GE410259RO; GF410594RT
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
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IN THE MATTER OF THE ADMINISTRATIVE : ADMINISTRATIVE REVIEW
APPEALS OF DOCKET NOs.GE410259RO
Isolino Fernandez : GF410594RT
& Marlyn Braccia DRO DOCKET NOs.BK410511R
a/k/a Marlon Braccia GC410015RP
PETITIONERS :
------------------------------------X
ORDER AND OPINION DENYING OWNER'S PETITION FOR ADMINISTRATIVE
REVIEW AND GRANTING TENANT'S PETITION FOR ADMINISTRATIVE REVIEW
IN PART
On May 29, 1992, the above-named petitioner-owner filed a petition
for Administrative Review against an order issued on April 28, 1992
by the Rent Administrator, 92-31 Union Hall Street, Jamaica, New
York concerning the housing accommodation known as 23 Grove Street,
apartment 3C, New York, New York wherein the Administrator
determined on remand that the tenant had been overcharged.
On June 1, 1992, the above-named petitioner-tenant filed a petition
for Administrative Review against the afore-mentioned order.
The petitioner-owner brought two separate petitions pursuant to
Article 78 of the Civil Procedure Law and Rules, seeking, in the
first to enjoin the DHCR from acting on the tenant's Rent
application and requesting, in the second, an order consolidating
the owner's and the tenant's PARS.
On April 5, 1993, by order of Judge Parness of the Supreme Court,
New York County, the owner's petition to enjoin the DHCR was denied
and dismissed but the owner's application to consolidate the two
pending PAR's was granted. Accordingly, the two PAR's are herein
consolidated.
This proceeding was commenced on November 20, 1987 when the tenant
filed an overcharge complaint.
Subsequent thereto, the owner brought a non-payment proceeding
against the tenant in the Civil Court of the City of New York.
Said proceeding was settled by stipulation dated June 26, 1989 and
"so ordered" by the court.
Based upon the afore-mentioned stipulation, the Administrator
terminated the tenant's overcharge complaint. Subsequently, the
tenant filed a Petition for Administrative Review and brought an
Article 78 proceeding seeking a "deemed denial" ruling in order to
have her PAR decided expeditiously on the merits. The owner was
not joined in this proceeding.
The Article 78 petition was withdrawn pursuant to a stipulation
between the tenant and the DHCR. By order of the court, the
proceeding was remanded to the DHCR for determination of the
tenant's PAR and consequently remanded to the Administrator for a
determination of the overcharge complaint on the merits.
In the order here under review (Docket Number ZGC410015RP), the
Administrator revoked the order issued on August 17, 1990 which had
terminated the tenant's complaint and determined that the Division
was bound by the 1989 settlement which established the lawful rent
at $628.07 as of July 1, 1989 but found, nevertheless, a rent
overcharge based upon the owner's failure to substantiate prior
rent increases and directed the owner to refund $17,998.98
including treble damages.
In his appeal, the owner contends that the order should be revoked
and that the order of August 17, 1990 be reinstated. The owner
asserts that the order was improperly issued due to the occurrence
of a number of procedural irregularities:
1) the owner was not made a party to nor put on notice of the
Article 78 proceeding whose discontinuance resulted in the
proceeding's remand and thus was unable to voice his objection;
2) the owner was first apprised of the stipulation by the remand
order which erroneously referenced a Civil Court Order and misnamed
the parties. The Administrator failed to reply to the owner's
request for an extension, requiring the owner to make a second
request whose denial prevented the owner from timely submitting
required proof;
3) there is no basis for the finding of a willful overcharge. The
order does not state the evidentiary basis for the finding. The
owner has not been served with evidence submitted by the tenant in
support of the finding, although the tenant submitted documentation
which had originated with the owner; this failure to serve
prevented the owner from determining whether the tenant had
submitted a full documentation;
4) the Administrator incorrectly denied the owner any rent
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increases between April 1, 1984 and September 29, 1987 on the claim
that the owner had failed to furnish leases and other rent records.
The owner did submit copies of the 1986 and 1987 annual apartment
registrations and in the possession of the agency were rent records
for the period 1984-87 which would have verified the accuracy of
rent increases;
5) the Administrator incorrectly reopened the overcharge complaint.
Any tenant claim for prior years is barred by the preclusive effect
of principles of res judicata and collateral estoppel. Despite the
absence of specific language, the court-ordered stipulation
resolved all issues between the parties;
6) lastly, the owner asserts that a great deal of work occurred,
which does not require a tenant's consent because it was done
during the vacancy period immediately before the tenant took
occupancy as well as during other vacancy periods. When the tenant
took possession, she consented to the rent as charged and has no
right to complain about the rent which is properly charged under
the provisions of Section 2522.4(a)(1).
In response, the tenant contends that there is no merit to the
owner's PAR which should be denied. The tenant asserts in her
answer and in her own PAR, incorporated by reference in the
tenant's answer, that no weight should be given to the stipulation
of settlement executed in Civil Court and that the doctrine of res
judicata/collateral estoppel is inapplicable because the issues in
contention were never presented to the court nor were documents
substantiating the rent presented. There was no intent to settle
the overcharge complaint pending before the DHCR which was not at
issue in the non-payment proceeding. The stipulation of settlement
was formulated and executed in the hallway of the court; there is
no language in the stipulation indicating an agreement to withdraw
the overcharge complaint. The tenant further contends that treble
damages are appropriate as the record and the rent history of the
subject apartment evidence an unwarranted doubling of the rent
whose legality has never been justified by the owner.
In her appeal, the tenant requests that the order be modified for
the following reasons;
1) since the determination of the legal regulated rent was not at
issue in the non-payment proceeding, the Administrator should not
have found that the legal regulated rent was set by the stipulation
of settlement; 2) the rent calculation chart is incorrect as to the
rent actually paid for the period covered by the stipulation which
should be corrected to include $1848.00 paid pursuant to the
stipulation and to find an even greater overcharge.
In reply, the owner asserts that the Civil Court settlement
resolved all issues between the parties; that it would not have
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settled with the tenant unless the overcharge complaint was
withdrawn, that the tenant is confused as to the meaning of the
doctrine of res judicata which states that when suing, a party must
include all claims especially when the claims arise out of the same
facts and circumstances. By virtue of the counterclaim in the non-
payment proceeding, the tenant settled all her claims by
stipulation. The Civil Court which has concurrent jurisdiction
with the DHCR set the rent in an order finalized by the tenant's
paying the rent and never appealing the order. The tenant
misunderstands the Administrator's order which is correct in
stating the amount of rent paid by the tenant.
After careful consideration, the Commissioner is of the opinion
that the owner's petition be denied, and the tenant's petition
should be granted in part.
The Commissioner notes that there is no requirement that the
Division make the owner/tenant a party to any Article 78 certiorari
review of final administrative orders. As a general rule, the
agency does not do so in either mandamus or deemed denial cases, as
these generally involve only the time frame in which the Division
must complete processing of a case- as in the instant case. Judge
Sherman ordered on December 6, 1991 that a determination of the
tenant's PAR be rendered within ninety (90) days and such
determination did not involve review of the merits.
Further, it is noted that Judge Parness denied and dismissed the
owner's petition to enjoin the DHCR from acting on the tenant's
rent application.
The Commissioner's order of January 31, 1991, remanding the
proceeding, does contain a misstatement in that the tenant and not
the owner had filed the "deemed denied" Article 78 petition.
However, this error did not affect the outcome of the case nor
infringe the owner's due process rights. The proceeding would have
been remanded for processing on the merits even if the parties had
been correctly identified as to which was the owner and which the
tenant. Although the clerical error continued to occur during the
course of processing until April 23, 1992, the owner was kept
apprised of the ongoing processing and was afforded ample
opportunity to submit evidence. Neverthless, the owner failed to
provide any documentation.
Turning to the merits of the case, the major point of contention in
this proceeding is the effect of the settlement reached by the
parties in the non-payment proceeding which was "so-ordered" by
Judge Dubinsky on June 28, 1989, establishing the rent at $628.07
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per month for the period July 1, 1989 through September 30, 1989.
Although the courts have concurrent jurisdiction with the Division
to establish rents, the Commissioner notes that the non-payment
proceeding was not judicially determined on the merits nor does the
stipulation make any mention of the overcharge proceeding then
pending before the agency. Moreover, the rent established is not
designated the legal stabilization rent but was merely denoted a
recalculated amount. For the so-ordered stipulated rent to bind
the Division, the stipulation should have stated clearly that it
was establishing the legal regulated rent and that the tenant was
withdrawing her overcharge complaint with prejudice. Accordingly,
the Commissioner grants the tenant's appeal in part and
recalculates the legal stabilization rent in the rent calculation
chart attached hereto and made fully a part of this order.
Further, the Commissioner finds that the tenant's overcharge claim
is not barred by the doctrines of res judicata or collateral
estoppel. The doctrine of res judicata gives binding effect to a
final judgment, preventing parties from relitigating previously
determined causes of action. Two actions or proceedings are
considered to be based upon the same cause of action where the two
have such a measure of identify that a different judgment in the
second would impair or destroy rights or interests established by
the judgment in the first. The instant matter concerns a cause of
action distinct from the cause of action resolved by the settlement
in the summary proceeding. The overcharge claim, the first to be
instituted, rests upon evidence, i.e the rent history of the
subject accommodation to establish the lawful rent. The rent in
the non-payment proceeding was called a recalculated rent and was
listed only for the purpose of such proceeding.
With regard to the imposition of treble damages, Section 26-516(a)
of the Rent Stabilization Law, as amended by the Omnibus Housing
Act of 1983, provides in pertinent part that any owner who is found
to have collected an overcharge shall be liable to the tenant for
a penalty equal to three times the amount of the overcharge. If
the owner establishes by a preponderance of the evidence that the
overcharge was not willful, the penalty will be the amount of the
overcharge plus interest. The Rent Stabilization law assesses
treble damages where the overcharge is willful.
The statute creates a presumption of willfulness subject to
rebuttal by the owner showing non-willfulness by a preponderance of
the evidence. In the absence of such affirmative proof by the
owner or after the submission of inadequate proof, treble damages
shall be assessed where an overcharge determination is made. Where
an owner submits no evidence, the overcharge is deemed to be
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willful.
Pursuant to Section 2523.7 of the Rent Stabilization Code, an owner
is required to maintain and produce records of a duly registered
housing accommodation for four years prior to the most recent
registration for such accommodation. In the instant case, the
owner was requested to submit a lease history from April 4, 1984
along with an explanation for any rent increase during the period
in order to establish the legitimacy of the rent charged in a
request dated July 11, 1990 when the case was originally being
processed under docket number BK401511R. The owner opted to submit
copies of the 1986 and 1987 registrations but failed to produce the
required records. The submission of registration forms is not a
substitute for the lease history which the owner was required to
produce.
Although the DHCR maintains records of duly filed registrations,
there is no competent evidence to suggest that the agency had under
its dominion and control, as is alleged by the owner, the lease
history and other rent records which the owner was required to
maintain. Accordingly, the Commissioner finds that the
Administrator correctly denied the owner any rent increases for the
period between April 1, 1984 and September 29, 1987.
On March 23, 1992, the owner was requested to submit evidence.
Despite the opportunity to do so, the owner failed to submit any
documentation. The granting of time extensions is discretionary.
The Administrator's lack of response to a request does not excuse
the owner's failure to provide requested material. The
Commissioner finds that the overcharge collected was correctly
deemed willful and treble damages were appropriately assessed on
that part of the overcharge collected before the settlement in the
non-payment proceeding. As for the overcharge collected
subsequently, the Commissioner finds that since the owner could
have reasonably believed that the rent established by the
stipulation was the legal rent, the owner has shown by a
preponderance of the evidence that that portion of the overcharge
was not willful. Accordingly, only interest will be imposed on
overcharges collected from July 1, 1989 through April 24, 1992.
The Rent Stabilization Law does not impose any burden on the tenant
with respect to treble damages. Nor is the tenant required to
produce evidence to justify the rent that the owner is charging.
With regard to the tenant's contention that the overcharge should
have included $1848.00 paid pursuant to the stipulation, the
Commissioner notes that it is unclear from the stipulation exactly
why the amount was paid. Accordingly it cannot be included in the
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overcharge determination herein.
The owner is directed to refund to the tenant an overcharge of
$32,643.97 inclusive of treble damages, interest and excess
security as determined in this order and opinion.
The owner is also directed to reflect the findings and
determinations made in this order on all future registration
statements, including those for the current year if not already
filed, citing this order as the basis for the change. Registration
statements already on file, however, should not be amended to
reflect the findings and determinations made in this order. The
owner is further directed to adjust subsequent rents to an amount
no greater than that determined by this order plus any lawful
increases.
This order may, upon the expiration of the period in which the
owner may institute a proceeding pursuant to Article 78 of the
Civil Practice Law and Ruled, be filed and enforced in the same
manner as a judgment or not in excess of twenty percent per month
thereof may be offset against any rent thereafter due the owner.
THEREFORE, in accordance with the provisions of the Rent
Stabilization Law and Code, it is
ORDERED, that the owner's petition be and the same hereby is
denied, the tenant's petition be, and the same hereby is granted in
part, and the Rent Administrator's order be, and the same hereby
is, modified in accordance with this order and opinion.
ISSUED:
JOSEPH A. D'AGOSTA
Deputy Commissioner
GE410259RO; GF410594RT
GE410259RO; GF410594RT
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