Opinion
111475/03.
Decided June 22, 2004.
Petitioner Sondra Rutherford, "Assignee Pro Se" for Jerome Brandt purports to bring this Civil Practice Law and Rules ("CPLR") Article 78 petition on behalf of Brandt, challenging an award of $10,000.92 by Order and Opinion dated April 28, 2003 issued by respondent New York State Division of Housing and Community Renewal("DHCR") pursuant to its authority under the Rent Stabilization Law ("RSL"). The amount was awarded pursuant to the continuation of a fair market rent appeal filed by the prior tenant in the apartment. Brandt, the tenant, recipient of the Order and Opinion, now resides at 900 Bay Drive, Miami Beach, Florida.
Background
Respondent-Intervener IG Second Generation Partners L.P. and IBLDG Co., Inc. are the current owners of the land and building known as 166 Second Avenue, New York, New York and Apartment PHD therein. Respondent-Intervener BLDG Management Co., Inc. d/b/a Wembly Management Co., is the managing agent which manages the subject premises.
Pursuant to a stipulation between the parties, dated August 1, 2003, and approved by this Court, IG Second Generation Partners L.P. and IBLDG Co., Inc., the current owners of 166 Second Avenue, New York, New York and Apartment PHD therein and BLDG Management Co., Inc. d/b/a Wembly Management Co., the building's managing agent are permitted to intervene in this CPLR Article 78 proceeding as Additional Respondent-Interveners.
Sheila King, the first rent stabilized tenant of apartment PHD, located in 166 Second Avenue, New York, New York 10003, commenced her tenancy on July 1, 1986. In July 1988, she filed a complaint with DHCR which was processed as a request for the determination of the fair market rent.
While King's complaint was pending, she vacated the apartment and Brandt began his tenancy pursuant to a lease commencing August 1989. The rent charged to Brandt was calculated by adding lawful increases to the rent charged to King. In October 1989, Brandt filed the subject complaint in the form of an "overcharge", explaining that he wanted DHCR to determine the fair market rent pursuant to his "No. 2522.3 application. A # 2522.3 application refers to an application made pursuant to Rent Stabilization Code ("RSC") section 2522.3 dealing with fair market rent appeals ("FMRA").
On October 29, 1991, the Rent Administrator ("RA") issued an order denying Brandt's complaint. The RA relied on the rent charged to King as the base and found that the landlord had charged Brandt less than the guidelines permitted. Thereafter, Brandt requested reconsideration asserting that this proceeding is dependent upon the FMRA filed by King which was still open and pending and that his complaint should remain open and pending until King's FMRA was decided.
Thereafter, the RA issued an order, dated November 16, 1992, reopening Brandt's proceeding, stating that once there was a determination of King's proceeding, "the lawful rent will be recalculated." The RA also stated that the RA's October 29, 1991 order would remain in effect until there was a new determination on that proceeding. Pursuant to that Order, the landlord continued to collect the rent as reflected in the lease.
Brandt vacated the apartment in August 1994, while his then-current lease was in effect as that lease, by its terms, did not expire until July 31, 1995. At the time Brandt vacated the apartment, there had been no determination of the King complaint and no new order in this proceeding. Brandt failed to pay any rent for the months of September 1994 through December 1994.
In January 1995, the subject apartment was re-rented. At the time of re-renting, Brandt owed approximately $10,000.
On November 18, 1994, the RA issued an order in the King proceeding, which was amended and re-mailed on December 29, 1994. In those orders, the RA determined and established the initial legal regulated rent for the subject apartment.
The landlord argues that the rent owed by Brandt to the landlord and the amount of excess rent previously collected by the landlord from Brandt was basically "even."
The landlord filed a Petition for Administrative Review ("PAR") to challenge the order in the King proceeding. The PAR was denied and the landlord sought judicial review of that denial. Both the Supreme Court and the Appellate Division affirmed DHCR's decision in the King proceeding.
After the Court of Appeals denied leave to appeal in King, the RA issued the DRA order in this proceeding. Recognizing that during the period of Brandt's tenancy the initial rent stabilized rent had not yet been determined, the RA determined that this proceeding should be treated as a continuation of the application for determination of the initial regulated rent. As a result, RA adjusted the rent but did not impose interest or treble damages. The RA also calculated the rent due only through August 11, 1994, when Brandt vacated the apartment.
Brandt filed a PAR asserting that he should be awarded treble damages, or interest. The landlord filed an answer to the PAR asserting, that no interest or treble damages should be imposed as the proceeding was based on an objection that the initial rent stabilized rent to King exceeded the fair market rent and interest cannot be awarded when the rent is adjusted to reflect the fair market rent. The landlord also asserted that at the time that the King proceeding resulted in an order reducing the initial rent, the adjustment due Brandt through August, 1994 equaled the arrears he would have owed from September 1994 through December 1994, thus the landlord had complied with the King order to credit subsequent tenants when it took no action to recover the tenant's arrears.
DHCR issued a Commissioner's Order dated November 25, 2002 which awarded the tenant interest. The landlord filed an Article 78 Petition against that Commissioner's Order in January 2003, Index No. 101351/03. In response to the landlord's Article 78 proceeding, DHCR acknowledged the agency's error in awarding interest to the tenant and the matter was remitted by the Supreme Court to the agency.
DHCR then issued the Commissioner's Order being challenged in this proceeding.
The instant CPLR Article 78 proceeding ensued.
Cross-motion to Dismiss
According to the Petition, on June 15, 2003, "in consideration of $1.00," Brandt purportedly assigned his claim of "overcharge" to petitioner. The assignment states:
This assignment is made for the purposes and convenience of allowing Sondra Rutherford as assignee to collect all monies due to me including prosecuting any proceedings within the agency or in any judicial forum in which she deems necessary for the purpose of Collection of the claim of overcharge.
The Court notes that the purported assignment is invalid in any case as a paper which permits a person to collect what is due the real party in interest for the latter's benefit is not a true assignment (see Spenser v. Standard Chemicals Metals Corp., 237 N.Y. 479.
This purported "assignment" is by its terms nothing more than a retainer agreement seeking to enable petitioner to engage in the unauthorized practice of law.
DHCR and the landlord both argue that petitioner cannot represent anyone other than herself in this, or any other, action as she is not an attorney. According to DHCR and the landlord, petitioner does not have standing to commence this action as she is neither the landlord, or the tenant. Indeed, it appears that she is an individual who acts as an expediter in proceedings before DHCR for pay. The Court agrees. Although, arguably, petitioner's apparent financial arrangement with Brandt may allow her to deem herself aggrieved by the Order and Opinion, she does not fall into a class of individuals within the zone of interest the statute is designed to protect-a requirement for commencement of a CPLR Article 78 proceeding by a party (see Dairylea Cooperative v. Walkley, 38 N.Y.2d 6, 9; Buckingham Apartments, Inc., Ltd. v. Doody, 165 A.D.2d 855, 856 [2nd Dept. 1990]).
Moreover, as the landlord argues Judiciary Law § 489 prohibits assignments, such as the one in the case, "made for the very purpose of bringing suit" ( Fairchild Hiller Corp. v. McDonrell Douglas Corp., 28 N.Y.2d 325).
Moreover, as the Court of Appeals explained in In re: Roel, 3 N.Y.2d 224 (1957), even where a person possesses a particular competence in a subject which involves the law, that person is still a layman when it comes to the requirements to have the capacity to practice law. As in Roel, petitioner renders legal services to the public before DHCR, and this Court, as a business accommodation (see Roel, 3 N.Y.2d, at 230). As in Roel, this Court will not allow petitioner to circumvent the laws of this State, by using a purported assignment, to practice law without a license. Therefore, petitioner lacks standing to commence or maintain this action. Accordingly, the cross-motion to dismiss the petition is granted as the agreement upon which the suit is based is "illegal and void" (see American Optical Company v. Curtiss, 56 F.R.D. 26 [S.D.N.Y. 1971]; Lee V. Community Capital Corp., 67 Misc.2d 699 [Nassau Co. Sup. Ct. 1971]).
The Petition
Even assuming arguendo that petitioner has both standing and the legal right to appear for others in a Court of Law, the cause of action pled in her papers do not entitle her or Brandt to the relief sought. Basically, petitioner asserts that the treatment of Brandt's complaint, also as a FMRA, rather than an overcharge complaint, was arbitrary and capricious in that it deprives Brandt of interest that should have been awarded to Brandt by DHCR as part of its determination. Because this Court finds that DHCR's determination was a rational application of the law and was within its area of expertise, the petition would have to be denied and dismissed in any event.
As noted in the Order and Opinion, the Brandt's complaint is dependent on the prior FMRA complaint and derivative of it. Indeed, although the tenant utilized the form for an overcharge complaint, the RA correctly recognized that the application, in actuality, required the establishment of the initial rent stabilized rent, or fair market rent. This is why the RA awaited the determination of the initial rent stabilized rent and then directed a refund of the difference between the free market rent that was collected and the free market rent based on the initial rent stabilized rent. Additionally, as pointed out by the landlord, not only did Brandt ask that this proceeding be treated as a FMRA, he asked that it be consolidated with King's FMRA. Brandt's whole claim was based on his claim that the initial stabilized rent charged to King exceeded the fair market rent for the apartment.
Moreover, while both FMRA's and overcharges may result in monetary awards to a tenant, there are certain differences. An FMRA is an adjustment of an initial stabilized rent of a formerly rent controlled apartment after vacancy decontrol (see RSL 26-513[b][1]). The Rent Stabilization Law provides that an owner is entitled to set the initial regulated rent at the rent agreed to by owner and tenant (see RSL 26-512[b]). However, the tenant has 90 days of receiving a notice of initial rent (or four years in the absence of such notice) of filing an FMRA with DHCR asserting that the rent exceeds the fair market rent (see Muller v. DHCR, 263 A.D.2d 296 [1st Dept.], lv. den. 95 N.Y.2d 763).
In an FMRA, the owner may still receive the rent stated in the lease by submitting evidence of rents in comparable units of the same size in the area, or under present regulations, DHCR may itself review such comparable rents. If no such comparables are used, DHCR will then use a procedure for calculating the initial rent based on fair market rent guidelines promulgated by the Rent Guidelines Board 9, NYCRR 2522.6. Alternatively, an owner may seek to establish that the apartment is unique either due to changes in its configuration, or otherwise, thus not capable of a comparability review and therefor, entitling the owner to a first stabilized rent without review against any of these standards (see 300 West 49th St. Assoc. v. DHCR, 212 A.D.2d 250 [1st Dept. 1995]).
An overcharge proceeding, on the other hand, is rent collected in violation of RSL 26-512(a), pursuant to which no owner shall charge or collect rent in excess of the initial rent or adjusted initial rent until a different rent is authorized. Where the "overcharge" is collected, pursuant to RSL 26-516, a tenant within four years may file a complaint and it may entitle the tenant to treble damages in the event of a wilful overcharge and interest as a penalty (see RSC 2526.1[d]).
DHCR is not bound by the form of a tenant's complaint but is authorized to convert FMRA's to overcharge complaints or vice versa depending on the nature of the actual facts and thus conform the pleadings to the proof (see Two Lincoln Square Assoc. v. DHCR, 191 A.D.2d 281 [1st Dept. 1993]; Jemrock Realty Co. v. DHCR, 169 A.D.2d 679 [1st Dept.], lv. denied 78 N.Y.2d 852; 1BK Street Corp. v. DHCR, 302 A.D.2d 263 [1st Dept.], lv. den. 100 N.Y.2d 516; Powers Assoc. Inc. v. DHCR, 229 A.D.2d 349 [1st Dept. 1996], lv. den. 89 N.Y.2d 808; Sponheimer v. DHCR, 277 A.D.2d 58 [1st Dept. 2000]). While an FMRA is an adjustment of an initial legal rent, both DHCR and the courts have held in a variety of circumstances that an application of a tenant, subsequent to the initial tenant, should be treated as a FMRA (see Weinreb Mgmt v. DHCR, 231 A.D.2d 473 [1st Dept. 1996]; Lighthouse Properties v. DHCR, 305 A.D.2d 283, 284 [1st Dept.], lv. denied 100 N.Y.2d 516; Sponheimer v. DHCR, 277 A.D.2d 58).
Moreover, it makes sense to treat Brandt's claim as an FMRA rather than an overcharge complaint in this case as Brandt's claim is completely dependent on and derivative of the litigation commenced by the tenant's predecessor. Without it, neither petitioner nor Brandt would have any claim. The bottom line is that unless and until the initial legal regulated rent is established, there is no legal regulated rent. Therefore, the landlord could not be overcharging Brandt until the initial legal rent is established (see Sponheimer v. DHCR, 277 A.D.2d 58). There is no reason to give petitioner and Brandt rights to the theoretically higher penalties available in an overcharge proceeding than the party actually litigating the propriety of that initial rent as an FMRA. As their predecessor's claim was pending when Brandt filed his claim, it was simply a matter of "piggy backing" on that original claim and the Brandt complaint properly was treated accordingly (see Century Towers Assoc. v. DHCR, 83 N.Y.2d 819; Crabtree v. DHCR, NYLJ, p. 26, col.1 (Sup.Ct. N.Y.Co. December 9, 1998]).
The Court notes that contrary to the petition, the matter was properly remitted to DHCR for further consideration (see Hakim v. DHCR, 273 A.D.2d 3 [1st Dept.], app. dism. 95 N.Y.2d 887; Schoenstein v. McGoldrick, 279 A.D. 395, appeal and rearg. den. 279 A.D. 906 [1st Dept. 1952]). Moreover, the fact that an unreviewed Rent Administrator's order in another case may have held a contrary position does not bind DHCR's Commissioner in this case (see 251 West 98th Street Owners Corp., 276 A.D.2d 265 [1st Dept. 2000]).
As to petitioner's complaints about the differences in statutory enforcement between overcharge and FMRA's; particularly the accrual of interest and the self-executing nature of an overcharge award which may be immediately docketed as a judgment as opposed to the need for a plenary action and the fact that interest is not awarded administratively with respect to collection on an FMRA award (Compare RSL 26-516a[4] and [5] on overcharges, with RSL 26-513[b][1] on fair market rent appeals). It is clear that these legislatively designed distinctions are rooted in the basic differences between the two proceedings. In any event, if a tenant is forced to commence a plenary action to enforce an FMRA award, the Courts have formulated rules to make sure a tenant is made whole, namely the tenant is entitled to interest and attorney fees where provided for in the tenant's lease (see Pagnuzzi v. Primrose Management Co., 268 A.D.2d 213 [1st Dept. 2000]; Chechack v. Hakim, 269 A.D.2d 333 [1st Dept. 2000]; Busbee v. Ken-Rob Company, 280 A.D.2d 406 [1st Dept.], lv. den. 97 N.Y.2d 605). However, since petitioner is not an attorney, she is not entitled to attorney fees or to even commence the action in the first place. Moreover, because this matter was properly treated as a FMRA, there is no basis for the imposition of either treble damages or interest. Finally, this Court notes that since King's FMRA to fix the initial fair rent was not entitled to interest, Brandt, whose claim is dependant on King's, is not entitled to interest. As noted in Spohnheimer, when rent is reduced due to the setting of the fair market rent, that is a rent adjustment and not subject to RSC 2526.1 overcharge penalties do not apply.
The Court notes that the petitioner owed the landlord rent for the months he moved out until the apartment was re-rented. The landlord did not pursue that rent because of the Order in this case and credited the amount to be refunded against the amount owed to the landlord by the tenant.
CPLR 7803 states that the court review of a determination of an agency, such as DHCR, consists of whether the determination was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion, including abuse of discretion as to the measure or mode of penalty imposed. CPLR 7803(3) (see Windsor Place Corp. v. New York State DHCR, 161 A.D.2d 279 [1st Dept. 1990]; Mazel v. DHCR, 138 A.D.2d 600 [1st Dept. 1988]; Bambeck v. DHCR, 129 A.D.2d 51 [1st Dept. 1987], lv. den. 70 N.Y.2d 615). An action is arbitrary and capricious, or an abuse of discretion, when the action is taken "without sound basis in reason and . . . without regard to the facts." Matter of Pell v. Board of Education, 34 N.Y.2d 222, 231(1974). Rationality is the key in determining whether an action is arbitrary and capricious or an abuse of discretion. Matter of Pell v. Board of Education, 34 N.Y.2d, at 231. The Court's function is completed on finding that a rational basis supports the DHCR's determination (see Howard v. Wyman, 28 N.Y.2d 434). Where the agency's interpretation is founded on a rational basis, that interpretation should be affirmed even if the Court might have come to a different conclusion (see Mid-State Management Corp. v. New York City Conciliation and Appeals Board, 112 A.D.2d 72 [1st Dept.], aff'd 66 N.Y.2d 1032).
Applying this test to the Order challenged in the instant petition, it is clear to this Court that no basis exists upon which to grant the petition. The administrative record in this case clearly shows that the Commissioner's determination is in all respects proper and rational.
As to petitioner's references to a completely unrelated case, namely, a dispute between the landlord and a tenant named Roger Netzer, this Court finds the Netzer case to be irrelevant as it was resolved by settlement without an admission of fault and not raised before DHCR (see Fanelli v. Conciliation Appeals Board, 90 A.D.2d 756 [1st Dept. 1982], aff'd 58 N.Y.2d 952 [1983]).
Accordingly, the motion is denied and the petition is dismissed. The cross-motion to dismiss the petition is granted.
This constitutes the decision, order and judgment of this Court.