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TEEVAL CO. v. DEWEY

April 10, 1950

TEEVAL CO., Inc.,
v.
DEWEY, Governor, et al.


Before AUGUSTUS N. HAND, Circuit Judge, and KNOX, Chief Judge, and NOONAN, District Judge.


The opinion of the court was delivered by: HAND

The plaintiff is the owner of premises at 1125 Park Avenue, an apartment house in New York City. From November 1, 1943, to June 30, 1947, the rents for those premises were controlled under the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix, § 901 et seq. That Act was followed by the Federal Housing Rent Act of 1947 as amended in 1948 and 1949, 50 U.S.C.A.Appendix, § 1881 et seq. The 1949 Amendment to the Federal Housing Rent Act in substance provided that the Expediter make prompt adjustments to cure hardships and inequities, Section 201(b), and that in curing hardships and inequities the Expediter observe the principle of maintaining maximum rents at levels which will yield 'a fair net operating income.' Section 204(b)(1). The Local Option provisions of the Act provided: (1) that State Control was to supplant Federal Rent Control upon advice by the Governor that the State had adequately provided for State Control, Section 204(j)(1); (2) that there should be decontrol of all or part of a State upon determination that the Housing Shortage had ended, Section 204(j)(2); (3) that there should be municipal decontrol after determination that housing shortage had ended in the municipality, Section 204(j)(3).

The Act further provided against any reimposition of Federal control after Federal decontrol became effective pursuant to Section 204(j).

 On September 27 and September 30, 1949, the Housing Expediter, after determining that the premises had an annual income of $ 214,000 and an annual expense of $ 185,000, adjusted the annual rents by $ 31,000 to provide a fair net operation income. Based upon these determinations and an assessed value of $ 1,450,000, the yield from the property was less than 2% prior to such adjustment.

 On October 7, 1949, the City of New York enacted Local Law 73 for the year 1949 which froze the rents of the premises as of March 1, 1949- the annual rent in effect prior to the adjustment- and forbade collection of the increase granted under Federal law.

 On December 29, 1949 the New York Court of Appeals held the Local Law unconstitutional on State grounds. F.T.B. Corp. v. Goodman, 300 N.Y. 140, 89 N.E.2d 865. On January 1, 1950, the accrued installments of increase and the January 1950 installments (which until the decision of the New York Court of Appeals above mentioned were barred by the Local Law) totalled $ 13,059.11 of which installments to the amount of $ 4,553.13 were collected by January 10, 1950.

 On January 10, 1950, the State of New York enacted a statute *fn1" validating the Local Law in order to cure the State constitutional defects as of October 7, 1949, and plaintiff thereupon returned the sum of $ 4,553.13 in compliance with that law. The New York Court of Appeals has now pending before it an action brought to determine issues arising under the Validating Act which we understand will be reached for argument on May 15, 1950.

 On March 29, 1950, the State of New York enacted Chapter 250 of the Laws of 1950, McK. Unconsol. Laws, Sec. 8581 et seq., the Emergency Housing Rent Control Law hereafter called the State Rent Law, the material provisions of which are as follows:

 (1) A requirement that the Governor advise the Housing Expediter that the State has adequately provided for Rent Control pursuant to Section 204(j)(1) of the Federal Act and that the State will take over Rent Control on May 1, 1950. Sec. 11, subd. 1.

 (2) A provision, effective upon enactment, for the appointment of a State Commissioner. Sec. 3.

 (3) A provision prohibiting the commencement of any action or reduction to judgment in any pending action of the difference between the federally established rent and the rent prescribed by Local Law 73. Sec. 13-a, subd. 2.

 (4) The establishment of maximum rents for premises subject on March 1, 1950, to both Federal and Local Law (New York City only) at the amounts prescribed by the Local Law, thus freezing New York City rents as of March 1, 1949. Sec. 4, subd. 1(a).

 (5) The establishment of maximum rents on March 1, 1950, for housing outside of New York City at the rents prescribed on March 1, 1950, by the Federal law. Sec. 4, subd. 1(a).

 (6) Not later than July 1, 1950, there shall be an adjustment of rentals for increased services and facilities. Sec. 4, subd. 2(a).

 (7) Upon completion of a study of all factors affecting residential rents and not later than December 1, 1950, there shall be an adjustment where (a) out-of-pocket expenses before depreciation exceed rental income; (b) hardship from difference in rents allowed for similar ...


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