State v. Bel Fior Hotel

Appeal from a judgment of the Supreme Court at Special Term, entered August 29, 1979 in Sullivan County, which, in a proceeding pursuant to subdivision 12 of section 63 of the Executive Law, granted petitioner summary judgment. The Attorney-General, acting pursuant to subdivision 12 of section 63 of the Executive Law, petitioned for an order permanently enjoining and restraining the respondent hotel from conducting and transacting their hotel business in a persistently fraudulent and illegal manner, and directing restitution to all aggrieved customers. Special Term, without conducting a hearing, granted the requested relief in the form of a judgment. This appeal ensued. There must be a reversal. The respondent hotel executed individual rental agreements with 280 students at the Sullivan County Community College, covering the period from September 14, 1977 through December 23, 1977. Each contract contained the following damage deposit provisions: "[Clause III, § A] Deposit: Each Resident Guest will pay a $50.00 deposit to hold a room. This sum is non-refundable and will be applied as the damage deposit. At the end of the term if no damage occurs, this sum will be returned. [Clause V, §6] Responsibility for Damages: In the event that it can not be determined who caused or was responsible for the damage to the Hotel property, then a reasonable cost of repair of the damage will be deducted from the Deposit fund referred to in 111(A). If the damage exceeds the individual damage deposit fund and the person(s) who cause the damage can not be ascertained, or are not financially responsible, then the damage máy be deducted from the Group Deposit Fund.” When at the end of the contract period, the hotel retained the entire damage deposit to cover the "cost of repairing damages to the hotel property [which occurred] during the time” of the students’ occupancy, the present proceeding was commenced, wherein it is alleged that clause V (6) is unconscionable and that such unconscionability constitutes fraud and illegality. In our view, the statute authorizing the Attorney-General to initiate a proceeding of this type is predicated upon a showing that the respondent "shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business” (Executive Law, § 63, subd 12). We do not believe that the provisions of a damage deposit clause in each of 280 separate but identical contracts can fairly be called "repeated” or "persistent” within the meaning of the statute. Respondent used the damage clause provision in connection with an unusual and unexpected request to provide housing for students who would otherwise lack shelter while attending college. Such an arrangement had not previously occurred despite the proximity of respondent’s hotel to the college, and, given this proceeding, is unlikely to occur again. We perceive no distinction between the insertion of a common damage clause in multiple contracts to guard against reasonably perceived property damage and the imposition of a "fuel surcharge” on contracts for ocean passage to protect against rises in the price of oil because of the 1973 oil embargo, which latter provision was found by the Court of Appeals to be neither a "repeated” nor "persistent” act or, in fact, unconscionable or illegal (Matter of State of New York v Italian Line, 43 NY2d 851, affg 56 AD2d 533). We reject the view that a single act contemporaneously affecting multiple parties is a "repeated” or "persistent” act. Relief for such parties is available by other 693 means (CPLR art 9) and resort should not be had to special proceedings legislatively intended to protect consumers victimized by continuing acts of fraud or illegality. Moreover, we also conclude that Special Term erred in granting summary relief on the ground of unconscionability of contract based on inequality of bargaining positions. While unconscionability is to be determined as a matter of law (Industralease Automated & ScientiSc Equip. Corp. v R.M.E. Enterprises, 58 AD2d 482), a summary disposition must be based on the absence of triable facts. In our view, the terms of the contract do not so unreasonably favor respondent so as to be unconscionable on their face without a factual inquiry into the relative bargaining position of the parties. The record does not reveal whether the students could have secured other lodgings without subjecting themselves to like damage deposits (see Equitable Lbr. Corp. v IPA Land Dev. Corp., 38 NY2d 516, 523). Judgment reversed, on the law, and petition dismissed, with costs. Mahoney, P. J., Sweeney, Staley, Jr., and Mikoll, JJ., concur.