Court Square Bldg., Inc. v. City of New York

• Decision Date: 13 January 1949
• Citation: 298 N.Y. 380,83 N.E.2d 843
• Parties: COURT SQUARE BUILDING, Inc. v. CITY OF NEW YORK.
• Court: New York Court of Appeals Court of Appeals

298 N.Y. 380

83 N.E.2d 843

COURT SQUARE BUILDING, Inc.

v.CITY OF NEW YORK.

Court of Appeals of New York.

Jan. 13, 1949.

Appeal from Supreme Court, Appellate Division, First Department.

Proceeding by Court Square Building, Inc., landlord, against the City of New York, tenant, under the Business Rent Control Law to fix rent for space leased by landlord to the City of New York in an office building in New York City. The Appellate Division of the Supreme Court in the First Judicial Department, entered April 22, 1948, 273 App.Div. 441, 77 N.Y.S.2d 847, modified, on the facts and the law, and affirmed as modified, an order of the Supreme Court at Special Term (Levey, J.), entered in New York County, as amended nunc pro tunc, fixing the rent. A specified finding of fact contained in order of Special Term amending the original decision nunc pro tunc was reversed and a new finding was made by Appellate Division in lieu thereof. The modification consisted of a holding that the landlord was entitled to a rental in excess of the emergency rent. From so much of the order of modification of the Appellate Division as failed to allow landlord the full amount of rental provided for by written lease between the parties and fails to hold that emergency rent legislation does not apply to the City of New York, the landlord appeals, and from the entire order of modification, the City of New York appeals.

Order of Appellate Division modified, and, as modified, affirmed. M. Carl Levine, David Morgulas and Albert Foreman, all of New York City, for petitioner, appellant and respondent.

John P. McGrath, Corporation Counsel, of New York City (Benjamin Offner, Harry E. O'Donnell and Reuben Levy, all of New York City, of counsel), for defendant, respondent and appellant.

LEWIS, Judge.

The petitioner-landlord is the owner of an office building in the city of New York occupying the greater portion of a city square bounded by Lafayette, Reade, Elm and Duane Streets. The City of New York, as a tenant, occupies six floors of the petitioner's building the second to seventh floors inclusive and in addition a ground-floor store on Reade Street and space in the basement. This extensive space has been used since 1935, for courtrooms and related uses by the Municipal Court of the City of New York. In January, 1943, the parties entered into a lease to run until April 30, 1945, at an annual rent of $123,300. On October 31, 1944, a renewal lease was executed for a three-year period commencing May 1, 1945, at an annual rent of $163,850.

After execution of the lease last mentioned above, but prior to the commencement of the city's tenancy thereunder, the Business Rent Control Law, L. 1945, ch. 314, Mc.K. Unconsol. Laws, s 8551 et seq., was enacted and became effective. By the terms of that statute rents for business properties were frozen at the rent paid on June 1, 1944, plus 15%. In those circumstances, on May 1, 1945, the city claiming to be protected by the Business Rent Control Law refused to pay the rent reserved in the lease executed October 31, 1944, on the ground that the emergency rent fixed by the statutory formula prescribed by chapter 314 of the Laws of 1945 was applicable. According to that formula the statutory emergency rent per year computed on the basis of the annual rent paid by the city on June 1, 1944 ($123,300) plus 15% amounted to $141,795.

By its petition in this proceeding, Court Square Building, Inc., the landlord, seeks a determination that the Business Rent Control Law, L. 1945, ch. 314, does not apply to the City of New York as a tenant and that the city is obligated to pay the rent specified in the lease executed October 31, 1944. In the event the Business Rent Control Law is held to be applicable, the petitioner asks that the emergency rent provided by that statute be held inadequate and that the reasonable rent be fixed at the figure provided in the lease of October, 1944.

At Special Term, the Business Rent Control Law was held to be applicable to the city's tenancy and the landlord's petition for a greater rent than the emergency rent was dismissed the ruling being that the emergency rent was a fair rent for the space occupied by the city.

At the Appellate Division, it was also ruled that the Business Rent Control Law was applicable to the city's tenancy. The Appellate Division found, however, that the plaintiff-landlord was entitled to rent in excess of the emergency rent and fixed an annual rent greater than that provided by the Special Term order. From the order of the Appellate Division both the landlord-petitioner and the tenant-respondent appeal to this court.

The landlord's first contention upon this appeal is that the Business Rent Control Law does not apply to the City of New York as a tenant. In support of that position it is argued that, inasmuch as a lease was executed prior to the effective date of the statute, March 28, 1945, the rent control law cannot be held applicable for it would then constitute a violation of the constitutional prohibition against impairing the obligation of a contract. The same argument was advanced in Twentieth Century Associates v. Waldman, 294 N.Y. 571, 63 N.E.2d 177, 162 A.L.R. 197, where this court considered the constitutionality of the Commercial Rent Control Law, L. 1945, ch. 3, McK. Unconsol. Laws, s 8521 et seq. The statute there involved differed from the statute now before us in that it covered different types of property, had a different effective date and a different date for the freezing of rents. In other respects the Commercial Rent Control Law and the Business Rent Control Law are alike. In the Twentieth Century Associates case, supra, the Commercial Rent Control Law was held to be a constitutional exercise of the police power and the statute there being considered was held to be applicable to leases executed prior to its effective date. We regard the rule of that case as decisive of the challenge upon this appeal by the petitioner-landlord to the constitutional validity of the Business Rent Control Law. In that connection we note that the enactment of the statute last mentioned was prompted by the same emergency arising from the prevalence of the same conditions affecting public welfare that caused the enactment of the Commercial Rent Control Law, compare L. 1945, ch. 314, s 1, McK. Unconsol. Laws, s 8551, with L. 1945, ch. 3, s 1, McK. Unconsol. Laws, s 8521.

The petitioner-landlord also claims that because the city possesses the power of eminent domain, it does not need, and should not be allowed, the protection of the Business Rent Control Law. We find nothing in the statute which indicates that it applies only to certain types of tenants excluding those, such as cities, which have the right of eminent domain. Indeed, under subdivision (g) of section 8, id. which defines the circumstances in which tenants may be evicted thereunder it is provided: ‘In no event, however, shall any tenant be evicted under or pursuant to the provisions of this subdivision * * * who is * * * an agency of the federal government, the state, the city, or any county’. It would thus seem that the need for specifically excluding ‘an agency of * * * the city,’ when reference is made to the rights under this section of ‘any tenant’, is an indication that the Legislature, in referring repeatedly to tenants throughout the statute, intended to include municipalities. Accordingly, we are in agreement with Special Term and the Appellate Division that the provisions of the Business Rent Control Law are constitutional and applicable to the city's tenancy here involved.

We come then to the landlord's contention that, if it be held that the city's tenancy is subject to the provisions of the emergency rent legislation, then the reasonable rent for the space occupied by the city should be fixed at $163,850. Opposed to this contention the city asserts that the emergency rent fixed according to the statutory formula was a fair and reasonable rent for the premises here involved and, therefore, the landlord is not entitled to rent in excess of this amount. The formula by which the courts are to determine whether a landlord is entitled to more than the statutory emergency rent is set forth in section 4 of chapter 314 of the Laws of 1945, as follows:

‘s 4. A rent, exceeding in amount the emergency rent, may within the limitations specified by this section, be fixed by arbitration or by the supreme court. The rent to be so fixed shall be a reasonable rent based on the fair rental value of the tenant's business space as of the date the application to the supreme court or submission to arbitration is...