Myers v. Frankel

• Decision Date: 07 April 2000
• Citation: 184 Misc.2d 608,708 N.Y.S.2d 566
• Parties: SHIRLEY MYERS et al., Appellants,<BR>v.<BR>CHRISTIAN A. FRANKEL et al., Respondents.
• Court: New York Supreme Court

184 Misc.2d 608

708 N.Y.S.2d 566

SHIRLEY MYERS et al., Appellants,

v.CHRISTIAN A. FRANKEL et al., Respondents.

April 7, 2000.

Timothy O'Donnell, New York City, for appellants.

Sperber & Denenberg, P. C., New York City (Steven B. Sperber and Pamela D. Evans of counsel), for respondents.

SCHOLNICK, J. P., and PATTERSON, J., concur; ARONIN, J., dissents in part in a separate memorandum.

OPINION OF THE COURT

MEMORANDUM.

Order modified by providing that tenants' cross motion for summary judgment on the counterclaim is granted and judgment directed to be entered in favor of tenants in the sum of $139,220, and by striking the provision severing landlords' "claim" for a rent increase; as so modified, affirmed without costs.

In March 1995, Lucie Myers commenced a holdover proceeding against tenants based on the termination of an alleged sublease. In an answer dated March 22, 1995, tenants asserted that Lucie Myers' overtenancy was illusory and that they were actually rent-stabilized tenants of Lucie's mother, Shirley Myers, the owner of the building. (Shirley Myers was subsequently added as a party.) They also counterclaimed for rent overcharges, treble damages and attorney's fees. The Civil Court (S. Krauss, J.) ruled that tenants were entitled to the protection of rent stabilization and dismissed the holdover proceeding. The court also severed the counterclaims and converted them to a plenary action.

Thereafter, Shirley and Lucie Myers (hereinafter landlords) moved, in the severed action, for summary judgment on the ground that the overcharge counterclaim was time barred under CPLR 213-a and Rent Stabilization Law of 1969 (RSL) (Administrative Code of City of NY) § 26-516 (a). In support of this motion, landlords asserted that the cause of action accrued in April 1990 when tenants first entered into possession and paid an excessive rent, and that the claim was not interposed until more than four years later on March 22, 1995. Landlords contended that the Rent Regulation Reform Act of 1997 (L 1997, ch 116 [Act]), which was made applicable to pending proceedings (L 1997, ch 116, § 46), barred examination of the rental history for more than four years before the claim was interposed.

In opposition, and in support of a cross motion for summary judgment on their counterclaim, tenants argued that the Statute of Limitations had never begun to run because landlords had not served and filed annual registrations during the period of their tenancy. (Actually, landlords had falsely registered the apartment as exempt "owner occupied/employee" but did not serve these registrations on tenants.) Tenants contended that RSL § 26-516 (a) and CPLR 213-a, as amended by the 1997 Act, precluded examination of the rental history for more than four years only where landlord had filed registration statements setting forth rents in the four years prior to the most recent statement. Tenants showed that the last registered rent was $502 in 1988. They set forth the details of their rent payments, which ranged between $1,900 and $2,100 per month, and established that the difference between what they had paid in the four years prior to the interposition of their counterclaim and what they would have paid at $502 per month was $69,708. They also asserted, mistakenly, that of said sum the amount to be trebled for the two years prior to the interposition of their claim was $37,552. (In calculating the two-year period for treble damages, tenants began with February 1993, whereas they should have begun with April 1993. The correct amount subject to trebling is $34,756.)

In reply papers as well as in their examinations before trial (portions of which were appended to tenants' motion papers), landlords stated, inter alia, that although the apartment had been sublet four times since 1982, Lucie Myers had been living in the apartment immediately prior to tenants' taking possession in April 1990. They further stated that landlords had renovated the apartment at that time at an itemized cost totaling $32,527.

The Civil Court denied landlords' motion for summary judgment. It reasoned that the Statute of Limitations begins to run from the date a rent is registered and that here the statute did not begin to run because no rents had been registered. The court also denied tenants' cross motion for summary judgment, reasoning that landlords were entitled to rent increases for the period that Lucie Myers was in occupancy immediately prior to tenants' occupancy (Rent Stabilization Code [9 NYCRR] § 2522.4 [b] [3] [vi]) and that there were questions of fact as to the dates of Myers' occupancy. Finally, the court severed landlords' "claim" for a rent increase based on the alleged renovations without prejudice to an application by landlords to the Division of Housing and Community Renewal (DHCR) for an adjustment of the legal regulated rent (179 Misc 2d 225).

Although only landlords have appealed and tenants have not cross-appealed, we modify the order by providing that tenants' cross motion for summary judgment is granted and by striking the provision severing landlords' "claim" for an increase (see, Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106).

We begin our analysis by reviewing the history of the rent overcharge claim in relation to rent stabilization. Prior to the enactment of the Omnibus Housing Act of 1983 (L 1983, ch 403), the Rent Stabilization Law and the Code promulgated pursuant thereto provided only for a refund of the amounts collected by owners in excess of the lawful rent (RSL former § YY51-6.0 [c] [3], prior to 1983 amendment; former Code of Rent Stabilization Assn of NY City, Inc. § 10; see, Blodgette v Melohn, 124 Misc 2d 736). Unlike earlier rent-regulatory schemes, which had provided for the assessment of treble damages and attorney's fees (see, e.g., Powell v Park Lex. Realty Corp., 280 App Div 136, affd 304 NY 960 [Rent Control Law]; Sisom v Filldor Realty Corp., 275 App Div 677 [Federal Emergency Price Control Act]; Jerome v Yudt, 186 Misc 408), the only penalty provided in the former Rent Stabilization Code was the discretionary partial or total expulsion from the Rent Stabilization Association (RSA) of owners found to have willfully overcharged (former Code of Rent Stabilization Assn of NY City, Inc. § 7 [a] [Code]). The lawful rent and thus the amount of any overcharge were calculated by reference to the first stabilized rent, and owners were required to keep all leases back to the date when the apartment first became stabilized (see, former Code § 42 [A]; Matter of Faymor Dev. Co. v Popolizio, 89 AD2d 857). By 1983, problems had arisen with this methodology because the rent history could extend back as far as 14 years, yet the agency (the Conciliation and Appeals Board [CAB]) would apply a "default" formula, which would presume an overcharge, if even one lease was missing (see, Estis and Turkel, Legislative Intent: Court Clarifies Procedure Used to Calculate Rent Overcharge, NYLJ, Jan. 28, 1998, at 5, col 2).

The Omnibus Housing Act of 1983 transferred the authority to administer the Rent Stabilization Law from the RSA and the CAB to DHCR; instituted a rent registration scheme (RSL former § YY51-6.0.6, now § 26-517; see generally, Murray v Morrison, 181 Misc 2d 209, 212-213); statutorily codified the rent overcharge claim in its current form, the elements of which it changed to conform to the new registration scheme; introduced new penalties for rent overcharge, including the assessment of treble damages, interest and attorney's fees; and enacted provisions designed to place time limits on claims for overcharges and for treble damages (RSL former § YY51-6.0.5, now § 26-516). To implement the registration scheme, the Legislature defined the "authorized" or legal regulated rent as the registered rent (RSL former § YY51-6.0.1 [e], now § 26-512 [e]) and defined an overcharge as the collection of rent in excess of the "authorized" rent (RSL former § YY51-6.0.5 [a], now § 26-516 [a]).

Among the provisions enacted to fix time limits on the overcharge claim was a Statute of Limitations, CPLR former 213-a, which then provided that "an action on a residential rent overcharge shall be commenced within four years of such overcharge" (L 1983, ch 403, § 35). Because of the continuing nature of a rent overcharge, a complementary provision was inserted into the Rent Stabilization Law which was designed to clarify that recovery could be had for overcharges collected within the four years prior to assertion of the claim only if the claim could be stated without reference to an overcharge which had occurred before the four-year period. The law enacted provided that an overcharge complaint had to be filed "within four years of the first overcharge alleged and no award of the amount of the overcharge may be based upon an overcharge having occurred more than four years before the complaint is filed" (RSL former § YY51-6.0.5 [a] [2], now § 26-516 [a] [2], prior to 1997 amendment). We incidentally note that this last provision is not a mere Statute of Limitations but is a substantive limit on the overcharges for which recovery can be had. That is, if a claim that an overcharge occurred within the four-year period could only be established by showing that an overcharge existed before the four-year period, the claim could not be made out, irrespective of whether the Statute of Limitations had been pleaded (cf., Avner v Trump Mgt., NYLJ, May 19, 1995, at 34, col 5 [App Term, 2d & 11th Jud Dists]).

Additionally, the Act gave owners who duly registered the benefit of a methodology which calculated the overcharge in terms of the rent registered in the statement filed four years prior to the most recent registration statement, thus insulating these owners from examination of the rental history for the period before the filing of that statement. It provided that "the legal regulated rent for purposes of determining an overcharge, ...