1097 Holding LLCv.Ballesteros

Civil Court of the City of New York, Bronx CountyApr 8, 2008
071549/2006 (N.Y. Misc. 2008)
071549/20062008 N.Y. Slip Op. 50856

071549/2006.

Decided April 8, 2008.

Petitioner: Mary Beth Hotaling, Esq. [Cohen Hurkin Ehrenfeld Pomerantz Tenenbaum LLP].

Respondent: Gabriel Benitez, Law Graduate and Jonathan Levy, Esq. [Legal Services for New York City, LSNY — Bronx].


After trial of this summary nonpayment proceeding the petition was dismissed based on petitioner's failure to prove the legal regulated rental amount. Respondents successfully proved their counterclaims for rent overcharge and breach of the warranty of habitability. This matter then was set down for a hearing on the issues of treble damages, interest and attorneys fees. Both parties submitted post-hearing memoranda of law.

Rent Overcharge, Treble Damages and Interest

A rent overcharge is presumed to be willful with mandatory imposition of treble damages unless petitioner can show by a preponderance of the evidence that it was not. Rent Stabilization Law ("RSL") § 26-516 [a]; Draper v. Georgia Properties, Inc., 230 AD2d 455(1st Dept 1997), affd, 94 NY2d 809 (1999); Century Towers Assocs. v. DHCR, 83 NY2d 819 (1994); Matter of Sohn v. DHCR, 258 AD2d 384 (1st Dept 1999); see Tockwotten Associates LLC. v. DHCR, 7 AD3d 453 (1st Dept 2004).

Overcharges arising from specific circumstances such as the purchase of a building at a judicial or bankruptcy sale where complete prior rent records were not available, tender of a full refund of all excess rent collected plus interest prior to interposing an answer or hyper-technical computation errors are examples where the resulting overcharges have been found non-willful. DHCR Policy Statement 89-2 [February 27, 1989].

However, when an owner fails to submit evidence, or when the evidence is equally balanced, the overcharge will be deemed willful, and treble damages will be imposed. Id. Even where a landlord proves by a preponderance of the evidence that the overcharge was not willful, interest may still be assessed on the overcharge amount. Rent Stabilization Code ("RSC") § 2526.1[a][1]. Interest on any overcharge is calculated pursuant to CPLR § 5004. Interest on a rent overcharge award is generally authorized from the date of the initial monthly overpayment except when treble damages are warranted. Mohassel v. Fenwick , 5 NY3d 44 (2005). Treble damages are imposed in lieu of interest from the date of the monthly overcharge to the date of the court's decision. Id. However, interest on treble damages may be imposed from the date of the court's decision going forward. Id.

Petitioner's Failure to Establish the Legal Regulated Rent

At trial, petitioner failed to establish the legal regulated rent paid by the prior rent-stabilized tenant Amanda Cruz. Petitioner therefore was entitled to claim a 20% vacancy increase on the last registered rent of $573.46 based on a two-year lease term ending June 30, 2004. At the hearing, petitioner successfully introduced into evidence Ms. Cruz' most recent two-year lease renewal commencing July 1, 2004 and ending June 30, 2006 at a rental rate of $616.46. (Pet. Exh. 8.) As Ms. Cruz vacated before the next filing date for registration, petitioner alleges, it did not register this rent with the DHCR.

Based on the testimony adduced at trial, and at hearing, petitioner was entitled to claim a 20% vacancy increase on $616.46, the rental amount paid by Ms. Cruz at the time of her vacatur from the apartment. Petitioner therefore has rebutted the presumption of willfulness of the overcharge arising from petitioner's application of the first vacancy increase based on a rental amount of $616.46.

Petitioner's Failure to Establish Entitlement to an IAI Increase

In order to claim an individual apartment improvement ("IAI") rent increase, petitioner must prove each specific item of improvement that was completed or installed. Matter of Charles Birdoff Co., v. DHCR, 204 AD2d 630 (2nd Dept 1994). Documentation must be as specific as possible. Id. DHCR sets forth guidelines in evaluating an owner's application for an IAI increase. DHCR Policy Statement 90-10 [June 26, 1990] provides, in relevant part: "[a]ny claimed MCI or individual apartment improvement cost must be supported by adequate documentation which should include at least (emphasis added) one of the following:

(1) Cancelled check[s] contemporaneous with the completion of the work;

(2) Invoice receipt marked paid in full contemporaneous with the completion of the work;

(3) Signed contractor agreement;

(4) Contractor's affidavit indicating that the installation was completed and paid in full. Whenever it is found that a claimed cost warrants further inquiry, the processor mayrequest that the owner provide additional documentation. . . . Where proof is not adequately substantiated, the difference of the claimed cost and the substantiated cost will be disallowed."

At trial, petitioner failed to prove by a preponderance of the evidence that it was entitled to an IAI 1/40th rent increase pursuant to RSC § 2522.4[a][1] following the departure of Ms. Cruz. The only testimony proffered was through the property manager, Mr. Singer, who testified that walls were ripped down and replaced, new equipment was installed such as new pipes, parquet floors, appliances and tub. Mr. Singer testified that he supervised the alleged renovations. Surprisingly, no testimony was proffered as to the condition of the apartment prior to or after the vacatur of Ms. Cruz on which the court could assess the nature of the claimed improvements. PWV Acquisition v. Toscano, 2005 NY Slip Op. 51870[U].

To bolster petitioner's claim for an IAI increase, Mr. Singer produced two cancelled checks for services allegedly performed in the premises. One check dated September 7, 2004 was made out to Genco Construction for $4,000.00 (Pet. Exh. 10A) and the second check dated September 22, 2004 was made out to Feldman Lumber for $3,528.94. (Pet. Exh. 10B.) However, neither check contained any indicia tying the payments to work performed in the subject apartment, or, even that such payments were paid for work performed in other apartments in the same building.

Testimony elicited during trial from Ms. Cruz cast further doubt on petitioner's claims that IAI improvements were undertaken in the subject premises following Ms. Cruz' vacatur and prior to the tenancy of Pilgrim Realty. Mr. Singer testified that the renovations to the subject apartment were performed after Ms. Cruz vacated the premises in July 2004, and before the new tenant Pilgrim Realty took possession of the premises in September 2004. However, Ms. Cruz, who was a disinterested witness, credibly testified that she vacated the subject apartment with her family in late October 2004 when she moved into her new apartment. Ms. Cruz also testified that no work had been performed in her apartment during the months of July, August, September and October of 2004. Ms. Cruz further testified that there were leaks and vermin infestation in her apartment when she returned the keys to petitioner. The court credits Ms. Cruz' testimony. Petitioner's claim that the apartment was renovated during the months of July 2004 and August 2004, therefore, could not have been possible.

Ms. Cruz missed two days of work to testify on respondents' behalf.

At the hearing, petitioner failed to rebut the presumption of willfulness vis Á vis its claim for an IAI rent increase. In particular, petitioner was unable to offer additional proof to link the cancelled checks to payments made for the alleged renovations in the subject premises. Remarkably, petitioner did not seek to introduce any invoices marked paid in full contemporaneous with the work allegedly performed. DHCR Policy Statement 90-10. Nor did petitioner produce any signed agreement with either contractor (Genco Construction or Feldman Lumber) tending to prove the nature of the work performed or the type of supplies purchased for use in the subject apartment. Id. Nor did petitioner introduce into evidence any affidavit by Genco Construction to indicate installation was completed, and paid in full. Id. In fact, petitioner did not offer any testimony or affidavit from anyone associated with Genco Construction or Feldman Lumber (or from any other contractor) who was involved in the alleged work in the premises.

Petitioner's failure to provide specific adequate documentation (receipts, leases, invoices, etc.) in support of its claimed IAI 1/40th increase, is fatal. Matter of 985 Fifth Avenue Inc. v. DHCR, 171 AD2d 572 (1st Dept 1991); Matter of Charles Birdoff Co., v. DHCR, 204 AD2d 630 (2nd Dept 1994); PWV Acquisition v. Toscano, 2005 NY Slip Op. 51870[U]; cf. Jemrock Realty Co. LLC., v. Krugman , 18 Misc 3d 15 (A.T.1 2007); DHCR Policy Statement 90-10.

The vague and conclusory nature of Mr. Singer's testimony, petitioner's inability to provide credible evidence linking the proffered cancelled checks to payments for work performed in the subject premises, the credible and disinterested testimony of Ms. Cruz as to her vacatur date, coupled with petitioner's failure to enter into evidence any receipts, leases, or invoices or other credible evidence whatsoever to support its assertion that work was performed in the premises, mandate imposition of treble damages.

At respondents' request, the court took judicial notice of the decision in DHPD v. 1805-1815 University Avenue Assocs. L.P., N.Y.L.J. Mar. 5, 1997 p. 27, c. 3 (Civ.Ct. Bx Co.) which charged Mr. Singer with civil penalties after falsely filing 11 sworn Certifications of Correction of Violation.

At the hearing for treble damages, attorneys' fees and interest, Mr. Singer was not permitted to relitigate issues already resolved at trial by offering duplicative testimony concerning the nature of the work performed in the subject premises. Petitioner had been afforded ample opportunity to present testimony concerning the nature of the renovations during the trial phase of these proceedings. This hearing was held to afford petitioner an opportunity to rebut the presumption of willfullness of the rent overcharge finding.

Petitioner's Failure to Establish the Pilgrim Realty Tenancy

At the trial and at the hearing, petitioner was unable to establish the existence of the tenancy of an entity denominated as Pilgrim Realty whom petitioner claimed moved into the subject apartment in September 2004 following the alleged renovations of the apartment, and whose purported tenancy immediately preceded the commencement of respondents' tenancy. Notably, no lease agreement between petitioner and Pilgrim Realty was ever admitted tending to indicate that an actual tenancy existed, nor was petitioner able to testify as to any specific details concerning the nature of such tenancy. In fact, Mr. Singer reluctantly conceded that he could not identify the name of any person who lived in the subject apartment for the duration of the alleged tenancy of Pilgrim Realty. Petitioner's failure to do so is troubling. Imposition of treble damages is warranted.

Based on the preponderance of the credible evidence, petitioner has failed to rebut the presumption of willfulness arising from the overcharge as follows:

Respondents are awarded treble damages in the sum of $13,338.00.

Attorneys Fees

As respondents are the prevailing parties in this proceeding pursuant to the parties' lease agreement containing an attorneys fees provision, they are entitled to an award of reasonable attorneys fees pursuant to Real Property Law § 234.

The standard of review for determination of reasonable legal fees in a particular case depends on the difficulty of the issues and the skill required to resolve them; the attorney's experience, ability and reputation; the time and labor required; the amount involved and the benefit resulting to the clients from the services; the customary fees charged for similar services; the contingency or certainty of compensation; the results obtained and the responsibility involved. Morgan Finnegan v. Howe Chemical Company, 210 AD2d 62 (1st Dept 1994). Actual payment of fees is not a condition precedent to the recovery of fees. Senfeld v. I.S.T.A. Holding Co., 235 AD2d 345 (1st Dept 1987), lv. den. 91 NY2d 956 (1998). The computation of a reasonable fee must take into account all relevant factors, including the nature, extent and necessity of services rendered, time spent and professional standing of counsel. Hudson Towers Associates v. Rubackin, N.Y.L.J. Nov. 26, 1999 p. 28, c. 6 (A.T. 1). In making such an evaluation, the court itself is an expert and may make an independent judgment of the reasonable value of an attorney's services. Rahmey v. Blum, 95 AD2d 294 (2nd Dept 1983); Solow v. Wellner, 150 Misc 2d 642 (Civ.Ct. NY Co. 1991). While specific evidence of billing practices during the relevant time period generally should be submitted for the court's review, public interest attorneys who do not work for a fee need not submit evidence in this regard due to the nature of their practice. National Assn of Concerned Veterans v. Secretary of Defense, 675 F.2d 1319 (D.C. Cir. 1982).

At the hearing, Gabriel BenÍtez of Legal Services for New York City — Bronx ("LSNY") testified as to his background and experience. Mr. BenÍtez graduated from Columbia University Law School in May 2005. He passed the New York State Bar Examination in February 2006, but has not been admitted to the New York bar. Prior to his employment with LSNY in September 2006, Mr. BenÍtez worked with the Puerto Rican Legal Defense Fund ("PRLDF") on civil rights litigation. At PRLDF, Mr. BenÍtez was responsible for contacting and preparing witnesses for depositions, performing legal research, and filing of motions. Mr. BenÍtez testified that he was billed out at $100.00 per hour. Mr. BenÍtez testified that he performed the following duties in the within proceeding: initial consultation and discussion of possible defenses with respondents and his supervising attorney; filing of motion to vacate the respondents' pro se stipulation of settlement; review of petitioner's opposition, and preparation of reply papers; preparation for and oral argument on the motion to vacate; preparation of the notice of entry; filing of an amended answer; preparation for trial including conducting research, witness interviews and trial preparation, preparation and settlement of a discovery motion, research and drafting of post-trial memoranda of law.

Mr. BenÍtez introduced an accounting of the hours he worked. He testified that he used LSNY's KEMP timekeeping system which records time based on increments of 15 minutes (.25), and that he made several notations of the hours spent on the respondents' case when he returned to his office at the end of each day. (Resp. Exh. AA.) Notations included specifics such as preparation of respondents' order to show cause, review of petitioner's opposition papers, preparation of reply papers, submission dates, adjournments, oral argument; filing of the notice of entry and amended answer; preparation of respondents' motion for discovery, filing and settlement therein; trial preparation; trial time; research and drafting of post trial brief; decision and filing of notice of entry. Mr. BenÍtez testified that he spent 125.75 hours on respondents' case.

Mr. Jonathan Levy testified as to his background and experience. He testified that he is a 1996 graduate of Minnesota Law School and has been exclusively practicing law in Housing Court since April 1997, first for Bronx Legal Services, and now for LSNY-Bronx. He served as a Housing Litigation Specialist from 2004 to June 2007, and currently is the Interim Deputy Supervisor of the Housing Unit of LSNY-Bronx. He is responsible for supervising seven attorneys. He is a seasoned, well-regarded trial attorney having tried over three dozen trials in Housing Court and in Supreme Court. Mr. Levy testified that he is in Housing Court on average of four to six cases a day and speaks to many attorneys and staff regarding pending cases throughout the day.

Mr. Levy introduced an accounting of the hours he worked on the instant lititgation. He testified that he used LSNY's KEMP timekeeping system and spent 9 hours in his role as supervising attorney to Mr. BenÍtez; seven of the nine hours were spent at trial. (Resp. Exh. BB.)

Mr. Levy called Eric Torres as a witness. Mr. Torres testified that he is a 2000 graduate of CUNY Law School — Queens, he was admitted to the New York Bar in October 2001, and has been in practice for seven years. He testified that he worked for LSNY-Bronx with Mr. Levy for approximately four years. Mr. Torres testified that he is currently in private practice representing tenants, and that 99% of his practice is in Housing Court. Mr. Torres testified that when he first began practicing in Housing Court, he billed his clients at $150.00 to $200.00 per hour; if he were supervising a junior attorney, he would bill his clients at $275.00 per hour. He further testified that his average billing rate is $225.00 an hour, and that his rate has remained unchanged for the last two years. He testified that a billing rate of $275.00 an hour is a reasonable rate for an attorney with 10 or more years experience.

Mary Beth Hotaling testified for the petitioner. She is a 1983 law graduate of New York Law School and was admitted to the New York Bar in May 1984. She became a partner in her firm, Cohen Hurkin Ehrenfeld Pomerantz Tenenbaum, LLP in 2001 and she has practiced primarily in the area of landlord-tenant law. The firm has 10 attorneys: four are partners and six are associates. Ms. Hotaling's responsibilities include supervising attorneys, paralegals, staff, and collection of fees as well as establishing fee policies for the firm. Ms. Hotaling testified that she represents both large management companies and small landlords. She testified that based on the market demands, a client may choose to pay on a case-by-case basis or on a retainer fee basis. In the former, the client is charged a flat rate of $1,500.00 per case, which includes any and all time spent at trial. In the latter, the client may pay a retainer fee of $100,000.00 which entitles the client to have the firm commence a certain number of cases. Ms. Hotaling testified that her firm charges an average flat fee of $270.00 to $660.00 for nonpayment proceedings commenced in Bronx Housing Court including trial, and $600.00 is the average flat fee for nonpayment proceedings in the Bronx including trial. Ms. Hotaling testified that her firm files approximately 650 to 1000 nonpayment cases a month.

Based on the testimonial and documentary evidence, the court's evaluation of the nature and complexity of the issues, the time and labor required by such issues, and the court's own observation of the ability, skill and quality of representation demonstrated by Mr. BenÍtez, as well as the results achieved on behalf of the respondents, the court finds that a billing rate of $100.00 an hour is quite reasonable for Mr. BenÍtez' work in this litigation. Although Mr. BenÍtez seeks reimbursement of 125.75 hours of work, the court reduces that amount to 95 hours after taking into account that Mr. BenÍtez spent more time on some tasks than one would expect based on the nature of the tasks involved (e.g., filing of notice of entry), the nature of LSNY's billing system requiring billing in 15-minute increments, as well as some expected inefficiencies in and out of court. The court notes that the lack of detail in some of Mr. BenÍtez' accounting (which was supplemented by testimony) does not bar recovery of attorneys fees herein in light of the nature of the public interest practice of LSNY. The court also credits the testimony of Mr. Torres regarding $200.00 to $225.00 as the prevailing hourly rate charged by housing court practitioners with approximately seven to ten years of experience. Therefore, Mr. Levy's request for attorneys fees at $200.00 an hour is reasonable, and nine hours of time (seven of which comprised the trial proceedings) is not excessive.

The court finds that while Ms. Hotaling testified as to the general billing practices of her firm, she did not provide specific testimony as to the billing and fee arrangement that she had with petitioner 1097 Holding for this proceeding. Petitioner also failed to call any disinterested witness to testify as to the billing rates and fee arrangements allegedly charged in the community.

Based on the foregoing, the court awards reasonable attorneys fees in the amount of $11,300.00 calculated as follows: $9,500.00 in fees for Mr. BenÍtez' work ($100.00 per hour x 95 hours) and $1,800.00 in fees for Mr. Levy's work ($200.00 x 9 hours).

Accordingly, the clerk of the court shall enter a money judgment in favor of respondents and against petitioner in the sum of $13,338.60 on their rent overcharge counterclaim. The clerk of the court also shall enter a money judgment in favor of respondents' attorneys and against petitioner in the sum of $11,300.00 representing reasonable attorneys fees.

This constitutes the decision and order of this court.