Opinion
102717/2010.
January 26, 2011.
In this Article 78 proceeding, petitioner owner/landlord, 554 West 181, LLC, seeks to annul the determination by respondent New York State Division of Housing and Community Renewal (DHCR), that Nelson Iglesias, a tenant residing at Apartment A at 554 West 181st Street, is entitled to treble damages on his rent overcharge complaint against petitioner. In the event petitioner prevails, it also seeks an award of costs, disbursements, and attorneys' fees incurred in connection with this proceeding.
On October 2, 2008, tenant Nelson Iglesias filed a Fair Market Rent Appeal with DHCR, alleging that the initial rent for his apartment was in excess of the fair market rent and as a result, he had been overcharged. On October 6, 2008, DHCR sent petitioner a Notice and Transmittal of Tenant's Complaint of Rent Overcharge, and petitioner filed a answer on November 6, 2008. On April 30, 2009, DHCR sent the tenant a Request for Additional Information/Evidence, and enclosed a copy of petitioner's answer.
On May 27, 2009, DHCR issued a "Final Notice to Owner — Imposition of Treble Damages on Overcharge" (Final Notice), advising that
[t]his is NOT an Order and contains only proposed findings . . . [which] are subject to change based on additional evidence and arguments." The Final Notice stated that "[b]ased on the evidence now in the record, the Rent Administrator proposes to find that there has been an overcharge in this matter. The calculation of the proposed overcharge and penalty is set forth on page two of this notice. In accordance with the mandate of Section 2526.1 of the Rent Stabilization Code, you will be directed to pay to the tenant a penalty equal to three times the amount of the overcharge unless you establish by a preponderance of the evidence that the overcharge was not willful.
The Final Notice included an explanation as to evidence in the file and basis for the overcharge, and afforded petitioner an "final opportunity to show that there was no overcharge and/or that the overcharge was not willful." The Final Notice also included an "Overcharge, Interest and Treble Damage Calculation Worksheet," listing a monthly overcharge of $507.35, six as the number of overcharge months, an overcharge of $3,044.10, treble damages in the amount of $6,088.20, and the "total amount due" as $9,132.30. The Worksheet also listed an excess security deposit of $507.35, for a "total refund" of $9,639.65.
The columns on the Worksheet for interest and number of interest months were blank.
In response to the Final Notice, petitioner sent the tenants, Nelson and Cecilia Iglesias, a letter dated June 4, 2009, enclosing two checks in the amounts of $3,044.10 and $507.35, "representing a refund of money due you according to the above DHCR docket number . . . [and] a refund of excess security money." The tenants responded by letter dated June 11, 2009, returning the checks and stating "we disagree with those checks, so we will wait DHCR conclusion." By letter dated June 16, 2009, petitioner advised DHCR that "the tenants have unreasonably declined our good faith effort" to refund the overcharge, and enclosed a copy of the tenants' letter returning the checks.
On July 21, 2009, the DHCR Rent Administrator issued an "Order Finding Rent Overcharge," which awarded treble damages. The Order included a "Calculation Chart" listing $11,161.70 as the total amount due to the tenant, based on the following items: overcharge amount $3,551.45; treble damages amount $7,102.09; interest amount $0.00; excess security amount $507.35. The order also included a document entitled "Calculation Chart Footnotes," which acknowledged the owner's June 4, 2009 submission regarding the refund checks it sent to the tenant and the tenant's response, and noted that "treble damages have been assessed in this proceeding pursuant to DHCR Policy Statement 89-2 because the owner failed to give the tenant a full refund of all excess rent collected, plus interest."
Petitioner filed a Petition for Administrative Review ("PAR"), objecting to the award of treble damages in light of its alleged "good faith effort" to refund the amount stated in DHCR's Final Notice of May 27, 2009. On January 6, 2010, DHCR Deputy Commissioner Leslie Torres issued an order and opinion denying the PAR, finding that refund tendered to the tenant in June 2009 "exceeded the `time within which the owner had to impose an answer to the proceeding,' and thus did not comply with the provisions of PS 89-2 [Policy Statement 89-2]. The Commissioner affirms the award of treble damages as the owner fell short of its burden of rebutting the `presumption of willfulness' by failing to comply with the conditions precedent necessary to do so established under PS 89-2. The fact that the tenant rejected the refund has no bearing on the matter since the refund was clearly not timely.
Petitioner timely commenced the instant Article 78 proceeding, seeking to annul DHCR's determination to the extent it awarded treble damages. The court's review of a determination made by an administrative agency such as DHCR, "is limited to whether such determination was arbitrary or capricious or without a rational basis in the administrative record." Partnership 92 LP Building Management Co. Inc. v State of New York Division of Housing Community Renewal, 46 AD3d 425, 428 (1st Dept 2007), aff'd 11 NY3d 859 (2008). "[T]he determination of an agency, acting pursuant to its authority and within the orbit of its expertise, is entitled to deference, and even if different conclusions could be reached as a result of conflicting evidence, a court may not substitute its judgment for that of the agency when the agency's determination is supported by the record." Id at 428-429 (citations omitted).
Under the Rent Stabilization Law, if DHCR finds that a landlord, after a reasonable opportunity to be heard, has collected rent in excess of the authorized amount, the landlord is liable to the tenant for a penalty equal to three times the amount of the overcharge, unless the landlord establishes by a preponderance of the evidence, that the overcharge was not willful. NYC Admin Code § 26-516(a); 508 Realty Assocs v. New York State Division of Housing Community Renewal, 61 AD3d 753, 754 (2nd Dept 2009). DHCR Policy Statement 89-2 provides that a landlord can meet its burden of proof to establish "the lack of willfulness," and "therefore, the treble damages penalty is not applicable . . . [w]here an owner adjusts the rent on his or her own within the time afforded to interpose an answer to the proceeding and submits proof to the DHCR that he or she has tendered, in good faith, to the tenant a full refund of all excess rent collected, plus interest." DHCR Policy Statement 89-2.
Here, when the DHCR Rent Administrator issued his July 21, 2009 Order, he assessed treble damages under Policy Statement 89-2 "because the owner failed to give the tenant a full refund of all excess rent collected, plus interest." Petitioner thereafter filed a PAR, asserting that the Rent Administrator "erroneously assessed treble damages without considering the fact that the Owner made a good faith refund by certified mail and sent proof of said refund to DHCR prior to the issuance of the underlying order." The DHCR Deputy Commissioner denied the PAR based on petitioner's failure to tender the refund "within the time afforded to interpose an answer," as required by Policy Statement 89-2.
In this proceeding, petitioner does not dispute that the checks were sent to the tenants more than six months after its time to answer had expired. Petitioner likewise does not dispute that the amount tendered did not include interest. Rather, petitioner argues that it nevertheless established a lack of willfulness under Policy Statement 89-2 since it refunded the amount noted by DHCR in its May 27, 2009 Final Notice, prior to DHCR issuing its July 21, 2009 Order. Citing First Department case law, and a number of DHCR decisions from 1998 through 2009, petitioner argues that "DHCR has a very long and consistent policy of not imposing treble damages in cases where the owner refunds to the tenant all overcharge amounts prior to the DRA [District Rent Administrator] issuing a final order determining the tenant's overcharge complaint," and that it was arbitrary and capricious for DHCR "to ignore and disregard all of its prior long-established precedent." Petitioner further asserts that it is "not possible" for an owner to make a refund prior to DHCR issuing a Final Notice, since the owner "has no way of knowing just what refund to make to a tenant until it receives the Final Notice from DHCR setting forth all of DHCR's calculations."
Petitioner's arguments are not persuasive. Petitioner's reliance on Sendowski v. New York State Division of Housing Community Renewal, 227 AD2d 55 (1st Dept 1996) and Round Hill Management Co v. Higgins, 177 AD2d 256 (1st Dept 1991), and twelve DHCR administrative decisions, is misplaced. Neither Sendowski nor Round Hill Management involved an owner's attempt to make a good faith tender of rent in accordance with Policy Statement 89-2. The DHCR administrative decisions are likewise distinguishable, as the refunds in those decisions included interest, and in many of those decisions, DHCR considered the "totality of the circumstances" or the "overall evidence" in finding that the owner had sustained its burden of demonstrating a lack of willfulness, based on specific mitigating factors or sui generis circumstances, that are absent from the instant proceeding.See e.g. Pinnacle Dunbar Manor LLC (Docket No. XF410059RO, August 24, 2009) (where owner had no opportunity to respond to RA's order changing and increasing the amount of the overcharge, Commissioner found owner was deprived of due process and "given these facts, treble damages should not be imposed in this case"); Eastchester Heights (Docket No. WD610042RO, September 25, 2008) (Commissioner found that a review of the totality of the evidence showed that the owner, who had purchased a 1,500 unit complex only four months prior to the filing of the tenant's complaint, submitted sufficient evidence to rebut the presumption of willfulness); Paljusevic (Docket No. RG410007RK, November 24, 2003) (where "reasonable yet different interpretations" could have been reached regarding a "very technical legal issue" as to deregulation, the Commissioner concluded that the owner could have reasonably believed that no overcharge had occurred, and treble damages were not assessed;Ragoo (Docket No. HJ610200RO, August 26, 1999) (Commissioner found nonwillfulness in the totality of the circumstances, where the owner was excusably confused about the effect of a pending PAR on the collectability of a MCI increase, and the owner made the refund before the Administrator issued her order);449 West 56th Assocs (Docket No. GD410070RO, December 4, 1998) (Commissioner found the following "indicia" contributed to the owner's showing of a lack of willfulness: the owner's prompt initial response to service of the complaint, the Administrator's failure to grant or deny the owner's request for an extension of time to answer; the owner had taken possession of the building only one week before the complaint was filed; an intervening non-payment proceeding; and the parties' negotiations in that proceeding).
Petitioner does not submit copies of the DHCR's administrative decisions, but DHCR annexes copies to its Memorandum of Law.
Petitioner further argues that it had no way of knowing how much to refund the tenant until DHCR issued the Final Notice, and that it refund the amount listed in the Final Notice, which did not include interest. Petitioner's arguments are directly contrary to the plain language of Policy Statement 89-2, which explicitly requires the refund to be made within the time the owner has to answer the complaint, and to include interest. While the Final Notice did not designate an amount for interest, that amount was easily ascertainable under Section 26-511© of the Rent Stabilization Law which provides for "interest from the date of the overcharge at the rate of interest payable on a judgment pursuant to section five thousand four of the civil practice law and rules," i.e. 9% per annum. Moreover, even if petitioner did not know how much to refund the tenant, petitioner made no effort to contact DHCR during the seventh-month period between its receipt of the complaint in October 2008 and its receipt of the Final Notice in late May or early June 2009.
The Rent Stabilization Law provide for the imposition of either interest or treble damages on an overcharge. Since the Final Notice called for treble damages, interest was not included.
Finally, in reply, petitioner argues that DHCR should be estopped from imposing treble damages. It is well settled, however, that estoppel generally may not be invoked against a governmental agency to prevent it from performing its statutory functions.See Parkview Assocs v. City of New York, 71 NY2d 274, cert denied 488 US 801 (1988); Benaresh v. City of New York Department of Housing Preservation Development, 273 AD2d 86 (1st Dept), lv app den 95 NY2d 765 (2000).
In light of the foregoing, DHCR's determination that petitioner failed to establish a lack of willfulness based on a good faith tender of a refund in compliance with Policy Statement 89-2, had a rational basis, and was neither arbitrary nor capricious. Thus, DHCR's imposition of treble damages will not be disturbed, and the petition is denied and the proceeding is dismissed.
Accordingly, it is
ORDERED AND ADJUDGED that the petition is denied and the proceeding is dismissed.