The opinion
Matter of 559 W. 156 BCR LLC v New York State
Div. of Hous. & Community Renewal
2025 NY Slip Op 30797(U)
March 11, 2025
Supreme Court, New York County
Docket Number: Index No. 157604/2024
Judge: Lyle E. Frank
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
Op 30001(U), are republished from various New York
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publication.
INDEX NO. 157604/2024
NYSCEF DOC. NO. 49 RECEIVED NYSCEF: 03/11/2025
SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY
PRESENT: HON. LYLE E. FRANK PART 11M
Justice
---------------------------------------------------------------------------------X INDEX NO. 157604/2024
IN THE MATTER OF THE APPLICATION OF 559 WEST
156 BCR LLC, 08/19/2024,
MOTION DATE 01/16/2025
Plaintiff,
MOTION SEQ. NO. 001 002
-v-
NEW YORK STATE DIVISION OF HOUSING AND
DECISION + ORDER ON
COMMUNITY RENEWAL,
MOTION
Defendant.
---------------------------------------------------------------------------------X
The following e-filed documents, listed by NYSCEF document number (Motion 001) 2, 10, 11, 12, 13, 14,
15, 16, 17, 18, 19, 20, 21, 22, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38
were read on this motion to/for ARTICLE 78 (BODY OR OFFICER) .
The following e-filed documents, listed by NYSCEF document number (Motion 002) 39, 40, 41, 42, 43,
44, 45, 46, 47
were read on this motion to/for PARTIES - ADD/SUBSTITUTE/INTERVENE .
Upon the foregoing documents, the petition is denied and the motion to intervene is
moot.1
Background
559 West 156 BCR LLC (“Petitioner”) brings the instant petition seeking to challenge a
decision made by the New York State Division of Housing and Community Renewal (“DHCR”)
as arbitrary and capricious. Petitioner seeks an order reversing the decision or in the alternative,
remanding it back to DHCR. In 2007, the occupants of a rent-controlled apartment in a building
located at 559 West 156th Street, Manuel Martinez and Amelia Martinez (the “Martinez
Parents”), signed an agreement to move out of their rent-controlled unit into a smaller unit in the
1
The Court would like to thank Mingyue Deng and Lingyi Yang for their assistance in this matter.
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same building. The same monthly rent of $541 was to apply to the new unit. Moving with the
Martinez Parents was their daughter, Margarita Martinez (“Proposed Intervenor”). Mrs. Martinez
passed away in late 2013 or early 2014, shortly before Petitioner purchased the building, and Mr.
Martinez passed away in June 2016. The Proposed Intervenor requested a lease renewal in her
name only, which was denied.
In August of 2016, the Proposed Intervenor filed a Failure to Renew Lease complaint
with DHCR. She asserts that her parents did not voluntarily surrender their first apartment
because they did not speak English and did not understand the terms when signing the new lease
agreement. The Rent Administrator issued an order, based on the language of the agreement
itself, determining that the Martinez Parents had voluntarily vacated their apartment and
therefore did not retain their rent-controlled status in the new unit. The Proposed Intervenor
appealed that decision and filed a Petition for Administrative Review (“PAR”) which was
denied. The Proposed Intervenor then filed the first of what would become three Article 78
petitions on this matter challenging the denial (the “Justice Edmead Decision”). The Justice
Edmead Decision remanded the matter back to DHCR for further proceedings in order to
conduct “a factual inquiry with respect to Martinez’s parents 2007 surrender” instead of relying
solely on the terms in the surrender agreement. In 2022, DHCR reopened the case, assigned a
new docket number, and notified the parties that the matter was under renewed consideration.
The outcome of that was a DHCR decision, based on the record before the original Rent
Administrator, granting the PAR in favor of the Proposed Intervenor and overturning the original
Rent Administrator’s decision.
The outcome of the new DHR decision was a determination that the 2007 surrender had
not been wholly voluntary under the test laid out in Capone v. Weaver, and therefore the
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Martinez Parents had retained their rent-controlled status, and the Proposed Intervenor had
succession rights. In response to this, Petitioner filed the second Article 78 petition (the “Justice
Ally Decision”). The Justice Ally Decision again remitted the matter back to DHCR, for “further
fact-finding and determination” beyond the record that had been before the original Rent
Administrator. Pursuant to this order, DHCR notified the parties that a new docket number was
being generated for the matter and that the PAR order would be reconsidered. Both sides were
asked to submit comments on the factual circumstances of the 2007 surrender. The Proposed
Intervenor submitted an affidavit and a lease extension rider, and Petitioner responded to these
submissions before DHCR. The DHCR Deputy Commissioner issued final order (the
“Challenged Order”) in June of 2024, reaffirming the decision that the Martinez Parents retained
their rent-controlled status in the new unit and the Proposed Intervenor had succession rights.
They noted that “given the sufficiency of the written evidentiary record […] a hearing is not
necessary to determine this matter.” Petitioner brings the present petition challenging this
decision. DHCR opposes, and the Proposed Intervenor has moved to intervene as an interested
party.
Standard of Review
Article 78 review is permitted, where a determination was made that “was arbitrary
and capricious or an abuse of discretion, including abuse of discretion as to the measure or mode
of penalty or discipline imposed.” CPLR § 7803(3). Arbitrary for the purpose of the statute is
interpreted as when an action “is without sound basis in reason and is taken without regard to the
facts.” Pell v. Board of Education, 34 NY2d 222, 231 (1974). “Rationality is what is reviewed
under both the substantial evidence rule and the arbitrary and capricious standard.” Id.
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If the court reviewing the determination finds that “[the determination] is supported by
facts or reasonable inferences that can be drawn from the records and has a rational basis in law,
it must be confirmed.” American Telephone & Telegraph v. State Tax Comm’n, 61 NY2d 393,
400 (1984). It is well established that the court should not disturb an administrative body’s
determination once it has been established that the decision is rational. See Matter of Sullivan
Cnty. Harness Racing Ass’n, Inc. v. Glasser, 30 NY2d 269, 277-78 (1972); Presidents’ Council
of Trade Waste Ass’ns v. New York, 159 AD2d 428, 430 (1st Dept 1990).
Discussion
Petitioner argues that the Challenged Order must be remanded to DHCR for three
reasons: 1) that the determination that the Martinez Parents retained their rent-controlled status in
the new unit was arbitrary and capricious; 2) that there were new issues and/or allegations raised
in the PAR that are not reviewable; and 3) that the decision not to hold a hearing on the
Challenged Order was arbitrary and capricious. For the reasons that follow, Petitioner fails to
establish that the DHCR decision was arbitrary and capricious and therefore the decision will not
be disturbed.
The Rent-Controlled Transfer Decision Was Rationally Not Wholly Voluntary and Therefore
DHCR’s Decision Not Arbitrary and Capricious
Petitioner argues that the Challenged Decision is arbitrary and capricious because there
was no proof that the Martinez Parents did not enter into the 2007 transfer agreement willingly
for consideration. They argue that the agreement benefited both parties and cite to the terms of
the agreement itself as an indication that the Martinez Parents were fully informed. DHCR
argues that their decision was rationally based on the case law following the Capone case. In
Capone, the Court of Appeals addressed transfers from a rent-controlled apartment, holding that
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a tenant transferring apartments does not lose rent-controlled status unless the transfer was
“wholly voluntary.” Capone v. Weaver, 6 N.Y.2d 307, 310 (1959). Subsequent courts have
interpreted Capone as meaning that a tenant’s rent-controlled status transfers to the new unit
when the move is initiated by the landlord and the landlord benefits from the transfer. 91 Real
Estate Assoc. LLC v. Eskin, 46 Misc. 3d 40, 41 (1st Dept. 2014); see also Saad v. Elmuza, 12
Misc. 3d 57, 59 (2nd Dept. 2006). It is not disputed that the 2007 transfer agreement was initiated
by the landlord, nor that the landlord derived some benefit from the transfer. Furthermore, under
the N.Y. Comp. Codes R. & Regs. tit. 9 § 2200.15, “[a]n agreement by the tenant to waive the
benefit of any provision of the Rent Law or these regulations is void.” DHCR’s decision cannot
be said to be irrational or without a basis in law, and therefore is not arbitrary and capricious.
DHCR Was Permitted to Consider Facts and Evidence Not Before the Rent Administrator
Petitioner argues that DHCR was not permitted to consider any facts and evidence, such
as the Proposed Intervenor’s affidavit, that was not before the original rent administrator. DHCR
points to the explicit language in both remand orders telling DHCR to consider additional facts
and evidence relating to the surrounding circumstances of the 2007 transfer agreement, and not
simply the language of the agreement itself as the rent administrator did. Under title 9 section
2529.6 of the N.Y. Comp. Codes R. & Regs., review is “limited to facts and evidence before a
rent administrator as raised in the petition.” Petitioner cites to this provision as meaning that
when remanded for new factual inquiry, the review was required to start with a rent administrator
before DHCR could review and make a determination. But the same provision continues to state
that “[p]roceedings remanded back to the DHCR following an Article 78 may be reconsidered, at
the discretion of the commissioner, without being remanded to the rent administrator.” DHCR
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was within their discretion to conduct the new factual inquiry as directed by two courts
themselves, without remanding first back to a rent administrator.
DHCR Was Not Required to Hold an Oral Hearing
Petitioner argues that because the two Article 78 orders told DHCR to conduct further
factual inquiry, an oral hearing was necessary and the failure to hold one was arbitrary and
capricious. DHCR argues that the paper factual inquiry, wherein both parties were asked to and
did in fact submit papers, arguments, and facts, was sufficient and that an in-person hearing was
not necessary. An evidentiary hearing is not required for a DHCR decision to be supported by
the evidentiary record. Manko v. N.Y. State Div. of Hous. & Cmty. Renewal, 88 A.D.3d 719, 721
(2nd Dept. 2011); see also Matter of DeSilva v. New York State Div. of Hous. & Community
Renewal Off. Of Rent Admin., 34 A.D.3d 673, 674 (2nd Dept. 2006). It was not arbitrary and
capricious for DHCR to make a factual finding from the paper record that both parties created,
without holding an in-person hearing. Ultimately, Petitioner has failed to meet the heavy burden
of showing that the challenged DHCR decision was arbitrary and capricious, and therefore the
petition must be denied. Because the petition is denied, the motion to intervene by Ms. Martinez
is moot. Accordingly, it is hereby
ADJUDGED that the petition is denied; and it is further
ADJUDGED that the motion to intervene is therefore moot.
3/11/2025
DATE LYLE E. FRANK, J.S.C.
CHECK ONE: X CASE DISPOSED NON-FINAL DISPOSITION
GRANTED X DENIED GRANTED IN PART OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
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YORK STATE DIVISION OF HOUSING AND COMMUNITY RENEWAL
Motion No. 001 002
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