Tai on Luck Corp. v. Cirota

• Decision Date: 17 December 1970
• Citation: 35 A.D.2d 380,316 N.Y.S.2d 438
• Parties: TAI ON LUCK CORP., Petitioner-Landlord-Appellant, v. Assunta CIROTA d/b/a 70 Bayard Street Pharmacy, Respondent-Tenant-Respondent, and 'John Doe', Respondent-Undertenant.
• Court: New York Supreme Court — Appellate Division

Page 438

316 N.Y.S.2d 438

35 A.D.2d 380

TAI ON LUCK CORP., Petitioner-Landlord-Appellant, v. Assunta CIROTA d/b/a 70 Bayard Street Pharmacy Respondent-Tenant-Respondent, and 'John Doe' Respondent-Undertenant.

Supreme Court, Appellate Division, First Department.

Dec. 17, 1970.

Max Steinberg, New York City, of counsel (Norman C. Harlowe, New York City, attorney) for petitioner-landlord-appellant.

William I. Cohen, New York City (Benjamin Cohen, New York City, with him on the brief) for respondent-tenant-respondent.

Before CAPOZZOLI, J.P., and MARKEWICH, NUNEZ, McNALLY and TILZER, JJ.

NUNEZ, Justice.

Petitioner-landlord appeals, by permission of the Appellate Term, from a determination entered in that Court on May 22, 1970, which by a divided court, reversed a judgment of the Civil Court, New York County (awarding the landlord possession of premises in a holdover proceeding) and directed a new trial.

The pertinent facts in this litigation are sufficiently stated in the dissenting opinion and the majority opinion in the Appellate Term, and need not be repeated herein. Essentially, the question presented is the effect of a provision in a lease (Article 38) which gave the tenant the right to renew for an additional term of five years 'at an annual rental to be determined by the landlord.'

Concededly the tenant complied with the provision in the lease as to appropriate notice of intention to renew. However, although the tenant was paying a rental of $400 per month for the five year term ending May 31, 1969, the landlord, upon being advised of the intention to renew, 'determined' that the rental for the renewal period was to be $2,000 per month.

At the trial in the Civil Court, the tenant interposed an equitable defense claiming that the parties had by mistake omitted to qualify the provision of Article 38 to restrict any increase in rent during the renewal term to a sum not in excess of 15% Of the rent for the first term. The Appellate Term affirmed the finding by the Civil Court that the defense of mistake had not been sustained. In view of our determination herein, it is unnecessary to disturb that finding.

However, the majority of the Appellate Term found that the $2,000 monthly rental fixed by the landlord on its face 'appears arbitrary and unconscionable' and remanded the proceeding 'for a new trial, to be treated as a non-payment proceeding, to determine whether or not the rent demanded by the landlord was in fact arbitrary or unconscionable.' The Appellate Term further directed that upon such new trial: 'If the rent fixed by landlord is found to be arbitrary or unconscionable, the trial court shall fix a rent not unconscionable in the circumstances, upon proof of all relevant factors and not necessarily confined to what may be deemed a reasonable rent.'

We agree with the conclusion of the Appellate Term that the interests of justice require a new trial. Little can be added to the opinion of the majority in the Appellate Term to demonstrate the soundness of the decision arrived at. Rigid formalism should not prevent courts from refusing to enforce arbitrary and unconscionable acts.

Nor od we see any insuperable objection to affirmance in the reasons advanced in the dissenting opinion. That a landlord and tenant relationship exists is clearly established by the record. The tenant in possession exercised the option and extended the tenancy as provided by the lease. The dissent concedes that the rent demanded for the new term is unconscionable. Yet the dissent would compel the tenant to pay that rent or forfeit all rights. The law in such cases properly imposes a condition that the rentals so fixed by not arbitrary and unconscionable.

The extended discussion in the dissenting opinion regarding the effect of the majority's decision upon possible further appeal to the Court of Appeals seems inappropriate at this juncture and consequently will not be dealt with herein except for an observation or two. Initially it must be emphasized that the power of this court to review the determination of the Appellate Term could be invoked only by the filing of a stipulation for judgment absolute (see CPLR 5703(a)). The giving of such a stipulation is an act that is always fraught with dangerous consequences (see Mackay v. Lewis, et al., 73 N.Y. 382, 383; Hiscock, et al. v. Harris, et al., 80 N.Y. 402, 407). If those consequences ensue upon an affirmance, it seems faulty logic and misplaced indulgence that would seize upon such foreseeable development as a basis for relieving a litigant from the effects of the stipulation. The furthest the Court of Appeals has gone in such situations has been to permit a withdrawal of the stipulation and the appeal (Vento, et al. v. South Brooklyn Ry. Co., 271 N.Y. 614, 3 N.E.2d 211; Sperti v. City of Niagara Falls, 281 N.Y. 708, 23 N.E.2d 540). We cannot, as indicated in the dissent, consciously ignore the existence of the stipulation and treat the appeal as if the stipulation did not exist.

In any event, it is suggested that the usual course in treating with the question of further appeal to the Court of Appeals is to await an application by interested counsel, and not to anticipate that problem or to render an advisory opinion on it. We should go no further than decide the appeal before us.

We conclude that the determination of the Appellate Term should be affirmed, without costs or disbursements. However, since the landlord, in order to obtain leave to appeal to this court (CPLR 5703(a)), stipulated for judgment absolute in the event of an affirmance, there must be a final holding that the rent demanded by the landlord is arbitrary and unconscionable, that the proceeding be converted into a non-payment proceeding, and the matter be remanded to the Civil Court for the sole purpose of determining the appropriate rental for the renewal period in accordance with the criteria laid down by the Appellate Term. (See Matter of Brosowski v. American Airlines, Inc., et al., 297 N.Y. 849, 78 N.E.2d 866; Tortora v. State of New York, 269 N.Y. 167, 199 N.E. 44; Cohen & Karger, Powers of the New York Court of Appeals, § 69, p. 306.)

Determination, Appellate Term, Supreme Court, First Department, entered on May 22, 1970, affirmed, without costs and without disbursements, and the matter is remanded to the Civil Court for the sole purpose of determining the appropriate rental for the renewal period in accordance with the criteria laid down by the Appellate Term.

Settle order.

All concur except MARKEWICH and McNALLY, JJ., who dissent in a dissenting opinion by McNALLY, J.

McNALLY, Justice (dissenting).

I would reverse the judgment of the Appellate Term and reinstate the judgment of the Civil Court in this summary proceeding and would award possession to the landlord-appellant.

On May 24, 1964, a lease was entered into between Jennie C. Lee and Assunta Cirota. This lease expired on May 31, 1969. The annual rent set forth therein was $4,800 payable $400 monthly. The lease was on the standard form of Real Estate Board of leases and paragraph 38 contained the following clause:

'Tenant may renew this lease for an additional term of five years next succeeding May 31, 1969, at an annual rental rate to be determined by the landlord, provided, however, that tenant gives notice in writing to the landlord, by registered mail, of its intention so to renew, no later than four months prior to the expiration date of the first five year term.'

The present landlord-appellant purchased the subject property on August 1, 1968 from a corporation which acquired it in February, 1967 from Jennie C. Lee and took title subject to the said lease.

The tenant interposed the following equitable defense. Article 38 omitted by mistake a provision that the rental for the additional five-year term would not exceed 15% Above that for the first term. The trial court held that the tenant failed to sustain this defense and awarded final judgment of possession to landlord. The majority in the Appellate Term held that the defense of mistake was not made out, but directed a new trial, not on the ground of holdover as stated in the petition, but on the ground of non-payment on the premise that if the rent to be determined by the landlord was construed as meaning any sum arbitrarily fixed by the landlord, his promise to renew was illusory and no promise at all since it was defeasible at the landlord's sole will be demanding a wholly unrealistic rent. The proceeding was remanded for a new trial to be treated as one for non-payment, permitting the trial court to determine whether or not the rent demand was arbitrary and unconscionable, and if the rent was found to be arbitrary and unconscionable, the trial court was directed to fix a rent not unconscionable in the circumstances.

Extremely important questions concerning holdover summary proceedings for the possession of business property are involved. Implicit in the holding the Appellate Term is the dismissal of the holdover petition. In addition, the Appellate Term Sua sponte has foisted on the landlord a non-payment proceeding and directed a trial to determine whether landlord's rent demand for a renewal is arbitrary or unconscionable and, if so, to fix the reasonable rent for the period of renewal. The majority has affirmed this holding.

There is jurisdictional and fundamental difference between a holdover and a non-payment proceeding. A holdover proceeding requires the allegation and proof of 'the...