Hotel Ass'n of New York City v. Weaver

• Decision Date: 03 July 1957
• Citation: 3 N.Y.2d 206,165 N.Y.S.2d 17,144 N.E.2d 14
• Parties: , 144 N.E.2d 14 HOTEL ASSOCIATION OF NEW YORK CITY, Inc., et al., Appellants, v. Robert C. WEAVER, as State Rent Administrator, Respondent.
• Court: New York Court of Appeals Court of Appeals

Page 17

165 N.Y.S.2d 17

3 N.Y.2d 206, 144 N.E.2d 14

HOTEL ASSOCIATION OF NEW YORK CITY, Inc., et al., Appellants, v. Robert C. WEAVER, as State Rent Administrator, Respondent.

Court of Appeals of New York.

July 3, 1957.

Charles W. Merritt, New York City, for appellants.

Beatrice Shainswit and Nathan Heller, New York City, for respondent.

CONWAY, Chief Judge.

This is an appeal by permission of the Appellate Division, First Department from its order affirming without opinion an order of the Supreme Court, New York County, which dismissed a petition filed pursuant to article 78 of the Civil Practice Act and section 9 of the State Residential Rent Law (L.1946, ch. 274, as amended), McK.Unconsol. Laws, § 8589.

The petitioner Hotel Association of New York City is a membership corporation consisting of, and representing, 171 hotels in New York City. The petitioner Hotel Wellington, Inc., is the owner-operator of the Hotel Wellington located in Manhattan, and containing housing accommodations subject to control under the State Residential Rent Law. The original proceeding was brought under subdivision 1 of section 12 of that law, McK.Unconsol.Laws, § 8592, subd. 1 for an order decontrolling the rents of rooms contained in hotels in New York City. Subdivision 1 of section 12 (as amended by L.1955, ch. 685) provides: '1. Whenever the commission shall find that, in any municipality specified by the commission, (a) the percentage of vacancies in all or any particular class of housing accommodations is five per centum or more, or, (b) the availability of adequate rental housing accommodations and other relevant factors are such as to make rent control unnecessary for the purpose of eliminating speculative, unwarranted, and abnormal increases in rents and of preventing profiteering and speculative and other disruptive practices resulting from abnormal market conditions caused by congestion, the controls imposed upon rents by authority of this act in such municipality or with respect to any particular class of housing accommodations therein shall be forthwith abolished; provided however that, except as otherwise provided in this section, no controls shall be abolished by the commission unless the commission shall hold a public hearing or hearings on such proposal at which interested persons are given a reasonable opportunity to be heard.'

The appellants in their petition to the Rent Administrator requested that the commission:

(a) make a finding that hotels are a class of housing accommodations within the meaning of section 12;

(b) make a finding that the percentage of vacancies in housing accommodations in New York City hotels is more than 5%.

(c) make a further finding that the availability of housing accommodations in hotels in New York City, and other relevant factors, are such as to make rent control of such accommodations unnecessary for the purpose of eliminating speculative, unwarranted and abnormal increases in rents and of preventing profiteering and speculative and other disruptive practices resulting from abnormal market conditions caused by congestion;

(d) hold a public hearing on this petition;

(e) thereafter issue an order abolishing controls on rents of housing accommodations in hotels in New York City;

(f) in the alternative, make a finding that hotels 125 rooms or more are a class of housing accommodations within the meaning of section 12; that the percentages of vacancies therein is more than 5%; hold a public hearing thereon and thereafter issue an order abolishing the control on rents in such part of the housing accommodations as are located in hotels of 125 rooms or more in New York City;

(g) in the alternative, take the same steps in relation to any other limited class of housing accommodations located in hotels in New York City as may be consistent with the purposes of the State Residential Rent Law.

Annexed to the petition were certain data and statistics relating to the percentage of vacancy in the total number of rooms, controlled and decontrolled, in 80 hotels in New York City, constituting 53% of the total hotel rooms in the city. Though the statistics were broken down among transient, semitransient, and residential hotels, no attempt was made in arriving at an average vacancy figure to separate controlled from decontrolled units. Though figures were produced to show the rents being paid for varying sizes of units subject to control, there was nothing to show the percentage of vacancy at the various rental levels. No figures were submitted regarding the percentage of vacancy in housing accommodations other than hotels. Petitioners' exhibit 'B' is a photostat of portions of a leading daily newspaper during October, 1955, in wich 61 New York hotels had placed advertisements for tenants. These are the few facts, briefly stated, which the appellants submitted to the commission as warranting decontrol. The administrator denied the petition in all respects in a decision which in substance set forth the following grounds:

1. Subdivision 1 of section 12 does not apply 'to protected hotel tenants as such, except insofar as they are deemed to be part of total controlled led housing population of the State. This latter class comprise the permanent housing population * * *.' (Emphasis added.)

2. The phrase 'in any particular class' as contained in subdivision 1 of section 12 refers not to the location within a certain type of building but to accommodations within a particular price range. Therefore, since a 5% vacancy ratio was not shown to exist within a class as defined above, but related only to hotels in general, there is no basis for decontrol under subdivision 1 of section 12.

3. Petitioners failed to establish pursuant to section 12 (sub. 1, par. (b)) 'that there are adequate rental housing accommodations available which could be rented by the controlled hotel tenants at rentals which would not result in speculative, unwarranted and abnormal increases in rents or 'hardship and dislocation."

4. In view of the foregoing, the petitioners were not entitled to a public hearing under section 12.

It may perhaps be noted also that the administrator claims approximately 20,000 tenants would be affected by the decontrol requested, whereas the petitioners place the figure at only 10,000.

If, as the petitioners contend, the ruling of the administrator is arbitrary, capricious and unreasonable, and not in accordance with the law, then we must reverse.

There is no provision in the statute which specifies that hotels as such shall constitute a 'class of housing accommodations'. Section 4 (subd. 4, par. (a)), McK.Unconsol.Laws, § 8584, subd. 4(a) of the act authorizes the commission to promulgate such rules and make such orders as it may deem necessary or proper to effectuate the legislative purpose. Subdivision 6 of section 4 provides that an order may contain such classifications and differentiations 'as in the judgment of the commission are necessary or proper in order to effectuate the purposes of this act.' (Emphasis added.) Clothed with this latitude of discretion, the administrator was here called upon to construe and apply the broad phrase, 'any particular calss of housing accommodations'. This phrase, it should be noted, was not contained in the 1950 enactment (L.1950, ch. 250), but was added by amendment in 1951 ( § 12, subd. 1, as amended by L.1951, ch. 443), which was enacted upon the recommendation of the commission. Indeed, those very words were suggested by the commission. Thus, not only was an administrative agency charged with the duty of initially construing and applying broad statutory language, but that language was its own. In construing and applying its own suggested words as now contained in the statute, it was bound to effectuate the purpose of the Legislature which was declared to be the prevention of the 'exactions of unjust, unreasonable and oppressive rents and rental agreements and to forestall profiteering, speculation and other disruptive practices' ( § 1, subd. 1, McK.Unconsol.Laws, § 8581, subd. 1). It was in this setting that the administrator determined that for purposes of decontrol, the word class refers not to the particular type or nature of the accommodation, e. g., hotels, but to accommodations in the general housing market which fall in the same rental level regardless of the fact that the accommodation happens to be in a particular type of building. The basis for this conclusion was that tenants who occupy accommodations at the lowest price levels do not compete with tenants in accommodations at the highest rent levels. If, as the petitioners request, the class were determined simply by the type of building involved, a substantial vacancy in high-priced accommodations would result in the decontrol also of low-priced accommodations as to which there is, or may be a shortage. Decontrol on the basis of an over-all 5% vacancy in hotels would force those tenants out into an uncontrolled housing market in which the availability of accommodations is not such as to preclude the danger sought to be guarded against by the Legislature the prevention of exactions of oppressive rents and the forestalling of profiteering and other disruptive practices. Thus it was felt by the administrator that a class should be determined only on the basis of amount of rent charged so that, in keeping with the statutory purpose, when a particular class should be decontrolled there would be available to the previously protected tenants a sufficiently free market to permit the resumption of normal bargaining between landlords and tenants. This would prevent the exaction of oppressive rents and forestall speculation and profiteering. The commission having thus exercised its power, it remains only to determine whether it has been guilty of an abuse of it.

Petitioners contend that the only proper way to interpret the word 'class' is to conclude that hotels, as such,...