Opinion
8157/04.
Decided September 9, 2004.
Four separate proceedings brought pursuant to Article 78 of the CPLR seeking judicial review of adverse determinations made by the New York State Division of Housing and Community Renewal ("DHCR"), which arise out of four tenancies in the same housing complex, have come on for joint hearing and disposition by way of orders to show cause. In each proceeding, the landlord, Bridgeview Garden Apartments LLC ("landlord" or "Bridgeview"), is the petitioner and seeks not only review of DHCR's adverse determinations but also "rent" or "use and occupancy" pendente lite from the individual tenants who had been joined as respondents with DHCR in the proceeding effecting their respective tenancy. In two of the four proceedings, Justice Martin Solomon, to whom the matters were initially assigned, granted relief pendente lite to the petitioner landlord. In the other two, pendente lite relief was denied. Following supplemental briefing requested by this Court, four motions, a cross motion and applications regarding use and occupancy were heard in oral argument on July 30, 2004 and decisions were reserved with the exception that the applications of the tenant respondents to vacate the award of pendente lite use and occupancy in the two proceedings where it had been ordered were granted and the applications of the landlord for use and occupancy from the tenant respondents where use and occupancy had been denied by Justice Solomon were, on renewal, denied again.
Litigation arising out of the Bridgeview tenancies reflects a more stupifying than usual trek through the bramble of New York law, which provides, on the one hand, for rent regulation and, on the other, tax incentives to encourage residential unit construction — all to respond to a perceived and declared housing emergency in the City of New York. The proceedings here follow only one byway to the glade of resolution. Overall, Bridgeview litigation remains somewhat convoluted, protracted and disjointed. Some of the tenants named as respondents in these proceedings were respondents in summary nonpayment proceedings previously dismissed in Housing Court. Not all of the tenants in that proceeding, however, have DHCR matters under review here. The decision of the Housing Court is on appeal to the Appellate Term. There are, apparently, new Housing Court proceedings involving other tenants pending as there were, and may still be, DHCR rent overcharge proceedings brought by other tenants. But, while divergent paths of judicial and administrative review are being cleared through the bramble, there are significant issues in common which can bring order and finality to the process despite the multiple forums invoked and the multiple parties not universally present in any one of them.
There is little dispute among the parties as to the underlying facts, though there is sharp and deep division as to their significance. Bridgeview became landlord in 2000. The story, however, begins a quarter century before. Bridgeview is a complex of buildings located at 101 through 121 Lyman Avenue on Staten Island. In 1969, upon the default of a prior owner of the property on which Bridgeview is now situated, the land with excavations and foundations in place was acquired by another of the petitioner's predecessors-in-interest at a foreclosure sale. Within two years, the Legislature enacted what became § 421 of the Real Property Tax Law designed to encourage the construction of residential units through the offer of a 10-year real property tax abatement. But, as a condition of the tax abatement, the landlord had to agree to rent regulation during the period of the abatement.
Construction on the buildings which now comprise Bridgeview began in late 1972 and was completed on February 9, 1973. The owner at the time applied for a certificate of eligibility for participation in the tax abatement program and, as part of that process, provided the local housing agency, now the New York City Department of Housing Preservation and Developement ("HPD"), with an affidavit which represented that the availability of a tax abatement under the § 421 program was the "sole inducement" for the completion of construction. A certificate of eligibility was issued by the municipal housing agency on March 22, 1973 and, according to the record in the proceedings now before this Court, participation in the abatement program through June 30, 1984 was confirmed by HPD.
During this same period of time, the Legislature enacted the Emergency Tenant Protection Act of 1974 ("ETPA"), which applied to certain residential units housed in buildings constructed on or before January 1, 1974. The records provided by DHCR on these motions are barren of any filing before 2000 by prior owners of Bridgeview specifically referencing ETPA as a basis for rent regulation. Indeed, much more than that, DHCR records verify that Bridgeview's predecessor-in-interest acted as if rent regulation of the complex had been imposed only as a result of its participation in the § 421, later § 421-a, tax abatement program and was subject to vacancy decontrol of individual apartments following the wind up of its tax abatement on June 30, 1984 as such decontrol was provided for in RPTL § 421-a. It is not a long drive from there to the inference that the current landlord believed when it acquired the complex that Bridgeview had come out of rent stabilization, except for individual units which had not turned over since the end of the tax abatement and, where such vacancies did occur, units which had not been for other reasons properly vacancy decontrolled.
Following purchase by the petitioner, the odyssey in the bramble began in earnest. On December 31, 2002, three of the respondent tenants here, O'Connor (Index 8158), Ragucci (Index 8174), and Sebesto (Index 8173), filed rent overcharge complaints with DHCR. The fourth tenant respondent in this Court, Sullivan (Index 8157), filed her rent overcharge complaint with DHCR on February 12, 2003. Pending before DHCR before the first of these filings was made were rent overcharge complaints brought by six other Bridgeview tenants. On January 17, 2003, those six complaints were initially resolved by the agency. The common thread implied in the resolution was DHCR's core view that the Bridgeview complex had been subject to rent stabilization solely as a result of its participation in the RPTL § 421 and § 421-a tax abatement programs and that the buildings, generally, were no longer stabilized. DHCR then determined further that four of the units remained subject to stabilization because the landlord and/or its predecessor-in-interest had failed to provide the required notice for vacancy decontrol. It also determined in the other two proceedings that appropriate notice had been provided and that those units had been properly decontrolled entirely. Bolstered by these determinations, the landlord then provided, on March 14, 2003, additional documentation to DHCR to support its position that participation in the tax abatement program had been the only ground for stabilization and that the four tenancies now before this Court related to individual units which had been vacancy decontrolled in that the subject tenancies had begun after the tax abatement had ended and that appropriate notice of such decontrol had been given to the tenants. The proof offered by the landlord also included a certificate of occupancy dated March 14, 1978.
This tenant's name was mispelled in the caption of the proceeding where he is named as a respondent. The caption is hereby ordered amended to reflect the correct spelling of his name.
In a showing of how prickly the bramble, during the pendency of the four underlying rent overcharge proceedings at DHCR, the landlord brought nonpayment proceedings in Housing Court to recover rental arrears from Ragucci, O'Connor, Sebesto and two other tenants of Bridgeview, who were not among the six who had previously filed the rent overcharge complaints with DHCR that were determined by the orders of January 17, 2003. The nonpayment proceedings were later dismissed by Housing Court, in a decision of Judge Birnbaum filed under Bridgeview Garden Apartments v. Ragucci, Index No. 51576/03 (Housing Court, Richmond County Oct. 31, 2003). The tenants had defended the nonpayment proceedings on the ground that the premises were not exempt from rent stabilization as the petitioner landlord had pled. Housing Court concurred, finding that the landlord had failed to prove by competent evidence its participation in the tax abatement program under § 421-a of the Real Property Tax Law. Also before Housing Court, as it ultimately was before and relied upon by the Rent Administrator in the four underlying rent overcharge proceedings here, was a second and earlier certificate of occupancy establishing that construction of the Bridgeview complex had been completed in February 1973 and not in 1978. Because it had been constructed prior to January 1, 1974, Housing Court ruled Bridgeview was subject to rent stabilization on that ground too. The court further found that the landlord also had not rehabilitated the premises to the level of "substantial rehabilitation" as defined by DHCR Operation Bulletin 95-2, and, therefore, there was no basis to find destabilization on that score either. With the landlord's failure to prove participation in the tax abatement program upon which its claim of destabilization rested, the court dismissed on the defense pled by the tenants.
This decision is on appeal to the Appellate Term, 2d 11th Districts. The five respondent tenants, including the three also before this Court, had counterclaimed in their respective nonpayment proceedings to recover rent overcharges. No further action has been taken on any of those counterclaims. There are, moreover, additional landlord/tenant proceedings pending in Housing Court relating to other Bridgeview tenants.
Paralleling the Housing Court litigation, on July 7, 2003, in a proceeding, Docket RF-320004-RK, involving one of the first Bridgeview tenants to file a rent overcharge complaint with DHCR, Georgean Copollo, a Notice of Proceeding to Reconsider Previous Order was issued based, essentially, on the newly acknowledged fact that the complex had been constructed or substantially rehabilitated prior to January 1, 1974. As a result, on September 12, 2003, DHCR revisited its orders of January 17, 2003 and did an about face. The agency now found that the landlord had failed to submit evidence of its participation in the tax abatement program and to the extent that any of the January 17, 2003 orders exempted units from rent stabilization they were modified to subject those units to stabilization without prejudice to the landlord seeking exemption on the grounds that the buildings were also substantially rehabilitated on or after January 1, 1974. Relying on its determination in the proceeding involving tenant Copollo, on or around October 15, 2003, DHCR advised the landlord regarding the four tenancies here that the Bridgeview complex was subject to rent stabilization and requested submission of relevant rent data for the final determination of any overcharge. Without reference to Judge Birnbaum's intervening decision of October 31, 2003, on four different dates in November, the Rent Administrator issued his respective orders finding rent overcharges in each case, first on the grounds set forth in the Copollo proceeding and also upon a separate and additional ground that the building complex had been constructed prior to January 1, 1974. The bottom line was that the complex was subject to rent stabilization and rent overcharges had occurred.
Sixteen days later, Judge Birnbaum would issue her decision finding as a matter of fact that the premises had not been "substantially rehabilitated" after January 1, 1974.
To be precise, the Rent Administrator in the Sullivan proceeding specified the pre-1974 construction as an independent ground for his decision but did not include a copy of the 1973 certificate of occupancy in the record. The Sebesto determination relied solely on the Copollo determination and neither referenced the pre-1974 construction nor included a copy of the 1973 certificate of occupancy in the record. In light of the ultimate disposition of these proceedings by this Court, the deviations are harmless.
The landlord filed a petition for administrative review (PAR) in each proceeding. With respect to all but Ragucci, orders and opinions were entered by DHCR denying the landlord's administrative appeals. While giving lip service to the revised determination originally made in Copollo that Bridgeview was subject to stabilization because the landlord had failed to prove its participation in the § 421-a tax abatement program, the orders entered upon administrative review clearly rely on the alternate basis to sustain the Rent Administator's finding of rent stabilization, that is, based on construction of the complex prior to January 1, 1974. The review opinions specifically noted that "since there was a second basis for the regulation of the subject premises, the expiration of any alleged § 421-a benefits would not result in deregulation." In Ragucci, the PAR was dismissed outright for untimely filing. The landlord contends that each of these PAR orders is erroneous as a matter of law and is arbitrary, capricious and unreasonable. By way of Article 78, the landlord seeks to enjoin enforcement of the rent overcharge determinations, vacate them and the orders upon which they are based and declare that the Bridgeview complex is free of rent regulation, save for compliance with the provisions for vacancy decontrol set forth in the Rent Stabilization Law of 1969. DHCR cross moves to dismiss the landlord's petition in Ragucci for failure to properly perfect its PAR and exhaust its administrative remedies.
USE AND OCCUPANCY PENDENTE LITE
As previously indicated, this Court determined at the time of oral argument that the landlord was not entitled to use and occupancy. Since its mere request in the context of an Article 78 proceeding is beyond run of the mill even in the bramble, the record should be clear as to the basis upon which the Court denied the landlord relief. This is especially so because of the incontestable fact that the tenants continue in possession of their apartments without paying any compensation to the landlord coupled with the tenants' two-pronged arguments here that the landlord is not entitled to pendente lite use and occupancy substantively, since it has been found in violation of its filing obligations under the rent stabilization laws, as well as procedurally, since, they contend, such remedy is unavailable in an Article 78 proceeding.
On substantive grounds, the tenants failed to make out their defense. New York common law, and its subsequent codification in § 220 of the Real Property Law, clearly recognizes that a landlord is entitled to some form of compensation upon theories of quantum meruit and unjust enrichment from a tenant who fails to pay an agreed rent yet remains in possession of the premises. See e.g., Eighteen Associates, LLC v. Nanjim Leasing Corp., 257 App. Div. 2d 559, 683 N.Y.S.2d 291 (2d Dep't 1999); 230 Park Avenue Associates v. State of New York, 165 Misc. 2d 920, 630 N.Y.S.2d 855 (Ct.Cl. 1995) (Where lease was invalid under State Finance Law, claim for use and occupancy at common law and under RPL § 220 still states a cause of action.). Case law barring the recovery of use and occupancy where the landlord is in violation of the Multiple Dwelling Law requirements for the filing of a multiple dwelling registration and/or cannot produce a valid certificate of occupancy is inapposite because it rests on specific statutory proscriptions. Cf. e.g., 111 on 11 Realty Corp v. Norton, 189 Misc. 2d 389, 401-402, 732 N.Y.S.2d 840, 849 (Civ.Ct., Kings County 2001), rev'd on other grounds, 2004 WL 1769202 (App. T., 2d 11th Dist. July 21, 2004). There is no comparable provision in the rent stabilization laws which specifically bars the recovery of use and occupancy merely on account of the landlord's failure to comply with a registration requirement. The only limitation restricting application of the ordinary rule entitling a landlord to recover the fair market value of an apartment where it is being occupied without compensation, see, e.g., Phillips v. Cohen, 2002 WL 1311689 (App. T., 9th and 10th Districts Apr. 2, 2002), is the obvious limitation that use and occupancy awarded pendente lite cannot exceed what the allowable rent would be under the rent stabilization laws. In circumstances like those presented here, where the landlord is challenging a finding by DHCR that there has been a rent overcharge, after the undisputed amount of rent overcharge found by DHCR has been credited against rent arrears and future rent as it comes due, [the tenant] shall pay use and occupancy without prejudice [to the landlord] in the amount of the lawful rent set by DHCR, plus any legal increases above that amount allowed under the Rent Stabilization Law and Code.
176 West 87th Street Equities, v. Amador, 151 Misc. 2d 234, 237, 573 N.Y.S.2d 221, 223 (Civ.Ct., N.Y. County 1991). Clearly, even where an award of use and occupancy is appropriate, the court must balance the landlord's equitable right to compensation and the tenant's right not to pay more than the legal rent should it be ultimately determined that the rent is properly regulated.
Nevertheless, there is a basis for disallowance of pendente lite use and occupancy procedurally. That is where the Court's ruling here is founded. Article 78 review is by way of a special statutory proceeding. The CPLR demands pencil thin focus on the four questions posed by CPLR 7803. While it is true that restitution or damages can be awarded to a petitioner, CPLR 7806 limits such awards to situations where the damages awarded are "incidental to the primary relief sought by petitioner." Use and occupancy, rent or any form of compensation to the landlord were not issues in the administrative proceeding at DHCR except to determine whether the landlord had received too much. The award of use and occupancy to the landlord in that context can hardly be viewed as incidental.
But, since the Court has determined that the landlord is not barred by its failure to comply with the registration requirements of the rent stabilization law from stating a claim for use and occupancy at common law and under § 220 of the Real Property Law, other authority permitting simple conversion, pursuant to CPLR 103 (c), of the use and occupancy claim into proper form must be considered. See generally D. Siegel, New York Practice § 563 (3d 1999). In fact, there is authority for a court to convert an Article 78 proceeding into sort of a hybrid proceeding and action allowing simultaneous review of a challenged agency action and consideration of an award of use and occupancy. See Stapleton Studios v. City of New York, NYLJ, Mar. 10, 2004, at 18, col. 1 (Sup.Ct., New York County) (use and occupancy awarded to the agency whose decision was under review). No party, however, has sought such conversion and the Court declines to opine whether similar conversion would be appropriate in a proceeding where the agency whose decision is under review would not be a party to the action for use and occupancy as would be the case here, unlike in Stapleton Studios. Without some form of conversion, however, the Court cannot award use and occupancy to the landlord in an Article 78 proceeding brought solely to review DHCR's adverse determinations in rent overcharge proceedings, much less award such relief pendente lite without a hearing to determine the amount of compensation to be actually awarded. It was on this basis that the Court vacated the award of use and occupancy in the two matters where Justice Solomon had awarded it and refused to award it in the two matters where Justice Solomon had already denied it. The Court's denial of use and occupancy, of course, is without prejudice to the landlord renewing its pursuit in a proper action in an appropriate forum.
THE DECISION OF HOUSING COURT
In none of the four rent overcharge proceedings under review here did either the Rent Administrator or the Deputy Commissioner on agency appeal rely upon, cite, or even acknowledge the existence of Judge Birnbaum's decision despite the fact that the Housing Court decision antedated all of DHCR's final determinations in these matters. The landlord obviously desires to continue to ignore it since, in the face of this prior judicial determination that the landlord's predecessor-in-interest had not participated in the § 421-a program and that Bridgeview was rent stabilized under the provisions of ETPA, the four instant proceedings for review of DHCR's PAR orders reaching identical conclusions are brought notwithstanding. The question is whether the landlord gets another bite out of the apple and, if so, how big?
Bridgeview seeks a new and full bite, opposing any reliance by this Court on Judge Birnbaum's decision based on procedural gripes as well as substantively. First to the procedural skirmishes. Bridgeview argues that because Judge Birnbaum's decision is on appeal it cannot be the basis for issue preclusion in this litigation. The argument is without merit. The rule in New York is clear that "the mere pendency of an appeal does not prevent the use of the challenged judgment as the basis of collaterally estopping a party to that judgment in a second proceeding." Amica Mutual Ins. Co. v. Jones, 85 App. Div. 2d 727, 728, 445 N.Y.S.2d 820, 822 (2d Dep't 1981).
The landlord also procedurally battles against the doctrine of collateral estoppel on the ground that there is a lack of identity among the parties in the Housing Court proceeding and the parties now before the Court on these petitions. That is unquestionably true. DHCR, of course, was not a party in Housing Court at all. Neither was respondent Sullivan. Two other tenants who were respondents there are not before the Court here. But, though factually correct, the argument is a red herring. The lack of congruence of the parties is not decisive because "the defense of issue preclusion (or collateral estoppel) may be asserted by strangers to the prior litigation." 303 Realty Corp. v. Albert, 154 App. Div. 2d 590, 591, 546 N.Y.S.2d 417, 418 (2d Dep't 1989). What is critical and decisive is the landlord's presence in the Housing Court proceeding. The presence or absence of other parties is irrelevant to a determination of the availability of the doctrine of issue preclusion if the party seeking to avail itself of that doctrine can show that the party against whom issue preclusion will be applied, here, the landlord, was present and had a full and fair opportunity to litigate the relevant claims actually litigated or even those which could have been litigated in the prior proceeding. See, e.g., Koch v. Consolidated Edison Co., 62 N.Y.2d 548, 558, 479 N.Y.S.2d 163, 168 (1984), cert. denied, 469 U.S. 1210, 105 S. Ct. 1177 (1985).
A trip through the bramble of New York rent regulation would not be complete without a rent slant to the red herring's fin. Since rent stabilization runs with individual apartment units, it is difficult to apply the doctrine of collateral estoppel even where units are located in the same building complex. Each tenant has a separate contract, the lease, with the landlord. Each tenant has individual substantive and procedural rights under the rent stabilization laws. There may be a lease breach with respect to one tenant and not another or a procedural violation in one landlord/tenant relationship and not another, even in the same building. (Here, for example, when DHCR initially determined that Bridgeview was subject to vacancy decontrol, the agency determined with respect to certain tenants that appropriate statutory notice of decontrol had been given and as to others that it had not.) In such situations, collateral estoppel is not applied. See Cambridge Development LLC v. McCarthy, 2003 WL 22798957 (Civ.Ct., N.Y. County 2003).
The last procedural scuffle the landlord ignites in its battle to stave off the application of issue preclusion adds more than a pinch of irony. Not only does the landlord want another bite out of the apple, Bridgeview also wants to bite the hand it asked Housing Court to extend. Relying upon Sohn v. Calderon, 78 N.Y.2d 755, 768, 579 N.Y.S.2d 940, 945 (1991), which holds that DHCR has primary and, in certain instances, exclusive, jurisdiction to entertain housing matters, the landlord argues that Housing Court should have deferred to DHCR on the rent overcharge issues. To be sure, DHCR does not have exclusive jurisdiction to entertain rent overcharge complaints. Housing Court, moreover, has the jurisdiction and the power to entertain various claims arising under the rent stabilization laws, including rent overcharge complaints. See, e.g., 520 East 81st Street Associates v. Lenox Hill Hospital, 38 N.Y.2d 525, 381 N.Y.S.2d 465 (1976); Villas of Forest Hill Co. v. Lumberger, 128 App. Div. 2d 701, 513 N.Y.S.2d 116 (2d Dep't 1987). So, zeroing in on abstention rather than power, the landlord argues that Housing Court should have stayed its hand where a tenant has asserted rent overcharge as an affirmative defense and/or counterclaim in a nonpayment proceeding while seeking the same relief in a rent overcharge proceeding previously commenced before DHCR. See, e.g., 176 West 87th Street Equities v. Amador, 151 Misc. 2d 234, 236-37, 573 N.Y.S.2d 221, 223 (Civ. Ct., N.Y. County 1991). And, if that is what happened here, the landlord would have a point.
Where Bridgeview's argument flounders is that it was Bridgeview which invoked the jurisdiction of Housing Court in this dispute. It was Bridgeview which did not move to strike or defer the counterclaims and affirmative defenses of rent overcharge that were asserted in the nonpayment proceedings in Housing Court. Plus, finally, and most importantly, Housing Court never decided the rent overcharge claims pending before it anyway. The findings of Judge Birnbaum incorporated in the judgment dismissing the landlord's nonpayment petition which DHCR and the tenants seek to rely upon here through their invocation of the doctrine of collateral estoppel are findings which Judge Birnbaum made on the landlord's own petition. Those findings do not reflect a direct determination by Judge Birnbaum of the rent overcharge complaints but, certainly, could properly have a collateral impact upon them in any forum where they subsequently were to be decided. Therefore, if the substantive test for issue preclusion is otherwise met, the precept of DHCR's primary jurisdiction to entertain rent overcharge claims provides no safe haven for the landlord.
The substantive standard for finding issue preclusion is a simple one:
Collateral estoppel, a corrollary doctrine of res judicata, "precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party . . ., whether or not the tribunals or causes of action are the same". . . . A party invoking either the doctrine of res judicata or collateral estoppel must show that the critical issue in the instant action was necessarily decided in the prior action and that the party against whom estoppel is sought has been afforded a full and fair opportunity to contest that issue. . . .
New York Site Development Corp. v. DEC, 217 App. Div. 2d 699, 700, 630 N.Y.S.2d 335, 336 (2d Dep't 1995), cited with approval, Rizzo v. Matturro, 8 App. Div. 3d 646, 779 N.Y.S.2d 551 (2d Dep't 2004). Manifestly, that standard has been met here.
Bridgeview is a party to every proceeding in this controversy — this Court, Housing Court, and before DHCR. In fact, it is the only party common to all. Nothing in the record here or anywhere suggests, nor has it ever even been alleged, that there are any distinctions in the construction and/or tax abatement history of any of the buildings or units comprising the Bridgeview complex. While the tenant/landlord relationship may vary from unit to unit and tenant to tenant, there is nothing unique in any of those relationships about construction or participation in the § 421-a program. Yet, controversy between the landlord and tenants regarding construction of the buildings, their participation in the tax abatement program, and the absence of subsequent substantial rehabilitation is, precisely, what gave rise to those issues being litigated in and decided in Housing Court at the landlord's initiation.
Specifically, in the very nonpayment petition filed by the landlord commencing the summary proceedings in Housing Court against five Bridgeview tenants, including three now before this Court, the landlord put in issue its contention that the Bridgeview complex was not subject to rent stabilization on the ground that the units in which those tenants resided had been vacancy decontrolled. Issue was immediately joined at the threshhold when the tenants controverted the allegation that their individual units were exempt from rent stabilization. At trial, the landlord offered proof of participation in the § 421-a tax abatement program and, alternatively, of post-construction renovation done to the premises to establish yet another way out of rent regulation. The tenants in defense offered proof that the buildings were constructed prior to January 1, 1974 and had not been substantially rehabilitated since. At the close of evidence, Housing Court determined construction of the buildings was completed in 1973, that there had been no rehabilitation to any of the premises reaching the level of "substantial rehabilitation" in accord with DHCR Operation Bulletin 95-2 and that the landlord had failed to prove its participation in the § 421-a program. Aside from "substantial rehabilitation", which was not raised by the landlord either at DHCR or before this Court, the other issues raised, fully and fairly litigated and then decided by Housing Court are identical to those advanced by the landlord on each of the pending Article 78 proceedings. In addition to the full and fair opportunity afforded to the landlord in Housing Court to contest these issues, it is clear beyond any reasonable dispute that these issues were properly before the Housing Court in order to resolve the tenants' challenge to the landlord's petition and were necessarily decided in the determinations Housing Court made in the exercise of its jurisdiction.
Accordingly, the landlord does not get another bite out of the apple. This Court is bound to apply the doctrine of collateral estoppel on the showing made by the respondents. Bridgeview, therefore, is precluded from re-litigating in these proceedings Housing Court's adverse determinations that the entire Bridgeview complex is subject to rent stabilization under the Emergency Tenant Protection Act of 1974, that any improvements made by the landlord do not rise to the level of "substantial rehabilitation" and that Bridgeview did not participate in the § 421-a program. These findings, of course, are identical to the findings made by the Rent Administrator in each of the four underlying rent overcharge proceedings and, with the exception of the Ragucci proceeding where the landlord's administrative appeal was dismissed summarily, were reaffirmed in the opinions and orders determining the petitions for administrative review now before this Court. With the doctrine of collateral estoppel precluding the landlord from assailing those findings in these proceedings, there is no basis upon which this Court can vacate and annul the orders denying the landlord's petitions for administrative review which found that Bridgeview had committed rent overcharges and which, ultimately, requires the landlord to file registration statements as provided in the rent stabilization law and to set rents comporting with it.
PUBLIC POLICY
As indicated above, the collateral estoppel consequences of Judge Birnbaum's decision were not advanced by the tenants or relied upon by the agency in the DHCR proceedings. To the contrary, though, at least by the time of the agency appeal process and, in most cases, while the rent overcharge complaints were still pending before the Rent Administrator, sufficient facts had been spread on the record to show that Bridgeview had participated in the § 421-a tax abatement program in contradiction to one of Judge Birnbaum's findings, as well as DHCR's own prior determination, that Bridgeview had not participated in that program. By then, again as Judge Birnbaum had coincidentally found, the facts in the record also clearly established that all of the buildings in the Bridgeview complex had been constructed prior to 1974. In determining the petitions for administrative review arising out of the Bridgeview rent overcharge proceedings, therefore, save for the summarily dismissed Ragucci appeal, DHCR hedged its bet and specifically found in the alternative that, even if Bridgeview had participated in § 421-a, the complex was still rent stabilized under ETPA. It is this conclusion which the landlord challenges most fundamentally as erroneous as a matter of law on the grounds of statutory interpretation, particularly when guided by the dictates of public policy.
The subsequent availability of evidence of Bridgeview's participation in the tax abatement program has no impact in determining the applicability of collateral estoppel to preclude re-litigation of those facts here.
The landlord's argument is simple. In cooperation with and furtherance of New York's enacted public policy to encourage the development of affordable housing, one of the landlord's predecessors-in-interest applied for and received a certificate making Bridgeview eligible to participate in the then § 421 tax abatement program. Participation in that program, Bridgeview asserts on the strength of a more than 20-year old affidavit of the developer, was the only reason the apartments were built. The deal at the time, undeniably, was that the landlord would receive a 10-year tax abatement and, in return, the units constructed would be made subject to rent stabilization for the period of the abatement. (The same evidence at DHCR proving Bridgeview's participation in the tax abatement program also established that the abatement ended on June 30, 1984.) Bridgeview argues now that the State should not be allowed to welch on its statutory contract with the landlord's predecessor-in-interest by subjecting all units at Bridgeview not vacancy decontrolled to the rent stabilization system. Moreover, Bridgeview offers, potential future affordable housing developers will be scared off from participation in affordable housing construction programs to the detriment of public policy encouraging such development because of DHCR's refusal to make good on New York's housing promises.
All of these arguments are hinged on the premise that the enactment of ETPA was an impermissable retroactive amendment of the RPTL § 421 tax abatement program. Bridgeview relies specifically upon the language of § 421 in effect on the date its certification of participation in the tax abatement program was issued and which provides:
at the expiration of [the abatement period] rents shall be decontrolled unless immediately prior to such expiration such rents would have been controlled by the provisions of any other law other than pursuant to this section, in which event [sic] such rents shall continue subject to such control to the same extent and in the same manner as if this section has never been applied thereto . . . [Emphasis supplied].
Bridgeview contends that the "other laws" referred to in the statute are laws which provide for rent stabilization coverage and which were in effect at least by the time § 421 certification was issued on March 22, 1973. Of course, there were no such laws then. Just as, despite many other legislative amendments to the tax abatement program, there were no amendments to either RPTL § 421 or § 421-a which specifically subjected participating buildings constructed prior to January 1, 1974 to rent stabilization upon the conclusion of the tax abatement period. Hence the landlord's argument.
To further its public policy point, Bridgeview makes reference to the rent law treatment of Mitchell-Lama units upon the withdrawal of such units from the coverage of that program. Like § 421-a, the Private Housing Finance Law, known popularly as the Mitchell-Lama Law, was enacted in the 1950's to encourage development of new housing for middle income tenants living in substandard housing neighborhoods. The landlord relies on a recent decision of the First Department, KSLM-Columbus Apartments, Inc. v. DHCR, 6 App. Div. 3d 28, 772 N.Y.S.2d 665 (1st Dep't 2004) ( "KSLM"), which held that, because Mitchell-Lama housing was specifically excluded from the Rent Stabilization Law of 1969, DHCR's ruling under review there, that units exiting Mitchell-Lama were covered by the 1969 law anyway, was erroneous as a matter of law. To accentuate its point, Bridgeview focused on language in the decision critical of DHCR's handling of the kind of public policy considerations it advances now, that is, the First Department's labeling of DHCR's re-regulation of the former Mitchell-Lama units under the Rent Stabilization Law of 1969 as imposing "arbitrary economic hardships" on landlords in the teeth of a contrary provision in the very 1969 law DHCR ruled should apply. The First Department further observed that to sustain such administrative overreaching "would certainly dampen any future interest by developers who may be inclined to participate in government subsidized housing programs." Id. at 39, 772 N.Y.S.2d at 673. The only distinction to be made between Mitchell-Lama units and § 421-a units, Bridgeview claims, is that the expiration of a § 421-a abatement, because of the specific language of that program, results in decontrol entirely rather than application of ETPA rent regulation as was the case in KSLM.
These contortions in the guise of argument are wrong as a matter of statutory interpretation and are wrong as a matter of public policy interpretation. Plain language interpretation of the very words of RPTL § 421 relied upon by the landlord to make its case for exemption from rent regulation establishes just the opposite. The "other laws" referred to in that statute do not mean laws in effect at the time § 421 was adopted or when the subject units were built or when the certificate entitling the owner to participate in the tax abatement program was issued. The "other laws" referred to in that section mean other rent regulation statutes, i.e., not by amendment to § 421, in effect at the time a particular tax abatement ends. At that time, if there is no other law existing which would make a building subject to rent regulation, § 421-a provides that units which were rent regulated because of participation in the § 421-a program would be vacancy decontrolled. Obviously, in 1984 when the Bridgeview tax abatement ended, there was another rent regulation law in effect, namely ETPA. The relevant missing statutory amendment, if any, then is an amendment to ETPA excluding from its ambit buildings stabilized as a result of a § 421-a tax abatement rather than a subsequent amendment to § 421-a authorizing continued post-abatement stabilization under ETPA. Its absence dooms the landlord's interpretation of the statute.
There was also no post-1974 amendment of RPTL § 421-a specifically exempting units receiving tax abatement under the program from the reach of ETPA upon expiration of the abatement.
No issue of constitutional dimension, as the landlord would have it, is raised at all. If there was one, it has long been decided by cases like Zeitlin v. New York City Conciliation and Appeals Board, 46 N.Y.2d 992, 416 N.Y.S.2d 233 (1979), which sustain the constitutional propriety of legislation permitting the declaration of a housing emergency in New York City and to include within the scope of its rent regulation all units of a particular class regardless whether those units had been exempt from regulation or decontrolled by prior law. In Zeitlin, the Court of Appeals sustained the "clear and unambiguous applicability" of ETPA and the implementing resolutions of the New York City Council even to previously exempted housing accommodations. Id. at 994-95, 416 N.Y.S.2d at 235. Put another way, housing accommodations, even those previously decontrolled, can become rent regulated under ETPA without offending the Constitution. Covering units still controlled under another law, if anything, is less offensive.
Without doubt then, the plain language of § 421-a and ETPA collide neither with the Constitution nor public policy. Indeed, although the Appellate Division in KSLM found DHCR's application of the old rent stabilization law to the exiting Mitchell-Lama units wrong as a matter of statutory interpretation and while the Court did note that failure to keep program promises would undercut the attractiveness of housing subsidy programs with developers, it also found that there was no statutory bar to the applicability of ETPA to those very same units nor was there any public policy implications regarding the potential disincentive to developers by the finding that rents would still be subject to regulation in those units pursuant to a law which had been enacted almost 20 years after the Mitchell-Lama program had been begun. Furthermore, if there were such public policy concerns regarding the applicability of ETPA to units exiting either the Mitchell-Lama or § 421-a programs, those concerns were not obviously shared by the Legislature as evidenced by its failure to enact an amendment to any law which would exempt such units from the reach of ETPA.
Accordingly, DHCR's alternate holding in accord with its policy view, that participation in the § 421-a program is irrelevant to a determination of whether such units are covered by rent stabilization if they are constructed prior to January 1, 1974, is far from erroneous as a matter of law. Indeed, DHCR has correctly stated and applied here the law, which this Court otherwise could and would have done, and its determination of the petitions for administrative review now before the Court by way of Article 78, must be, and hereby is, sustained on this ground as well. SUMMARY DISMISSAL IN RAGUCCI
Bridgeview neither challenges DHCR's arithmetic in computing the rent overcharges nor asserts any other basis to support setting aside the determinations under review.
DHCR did err, however, in its summary dismissal of the landlord's PAR in Ragucci. The landlord initially timely filed a PAR but inadvertently failed to include the calculation chart footnote page for the arithmetic calculation page a calculation which the landlord was not contesting beyond its general challenge that the Ragucci unit was not stabilized at all. DHCR granted permission to re-file the PAR but the landlord missed the new deadline by two days because of law office failure. Especially given that identical issues were being advanced in the other three proceedings, the landlord contends there was no prejudice to DHCR as a result of the late filing and, therefore, that its technical default in meeting the re-filing deadline should have been waived. Alternatively, Bridgeview also contends that summary dismissal was inappropriate because its timely original filing was in substantial compliance with DHCR regulations.
DHCR's lament that a deadline is a deadline and that it is without power to grant Bridgeview relief by extending it rings particularly hollow in the totality of the Bridgeview litigation that was and is pending before it. Clearly, the landlord is correct on both scores. Bridgeview's initial filing was in substantial compliance and DHCR did have the discretion to deem timely the landlord's filing of its amended PAR two days after the filing deadline. Since DHCR had the discretion to entertain Bridgview's appeal under either filing, DHCR's failure to exercise it was arbitrary, capricious and wrong. See Dworman v. DHCR, 94 N.Y.2d 359, 704 N.Y.S.2d 192 (1999); Jemrock Realty Co., LLC v. DHCR, 7 App. Div. 3d 338, 776 N.Y.S.2d 561(1st Dep't 2004); IG Second Generation Partners, LP v. DHCR, 294 App. Div. 2d 300, 743 N.Y.S.2d 424 (1st Dep't), lv. to app. den., 98 N.Y.2d 607, 746 N.Y.S.2d 691 (2002).
At the same time, aside from the procedural quirk in perfecting the PAR, there is not a dime's worth of difference between between the facts and law in issue on Ragucci and those in issue in the other three proceedings. If remanded to DHCR, the collateral estoppel effect of this decision and Judge Birnbaum's would bar the landlord from re-litigating these common issues of law and fact on the Ragucci PAR; nor would there be any basis at administrative appeal upon which DHCR could set aside the Rent Administrator's determination for, again, the landlord neither challenges the arithmetic nor asserts any other ground upon which a different result could be reached. For the wrong reasons, DHCR got the right result — Bridgeview is not entitled to relief from the agency's finding of rent stabilization coverage and rent overcharge in Ragucci either. In this unusual circumstance, further waste of time and resources on a remand is not warranted. The determination of the Rent Administrator should not be disturbed and the formalities of a return to DHCR for a hearing on a PAR where all the facts and law have already been decided need not be observed. For that limited reason, this petition too must be dismissed and the cross motion of DHCR must be, and is, denied as academic.
In accord with the foregoing determination of the facts and law, this Court finds in each of the four Article 78 proceedings before it that the petitioner landlord has failed to establish that DHCR acted in an arbitrary, capricious or unreasonable manner or that any of its conclusions of law are in any way erroneous. As a result, each of the petitions is dismissed and the findings of rent overcharge by DHCR are sustained.