In the Matter of Bruckner Realty LLC, Appellant,v.Jeanette Cruz, Respondent.BriefN.Y.December 14, 20161 SONTAG & HYMAN, P.C. ATTORNEYS AT LAW 69 ROSLYN ROAD ROSLYN HEIGHTS, NEW YORK 11577 (516) 621-0600 Facsimile (516) 621-8990 mhyman@sontag-hyman.com August 22, 2016 State of New York Court of Appeals 20 Eagle Street Albany, New York 12207-1095 Attn: John P. Asiello Re: Matter of Bruckner Realty vs. Cruz APL-2016-00152 Dear Mr. Asiello: Petitioner-Appellant, Bruckner Realty LLC, respectfully submits this letter as its consent and response to the Court’s sui sponte determination pursuant to §500.11 of the Court of Appeals Rules of Practice to examine the merits of the appeal in letter form and from the briefs and records submitted at the Appellate Division level. Preliminary Remarks This case presents an exceptionally important question of New York law that is central in how to determine what is or is not an ancillary service in countless residential rent regulated properties throughout the State. The question has squarely evolved in producing different determinations on materially 2 analogous facts within the Appellate Division First Department. Here, a combination of errors of law lead the Appellate Term and Appellate Division to erroneously reverse the Trial Court’s decision that properly granted Petitioner-Appellant summary judgment finding that the subject parking garage (the alleged ancillary service) is not and cannot be an ancillary service subject to Rent Stabilization protection. The Appellate Division (as did the Appellate Term) failed to follow established precedent set by this Court, set by the Second Department, and even precedent set in their own prior holdings. Instead, the Court below misapplied two of its previous holdings which have no relevance to this case. STATEMENT OF THE FACTS Respondent Jeanette Cruz (Tenant) moved into a residential apartment in the subject building owned by Petitioner-Appellant Bruckner Realty LLC (Landlord) in 1994 as a Rent Stabilized Tenant. It is undisputed that parking garage service was not provided to the Tenant in connection with leasing or use of the Tenant’s apartment. The Tenant’s initial apartment lease made no mention of parking garage services. Eight years later, in 2002, the Tenant executed a non-regulated lease to rent one of the parking garage spaces, the lease being separate and distinct from the residential apartment lease and tenancy. The lease for 3 the garage space was then renewed on a month-to-month basis by written agreement dated August 9, 2012. (39) 1 The Landlord billed the rent for the apartment separately from the garage rent. The building is comprised of 142 residential apartments and a parking garage that contains only 56 parking spaces. (106- 108). Thus parking is not and cannot be available to all tenants simultaneously as there are only a limited number of parking spaces compared to the number of apartments/tenants in the building. The building-wide services for the building listed by DHCR do not include parking garage services. The Landlord subsequently terminated the parking garage month-to-month tenancy and this proceeding ensued. HISTORY OF THE PROCEEDING This is a commercial summary holdover proceeding brought in the Civil Court City of New York, County of Bronx, seeking possession of the commercial parking garage space. The Landlord moved for summary judgment. (11-47, 97-105). The Trial Court granted the Landlord’s motion for summary judgment pursuant to its Decision/Order dated September 4, 2014. (9-10). The Trial Court correctly found that on the facts presented the parking garage is not and cannot be deemed a 1 Numbers in parenthesis refer to pages in the Appellate Division record on appeal. 4 building-wide ancillary service subject to the protections of rent stabilization. The Trial Court reasoned: There is no dispute that the respondent became a rent stabilized tenant at the subject building in 1994, and some time in 2002, the respondent started renting a parking space located in the basement on a month- to-month basis. The respondent’s apartment lease does not include rent for the parking space, nor does it make reference to the parking space. According to the building’s certificate of occupancy, there are not enough parking spaces for every tenant (i.e., 142 residential units and 56 parking spaces). (10). On appeal by the Tenant, the Appellate Term reversed, holding in pertinent part that the “Landlord failed to sustain its burden of eliminating all triable issues as to whether the garage space was a required ancillary service” in that “the record is bereft of any evidence as to the nature and chronology of landlords provision of garage service, absent which an informed determination on the coverage issue cannot be made.”(6- 8). Permission for leave to appeal to the Appellate Division was granted by the Appellate Division. The Appellate Division affirmed, 2 and refused to look to all relevant factors as established by this Court and other Appellate Courts when determining what is or is not an ancillary service. The Court concluded that in the First Department, the test of whether a service is a required ancillary service is “whether [it] was 2 A copy of the decision is annexed hereto. 5 provided primarily for the use of the tenants, not whether [it] was used primarily by the tenants.” The Appellate Division also stated it declined to follow the rule of law in the Second Department in Matter of 110-15 71 st Rd. Assoc., LLC vs. Division of Hous. & Community Renewal, 54 A.D.3d 679, 681, 863 N.Y.S.2d 713 (App Div. 2 nd Dept. 2008) lv denied, 12 N.Y.3d, 909 N.E.2d 1235, 882 N.Y.S.2d 397 (Court of Appeals 2009), a case that is directly on point to the facts of this proceeding. QUESTION PRESENTED The Appellate Division, by Order entered July 14, 2016, certified the question: Was the order of this Court, which affirmed the order of the Supreme Court 3 , properly made? ANALYSIS AND ARGUMENT THE PARKING GARAGE SPACE IS NOT AND CANNOT BE A BUILDING-WIDE ANCILLARY SERVICE Under settled New York Law as articulated by this Court, the Appellate Division of both the First and Second Departments, and the Appellate Term, an ancillary service subject to rent regulation is one that is building-wide usable by all tenants, 3 While the Division referenced “Supreme Court” it is assumed they meant the “Appellate Term.” 6 and provided in connection with the leasing or use of their apartment (emphasis added). See, Century Tower Assoc. vs. State Division of Hous. & Community Renewal, 83 N.Y.2d 819, 611 N.Y.S.2d 491, 1994 N.Y. LEXIS 4630 (Court of Appeals 1994); Matter of 110-15 71 st Rd. Assoc., LLC vs. Division of Hous. & Community Renewal, 54 A.D.3d 679, 681, 863 N.Y.S.2d 713 (App Div. – 2 nd Dept. 2008) lv denied, 12 N.Y.3d 712, 909 N.E.2d 1235, 882 N.Y.S.2d 397 (Court of Appeals 2009); Netherland Operating Corp. vs. Eimicke, 135 A.D.2d 352, 521 N.Y.S.2d 245, 1987 N.Y. App. Div. LEXIS 52322 (App. Div. 1 st Dept. 1987); 420 Riverside Drive vs. Ettinger, 763 N.Y.S.2d 704, 196 Misc.2d 107 (App. Term – 1 st Dept. 2003), lv denied, 2003 N.Y. App. Div. LEXIS 11362 (App. Div. 1 st Dept. 2003); 3300 Co. vs. Ryan, 12 Misc.3d 146(A), 824 N.Y.S.2d 770 (App. Term – 1 st Dept. 2006). An analysis of the findings of the different Courts is instructive and relevant in showing that the Appellate Division misapplied the controlling law and misapplied its prior holdings. RULE OF LAW IN THE COURT OF APPEALS In Century Tower Assoc. vs. State Division of Hous. & Community Renewal, supra. in affirming the Appellate Division First Department, this Court instructed that the ancillary service (such as garage service) must be a service “building- 7 wide” usable to “all tenants.”(“… the garage service was a building-wide service … applied to all tenants of the building….”). Id. at 822. RULE OF LAW IN THE APPELLATE DIVISION SECOND DEPARTMENT In Matter of 110-15 71 st Rd. Assoc., LLC vs. Division of Hous. & Community Renewal, supra., the Appellate Division Second Department dealt with a case directly on point to the facts of the case at bar. That tenant was a rent stabilized tenant. The Rent Stabilized apartment lease made no mention of and did not include use of the parking garage in the building. Many years later the tenant executed a lease with the landlord for a parking space in the garage at the building on a month-to-month basis. The building contained 74 apartments and only 40 parking spaces. Thereafter the Landlord terminated the parking garage tenancy. The tenant filed a complaint at DHCR for a determination on whether or not the parking garage space was an ancillary service. DHCR found the garage space was an ancillary service. The landlord then commenced an Article 78 proceeding and the Supreme Court dismissed the case. The Landlord appealed and the Appellate Division reversed, finding the garage space was not an ancillary service. In so holding, the Appellate Division explained “[s]ince the rental of 8 the parking space was not part of the tenant’s rent stabilized apartment lease the [landlord] had the right to terminate the tenancy in the parking space.” Id at 682. The Court further held that when there are only a limited number of parking spaces compared to the number of apartments in the building, parking services cannot be deemed a “building- wide” ancillary service (“parking was not a building wide service, since there were 74 apartments in the building but only 40 parking spaces....”). Id. at 681. An application was made for leave to appeal the Appellate Division Second Department’s finding in Matter of 110-15 71 st Rd. Assoc., LLC vs. Division of Hous. & Community Renewal, and the application was denied by this Court. Id. at 12 N.Y.3d, 909 N.E.2d 1235, 882 N.Y.S.2d 397 (Court of Appeals 2009). The refusal by this Court to grant leave certainly implies that this Court found the Second Department properly applied the controlling law to the facts. Here, the Court below ignored these exact same facts and refused to follow this established rule of law. RULE OF LAW IN THE APPELLATE DIVISION FIRST DEPARTMENT The Appellate Division First Department, in a prior decision, properly applied the law as stated by this Court and 9 the other Courts in Netherland Operating Corp. vs. Eimicke, 135 A.D.2d 352, 521 N.Y.S.2d 245, 1987 N.Y. App. Div. LEXIS 52322 (App. Div. 1 st Dept. 1987). In Netherland Operating Corp the Appellate Division properly considered the following relevant factors: a. Whether or not the garage service was building-wide, capable of being used by all tenants simultaneously, and not service for an individual tenant. b. Whether the service was provided in connection with the leasing or use of their apartment. The Court concluded: Garage service in connection with the leasing of an apartment is in the nature of a building-wide service, not a service for an individual tenant. Thus, it applies to all tenants of the building for whom garage service was provided in connection with the leasing or use of their apartment. Id. at 252. In making its determination, that Court did not reference or use the so-called “test” that the Appellate Division in the case at bar stated was the test in the First Department. Clearly here the Appellate Division erroneously ruled that is the “test” and only determinative factors to use when determining what is or is not an ancillary service. Here, the Court below certainly failed to look to all the other relevant factors necessary in making a determination. 10 RULE OF LAW BY THE APPELLATE TERM FIRST DEPARTMENT The Appellate Term in the First Department also dealt with a case directly on point, except the alleged ancillary service was a storage facility. In 420 Riverside Drive vs. Ettinger, 763 N.Y.S.2d 704, 196 Misc.2d 107 (App. Term – 1 st Dept. 2003), lv denied, 2003 N.Y. App. Div. LEXIS 11362 (App. Div. 1 st Dept. 2003), the rent regulated tenant rented a storage facility separate and distinct from the residential lease executed for the apartment. The building did not contain a storage space for every tenant in the building, thus it was not “building-wide.” The landlord terminated the tenancy of the storage facility. The Appellate Term affirmed the Trial Court and held the storage facility could not be a building-wide service subject to protection. The Appellate Term, applying the relevant factors, reasoned that: [The storage facilities] are clearly not physically appurtenant to the controlled apartments and were demised under leases (now expired) which made no reference to the apartments to which they are ostensibly connected. Tenant makes separate rent payments for the residential and basement spaces. As correctly stated by the motion court, coverage under a rent regulatory scheme is a matter of statutory right and cannot be created by waiver or estoppel (see, Ruiz v Chwatt,247 A.D.2d 308, 669 N.Y.S.2d 47 [1998]). Tenant could not, by his use of the cellar premises for storage, workspace or recreational activities, confer regulated status upon separate and distinct nonresidential space that was not equipped or leased as a housing accommodation (see, 129 East 56th Street Corp. v 11 Harrison, 122 Misc. 2d 799, 473 N.Y.S.2d 910 [1984]). Id at 108. An application for leave to appeal the Ettinger decision was denied by the Appellate Division. Id. at 2003 N.Y. App. Div. LEXIS 11362 (App. Div. 1 st Dept. 2003). In denying leave, it is implied that the Appellate Division First Department then recognized that the so-called “test” is far more expansive than merely whether “the service was provided primarily for the use of the tenants.” Certainly the limited storage facilities in the Ettinger building, while “provided primarily for the use of the tenants” was not deemed an ancillary service subject to protection by this Court because it was not “building-wide” capable for use by all tenants simultaneously and not offered in connection with the leasing and use of their apartments. Cf. Matter of 110-15 71 st Rd. Assoc., LLC vs. Division of Hous. & Community Renewal. In 3300 Co. vs. Ryan, 12 Misc.3d 146(A), 824 N.Y.S.2d 770 (App. Term – 1 st Dept. 2006) the Appellate Term in this Department was also asked to determine if parking garage service was a building-wide ancillary service. That Court, relying on Ettinger, supra., found that the “tenant’s failed to establish any right to continue possession of the demised parking space.” The Court further held “[n]o claim or showing was made that the parking space was ancillary to tenants' residential tenancy in 12 the building (see 420 Riverside Drive v. Ettinger, 196 Misc 2d 107, 763 N.Y.S.2d 704 [2003]).” Id. at 770. THE LEGAL PRINCIPLES APPLICABLE IN DETERMINING WHAT IS OR IS NOT AN ANCILLARY SERVICE WERE IGNORED BY THE APPELLATE DIVISION The Appellate Division’s decision is fatally flawed in various critical aspects. The Court Below Failed To Look At All Relevant Factors As previously mentioned, the Court erroneously stated that the test in determining an ancillary service is to solely look at whether “the service was provided primarily for the use of the tenants.” At all events, the rulings of this Court and many other Appellate Courts in the First and Second Department, all have shown that is not the “test,” and that the so-called test is much more expansive. Specifically, those Courts also looked at the many other pertinent factors, such as, whether or not the alleged service is building-wide capable of being used simultaneously by all tenants rather than just a few, whether or not the alleged service was provided in connection with the leasing and use of their apartment, whether or not there was one lease that provided for use of the service or two separate and distinct 13 leases (and when the separate leases were executed), whether or not there was a fee (rent) charged for the use of the ancillary service, and if there was a fee, was it included in the monthly rent or was there a separate charge for the service. Accordingly, the decision of the Court below is fatally flawed. In essence, according to the Appellate Division’s decision, any type of service provided would be deemed ancillary and protected even if it was capable of only servicing one tenant in the building (such as a building that contains only one parking space or one storage closet). By this logic, there is no basis to even have a test as every type of “service” provided would be considered ancillary. Additionally, in this scenario, any other tenant in the building wanting use of said service clearly could not because there would be an insufficient number of parking spaces or storage closets, which could subject an owner to potential rent reductions and damages. The determination or distinction as to what is or is not a protected ancillary service is easy to understand by way of example. A laundry facility, a courtyard, a swimming pool, individual storage facility/bins sufficient in number for each apartment in the building, and parking services with enough parking spaces for all apartments in the building, could all be considered protected ancillary services because they are 14 provided to all the tenants, building-wide, and they can be used by all tenants simultaneously. Cf., Century Tower Assoc. vs. State Division of Hous. & Community Renewal, supra.; Netherland Operating Corp. vs. Eimicke, supra.; Matter of 110-15 71 st Rd. Assoc., LLC vs. Division of Hous. & Community Renewal, supra.; 3300 Co. vs. Ryan, supra.; 420 Riverside Drive vs. Ettinger, supra. However, a storage facility or a parking garage each with limited number compared to the number of apartments in a building cannot be deemed a “building-wide” ancillary service subject to protection as they clearly are not provided for use of all the tenants simultaneously. Cf. Matter of 110-15 71 st Rd. Assoc., LLC vs. Division of Hous. & Community Renewal, supra.; 3300 Co. vs. Ryan, supra.; 420 Riverside Drive vs. Ettinger, supra. Accordingly, the number of parking spaces compared to the number of dwelling units in the building, intentionally disregarded by the Court below as “not determinative,” was reversible error as it absolutely is a determinative and relevant factor that should have been considered. Cf. Matter of 110-15 71 st Rd. Assoc., LLC vs. Division of Hous. & Community Renewal, supra. In the case at bar, it is undisputed the Tenant took occupancy of her apartment without the use of garage service; 15 The Tenant’s initial apartment lease made no mention of parking garage services; There were two separate and distinct lease agreements (one for the apartment and one for the garage) executed at different times; The tenant was billed separately for the apartment rent and the garage rent; There are only a limited number of parking spaces compared to the number of tenants in the building and thus parking services was not usable to all tenants at the same time. Cf., Matter of 110-15 71 st Rd. Assoc., LLC vs. Division of Hous. & Community Renewal, supra. On these specific facts, the Appellate Division simply ignored the rule of law as it applies to determining an ancillary service, and their conclusion squarely conflicts with the well settled principals of law. The Appellate Division’s Citation Of Inapplicable Authorities Was Clear Error Despite the undisputed facts and findings of the aforementioned cases, the Appellate Division nevertheless supported its erroneous holding by citing two wholly inapplicable decisions it had previously rendered. In Missionary Sisters of Sacred Heart vs. Meer, 131 A.D.2d 393, 681 (App. Div. 1 st Dept. 1987) the sole issue before the Court was an action for damages to a tenant that did not timely get a parking space as a majority of the spaces were rented to 16 non-building tenants. None of these issues are present in the case at bar. Additionally, the Court in Missionary Sisters did not make and was not asked to make any determination as to whether or not the garage was an ancillary service. That determination was already made by an unreviewed finding at the Conciliation and Appeals Board (CAB), the then administrative agency. It is settled that unreviewed errors of an administrative agency are not binding on higher courts. See, 251 W. 98 th St. Owners, LLC vs. New York State Div. of Hous. & Community Renewal, 276 A.D.2d 265, 713 N.Y.S.2d 729, 2000 N.Y. App. Div. LEXIS 9863 (App. Div. 1 st Dept. 2000)(“DHCR’s Commissioner should not be required to adopt unreviewed errors made by a Rent Administrator.”). As there was no review, let alone Appellate review of CAB’s determination that parking services in Missionary Sisters was a protected ancillary service, the finding in Missionary Sisters is not binding on the case at bar. Lastly, in Missionary Sisters, damages were imposed against the owner for failure to have an available parking space for the tenant. The same certainly would hold true in the case at bar if the garage is deemed a protected service in that if all 56 parking spaces were taken by other tenants in the building and a 57 th tenant also wanted a parking space, that tenant could file for a rent reduction and other relief against the Landlord for 17 failure to give parking to that 57 th tenant. Indeed this would be an untenable situation and create disastrous results. In In Re 501 E. 87th St. Realty Co., 22 A.D.3d 294, 804 N.Y.S.2d 20, 2005 N.Y. App. Div. LEXIS 10731, 2005 NY Slip Op 7473 (App. Div. 1st Dep't 2005), the facts of that case are silent as to the number of parking spaces available compared to the number of apartments at the building. Additionally, that Court dealt with the owner renting out the garage to non- residents, a non-issue in the case at bar. However, the use of the garage by non-tenants was the motivation behind the Appellate Division’s creation of their so- called “test” and its resulting language “whether or not it was used primarily by the tenants.” At all events, these two cases relied upon by the Court below have no applicability here, their findings squarely conflicting with settled principles of law on materially analogous facts. Thus, under these specific facts and circumstances, the Appellate Division clearly erroneously misapprehended the facts and failed to apply the controlling law as on how to determine what is or is not an ancillary service. 18 CONCLUSION Based on the facts and the law, as well as the briefs submitted by both parties in the Appellate Division, this Court should reverse the decision of the Appellate Division, First Department, and the sound decision and finding of the Trial Court granting Petitioner-Appellant summary judgment should be reinstated. Respectfully submitted, By: Marc H. Hyman, Esq. Sontag & Hyman, P.C. Attorneys for Petitioner-Appellant Tom, J.P. , Rem•lick, Richter, Kapnick, i~ebber, J J. 1026 In re Bruckner Realty LLC, Petitioner-Appellant, Jeannette Cruz, t. Index 570004/15 Sontag & Hyman, P.C., Roslyn Heights (Hare H. Hy:nan of counsel), fo~· a_opellant. Jeannette Cruz, respo~de~t pro se. Order of the Appellate Term, Supreme Court, First order of Civil Court, Bronx County (Joseph E. Capella, J.), entered 4, 2014, to deny the parts of petitioner's summary judgment motion that dismiss respondent's second and ':h.ird .. 'affirmative defenses'' and first. and second ''defer:ses" and for summary judgment of possession, unanimously affirmed, without costs. Since petitioner's first surnmary judgment Motion was made after respondent's deemed general denial, ~vhereas :i.ts second suer: motion was made after her answer, the second motion v1as no·c barred the rule against successive surnnary j·c;dgment motic.rcs (see e.g. Healthcare I.Q., LLC v I'sai Chung Chao, 118 AD3d 98, 53 102-103 [1st 2014]). On the merits, ioner failed to establish its prima fac~e case. The fact that ect bui.lding has :.;z dwelling- Missionary Sisters of Sacred Heart v Meer, 131 AD2d 393 [1st 1987]). 7o the extem: Matter of 110-15 71st Rd. Assoc., LLC v Division of lious. & Community Renewal (54 AD3d 679, 681 [2d 2008], lv 12 NY3d 712 [2009]) is to tbe cor;trary, we decline to follow it. In this Department, the test of whether a service is a required ancil service is "whether [itJ was provided primarily for the use of the ter;ar.ts, not \vhether [it.] was used primari::_y by the tena:1ts" (Matter of 501 E. 87th St. Realty Co., L.L.C. v New York State Div. of Hous. & Communi Renewal, 22 AD3d 294, 29S [lst Dept 2005] [internal marks omitted]). THIS CONSTir'JTES THE DECIS:':ON AND ORDER OF THE SUPREME COURT, APPELLATE o=VISION, FIRST DEPARTMENT. ENTERED: ~mY 3, 2016 ~ ...................... CLERK 54 COURT OF APPEALS STATE OF NEW YORK --------------------------------------X APL-2016-00152 BRUCKNER REALTY LLC, Petitioner-Appellant, -against- JEANETTE CRUZ, Respondent-Respondent. --------------------------------------X DISCLOSURE STATEMENT PURSUANT TO §500.1(f) Appellant Bruckner Realty LLC states it has no parents, subsidiaries or affiliates. Dated: Roslyn Heights, New York August 22, 2016 SONTAG & HYMAN, P.C. Attorneys for Bruckner Realty LLC Petitioner-Appellant 69 Roslyn Road Roslyn Heights, New York 11577 (516) 621-0600 By: ________________________ Marc H. Hyman, Esq.
