People by Lefkowitz v. Booke
| Decision Date | 21 June 1977 |
| Parties | Application of the PEOPLE of the State of New York by Louis J. LEFKOWITZ, Attorney General of the State of New York, Petitioner-Respondent-Appellant, For an Order Enjoining and Restraining Morris BOOKE, Individually and doing business as Wellbuilt Management Co., and 230 East 12th Street Corporation, Respondents-Appellants-Respondents, From carrying on, conducting and transacting their business in a persistently fraudulent and illegal manner, pursuant to Section 63, Subdivision 12 of the Executive Law, and enjoining and restraining the Respondents from violating the provisions of Section 7-103 of the General Obligations Law, pursuant to General Obligations Law, Section 7-107. |
| Court | New York Supreme Court — Appellate Division |
Saul I. Radin, New York City, for respondents-appellants-respondents.
Maurice A. M. Edkiss, Flushing, of counsel (Samuel A. Hirshowitz, Meyer H. Mencher, Sol Koenigsberg and Nathaniel Saperstein, New York City, with him on the brief, Louis J. Lefkowitz, Atty. Gen.), for petitioner-respondent-appellant.
Before MURPHY, J. P., and KUPFERMAN, LUPIANO and LANE, JJ.
This proceeding was commenced under General Obligations Law § 7-107 and Executive Law § 63, subd. 12 to compel the respondent owners to pay appropriate interest on rent security deposits and otherwise comply with the mandates of GOL § 7-103. Although the petition is only addressed to three buildings owned by the respondents, the present papers discuss two other buildings owned by them. Therefore, the petition will be deemed amended to cover the entire five buildings.
Respondent Booke is the owner of four buildings and respondent 230 East 12th Street Corporation is the owner of one building in Manhattan. Each building contains six or more family units with a total of two hundred and eight apartments. Before July of 1976, the respondent owners never maintained individual bank accounts for the rent security received from their tenants. However, they allege that they have deposited the rent security in two "mass" accounts (Booke and corporate accounts). Over the years, $21,501.11 has been withdrawn from the Booke account while $14,459.33 has been taken from the corporate account. After this proceeding was commenced, the respondents set up individual bank accounts for the present tenants in the five buildings. At present, a balance of $6,894.13 remains in the Booke account.
The petitioner, the Attorney General, avers that the respondents have not paid interest on the rent security to present and former tenants in the five buildings. He further asserts that the respondents improperly withdrew the monies from the two "mass" accounts. The petitioner also emphasizes that the owners failed to set up individual accounts for the tenants and to notify them of that fact. Lastly, it is stressed that an advance by a Dr. Phyllis Chesler has not been placed in an individual bank account and has not been returned to her even though an apartment was not made available, as promised. Parenthetically, the respondents contend that Dr. Chesler breached her agreement to lease.
The Court at Special Term directed, inter alia, that:
(1) the respondents pay over to the petitioner all monies withdrawn from the "mass" accounts plus any additional monies remaining in those accounts so that the true owners thereof could be ascertained;
(2) the respondents pay interest to present and former tenants in four of the buildings and to present tenants in one of the buildings;
(3) the petitioner attempt to locate all tenants to whom money was owed;
(4) the respondents pay to the petitioner $2,000 plus other enumerated expenses to be incurred in the search for the present and former tenants;
(5) the respondents, within ninety days, could recoup any monies turned over to the petitioner upon proper proof of ownership thereof;
(6) the respondents to maintain individual bank accounts for the tenants' rent security and to inform them that the accounts had been established in their individual names;
(7) the respondents to keep detailed business records covering the rent security accounts;
(8) the respondents be enjoined from engaging in further fraudulent and illegal acts in violation of GOL § 7-103 and Executive Law § 63 subd. 12; and
(9) the petitioner receive $2,000 in costs from the respondent under CPLR § 8303(a)(6).
It is clear that the respondents have violated GOL § 7-103, subd. 2-a, by failing to set up individual interest bearing accounts for the rent security and that they violated GOL § 7-103, subd. 2 by failing to apprise the tenants of those accounts. The respondent owners have further breached GOL § 7-103, subd. 2 by failing to distribute the interest or to apply it toward the rent due. Nonetheless, upon this inconclusive record, it does not necessarily follow that the respondents used all withdrawals for unlawful purposes. During the period under discussion, it should be stressed that the deposits in the "mass" accounts exceeded withdrawals. Furthermore, the petitioner does not contend, except for the Chesler advance, that any tenant failed to receive the principal amount of his security deposit upon moving from the subject buildings. It is quite possible that the...
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