On March 31, 2000 the Supreme Court ordered that the "ousted board" turn over all of the corporation's books, records and funds to the "lawful board." Mr. Stepper filed a notice of appeal of that order in the name of the corporation on behalf of the "ousted board," and was granted a stay pending appeal that was ultimately vacated on May 22, 2000.

On May 22, 2000 the lawful board filed an Order to Show Cause requesting an order directing the production of the corporation's books, records and funds in the "ousted board's" possession, holding the ousted board and Mr. Stepper in contempt for violating the March 31, 2000 order, and awarding attorney's fees and court costs and disbursements. Mr. Stepper filed an affirmation in opposition stating that he should not personally be held in contempt because he is not a party to the action nor subject to any order and because he never had any of the requested items in his possession.

On May 25, 2000 the parties entered into a stipulation regarding surrendering the books, records, etc. to the lawful board and the court ordered that the remaining issues of attorney's fees, costs and disbursements would be held in abeyance pending Mr. Stepper's compliance with the court order and his providing a full accounting. Mr. Stepper delivered a letter to the Court and opposing counsel stating that he received $20,417.09 in fees together with invoices and a "Statement of Account." In response, the lawful board submitted an "Affirmation in Support of Request for Legal Fees" dated June 26, 2000. It sought to recover $8,642.75 in legal fees incurred by the lawful board since the January 13, 2000 order by the Special Referee. The affirmation did not set a hearing date or return date. It was without a Notice of Motion and appeared to be an ex parte application to the Supreme Court. The affirmation resulted in a decision and order dated July 12, 2000 which held that Mr. Stepper "appears to have participated in unnecessary, frivolous, and vexatious actions" and that the sum of $8,642.75 "shall be assessed against Michael Stepper, Esq. for engaging in frivolous and contumacious litigation."

The Appellate Division states that it is "unclear" as to the grounds for the award against Mr. Stepper. They state that "the initial fundamental error made by the motion court was the decision to issue its order based upon ex parte communication without affording Stepper the opportunity to reply." Further, the court held that if the award as a sanction pursuant to 22 NYCRR 130-1 it is improper because Mr. Stepper "was clearly not provided with a 'reasonable opportunity to be heard'" and the motion court's order does not articulate the conduct upon which the sanction is based.

Similarly, the Court held that the Supreme Court Order cannot stand as a sanction for criminal or civil contempt. The award of more than $8,000 in attorney's fees is not an appropriate sanction for criminal contempt as outlined in Judiciary Law  751 and there was no personal service on Mr. Stepper. With regard to civil contempt the standard is, "the Court must expressly find that the person's actions were calculated to or actually did defeat, impair, impede or prejudice the rights or remedies of a party to civil proceeding." (citing Oppenheimer v. Oscar Shoes, Inc., 111 AD 2d 28,29) Because this was not a finding of the motion court, the order is "fatally defective."

The notice of termination, notice of petition and petition were served by conspicuous or "nail & mail" service after prior attempts at service. All of the above documents were affixed to the door of the deceased tenant's apartment and subsequently mailed to that address. The respondent (administratrix of the decedent's estate) claims that since she was not served at her address, the Court has failed to obtain jurisdiction over the estate. The respondent asserts that she resides in the same apartment building as her deceased mother and that petitioner was aware of this fact. Petitioner claims it has no obligation to serve the estate at any address other than the demised premises and that as the fiduciary the respondent-administratrix was obligated to check the demised premises.

The Court stated that it is well settled that before a landlord uses the method of "conspicuous service" it is "required to demonstrate that upon reasonable application admittance to the subject premises cannot be obtained and/or a proper person cannot be found to whom the notice and petition may be delivered." Additionally, when a landlord is aware of an alternate address where the tenant os residing, it is required to mail the termination notice and petition to that alternate address. The Court states that the above-mentioned "alternative address" situation is analogous to this case, because the real party in interest is the estate of the deceased tenant. Petitioner in this case was aware of the administratrix's address yet failed to attempt service there. The Court held that while there is no requirement that the petitioner first attempt service on the administratrix at her address before resorting to conspicuous service, ..." under the R.P.A.P.L. the petitioner was required to mail a copy of the termination notice and petition and notice of petition to the administratrix at her address. The petitioner's failure to mail the pleadings to the administratrix renders this proceeding jurisdictionally defective." Based upon the improper service, respondents motion to dismiss for lack of jurisdiction was granted.

On October 18, 2000, the tenant moved (by notice of motion) for vacatur of the stipulation and judgment. Tenant claimed that in acting pro se, she had "improvidently entered into the stipulation, had unknowingly waived her defense of breach of the warranty of habitability, and had not understood the operation of the section 8 subsidy."

The return date of the motion was November 20, 2000 and an inspection of the apartment was ordered. On November 15, 2000 HPD conducted an inspection and discovered seven "B" violations and three "C" violations. The motion was argued and submitted without any opposition papers from the landlord.

The Court stated that ordinarily the courts will enforce stipulations that are entered into freely. However, courts may vacate a stipulation where good cause to do so is shown, "such as where it appears that a party, to his prejudice, 'has inadvertently, inadvisably, or improvidently entered into an agreement which will take the case out of the due, and ordinary course of [the] proceeding.'" (citing In Re Frutiger's Estate, 29 N.Y. 2d 143, 149-150)

The Court held that tenant has shown sufficient good cause to vacate the stipulation due to the fact that severe violations existed and that the NYC Housing Authority had suspended payment of its share of the section 8 subsidy because of the conditions existing in the apartment. Thus, tenants defense of breach of the warranty of habitability is "substantial and meritorious." Additionally, the record indicated that tenant did not understand the section 8 subsidy and its transfer requirements which could not possibly have been met between August 8, 2000 and September 30, 2000. The record also strongly suggested that tenant only agreed to move because she believed that landlord would not cure the conditions in her apartment. The tenant's motion was granted upon her showing of good cause to vacate the stipulation and judgment.

Tenant petitioned for administrative review in 1989 and the Deputy Commissioner directed that an evidentiary hearing be conducted to address tenant's challenge of the authenticity of the leases submitted by landlord. The hearings were held in May, June and August, 1990. Tenant brought forth three witnesses who testified and provided documentary evidence which established themselves as the genuine tenants of the apartment during the relevant periods. The Administrative Law Judge found, based upon the evidence presented by tenant that the "leases submitted by landlord were either sham fabrications or pertained to the letting of irrelevant office space elsewhere." The Administrative Law Judge thus held that the fraudulent proof which had been offered by landlord was evidence of "willfulness in overcharging rent." The tenant prevailed.

Prior to the evidentiary hearings, the pro se tenant had "updated his investigations by submitting some ex parte letters to the agency." Most, if not all of these materials were forwarded by the Administrative Law Judge to landlord's attorney. Additionally, immediately following the first hearing, landlord's attorney was given a full opportunity to inspect the entire file. He did not do so until the day after the last hearing.

The lower court in this Article 78 proceeding, following oral argument held that, "the tenant's ex parte communications had so tainted the 1990 hearings as to require a total vacatur of the agency order and a trial de novo before a different Administrative Law Judge."

The Appellate Division disagreed and held that after a careful review of the record, the Administrative Law Judge made a detailed determination based upon the compelling proof offered by tenant that established the landlord's "egregious conduct." Furthermore, the Administrative Law Judge was determined to be "wholly unaffected by the ex parte submissions." Based upon the above, the Appellate Division reversed the decision of the lower court, tenant's 1992 DHCR determination of willful rent overcharge and treble damage refund, was reinstated and confirmed.

The claim, apparently by landlord, that residential use is prohibited because the building is situated in a "light manufacturing district" does not, without more evidence, definitively resolve whether the residential use or joint living/working use of the lofts dating back to 1981 would qualify as a permitted use under the applicable zoning resolutions, even if new residential development is now excluded in the district. The Appellate Term regarded these questions as unanswered on the record, thereby precluding a summary judgment determination.

The Appellate Term held: "Assuming without deciding that ETPA coverage applies to the lofts, a further issue for determination is landlord's claim to the `substantial rehabilitation' exemption." The Court concluded that the landlord's motion for renewal (submitting additional evidence) on this issue should have been granted since there are triable issues as to the scope of the rehabilitation and whether this is a case where the cost of the rehabilitation was substantially borne by the tenants. Hence, the Appellate Term remanded the proceeding for determination on these outstanding issues.

The filing date of rent registrations is significant and controlling, not the contents of the filings. A party may not collect any alleged overcharges past the four years from the allegation of the rent overcharge, however, this does not preclude the examination of the registered rent beyond the four year period. The court observed: "To limit a review of the registered rent period to a four year period is impractical and would in essence allow a landlord to profit by not registering the premises for a four year period. If this were the case then every landlord not registering the premises would be allowed essentially to circumvent the rent stabilized program and set its own rent with no repercussions or incentive to comply with the DHCR requirements."

In this case the apartment registration for the years 1985 through 1995 were registered in 1995. This period would allow these all registrations to be challenged since they were only filed within the last four years. The question whether changing rooms in this SRO results in a new tolling of time for rent stabilization purposes is moot as the time frame used to measure the permanency of the tenant's stay is when the tenant moves into the building, not a particular unit therein. When a tenant is not given a copy of the Notice of Rights and Duties of Hotel Owners and Occupants, that tenant is deemed to be a permanent tenant from the day they moved in to the subject premises. In this case the landlord failed to provide the tenant with the necessary notice, but the court ruled that this did not diminish the tenant's rights to claim permanent resident status in the subject premises.

Based on the facts of this case, the court held that it is clear that it is required to examine the rent history beyond the four years and look beyond the said term to 1985 when the last unchallengeable registration was filed. The registered rent for 1985 is $229, and lawful increases since then bring the legal rent to $270.84. Since the tenant paid $186 in rent, the overcharges amount to $5,681 which was granted to tenant as a judgment against the landlord. The tenant's claim of a treble damages (whether the overcharge was wilful) was set down for a separate hearing date.

The four units were allegedly vacant from 1969 through 1972, when the owner claimed the building was completely renovated from a class "B" single room hotel into a class "A" building with 89 units. When renovation was completed, the owner applied for a real estate tax exemption and abatement pursuant to section J.51-2.5 of the Administrative Code of the City of New York, which was granted in 1974. At that time, the J-51 program required that all residential units be rent controlled for the duration of the exemption/abatement. Thereafter, the building was converted to cooperative ownership under a noneviction plan, and the owner became shareholder and proprietary lessee of the four units. The tenants continued to reside in the four units under rent control. As of June 30, 1986, the building no longer received benefits from the J-51 tax program.

Twelve years later, the owner sought to have the four units decontrolled. However, in 1985 a statute was enacted which provided that a unit previously subject to rent regulation as a result of a J-51 tax abatement and/or exemption would continue to be subject to such regulation until the first vacancy of the unit after the benefits ended, unless the tenant had received notice in the initial lease and the subsequent renewal leases that rent regulation of the unit would terminate upon expiration of the J-51 benefits.

When the owner moved for summary judgment, the Court refused to decontrol the units, as the owner failed to prove that the tenants were notified that regulation of their J-51 units would expire. Instead the Court granted the tenants' cross-motions for summary judgment, and declared that the four units would be rent controlled until there were vacant. The Court rejected the owner's argument that he was denied equal protection of the law, or that the owner's reliance on the representations made to him in the law as it existed in 1974 excused him from the effects of the 1985 amendments.

The Court disagreed. While noting Housing Court decisions which have found that tenants whose rent stabilized tenancies became stabilized solely as a result of the ETPA -- i.e. tenancies which commenced as unregulated tenancies between July 1, 1971 and May 29, 1974, the period between vacancy decontrol and the effective date of the ETPA -- the tenant in this case did not take occupancy until July 1, 1974, and thus, her apartment was stabilized due to the Rent Stabilization Law and Code, not solely due to the ETPA. Therefore, the tenant took occupancy too late for ETPA protection to apply, and the Court denied tenant's motion to dismiss and permitted the action to proceed.

The tenants moved to vacate their default, attempting to show the required factors of a) an excusable default, and b) a meritorious defense. Tenant's counsel stated that he was not informed of the adjourned date of the landlord's motion until after the appearance. Moreover, the tenants argued that they were entitled to the protections of rent stabilization, and further that the landlord was not entitled to use and occupancy, for its failure to file a multiple dwelling registration statement, as the landlord knew that at least six (6) separate tenants were using their units as residences.

While the Court found the default excusable, it also found that the tenants did not demonstrate a meritorious defense, and therefore, the tenant's motion to vacate the default was denied. First, the Court found that the tenants could not qualify for Loft Law protection, since the building was vacant from 1945 until 1994. Second, the building was gutted by fire in 1988 and thereafter the new owner completely renovated the building, replacing more than 75 percent of the building-wide systems. Thus, even if the building were subject to rent stabilization -- which is doubtful, as the residential use violated zoning requirements -- the building would have been exempt from rent stabilization. The Court expressly rejected the tenant's argument that a de facto multiple dwelling could be found in a commercial building not subject to the Loft Law, particularly where residential use was prohibited by zoning requirements. The Court noted that pre-Loft Law cases, which previously permitted de facto multiple dwelling claims in commercial buildings, were superseded by the Loft Law, and thus, since the tenant could not satisfy the Loft Law's requirements, there was no protection for the tenant's residential tenancy in the commercial building.

The landlord argued that DHCR had no authority to convert the tenant's complaint, which was initially filed as an overcharge complaint, to a FMRA, that the DHCR unlawfully failed to consider comparability data submitted by the landlord, and that the DHCR violated the equal protection and due process rights of the landlord by failing to permit the landlord to submit additional data in support of the initial rent charged.

The Court denied and dismissed the landlord's Article 78 Petition, finding that the DHCR had the authority to convert a rent overcharge complaint to a FMRA, holding that the tenant was not required to state specific statutory language in such a complaint. Moreover, the tenant alleged that the rent he was initially charged was excessive, and the landlord never produced evidence that it served a DC-2 form (which notifies tenants of the change of regulation status for their apartment and their right to file a FMRA). The Court also found that the DHCR's rejection of comparability data was supported by statute (which requires comparability data from comparable units which initial legal regulated rents are charged or determined within four (4) years prior to, or one year after, the commencement date of the initial lease for the apartment considered in the FMRA), and DHCR's rational policy, as none of the units satisfied the statute, and the DHCR was entitled to reject apartments with fewer rooms (and higher rents) than the subject apartment. Finally, the Court upheld DHCR's use of its special guidelines, and its strict review of renovations claimed by the landlord, where the DHCR rejected all such claims which were not directly provable for the subject apartment by clear invoices and check receipts noting exactly what the payments were for (as some checks and invoices were for services performed to units other than the subject unit). The Court also found that DHCR gave the owner ample opportunity to submit its comparability data.