H. Kauffman & Sons Saddlery Co. v. Miller

Fuld, J. This appeal presents another aspect of the emergency rent legislation affecting property in the city of New York. In 1942, plaintiff rented an entire five-floor building in the borough of Manhattan, for an indefinite term, for the conduct of its business. Four years later, in May of 1946, defendant bought the building. Shortly thereafter, claiming that he needed it for his own commercial use, he began a summary dispossess proceeding in the Municipal Court of the City of *41 New York to remove plaintiff from possession pursuant to subdivision (d) of section 8 of tbe Commercial Kent Law (L. 1945, ch, 3, as amd. by L. 1946, cb. 272). After a precept bad been issued tbe clerk of tbe Municipal Court and after it bad been served upon plaintiff, tbe latter consented to tbe entry of a final order of dispossession and voluntarily vacated tbe premises on August 31, 1946. A surrender under sucb circumstances constitutes a dispossession witbin tbe meaning of tbe rent laws (Sno-Wite, Inc., v. Gerald Operating Corp., 297 N. Y. 1007, decided May 20, 1948, affg. 271 App. Div. 314). A short time later, defendant took over tbe entire building. He did not, however, continue in sole occupancy; about a month or so thereafter, on November 1, 1946, be rented two of tbe five floors to other parties and three months later, on February 1, 1947, rented a third floor to another tenant. Thus, it appears without dispute that defendant, witbin a short time of plaintiff’s removal from tbe premises, relet to third parties 60% of tbe space vacated by tbe tenant. Plaintiff, pointing to tbe provisions of subdivision (d) of section 8, maintains that the facts asserted — namely, that tbe landlord dispossessed tbe tenant and then rented part of tbe tenant’s to third parties — establish, without more, tbe tenant’s right to damages. On tbe other band, defendant contends, since be continues in tbe use and occupancy of a portion of tbe space vacated by tbe tenant, be may not be charged with any liability under tbe rent law. Tbe court at Special Term adopted that view and dismissed tbe complaint; tbe Appellate Division, two justices dissenting, affirmed. Ib tbe clearest of language, tbe Legislature has, in tbe introductory sentence of section 8 of tbe Commercial Rent Law, prohibited a landlord from removing a rent-paying tenant from “ any commercial space ” unless tbe landlord comes witbin one of several enumerated exceptions. One of those exceptions is contained in subdivision (d). Upon tbe strength of that subdivision, a tenant may be dispossessed by a landlord who “ seeks in good faith ” to recover “ tbe [tenant’s] commercial space for bis immediate and personal use ”. However, tbe statute continues, if tbe landlord, having acquired tbe space, (1) “ shall fail,” witbin thirty days of tbe tenant’s dispossession, “ to *42 occupy such space and actively to conduct such business therein,” or (2) “ shall lease or rent such space to or permit occupancy thereof by a third person within a period of one year ” of such dispossession, “.he shall be liable to the tenant for all damages sustained on account of such removal.” A landlord may not, we recently held, remove or dispossess a tenant from a portion of his rented premises; a landlord must,- to avail himself of the privilege granted by subdivision (d), dispossess the tenant from all of the space occupied by him. (See Morse & Grossman, Inc., v. Acker & Co., 297 N. Y. 304.) Such a ruling does not, however — as defendant herein urges — justify the tenant’s ouster from all of his space if the landlord has need of but a fraction of it. By forbidding a tenant’s removal from any of his space, the Legislature has made it manifest that the landlord may invoke the provisions of subdivision (d) and dispossess the tenant from his space — whether it be floor, building or other rental area — only if the landlord seeks all of it for his own use. The language of the statute is too clear to permit the argument that a landlord may dispossess and then relet to others. If the result seems to work hardship a landlord who requires but a portion of his tenant’s premises, recourse must be to the Legislature, and, in that connection, we note the current suggestion of a legislative body that the statute be amended to permit the owner “ to repossess part ” of the premises. (See Report of the New York State Joint Legislative Committee to Study Rents, dated March 8, 1948, N. Y. Legis. Doc., 1948, No. 47, p. 14.) As the statute now stands, if a landlord were tó be permitted to dispossess a tenant from all of his space and then to rent the part which he knew he did not need — perhaps at a higher circumvention of the emergency rent legislation would be facilitated, its evasion encouraged.” (Morse & Grossman, Inc., v. Acker & Co., supra, p. 312.) We are brought, then, to the second and final question posed by this appeal — a question somewhat more difficult of solution. The statute allows the tenant damages if the landlord, haying regained possession, either fails to occupy and carry on his business within thirty days or relets the space to third persons within a year. Does it thereby impose upon the landlord an absolute and inexorable liability — irrespective of good or bad *43 faith — if he disregards the restrictions placed on his use of the vacated space? A strict and literal reading of the statutory language may suggest an affirmative answer, and' some support is given such a conclusion by the circumstance that the immediately preceding subdivision (c) of section 8 — permitting a landlord to evict a tenant in order to demolish the building — expressly exonerates the landlord from liability if he failed within a specified time to accomplish demolition ** for good cause shown "There is no clue, either in the legislative history or in the scheme of the rent laws, for the variance in the language of the two subdivisions. No operative significance may, however, be attached to the omission from subdivision (d) of a similarly explicit exonerative clause, for in the first sentence of that subdivision the Legislature has indicated that ‘ ‘ good faith ’ ’ is the determinative factor. Removal of a tenant is there sanctioned at the hands of the landlord who1 ‘ seeks in good faith ” the space for his own use. In our view, the landlord complies with the statute’s demands if he brings the eviction proceeding with the intention ‘ ‘ to occupy such space ’ ’ and “ actively to conduct ” his own business therein. He is not, in other words, permitted to oust the tenant for the purpose of reletting the space to others. But the Legislature well knew that a tenant might, at the time of his ouster, find it impossible to disprove the landlord’s claim that he was acting in “ good faith ”, Accordingly, it provided that the tenant might rely upon the landlord’s subsequent conduct to establish his improper motives in dispossessing him. Thus read, reasonable meaning attaches to the provision that the landlord must begin active conduct of his business on the vacated premises within the thirty days following, and must not permit a third person to occupy the space within the year following, under penalty of becoming liable to the tenant in damages. In effect, these conditions were inserted to test, retroactively, the good faith of the landlord in accomplishing the tenant’s dispossession. Their observance would indicate that his motives had been proper and truly represented; their breach would tend to prove that his intentions were, from the outset, improper and ulterior. In the latter event, charging him with the damages sustained by the tenant would be a just and effective sanction. *44 Neither the reason of the statute nor the dictates of good sense and common fairness, however, point the conclusion that the landlord was to be liable, absolutely and inescapably, if he rerented the vacated space within a year. At most, his breach of one or another of the conditions specified casts doubt, on his assertion that he had initially acted in good faith. To read the provision otherwise, to construe it as rendering the landlord responsible even though he acted properly and in good faith throughout, would be to attribute to the Legislature an intent to accomplish a most unjust and unreasonable result. It could not have been the legislative purpose to charge the landlord with liability if changing and unforeseen circumstances — illness or adverse business conditions — made uneconomical or ill-advised his continued use of all of the space obtained from the tenant. Were this not so, a landlord who became ill or whose business prospects suddenly and unexpectedly deteriorated after he went into possession would be helpless to retrieve his situation in any way. He would be forced either to keep the property uneconomieally and wastefully untenanted —; a result startlingly at odds with the whole scheme of the emergency rent laws — or, upon rerenting it, become liable to the tenant for damages. *45 from evicting a tenant under the pretense-and guise that he needed the space for himself and from then renting it to others at an increased rental. By permitting a tenant a cause of action only against a landlord who had not acted in good faith, the Legislature has accorded adequate protection to tenant and to public without visiting upon the landlord unfair and oppressive consequences. By reading the provision in this reasonable manner, the design of the statute is effectuated without working injustice upon any one. In the present case, the landlord claims that, when he instituted the dispossess proceedings, he intended to occupy the entire building for his own use, and was induced to rent several of the doors “ only because of the subsequent change in business conditions ”. The question of fact, thus raised, as to the landlord’s good faith must be determined upon a trial. In conclusion, then, a landlord may acquire possession of a tenant’s space, in accordance with subdivision (d) of section 8 of the Commercial Bent Law, only if he intends, in good faith, to use all such space for his own immediate and personal use. If, under protestations of good faith, he succeeds in evicting his tenant, he assumes the burden of proving — if the tenant thereafter brings suit — that his subsequent act in renting some of that space within a year was dictated by unforeseen and justifiable circumstances; failing to do so, he is liable in damages to the tenant. Thus, in this case, the motion made by plaintiff for summary judgment was properly denied, but, since a good and valid cause of action was alleged, the complaint should not have been dismissed. The judgments and orders of the Appellate Division and Special Term should be reversed insofar as they dismiss the complaint, with costs to plaintiff in this court and in the Appellate Division. Loughran, Ch. J., Lewis, Conway, Desmond, Thacher and Dye, JJ., concur. Judgment accordingly.