Tai On Luck Corp. v. Cirota

Nunez, J. 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 of the City of New York, 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 (art. 38) which gave the tenant the right to renew for an additional term of five years “ at an annual rental rate 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 provsion 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 ‘1 for a new trial, to be treated as a non-payment proceeding, to determine whether or not the rent demanded by 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. [382] Nor do 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 be 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, su'bd. [a]). The giving of such a stipulation is an act that is always fraught with dangerous consequences (see Mackay v. Lewis, 73 N. Y. 382, 383; Hiscock v. Harris, 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 v. South Brooklyn Ry. Co., 271 N. Y. 614; Sperti v. City of Niagara Falls, 281 N. Y. 708). 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, subd. [a]), stipulated for judgment absolute in the event of an affirmance, there must be á final holding that the rent demanded by the landlord is arbitrary and unconscionable, that the proceeding be converted into a nonpayment 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 [383] Appellate Term. (See Matter of Brosowski v. American Airlines, 297 N. Y. 849; Tortora v. State of New York, 269 N. Y. 167; Cohen and Karger, Powers of the New York Court of Appeals, § 69, p. 306.) Settle order.