Admin. Review Docket No.: EG 420535 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  SJR No.:  6449          

           IN THE MATTER OF THE ADMINISTRATIVE  ADMINISTRATIVE REVIEW        
           APPEAL OF                            DOCKET NO.: EG 420535 RT
                                                DRO DOCKET NOS.:    
                 PATSY GOLDSBORO                      AI 420003 OE           
                                                                       
                                 PETITIONER                             
                                                OWNER:  SATTLER REALTY
                                                        COMPANY               
           ----------------------------------X                                
                                                                              
                                                             
                                                                      ORDER AND OPINION GRANTING PETITION FOR ADMINISTRATIVE
                                         REVIEW



                The above-named petitioner-tenant timely filed a Petition for 
           Administrative Review against an order issued on June 20, 1990 by 
           the Rent Administrator at Gertz Plaza, Jamaica, New York, 
           concerning housing accommodations known as apartment 2, at 1790 
           Third Avenue, New York, New York, wherein the Administrator 
           directed that a certificate of eviction be issued with respect to 
           the subject accommodation on the grounds that the owner wished to 
           withdraw the subject building from both the housing and nonhousing 
           rental markets and utilize the entire building in connection with 
           the business already in operation in the rest of the subject 
           building. 

                Subsequently, the owner filed an Article 78 Proceeding in 
           Supreme Court, New York County, in the nature of an application for 
           a writ of mandamus, requesting that a determination of the 
           Petitioner's administrative appeal be issued.   

                Thereafter, pursuant to a court order, the matter was remanded 
           to the Division for further processing.

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

                The issue in this appeal is whether the owner of the subject 
           building may be granted the relief provided in the appealed order.

                The Commissioner finds that that relief may not be granted to 













          Admin. Review Docket No.: EG 420535 RT 

           the owner of the subject building because that owner is not the 
           entity which operates the subject business.

                This proceeding was commenced on September 16, 1986, by the 
           filing of an application for a certificate of eviction. In its 
           application the owner alleged, in substance, that a) the owner of 
           the building is a partnership whose partners own substantially all 
           of the stock in Anton Sattler, Inc., a painting contractor, which 
           occupies all of the space in the building except the subject 
           apartment ; b) the owner seeks to withdraw the subject rent 
           controlled housing accommodation from both the housing and 
           nonhousing market so that the entire structure can be utilized in 
           the conduct of the business of Anton Sattler, Inc.; and c) the 
           space occupied by the tenant is needed in connection with that 
           business because said business is expanding.

                The tenant answered the application alleging, in substance, 
           that  a) the Certificate of Occupancy (C of O) for the building 
           permits the second floor of the building (the floor whereon the 
           tenant's apartment is located) to be used for residential use only; 
           b) the application was not made in good faith and the proof thereof 
           is that the year before its submission (that is, in 1985) the owner 
           had tried to obtain possession of the subject apartment on the 
           grounds that it was needed for the personal use and occupancy of 
           one of the partners; and, that the owner had submitted the present 
           application merely because the owner perceived that it might be 
           more successful in its attempt to evict the tenant on the presently 
           alleged grounds; and c) the owner's application was defective as it 
           did not comply with all of the requirements of Section 2204.9(a)(1) 
           of the Rent and Eviction Regulations.    

                Thereafter the proceedings were referred to a DHCR staff 
           Administrative Law Judge (ALJ) who heard testimony and received 
           documentary evidence relevant to the issues herein.

                The ALJ's findings and conclusions stated, in substance, that 
           the owner had met all of the criteria for entitlement for the 
           issuance of a certificate of eviction under the New York City Rent 
           and Eviction Regulations Section 2204.9(a)(1) (also cited as 9NYCRR  
           2204.9(a)(1) ) and recommended that such a certificate be issued,  
           subject to all of the provisions in Section 2204.4 relating to the 
           owner's obligation to pay a stipend to, and relocate, the tenant.

                In the appealed order, the Administrator followed the 
           recommendations of the ALJ and directed the issuance of the 
           certificate of eviction.

                In the Petition for Administrative Review, the tenant asserts, 
           in substance,  that the Administrator's order should be revoked and 
           that: a) the tenant has resided in the subject apartment since 1956 
           and is the last residential tenant in the entire building; b) the 
           other half of the second story has been illegally occupied by Anton 



          Admin. Review Docket No.: EG 420535 RT 

           Sattler, Inc. in violation of the C of O; c) the owner has failed 
           to present certified copies of plans filed with the New York  City 
           Department of Buildings; d) has failed to produce the consent of 
           all of the partners who own the building to the application for the 
           certificate of eviction; e) has failed to produce evidence as to 
           the other tenants in occupancy when the building was purchased; f) 
           and the owner has failed to maintain all essential services and has 
           failed to make necessary repairs to the subject building and the 
           tenant's apartment; f) the entity which owns the building is not 
           the entity which operates the business which will allegedly utilize 
           the entire structure; and g) the tenant was denied due process as 
           the owner was permitted to submit documents by mail after the close 
           of the hearing thus denying the tenant her right to confront the 
           owner as to the vague allegations contained in said documents.

                The owner filed an answer opposing the Petition. In that 
           answer the owner argued, in substance, that the Administrator's 
           order was correct and a) that the tenant has added nothing to the 
           record that was not already before the ALJ; b) that one of the 
           partners had in fact sought the use and occupancy of the apartment 
           to stay at during periods of inclement weather because he is blind 
           in one eye and it is hazardous for him to drive to and from work in 
           inclement weather; and c) all essential services are provided at 
           the subject apartment and building and repairs are made as needed; 
           d) all of the requirements that must be met for the relief sought 
           to be granted have been proven to have been met; this proof was 
           provided by the testimony of Neal Sattler and the production of the 
           documents the owner was requested to produce.

                The Commissioner is of the opinion that the Petition should be 
           granted and that the Administrator's order should be revoked

                The Commissioner has formed this opinion based  on a finding 
           that, as a matter of law, it cannot be held that there is 
           sufficient identification between the three individuals  (G. 
           Richard Sattler, A. Richard Sattler and Neal Sattler) who each own 
           a one third interest in the building and Anton Sattler, 
           Inc., which operates the subject business and 85% of whose stock  










           was owned by G. Richard Sattler at the time the application was 
           filed*. The Commissioner finds that this must be concluded 
           particularly in the light of the testimony of Neal Sattler, the 
           owner's chief witness at the hearing below, that A. Richard 













          Admin. Review Docket No.: EG 420535 RT 

           Sattler, one of the three owners of the building "had left the 
           company [Anton Sattler, Inc.]"; "is on his own", "doing his own 
           thing"; and "basically  we're not talking very much."

                Further, the Commissioner notes that the 1987 corporate income 
           tax return filed for Anton Sattler, Inc. indicates that effective 
           January 1, 1987, Anton Sattler, Inc. had elected to be treated as 
           a closed corporation under Subchapter S of the Internal Revenue 
           Code. The Commissioner further notes that the basic effect of such 
           an election is that the losses suffered by a corporation and the 
           profits earned by that corporation are directly attributable, pro 
           rata, to (and therefore reportable on the personal income tax 
           returns of) the shareholders of that corporation. This, the 
           Commissioner finds intensifies the identification between G. 
           Richard Sattler and the corporation; and, at the same time, further 
           separates the other two partners in the real estate, Neal Sattler 
           and (especially) A. Richard Sattler (each holding less than 5% of 
           the stock of the corporation), from any possible perception of them 
           as alter egos of Anton Sattler, Inc. 

                The Commissioner notes that the determination contained in 
           this order and opinion has been made without setting aside any 
           determination of the ALJ's as to the credibility of any witness. 
           Indeed, this determination relies, in part, upon the testimony of 
           Neal Sattler, a witness whose testimony was apparently relied upon 
           by the ALJ as credible. 

                The Commissioner's determination herein is based upon a 
           finding that the ALJ had made an erroneous application of the law 
           when he concluded that there was a sufficient identification 
           between the corporation which actually runs the subject business 
           and the partnership which owns the subject building to warrant the 
           granting of the relief sought herein. 
                                   
           * According to the 1986 income tax return (form 1120) filed by 
           Anton Sattler, Inc. However, the 1989 certification by the 
           Secretary of Anton Sattler, Inc. as to the corporation's 
           shareholders and their holdings shows that by 1989, G. Richard 
           Sattler had transferred some of his stock to other members of the 
           Sattler family (other than A. Richard Sattler and Neal Sattler who 
           still held their original proportion of the stock: slightly less 
           than 5% each), but still retained 68% of the stock. That 
           certification also states that Marilyn Sattler (who was listed as 
           having the same residence address as G. Richard Sattler in the 
           corporation's 1987 federal income tax return) held 56 shares of 
           Anton Sattler, Inc., that is, 16.5% of the total.
                The Commissioner notes that the plain meaning of the language  
           in Section 2204.9(a)(1)  of the Rent and Eviction Regulations 
           requires that the owner of the building must be the same entity as 
           the one which operates the business sought to be housed in the 
           building. However, in certain limited cases (for the sake of 
           illustration, such as where the business may have been organized 



          Admin. Review Docket No.: EG 420535 RT 

           under a corporate structure, for tax reasons and to limit personal 
           liability, but the individual who actually runs the business and 
           owns all of the corporation's stock is also the individual who owns 
           the building), a certificate of eviction has been issued where, 
           technically speaking, one entity owned the business and another 
           owned the building; but such is not the case here. 

                In this case, between 85% and 68% of the stock of the 
           corporation that runs the business is owned by one partner and each 
           of the other partners owns less than 5%, yet each partner owns a 
           one third interest in the subject building. Therefore the 
           Commissioner finds that such an identification between the 
           disparate controlling entities as has in other cases permitted the 
           relief sought herein to be granted does not exist; especially since 
           one of the partners has totally withdrawn from the operation of the 
           subject business and, judging from Neal Sattler's statement that A. 
           Richard Sattler is "on his own", may even have gone into 
           competition with Anton Sattler, Inc.  

           THEREFORE, pursuant to all of the applicable statutes and 
           regulations, it is

           ORDERED, that the Petition be, and the same hereby is granted and 
           that the Administrator's order be and the same hereby is revoked. 

           ISSUED:




                                                              
                                      JOSEPH A. D'AGOSTA
                                      ACTING DEPUTY COMMISSIONER 
















    

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