MAE GILLIGAN et al., on Behalf of Themselves and All Tenants of 1070 Park Avenue, Similarly Situated, Appellants,
TISHMAN REALTY & CONSTRUCTION CO., INC., et al., Respondents.
APPEAL from a judgment of the Supreme Court in favor of defendants, entered September 30, 1952, in New York County, upon a dismissal of the amended complaint by the court at a Special Term (WALTER, J.), at the close of plaintiffs' case.
John F. X. Finn of counsel (Martin V. Callagy, David M. Palley, Julius L. Neidle with him on the brief; David M. Palley, Julius R. Oltarsh and Julius L. Neidle, attorneys), for appellants.
Charles H. Tally of counsel (Reuben Tally with him on the brief; Charles H. Tally, attorney), for Tishman Realty & Construction Co., Inc., and others, respondents.
Robert S. Fougner of counsel (McLaughlin & Fougner, attorneys), for Maurice Mound and others, respondents.
This action is brought by a number of tenants of a Park Avenue multiple dwelling, who seek a declaratory judgment declaring in essence that a plan for the co-operative ownership of the apartment building was illegally conceived and executed and therefore never became legally operative;
and also that illegal pressures were exerted by the defendants to cause tenants to purchase stock in the co-operative venture. The defendants may be divided into two groups. One consists of corporations and individuals that shall be referred to as 'Realty', because there is little dispute that their concerted activities in presenting the co-operative plan to the tenants were sponsored and directed by the defendant Tishman Realty & Construction Co., Inc. The second group of defendants consists of the so-called co-operative corporation and its stockholders.
The plaintiffs are all statutory tenants. Each such tenant 'thus remains in possession, not by virtue of any agreement, express or implied * * * but by virtue of the compulsion which the law exerts on the landlord to allow him to remain' ( Stern v. Equitable Trust Co., 238 N.Y. 267, 269). Under certain circumstances the compulsion may be lifted and the landlord may recover possession of the housing accommodation (State Residential Rent Law, L. 1946, ch. 274, § 5, as amd.). In order to recover such possession, however, the landlord must be granted a certificate of eviction by the Temporary State Housing Rent Commission (Administrator), designed to permit the landlord to pursue his remedies at law. In 1951 the commission, pursuant to its powers under paragraph a of subdivision 4 of section 4 of the State Residential Rent Law (L. 1951, ch. 443), promulgated a regulation establishing a procedure for the granting of a certificate of eviction to a purchaser of stock in a co-operative corporation, who thereby acquires a proprietary lease to an apartment in the co-operative building and the status of 'landlord' under the regulation. We have recently held that the promulgation of this regulation was a valid exercise of the Administrator's powers (People ex rel. McGoldrick v. Sterling, 283 A.D. 88).
The practical and implementing effect of the judicial declaration sought by the plaintiffs would be a holding that certificates of eviction should not be issued to purchasers of stock allocated to apartments presently occupied by plaintiffs, who enjoy the status of statutory tenants.
A trial was had at Special Term, and at the close of the plaintiffs' cases the Justice presiding dismissed the amended complaint. Plaintiffs appeal from this judgment of dismissal.
There is little doubt that Realty bought the building with the purpose in mind of organizing a co-operative corporation and selling the building to it at a substantial profit. Plans for launching an elaborate campaign to turn the building into a
co-operative one were initiated immediately after Realty took title. This profit-making objective, in and of itself, is not illegal ( Matter of Hoenig v. McGoldrick, 281 A.D. 663); and it does not appear that the amount which Realty fixed as the sale price of any of the seventy-two apartments in the building was unfair or discriminatory. The emergency rent statutes and implementing regulations do not proscribe the profit motive--provided its unrestrained exercise does not result in 'exactions of unjust, unreasonable and oppressive rents and rental agreements.' (Declaration and Findings, State Residential Rent Law.)
Of course, there is small likelihood of any co-operative plan springing spontaneously from among the tenants, who are usually and understandably quite content to maintain the status quo. Therefore, an owner in search of profit may properly give impulse to a co-operative movement to purchase his building. He may promulgate the plan, he may present it to his tenants, and in so doing he may explain the advantages of the plan and properly persuade them to purchase apartments. He may expound the applicable law--correctly--and if that law strikes the tenants as harsh and oppressive the owner is under no obligation to soften literal compliance by one jot. Nothing will be found in the Emergency Housing Rent Control Law or in the applicable regulations (Rent and Eviction Regulations, § 55, subd. 3, particularly) inhibiting such activities of an owner. The defendants' good faith is tested by the spirit and the letter of the emergency rent statutes and ...