165 William Street, LLC v. Baumane, 2008 NY Slip Op 32237(U) (N.Y. Sup. Ct. 8/5/2008)

• Decision Date: 05 August 2008
• Docket Number: Seq. No. 003.,0116050/2007.,Seq. No. 001.
• Citation: 2008 NY Slip Op 32237
• Parties: 165 William Street, LLC, Plaintiff, v. Signe Baumane, Wallace Keller, Matthew Leaker, and the New York State Division of Housing and Community Renewal, Defendants.
• Court: New York Supreme Court

Page 1

2008 NY Slip Op 32237(U)

165 William Street, LLC, Plaintiff, v. Signe Baumane, Wallace Keller, Matthew Leaker, and the New York State Division of Housing and Community Renewal, Defendants.

0116050/2007.

Seq. No. 001.

Seq. No. 003.

Supreme Court of the State of New York, New York County.

August 5, 2008.

DECISION/ORDER

JUDITH J. GISCHE, Judge.

Upon the foregoing papers, the decision and order of the court is as follows:

This action is for a declaratory judgment and other relief in connection with the parties' dispute over whether the individually named defendants are entitled to a rent stabilized renewal lease. At bar are motions by plaintiff, the individual defendants and the New York State Division of Housing and Community Renewal ("DHCR"). Plaintiff's motion (sequence number 2) is for a preliminary injunction against DHCR proceeding with the complaint filed before it by the individual defendants. DHCR opposes that motion. It has also separately cross moved to dismiss plaintiff's 1^st and 5^th causes of action. CPLR 3211. The individual defendants oppose plaintiff's motion. They support DHCR's cross motion and have also separately moved to dismiss the complaint in its entirety.

Plaintiff commenced this action with the filing of the summons and complaint on December 4, 2007. At that time plaintiff brought an order to show cause seeking a temporary restraining order ("TRO"), enjoining DHCR from acting on defendants' complaint and other relief. The court granted the TRO and extended it on the return date of the motion, so that it remains effective pending the court's decision on these motions. Plaintiff has since served an amended complaint as of right. CPLR 3025.

In connection with the motions to dismiss, the court will consider whether, accepting all of the plaintiffs' facts, they support the causes of action asserted. Rovello v. Orofino Realty Co., 40 NY2d 633, 634 (1976). However, plaintiffs burden on its motion for a preliminary injunction is different. To satisfy the requirements for the issuance of a preliminary injunction, the plaintiff must show a likelihood of success on the merits, irreparable harm, and a balancing of the equities in its favor. CPLR § 6301, Aetna Insurance Co., Inc. v. Capasso, 75 NY2d 860 [1990]; W.T. Grant Co. v. Srogi, 52 NY2d 496 (1981). Although the party seeking a preliminary injunction does not have to provide conclusive proof of its right to such relief, and a preliminary injunction can, in the court's discretion, even be issued where there are disputed facts (Terrell v. Terrell, 279 A.D.2d 301 [1^st Dept 2001]), generally a preliminary injunction will be denied unless the relief is necessitated and justified from the undisputed facts. O'Hara v. Corporate Audit Co., 161 AD2d 309 (1^st Dept 1990).

Facts considered and arguments presented to the court

Plaintiff 165 William Street, LLC ("plaintiff' at times "landlord") is the present owner of 165 William Street in New York City ("the building"). Its predecessor in interest is non-party 169 Beekman Associates, L.P. The transfer in ownership occurred in April 2007.

Defendants Signe Baumane, Wallace Keller and Matthew Leaker (collectively "individual defendants") occupy the 2^nd apartment. Wanda Coffee moved into the apartment in 1978 when it was a loft and lived there with Mel Geary until her death in 1997. Geary continued renting the apartment until he died in July 2007. At the time of his death he had a rent stabilized lease expiring December 2007.

Following Geary's death, plaintiff received two bank checks from the individual tenants for the rent on the 2^nd floor apartment. Plaintiff cashed both checks. Thereafter, plaintiff received a letter from the individual defendants dated September 17, 2007 requesting a renewal lease stating as follows:

"we have been living in the apartment for upwards of 11 years, with Mel [Geary] having permanently vacated the apartment in early 1998. We are concerned that we have not received a lease renewal form and wish to continue our happily uneventful residence within 165 William Street, 2^nd floor. We understand that, with the unfortunate death of Mel Geary, and our long established payment history, we are entitled to assume the existing lease, be afforded a lease renewal in our names . . . " Shortly thereafter, on September 26, 2007, the individual defendants filed a complaint with DHCR [VI 410065 RV] ("DHCR complaint) alleging that the plaintiff had refused to give them a renewal lease, although they were entitled to one, The individual tenants' claim before the DHCR (and in this case) is that Geary was an illusory tenant who charged them more than the legal rent for the apartment. They contend Geary permanently out of the 2^nd floor apartment in 1998, but sublet the apartment to them for $2,260 per month although the legal rent for the apartment is $1,015 per month. The individual defendants contend that plaintiff and/or plaintiff's predecessor in interest knew that Geary no longer lived at the apartment, but even if they did not know, they are true occupants of the apartment with rights under the rent regulations,

Plaintiff did not answer the DHCR complaint, but instead commenced the within action on December 4, 2007 for a declaration that there was no illusory tenancy, the individual defendants have no right to a renewal lease in their own names, and therefore the defendants are illegal occupants without the right to continued possession of the apartment (1^st cause of action). Plaintiff has asserted other causes of action in its amended complaint. They are as follows: 2^nd cause of action — for a preliminary injunction, enjoining the individual defendants from allowing additional occupants to move into and reside in the apartment; 3^rd cause of action — fraud; 4^th cause of action unjust enrichment; 5^th cause of action — for a permanent injunction against the DHCR from adjudicating the complaint before it; and 6^th of action — a writ of ejectment.

In support of its motion for a preliminary injunction, and in opposition to the motions to dismiss its 1^st cause of action for a declaration and its 5^th cause of action for a permanent injunction against the DHCR, plaintiff argues that the parties' disputes are best addressed and decided in court, rather than before the DHCR because DHCR cannot adjudicate some of the landlord's claims, or provide complete relief. Thus, plaintiff argues that DHCR has no jurisdiction to decide its fraud claim or issue a writ of ejectment, nor can it award damages on its unjust enrichment claims as this court can. Plaintiff argues further that the fair market rent for the 2^nd floor apartment is in excess of $10,000 per month, and that this court can — and should — order the individual defendants who are illegal occupants to pay that amount. Plaintiff contends that relief is not available through DHCR.

It is unrefuted that the DHCR complaint filed by the individual defendants was first in time. Nonetheless, plaintiff contends that until the Geary renewal lease expired, it could not bring any action to adjudicate the parties' dispute, and therefore the individual defendants had an unfair advantage. In any event, plaintiff argues this is a more preferable forum for it to resolve the disputes between itself and the individual defendants because the court's jurisdictional powers are far broader than DHCR's.

Plaintiff argues that it can obtain discovery here, whereas only limited discovery is available before the DHCR. Plaintiff warns that were it forced to proceed before the DHCR, it would be relegated to bringing an Article 78 petition to challenge the agency's determination, which would entail an entirely different — and higher — burden of proof, thereby causing it severe prejudice because of the court's limited scope of review ("arbitrary and capricious").

Plaintiff contends that it meets the threshold requirements for a preliminary injunction which are a likelihood of success on the merits, irreparable harm, and that the equities balance in its favor. Plaintiff argues that it can prove that Geary was not an illusory tenant. It can also prove that the individual defendants tried to conceal their occupancy by sending bank checks after Geary died, without identifying themselves by name. Plaintiff provides sworn affidavits by Jack Berman, the building manager who states that he is "directly responsible for the management of the building." He also states that plaintiff accepted "rent" checks from the occupants, but did so by accident. Berman denies that plaintiff (or its predecessor in interest) knew that Geary had moved out, or that the individual defendants were living there.

In support of the "irreparable harm" requirement, plaintiff argues that unless the DHCR is enjoined there is the potential that DHCR will make determinations that are inconsistent with this court's decisions. Plaintiff argues further that the equities balance in the landlord's favor because the individual tenants are not paying rent, or even if they will pay rent, it will be at below market rate. Thus, plaintiff argues the court can, and should, order the individual defendants to pay use and occupancy in excess of $10,000 per month because they are not subject to the protections of rent stabilization. The plaintiff also seeks a preliminary injunction preventing the individual defendants from bringing in any new occupants.

DHCR and the individual tenants oppose plaintiff's motion for a preliminary injunction. The individual tenants and DHCR also seek the dismissal of the 1^st and 5^th causes of action as well. The arguments by the agency and individuals in connection with these motions are closely related and complementary. Therefore they are presented together and examined holistically.

The defendants argue that the core issues before the DHCR to decide are indistinguishable from, if not exactly identical to, the declaration that plaintiff seeks from this court, to wit: was Geary...