656 W. 162nd St. Tenants Assn. v. 656 Realty LLC

2025 NY Slip Op 32324(U)

Opinion

656 W. 162nd St. Tenants Assn. v 656 Realty LLC 2025 NY Slip Op 32324(U) July 1, 2025 Supreme Court, New York County Docket Number: Index No. 151733/2021 Judge: Mary V. Rosado Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 151733/2021 NYSCEF DOC. NO. 287 RECEIVED NYSCEF: 07/01/2025

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. MARY V. ROSADO PART 33M Justice -------------------X INDEX NO. 151733/2021 656 WEST 162ND ST TENANTS ASSOCIATION, SANTA MOTION DATE 06/14/2024, NAUT, LUCIA ORTEGA, KATE GILL, DENISE MARTE, PETER FRIEDRICHS, LINA ROJAS, WILLIAM DURNELL, DEON DURRANT, MARVIS MARTIN, JALEN DANSBY, MOTION SEQ. NO. 006 CHIMERE EZUMA, ALI MUKHTAR, ROSE SMITH and ELLEN WHITE

Plaintiffs,

- V - DECISION + ORDER ON MOTION and SUSAN EDELSTEIN,

Defendants. -------------------X

The following e-filed documents, listed by NYSCEF document number (Motion 006) 177, 178, 179, 180, 181,182,183,184,185,186,187,188,189,190,191,192 ,193,194,195,196,197,198,199,200,201, 202,203,204,205,206,207,208,209,210,211,212,213 ,214,215,216,217,218,219,220,221,222, 223,224,225,226,227,228,229,230,231,232,233,234 ,235,236,237,238,239,240,241,242,243, 244,245,246,247,248,249,250,251,252,253,254,255 ,256,257,258,259,260,261,262,263,271, 272,273,276,277,278,279,280,281,283 were read on this motion to/for JUDGMENT-SUMMARY Upon the foregoing documents, and after a final submission date of April 11, 2025,

Plaintiffs 656 West 162nd St. Tenants Association, Santa Naut ("Naut"), Lucia Ortega ("Ortega"),

Kate Gill ("Gill"), Denise Marte ("Marte"), Peter Friedrichs ("Friedrichs"), Lina Rojas ("Rojas"),

William Durnell ("Durnell"), Deon Durrant ("Durrant"), Marvis Martin ("Martin"), Jalen Dansby

("Dansby"), Chimere Ezuma ("Ezuma"), Ali Mukhtar ("Mukhtar"), Rose Smith ("Smith") and

Ellen White's ("White") (collectively "Plaintiffs") motion for partial summary judgment seeking

(1) a declaration that Defendants 656 Realty LLC ("656 Realty"), Successful Management Corp.

("Successful Management"), and Susan Edelstein ("Edelstein") (collectively "Defendants")

engaged in a fraudulent overcharge and deregulation scheme in all Plaintiffs' Apartments; (2)

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declaring the legal regulated rent for Plaintiffs Naut, Ortega, Gill, Friedrichs, Marte, Rojas, Smith,

Durnell, Durrant, Martin, and White must be calculated using the default formula under Rent

Stabilization Code§ 2522.6, and ordering Defendants to produce all necessary documentation to

apply the default formula, and (3) declaring that pursuant to Rent Stabilization Code § 2522.5, the

legal regulated rent for Plaintiffs Dansby, Ezuma, and Mukhtar were frozen at the rent registered

for the immediately preceding tenant for the duration of their tenancy, is denied.

I. Background

Plaintiffs are tenants in the building at 656 W. 162nd Street, New York, New York (the

"Building"). The Building is owned by Defendant 656 Realty and is managed by Defendant

Successful Management. Ms. Edelstein is the principal of 656 Realty and Successful Management,

and it is alleged that Ms. Edelstein exercises complete control over those entities, while

disregarding required corporate formalities. Plaintiffs further allege that Defendants engaged in a

fraudulent scheme to inflate the legal regulated rent of rent stabilized units to deregulate rent

stabilized apartments via the previously applicable threshold for luxury deregulation. As part of

this scheme, Plaintiffs allege that Defendants have claimed hundreds of thousands of dollars of

individual apartment improvements to raise the rent, despite there being no corresponding New

York City Department of Building records corroborating those improvements.

Ms. Edelstein, via other non-party corporate entities, owns and manages various other

residential real estate buildings in New York City. Ms. Edelstein was married to non-party Michael

Cagen from 2004 until their separation in 2014 (NYSCEF Doc. 179 at 26). Mr. Cagen, through

his company Double Diamond, allegedly performed individual apartment improvements in the

Building until 2014 (NYSCEF Doc. 179 at 82-83). Mr. Cagen was the sole owner of Double

Diamond, and Mr. Cagen and Ms. Edelstein, who were married at the time, purportedly negotiated

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with one another the price of apartment renovations (NYSCEF Doc. 179 at 85). Another company

involved in apartment renovations was Affordable Construction, which was created by Edwin

Algarin, Successful Management's Property Manager from 2008 to 2018. In 2022, Mr. Algarin

testified in a separate proceeding that during his tenure working for Defendants he "witnessed the

landlord engage in a deliberate pattern of behavior with the sole goal of deregulating as many units

as possible" (NYSCEF Doc. 183). 1

Plaintiffs have produced an expert affirmation from Christopher J. Leahy, a licensed New

York City general contractor and New York City landlord who has worked on many residential

renovation projects (NYSCEF Doc. 252). Mr. Leahy inspected the apartments at issue and opined

the claimed individual apartment improvements were inflated or non-existent. According to Ms.

Edelstein, some of the records they maintained were removed or destroyed by Mr. Algarin, who

allegedly did not have authority to do this and was terminated as a result (NYSCEF Doc. 119 at ,i

14). Ms. Edelstein further testified that the apartment improvements were negotiated "at arm's

length" and Mr. Diaz provided testimony and records which purport to evidence the individual

apartment improvements at issue.

Plaintiffs now move for summary judgment seeking (1) a declaration that Defendants

engaged in a fraudulent overcharge and deregulation scheme in all Plaintiffs' apartments; (2)

declaring the legal regulated rent for Plaintiffs Naut, Ortega, Gill, Friedrichs, Marte, Rojas, Smith,

Durnell, Durrant, Martin, and White must be calculated using the default formula under Rent

Stabilization Code § 2522.6, and ordering Defendants to produce all necessary documentation to

apply the default formula, and (3) declaring that pursuant to Rent Stabilization Code § 2522.5, the

1 Mr. Algarin was a defendant in a non-payment proceeding captioned 601 West Realty, LLC v. Algarin, Index No. LT-078379-18. 601 West Realty, LLC is apparently another company owned by Ms. Edelstein. 151733/2021 656 WEST 162ND ST TENANTS vs. 656 REALTY LLC Page 3 of& Motion No. 006

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legal regulated rent for Plaintiffs Dansby, Ezuma, and Mukhtar were frozen at the rent registered

for the immediately preceding tenant for the duration of their tenancy. Defendants oppose.

II. Discussion

"Summary judgment is a drastic remedy, to be granted only where the moving party has

tendered sufficient evidence to demonstrate the absence of any material issues of fact." (Vega v

Restani Const. Corp., 18 NY3d 499, 503 [2012]). The moving party's "burden is a heavy one and

on a motion for summary judgment, facts must be viewed in the light most favorable to the non-

moving party." (Jacobsen v New York City Health and Hosps. Corp., 22 NY3d 824, 833 [2014]).

Once this showing is made, the burden shifts to the party opposing the motion to produce

evidentiary proof, in admissible form, sufficient to establish the existence of material issues of fact

which require a trial (See e.g., Zuckerman v City o/New York, 49 NY2d 557,562 [1980]).

The first branch of Plaintiffs' motion, which seeks a declaration that Defendants engaged

in a fraudulent overcharge and deregulation scheme in all Plaintiffs' apartments is denied. As a

preliminary matter, the Court finds there is sufficient indicia of fraud to warrant piercing the four-

year look back period. Contrary to Defendants' contention, the Court of Appeals has now clarified

that the common law elements of fraud are not required to pierce the four-year look back period -

the fraud exception applies where the totality of the circumstances establish sufficient indicia of a

"fraudulent scheme to evade the protections of the rent stabilization law" (Burrows v 75-25 153rd

Street, LLC, -NE3d-, 2025 Slip Op 01669 at *3 [2025]).

While Defendants are correct that a historical rent spike alone is insufficient to establish a

colorable claim of fraud, Plaintiffs have set forth more evidence than mere rent spikes. Indeed,

there is a sworn statement in the record from Defendants' former employee that Defendants

engaged in a deliberate scheme to deregulate as many units in their buildings as possible.

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Moreover, Defendants relied on companies owned by employees and Ms. Edelstein's spouse to

carry out the alleged individual apartment increases. Although Ms. Edelstein asserts that the

expenditures for such increases were negotiated at "arm's length" the incredibly close and

dependent relationships between the contractors and the Defendants raise credibility issues.

Whether the individual apartment improvements took place at all or were artificially inflated is

compounded by Plaintiffs' expert opinion. There is also a complete absence of Department of

Building records corroborating the allegedly hundreds of thousands of dollars in individual

apartment improvements. Based on the foregoing, the totality of the circumstances establish the

requisite indicia of a fraudulent scheme to overcharge and deregulate (see also Cox v 36 S Oxford

St, LLC, 237 AD3d 604, 606 [1st Dept 2025]).

However, while Plaintiffs have set forth sufficient indicia of fraud, there are triable issues

of fact preventing summary judgment. The central issue in this case is whether individual

apartment improvements took place, or if they did take place, were fraudulently inflated, for the

purpose of deregulating units and/or overcharging tenants. The question of whether individual

apartment improvements took place or if the expenditure for those improvements was fraudulently

inflated is typically a question to be resolved by the factfinder "based on the persuasive force of

the evidence submitted by the parties" (Jemrock Realty Co., LLC v Krugman, 13 NY3d 924, 926

(2010]; see also Ampim v 160 E. 48th Street Owner II LLC, 208 AD3d 1085, 1086-87 [1st Dept

2022]). Here, there is a plethora of conflicting testimony and evidence, as well as a multitude of

credibility issues which require a trial on whether Defendants engaged in a fraudulent scheme to

overcharge and deregulate (see also 435 Central Park West Tenant Association v Park Front

Apartments, LLC, 183 AD3d 509, 510-11 [1st Dept 2020]). Therefore, based on the conflicting

evidence and need for credibility determinations, this branch of Plaintiffs' motion for summary

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judgment is denied (see also Davis v Graham Court Owners Corp., 211 AD3d 629,630 [1st Dept

2022] [finding of fraudulent scheme to deregulate apartment by claiming fictional individual

apartment improvements rests largely on credibility determinations]).

Because there has not yet been a definitive finding of a fraudulent scheme to overcharge

and deregulate, the portion of the motion which seeks the application of the default formula under

Rent Stabilization Code§ 2522.6 to determine the legal regulated rent for Plaintiffs Naut, Ortega,

Gill, Friedrichs, Marte, Rojas, Smith, Durnell, Durrant, Martin, and White's apartments is denied,

without prejudice, as premature.

Likewise, as there has been some documentation produced regarding renovations in the

amount of at least $44,000 to Dansby, Ezuma, and Mukhtar's, there are issues of fact regarding

the legal regulated rent which prevent granting these tenants summary judgment. Therefore, the

branch of Plaintiffs' motion seeking a declaration that pursuant to Rent Stabilization Code §

2522.5, the legal regulated rent for Plaintiffs Dansby, Ezuma, and Mukhtar were frozen at the rent

registered for the immediately preceding tenant for the duration of their tenancy, is denied.

Accordingly, it is hereby,

ORDERED that Plaintiffs' motion for summary judgment is denied; and it is further

ORDERED that within ten days of entry, counsel for Defendants shall serve a copy of this

Decision and Order, with notice of entry, on all parties via NYSCEF.

This constitutes the Decision and Order of the Court.

7/1/2025 DATE tn~ v 14 . . . ,. HON, MARY V. ROSADO, J.S.C. J,c:..

CHECK ONE: CASE DISPOSED x NON-FINAL DISPOSITION

GRANTED 0 DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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