Opinion
101005/10.
Decided October 8, 2010.
Roberta L. Martin, Esq., Assistant Attorney General, New York, NY, Attorney's for Respondent.
Daniel Saketkhou, Esq., Gutman, Mintz, Baker Sonnenfeldt, P.C., New Hyde Park, NY, Attorney for Southbridge Towers.
David Hershey-Webb, Esq., Himmelstein, McConnell, Gribben, Donoghue Joseph, Esqs., New York, NY, Attorney for Petitioner.
This case illustrates DHCR's myopic interpretation of the tenant succession regulations, resulting in a decision that arbitrarily ignores extensive documentary evidence submitted by petitioner and turns a blind eye to the public policy favoring the continuation of long-term, rent-regulated tenancies. At issue specifically is the October 14, 2009 decision by respondent New York State Division of Housing and Community Renewal (DHCR) attached as Exhibit A to the petition. In that decision, DHCR upheld the decision by respondent Southbridge Towers denying the application by petitioner Paul Murphy for succession rights to apartment 7C at 90 Gold Street in lower Manhattan, the very apartment where he was born and lived his entire life.
Background Facts
The subject apartment 7C is located in the building complex known as Southbridge Towers. Respondent Southbridge Towers, Inc., which holds title to the building, is a State-supervised, limited profit housing company organized under Article II of the Private Housing Finance Law, commonly known as Mitchell-Lama. In exchange for the company's receipt of tax benefits and low-interest financing, the cooperative apartments are sold at below-market rates, and limitations are placed on the maintenance fees that can be charged to the cooperators who purchase the shares allocable to the apartments where they reside.
On May 15, 1981, Kevin and Paula Murphy became shareholders and signed a lease for apartment 7C. It is undisputed that their son, petitioner Paul Murphy, also moved into the apartment at that time. Paul was then an infant, one month old, and was listed on some documents as an additional shareholder, although his infancy barred him from actually holding title. School records confirm that Paul lived in the apartment with his mother Paula through his graduation from high school in June 1999. As detailed below, other documents exist confirming that Paul continued to occupy the apartment as his primary — and sole — residence after his graduation and continuing to date.
For part of the relevant period, Paul's father lived elsewhere and then returned to the apartment. However, the record need not be burdened with those details, as Paul's succession claim is based on his co-occupancy of the apartment with his mother for far more than the minimum two-year period before she moved out in January 2000.
On or about October 5, 2004, petitioner Paul Murphy, then 23 years old, submitted to Southbridge a Preliminary Succession Rights Application for himself and his uncle James Soucy. Pursuant to 9 NYCRR § 1727-8.3(a), Paul requested a lease in his own name, indicating that both of his parents had permanently vacated the apartment and that he had co-occupied the apartment with his mother as a primary residence for more than the requisite two-year period of time set by the regulations governing succession rights. In support of the application, Paul submitted extensive proof of his co-occupancy with his mother. Included with that proof were the annual income affidavits, which every tenant shareholder was required to file, for the calendar years 1990 through 1997. The 1997 affidavit was signed on May 21, 1998 and submitted on or about that date. The record also contains copies of the annual income affidavits for the calendar years 2000 through 2003, after which the 2004 succession application was filed. All the affidavits beginning in 2000 list Paul Murphy and James Soucy as the occupants of the apartment
The regulations have since been renumbered and amended, but the amendments are not significant so need not be addressed.
Paul's application for succession rights was also supported by a statement from his mother. There Mrs. Murphy confirmed that her son Paul had lived with her in the apartment for his entire life until she and her husband permanently vacated in January 2000. As particularly relevant here, Mrs. Murphy acknowledged that she had not submitted income affidavits for the calendar years 1998 and 1999 due to information security and privacy concerns, knowing full well that Southbridge could impose a surcharge based on the failure to file. In fact, Southbridge did impose a surcharge, and Mrs. Murphy paid it in full. However, Southbridge took no steps to terminate Mrs. Murphy's tenancy or otherwise penalize her for not filing the two affidavits.
It is undisputed that petitioner submitted each and every document in his possession requested by Southbridge to support his application. The only requested documents not submitted were the income affidavits for the calendar years 1998 and 1999, as his mother had not prepared them. As noted above, Paul was a high school student through June of 1999 and turned 18 about that time. Thus, it cannot be disputed that Mrs. Murphy, and not Paul, was charged with the duty to file the affidavits, and she had explained to Southbridge why she had not done so.
Nevertheless, by letter dated February 28, 2007, Southbridge denied petitioner's application for succession rights. The sole basis for the denial relating to Paul was the absence of the income affidavits for 1998 and 1999, which Southbridge deemed necessary to prove that Paul lived in the apartment with his mother. Other grounds were stated with respect to Paul's uncle James Soucy, but they need not be detailed here as Mr. Soucy has chosen not to pursue his succession claim.
Paul Murphy then promptly appealed the denial of his succession application to DHCR, the administrative agency that regulates Mitchell-Lama housing like Southbridge. The proceeding spanned two years and included the submission of substantial documents and legal arguments by counsel for both parties. The appeal was determined by DHCR's October 14, 2009 order, which is challenged herein.
DHCR's Denial Order is Arbitrary and Capricious
As noted above, DHCR upheld the denial of petitioner's succession claim, despite the extensive documentation in the record proving that Paul Murphy lived in the apartment with his mother as their primary residence from his infancy until Mrs. Murphy moved out in January 2000. That documentation, part of the Administrative Record submitted to this Court in this proceeding, included:
the May 15, 1981 initial occupancy agreement, listing Kevin and Paula Murphy and their son Paul;
Paul Murphy's high school transcript, listing the apartment as his address through his graduation in June 1999;
Paul's driver's license, listing the apartment;
Paul Murphy's 1998 income tax forms, listing 90 Gold Street, as well as a letter from his accountant confirming various tax-related documents listing the apartment;
Paul's statements of dividends for 1998 and 1999, listing the apartment;
various statements of earnings for Paula and Kevin Murphy for 1998 and 1999, listing the apartment;
the annual income affidavits from 1990-1997, all of which listed both Paul Murphy and his mother Paula at the apartment;
income affidavits for 2000-2006, listing Paul Murphy and James Soucy;
various bills and bank statements for 2004 and 2005, naming Paul Murphy at the apartment;
pay stubs for Paul Murphy for 2005, listing the apartment;
Paul's 1998 tax return, listing 90 Gold Street, his 2001-2003 returns, listing the apartment, and copies of tax transcripts for Paul for 2001-2004, listing the apartment;
Paul's birth certificate, confirming his relationship to his mother;
notarized statements from Kevin and Paula Murphy, confirming that their son had lived in the apartment since childhood, that they had moved out in 2000, and that they supported his application for succession;
Mrs. Murphy's income tax returns and supporting W-2 and 1099 statements for 1998 and 1999, confirming her address at the apartment;
Mrs. Murphy's voting records for 1998-2000, listing the apartment;
an affidavit from Mrs. Murphy (inadvertently unnotarized but later replaced with a notarized version) explaining that she had not submitted the income affidavits for 1998 and 1999 because "there was corruption at Southbridge Towers and I did not want to provide my financial information. A Southbridge Towers Board member and DHCR employee, Jody Wolfson, was indicted on embezzlement charges."
Petitioner's counsel has submitted confirmation that Ms. Wolfson, a DHCR employee who resided at Southbridge, was convicted of corruption for acts occurring from 2000-2005 and that Mrs. Murphy's decision not to file the 1998 and 1999 affidavits (due in 1999 and 2000) was based on information which led to the indictments.
After reviewing the background facts, DHCR then turned in its decision to the governing regulations. Specifically, it stated that 9 NYCRR § 1727-8.3(a) provided for succession rights in a Mitchell-Lama project like Southbridge under the following circumstances:
if [a] tenant has permanently vacated the housing accommodation, any member of such tenant's family . . . who has resided with the tenant in the housing accommodation as a primary residence for . . . not less than two years, has been listed on the income affidavit and/or on the Notice of Change to Tenant's Family . . . immediately prior to the permanent vacating of the housing accommodation by the tenant, . . . may request to be named as a tenant on the lease and on the stock certificate.
DHCR also quoted the definition of "primary residence" found at 9 NYCRR § 1727-8.2(a)(5):
The housing accommodation in which the person actually resides and maintains a permanent and continuous physical presence. Proof of such residency shall be the listing of such person on the annual income affidavit and/or the filing of the Notice of Change to Tenant's Family . . . together with other evidence, such as certified copies of tax returns, voting records, motor vehicle registration and driver's license, school registration, bank accounts, employment records, insurance policies, and/or other pertinent documentation or facts.
Applying the regulations to the facts of the case, DHCR concluded that Paul Murphy had clearly established that he was the son of Paula Murphy, that he had lived with his mother in the apartment throughout his childhood, and that Southbridge had notice of his occupancy based on the income affidavits filed for the calendar years from 1990 through 1997. Finding that Mrs. Murphy had vacated the apartment in January 2000, DHCR further stated that the applicable two-year period for determining succession rights ran from January 1998 through January 2000. The last affidavit filed was dated May 21, 1998, for the calendar year 1997.
DHCR found the filing of the income affidavit in May 1998 to be highly significant, noting that it "occurred within the applicable two-year qualification period in this matter." However, DHCR found it equally significant that Mrs. Murphy had not submitted an income affidavit for the following year: "Ordinarily, the execution of the calendar year 1998 annual affidavit would have occurred in mid-1999, which falls within the applicable two-year qualification period in this matter."
DHCR then held that Paul Murphy was barred from obtaining succession rights. That decision was based on one fact and one fact alone; that is, the fact that Mrs. Murphy had not filed the income affidavit due in mid-1999 for the preceding calendar year. As noted previously, petitioner Paul Murphy was at that time a high school senior, and he had otherwise established through extensive competent evidence that he had been living in the apartment with his mother then, for his entire life before then, and continuing until Mrs. Murphy moved out in January 2000. Nevertheless, DHCR discounted that overwhelming evidence in petitioner's favor and held that the absence of that single affidavit was fatal to petitioner's claim:
Those affidavits are the primary evidence showing that the subject apartment was a succession claimant's primary residence. 9 NYCRR § 1727-8.2(a)(5). In addition, the appearance of a succession claimant's name on the subject apartment's annual affidavits executed during the applicable qualification period is a separate and coextensive requirement for obtaining succession rights to the unit's tenancy. 9 NYCRR § 1727-8.3(a). Due to the absence of that required annual affidavit from the Apartment's documentary record, the Applicant's succession claim must fail.
In denying petitioner's succession claim, DHCR has arbitrarily applied the applicable regulations to give the annual affidavit the significance of a trump card, invalidating all other evidence in the case. Such a result is not supported by the wording of the regulations or the policy behind it. The definition of "primary residence" quoted above refers to the annual affidavit as proof of primary residence, but it does not expressly bar an individual from establishing primary residence through other documentation. In fact, the regulation itself expressly allows a Notice of Change to Tenant's Family to serve as an alternative to the affidavit. That same alternative is included in the above-quoted succession regulation.
The primary purpose of the provision is to insure that the tenant notify the housing company of the names of the individuals residing in the household so that eligibility requirements are maintained. Similarly, as indicated in the federal case cited by DHCR, the primary purpose of the annual affidavit is to provide the income of household members so that the rent can be properly calculated based on that income. Claugus v Roosevelt Island Housing Management Corp., 1999 WL 258275(SDNY 1999); see also Parker v New York City Housing Authority, 73 AD3d 632 (1st Dep't 2010). Here, there is no dispute that Paul Murphy was a long-term member of the household, having grown up in the apartment. As a student, his income was negligible, if it existed at all. In any event, the record confirms that Mrs. Murphy knowingly and willingly paid the maximum rent, which included a surcharge for not filing the 1999 affidavit, because of privacy concerns.
None of the cases cited by the parties, nor any found by this Court, support DHCR's interpretation of the regulation to bar succession rights based solely on the absence of a single income affidavit, in the face of overwhelming proof in the applicant's favor. For example, the case of Renda v DHCR, 22 AD3d 382 (1st Dep't 2005), cited in the DHCR order in this case, and the more recent Girigorie, Jr. v NYC Dept of Housing Preservation and Development, 75 AD3d 430 (1st Dep't 2010), are both readily distinguishable in that the individuals seeking succession rights lacked proof of primary residence in general, whereas the proof in the case at bar is extensive. Similarly misplaced is DHCR's reliance on Greichel v DHCR, 39 AD3d 421 (1st Dep't 2007), where the tenant filed income affidavits that did not include the name of the individual who later sought succession rights. In contrast here, the name of petitioner Paul Murphy appeared on each and every income affidavit that was filed.
What is more, both in Callwood v Cabrera , 49 AD3d 394 , 395 (1st Dep't 2008) and Gilbert v Perine , 52 AD3d 240 , 241 (1st Dep't 2008), the Appellate Division referred to the applicant's "failure to demonstrate why his name did not appear" on the annual income affidavit. This language suggests that the absence of an affidavit shall not be an absolute bar to succession, but is instead something to be inquired into and considered by the agency. In the instant case, Paula Murphy submitted an affidavit explaining that she declined to file the income affidavit at issue due to concerns about wrongdoings at Southbridge. As those concerns were tied to a DHCR employee residing at Southbridge who was convicted of corruption due to acts occurring at or about that time, DHCR's counsel has little standing to argue that the explanation is insufficient. Such arguments by counsel also have limited value because, while DHCR referred to the affidavit in the challenged order, the agency relied for its decision on Mrs. Murphy's failure to file the affidavit in the first instance, that is, on "the absence of that required annual affidavit from the Apartment's documentary record," and not on the adequacy of her explanation for the failure to file.
Considering the totality of the circumstances here, this Court finds that DHCR's decision to deny Paul Murphy succession rights to the apartment where he indisputably lived his entire life — based solely on his mother's failure to file a single income affidavit — was arbitrary and capricious and must be annulled. As DHCR found that the applicant had satisfied all the other criteria for succession, no remand is required, as a finding in favor of Paul Murphy can be made based on the record presented. Also, as DHCR filed a Verified Answer along with its cross-motion to dismiss, the denial of its motion does not entitle the agency to file any further papers.
Accordingly, it is hereby
ORDERED that the cross-motion to dismiss by respondent DHCR is denied; and it is further
ADJUDGED that the petition is granted, and the October 14, 2009 Order Denying Appeal issued by DHCR Assistant Commissioner Richmond McCurnin is annulled; and it is further
ADJUDGED AND DECLARED that petitioner Paul Murphy is entitled to succession rights to Apartment 7C at 90 Gold Street, New York, NY.
Counsel for DHCR may pick up the Administrative Record from Room 222 at the courthouse at 60 Centre Street.