Case Name: In the Matter of The 60 East 12th Street Tenants' Association et al., Respondents, v. New York State Division of Housing and Community Renewal, Respondent, and 12 Broadway Realty LLC, Appellant; In the Matter of 12 Broadway Realty LLC, Appellant, v. New York State Division of Housing and Community Renewal, Respondent, and The 60 East 12th Street Tenants' Association et al., Intervenors-Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 2015-12-29
Citations: 134 A.D.3d 586
Docket Number: 
Parties: In the Matter of The 60 East 12th Street Tenants’ Association et al., Respondents, v New York State Division of Housing and Community Renewal, Respondent, and 12 Broadway Realty LLC, Appellant. In the Matter of 12 Broadway Realty LLC, Appellant, v New York State Division of Housing and Community Renewal, Respondent, and The 60 East 12th Street Tenants’ Association et al., Intervenors-Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 134
Pages: 586–598

Head Matter:
(December 29, 2015)
In the Matter of The 60 East 12th Street Tenants’ Association et al., Respondents, v New York State Division of Housing and Community Renewal, Respondent, and 12 Broadway Realty LLC, Appellant. In the Matter of 12 Broadway Realty LLC, Appellant, v New York State Division of Housing and Community Renewal, Respondent, and The 60 East 12th Street Tenants’ Association et al., Intervenors-Respondents.
[23 NYS3d 40]

Opinion:
Order, Supreme Court, New York County (Alice Schlesinger, J.), entered October 24, 2014, which, insofar as appealed from as limited by the briefs, granted the petition of 60 East 12th Street Tenants' Association and Jeffrey Schanback, as its President and Tenant Representative (collectively, Tenants), to the extent of annulling so much of the determination of the New York State Division of Housing and Community Renewal (DHCR), dated August 15, 2013, which effectively granted in part and denied in part the application of 12 Broadway Realty LLC (Owner) for a rent increase based on a claimed major capital improvement (MCI) involving resurfacing of exterior walls of the subject building, and remanded to DHCR with conditions precluding it from reconsidering that MCI issue, modified, on the law, to permit DHCR on remand to address Owner's application for an MCI rent increase based on resurfacing work consistent with this decision, and otherwise affirmed, without costs.
Owner applied for an MCI rent increase on or about November 13, 2007, claiming, among other things, that it expended $1,931,013.69 on resurfacing the exterior brick walls of its apartment building. DHCR's Rent Administrator denied this application, insofar as relevant on appeal, on October 9, 2009. Among other things, the Rent Administrator disapproved the claimed work on the ground that the useful life of prior such work had not expired and Owner had not obtained a waiver from DHCR following its June 20, 1995 order granting an MCI rent increase. The 1995 order described the previous work, which was completed in or about 1993, as follows, without any elaboration or supporting fact findings: "RESURF EXT WALLS ETC." Then, in an order dated February 20, 1998, DHCR modified the 1995 order by offsetting the rent increase in light of Owner's receipt of a tax abatement. The 1998 order described the previous work as follows, again without elaboration or findings: "WATERPROOFING, POINTING, MASONRY."
Owner filed a request for reconsideration (RFR) of the 2009 order, which the Rent Administrator granted. On or about June 30, 2011, the Rent Administrator granted in part and denied in part Owner's RFR, finding the useful life requirement partly applicable, and rejecting Owner's contention that the 1998 order contradicted the 1995 order as to the nature of the previous work. Owner and Tenants each filed a separate, undisputedly timely petition for administrative review (PAR) from the Rent Administrator's 2011 order. On or about August 15, 2013, DHCR's Deputy Commissioner issued an order which granted Owner's PAR to the extent of modifying the MCI rent increase to $46.25 per room per month, found that the Rent Administrator had improperly disallowed some of the claimed "exterior resurfacing costs," otherwise denied Owner's PAR, and denied Tenants' PAR in its entirety.
In these two ensuing consolidated CPLR article 78 proceedings, the court effectively annulled the determination to grant reconsideration of the resurfacing issue. By order entered January 23, 2015, the court granted Owner's motion for leave to appeal to this Court.
The court erred in finding that Owner failed to exhaust its administrative remedies. Notwithstanding that Owner filed an RFR rather than a PAR from the 2009 order, Owner undisputedly filed a timely PAR from the 2013 order challenged in these proceedings (cf. Matter of Klein v New York State Div. of Hous. & Community Renewal, 17 AD3d 186 [1st Dept 2005]).
Moreover, the court should not have effectively annulled DHCR's reconsideration of the MCI issue and precluded it on remand from resolving the discrepancy between the 1995 and 1998 orders as to the nature of the work performed on the building which justified the 1995 grant of an MCI rent increase. DHCR has the authority to apply its expertise to the question of Owner's entitlement to a subsequent MCI rent increase. Although the Rent Administrator's 2011 order largely rejected Owner's MCI application and conclusorily disregarded the discrepancy between the 1995 and 1998 orders, the subsequent challenged order used the language of the 1998 order in describing the First Project as waterproofing and pointing. DHCR correctly viewed those several orders as so inconsistent and unclear about this matter as to constitute an irregularity in a vital matter, warranting a remand (see Rent Stabilization Code [9 NYCRR] § 2527.8; see also Matter of Atkinson v Division of Hous. & Community Renewal, 280 AD2d 326 [1st Dept 2001]). As this Court recognized in Matter of Peckham v Calogero (54 AD3d 27, 28 [1st Dept 2008], affd 12 NY3d 424 [2009]), when such an "irregularity in vital matters" is presented, and the agency is not merely attempting to reach a different determination, a remand is appropriate despite the otherwise final nature of the questioned order. This is in keeping with the deferential standard utilized in assessing the careful and considered approach to this problem taken by the administrative agency (DHCR) charged with the responsibility over the subject matter at issue. Contrary to Tenants' argument, such "irregularity in vital matters" is not limited to procedural defects but may be substantive in nature (see e.g. Matter of Silverstein v Higgins, 184 AD2d 644 [2d Dept 1992]).
In light of the inconsistency between the 1995 and 1998 orders, the court erred in finding that Owner is collaterally estopped by the 1995 order (see Matter of Sherwood 34 Assoc. v New York State Div. of Hous. & Community Renewal, 309 AD2d 529, 532 [1st Dept 2003]). Owner established that its predecessor did not have "a full and fair opportunity to litigate in the prior proceeding" (Gersten v 56 7th Ave. LLC, 88 AD3d 189, 201 [1st Dept 2011], appeal withdrawn 18 NY3d 954 [2012]; see ABN AMRO Bank, N.V. v MBIA Inc., 17 NY3d 208, 226-227 [2011]), since the 1995 order granted the full relief sought by the predecessor (see Parochial Bus Sys. v Board of Educ. of City of N.Y., 60 NY2d 539, 545 [1983]).
However, upon remand, DHCR must be "limited to the facts and evidence" previously submitted, except under the "narrow circumstances" in which a party submits " 'certain facts or evidence which [it] establishes could not reasonably have been offered or included' " in the prior administrative proceedings (Matter of Gilman v New York State Div. of Hous. & Community Renewal, 99 NY2d 144, 150 [2002], quoting 9 NYCRR 2529.6).
We have considered Tenants' arguments on preservation, among other things, and find them unavailing. Concur— Gonzalez, P.J., Sweeny and Saxe, JJ.