IN RE: Application of Peter SUDARSKY

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Supreme Court, Appellate Division, First Department, New York.

IN RE: Application of Peter SUDARSKY, et al., Petitioners-Respondents-Appellants, For a Judgment, etc., v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, et al., Respondents-Appellants-Respondents.

Decided: February 25, 1999

ROSENBERGER, J.P., NARDELLI, WILLIAMS and RUBIN, JJ. Seth A. Miller, for petitioners-respondents-appellants. Marion R. Buchbinder, Jeffrey R. Metz, for respondents-appellants-respondents.

Order, Supreme Court, New York County (Herman Cahn, J.), entered on or about October 10, 1997, which, insofar as appealed from as limited by the agency's brief, granted the petition pursuant to article 78 of the CPLR challenging a final determination of respondent agency that denied petitioner tenants' petition for administrative review of an order of rent deregulation to the extent of remanding the matter to the agency for additional consideration, unanimously modified, on the law, to the extent of dismissing the petition and confirming the determination of respondent Division of Housing and Community Renewal and, except as so modified, affirmed, without costs.   The cross appeal of petitioners Sudarsky and Cheung unanimously dismissed, without costs, as untimely.

Respondent-appellant Langham Mansions Co. is the owner and respondent-appellant Jeffrey Manocherian is the managing agent (collectively, the landlord) of the premises known as 135 Central Park South, located in the City and County of New York. Petitioner-respondent Peter Sudarsky, the tenant of record of apartment 12N, and his wife, petitioner-respondent Sou Hon Cheung (collectively, petitioners), reside at the subject premises.

On April 19, 1994, by certified mail, return receipt requested, respondent landlord sent petitioner Sudarsky a form requesting that he certify his household income.   It states that the completed certification must be returned to the owner within 30 days and includes the warning, “Failure to reply may ultimately result in the deregulation of the subject housing accommodation.”   On May 27, 1994, also by certified mail, return receipt requested, landlord's counsel sent the tenant a letter advising him that the income certification form had not been received.

On June 9, 1994, the landlord filed a petition for high income deregulation, stating that “the tenant failed to return the Income Certification Form to the owner.”   Without naming Ms. Cheung, the petition indicates that the premises are otherwise occupied by “wife”.

By notice dated August 4, 1994, the Division of Housing and Community Renewal (DHCR) requested income verification for the tenants and occupants of the apartment.   The notice imposes a 60-day time limit to respond and, as required by the Rent Stabilization Law, includes a bold-face provision that an answer filed after the time limit “will be considered late and will result in issuance by DHCR of an order deregulating your housing accommodation.”   The notice prominently indicates the address of respondent DHCR to which it is to be mailed.

It is undisputed that the tenants did not send any response to DHCR. The District Rent Administrator issued a deregulation order on January 31, 1995, finding that the tenant had not responded to the landlord's petition for deregulation and had provided no verification of income.

On February 21, 1995, Mr. Sudarsky filed a petition for administrative review (PAR), which is not signed by his wife, seeking to overturn the District Rent Administrator's deregulation order.   In it, Mr. Sudarsky claims that a verification form, indicating total household annual income of about $20,000, had been sent to the agency “several weeks ago”.   In an attachment, he claims that the income certification form mailed to him by the landlord had been returned on an unspecified date “at the end of May 1994”;  however, no copy of a completed form has been produced.   The attachment suggests that the answer to the landlord's deregulation petition was sent to the landlord, rather than to DHCR, sometime “toward the end of July, 1994”;  however, as petitioners concede, the form bears the mailing date August 4, 1994.   Mr. Sudarsky accuses the landlord of not forwarding the answer to DHCR, claiming that his default is therefore “at least the partial responsibility of the landlord.”   Annexed joint tax forms reveal that petitioners reported a negative 1993 adjusted gross income of $514,571.

DHCR issued an order denying the PAR on August 1, 1995.   The agency found that, even according full credibility to Mr. Sudarsky's explanations, neither the mailing of the income verification statement “in late July” of 1994 or “several weeks” before the PAR was filed would render the response to the petition timely.   Mr. Sudarsky claims to have received the order by mail on August 6, 1996.

The tenants commenced the instant article 78 proceeding by way of an order to show cause, allegedly obtained on October 4, 1996, seeking vacatur and annulment of the DHCR order.   For the first time, petitioners claim that Mr. Sudarsky had been suffering from clinical depression, while Ms. Cheung, a concert pianist, had been away on a performance tour.   The landlord and DHCR cross-moved to dismiss the petition, contending, inter alia, that it was time barred.   Attached is the affidavit of an employee denying that any completed income certification form or answer to petition had been received at the landlord's office.   Ms. Cheung appeared for the first time in opposition to the dismissal motions, asserting that she had received no notice of the proceedings.   For his part, Mr. Sudarsky claimed that the affidavit by the Landlord's employee was false.   Supreme Court granted the petition, referring the matter to DHCR for reconsideration.   The court reasoned that it was arbitrary and capricious to have upheld the high-income deregulation order, rendered upon the tenant's default, in the face of conflicting evidence.

 In a proceeding pursuant to CPLR article 78, judicial review is limited to the question of whether or not the administrative agency's determination has a rational basis (Chelrae Estates v. State Div. of Hous. & Community Renewal, 225 A.D.2d 387, 389, 638 N.Y.S.2d 950, citing Matter of Pell v. Board of Educ., 34 N.Y.2d 222, 230-231, 356 N.Y.S.2d 833, 313 N.E.2d 321), and the Court may not substitute its own judgment for that of the agency (Rudin Management Co. v. State Div. of Hous. & Community Renewal, 215 A.D.2d 243, 626 N.Y.S.2d 487).   The court's consideration is confined to those issues properly raised in the administrative proceedings (Matter of Rozmae Realty v. State Div. of Hous. & Community Renewal, 160 A.D.2d 343, 553 N.Y.S.2d 738 [citing Matter of Klaus v. Joy, 85 A.D.2d 603, 444 N.Y.S.2d 691], lv. denied 76 N.Y.2d 712, 563 N.Y.S.2d 768, 565 N.E.2d 517), which do not encompass material presented for the first time on a petition for administrative review (Matter of Levine v. New York State Div. of Hous. & Community Renewal, 243 A.D.2d 373, 663 N.Y.S.2d 205) unless the petitioner was prevented from submitting it at the initial level by a deviation from customary agency procedures (cf., Stern v. State Div. of Hous. & Community Renewal, 250 A.D.2d 403, 673 N.Y.S.2d 7).

 As we stated recently in Pledge v. New York State Div. of Hous. and Community Renewal, 257 A.D.2d 391, 394, 683 N.Y.S.2d 76, the statutory requirement of N.Y.C. Admin. Code § 26-504.3[c][1], [3] is “mandatory and explicit”.   We noted that “this Court has construed the Rent Stabilization Law [Administrative Code of City of N.Y., tit. 26, ch. 4] to require deregulation of a stabilized apartment where the tenant fails to supply the requisite certification of household income within the 60-day period provided by the statute” (id.;   citing Bazbaz v. State of New York Div. of Hous. and Community Renewal, 246 A.D.2d 388, 667 N.Y.S.2d 720;  Nick v. State of New York Div. of Hous. and Community Renewal, 244 A.D.2d 299, 664 N.Y.S.2d 777).  Pledge expressly rejects the contention, advanced by petitioners herein, that DHCR is required to undertake independent income verification in response to a landlord's petition for luxury deregulation.

 Furthermore, we agree with the administrative agency's finding that petitioners failed to provide a valid excuse for the failure to timely submit the income certification form to DHCR (Pledge v. New York State Div. of Hous. and Community Renewal, supra ).   The tenant was provided with ample notice and opportunity to submit verification of income to the landlord or, upon the landlord's petition for deregulation, to DHCR. We discern no reason to depart from established precedent based upon the belated excuses proffered by petitioners before Supreme Court (cf., Seymour v. State Div. of Hous. & Community Renewal, 175 Misc.2d 996, 670 N.Y.S.2d 1017 [excuse presented at initial administrative hearing level upon request for reconsideration] ).

 Petitioners' cross appeal is both untimely and devoid of merit.   Notice of the cross appeal was served neither within 30 days of their service of Supreme Court's decision with notice of entry nor within 10 days of the service of the notice of appeal by respondents.   Petitioners' claim that the procedures followed by DHCR are unconstitutional as applied to them was not raised before the administrative agency and is not cognizable for the first time on appeal (Dowling v. Holland, 245 A.D.2d 167, 170, 666 N.Y.S.2d 585).  In any event, we note that minimal due process requirements for notice and opportunity to be heard “with due regard for the practicalities and peculiarities of the case” (Mullane v. Central Hanover Trust Co., 339 U.S. 306, 314-315, 70 S.Ct. 652, 94 L.Ed. 865) were complied with in this matter.

 Petitioners' contention that they are entitled to a renewal lease because their lease expired during the pendency of the administrative proceedings is both unpreserved for review (Clark v. 345 East 52nd St. Owners, 245 A.D.2d 410, 413, 666 N.Y.S.2d 207) and without merit.   That the filing of a PAR effects a stay of an order of deregulation (Rent Stabilization Code [9 NYCRR] 2529.12) does not require the conclusion that renewal of petitioner Sudarsky's lease is mandated.   The stay preserves the status quo as it existed at the time of the issuance of the order subject to administrative review.   It does not operate to confer rights that would subsequently accrue only in the event of defeasance of the order.   Otherwise, the right won by the landlord before DHCR would be subjugated by the pendency of the proceedings, irrespective of whether the administrative order that conferred it was ultimately vindicated.

 Petitioners' causes of action asserting, variously, fraud, unjust enrichment and deceptive trade practices may not be interposed in this proceeding (CPLR 7803) and were properly dismissed by Supreme Court.


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