Park Holding Co. v. Johnson

• Decision Date: 11 December 1980
• Citation: 106 Misc.2d 834,435 N.Y.S.2d 479
• Parties: PARK HOLDING CO., Petitioner-Landlord, v. Jennifer A. JOHNSON, Respondent-Tenant.
• Court: New York City Court

Page 479

435 N.Y.S.2d 479

106 Misc.2d 834

PARK HOLDING CO., Petitioner-Landlord, v. Jennifer A. JOHNSON, Respondent-Tenant.

Civil Court of the City of New York, New York County, Trial Term, Part 49B.

Dec. 11, 1980.

Steinberg & Siegel, Brooklyn (Samuel Steinberg, Brooklyn, of counsel), for petitioner-landlord.

No appearance for respondent-tenant in default.

JAY STUART DANKBERG, Judge.

Does a failure to give a required security deposit constitute a breach of a substantial obligation of a tenancy? Given the multitude of landlord-tenant relationships in New York, it may seem strange, but neither the Court's nor counsel's research has uncovered any reported decision on point. Accordingly, this is a case of apparent first impression.

In this holdover summary proceeding based upon the alleged breach of a substantial obligation of tenancy, I give full credence to the testimony of landlord's witness and find and decide the following.

On May 16, 1980, petitioner-landlord and respondent-tenant executed a lease for the period June 1, 1980 to May 27, 1981 at a monthly rent of $950. The leasehold estate is covered by the Rent Stabilization Law of 1969 (as amended). Pursuant to the lease, tenant gave a check representing one month's rent to be held as a security deposit. The check was dishonored for insufficient funds. A letter did not result in payment and landlord commenced legal proceedings to recover possession of the apartment. After having been served with the applicable notices and a petition and notice of petition, respondent defaulted in making a court appearance and an inquest was held.

"It is quite usual for a landlord to require a tenant to deposit with him a sum of money or other security, such as a bond, to secure payment of the rent, or performance of the covenants and conditions of the lease on the tenant's part to be performed" (Rasch, New York Landlord and Tenant, Summary Proceedings, 2nd Edition, § 379).

Both of the major New York City tenancy protective enactments Rent Stabilization Code, in § 63, and Rent, Eviction and Rehabilitation Regulations, ("Rent Control"), in § 65 authorize a landlord to have a lease clause requiring the deposit of one month's rent as security. In fact, the giving of a lease security deposit is so universal, Social Services Law 143-c allows the Department of Social Services to provide lease security for a recipient of public assistance by means of an agreement, by depositing money in an escrow account, or even by making a deposit in cash.

It has long been established in New York that a tenant who has given a security deposit must keep good the amount of the deposit for such time as he continues in possession of the demised premises pursuant to the lease (see Matter of Atlas v. Moritz, 217 App.Div. 38, 42, 216 N.Y.S. 490 (4th Dept., 1926); see also, Turquoise Realty Corp. v. Burke, 168 Misc. 670, 6 N.Y.S.2d 125 (Municipal Court, New York Co., 1938) and Euclid Holding Co. v. Kermacoe Realty Co., Inc., 131 Misc. 466, 227 N.Y.S. 103 (Municipal Court, New York Co., 1928)).

Under the 1926 holding of Matter of Atlas, supra, if the security was not kept whole, the landlord could "maintain a suit in equity to compel the tenants to restore the deposit" (Turquoise Realty Corp., supra 168 Misc. at 672, 6 N.Y.S.2d at 125). In 1980, does a landlord have available any other alternatives to compel a tenant to restore or (as here) provide an otherwise legal, lease required security deposit?

The nature of the security deposit relationship has undergone massive changes in New York since 1926, when Matter of Atlas was decided. Until 1935, it was uniformly held that a tenant's deposit of security under a lease created a debtor-creditor relationship by which the landlord could use such money until the time specified for repayment (Mendelson-Silverman, Inc. v. Malco Trading Corp., 262 N.Y. 621, 188 N.E. 92 (1933); Malco Trading Corp. v. Mendelson-Silverman, 240 App.Div. 322, 269 N.Y.S. 95, aff'd 264 N.Y. 651, 191 N.E. 609 (1934); Rambach v. Heights Theatres, Inc., 239 App.Div. 203, 267 N.Y.S. 208 (1st Dept., 1933); Jahmes Co., Inc. v. Propper, 238 App.Div. 326, 264 N.Y.S. 279 (1st Dept., 1933); Levinson v. Shapiro, 238 App.Div. 158, 263 N.Y.S. 585 (1st Dept., 1933)).

That relationship was changed by the Legislature in 1935. By operation of a statute enacted to provide protection to the lessee-tenant (Mallory Associates, Inc. v. Barving Realty Co., 300 N.Y. 297, 301-2, 90 N.E.2d 468 (1949)), known in 1980 as General Obligations Law 7-103 (originally enacted as Real Property Law 233, subsequently amended several times, repealed and now re-enacted), the debtor-creditor relation between landlord-lessor and tenant-lessee has been transformed into a trust. With this legislative mandate, landlords holding lease security deposits were changed from debtors into trustees (People v. Horowitz, 309 N.Y. 426, 428, 131 N.E.2d 715 (1956); Mallory Associates, Inc. v. Barving Realty Co., supra; Matter of Perfection Technical Services Press, Inc. (Cherno-Dalecar Realty Corp.), 22 A.D.2d 352, 356, 256 N.Y.S.2d 166, aff'd without opn. 18 N.Y.2d 644, 273 N.Y.S.2d 71, 219 N.E.2d 424 (1966)).

Though such security deposit is held in a trust capacity, such trust "should not serve to obscure the basic nature of a security deposit. A landlord requires such a deposit, although still the property of the tenant, to attain the status of a protected creditor should the tenant breach the lease" (Glass v. Janbach Properties, Inc., 73 A.D.2d 106, 108-9, 425 N.Y.S.2d 343 (2nd Dept., 1980)).

A lease, in fact, is more than a mere simple conveyance of an interest in real estate "for a fixed period of time. Typically it is...