfreyAnnotate this Case
Decided on June 15, 2015
Civil Court of the City of New York, New York County
M & E Christopher LLC, Petitioner,
Jason Godfrey, Respondent, NEDEIDA GODFREY, "JOHN DOE" AND "JANE DOE" Respondents.
L & T 80419/2012
Petitioner's attorney: Rosenberg & Estis, P.C. by Deborah Riegel, Esq.
Respondent's attorney: Urban Justic Center by Sadia Rahman, Of Counsel
Peter M. Wendt, J.
Recitation, as required by CPLR 2219(a), of the papers considered in the review of Respondents' motion for summary judgment dismissing the petition, and Petitioner's cross-motion for partial summary judgment:
Notice of Motion and Affidavit Annexed and Memorandum of Law1
Notice of Cross-Motion and Affirmation Annexed2
Memorandum of Law3
Affirmation in Opposition to the Cross-Motion4
Reply Memorandum of Law6
Upon the foregoing cited papers, the Decision/Order in this motion is as follows:
Petitioner M & E Christopher LLC ("Petitioner") commenced this holdover proceeding against Respondents Jason and Nedeida Godfrey (collectively "Respondents"), and John Doe and Jane Doe seeking possession of Apartment 1C, 110 Bedford Street, New York, New York (the "subject premises") based upon the termination of Respondents' month-to-month tenancy. Petitioner alleges that Respondents entered into possession of the subject premises pursuant to a written lease agreement dated March 21, 2005 for a two year term commencing May 1, 2005 and expiring on April 30, 2007, which agreement was thereafter renewed by a series of written renewal agreements, the most recent of which is dated January 19, 2009 for a period commencing May 1, 2009 and ending April 30, 2011. Subsequent to April 30, 2011, Respondents' lease was not further renewed. Moreover, Petitioner alleges that the subject premises is not subject to the New York City Emergency Housing Rent Law, Rent Control, Rent Stabilization Law of 1969 as Amended or the Emergency Tenant Protection Act of 1974 because the subject premises became vacant after April 1, 1994 and the vacancy rent was $2,000.00 or more; or in the alternative, because the subject premises became vacant in or about 2004, and at the time the subject premises became vacant, Petitioner was entitled to charge "first rent" in excess of $2,000.00, and the subject premises thereby became exempt from Rent Stabilization. Respondent interposed an Answer, by counsel, asserting that the subject premises is subject to rent stabilization, and thus, they are rent stabilized tenants, along with other affirmative defenses.
Respondents move for an order granting summary judgment dismissing the petition on the grounds that the subject premises was improperly deregulated, and Respondents are rent stabilized tenants that have been overcharged. The affidavit of Nedeida Godfrey states that: 1) she is married to Respondent Jason Godfrey; 2) on March 21, 2005, Respondents entered into a lease with Petitioner that stated the subject premiss was not rent-controlled and rent was $2,050.00 per month; 3) since the initial lease, Respondents have entered into a series of renewal leases which eventually raised the rent to $2,350.00; 4) on September 5, 2012, Respondent filed a rent overcharge complaint with DHCR; and 5) on September 14, 2012, Petitioner commenced this proceeding. Respondents assert that the initial lease under which Respondent occupied the subject premises commenced on May 1, 2005. Respondents state that: 1) the subject premises was last listed as rent stabilized in 1998 at the monthly rent of $791.70; 2) in 1999, the Petitioner registered the subject premises as "exempt owner occupied/ employee" as it was allegedly occupied by Richard Goidel from 1999 through 2004 as a live-in employee; 3) in 2005, it was rented to Respondents as a non-stabilized apartment at $2,050 per month, which eventually rose to $2,350.00 in 2012; and 4) the subject premises was then listed as "exempt high/rent/high income, and then "exempt [*2]apartment-reg not required."
Respondents maintain that there are no issues of fact regarding whether the subject apartment was rent stabilized when Respondents entered into possession. Respondents assert that since the subject premises were rent-stabilized before Mr. Goidel allegedly occupied it, it reverted back to being rent stabilized when he vacated pursuant to Rent Stabilization Code ("RSC") 2520.11. Respondents further assert that Petitioner improperly deregulated the subject premises when it rented the apartment to Respondents after Mr. Goidel vacated. Respondents state that pursuant to RSC §2526.1(a)(3)(iii), they were entitled to a rent regulated lease since they were the first tenants to enter into the subject premises subsequent to the apartment being temporarily exempt from regulation pursuant to RSC §2520.11. In its reply, Respondents argue that the four (4) year look back rule is inapplicable in determining whether an apartment is subject to rent regulation.
Petitioner cross-moves for partial summary judgment to the extent of determining that the subject premises have been lawfully and properly deregulated. Petitioner asserts that the RSC specifies that it applies to various housing accommodations except those, like the subject premises, "which became or become vacant on or after June 19, 1997, with a legal regulated rent of $2,000.00 or more per month." Petitioner further asserts that: 1) the subject premises became vacant after June 19, 1997, when the employee Richard Goidel moved out immediately prior to Respondents' occupancy; 2) Respondents commenced occupancy pursuant to a two year vacancy lease commencing May 1, 2005 at a rent of $2,050.00 per month, which rent can no longer be challenged, and therefore was the legal regulated rent; and 3) Respondents did not challenge the rent or status of the subject premises within four (4) years of May 1, 2005, and thus, is now barred. Petitioner maintains that Respondents' vacancy lease cannot be challenged since the RSC has a four (4) year look back for rent overcharge complaints. Moreover, Petitioner asserts that RSC §2526.1(a)(3)(iii) as it existed on May 1, 2005 [FN1] provided that where an apartment had been "Temporarily Exempt" from rent stabilization law for a period of at least four years, the first rent charged thereafter to the next tenant would be the legal regulated rent. Petitioner states that it had long been DHCR's interpretation of RSC §2526.1(a)(3)(iii) that if the first rent charged after a temporary exemption on the base date exceeded the deregulation threshold, the apartment was deregulated. Petitioner further argues that since the rent established in 2005 when Respondents commenced occupancy of the subject premises was more than $2,000.00 and the rent is no longer subject to review, it must be held that the subject premises is exempt from rent stabilization laws. Moreover, Petitioner maintains that assuming arguendo Respondents were entitled to a rent stabilized lease in May 2005, the initial rent of $2,050.00 [*3]per month agreed upon by the Respondents and Petitioner, at that time, was the legal regulated rent pursuant to RSC §2526.1(a)(3)(iii).[FN2]
Pursuant to CPLR §3212, a grant of summary judgment is permissible in cases where there is clearly no material and triable issue of fact presented. Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395 (1957); Di Menna & Sons, Inc. v City of New York, 301 NY 118 (1950). Summary judgment is a drastic remedy and should not be granted where there is any doubt as to the existence of a triable issue, Rotuba Extruders, Inc. v Ceppos, 46 NY2d 223 (1978).
To obtain summary judgment, the moving party must make a prima facie showing to the court that as a matter of law it is entitled to judgment in its favor. Friends of Animals v Associated Fur Mfrs., 46 NY2d 1065 (1979); CPLR 3212 (b). To defeat a motion for summary judgment, the opposing party must then show sufficient facts to require a trial on any issue. DiSabato v Soffes, 9 AD2d 297 (1st Dept 1959). Both parties must lay bare their evidentiary proof in admissible form. Friends of Animals v Associated Fur Mfrs., supra; Zuckerman v City of New York, 49 NY2d 557 (1980).
The role of the motion court is merely one of issue finding, not issue determination. Rose v Da ECIB USA, 259 AD2d 258 (1st Dept 1999); Pirrelli v Long Island RR, 226 AD2d 166 (1st Dept 1996). The court must view the evidence in light most favorable to the opposing party and draw all reasonable inferences in the opposing party's favor. Assaf v Ropog Cab Corp., 153 AD2d 520 (1st Dept 1989). However, mere conclusory allegations regarding the existence of questions of fact are insufficient to defeat a motion for summary judgment. Dillenberger v. 74 Fifth Avenue Owners Corp., 155 AD2d 327 (1st Dept., 1989).
Respondents moved into the subject premises on May 1, 2005. Prior to entering into possession of the subject premises, the apartment was occupied by Petitioner's employee, Richard Goidel, and was temporarily exempted from regulation from 1999-2004. Prior to Petitioner's employee entering into possession of the subject premises, the apartment was registered as rent stabilized with a monthly rent of $791.70. As further discussed below, Petitioner's arguments are unavailing, and Respondent's motion for summary judgement dismissing the petition must be granted as the subject premises is subject to rent stabilization.
RSC §2526.1(a)(3)(iii) states, "where a housing accommodation is vacant or temporarily exempt from regulation pursuant to section 2520.11 of this Title on the base date, the legal regulated rent shall be the rent agreed to by the owner and the first rent stabilized tenant taking occupancy after such vacancy or temporary exemption, and reserved in a lease or rental agreement; or, in the event a lesser amount is shown in the first registration for a year commencing after such tenant takes occupancy, the amount shown in such registration, [*4]as adjusted pursuant to this Code."
In 656 Realty, LLC v. Cabrera, 27 Misc 3d 1225(A) (Civ. Ct. NY Co. 2009, Kaplan, J.), aff'd 27 Misc 3d 138(A) (App. Term 1st Dept. 2010), the landlord commenced a lease expiration holdover against the tenant on the premise that the apartment he occupied was not subject to rent regulation as it "was or became vacant on or after April 1, 1994, and had a regulated rent of $2,000.00 or more per month." The tenant interposed several affirmative defenses, including the defense that the subject premises was improperly removed from rent stabilization. Petitioner relied on RSC §2526.1(a)(3)(iii) in support of its contention that: 1) RSC §2526.1(a)(3)(iii) allowed the landlord to negotiate a first rent after a temporary exemption however it and the initial tenant deemed appropriate. Moreover, if the landlord and the initial tenant agreed upon a first rent of $2,000.00, it would render the apartment deregulated; and 2) even if it had wrongfully removed the premises from rent stabilization when it rented it out to the tenants in April 2001, it is too late for the tenants to challenge it. The Court found that Petitioner's arguments were unavailing, and granted the tenant's motion for summary judgment seeking dismissal of the petition. The Court held, in pertinent part:
Petitioner argues that this provision of the RSC §2526.1(a)(3)(iii) allows it to negotiate a first rent after a temporary exemption however it and the initial tenant deemed appropriate. This interpretation, as applied by petitioner, is misguided for numerous reasons.
The statute is clear that the first rent must be "regulated." Here, the 2011 lease issued immediately after the temporary exemption stated that the legal rent was $2000 and that the new tenant had a preferential rent of $950. Petitioner argues that the $2000 rent rendered the premises unregulated. However, such a lease would run directly contrary to the RSC which requires that the first post-temporary exemption lease be regulated. Thus, if the court were to follow petitioner's interpretation of how it may set the first post-temporary exemption rent, the "temporary" characterization of RSC §2520.11(m) exemptions is rendered meaningless as the exemption becomes permanent at the whim of the landlord.... petitioner's interpretation of the RSC would create a loophole that undermines the goals of rent regulation. Under such a scenario, a landlord could place an employee in an apartment for a short period of time for the sole purposes of skirting its rent regulatory status as it could then permanently deregulate the premises once the employee vacates.
To the extent that the petitioner relies on the 2001 Crump lease as its sole basis for deregulating the premises, said lease is contrary to the express terms of the RSC and void against public policy to the extent that it provided for a fictitious and impermissible legal rent of $2000 as a basis to improperly remove the subject apartment from rent stabilization. As it is apparent, as a matter of law, that there was no other cognizable basis for deregulation of the subject premises, in 2001, the apartment still falls under the purview of the rent stabilization law.
Further, in Goldman v. Malagic, 45 Misc 3d 37 (App. T. 1st Dept. 2014)[FN3] , the parties stipulated to have the trial court determine "the legal rent" and whether "there is any overcharge" based on certain facts agreed upon as well as submitted documents. The stipulated facts were that the tenant initially took occupancy of the apartment in 1994 as an incident of his employment as the building's superintendent. The tenant's employment was terminated in October 2007. Thereafter, the tenant remained in occupancy of the apartment pursuant to a series of unregulated lease agreements, the first of which fixed the monthly rent at $2,000.00, with a preferential rent of $1,500. On those stipulated facts, the trial court determined that no overcharge had occurred based upon its conclusion that the parties were "free to negotiate a rent of their choosing" upon the severance of their employment relationship and that their " agreement to a rent of $2,000.00 deregulated the apartment as a matter of law." Tenant appealed, and the Appellate Term reversed, holding: 1) the apartment, though temporarily exempt from rent stabilization during the period of the tenant's employment (RSC§2520.11[m] ), reverted back to its prior (conceded) stabilized status when the landlord accepted him as a tenant in his own right after his stint as superintendent; and 2) the landlord's reliance on RSC §2526.1(a)(3)(iii) as a basis to destabilize the apartment was misplaced, since the language of that section "necessarily presumes that the first tenant after a vacancy is offered a rent stabilized lease" (citing 500 Gordon v. 305 Riverside Corp., 93 AD3d 590, 592  ).
In view of the statute and case law above, Petitioner's first contention that pursuant to RSC §2526.1(a)(3)(iii), it properly deregulated the subject premises as the first rent charged and agreed upon by the parties, after temporary exemption, exceeded deregulation threshold of $2,000.00 per month is incorrect and unavailing. Petitioner was required to offer a rent stabilized lease to Respondents as they were the first tenants to take occupancy after a temporary exemption. Although Petitioner refers to DHCR decision(s) that predate the Appellate Term decision of 656 Realty, LLC v. Cabrera, supra. and Goldman v. Malagic, supra., they don't cite a single decision or case that post dates 656 Realty, LLC v. Cabrera, supra. and Goldman v. Malagic, supra. Therefore, if there is any conflict between an Appellate Court decision and DHCR decision, clearly the Appellate Court decision, particularly a later one, is binding on this court.
Petitioner also argues that since Respondents cannot challenge the rent charged in its initial lease on May 1, 2005 pursuant to RSC §2526.1(a)(2), they are also barred from challenging the regulatory status of the subject premises as that first rent charged resulted in the deregulation of the subject premises. This argument is also unavailing as the rent overcharge claim is ancillary to the claim that the subject premises is subject to rent stabilization. It has been held that the court may look beyond the four year look back period [*5]when determining whether the apartment is subject to rent regulation. See East West Renovating Co. v. New York State Division of Housing & Community Renewal, 16 AD3d 166 (1st Dept. 2005) ("DHCR's consideration of events beyond the four year rule is permissible if done not for the purpose of calculating in overcharge but rather to determine whether an apartment is deregulated"). Moreover, RSC §2526.1(a)(2)(ii) specifically states that "nothing contained herein shall limit a determination as to whether a housing accommodation is subject to the rent stabilization law and this code."
Petitioner's final argument asserts that even if the subject premises is found to be rent stabilized, the initial rent charged to Respondents in May 2005 was the legal regulated rent. As mentioned above, the last legal regulated rent registered for the subject premises prior to the temporary exemption was $791.70 per month. However, Petitioner has not alleged any renovations performed or any other basis which would justify or permit an approximate 250% increase from the pre-temporary exemption legal regulated rent. Petitioner's only justification for the 250% increase is that it was the first rent agreed upon by both parties after a temporary exemption pursuant to RSC §2526.1(a)(3)(iii), and thus it should be the legal regulated rent for the premises. Similar to the facts in this proceeding, the lower court in 656 Realty, LLC v. Cabrera, supra. held:
...the purported $2000 rent in the 2001 Crump lease was effectively illusory. Even if petitioner were able to set the rent at what the free market called for, all indications are that $2000 was in far excess of the market rate at the time...the alleged $2000 rent can only be seen as an attempt to circumvent the rent regulatory framework. Such a scenario is akin and perhaps even more egregious than that which was prohibited in 390 West End Assoc. v. Harel (298 AD2d 11 (1st Dept. 2002). In Harel, the court emphasized the well recognized precept that an apartment cannot be deregulated by private contract.
The 2001 lease in this instance has the same effect of the invalid lease in Harel as it allowed the landlord to negotiate a fictitious $2000 "legal rent" with the tenant and deregulate the premises even though the $2000 figure was completely unsupported. However, what makes this situation more offensive than Harel, is that there is no indication of how this arrangement was to the benefit of the 2001 leaseholder—a scenario that implies a nefarious scheme to distort the regulatory status of the premises to hide it from future tenants.
Further, in 656 Realty, LLC v. Cabrera, supra., the Appellate Term affirmed by stating, "as the motion court properly recognized, the claimed temporary use of the unit as a superintendent's apartment in or around 1999 did not serve to justify the "fictitious and impermissible" 300% rent increase subsequently imposed by the landlord."
Respondents also move for discovery seeking leave of the court to conduct limited disclosure of Petitioner requesting documents relevant to determining the proper stabilized rent, and the default formula for fixing the amount of overcharges and treble damages.
Discovery, permissible by leave of court in a summary proceeding to narrow the issues [*6]to be presented at trial, requires the moving party to demonstrate ample need. Hughes v Lenox Hill Hospital, 226 AD2d 4 (1st Dept 1996), lv to appl den'd, 90 NY2d 829 (1997); New York University v Farkas, 121 Misc 2d 643 (Civ Ct, NY Co 1983). In New York University v. Farkas, 121 Misc 2d 643, 468 N.Y.S.2d 808 (Civ.Ct., NY County 1983), the court outlined six factors to be considered in determining ample need for disclosure: (i) whether, in the first instance, the party seeking discovery has asserted facts to establish a cause of action; (ii) whether there is a need to determine information directly related to the cause of action; (iii) whether the requested disclosure is carefully tailored and is likely to clarify the disputed facts; (iv) whether prejudice will result from the granting of an application of disclosure; (v) whether the prejudice can be diminished or alleviated by an order fashioned by the court for this purpose ...; and (vi) whether the court, in its supervisory role, can structure discovery so that pro se tenants, in particular, will be protected and not adversely affected by a landlord's discovery requests. Petitioner objects to discovery, arguing that the overcharge claim lacks merit. The court finds that the Farkas factors are satisfied. Certainly, the delay will not prejudice Petitioner, as its petition is being dismissed.
Respondents have established ample need to obtain information relevant to determine the stabilized rent for the subject premises and their overcharge counterclaim as their affirmative defense that the subject premises falls under the purview of the rent stabilization law has been established, asserted facts to establish a cause of action and make an effective argument that a rent overcharge may have occurred, and demonstrated that Petitioner will not be prejudiced by granting this discovery request, Therefore, Respondents' motion for discovery is granted.
Accordingly, for all the above stated reasons, Respondents' motion seeking to dismiss the petition and seeking discovery is granted, and Petitioner's cross-motion is denied. The matter is marked off calendar pending discovery.
The foregoing constitutes the Decision and Order of this Court.
Dated: New York, New York
June 15, 2015_________________________________
PETER M. WENDT, J.H.C.Footnotes
Footnote 1:RSC §2526.1(a)(3)(iii) was amended on January 8, 2014. Subsequent to the amendment, RSC §2526.1(a)(3)(iii) provides that the rent of an apartment which was vacant or temporarily exempt on the base date is to be calculated by applying rent increases as if occupants had executed rent stabilized renewal leases during the entire period of such vacancy or exemption.
Footnote 2:Petitioner and Respondent concede that the application of RSC §2526.1(a)(3)(iii) as amended on January 8, 2014 cannot be applied retroactively. Thus, the Court shall not and need not deal with this issue.
Footnote 3:Although this case was decided subsequent to the amendment to RSC §2526.1(a)(3)(iii), the court discussed and analyzed the regulations as it existed at the time the tenant took occupancy in 2007.