Randall-Smith, Inc. v. 43rd St. Estates Corp.

Decision Date24 February 1966
Docket NumberRANDALL-SMIT,INC
Citation268 N.Y.S.2d 306,17 N.Y.2d 99,215 N.E.2d 494
Parties, 215 N.E.2d 494 , Respondent, v. 43RD ST. ESTATES CORP. et al., Appellants, et al., Defendants.
CourtNew York Court of Appeals Court of Appeals

I. Louis Winokur, Jamaica, Philip Adelman, Simon Sheib and Carl I. Kaminsky, New York City, for appellants.

John J. Abberley and Frank Marcellino, New York City, for respondent.

KEATING, Judge.

This is an appeal by the defendants from an order of the Appellate Division, First Department, which modified, on the law and the facts, a judgment of the Supreme Court, New York County, awarding plaintiff treble damages for forcible ejectment from a portion of leasehold premises, by eliminating an item of $1,500 for legal expenses, and, as modified, affirming.

Under the terms of a 10-year lease commencing July 1, 1960, at an annual rental escalating from $12,000 to $14,000 over the term, plaintiff leased the entire eighth floor of certain premises in New York City. The premises, used for commercial art work, photographing and illustrating studios, subleasing to transient commercial artists, and office space for the plaintiff, are partitioned into numerous separate rooms.

Defendants are the lessor, and Charles Kretchmer, Inc., a construction company which participated in the ejectment of plaintiff for the purpose of constructing elevators in plaintiff's premises. A third defendant, MPO Videotronics, Inc., was released from liability by the trial court and is not involved in this appeal. We note, however, that its status as a new lessee of the fourth, fifth, sixth, and seventh floors of the premises prompted defendant to appropriate the portion of plaintiff's leasehold in question.

The record leaves no doubt that plaintiff was forcibly ejected from a portion of the leasehold without justification and over strenuous objection, and that treble damages are appropriate in the circumstances (Real Property Actions and Proceedings Law, Consol.Laws, c. 81, § 853).

We find no error in the exclusion of parol evidence seeking to vary the terms of the lease and pass immediately to the substantial question on this appeal relating to the measure and application of the appropriate rule of damages.

The courts below found that 269 square feet of valuable office space was appropriated and that, while the plaintiff paid $1.90 per square foot for this area under the lease, it had an actual value of $5 per square foot. With evidence to support this valuation, the court stated: 'The actual rental loss thereby suffered by the plaintiff is $1,345 per year (269 times $5) and for the balance of the unexpired lease (8 years) it amounts to $10,760. As this damage should be trebled, the damage award for this item amounts to $32,280.' Defendants were given an opportunity to have the judgment reduced by $1,345 per year if they would stipulate to an equal reduction in the annual rental due under the lease.

Defendant challenge this computation upon the ground that an erroneous rule of law was applied. We agree.

The rule, stated in numerous cases, is that, for an actual partial eviction, the measure of damages is the Difference between the actual rental value and the agreed upon but Unpaid rent. (Buhrmaster v. Ainsworth, 90 Hun 563, 36 N.Y.S. 68; Peerless Candy Co. v. Halbreich, 125 Misc. 889, 211 N.Y.S. 676, 213 N.Y.S. 49; Denison v. Ford, 7 Daly 384 (Ct. of Common Pleas, Gen.Term, 1878); Mack v. Patchin, 42 N.Y. 167; Dodds v. Hakes, 114 N.Y. 260, 21 N.E. 398; Lieberman v. Graf Realty Holding Co., 174 App.Div. 774, 776, 161 N.Y.S. 567, 568.) And if the full rent is paid, as here, the plaintiff is also entitled to receive '(t)he proportionate part of the rent of that portion of the premises from which he is evicted.' (Peerless Candy Co. v. Halbreich, 125 Misc. 889, 891, 211 N.Y.S. 676, 213 N.Y.S. 49, 51, supra). In this case, that amount, prima facie, would be $1.90 per square foot for 269 square feet, or $511.10 per year.

The defendants also contend that the final award, insofar as it covers damages for an eight-year appropriation, must be reduced to an amount equal to its present worth.

In the present circumstances, we agree. We think that due regard for an award which neither overcompensates the plaintiff nor unduly penalizes the defendants warrants reduction of the award to its present value. (See, Hollwedel v. Duffy-Mott Co., 263 N.Y. 95, 188 N.E. 266, 90 A.L.R. 1312; Cornell v. T.V. Development Corp., 17 N.Y.2d 69, 268 N.Y.S.2d 29, 215 N.E.2d 349, decided herewith.)

Under standard valuation tables, if we employ a discount rate of 5% The present value of $1 of annual income for eight years is $6.155. In the following computations, we will employ these 'present worth' figures.

The errors committed below now become apparent. Instead of allowing the plaintiff treble damages only for the difference between rent received under the lease and rental value, treble damages were allowed for the full rental value, and, instead of allowing defendants a reduction of the judgment upon stipulating to a reduction in rent due under the lease, reduction based on rental value was allowed. The effect of the erroneous reduction provision, of course, allowed the defendants to obtain full rental value where, at best, they were only entitled to the $1.90 per square foot reserved.

The appropriate rule of damages to be applied in a case such as this was succinctly stated in the Encyclopedia of New York Law (Vol. 3, Damages, § 1024), citing Holmes v. Davis, 19 N.Y. 488: 'When an action of ejectment is brought by a tenant against his landlord for the recovery of the possession of the demised premises, the damages recoverable for withholding the possession are the value of the use and occupation Under the terms of the lease, and not the value of such use and occupation on the basis of a general ownership by the tenant, and Consequently the rent which the tenant would have been liable to pay if he had enjoyed the possession is to be deducted from the value of the use and occupation during the period of the withholding of the possession.' (Emphasis added.)

Applying this rule to the present case, the court should have multiplied the 269 square feet taken by the difference between rental value and rent reserved ($3.10) to arrive at an annual damage value of $833.90, multiplied by the unexpired term (eight years) for a total damage award of $6,671.20, trebled to $20,013.60. When reduced to its present value, this award comes to $15,397.95.

The $15,397.95 award assumes that the plaintiff will not pay rent for the portion of the leasehold taken.

Of course, if it does pay that rent over the course of the term, it is entitled to have an amount added to its...

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