N. R. M. Garage Corp. v. Morris Feig Garage Corp.

Van Voobhis, J. The landlord-respondent, being a lessee under a written lease for a term of twenty-one years, has obtained a dispossess order in summary proceedings upon the ground that it seeks in good faith to obtain possession of the demised commercial space for its immediate and personal use (Commercial Rent Layr, § 8, subd. [d], par. [2]). Appellant is a statutory tenant in possession at the commencement of the term of this lease. It contends that the dispossess order should be reversed upon three grounds: (1) that summary proceedings for the possession of real property do not lie, and that respondent should be relegated to an action in ejectment; (2) that the twenty-one-year lease contains a cancellation clause in event of inability to obtain possession of the space from appellant; and (3) that respondent was newly incorporated prior to its entry into the twenty-one-year lease. We think that these objections were properly overruled at Special Term, for the reasons hereafter stated under the corresponding numbers. (1) It is urged by appellant that the case of Consolidated Service Stations v. Cities Service Oil Co. (279 App. Div. 592) decided October 8, 1951, by the Appellate Division, Second Department, requires a reversal of the final order of dispossession on the ground that summary proceedings cannot be maintained by respondent as a subsequent lessee. It is argued that the relation of landlord and tenant does not exist between — 129 — these parties, and that this is fatal to the proceeding. The Consolidated Service Stations case follows Eells v. Morse (208 N. Y. 103) the memorandum of decision stating: “ Petitioner is neither the landlord, lessor, nor assignee of the landlord within the meaning of subdivisions 1 and 6 of section 1414 of the Civil Practice Act. (Imbert v. Hallock, 23 How. Pr., 456, 462; Cullinan v. Goldstein, 61 Misc. 82, both cited with approval in Eells v. Morse, supra.)” The facts in the Consolidated Service Stations case and in the other cases cited were different from those at bar. Here the lease to respondent recites that “ possession of the demised premises is sought by the Tenant [respondent] for its immediate and personal use. Accordingly, it is stipulated and agreed that the Tenant shall have the privilege to terminate this lease in the event that the Tenant shall be unable with due diligence to obtain possession of the demised premises from the present tenant, Morris Feig Garage Corp., either by agreement with said tenant or, in lieu of such agreement, by an order of a Court of competent jurisdiction pursuant to the provisions of clause (d) (2) of Section 8 of the Commercial Space Rent Control Law of the State of New York, Chapter 3, Laws of 1945, as amended or any other relevant statute. The Tenant hereby covenants and agrees, at its sole cost and expense, to apply to a Court of competent jurisdiction for an order awarding possession of the demised premises to the Tenant pursuant to the aforesaid provisions of the Commercial Space Rent Control Law of the State of New York, immediately after the commencement of the term herein demised, unless prior to said time possession had been obtained by the Tenant through an agreement with said Morris Feig Garage Corp.” No similar provision was contained in the lease in Consolidated Service Stations v. Cities Service Oil Co. (supra). This and other similar clauses in this lease render inapplicable that decision, and the other cases cited such as Eells v. Morse and Imbert v. Hallock, holding that the landlord rather than the second tenant should maintain the summary proceeding. They hold simply that the mere demise of real property does not constitute an assignment of possession to a tenant, so as to enable the tenant to institute summary proceedings against a previous tenant holding over. Even so, the rule that the landlord is not bound to put his lessee into actual possession does not apply where the lease contains an express undertaking on the part of the landlord to deliver possession to the tenant (Harris v. Greenberger, 50 App. Div. 439, Willard Bartlett, J.). — 130 — In the present instance the landlord, wary of a covenant to deliver possession by a day certain, nevertheless transferred to the tenant the right to possession and to institute appropriate proceedings in court in order to obtain it. Subdivision 6 of section 1414 of the Civil Practice Act provides that application for the removal of a person from real property by summary proceedings may be made by “ The legal representative, agent or assignee of the landlord, purchaser or other person so entitled to apply” (italics supplied). It has been held that such a proceeding may be entitled and the precept issued in the name of the agent of the owner (Case v. Porterfield, 54 App. Div. 109; Reserve Finance Corp. v. Rosen, 127 Misc. 5191, affd. 218 App. Div. 811). In Goodman v. Schached (144 Misc. 905) summary proceedings were held to be maintainable by an assignee of rents with the right to dispossess tenants for nonpayment. Under the lease in the present case, respondent not only was given the right but undertook the duty to maintain legal proceedings to dispossess this tenant. That constituted respondent at least the agent of the landlord, if not the assignee, expressly entitled to maintain these proceedings. The trend has been to add to the instances in which summary proceedings can be conducted, by amendments from time to time to section 1414 and its predecessor section 2235 of the Code of Civil Procedure, in order to render unnecessary the cumbersome procedure by action in ejectment. Statutory tenants are protected by the emergency rent laws; in addition, they have no vested rights in the antiquated and dilatory procedure of ejectment actions. (2) In this case, as has been stated, the owner of the fee authorized and required respondent (the new tenant for twenty-one years) to take all legal steps necessary to dispossess the former tenant. The reason for placing this burden upon respondent was that unless it could obtain possession by consent or as a result of legal proceedings, respondent might cancel the lease, which would have been a consequence that the lessor wished to avoid. This cancellation clause is said to run afoul of the section of the Commercial Rent Law by permission of which respondent has brought this proceeding (§8, subd. [d], par. [2] added by L. 1950, ch. 327), allowing recovery of possession from a statutory tenant if it “ is sought by a person who is the lessee of an entire building for a term of twenty-one years or more who seeks in good faith to obtain possession of the commercial space for his immediate and personal use.” The object of this amendment is to put a lessee of an entire building — 131 — for twenty-one years in similar position to that of the owner of the fee for this purpose. If this cancellation clause were to prevent the application to this case of this provision in the statute, the object of the section would be defeated. No lessee for twenty-one years is covered by it except one that seeks possession for its immediate and personal use. That signifies that such a lessee must require actual possession for the lessee’s own purposes, and not merely constructive possession. A clause in such a lease that it shall be cancelable unless the lessee can obtain actual possession, is not at variance but in accord with the object of this enactment, which requires that the lessee shall seek possession for itself and not for another. Unless the lessee can gain possession, the lease is useless insofar as this section of the statute is concerned. A lease does not come under the section unless it enables the tenant to get possession. A cancellation clause in event that the tenant cannot get possession does no violence to the statute. It would not be contended that the statute would be offended by the right of a tenant to cancel for breach of a covenant by a landlord to put the tenant into possession. No greater infraction is involved in this lease, which empowers and requires the tenant to sue for possession but allows cancellation in case of failure to obtain it. If possession could not be obtained, the purpose of the lease would fail. On the other hand, if the new tenant succeeds in obtaining possession, the option to cancel is ended. The former tenant can have no cause to complain, inasmuch as the only event which could render the cancellation clause operative would be its own continuance in possession. If appellant be ousted from possession, the cancellation privilege ceases to exist. If appellant remains in possession, it is not aggrieved. (3) To hold categorically that a landlord cannot repossess space from a statutory tenant for the landlord’s immediate and personal use, except for an existing business, would attach a condition to the operation of the emergency rent laws which the Legislature has not imposed. The formation of a corporation for the purpose of embarking upon a new business venture may, in certain instances, be evidence of bad faith under this section, and thus render it inapplicable to a particular case (City Bank Farmers Trust Co. v. Harvey’s Garages, 278 App. Div. 917), but there can be no such legal rule, even where the new business to be conducted is the same as that of the former tenant. The latter would be likely to be the case where, as here, the real property is adapted solely to the type of business con - ducted by the former tenant. Here the new tenant (respondent) — 132 — has agreed to make improvements to the property which the lease states shall cost not less than $25,000 and which appellant estimates will cost $83,000. There is nothing in the emergency rent laws which prevents an owner of real property from repossessing from a statutory tenant in order to go into the same business in good faith, especially where extensive alterations are to be made to the premises. The same power is allowed to a lessee for twenty-one years by paragraph (2) of subdivision (d) of section 8 (cf. St. Nicholas Sports Center v. Lincoln Sq. Center, 276 App. Div. 521, 522, stating: “ There is no reasonable basis for distinguishing between a landlord whose right to possession is based upon ownership and one whose right is predicated upon a leasehold ”). It is not the purpose of the emergency rent laws to discourage new enterprises, nor to create vested rights in statutory tenants to good will appertaining to particular locations after their leases have expired. Paragraph (2) of subdivision (d) of section 8 contemplates, to be sure, the making of a bona fide twenty-one-year lease, with a tenant presumptively able to perform it, and would not be satisfied if the new tenant were financially irresponsible or had entered into the required long-term engagement subject to a collateral reservation that it would be terminated for the landlord’s benefit after the previous tenant had been removed. The lease forming the basis for the application to dispossess the former tenant must have been made in good faith. If the lessee were an irresponsible corporation, whether newly formed or not, that would bear upon Avhether the lease had been made in good faith, which is a question of fact (City Bank Farmers Trust Co. v. Harvey’s Garages, supra). The statute contains no condition as a rule of law that a landlord or a lessee for twenty-one years cannot repossess in order to conduct a new business, if it is done in good faith. No facts are contained in this record indicating that this lease with respondent was made in bad faith. The facts, by themselves, are insufficient to defeat this application that possession is required to conduct a neAV enterprise in a business similar to that of the preAdous tenant, especially where, as here, that is the only kind of business to which the subject property is adapted, and the new tenant is obligated to make extensive capital improvements to the property. The usual test is whether the landlord or lessee really intends to enter into the business or is merely proposing to do so as a pretext to dispossess the tenant and relet to another at a higher rental or otherwise obtain more favorable terms. The Municipal — 133 — Court, which was the trier of the fact, has found on sufficient evidence that this application was made in good faith, and the Appellate Term has affirmed. This finding should not be disturbed. Although some of the evidence excluded by the Municipal Court might have been admitted, most of the facts which appellant sought to elicit found their way into the record, and such errors of this nature as there may have been were not prejudicial. Appellant appears not to have questioned seriously respondent’s purpose to operate a garage at this location under the twenty-one-year lease, but has sought to impugn respondent’s good faith by affirming that it does intend to conduct such a business, and thereby take over good will created by appellant appertaining to a garage business at that location. Even if that type of good will has been created by appellant during the period while it conducted a garage there, the law does not recognize property in good will of that nature divorced from the right to occupy the location to which it pertains (cf. Banner Milling Co. v. State of New York, 240 N. Y. 533). It is an intangible that cannot exist without tangible basis, and cannot be claimed by a tenant after expiration of its lease. No right to the retention of such good will has been vested in statutory tenants by the emergency rent laws. The charge which appellant makes that respondent proposes to appropriate its good will, tacitly concedes that respondent intends to conduct this business at the location in question under long-term lease, as the judgment appealed from has determined to be the fact. The contention that this lease does not cover an “ entire building ” within the meaning of the statute, as applied to 248 West 80th Street, appears to have been based upon architects’ plans which were not carried out in the construction of the building. That this contention is unfounded appears from the cross-examination of appellant’s architect concerning the construction of the building subject to the lease. The determination of the Appellate Term and the orders of the Municipal Court should be affirmed, with costs to respondent.