Franklin St. Realty Corp. v. NYC Envtl. Control Bd., 5418-5422

• Court: New York Supreme Court Appellate Division
• Writing for the Court: TOM, J.P.
• Citation: 164 A.D.3d 19,83 N.Y.S.3d 41
• Parties: In re FRANKLIN STREET REALTY CORP., Petitioner, v. NYC ENVIRONMENTAL CONTROL BOARD, et al., Respondents. In re J.P. & Associates Properties Corp., Petitioner, v. NYC Environmental Control Board, et al., Respondents. In re 41-03 ave Realty Corp., Petitioner, v. NYC Environmental Control Board, et al., Respondents. In re 23-06 Jackson Ave Realty Corp., Petitioner, v. NYC Environmental Control Board, et al., Respondents.
• Decision Date: 19 July 2018
• Docket Number: 5418-5422,100303/16,Index 101770/15,101769/15,101768/15,101767/15

164 A.D.3d 19
83 N.Y.S.3d 41

In re FRANKLIN STREET REALTY CORP., Petitioner,
v.
NYC ENVIRONMENTAL CONTROL BOARD, et al., Respondents.

In re J.P. & Associates Properties Corp., Petitioner,
v.
NYC Environmental Control Board, et al., Respondents.

In re 41-03 ave Realty Corp., Petitioner,
v.
NYC Environmental Control Board, et al., Respondents.

In re 23-06 Jackson Ave Realty Corp., Petitioner,
v.
NYC Environmental Control Board, et al., Respondents.

5418-5422
Index 101770/15
100303/16
101768/15
101769/15
101767/15

Supreme Court, Appellate Division, First Department, New York.

July 19, 2018

Cohen, Hochman & Allen, New York (Lindsay I. Garroway and Nicole Beletsky of counsel), for petitioners.

Zachary W. Carter, Corporation Counsel, New York (Barbara Graves–Poller and Claude S. Platton of counsel), for respondents.

Peter Tom, J.P., Richard T. Andrias, Barbara R. Kapnick, Troy T. Webber, Cynthia S. Kern, JJ.

TOM, J.P.

In these article 78 proceedings, petitioners seek to annul determinations of the New York City Environmental Control Board (ECB) which found that petitioners engaged in unauthorized outdoor advertising and imposed penalties for such conduct. We find the determinations of the ECB that petitioners engaged in unauthorized outdoor advertising, and imposing penalties for such violations, have a rational basis and were not arbitrary and capricious.

Petitioners 23–06 Jackson Avenue Realty Corp. (Jackson Corp.), 41–03 31 ^st Avenue Realty Corp. (31 ^st Avenue), Franklin Street Realty Corp. (Franklin Street), and J.P. & Associates Properties Corp. (JP & Associates) are the owners of five buildings that displayed "advertising signs" promoting the "Law Offices of John J. Ciafone, Esq." on their front facades. Mr. Ciafone purportedly owns each of the petitioner

83 N.Y.S.3d 43

corporations and used the signs, for which he had not obtained permits, to promote his law practice, under an entity known as "Ciafone, P.C.."

In July and October 2014, a Department of Buildings (DOB) inspector visited each of the five buildings, and after observing the signs on the front of the buildings, issued notices of violations of Administrative Code of City of N.Y. §§ 28–105.1, 28–415.1, and 28–502.6, and Zoning Resolution § 32–63.

The violations charged each building owner with operating as an outdoor advertising company (OAC) by displaying a sign without obtaining a permit. The remedy sought by the violations was the removal of the illegal signs or the owners properly registering the signs.

Notably, while there is an exception under the Administrative Code for "accessory signs," which promote onsite activity that benefits the owner, residents or visitors associated with the building's primary use, the notices here charged that the petitioners' displays of the non-DOB registered signs, which advertised, without permits, for law offices that were not located on those premises, constituted "Class 1" violations of the outdoor advertising rules and zoning rules regulating outdoor advertising signs posted by an OAC.

The notices were reviewed in a series of separate hearings before two hearing officers. The parties adopted common facts and arguments in all the proceedings.

The evidence at the hearings established that Jackson Corp. owns the building located at 23–06 Jackson Avenue, in Long Island City, New York, having acquired it from Ciafone on March 12, 2014; JP & Associates acquired the building at 154 Huron Street, Brooklyn, from an individual other than Ciafone on September 25, 2006; 31st Avenue owns the property located at 41–03 31st Avenue in Queens, having purchased it from an unrelated entity in 2009; Franklin Street owns the building located at 202 Franklin Street in Brooklyn, having purchased it from an unrelated entity in 2010; and JP & Associates owns the walk-up apartment building located at 33–51 Vernon Boulevard, in a residential district in Queens, having purchased it from an unrelated individual in 2005.

Ciafone testified on behalf of each building owner as he was either the sole shareholder or a member of each owner corporation, although records showed that Gina Argento, Ciafone's wife, was the president and sole shareholder of 31 ^st Avenue.

Ciafone admitted that he arranged for the signs to be affixed to the buildings without obtaining DOB permits. However, he argued that petitioners did not make advertising space available "to others" because no meaningful differences separate Ciafone, Ciafone P.C., and the corporate building owners, and that the signs were "accessory" signs because Ciafone provided legal services at each building that amounted to an accessory use. In particular, Ciafone argued that he owns all the buildings through the corporate entities, and that he also owns his own law practice, promoted on the signs, which operates from spaces in each of the buildings, such that the building owners were not acting as OACs when the signs merely promoted the legal business of their principal that operated therein, which also made the signs an accessory use.

More specifically, as to each building, Ciafone testified that he used various spaces as "satellite offices," including vacant residential apartments, a space within a storefront, a small office in the back of a barbershop, a basement storage area, and that he also met clients in a restaurant located at one of the buildings.

83 N.Y.S.3d 44

DOB argued that the evidence established that Ciafone provides legal services through "Ciafone P.C.," a professional corporation that maintains no staff or regular business hours at any of the cited properties, and that the signs did not identify the buildings as locations for Ciafone P.C.'s operations. DOB further argued that Ciafone did not own the buildings individually, and that Ciafone P.C. provided no onsite services that amounted to "accessory use."

In a series of decisions, the hearing officers rejected the building owners' argument that the signs were accessory signs, finding that the signs do not state that the advertiser's business operates on the lot, and declining to credit the claim that the advertised business is conducted on the lot.

However, the hearing officers concluded that petitioners were not acting as OACs because Ciafone, owner in all but name of the buildings, was selling himself on the signs, and not making space available "to others." In this regard, the hearing officers relied on NYC v. Joseph Nativo (ECB Appeal No. 1000307 [August 19, 2010] ), in which ECB found that where the individual owner of the building is the sole owner of the companies advertised on the building facade, it does not "interpret making space on signs ‘available to others’ to encompass the display of signs by a property owner that advertise[s the] services of companies solely owned by such property owner."

Notably, the hearing officers found that Ciafone is the owner of the buildings under a corporate name, and that the advertised entity is not a different corporation, but a law office solely owned by Ciafone, adding that though the "law office is a PC, that is not the equivalent of a corporate entity considered to be a ‘person’ in law with its own identity." Thus, the hearing officers concluded that Nativo applies, and that although the signs were "not legal," the building owners were not OACs subject to Class 1 charges.

On administrative appeal, ECB issued decisions and orders dated May 28, 2015 and October 29, 2015 reversing the decisions of the hearing officers and finding petitioners in violation of Class 1 charges. ECB concluded that the building owners were operating as OACs, finding that the buildings were owned by the particular corporate entities, not Ciafone or Ciafone P.C., and that the building owners did not own the company (Ciafone law offices or P.C.) whose services were being advertised on the signs.

ECB found that in cases decided after Nativo, including NYC v. 415 89 ^th Street LP (ECB Appeal No. 1200974 [January 31, 2013] ), NYC v. Lodz Development ( ECB Appeal No. 1400355 [July 31, 2014] ) and NYC v. Stahl and Stahl, LLC (ECB Appeal No. 1400137 [April 24, 2014] ), it had clarified that if the company being advertised and the owner of a building that provides space for the sign are two separate corporations, even though there may be an overlapping of principals, Nativo is inapplicable. Here, ECB held that there was no reason to apply the Nativo exception simply because the advertised company was organized as a professional corporation as opposed to a different corporate form. Accordingly, ECB reversed the hearing officers' decisions and imposed $10,000 penalties for each Class 1 violation.

Petitioners then commenced these article 78 proceedings seeking to reverse ECB's decisions. Supreme Court transferred the proceedings to this Court, finding a question of whether there was substantial evidence to support the ECB's determinations pursuant to CPLR 7803[f].

The proper standard of review is whether ECB's determination "was made

83 N.Y.S.3d 45

in violation of lawful procedure, was affected by an error of law, was arbitrary and capricious, or was an abuse of discretion" ( Matter of Vataksi v. Environmental Control Bd., 107 A.D.3d 905, 906, 967 N.Y.S.2d 415 [2d Dept. 2013] ; Matter of...