Edgar A. Levy Leasing Co. v. Siegel

Order affirmed, with costs, on opinion of Pound, J., in People ex rel. Durham Realty Corp. v. La Fetra ( 230 N. Y. 429 ), and questions certified answered as follows: Nos. 1, 4,5,6 and 7 in the negative; Nos. 2 and 3 in the affirmative.

Concur: His cock, Ch. J., Hogan, Cardozo, Pound, and Andrews, JJ.; Crane, J., concurs in result on opinion in Guttag v. Shatzkin ( 230 N. Y. 647 ); McLaughlin, J., dissents in following opinion:

The complaint in this action alleged, in substance, that on the 26th of June, 1918, the plaintiff, a domestic corporation, leased to the defendant an apartment in the city of New York for a period of two years commencing October 1, 1918, at an annual rental of $1,450, payable in equal monthly installments on the first day of each month; that defendant went into and continued in possession under the lease until the expiration of the term therein provided; that on the 3d of May, 1920, the parties entered into a written agreement, renewing the lease for a further term of two years from the 1st of October, 1920, at an annual rental of $2,160, payable in equal monthly installments on the first day of each month; that defendant neglected and refused to pay the rent faffing due on the 1st of October, 1920, amounting to $180, which sum was due and owing the plaintiff, and for which judgment was demanded.

The answer admitted all the allegations of the complaint, except that the amount of rent was due and payable, which was denied. This denial did not raise an issue, since it was a mere legal conclusion. The answer then set up two affirmative defenses: First, that

The second affirmative defense realleged the facts set forth in the first, and in addition thereto alleged that the rent reserved in the instrument purporting to be the renewal lease, and claimed by plaintiff for the month of October, 1920, was “ unjust, unreasonable and oppressive.”

The judgment demanded was that the alleged renewal lease be “ rescinded, vacated and set aside ” and that the complaint be dismissed.

' After issue had been joined, plaintiff moved, under section 547 of the Code of Civil Procedure, for judgment on the pleadings. The motion was denied, an appeal taken to the Appellate Division, where the' order was affirmed, two of the justices dissenting, and leave given to appeal to this court, certifying certain questions. Two of the questions certified were whether the affirmative defenses constituted a defense to the plaintiff’s claim, and the others whether chapter 944 of the Laws of 1920 were constitutional.

The facts pleaded in the first affirmative defense were insufficient upon the face thereof and in this all the members of the court agree. Such facts do not con

The second affirmative defense realleges the facts set forth in the first, and then alleges that the rent reserved in the writing purporting to be a renewal lease, and claimed by plaintiff for the month of October, 1920, was “ unjust, unreasonable and oppressive.” This defense is predicated on chapter 944 of the Laws of 1920. If that be valid, then the defense pleaded is good. If the act be void, it furnishes no defense; in other words, if the act be unconstitutional, it is not a law. “ It confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never been passed.” (Norton v. Shelby County, 118 U. S. 425 , 442.)

Appellant contends the act is unconstitutional in that it impairs the obligation of the contract of. lease (Federal Const, art. 1, sec. 10); deprives the plaintiff of its property without due process of law; denies to it the equal protection of the law (Federal Const. Fourteenth Amendment); and takes private property for a private use without compensation. (Const. State of New York, art. 1, sec. 6.)

This act purports to amend, but is really designed to entirely supersede, chapter 136 of the Laws of 1920. It provides that it shall be a defense to an action for rent accruing under an agreement for premises in a city of the first class, or in a city in a county adjoining a city of the first class, occupied for dwelling purposes, that such rent is unjust, unreasonable and the agreement under which the same is sought to be recovered is oppressive. (Sec. 1.) That where the answer contains the defense mentioned in section 1, the plaintiff, within five days thereafter (unless upon good cause shown the time be enlarged), must file with the clerk of the court a verified bill of particulars setting forth certain specified facts, and if he does not, the complaint shall, upon motion of the defendant, be dismissed. (Sec. 2.) That where it

I agree with the majority of the court that in determining whether or not the act be constitutional, it must be considered in connection with chapters 942 and 947, passed at the same extraordinary session of the legislature. These three acts, with others not here involved, indicate

This brings us to the determination of the fundamental question already suggested: Is chapter 944, as applied to leases made prior to its passage, unconstitutional? I am of the opinion that it is. First, it impairs the obligation of a contract, and is thus directly in conflict with the Federal Constitution. (Art. 1, sec. 10.) The defendant, several months prior to the passage of the act, freely, deliberately, and with full knowledge of what he was doing, entered into the renewal lease. But he can violate the agreement, because, according to the act, it is, presumptively, unjust, unreasonable and oppressive. The landlord, however, is bound. He cannot get possession of his property and must accept what the court finds to be the fair rental value. It is the substitution of a new contract which the parties never made, and to the terms of which they never agreed. Such

Second. It deprives the plaintiff of its property without due process of law and denies to it the equal protection of the law. It binds the landlord to give to each tenant in possession when the act took effect the right to occupy the premises for at least two years if he so desires, but imposes no obligation to do so. The landlord must permit him to remain, while he is at liberty to depart whenever he sees fit. Not only this, but the landlord is compelled to take the rent which the court fixes as reasonable. This he must accept whether satisfied or not, and if not satisfied, then he is denied the right to regain possession of his property. The tenant, if dissatisfied with the amount fixed, may refuse to pay, and without notice quit and surrender the premises. If this does not amount to depriving a landlord of his property without due process of law, it is difficult to imagine what would. (People ex rel. Herrick v. Smith, 21 N. Y. 595 ; Matter of Tuthill, 163 N. Y. 133 .) In determining -what is due process of law, regard must be had to substance and not to form. (Chicago, B. & Q. R. R. Co. v. Chicago, 166 U. S. 226 , 235.) The protection of property involves the protection of its value. (Southern Ry. Co. v. Greene, 216 U. S. 400 ; Ames v. Union Pacific Ry. Co., 64 Fed. Rep. 165 .) It is not difficult to see how the value of prop

The landlord is also denied the equal protection of the law. He must accept the fair rental value, irrespective of what the tenant has agreed to pay, while the owner of a building in process of construction, or one constructed after the passage of the act, may exact whatever rent he sees fit. The act, therefore, is not uniform upon the same class of persons. One class is compelled arbitrarily to retain tenants whether desired or not, and to accept what the court fixes as a fair rental, while the other class may select its tenants and fix the rent at an amount upon which the parties agree. It is perfectly obvious that under the.provisions of the act one who becomes a tenant after its passage might, and probably would, pay substantially more than a tenant in possession of like property in the same locality, and surrounded by the same conditions. The act was not intended to be uniform in its operations. It affected property leased when it took effect in one way, and property not then ready to-be leased in another. One class was to be benefited at the expense of the other. (Willson v. McDonnell, 265 Fed. Rep; 432.)

Third. It takes private property for a private use. The plaintiff and defendant are private citizens, engaged in a private business. The renting of property can no more be said to be for a public use in the city of New York than can the sale of food, clothing or any other article. Of course the landlord is a “ vendor of space.” The baker is a vendor of bread; the butcher is a vendor of meat; the tailor is a vendor of clothes; indeed, every person who sells any kind of property is a vendor of the article sold; all are engaged in a private enterprise. But this does not give the state the right to fix the price at which the sale shall be made, unless it be for the public health, public morals, or the general welfare. If it does,

In Munn v. Illinois ( 94 U. S. 113 ), chiefly relied upon by the respondent, the owner of a grain elevator had for years devoted it to a public use in handling grain for the public generally. The same principle is applied in German Alliance Insurance Co. v. Lewis ( 233 U. S. 389 ); Union Dry Goods Co. v. Georgia Public Service Corp. ( 248 U. S. 372 ); Producers Transportation Co. v. Railroad Commission ( 251 U. S. 228 ) and other authorities cited by respondent’s counsel. The renting of property for housing purposes in the city of New York, as I have already said, is a private business and cannot be made public or impressed with a public interest merely by legislative fiat. Such interest cannot be created in this way or property rights be divested under the guise or pretense of the exercise of the police power. In Producers Transportation Co. v. Railroad Commission (supra) Mr. Justice Van Devanter, speaking for the court, said: “ It is, of course, true that if the pipe line was constructed" solely to carry oil for particular producers under strictly private contracts and never was devoted by its owner to public use, that is, to carrying for the public, the State could not by mere legislative fiat or by any regulating order of a commission convert it into á public utility or make its owner a common carrier; for that would be taking private property for public use without just compensation, which no State can do consistently with the due process of law clause of the Fourteenth Amendment.” (p. 230.)

The police power is not superior to the Constitution; on the contrary, it is subject to applicable constitutional limitations. (Hamilton v. Kentucky Distilleries & Warehouse Co., 251 U. S. 146 .)

The statutes regulating interest are not analogous. No one would contend that the legislature would have power to pass a statute reducing the rate of interest on outstanding obligations. When interest was reduced from seven to six per cent, the statute was silent as to whether it applied to obligations outstanding at the time of its passage, but the courts held it did not apply to such contracts.

The statutes are not analogous in another respect, because there is no statute which compels a person to loan money unless he so desires. The statutes under consideration compel the leasing of property without the consent of the landlord and upon terms which the court itself determines. They are in many respects like the provisions of the act of Congress known as - the “ Ball Rent Law,” for the relief of tenants in the District of Columbia. This act was declared unconstitutional by the Court of Appeals of the District of Columbia. (Hirsh v. Block, 267 Fed. Rep. 614 .)

In the recent case of Stell v. Mayor, etc., of Jersey City, decided by the Supreme Court of New Jersey, and reported in 111 Atlantic Reporter, 274 (No. 6 Advance Sheets), a resolution of a municipal corporation, providing that city money should be advanced to defend proceedings to dispossess tenants, was held illegal and void. Justice Swayze, speaking for the court, said: “It is enough to say that any authority of the city government to protect property certainly cannot include authority to deprive

I am also of the opinion that the statute is uncon-, stitutional in so far as it attempts to confer upon the Municipal Court equitable jurisdiction. Article 6, section 18 of the State Constitution provides: “ The Legislature shall not hereafter confer upon any inferior or local court of its creation, any equity jurisdiction or any greater jurisdiction in other respects than is conferred upon County Courts by or under this article,” This inhibition is not confined to local or inferior courts created after the adoption of the present Constitution. It is equally applicable to those theretofore created. (Lew kowicz v. Queen Aeroplane Co., 207 N. Y. 290 .) The Municipal Court of the city of New York is a continuation of the old District Court. (Worthington v. London Guarantee & Accident Co., 164 N. Y. 81 .) It is a local court of legislative creation. While it is true that it has jurisdiction of equitable defenses to the extent of defeating a plaintiff’s claim, it is nevertheless true that such defense must be a defense, pure and simple, and the test is the relief asked. This act clothes the Municipal Court (in which a large percentage of the rent cases is brought) with equitable powers. It may, in effect, proceed to vacate and set aside the lease under which a tenant is in possession and then determine what is a fair rental, and having ascertained that fact, enter judgment accordingly. This is the exercise of equitable powers. (Simon v. Schmitt, 137 App. Div. 625 .)

Entertaining the views above expressed I dissent, vote to reverse the orders of the Appellate Division and Special Term, and grant the motion for judgment on the pleadings.