STATE OF NEW YORK
                     DIVISION OF HOUSING AND COMMUNITY RENEWAL
                           OFFICE OF RENT ADMINISTRATION
                                    GERTZ PLAZA
                              92-31 UNION HALL STREET
                              JAMAICA, NEW YORK 11433



     ------------------------------------X 
     IN THE MATTER OF THE ADMINISTRATIVE :  SJR 4671 (deemed denial)
     APPEAL OF                              ADMINISTRATIVE REVIEW
                                         :  DOCKET NO. DI 410106-RO
         PAN AM EQUITIES, INC.,             DRO DOCKET NO. L-3115984-R
                             PETITIONER  :               
     ------------------------------------X                            


           ORDER AND OPINION DENYING PETITION FOR ADMINISTRATIVE REVIEW

     On September 12, 1989 the above named petitioner-owner  filed  a  Petition
     for Administrative Review against an order issued on  August  8,  1989  by
     the District Rent Administrator, 10 Columbus Circle, New  York,  New  York
     concerning housing accommodations known as  Apartment  4A  at  124  Second
     Avenue, New  York,  New  York  wherein  the  District  Rent  Administrator
     determined that the owner had overcharged the tenants.

     Subsequent thereto, the petitioner-owner filed a petition in  the  Supreme
     Court pursuant  to  Article  78  of  the  Civil  Practice  Law  and  Rules
     requesting that the "deemed denial" of  its  Petition  for  Administrative
     Review be annulled.  The proceeding was remitted  to  the  DHCR,  and  the
     owner's petition is herein decided on the merits.

     The Commissioner notes that this proceeding was filed prior  to  April  1,
     1984.  Sections 2526.1(a)(4) and 2521.1(d) of the Rent Stabilization  Code
     (effective May 1, 1987) governing rent overcharge  and  fair  market  rent
     proceedings provide that determination of these matters be based upon  the
     law or code provisions in effect on March  31,  1984.   Therefore,  unless
     otherwise indicated, reference to sections of the Rent Stabilization  Code
     (Code) contained herein are to the Code in effect on April 1, 1987.

     The issue in this appeal is  whether  the  District  Rent  Administrator's
     order was warranted.

     The applicable sections  of  the  Law  are  Section  26-516  of  the  Rent
     Stabilization Law, Section 2526.1(a) of  the  current  Rent  Stabilization
     Code and Section 42A of the former Rent Stabilization code.

     The Commissioner has reviewed all of the evidence in the  record  and  has
     carefully considered that portion of the  record  relevant  to  the  issue
     raised by the administrative appeal.

     This proceeding was originally commenced by the filing in March, 1984 of a 
     rent overcharge complaint by the tenants (Janet Rogers and Adele  DeWitt),
     in which they stated that they had commenced occupancy on October 30, 1983 
     at a rent of $715.00 per month.








          DOCKET NO.:  DI 410106-RO

     The owner was served with a copy of the complaint  and  was  requested  to
     submit rent records to prove the lawfulness of the rent being charged.  In 
     an October 17, 1984 answer to the complaint, the owner submitted a  rental
     history form whose contents it claimed had been approved by the  New  York
     State Attorney General's office.  Such rental history showed the  rent  of
     the initial stabilized tenants increasing from $379.15 to  $481.47  during
     the course of four one-year leases, and an increase  to  $715.00  for  the
     complainant's first lease based on a claim that the "apartment  was  fully
     renovated prior to the tenants moving in."

     In response, the  tenants  claimed  that  their  apartment  had  not  been
     renovated but merely painted as required by law.

     On June 11, 1986 the owner was sent a Final  Notice  of  Pending  Default,
     which stated in substance that unless a complete rental history  from  the
     base date was submitted within 20 days, certain DHCR procedures  would  be
     used to establish the lawful rent, and treble damages would be imposed  on
     willful overcharges occurring on or after April 1, 1984.

     In a response dated October 10, 1986,  the  owner  asserted  in  substance
     that an Assurance of  Discontinuance  entered  into  between  it  and  the
     Attorney General precluded the DHCR  from  determining  lawful  rents  and
     overcharges for the period of time reviewed in  the  rental  history  form
     submitted to the Attorney General; that there was no overcharge shown  for
     the period; that the current lawful rent was to be based on the registered 
     April 1, 1984 rent; and that there had been only  lawful  increases  taken
     since April 1, 1984.

     On October 14, 1986 the owner was sent another  Final  Notice  of  Pending
     Default.

     In another response dated March 9, 1989 the owner contended  in  substance
     that the tenants' complaint was filed on October 23, 1984; that  April  1,
     1984 was the base date since the complaint was filed after April 1,  1984,
     and more than 90 days after the service of the initial  registration;  and
     that there had been no overcharge since April 1,  1984.   The  owner  also
     withdrew its claim that the DHCR did  not  have  jurisdiction.   With  its
     response the owner included a copy of the tenants'  complaint  bearing  no
     date stamp, having "3115984" stamped on the back, and  having  been  dated
     October 23, 1984 by the tenants.  The original complaint in  the  file  of
     the proceeding before the Administrator does have  a  CAB  date  stamp  of
     March 28, 1984, but does not have "3115984"  stamped  on  the  back.   The
     docket number was stamped individually on the front of the original and of 
     the owner's copy.  A close comparison of the original and the owner's copy 
     reveals them to be identical with those three exceptions.  Every slightest 
     handwritten mark on the original is  exactly  duplicated  on  the  owner's
     copy, which indicates that the owner's copy is a  photocopy  made  of  the
     original before anything was stamped on the reverse side of the original.

     On May 26, 1989 and June 26, 1989 the owner was sent other  Final  Notices
     of Pending Default.  With both of the notices was enclosed a copy  of  the
     tenants' complaint date-stamped on March 28, 1984.








          DOCKET NO.:  DI 410106-RO

     In an order issued on August 8, 1989 the District Rent Administrator found 
     that the owner had failed to substantiate the base date rent, and  applied
     established DHCR default  procedures  to  determine  the  tenants'  lawful
     initial rent.  By  freezing  the  rent  and  imposing  treble  damages  on
     overcharges occurring  on  or  after  April  1,  1984,  the  Administrator
     calculated total overcharges of $91,979.12 from October 16,  1983  through
     August 31, 1989.  The Administrator directed  the  owner  to  refund  such
     overcharges to the tenants as well as to reduce the rent.

     In this petition the owner contends in substance  that  its  copy  of  the
     complaint clearly showed that it was not filed prior  to  April  1,  1984;
     that the DHCR never informed the owner of the  existence  of  an  envelope
     postmarked March 26, 1984 and of a date-stamp of March  28,  1984  on  the
     complaint; that the owner therefore did not have an opportunity either  to
     submit a pre-April 1, 1984 rental history or to contest the date of filing 
     of the complaint; that the complaint may have been back-dated by the DHCR; 
     that the complaint may have been filed unsigned and only signed  later  on
     October 23, 1984; that if the complaint was indeed "filed" on October  23,
     1984 by being signed on that date, then April 1, 1984 would  be  the  base
     date since October 23 is more than 90 days after the tenants  were  served
     with the initial apartment registration on June 15, 1984; that the  owner,
     making a good faith  effort  to  determine  and  refund  any  overcharges,
     calculated that there was no overcharge after the (apparent) base date  of
     April 1, 1984; and that at least a hearing should be held on the issue  of
     the date of filing of the complaint.

     In answer to the owner's petition, the tenants assert in substance that  a
     lack of concentration, and the fact of  one  tenant  having  just  written
     "10/30/83", "10/16/83", and "10/31/84" on the front of the  complaint  led
     her to date the complaint as "10/23/84" rather than  "3/23/84";  that  the
     signed complaint was actually filed prior to April 1, 1984; that the owner 
     repeatedly failed to comply with the DHCR's requests  for  a  full  rental
     history, although such requests informed the owner that the complaint  was
     filed prior to April 1, 1984; that the DHCR was not obligated to prove  to
     the owner that it was proceeding  lawfully,  that  the  owner  could  have
     inspected the file pursuant to the Freedom of Information Law to determine 
     when the complaint was filed; and that it was proper for the Administrator 
     to apply the default procedure.

     On February 21, 1990 the owner was sent a copy of the  tenants'  complaint
     date-stamped March 28, 1984, of the envelope postmarked  March  26,  1984,
     and of the owner's answer of October 17, 1984, with the comment  that  the
     owner's answer to the tenants' complaint was dated prior to the time  that
     the owner claimed the tenants had signed the  complaint.   In  reply,  the
     owner states that the information now supplied  it  indicates  the  DHCR's
     entitlement to pre-April 1, 1984 rent records, and contends  in  substance
     that the proceeding should be remanded to the Administrator to  allow  the
     owner an opportunity to recalculate the tenants' rent and  to  refund  any
     overcharge, based on the default formula, since the owner  does  not  have
     sufficient documentation to support the rent charged; that  such  lack  of
     documentation, as well as the overcharge and  even  the  owner's  lack  of
     awareness that an answer had been submitted on October 17, 1984,  was  the
     result  of  alleged  fraudulent  practices,  including  falsification  and
     removal of records, by two former top management employees acting  outside
     the scope of their employment; that the owner would  have  calculated  the
     overcharge and made a refund prior to the Administrator's order if only it 
     had been furnished by the DHCR with the information necessary  for  it  to
     realize that lawful rents needed to be based on a base date prior to April 
     1, 1984; and that treble damages should not be imposed,  as  the  peculiar






          DOCKET NO.:  DI 410106-RO
     facts of this case indicate that any  overcharge  was  not  willful.   The
     owner also states that, while it is willing to make a refund,  one  tenant
     vacated at a unknown time, making the proper apportionment of  the  refund
     problematical.

     In response to the owner's submission, one  tenant  asserts  in  substance
     that  the  owner's  present  willingness  to  "voluntarily"   refund   the
     overcharge is not evidence of good faith as a refund (with treble damages) 
     is already mandatory; that a refund of overcharges serves to preclude  the
     imposition of treble damages only if such refund  is  made  prior  to  the
     issuance of an order in a proceeding; that the DHCR has the right, subject 
     to judicial review, to order parties to  produce  documents;  and  that  a
     party may not unilaterally decide that it does not have to provide records 
     unless the DHCR proves to its satisfaction  that  a  complaint  was  filed
     prior to April 1, 1984.  The tenant also contends in  substance  that  the
     overcharge should be  considered  willful,  and  treble  damages  imposed,
     because the willful act of a corporate officer in charge of  leasing  must
     be imputed to the owner, since such a person is acting  within  the  scope
     of his authority when setting and/or charging rents, even  unlawful  ones;
     because the owner did not make any attempt to investigate  when  the  rent
     for the  subject  apartment  increased  dramatically;  because  the  owner
     failed to properly supervise its employees to  ensure  that  such  willful
     overcharges would not occur; and because the owner's  willful  obstruction
     and frustration of the DHCR's investigation may not serve as a basis for a 
     demonstration of  good  faith  or  non-willfulness.   The  tenant  further
     asserts that legal expenses of over $6,000 and interest  of  approximately
     $14,000 should be added to any overcharge award.

     In later supplements to its petition, the owner contends in substance that 
     while it is willing to reset the rent of the subject  apartment  based  on
     the DHCR's default formula, it does not feel that the Administrator should 
     have frozen the lawful rent at the default rent from 1983 to the  present,
     particularly since the tenants had renewal leases and  since  the  default
     rent is lower than that paid by the prior tenant; that it  has  no  record
     for the apartment other than those already submitted,  and  was  not  even
     aware of the October 17, 1984 answer, due to the unauthorized  actions  of
     two former employees whom it is suing; and that  treble  damages  are  not
     warranted.  The owner also asserts in substance  that  the  proceeding  be
     remanded in accordance with the  DHCR  policy  that  a  landlord  must  be
     provided the complete record so that a proper reply can be  made,  and  so
     that a refund can be made if it appears there is an overcharge.

     The Commissioner is of the opinion that this petition should be denied.

     A summary of the facts mentioned earlier regarding  the  circumstances  of
     the filing and service of the  tenants'  complaint  is  as  follows:   The
     tenants mailed a complaint  (dated  October  23,  1984  for  some  unknown
     reason, probably meant to be March 23) on March 26,  1984.   Upon  receipt
     two days later by the Conciliation and  Appeals  Board,  a  photocopy  was
     made.  Both original and copy were individually stamped on the front  with
     the docket number.  The original (only) was date-stamped on the back,  and
     the copy (only) was stamped with a docket number on the  back.   The  copy
     was mailed to the owner  on  October  11,  1984,  according  to  the  Rent
     Examiner Progress Report (which report does not make  any  mention  of  an
     unsigned complaint or of the tenants coming in to sign it, most especially 
     not coming in to sign it on October 23, 1984, subsequent to the time  that
     the copy of the [signed] complaint was sent to the owner).  The owner then 
     submitted an answer on October 17, 1984.  The Commissioner finds that  the
     preponderance of the evidence indicates that the  complaint  was  properly
     filed prior to April 1,  1984.   The  owner  was  therefore  obligated  to






          DOCKET NO.:  DI 410106-RO
     furnish a rental history from June 30, 1974 or a later (proven) base date. 
     The owner was given another opportunity to do so on February 21, 1990, but 
     has indicated that it is unable to furnish such a  rent  history.   It  is
     therefore proper to uphold the Administrator's  use  of  established  DHCR
     default procedures to determine the lawful rents.  While it is  true  that
     the calculated default rent is less than that allegedly charged the  prior
     tenants, such prior rent has not even been shown to be lawful itself.  The 
     Commissioner  notes  that  the  default  procedures,  as  adopted  by  the
     Conciliation and Appeals Board and ultimately affirmed  by  the  Court  of
     Appeals, provide that there be no vacancy or Guidelines increase until the 
     time of the C.A.B.'s [now DHCR's] order.  The  rationale  behind  this  is
     that the procedures, in addition to being a way  to  set  a  rent,  are  a
     penalty to be applied when an owner has defaulted in its obligations under 
     Section 42A.  It was not an error for the  Administrator  to  follow  DHCR
     procedures and impose this penalty for the owner's default.

     Section 2526.1(a)(1) of the current Rent Stabilization  Code  provides  in
     pertinent part that an owner  shall  be  liable  for  treble  damages  for
     overcharges occurring on or after April 1,  1984,  unless  the  owner  can
     establish by a preponderance of the evidence that the overcharges were not 
     willful, in which case interest is to be imposed.  It  is  generally  DHCR
     policy that the presumption of willfulness that arises when an  overcharge
     is found (and which results in the imposition of treble  damages)  is  not
     rebutted simply because negligence in supervision  allows  a  lower  level
     employee to make either accidental or deliberate errors, since an owner is 
     bound to take steps to ensure that only  lawful  rents  are  charged,  and
     since otherwise the large loophole available  by  alleging  "human  error"
     would effectively shift the burden of proof away  from  a  presumption  of
     willfulness.  Since negligent supervision of lower  level  employees  does
     not rebut the presumption of willfulness on the part of the owner,  it  is
     all the more appropriate  that  the  deliberate  actions  of  a  corporate
     officer (in fact the very person who would  be  responsible  for  ensuring
     that lower level employees did not make  "errors"  that  would  result  in
     treble damages), an officer with the right to  bind  the  corporation,  in
     overcharging not fail to impute willfulness to the owner just because  the
     officer was inadequately controlled.  It is useful to consider that, under 
     the new Code, a current owner is responsible for treble  damages  both  on
     the overcharges collected on and after April 1, 1984 by a  previous  owner
     (even though the current owner did not collect the overcharges itself  and
     would almost certainly not have been aware of  them  as  they  were  being
     collected by the previous owner), as well as overcharges which it collects 
     based on otherwise appropriate percentages of increase over an (unknown to 
     the new owner) unlawful lease rent inherited from the previous owner.   In
     addition, even the failure to submit a rental history to  substantiate  an
     otherwise reasonable-appearing rent can result in the imposition of treble 
     damages, despite the fact that the necessary rent records  may  have  been
     accidentally destroyed or lost, or not even furnished by  a  prior  owner.
     In light of these policies it would be all the more inappropriate for  the
     owner to escape liability  for  treble  damages  based  upon  acknowledged
     willful overcharges by a corporate officer.  Even aside  from  the  strong
     presumption of willfulness that arises when there is  an  overcharge,  the
     owner has not shown that it did not benefit  from  the  overcharges.   (In
     fact, in its lawsuit against its former employees  [a  copy  of  which  is
     contained in the file for Docket No. ARL  13522-L],  the  owner  seems  to
     allege that excess rents were not generally being kept by  its  employees,
     but were being used to raise the base on which the employees were  getting
     a percentage of rent as illegal kickbacks and "co-brokerage"  fees.)   The
     owner may not  escape  liability  to  innocent  3rd  parties  by  alleging
     unauthorized actions by its employees; its remedy is to proceed  in  court
     against those employees for damages which their actions may have caused.






          DOCKET NO.:  DI 410106-RO

     While DHCR policy (as recently made explicit  in  Policy  Statement  89-2)
     would allow an owner to escape treble damages on even egregiously  willful
     overcharges so long as a refund is  made  within  the  time  permitted  to
     answer the complaint; while earlier policy was that a refund prior to  the
     issuance of the Administrator's order would avoid the imposition of treble 
     damages; and while the owner might be able to  contend  that  this  "grace
     period" should be extended in the present case  where  it  relied  on  the
     Assurance of Discontinuance, and later on the "10/23/84" date put  on  the
     un-date-stamped complaint, as justification for believing that  there  had
     been no lawful increases over the April 1, 1984 base date  rent  requiring
     refunds, the owner was sent another copy of a date-stamped complaint  with
     a Final Notice of Pending Default on June 29, 1989 (as well as being  sent
     on May 26, 1989 a copy that was almost certainly date-stamped),  after  it
     had on  March  14,  1989  changed  its  reliance  from  the  Assurance  of
     Discontinuance to claim of an April  1,  1984  base  date.   There  is  no
     evidence that the owner made any refund of overcharges within 20  days  of
     June 29, 1989.  In fact, the owner has apparently not made any  refund  at
     least as of April 4, 1990 (six weeks after being sent a copy of the  March
     26, 1984 postmarked envelope and of its October 17, 1984 answer as well as 
     of the date-stamped complaint), although it acknowledges it cannot justify 
     the rents charged, since it requests a  remand  to  recalculate  the  rent
     (without freezing the tenants' initial rent) and to give it an opportunity 
     to make a refund.   The  Commissioner  does  not  find  that  the  limited
     exemption from (customary) treble damages conferred  by  prompt  voluntary
     refund of overcharges is appropriate under the facts of this case.

     With regard to the method of refund of the overcharge and  penalties,  the
     owner is directed to do one of the following:


          1)  Within thirty days of the issuance of this order,  tender
              to the tenants a  check  for  the  total  amount  of  the
              overcharge and penalties payable to the order  of  "Janet
              Rogers and Adele DeWitt"; or

          2)  Tender to either tenant (Janet Rogers or Adele  DeWitt)  a
              check  for  the  full  amount  of   the   overcharge   and
              penalties upon presentation by such tenant  to  the  owner
              of a written instrument in proper form  duly  executed  by
              the other tenant releasing  the  owner  from  any  further
              liability for such refund.



     If the owner does not perform either of these  two  options,  the  tenants
     may, upon the expiration if the period in which the owner may institute  a
     proceeding pursuant to Article 78 of the Civil  Practice  Law  and  Rules,
     file and enforce this order in the same manner as a judgment.

     Regarding the contention in the tenant's answer that attorney's  fees  and
     additional interest to date should be imposed: this contention could  only
     properly be considered if raised in the tenant's own petition against  the
     Administrator's order, rather than in an answer to the  owner's  petition.
     This order is without prejudice to any rights which the  tenant  may  have
     to raise this claim in a court of competent jurisdiction.

     Because of the possibility that the rents charged were not  reduced  after
     the Administrator's order, the owner is cautioned to adjust the  rent,  in
     leases after those considered by the Administrator, to amounts no  greater






          DOCKET NO.:  DI 410106-RO
     than  that  determined  by  the  Administrator's  order  plus  any  lawful
     increases, and to register any  adjusted  rent  with  the  Administrator's
     order being given as the reason for the adjustment.

     THEREFORE, in accordance with the Rent Stabilization Law and Code, it is 

     ORDERED, that this petition be, and the same hereby is,  denied  and  that
     the Administrator's order be, and the same hereby is, affirmed.  The total 
     overcharge, including excess security of  $563.96,  is  $91,979.12  as  of
     August 31, 1989.

     ISSUED:




                                                                   
                                             ELLIOT SANDER
                                          Deputy Commissioner
    

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