Myers v. Frankel

• Decision Date: 25 September 1998
• Citation: 684 N.Y.S.2d 750,179 Misc.2d 225
• Parties: , 1998 N.Y. Slip Op. 98,695 Shirley MYERS et al., Plaintiffs, v. Christian A. FRANKEL et al., Defendants.
• Court: New York City Court

Page 750

684 N.Y.S.2d 750

179 Misc.2d 225, 1998 N.Y. Slip Op. 98,695

Shirley MYERS et al., Plaintiffs, v. Christian A. FRANKEL et al., Defendants.

Civil Court of the City of New York, Kings County.

Sept. 25, 1998.

Sperber & Dennenberg, New York City (Steven B. Sperber of counsel), for plaintiffs.

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

GUSTIN L. REICHBACH, J.

The instant motion and cross motion presents a factual pattern clearly unanticipated by the recently amended sections of the Rent Stabilization Law (RSL § 26-516), the Emergency Tenant Protection Act (ETPA § 12(a)(1), and the Civil Practice Law and Rules (CPLR § 213-a).

In April 1990 the Defendants entered into what purported to be a sublease agreement with Plaintiff Lucie Myers for the premises at 15 Pierepont Street, second floor. That agreement was for a term of two years at a rental of $2000 per month. The agreement made reference to an overlease between Plaintiff Shirley Myers as Landlord and Plaintiff Lucie Myers as Overtenant. Shirley Myers is the mother of Lucie Myers. A written renewal was executed in June 1992, for an additional two-year term. In March of 1995 Plaintiff Lucie Myers commenced a holdover proceeding against Defendants, claiming the termination of Defendants month to month tenancy. It was in that holdover petition that Defendants learnt for the first time that their apartment was subject to the Rent Stabilization Law. Prior to that time, both when Defendants had entered into their original rental agreement and their renewal, the Plaintiffs had failed to provide Defendants with either a Rent Stabilization Renewal Rider or a notice of prior legal regulated rent as required under Sections 2522.5(c)(1) and (c)(1)(i) of the Rent Stabilization Code. Uncontested documentary evidence indicates that at least since 1988 annual rent registrations made with DHCR failed to list any registered rent whatsoever for the premises, claiming that the apartment was "owner occupied/employee." The last actual rent registered was $502 in 1988.

In response to the summary proceeding brought by Plaintiff Lucie Myers, Defendants asserted in their March 1995 answer that the sublease agreement was a sham to circumvent the provisions of the Rent Stabilization Law, that Defendants were entitled to continued occupancy under the protection of the Rent Stabilization Law and further asserted a counterclaim for overcharges from the inception of their tenancy on April 15, 1990. By Order, dated August 7, 1997, Judge Sarah Krauss of this Court determined that Defendants Frankel and Griffen are tenants of the subject apartment entitled to possession and full protection under the Rent Stabilization Law and Code including the right to receive a rent stabilized lease from the owner, Shirley Myers. The rent overcharge counterclaim and request for legal fees were severed and converted to a plenary action.

In that plenary action Plaintiffs Shirley and Lucie Myers now move for summary judgment dismissing Defendants overcharge counterclaim and request for attorneys fees on the grounds that such claims are barred by CPLR § 213-a. Defendants cross-move for summary judgment on their claim for overcharges.

Prior to the recent amendments there had been considerable disagreement as to how the four-year statute of limitations contained in CPLR § 213-a was to be applied. DHCR would use as the base rent the rent indicated in the annual registration four years prior to the most recent one and determine if any subsequent increases exceeded lawful amounts. Overcharges would be computed only from that date forward. The First Department disagreed. That Court used the earliest base date possible (i.e. the initial registered rent) and calculated all subsequent increases on that rent. While overcharges could only be awarded for the amount accrued in the last four years, the base to calculate the legal rent could go back much farther. Zafra v. Pilkes, N.Y.L.J., 4/12/96, p.25, col.3 (App.Term 1st Dept.), aff'd, 245 A.D.2d 218, 666 N.Y.S.2d 633 (App.Div.1st Dept.). This dispute seems to have been resolved by the Legislature in its 1997 amendments. CPLR § 213-a prohibits awards for overcharges occurring four years prior to commencement of the action and, as amended by the Legislature also, "preclude(s) examination of the rental history of the housing accommodation prior to the four year period immediately preceding the commencement of the action."

The Legislature also amended § 26-516(a) of the Administrative Code to provide, "Where the amount of rent set forth in the annual rent registration filed four years prior to the most recent registration statement is not challenged within four years of its filing, neither such rent nor service of any registration shall be subject to challenge at any time thereafter." (emphasis added). It is clear that the Legislature intended to provide a bright line rule, so that a rent, once registered and unchallenged for four years, is immunized from further challenge, notwithstanding that the rent registered may have exceeded the lawful maximum. Hart Zafra v. Pilkes, --- A.D.2d ----, 666 N.Y.S.2d 911. Based on this the Landlord argues that since the first overcharge alleged occurred almost five years prior to interposition of the rent overcharge counterclaim, and there were no subsequent overcharges, the claim is barred by CPLR § 213-a. The landlord further contends that notwithstanding that no rent was registered as required, since four years ago the tenants were paying $2000 per month, this sum is now beyond challenge. Finally, the Landlord contends that there were major capital improvements made to the unit, and that the Landlord was in fact entitled to charge the amount they did.

For their part, the tenants contend that since the Code, as amended, bars challenges to the rent set forth in the annual registrations after four years and that in this case no rental amount was set forth in the registrations the four year period of limitations has no applicability under the facts presented. The tenants further contend that notwithstanding that there may have been other subtenants prior to their occupancy, since the last registered rent, in 1988 was $502 per month, overcharges must be calculated on that figure.

An illusory tenancy exists where the rent laws have been violated in a way to permit the landlord or prime tenant to "rent for the purpose of subleasing for profit or otherwise depriving the subtenant of rights under the Rent Stabilization Law." Avon Furniture Leasing v. Popolizio, 116 A.D.2d 280, 284, 500 N.Y.S.2d 1019; Perlbinder v. C.A.B., 67 N.Y.2d 697, 499 N.Y.S.2d 925, 490 N.E.2d 844. Upon a finding of an...