Phoenix v New York State Homeowners' Assistance Fund
Annotate this CaseDecided on September 18, 2023
Supreme Court, Albany County
Alexander Phoenix, Petitioner,
against
New York State Homeowners' Assistance Fund,
NYS HOMES AND COMMUNITY RENEWAL,
RUTHANNE VISNAUSKAS, JOHN DOE, JANE DOE, Respondents.
Index No. 903898-23
Petitioner — pro se
Respondents - Kostas Leris, Esq., Office of the Attorney General James R. Farrell, J.
The following papers numbered 1 to 14 were read on this CPLR Article 78 petition:
PAPERS NUMBEREDNotice of Petition, Petition with exhibits 1-19 1-3
Answer in Special Proceeding, Appendix, Exhibit A, Chan Affidavit, Memorandum of Law 4-7
Verified Reply, Memorandum of Law in Reply, Affidavit in Opposition to Chan Affidavit, Exhibits R1-R3 and M1-M3 8-11
Affidavit in Opposition to Certification with Exhibits B1-B2, Revised Affidavit in Opposition to Chan Affidavit with Exhibits A1-A3, Revised Verified Reply and Memorandum of Law in Opposition (Revised) 12-14
Petitioner, Alexander Phoenix, filed the instant Article 78 proceeding challenging Respondents' denial of his application for funding from the New York State Homeowner Assistance Fund to pay delinquent property taxes. Petitioner seeks an order of this Court directing Respondents to reinstate his "approved" status and pay Petitioner back the money he paid to the City of Rochester and County of Monroe for delinquent property taxes.
Background and Procedural History
The Homeowner Assistance Fund ("HAF") was established under Section 3206 of the American Rescue Plan Act of 2021 and provided $9.961 billion to support homeowners facing financial hardship associated with COVID-19. The purpose of HAF was to provide funds to homeowners experiencing financial hardship after January 21, 2020, to prevent mortgage delinquency, defaults, foreclosures, loss of utilities, and displacement. Respondent New York State Homes and Community Renewal ("HCR") consists of all the major housing and community renewal agencies of the State of New York including NYS Division of Housing and Community Renewal and the Housing Trust Fund Corporation ("HTFC"). Respondent RuthAnne Visnauskas was appointed Commissioner of HCR in 2017. HCR submitted a [*2]program plan to the U.S. Treasury, which was approved and $539,458,516 in financial assistance was allocated for the New York State Homeowner Assistance Fund ("NYS HAF"). The Commissioner delegated the NYS HAF program and award to HTFC. HTFC engaged Sustainable Neighborhoods LLC to implement and manage the NYS HAF program subject to oversight by HCR and HTFC. The NYS HAF Policy Manual ("Manual") establishes policies for NYS HAF. The policies contained in the Manual may be supplemented or modified to address changes in rules, guidance or the evolving needs of NYS homeowners impacted by COVID-19. The Manual is available on NYS HAF's website, as are the revisions made to the Manual (see www.nyhomeownerfund.org/policy-manual), which includes information on the eligibility criteria and the application process.
Applications were accepted for NYS HAF beginning January 3, 2022. Petitioner submitted an application to NYS HAF for assistance with delinquent property taxes on January 5, 2022. Petitioner applied for assistance with past-due property taxes for a two-family home located at 78 Lime Street in the City of Rochester, County of Monroe, State of New York ("subject property"). When Petitioner applied, the subject property was titled to 78 Lime St LLC. Petitioner was the sole member of the LLC. On February 4, 2022, NYS HAF issued a notice to Petitioner advising that additional information from him was needed to complete the review of his application. Specifically, the notice advised Petitioner "[w]e have not been able to determine whether you are eligible because we do not have proof that you own the home." In response, Petitioner submitted a NYS Department of State filing receipt for 78 Lime St LLC and an IRS EIN notice to 78 Lime St LLC. These documents established that Petitioner was the sole member of 78 Lime St LLC. Respondents assert that a third-party verification identification was requested of the City Treasurer of Rochester on February 18, 2022 for verification of delinquent taxes on the subject property. Respondents state that "this request was made even though the required proof of ownership was not yet submitted so as to move the process forward based on what was assumed to be a good faith representation of ownership by Petitioner." On February 22, 2022, NYS HAF informed Petitioner via email that the "application is conditionally approved." The Conditional Approval form submitted by Petitioner states next to "Ownership" — "Verified (not yet active)." Petitioner received updates indicating that his application remained under review on April 29, 2022 and August 30, 2022.
On April 6, 2022, the City of Rochester commenced an in rem tax lien foreclosure action against the subject property. On August 30, 2022, Petitioner submitted a notice of tax foreclosure to NYS HAF for the subject property from the City of Rochester issued on August 22, 2022, advising of a tentative tax foreclosure auction scheduled for November 10, 2022. Petitioner alleges that on October 18, 2022 and October 20, 2022, he spoke with an HAF agent and an HAF supervisor, who advised him that his application was in the final stages of the approval process and that his application would be resolved a day before the foreclosure action. Petitioner alleges that the City of Rochester held the foreclosure auction, and that prior to that date, Petitioner paid the delinquent taxes as to prevent auction of the subject property.
On November 21, 2022, NYS HAF issued a determination of ineligibility denying Petitioner's application for assistance. Petitioner was found ineligible to receive NYS HAF assistance because he did not own the subject property. Petitioner filed a Request for Review which was denied December 7, 2022 and an Appeal which was denied January 9, 2023. On January 9, 2023, NYS HAF issued a final determination of Petitioner's eligibility, finding legal ownership of the subject property was held by 78 Lime St LLC and pursuant to U.S. Treasury [*3]guidance and the NYS HAF plan the application, failed to meet mandatory criteria for ownership. Thereafter, Petitioner filed the instant Article 78 proceeding.
Instant Application
Petitioner asserts that Respondents' denial of his HAF application was arbitrary and capricious and not supported by a rational basis. Petitioner contends that Respondents failed to assign his case to a case manager as required under their administrative rules; that they failed to timely advise him of the "natural person" requirement or other eligibility requirements; and that they unreasonably delayed in processing his application, which caused him harm. He further asserts that Respondents "approved" his application, and unreasonably denied his application as ineligible several months later. Although Petitioner does not state that he, individually, was the property owner, he appears to argue that he should have been determined to be the property owner because the LLC is a pass-through LLC of which he is the sole member, and because he, individually, pays the taxes, utilities, and homeowners' insurance.
In response, Respondents argue that the denial of Petitioner's application was supported by a rational basis in the record and was neither arbitrary nor capricious. Respondents assert that Petitioner's case was assigned to a case manager on January 11, 2022, and the initial review was completed on January 27, 2022. Respondents further assert that Petitioner was provided a link to NYS HAF's website and advised of its contents, in December 2021. Respondents argue that the record does not support Petitioner's claim that his application had ever been "approved" and waiting final payment. Instead, Respondents argue that the record shows that Petitioner's application was conditionally approved pending proof of ownership. Lastly, Respondents' argue that Petitioner's payment of the delinquent taxes prior to his application being decided was an additional basis upon which his application could have been denied because he was no longer experiencing a financial hardship, another eligibility criterium.
"Where, as here, an administrative determination is made where an evidentiary hearing is not required by law, this Court's review is limited to whether the determination had a rational basis and was not arbitrary and capricious" (Smith v City of Norwich, 205 AD3d 140, 142 [3d Dept 2022]; see CPLR 7803[3]). "An action is arbitrary and capricious when it is taken without sound basis in reason or regard to the facts" (Matter of Peckham v Calogero, 12 NY3d 424, 431 [2009]). "Further, courts must apply deference to an agency's interpretation of its own regulations in its area of expertise" (Matter of Abramoski v New York State Educ. Dept., 134 AD3d 1183, 1185 [3d Dept 2015] [internal quotations and citation omitted]). "When a determination is supported by a rational basis, it must be sustained even if the reviewing court would have reached a different result" (Matter of CDE Elec., Inc. v Rivera, 124 AD3d 1178, 1180 [3d Dept 2015]).
Respondents' denial of petitioner's HAF application is supported by a rational basis and was neither arbitrary nor capricious. The record establishes that Petitioner's application was timely assigned to a case manager for review. The program eligibility requirements require that the legal owner of the property be a natural person or trustee of a living trust. At what point in time Petitioner became aware of this requirement is not relevant to the analysis of eligibility; and in any event, the record establishes that Petitioner was made aware of Respondent's website and its contents in December 2021, prior to the filing of his application. The record is clear that at the time Petitioner submitted his application, he, individually, was not the legal owner of the subject property. The property was legally owned by 78 Lime St. LLC. That Petitioner was the sole owner of a "pass through" LLC does not make Petitioner the legal owner of the subject [*4]property, nor does Petitioner's payments of the property taxes, homeowners' insurance, and utilities. The property tax bills submitted by Petitioner to NYS HAF show that 78 Lime St. LLC was the legal owner of the property. Moreover, the quit claim deed submitted by Petitioner on this Article 78 proceeding as proof of ownership shows that the subject property was transferred from 78 Lime St. LLC to Petitioner on January 17, 2023, after the final determination was issued on Petitioner's HAF application. Furthermore, the record does not support Petitioner's contentions that his application had been "approved," and then denied. The record before the Court demonstrates that Petitioner's application had been conditionally approved pending verification of ownership status and that the application remained under review until a determination of ineligibility was rendered on November 21, 2022.
The Court has considered the Petitioner's remaining contentions and finds them to be without merit.
Based upon the foregoing, it is hereby
ORDERED that the petition is denied.
This constitutes the Decision and Order of the Court.
Dated: September 18, 2023ENTER:
Monticello, NY
_________________________________
HON. JAMES R. FARRELL, A.J.S.C.
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