STATE OF NEW YORK
                          OFFICE OF RENT ADMINISTRATION
                                   GERTZ PLAZA
                             92-31 UNION HALL STREET
                             JAMAICA, NEW YORK 11433

      APPEALS OF                             DOCKET NO. HD410088RO, DG410067RT

                                          :  DISTRICT RENT OFFICE
           Empire Associates Realty Co.,     DOCKET NO. EG410031RK, BB410359R
           Robert Shaw, tenant,
                            PETITIONERS   : 


      On April 30, 1993, the above-named owner filed a Petition for 
      Administrative Review against an order of a Rent Administrator issued on 
      March 26, 1993, concerning the housing accommodations known as Apt. 4B 
      at 33 East 65th Street, New York, New York, in which the Administrator 
      ordered the payment to the tenant of $69,430.90, due to overcharges by 
      the owner.  Previously, the tenant had filed a similar petition for 
      review of an Administrator's order issued on June 15, 1989, wherein it 
      was determined that the same accommodations were not subject to the Rent 
      Stabilization Code.

      The pertinent facts -- as documented, or alleged and not disputed -- are 
      as follows.

      A. The Certificate of Occupancy for the aforementioned building permits 
      "One (1) Doctor's Apartment and office" in the basement, "Two (2) 
      Doctors' Apartment [sic] and offices" on the first story, and 4 
      "apartments" in the rest of the building; it also provides that 
      "[d]octors using offices must reside in this building."

      B. In a petition filed in the Civil Court seeking the tenant's eviction, 
      the owner alleged that said building was not subject to rent regulation.  
      In 1985 the court dismissed that petition for the reason that the 
      building was indeed subject to Rent Stabilization.  

      The same case was then set on for hearing on the tenant's motion for 
      attorney's fees (the owner having meanwhile filed another eviction 
      petition that did allege the building was "stabilized," but which had 
      been discontinued for another reason).  At the time set for the hearing 
      on fees (August 28, 1986), the parties settled the "above entitled 


      proceeding ... on the following terms:

      "Respondent owes rent for the period November 1984 through August 1986 
      in the total amount of $18,123.66. 

      "Respondent will pay $6,686.56 in full satisfaction of all rent due .... 
      This figure accounts for a 30% abatement ... [for] breach of warranty of 
      habitability ... and payment of attorneys fees in the amount [of] 
      $6,000.00.  Respondent shall pay the full $6,686.56 upon the execution 
      of a proper renewal lease at a monthly rental of $863.32."  The 
      settlement was then signed as "so ordered" by Judge Dankberg.

      In February of 1987 the tenant commenced the instant proceeding by 
      filing an overcharge complaint with this Division ("the DHCR").  In 1989 
      the Rent Administrator denied the requested relief, stating that the 
      subject building was not subject to the Rent Stabilization Code.  The 
      DHCR subsequently granted the tenant's request for reconsideration, 
      ruling in the order appealed herein that the premises were indeed 
      subject to the Code.  In arriving at the aforementioned refund figure, 
      the Administrator imposed treble damages (for willfulness) for 
      overcharges collected from March 15, 1985 through March 14, 1991, except 
      for those collected between June 15, 1989 and November 15, 1990, the 
      Administrator stating that fairness precluded a finding of willfulness 
      for the period between the issuance of the first Administrator's order 
      (declaring the premises to be unregulated) and the order reopening the 
      matter for reconsideration.

      In this petition the owner attacks that order as follows.  

      (1) The sole basis thereof is the 1985 order of the Civil Court, holding 
      that the subject premises are subject to rent stabilization.  The 
      subsequent 1986 court order in the same matter, however, superseded the 
      first order or revoked it by implication, leaving the second order as 
      the final and binding one in the parties' litigation.  That second order 
      states that the tenant owes a sum for rent that "represents the actual 
      lease rent due and owing * * * [; and] the parties further agreed to 
      enter into a renewal lease in the amount of $863.32 ... ."   The 1986 
      order, then, "by upholding the prior lease rents ... implicitly upholds 
      the lack of rent stabilization coverage for this apartment," and the 
      Administrator's order here appealed, based solely on a superseded court 
      order, must be revoked. 

      (2) Because the owner was never served with a notice of entry of that 
      first order, "it never became a final and binding order upon the 
      Petitioner."  Therefore it does not bind the DHCR through collateral 
      estoppel or as res judicata.

      (3) If (in the alternative) the first court order is binding as to rent- 
      stabilization coverage, the second one remains "fully binding upon the 
      tenant and the DHCR with respect to the legal lease rent and renewals 
      for the subject apartment."  


      (4) The Administrator erred in trebling the refund herein, in view of 
      the second court order.

      The tenant's answer to the petition makes the following points:

      (a) The judge (Dankberg) who issued the second order, had authority only 
      to decide the issue of attorney's fees, as the first order -- dismissing 
      the case because the apartment was rent-stabilized -- was already "'law 
      of the case'."

      (b) It is "absurd" to say that "every tenant who settles a nonpayment 
      proceeding by agreeing to pay rent, waives the right to challenge that 
      rent at the DHCR."

      (c) The first court order, which the owner has not appealed and by which 
      it has in fact abided for nine years, is binding on the DHCR.

      (d) Even without that order, the merits herein require the Commissioner 
      to determine that the subject accommodations have at all relevant times 
      been rent-stabilized.

      (e) Treble damages must be upheld in view of the owner's deceitful 
      arguments in this proceeding.  

      (f) "Tenant has now moved from subject apartment."

      The Commissioner is of the opinion that the owner's petition should be 
      denied, and the tenant's, terminated as moot.

      The argument that the second court order, by adopting the previous 
      rental levels stipulated to by the parties, thus revoked the holding 
      that the accommodations were regulated, is frivolous; the Commissioner 
      will therefore reject it summarily and will move on to the question of 
      whether the second order is binding as to the lawful rent.

      The order in question, settling litigation in which the issues were 
      whether the tenant could be evicted, whether the warranty of 
      habitability had been breached, and how much rent was owed, ratified a 
      stipulation as to arrears, providing for their payment upon execution of 
      a lease in a certain amount.  It made no pretense, however, of 
      determining the lawful stabilization rent.  Thus the issue settled in 
      that litigation is not identical to the overcharge issue herein, so that 
      the stipulation has no res-judicata or collateral-estoppel effect 
      thereon.  The Administrator was therefore not precluded from determining 
      said lawful rent and consequent overcharge.

      The Commissioner will specifically decline to rule on the question of 
      whether the absence of a notice of entry thereof, renders nonbinding the 
      first court order (a decision rendered unnecessary by the following 
      determination on the merits).


      The above-described Certificate of Occupancy clearly provides that the 
      physicians occupying apartment offices in the subject building must 
      reside therein.  And the Rent Stabilization Code clearly provides that 
      units used as residences are subject thereto, even if also used for 
      other purposes.  Thus the certificate permits the required number of 
      apartments (at least six) to render the building "stabilized" (and any 
      changes the owner might have made to later decrease that number must be 
      viewed as unlawful ones from which it cannot be allowed to profit).  In 
      sum the building was "stabilized" at the commencement of this tenancy, 
      and because, as discussed above, no judicial decision has changed that 
      status, it remains stabilized.  The Administrator's finding of 
      overcharge will therefore be upheld, leaving the propriety of treble 
      damages as the only outstanding issue.

      With regard to the issue of treble damages, the Commissioner is of the 
      opinion that a preponderance of the evidence in the record does not show 
      a lack of willfulness by the owner, and therefore the imposition of 
      treble damages as imposed by the Rent Administrator was warranted.  The 
      evidence of record including the decision in the first court proceeding 
      clearly discloses that the subject apartment was rent stabilized.  Yet 
      the owner failed to produce a complete rental history although given 
      ample opportunity to do so and continued to allege the subject apartment 
      was exempt from rent stabilization.  The second court proceeding dealt 
      with attorney's fees, witheld rent and a rent abatement for breach of 
      the warranty of habitability, and clearly had nothing to do with the 
      issue of whether the subject apartment was rent stabilized or the amount 
      of the lawful stabilization rent.  An owner cannot avoid the penalty of 
      treble damages by bringing a nonpayment proceeding in court and settling 
      such proceding with a tenant.

      The tenant's petition, finally, must be terminated in view of the 
      Administrator's reconsideration and second order, which obviously render 
      that petition moot.
      The Commissioner has determined in this Order and Opinion that the owner 
      collected overcharges of $69,430.90.  This order may, upon expiration of 
      the period for seeking review of this Order and Opinion pursuant to 
      Article Seventy-eight of the Civil Practice Law and Rules, be filed and 
      enforced as a judgment.  Where the tenant files this order as a 
      judgment, the County Clerk may add to the overcharge, interest at the 
      rate payable on a judgment pursuant to section 5004 of the Civil 
      Practice Law and Rules, from the issuance date of the Rent 
      Administrator's order to the issuance date of the Commissioner's order.
      A copy of this order is being sent to the current occupant of the 
      subject apartment.  The lawful stabilization rent as of March 14, 1991 
      was $565.21.

      The owner is 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 

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

      ORDERED, that the petition docketed at number DG410067RT be, and the 
      same hereby is, terminated, and that the petition docketed at number 
      HD410088RO be, and the same hereby is, denied, the Rent Administrator's 
      order being thus affirmed.


                                      JOSEPH A. D'AGOSTA
                                      Deputy Commissioner


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