London Terrace Gardens, L.P. v. City of New York
Decision Date | 23 October 2012 |
Citation | 953 N.Y.S.2d 28,2012 N.Y. Slip Op. 07078,101 A.D.3d 27 |
Court | New York Supreme Court — Appellate Division |
Parties | In re LONDON TERRACE GARDENS, L.P., Petitioner–Appellant, v. The CITY OF NEW YORK, et al., Respondents–Respondents. London Terrace Gardens, L.P., Plaintiff–Appellant, v. The City of New York, et al., Defendants–Respondents. |
OPINION TEXT STARTS HERE
Borah, Goldstein, Altschuler Nahins & Goidel, P.C., New York (Robert D. Goldstein, Richard M. Goldstein, Harry Frischer and Paul N. Gruber of counsel), for appellant.
Jeffrey D. Friedlander, Acting Corporation Counsel, New York (Joshua M. Wolf, Paul T. Rephen and Vincent D'Orazio of counsel), for The City of New York and New York City Department of Housing Preservation and Development, respondents.
Eric T. Schneiderman, Attorney General, New York (Sudarsana Srinivasan and Michael S. Belohlavek of counsel), for New York State Division of Housing and Community Renewal, respondent.
PETER TOM, J.P., ANGELA M. MAZZARELLI, KARLA MOSKOWITZ, DIANNE T. RENWICK, and SHEILA ABDUS–SALAAM, JJ.
Petitioner/plaintiff London Terrace Gardens, L.P., seeks to rescind its participation in the City's J–51 tax incentives program following the Court of Appeals decision in Roberts v. Tishman Speyer Props., L.P., 13 N.Y.3d 270, 890 N.Y.S.2d 388, 918 N.E.2d 900 [2009]. That decision held that the owners of rent-stabilized apartments in New York City “[are] not entitled to take advantage of the luxury decontrol provisions of the Rent Stabilization Law (RSL) [ ] while simultaneously receiving tax incentive benefits under the City of New York's J–51 program” ( id. at 280, 890 N.Y.S.2d 388, 918 N.E.2d 900). This Court has given retroactive effect to Roberts ( see Roberts v. Tishman Speyer Props., L.P., 89 A.D.3d 444, 932 N.Y.S.2d 45 [1st Dept.2011];Gersten v. 56 7th Ave. LLC, 88 A.D.3d 189, 198, 928 N.Y.S.2d 515 [1st Dept.2011] ).
This proceeding and plenary action were commenced after defendant New York City Department of Housing Preservation and Development (HPD) refused London Terrace's offer to “unwind” its J–51 arrangement with HPD and to tender repayment of all J–51 benefits, in consideration for which HPD would deem the certificates granting tax abatement benefits to be void and of no effect, thereby nullifying its prior determination of eligibility for J–51 benefits. Petitioner/plaintiff proposed that HPD declare that London Terrace “is no longer subject to the provisions of the J–51 program, including but not limited to any rent regulatory provisions contained therein.” The “unwinding” agreement would be conditioned upon entry of a final order and judgment by a court of competent jurisdiction, “directing and binding DHCR to treat [London Terrace] as subject to no other rent stabilization laws and requirements than would have been applicable had [London Terrace] never been granted J–51 benefits, with said order and judgment being binding upon the tenants as well.” HPD took the position that there is no provision for voluntary withdrawal, and that rescission is not effective.
London Terrace's argument in support of rescission is that the Court of Appeals decision makes it clear that the J–51 arrangement was based on a mutual mistake of the law on the part of London Terrace, the City and HPD, and that London Terrace would not have applied for such benefits if, as a result of receiving the benefits, it would be precluded from exercising luxury decontrol. There is no provision in the J–51 program for unilateral withdrawal from the program or for repaying the tax benefits in exchange for rescission from the program nunc pro tunc ( see generallyRPTL 489; Administrative Code of the City of New York § 11–243). On the contrary, the Rules of the City of New York provide that “rent regulation [requirements] shall not be terminated by the waiver or revocation of tax benefits” (28 RCNY 5–03[f][3] [ii] ). London Terrace asserts that it is not seeking a waiver of previously accepted benefits but instead, a finding that the benefits are deemed void ab initio. Still, in practical effect, under the guise of rescission, London Terrace is seeking a waiver, which is not permitted under the Rules of the City of New York.
Putting aside the semantics of whether London Terrace is seeking a waiver under the cloak of rescission, the remedy of rescission is not available here. The J–51 program is a tax benefit program—there is no contract or agreement to rescind ( seeRPTL 489; Wisconsin & Michigan Ry. Co. v. Powers, 191 U.S. 379, 24 S.Ct. 107, 48 L.Ed. 229 [1903] [ ] ). London Terrace's reliance on Matter of Gould v. Board of Educ. of Sewanhaka Cent. High School Dist., 81 N.Y.2d 446, 599 N.Y.S.2d 787, 616 N.E.2d 142 [1993] is misplaced. In Gould, a teacher submitted her resignation and the school board accepted it, “all premised on a mutual mistake of fact as to a critical element: that [the teacher] was only a probationary employee” (81 N.Y.2d at 453, 599 N.Y.S.2d 787, 616 N.E.2d 142). As explained in Gould, a contract is voidable and subject to rescission where there has been a mutual mistake of fact, “[t]he idea [being] that the agreement as expressed, in some material respect, does not represent the ‘meeting of the minds' of the parties” (81 N.Y.2d at 453, 599 N.Y.S.2d 787, 616 N.E.2d 142 [citations omitted] ). Here, there is no mutual mistake of fact.
Furthermore, even though DHCR, and perhaps also HPD, were under the same mistaken interpretation of the Rent Stabilization Law as was London Terrace prior to the Court of Appeals decision in Roberts, that interpretation is entirely unrelated to HPD's confirmation of London Terrace'seligibility for the J–51 program. As indicated in the J–51 Certificates issued by HPD, the presence of...
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