Vintage Ventures Llc. v. City Of N.Y. Dep't Of Finance

• Decision Date: 14 September 2010
• Docket Number: Docket No. 09-2327-cv.
• Citation: 620 F.3d 146
• Parties: CHASE GROUP ALLIANCE LLC, Esquire Group Estates LLC, Vintage Ventures LLC, Plaintiffs-Appellants, v. CITY OF NEW YORK DEPARTMENT OF FINANCE, Martha E. Stark, Finance Commissioner of New York, City of New York, Department of Housing Preservation and Development, Rafael Cestero, Commissioner of New York City Department of Housing Preservation and Development, Debra A. Thomas, Director of Article 7A Programs at the New York City Department of Housing Preservation and Development, Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

620 F.3d 146

CHASE GROUP ALLIANCE LLC, Esquire Group Estates LLC, Vintage Ventures LLC, Plaintiffs-Appellants,

v.CITY OF NEW YORK DEPARTMENT OF FINANCE, Martha E. Stark, Finance Commissioner of New York, City of New York, Department of Housing Preservation and Development, Rafael Cestero, Commissioner of New York City Department of Housing Preservation and Development, Debra A. Thomas, Director of Article 7A Programs at the New York City Department of Housing Preservation and Development, Defendants-Appellees.

Docket No. 09-2327-cv.

United States Court of Appeals,Second Circuit.

Argued: Jan. 20, 2010.

Decided: Sept. 14, 2010.

Robert J. Tolchin (Oleg Rivkin, Fox Horan & Camerini, LLP, New York, NY, on the brief), The Berkman Law Office, LLC, Brooklyn, NY, for Appellants.

Julian L. Kalkstein, Assistant Corporation Counsel of the City of New York (Michael Cardozo, Corporation Counsel of the City of New York; Larry A. Sonnenshein, of counsel), New York, NY, for Appellees.

Before: WINTER, WALKER, and POOLER, Circuit Judges.

WINTER, Circuit Judge:

Appellants are owners of three apartment buildings in New York City. They sued the City of New York and various City agencies and officials, claiming that the City defendants imposed liens on the properties without giving appellants prior notice of the liens or securing the approval of the New York Housing Court, as required by an order of that court. Judge Pauley dismissed their complaint. We affirm because the complaint itself alleges that the Housing Court order afforded appellants a right to notice and access to New York courts before the imposition of valid liens. The availability of this process satisfied due process.

BACKGROUND

Because this is an appeal from a dismissal under Fed.R.Civ.P. 12(b)(6), we view the facts alleged in the complaint in the light most favorable to the appellants. Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir.2002).

The complaint alleged the following. Tenants of three apartment buildings in New York City commenced an action in the New York City Civil Court, Housing Part under Article 7A of the New York Real Property Actions and Proceedings Law. The tenants sought the appointment of a “7A Administrator” to oversee the properties and to remedy housing code violations. The Housing Court issued an order appointing Peter Nakos as the 7A Administrator for the properties.

The Housing Court's order gave the 7A Administrator authority to collect and use rents, “subject to the Court's direction, to remedy the conditions alleged in the Petition, any violations of record issued by [the New York City Housing Preservation Department (“HPD”) ] ... and to undertake work as authorized by the Real Property Actions and Proceedings Law § 778(1)....” The order authorized the 7A Administrator to use rent monies to “[o]rder the necessary materials, labor and services to remove or remedy the conditions alleged in the Petition, and to remedy all violations currently on record with HPD....” The 7A Administrator was also given authority to borrow money when necessary. In this respect, the Housing Court's order provided that the 7A Administrator could:

Borrow funds from HPD or other governmental entity for repairs at the Premises that are necessary to implement the objectives of this Judgment and enter into an agreement with HPD or other governmental entity for the repayment of such monies.... The Administrator may apply for any loan from a bank or lending institution or grant available for the purposes of repair and rehabilitation of the Premises or which are otherwise made available through any governmentally administered or subsidized program.

However, the order limited the 7A Administrator's authority to accept loans that would result in liens against the properties:

[A]ny loan which would result in a lien on the Premises may not be accepted without approval of the Court, which approval shall be sought upon notice to the Premises' owner or attorney for the owner and all other parties to this proceeding. Said approval may be sought without formal motion procedure so long as at least eight days' written notice of such approval is given to the owner or attorney thereof, and any other interested parties. The Court may set such procedures as are reasonable to hear any objections to such application, and if any party objects to its proposal loan they may bring an order to show cause or seek such other remedy as may be appropriate.

The Housing Court's order also set forth record-keeping and reporting requirements. Within thirty days of the order's issuance, the 7A Administrator was required to file with the HPD and with all relevant parties a plan for the provision of rehabilitative services. The order further required that the 7A Administrator submit to both the Housing Court and to HPD monthly financial statements of all receipts and expenditures.

The provisions of the Housing Court's order mirror statutory provisions in Article 7A that lay out the scope of authority given to a 7A administrator. That law provides in relevant part: “Any administrator is authorized and empowered in accordance with the direction of the court, to order the necessary materials, labor and services to remove or remedy the conditions specified in the judgment, and to make disbursements in payment thereof; and to demand, collect and receive the rents from the tenants....” N.Y. Real Prop. Acts. § 778(1) (emphasis added). As to a 7A administrator's authority to encumber properties placed in its care, Article 7A provides:

In addition, such administrator is authorized and empowered in accordance with the direction of the court to accept and repay such moneys as may be received from the department charged with enforcement of the housing maintenance code of the city of New York for the purpose of replacing or substantially rehabilitating systems or making other repairs or capital improvements authorized by the court. All moneys expended by the department pursuant to the foregoing shall constitute a debt recoverable from the owner and a lien upon the building and lot, and upon the rents and other income thereof.

Id. (emphasis added). Article 7A also sets out similar reporting requirements. For example, it requires that the administrator submit work plans and make publicly available all receipts and expenditures. Id. at §§ 778, 779.

At some point after the appointment of Nakos as the 7A Administrator, appellants purchased the properties in question. They allege that the 7A Administrator subsequently accepted $712,567.55 in loans from HPD, all of which the New York City Department of Finance has “purported to deem ... to be liens” against the properties and has so filed them. It further alleges that HPD granted, and the 7A Administrator accepted, these loans without prior notice to appellants or court approval. The complaint asserts that this conduct not only deprived appellants of “rights that the plaintiffs plainly were entitled to under the Housing Court Order[ ]” but also of their due process rights under the Fourteenth Amendment. ¹ In this respect, the complaint asserts that the 7A Administrator's unilateral decision to encumber the properties deprived appellants of any “opportunity to contest the amount of the loans, or the necessity or appropriateness of the work which the 7A administrator planned to carry out with the proceeds of such loans.”

The complaint requests that the district court issue an order: (i) enjoining the City from placing any additional liens on the properties; (ii) prohibiting the City from either selling or transferring the existing liens to a third party; and (iii) directing that the City remove the existing $712,567.55 in liens from the properties immediately.

Applying the Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976), balancing test, the district court granted the City's motion to dismiss for failure to state a claim. The district court concluded that pre-deprivation process would: (i) “impede the 7A Administrator's ability to carry out his functions in a timely manner”; (ii) “impose a costly burden on Defendants”; and (iii) “endanger the safety of those living at the Properties by impeding the 7A Administrator's actions.” Given these considerations and the fact that appellants already “were given adequate notice of the pendency of the 7A Proceeding and ample opportunity to respond and protect their interests,” it found that appellants had failed to state a due process claim.

This appeal followed. We affirm but on different grounds.

DISCUSSION

As noted, we review the grant of a Rule 12(b)(6) motion to dismiss de novo, “construing the complaint liberally, accepting all factual allegations in the complaint as true, and drawing all reasonable inferences in the plaintiff's favor.” Chambers, 282 F.3d at 152. Because our review is de novo, “we are free to affirm the decision below on dispositive but different grounds.” Primetime 24 Joint Venture v. Nat'l Broad. Co., 219 F.3d 92, 103 (2d Cir.2000). We will affirm “only if the plaintiff fails to provide factual allegations sufficient to raise a right to relief above the speculative level.” Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122, 124 (2d Cir.2008) (internal quotation marks omitted).

Appellants claim that the imposition of liens on the properties by the City violated their Fourteenth Amendment due process rights. “An essential principle of due process is that a deprivation of life, liberty, or property be preceded by notice and opportunity for hearing appropriate to the nature of the case.” Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 542, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985) (internal quotation marks omitted). The requisite notice must be “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Cent. Hanover Bank & Trust Co., ...