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In re Perez

New York Court of Appeals

February 14, 2013

In the Matter of Jacqueline Perez, Respondent.
John B. Rhea, & c., Appellant.

Seth E. Kramer, for appellant.

Marc Sackin, for respondent.

Housing Court Answers, Inc., amicus curiae.



The question presented by this case is whether the New York City Housing Authority's termination of petitioner's tenancy was, in light of the circumstances, so disproportionate to her misconduct as to shock the judicial conscience, thereby constituting an abuse of discretion as a matter of law (see generally Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 N.Y.2d 222, 233 [1974]; Matter of Featherstone v Franco, 95 N.Y.2d 550, 554 [2000]). We hold that it was not.

Petitioner is a tenant in a New York City Housing Authority ("NYCHA") public housing apartment in Manhattan. In the late 1990s, she became employed, for the first time, as a bookkeeper. She failed to disclose her new earnings to her landlord, each year stating in an affidavit of income that she did not work. This omission allowed petitioner to pay a substantially lower rent than she would have had she revealed the income.

When NYCHA officials discovered the misrepresentation, the matter was referred to its Office of Inspector General. In December 2006 petitioner was charged criminally with grand larceny in the third degree and offering a false instrument for filing in the first degree, for failing to report her income, "thereby causing NYCHA to be defrauded of $27, 144.00." In July 2008, petitioner pleaded guilty to a reduced charge of petit larceny and received a conditional discharge, upon her agreement to pay restitution to NYCHA in monthly installments totaling $20, 000.

Thereafter, NYCHA sought to terminate petitioner's tenancy, on the grounds of non-desirability, misrepresentation, non-verifiable income, and breach of rules and regulations. In hearings in the spring of 2009, petitioner admitted that at the time she failed to report her employment, she had been aware that her rent was based on income. She also testified that her three children, two of whom have learning disabilities, live with her, and that she needed a larger home for her family, but could not afford to rent one.

The Hearing Officer ruled that, despite "[t]he plight of the family, " termination of petitioner's tenancy was "the only appropriate disposition." Petitioner, the Hearing Officer reasoned, had given no explanation for her misrepresentations that might tend to "show that she did not intend to defraud NYCHA." The Hearing Officer concluded that "[a]n individual who through misrepresentation obtains from the tax-paying public a greater subsidy than that to which she is entitled is not eligible for tenancy." NYCHA approved the Hearing Officer's decision and ordered that petitioner's tenancy be terminated.

Petitioner then commenced this article 78 proceeding, challenging that determination. She contended that the penalty of termination was so harsh as to constitute an abuse of discretion as a matter of law. For the first time, petitioner claimed that eviction might leave her homeless. She included documentary evidence concerning her sons' learning disabilities and the negative impact on their schooling should the family be forced to move to a homeless shelter.

Supreme Court confirmed NYCHA's determination, denied the article 78 petition, and dismissed the proceeding, holding that "termination is appropriate when the tenant conceals a large amount of income over an extended period causing a substantial rent underpayment, even if a child is part of the household."

The Appellate Division reversed Supreme Court's judgment, granted the article 78 petition to the extent of vacating the penalty of termination, and remanded the matter to NYCHA for the imposition of a lesser penalty (87 A.D.3d 476 [1st Dept 2011]). It concluded that termination of tenancy was so disproportionate to the offense, in the light of all the circumstances, as to shock the judicial conscience. The court stated that "forfeiture of public housing accommodations is a drastic penalty because, for many of its residents, it constitutes a tenancy of last resort" (87 A.D.3d at 479, quoting Matter of Holiday v Franco, 268 A.D.2d 138, 142 [1st Dept 2000]).

One Justice dissented, reasoning that "[i]n accordance with her plea agreement, petitioner was required to repay only $20, 000 of the more than $27, 000 in rent that she avoided paying, which amounts to no penalty at all. If defrauding a governmental agency incurs no adverse consequence, others will be encouraged to engage in similar fraudulent conduct — hardly an ...

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