Tranghese v. W 122 Enters. Group LLC

2025 NY Slip Op 32366(U)

• Court: New York Supreme Court, New York County
• Decided: July 7, 2025
• Docket: Index No. 157241/2019
• Status: Unpublished

Opinion

Tranghese v W 122 Enters. Group LLC 2025 NY Slip Op 32366(U) July 7, 2025 Supreme Court, New York County Docket Number: Index No. 157241/2019 Judge: Lori S. Sattler 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. 157241/2019 NYSCEF DOC. NO. 146 RECEIVED NYSCEF: 07/07/2025

` SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. LORI S. SATTLER PART 02M Justice ---------------------------------------------------------------------------------X INDEX NO. 157241/2019 CARLA TRANGHESE, MOTION DATE 01/14/2025 Plaintiff, MOTION SEQ. NO. 002 -v- W 122 ENTERPRISES GROUP LLC DBA E 122 GROUP LLC,E 122 ENTERPRISES GROUP LLC DBA E 122 DECISION + ORDER ON GROUP LLC,E 122 GROUP LLC MOTION Defendant. ---------------------------------------------------------------------------------X

The following e-filed documents, listed by NYSCEF document number (Motion 002) 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93, 94, 95, 96, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145 were read on this motion and cross-motion to/for JUDGMENT - SUMMARY .

In this residential rent overcharge action, Defendants W 122 Enterprises Group LLC

d/b/a E 122 Group LLC and E 122 Enterprises Group LLC d/b/a E 122 Group LLC (collectively

“Landlord”) seek summary judgment dismissing the Amended Complaint, while Plaintiff-tenant

Carla Tranghese (“Tranghese”) cross-moves for summary judgment on the Amended Complaint.

Both motions are opposed.

Tranghese is the tenant of record of unit #5E (“Apartment”) in a residential building

located at 105 East 122nd Street in Manhattan (“Building”), owned by the Landlord. Tranghese

initially lived in the Apartment as a roommate of the prior tenant of record. She later executed a

two-year, non-rent-regulated lease commencing June 1, 2005 for a monthly rent of $1,650. At

the time, the Building was owned by non-party Up and East, Inc. (“Former Owner”). According

to Tranghese, the Landlord purchased the Building from the Former Owner on August 6, 2018.

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Tranghese claims that she first examined the Apartment’s rent registration history in 2019

after requesting documents from the New York State Division of Housing and Community

Renewal (“DHCR”). She alleges those documents establish that the Former Owner ceased

registering the Apartment as a rent stabilized unit in 2002 on the ground that it was exempt from

registration due to high rent vacancy, and that that status was subsequently recorded on every

DHCR rent registration statement through 2019 (NYSCEF Doc. No 9, “Amended Complaint,”

¶¶ 33-41).

Tranghese commenced this action on July 24, 2019. She filed the Amended Complaint

on November 7, 2019 which pleads causes of action for: 1) a declaratory judgment that the

Apartment is a rent stabilized unit and establishing its correct monthly legal regulated rent; 2) an

injunction ordering the Landlord to provide Tranghese with a rent stabilized lease for the

Apartment at the correct monthly legal regulated rent; 3) rent overcharge in violation of Rent

Stabilization Law (“RSL”) § 26-516; and 4) attorney’s fees pursuant to Real Property Law § 234.

The Landlord filed an amended verified answer with affirmative defenses on November 5, 2021

(NYSCEF Doc. No. 54). The parties engaged in discovery and Tranghese filed a Note of Issue

on April 30, 2024. The Landlord filed this motion for summary judgment to dismiss the

Amended Complaint and Tranghese cross-moved for summary judgment in her favor.

A party moving for summary judgment must make a prima facie showing of entitlement

to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of

fact from the case (see e.g., Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985];

Sokolow, Dunaud, Mercadier & Carreras v Lacher, 299 AD2d 64, 70 [1st Dept 2002]). Once

that showing has been 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

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fact which require a trial of the action (Zuckerman v City of New York, 49 NY2d 557, 562

[1980]; Pemberton v New York City Tr. Auth., 304 AD2d 340, 342 [1st Dept 2003]).

At the outset, the Court rejects the Landlord’s argument that Tranghese’s claims are

barred by the doctrine of collateral estoppel because the DHCR previously denied an overcharge

claim by another tenant in the Building. “Collateral estoppel applies when (1) the issues in both

proceedings are identical; (2) the issue in the prior proceeding was actually litigated and decided;

(3) there was a full and fair opportunity to litigate in the prior proceeding; and (4) the issue

previously litigated was necessary to support a valid and final judgment on the merits” (Gersten

v 56 7th Ave. LLC, 88 AD3d 189, 201 [1st Dept 2011], citing Ryan v New York Tel. Co., 62

NY2d 494, 500–501 [1984]). The Landlord asserts that the DHCR issued a decision against the

other tenant on December 7, 2017 (see NYSCEF Doc. No. 90). That determination was made

prior to changes in the law as discussed below (see e.g., Apollo Asset Mgt., Inc. v Cernich, 226

AD3d 466, 466 [1st Dept 2024] [intervening change in the law precludes reliance on the doctrine

of collateral estoppel]), and in any event the two proceedings involve different parties and

different apartments with different rental histories.

As to the merits, the parties devote a portion of their papers to addressing which version

of the law applies to this case. Pursuant to RSL § 26-516(a), landlords are liable to complaining

tenants when they are found to have overcharged above the authorized rent. In the version in

effect prior to June 2019, complaining tenants who successfully showed rent overcharge were

entitled to recovery for overcharges up to four years before the filing of the Complaint, and the

statute contained a clause providing that “no determination of an overcharge and no award or

calculation of an award of the amount of an overcharge may be based upon an overcharge having

occurred more than four years before the complaint is filed” (L.2015, c. 20, pt. A, § 23, eff. June

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26, 2015, deemed eff. June 15, 2015; L.2009, c. 480, § 1, eff. Oct. 9, 2009; L.1997, c. 116, §

28-b, eff. July 19, 1997, § 33, eff. June, 19, 1997). This prohibition against relying on rental

history before the four-year recovery period is known as “the lookback rule.”

The Housing Stability and Tenant Protection Act of 2019 (“HSTPA”) went into effect on

June 14, 2019. It lengthened the recovery period to six years and eliminated the lookback rule

such that a plaintiff can now use all of their apartment’s rental history to demonstrate an

overcharge. In 2020, the Court of Appeals in Matter of Regina Metro. Co., LLC v New York

State Div. of Hous. & Community Renewal, held that the HSTPA does not apply retroactively to

overcharges claims that occurred prior to the statute’s effective date (35 NY3d 332, 363 [2020]).

This action was commenced just after the effective date of the HSTPA, but it alleges overcharges

that occurred prior to its enactment, therefore pre-HSTPA law requires.

In pre-HSTPA law, an exception to the lookback rule exists such that, if a complaining

tenant can demonstrate that a landlord engaged in a “fraudulent scheme” to unlawfully inflate

rents and/or to unlawfully deregulate rent stabilized units, a reviewing court may consider an

apartment’s entire rent and registration history “for the limited purpose of determining whether a

fraudulent scheme to destabilize the apartment tainted the reliability of the rent on the base date,”

(id. at 354-56; quoting Matter of Grimm v State of N.Y. Div. of Hous. & Community Renewal Off.

of Rent Admin., 15 NY3d 358, 366-367 [2010]).

In 2024, the Legislature clarified that when a proceeding sets forth “a colorable claim”

that an owner engaged in a fraudulent scheme to deregulate a unit, a court, in making its

determination, must look at “the totality of the circumstances,” considering “all of the relevant

facts and all applicable statutory and regulatory law and controlling authorities” (L.2024, c. 95,

§§ 2, 4, 5, eff. March 1, 2024, “Chapter Amendments”). “[T]here need not be a finding that all

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of the elements of common law fraud . . . were satisfied . . . if the totality of the circumstances

nonetheless indicate that such fraudulent scheme to deregulate a unit was committed” (id.).

These amendments took immediate effect and “shall apply to any action or proceeding in any

court . . . on the effective date of this act” (id.).

The Landlord asserts that pre-HSTPA applies and that Tranghese improperly seeks to

have the court analyze her rent history “well beyond the four-year limitations period.”

Tranghese commenced this action on July 24, 2019, after the HSTPA’s effective date but before

the Court of Appeals decided Regina. So, while the Amended Complaint seeks relief under the

HSTPA, there does not appear to be any dispute among the parties that the law in place pre-

HSTPA now applies to Tranghese’s claims. To that end, rather than relying on all older rental

history as is permitted under the new law, Tranghese alleges that there was a fraudulent scheme

to deregulate her unit. However, she argues that the Court is required to analyze this claim using

the “totality of the circumstances standard.” This is not disputed by the Landlord. As the

Chapter Amendments clearly apply to all actions pending when they were implemented, the

Court agrees (see also Cox v 36 S Oxford St, LLC, 237 AD3d 604, 606 [1st Dept 2025]; Gomes v

Vermyck, LLC, — AD3d —, 2025 NY Slip Op 00849, *3-5 [2d Dept 2025]). The Court further

finds that the Amended Complaint sets forth a colorable claim of fraud, requiring it to look at the

totality of the circumstances. In establishing the existence of a fraudulent scheme under this

standard, “plaintiffs do not need to prove all of the elements of common-law fraud so long as the

totality of the circumstances nonetheless indicate that a fraudulent scheme to deregulate an

apartment unit was committed” (Gomes, 2025 NY Slip Op 00849, *7-8). A reviewing court’s

task is to evaluate the circumstances set forth by the plaintiffs in their motion (id.).

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The Landlord argues that it is entitled to summary judgment dismissing the Amended

Complaint for failure to state a claim, contending it has submitted evidence that the apartments

of the building were properly deregulated. Tranghese opposes and cross-moves for summary

judgment, arguing she has presented documentary evidence of a fraudulent scheme to deregulate,

that the Landlord has failed to meet its burden to prove that the rent charged complies with New

York Law, and that the overcharges are willful.

Tranghese maintains the existence of fraudulent schemes both to deregulate all ten of the

Building’s rent stabilized units and to deregulate her Apartment specifically. As to the Building,

she asserts the scheme “consisted first of failing to file DHCR rent registrations, and then filing

backdated registrations . . . replete with inconsistencies, impossibilities, and/or brief tenancies

that enabled the landlord to claim multiple vacancy increases within a single year, and, then, for

the remaining rent-stabilized tenants, simply transferring the tenant’s actual rent paid out of the

legal regulated rent category while the Former Owner picked a legal regulated rent that was

either one or two vacancy increases away from deregulation” (NYSCEF Doc. No. 120 at 9).

With respect to her Apartment specifically, Tranghese asserts that the scheme involved a one-

month tenancy that the Former Owner used to claim a full vacancy increase, plus the unjustified

rent jump of $300 in rent for which the Defendant can show no record of any improvements that

would justify any increases (id. at 8-9).

To support these allegations, Tranghese produces an expert affirmation from contractor

Christopher J. Leahy (“Leahy”); a 2018 lease and an unexecuted 2019 lease; the Apartment’s

DHCR rent registration history from 1984 to 2018; the Building’s DHCR rent roll from 1994 to

2018; a deposition transcript of the Landlord’s principal officer; and copies of indictments for

and guilty pleas to unrelated federal bid rigging and bribery charges that included that officer

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(id., NYSCEF Doc. Nos. 104-119). Tranghese claims that the DHCR records establish that the

Former Owner unlawfully inflated rents in the building by claiming 20% “vacancy increases” to

rents which the law did not authorize and by claiming permanent “individual apartment

improvement” (“IAI”) rent increases for work that was either non-qualifying or had never been

performed. She argues that Leahy’s testimony establishes that said IAI work was either non-

qualifying or had never been performed (id., NYSCEF Doc No. 120 at 8-12, 16-23).

In opposition, the Landlord annexes expert affirmations from contractor Milton Bermeo

(“Bermeo”) and engineer Sion Hourizadeh, P.E. (“Hourizadeh”); an affidavit from the president

of the Former Owner, Adonis Mallios (“Mallios”); and copies of Department of Buildings

records regarding certain work performed in the building in 1991 and 1992 (NYSCEF Doc. Nos.

125-135. The Landlord maintains that Bermeo’s affirmation establishes that Leahy’s expert

opinion was speculative and that the remaining affirmations and records show that the Building

was substantially renovated in 1992 and 1993 after it had been rendered uninhabitable by a fire,

therefore the Building was lawfully deregulated (id., NYSCEF Doc. No. 136 at 10-12).

The Court finds that none of the foregoing evidence is so dispositive as to warrant a grant

of summary judgment regarding an alleged fraudulent scheme to deregulate either the Building

or the Apartment. The Apartment’s DHCR rent registration history records four large vacancy

increases to its rent from 1999 to 2001 coupled with lower preferential rents charged to tenants

of record who Tranghese claims never lived there (see NYSCEF Doc. No. 109). It also shows

the Apartment became permanently exempt from rent registration in 2004 by virtue of “high rent

vacancy,” whereas Tranghese’s initial 2005 lease, which is not attached to the papers,

purportedly failed to include a rider explaining how the rent increases that justified deregulation

had been calculated, as is mandated by the Rent Stabilization Code, 9 NYCRR § 2522.8 (see

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e.g., 65 Spring Realty v State Div. of Hous. & Cmty. Renewal, 2023 NY Slip Op 33023[U] [Sup

Ct, NY County 2023]). While this might evidence impropriety, it does not constitute prima facie

evidence of a fraudulent scheme (see e.g., Sandlow v 305 Riverside Corp., 201 AD3d 418, 419

[1st Dept 2022]; see also Reichenbach v Jacin Invs. Corp., 237 AD3d 446 [1st Dept 2025]).

With respect to the IAIs, the Mallios and Hourizadeh affidavits coupled with the

Department of Buildings records establish that certain work was performed in the Building in

1992 and 1993 (see NYSCEF Doc. Nos. 126-134). However, the Landlord’s claim that this

work resulted in the Building becoming deregulated at that time is belied by the Building’s rent

roll, which records that the majority of its units remained rent stabilized until 2004 (id., NYSCEF

Doc. No. 112). Furthermore, Leahy’s affirmation opines that no qualifying IAI work appears to

have been performed in the Apartment at the commencement of Tranghese’s tenancy (see

NYSCEF Doc. No. 105). Leahy’s opinion is challenged by Bermeo’s expert affirmation,

although it does not appear that Bermeo actually inspected the unit (id., NYSCEF Doc. No. 125).

These differences constitute questions of fact regarding the purported IAI work.

The Court concludes that the documents submitted are insufficient to establish a

fraudulent scheme to deregulate the Building, and that the affidavits submitted herewith raise

triable issues of fact regarding both the propriety of apartment deregulations in the Building and

whether qualifying IAI work was performed in the Apartment. Accordingly, the Court finds that

neither party has demonstrated entitlement to summary judgment.

Even if the Court were to find that Tranghese was entitled to summary judgment on her

claim that the Landlord improperly deregulated the Apartment, and were to determine the legal

regulated rent, Tranghese fails to establish what she would be entitled to in damages. The parties

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have not produced copies of all of the Apartment’s relevant leases or any record of rent

payments. Thus, the Court is unable to discern the rent charged or the rent paid at this time.

Finally, with respect to Tranghese’s other three causes of action, which are not discussed

in her motion, the Court notes that it was unnecessary for her to have pled them as separate

claims since declaratory and injunctive relief and attorney’s fees are all items of damages which

may be obtained under RSL § 26-516.

Accordingly, both parties’ summary judgment motions are denied.

This constitutes the Decision and Order of the Court.

7/7/2025 $SIG$ DATE LORI S. SATTLER, J.S.C. CHECK ONE: CASE DISPOSED X 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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