State v. Wolowitz

• Decision Date: 24 October 1983
• Parties: STATE of New York, Appellant, v. Arnold WOLOWITZ d/b/a La Bonne Vie Associates, etc., Respondent. Arnold WOLOWITZ d/b/a Country Club Associates, etc., Respondent, v. The STATE of New York, etc., Appellant.
• Court: New York Supreme Court — Appellate Division

Page 131

468 N.Y.S.2d 131

96 A.D.2d 47

STATE of New York, Appellant, v. Arnold WOLOWITZ d/b/a La Bonne Vie Associates, etc., Respondent.

Arnold WOLOWITZ d/b/a Country Club Associates, etc., Respondent, v. The STATE of New York, etc., Appellant.

Supreme Court, Appellate Division,

Second Department.

Oct. 24, 1983.

Robert Abrams, Atty. Gen., New York City (Melvyn R. Leventhal, Stephen Mindell, Herbert Israel, Asst. Attys. Gen., New York City, and Andrew L. Levy, White Plains, of counsel), for appellant.

Wofsey, Certilman, Haft, Lebow & Balin, Valley Stream (David I. Rosenberg, Valley Stream, of counsel), for respondent.

Before LAZER, J.P., and GIBBONS, NIEHOFF and BOYERS, JJ.

GIBBONS, Justice.

Arnold Wolowitz, doing business as La Bonne Vie Associates, LBV Realty Associates, and Country Club Associates (hereinafter respondent) owns and operates two apartment complexes in Suffolk County known as the La Bonne Vie and La Bonne Vie II. The latter contains 635 apartment units and is located in East Patchogue; the Respondent utilizes a form lease of 15 printed pages. He, through his attorney, acknowledges that the terms of the lease are not negotiable and that it is presented to a prospective tenant on a take-it-or-leave-it basis.

former is in Coram and has 256 apartment units.

Acting in response to various complaints received from respondent's tenants, in or about January, 1979, the State Attorney-General commenced an investigation of various acts and practices of respondent, including an inquiry into the propriety of several of the provisions in the lease. The Attorney-General's office corresponded with respondent and his attorney, and vice versa, and, at one point, a conference was held. This informal communication failed to resolve the parties' differences.

During the pendency of the Attorney-General's investigation, by letter dated June 25, 1979, respondent notified tenants in La Bonne Vie II that, effective July 1, 1979, their rent would be increased five per cent a month, the increase to remain in effect until the end of the lease term. Tenants in the La Bonne Vie apartments were informed of a flat $10 per month increase in rent. According to respondent, the rent surcharge was necessitated by rising heating oil costs which, in turn, were caused by the nationwide fuel crisis.

It is uncontroverted that there is no provision in the lease authorizing a fuel surcharge. In response to the June 25 letter, a petition of protest signed by 170 tenants from La Bonne Vie II was sent to respondent, with a copy to the Attorney-General's office. On June 28, 1979, a second letter was sent to the tenants by respondent, purporting to clarify the first letter. According to the second letter, respondent was only "requesting a rental increase". The letter goes on to state that "[i]t was our original intention and continues to remain our intention to give each resident that pays the * * * energy increase a rider to their [sic ] current lease which guarantees that new adjusted rent for the balance of its term. Furthermore, we will also waive the provisions of paragraph 32 in their [sic ] lease with regard to any further increases due either to the fuel crisis or any other provision in this paragraph".

Paragraph 32 of the lease is entitled "Tax Clause" and provides for a rent surcharge in the event of an increase in property, water or sewer taxes, or in garbage collection costs. It does not contain a provision relating to heat or fuel.

Many tenants did pay the surcharge and executed a rider to their leases fixing a new monthly rental. The rider included the following paragraph: "In consideration of the aforementioned increase the OWNER waives the provisions in paragraph # 32 of the lease for any further rental increase and further agrees not to impose any further increase due to the fuel crisis. This provision will remain in effect for the full term of the captioned lease". This paragraph was not contained in new leases and renewed leases. Instead, a new paragraph 34 was added to the form lease, designated "Fuel Oil Clause", obligating the tenant to pay an additional $1 a month rent for every cent the cost to respondent of fuel oil exceeded 59 cents per gallon.

Apparently, the June 25 and June 28 letters, purporting to increase the rent, were not sent to new tenants or to tenants who had just renewed their leases. Tenants in these categories were, however, sent a letter, dated July 16, 1979, reading in pertinent part, as follows:

"The reason I had not written to you at that time was that you were either a new resident or had just renewed your lease. With the energy crisis accelerating and the cost of fuel oil continuing to increase at an alarming rate, I am forced to write to you requesting a rental increase due to the energy crisis.

"Since you are a new resident or one that has recently renewed their [sic ] lease we are offering to you the option of either paying a 5% increase per month or signing a rider to your lease which would increase your rent in the future in direct relationship to any future increase in the cost of fuel oil.

"I would appreciate your contacting our office for further explanation or to discuss the alternative which best suit [sic ] your needs. Regardless of which option you choose, you will receive a rider from us which guarantees no further rental increase either due to the fuel crisis or any other provision of your lease, including paragraph # 32."

The Attorney-General's office circulated a form questionnaire to respondent's tenants, asking questions about, among other things, various portions of the lease and the fuel surcharge. About 250 filled-in questionnaires were returned to the Attorney-General.

On or about August 9, 1979, respondent commenced suit against "The State of New York, Department of Law, Robert Abrams, Attorney General", seeking a declaration "that the lease is legal and proper under the Laws of the State of New York", and an injunction enjoining "defendant * * * from any interference with plaintiff in the conduct of his business concerning the lease and its provisions" and "from his conduct regarding an official investigation of the plaintiff and his business". Issue was joined with service of an answer, dated August 22, 1979.

By notice of motion, dated December 19, 1979, the Attorney-General moved to dismiss respondent's complaint for failure to state a cause of action and for failure to join necessary parties to the action, namely, the tenants. By notice of petition and petition, also dated December 19, 1979, the Attorney-General commenced a proceeding against respondent, in the name of the State of New York, for "an order enjoining respondent from engaging in conduct violative of Executive Law § 63(12), directing restitution to eligible tenants and providing each tenant with a new lease in conformity with the Law". The petition contains 10 causes of action. The first alleges that the letters to the tenants, concerning the fuel surcharge, were "false and deceptive", and were "artfully contrived to convey the impression that the rent increase demanded was authorized by clause 32 of the lease". The second cause of action alleges that the lease's new paragraph, number 34, is unconscionable because, among other defects, it "provides for an arbitrary formula without regard to the amounts consumed that can result in a varying month-to-month charge". The remaining causes of action allege that various provisions of the lease are unconscionable and/or violative of statute. Specifically, and pertinent to this appeal, the Attorney-General questions the following provisions: (1) item 15 of the respondent's Rules and Regulations, appended to the lease, which provides that "[i]n the event the Resident requests service to the demised premises and such service call is found to be unwarranted, an 'unwarranted' service fee will be charged to the Resident"; (2) the portion of paragraph 3 of the lease which states that "a 4% late charge may be imposed on rents received after the 5th of the month"; (3) paragraph 31, which sets forth a schedule of attorney fees to be paid to respondent by a tenant in any judicial proceeding commenced against the tenant; (4) paragraph 7, which provides that a tenant's security "will be placed in an interest bearing account and said interest, less 1% service charge, shall be paid to the Resident after expiration of the lease"; and (5) a rider to the lease requiring a tenant, if he wishes to keep a pet, to post "a damage bond" in the amount of one month's rent. In regard to keeping a pet, the Attorney-General alleges that, while not authorized in the rider, it is respondent's practice to require pet owners to pay $10 per month as additional rent.

Respondent moved to dismiss the petition on the grounds that his action against the State involved "the same relief" and "the same parties". In two orders, both dated March 3, 1980, Special Term (BRACKEN, J.) denied the Attorney-General's motion to dismiss respondent's complaint in the first action and denied respondent's motion to dismiss the petition brought by the State of New York. Thereafter, the Attorney-General moved to consolidate both matters. That motion was granted by Special Term (BAISLEY, J.) in the order and judgment being appealed from, dated June 1, 1981.

In the same order and judgment Special Term disposed of both matters on the merits. In its memorandum decision, Special Term wrote, in relevant part: "motion # 6,747, seeking consolidation of these two proceedings is granted. The pleadings under Index # 80-456 [the proceeding under the Executive Law], raise issues, the determination of which has been regarded by the parties as dispositive of both actions, and will be so treated by the court".

Certain of the contentions of the Attorney-General, contained in the petition but not at issue here, were sustained by Special Term. However, all the above-described causes of action were dismissed,...