DK 420087-RT
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 S.J.R. 5678
IN THE MATTER OF THE ADMINISTRATIVE ADMINISTRATIVE REVIEW
APPEALS OF DOCKET NOS.:
DK 420087-RT
DAVID CORBIN, Tenant, DK 420014-RO
and
B. GREENBERG & H. STEVENS, DISTRICT RENT
Landlords, ADMINISTRATOR'S DOCKET
NO.:
PETITIONERS AK 420018-AD
----------------------------------x
ORDER AND OPINION GRANTING TENANT'S PETITION FOR ADMINISTRATIVE
REVIEW AND REMANDING PROCEEDING TO THE RENT ADMINISTRATOR,
AND DENYING LANDLORDS' PETITION
On November 3, and November 9, 1989, the above-named parties
filed Petitions for Administrative Review against an order issued
on October 19, 1989 by the Rent Administrator of the Jamaica
District Rent Office, concerning the housing accommoda-tions
known as the second floor apartment, 631 Park Avenue,
New York, New York.
Subsequently the landlords filed a petition in the Supreme Court
pursuant to Article 78 of the Civil Practice Law and Rules,
requesting that the "deemed denial" of their administrative
appeal be annulled. The proceeding was remitted to the
above-referenced Division (also "DHCR" herein) pursuant to court
order. After consolidating the two appeals, on February 19, 1991,
the Commissioner issued an order denying the landlords' petition
(also "PAR" herein), granting the tenant's, and remanding the
proceeding to the Administrator for determination of the legal
regulated rent of the subject accommodations. The landlords once
more sought Article-78 relief in the Supreme Court, and on July
26, 1991, Justice Parness granted the Division's motion to remand
the proceeding for reexamination.
This proceeding commenced on November 26, 1986, when the tenant
requested the Division to determine that the premises were sub-
ject to the New York City Rent Regulations because the landlord
had filed a fraudulent application for decontrol thereof and
because they had never been vacant since June 30, 1971. In the
tenant's application and amendments thereof, the tenant alleged:
that he occupied the front half of the second-floor apartment in
the subject building; that the entire second floor was one
apart-ment which had never been vacant since coming under rent
control in 1943; that the current Certificate of Occupancy listed
the second floor as a single floor-through apartment; that, when
registered in 1943, the second-floor apartment had been occupied
by Ethel Cramer and Dorothea Fischer; that the landlords had
sought to treat this apartment as two units and to collect sep-
arate rents from the original tenants; that in 1974, under DRO
Docket Nos. 2AD 37833/37834, the landlords had tried to obtain
rent increases from each tenant because each tenant had a bath-
room and kitchenette; that that application had been denied in an
order issued on September 30, 1974, with a finding that "...the
subject accommodation is legally a self-contained unit registered
in 1943 with the present tenants as occupants..."; that the
address of the tenants had been "apartment 2nd floor"; that on
August 12, 1976, the landlord had filed an application to
decontrol the subject apartment, alleging that Dorothea Fischer
was no longer occupying it as her primary residence; that in that
application the landlord had failed to disclose that Ethel Cramer
was still in occupancy; that for Item 7 of the applica-tion, "Is
the housing accommodation occupied by any other party than the
tenant specified in Item 2 above?", the box "No" had been filled
in; that the landlord had never disclosed that Ethel Cramer still
occupied the apartment; that, as a result of that fraudulent
application, the apartment had been decontrolled; that the order
should be declared ineffective because of the land-lords' failure
to disclose the occupancy of Ethel Cramer; that the landlord had
illegally sealed the separation between the front and rear halves
of the second floor apartment; that the tenant had moved into the
front half in February, 1981, at which time Ethel Cramer was
occupying the rear half; and that at no time since 1943 had the
second-floor apartment been vacant.
In answer to the tenant's application, the landlords contended in
substance: that the second-floor apartment had been decontrolled
because it was not the primary residence of Dorothea Fischer;
that thereafter Ethel Cramer had negotiated a lease for her
portion of the second floor; that the issue of non-primary
residence decontrol had been the subject of an unsuccessful
Administrative Appeal before the Office of Rent Control (CPTA
17,019); that the present proceeding represented a collateral
attack on the prior determination and should be rejected; that
attempts to obtain a copy of the order issued in CPTA 17,019 had
been unsuccessful; and that the DHCR had refused to reopen the
prior decision in an order issued on September 3, 1985, under
CPTA 21,406.
On October 19, 1989, the Rent Administrator revoked the decontrol
order of February 11, 1977, based on the owner's failure to have
advised the Office of Rent Control, on Application Form A-16,
that co-tenant E. Cramer was still residing in a section of the
subject apartment. The Administrator further stated: that Cramer
had remained in occupancy until January 21, 1982; that the
present tenant had occupied the premises since February of 1981;
that said tenant was not related to either of the previous
rent-controlled tenants; that the apartment was therefore not
subject to the Rent and Eviction Regulations as far as concerns
said tenant; and that the landlords might therefore file an
Owner's Report of Vacancy Decontrol.
In his PAR the tenant contended: that vacancy decontrol does not
attach unless there is a physical vacancy of an apartment; that,
in this proceeding, the subject apartment had never become
vacant; that the certificate of occupancy, issued in 1937,
showing the second floor to be a single unit, is controlling; and
that the illegal separation of the subject accommodation into two
units had no effect on the controlled status of the second floor
as a single floor-through apartment.
The landlords' PAR stated in substance: that the Administrator
had erroneously revoked the order of decontrol issued on February
11, 1977; that this issue had been raised in two prior proceed-
ings before the Commissioner and determined therein; that
collat-eral estoppel required that DHCR adhere to its prior
decision; that the Administrator's order effectively gave the
estate of Cramer, rights that it had been denied by the
Commissioner in prior proceedings; that vacancy decontrol is
automatic by opera-tion of law upon the vacancy of the tenant,
and that Cramer is admittedly deceased; that it was erroneous for
the Administrator to state that "the owner failed to advise the
Office that the co-tenant, Ethel Cramer was still in occupancy of
a section of the subject apartment"; that it had never been
established that the 1977 decontrol had been based on incorrect
information; that, at that late date, it was impossible to
determine the actual circum-stances that had led to decontrol of
the apartment; that it could just as easily have been speculated
that Cramer had agreed to the decontrol and to the subsequent
division of the second floor into two apartments; and that Corbin
was not a tenant in 1977 and had no standing to contest the
decontrol order issued in that year.
The aforementioned Commissioner's order of February 19, 1991
ensued, and as mentioned above the matter is again before the
Commissioner for reconsideration pursuant to Justice Parness'
order.
Having carefully considered the record herein, including papers
submitted to the Supreme Court, the Commissioner is of the
opinion that that order of February 19, 1991 should be reaf-
firmed.
The owners contend that it was erroneous for the Administrator to
revoke the 1977 decontrol order, since this issue had been the
subject of two administrative appeals. The owner's reliance on
the doctrines of res judicata and collateral estoppel, however,
is misplaced. Pursuant to Section 2207.8(a) of the Rent Regula-
tions, the Division "may not modify, supersede or revoke any
order issued under these or previous regulations unless [it]
finds that such order was the result of illegality, irregularity
in vital matters, or fraud...". Where one of those predicate
conditions is found, the regulation supersedes common-law doc-
trines precluding reexamination of decided cases and issues. Its
very purpose is to set forth those occasions when --as here-- a
final order, too old to be appealed, can be upset. If the alle-
gation of fraud had been litigated and decided previously, res
judicata would be a pertinent doctrine; but as there is no claim
that any tribunal has previously considered that allegation and
no evidence of such consideration in the record, the relevant
question is simply whether the 1977 decontrol order resulted from
illegality, irregularity in vital matters, or fraud. And that
question must be answered affirmatively, for the order would not
have been issued but for the landlords' fraud.
For fraud to be found herein, (1) the owner must have intention-
ally misrepresented the facts in his application for decontrol,
(2) he must have made that misrepresentation with intent to
defraud, (3) the misrepresented fact must have been material to
the agency's issuance of its decontrol order, (4) that order must
have been issued and (5) that issuance must have operated to a
tenant's detriment. The question is whether the Administrator
committed error in finding that those elements existed here. Let
us examine the evidence as to those elements which, for conven-
ience and clarity, will be discussed in reverse order.
No demonstration is required for the proposition that the type of
order involved here -- removing a housing accommodation from rent
control - works to the detriment of present and future tenants of
that accommodation (element 5). As to element (4), the decontrol
order for the subject accommodation is of course in the record.
Turning to (3), there is no dispute that if a rent-controlled
co-tenant ceases to occupy an apartment, leaving a rent-
controlled tenant still in occupancy, that apartment does not
lose its rent-controlled status. The presumption of regularity
of official
acts would therefore dictate a finding that if the agency had
been made aware of the continued presence of such a tenant, it
would not have decontrolled the accommodation. The fact in
question, then, was highly material to the agency's issuance of
the decontrol order.
Elements (1) and (2) are best discussed together. There must
first of all have been an inaccurate representation in the
decontrol application. The face of that document reveals that
only the nonprimary resident is mentioned thereon, as the only
tenant in the subject accommodation. The inaccuracy of that
representation is shown by, inter alia: a 1937 Certificate of
Occupancy from the Department of Buildings and the 1943 Notice of
Maximum Rent, both indicating that the entire second floor of the
building in question had been rent-controlled as one apartment;
the Office of Rent Control's Order Denying Application or
Terminating Proceeding of September 30, 1974 and the 1976 Master
Building Rent Schedule, which show that that classification was
still in effect when the application in question was filed; the
affidavit of Rose Lanzolla, former managing agent of the
building, which shows, along with the last two documents listed
above, that there were two rent-controlled tenants in that
apart-ment; and the lease of June 1, 1977, with the tenant
Cramer, which shows, along with the Lanzolla affidavit, that a
rent-con-trolled tenant still lived in the subject premises when
the decontrol application was filed.
Elements (1) and (2) require, of course, not simply an inaccurate
representation, but one made intentionally, with intent to
defraud. In the absence of an admission, intent can only be
proven circumstantially. Given the facts that as late as
September, 1974, the premises had been officially reaffirmed as
constituting a single rent-controlled apartment, that at all
times that apartment had had two tenants (one of whom kept living
there even after the decontrol application had been granted) and
that the form for that application was clear in requesting all
affected tenants' names, and given the reasonable assumption that
a landlord knows the identities of his rent-controlled tenants,
it was logical for the Administrator to infer that the landlords
knew their representation to be false. Given that knowledge, the
next question is why they made that representation. Because of
the obvious benefit to a landlord when an apartment is decon-
trolled, the Administrator was again reasonable in inferring that
their intent was to defraud the agency and/or the remaining
tenant and/or succeeding tenants, by falsely asserting that all
rent-controlled tenants had ceased to reside in the subject
accommodation. There was thus substantial evidence for the
Administrator's finding of fraud.
It should be noted that despite the clarity with which the tenant
has, from the inception of these proceedings, repeatedly alleged
the existence of those elements, and despite the seriousness of
such allegations, the landlord did not address them during the
entire period of this Division's jurisdiction. Only in the
aforementioned Article-78 petition did the landlord see fit to
tell the court: that "given that DHCR was not the agency that
initially issued the decontrol order," the finding of fraud "is
without any factual or evidentiary basis;" that none of the
elements of fraud has been established; and that any
misrepresen-tation was not material to the proceedings because
"[t]he fact that there was not a vacancy on the second floor was
not material to the decontrol of the proceedings based on non-
primary resi-dence."
The first of those arguments, based on the fact that the 1977
order issued from the New York City Office of Rent Control (ORC),
is frivolous in view, inter alia, of the statement in the same
petition that in 1984, pursuant to state law, "DHCR succeeded the
ORC as the agency responsible for administering the rent control
laws." The second argument, a general declaration that fraud has
not been proven, is as close as the landlord has come to denying:
that the entire second floor was rent-controlled as one apart-
ment; that that classification had never changed through the time
of the application for decontrol; that the apartment had been
occupied by two rent-controlled tenants; that at the time of the
decontrol application based on non-primary residence of one
tenant, the other (Cramer) continued to reside there; that the
aforesaid application mentioned only the non-residing tenant;
that the landlords indicated thereon that the latter tenant was
the only party occupying the subject housing accommodation; that
the applicants were then aware that that representation was
false; that if the agency had been apprised that a rent-
con-trolled tenant continued to occupy the second-floor
apartment, it could not legally have decontrolled same; and that
the agency decontrol order operated to the detriment of the
remaining tenant and all succeeding tenants.
Because all the above were alleged herein and none have ever been
denied by the landlords (represented throughout by counsel), the
Commissioner did not need to review the Administrator's findings
pertaining thereto on this appeal. Nevertheless the Commissioner
has done so, above, out of abundant caution.
The Landlord also argues that because its application for decon-
trol was on the basis of nonprimary residence and not vacancy, it
should not have been denied on the basis that there was no
vacancy. There is no merit to this argument.
The Commissioner recognizes that the owner's application for
decontrol was based on nonprimary residence rather than vacancy
decontrol. Nonetheless, the issuance of the 1977 decontrol order
was not appropriate since the owner did not establish that both
tenants did not occupy the apartments as primary resi-dents. Had
the tenant's (Cramer's) name been properly noted by the owner on
the decontrol application, the second floor apart-ment would not
have been decontrolled based on a finding regarding only one of
the tenants.
The record indicates that there was no administrative determina-
tion made of the Cramer residency by the agency prior to the 1977
decontrol order, due to the owner's failure to disclose that
Cramer was still a tenant in the apartment. Accordingly, the
residency of the tenant Cramer in the subject apartment in 1977
renders the issuance of an administrative order premised on the
nonprimary occupancy of another tenant (Fisher) inappropriate.
The Commissioner therefore determines that the Administrator did
not err in revoking the decontrol order. The owner's contention
as to the present tenant's standing to contest the decontrol
order is not to the point. The previous determinations of
admin-istrative appeals do not bar the Administrator's ruling in
view of the owners' fraud.
The present tenant was an occupant of the subject apartment while
the original 1943 registered tenant was also residing therein.
Since the 1937 certificate of occupancy is still in effect and
calls for a single apartment on the second floor, and since the
1974 order, supra, found that the second floor apartment was
sub-ject to rent control as a single self-contained
accommodation, the subject apartment remains under the
jurisdiction of DHCR as a rent-controlled apartment until such
time as there is a physical vacancy thereof. The Commissioner
notes the absence of any claim by the landlords, and of any
evidence in the record, that the Office of Rent Control or this
Division ever authorized the splitting of the subject premises
into two apartments. The Admin-istrator clearly did not err,
therefore, in determining that the accommodation is still a
single unit.
The landlords' contention that a physical vacancy is not re-
quired, since the 1943 tenant is deceased, is without merit. It
has been held that vacancy decontrol is applicable only when an
apartment has been physically vacated by a tenant who was in
possession thereof.
Regarding the landlords' statement in their petition, that "it
can just as easily be speculated that Cramer agreed to the
decon-trol...", the Commissioner notes that a tenant cannot waive
any rights or benefits granted by the rent laws.
This proceeding is remanded to the Rent Administrator for the
sole purpose of determining the legal regulated rent of the
second-floor apartment as one housing accommodation. (The tenant
now occupies the entire floor.)
THEREFORE, in accordance with the provisions of the Rent and
Evictions Regulations for New York City, it is
ORDERED, that the owner's petition for administrative review be,
and the same hereby is, denied, and it is further
ORDERED, that the tenant's petition be, and the same hereby is,
granted, and that the order of the Rent Administrator be, and the
same hereby is, modified by deleting all reference to the Divi-
sion's lack of jurisdiction over the tenant, and it is further
ORDERED, that this proceeding be, and the same hereby is, re-
manded to the Administrator for the determination of the legal
regulated rent of the second floor apartment.
ISSUED:
ELLIOT SANDER
Deputy Commissioner
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