East 56th Plaza, Inc. v. New York City Conciliation and Appeals Bd.

• Decision Date: 19 May 1981
• Citation: 439 N.Y.S.2d 361,80 A.D.2d 389
• Court: New York Supreme Court — Appellate Division
• Parties: In the Matter of the Application of EAST 56TH PLAZA, INC., Petitioner-Appellant, for a judgment pursuant to Article 78 of the Civil Practice Law and Rules v. NEW YORK CITY CONCILIATION AND APPEALS BOARD, Respondent-Respondent.

Page 361

439 N.Y.S.2d 361

80 A.D.2d 389

In the Matter of the Application of EAST 56TH PLAZA, INC. Petitioner-Appellant for a judgment pursuant to Article 78 of the Civil Practice Law and Rules v. NEW YORK CITY CONCILIATION AND APPEALS BOARD, Respondent-Respondent.

Supreme Court, Appellate Division First Department.

May 19, 1981.

Arthur Richenthal, New York City, of counsel (Richenthal, Abrams & Moss, New York City, attorneys), for petitioner-appellant.

William E. Rosen, New York City, of counsel (Ellis S. Franke, New York City, attorney), for respondent-respondent.

Before SANDLER, J. P., and SULLIVAN, ROSS, CARRO and FEIN, JJ.

SULLIVAN, Justice.

A narrow question of law is presented as to the interpretation of a provision of the Rent Stabilization Code. The facts are not in dispute.

Petitioner is the owner of a New York City luxury apartment building in which all of the housing accommodations are subject to the provisions of the New York City Rent Stabilization Law of 1969. (Local Law 16 of 1969, as amended to date by Chap. 576, Laws of 1974, and subsequent Local Laws.) On September 27, 1979, it submitted to the Attorney General of the State of New York a proposed offering plan for converting the building to cooperative ownership. The same day petitioner gave written notice of the filing of such plan to the Rent Stabilization Division of the New York City Department of Housing Preservation and Development (HPD).

Previously, by letter dated July 11, 1979, petitioner pursuant to section 60 of the Rent Stabilization Code, ¹ had offered the tenants of apartment 20B, Mr. and Mrs. Sigmund Schutz, a renewal of their existing lease, which was due to expire on September 30, 1979. In its offer petitioner explained the tenants' options as to the election of an extension of the lease for a term of one, two or three years. Petitioner also enclosed, in triplicate, an unsigned renewal agreement which contained the terms of the proposed renewal lease and provided an appropriate place for the tenants to indicate by their signature the choice of a lease term. The document concluded with the provision "IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written." Spaces for signature by both the landlord and the tenants immediately followed.

The tenants selected a three-year term commencing October 1, 1979 at a monthly rental of $1,059.15, affixed their signatures twice in the appropriate places, and on or about July 28, 1979, returned the renewal agreement in triplicate to petitioner's managing agent with a check for the additional security based upon the increased stabilization rent. Petitioner, however, anticipating the filing of an offering plan for conversion of the building to cooperative ownership and intending in that event, to include in the lease the 90-day cancellation clause authorized by Section 61(7) of the Code, did not deposit the tenants' check for the additional security or sign the renewal lease agreement.

On September 28, 1979, the day after the filing of the proposed conversion plan and notice to HPD of such filing, petitioner hand-delivered to the tenants the renewal agreement together with a rider containing the 90-day cancellation clause authorized by section 61(7) of the Code. A covering letter requested the tenant to "review, sign the rider and return ... for further processing and signature of the Landlord." The cancellation clause reads as follows:

CO-OP CANCELLATION CLAUSE

The tenant is hereby advised that the owner has submitted a proposed plan of cooperative conversion for the demised premises to the New York State of Attorney General and that the Department of Housing Preservation and Development has been notified of such submission. In accordance with section 61, subsection 7 of the Code of the Rent Stabilization Association, owner and tenant agree that owner may cancel this lease upon ninety day notice to tenant that the proposed plan of cooperative conversion has been declared effective.

Thereafter, apparently on October 5, 1979, the tenants signed the rider with the notation "under protest", and returned to petitioner's managing agent both the renewal agreement initialled, also under protest, to show the inclusion of the rider, and the rider. Petitioner immediately signed the renewal agreement and rider and returned an executed copy to the tenants.

The tenants, challenging the validity of the 90-day cancellation clause, thereupon filed a complaint with the New York City Conciliation and Appeals Board. The Board declared the cancellation clause a nullity, finding that section 61(7) of the Code does not permit the insertion of such a clause into the lease after the tenant has been offered and has accepted and signed a renewal agreement which does not contain such a clause. Petitioner then commenced this Article 78 proceeding to vacate the Board's determination. Special Term denied the petition and dismissed the proceeding, a disposition with which we disagree. We would reverse, grant the petition and annul the order and opinion of the Board.

Section 61(7) of the Rent Stabilization Code provides:

Notwithstanding anything contained herein to the contrary, any renewal or vacancy lease executed after notice to the Department of Housing Preservation and Development that a proposed cooperative or condominium Plan has been submitted to the Attorney General may contain a provision that the lease may be cancelled after 90 days' notice to the tenant that the Plan has been declared effective. In any lease containing such a provision, upon submission of the Plan of cooperative or condominium ownership to the tenant after acceptance for filing by the Attorney General, no increase in rent may be collected thereafter pursuant to said lease. If the Plan is abandoned then the rent will be at the rate set forth in said lease from the date of abandonment.

Thus, once notice is given to HPD of the submission of a proposed cooperative plan to the Attorney General, any vacancy or renewal lease thereafter "executed" may provide for cancellation of the lease after 90 days' notice to the tenant that the plan has been declared effective. Here, submission of the plan and, perforce, notice thereof to HPD, occurred subsequent to the time the tenants had been offered and signed a proposed renewal lease, but before petitioner, as landlord, had signed. Thus, the issue is whether under section 61(7) of the Code a renewal lease which by its terms requires the signatures of both landlord and tenant for its validity is executed when only the tenant has signed the lease. The Board held that the landlord could not insert the 90-day cancellation clause once the tenant had signed the renewal lease, thereby ruling, in effect that the lease was executed when the tenants alone signed. In our view this determination is contrary to law.

A lease or other bilateral contract which, as here, provides for the signature of both parties is "executed" only when it is signed by both parties and delivered. (See 219 Broadway Corp. v. Alexander's, Inc., 46 N.Y.2d 506, 414 N.Y.S.2d 889, 387 N.E.2d 1205.) "the parties to an agreement do not intend it to be binding upon them until it is reduced to writing, and signed by both of them, they are not bound and may not be held liable until it has been written out and signed." (Scheck v. Francis, 26 N.Y.2d 466, 468-470, 311 N.Y.S.2d 841, 260 N.E.2d 493.) As already noted, the renewal agreement contained a signature place for both "Landlord" and "Tenant", immediately following the provision "IN WITNESS WHEREOF, the parties have executed this Agreement ...." Obviously execution of the lease contemplated a signing by both parties.

In 219 Broadway Corp. v. Alexander's, Inc., 46 N.Y.2d 506, 414 N.Y.S.2d 889, 387 N.E.2d 1205, supra, the Court of Appeals had occasion to reiterate a fundamental principle relating to the making of a lease:

A lease ... requires the fulfillment by the parties of certain prerequisites to take effect. It is the well-established rule in this State that delivery is one such requirement, the absence of which, without more, renders the lease ineffective. (Id. at 511, 414 N.Y.S.2d 889, 387 N.E.2d 1205.)

Special Term's attempt to distinguish 219 Broadway on the ground it involved "commercial property not bound by the Rent Stabilization Code" is unavailing. Rent Stabilization affects the substantive content of leases but in no way purports to change well-established principles relating to the requisites for execution of leases. Whether commercial or residential, and if residential, rent stabilized, or free from statutory controls, a written lease agreement ² requires the formalities of signature by both parties for its proper execution.

Nor do we find any basis for an administrative interpretation of "executed", as that term is used in section 61(7) of the Code, different from the established meaning ascribed to it by legal precedent. The language of section 61(7) of the Code, "any renewal or vacancy lease executed after notice," could not be clearer. "Statutory language which is plain and unambiguous should be construed in its natural and most obvious sense." (Fullerton v. Gen. Motors Corp., 46 A.D.2d 251, 252, 362 N.Y.S.2d 581; McKinney's Statutes §§ 94, 232.) In construing the Rent Stabilization Law or the Code, in the absence of express provision otherwise, the settled meaning of a term should control. As one court has noted in considering terms used in the Workmen's Compensation Law:

words have a distinct and well-defined meaning in the jurisprudence of the State, and must be deemed to have the same meaning when used in the statutes. (Skeels v. Paul Smith's Hotel Co., 195 App.Div. 39, 42, 185 N.Y.S. 665.)

In ignoring the explicit language of section 61(7) and the settled meaning of the term "executed" as that term applies to bilateral written contracts, and in disregarding the format and "execution" clause of the...