[*1]
Matter of Salva (442-452 Fort Wash. Ave.)
2015 NY Slip Op 50626(U) [47 Misc 3d 1215(A)]
Decided on April 22, 2015
Civil Court Of The City Of New York, New York County
Gonzales, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on April 22, 2015
Civil Court of the City of New York, New York County


In the Matter of the Application of Gladys L. Salva, Vickie Varnuska, Zenaida Roque, Rosalba Almanzar, Yolanda Kaminsky, Andrew Massa, Lilian Del Rio, Aida Wenzell, Enrique Triana, Jesus Bustamante, John T. Gallagher, Ana Morales, Digna Wenzell, Peggy Ruesga and Meghan Getting-Strasser, Petitioners for a judgment pursuant to Article 7A of the Real Property Actions and Proceedings Law, appointing a court-designated administrator for the premises known as
442-452 Fort Washington Avenue AKA 725 West 180 Street, NY, NY 10033, Respondents, Commissioner of the Department of Housing Preservation and Development of the City of New York, Co-Respondent.



Gladys Salva, Rosalba Almanzar, and Aida Wenzell, Petitioners,

against

Tyvan Hill Company, Dorothea Levine, Greg Healy, and the Department of Housing Preservation and Development of the City of New York, Respondents.




22068/08



Appearances of Counsel:

Petitioners
Nazy Modiri, Esq.
Kellner Herlihy Getty & Friedman LLP

Respondents
Daniel J. Chirlin, Esq.
Ropes & Gray LLP

Co-Respondent
Lynette Parker, Esq.
Department of Housing Preservation and Development
7A Administrator
Bruno Bianchi, Esq.


Cheryl J. Gonzales, J.

The following papers numbered 1 to 38 read on these motions:

PapersNumbered

Notice of Motion and Affidavit Annexed1-2

Notice of Cross-Motion and Affirmation annexed7-8

Affirmations in Opposition20-24

Reply Affirmation38

Exhibits3-6, 9-19, 25-37

_____________

The Department of Housing Preservation and Development (DHPD), commenced this proceeding for the appointment of a 7A Administrator for the subject building on September 23, 2008 under Index no. 22068/08. Petitioners, Gladys Salva, Rosalba Almanzar, and Aida Wenzell commenced an HP proceeding under Index no. 6399/08 seeking repair of the violations of record at the subject building. Subsequently, the tenants moved to substitute for DHPD as [*2]petitioners . The parties consented to the substitution in a stipulation dated November 17, 2008, and DHPD became a co-respondent in the 7A proceeding. On December 22, 2008, the 7A proceeding and the HP proceeding were consolidated for trial.

In an order dated April 22, 2010, the petition in this matter was granted, and pursuant to RPAPL § 778 the court appointed Allan Heussinger as the 7-A Administrator for the building located at 446-452 Fort Washington Avenue, a/k/a 725 West 180th Street, New York, NY. Mr. Heussinger's appointment as the 7A Administrator was terminated pursuant to an order dated November 7, 2014, and control of the building was turned over to Phillip Levine as Independent Executor of the Estate of Dorothea Levine, the owner. Subsequently, Mr. Heussinger moved for an order settling the Article 7A Administrator's final accounting, and directing the disbursement of the funds remaining in the Administrator's bank account. Petitioners cross-moved for an order directing the Administrator to re-pay petitioners $21,165.04 in accordance with an order dated September 2, 2010 and paragraph 8(j) of the order appointing the Administrator, and directing the Administrator to return any surplus funds to petitioners pursuant to RPL §235-b and MDL§ 302-a.

As of the 7A Administrator's final settlement, $132,763.54 remains in the Administrator's bank account for disbursement. Petitioners, co-respondent DHPD, and Phillip Levine as Executor of the Estate of Dorothea Levine, all lay claims to all or part of the funds remaining in the 7A Administrator's bank account.

In their cross-motion, petitioners assert that the sum of $21,165.04 that was advanced to the 7A Administrator is a liability of the Administrator which must be repaid. Petitioners withheld rents from September 2005 through April 2010, and these funds were deposited into an escrow account. The 7A Administrator sought a court order releasing two months of rent from the escrow funds, and this application was granted in an order dated September 2, 2010 pursuant to paragraph 8 (j) of the court order dated April 22, 2010 appointing the 7A Administrator. Annexed as Exhibit 6 to petitioners' cross-motion are a copy of a check for the sum of $21,165.04 dated January 7, 2014 made payable to the 7A Administrator, and a letter dated January 8, 2014 which states that the funds are subject to petitioners' "claims for breach of the warranty of habitability, damages and legal fees against Respondents." The check also included payments from tenants who are not petitioners in this proceeding. In addition, the Petitioners argue that they are entitled to a 100% abatement for the period during which the Administrator was in control of the building.

Co-respondent DHPD asserts that the order under which the 7A Administrator was appointed, and the agreement between the Estate and the Department of Finance (DOF) dictate the priority for the disbursement of the 7A Administrator's funds. In the aforementioned agreement, which was approved by the DOF on May 1, 2014, the Estate agreed to pay $2,026,913.13 to the DOF in 40 quarterly installment payments of $110,061.38 commencing July 1, 2014. DHPD states that as of January 2015, the building owed $1,900,000.00 to the DOF. This debt accrued based on the following: expenses incurred when DHPD provided heat and hot water for the subject building under its emergency repair program; a loan in the amount of $546,000.00 from DHPD to the 7A Administrator to make repairs in the subject building, which has not been repaid. [*3]DHPD placed a lien on the property and transferred the sums owed to the DOF for collection. The debt also includes outstanding real estate and water taxes.

The Estate contends that its installment payment with the DOF satisfies the payment of the building's outstanding liens with respect to the payment priorities outlined in the order of November 7, 2014 discharging the Administrator. Further, the Estate argues that disbursement of the 7A Administrator's funds to the DOF would constitute a prepayment in derogation of the terms negotiated in the agreement between the estate and the DOF. As to petitioners' claim for disbursement of $21,165.04, the Estate asserts that petitioners have never previously identified this sum as a liability to be reimbursed, and that petitioners made the payment pursuant to a court order. Further, the Estate maintains that petitioners have interposed a claim based on the warranty of habitability in a Supreme Court action commenced by petitioners and other tenants under Index no. 150144/08.

Petitioners claim that the sum of $21,165.04, which was paid from their escrow account to the 7A Administrator, was a loan to be repaid as provided in the court order dated September 2, 2010 and paragraph 8(j) of the order appointing the Administrator. The court order of September 2, 2010 states that it was made upon the application of the 7A Administrator, and the stated purpose was to "effectuate the repairs set forth in Heussinger's 9/1/10 letter except (emphasis in original) for work to the building intercom/security system." Further, the order provided that release of escrow funds was done pursuant to paragraph 8(j) of the order of April 22, 2010 appointing the Administrator. This paragraph states:

In addition to borrowing funds from HPD as permitted above, the Administrator may apply for the release of funds for specified repairs from the petitioners' escrow account currently held by their attorneys, subject to petitioners' claims for breach of the warranty of habitability, damages and legal fees againstrespondents. The funds may be released upon the consent of the parties or as otherwise permitted by law.

The language of this paragraph does not describe the release of funds by petitioners as a loan, but clearly makes the funds released subject to petitioners' warranty of habitability claims, legal fees and damages, as does the letter from petitioners' attorney which accompanied the check. The court order dated September 2, 2010 also does not provide support for petitioners' claim that the funds released constituted a loan. RPAPL §778 (2) also provides that the court may allow rent money on deposit to be used by a 7A Administrator, and the statute does not make any reference to such funds as a loan. Further, petitioners have not provided any documentary evidence pursuant to GOL §17-101 which could support their claim that the funds released were loaned to the Administrator.

Petitioners provide no evidence that the abatement claim was part of the relief they sought in this proceeding, but their second cause of action in the amended complaint in Supreme Court under [*4]Index no. 150144/08 addresses their warranty of habitability claim. Notwithstanding RPAPL §783 which precludes the defense of the warranty of habitability during the period of appointment of a 7A Administrator [FN1] , it is undisputed that in this proceeding petitioners have reserved their claims under the warranty of habitability, and claims for damages and legal fees. However, petitioners cannot seek abatements in both the instant proceeding and the Supreme Court action, split the cause of action, and litigate this claim in different forums (see Solow v Avon Products Inc. 56 AD2d 785 [1st Dept 1977]). Accordingly, petitioners' cross- motion is denied without prejudice.

As to the Estate's claim with regard to the funds held by the former 7A Administrator, the Estate acknowledged on the record that since December 2014 title to the subject property is held by Piermount Court LLC, a separate legal entity which is not a party to the instant proceeding. This fact raises questions as to the Estate's compliance with the court order of November 7, 2014 which discharged the 7A Administrator and allowed the Estate to assume control of the subject building upon specified conditions [FN2] . The Estate's status as an owner pursuant to RPAPL §781 is unclear, and this calls into question the Estate's standing to lay claim to the funds. Therefore, the court will not reach the Estate's arguments with regard to its agreement with the DOF to pay the debt in installments as it relates to the priority of payments as set forth in RPAPL §778 (1a-e).

Accordingly, pursuant to RPAPL §778 (1c), and (1d) the 7A Administrator is directed to pay the funds remaining in the Administrator's bank account to the City of New York.

This constitutes the decision and order of this court.

DATED: April 22, 2015_______________________

Cheryl J. Gonzales, JHC

Footnotes


Footnote 1:Unless the conditions were caused by the Administrator's failure to perform his duties ina reasonable manner.

Footnote 2:Among other things the Estate agreed to notify HPD of its intent to sell or covey theproperty at least 30 days prior to the sale or conveyance.