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IN RE: the Application of PERSPOLIS REALTY LLC, Petitioner, For a Judgment Under Article 78 of The Civil Practice Law and Rules, v. DIVISION OF HOUSING AND COMMUNITY RENEWAL, and Eliza Rodriguez, Respondents.
In this Article 78 proceeding, petitioner Perspolis Realty, LLC challenges an order which respondent Division of Housing and Community Renewal (DHCR) issued on September 28, 2015 and affirmed on May 3, 2016 in response to petitioner's petition for administrative review (PAR). These orders found that, due to a determination on the April 10, 2008 base date, respondent Eliza Rodriguez's rent was frozen at $374.88.
Further, the orders awarded treble damages to the tenant, Ms. Rodriguez. They relied on DHCR Policy Statement 89–2 which indicates, in pertinent part, that treble damages are awarded for willful overcharges (citing Rent Stabilization Code § 26–516 [a]  [i] ) and that there is a presumption that overcharges are willful. Petitioner argued that it showed lack of willfulness because, within the timeframe DHCR provided, it tendered several refund checks to Ms. Rodriguez. The orders rejected this position, noting that Ms. Rodriguez's counsel stated that she had received the first check, for $1480.14, but that she had never received the subsequent checks. Moreover, the orders concluded that, even if all the alleged checks were considered, petitioner still had not refunded the full amount of the overcharge together with all outstanding interest.
In further support of its argument that the overcharge was not willful, petitioner pointed out that the tenant's overcharge complaint used the wrong docket number, “JF 530034 S,” instead of the actual number, “JF 530034 B,” for one of her challenges. It is in docket number JF 530034B that the rent rate was frozen at $374.88. Therefore, petitioner argued, it was not on proper notice of this complaint against it and it had no ability to remunerate Ms. Rodriguez within the specified timeframe. In the challenged orders, DHCR concluded this argument was disingenuous. They noted that petitioner had brought three separate applications to restore rent that were related to—and referred to—the freeze order set forth in docket number JF 530034 B. Therefore, petitioner could not claim ignorance of the proper docket number.
In considering the PAR, DHCR also rejected the argument that the September 28, 2015 order improperly applied the law. Petitioner had contended that, under Rent Stabilization Code 2526.1 (v), which provides that a rent reduction order “remaining in effect within four years of the filing of a complaint pursuant to this section may be used to determine an overcharge or award an overcharge or calculate an award of the amount of an overcharge.” Petitioner stated that because of the dearth of complaints over the four years immediately preceding the current challenge, DHCR should have exercised its discretion and disregarded the 2008 rent freeze order. DHCR found that although it was within its discretion to disregard the old order, the limited circumstances in which it would do so were not present in the case at hand. It further cited Cintron v. Calogero (15 NY3d 347, 356  ), which states that “rent reduction orders impose a continuing obligation on a landlord and, if still in effect during the four-year [look-back] period, are in fact part of the rental history which DHCR must consider.” The discretionary language in Rent Stabilization Code 2526.1 (v), coupled with the principle articulated in Cintron, DHCR concluded, justified the ruling and the imposition of treble damages.
Petitioner also argued to the DHCR that the overcharge dispute had been settled by stipulation in 2011. DHCR rejected this argument as well, noting that petitioner had not provided a copy of the stipulation and that Ms. Rodriguez stated she was unaware of such an arrangement.
The current Article 78 proceeding reiterates the challenges made to the DHCR during its review and appeal process. In opposition, DHCR points out the deferential standard of review that courts must apply. It asserts that its rulings were rational. It notes that treble damages are mandatory unless a landlord proves by a preponderance of evidence that the overcharge was not willful, and it states petitioner did not satisfy its evidentiary burden. In reply, petitioner adheres to its challenges. Among other things, it also attaches the first page of a letter from March 2015 to DHCR. The letter, from petitioner, states that it had resolved all overcharge claims prior to June 9, 2011 through a settlement pursuant to which it refunded the overcharge. In support, petitioner included a single page of a purported settlement agreement, which cuts off at the bottom of the page and does not include the signatures of either petitioner or Ms. Rodriguez, and which refers not to a 2008 rent freeze order but to petitioner's eviction proceeding against Ms. Rodriguez. The submitted page of the stipulation does not refer to any refunds by petitioner to Ms. Rodriguez but instead provides that Ms. Rodriguez would pay petitioner the back rent which she owed and that petitioner would make necessary repairs to the apartment. Petitioner states that, at the least, this matter should be remanded to DHCR for further consideration in light of the stipulation.
“The appropriate, well-established standard of judicial review of an administrative determination is whether the determination was arbitrary and capricious or without a rational basis in the administrative record” (Tockwotten Assoc., LLC v. New York State Div. of Housing and Community Renewal, 7 AD3d 453, 454 [1st Dept 2004] ). If the determination was rational, the court cannot overturn the decision (id.; see Two Lincoln Square Assoc. v. New York State Div. of Housing and Community Renewal, 191 AD2d 281, 281 [1st Dept 1993] ). With respect to treble damages, courts determine whether it was rational to conclude that a landlord “failed to establish, by a preponderance of the evidence, that the ․ rent overcharges were not willful” (In re 426 3rd Ave. Realty Co. v. New York State Div. of Housing and Community Renewal, 29 AD3d 332, 333 [1st Dept 2006] ). This same standard of reasonableness applies to DHCR's interpretation of “the statutes and regulations it administers” (Matter of Cipolla v. New York State Div. of Housing and Community Renewal, 153 AD3d 920, 922 [2nd Dept 2017]; see Terrace Court, LLC v. New York State Div. of Housing and Community Renewal, 18 NY3d 446, 454  ).
In the proceeding at hand, the Court determines that DHCR's decision was rational. DHCR did not misapply the Rent Stabilization Code when it relied on Cintron. As respondent's decision denying the PAR noted, Rent Stabilization Law § 26–516 [a]  [i] gives DHCR the discretion to limit its look-back to four years, but it should not do so where an old freeze order remains in effect during the four-year period (see also H.O. Realty Corp. v. State of New York Div. of Housing and Community Renewal, 46 AD3d 103, 108 [1st Dept 2007] [“It is difficult to conceive of a rational basis for precluding from consideration evidence that is otherwise relevant and helpful in determining willfulness simply because it predates the date of the overcharge by four years”] ). As such, the Rent Stabilization Law does not legislatively overturn Cintron. Petitioner's reliance on Matter of Napa Partners, LLP v. DHCR (2016 NY Misc LEXIS 5181 [Sup Ct, Queens County, June 21, 2016, Index No. 11928/2015] for a contrary conclusion is misplaced. The Court notes, for one thing, that a Queens trial court decision is persuasive but not binding authority. More significantly, citing Cintron, among other cases, the Second Department reversed the trial court's ruling and found that the DHCR's determination, including its decision to consider rent reduction orders from 1996 and 1997, was rational (Matter of Napa Partners, LLC v. Div. of Housing and Community Renewal, 158 AD3d 632 [2nd Dept 2018] ).
In addition, petitioner's other arguments are unpersuasive. DHCR had ample evidence to conclude that petitioner was aware of the correct docket number, given that petitioner's applications to restore rent all referred to it properly. Furthermore, as DHCR notes, Rent Stabilization Code 2526.1 (f) (2), petitioner is liable for all overcharge penalties, including those incurred by the prior owner of the building. It was not required to accept petitioner's representation that it had mailed Ms. Rodriguez all the overcharge she was due, as Ms. Rodriguez stated that she only received the first check—which was the only one that she cashed. Even if that were not the case, DHCR concluded that petitioner had not attempted to refund the full amount due to the tenant including all interest.
The Court does not consider the pages from the supposed settlement stipulation and the accompanying letter, which petitioner submits for the first time in its reply papers and which were not before DHCR when it reached its determinations (see Rizzo v. New York State Div. of Housing and Community Renewal, 6 NY3d 104, 110  ). Even if petitioner is correct that the pages were before DHCR at the time, it would not change the Court's decision. The pages are incomplete, the stipulation is cut off at the bottom, there is no signature page, and nothing in the documents appears to be pertinent to the rent overcharge at issue. The Court need not address the remainder of the parties' arguments or discuss the additional cases upon which the parties rely. Accordingly, it is
ORDERED that the petition is dismissed.
Carmen Victoria St. George, J.
Response sent, thank you
Docket No: 101059/2016
Decided: June 12, 2018
Court: Supreme Court, New York County, New York.
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