GRAHAM COURT OWNERS CORP v. THOMAS

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Civil Court, City of New York.

GRAHAM COURT OWNERS CORP., Petitioner, v. Joycella THOMAS, Respondent.

55744/2014

Decided: February 04, 2019

Graham Court Owners Corp., the petitioner in this proceeding (“Petitioner”), commenced this summary proceeding against Joycella Thomas, the respondent in this proceeding (“Respondent”), seeking a money judgment and possession of 1925 Seventh Avenue, Apt. 3G, New York, New York (“the subject premises”) on the basis of nonpayment of rent. Respondent interposed defenses and counterclaims sounding in rent overcharge and breach of the warranty of habitability. By an order dated November 2, 2015 (“the Decision”), the Court granted Respondent's motion for partial summary judgment, awarding Respondent a judgment on part of her counterclaims. As the petition has otherwise been satisfied, this matter proceeded to trial on the balance of Respondent's counterclaims, a trial which the Court held on April 26, 2017, October 31, 2017, February 13, 2018, March 26, 2018, April 17, 2018, May 16, 2018, and June 18, 2018 and then adjourned for post-trial submissions, ultimately to January 8, 2019.

Respondent is a tenant of the subject premises subject to the Rent Control Law. The New York State Division of Housing and Community Renewal (“DHCR”) issued a rent reduction order in 1976 (“the rent reduction order”). The rent reduction order did not mention the subject premises. However, the Court, in the Decision, found that the rent reduction order applied to the subject premises, as DHCR had denied Petitioner's application to restore the rent by an order dated June 10, 2009 (“the denial order”) that stated that the rent reduction order applied to the subject premises. DHCR also found that the rent reduction order applied to the subject premises in an affirmance of the denial order following a Petition for Administrative Review (“PAR”) dated August 12, 2011. The rent reduction order froze the collectible rent at a rate of $ 241.01 a month from its inception in 1976 through March of 2013, after which DHCR restored the rent by another order. The Decision found that Respondent interposed her overcharge claim on January 14, 2011, thus preserving her claim as of January 14, 2009.

The Decision held that Petitioner collected more than $ 241.01 a month from February of 2009 through and December of 2010 and then against from March of 2012 through March of 2013, for a total of $ 32,095.53. The trial concerned time periods other than those determined by the Decision, Respondent's claim for treble damages, interest, and attorneys' fees, and Respondent's habitability counterclaims.

A rent ledger introduced into evidence shows that Respondent made the following payments to Petitioner: $ 512.00 in January of 2011, $ 642.87 and $ 643.87 and $ 512.00 in February of 2011, $ 512.00 and $ 644.87 in March of 2011, $ 175.30 and $ 105.42 in April of 2011, $ 831.00 in May of 2011, $ 512.00 and $ 700.00 and $ 175.30 and $ 235.26 and $ 728.50 and $ 207.50 in June of 2011, $ 415.00 in July of 2011, $ 415.00 and $ 775.00 and $ 765.67 in August of 2011, $ 415.00 in September of 2011, $ 415.00 and $ 775.00 in October of 2011, $ 415.00 and $ 775.00 in November of 2011, $ 415.00 and $ 775.00 in December of 2011, $ 415.00 and $ 776.50 and $ 137.15 in January of 2012, and $ 776.00 and $ 207.50 in February of 2012. The total amount of payments during this time period was $ 15,796.71. At a rate of $ 241.01 for fourteen months, Respondent's actual rent liability for this period was only $ 3,374.14. The difference between the two is the overcharge Respondent paid, which was $ 12,422.57. This sum, plus the $ 32,095.53, totals $ 44,518.10.

A landlord found to have overcharged a rent-controlled tenant shall be liable for treble damages unless the landlord proves that the violation was neither willful “nor the result of a failure to take practicable precautions against the occurrence of the violation.” N.Y.C. Admin. Code § 26-413(d)(2). The statute therefore lays the burden on Petitioner to prove that the overcharge was not willful. Santon v. Rooney, 99 Misc. 2d 687, 690, 416 N.Y.S.2d 1020 (Civ. Ct. N.Y. Co. 1979), Jaffe v. Glay Realty Corp., 2 Misc. 2d 915, 920, 150 N.Y.S.2d 294 (City Ct. N.Y. Co. 1956). Compare Matter of 450-452 E. 81st St., LLC v. New York State Div. of Hous. & Community Renewal, 70 A.D.3d 489, 895 N.Y.S.2d 54 (1st Dept. 2010)(apportioning the same burden to a landlord found to have overcharged a rent-stabilized tenant).

The secretary of Petitioner's Board (“the Secretary”) testified that he has worked for Petitioner since 1987; that he first became aware of the rent reduction order when another tenant brought it to his attention in 2011; that the rent reduction order was for one tenant who was not Respondent; that Petitioner received a number of Maximum Base Rent (“MBR”) increases from DHCR for the subject premises in the intervening years; 1 that he understood that DHCR would not have permitted Petitioner a MBR if Petitioner had denied Respondent an essential service; that, for the Secretary, the MBR's, then, compelled the conclusion that the rent reduction order could not have applied to the subject premises; that, when Petitioner applied to restore the rent that the rent reduction order had frozen, Petitioner applied on behalf of a number of apartments, including the subject premises, out of an abundance of caution; that, in 2012, he stopped sending rent bills to rent-controlled tenants until the issue was resolved; that the only demand Petitioner made of Respondent for rent was made in error upon the commencement of this proceeding; and that he credited Respondent for the rent reduction order after the Order found an overcharge.

The Secretary testified on cross-examination that Petitioner obtained title to the building in which the subject premises is located (“the Building”) in a tax foreclosure sale; that he was aware of an Article 78 proceeding concerning the rent reduction order; 2 that he was familiar with the rent reduction order with regard to that tenant as far back as 2010; that he believed that Respondent owed arrears even though a nonpayment case was commenced in error; that he did not want to sue Respondent in a nonpayment proceeding until two years after the restoration of the rent, the length of the statute of limitations for a rent overcharge complaint for a rent-controlled apartment; that Petitioner received rent payments into a lockbox that were automatically deposited; that when he commenced this proceeding, he based the monthly rent on the maximum collectible rent (“MCR”); and that he did not think that the rent reduction order applied to the subject premises because the Building actually consists of four separate structures and the structure that the condition mentioned in the rent reduction order was not in the same one as the subject premises.

Respondent introduced into evidence rent bills Petitioner sent Respondent as of February 22, 2012 and evidence of a fuel cost adjustment showing a total fuel cost adjustment of $ 104.32, and that the current MCR has been $ 1,023.82. At Respondent's request, the Court also took judicial notice of an affidavit that the Secretary executed in this matter on April 23, 2014 that stated that Respondent owed $ 16,000.00 at the time.

The Secretary testified on redirect examination that he is very familiar with DHCR, having filed documents with DHCR for thirty-two years with a building that, as of twenty-two years before his testimony, had twenty-four rent-controlled units and had thirteen rent-controlled units as of five years before his testimony; that he understands that a rent reduction order for a rent-controlled unit remains in effect when the tenant vacates and a new, rent-stabilized tenant takes possession; and that his registration of new rent-stabilized tenants in those apartments for him compelled the conclusion that the rent reduction order did not apply to units other than the one he understood it to apply to.

A finding of willfulness should depend on a finding as to whether the owner had reason to know that the amount it was charging was in excess of the lawful rent. Round Hill Mgmt. Co. v. Higgins, 177 A.D.2d 256, 257-58, 575 N.Y.S.2d 842 (1st Dept. 1991). A lack of clarity about an issue that persists until a DHCR ruling shall not be a basis to find willfulness, Myers v. D'Agosta, 202 A.D.2d 223, 224, 608 N.Y.S.2d 447 (1st Dept. 1994), nor should a “hypertechnical error.” Two Lincoln Square Assocs. v. N.Y. State Div. of Hous. & Cmty. Renewal, 191 A.D.2d 281, 282, 594 N.Y.S.2d 755 (1st Dept. 1993). As the condition in the rent reduction order did not appear to apply to the specific structure that Respondent lived in, and as the rent reduction order did not state the subject premises, the Court does not find that such a level of ambiguity renders Petitioner's original collection of rents from Respondent at the MCR rate to be willful.

However, as of June 10, 2009, the date of the denial order, DHCR expressly applied the rent reduction order to the subject premises. Once a landlord is on notice of the relevance of a rent reduction order, charging rent in excess of such an order is willful. Raffo v. McIntosh, 3 Misc. 3d 127(A), 2004 WL 906582 (App. Term 1st Dept. 2004).

Petitioner argued that the rent reduction order could not have applied to the subject premises because of intervening MBR's DHCR granted for the subject premises.3 Petitioner did not actually introduce into evidence any MBR orders that DHCR issued. On that basis alone, Petitioner does not sustain its burden of proving that it relied on them. Even assuming arguendo, however, that the Court takes into consideration such MBR orders, copies of which the parties annexed to the motion papers upon which the Court granted summary judgment by the Decision, the MBR orders do not support Petitioner's argument. MBR orders dated November 29, 1996, April 22, 1999, June 7, 2001, February 12, 2004, November 10, 2005, October 26, 2006, and February 28, 2008 grant increases, but all also state that the increases are only collectible as of the first rent payment date after the effective date of a rent reduction order, compelling the conclusion that an extant rent reduction order would not preclude DHCR from issuing an MBR. Issuance of MBR's with such language precludes a defense against an overcharge based on collection of a rent higher than a rent reduction order permits. Westmoreland v. Kispert, 2002 N.Y. Slip Op. 50474(U), ¶¶ 4-5, 2002 WL 31777885 (Civ. Ct. Queens Co.).

Petitioner's argument is also inconsistent with Policy Statement 90-1, which DHCR issued in 1990, nineteen years before 2009. See Nelson, supra, 95 A.D.3d at 734, 945 N.Y.S.2d 249. This policy statement provides in pertinent part: “Rent decrease orders for a failure to maintain services, currently in effect for rent controlled apartments, which do not distinguish between a failure to provide an essential or a non-essential service, bar the collectability of any subsequent MCR increase, until an order has been issued restoring the rent.” Id., W. 109 Realty LLC v. Hidalgo, 42 Misc. 3d 874, 878-79, 978 N.Y.S.2d 670 (Civ. Ct. N.Y. Co. 2014), Matter of Lowe v. State of N.Y. Div. of Hous. & Community Renewal, 3 Misc. 3d 1105(A), 2004 WL 1152738 (S. Ct. Queens Co. 2002). Logically, an MBR order only deemed collectible on the lifting of a rent reduction order could only be issued during the pendency of a rent reduction order. Petitioner's contrary position therefore amounts to a misapprehension of the law, which is insufficient rebut the presumption of willfulness. PWV Acquisition, LLC v. Paradise, 59 Misc. 3d 130(A), 2018 WL 1529179 (App. Term 1st Dept. 2018).

Petitioner's rent ledger shows that, from February of 2009 through June of 2009, Respondent paid Petitioner an aggregate of $ 4,692.00. During this time, the pendency of the rent reduction order rendered Respondent's monthly collectible rent liability to be $ 241.01 per month. Five months at $ 241.01 per month is $ 1,205.05. The amount of overcharge that Respondent paid for this time, therefore, is $ 3,486.95. The Court does not award treble damages for this amount. Taking the $ 3,486.95 out of the total overcharge noted above of $ 44,518.10 leaves a balance of $ 41,031.15, for which the Court determines treble damages are appropriate. Three times $ 41,031.15 is $ 123,093.45. Adding the $ 3,486.95 overcharge amount for which treble damages do not apply to the $ 123,093.45 leaves a total of $ 126,580.40.

Respondent argues that she is entitled to prejudgment interest, citing Mohassel v. Fenwick, 5 N.Y.3d 44, 50, 799 N.Y.S.2d 758, 832 N.E.2d 1174 (2005). However, the decision of the Court in Mohassal, supra, was “informed by Rent Stabilization Law § 26-516(a)”, in particular by N.Y.C. Admin. Code § 26-516(a)(4), which states that an owner who is found to have overcharged rent “may be assessed ․ interest from the date of the overcharge.” Id. at 50, 799 N.Y.S.2d 758, 832 N.E.2d 1174. In contrast to the Rent Stabilization Law, however, the analogous Rent Control Law provision, N.Y.C. Admin. Code § 26-413(d), does not provide for pre-judgment interest. Where a law expressly describes a particular thing to which it shall apply, the Court must draw an “irrefutable inference” that the Legislature intended to omit or exclude what the Legislature omitted or excluded. Myers v. Schneiderman, 30 N.Y.3d 1, 12, 62 N.Y.S.3d 838, 85 N.E.3d 57 (2017), Matter of Shannon, 25 N.Y.3d 345, 352, 12 N.Y.S.3d 600, 34 N.E.3d 351 (2015), Matter of Raynor v. Landmark Chrysler, 18 N.Y.3d 48, 56, 936 N.Y.S.2d 63, 959 N.E.2d 1011 (2011), Town of Riverhead v. N.Y. State Bd. of Real Prop. Servs., 5 N.Y.3d 36, 42-43, 799 N.Y.S.2d 753, 832 N.E.2d 1169 (2005). Given the explicit inclusion of pre-judgment interest as a remedy in N.Y.C. Admin. Code § 26-516(a), which the Court in Mohassel, supra, stated “informed” its determination thereof, the absence of such a provision in N.Y.C. Admin. Code § 26-413(d) compels the conclusion that the drafters intended such an omission.

However, Respondent is correct that she is entitled to post-judgment interest accruing from the award of a judgment in the amount of $ 32,095.53 as of the date of the judgment, November 2, 2015. CPLR § 5002. The amount of interest “shall” be computed by the clerk of the court and included in the judgment. Id.

Respondent is also correct that the statute entitles her to a judgment in attorneys' fees. N.Y.C. Admin. Code § 26-413(d). As Respondent requests fees, the Court must calendar the matter for a hearing on the fees.

Respondent also raised a counterclaim of breach of the warranty of habitability. A counterclaim for breach of the warranty of habitability, in the form of a rent abatement, is not limited to unpaid rent sought by landlord. Dunbar Owner LLC v. Jones, 54 Misc. 3d 134(A), 2017 WL 375216 (App. Term 1st Dept. 2017). The measure of damages for breach of the warranty of habitability is the difference between the rent and the value of the premises during the period of the breach. Park West Management Corp. v. Mitchell, 47 N.Y.2d 316, 329, 418 N.Y.S.2d 310, 391 N.E.2d 1288, cert. denied, 444 U.S. 992, 100 S.Ct. 523, 62 L.Ed.2d 421 (1979), Elkman v. Southgate Owners Corp., 233 A.D.2d 104, 105, 649 N.Y.S.2d 138 (1st Dept. 1996). In a rent-controlled apartment, the rent as such is the MCR. Matter of White v. New York State Div. of Hous. & Community Renewal, 2013 N.Y. Slip Op. 30747(U) n. 2, 2013 WL 1699246 (S. Ct. N.Y. Co. 2013), Matter of COD, L.L.C. v. New York State Division of Housing and Community Renewal, 2008 WL 168960, 2008 N.Y. Misc. LEXIS 7756 (S. Ct. N.Y. Co. 2008). The Court considers Respondent's counterclaim from the date of notice of the conditions in Respondent's answer in March of 2014.

Respondent testified in October of 2017 that there was a dent under the stove where Petitioner removed a big stove and replaced it with a smaller stove; that the kitchen had mouse holes and an uneven inconsistently-tiled floor over a rotted woof subfloor in kitchen; and that risers in the kitchen had a mold condition. Respondent's answer, dated March 19, 2014 included the allegations regarding the kitchen, as did an answer in a prior case between the parties, Graham Court Owners Corp. v. Thomas, Index No. L/T 51951/2007 (Civ. Ct. NY Co.) mailed on February 2, 2007 (“the 2007 answer”). Respondent introduced into evidence photographs taken in October of 2014 of the kitchen floor, the bottom of the wall, and the risers. The Court took judicial notice of a “B” violations of the housing maintenance code that the Department of Housing Preservation and Development of the City of New York (“HPD”) placed on the subject premises on July 27, 2016 for these conditions. The Court finds that this condition diminished the habitability of the subject premises by ten percent. Ten percent of $ 1,023.92 for the forty-four months from March of 2014 through October of 2017 leaves a total of $ 4,505.25.

Respondent testified in October of 2017 that the shower head and knobs in the tub frequently fall off; that the super has fixed them many times; that, after the repair of the shower, she couldn't take a shower for about a month in the summer of 2016 because Petitioner took a pipe out for the repair; that bathroom floor tiles are not affixed the floor; that water leaks over the bathroom sink; and that light fixtures in the bedroom did not work for eight years. The Court finds that these conditions diminished the habitability of the subject premises by eight percent. Eight percent of $ 1,023.92 for the forty-four months from March of 2014 through October of 2017 leaves a total of $ 3,604.20.

Respondent testified that she had similar problems with a second bathroom and that Petitioner fixed the conditions in December of 2017. The Court finds that this condition diminished the habitability of the subject premises by five percent. Five percent of $ 1,023.92 for the forty-seven months from March of 2014 through December of 2017 leaves a total of $ 2,252.62.

Respondent testified that she had no gas from December of 2016 through June 5, 2017 and that Petitioner gave her a hotplate when she had no gas, but she could not use the hotplate. The Court finds that this condition diminished the habitability of the subject premises by ten percent. Ten percent of $ 1,023.92 for the six months without gas leaves a total of $ 614.35.

The total rent abatement the Court awards is $ 10,976.42. As noted above, Respondent is also entitled to an award of $ 126,580.40 on her rent overcharge counterclaim. Adding the rent abatement counterclaim to the rent overcharge counterclaim leaves a sum of $ 137,556.82. Of this amount, Respondent is entitled to post-judgment interest on $ 32,095.53. The Court will therefore award Respondent two judgments against Petitioner, one in the amount of $ 105,461.29, the amount for which Respondent is not entitled to post-judgment interest, and one in the amount of $ 32,095.33, for which Respondent is entitled to post-judgment interest.

Accordingly, it is

ORDERED that Respondent is entitled to a money judgment against Petitioner in the amount of $ 105.461.29, and it is

ORDERED that Respondent is entitled to a separate money judgment against Petitioner in the amount of $ 32,095.33, and that Respondent is further entitled to post-judgment interest on this judgment at the statutory rate dating back to November 2, 2015, and the Court directs the clerk to so calculate the interest and award Respondent a money judgment on the resulting total, and it is

ORDERED that Respondent is entitled to a judgment for her attorneys' fees pursuant to N.Y.C. Admin. Code § 26-413(d), and the Court calendars this matter for a conference to pick a hearing date for March 4, 2019 at 9:30 a.m. in part N, Room 823 of the Courthouse located at 111 Centre Street, New York, New York.

The parties are directed to pick up their exhibits within thirty days or they will either be sent to the parties or destroyed at the Court's discretion in compliance with DRP-185.

This constitutes the decision and order of this Court.

FOOTNOTES

1.   The process for applying for approval of maximum rents for rent-controlled apartments is set forth in 9 N.Y.C.R.R. § 2202.3 et seq.

2.   The Article 78 proceeding was appealed to the First Department of the Appellate Division and was reported at Matter of Nelson v. N.Y. State Div. of Hous. & Cmty. Renewal, 95 A.D.3d 733, 945 N.Y.S.2d 249 (1st Dept. 2012).

3.   Petitioner did not make this argument in opposition to Respondent's summary judgment motion that resulted in the Decision.

Jack Stoller, J.