EAST 168TH STREET ASSOCIATES, Petitioner–Landlord, v. Octavia CASTILLO, Respondent–Tenant.
Background and Procedural Posture
This is a summary nonpayment proceeding brought by Petitioner against Respondent, a tenant in a federally subsidized housing complex, alleging that Respondent owes $748 for the month of May 2017, $1,705 for June 2017, and $1,705 for July 2017. Petitioner is seeking the market rate rent from Respondent based on its claim that Respondent did not properly recertify her federal subsidy.
A default judgment was entered on September 14, 2017 for Respondent's failure to appear in the proceeding. A marshal's notice of eviction was served on September 26, 2017. Two days later, on September 28, 2017 Respondent filed an Order to Show Cause to vacate the default judgment which was returnable on October 12, 2017. The matter was adjourned that day for Respondent to seek counsel. On November 15, 2017, the Legal Aid Society appeared in the proceeding and submitted a Supplemental Affirmation dated January 2, 2018 in support of Respondent's Order to Show Cause.
The Supplemental Affirmation is supported by Respondent's affidavit dated December 31, 2017, and seeks the following relief: 1) Vacatur of the default judgment on the basis that she was not served with the Rent Demand or the Notice of Petition and Petition; and 2) leave to serve an Answer and compelling Petitioner to accept service of same; and 3) summary judgment dismissing the Petition on Respondent's third affirmative defense because Respondent is a tenant in a federally subsidized Section 8 building, but the Petition fails to disclose the specific Section 8 program and the statutes, regulations, and rules governing the tenancy in violation of RPAPL 741(1) and (4) 1 ; or, in the alternative, 4) summary judgment on the Respondent's fourth affirmative defense dismissing Petitioner's claims for any arrears in excess of Respondent's Section 8 share on the basis that termination of her Section 8 benefits was improper because Petitioner failed to comply with HUD regulations; or, in the alternative 5) staying the execution of the warrant of eviction to enable Respondent to obtain a rent arrears grant from Public Assistance.
Petitioner opposes Respondent's motion on the following bases: 1) Respondent did not seek leave of the court to move the Court for permission to serve a Supplemental Affirmation; 2) the Respondent was properly served with the Notice of Petition and Petition and the matter should be scheduled for a traverse hearing rather than an allegation of denial of service serving as the basis for vacating the default judgment; 3) the Respondent should not be allowed to serve a late Answer because the Petitioner has been prejudiced by her delay in paying arrears; 4) the Petitioner properly pled the Section 8 program and applicable statutes, rules and regulations in the Petition; and 5) the Petitioner followed the requirements of the HUD Handbook and had adequate grounds to terminate Respondent's Section 8 subsidy and charge her market rate rent.
Pro se litigants in Housing Court who later retain counsel routinely submit Supplemental Affirmations by counsel to expand upon and better articulate the defenses available to them. While the better practice may be to withdraw the formerly pro se litigant's Order to Show Cause and submit a new motion, Petitioner did not cite any authority for this proposition either in its opposition papers, or at oral argument.
Withdrawing a pro se Order to Show Cause and filing another motion, or seeking leave of the court to submit a supplemental affirmation, is not in the interests of judicial economy and would only cause further delay. In addition, the Court finds the practice of submitting a Supplemental Affirmation to support a pro se Order to Show Cause to be acceptable as it is in the interests of justice. Respondent's attorney's Supplemental Affirmation and Respondent's Affidavit in support of the Supplemental Affirmation are deemed submitted for consideration.
Vacating the Default Judgment
CPLR 5015 (a) (1) allows vacatur based on “excusable default.” To demonstrate an excusable default, a party must establish both a reasonable excuse for defaulting and a meritorious defense to the proceeding. What constitutes a reasonable excuse for a default generally lies within the sound discretion of the motion court. (Chevalier v. 368 E. 148th Street Associates, LLC, 80 A.D.3d 411, 914 N.Y.S.2d 130 [1st Dept. 2011]; 38 Holding Corp. v. New York, 179 A.D.2d 486, 578 N.Y.S.2d 174 [1st Dept. 1992].) In addition to the grounds set forth in CPLR 5015(a), this court has the discretion to vacate its own judgment for sufficient reason and in the interests of substantial justice. (Woodson v. Mendon Leasing Corp., 100 N.Y.2d 62, 68, 760 N.Y.S.2d 727, 790 N.E.2d 1156 .)
Respondent, an individual of limited English proficiency (aff of Respondent at 10), states that she did not receive the Rent Demand and the Notice of Petition and Petition herein (aff of respondent at 11 and 12). The warrant of eviction was issued to a Marshal on September 14, 2017 and the notice of eviction was served on September 26, 2017. Respondent moved immediately on September 28, 2017 by Order to Show Cause to vacate the default.
While the affidavits of service appear proper on their face, even if Respondent received actual notice of the proceeding, a default judgment can be vacated where the default was neither willful or intentional. (Cotter v. Consol. Edison Co. of New York, 99 A.D.2d 738, 738, 472 N.Y.S.2d 384 ; Clypeta Realty v. Levy, NYLJ Feb. 20, 1991, at 25 col. 1 [App Term 1st Dept.] [“there may have been neglect on the tenant's part which culminated in the entry of a default judgment,” but judgment vacated because default not willful]; Horseshoe Realty, LLC v. Meah, 47 Misc. 3d 127(A), 2015 WL 1400554 [App. Term 1st Dept., 2015] [tenant's brief, isolated nonappearance was neither willful nor intentional].) 2
The fact that Respondent moved quickly to vacate her default judgment lends credence to the lack of willfulness or intentionality of her default. It also demonstrates her lack of intent to abandon any defenses to the action, as does her requesting counsel on the first return date of her Order to Show Cause.
Here, Respondent raises numerous potentially meritorious defenses to the proceeding. The defenses are detailed in her attorney's Supplemental Affirmation which is supported by her Affidavit.
To vacate a default judgment, the tenant's defense need not be established as a matter of law, as long as she has made a prima facie showing of her claim. (Tat Sang Kwong v. Budge–Wood Laundry Serv., Inc., 97 A.D.2d 691, 468 N.Y.S.2d 110 [1st Dept. 1983]; C & S Building Materials, 116 A.D.2d 822, 497 N.Y.S.2d 209 [3d Dept. 1986].)
Upon retaining counsel, Respondent articulated her reasonable excuse for her default, and her potentially meritorious defenses. The Court finds that Respondent has articulated viable defenses demonstrable of merit. The third affirmative defense, that Petitioner failed to plead the specific Section 8 program which governs the tenancy, calls into question the sufficiency of the Petition. Numerous courts have held that failure to plead the regulatory status, and/or rules and regulations governing a tenancy require dismissal of a proceeding. (MSG Pomp Corp. v. Doe, 185 A.D.2d 798, 586 N.Y.S.2d 965 [1st Dept. 1992]; Villas of Forest Hills Co. v Lumberger, 128 A.D.2d 701, 513 N.Y.S.2d 116 [2nd Dept. 1987]; Matter of Volunteers of America v. Almonte, 65 A.D.3d 1155, 886 N.Y.S.2d 46 [2d Dep't 2009) ].) The fourth affirmative defense, that Petitioner improperly terminated Respondents Section 8 subsidy and is seeking a rent in excess of what is lawful, calls into question whether Petitioner properly followed the rules and regulations governing Respondent's tenancy.
Vacating the default judgment is also warranted by the strong public policies in this State favoring the resolution of cases on the merits rather than on default. (Chevalier v. 368 E. 148th Street Associates, LLC, 80 A.D.3d 411, 914 N.Y.S.2d 130 [1st Dept. 2011] ), citing Harcztark v. Drive Variety, Inc., 21 A.D.3d 876, 876–877, 800 N.Y.S.2d 613 [1st Dept. 2005]; 38 Holding Corp v. New York, 179 A.D.2d 486, 487, 578 N.Y.S.2d 174 [1st Dept. 1992]; Picinic v. Seatrain Lines, Inc., 117 A.D.2d 504, 497 N.Y.S.2d 924 [1st Dept. 1986]; Cappel v. RKO Stanley Warner Theaters, 61 A.D.2d 936, 403 N.Y.S.2d 31 [1st Dept. 1978]; Horseshoe Realty v. Meah, 47 Misc. 3d 127(A), 2015 WL 1400554 [App. Term 1st Dept. 2015].
As explained by the Appellate Division, First Department in 38 Holding Corp. v. New York, 179 A.D.2d 486, 487, 578 N.Y.S.2d 174 [1st Dept. 1992]):
Repeatedly, it has been held that “it is the general policy of the courts to permit actions to be determined by a trial on the merits wherever possible and for that purpose a liberal policy is adopted with respect to opening default judgments in furtherance of justice to [*6]the end that the parties may have their day in court to litigate the issues ․”.
Under the circumstances of this case, where the default was not willful or deliberate, Respondent moved quickly to vacate her default, subsequently retained counsel and made a prima facie showing of potentially meritorious defenses, the default judgment should be vacated. This is especially true in light of Petitioner's failure to demonstrate that it would be severely prejudiced by the vacatur. Petitioner states only that Respondent's “current indebtedness through February 2018 is $11,600.00.” (Aff of Petitioner at 9.) Petitioner does not expound on the prejudice to which it has been subjected. In fact, based on Petitioner's rent ledger, attached at Exhibit H of its opposition papers, it appears that Respondent has continued to pay her tenant share of the rent during the pendency of this proceeding so that the arrears have not continued to mount, and the passage of time since commencement is attributable to Respondent's having retained counsel as well as the subsequent motion practice. At oral argument it was not disputed that Respondent is now recertified.
Having met the two-pronged test of CPLR 5015, the default judgment is hereby vacated.
Leave to Serve a Late Answer
The parties are returned to the status quo, and Respondent should be permitted to interpose a late Answer. Respondent's motion is granted, and the proposed late Answer is deemed served upon Petitioner and filed, after the Court's consideration of the relatively brief nature of the delay, the lack of prejudice to Petitioner, the reasonable excuse for the delay, the evidence of meritorious defenses, the lack of evidence of a willful default or intent to abandon any defenses to the action, and the public policy which favors the resolution of cases on the merits. (City Line Auto Mall, Inc. v. Citicorp Leasing, Inc., 45 A.D.3d 716, 846 N.Y.S.2d 298 .) In addition, Respondent who was previously pro se now has counsel and should be allowed to serve a late Answer in order to obtain the full benefit of representation. (Harlem Restoration Project v. Alexander, NYLJ July 5, 1995, at 27, col. 2 [Civ. Ct. N.Y. Co.] ).
To hold that Respondent cannot interpose a late Answer after vacating the default judgment would render the vacatur of the default judgment a meaningless exercise, and it would be antithetical to the strong public policy in favor of resolving cases on their merits. The Court finds that the Petitioner would not be actually prejudiced by the interposition of a late Answer, nor has Petitioner claimed surprise. Any delay beyond Respondent's promptly made motion to vacate the default judgment is attributable to her seeking counsel, motion practice, and settlement negotiations. As stated above, while Petitioner claims prejudice from Respondent's alleged indebtedness, at oral argument it was not disputed that Respondent is now recertified and, according to Petitioner's breakdown annexed at its opposition papers at Exhibit H, Respondent has continued to pay her tenant share of the rent.
Summary Judgment Standard
CPLR 3212(e) provides that “summary judgment may be granted as to one or more causes of action, or part thereof.” Summary judgment is designed to expedite civil cases, by removing claims which can be resolved as a matter of law from the trial calendar. (Andre v. Pomeroy, 35 N.Y.2d 361, 364, 362 N.Y.S.2d 131, 320 N.E.2d 853 .)
Where no triable issue of fact exists, the Court must grant summary judgment to the movant. (Alvarez v. Prospect Hospital, 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923, 501 N.E.2d 572 ; Zuckerman v. City of New York, 49 N.Y.2d 557, 598, 427 N.Y.S.2d 595, 404 N.E.2d 718 .)
To defeat a motion for summary judgment, one opposing the motion must “show facts sufficient to require a trial on any issue of fact.” (CPLR 3212[b].) The party in opposition must “produce evidentiary proof in admissible form to require a trial of material questions of fact on which he rests his claim.” Zuckerman, 49 N.Y.2d at 562, 427 N.Y.S.2d 595, 404 N.E.2d 718.
Failure to Plead Section 8 Status
RPAPL 741 mandates that a petition must
“(1) State the interest of the petitioner in the premises from which removal is sought; (2) State the respondent's interest in the premises and his relationship to petitioner with regard thereto; (3) Describe the premises from which removal is sought; (4) State the facts upon which the special proceeding is based; and (5) State the relief sought. The relief may include a judgment for rent due, and for a period of occupancy during which no rent is due, for the fair value of use and occupancy of the premises if the notice of petition contains a notice that a demand for such a judgment has been made.”
Thus, pursuant to RPAPL 741, where a tenancy is subject to a specific type of regulation, the Petition must set forth the premises' regulatory status since the status may determine the scope of the parties' rights and defenses. A petition that fails to satisfy this requirement is subject to dismissal. (MSG Pomp Corp. v. Doe, 185 A.D.2d 798, 586 N.Y.S.2d 965 [1st Dept. 1992]; Villas of Forest Hills Co. v. Lumberger, 128 A.D.2d 701, 513 N.Y.S.2d 116 [2d Dept. 1987][Petitioner must also plead compliance with the rules and regulations governing the tenancy]; Matter of Volunteers of America–Greater v. Almonte, 65 A.D.3d 1155, 886 N.Y.S.2d 46 [2d Dept. 2009].) This requirement ensures that Respondents are accurately alerted to the claims against them in order to prepare a proper defense. A precise and complete description of regulatory status is essential to this purpose. In Homestead Equities Inc. v. Washington, 176 Misc. 2d 459, 672 N.Y.S.2d 980, the Court opined, “[t]hese pleadings are required because they may determine the scope of the rights of the parties, and may affect the manner in which the court proceeds with the litigation.” (Homestead Equities Inc., 176 Misc. 2d at 462, 672 N.Y.S.2d 980.)
The Petition states at Paragraph 7:
The apartment is not subject to Rent Control, the ETPA, the Rent Stabilization Law or the Omnibus Housing Act. The premises are contained in a multifamily housing project which receives assistance from the DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT under the SECTION 8 PROGRAM, pursuant to the NATIONAL HOUSING ACT and the US HOUSING ACT OF 1937. Occupancy requirements and rents are established and administered by HUD.
The HUD Handbook Section 4530.3 governs the subject project based property.3 Courts have held that the provisions of the HUD handbook are mandatory and not merely suggestive.4 Chapter 1, Section 1–2 of the HUD Handbook (Figure 1–1) sets forth the numerous and varied programs subject to the HUD Handbook.5 The Handbook contains a myriad of rules that landlords of federally subsidized housing must follow. Notably, these rules are not the same for each program. For instance, the Handbook at Chapter 1, Section 1–2.B cautions that “for HUD-subsidized properties financed by state agencies, this handbook covers only the applicable HUD requirements. Owners of these properties are subject to additional requirements established by states and their designated housing finance or other agencies.”
The Handbook specifically addresses how its applicability may differ depending on the program. Chapter 1, Section 1–2.C (“How Applicability Varies”) states that “[n]ot all requirements apply to all properties or tenants. Furthermore, some properties are assisted under multiple programs and are subject to multiple sets of requirements.” Specifically, Chapter 1, Section 1–2.C indicates that applicability can vary depending on by the “[t]ype of Section 8 assistance (e.g., Loan Management Set–Aside versus New Construction),” and as set forth above, if these programs receive State financial assistance, the tenant's subsidy may be subject to “additional requirements established by states and their designated housing finance or other agencies.” (Chapter 1, Section 1–2 of the HUD Handbook.)
In Giannini v. Stuart, 6 A.D.2d 418, 178 N.Y.S.2d 709 (1958), the court found a Petition to be deficient which pled the bare allegation that a premises was decontrolled. The court explained that “the decontrol may rest on one of several statutorily specified reasons.” (Id. at 420, 178 N.Y.S.2d 709.) In dismissing the proceeding, the court held that a “tenant is entitled to a concise statement of the ultimate facts upon which the proceeding is predicated so that the issues, if any there be, are properly raised and can be met.” (Id. at 420, 178 N.Y.S.2d 709.)
In this case, as in Giannini, the Petitioner's conclusory statement that the premises is a HUD building that receives assistance under the Section 8 Program is inadequate. The Petitioner ignores that there are numerous Section 8 Programs, each subject to different rules and requirements. The Petition is silent as to by which Section 8 Program the Respondent's tenancy is governed.
Respondents should not have to guess which Section 8 program governs their tenancy, or which rules and regulations their tenancy is subject to when preparing a defense. The pleading requirement is hollow if this analysis takes place during litigation when, and if, the Petitioner reveals the particular regulations to which the apartment is subject.6 In Volunteers of America–Greater v. Almonte, 65 A.D.3d 1155, 886 N.Y.S.2d 46 the court found it unacceptable that the respondent's attorney was not aware of the contract that provided the respondent with potential defenses until the “litigation was well under way.” The purpose of pleading specific regulatory schemes and compliance therewith is to enable litigants and their attorneys to ascertain if there are “potential defenses” to the proceeding prior to being in court, and for the court to be able to properly adjudicate the proceeding. (Id. at 1157, 886 N.Y.S.2d 46.) Pleading the particular Section 8 program would enable Respondent and/or her attorney to discern exactly which requirements apply to her, and to determine the scope of her rights and defenses.
For the foregoing reasons, Respondent's motion for summary judgment is granted on her third affirmative defense as a matter of law. Accordingly, the Petition is dismissed. The remaining branches of Respondent's motion are denied as moot. The foregoing constitutes the decision and order of the Court.
1. Although the motion seeks dismissal pursuant to RPAPL 741(1) and 741(4) for failure to state the facts upon which the proceeding is based, the motion is actually pursuant to CPLR 3211(a)(7) for failure to state a cause of action, in that Petitioner failed to comply with RPAPL741 (1) and 741(4).
2. Moreover, courts will relieve litigants of their defaults due to law office failure. (Chevalier v. 368 E. 148th St. Assoc., LLC, 80 A.D.3d 411, 914 N.Y.S.2d 130 [1st Dept. 2011] [excuses asserted by litigant's prior counsel found to be sufficient to vacate the default “because any law office failure was inadvertent”, especially in light of the short delay caused by the default, the lack of prejudice to the other party and public policy concerns]; see also, Elliot Place Properties, Inc. v. Perez, 53 Misc. 3d 1212(A), 48 N.Y.S.3d 265 [N.Y. Civ. Ct., New York Co., 2016] for a detailed discussion of vacatur of default judgments based on law office failure). As such, it would make no sense to hold an indigent, pro se litigant with limited proficiency in English to a higher standard than lawyers.
3. Presumably, though not made clear by Petitioner, it is referring to the HUD handbook when it states in the Petition that “[o]ccupancy requirements and rents are established and administered by HUD.”
4. Courts have held that the provisions of the HUD Handbook are mandatory, not merely suggestive. (Thorpe v. Housing Authority of Durham, 393 U.S. 268, 89 S.Ct. 518, 21 L.Ed.2d 474 [Handbook provisions are mandatory upon landlords]; Green Park Assocs. v. Inman, 121 Misc. 2d 204, 205, 467 N.Y.S.2d 500 [N.Y. Co. Civ. Ct. 1983] [“it is established that the handbook-prescribed ․ procedures were intended to be mandatory”].)
5. Section 221(d)(3) Below–Market Interest Rate; Section 236—Rental Assistance Payment (RAP); Rent Supplement; Section 8 Project–Based Assistance New Construction including State Agency Financed (generally are New Construction or Substantial Rehabilitation projects), Substantial Rehabilitation, Section 202 Projects with Section 8 Assistance (Section 202/8); Rural Housing Section 515 Projects with Section 8 Assistance (RHS Section 515/8), Loan Management Set–Aside (LMSA), Property Disposition Set–Aside (PDSA), Section 202 with 162 Assistance—Project Assistance Contracts (Section 202 PACs); Section 202 with Project Rental Assistance Contracts (Section 202 PRACs); Section 202 without Assistance (Income Limits Only); and Section 811 with Project Rental Assistance Contracts (Section 811 PRACs).
6. At oral argument, Petitioner's attorney was not able to articulate the particular Section 8 program governing Respondent's tenancy.
Karen May Bacdayan, J.