Matter of Zellner (Brooklyn Trust Co.)

Lewis, J. This is a proceeding by a tenant to fix emergency rent under the provisions of section 2, subdivision (e), chapter 3 of the Laws of 1945 (McKinney’s Unconsol. Laws, § 8522, subd. [e]), known as the Commercial Bent Control Law. The proceeding was initiated by an order to show cause dated February 27, 1945, returnable at Special Term, Kings County. Subsequently the report of a referee — which made no specific findings — was confirmed by Special Term, but reversed by the Appellate Division and remitted to Special Term with instruc *245 tions to make a decision and to indicate the findings upon which it was made. (270 App. Div. 941.) Upon that remission Special Term again referred the proceeding to a referee whose report was modified by Special Term and, as so modified, was confirmed. Upon cross appeals the Appellate Division modified the order of Special Term — making a new finding of fact and reversing all inconsistent findings — and, as so modified, the order was unanimously affirmed. (273 App. Div. 906, 907.) The proceeding is here on appeal by the tenant only from the order of the Appellate Division. On December 15, 1944, the respondent, Brooklyn Trust Company, as trustee for mortgage participation certificate holders, while operating the building in suit under an assignment of rents, leased the premises to the petitioner-appellant for a term of five years from January 1, 1945, at an annual rent of $5,400. Under that lease the tenant was obligated to make necessary repairs. As the lease was made on December 15,1944 — prior to the enactment of the Commercial Rent Control Law (L. 1945, ch. 3) — no question arises as to an intentional evasion of that statute. On December 30, 1944, respondent acquired the fee by deed in lieu of foreclosure, which deed expressly negatived merger of the mortgage in the fee. Shortly thereafter, the Commercial Rent Control Law became effective and thereupon petitioner instituted this proceeding based upon the claim that the rent reserved in the lease was in excess of the emergency rent permitted by the statute. The Commercial Rent Control Law (L. 1945, ch. 3, § 2, subd. [e]) — which was in effect without amendment at the time this proceeding was instituted — defines 1 ‘ emergency rent ’ ’ as “ The rent reserved or payable under any lease, agreement or tenancy of commercial space in force on March first, nineteen hundred forty-three, plus fifteen per centum of such rent; provided that if the commercial space was not used or occupied on such date for commercial purposes, the emergency rent shall be the reasonable rent therefor .as of such date, plus fifteen per centum thereof, to be fixed by agreement, by arbitration, or by the supreme court upon the basis of the rent charged on such date for the most nearly comparable commercial space in the same building or other satisfactory evidence.” ■ (Emphasis supplied.) The property here involved is located at 9A-100 Putnam *246 Avenue in Brooklyn and consists of a corner lot entirely occupied by a four-story building which is about fifty years old and in a state of poor repair. On March 1,1943 — the controlling date of the statute quoted above — the building was occupied by the then owner and was operated as a garage. It thus appears that on March 1, 1943, the building was producing no rent which could serve as a base for determining emergency rent under the statute and, accordingly, that part of the statutory definition of “ emergency rent ” found in subdivision (e) of section 2 quoted (supra) — viz. “rent reserved * * * plus fifteen per centum of such rent ” — does not apply. Nor is the remaining language of that section precisely applicable to controlling facts in this case because, although the building was used on March 1, 1943, for a commercial purpose (subd. [b] id.), it was not then rented. However, the Justice at Special Term ruled that the word “ used ”, as it appears in the statute, should be construed to include “ rented ”, and that accordingly the latter part of the section is applicable. Furthermore, since the lease here involved covered the property in its entirety, there is no “ comparable commercial space in the same building ” (§2, subd. [e] id.) producing rent which would serve as a factor to be considered in determining ‘ ‘ emergency rent. ’ ’ It was in those circumstances that the Justice at Special Term adopted the course now challenged by the appellant but which has met with the approval of the Appellate Division and which we now approve. Mindful that the statute (§ 2, subd. [e] id.) directed that “ the emergency rent shall be the reasonable rent therefor as of such date [March 1, 1943] ” and relying upon the authority expressly given by that statute to the Supreme Court to use “other satisfactory evidence” as a “basis” for determining “ emergency rent ”, the Justice at Special Term turned to the method of fixing “ reasonable rent ” as set forth in section 4 of chapter 3 of the Laws of 1945 (as amd. by L. 1945, ch. 315 — and see McKinney’s Unconsol. Laws, § 8524). That section provides in.part: “ In the determination of the amount of such reasonable rent: (a) due consideration shall be given to the cost of maintenance and operation of the entire property (including land and building in which such commercial space is located) including amounts paid for taxes assessed against such property, and to the kind, quality and quan *247 tity of services furnished, but excluding amortization or interest paid or accrued on any incumbrances thereon * * * . A net annual return of six per centum on the fair value of the entire property including the land plus two per centum of principal for amortization of any mortgages thereon shall be presumed to be a reasonable return. The assessed valuation of the entire property, including land and building, as shown by the latest completed assessment-roll of the city, shall be presumed to be the fair value of the premises, but other lawful evidence of the fair value may be offered and received.” To the “reasonable rent ” so derived as of March 1,1943 — not as of the date the application was made — Special Term added 15% as expressly authorized by subdivision (e) of section 2 of chapter 3 of the Laws of 1945 (quoted supra) to arrive at the “ emergency rent ” prescribed by law. Our thought is that in the circumstances disclosed by this record the process by which the courts below determined the appropriate emergency rent was permissible within the unequivocal language chosen by the Legislature to express its purpose and the means by which that purpose may be accomplished. We may assume that by expressly authorizing the Supreme Court in its discretion to use “ other satisfactory evidence ” (§ 2, subd. [e] id.) as a basis for determining emergency rent, the Legislature intended that phrase to serve some purpose. (People v. Dethloff, 283 N. Y. 309, 315; Allen v. Stevens, 161 N. Y. 122, 145; Palmer v. Van Santvoord, 153 N. Y. 612, 616.) We cannot say as a matter of law that the purpose served in this instance by the authorized use of “ other satisfactory evidence ” to determine emergency rent was not within the Legislature’s intent. With the exception of one item, to which reference will presently be made, we conclude that the order of the Appellate Division does not transcend authority granted by the statutes cited above. That order modified the order of Special Term on the law and the facts by striking out $5,140.79 as the total emergency rent fixed by Special Term and inserting in its place $5,334.85. The items which comprise the total figure last mentioned above and the computation by which that figure is reached are set forth in the following new finding made by the Appellate Division: “ ‘ The proper items and amounts to be taken into consideration *248 as cost of maintenance and operation are, taxes, $1,550.50; insurance, $418.50; and managing agent, $270, making a total of $2,239, to which should be added the sum of $2,400, representing six per centum of $40,000, the value of the property, making á total of $4,639, fifteen per centum of which, or $695.85, should further be added thereto, making a total of $5,334.85.’ ” (273 App. Div. 906, 907.) The above items which the Appellate Division found to be properly included within the cost of maintenance and operation of the building do not include a trustee’s fee of $96.25 which Special Term had ruled should be so included. We disregard that omission in view of the fact that upon the present appeal neither party has made reference to it. There remains for consideration, however, the appellant’s challenge to the new finding by the Appellate Division insofar as it includes a managing agent’s fee in the amount of $270 as an appropriate item of cost of maintenance. That item being one not found by the Justice at Special Term, we have reviewed the facts relating thereto. (Civ. Prac. Act, § 605; Harrington v. Harrington, 290 N. Y. 126,. 130.) As to that item our conclusion is that the weight of evidence fails to establish that the respondent landlord actually maintains a managing agent whose functions relate to this particular property of which the plaintiff leases the entire building and as to which he is required to make all repairs at his own cost. The order of the Appellate Division should be modified by striking the item “ managing agent, $270 ” from those items set forth in the new finding by the Appellate Division to be taken into consideration in ascertaining the cost of maintenance and operation of the property in suit, and the computation by which the total emergency rent is determined should be modified accordingly, and as so modified the order should be affirmed, with costs to the appellant.