Dowling v. Holland

• Decision Date: 18 December 1997
• Citation: 245 A.D.2d 167,666 N.Y.S.2d 585
• Parties: , 1997 N.Y. Slip Op. 10,932 In re Application of William Q. DOWLING, et al., Petitioners-Respondents, For a Determination, etc., v. Joseph H. HOLLAND, etc., et al., Respondents-Appellants.
• Court: New York Supreme Court — Appellate Division

Page 585

666 N.Y.S.2d 585

245 A.D.2d 167, 1997 N.Y. Slip Op. 10,932

In re Application of William Q. DOWLING, et al.,

Petitioners-Respondents, For a Determination, etc., v. Joseph H. HOLLAND, etc., et al., Respondents-Appellants.

Supreme Court, Appellate Division,

First Department.

Dec. 18, 1997.

Rizpah A. Morrow, for Petitioners-Respondents.

Roderick J. Walters, Jeffrey R. Metz, for Respondents-Appellants.

Before WALLACH, J.P., and NARDELLI, TOM, MAZZARELLI and COLABELLA, JJ.

MEMORANDUM DECISION.

Order and judgment (one paper), Supreme Court, New York County (Elliott Wilk, J.), entered on or about December 6, 1996, which granted the Article 78 petition seeking an order, inter alia, directing respondent Division of Housing and Community Renewal ("DHCR") to render a determination on petitioners' petition for administrative review and vacatur of DHCR's order of deregulation, to the extent of remanding respondent-owner's petition for high income rent deregulation to DHCR for a new hearing, and denied respondents' cross motions to dismiss the petition, unanimously reversed, on the law, without costs, respondents' cross motions are granted and the petition dismissed.

In May 1994, respondent Katz 737 Corp. ("owner") filed a Petition for High Income Rent Deregulation with respondent DHCR regarding petitioners-tenants' apartment located at 737 Park Avenue. The Rent Stabilization Code ("RSC") permits deregulation of apartments with a legally regulated rent of $2,000 or more per month as of October 1, 1993, and whose tenants and occupants have a total annual income in excess of $250,000 for each of the preceding two calendar years (RSC §§ 26-504.1--504.3). ¹ On August 4, 1994, DHCR mailed the tenants a form requesting both an answer to the owner's petition, and certification from the tenants that their total incomes for 1992 and 1993 did not exceed the $250,000 statutory threshold. Although the form sent by DHCR included a notice, in bold print, that tenants' failure to respond within 60 days would result in the issuance of a deregulation order, tenants did not respond to this notice.

On February 3, 1995, DHCR's Rent Administrator issued an Order of Deregulation concerning the tenants' apartment, to be effective as of the expiration of the current lease. The order also included a notice advising tenants of their right to file a Petition for Administrative Review ("PAR"), and stating that any PAR must be delivered or mailed to DHCR "no later than 35 days after the order was issued." Pursuant to the Rent Stabilization Code, the deregulation order was mailed both by regular and certified mail, return receipt requested (RSC § 26-504.3[c][3] ). A return receipt was signed on February 6, 1995.

Tenants missed the 35-day deadline and did not contact DHCR until February 15, 1996, over one year later, when their attorney wrote a letter requesting reconsideration of the deregulation order. On the same date, tenants filed an untimely PAR. In support of both, tenants offered tax documentation purportedly demonstrating that their income was less than $250,000 for 1992 and 1993. They also claimed that they had not received the petition and request for income certification sent by DHCR because they had been abroad for much of 1994 and 1995. However, tenants did not deny receiving the deregulation order and gave no explanation why their PAR was untimely. DHCR denied the request for reconsideration in March 1996, and the PAR on August 1, 1996, the latter on the ground that it was untimely filed.

Tenants commenced this Article 78 proceeding in June 1996, and filed an amended petition in August 1996, again alleging non-receipt of the petition, but now adding the allegation that they had not received the deregulation order. Accordingly, they claimed that the denial of their PAR was arbitrary and capricious since they had never received notice of the deregulation proceedings and their incomes did not meet the statutory threshold. In their reply papers, tenants alleged, again for the first time, that the return receipt was signed by the doorman of their building, who on previous occasions had accepted mail on their behalf that was subsequently lost. Tenants further asserted that they were away from New York for some but not all of the 35-day period after the order was issued. The owner and DHCR filed cross petitions to dismiss the proceeding arguing, inter alia, that the PAR was properly denied as untimely, and that the petition failed to state a cause of action because tenants failed to exhaust their administrative remedies by failing to obtain timely administrative review.

The IAS court found that receipt of the deregulation order (and the 35-day notice to commence a PAR) by the doorman did not establish notice to the tenants, which "fundamental fairness" required. According to the court, the lack of notice made it impossible for tenants to exhaust their administrative remedies. Addressing the merits of the PAR, the court ruled that the financial information submitted by the tenants, the lack of notice of the 35-day period to file a PAR and the disproportionate penalty required that the petition be remanded for a ruling by DHCR on the merits. We reverse.

The tenants' PAR, filed over one year after the deregulation order was issued, was properly dismissed as untimely. The Rent Stabilization Code unambiguously provides: "A PAR against an order of a Rent Administrator must be filed in person or by mail with the DHCR within thirty-five...