93 Ralph, LLC v. N.Y.C. Housing Auth. Law Dep't

• Decision Date: 03 September 2013
• Citation: 41 Misc.3d 692,971 N.Y.S.2d 412,2013 N.Y. Slip Op. 23308
• Parties: 93 RALPH, LLC, Plaintiff, v. NEW YORK CITY HOUSING AUTHORITY LAW DEPARTMENT, Defendant.
• Court: New York Civil Court

41 Misc.3d 692

971 N.Y.S.2d 412

2013 N.Y. Slip Op. 23308

93 RALPH, LLC, Plaintiff,

v.NEW YORK CITY HOUSING AUTHORITY LAW DEPARTMENT, Defendant.

Civil Court, City of New York,

Kings County.

Sept. 3, 2013.

Robert H. Gordon, Esq., New York, for Plaintiff.

Sonya M. Caloyanides, Esq., General Counsel, New York, for Defendant.

KATHERINE LEVINE, J.

Plaintiff 93 Ralph, LLC (“Plaintiff” or “landlord”) brings this breach of contract action to recover $25,000 from Defendant New York City Housing Authority (“Defendant” or “Housing Authority”) for unpaid Section 8 subsidies and consequential damages. Plaintiff alleges that the Authority improperly suspended subsidy payments between January–June 2011 due to its failure to timely notify plaintiff of defects in the property, as contained in the contract between plaintiff and defendant, and hence failed to give plaintiff an opportunity to cure said defects.

Defendant moves to dismiss the complaint pursuant to CPLR 3211(a)(2) on the grounds that this court lacks subject matter jurisdiction since the plaintiff should have challenged the Housing Authority's failure to give proper notice in a CPLR Article 78 proceeding and the Civil Court has no jurisdiction to hear an Article 78 proceeding. Defendant also moves to dismiss pursuant to CPLR 3211(a)(5) and (7) on the grounds that any claims under an Article 78 proceeding are time barred; and that plaintiff fails to state a cause of action.

Facts

Plaintiff owns an apartment building at 93 Ralph Avenue in Brooklyn, New York. It participates in the federally funded section 8 rent subsidy program (“Section 8”) of the Housing Act (42 USC 1437(g)) which aids “low income families in obtaining a decent place to live, by subsidizing private landlords who would rent to low income tenants.” Rosario v. Diagonal Realty, LLC, 9 Misc.3d 681, 685, 803 N.Y.S.2d 343 (Sup.Ct. Kings Co.2005)citing Cisneros v. Alpine Ridge Group, 508 U.S. 10, 12, 113 S.Ct. 1898, 123 L.Ed.2d 572 (1993). Section 8 authorizes the U.S. Department of Housing and Urban Development (“HUD”) to enter into annual contribution contracts with local public housing authorities so that they may make assistance payments to owners of existing buildings. Rosario, supra, 9 Misc.3d at 681, 803 N.Y.S.2d 343. The Housing Authority is one of the local agencies that administers the Section 8 program. Citadel Estates, LLC v. NYC Housing Authority, 39 Misc.3d 880, 960 N.Y.S.2d 598 (Sup.Ct., Kings Co.2013).

HUD has promulgated regulations that govern the operation and administration of Section 8. See 24 CFR Part 982. Pursuant to 24 CFR §§ 982.305(a)(2), (b)(1)(I), all prospective apartments must meet federal housing qualify standards (“HQS”) and be inspected by the Housing Authority prior to being certified under Section 8. Once certified, the apartments must be inspected at least once annually to ensure their continuous compliance. The regulations prohibit the Authority from paying any subsidies to apartments that do not need federal HQS. 24 CFR § 982.404(a)(3), § 982.452(b)(2), § 982.453(a)(1). Pursuant to 24 C.F.R. § 982.404, the Housing Authority must afford the landlord at least 30 days to correct any non-life threatening HQS violation unless the Housing Authority extends the deadline. See, Matter of 12th & 14th Street Inv., LLC v. New York City Housing Authority, 2013 N.Y. Slip Op. 30696(U), 2013 WL 1562134, 2013 N.Y. Misc. LEXIS 1436 (Sup.Ct., N.Y. Co.2013); Rowe v. NYC Housing Authority, Index No. 029455–10 (Civil Ct., Kings Co.2010).

The relationship between the landlord and the Housing Authority is governed by a Housing Assistant Payment Contract (“HAP”) under which the latter pays the Section 8 landlord monthly housing assistance payments from funds allocated by HUD. These rents constitute the difference between the total rent due for an apartment leased by the landlord to a qualified tenant and the rent due by said tenant under the controlling federal regulations. Citadel Estates, supra, 39 Misc.3d at 883, 960 N.Y.S.2d 598.

Both sides agree that the plaintiff and the Housing Authority entered into a HAP on or about May 1, 2009. According to the HAP, Part B subsection 7, defendant must make monthly payments so long as the plaintiff complies with all the provisions of the contract. Part B, subsection 3a, requires the landlord to “maintain the contract unit and premises in accordance with the HQS. Subsection 3c provides that “if the owner does not maintain the contract unit in accordance with the HQS the [Authority] may exercise any available remedies which include the termination of housing assistance payments.” Subsection 3e allows the Authority to inspect the contract unit and premises as the Authority sees fit in accordance with the HQS. Per Subsection 3f, the Housing Authority must notify the owner of any HQS defects revealed by the inspection and the Authority shall not, pursuant to Subsection 3d, make any housing assistance payments if the contract unit does not meet the HQS, unless the owner corrects the defect within the period specified by the Authority and the Authority verifies the correction.”

It is clear that the HAP contract does not spell out the time limit in which the Authority must notify the landlord of the HQS defects or how much time the Authority must give the landlord to cure the defects before it stops making HAP payments. While Subsection 3d mandates that the landlord/owner must cure the defect within 24 hours if the defect is “life threatening,” it does not specify the cure period for non life threatening defects, leaving it up to the Housing Authority to determine the necessary period.

Plaintiff asserts that the Housing Authority has “clarified the process” by a memo which states that once an inspection is done the Authority must mail the results of the inspection to the landlord within one business day via an “NE–1 Notice.” This Notice advises the landlord that it has 30 days to complete the repairs, which if complied with will obviate the suspension of payments. However, plaintiff failed to attach this memo to any of its papers.

Suspension of the Subsidy

By NE–1 letter dated December 29, 2010, the Authority indicated that based upon its inspection of the premises on December 3, 2010, it had found six “serious HQS” violations. The notice indicated that the window guard violation had to be corrected within 10 days of the inspection and all other serious violations had to be corrected as “expeditiously as possible.” The notice then stated that unless plaintiff notified the Authority that the appropriate remedies had been properly made and that such corrective measures were verified, the Authority would suspend subsidies on December 31, 2010. The notice specified that the landlord had to notify the Authority within 20 days after the inspection that the repairs had been made so that the Authority could reinspect the premises on December 28, 2010.

Both sides agree that the Authority suspended Plaintiff's subsidy for the assisted apartment effective January, 2011. While not addressed by plaintiff, the Housing Authority indicates that on February 23, 2011, it again inspected the apartment and found that two serious HQS violations existed, including the pre-existing violation of mouse droppings. By NE–1 letter dated March 9, 2011, the Authority notified the landlord that it would suspend the subsidy on March 25, 2011, unless the repairs were made within 20 days of the inspection. If the landlord failed to comply, the Authority would offer the family a voucher to enable them to seek other housing and would terminate the HAP contract without further notice if the family was approved for a transfer. On June 16, 2011, the subject premises passed an inspection and the Authority lifted its payment suspension for the apartment on July 1, 2011.

On or about October 4, 2011, the Housing Authority was served with a summons and complaint for unpaid housing subsidies from January through June 2011. The complaint alleges that the Authority “breached the HAP contract by suspending the Section 8 payments without following the notice procedure.” Rather than sending the NE–1 Notice on December 6, 2010, as required by the memo,¹ defendant mailed the letter 28 days after the inspection. The Notice was received by plaintiff on January 7, 2011, making it virtually impossible for plaintiff to make the necessary repairs prior to December 28, 2010 when the Housing Authority was supposed to reinspect, or to avoid suspension of payments. The complaint avers that plaintiff was thus damaged by the wrongfully suspended subsidy payments and incurred various consequential damages to the extent of $25,000.

Discussion

In determining a motion to dismiss pursuant to CPLR § 3211, the court accepts the facts alleged in the complaint as true, and the plaintiff is accorded the benefit of every favorable inference. Leon v. Martinez, 84 N.Y.2d 83, 614 N.Y.S.2d 972, 638 N.E.2d 511 (1994). The court solely determines whether “the facts fit within any cognizable legal theory.” Id. at 84, 614 N.Y.S.2d 972, 638 N.E.2d 511. See, 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 746 N.Y.S.2d 131, 773 N.E.2d 496 (2002).

Defendant moves to dismiss this proceeding because plaintiff is challenging an administrative determination of the Housing Authority to suspend or withhold Section 8 subsidy payments, which can only be brought pursuant to CPLR Article 78. It also asserts that plaintiff cannot cast its action as one resting in contract simply because there is a HAP contract, because plaintiff claims inextricably arise from the Housing Authority's administration of the Section 8 program and its alleged failure to comply with regulations and procedures governing said program. Finally, defendant asserts that the Supreme Court has exclusive jurisdiction over Article 78 proceedings.

Plaintiff counters that Civil Court is the proper forum as its complaint is based in contract law since defe...