Rizzo v. New York State Dhcr

• Decision Date: 20 December 2005
• Citation: 6 N.Y.3d 104,843 N.E.2d 739
• Parties: In the Matter of George RIZZO, Appellant, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent.
• Court: New York Court of Appeals Court of Appeals

843 N.E.2d 739

6 N.Y.3d 104

In the Matter of George RIZZO, Appellant, v. NEW YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL, Respondent.

Court of Appeals of New York.

December 20, 2005.

Linda Rzesniowiecki, New York City, for appellant.

Gary Turk, New York City, and David B. Cabrera for respondent.

OPINION OF THE COURT

ROSENBLATT, J.

In this CPLR article 78 proceeding, we hold that after the New York State Division of Housing and Community Renewal (DHCR) has issued a final determination, concerning an application for a certificate of eviction pursuant to New York City Administrative Code § 26-408(b)(3) or New York City Rent and Eviction Regulations (9 NYCRR) § 2204.7, a reviewing court may not remit the matter to the agency for de novo review of events that arose after its determination.

I.

Rachel Crespin owns 323 East 53rd Street, a four-story apartment building in Manhattan. Petitioner George Rizzo resides in a rent-controlled unit comprising the third floor of the building. He lives alone in an apartment of some 1,200 square feet which, as of the original certificate of occupancy, contained six rooms. Crespin resides in a unit comprising the second story; she and her husband had been the building's first rent-controlled tenants. The fourth-floor apartment was rent-controlled until its occupant, Elaine Bloedow, died in early January 2002, an event of significance in this litigation. The remaining unit is unregulated.

Crespin bought the building in 1981. In 1996, she filed applications for certificates of partial eviction of Rizzo and Bloedow, explaining that she had been losing money on the property for years. In her application, she relied on New York City Rent and Eviction Regulations (9 NYCRR) § 2204.7, which prescribes when the Rent Administrator may authorize subdivision of an under-occupied, rent-controlled apartment and order partial eviction of its tenant. Crespin sought to evict Rizzo and Bloedow from the front portions of their units, leaving them with considerably smaller apartments, in order to create a new duplex unit from the vacated front rooms.

The New York City Rent and Rehabilitation Law and its implementing regulations require the City's rent agency to issue an order granting a certificate of eviction or partial eviction when "[t]he landlord seeks in good faith to recover possession of a housing accommodation for the immediate purpose of substantially altering or remodeling it" (Administrative Code of City of N.Y. § 26-408[b][3]; N.Y. City Rent and Eviction Regulations [9 NYCRR] § 2204.7). Such a certificate, however, may be granted only if two conditions are met: the agency must determine, first, that the housing accommodation in question is under-occupied and contains six or more rooms, excluding bathrooms and kitchen (N.Y. City Rent and Eviction Regulations [9 NYCRR] § 2204.7[a]), and, second, that, without recourse to eviction, "there is no reasonable possibility that the landlord can make a net annual return of eight and one-half per centum of the assessed value of the subject property" (Administrative Code of City of N.Y. § 26-408[b][5][a]; see also N.Y. City Rent and Eviction Regulations [9 NYCRR] § 2204.4[g] [1]).

Following an audit of Crespin's income and expenses for the "test year" 1996, an inspection of Rizzo's apartment, a fact-finding hearing in 1999 and a detailed, May 26, 2000 report by an Administrative Law Judge, DHCR granted Crespin's application, on September 18, 2000, and ordered Rizzo and Bloedow to surrender the front halves of their apartments. The agency also ordered Crespin to reduce Rizzo's rent from $673.64 to a maximum of $301.55. With regard to the relevant year, 1996, DHCR's District Rent Administrator noted that the Administrative Law Judge had found no reasonable possibility that Crespin could make a net annual return of 8.5% of the assessed valuation of the property, without recourse to eviction.¹ The Rent Administrator further found that there was no probative evidence of bad faith on Crespin's part; that Rizzo's apartment originally contained six rooms and that a wall had been taken down in the interim; and that it was under-occupied within the meaning of New York City Rent and Eviction Regulations (9 NYCRR) § 2204.7(a).

Rizzo and Bloedow filed petitions for administrative review. On January 2, 2002, the DHCR Deputy Commissioner denied them. Then, apparently the very next day, Bloedow died, and her apartment became deregulated.

In March 2002, Rizzo commenced this article 78 proceeding, seeking reversal and remittal to DHCR.² Supreme Court noted that Bloedow's death had resulted in decontrol of her apartment and held that "[t]he impact of the recent deregulation of Ms. Bloedow's apartment must be considered by the DHCR in determining the owner's ability to meet the 8½% return requirements of the Sound Housing Act." It vacated DHCR's determination, ordered that the evidence of Bloedow's death and its impact be presented to the agency and remitted the application for reprocessing.³

DHCR appealed and, by a divided court, the Appellate Division reversed, concluding that the trial court's consideration of evidence not contained in the administrative record exceeded the scope of permissible judicial review. Rizzo appeals as of right (CPLR 5601[a]), and we now affirm.

II.

In reviewing orders of the DHCR, courts are limited to the factual record before the agency when its determination was rendered. As a rule, the court may not consider evidence concerning events that took place after the agency made its determination. This follows from a fundamental principle of article 78 review, that "[j]udicial review of administrative determinations is confined to the facts and record adduced before the agency" (Matter of Yarbough v. Franco, 95 N.Y.2d 342, 347, 717 N.Y.S.2d 79, 740 N.E.2d 224 [2000] [internal quotation marks and citation omitted]). That, of course, is merely another way of saying that an appellate court is bound by the record. In short, "[j]udicial review of an administrative determination is limited to the grounds invoked by the agency" (Matter of Aronsky v. Board of Educ., Community School Dist. No. 22 of City of N.Y., 75 N.Y.2d 997, 1000, 557 N.Y.S.2d 267, 556 N.E.2d 1074 [1990]; see generally Matter of Montauk Improvement v. Proccacino, 41 N.Y.2d 913, 394 N.Y.S.2d 619, 363 N.E.2d 344 [1977]).

Rizzo relies on New York City Administrative Code § 26-411(a) (2), which carves out a narrow exception to the general rule:

"If application is made to the court by either party for leave to introduce additional evidence which was either offered and not admitted or which could not reasonably have been offered or included in such proceedings before the city rent agency, and the court determines that such evidence should be admitted, the court shall order the evidence to be presented to the city rent agency."

This language, however, should not be interpreted as permitting a court to engage in, or order, a de novo review based on events that took place after the agency made its determination. As the Appellate Division noted, "the admission of subsequent events which occurred after the final agency order would defeat finality and could subject an otherwise final order to endless recurring review" (16 A.D.3d 72, 78, 789 N.Y.S.2d 139 [2005]). We agree with DHCR that it could not have been the intent of the Legislature to subject the agency's rulings to the prospect of such endless review, based on submissions by tenants or by landlords as to post-determination events.

We therefore hold that in judicial review of a rent agency decision made pursuant to New York City Administrative Code § 26-408(b)(3) or New York City Rent and Eviction Regulations (9 NYCRR) § 2204.7, the "additional evidence" that may be admitted under § 26-411(a)(2) is limited to facts that arose before the agency made its determination. When, as here, DHCR determines that a landlord's application for a certificate of eviction should be granted because, at the time of the application, there was no reasonable possibility that the landlord could make an 8.5% net annual return, a reviewing court may admit additional evidence only if the evidence is relevant to that time-specific determination.

DHCR's inquiry was whether Crespin could make an 8.5% net annual return in the test year 1996. Bloedow's death in 2002 was irrelevant to the DHCR's determination and should not have been considered by Supreme Court. By ordering that the evidence of Bloedow's death be presented to the DHCR, the court exceeded the permissible scope of its review.

III.

Petitioner and our dissenting colleague cite Matter of McMurray v. New York State Div. of Hous. & Community Renewal, 72 N.Y.2d 1022, 534 N.Y.S.2d 924, 531 N.E.2d 645 [1988] in support of the claim that Supreme Court correctly remitted the matter to the agency for de novo review. McMurray is not on point. It concerned a different provision of the Rent and Rehabilitation Law (Administrative Code of City of N.Y. § 26-408[b] [1]), the legislative history of which distinguishes it from New York City Administrative Code § 26-408(b)(5)(a), the provision that is crucial here.

New York City Administrative Code § 26-408(b)(1), the subject of McMurray, makes tenancy for less than 20 years a condition precedent of evicting the tenant of a rent-controlled apartment that the landlord requires for personal use and occupancy. This Court held that "a tenant in possession who accumulates the requisite 20 years of occupancy before the validity of a certificate of eviction is finally determined by the courts is protected from eviction," even when the tenant reaches the 20-year milestone after the certificate of eviction is issued (72 N.Y.2d 1022, 1024, 534 N.Y.S.2d 924, 531 N.E.2d 645).

The provision in McMurray was construed in the tenant's favor because the legislative history of that provision, a 1984 amendment, shows a clear intent to protect elderly,...