Case Name: In the Matter of Paul Murphy, Respondent, v. New York State Division of Housing and Community Renewal, Appellant, et al., Respondent
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 2013-10-17
Citations: 21 N.Y.3d 649
Docket Number: 
Parties: In the Matter of Paul Murphy, Respondent, v New York State Division of Housing and Community Renewal, Appellant, et al., Respondent.
Judges: 
Reporter: New York Reports
Volume: 21
Pages: 649–664

Head Matter:
[999 NE2d 524, 977 NYS2d 161]
In the Matter of Paul Murphy, Respondent, v New York State Division of Housing and Community Renewal, Appellant, et al., Respondent.
Argued September 4, 2013;
decided October 17, 2013
POINTS OF COUNSEL
Eric T. Schneiderman, Attorney General, New York City (Brian A. Sutherland, Barbara D. Underwood and Steven C. Wu of counsel), for appellant.
I. Paul Murphy’s undisputed failure to meet the New York State Division of Housing and Community Renewal’s income-affidavit requirement supports the denial of his succession application. (Matter of Renda v New York State Div. of Hous. & Community Renewal, 22 AD3d 382; Matter of Miney v Donovan, 68 AD3d 876, 15 NY3d 712; Matter of Meyers v New York State Div. of Hous. & Community Renewal, 68 AD3d 1518, 14 NY3d 714; Matter of Cognata v New York State Div. of Hous. & Community Renewal, 82 AD3d 482; Taylor v New York State Div. of Hous. & Community Renewal, 73 AD3d 634; Matter of Greichel v New York State Div. of Hous. & Community Renewal, 39 AD3d 421; Parsa v State of New York, 64 NY2d 143; United States v Boyle, 469 US 241; Heckler v Community Health Services of Crawford Cty., Inc., 467 US 51; Matter of Gaines v New York State Div. of Hous. & Community Renewal, 90 NY2d 545.) II. Substantial evidence supports the New York State Division of Housing and Community Renewal’s rejection of Paul Murphy’s excuse. (Matter of State Div. of Human Rights [Granelle], 70 NY2d 100.)
Himmelstein, McConnell, Gribben, Donoghue & Joseph, New York City (David Hershey-Webb of counsel), for respondent.
I. The courts below properly construed the Mitchell-Lama succession regulations to require granting succession to a lifelong family member given the unique facts of this case. (Matter of Dworman v New York State Div. of Hous. & Community Renewal, 94 NY2d 359; Jenkins v Fieldbridge Assoc., LLC, 65 AD3d 169; Kuppersmith v Dowling, 93 NY2d 90; Kahn v New York City Dept. of Hous. Preserv. & Dev., 28 Misc 3d 1206[A], 2010 NY Slip Op 51197[U]; Matter of Meyers v New York State Div. of Hous. & Community Renewal, 68 AD3d 1518; Matter of Greichel v New York State Div. of Hous. & Community Renewal, 39 AD3d 421; Matter of Callwood v Cabrera, 49 AD3d 394; Matter of Gilbert v Perine, 52 AD3d 240; Matter of Cognata v New York State Div. of Hous. & Community Renewal, 2008 NY Slip Op 33595[U], 82 AD3d 482; Taylor v New York State Div. of Hous. & Community Renewal, 73 AD3d 634.) II. This Court has repeatedly rejected the mechanistic application of regulations which undermine the purpose of those regulations and compel absurd results. (Matter of Dworman v New York State Div. of Hous. & Community Renewal, 94 NY2d 359; Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off. of Rent Admin., 15 NY3d 358; Matter of Cintron v Calogero, 15 NY3d 347; Eastside Exhibition Corp. v 210 E. 86th St. Corp., 18 NY3d 617; Roberts v Tishman Speyer Props., L.P., 13 NY3d 270; Matter of Schorr v New York City Dept. of Hous. Preserv. & Dev., 10 NY3d 776.) III. The New York State Division of Housing and Community Renewal’s rejection of Paul Murphy’s explanation for failing to file an income affidavit lacked a rational basis.
Michael A. Cardozo, Corporation Counsel, New York City (Karen M. Griffin and Francis F. Caputo of counsel), for City of New York, amicus curiae.
The Appellate Division exceeded the bounds of proper judicial review when it ignored a specific, reasonable regulatory requirement for succession eligibility. (Kuppersmith v Dowling, 93 NY2d 90; Matter of Miney v Donovan, 68 AD3d 876, 15 NY3d 712; Matter of Schorr v New York City Dept. of Hous. Preserv. & Dev., 10 NY3d 776.)

Opinion:
OPINION OF THE COURT
Chief Judge Lippman.
This case arises from a determination of the Division of Housing and Community Renewal (DHCR) denying petitioner Paul Murphy (Murphy) succession rights to a Mitchell-Lama apartment. Because the evidence of Murphy's primary residency was overwhelming, and because there was no relationship between the tenant-of-record's failure to file the income affidavit and the succession applicant's income or occupancy, the agency's determination was arbitrary and capricious.
Murphy is a lifelong resident of an apartment in Southbridge Towers, a housing complex in Lower Manhattan operated under the Limited-Profit Housing Companies Law (Private Housing Finance Law art II [Mitchell-Lama]). Murphy moved into the apartment with his parents when he was one month old, in 1981, and extensive evidence demonstrates that he has continued to live in the apartment ever since. In January 2000, Murphy's parents vacated the apartment, and in 2004, Murphy filed a succession application to succeed to the tenancy.
Southbridge Towers rejected the application and DHCR subsequently denied Murphy's appeal. DHCR based its denial on the fáct that Murphy's mother, the tenant-of-record, had failed to file an annual income affidavit listing Murphy as a co-occupant for one of the two years prior to her vacatur in 2000. The agency considered this failure an absolute bar to Murphy's succession eligibility under its regulations. Murphy then filed the instant CPLR article 78 petition in Supreme Court challenging the agency's determination, and DHCR moved to dismiss the proceeding. Supreme Court denied DHCR's motion, annulled the agency's denial of Murphy's appeal, and granted his succession petition (29 Misc 3d 1213[A], 2010 NY Slip Op 51816[U] [2010]). The Appellate Division affirmed (91 AD3d 481 [1st Dept 2012]), and we granted DHCR's motion for leave to appeal (19 NY3d 812 [2012]).
" Tn reviewing an administrative agency determination, [courts] must ascertain whether there is a rational basis for the action in question or whether it is arbitrary and capricious' " (Matter of Peckham v Calogero, 12 NY3d 424, 431 [2009], quoting Matter of Gilman v New York State Div. of Hous. & Community Renewal, 99 NY2d 144, 149 [2002]). "An action is arbitrary and capricious when it is taken without sound basis in reason or regard to the facts" (Peckham, 12 NY3d at 431, citing Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222, 231 [1974]).
Regulations providing for succession rights to Mitchell-Lama apartments serve the important remedial purpose of preventing dislocation of long-term residents due to the vacatur of the head of household (see Notices of Emergency/Proposed Rule Making, NY Reg, Nov. 29, 1989 at 23-29). Succession is in the spirit of the statutory scheme, whose goal is to facilitate the availability of affordable housing for low-income residents and to temper the harsh consequences of the death or departure of a tenant for their "traditional" and "non-traditional" family members (see Braschi v Stahl Assoc. Co., 74 NY2d 201 [1989]; see also Rent Stabilization Assn. of N.Y. City v Higgins, 83 NY2d 156 [1993]).
In the event that Mitchell-Lama tenants vacate an apartment, their co-occupants are not automatically entitled to succeed to the tenancy. Under the applicable regulations, succession applicants must make an affirmative showing in order to establish their eligibility. Specifically, they must demonstrate that they qualify as family members or were otherwise sufficiently interdependent with the tenant-of-record; that the unit at issue was the applicant's primary residence during the two years immediately prior to the tenant's vacatur; and that they were listed as co-occupants on the income affidavits filed for the same two-year period (see former 9 NYCRR 1727-8.3 [a]).
We have recognized that "[t]he Mitchell-Lama law prescribes strict guidelines for tenant eligibility and succession" (Matter of Schorr v New York City Dept. of Hous. Preserv. & Dev., 10 NY3d 776, 778 [2008]). However, as DHCR noted in connection with the 1991 amendments to its regulations, "these [succession] regulations are not intended to cover all possibilities that may occur but are intended to meet the probable occurrences that may transpire as a result of a tenant's permanent absence from a housing unit and the rights and obligations of those who may claim to be entitled to succeed such tenant" (NY Reg, June 5, 1991 at 21).
In this case, DHCR contests neither Murphy's status as a family member, nor that he lived in the apartment during the relevant two-year period of 1998-1999. The sole basis for DH-CR's denial of Murphy's application was that his mother did not file the requisite income affidavit for 1998, the year prior to Murphy's high school graduation. Given the overwhelming evidence of primary residence, and the absence of any indication that the failure to file was related to Murphy's status as a co-occupant or an income-earner, we hold that it was arbitrary and capricious for DHCR to deny succession on the basis of the failure to file a single income affidavit.
There is no doubt that DHCR has a compelling interest in encouraging the timely filing of income affidavits in order to fairly and efficiently administer the Mitchell-Lama program. Housing companies and supervising agencies like DHCR rely on these affidavits to monitor both the number and aggregate income of occupants, information that is crucial to determining the appropriate amount of rent and to ensuring that tenants remain eligible for the rental subsidy. Accordingly, failure to file income affidavits can result in harsh penalties: the tenant can be charged a surcharge on rent for the applicable year (as occurred here), or can be evicted (see former 9 NYCRR 1727-2.6 [a] and 1727-5.3 [a] [7]).
In the succession context, however, the principal purpose of the income affidavit is to provide proof of the applicant's primary residence. As stated in the DHCR regulations,
"Proof of [primary residence] shall be the listing of such person on the annual income affidavit and/or the filing of the Notice of Change to Tenant's family . . . , together with other evidence, such as certified copies of tax returns, voting records, motor vehicle registration and driver's license, school registration, bank accounts, employment records, insurance policies, and/or other pertinent documentation or facts" (former 9 NYCRR 1727-8.2 [a] [5]).
While agency interpretations of their own regulations are generally afforded considerable deference (see e.g. Matter of Gaines v New York State Div. of Hous. & Community Renewal, 90 NY2d 545, 548-549 [1997]), "[c]ourts must scrutinize administrative rules for genuine reasonableness and rationality in the specific context presented by a case" (Kuppersmith v Dowling, 93 NY2d 90, 96 [1999]; see also Matter of Dworman v New York State Div. of Hous. & Community Renewal, 94 NY2d 359 [1999]). As both Supreme Court and the Appellate Division noted, Murphy provided ample evidence in support of his succession application evincing that he resided in the apartment during 1998 and 1999. Indeed, DHCR does not dispute Murphy's residency for the past 32 years. DHCR instead cites only his mother's technical noncompliance for a single year to justify evicting him from the only home he has ever known.
Notwithstanding the importance of the income affidavit requirement, given the overwhelming evidence of residency provided in this case, and the lack of relationship between the tenant-of-record's failure to file and Murphy's income or co-occupancy, DHCR's decision to deny Murphy succession rights was arbitrary and capricious.
Accordingly, the Appellate Division order should be affirmed, with costs.
. The dissent's assertion that Murphy's affirmative showing was limited to "shifting explanations for his mother's neglect to file" (dissenting op at 661) income affidavits fails to take into account the extensive record evidence he submitted demonstrating his primary residence in the apartment during the years in question.
. The relevant regulations were revised and renumbered in 2009. The provisions used herein refer to the regulations in effect in 2004, when the succession application was submitted.
. Contrary to the dissent's contention, in reaching our conclusion, it is unnecessary to accept any of Murphy's mother's explanations for nonfiling.
. In doing so, we do not treat one who fails to file more leniently than one who files. The same principle would apply had the income affidavit been filed, but the 17-year-old's name was omitted for a reason unrelated to his co-occupancy or income, such as inadvertence.