Argued May 5, 2005; decided June 16, 2005

Mohassel v Fenwick, 6 AD3d 234, affirmed.

Graffeo, J.

In this rent overcharge proceeding, the issue is whether a rent stabilized tenant was properly granted prejudgment interest on a treble damages award. We conclude that he was.

In 1984, Parviz Robert Mohassel commenced a rent overcharge proceeding with the Division of Housing and Community Renewal (DHCR) relating to his Manhattan apartment, [*2]alleging that building owner Lila Fenwick was collecting rent in excess{**5 NY3d at 48} of that authorized under the New York City Rent Stabilization Law. A cotenant was also named in the petition. After the owner failed to comply with repeated agency requests for rent history documentation, in November 1989 the Rent Administrator issued a decision finding a rent overcharge in the amount of approximately $300 per month between 1984 and 1989, totaling $26,106.72. Because the violation was determined to be willful, the tenant was granted treble damages. Taking into account the treble damages award plus other related overcharges, the Rent Administrator ruled that Fenwick owed Mohassel $81,303.53. There was no reference to the cotenant in the Rent Administrator's decision.

The owner challenged the award in an administrative appeal to DHCR by filing a petition for administrative review (PAR). In March 1997, DHCR upheld the Rent Administrator's decision and noted that the tenant was entitled to interest on the overcharge award from the date of the Rent Administrator's decision to the date of the DHCR determination.

Unsuccessful before the administrative agency, the owner commenced a CPLR article 78 proceeding against DHCR without naming the tenant as a party respondent. The article 78 petition was denied on the merits in May 1998. The owner apparently filed a notice of appeal but the appeal was never perfected.

In October 2001, DHCR notified the tenant that the owner's judicial challenge to the overcharge determination had been denied, forwarding a "Notice of Rent Stabilized Tenant Concerning Payment of Penalties Which Landlord Has Been Directed to Pay By An Administrator's Order." The notice advised the tenant of two options for collecting the rent overcharge: a deduction could be made from future monthly rent payments in an amount no greater than 20% of the overcharge or a judgment could be obtained against the owner by filing a notice with the County Clerk. Because Mohassel no longer resided in an apartment owned by Fenwick, his only available option was to obtain a judgment. Thus, Mohassel filed the necessary documentation with the County Clerk and a judgment was entered against Fenwick in April 2002. In the judgment, the clerk calculated prejudgment interest on the $81,303.53 overcharge from the date of the Rent Administrator's decision to the date of entry of the judgment. With interest, the judgment totaled $172,238.74.{**5 NY3d at 49}

Soon after entry of the judgment, the owner brought this CPLR 5015 motion to vacate the judgment in Supreme Court, obtaining a stay of enforcement pending the proceeding. Fenwick argued that Mohassel was not entitled to the full judgment because the overcharge proceeding had been initiated in the name of Mohassel and a cotenant, contending that Mohassel's attempt to collect the entire overcharge himself amounted to "fraud." She also alleged that the judgment should be vacated under the equitable doctrine of laches due to the [*3]tenant's failure to enter it within a reasonable time period. Finally, she asserted that the tenant was not entitled to prejudgment interest on the rent overcharge because such interest is not appropriate when treble damages are awarded.

Supreme Court rejected the fraud and laches arguments and declined to vacate the judgment but concluded that the interest award should be reduced, although not on the grounds asserted by the owner. Noting that the DHCR determination explicitly directed interest from the date of the Rent Administrator's decision to the issuance of the determination, Supreme Court concluded that the tenant was not entitled to interest thereafter. In other words, Supreme Court interpreted DHCR's silence on the question of postdetermination interest as precluding such an award. The court therefore directed that the judgment be recalculated to delete the interest award covering the period from March 1997 to April 2002, and an amended judgment was entered.

On appeal, the Appellate Division modified by reinstating the original judgment.^[FN1] The Court noted that the tenant was entitled to postdetermination interest under the Rent Stabilization Law, declining to interpret DHCR's failure to address postdetermination interest as a finding that such interest was not warranted. The Appellate Division granted the owner leave to appeal to this Court and we now affirm.^{[FN2]{**5 NY3d at 50}}

Although the owner raises a number of issues on appeal, we begin with the question of whether the tenant was entitled to prejudgment interest on the treble damages award. Our decision is informed by Rent Stabilization Law § 26-516 (a) and the regulations promulgated thereunder. Although section 26-516 (a) has been amended since the Rent Administrator issued its 1989 decision, the amendments have not substantively altered the provisions addressing [*4]prejudgment interest on rent overcharge awards. Under section 26-516 (a), if DHCR finds that an owner has collected rent in excess of that authorized by statute, the owner "shall be liable to the tenant for a penalty equal to three times the amount of such overcharge," unless the owner demonstrates that the overcharge was not willful. In the absence of willfulness, DHCR "shall establish the penalty as the amount of the overcharge plus interest" (Rent Stabilization Law § 26-516 [a]). The implementing regulation similarly authorizes either a treble damages award on the overcharge or interest "from the date of the first overcharge . . . at the rate of interest payable on a judgment pursuant to section 5004 of the [CPLR]" (Rent Stabilization Code [9 NYCRR] § 2526.1 [a] [1]). In addition, Rent Stabilization Law § 26-516 (a) (4) states that an owner who is found to have overcharged rent "may be assessed the reasonable costs and attorney's fees of the proceeding and interest from the date of the overcharge at the rate of interest payable on a judgment pursuant to section five thousand four of the [CPLR]."

These provisions are designed to discourage violations of the Rent Stabilization Law and, where a violation occurs, to compensate the tenant, particularly when the violation is willful. Interest on a rent overcharge award is generally authorized from the date of the initial monthly overpayment, except when treble damages are warranted. In those circumstances, treble damages are imposed in lieu of interest from the date of the monthly overcharge to the date of the Rent Administrator's decision. But nothing in the rent stabilization scheme restricts the grant of interest from the date of the Rent Administrator's decision forward. To the contrary, section 26-516 (a) (4) is open-ended, authorizing an interest award equivalent to that imposed in a civil action (see CPLR 5002, 5003).

Here, after determining that the owner's conduct was willful, the Rent Administrator imposed treble damages and did not{**5 NY3d at 51} grant the tenant interest from the date of each monthly rent overpayment. Because no interest was awarded for the five-year period prior to the Rent Administrator's 1989 decision, the interest calculation in the original judgment was in accord with Rent Stabilization Law § 26-516 (a) and 9 NYCRR 2526.1 (a) (1).

The owner does not dispute that prejudgment interest is authorized when there is no treble damages award but asserts that, even though more than 15 years have elapsed and the tenant has yet to collect any of the rent he overpaid, the 1989 treble damages order in this case forever prohibited subsequent prejudgment interest. We are unpersuaded. To interpret the Rent Stabilization Law as the owner suggests—authorizing prejudgment interest in cases where treble damages are not awarded (because the overcharge was not willful) but precluding it when the overcharge was willful—would turn the statutory scheme on its head, allowing willful violators to delay paying meritorious claims while enjoying interest-free use of tenants' money. Such an analysis would be inconsistent with the purpose of overcharge proceedings to fully compensate [*5]tenants when owners fail to comply with rent stabilization requirements, especially when noncompliance is willful. The imposition of prejudgment interest ensures that injured tenants will be made whole and encourages both willful and nonwillful violators to make prompt repayment.

The owner also argues that the prejudgment interest award should be vacated because it punishes her for the delay in entry of the judgment, which she attributes to DHCR's failure to timely resolve the administrative appeal^[FN3] and the tenant's failure to timely enter a judgment. This contention misapprehends the purpose of interest in the context of a lump sum compensatory damages award against a private party.

"Specifically, interest is not a punishment arbitrarily levied upon a culpable party. Instead, an award of interest is simply a means of indemnifying an aggrieved person. It represents the cost of having the use of another person's money for a specified period" (Matter of Aurecchione v New York State Div. of{**5 NY3d at 52} Human Rights, 98 NY2d 21, 27 [2002] [citation and internal quotation marks omitted]).

As of November 1989, the owner owed the tenant $81,303.53. Instead of paying the tenant at that time, the owner pursued an administrative appeal and a judicial challenge, both of which were unsuccessful. Although the owner was certainly entitled to chart this course, the fact remains that she had the use of the tenant's money during this time period while the tenant was deprived of it. The owner,

"has presumably used the money to its benefit and, consequently, has realized some profit, tangible or otherwise, from having it in hand during the pendency of the litigation. There is thus nothing unfair about requiring the [owner] to pay over this 'profit' in the form of interest to the . . . party who was entitled to the funds from the date . . . liability was fixed" (Love v State of New York, 78 NY2d 540, 545 [1991]).

This rationale applies regardless of whether the delay was attributable to the party who had use of the money. For example, in Aurecchione, we rejected the notion that an agency's [*6]11-year administrative delay in resolving a controversy between an employee and a private employer relieved the employer of its obligation to pay predetermination interest on a back pay award.

Although the owner claims that the tenant was guilty of laches for failing to enter the judgment at an earlier point in the process, that argument finds no support in the record. Mohassel sought entry of the judgment within six months of being informed by DHCR that the article 78 challenge had concluded. Since he was not a party to the judicial proceeding, the tenant cannot be faulted for awaiting word from DHCR before obtaining a judgment. Indeed, the tenant's conduct was consistent with DHCR's written instructions, which indicate that a judgment should not be filed until DHCR certifies "that the owner has not filed a PAR or a proceeding for judicial review, or, if filed, that those proceedings have concluded." (DHCR Fact Sheet No. 16, Collecting Overcharges in Rent Stabilized Apartments in New York City.) Under these circumstances, the courts below properly rejected the owner's laches claim.

In sum, nothing in the governing rent stabilization provisions prohibited the grant of prejudgment interest in this case. We agree with the Appellate Division's conclusion that DHCR's{**5 NY3d at 53} silence on the question of postdetermination interest should not have been interpreted as precluding it. DHCR's failure to address the issue in its March 1997 determination is understandable since it had no reason to presume that the owner would commence a judicial proceeding rather than paying what was owed at that time. Had the owner repaid the tenant when the administrative appeal was denied, there would have been no occasion for postdetermination interest.

None of the owner's remaining arguments are reviewable in this Court. Fenwick's due process claim that the statutory scheme is flawed because it fails to restrict the time frame for entry of a judgment on an overcharge award is unpreserved for review because she failed to raise the issue in Supreme Court. The argument that DHCR erred, or that Mohassel engaged in fraud, when the overcharge award was granted in Mohassel's name alone without joinder of the cotenant should have been asserted in the administrative appeal from the Rent Administrator's decision—at a time when the underlying circumstances could have been explored and any apportionment error timely corrected.^[FN4] [*7]

Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative.

Chief Judge Kaye and Judges G.B. Smith, Ciparick, Rosenblatt, Read and R.S. Smith concur.

Order affirmed, etc.