240 A.D.2d 665, 659 N.Y.S.2d 1009

Supreme Court, Appellate Division, Second Department

In the Matter of COOPER REALTY COMPANY, Appellant, v. DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent.

June 23, 1997.

Kucker Kraus & Bruh, LLP, New York City (Patrick K. Munson, of counsel), for appellant.

Marcia Hirsch, New York City (Richard Hartzman, of counsel), for respondent.

In a proceeding pursuant to CPLR article 78 to review a determination of the Deputy Commissioner of the New York State Division of Housing and Community Renewal, dated May 30, 1995, confirming a determination of the District Rent Administrator, dated October 5, 1993, which found that the tenant was not timely served with copies of rent registrations, imposed a rent freeze, and awarded treble damages for a willful overcharge of rent, the petitioner appeals from a judgment of the Supreme Court, Queens County (Lisa, J.), dated June 4, 1996, which denied the petition and dismissed the proceeding.

ORDERED that the judgment is modified, on the law, by deleting the provision thereof which denied that branch of the petition which challenged the award of treble damages and substituting therefor a provision granting that branch of the petition and vacating that award; as so modified, the judgment is affirmed, without costs or disbursements.

An administrative determination will not be set aside unless it is arbitrary and capricious and without a rational basis in the record (see, Matter of Sterling Ridge Realty Co. v. New York State Div. of Hous. & Community Renewal, 185 A.D.2d 354, 586 N.Y.S.2d 312; Matter of Seales v. Mirabal, 152 A.D.2d 672, 543 N.Y.S.2d 738). In this case, there is a rational basis in the record for the determination of the New York State Division of Housing and Community Renewal (hereinafter the DHCR) that the petitioner did not mail copies of initial or annual rent registrations to its tenant. DHCR's imposition of a rent freeze based upon that determination was not arbitrary and capricious or contrary to law (see, Rent Stabilization Code [9 NYCRR 2528.4] ). We conclude, however, that in this case the petitioner showed, by a preponderance of the evidence, that any rent overcharge was not willful, and therefore treble damages The petitioner's remaining contentions are either unpreserved for appellate review or without merit.

MILLER, J.P., and SULLIVAN, JOY and ALTMAN, JJ., concur.

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234 A.D.2d 28, 650 N.Y.S.2d 555

Supreme Court, Appellate Division, First Department, New York

Alex MOREIRA, et al., Plaintiffs-Respondents-Appellants, v. Donald M. HALPERIN, etc., Defendant-Appellant-Respondent.

Dec. 3, 1996.

David A. Weinraub, for Plaintiffs-Respondents-Appellants.
Richard Hartzman, for Defendant-Appellant-Respondent.

Order, Supreme Court, New York County (Charles Ramos, J.), entered August 10, 1995, unanimously affirmed for the reasons stated by Ramos, J., without costs and disbursements. No opinion.

MILONAS, J.P., and WALLACH, KUPFERMAN, TOM and ANDRIAS, JJ., concur.

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233 A.D.2d 443, 650 N.Y.S.2d 595

Supreme Court, Appellate Division, Second Department, New York

In the Matter of Florence FISHER, etc., et al., Appellants, v. Joseph HOLLAND, etc., et al., Respondents.

Nov. 18, 1996.

Creditor & Digrugilliers, Forest Hills (Richard Creditor, of counsel), for appellants.
Leslie R. Byrd, Bronx (Richard Hartzman, of counsel), for respondents.

Appeal by the petitioner from a judgment of the Supreme Court, Queens County (Rutledge, J.), dated January 3, 1996. ORDERED that the judgment is affirmed, with costs, for reasons stated by Justice Rutledge in his memorandum decision dated October 17, 1995.

ROSENBLATT, J.P., and O'BRIEN, THOMPSON and McGINITY, JJ., concur.

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233 A.D.2d 120, 649 N.Y.S.2d 135

Supreme Court, Appellate Division, First Department, New York

In re Application of Justin E. HOY, Petitioner-Appellant, For a Judgment, etc., v. STATE OF NEW YORK DIVISION OF HOUSING AND COMMUNITY RENEWAL, et al., Respondents-Respondents.

Nov. 7, 1996.

Mortimer Todel, New York City, for Petitioner-Appellant.
Richard Hartzman, Patrick Munson, New York City, for Respondents- Respondents.

Before SULLIVAN, J.P., and ELLERIN, TOM and MAZZARELLI, JJ.

MEMORANDUM DECISION.

Judgment, Supreme Court, New York County (Charles Ramos, J.), entered August 10, 1995, which confirmed a determination of respondent Division of Housing and Community Renewal (DHCR) dated August 26, 1994, denying petitioner's fair market rent appeal, and denied the petition and dismissed the proceeding brought pursuant to CPLR article 78, unanimously affirmed, without costs. DHCR's determination, that vacancy decontrol did not apply to the subject apartment, had a rational basis. After the apartment was decontrolled pursuant to a stipulation between the rent controlled tenant and respondent- landlord, the rent controlled tenant remained on the lease as a co-tenant of petitioner for seven months. There was no "hiatus in possession", because the rent controlled tenant was still entitled to the use or possession of the apartment after decontrol and after petitioner's tenancy began (see, Matter of Ghignone v. Joy, 55 N.Y.2d 853, 447 N.Y.S.2d 708, 432 N.E.2d 601, affd 83 A.D.2d 839, 441 N.Y.S.2d 568; Matter of Veltri v. Joy, 55 A.D.2d 529, 530, 389 N.Y.S.2d 105, affd 43 N.Y.2d 660, 400 N.Y.S.2d 816, 371 N.E.2d 534).

We have considered petitioner's other arguments and find them to be without merit.

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226 A.D.2d 128, 640 N.Y.S.2d 82

Supreme Court, Appellate Division, First Department, New York.

In re Application of MOUNTBATTEN EQUITIES, Petitioner-Appellant-Respondent, For a Judgment, etc., v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent- Respondent, and 421 Hudson Street Tenants Association, et al., Respondents-Intervenors- Respondents-Appellants.

April 4, 1996.

Rosenberg & Estis, P.C., for Mountbatten Equities.
Richard Hartzman, for N.Y. State Dept. of Housing & Community Renewal.
Larry M. Carlin, for 421 Hudson Street Tenants Ass'n.

Before MURPHY, P.J., and SULLIVAN, RUBIN, ROSS and TOM, JJ.

MEMORANDUM BY THE COURT.

Order and judgment (one paper), Supreme Court, New York County (Beverly Cohen, J.), entered May 10, 1995, which, inter alia, denied petitioner owner's application pursuant to CPLR article 78 to annul respondent Division of Housing and Community Renewal's ("DHCR's") determination revoking rent increases previously granted to owner for the institution of new doorman services at the subject building, awarding certain classes of respondent tenants retroactive rent reductions, directing any unclaimed refunds be forfeited to DHCR, denying owner's request to offset rent arrears of tenants whose whereabouts are unknown against those refunds, and denying tenants' application for treble damages, attorneys' fees, and statutory interest, unanimously modified, on the law and the facts, to annul that portion of the determination which awarded rent reductions to the class of tenants who had voted in favor of the new service and rent increase but subsequently joined the original Petition for Administrative Review ("PAR") instituted against owner, and otherwise affirmed, without costs.

DHCR correctly applied the current Rent Stabilization Code ("RSC") to the proceedings, rather than the former Code in effect when owner filed its application in 1983 for a building-wide rent increase for new doorman services, as there was no showing that DHCR deliberately or negligently delayed processing the application (Matter of St. Vincent's Hosp. v. New York State DHCR, 109 A.D.2d 711, 487 N.Y.S.2d 36, affd. 66 N.Y.2d 959, 498 N.Y.S.2d 799, 489 N.E.2d 768). Section 20 of the Omnibus Housing Act of 1983 (L 1983 ch 403) grants DHCR the authority to apply the current Code to proceedings pending on April 1, 1984, and the exercise of such authority did not cause owner undue hardship or prejudice" (RSC [9 NYCRR] 2527.7), any hardship having been caused by owner's instituting the new service prior to obtaining Conciliation and Appeals Board ("CAB") or DHCR approval and originally misrepresenting to the DHCR District Rent Administrator the number of consenting tenants.

Given owner's concession that it did not obtain approval from 75% of the tenants, as required by the current Code, DHCR properly denied owner's application for a building-wide rent increase. However, even under the applicable section of the former Code, RSC 20C(3), owner would not be entitled to a building-wide increase, because a "substantial number" of tenants did not approve the new service. The silence of those tenants who abstained in the building poll regarding the service cannot be deemed consent, since tenants never received written notice that their silence would be so interpreted.

DHCR properly balanced the equities pursuant to RSC 2522.7 and Rent Stabilization Law ("RSL"); Administrative Code of City of NY, 26-516(b) in denying a refund to two classes of tenants--those who had voted in favor of the new service and did not participate in the PAR, and those who took occupancy in the subject building after the new service was instituted regardless of whether they participated in the PAR--and in granting a refund to two other classes of tenants--those who had voted against the new service, and those who were in occupancy at the time the service was instituted but neither consented to nor approved the service. However, DHCR improperly balanced the equities and abused its discretion in awarding a refund to that class of tenants who voted in favor of the doorman service and fee but subsequently participated in the PAR contesting the collection of that fee. Such opportunistic actions and inconsistent positions should not be rewarded. We further note that the former Code, in effect at the time of the building poll, provided for a pro rata increase in a tenant's rent for an increase in building-wide services, by agreement with the tenant. The poll constituted a written agreement by this class of tenants to assume the new charge. DHCR did not abuse its discretion to fashion remedies and issue orders it deems necessary to enforce the RSC and RSL (RSC 2526.2[a], RSL 26-516 [b] ) by directing that unclaimed refunds be forfeited to it as a fine. Furthermore, its interpretation of those statutes as permitting treble damages only in rent overcharge proceedings was not irrational and should therefore be upheld (Matter of Salvati v. Eimicke, 72 N.Y.2d 784, 791, 537 N.Y.S.2d 16, 533 N.E.2d 1045).

The RSL and RSC grant DHCR discretion in deciding whether to award statutory attorneys' fees and interest (RSC 2526.1[d]; RSL 26-516[a][4] ), and it was not an abuse of that discretion to deny such sanctions in this case. This is not one of those "exceptional cases" demanding the equitable grant of attorneys' fees under the "common fund" doctrine (see, Builders Affiliates v. North Riv. Ins. Co., 91 A.D.2d 360, 367, 459 N.Y.S.2d 41, quoting Sprague v. Ticonic Natl. Bank, 307 U.S. 161, 167, 59 S.Ct. 777, 780, 83 L.Ed. 1184).

We have considered the parties' other arguments for affirmative relief and find them to be without merit.

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221 A.D.2d 540, 635 N.Y.S.2d 487

Supreme Court, Appellate Division, Second Department, New York.

In the Matter of 114 FENIMORE ASSOCIATES, Appellant, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent.

Nov. 20, 1995.

Horing & Welikson, P.C., Forest Hills (David B. Cabrera and Niles C. Welikson, of counsel), for appellant.

Barbara M. Fair, Bronx (Richard Hartzman, of counsel), for respondent.

Appeal by the petitioner from a judgment of the Supreme Court, Kings County (Kramer, J.), dated June 4, 1994.

ORDERED that the judgment is affirmed, with costs, for reasons stated by Justice Kramer at the Supreme Court.

O'BRIEN, J.P., and PIZZUTO, SANTUCCI and KRAUSMAN, JJ., concur.

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220 A.D.2d 504, 632 N.Y.S.2d 219

Supreme Court, Appellate Division, Second Department, New York

In the Matter of LIVINGSTON ASSOCIATES, Respondent, v. STATE of New York DIVISION OF HOUSING AND COMMUNITY RENEWAL, etc., Appellant.

Oct. 10, 1995.

Dennis J. Saffran, Bronx (Richard Hartzman, of counsel), for appellant. Joel Levy, New York City, for respondent.

Before THOMPSON, J.P., and COPERTINO, HART and GOLDSTEIN, JJ.

MEMORANDUM BY THE COURT.

In proceeding pursuant to CPLR article 78 to review a determination of the New York State Division of Housing and Community Renewal, dated May 4, 1993, which remitted the matter to the District Rent Administrator for further proceedings, the appeal is from a judgment of the Supreme Court, Kings County (Hutner, J.), dated January 31, 1994, which granted the petition and vacated the determination.

ORDERED that the judgment is reversed, on the law, with costs, the determination is reinstated, the petition is denied, and the proceeding is dismissed.

The petitioner is the owner of a certain apartment building located in Brooklyn. In April 1967, the Division of Housing and Community Renewal (hereinafter the DHCR) issued a decontrol order for apartment 1 of the building based on owner occupancy. In September 1989, after an administrative proceeding to review the rent status of the apartment in question, the DHCR's District Rent Administrator (hereinafter the DRA) determined that (1) the apartment was not subject to Rent Control based on the 1967 decontrol order, and (2) the premises was not a horizontal multiple dwelling and therefore not subject to the Rent Stabilization Code.

In a determination dated May 4, 1993, rendered upon the tenant's petition for administrative review (hereinafter the PAR), the DHCR found some evidence that (1) the 1967 decontrol order was obtained by fraud, and (2) the premises was a horizontal multiple dwelling. The DHCR therefore granted the PAR to the extent of remitting the matter to the DRA for further proceedings to determine whether the 1967 decontrol order was obtained by fraud and, if not, whether the premises was a horizontal multiple dwelling subject to the Rent Stabilization Code (see, 9 NYCRR parts 2520-2530). The Supreme Court granted the owner's petition pursuant to CPLR article 78 and vacated the DHCR's determination to remit the matter to the DRA.

We agree with the DHCR, however, that its determination of May 4, 1993, did not conclude the proceedings or finally determine the parties' rights. Absent a final administrative determination, judicial review is unavailable (see, CPLR 7801[1]; Matter of Plaza Realty Investors v. New York State Div. of Hous. & Community Renewal, 173 A.D.2d 290, 569 N.Y.S.2d 683; Matter of 140 W. 57th St. Corp. v. State Div. of Hous. & Community Renewal, 130 A.D.2d 237, 245, 517 N.Y.S.2d 720). The Supreme Court therefore erred in granting the owner's petition to vacate the determination.

In light of our determination, we need not address the DHCR's remaining contentions.

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212 A.D.2d 603, 622 N.Y.S.2d 548

Supreme Court, Appellate Division, Second Department, New York

In the Matter of BRIGHTWATER TOWERS ASSOCIATES, Appellant-Respondent, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, et al., Respondents- Appellants. (Proceeding No. 1)

In the Matter of Paul PODHAIZER, et al., Respondents-Appellants, v. Angelo APONTE, etc., et al., Respondents. (Proceeding No. 2)

Feb. 14, 1995.

Rosenberg & Estis, P.C., New York City (Gary M. Rosenberg, Jeffrey Turkel, and Sherry A. Taylor, of counsel), for appellant- respondent Brightwater Towers Associates.

Sonnenschein, Sherman & Deutsch, New York City (Sara R. Throne, of counsel), for respondents-appellants Paul Podhaizer, Victor Silverman, and Brightwater Towers Tenants' Council, Inc.

Dennis J. Saffran, Bronx (Richard Hartzman, of counsel), for respondent- appellant New York State Div. of Housing and Community Renewal.

Before MANGANO, P.J., and SULLIVAN, BALLETTA and MILLER, JJ.

MEMORANDUM BY THE COURT.

In two related proceedings pursuant to CPLR article 78 to review a determination of the Commissioner of the New York State Division of Housing and Community Renewal, dated March 6, 1991, (1) Brightwater Towers Associates, the petitioner in Proceeding No. 1, appeals, as limited by its brief, from so much of an order and judgment (one paper) of the Supreme Court, Kings County (Vaccaro, J.), entered February 3, 1993, as modified the Commissioner's order by directing that all of the subject leases be restructured to reflect each tenant's original occupancy date, and dismissed Proceeding No. 1 in all other respects, (2) Paul Podhaizer, Victor Silverman, and Brightwater Towers Tenants' Council, Inc., the petitioners in Proceeding No. 2, cross-appeal, as limited by their brief, from so much of the same order and judgment as dismissed Proceeding No. 2 and modified the Commissioner's order as aforesaid, and (3) the New York State Division of Housing and Community Renewal cross- appeals from so much of the same order and judgment as modified the Commissioner's order as aforesaid.

ORDERED that the order and judgment is modified, on the law, by deleting therefrom the provision modifying the Commissioner's order and dismissing Proceeding No. 1 in all other respects, and by substituting therefor a provision denying the petition in Proceeding No. 1 and dismissing Proceeding No. 1 in its entirety; as so modified, the order and judgment is affirmed insofar as appealed and cross-appealed from, with one bill of costs payable to the New York State Division of Housing and Community Renewal.

It is well settled that, in a proceeding to review a determination of the New York State Division of Housing and Community Renewal (hereinafter the DHCR), the court is limited to a review of the record which was before the DHCR and to the issue of whether its determination was arbitrary and capricious and without a rational basis (see, Matter of McKinnon v. Aponte, 196 A.D.2d 655, 601 N.Y.S.2d 631; Matter of Drizin v. Commissioner of Div. of Hous. & Community Renewal, 140 A.D.2d 605, 528 N.Y.S.2d 864). Moreover, the DHCR's interpretation and application of the regulations it administers, if not unreasonable or irrational, is entitled to great deference (see, Matter of Salvati v. Eimicke, 72 N.Y.2d 784, 537 N.Y.S.2d 16, 533 N.E.2d 1045; Matter of Albe Realty Co. v. Division of Hous. & Community Renewal, 197 A.D.2d 618, 602 N.Y.S.2d 670).

In the instant case, the Commissioner's determination that income surcharges should be included in the initial regulated rent, while pool restoration charges should be excluded, was not unreasonable. The Rent Stabilization Code provides that, for housing accommodations where rentals were previously regulated under the Private Housing Finance Law, "the initial legal registered rent shall be the rent charged to and paid by the tenant in occupancy on the date such regulation ends" (9 NYCRR 2521.1[1] ). Moreover, Private Housing Finance Law regulations provide, inter alia, that the rent entered on a lease shall include surcharges being assessed against the tenant (9 NYCRR 1727-3.3[a] ). Since various tenants in this case were paying income-based surcharges as part of their rent on the date regulation under the Private Housing Finance Law ended, the Commissioner properly determined that these surcharges should be included in the initial regulated rent. Conversely, by an order of the DHCR dated November 26, 1985, the pool restoration charges were authorized for the calendar year 1986 only. Although the tenants entered into a stipulation with the owner to extend the payment of these charges through 1989, these charges were not part of the rent authorized by the DHCR at the time regulation under the Private Housing Finance Law ended. Accordingly, the Commissioner's determination to exclude such payments from the initial regulated rent had a rational basis in the record.

However, we find that the Supreme Court erred in modifying the Commissioner's order with respect to the restructuring of the leases. The Commissioner's determination that the owner had violated certain regulations by failing to provide renewal leases on each tenant's anniversary date and that the tenants should have the option of restructuring their leases to conform to those regulations had a rational basis in the record and should not have been disturbed (see, Matter of Mott v. New York State Div. of Hous. & Community Renewal, 191 A.D.2d 566, 595 N.Y.S.2d 98).

The remaining contentions of the owner and tenants are without merit.

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203 A.D.2d 291, 609 N.Y.S.2d 673

Supreme Court, Appellate Division, Second Department, New York

In the Matter of JANOFF & OLSHAN, INC., Appellant, v. DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent.

April 4, 1994.

Kucker Kraus & Bruh, New York City (Patrick K. Munson, on the brief), for appellant.

Dennis B. Hasher, Bronx (Richard Hartzman, of counsel), for respondent.

Before LAWRENCE, J.P., and JOY, FRIEDMANN and KRAUSMAN, JJ.

MEMORANDUM BY THE COURT.

In a proceeding pursuant to CPLR article 78 to review a determination of the State Division of Housing and Community Renewal, dated June 25, 1991, which affirmed an order of the District Rent Administrator, dated October 16, 1990, adjusting the initial legal regulated rent on the subject premises, the petitioner appeals from a judgment of the Supreme Court, Kings County (Shaw, J.), dated May 27, 1992, which denied the petition and dismissed the proceeding.

ORDERED that the judgment is affirmed, with costs.

In January 1980 the tenant filed a timely Fair Market Rental Appeal with the Conciliation and Appeals Board (now the DHCR) challenging the initial legal regulated rent established for the apartment that he had rented the month before. In response to the agency's request, the petitioner owner submitted a list of comparable rents, which were rejected as relating to rent-controlled apartments. In August 1980 the agency, relying on the special guidelines promulgated pursuant to the Rent Stabilization Law, determined that the appropriate initial legal regulated rent was approximately $150 less than the monthly rent contained in the lease. After the petitioner commenced a prior proceeding pursuant to CPLR article 78, challenging that determination, upon stipulation of the parties, the case was reopened in order to give the petitioner a further opportunity to submit comparable rentals. The petitioner never availed itself of that opportunity, and in 1990 the agency's prior determination was reinstated. Given that the petitioner failed to submit appropriate comparables after having been given numerous opportunities to do so, the agency's determination of the fair market rent for the apartment in question, which was reached by relying solely upon the special rent guidelines promulgated under the Rent Stabilization Law was not arbitrary and capricious (see, Matter of A.J. Clarke Mgt. Corp. v. Conciliation & Appeals Bd. of City of NY, 91 A.D.2d 517, 456 N.Y.S.2d 391, affd 58 N.Y.2d 1108, 462 N.Y.S.2d 848, 449 N.E.2d 742). We reject the petitioner's contention that it was improperly required to produce records that were more than four years old (cf., Matter of J.R.D. Mgt. Corp. v. Eimicke, 148 A.D.2d 610, 539 N.Y.S.2d 667; Administrative Code of City of N.Y. 26-516[g]).

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851 F.2d 547

United States Court of Appeals, Second Circuit

UNITED STATES of America, Appellee, v. CHANG AN-LO, a/k/a "White Wolf", Shiang Bao-Jing, a/k/a "Cripple", George Qi Lu, Peter Yang, Lam Tso, a/k/a "Sammy Lam", John Kirkpatrick, Ah Min, Jack Ma, a/k/a "Jack Li", Tung Kuei-Sen and Chen Chih-Yi, a/k/a "Yellow Bird", Defendants-Appellants.

No. 1318, Dockets 86-1506, 86-1507 to 86-1512, 87-1001, 87-1002, 87-1013 and 87-1029.

Argued Aug. 10, 1987. Decided June 27, 1988.

* * * *

Lawrence Gross, Elmhurst, N.Y. (Gering, Gross & Gross, Elmhurst, N.Y., of counsel), for defendant-appellant Tung Kuei-Sen.
Anne T. Vitale, Asst. U.S. Atty., S.D.N.Y., New York City
(Rudolph W. Giuliani, U.S. Atty., S.D.N.Y., Bruce Green, Asst. U.S. Atty., S.D.N.Y., New York City, of counsel), for appellee.

Before WINTER and MAHONEY, Circuit Judges, and STEWART, District Judge. [*FN]

FN* The Honorable Charles E. Stewart, Jr., of the United States District Court for the Southern District of New York, sitting by designation.

MAHONEY, Circuit Judge:

Defendants-appellants appeal from judgments entered upon their convictions by a jury after an eight week trial in the United States District Court for the Southern District of New York, Robert L. Carter, Judge. They were charged in a fourteen count indictment. Count one alleged a RICO conspiracy to conduct the affairs of United Bamboo, a criminal enterprise which originated in Taiwan approximately thirty years ago and is active in the United States, through a pattern of racketeering activity involving the murder of journalist Henry Liu in Daly City, California on October 15, 1984, various narcotics conspiracies and distributions, and interstate travel in aid of racketeering. Count two alleged the conduct of that enterprise's affairs as aforesaid. Counts three through ten alleged various narcotics conspiracies and distributions. Count eleven charged interstate travel in aid of racketeering, counts twelve and thirteen charged illegal transportation and receipt of firearms in interstate commerce, and count fourteen charged a conspiracy to counterfeit a United States passport. All defendants-appellants were charged with and convicted of one or more crimes, and sentenced to terms ranging from twenty-five years for Lam Tso to time served of one year for Peter Yang.

Appellants raise numerous issues on appeal. We affirm, except that we remand as to defendants-appellants George Qi Lu and Tung Kuei-Sen for compliance with Fed.R.Crim.P. 32(c)(3)(D). We consider herein defendants-appellants' contentions concerning the sufficiency of the evidence as to certain defendants, the refusal of the trial judge to grant certain defendants' motions for severance which allegedly resulted in an unfair trial, the admissibility of a duplicate foreign business record when the supporting witness had never seen the original, the propriety of the trial judge's ex parte examination of certain jurors concerning one juror's reading a newspaper report concerning the case prior to allowing defense counsel the opportunity to interview the jurors, whether the alleged inconsistency between verdicts on RICO counts and non-RICO counts charging identical conduct requires reversal of conviction, and the conduct of the sentencing proceedings with respect to defendants George Qi Lu and Tung Kuei-Sen.

I. Background

A. The United Bamboo.

This case involves the activities of a Chinese organized crime syndicate, the United Bamboo. The United Bamboo was founded in Taiwan approximately three decades ago. Over the years, the enterprise has extended its activities to Hong Kong, Japan, the Philippines, Singapore, and most recently the United States. In this country, the United Bamboo has established its operations in Houston, Los Angeles, San Francisco and New York. The members and associates of the organization in the United States established the United Bamboo's presence here through involvement in various illegal activities such as prostitution, illegal gambling, assisting fugitives from justice, extortion, kidnapping, murder, and trafficking in guns and narcotics.

The United Bamboo's international leader, Chen Chi-Li, came to Los Angeles in September, 1984 for a series of meetings with members and associates of the United Bamboo, including the defendant Chang An-Lo, the leader of the United Bamboo in the United States; the defendant Chen Chih-Yi, the financial leader of the organization in the United States; and the defendant Tung Kuei-Sen, among others, to discuss plans that would expand the group's activities here.

To demonstrate its strength and capability, the United Bamboo planned to murder Henry Liu, a Taiwanese journalist who had written critically of the Taiwanese government. After careful planning by Chen Chi-Li and his associates, one Wu Tun and defendant Tung Kuei-Sen murdered Henry Liu during the early morning hours of October 15, 1984 at Liu's home in Daly City, California. Four days after the murder, Chen Chi-Li, Wu Tun and Tung Kuei-Sen fled the United States and returned to Taiwan with the help of Chen Chih-Yi.

As a result of the shock and outcry over Henry Liu's murder, Taiwan began the "I Ching," a crackdown on the underworld in Taiwan. The "I Ching" was successful in arresting numerous Chinese underworld figures, including Chen Chih-Yi. As a result of the disruption of the United Bamboo's activities caused by the "I Ching," the organization sought to raise money in support of members and associates who had been arrested and further sought to aid fugitives who had left Taiwan.

In furtherance of United Bamboo's expansion plan, Chang An-Lo contacted one Steven Wong numerous times and asked him to provide specific information about the street gangs and their criminal activity in New York's Chinatown. Chang An-Lo intended to use that information to take over and profit from criminal activities in Chinatown. In March, 1985, however, Steven Wong began to work in an undercover capacity for the New York City Police Department, and thereafter for the Federal Bureau of Investigation. After providing the authorities with information pertaining to the murder of Henry Liu and the United Bamboo's proposed activities in Chinatown, Wong proceeded to record numerous conversations with various defendants during the course of a five month investigation, some hundred of which were used as evidence at trial. The investigation revealed separate but related schemes to acquire and distribute narcotics in order to raise money for United Bamboo.

B. The Heroin-Cocaine Conspiracy.

The first plan involved a conspiracy to obtain and distribute heroin and cocaine between April and September, 1985. Defendants Chang An-Lo, Shiang Bao-Jing, George Qi Lu, Lam Tso and Tony Wong [*FN1] participated in this conspiracy, which, while ultimately unsuccessful, resulted in the sale of one pound of heroin and the distribution of three additional samples of heroin to undercover law enforcement officers.

FN1* Although a defendant and convicted below, Tony Wong is not a party to this appeal.

The government proved the existence of the conspiracy through the surveillance of numerous meetings between certain of the defendants and Steven Wong (and other undercover officers) during the period in question. At those meetings, many of which took place in April and May, 1985, matters relating to the attempted establishment of a substantial narcotics trade were revealed. Chang An-Lo made several statements about his "connections" in the Golden Triangle, an area in Southeast Asia known for heroin production. He also told Wong of his plans to "take over" Chinatown. Moreover, Chang gave Wong express authority to arrange narcotics transactions with the defendant Lam Tso. Throughout May and June, 1985, Lam Tso, who was based in New York, continuously attempted to secure a source for heroin through the help of defendant George Qi Lu.

In this connection, Lam Tso told Steven Wong on May 24, 1985, that George Qi Lu would be meeting a heroin source in Los Angeles and arranging narcotics transactions on behalf of Lam Tso and Steven Wong. In addition, George Qi Lu arranged on one occasion for Chang An-Lo to meet with Lu's heroin source from the Golden Triangle.

On June 6, 1985, Chang An-Lo was arrested on charges of kidnapping and extortion. [*FN2] Defendant Shiang Bao-Jing then became the leader of the United Bamboo in Los Angeles, and continued to carry out Chang's plan for the organization's development. [*FN3] On June 19, 1985, at a meeting in Los Angeles with Steven Wong, two undercover officers and defendant George Qi Lu, Shiang Bao-Jing told of a ten point plan that he had designed to carry out the development of United Bamboo in the United States that Chang had initiated. One of the elements of the plan was narcotics trafficking. In that connection, on June 20, 1985, Shiang discussed available sources for narcotics.

FN2* Chang's arrest stemmed from an attempt to extort money from a merchant who owed a debt to members of the United Bamboo. Chang organized the kidnapping of Wang Chuo Tao, an employee of the merchant, in order to extort the money. Tao was released because she recognized Chang. After the release, Chang spoke with Wang Chuo Tao by telephone. During that conversation, which was recorded, Chang admitted his role in the kidnapping, and was subsequently arrested.

FN3* While Shiang only assumed control over the Los Angeles operation after Chang's arrest, Shiang had been a trusted associate and had fully participated in the conspiracy, prior to that time. Shiang partook in several of the aforementioned meetings and conversations in April and May, 1985. Specifically, Shiang discussed taking over Chinatown, and said that he believed New York was a good place to "hustle." He also told Wong that he could easily smuggle narcotics and other contraband into the United States in his metal crutches without being detected.

On the evening of June 19, 1985, Steven Wong discussed narcotics sources with defendant George Qi Lu, as well. Lu told Wong that he too had available sources for heroin. Lu described how he had brought a particular source to New York to meet with Lam Tso on two occasions in order to arrange a drug deal. Concurrently, over the next several days, Shiang indicated his awareness of his associates' efforts to bring about narcotics sales, and began to pursue the opportunities available to secure narcotics by personally dealing with Lu's source, despite Shiang's distrust of that source.

Upon his return to New York, Wong kept in touch with Shiang Bao-Jing regarding the proposed narcotics transactions. On July 15, 1985, Shiang advised Wong that he would set up meetings for Wong with narcotics sources when Wong next returned to the west coast area, and that samples of both heroin and cocaine would be readily available. On July 20, 1985, Shiang Bao-Jing actually brought a narcotics source to Las Vegas to meet with other members of the conspiracy, but that meeting went awry. The defendants' efforts to obtain heroin and cocaine from their contact from the Golden Triangle never came to fruition. However, Lam Tso was able to make arrangements through other sources, which resulted in a sale of 354 grams of heroin for $48,000 by Tony Wong and Lam Tso to Steven Wong and two undercover law enforcement associates on July 26 and 27, 1985. Further, Lam Tso delivered two more samples of heroin to Steven Wong on July 30, and another sample on August 15, 1985.

C. The Marijuana-Cocaine Conspiracy.

The second conspiracy involved the efforts of defendants Chen Chih-Yi, Jack Ma, John Kirkpatrick, Lam Tso and Tony Wong to distribute one hundred fifty pounds of marijuana between June and September, 1985. In addition, there was a plan to distribute cocaine, which resulted in Chen Chih-Yi supplying undercover officers with a sample of the drug. Once again, the government was able to prove the conspiracy largely through the efforts of Steven Wong and the other undercover officers.

On June 25, 1985, Steven Wong met with Chen Chih-Yi in New York. At that meeting, among other things, Chen told Steven Wong of his capabilities of dealing in marijuana and cocaine. On June 26, 1985, Steven Wong presented Chen with a $5,000 deposit for one hundred pounds of marijuana that was eventually to be shipped from Texas to New York City. On July 1, 1985, Steven Wong, along with two undercover associates, went to Texas at Chen's invitation, where they were introduced to Chen's marijuana sources. Wong and his colleagues also met defendant Jack Ma for the first time during that trip, as well as other United Bamboo members. On July 2, 1985, Chen supplied Steven Wong with samples of marijuana and cocaine.

On July 31, 1985, Steven Wong wired Chen a further partial payment for the marijuana. In addition, Chen thereafter agreed to give the defendant Lam Tso an extra fifty pounds of marijuana on consignment, as well as six firearms. On August 7, 1985, the defendant John Kirkpatrick arrived by car in New York with the marijuana and firearms. After contacting Chen, who had been dining with Jack Ma, Lam Tso, Tony Wong, Steven Wong and Steven Wong's undercover associates, Kirkpatrick waited for them at a designated site. The parties then proceeded to a secluded area on the west side of Manhattan, where one of the undercover agents gave Jack Ma $25,000 in exchange for the marijuana and guns.

D. The Conspiracy to Import and Distribute Three Hundred Kilograms of Heroin.

The third phase of the United Bamboo plan involved a conspiracy to import and distribute three hundred kilograms of heroin into the United States in which defendants Chen Chih-Yi, Tung Kuei-Sen, Jack Ma, Peter Yang and Ah Min participated from June through September, 1985. Steven Wong was first made aware of the details of the plan to obtain heroin on July 24, 1985. On that day, Chen told Wong that Tung Kuei-Sen had assured Chen that the "stuff" would be forthcoming from Thailand. At that point, Chen believed that after a smaller purchase, the conspiracy could obtain one hundred to two hundred kilograms of heroin for distribution. Thereafter, on August 13, 1985, Chen flew to Brazil to meet with Tung Kuei-Sen in Rio de Janeiro. Telephone calls were made to the telephone number of defendant Ah Min, the purported heroin source, in Thailand on August 13 and 15, 1985 from Tung's hotel room in Rio de Janeiro.

The negotiations for this transaction subsequently continued in New York City. At a meeting there on August 20, 1985, Chen introduced Peter Yang to Steven Wong, describing Yang as a trusted associate and one of the toughest members of the United Bamboo; an enforcer. The next day, Chen, accompanied by Yang, held another meeting regarding the heroin transaction, at which he reviewed the details of the transaction with two undercover agents who were the purported purchasers.

On September 13, 1985, Chen and Jack Ma arrived in New York with Ah Min. The three hundred kilogram heroin transaction was finalized during the next three days. On the morning of September 15, 1985, the purchasers handed over $50,000 to Chen to make any arrangements necessary to conclude the transaction. Shortly thereafter, the defendants were arrested.

As described earlier, the indictment, trial and conviction of the defendants- appellants ensued.

II. Discussion

A. Sufficiency of the Evidence.

Defendants Shiang Bao-Jing, George Qi Lu, Peter Yang and Jack Ma contend that the evidence introduced by the Government at trial was insufficient to support their respective convictions. We address these claims individually.

The rules for determining appellate sufficiency claims are well settled. First, the defendant bears a "very heavy burden" in challenging the sufficiency of the evidence. United States v. Buck, 804 F.2d 239, 242 (2d Cir.1986); United States v. Grubczak, 793 F.2d 458, 462-63 (2d Cir.1986) (citations omitted). The test is "whether the jury, drawing reasonable inferences from the evidence, may fairly and logically have concluded that the defendant was guilty beyond a reasonable doubt." Grubczak, 793 F.2d at 463 (citations omitted). In making such a determination, the evidence is viewed in the light most favorable to the government, and all permissible inferences are construed in its favor. Grubczak, 793 F.2d at 463; see United States v. Nersesian, 824 F.2d 1294, 1324 (2d Cir.), cert. denied --- U.S. ----, 108 S.Ct. 355, 98 L.Ed.2d 380 (1987). If any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt, the conviction must be sustained. United States v. Fiore, 821 F.2d 127, 128 (2d Cir.1987) (citing Jackson v. Virginia, 443 U.S. 307, 319, 99 S.Ct. 2781, 2789, 61 L.Ed.2d 560 (1979); United States v. Badalamenti, 794 F.2d 821, 828 (2d Cir.1986); Grubczak, 793 F.2d at 462- 63). Nor is the government required to preclude every reasonable hypothesis which is consistent with innocence. Fiore, 821 F.2d at 128.

Defendants Shiang Bao-Jing and George Qi Lu challenge the sufficiency of the evidence with respect to their convictions on count three of the indictment, the only count of which they were convicted, which relates to the heroincocaine conspiracy described supra in Section IB.

Since "conspiracy by its very nature is a secretive operation," United States v. Provenzano, 615 F.2d 37, 45 (2d Cir.), cert. denied, 446 U.S. 953, 100 S.Ct. 2921, 64 L.Ed.2d 810 (1980), the elements of a conspiracy may be established through circumstantial evidence. United States v. Soto, 716 F.2d 989, 991 (2d Cir.1983) (quoting United States v. Sanzo, 673 F.2d 64, 69 (2d Cir.), cert. denied, 459 U.S. 858, 103 S.Ct. 128, 74 L.Ed.2d 111 (1982)). However, "absent evidence of purposeful behavior, mere presence at the scene of a crime, even when coupled with knowledge that a crime is being committed, is insufficient to establish membership in a conspiracy; and mere association with conspirators is similarly insufficient." United States v. Martino, 759 F.2d 998, 1002 (2d Cir.1985) (citations omitted); United States v. Johnson, 513 F.2d 819, 823-24 (2d Cir.1975). Thus, evidence of purposeful behavior designed to further a conspiracy must be shown to prove membership in that conspiracy. See United States v. Torres, 519 F.2d 723, 726 (2d Cir.), cert. denied, 423 U.S. 1019, 96 S.Ct. 457, 46 L.Ed.2d 392 (1975); Johnson, 513 F.2d at 823.

* * * *

Jack Ma challenges the sufficiency of the evidence underlying his conviction on counts one, seven, eight, ten and twelve of the indictment, relating to the general RICO conspiracy, the narcotics conspiracies described supra in sections IC and ID, and illegal interstate transportation and delivery of firearms. His claim cannot be sustained.

Ma was not only present at, and a participant in, the meetings at which these conspiracies and transactions were discussed, but was present at the actual delivery of the one hundred fifty pounds of marijuana and six firearms which are the subject of counts seven, eight, and twelve. The final $25,000 payment for the marijuana was made to Ma. He was also present at the meetings at the Vista Hotel in Manhattan on September 13, 14 and 15 at which the transaction involving three hundred kilograms of heroin, the subject of count 10, was conducted. Finally, he was the personal bodyguard for defendant Chen Chih-Yi, a major leader of United Bamboo in the United States. In short, there was ample evidence to support his several convictions.

* * * *

C. Admission of Duplicate Copies of Telephone Records as Evidence.

Defendant Tung Kuei-Sen contends that the trial court erroneously admitted into evidence certain telephone logs that showed two telephone calls to defendant Ah Min's telephone number in Bangkok, Thailand from Tung's hotel room in Rio de Janeiro, Brazil on August 13 and 15, 1985. Tung argues that the records were inadmissible because they were duplicates rather than the original hotel records, and were not sufficiently authenticated to be deemed reliable. This claim is without merit.

" 'The admissibility of secondary evidence is within the broad discretion of the trial judge.' " Ruberto v. Commissioner, 774 F.2d 61, 64 (2d Cir.1985) (per curiam) (quoting United States v. Covello, 410 F.2d 536, 543 (2d Cir.) (citations omitted), cert. denied, 396 U.S. 879, 90 S.Ct. 150, 24 L.Ed.2d 136 (1969)). Tung has failed to demonstrate that there was any abuse of that discretion. The government introduced the duplicate telephone logs pursuant to the business records exception to the rule against hearsay stated in Fed.R.Evid. 803(6). That rule provides in pertinent part that a record, "made at or near the time by ... a person with knowledge, if kept in the course of a regularly conducted business activity, and if it was the regular practice of that business activity to make the ... record," is admissible upon "the testimony of the custodian or other qualified witness," absent some indication of untrustworthiness. That is, "someone who is sufficiently familiar with the business practice must testify that [the] records were made as part of that practice." United States v. Rosenstein, 474 F.2d 705, 710 (2d Cir.1973).

Moreover, "[a] duplicate is admissible to the same extent as an original unless (1) a genuine question is raised as to the authenticity of the original or (2) in the circumstances it would be unfair to admit the duplicate in lieu of the original." Fed.R.Evid. 1003. Thus, Tung has the burden of demonstrating "a genuine issue as to the authenticity of the unintroduced original, or as to the trustworthiness of the duplicate, or as to the fairness of substituting the duplicate for the original." United States v. Georgalis, 631 F.2d 1199, 1205 (5th Cir.1980).

Tung raises no genuine issue with respect to any of these concerns. Instead, he simply speculates that there is no assurance that the proffered document is actually a duplicate of the original. The government called Jose Candido Novais Couinko, the deputy manager of the Grand Hotel OK, where Tung stayed in Rio de Janeiro, as a witness to testify as to the records. He identified the logs as those kept in the normal course of business at the hotel. As a deputy manager of the hotel, he was certainly qualified as a witness to testify about the records. While he had not compared the specific page of the duplicate with the original, he did recognize the names and signatures of the telephone operators and the handwriting, room numbers and printed format used on the logs.

In addition, the American Consulate in Rio de Janiero affixed a certification under seal to the duplicate copies of the logs which stated that the duplicates were a "true and faithful copy of the original ... [that] were carefully examined by me and compared with the original and found to agree therewith word for word and figure for figure." This would appear to dispose of any issue as to the authenticity of the telephone logs. In any event, the defendant has not met his burden by making a showing to the contrary. The trial judge was clearly justified in admitting the duplicate logs as evidence.

* * * *

E. Inconsistent Verdicts.

Defendants Chang An-Lo, Tung Kuei-Sen and Jack Ma challenge their convictions on the grounds that some of the jury verdicts were inconsistent. Lam Tso makes an analogous argument that the jury manifestly failed to follow the court's instructions, in view of the jury verdicts. Specifically, Chang was convicted on count three, the conspiracy to distribute heroin and cocaine, and was acquitted on the RICO charges in counts one and two. Tung was convicted on count ten, the conspiracy to import and distribute three hundred kilograms of heroin, and was also acquitted on the RICO charges. Ma was convicted on counts seven and ten, relating to narcotics conspiracies, and on count one, the RICO conspiracy count that alleged these narcotics conspiracies as predicate acts, but was acquitted on count two, the substantive RICO count which alleged the same narcotics conspiracies as predicate acts. There is no discernible inconsistency in the verdicts rendered as to Lam Tso.

Chang, Tung and Ma argue that conviction on the various conspiracy counts, which involve conduct identical to that charged as predicate acts of racketeering in the RICO counts, is so logically inconsistent with acquittal on the RICO counts that reversal of the conspiracy convictions is warranted.

In Dunn v. United States, 284 U.S. 390, 52 S.Ct. 189, 76 L.Ed. 356 (1932), the Supreme Court held that a defendant will not be allowed to attack a conviction on the ground of in United States v. Powell, 469 U.S. 57, 105 S.Ct. 471, 83 L.Ed.2d 461 (1984). The Supreme Court there explained that inconsistent verdicts may be the product of compromise, mistake or lenity on the part of the jury. Id. at 65-66 & n. 7, 105 S.Ct. at 476-477 & n. 7; see Dunn, 284 U.S. at 394, 52 S.Ct. at 191. "Inconsistent verdicts therefore present a situation where 'error,' in the sense that the jury has not followed the court's instructions, most certainly has occurred, but it is unclear whose ox has been gored." Powell, 469 U.S. at 65, 105 S.Ct. at 477. The Court noted further that the government cannot attack an inconsistent acquittal, even if palpably erroneous, because of the Constitution's double jeopardy provision. Id.

The Court also found that a defendant should not be allowed to challenge inconsistent verdicts on the ground that they resulted not from lenity, but rather from some error that worked to the defendant's disadvantage. Id. at 66, 105 S.Ct. at 477. Such challenges would either be based upon pure speculation or would improperly intrude upon the jury's deliberations. Id. Finally, the Court noted that a defendant is protected from jury irrationality or error by independent review of the sufficiency of the evidence by trial and appellate courts. Id. at 67, 105 S.Ct. at 477. These precedents clearly preclude the challenges presented here as to the alleged inconsistency of the verdicts reached by the jury in this case. Even assuming that some of the verdicts are inconsistent, which is less than certain where the allegedly inconsistent acquittals occur on RICO counts implicating the special and distinct requirements of that statute, there is no basis for reversal of the assertedly offensive guilty verdicts.

F. Sentencing Matters.

Defendant Tung Kuei-Sen contends that the district court failed, in sentencing Tung, to comply with Fed.R.Crim.P. 32(c)(3)(D), which provides: If the comments of the defendant and the defendant's counsel or testimony or other information introduced by them allege any factual inaccuracy in the presentence investigation report or the summary of the report or part thereof, the court shall, as to each matter controverted, make (i) a finding as to the allegation, or (ii) a determination that no such finding is necessary because the matter controverted will not be taken into account in sentencing. A written record of such findings and determinations shall be appended to and accompany any copy of the presentence investigation report thereafter made available to the Bureau of Prisons or the Parole Commission.

Tung accordingly seeks "remand [ ] for a hearing on the allegations contained in the presentence report and for sentencing."

Defendant George Qi Lu contends that he contested allegations in his presentence report and requested a hearing with respect to them which hearing the district court improperly denied. He requests vacation of his sentence and remand for a hearing.

Our review of the transcript of the sentencing hearing does not indicate any explicit, on-the-record compliance with Rule 32(c)(3)(D) with respect to these defendants in the course of that hearing, and the government does not contend in its brief that there has been such compliance, which is mandatory in this circuit. United States v. Weichert, 836 F.2d 769, 771 (2d Cir.1988); United States v. Bradley, 812 F.2d 774, 781-82 (2d Cir.), cert. denied, --- U.S. ----, 108 S.Ct. 107, 98 L.Ed.2d 67 (1987); United States v. Ursillo, 786 F.2d 66, 71 (2d Cir.1986). Out of an abundance of caution, we accordingly remand for findings or determinations as to these defendants pursuant to Fed.R.Crim.P. 32(c)(3)(D). If the district court elects to make findings as to any controverted allegations in either of these defendants' presentence reports, it should then determine, in the exercise of its discretion, whether a hearing is required with respect to those matters. See United States v. Fatico, 603 F.2d 1053, 1057 n. 9 (2d Cir.1979); see also United States v. Bradley, 812 F.2d at 783 n. 10.

G. Other Contentions.

We have considered defendants' other contentions, and find them to be without merit.

III. Conclusion

The judgments of conviction are affirmed. The case is remanded for compliance with Fed.R.Crim.P. 32(c)(3)(D) with respect to defendants Tung Kuei-Sen and George Qi Lu.

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111 A.D.2d 333, 489 N.Y.S.2d 1014

Supreme Court, Appellate Division, Second Department, New York

In the Matter of Debra GENTILE, Appellant, v. David A. LEVINE, Respondent.

May 20, 1985

Sidney Sherwin, Rego Park (Richard M. Hartzman, New York City, of counsel), for appellant.
Les J. Levine, New City, for respondent.

Order of the Family Court, Queens County, dated December 20, 1983, affirmed, with costs, for the reasons stated in the memorandum of Judge Gilman at the Family Court.

O'CONNOR, J.P., and WEINSTEIN, BROWN and KUNZEMAN, JJ., concur.

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118 A.D.2d 731, 500 N.Y.S.2d 63

Supreme Court, Appellate Division, Second Department, New York.

The PEOPLE, etc., Respondent, v. Richard Clayton JACKSON, Appellant.

March 17, 1986.

Lawrence J. Gross, Elmhurst (Richard M. Hartzman, of counsel), for appellant.
John J. Santucci, Dist. Atty., Kew Gardens (Alexander P. Schlinger, of counsel), for respondent.

Before GIBBONS, J.P., and BRACKEN, WEINSTEIN and NIEHOFF, JJ.

MEMORANDUM BY THE COURT.

Appeal by the defendant from a judgment of the Supreme Court, Queens County (Chetta, J.), rendered November 10, 1982, convicting him of criminal possession of a weapon in the second degree, upon his plea of guilty, and imposing sentence. The appeal brings up for review the denial (Groh, J.), after a hearing, of that branch of the defendant's omnibus motion which sought the suppression of certain statements.

Judgment affirmed.

The finding by the hearing court that the defendant gave both his oral statement to the arresting officer and his taped confession to an assistant district attorney after separate, valid waivers of his Miranda rights was amply supported by the record. Although the arresting officer did not consent to the defendant's request to speak with his wife during the stationhouse interrogation, in the absence of evidence that the police forbade the defendant to speak with his wife in an effort to bar the defendant's exercise of his right to counsel and to obtain a confession, there was no infringement of the defendant's rights (see, People v. Fuschino, 59 N.Y.2d 91, 100, 463 N.Y.S.2d 394, 450 N.E.2d 200).

The defendant's failure to pursue the issue of the existence of probable cause for his arrest at the hearing as evidenced by his failure to cross-examine the arresting officer as to the probable cause basis for his arrest, failure to mention the issue in his closing statement, and his failure to object when the hearing court's decision did not address the issue, constitutes a failure to preserve the issue as a matter of law (see, People v. Martin, 50 N.Y.2d 1029, 431 N.Y.S.2d 689, 409 N.E.2d 1363; People v. Smith, 108 A.D.2d 763, 484 N.Y.S.2d 920).

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125 A.D.2d 1014, 509 N.Y.S.2d 684 (Table)

Supreme Court, Appellate Division, First Department, New York

The PEOPLE, etc., Respondent, v. Eric ARMSTEAD, Appellant. [Torres, J.]

Dec 30, 1986

JUDGMENT AND ORDER AFFIRMED [no opinion reported]

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94 A.D.2d 667, 462 N.Y.S.2d 609

Supreme Court, Appellate Division, First Department, New York

In the Matter of Barbara McVey, Appellant, v. Marshall Papier, Respondent

May 19, 1983

Order of the Family Court, Bronx County (Kram, J.), dated March 14, 1980, affirmed, without costs.

A review of the evidence leads to the conclusion, as found by the Trial Judge, that paternity was not established.

Concur -- Kupferman, J. P., Sandler, Silverman and Bloom, JJ.

Asch, J., dissents in a memorandum as follows:

OPINION OF THE COURT

Asch, J.

I am motivated to dissent in this case not only because an accurate resolution of the issue of paternity is so important to the parties and the infant herein but also because of the ripple of consequences which flows in its wake. The human leukocyte antigen (HLA) test now affords the technological possibility of determining paternity to a 95% certainty. The HLA technique was available at the time that the matter was heard in the Family Court even though it was not expressly made admissible by statute until March of 1981. While the proceeding was still pending in the Family Court, both parties were amenable to the administration of blood-grouping tests including the HLA. The consequences of not ascertaining paternity as accurately as possible are too serious to permit the date of the actual enactment of the law to stand as a technical bar to the employment of the HLA test.

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60 N.Y.2d 890, 470 N.Y.S.2d 583, 458 N.E.2d 1260

New York Court of Appeals

In the Matter of Barbara McVey, Appellant, v. Marshall Papier, Respondent.

Reported below, 94 AD2d 667.

On review of submissions pursuant to rule 500.2 (b) of the Rules of the Court of Appeals (22 NYCRR 500.2 [g]), appeal dismissed, without costs, upon the ground that the dissent at the Appellate Division is not on a question of law (CPLR 5601, subd [a], par [i]).

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206 A.D.2d 251, 614 N.Y.S.2d 502

Supreme Court, Appellate Division, First Department, New York

In the Matter of Metropolitan Associates Limited Partnership, Appellant, v. New York State Division of Housing and Community Renewal, Respondent.

July 5, 1994

Judgment, Supreme Court, Bronx County (Hansel McGee, J.), entered November 8, 1993, which denied the petition (1) to enjoin respondent from enforcing the provision of an order of its Deputy Commissioner dated March 20, 1992 to the extent it (a) disallowed rent increases that were previously granted by the District Rent Administrator by order dated June 8, 1989, and (b) directed petitioner to refund or credit to the tenants of rent controlled and rent stabilized apartments in the subject premises any rent increases collected pursuant to said order, (2) to annul and revoke the order of the Deputy Commissioner, and (3) to direct respondent to issue a new order reinstating the order of the District Rent Administrator, unanimously modified, on the law to the extent of allowing a 50% Major Capital Improvement ("MCI") increase for windows to the Tavon apartment, and otherwise affirmed, without costs.

The interpretations of respondent agency of statutes which it administers are entitled to deference if not unreasonable or irrational (Matter of Salvati v Eimicke, 72 NY2d 784, 791). Here, the Deputy Commissioner rationally disallowed that portion of the MCI increases to petitioner, the sponsor/holder of unsold shares in the cooperative complex, which were paid from a fund established for and owned by the cooperative corporation which the Deputy Commissioner properly concluded was the functional equivalent of a reserve fund (see, Matter of Versailles Realty Co. v New York State Div. of Hous. & Community Renewal, 76 NY2d 325). Petitioner, as the party seeking the rent increases, had the burden of proving the MCI expenditures (see, 9 NYCRR 2522.4 [a] [3] [i] [c]). Respondent weighed the inconsistent figures and reached a rational conclusion in reducing the allowed cost of the new boiler/burner, a conclusion which should not now be rejected (see, Matter of Stork Rest. v Boland, 282 NY 256). Further, the determination that the MCI disallowance was applicable to tenant Adolph was not inconsistent with or a reversal of the prior denial of the Adolph petition for administrative review since the Deputy Commissioner had expressly reserved the authority to apply to Adolph the determination in the complex-wide proceeding.

However, because petitioner had claimed that the replacement of windows throughout the buildings was for energy conservation purposes, respondent erred in denying petitioner a 50% MCI increase for replacing the windows in the Tavon apartment, even though those windows were only a few years old (see, Operational Bulletin 84-4).

Concur--Sullivan, J. P., Carro, Ellerin, Asch and Tom, JJ.

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240 A.D.2d 1014, 660 N.Y.S.2d 783 [table]

Unpublished Disposition

Supreme Court, Appellate Division, First Department, New York

APPEALS WITHDRAWN UPON STIPULATION

19 E. 80th St. Tenants' Assn., Matter of, v New York State Div. of Hous. & Community Renewal [Schoenfeld, J.]

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242 A.D.2d 983, 662 N.Y.S.2d 970 [table]

Supreme Court, Appellate Division, First Department, New York

19 E. 80th St. Tenants' Assn. v NYS Div. of Hous. & Community Renewal

APPEAL WITHDRAWN

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134 A.D.2d 967, 520 N.Y.S.2d 692 [table]

Supreme Court, Appellate Division, First Department, New York

Coronet Props. Co. v. State of New York of Div. of Hous. & Community Renewal [Hughes, J.]

JUDGMENT AFFIRMED

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135 A.D.2d 1152, 522 N.Y.S.2d 1007 [table]

Supreme Court, Appellate Division, First Department, New York

Seril v. Mirabal [Evans, J.]

JUDGMENT AFFIRMED

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191 A.D.2d 440, 594 N.Y.S.2d 57

Supreme Court, Appellate Division, Second Department, New York

In the Matter of HYDE PARK ASSOCIATES, et al., Petitioners-Appellants, v. Richard HIGGINS, etc., et al., Respondents; Thrift Associations Service Corporation, Intervenor-Appellant.

March 1, 1993

Dennis B. Hasher, New York City (Richard Hartzman, of counsel), for respondent Div. of Housing and Community Renewal.
Richard Creditor, Forest Hills, for respondents tenants of New Hyde Park Gardens.

Before ROSENBLATT, J.P., and LAWRENCE, O'BRIEN and COPERTINO, JJ.

MEMORANDUM BY THE COURT.

In a proceeding pursuant to CPLR article 78 to review a determination of the New York State Division of Housing and Community Renewal, dated March 9, 1990, which ordered a rent reduction, Hyde Park Associates and Hyde Park Owners Corp. appeal from so much of a judgment of the Supreme Court, Queens County (Leviss, J.), dated January 15, 1991, 149 Misc.2d 682, 564 N.Y.S.2d 651, as dismissed the petition, and intervenor Thrift Associations Service Corporation separately appeals from so much of the same judgment as dismissed its cross claim against the respondent Division of Housing and Community Renewal. ORDERED that the judgment is affirmed, with one bill of costs to the respondents appearing separately and filing separate briefs, payable by the appellants appearing separately and filing separate briefs.

In Matter of Hyde Park Gardens v. New York State Div. of Hous. & Community Renewal, 140 A.D.2d 351, 527 N.Y.S.2d 841, this court affirmed the judgment of the Supreme Court which confirmed the determination of the respondent Division of Housing and Community Renewal (hereinafter the DHCR) finding a reduction in services. We also agreed with the Supreme Court that, having found a reduction in services, the DHCR was required by Administrative Code of the City of New York 26-514 to order a rent reduction. The Court of Appeals agreed as well, and the matter was remitted to the DHCR for a determination of the amount of the rent reduction (see, Matter of Tenants of Hyde Park Gardens v. State of New York, Div. of Housing & Community Renewal, Off. of Rent Admin., 73 N.Y.2d 998, 541 N.Y.S.2d 345, 539 N.E.2d 101).

Accordingly, upon remittitur, the DHCR ordered a rent reduction for the complaining tenants in the amount of all rent increases from February 1, 1984, the first rent payment day after the DHCR informed the owner of the tenants' complaints, to September 1, 1989, which the DHCR determined to be the date that services were restored. In addition, the DHCR ordered a refund of major capital improvement rent increases for all tenants for the same period. An accounting firm retained by the petitioners calculated the total rent reduction for the 67-month period of reduced services to be $762,814.67.

The petitioners commenced this proceeding to review the DHCR determination, on the ground that, inter alia, the application of the Administrative Code 26-514 in this case constitutes a denial of due process. Thrift Associations Service Corporation (hereinafter TASCO), as holder of a mortgage on the property, was granted leave to join the proceeding as an intervenor.

We find no merit to the petitioners' contention that the rent reduction is so excessive or wholly disproportionate to the offense as to shock the conscience (see, Matter of Pell v. Board of Educ., 34 N.Y.2d 222, 231, 356 N.Y.S.2d 833, 313 N.E.2d 321; cf., Matter of Milevoi v. Conciliation & Appeals Bd. of City of NY., 137 A.D.2d 533, 535-536, 524 N.Y.S.2d 274). Nor do we find the rent reduction to be a denial of procedural due process (see, Matter of Colton v. Riccobono, 67 N.Y.2d 571, 576, 505 N.Y.S.2d 581, 496 N.E.2d 670). In addition to the financial incentive for landlords to maintain services, Administrative Code 26-514 provides a remedy for tenants who have paid rent increases during periods of decreased services (see, Administrative Code of City of NY 26-514). While the petitioners were free to avail themselves of the judicial process, the tenants should not be made to suffer because the petitioners did not restore services until all appeals were exhausted.

Equally without merit is TASCO's argument that its cross claim against the DHCR should not have been dismissed. Cross claims are not permitted in special proceedings absent leave of court (see, Matter of O'Connor v. D'Apice, 156 A.D.2d 610, 612, 549 N.Y.S.2d 424). TASCO did not request, and was not granted, leave to file a cross claim, and the Supreme Court properly dismissed the cross claim on the motion of the DHCR.

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149 Misc.2d 682, 564 N.Y.S.2d 651

New York Supreme Court, Queens County

In the Matter of Hyde Park Associates et al., Petitioners, v. Richard Higgins, as Commissioner of the New York State Division of Housing and Community Renewal, et al., Respondents.

November 19, 1990

APPEARANCES OF COUNSEL

White & Case for petitioners. Richard Creditor for tenants of Hyde Park Gardens. Dennis Hasher for respondents. Cadwalder, Wickersham & Taft for Thrift Associates.

OPINION OF THE COURT

Sidney Leviss, J.

In these CPLR article 78 proceedings petitioners Hyde Park Associates (hereinafter HPA) and Hyde Park Owners Corp. (hereinafter HPOC) seek a judgment vacating the March 9, 1990 order of respondents Commissioner Richard Higgins and the New York State Division of Housing and Community Renewal (hereinafter Commissioner and DHCR) which ordered a rent reduction and rent freeze for the period of February 1, 1984 to September 1, 1989 during which time there was a reduction in essential services.

This court, in an order dated March 29, 1990, granted petitioners' request for a temporary restraining order staying enforcement of the DHCR's order of March 9, 1990.

HPA is the landlord of the rent-stabilized tenants who reside at a garden apartment complex known as Hyde Park Gardens. HPOC is the owner of a cooperative located at Hyde Park Gardens. HPA was the sponsor of the cooperative, is a majority shareholder of HPOC, and pays maintenance to HPOC. The rent-stabilized tenants, however, only pay rent to HPA.

The DHCR in an order dated February 11, 1986 determined that HPA had reduced essential services at Hyde Park Gardens, but declined to order a rent reduction. That portion of the Commissioner's order which found a reduction of essential services was affirmed by this court in Matter of Hyde Park Assocs. v New York State Div. of Hous. & Community Renewal (Lonschein, J.) and by the Appellate Division, Second Department (140 AD2d 351, lv denied 72 NY2d 809). This court, in Matter of Tenants of Hyde Park Gardens v State of New York, Div. of Hous. & Community Renewal, Off. of Rent Admin. (Lonschein, J.), held that upon the finding of a reduction of essential services, the DHCR was required, as a matter of law, to order a rent reduction, under section 26- 514 of the Administrative Code of the City of New York. (Commonly known as the Rent Stabilization Law.) This court's decision was upheld by the Appellate Division, Second Department, on May 2, 1988 (140 AD2d 351, supra) and the Court of Appeals on April 27, 1989 (73 NY2d 998). The matter was remanded to the DHCR for the sole purpose of determining the amount of the rent reduction. The landlord restored the security services at Hyde Park Gardens on September 1, 1989.

The DHCR, in an order issued on March 9, 1990, modified its prior order of February 11, 1986, and reduced the rent in accordance with the formula set forth in section 26-514 of the Rent Stabilization Law. The Commissioner, upon a review of the evidence, found that there was no basis "to order an extended payback period or to vary the Division's standard refund directive in any other respect" and directed that those tenants who had joined the complaint of a decrease in building wide services, would have their rents reduced to the level in effect prior to the last rent guideline increase commencing before the effective date of the rent reduction. This rent reduction was for the period of February 1, 1984, the date of the tenants' complaint, to August 31, 1989. In addition, as the housing complex had been the subject of various major capital improvement (MCI) increases over the years, the owner was barred from applying for or collecting rent increases for MCIs from all tenants in the complex for the period that the owner failed to maintain essential services. The Commissioner directed the owner to refund to the tenants all amounts collected in excess of the reduced rent attributable to guidelines or the MCI increases. The Commissioner also directed the restoration of the rents as of September 1, 1989, the date the owner had restored the services in question.

Petitioners now seek to vacate the DHCR's order of March 9, 1990 and assert that as they acted in good faith, the penalty of a rent reduction estimated to be over $750,000 is excessive and so disproportionate to the offense as to render section 26-514 of the Rent Stabilization Law unconstitutional as applied to them under the 8th, 5th and 14th Amendments of the US Constitution, and article I, 5 and 6 of the NY Constitution.

Respondents Commissioner and DHCR, in opposition, assert that the statutory sanctions imposed under section 26-514 of the Rent Stabilization Law are not excessive, or disproportionate to the wrong, are reasonably related to the statutory purpose, and are constitutional as applied. Respondents further assert that the 8th Amendment is inapplicable, as the rent reduction, while serving governmental purposes in protecting tenants, is neither a fine nor a penalty and is payable only to the tenants and not the government. It is further asserted that the rent reduction formula has not been challenged by petitioners, and is neither "wholly disproportionate" nor "grossly excessive" so as to violate due process. Rather, respondents assert that petitioners only complain as to the amount of the rent reduction, which they could have minimized by restoring the required services prior to September 1, 1989. Finally, respondents assert that petitioners' good faith may not be taken into consideration in fixing the amount of the rent reduction, as the sanction imposed is nondiscretionary and fixed by statute.

It is well settled that an article 78 proceeding is the proper method for determining whether a statute in a specific instance has been applied in an unconstitutional manner. An article 78 proceeding, however, is not the proper method of testing the general constitutionality of a statute (Matter of R & G Outfitters v Bouchard, 101 AD2d 642). Petitioners herein do not challenge the general constitutionality of section 26-514 of the Rent Stabilization Law. Rather, petitioners assert that section 26-514 was applied to them by the DHCR in an unconstitutional manner. Petitioners assert that the DHCR's order reducing and freezing the rent for the period in question resulted in the imposition of a penalty estimated at $762,814.16 and as such is so large and disproportionate to the offense that it violates their due process rights. Petitioners argue that the penalty imposed upon them is unconstitutionally excessive because they acted in good faith to improve services. Petitioners further argue that the penalty is unconstitutionally excessive because the tenants suffered little or no actual injury. Finally, petitioners argue that the penalty imposed is unconstitutional because it has no relation to the statute's purpose.

It is well established that a civil penalty violates due process when it is "grossly excessive" or "so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable." (St. Louis, Iron Mountain & S. Ry. Co. v Williams, 251 US 63, 67; Browning-Ferris Indus. v Kelco Disposal, 492 US 257, 109 S Ct 2909.)

The DHCR, upon a finding of a reduction in essential services, is mandated by section 26-514 of the Rent Stabilization Law to reduce the tenants' rent to the guidelines level in effect in the tenants' prior lease, and to prohibit any further rent increases until such time as the services have been restored. The DHCR has no discretion in ordering such a rent reduction, and must follow the statutory formula for determining the amount of the rent reduction. (Matter of Tenants of Hyde Park Gardens v State of New York, Div. of Hous. & Community Renewal, Off. of Rent Admin., 140 AD2d 351, affd 73 NY2d 998, supra.) Petitioners do not claim that a rent reduction pursuant to this formula, or a rent freeze itself is excessive.

The court finds that the rent reductions ordered by the DHCR are neither "grossly excessive" nor "wholly disproportionate" to the offense so as to be unreasonable and unconstitutional. The rent reductions mandated by section 26- 514 upon a finding of reduction in essential services are payable or credited to each individual tenant. The amount in question is large only because the reduction in essential services lasted for a period of 5 years and 7 months, and affected a total estimated 602 tenants who reside in the complex. According to petitioners' calculations, the 209 tenants who joined in the decrease in services complaint will receive a refund of $609,929.73, and the 393 noncomplaining tenants will receive a total refund of $152,884.94 based solely on MCI increases. Thus, on an average, each complaining tenant will receive a refund of $2,918.32, which is equal to $43.55 per month or $522.68 per year for the entire 67-month period. The noncomplaining tenants, on an average, will receive a refund of $389.02, which is equal to $5.81 per month or $69.68 per year for the entire 67-month period. These refunds, per tenant, are clearly not excessive. Moreover, the Legislature, in fashioning a remedy to compensate tenants for the reduction in essential services, was not required to limit the sanction to the actual damages sustained by the tenants. (See, St. Louis, Iron Mountain & S. Ry. Co. v Williams, 251 US 63, supra.) Petitioners may not relitigate the issue of reduction in essential services under the guise of a constitutional attack on the DHCR's order of March 9, 1990. In addition, petitioners may not reargue the issue of good faith. The rent reduction mandated by section 26-514 is nondiscretionary, and therefore the landlord's good faith may not be considered in calculating the amount of the rent reduction. The fact that this statutory provision is nondiscretionary does not render its application unconstitutional. Moreover, the issue of petitioners' good faith was argued by the DHCR before the Court of Appeals and implicitly rejected in Matter of Tenants of Hyde Park Gardens v State of New York, Div. of Hous. & Community Renewal, Off. of Rent Admin. (140 AD2d 351, affd 73 NY2d 998, supra).

Finally, the sanctions of a rent refund and rent freeze mandated by section 26-514 of the Rent Stabilization Law, and ordered by the DHCR, are clearly and reasonably related to the statutory goal of compelling a landlord to restore services, and affording tenants a measure of compensation for the period that these services were not provided. In addition, these sanctions serve the governmental interest in the preservation and maintenance of the rental housing stock in New York City. (Administrative Code 26-501.) It is clear that it was only the imminent imposition of a rent reduction and rent freeze which compelled petitioners to restore the security services on September 1, 1989. Petitioners took no steps to restore these services prior to the Court of Appeals decision. Petitioners, however, were not parties to that litigation, and their appeals of the essential services issue ended on October 18, 1988 when the Court of Appeals denied leave to appeal from the Appellate Division's determination. (Matter of Hyde Park Assocs. v New York State Div. of Hous. & Community Renewal, 140 AD2d 351, lv denied 72 NY2d 809, supra.) Petitioners thus could have restored essential services after October 18, 1988, without forfeiting any right to appeal, and could have reduced the period of the rent refunds by nearly a year. Contrary to petitioners' assertions, they did not have to await an order of a rent reduction, in order to restore essential services, and the DHCR could not have extended the refund beyond the date the essential services were restored. (See, Administrative Code 26- 514.)

Accordingly, the court finds that section 26-514 of the Rent Stabilization Law was constitutional as applied to the petitioners and that the rent refund ordered by the DHCR on March 9, 1990 was not "excessive" nor "wholly disproportionate" and therefore the petition is dismissed.

[Portions of opinion omitted]

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177 A.D.2d 488, 575 N.Y.S.2d 1019

Supreme Court, Appellate Division, Second Department, New York

In the Matter of Ernest JEREMIAS, et al., Petitioners, v. Elliot G. SANDER, etc., Respondent.

November 4, 1991

Segal, Goodman & Goodman, Brooklyn (Jerald Segal, of counsel), for petitioners. Dennis B. Hasher, Bronx (Richard Hartzman of counsel), for respondent.

Proceeding pursuant to CPLR article 78 to review a determination of the respondent Deputy Commissioner of the New York State Division of Housing and Community Renewal, dated April 4, 1989, which, after a hearing, inter alia, found that the petitioner landlords had harassed their tenants, and imposed civil penalties. ADJUDGED that the determination is confirmed and the proceeding is dismissed on the merits, with costs. Following an administrative hearing, the respondent Deputy Comissioner of the New York State Division of Housing and Community Renewal (hereinafter DHCR) adopted the findings of its hearing officer and determined that the petitioners willfully violated the Administrative Code of the City of New York 26-516 and selected provisions of the Rent Stabilization Code (9 NYCRR 2522.5, 2524.1, 2525.1, 2525.2, 2525.4, 2525.5 and 2526.2), and imposed civil penalties. It is well settled that an impartial decision maker is an essential component of due process (see, Withrow v. Larkin, 421 U.S. 35, 46-47, 95 S.Ct. 1456, 1464, 43 L.Ed.2d 712; Matter of Warder v. Board of Regents of Univ. of State of N.Y., 53 N.Y.2d 186, 197, 440 N.Y.S.2d 875, 423 N.E.2d 352; State Administrative Procedure Act 303; see also, Matter of 1616 Second Ave. Rest. v. New York State Liq. Auth., 75 N.Y.2d 158, 551 N.Y.S.2d 461, 550 N.E.2d 910). Thus, "a determination based not on a dispassionate review of facts but on a body's prejudgment or biased evaluation must be set aside (see, Matter of Rotwein [Goodman], 291 N.Y. 116, 123, 51 N.E.2d 669). But a mere allegation of bias will not suffice. There must be a factual demonstration to support the allegation and proof that the outcome flowed from it" (Matter of Warder v. Board of Regents of Univ. of State of N.Y., supra, 53 N.Y.2d at 197, 440 N.Y.S.2d 875, 423 N.E.2d 352; see also, Matter of Hughes v. Suffolk County Dept. of Civ. Serv., 74 N.Y.2d 833, 546 N.Y.S.2d 335, 545 N.E.2d 625). We can find no factual support for the petitioners' allegation of bias. The petitioners' contention that the Deputy Commissioner's determination was not supported by substantial evidence is without merit. "Where there is a conflict in the testimony produced * * * where reasonable men might differ as to whether the testimony of one witness should be accepted or the testimony of another be rejected, where from the evidence either of two conflicting inferences may be drawn, the duty of weighing the evidence and making the choice rests solely upon the [administrative agency]. The courts may not weight the evidence or reject the choice made by [such agency] where the evidence is conflicting and room for choice exists" (Matter of Stork Rest. v. Boland, 282 N.Y. 256, 267, 26 N.E.2d 247; Matter of Berenhaus v. Ward, 70 N.Y.2d 436, 522 N.Y.S.2d 478, 517 N.E.2d 193; see also, Matter of Hoover v. Waters, 119 A.D.2d 575, 576, 500 N.Y.S.2d 1005). We find no basis for disturbing the Deputy Commissioner's determination.

MANGANO, P.J., and BRACKEN, LAWRENCE and O'BRIEN, JJ., concur.

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136 A.D.2d 529, 523 N.Y.S.2d 149

Supreme Court, Appellate Division, Second Department, New York

MID-STATE MANAGEMENT CORP., Appellant, v. The NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL.

Jan. 11, 1988

Kucker, Kraus & Bruh, New York City (Patrick K. Munson, of counsel), for appellant.
Dennis B. Hasher, Bronx (Richard Hartzman, of counsel), for respondent.

Before THOMPSON, J.P., and LAWRENCE, RUBIN and SPATT, JJ.

MEMORANDUM BY THE COURT.

In a consolidated proceeding pursuant to CPLR article 78 to review two determinations of the Division of Housing and Community Renewal (hereinafter DHCR), which ordered, inter alia, inclusion of master television antenna service in a registration statement, the building owner appeals from so much of a judgment of the Supreme Court, Kings County (Morton, J.), dated May 2, 1986, as confirmed the determination of the DHCR and dismissed the proceeding.

ORDERED that the judgment is reversed insofar as appealed from, without costs or disbursements, the petitions are granted, the determinations of the DHCR are annulled, and the matter is remitted to the DHCR for a new determination on the objections to the petitioner's registration statement.

The appellant owned a building in Brooklyn which was subject to the Rent Stabilization Code (Administrative Code of City of New York 26-504). Pursuant to that statute, the appellant filed a registration statement. Two tenants objected to the statement on the ground that it did not include a master television antenna as a service provided by the building owner. The District Rent Administrator sustained the tenants' objections and directed that the statement be corrected to include antenna service. On administrative review by the DHCR and again in the consolidated CPLR article 78 proceeding, this determination was upheld. Pursuant to the applicable provisions of the Rent Stabilization Code as it existed in 1984 through 1986 when these proceedings were held, the determinations were correct. Section (2)(m) of that code included in the definition of required services which must be listed in the registration statement "ancillary services including * * * recreational facilities". If the service was provided by an independent contractor and had so been provided since the effective date of the Rent Stabilization Law, and the building owner had no ownership interest in the service, the charge for the service was not subject to the limitations of the Rent Stabilization Law (see, former Code of the Rent Stabilization Association of New York City, Inc., 2 [m][1][a][ii] ). The owner's obligation was merely to maintain the service by contracting with an independent contractor.

Were it not for a change in the law which occurred while this appeal was pending, we would affirm. However, effective May 1, 1987, the DHCR promulgated a new Rent Stabilization Code. The new code provides that ancillary services for which there is a separate charge are not subject to the code if the service "was provided on the applicable base date and at all times thereafter by an independent contractor" and "where no common ownership between the operator of such service and owner exists or existed on the applicable base date, or at any time subsequent thereto". The parties concede that the new code is applicable to this appeal. The DHCR requests that this matter be remitted for a new hearing and the appellant concedes that a hearing in this regard is necessary. Accordingly, this case is remitted to the DHCR for a hearing to determine whether the three factors which would exempt the service under the new code exist. Following the hearing, the Supreme Court shall direct approval or disapproval of the registration statement in accordance with the factual findings.

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138 A.D.2d 235, 525 N.Y.S.2d 570

Supreme Court, Appellate Division, First Department, New York

Jenny MATTHAU, Petitioner-Appellant, v. Manuel MIRABAL, etc., et al., Respondents-Respondents.

March 1, 1988

R.E. Levy, New York City, for petitioner-appellant.
R. Hartzman and M.I. Berkowitz, New York City, for respondents-respondents.

Judgment, Supreme Court, New York County (Elliott Wilk, J.), entered on February 27, 1987, unanimously affirmed for the reasons stated by Elliott Wilk, J., without costs and without disbursements.

MURPHY, P.J., and SANDLER, SULLIVAN, MILONAS and KASSAL, JJ., concur.

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140 A.D.2d 351, 527 N.Y.S.2d 841

Supreme Court, Appellate Division, Second Department, New York

In the Matter of HYDE PARK GARDENS, etc., Petitioners-Respondents-Appellants, v. STATE of New York, DIVISION OF HOUSING AND COMMUNITY RENEWAL, OFFICE OF RENT ADMINISTRATION, Respondent-Respondent-Appellant. (Proceeding No. 1)

In the Matter of HYDE PARK ASSOCIATES, Petitioner-Appellant-Respondent, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, etc., Respondent- Respondent-Appellant. (Proceeding No. 2)

May 2, 1988

Richard M. Creditor, Forest Hills, for petitioners-respondents-appellants.
Dennis B. Hasher, Bronx (Richard Hartzman, of counsel), for respondent- respondent-appellant.

Before BRACKEN, J.P., and LAWRENCE, RUBIN and KOOPER, JJ.

MEMORANDUM BY THE COURT.

In two proceedings pursuant to CPLR article 78 for review of a determination of the New York State Division of Housing and Community Renewal (hereinafter DHCR), which found that the landlord, Hyde Park Associates, the petitioner in proceeding No. 2, had failed to maintain required services, but declined to order a rent reduction, (1) Hyde Park Associates, the petitioner in proceeding No. 2, appeals from (a) so much of a judgment of the Supreme Court, Queens County (Lonschein, J.), dated November 13, 1986, as dismissed its petition, denied its motion to intervene in Proceeding No. 1 and granted the petition of the tenants in Proceeding No. 1 and (b) so much of an order of the same court dated April 10, 1987, as, upon reargument, adhered to the original determination; (2) the DHCR cross-appeals from so much of the judgment as (a) granted the petition in proceeding No. 1 to the extent of determining that it erred in not ordering a rent reduction and (b) remitted the proceeding to the DHCR for a determination of the rent reduction; and (3) The Tenants of Hyde Park Gardens, the petitioners in the first proceeding, cross- appeal from so much of the judgment as denied their application to intervene in Proceeding No. 2. The appeals of DHCR and Tenants from the judgment brings up for review the order dated April 10, 1987 (see, CPLR 5517[b]).

ORDERED that the appeal and cross appeals from the judgment dated November 13, 1986, are dismissed, without costs or disbursements, as that judgment was superseded by the order of the same court dated April 10, 1987, made upon reargument; and it is further,

ORDERED that the order dated April 10, 1987, is affirmed insofar as appealed from and reviewed, without costs or disbursements.

The principal issue determined by the DHCR was whether the tenants of Hyde Park Gardens had sustained a reduction in a "required service" as defined by the Rent Stabilization Law of 1969 (Administrative Code of City of New York 26-514). Specifically, the issue determined by the agency was whether there had been a reduction in security caused by the landlord's implementation of a new overall security system. "The question of what constitutes a required service presents a factual issue which is to be determined by the * * * administrative agency" (Fresh Meadows Assoc. v. New York City Conciliation & Appeals Bd., 88 Misc.2d 1003, 1004, 390 N.Y.S.2d 351, affd. 55 A.D.2d 559, 390 N.Y.S.2d 69, affd. 42 N.Y.2d 925, 397 N.Y.S.2d 1007, 366 N.E.2d 1361). The DHCR made its determination after a hearing held at the request of the parties, pursuant to 26-514 of the Administrative Code of the City of New York. Upon our review of the record, we find that the determination of the DHCR was supported by substantial evidence at the hearing. We further find that the determination had a rational basis and was not arbitrary and capricious (see, Matter of Bambeck v. State Div. of Hous. & Community Renewal, Off. of Rent Admin., 129 A.D.2d 51, 55, 517 N.Y.S.2d 130; Villas of Forest Hills v. Lumberger, 128 A.D.2d 701, 703, 513 N.Y.S.2d 116; Matter of Plaza Realty Investors & Queens Blvd. Props. Co. v. New York City Conciliation & Appeals Bd., 111 A.D.2d 395, 396, 489 N.Y.S.2d 603). Clearly the enumerated factors considered by the agency establish that a rational basis existed for its determination which accordingly should not be disturbed (see, Matter of Bambeck v. State Div. of Hous. & Community Renewal, Off. of Rent Admin., supra; see also, Mid-State Mgt. Corp. v. New York City Conciliation & Appeals Bd., 112 A.D.2d 72, 491 N.Y.S.2d 634, affd. on opn. below 66 N.Y.2d 1032, 499 N.Y.S.2d 398, 489 N.E.2d 1300).

Nor was the agency's determination barred by res judicata or collateral estoppel by the prior decision of the New York City Civil Court. There was not an identity of issues as the Civil Court's determination focused on habitability within the complex generally, whereas the DHCR's decision turned on the determination that there had been a diminution in a specific "required service". As previously noted this matter was precisely within the jurisdiction of the DHCR (see, Fresh Meadows Assoc. v. New York City Conciliation & Appeals Bd., supra ). Moreover, the Civil Court's decision expressly provided it was "without prejudice to the rights of the parties in their present pending proceedings before other tribunals". [3] Finally, the Supreme Court was correct in remitting the matter of a rent reduction to the DHCR for a computation of the appropriate amount thereof. The agency's determination not to order a rent reduction constituted an exercise of discretion which that agency did not possess based upon the mandatory nature of the language in the Rent Stabilization Law of 1969 (Administrative Code 26-514). When the agency determines that there has been a diminution of a "required service", "the commissioner shall so reduce the rent" (Administrative Code 26-514 [emphasis supplied] ).

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73 N.Y.2d 998, 541 N.Y.S.2d 345, 539 N.E.2d 101

Court of Appeals of New York

In the Matter of the Tenants of Hyde Park Gardens et al., Respondents, v. State of New York, Division of Housing and Community Renewal, Office of Rent Administration, Appellant.

Argued March 21, 1989; decided April 27, 1989

APPEARANCES OF COUNSEL

Richard Hartzman and Dennis B. Hasher for appellant.
Richard M. Creditor for respondents.

OPINION OF THE COURT

Order insofar as appealed from affirmed, with costs, and certified question answered in the affirmative for the reasons stated in so much of the memorandum at the Appellate Division as related to the issue of rent reduction (140 AD2d 351).

Concur: Chief Judge Wachtler and Judges Simons, Alexander, Titone, Hancock, Jr., and Bellacosa. Taking no part: Judge Kaye.

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183 A.D.2d 651, 584 N.Y.S.2d 42

Supreme Court, Appellate Division, First Department, New York

Georges Misthopoulos et al., Respondents, v. Estate of Darrell A. Ruhl, Deceased, et al., Defendants, and State of New York Division of Housing and Community Renewal, Office of Rent Administration, Appellant.

Order, Supreme Court, New York County (Beatrice Shainswit, J.), entered April 23, 1991, which denied the motion of the State of New York Division of Housing and Community Renewal (DHCR) to dismiss the complaint as against it, and to dismiss so much of the complaint as seeks a court order directing DHCR to issue an order of eviction, unanimously reversed, on the law, without costs, and the motion to dismiss is granted. The Clerk is directed to enter judgment in favor of defendant-appellant severing and dismissing the complaint as against it.

This case concerns the succession rights to a rent controlled apartment currently occupied by the companion of the now-deceased tenant, and possibly other persons. Plaintiffs (hereafter collectively "landlord") brought an action for a judgment declaring, inter alia, that the apartment is no longer rent controlled, that the current occupants are trespassers, and for an order directing DHCR to issue an "order of eviction" against the occupants. DHCR moved for an order dropping the agency as a party defendant pursuant to CPLR 1003 on the ground that it is not a necessary or proper party, and dismissing that portion of the complaint which seeks a court order directing DHCR to issue an "order of eviction" on the ground that no application had been made to DHCR requiring action by that agency. The Supreme Court denied the motion on the ground that DHCR's records and its expertise in the interpretation and administration of the laws upon which the complaint was based might "play a significant role" in determining the merits of the dispute between the landlord and the occupants of the apartment.

We find that this was not a sufficient reason for denying DHCR's motion. DHCR has no authority to issue an "order of eviction", and a certificate of eviction may be issued only upon application made to the agency by the landlord (9 NYCRR 2204.4). Since the record does not reveal that such an application was made, there is no action that can be required of the agency.

The DHCR and the courts have concurrent jurisdiction to determine so-called succession cases, such as the one at bar, but when the landlord commences a court action to determine succession rights (e.g., Braschi v Stahl Assocs. Co., 74 NY2d 201) the DHCR is not a necessary or proper party. If the real parties in interest require DHCR records in order to determine the issues, those records can be obtained by subpoena duces tecum. Moreover, even if it were appropriate to call a DHCR staff member as an expert, a proposition that is doubtful at best, that circumstance would not warrant forcing the DHCR to remain as a defendant in this action. Accordingly, we grant DHCR's motion by declaring that it has no obligation to take any action with respect to the plaintiffs or the subject apartment, and the DHCR is hereby released from the case as a party defendant.

Concur--Murphy, P. J., Carro, Milonas, Ellerin and Kupferman, JJ.

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145 A.D.2d 1004, 535 N.Y.S.2d 658 [table]

Supreme Court, Appellate Division, First Department, New York

December 15, 1988

Cucin, Matter of, v. Division of Hous. & Community Renewal Off. of Rent Admin. [Sandifer, J.]

ORDER AFFIRMED

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147 A.D.2d 642, 538 N.Y.S.2d 49

Supreme Court, Appellate Division, Second Department, New York

In the Matter of EMPRESS MANOR APARTMENTS, Appellant, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent.

Feb. 21, 1989.

Rosenberg & Estis, P.C., New York City (Gary M. Rosenberg, Blain Z. Schwadel and Peter A. Schwartz, of counsel), for appellant.
Dennis B. Hasher, Bronx (Richard Hartzman, of counsel), for respondent.

Before MANGANO, J.P., and BROWN, EIBER and HARWOOD, JJ.

MEMORANDUM BY THE COURT.

In a proceeding pursuant to CPLR article 78 to review a determination of the respondent New York State Division of Housing and Community Renewal, dated January 30, 1987, which found that the petitioner failed to maintain required services, directed that the services be restored and ordered a reduction in rent, the petitioner Empress Manor Apartments appeals from a judgment of the Supreme Court, Kings County (Vinik, J.), dated July 29, 1987 which dismissed the petition.

ORDERED that the judgment is affirmed, with costs.

ORDERED that the judgment is affirmed, with costs.

The principal issue raised by the petitioner is whether it was denied due process of law by the failure of the respondent New York State Division of Housing and Community Renewal (hereinafter DHCR) to apprise it of the evidence against it and its potential liability for a rent reduction. The petitioner maintains that it was entitled to receive the results of DHCR's inspection reports prior to the determination. We disagree. Nothing in Administrative Code of the City of New York 26-501 et seq. requires the DHCR to forward copies of its inspection reports. The petitioner was fully informed of the allegations in the tenants' complaint and chose not to diligently contest them. The inspection reports merely confirmed some of the allegations in the complaint. As a consequence, it cannot be said that the petitioner was denied due process of law (cf., Matter of Simpson v. Wolansky, 38 N.Y.2d 391, 380 N.Y.S.2d 630, 343 N.E.2d 274).

Nor was the petitioner denied due process by DHCR's purported failure to notify it of its potential liability for a rent reduction. Administrative Code of the City of New York 26-514 provides in pertinent part that:

"In addition to any other remedy afforded by law, any tenant may apply to the state division of housing and community renewal, for a reduction in the rent to the level in effect prior to its most recent adjustment and for an order requiring services to be maintained as provided in this section, and the commissioner shall so reduce the rent if it is found that the owner has failed to maintain such services."

The DHCR noted that nothing in the section precluded the tenant from requesting a rent reduction at a date subsequent to the date of filing of a complaint of a decrease of service. Generally, "the construction given statutes and regulations by the agency responsible for their administration, if not irrational or unreasonable, should be upheld" (Matter of Howard v. Wyman, 28 N.Y.2d 434, 438, 322 N.Y.S.2d 683, 271 N.E.2d 528; Matter of Salvati v. Eimicke, 72 N.Y.2d 784, 537 N.Y.S.2d 16, 533 N.E.2d 1045; Matter of Bambeck v. State Div. of Hous. & Community Renewal Office of Rent Admin., 129 A.D.2d 51, 56, 517 N.Y.S.2d 130, lv. denied 70 N.Y.2d 615, 524 N.Y.S.2d 676, 519 N.E.2d 622). Since this section requires a rent reduction upon a finding of a diminution of a required service (see, Matter of Hyde Park Gardens v. State of New York Div. of Hous. & Community Renewal Office of Rent Admin., 140 A.D.2d 351, 352, 527 N.Y.S.2d 841, lv. denied 72 N.Y.2d 809, 534 N.Y.S.2d 666, 531 N.E.2d 298) it cannot be gainsaid that the agency's construction was rational.

We have examined the petitioner's remaining contentions and find them to be either unpreserved for appellate review (see, Matter of 230 E. 52nd St. Assoc. v. State of New York Div. of Hous. & Community Renewal, 131 A.D.2d 349, 517 N.Y.S.2d 2) or without merit.

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147 A.D.2d 401, 537 N.Y.S.2d 820

Supreme Court, Appellate Division, First Department, New York

Andrew BLANE, Petitioner-Appellant, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent- Respondent. and Robert Reiter, Intervenor-Respondent-Respondent.

Feb. 21, 1989.

G.M. Rosenberg, New York City, for petitioner-appellant.
R. Hartzman, New York City, for respondent-respondent.
T.P. Kerrigan, Brooklyn, for intervenor-respondent-respondent.

Before CARRO, J.P., and ASCH, MILONAS and ROSENBERGER, JJ.

MEMORANDUM DECISION.

Judgment of the Supreme Court, New York County (Jacqueline W. Silbermann, J.), entered March 31, 1988, which dismissed the article 78 petition seeking to annul the order of respondent New York State Division of Housing and Community Renewal dated September 21, 1987, holding that the subject premises was subject to the Rent Stabilization Law as a horizontal multiple dwelling, is unanimously affirmed, without costs or disbursements. The Division of Housing and Community Renewal found that a two-unit structure occupied by intervenor-respondent Robert Reiter was part of a horizontal multiple dwelling complex consisting of an eight-unit front building and two, two-unit semiattached buildings.

Accommodations in one- or two-unit buildings which are part of horizontal multiple dwellings have consistently been held to be subject to rent regulation (see, Matter of Love Securities v. Berman, 38 A.D.2d 169, 328 N.Y.S.2d 8). "Further, the language of Administrative Code 26-505, specifically the words 'shall be deemed to include a multiple family garden- type maisonette dwelling complex' is inclusive rather than exclusive and does not restrict the definition of dwellings covered by the act to 'garden-type maisonette' structures" Matter of Salvati v. Eimicke, 135 A.D.2d 424, 426, 522 N.Y.S.2d 138, revd. on other grounds, 72 N.Y.2d 784, 537 N.Y.S.2d 16, 533 N.E.2d 1045.

The record shows here that the structures have been in common ownership and management since before 1966 and that they share water, sewer, electric and gas systems. They are on one tax lot, and water, sewer and real estate taxes are paid in common. The heating system was also shared until 1982. Thus, the factual findings set forth support the determination of the agency.

In determining the existence of a regulated horizontal multiple dwelling the crucial factor, therefore, is not whether the housing accommodations are part of a 'multiple family garden-type maisonette complex', but rather whether there are sufficient indicia of common facilities, common ownership, management and operation to warrant treating the housing as an integrated unit and multiple dwelling subject to regulations [citations omitted].

(Salvati v. Eimicke, 72 N.Y.2d 784, supra, at 792, 537 N.Y.S.2d 16, 533 N.E.2d 1045.)

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148 A.D.2d 185, 544 N.Y.S.2d 331

Supreme Court, Appellate Division, First Department, New York

In the Matter of the Application of Robert & Suzanne LAVANANT, Petitioners- Appellants, for a judgment under Article 78 of the Civil Practice Law and Rules, v. STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Manuel Mirabal, Deputy Commissioner for Rent Administration, Respondents-Respondents.

July 20, 1989

Robert H. Berman, of counsel (Finkelstein, Borah, Schwartz, Altschuler & Goldstein, P.C., attorneys), New York City, for petitioners- appellants.
Richard Hartzman, of counsel (Dennis B. Hasher, attorney) for respondents- respondents.

Before MURPHY, P.J., and SULLIVAN, KASSAL, ELLERIN, and SMITH, JJ.

SMITH, Justice.

Petitioner-landlords Robert and Suzanne Lavanant appeal from a judgment of the Supreme Court, New York County, which dismissed their petition seeking review of a determination by respondent State Division of Housing and Community Renewal (the "Division") granting treble damages to a tenant on rent overcharges collected by petitioners after April 1, 1984.

The issue here is whether the respondent Division properly imposed treble damages upon petitioner-landlords pursuant to Title 26 of The New York City Administrative Code upon a finding of a rent overcharge where the complaint was filed by the tenant prior to April 1, 1984, the effective date of Section YY51- 6.0.5 (now 26-516) of said Code. Petitioners do not challenge the Division's determination that their tenant was in fact overcharged both before and after April 1, 1984.

Petitioners are the owners of an apartment building at 228 East 75th Street in Manhattan which is subject to New York City's Rent Stabilization Law. In November 1981, G. Duane Peters, the tenant of apartment 2A, filed a rent overcharge complaint with the Conciliation and Appeals Board ("CAB"), the predecessor agency to the Division. The complaint was based in part on an allegation that petitioners had signed two leases on the same date for two different tenants, one at $370.00 and the other at $422.00 per month, and that subsequent increases were based upon the higher rent even though the first tenant had never occupied the apartment. In answer to the complaint petitioners submitted the leases of prior tenants of the apartment from 1976, when the apartment became subject to the Rent Stabilization Law, and copies of bills for new equipment and improvements to the apartment made immediately prior to Mr. Peters' occupancy. Petitioners indicated that the first lease referred to by Peters was an accommodation for the then tenant-in-occupancy who wished to remain in the apartment for an additional month. This lease was for one year. The subsequent tenant executed a two year lease covering that same period since she was willing to wait a month for the apartment to be vacated. The District Rent Administrator of the Division requested additional information and in a "Final Notice of Pending Default" sent to petitioners on September 12, 1986, stated:

Treble damages will be imposed on any overcharge occurring after April 1, 1984 for which the owner fails to satisfy the Division that the overcharge was not willful. On February 3, 1987, some five years after the initial complaint, the District Rent Administrator issued an order finding that since December 15, 1979 the tenant had been overcharged in rent by $1,645.47 and in security deposits by $22.27, and directing a refund of the overcharges with interest.

On February 11, 1987 the tenant filed a "Petition for Administrative Review," claiming that the District Rent Administrator's order should be modified to award him treble damages pursuant to the Rent Stabilization Law YY51-6.0.5 [now 26-516] since petitioners had not established by a preponderance of the evidence that the overcharges were not willful. Petitioners responded, claiming, inter alia, that the tenant's complaint was filed prior to April 1, 1984, the effective date of YY51-6.0.5; that they had not received notice of the possible imposition of treble damages; and that their responsiveness to the original complaint, the nominal amount of the overcharge and the disallowance of certain claimed improvements, all support a finding that the overcharge was not willful.

Based upon these submissions and a review of the entire record, the Division, on June 26, 1987, issued an order directing treble damages as to the post-April 1, 1984 overcharge of $696.81, stating in part:

... on September 12, 1986 the Division sent a correctly addressed Final Notice of Pending Default to the owner. This notice stated, in part: "Treble damages will be imposed on any overcharge occurring after April 1, 1984 for which the owner fails to satisfy the Division that the overcharge was not willful."

... Nothing in the record or in the owner's answer to this Petition indicates that the owner has met its burden of proving the overcharges were not willful.... Accordingly, the Administrator's Order is hereby modified by replacing the $696.81 post-April 1, 1984 actual overcharge (without interest) by three times that amount, $2,090.43, and by subtracting the $49.46 in interest which the Administrator imposed in lieu of treble damages ...

... although the complaint was filed prior to the effective date of the Act (April 1, 1984), the DHCR (Division) served the owner with the ... Final Notice of Pending Default, which clearly advised the owner of the penalty of treble damages unless willfulness was disproved. The Commissioner notes that this Order is not based on the tenant's assertion that the fact that the owner signed two leases on one day proves the willfulness of the overcharges. The record supports the owner that the first lease was a renewal lease to the then-current tenant who was planning to vacate and the second lease was a vacancy lease to a new tenant.

Finally, the Commissioner notes that since both of the above-mentioned leases began in a single guideline period the possibility of "piggybacking" (compounding rent increases in a single guideline period) arises and it is the general rule that no treble damages are imposed if that is the sole source of the overcharge ... However, in the present case no piggybacking occurred. Indeed, there was a greater overcharge in the first of the two leases in question than in the second lease. This proves that piggybacking was not the source of the overcharges.

Thereafter, the Lavanants commenced a proceeding pursuant to CPLR, Article 78 to vacate the Division's award of treble damages. In the judgment appealed from, the IAS court denied the petition, finding that the Division's determination had a rational basis and that treble damages may be awarded to a tenant for overcharges accruing on or after April 1, 1984 even though the tenant's complaint was filed prior to that date. The court also noted that willfulness is "knowing," not necessarily malicious, conduct and that since the petitioners failed to supply the Division with "any evidence whatsoever on the issue" of willfulness, there was no need to hold a hearing.

This appeal followed.

Petitioners' assertion that the Division lacks the statutory authority to impose treble damages upon them because their tenant's complaint was filed prior to April 1, 1984, the effective date of YY51-6.0.5 of the N.Y.C.Admin.Code (now 26-516), is without merit. Cenpark Realty Company v. State Division of Housing and Community Renewal, 131 A.D.2d 980, 515 N.Y.S.2d 941 (1st Dept.1987), lv. to appeal den. 70 N.Y.2d 609, 522 N.Y.S.2d 109, 516 N.E.2d 1222. In Cenpark, the State Division of Housing and Community Renewal determined that a tenant had been overcharged and directed a refund, including treble damages for the period after April 1, 1984. Although informed that she could file a Petition for Administrative Review of the said order, the landlord failed to do so. Instead she sought relief by means of an Article CPLR 78 proceeding in the Supreme Court. That court denied relief for failure to exhaust administrative remedies and this court affirmed.

Section 26-516(a) of the Code provides that a landlord who has been found by the Division to have collected rent overcharges "shall be liable to the tenant for a penalty equal to three times the amount of such overcharge." However, "if the landlord establishes by a preponderance of the evidence that the overcharge was not willful," the penalty is to be assessed at only the amount of the overcharge plus interest. Moreover, 26-516(a)(2) proscribes the award of treble damages "based upon an overcharge having occurred more than two years before the complaint is filed or ... which occurred prior to April first, nineteen hundred eighty- four." [FN1*] Thus, as notice to petitioners was given, the Division could impose a treble damage penalty for overcharges occurring after April 1, 1984.

*FN1 Prior to the enactment of YY51.6.5 ( 26-516) a tenant could commence a civil action for treble damages against an overcharging landlord. The burden of proving non-willfulness was on the landlord. Such civil remedy is still available. 26-413(d)(2) [formerly Y51- 11.0(d)(2)].

Next, petitioners contend that the respondents erroneously determined that the overcharge to Peters was "willful," since such overcharge was due to their belief that they were entitled to increases for certain improvements [N.Y.C.Admin.Code 20C(1) ], which improvements were eventually disallowed by respondents. However, petitioners' contention is belied by the record. The Division specifically found that the overcharges originated in October 1978 with the first of the aforementioned two prior leases for the apartment and was not due, as claimed by petitioners, to an increase based upon the cost of lumber, a new lock and an air conditioner charge, added with other allowed improvements at the time of petitioners' lease to Mr. Peters. The origin of the overcharge in 1978 is made obvious by the record; it was carried through subsequent leases and was modified through deductions for allowable improvements, finally leading to an overcharge of $9.80 per month in the first lease to Mr. Peters in December 1979. Petitioners offered no evidence that the overcharges in the prior leases were not willful, nor do they do so now.

Willfulness is "intentionally doing an act and knowing that the act is being done." Matter of Old Republic Life Insurance Co. v. Thacher, 12 N.Y.2d 48, 234 N.Y.S.2d 702, 186 N.E.2d 554 (1962). Petitioners have not disproven that commencing in 1978 they consciously and knowingly charged their tenants the improper rent. A rational basis supports respondents' award of treble damages which, therefore, must stand. [Matter of Pell v. Board of Education, 34 N.Y.2d 222, 356 N.Y.S.2d 833, 313 N.E.2d 321 (1974).]

For the first time, in their reply brief before this court, petitioners contend that the prior leases should not have been considered by the Division because the law has changed and no longer requires a landlord to produce a complete rent history. The old law, Section 42(a) of the New York City Rent Stabilization Code, promulgated pursuant to former Section YY 51-6.0 of the Administrative Code, provided in relevant part as follows:

... It shall be the duty of an owner to retain all leases in effect May 31, 1968 or thereafter and produce them on demand of the Association (Real Estate Industry Stabilization Association), the CAB (Conciliation and Appeals Board), the Housing and Development Administration or a new purchaser for as long as the Rent Stabilization Law or any extension thereof is in effect.

Under Section 26-516(g) of the New York City Administrative Code, which was the relevant law in effect on February 3, 1987, the date of the Division's order, the petitioners were not required to produce rent records further back than April 1, 1980. In this regard Section YY51-6.0.5(g) (now 26-516(g)), effective April 1, 1984, provides:

Any owner who has duly registered a housing accommodation ... shall not be required to maintain or produce any records relating to rentals of such accommodation for more than four years prior to the most recent registration or annual statement for such accommodation.

In their reply brief the petitioners also rely on Matter of J.R.D. Management Corp. v. Eimicke, 148 A.D.2d 610, 539 N.Y.S.2d 667 (2nd Dept.1989). There, the Commissioner of the New York State Division of Housing and Community Renewal had awarded a rent roll-back to a tenant after the landlord failed to submit a complete rent history for the apartment pursuant to Rent Stabilization Code 42(A). The Second Department reversed a determination, made in an Article 78 CPLR proceeding, which upheld the Commissioner's action and remitted the matter to the Commissioner. The Second Department ruled that the decision of the Commissioner to apply the law in effect at the time of the filing of the rent overcharge complaint [Rent Stabilization Code 42(A) which required the landlord to submit complete rent records] rather than the law in effect at the time of the determination [Section YY51-6.0.5(g), now Section 26-516(g), which requires the landlord to submit rent records for only the four year period prior to the most recent registration] was arbitrary and capricious since it was not based upon any rational reason.

Respondents in a supplemental surreply brief filed upon leave by this court argue that, contrary to the holding in Matter of J.R.D. Management Corp., its application of the law as it existed at the time of the complaint, under these circumstances, was rational, and consistent with both the legislative intent of the Omnibus Housing Act (Chapter 403, Laws of 1983) and with the established policies of the Division and of its predecessor agency. Respondent contends that the holding in Matter of J.R.D. Management Corp. v. Eimicke, supra, overlooked not only controlling case law and legislative intent but the disastrous effects that the holding would have on some five thousand cases pending before the Division.

We find that the administrative determination that complete rent histories should be required for cases filed prior to April 1, 1984 has a rational basis.

First, the policy appears to accord with legislative intent. The Omnibus Housing Act (the "Act") which created what is now 26-516(g) was enacted on June 30, 1983. The Act established for the first time a four year limitation on the calculation of rent overcharges and, concomitantly, on the number of years for which rental records were required. The effective date of Section 26-516(g) was delayed until April 1, 1984 in order to enable tenants whose claims for overcharges had accrued more than four years prior to the enactment time to file claims under the existing law. Widespread publicity, including a "Press Advisory of the Attorney General Robert Abrams" encouraging tenants to file prior to the April 1, 1984 "deadline," resulted in some 30,000 filings.

Prior to that time, the policy of the Conciliation and Appeals Board, adopted August 18, 1982, was to require that all landlords supply a complete rental history. Section 20 of the Omnibus Housing Act provides for the continuation of proceedings by the Division "in the same manner ... as if conducted and completed by ... (the) conciliation and appeals board." Similarly, Section 19 provides for the continuance of rules and regulations "until duly modified or abrogated by the division ..." Pursuant to Sections 19 and 20, the Conciliation and Appeals Board on February 16, 1984 voted to continue the policy of requiring that complete records to 1974 be produced in connection with all overcharge complaints filed prior to April 1, 1984. This policy finds support in Matter of 61 Jane Street v. New York City Conciliation and Appeals Board, 108 A.D.2d 636, 486 N.Y.S.2d 694 (1st Dept.1985) aff'd. 65 N.Y.2d 898, 493 N.Y.S.2d 455, 483 N.E.2d 130 (1985). There this court upheld a determination by the motion court that an owner who had purchased a building at a relatively recent date was obliged to supply a total rent history to the Conciliation and Appeals Board on an issue involving a rent overcharge and that failure to do so could result in a lowering of the rent to the lowest rent in the same line of apartments and a substantial back- rent payment.

On May 1, 1987, the Division promulgated Section 2526.1(a)(4) of the Rent Stabilization Code which provides:

Complaints filed prior to April 1, 1984 shall be determined in accordance with the Rent Stabilization Law and Code provisions in effect on March 31, 1984, except that an overcharge collected on or after April 1, 1984 may be subject to treble damages pursuant to this section.

Thus, respondents requirement that leases dating back to 1974 be provided was rational and finds support in both the law and legislative history of the Act.

Second, the interpretation by an administrative agency of the statutes it administers and of its own rules and regulations should be given deference if not unreasonable. Salvati v. Eimicke, 72 N.Y.2d 784, 537 N.Y.S.2d 16, 18, 533 N.E.2d 1045, 1047 (1988), recon. den. 73 N.Y.2d 995, 540 N.Y.S.2d 1006, 538 N.E.2d 358 (1989).

Accordingly, the judgment of the Supreme Court, New York County (Glen, J.), entered May 2, 1988, should be affirmed, without costs.

Judgment, Supreme Court, New York County, entered on May 2, 1988, unanimously affirmed, without costs and without disbursements. Application granted only to the extent of supplementing record.

All concur.

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151 A.D.2d 426, 542 N.Y.S.2d 634

Supreme Court, Appellate Division, First Department, New York

In re Application of Terry GRUBER, Petitioner-Appellant, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent- Respondent.

June 29, 1989.

S.S. Anderson, New York City, for petitioner-appellant.
R. Hartzman, for respondent-respondent.

Before MURPHY, P.J., and MILONAS, KASSAL, ROSENBERGER and SMITH, JJ.

MEMORANDUM DECISION.

Judgment of the Supreme Court, New York County (Beatrice Shainswit, J.), entered on May 23, 1988, which granted respondent's cross-motion to dismiss the petition pursuant to Article 78 of the CPLR, is unanimously reversed on the law and the petition reinstated, without costs or disbursements.

Petitioner, a rent-stabilized tenant residing in apartment 9-A at 880 West End Avenue in Manhattan, commenced the instant proceeding pursuant to Article 78 of the CPLR on November 30, 1987 to challenge a determination by respondent New York State Division of Housing and Community Renewal which was issued on September 28, 1987. The only issue on appeal is whether the Supreme Court properly dismissed the petition as untimely based upon the fact that it was not served until the sixty-third day. According to section 26-516(d) of the Administrative Code of the City of New York, "[a]ny proceeding pursuant to article seventy-eight of the civil practice law and rules seeking review of any action pursuant to this chapter shall be brought within sixty days of the expiration of the ninety day period and any extension thereof provided in subdivision h of this section or the rendering of a determination, whichever is later." Section 9 NYCRR 2530.1 of the Rent Stabilization Code provides that "[a] proceeding for judicial review of an order issued pursuant to Section 2526.2(c)(2) or Section 2529.8 of this title shall be brought within 60 days after the issuance of such order."

Although the parties herein agree that sixty days is the operative limitations period, they differ concerning whether the statute begins to run on the date that the determination being appealed is issued, as urged by respondent, or when notice of the administrative order is received by the aggrieved party, as petitioner claims. In that connection, petitioner alleges that she received a copy of respondent's determination by mail some ten or twelve days after it was issued and no earlier than October 8, 1987. Respondent is silent regarding the date of mailing of its order or how service was otherwise effected. It simply rests its assertion of untimeliness upon a literal reading of the regulation that a proceeding for judicial review be commenced within sixty days after the "issuance" of the subject administrative determination. Significantly, section 26-516(d) of the Administrative Code does not contain the word "issuance", and respondent is thereby endeavoring to interpret a regulation (9 NYCRR 2530.1), whose purpose is, after all, to implement the statutory provision, in such a manner as would limit a party's right to seek judicial review of an administrative order by making the period of limitations almost entirely dependent upon the arbitrary actions of the agency. Thus, if respondent delays in notifying a party of a particular ruling for several weeks, that party would be compelled to file papers within, for instance, forty days rather than sixty days. Clearly, it would be violative of due process to compute the statute of limitations from the mere issuance of a determination regardless of when the affected party actually received notice of the administrative decision. As the Court of Appeals concluded in Matter of Edmead v. McGuire, 67 N.Y.2d 714, 499 N.Y.S.2d 934, 490 N.E.2d 853, which involved a proceeding wherein there was a challenge to a determination of the Board of Trustees of a police pension fund, "the determination of the Board of Trustees became 'final and binding' (CPLR 217) and, therefore, ... the four- month limitation period commenced to run, on the date petitioner was notified of the Board's decision" (at 716). Similarly, in both Matter of Biondo v. New York State Board of Parole, 60 N.Y.2d 832, 470 N.Y.S.2d 130, 458 N.E.2d 371, and Rudey v. Landmarks Preservation Commission, 137 A.D.2d 238, 529 N.Y.S.2d 744, the limitations period was held not to begin to run until notice was received of the administrative ruling. Respondent's position, if accepted, would render the appeal process virtually meaningless. However, nothing in either the case law or a reasonable construction of the statutory scheme requires such a patently unfair result.

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151 A.D.2d 465, 542 N.Y.S.2d 255

Supreme Court, Appellate Division, Second Department, New York

NINE HUNTS LANE REALTY CORP., Appellant, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, et al., Respondents.

June 5, 1989.

Rosenberg & Estis, P.C., New York City (Gary M. Rosenberg and Jeffrey Turkel, of counsel), for appellant.
Dennis B. Hasher, Bronx (Richard Hartzman, of counsel), for respondent New York State Div. of Housing and Community Renewal.

Before MOLLEN, P.J., and MANGANO, KUNZEMAN and BALLETTA, JJ.

MEMORANDUM BY THE COURT.

In a proceeding pursuant to CPLR article 78 to review a determination of the respondent New York State Division of Housing and Community Renewal dated June 15, 1987, which found that certain premises owned by the petitioner were subject to the provisions of the Emergency Tenant Protection Act of 1974, the petitioner appeals from a judgment of the Supreme Court, Kings County (Dowd, J.), entered March 21, 1988, which dismissed the proceeding.

ORDERED that the judgment is affirmed, with costs.

The subject premises consist of two adjacent buildings in Brooklyn. One of the buildings, which is located at 9 Hunts Lane, contains two dwelling units. The other building, which is located at 116 Remsen Street, contains 10 dwelling units. The two buildings have a long history of common ownership and management.

The principal issue is whether the various factors present here are sufficient to provide a rational basis for the determination by the New York State Division of Housing and Community Renewal (hereinafter the DHCR) that the common facilities, ownership, and management of the buildings warrant the treating of the premises as one integrated unit, thereby constituting a horizontal multiple dwelling for purposes of rent stabilization. Based upon a physical inspection by the DHCR's inspector, which found that the premises had shared a common heating, sewer, oil and water system, the DHCR determined that the two units constituted a single horizontal multiple dwelling and are therefore subject to the Emergency Tenant Protection Act of 1974.

It is well settled that a determination of the DHCR which is rationally based and in accordance with the law should be upheld, even where there are divergent factors which might lead to different conclusions (see, Matter of Krakower v. State of New York, Div. of Hous. & Community Renewal, Off. of Rent Admin., 137 A.D.2d 688, 524 N.Y.S.2d 778; Matter of Love Securities Corp. v. Berman, 38 A.D.2d 169, 171, 328 N.Y.S.2d 8). The DHCR considered all of the relevant factors and concluded that the common features predominate (see, Matter of Bambeck v. State Div. of Hous. & Community Renewal Off. of Rent Admin., 129 A.D.2d 51, 517 N.Y.S.2d 130; cf., Matter of Salvati v. Eimicke, 72 N.Y.2d 784, 537 N.Y.S.2d 16, 533 N.E.2d 1045, revg.135 A.D.2d 424, 522 N.Y.S.2d 138). On this record we find no reason to interfere with the determination that 9 Hunts Lane and 116 Remsen Street together comprise a horizontal multiple dwelling, subject to the Emergency Tenant Protection Act of 1974.

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151 A.D.2d 681, 542 N.Y.S.2d 740

Supreme Court, Appellate Division, Second Department, New York

In the Matter of SADORE LANE MANAGEMENT CORP., Appellant, v. STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, et al., Respondents.

June 19, 1989.

Finkelstein, Borah, Schwartz, Altschuler & Goldstein, P.C., New York City (Robert H. Berman and Martin A. Shlufman, of counsel), for appellant.
Dennis B. Hasher, Bronx (Richard Hartzman, of counsel), for respondent State Div. of Housing and Community Renewal.

Before BRACKEN, J.P., and EIBER, HARWOOD and BALLETTA, JJ.

MEMORANDUM BY THE COURT.

In a proceeding pursuant to CPLR article 78 to review, inter alia, a determination of the State Division of Housing and Community Renewal, dated September 17, 1987, which denied the petitioner's application for a rent increase, the petitioner appeals from an order and judgment (one paper) of the Supreme Court, Westchester County (Rubenfeld, J.), dated May 12, 1988, which dismissed the proceeding.

ORDERED that the order and judgment is affirmed, with costs.

The petitioner, Sadore Lane Management Corporation, contends that the respondent State Division of Housing and Community Renewal (hereinafter DHCR) erroneously determined that there was no reliance by the petitioner on prior DHCR rulings granting applications for rent increases based on the installation of storm windows as a "major capital improvement" (hereinafter MCI) pursuant to 9 NYCRR 2502.4(a). It argues that Operational Bulletin 84-4 (hereinafter OB 84-4), is not binding and that by not giving the petitioner an exception, allegedly pursuant to past practice, the respondent DHCR denied the petitioner due process. The petitioner submits, therefore, that the DHCR's determination lacks any rational basis in the record or in the law, and thus evidences an abuse of discretion warranting a judicial annulment. The Supreme Court found that the DHCR's determination that equitable considerations did not warrant application of its previous policy in this case, "has a rational basis in light of the wholly unexplained failure of petitioner to apply for a rent increase until five years after the installation of the windows". We agree.

It is a well settled principle of administrative law that the law in effect at the time of an administrative determination is controlling even if it has been amended during the pendency of the proceeding (St. Vincent's Hospital and Medical Center of N.Y. v. New York State D.H.C.R., 109 A.D.2d 711, 487 N.Y.S.2d 36, affd. 66 N.Y.2d 959, 498 N.Y.S.2d 799, 489 N.E.2d 768). This rule has also been applied to a rent administrator's written interpretation of the statute it administers, such as OB 84-4 (Ess Pee Bee Realty v. Gabel, 52 Misc.2d 1003, 277 N.Y.S.2d 743, affd. 28 A.D.2d 822, 282 N.Y.S.2d 632). The granting to the petitioner of an MCI rent increase would be precluded by this policy alone.

Furthermore, a court's reviewing function is limited to a finding that a rational basis supports the agency's determination, and where such determination has a rational basis in the record, the court cannot substitute its own judgment for that of the agency (see, Bambeck v. DHCR, 129 A.D.2d 51, 54, 517 N.Y.S.2d 130; Mid-State Management Corp. v. New York City Conciliation and Appeals Board, 112 A.D.2d 72, 491 N.Y.S.2d 634). In the instant proceeding, the DHCR adhered to the policy of the agency enunciated in OB 84-4 and explained fully why it did not apply the exception contained therein. There was no unexplained departure from agency policy. Upon the facts and circumstances adduced in the record, it was rational for the DHCR to conclude that there was no equitable basis for granting an MCI rent increase, and this determination should not be disturbed by the court.

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153 A.D.2d 741, 544 N.Y.S.2d 987

Supreme Court, Appellate Division, Second Department, New York

In the Matter of J.R.D. Management Corp., Appellant, v. William EIMICKE, etc., Respondent.

August 28, 1989

Horing & Welikson, Forest Hills (Niles C. Welikson, of counsel), for appellant.
Dennis B. Hasher, Bronx (Richard Hartzman, of counsel), for respondent.

In a proceeding pursuant to CPLR article 78 to review a determination of the respondent Commissioner of the New York State Division of Housing and Community Renewal, dated June 12, 1987, granting a rent roll back, the petitioner appeals from so much of a judgment of the Supreme Court, Kings County (Shaw, J.), dated May 11, 1988, as, after modifying the determination on the consent of the respondent, dismissed the proceeding on the merits.

ORDERED that the judgment is reversed insofar as appealed from, on the law, without costs or disbursements, and the matter is remitted to the respondent for a new determination based upon the law as it existed at the time of its determination, to wit, Administrative Code of City of New York former YY51- 6.0.5(g) (now 26-516[g]; see, Matter of J.R.D. Mgt. Corp v. Eimicke, 148 A.D.2d 610, 539 N.Y.S.2d 667).

BROWN, J.P., and KOOPER, HARWOOD and ROSENBLATT, JJ., concur.

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159 A.D.2d 270, 552 N.Y.S.2d 271

Supreme Court, Appellate Division, First Department, New York

In the Matter of the Application of Philip TENER, Petitioner-Appellant, For a Judgment etc., v. The NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, etc., Respondent- Respondent, and Cleo Wadler, Intervenor-Respondent.

March 13, 1990.

R.H. Berman, for petitioner-appellant. R. Hartzman, New York City, for respondent-respondent. D.J. Seidman, for intervenor-respondent.

Before MURPHY, P.J., and SULLIVAN, MILONAS, KASSAL and WALLACH, JJ.

MEMORANDUM DECISION.

Judgment of the Supreme Court, New York County (Stanley L. Sklar, J.), entered on April 11, 1989, which denied petitioner's application pursuant to Article 78 of the CPLR to annul a denial of a Petition for Administrative Review issued on June 13, 1988 by respondent New York State Division of Housing and Community Renewal and dismissed the petition, is unanimously affirmed, without costs or disbursements.

Petitioner seeks to annul respondent's determination that the intervenor/tenant was protected by the rent control laws because she has been in continuous occupancy of the subject apartment since her birth in 1937. The tenant of record, intervenor's mother, vacated the apartment to reside in a nursing home. Intervenor's uncontroverted statement was that for a period of only six months to one year she stayed with a friend but, even during such period, she returned regularly to the apartment and left most of her personal property there. Intervenor also provided documentary evidence of her residency. Respondent found that petitioner was unable to rebut the intervenor's statements except by allegations that were conclusory or based on hearsay. The Supreme Court concluded that the administrative ruling was neither arbitrary, capricious or unreasonable. We agree.

Vacancy decontrol of a rent-controlled apartment occurs when the tenant of record voluntarily vacates the unit (9 NYCRR 2200.2f[17] ). However, pursuant to 9 NYCRR 2204.6(d), the surviving spouse or family member of a deceased tenant who has continuously lived with the tenant is entitled to remain in possession of the apartment as a rent-controlled tenant. The protection of this section has been extended to family members living with a tenant who voluntarily vacated the unit (Herzog v. Joy, 74 A.D.2d 372, 428 N.Y.S.2d 1, aff'd, 53 N.Y.2d 821, 439 N.Y.S.2d 922, 422 N.E.2d 582). The family member must establish a contemporaneous occupancy with the named tenant and some indication of permanence or continuity (829 Seventh Avenue Co. v. Reider, 67 N.Y.2d 930, 502 N.Y.S.2d 715, 493 N.E.2d 939). Such evidence was presented here. This court may not substitute its judgment for that of the administrative agency; it is our function merely to ascertain whether there was a rational basis for the determination and that it was not arbitrary or capricious (Matter of Pell v. Board of Education, 34 N.Y.2d 222, 356 N.Y.S.2d 833, 313 N.E.2d 321).

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160 A.D.2d 343, 553 N.Y.S.2d 738

Supreme Court, Appellate Division, First Department, New York

In re Application of ROZMAE REALTY, Petitioner-Respondent, For a Judgment, etc., v. STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, etc., Respondent-Appellant, Stephanie Gordon, et al., Intervenors-Tenants-Respondents.

April 12, 1990.

W.J. Eberight, New York City, for petitioner-respondent.
R. Hartzman, New York City, for respondent-appellant.
L. Okin, New York City, for intervenors-tenants-respondents.

Before MURPHY, P.J., and KUFPERMAN, ROSS, ASCH and RUBIN, JJ.

MEMORANDUM DECISION.

Judgment of the Supreme Court, New York County (Francis N. Pecora, J.), entered December 14, 1988, which granted a petition by the landlord to review an administrative determination on lawful rent to the extent of remanding the matter to the agency for redetermination of rent overcharges, unanimously reversed on the law, the determination confirmed and the petition denied and dismissed, without costs.

When petitioner landlord failed to supply respondent DHCR with a rent history of the rent-stabilized apartment as to which rent overcharge had been alleged, DHCR determined, in accordance with the governing rules and regulations, that the legal rent for the subject apartment would be the same as that charged for the least expensive stabilized apartment of the same size in the landlord's housing complex. The landlord now urges that the apartment used by DHCR to establish the legal stabilized rent of the apartment in question was not the same size or otherwise comparable to the apartment whose legal rent was at issue. This contention, however, was not raised in the administrative proceedings before DHCR, and may not be considered for the first time in the judicial review of those proceedings pursuant to CPLR Article 78 (Matter of Klaus v. Joy, 85 A.D.2d 603, 444 N.Y.S.2d 691).

Moreover, even if it were proper to address the landlord's newly raised claim, we would find it to be without merit. Both the apartment as to which the legal stabilized rent is disputed and the apartment which has been deemed comparable for purposes of determining the rent to be charged, are listed by the landlord in its registration statements filed with DHCR as two-room apartments. Clearly then there was a rational basis for the agency's conclusion that the apartments were comparable. Having found that there was a rational basis for DHCR's determination, that is where our inquiry must end. The limited purpose of judicial review of agency determinations pursuant to CPLR Article 78 is not to substitute judicial conclusions for those of the agency, but simply to assure that the agency's determinations are rationally supported (Matter of Bambeck v. State Division of Housing and Community Renewal, 129 A.D.2d 51, 517 N.Y.S.2d 130 lv. denied 70 N.Y.2d 615, 524 N.Y.S.2d 676, 519 N.E.2d 622; Matter of Phelps Management Co. v. Gliedman, 86 A.D.2d 540, 446 N.Y.S.2d 72; Matter of Buhagiar v. New York State DHCR, 138 A.D.2d 226, 525 N.Y.S.2d 202; Matter of Rose Associates v. State DHCR, 121 A.D.2d 185, 503 N.Y.S.2d 13 lv. denied 69 N.Y.2d 601, 511 N.Y.S.2d 1027, 503 N.E.2d 695).

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160 A.D.2d 883, 554 N.Y.S.2d 316

Supreme Court, Appellate Division, Second Department, New York

In the Matter of Shirley TRAENDLY, Appellant, v. The STATE of New York, DIVISION OF HOUSING AND COMMUNITY RENEWAL, OFFICE OF RENT ADMINISTRATION, Respondent.

April 16, 1990.

Solomon Abrahams, P.C., White Plains, for appellant.
Dennis B. Hasher, Bronx (Richard Hartzman, of counsel), for respondent.

Before BRACKEN, J.P., and SULLIVAN, HARWOOD and ROSENBLATT, JJ.

MEMORANDUM BY THE COURT.

In a proceeding pursuant to CPLR article 78, inter alia, to prohibit the respondent from "exercising jurisdiction" over the petitioner's premises, the petitioner appeals from a judgment of the Supreme Court, Westchester County (West, J.), entered April 22, 1988, which dismissed the proceeding.

ORDERED that the judgment is affirmed, with costs.

The record before us indicates that in 1974, Fine Homes, Inc., the then owner of the premises identified as 349 to 369 Mayflower Avenue, New Rochelle, New York, which was developed with eight residential buildings of four apartments each, registered the premises with the respondent as a horizontal multiple dwelling of at least six units, thus subjecting the premises to the Emergency Tenant Protection Act (hereinafter ETPA) (see, McKinney's Uncons.Laws 8621, et seq.; see particularly, ETPA 8625[a][4][a], [b]). The petitioner alleges that in 1984, the premises were "subdivided", and the record indicates that in 1985 tenants began filing complaints with the respondent concerning rent overcharges and the refusal by "the landlord" to offer lease renewals.

Fine Homes, Inc., apparently answered the complaints, at least those with respect to the premises now identified as 355 Mayflower Avenue, by asserting that the "subdivided" units were each individual four-family homes and were thus exempt from regulation (see, ETPA 8625[a][4][a] ). The record reflects that in 1986 the District Rent Administrator resolved these complaints against Fine Homes, Inc., "since there [was] no evidence of any physical change to the buildings to warrant exemption". The Administrator ruled that the buildings involved would remain subject to regulation until the landlord filed a required "Form RS-3" application to determine whether the premises were exempt from the ETPA. Thereafter, Fine Homes, Inc., evidently filed a Petition for Administrative Review (hereinafter PAR) (see, 9 NYCRR part 2510) with respect to rulings concerning apartments located at 355 Mayflower Avenue. The seeking of PAR review is a prerequisite to judicial review pursuant to CPLR article 78 (see, ETPA 8632[c]).

Also in 1986, the petitioner purchased 369 Mayflower Avenue, on which is located one of the buildings which was part of the complex previously owned by Fine Homes, Inc. The petitioner adopted the argument of Fine Homes, Inc., that the building is a four-family home exempt from regulation. It appears that thereafter, tenants of 369 Mayflower Avenue and of the other buildings within what was registered as one complex, filed additional complaints. The record is silent as to what, if any, action was taken on these complaints, but in 1987, the petitioner and others commenced under seven index numbers what were apparently denominated special proceedings to prohibit the respondent from exercising jurisdiction under the ETPA over those buildings. By order dated September 14, 1987, consolidating the proceedings for purposes of determination, the Supreme Court, Westchester County (Marbach, J.), granted the respondent's motion to dismiss for failure to exhaust administrative remedies but also directed the respondent to determine "various administrative appeals involving the petitioners" within 60 days after service of the order upon it, and that, should the "appeals not be decided as aforesaid, then they shall be deemed to have been determined adversely to the petitioners [see, ETPA 8632(c)] and Petitioners may seek Article 78 review without further administrative action".

No appeal was taken from that order, and the respondent thereafter issued a determination with respect to the PAR filed by Fine Homes, Inc., regarding the apartments at 355 Mayflower Avenue. The respondent "denied" the appeal, noting that the regulatory status was decided in prior proceedings and that the "owner" was previously advised to file a "Form RS-3" application "in order that the matter may be decided in an appropriate proceeding". The PAR determination was without prejudice to the "filing such application".

After the expiration of the 60 day period fixed by Supreme Court for determination of then pending administrative appeals, and apparently operating on a theory that she had made an application which, pursuant to the order dated September 14, 1987, had been deemed denied (cf., ETPA 8632[c] ), the petitioner renewed her proceeding, and, in effect, sought review of the "deemed" determination by the respondent that the premises known as 369 Mayflower Avenue is subject to the ETPA. The Supreme Court, Westchester County (West, J.), again ruled that the petitioner failed to exhaust administrative remedies, and, in the judgment appealed from, dismissed her proceeding.

Contrary to the petitioner's argument, the record demonstrates that the respondent, in accordance with the order dated September 14, 1987, timely determined the only pending administrative appeal when it denied that of Fine Homes, Inc., pertaining to the apartments at 355 Mayflower Avenue. And although the history of attempts to have the premises judicially declared exempt from regulation is lengthy, the record before us presents no basis for judicial intervention. Indeed, the filing of a PAR with respect to the apartments at 369 Mayflower Avenue, a step which was not taken here, is a necessary prerequisite for judicial review of issues raised on tenant's complaints (see, ETPA 8632[c] ). Furthermore, judicial intervention is not warranted on the ground that the respondent's delay, if any, in adjudicating the issues raised in the complaints by tenants of 369 Mayflower Avenue is an unreasonable one (see, Matter of Cortlandt Nursing Home v. Axelrod, 66 N.Y.2d 169, 495 N.Y.S.2d 927, 486 N.E.2d 785). Rather, the delay here is due to the petitioner's failure to avail herself of available remedies, including the filing of a "Form RS-3" application so as to trigger appropriate administrative and, if necessary, judicial inquiry (cf., Matter of Krakower v. State of New York, Div. of Hous. & Community Renewal, Off. of Rent Admin., 137 A.D.2d 688, 524 N.Y.S.2d 778; see also, Castillo v. Wenk, NYLJ, June 10, 1987, at 15, col 2, App.Term, 9th and 10th Jud.Dist.; cf., 520 East 81st St. Assoc. v. Lenox Hill Hosp., 38 N.Y.2d 525, 381 N.Y.S.2d 465, 344 N.E.2d 398).

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163 A.D.2d 131, 557 N.Y.S.2d 356

Supreme Court, Appellate Division, First Department, New York

Lillian SERIL, etc., Petitioner-Respondent, v. DIVISION OF HOUSING AND COMMUNITY RENEWAL-OFFICE OF RENT ADMINISTRATION OF THE STATE of New York etc., for Judgment etc., Respondents-Appellants, and Belnord Tenants Association et al., Intervenors-Appellants.

July 10, 1990.

L.B. Hoguet, New York City, for petitioner-respondent.
R. Hartzman, New York City, for respondents-appellants.
P.G. Burns, New York City, for intervenors-appellants.

Before KUPFERMAN, J.P., and CARRO, SMITH and RUBIN, JJ.

MEMORANDUM DECISION.

Judgment, Supreme Court, New York County (Martin Stecher, J.), entered May 26, 1988, which granted petitioner's motion for renewal and reargument of a prior decision of the same court and justice, dated January 15, 1988, denying her CPLR Article 78 challenge of two administrative orders issued by respondent on March 17, 1987, which found petitioner to be ineligible for maximum base increases for the years 1980/1981 and 1984/1985 and, upon reargument, vacated the court's prior decision and granted the Article 78 petition to the extent of annulling the administrative orders and remanding the proceeding to respondent Division of Housing and Community Renewal (DHCR) for a hearing encompassing all disputed issues of fact, unanimously reversed, on the law, the motion denied and the administrative determinations reinstated and confirmed, and the petition denied and dismissed, without costs.

The issue on this appeal is whether the Division of Housing and Community Renewal ("DHCR") had a rational basis for denying the applications of petitioner Lillian Seril, who is the owner of a building located at 201-223 West 86th Street, for maximum base rent ("MBR") increases for the 1980/1981 and 1984/1985 rent cycles. Because the record herein reveals extant findings of harassment, failure to provide essential services, and a continuous, consistent and uncorrected pattern of "rent impairing violations", we conclude that DHCR did, in fact, have a rational basis for denying the subject applications for the years in question. DHCR's determinations were, therefore, neither arbitrary and capricious nor did they constitute an abuse of discretion. Indeed, any one of the three grounds stated above would have sufficed to support DHCR's denials of the MBR applications for the periods in question. See e.g., Matter of Meko Holding v. Joy, 107 A.D.2d 278, 282-283, 486 N.Y.S.2d 201 (1st Dept.1985), appeal dismissed, 65 N.Y.2d 923 (regarding harassment); Matter of 230 East 52nd Street Assocs. v. State Division of Housing and Community Renewal, 131 A.D.2d 349, 350-351, 517 N.Y.S.2d 2 (1st Dept.1987); (concerning necessary and essential services); Pearce, Mayer & Greer v. Joy, 63 A.D.2d 928, 406 N.Y.S.2d 94 (1st Dept.1978), aff'd, 48 N.Y.2d 680, 421 N.Y.S.2d 882, 397 N.E.2d 393 (rent impairing violations).

Insofar as the instant Article 78 petition is concerned, the IAS court initially and correctly held that in view of petitioner's failure to maintain essential services, correct violations and failure to seek the removal of outstanding findings of harassment, DHCR's determinations had a rational basis. However, petitioner moved for renewal and reargument, urging that because the DHCR did not comply with a 1983 directive of then Commissioner Daniel W. Joy that a hearing be held, the 1987 orders were arbitrary and capricious. The IAS court agreed and granted reargument.

We hold that the IAS court erred. Petitioner correctly notes that, when "an agency determines to alter its prior stated course it must set forth its reasons for doing so," and "[a]bsent such an explanation, failure to conform ... require[s a] reversal on the law as arbitrary, even though there is in the record substantial evidence to support the determination made." Matter of Charles A. Field Delivery Service, Inc. v. Roberts, 66 N.Y.2d 516, 520, 498 N.Y.S.2d 111, 488 N.E.2d 1223 (1985). However, in the case at bar, notwithstanding that the "suggested" hearing was never held, the record was more than sufficient to support the DHCR's rulings, and in any event, additional and substantial evidence was developed subsequent to the 1983 directive, which constituted sufficient evidence to support a denial of the MBR requests. In light of the extensive support in the record of independent grounds for denial of the MBR's, we decline to hold that petitioner is entitled to a hearing in order to reach a determination consistent with due process. See, Matter of Aguayo v. New York State Division of Housing and Community Renewal, 150 A.D.2d 565, 566-567, 541 N.Y.S.2d 133 (2d Dept.1989) (citations omitted).

Thus, since DHCR's determination cannot be said to be arbitrary and capricious, and the IAS court erred in withdrawing its original holding, we now reinstate.

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544 N.Y.S.2d 147

Supreme Court, Appellate Division, First Department, New York

In re Application of Jerrold D. ZIMAN, et al., Petitioners-Appellants, For a Judgment, etc., v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent- Respondent. Robert Walker, et al., Intervenors-Respondents.

Aug. 10, 1989.

S. Kazman, B. Levinson, for petitioners-appellants.
R. Hartzman, for respondent-respondent.
J.H. Teschner, New York City, for intervenors-respondents.

Before MURPHY, P.J., and KUPFERMAN, ROSS, ASCH and ELLERIN, JJ.

MEMORANDUM DECISION.

Judgment, Supreme Court, New York County (Dennis Edwards, Jr., J.), entered September 12, 1988, which denied the petition and dismissed the proceeding, reversed, on the law, the petition granted, without costs, and the matter remitted to respondent, which is directed to issue the requested certificates of eviction pursuant to 9 NYCRR 2204.4(g) and 2204.9.

In February 1984, petitioners purchased a small, two hundred twenty year old, Federal-style townhouse in Greenwich Village for the express purpose of converting it back to its original use as a one-family residence and occupying it with their son and daughter, aged seven and two. The house had earlier been subdivided into as many as seven rent-controlled units of one to two rooms each. Shortly after their purchase, petitioners applied, pursuant to then Section 55 of the New York City Rent and Eviction Regulations (now 9 NYCRR 2204.5), for eviction certificates for the three remaining rent-controlled tenants. At the time of their application, Section 55 required the issuance of a certificate of eviction where the owner of a building containing twelve or less housing accommodations sought, in good faith, to recover possession of the premises for use and occupancy by him or his immediate family. Three and a half months later, on July 19, 1984, the Legislature amended Section 55 to protect certain tenants, including ones who had lived in the building for 20 years or more (L.1984, ch. 234). At the time, one of petitioners' tenants met the 20-year criterion and a second one qualified during the course of the administrative proceedings; the third died in 1987 and his apartment is no longer the subject of this proceeding. On August 9, 1984, petitioners filed three additional applications seeking certificates of eviction pursuant to Section 59 of the Regulations (now 9 NYCRR 2204.9) on the ground that they sought, in good faith, to withdraw the occupied apartments from the market because the continued operation of such apartments imposed an undue hardship on them within the meaning of Regulations 54(g) (now 9 NYCRR 2204.4[g] ) because of their inability to make a net annual return of 8 1/2 % of the assessed valuation of the property without recourse to the evictions sought. In audits dated April 2, 1985 and October 7, 1985, respondent found that an 8 1/2 % return on the premises was not realizable.

In dismissing petitioners' consolidated applications, the administrative law judge, finding that petitioners' sole purpose in seeking the eviction was to occupy the house as their primary residence, held that Section 55 specifically controlled this factual situation and petitioners could not avoid it by looking to section 59. He then held that the Division must only consider the Section 55 application which had to be dismissed because both tenants had lived there for more than 20 years.

In deciding petitioners' administrative appeal, respondent, in its order dated February 26, 1987, affirmed the administrative law judge's findings and recommendations and held in pertinent part:

One section of the rent control laws and regulations may not be used to circumvent or evade another section. The case here is one where the owners are seeking to evict tenants for their own use and occupancy. The Legislature chose to extend special protection to certain classes of tenants in that situation. The parties may not use other sections of the regulations (9 NYCRR 2204.4 and 2204.9) to evade the intent of the Legislature.

Although there is no case law on the issue, the regulations clearly provide that the protection afforded to long-term tenants of twenty or more years standing is limited to applications for eviction on grounds of the landlord's personal use and occupancy (See, e.g., Matter of McMurray v. N.Y. State Div. of Housing and Community Renewal, 135 A.D.2d 235, 236, 524 N.Y.S.2d 693). If the Legislature, in adding such protection (L.1984, ch. 234) intended to extend it to hardship applications under 9 NYCRR 2204.9 and 2204.4(g), it could have done so. Absent any evidence of such intent, there is no basis for respondent's interpretation of the Legislature's amendment. Amendments or repeals of statutes by implication are not favored. (People v. Newman, 32 N.Y.2d 379, 389-90, 345 N.Y.S.2d 502, 298 N.E.2d 651; McKinney's Cons. Laws of N.Y., Book 1, Statutes 370)

Accordingly, since there is no question that petitioners meet the hardship requirements of sections 2204.9 and 2204.4 and their express purpose of converting their house to its original use as a single-family residence is consistent with their request to remove the apartments in issue from the housing market, to deny them the requested certificates of eviction was arbitrary and capricious.

All concur except ELLERIN, J. who dissents in a memorandum as follows:

ELLERIN, Justice (dissenting).

It is clear that, no matter how their application was styled, petitioner- landlords were seeking to recover possession of the rent-controlled apartments here at issue in order to occupy them for their own personal use. Respondent DHCR properly held that petitioners could not use one section of the New York City Rent and Eviction Regulations (Regulations) (i.e., Section 59) to circumvent or evade another section (i.e., Section 55) wherein the Legislature extended special protection to a certain class of tenants. By granting the petition herein, and overturning the DHCR determination, the majority is permitting petitioners to do precisely that.

Petitioners initially commenced these proceedings before the Office of Rent Control to recover possession of the subject apartments for their own personal use pursuant to Section 55 of the New York City Rent and Eviction Regulations (renumbered 9 NYCRR 2204.5). During the pendency of the proceedings the Legislature amended Section 55 to protect certain tenants from eviction, including those who had lived in the building for 20 years or more (L.1984, c. 234). When it became apparent that at least one of the tenants in petitioners' building met that criterion, petitioners filed new applications for certificates of eviction, grounded on the theory of economic hardship under Section 59 of the regulations (9 NYCRR 2204.4(g) and 2204.9).

Notwithstanding the stated grounds of hardship in the amended applications for eviction, the petitioners repeatedly made clear throughout the subsequent proceedings that their purpose in seeking to recover these apartments was the continued desire to occupy them for their own use. In the amended applications, even while claiming financial hardship, they asserted: "However, our primary concern is not monetary. We did not buy the house to make money. Rather, we only want a good home for ourselves and our two young children." During oral statements at the hearing, the petitioners repeated that their purpose in seeking the evictions was to occupy the building themselves. Furthermore, in his affidavit in support of this CPLR 78 petition, Jerrold D. Ziman stated: "This is not a case about money. This is a case involving shattered lives and my home, which is also the home of my wife and our two young children." Thus, it can readily be seen that while the applications for certificates of eviction were styled as based on "economic hardship", the overriding ground for the proceeding was not economic but rather the desire of the petitioner-landlords to occupy the apartments for their own personal use.

The amendments to Section 55, affording protection to 20-year tenants from eviction in proceedings brought by landlords seeking to recover possession for their personal use, were enacted by the Legislature in response to the devastating impact that eviction of long-term tenants can have on such tenants and their communities (L.1984, c. 234). We have consistently held that this remedial statute should be liberally construed to carry out the reform intended and spread its beneficial results as widely as possible (e.g., McMurray v. DHCR, 135 A.D.2d 235, 524 N.Y.S.2d 693, aff'd, 72 N.Y.2d 1022, 534 N.Y.S.2d 924, 531 N.E.2d 645; Lavalle v. Scruggs-Leftwich, 133 A.D.2d 313, 519 N.Y.S.2d 218). Here, even though the application is nominally brought under Section 59, it implicates the eviction of long-term tenants, to whom the Legislature expressly intended to provide protection against eviction where the landlord would be recovering the unit for personal use. That legislative intent would clearly be frustrated by permitting a landlord who avowedly seeks the unit for personal use to achieve that goal by ostensibly seeking the eviction for another purpose, here economic hardship, although the evidence supports a finding by the respondent agency that the latter purpose was not the landlord's actual intent.

The majority candidly admits that there is no case law governing the instant situation. Since the resolution of this matter turns on the interplay of specialized regulations, we should defer to the interpretation and construction given by the administrative agency charged with administering these regulations. Since that interpretation is not unreasonable or irrational, it should be upheld in this Article 78 proceeding. (E.g., Matter of Salvati v. Eimicke, 72 N.Y.2d 784, 537 N.Y.S.2d 16, 533 N.E.2d 1045; Howard v. Wyman, 28 N.Y.2d 434, 438, 322 N.Y.S.2d 683, 271 N.E.2d 528.)

In rejecting DHCR's determination in this case, the majority limits its focus to the uncontradicted fact that audits disclosed that an 8 1/2 % net annual return on this property was not realizable, and concludes that such showing alone, without more, automatically establishes the landlord's right to a hardship eviction under Section 59. But to prevail under that section it is not enough to simply show that an 8 1/2 % annual return is not possible. What is necessary is a showing that it is the landlord's good-faith intention in seeking eviction to permanently remove the housing accommodation from the market because of financial hardship. That such element is critical to the Division's finding of entitlement under Section 59 was expressly upheld by this Court in Asco Equities v. McGoldrick, 285 A.D. 381, 137 N.Y.S.2d 446, aff'd, 309 N.Y. 738, 128 N.E.2d 426. In affirming the agency's denial of a Section 59 certificate of eviction in that case, we held:

Obviously the rent commission has the burden and the responsibility of determining the good faith of the intention expressed by the landlord. It would be senseless to hold that the rent commission is bound by the landlord's bare assertion. That would be an illusory control indeed. Consequently, the rent commission must be satisfied, on objective grounds, that a landlord intends as he says. Supra, at 384, 137 N.Y.S.2d 446.

The record in this case is replete with evidence supporting the Division's finding that the only purpose for which the petitioners were seeking these evictions was to occupy the units themselves and that the assertion of hardship was not made in good faith. Accordingly, that finding is beyond our review. (Matter of Pell v. Board of Education, 34 N.Y.2d 222, 356 N.Y.S.2d 833, 313 N.E.2d 321.)

Parenthetically, it may be noted that even though the Section 59 hardship application was denied, eviction is not the only remedy available in cases of economic hardship. As the Deputy Commissioner stated in his decision, financial relief may be available to the landlords under the "MBR" and "hardship" provisions of the regulations.

Since the record here clearly demonstrates that a rational factual basis exists for the conclusions in the administrative determination, it should be upheld. (Matter of First Terrace Gardens, Inc. v. McGoldrick, 1 N.Y.2d 1, 150 N.Y.S.2d 1, 132 N.E.2d 887.)

Accordingly, I would affirm that determination.

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76 N.Y.2d 727, 557 N.E.2d 112, 557 N.Y.S.2d 876

Court of Appeals of New York

In the Matter of Jerrold D. Ziman et al., Respondents, v. New York State Division of Housing and Community Renewal, Appellant, and Robert Walker et al., Intervenors-Appellants.

Decided May 31, 1990

Richard Hartzman and Dennis Hasher for appellant.
John H. Teschner for intervenors-appellants.
Sam Kazman and Bruce Levinson for respondents.
Martin J. Heistein and Andrew Schepard for Rent Stabilization Association of New York City, Inc., amicus curiae.
Carol S. Keenan, Ronald A. Zumbrun, Edward J. Connor, Jr., and R.S. Radford for Pacific Legal Foundation, amicus curiae.

OPINION OF THE COURT

Order affirmed, with costs, for reasons stated in the memorandum of the Appellate Division (153 AD2d 489). We add only that, in view of the unrefuted evidence of hardship, including two unchallenged audit reports prepared by DHCR's own Accounting Division, it was not improper for the Appellate Division to remit the matter to DHCR with instructions to grant the petition.

Concur: Chief Judge Wachtler and Judges Simons, Kaye, Alexander, Titone, Hancock, Jr., and Bellacosa

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165 A.D.2d 758, 560 N.Y.S.2d 193

Supreme Court, Appellate Division, First Department, New York

In the Matter of Jane Street Co., Appellant, v. State Division of Housing and Community Renewal et al., Respondents.

September 20, 1990

Order and judgment (one paper), Supreme Court, New York County (Harold Tompkins, J.), entered on November 1, 1989, which dismissed petitioner's CPLR article 78 proceeding, and an order of the same court entered on February 28, 1990, which granted petitioner's motion for reargument and, on reargument, adhered to the original determination, unanimously affirmed, without costs and without disbursements.

Respondent Division of Housing and Community Renewal (DHCR) determined that the petitioner owner was guilty of willful rent overcharges and assessed a penalty of three times the amount of the overcharge. Although the owner does not deny having failed to submit a complete rental history, it does argue that it disproved willfullness, and that consequently treble damages should not have been assessed against it.

In view of the unexplained and unjustified increase in rental from the amount paid by the prior tenant ($400) to that paid by the complaining tenant in his initial lease ($510.21), and two opportunities to recompute the rent dating back to 1981, DHCR had a rational basis to determine that the overcharge was willful, and the IAS court properly declined to substitute its own view for that of DHCR (see, Matter of Bambeck v State Div. of Hous. & Community Renewal, 129 AD2d 51, 54, lv denied 70 NY2d 615). It was for DHCR to weigh the evidence submitted by petitioner, which consisted of unexecuted leases, and allegations that it hired a private investigator in an attempt to locate prior leases.

Similarly, the IAS court correctly declined to hold that DHCR was arbitrary or capricious in refusing to be bound by an assurance of discontinuance (AOD) executed by the New York State Attorney-General and the rental agent for this and numerous other buildings. Neither the DHCR nor the tenant was a party to this AOD. The AOD contains express language providing that the tenant retains all of his legal remedies. Further, the action taken by the Attorney-General, whose inquiry was directed not at individual overcharges so much as at wide- ranging fraudulent practices, would hardly preclude maintenance of an overcharge proceeding before DHCR, especially in view of the express language of the AOD reserving all of the tenant's rights.

Petitioner argues that it was improperly penalized for overcharges by the predecessor owner. This argument is based on facts presented for the first time in the article 78 petition, and the IAS court properly declined to consider it (Matter of Fanelli v New York City Conciliation & Appeals Bd., 90 AD2d 756, affd 58 NY2d 952).

Concur--Murphy, P. J., Ross, Carro and Rosenberger, JJ.

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169 A.D.2d 495, 564 N.Y.S.2d 170

Supreme Court, Appellate Division, First Department, New York

Edward T. Savage, Respondent-Appellant, v. William V. Eimicke, as Commissioner of the Division of Housing and Community Renewal, et al., Appellants-Respondents.

January 17, 1991

Judgment of the Supreme Court, New York County (Edward Lehner, J.), entered on June 5, 1989, which granted in part a CPLR article 78 petition brought by a tenant seeking judicial review of an order of Division of Housing and Community Renewal (DHCR) and remanded the proceeding to DHCR, is unanimously modified, on the law and the facts, the direction that the matter be remanded is vacated, the determination is confirmed in its entirety, the petition is dismissed, and except as so modified, affirmed, without costs.

This appeal arises out of three rent overcharge complaints for apartment 16A at 401 East 88th Street for the period of November 1, 1977 to October 31, 1988. The landlord conceded, and DHCR found, that the tenant had been overcharged from November 1, 1977 to October 31, 1981. During the period of November 1, 1981 to October 31, 1984, the tenant occupied the unit without a written lease. The Supreme Court found that DHCR should not have deemed a three-year renewal lease to have been in effect for the period November 1, 1981 to October 31, 1984, and that DHCR should have considered the issue of treble damages. Since the court found the post-1984 rent unlawful, it remanded the matter for a proper determination of the rent as well as six items enumerated in its decision.

An administrative agency's determination is supported by substantial evidence when there is a rational basis for the finding of fact supporting the agency's decision. (Matter of Pell v Board of Educ., 34 NY2d 222.) DHCR's interpretation of statutes and regulations, if not unreasonable or irrational, is entitled to deference. (Matter of Salvati v Eimicke, 72 NY2d 784, 791, rearg denied 73 NY2d 995.) The facts indicate that the landlord offered the tenant a three-year lease, which would have been accepted except for a dispute as to the rental amount. The deeming of a lease for a three- year period had a rational basis, and the Supreme Court should not have substituted its judgment to find otherwise. Furthermore, the remand ordered by the Supreme Court encompassed six issues which were adequately addressed by DHCR and require no further consideration.

Concur--Murphy, P. J., Kupferman, Sullivan, Wallach and Rubin, JJ.

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170 A.D.2d 184, 565 N.Y.S.2d 86

Supreme Court, Appellate Division, First Department, New York

Nicholas E. Brusco, Appellant, v. New York State Division of Housing and Community Renewal, Respondent.

February 5, 1991

Order, Supreme Court, New York County (Helen Freedman, J.) entered September 29, 1989, which dismissed the landlord's petition seeking review of a determination of the New York State Division of Housing and Community Renewal which established the lawful stabilized rent for the subject housing unit and directed petitioner to refund rent overcharges to the tenant, unanimously affirmed, without costs.

The tenant in apartment 1B at 118 West 69th Street, New York, New York, filed a rent overcharge complaint on February 15, 1984. The petitioner, who is the landlord of those premises, failed to submit a complete rent history as he was requested. The District Rent Administrator issued an order on August 12, 1986 finding the owner in default, setting the rent at $564.75 as of August 1984 and finding an overcharge, including interest and excess security, of $5,810.03. When petitioner filed a petition for administrative review (PAR), he stated that he was unable to produce leases prior to 1980, the year he purchased the building. The Deputy Commissioner denied the PAR.

Effective April 1, 1984, the Rent Stabilization Code required landlords to keep rent records for an apartment for four years. The law in effect on April 1, 1984 (old law) required the landlord to maintain a complete rent history. Although New York State Division of Housing and Community Renewal's order was issued after April 1, 1984, the overcharge complaint was filed previously thereto. As this court held in Matter of Lavanant v State Div. of Hous. & Community Renewal (148 AD2d 185), the "old law" is to be applied.

Petitioner's argument that the respondent has not complied with his request under the Freedom of Information Law to obtain prior rent records was first made after the PAR was denied. In the course of judicial review, the court may not consider arguments or evidence not contained in the administrative record. (Matter of Rozmae Realty v State Div. of Hous. & Community Renewal, 160 AD2d 343, lv denied 76 NY2d 712.) We therefore find that the administrative agency's determination was supported by a rational basis.

Furthermore, petitioner has failed to rebut the presumption of constitutionality of the Rent Stabilization Code by proof beyond a reasonable doubt as it relates to the imposition of a rent ceiling on vacant units. (See, Hotel Dorset Co. v Trust for Cultural Resources, 46 NY2d 358, 370.)

Concur--Murphy, P. J., Milonas, Ross, Asch and Rubin, JJ.

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172 A.D.2d 541, 567 N.Y.S.2d 872

Supreme Court, Appellate Division, Second Department, New York

In the Matter of Terry S. TRIADES, et al., Appellants, v. Manuel MIRABAL, etc., et al., Respondents.

April 1, 1991.

Albanese, Albanese & Fiore, Garden City (Thomas G. Sherwood, of counsel), for appellants.
Dennis B. Hasher, Bronx (Richard Hartzman, of counsel), for respondent Division of Housing and Community Renewal.

Before BROWN, J.P., and KOOPER, HARWOOD and MILLER, JJ.

MEMORANDUM BY THE COURT.

In a proceeding pursuant to CPLR article 78 to review a determination of the New York State Division of Housing and Community Renewal, dated November 5, 1987, which found that the petitioners' premises constituted a horizontal multiple dwelling subject to rent regulation, the petitioners appeal from so much of a judgment of the Supreme Court, Queens County (DiTucci, J.), dated November 16, 1988, as denied their petition in part.

ORDERED that the judgment is affirmed insofar as appeal from, with costs to the respondent Division of Housing and Community Renewal.

It is well established that horizontal multifamily structures may be subject to rent regulation provided that they share common facilities and services so as to warrant treating the housing as an integral unit (see, Matter of Salvati v. Eimicke, 72 N.Y.2d 784, 792, 537 N.Y.S.2d 16, 533 N.E.2d 1045; Matter of Krakower v. State of New York Div. of Hous. & Community Renewal, Off. of Rent Admin., 137 A.D.2d 688, 524 N.Y.S.2d 778; Matter of Bambeck v. State Div. of Housing & Community Renewal, Off. of Rent Admin., 129 A.D.2d 51, 58, 517 N.Y.S.2d 130). Prior to 1979, the subject premises had been one horizontal eight-family structure, under common ownership, with a single heating system. At that time, gas and electric meters were situated in the basement of one unit. Thereafter, the then landlord installed separate boilers, moved the electrical meters, and made an application to divide the existing tax lot. Under the circumstances, we are satisfied that the determination that the subject premises constituted a horizontal multiple dwelling subject to rent regulation, notwithstanding its conversion into independent buildings (see, 9 NYCRR 2520.11[d]), was not irrational nor arbitrary and capricious.

In addition, we note that the order dated November 3, 1983, of the Queens County District Rent Director, which purported to terminate the administrative proceeding on the ground that the premises did not fall under rent regulation, did not bar Division of Housing and Community Renewal (hereinafter the DHCR) from reinstating the administrative proceeding. That order was not released to the parties. Therefore, the parties were not given an opportunity to challenge the finding therein, and it cannot be deemed a final order precluding further action by the DHCR.

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173 A.D.2d 371, 570 N.Y.S.2d 7

Supreme Court, Appellate Division, First Department, New York

In the Matter of 30 Seaman Avenue Company, Appellant, v. Richard Higgins, as Commissioner of the New York State Division of Housing and Community Renewal, et al., Respondents.

May 23, 1991

Order and judgment (one paper), Supreme Court, New York County (Martin Schoenfeld, J.), entered on December 27, 1990, which, inter alia, granted the petitioner's CPLR article 78 petition challenging a final order of respondent Division of Housing and Community Renewal (DHCR) dated January 30, 1990 only to the extent of remanding the proceeding to the DHCR for determination of amount, if any, of damages that should be awarded for such periods of time in which respondent Brenda Ratliff did not pay rent to petitioner and for a modification of the treble damages award accordingly, and otherwise denied the article 78 petition, and granted respondent Ratliff judgment against the petitioner in the amount of $19,632.33, unanimously modified, on the law and the facts and in the interest of justice, to delete the last two decretal paragraphs, and otherwise affirmed. Judgment of the same court entered on January 7, 1991, in favor of respondent Ratliff in the total amount of $23,984.46, unanimously reversed, on the law, the facts and in the exercise of discretion, and vacated without prejudice to the entry of a judgment in favor of respondent Ratliff on the basis of respondent DHCR's determination on remand, without costs.

On appeal, DHCR concedes, and we agree that a final money judgment should not have been entered in favor of the tenant until after DHCR renders a final order on the remand, to which DHCR consented. Otherwise, we find the determination of DHCR that there was a willful overcharge of rent, despite allegations of improvements made to the subject apartment for the period December 1, 1986 through August 31, 1988, supported by the record. The landlord had ample opportunity to demonstrate the legitimate expenditure of $12,160 and failed to do so (see, Matter of 985 Fifth Ave. v State Div. of Hous. & Community Renewal, 171 AD2d 572).

We have reviewed petitioner's remaining arguments and find them to be without merit.

Concur--Sullivan, J. P., Carro, Rosenberger, Ross and Smith, JJ.

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174 A.D.2d 483, 571 N.Y.S.2d 260

Supreme Court, Appellate Division, First Department, New York

In the Matter of Sutton Realty Co., Appellant, v. Richard Higgins, as Commissioner of the New York State Division of Housing and Community Renewal, Respondent.

June 18, 1991

Judgment, Supreme Court, New York County (Irma Vidal Santaella, J.), entered July 2, 1990, dismissing a CPLR article 78 petition for review of an order by the Deputy Commissioner, dated September 14, 1989, which had affirmed a Rent Administrator's determination concerning petitioner's overcharge of rent for the period March 1986 through September 1988, unanimously reversed, on the law and the facts, and the petition granted to the extent of remanding to respondent Division of Housing and Community Renewal ("DHCR") for recalculation of the overcharge assessment in light of the fact that petitioner never received any rent from the tenant after January 1987, without costs.

The tenant entered into a lease with petitioner landlord for an apartment on East 52nd Street in Manhattan, for the period March 15, 1986 to March 31, 1987. Shortly thereafter, the tenant filed a complaint with DHCR asserting a rent overcharge. Petitioner answered the complaint in prompt fashion, attempting to justify the extraordinary rent increase on the basis of the apartment's recent vacancy and renovations in the kitchen. Over the course of the next two years, petitioner provided information to the agency as requested, including documentation of the capital improvements and verification of rent history for the apartment. Meanwhile, a few months before expiration of the lease, the tenant signed a renewal for a two-year extension.

On September 29, 1988 DHCR's District Rent Administrator ("DRA") issued a ruling that petitioner had overcharged its tenant in the total amount of $6,353.48. Included in this sum was an itemization of the actual rent charged, as well as calculation of the overcharge, for the period of the initial lease (through March 1987), and under the renewal lease (through September 1988, the date of determination).

Petitioner filed a timely petition for administrative review. In addition to challenging the DRA's rejection of justification for extraordinary rent increase, petitioner cited the fact that the calculation of overcharges was overstated in that the tenant, having vacated the premises after defaulting in an eviction proceeding, never did pay any rent to petitioner after January 1987.

In his order affirming the DRA's ruling in all respects, DHCR's Deputy Commissioner rejected petitioner's challenge of the overcharge calculation because petitioner had failed to urge tenant's nonpayment before the DRA, thus rendering it "proper for the District Rent Administrator to presume that the tenant was paying rent in accordance with the submitted leases."

In dismissing this article 78 proceeding, the IAS court noted that while the issue of the tenant's failure to pay rent after January 1987 had been raised in the eviction proceeding, it was never brought to DHCR's attention prior to the District Rent Administrator's ruling.

We agree that the petitioner has failed to demonstrate that DHCR's calculation of the rent overcharge per se was either arbitrary or capricious. And we note the parties' agreement that the unnamed tenant is not a necessary party to these proceedings, notwithstanding the IAS court's statement to the contrary. But we disagree that petitioner's failure to raise the issue of excessiveness of the overcharge assessment before the District Rent Administrator should have precluded its consideration on the petition for administrative review. Indeed, petitioner did not have notice of the overcharge calculation until issuance of the DRA ruling in September 1988. No one would have been prejudiced by a remand to the DRA for a recalculation of the rent overcharge based on the tenant's actual rental payments, or more to the point, nonpayments. Respondent DHCR does not dispute the long-absent tenant's asserted failure to pay rent after January 1987. DHCR, and through it the defaulting tenant, are not entitled to exact a windfall for the return of payments never made.

Concur--Sullivan, J. P., Carro, Wallach and Rubin, JJ.

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175 A.D.2d 729, 572 N.Y.S.2d 916

Supreme Court, Appellate Division, First Department, New York

Fiordalisa Polanco, Respondent, v. Richard Higgins, as Commissioner of the New York State Division of Housing and Community Renewal, et al., Appellants.

August 15, 1991

Order and judgment (one paper), Supreme Court, New York County (Eve Preminger, J.), entered May 9, 1990, which, inter alia, annulled and vacated the determination of the respondent State Division of Housing and Community Renewal dated December 30, 1989, unanimously affirmed, without costs.

The IAS court found a decision by the respondent Commissioner that the tenant could not recover the full amount of a rent overcharge from the present landlord but that said overcharge should be apportioned between the present and prior landlords was without a reasonable basis.

Our review of this matter is restricted to an inquiry into the rationality of the determination made by the respondent Division of Housing and Community Renewal (Matter of Pell v Board of Educ., 34 NY2d 222, 230 [1974]). Without passing on the policy of apportioning between former and current owners of a rent stabilized accommodation the liability for excess rent charged to a tenant which results from a Fair Market Rent Appeal, we find that the respondent Division's determination, in the particular circumstances of this proceeding, was not rationally based.

Times Equities Inc., the current owner, was aware of the tenant's Fair Market Rent Appeal when it purchased the building in which the subject apartment is located, as it filed an answer in the proceeding the day after it acquired the premises. Since both the former and current owners were aware of the potential liability that would result from the proceeding, arrangements could have been made between them so that each would bear its share of the burden. These facts preclude apportionment of the award by the respondent Division, notwithstanding its argument that such apportionment is in accordance with the prior longstanding policy originating with the Conciliation and Appeals Board. It would be unfair, in light of these facts, to require the tenant to incur the expense of obtaining the proceeds of a favorable determination from the prior owner.

Concur--Murphy, P. J., Carro, Wallach, Kupferman and Smith, JJ.

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176 A.D.2d 941, 575 N.Y.S.2d 553

Supreme Court, Appellate Division, Second Department, New York

In the Matter of FLEETWOOD TENANTS ASSOCIATION, etc., Petitioner-Respondent, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, et al., Respondents, Jerome Fisher, et al., Appellants.

Oct. 28, 1991

Kaufman, Tuchman, Schwartz, Gelles & Korngold, New York City (Paul J. Korngold, of counsel), for appellants.
Dennis B. Hasher, Bronx (Richard Hartzman, of counsel), for respondents.

Before KOOPER, J.P., and SULLIVAN, MILLER and O'BRIEN, JJ.

MEMORANDUM BY THE COURT.

In a proceeding pursuant to CPLR article 78 to review a determination of the New York State Division of Housing and Community Renewal dated July 28, 1987, which, inter alia, granted increases in rent based upon major capital improvement expenditures by the appellant landlords, in which the appellant landlords cross-petitioned to prohibit the New York State Division of Housing and Community Renewal from reopening their application for rent increases, the appeal is from a judgment of the Supreme Court, Queens County (Rozenzweig, J.), entered January 13, 1989, which denied the cross petition.

ORDERED that the judgment is affirmed, with costs.

It is well settled that the extraordinary remedy of prohibition is not available to prevent even ultra vires administrative action when the party seeking such relief may pursue other avenues of judicial review without sustaining irreparable injury (see, Matter of American Tr. Ins. Co. v. Corcoran, 65 N.Y.2d 828, 493 N.Y.S.2d 122, 482 N.E.2d 918; Matter of City of Newburgh v. Public Employment Rel. Bd. of State of New York, 63 N.Y.2d 793, 481 N.Y.S.2d 327, 471 N.E.2d 140). In the instant matter, even assuming that the New York State Division of Housing and Community Renewal was without authority (see, 9 NYCRR 2529.9) to reopen the proceedings dealing with the landlords' application for rent increases, based upon its admitted failure to consider "vital" matters, the landlords will have an opportunity to obtain judicial review in the event that they are ultimately aggrieved by a determination of the agency. Accordingly, in the absence of any evidence that the landlords will suffer irreparable harm, we find no impropriety in denying prohibition.

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184 A.D.2d 276, 586 N.Y.S.2d 884

Supreme Court, Appellate Division, First Department, New York

In the Matter of Marin Management, Appellant, v. Division of Housing and Community Renewal, Respondent, et al., Respondent.

June 9, 1992

Order, Supreme Court, New York County (Alice Schlesinger, J.) entered April 26, 1991, which, inter alia, dismissed the petition seeking to review and annul a determination by respondent Division of Housing and Community Renewal, dated August 9, 1990 which upon a reopened proceeding, determined a rent overcharge to exist, unanimously affirmed, without costs.

The reopening of the proceeding, to which the petitioner had never voiced any objection, was both proper and rational (Rent Stabilization Code [9 NYCRR] 2527.8; cf., Matter of Cupo v McGoldrick, 278 App Div 108), and the subsequent finding of a rent overcharge is amply supported by the record (Matter of Pell v Board of Educ., 34 NY2d 222, 230). The alternative procedure for adjusting the base rent utilized by the Division was authorized (Matter of 61 Jane St. Assocs. v New York City Conciliation & Appeals Bd., 65 NY2d 898, affg 108 AD2d 636) and had a rational basis in the record that was before the Division (Matter of Lavanant v State Div. of Hous. & Community Renewal, 148 AD2d 185, 192). The remaining arguments were not raised below (cf., Matter of 985 Fifth Ave. v State Div. of Hous. & Community Renewal, 171 AD2d 572, lv denied 78 NY2d 861), but, were we to consider them, we would find them to be without merit.

Concur--Carro, J. P., Milonas, Ellerin and Ross, JJ.

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191 A.D.2d 281, 594 N.Y.S.2d 755

Supreme Court, Appellate Division, First Department, New York

In the Matter of Two Lincoln Square Associates, Appellant-Respondent, v. New York State Division of Housing and Community Renewal, Respondent, and Hilde R. Monkmeyer, Intervenor-Respondent-Appellant.

In the Matter of Hilde R. Monkmeyer, Appellant-Respondent, v. New York State Division of Housing and Community Renewal, Respondent, and Two Lincoln Square Associates, Intervenor-Respondent-Appellant.

March 16, 1993

Judgment, Supreme Court, New York County (Stanley Sklar, J.), entered September 8, 1992, which, in awarding $30,630.75 to Hilde R. Monkmeyer ("the Tenant") as against Two Lincoln Square Associates ("the Landlord") in accordance with a revised rent calculation chart submitted by the New York State Division of Housing and Community Renewal ("DHCR"), denied and dismissed the Landlord's petition seeking to annul a determination of the Deputy Commissioner of the DHCR, issued on October 4, 1991, finding that a portion of the Landlord's rent overcharge on the Tenant's rent stabilized apartment was willful and subject to treble damages in Tenant's favor, and which denied the Tenant's petition to the extent the Tenant sought reinstatement of an award of treble damages for certain rent overcharges attributable to unlawful compounding of rent increases within a single guidelines year, unanimously affirmed, without costs.

The IAS Court properly upheld the Deputy Commissioner's finding that a portion of the Landlord's rent overcharge was willful and therefore subject to treble damages where the record reveals that DHCR had a rational basis for concluding that the Landlord had not sustained its burden of establishing that these overcharges were not willful (Matter of 985 Fifth Ave. v State Div. of Hous. & Community Renewal, 171 AD2d 572, 575, lv denied 78 NY2d 861), and where the Deputy Commissioner acted in accordance with DHCR's Policy Statement 89-2 regarding proof of lack of willfulness by an owner when calculating rent, in determining that treble damages should be imposed on those portions of the rent overcharge.

Similarly, the Deputy Commissioner's refusal to award the Tenant treble damages attributable to the Landlord's compounding of guidelines increases within the same guidelines year was neither arbitrary nor capricious since DHCR Policy Statement 89-2 specifically includes " 'piggy- backed' " or compounded guidelines increases within the same guidelines year as a hypertechnical error for which the burden of proving non-willfulness has been deemed to have been met and since the determination not to impose treble damages for compounded guidelines increases was upheld as rational in Hammond v Division of Hous. & Community Renewal (Sup Ct, NY County, Jan. 15, 1988, Stecher, J., index No. 4340/87).

Finally, the IAS Court properly upheld the Deputy Commissioner's conversion of the Tenant's Fair Market Rent Appeal into a Rent Overcharge Complaint where the record reveals that the Landlord, by not raising that issue during the underlying administrative proceedings, failed to preserve the issue, as a matter of law, for judicial review (Matter of Rozmae Realty v State Div. of Hous. & Community Renewal, 160 AD2d 343, lv denied 76 NY2d 712), and since this Court has repeatedly held that DHCR may convert Fair Market Rent Appeals to Rent Overcharge Proceedings (Matter of Jemrock Realty Co. v State Division of Hous. & Community Renewal, 169 AD2d 679, lv denied 78 NY2d 852; Matter of Jemrock Realty Co. v Division of Hous. & Community Renewal, 166 AD2d 222, lv denied 77 NY2d 805).

We have reviewed the respective parties' remaining claims and find them to be without merit.

Concur--Sullivan, J. P., Rosenberger, Kupferman and Asch, JJ.

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194 A.D.2d 375, 598 N.Y.S.2d 497

Supreme Court, Appellate Division, First Department, New York

In the Matter of Lina Yanni, Respondent-Appellant, v. New York State Division of Housing and Community Renewal, Appellant-Respondent, and Bruce Brandwen Productions, Inc., Intervenor-Appellant-Respondent.

June 8, 1993

Order of the Supreme Court, New York County (Franklin Weissberg, J.), entered November 27, 1991 which, inter alia, in a proceeding pursuant to CPLR article 78, granted petitioner landlord's application to the extent of directing respondent State Division of Housing and Community Renewal to recalculate the monthly rent for the subject apartment at the lower of the two relevant default procedures, but denied the application insofar as it sought to annul respondent's award of treble damages for excess rent charged after March 1, 1985, unanimously modified, on the law, to the extent of vacating so much of the order as directed respondent to recalculate the rent and confirming, in its entirety, the determination of respondent and, except as so modified, affirmed, without costs.

The duplex apartment which is the subject of this proceeding was created by combining two two-room apartments located on the fifth and sixth floors of the premises, a six-story, walk-up apartment building. Upon petitioner's failure to provide a complete rental history for the subject apartment (see, Matter of 61 Jane St. Assocs. v New York City Conciliation & Appeals Bd., 65 NY2d 898), respondent established a comparable rent for the duplex by doubling the rent for a two-room apartment located in the same building. This method of establishing the rent is a reasonable expedient necessitated by the landlord's default in supplying rent records going back to the base rent date and, thus, is not a substantial departure from respondent's own precedents (see, Matter of Field Delivery Serv. [Roberts], 66 NY2d 516, 519-520).

Concerning the imposition of treble damages, the record shows that petitioner willfully overcharged rent by requiring tenants to lease the apartment in a corporate name, even though petitioner knew the apartment would be used primarily for residential purposes, all pursuant to a scheme to evade the Rent Stabilization Code. The record does not support petitioner's claim that the apartment had been legally exempted from the requirements of the Rent Stabilization Code as a commercial unit.

Concur--Carro, J. P., Rosenberger, Ellerin, Wallach and Rubin, JJ.

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2 A.D.3d 153, 770 N.Y.S.2d 1

Supreme Court, Appellate Division, First Department, New York

Roger RIBACOFF, et al., Plaintiffs-Appellants, v. CHUBB GROUP OF INSURANCE COMPANIES, Defendant, Federal Insurance Company, Defendant-Respondent.

December 4, 2003

Richard M. Hartzman, for Plaintiffs-Appellants.
Lawrence Klein, for Defendant-Respondent.

Judgment, Supreme Court, New York County (Carol Huff, J.), entered October 11, 2002, which, after a nonjury trial, dismissed the complaint and granted defendant Federal Insurance Company's counterclaim to reform the insurance contract with plaintiffs to include a "stock definition" endorsement, excluding jewelry stock from the policy coverage, unanimously modified, on the facts, to award plaintiffs $9,300 as against defendant Federal, and otherwise affirmed, without costs.

Before reformation of a contract may be granted, a party must establish his right to such relief by clear, positive and convincing evidence (see Amend v. Hurley, 293 N.Y. 587, 595, 59 N.E.2d 416). Reformation is permitted where there is mutual mistake, e.g., "where the parties have a real and existing agreement on particular terms and subsequently find themselves signatories to a writing which does not accurately reflect that agreement" (Harris v. Uhlendorf, 24 N.Y.2d 463, 467, 301 N.Y.S.2d 53, 248 N.E.2d 892).

Mary Beth Kelly of Gueits Adams & Co., plaintiffs' insurance broker, testified that plaintiffs never purchased coverage for his jewelry stock through defendant Federal Insurance Company, that Kelly never requested such coverage from Federal on his behalf, and that it was never the intention of the insured or his broker to include such coverage in the policy. Indeed, plaintiffs had canceled their jeweler's block coverage through another insurer several years prior to the theft underlying the instant claim (evidently because of a hike in the premium), as evidenced by a written communication from Kelly to Ribacoff at the time and the drastically reduced premiums since then. Annual renewals for personal property coverage required a "stock definition" endorsement in order to exclude jewelry stock from coverage, and the inadvertent omission of that endorsement from the policy the year before this theft was corrected with retroactive issuance of such an endorsement during that policy year. The same omission occurred during the instant year.

At the very least, Kelly and Gueits Adams were aware that there was no jewelry stock coverage under this policy. An insurance broker is an agent of the insured (Insurance Law 2101[c]; Bohlinger v. Zanger, 306 N.Y. 228, 231, 117 N.E.2d 338). As such, the latter is bound, as principal, by notice to or knowledge acquired by the agent (Matter of Hayden v. S & W Meat & Poultry, 221 A.D.2d 823, 825, 634 N.Y.S.2d 226). Plaintiffs are thus bound by their agent's understanding that insurance coverage for jewelry stock was not intended to be included in the Federal policy, and that omission of the "stock definition" endorsement was again inadvertent.

Federal does concede that plaintiffs are entitled to $9,300 as stipulated settlement for the claim for theft under the personal property coverage. No interest on that sum is warranted, however, because plaintiffs never tendered to Federal a duly executed release and discontinuance with regard to that settlement (CPLR 5003-a[e],[a] ).

Concur--Nardelli, J.P., Mazzarelli, Andrias, Williams, JJ.

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22 A.D.3d 348, 802 N.Y.S.2d 156,

Supreme Court, Appellate Division, First Department, New York.

In re EUGENE L. and Others, Children Under the Age of Eighteen Years, etc., Virginia L., Respondent-Appellant, Cardinal McCloskey Services, Petitioner-Respondent.

Oct. 18, 2005.

Nancy Botwinik, New York, for appellant.
David H. Berman, Mamaroneck, for respondent.
Tamara A. Steckler, The Legal Aid Society, New York (Richard M. Hartzman of counsel), Law Guardian.

Orders of disposition, Family Court, New York County (Susan Larabee, J.), entered on or about April 13, 2004, which, upon a fact-finding determination of permanent neglect, terminated respondent's parental rights to the subject children and committed their custody and guardianship to petitioner agency and the Commissioner of Social Services for the purpose of adoption, unanimously modified, on the facts, to vacate the order that terminated respondent's parental rights to the child Eugene and freed him for adoption, and the matter remanded to Family Court for a new dispositional hearing regarding the best interests of Eugene, and otherwise affirmed, without costs.

The finding of permanent neglect is supported by clear and convincing evidence of respondent's failure to cooperate with the agency's diligent efforts to assist her in regularly visiting the children and in undertaking the therapy and acquiring the parenting skills necessary to address the children's special needs (see Matter of Star Leslie W., 63 N.Y.2d 136, 142-143, 481 N.Y.S.2d 26, 470 N.E.2d 824 [1984] ). Although a preponderance of the evidence at the dispositional hearing shows that the children's adoption by their respective foster families is in their best interests (see id. at 147-148, 481 N.Y.S.2d 26, 470 N.E.2d 824), we remand for a new dispositional hearing with respect to Eugene's best interests since petitioner and the Law Guardian have advised that Eugene has moved to a therapeutic foster home that is not a pre-adoptive home and has expressed a desire to be with his biological family (see Matter of Michael B., 80 N.Y.2d 299, 318, 590 N.Y.S.2d 60, 604 N.E.2d 122 [1992]; Matter of Marc David D., 20 A.D.3d 565, 799 N.Y.S.2d 552 [2005] ). Respondent's claim that the agency's case records were improperly admitted into evidence is unpreserved, and her other claims concerning evidentiary rulings are unavailing.

TOM, J.P., ANDRIAS, SULLIVAN, GONZALEZ, SWEENY, JJ.

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