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Dixon v. 105 West 75th Street LLC

Supreme Court of New York, First Department

March 30, 2017

Benjamin Dixon, Plaintiff-Appellant,
105 West 75th Street LLC, et al., Defendants-Respondents.

          Moira C. Brennan, New York, for appellant.

          Kucker & Bruh, LLP, New York (Robert H. Berman of counsel), for respondents.

          Acosta, J.P., Mazzarelli, Manzanet-Daniels, Webber, Gesmer, JJ.

         Orders, Supreme Court, New York County (Manuel J. Mendez, J.), entered April 13, 2015 and August 11, 2015, which, respectively, granted the landlord defendants' (landlord) motion to dismiss the complaint against them and for an award of attorneys' fees and costs, and, to the extent appealed from as limited by the briefs, denied plaintiff's motion to renew, modified, on the law, to declare that the apartment at issue is a legal apartment and no longer subject to rent stabilization, and to deny the motion for legal fees and costs, and otherwise affirmed, without costs.

         The complaint in this case alleges that apartment 5B in the subject building, for which plaintiff has been charged market rent since he entered into a one year lease in May 2013, is subject to rent stabilization. The tenant who immediately preceded plaintiff also paid market rent. Prior to that, the apartment was registered with DHCR, with a legal regulated rent of $1, 117.42 per month as of July 31, 2002, when, according to DHCR rent records, the apartment became vacant. Landlord asserts that it purposely kept the apartment vacant at that time, waiting until the apartment next door, 5A, also became vacant. When 5A became vacant, landlord commenced a project to add a penthouse to the building and connect it to 5A and 5B, thus creating twin duplex apartments. When plaintiff inquired as to why he was being charged market rate, given the regulated status of the apartment as of July 31, 2002, landlord informed him that the project to convert the unit to a duplex substantially changed the physical character of the apartment so as to entitle landlord to charge a market rate "first rent." Alternatively, landlord informed plaintiff, the costs of the renovation to the apartment were such that, applying one-fortieth of them to the regulated rent as allowed by the Rent Stabilization Code, brought the rent above the threshold necessary to permit high rent vacancy deregulation.

         The complaint alleged that landlord was not entitled to first rent for the apartment because, after the conversion to a duplex, the apartment retained the same number of rooms and bathrooms, the same kitchen, plumbing and heating system and electrical wiring, the same amount of useable square footage, and because there was no substantial increase or decrease in the outer perimeter of the apartment. Plaintiff further asserted that landlord did not obtain proper approvals for the renovation until three years after it began charging market rent, and fraudulently obtained a new certificate of occupancy for the building. Plaintiff also alleged that landlord did not expend sufficient funds on individual apartment improvements to justify an increase in the legal regulated rent warranting high rent vacancy deregulation; and that the majority of the work performed in the apartment consisted of repairs and maintenance, which did not qualify as individual apartment improvements under the Code. The first cause of action in the complaint sought a declaratory judgment that the apartment was illegal and that plaintiff had no obligation to pay rent. The second cause of action requested an injunction directing landlord to legalize the apartment. The third cause of action was for a declaratory judgment that the apartment was subject to rent stabilization. The fourth cause of action sought lease reformation and an injunction barring landlord from collecting rent in excess of the lawful stabilized rent. The fifth cause of action sought monetary damages for rent overcharges; and the sixth cause of action requested reimbursement of plaintiff's attorneys' fees and costs.

         Landlord moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (7), and for an award of legal fees and costs. In a supporting affidavit, defendant Nunzio Ruggiero, a principal of defendant 105 West 75th Street LLC, explained that after apartment 5A became vacant in September 2003, landlord decided to create an addition on the roof of the building to create two duplex apartments out of apartments 5A and 5B. An architect prepared plans, which were filed and approved by the Department of Buildings and the Landmarks Preservation Commission. A permit was issued for the new penthouse on the existing roof to be connected to the renovated apartments on the fourth floor of the building, where apartments 5A and 5B were located. In 2003 and early 2004, John & Joseph Bonanno Construction & Development Corp. (Bonanno) constructed the penthouse enclosure and connected it to the apartments, which were also renovated.

         Ruggiero attached to his affidavit work permits issued by the DOB in 2003 and 2004 for the renovation of apartments 5A and 5B, including the installation of new bathrooms and kitchens, and a staircase to connect to a new penthouse on the existing roof. Ruggiero also attached an invoice from Bonanno dated September 7, 2004, which described the work to be performed, including framing a new penthouse on the roof and a new bathroom, and negotiated checks from January 6, 2003 through September 7, 2004 to Bonanno totaling $184, 000, which was exactly the amount on the invoice. In addition, Ruggiero attached to his affidavit an invoice dated February 11, 2004 from Vin-Ray Plumbing & Heating Co. for $25, 000, along with checks totaling that amount, indicating that plumbing work was performed in various areas, including the penthouse floor.

         In opposition, plaintiff submitted an affidavit in which he asserted that he was the senior cost manager at a global consultancy company that offered a range of services to the construction and property industry, was a member of the Construction Financial Management Association, and a chartered surveyor. Based on that experience, he opined that the rooftop structure was different from the structure in the approved plans, because the plans permitted a penthouse covering 18 feet of the roof, but the actual structure covered 35 feet, and the work was to be performed on apartments 4A and 4B, not 5B.

         Plaintiff stated that contrary to industry practice, the construction contract did not detail the scope of work or break out the costs for each element of the work, the Bonanno invoice was not marked "paid in full, " some of the services listed on the invoice could not be verified, and only three of the checks were paid on or after the date of the invoice. Plaintiff opined that, based on his professional experience and expertise, landlord did not spend $100, 000 on renovations to the apartment.

         In reply, landlord submitted the affidavits of tenants who occupied apartments 5A and 5B before the penthouse was added. The prior occupant of 5B averred that during her residency the premises she occupied consisted of a one-bedroom apartment on the top floor of the five-story building, with nothing above the apartment except for the roof. The former occupant of 5A stated that in 2002, when 5B became vacant, Ruggiero asked him to relocate so that a penthouse addition could be constructed on the roof, making 5A and 5B duplexes, and he agreed to move. He further asserted that the two penthouses on the roof, which did not previously exist, were constructed and connected to the apartments with internal staircases, increasing the size of each apartment.

         Supreme Court granted landlord's motion to dismiss the complaint, and ordered an inquest as to the amount of reasonable costs and attorneys' fees incurred by landlord in defending the action. The court determined that the documentary evidence submitted by landlord refuted the allegations of the complaint and showed that the apartment was vacant prior to the renovations and that a newly created duplex apartment was constructed, which did not exist previously. The court found that the 2002 certificate of occupancy for the building showed that the building did not include rooftop living space, and that the work permits and subsequent certificates of occupancy demonstrated that additional living space was constructed, entitling landlord to "first rent, " without rent stabilization restrictions. The court further found that the invoices and checks payable to Bonnano and the plumbing contractor showed that landlord spent approximately $200, 000 for the renovation, which also entitled it to increase the rent by one-fortieth of the cost per apartment. The court noted that this increased the legal rent to well over $2, 000 per month, the threshold amount required to remove an apartment from rent stabilization. Finally, the court awarded landlord its legal fees and expenses pursuant to a provision in the lease that requires plaintiff to reimburse landlord's "legal fees and disbursements for legal actions or proceedings brought by [landlord] against [plaintiff] because of a Lease default by [plaintiff] or for defending lawsuits brought against [plaintiff] because of [plaintiff's] actions."

         Plaintiff moved to renew and reargue. He asserted that the court did not properly credit his expert affidavit, that a financial statement of landlord's failed to establish an expenditure of $200, 000 on major capital improvements or renovation, and that the DOB had received complaints about, and issued violations concerning, the penthouse. The court denied the motion, finding that none of the evidence presented on the motion was newly discovered, nor did plaintiff establish that the court misapprehended or overlooked any issue of fact or law.

         Dismissal of a complaint pursuant to CPLR 3211(a)(1) is only appropriate where the documentary evidence presented conclusively establishes a defense to the plaintiff's claims as a matter of law (Leon v Martinez, 84 N.Y.2d 83, 88 [1994]). The documents submitted must be explicit and unambiguous (see Bronxville Knolls v Webster Town Ctr. Partnership, 221 A.D.2d 248, 248 [1st Dept 1995]). In considering the documents offered by the movant to negate the claims in the complaint, a court must adhere to the concept that the allegations in the complaint are presumed to be true, and that the pleading is entitled to all reasonable inferences (see Leon, 84 N.Y.2d at 87-88). However, while the pleading is to be liberally construed, the court is not required to accept as true factual allegations that are plainly contradicted by documentary evidence (Robinson v Robinson, 303 A.D.2d 234, 235 [1st Dept 2003]).

         The documentary evidence submitted by landlord was designed to refute plaintiff's claim that the conversion of the apartment into a duplex did not meet the criteria for first rent or high rent vacancy deregulation. A landlord may charge first rent, pursuant to the Rent Stabilization Code, where the landlord "substantially alters the outer dimensions of a vacant housing accommodation, which qualifies for a first rent equal to or exceeding the applicable amount qualifying for deregulation" (9 NYCRR 2520.11[r][12]) which in this case, was $2, 000 or more per month" (9 NYCRR 2520.11[r][4]). Stated somewhat differently, first rent is permitted "when the perimeter walls of the apartment have been substantially moved and changed and where the previous apartment, essentially, ceases to exist, thereby rendering its rental history meaningless" (Matter of 300 W. 49th St. Assoc. v New York State Div. of Hous. & Community Renewal, Off. of Rent Admin., 212 A.D.2d 250, 253 [1st Dept 1995]). This Court has described the test for whether alterations qualify for first rent as "reconfiguration plus ...

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