State v. Fashion Place Associates

• Decision Date: 15 February 1996
• Docket Number: No. 1,No. 2,1,2
• Citation: 638 N.Y.S.2d 26,224 A.D.2d 280
• Parties: , Blue Sky L. Rep. P 74,118 STATE of New York, Plaintiff-Respondent, Claire Ehrlich, et al., Plaintiffs-Intervenors-Respondents, v. FASHION PLACE ASSOCIATES, et al., Defendants-Appellants. (Action) In the Matter of the Application of FASHION PLACE ASSOCIATES, Petitioners-Appellants, v. NEW YORK CITY DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT, Respondent-Respondent, Claire Ehrlich, et al., Respondents-Intervenors-Respondents. (Action)
• Court: New York Supreme Court — Appellate Division

Page 26

638 N.Y.S.2d 26

224 A.D.2d 280, Blue Sky L. Rep. P 74,118

STATE of New York, Plaintiff-Respondent, Claire Ehrlich, et al., Plaintiffs-Intervenors-Respondents, v. FASHION PLACE ASSOCIATES, et al., Defendants-Appellants.

(Action No. 1.)

In the Matter of the Application of FASHION PLACE

ASSOCIATES, Petitioners-Appellants, v. NEW YORK CITY DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT, Respondent-Respondent, Claire Ehrlich, et al., Respondents-Intervenors-Respondents.

(Action No. 2.)

Supreme Court, Appellate Division First Department.

Feb. 15, 1996.

G.J. Hurwitz, for State of New York.

H.W. Harting, for Claire Ehrlich, et al.

M.L. Cruz, for Fashion Place Associates, et al.

R. Carver, for New York City Department of Housing Preservation and Development.

Before MURPHY, P.J., and WALLACH, ROSS, NARDELLI and TOM, JJ.

MEMORANDUM DECISION.

Order and judgment (one paper), Supreme Court, New York County (Lewis Friedman, J.), entered May 17, 1994, which, inter alia, granted plaintiff State of New York's motion for partial summary judgment on its complaint to the extent of permanently restraining and enjoining defendants in Action No. 1 from engaging in any and all acts directly or indirectly involving the offer of sale of real estate securities to the public within or from the State of New York, including cooperative and condominium interests in real property, and from violating the provisions of and the regulations promulgated under Article 23-A of the New York General Business Law ("the Martin Act"); directed defendants to provide all tenants who resided in the subject building prior to July 27, 1990 [the date the Plan was declared effective] with all rights accorded to tenants protected by New York's rent stabilization laws and regulations, including but not limited to providing them with a rent stabilized lease; denied defendants' cross-motion for summary judgment dismissing the State's complaint, and, in a proceeding brought pursuant to CPLR article 78, denied petitioner's application challenging a declaratory ruling by the respondent New York City Department of Housing Preservation and Development ("HPD") that the Sponsor was prohibited from unilaterally terminating its tenants' rent stabilization in the subject building by waiving certain real property tax benefits, and dismissed the proceeding, unanimously affirmed, without costs.

Order of the same court and Justice, entered December 30, 1994, which, inter alia, denied the Sponsor's motion for reargument and renewal, unanimously affirmed, without costs.

In these consolidated actions under the Martin Act and CPLR article 78, the IAS court properly determined that the declaratory ruling by HPD that the Sponsor was prohibited from terminating its tenants' rent stabilization status in the subject building by unilaterally waiving J-51 real property tax benefits and exemptions with respect to post-1985 tenancies was not arbitrary and capricious (Matter of Hill v. Perales, 78 N.Y.2d 351, 354, 575 N.Y.S.2d 800, 581 N.E.2d 1046; Matter of Gramercy N. Assocs. v. Biderman, 169 A.D.2d 345, 351, 573 N.Y.S.2d 491, lv. denied 78 N.Y.2d 863, 578 N.Y.S.2d 877, 586 N.E.2d 60). The contrary position would permit a sponsor to reap substantial tax benefits and then escape its concomitant obligations.

Nor did the IAS court, in granting partial summary judgment in favor of the State, err in determining that the Sponsor had violated the Martin Act, and engaged in a course of conduct in violation of General Business Law § 352-eeee(4), by making material misstatements of fact and by failing to disclose material facts in the offering plan and the amendments thereto with respect to the J-51 tax benefit and rent regulatory status of the subject building (Council For Owner Occupied Hous. v. Abrams, 72 N.Y.2d 553, 557, 534 N.Y.S.2d 906, 531 N.E.2d 627; 88 Assocs. v. Abrams, 159 A.D.2d 412, 553 N.Y.S.2d 108, lv. denied 76 N.Y.2d 702, 558 N.Y.S.2d 891, 557 N.E.2d 1187; Matter of 44 W. 96th St. Assocs. v....