In these six cases questions are raised as to the constitutional validity of two statutes. One is the New York State rent control statute which became effective May 1, 1950 (L. 1950, ch. 250). The other is the so-called Sharkey Law (Local Laws, 1949, No. 73 of City of New York; Administrative Code of City of New York, § U41-7.0) which was validated by the State Legislature (L. 1950, ch. 1) after this court had held it to be unconstitutional. (F. T. B. Realty Corp. v. Goodman, 300 N.Y. 140.)
Plaintiff, a domestic corporation, owns No. 1125 Park Avenue, a residential property in the city of New York. On September 15, 1948, the parties entered into an agreement whereby the plaintiff leased to the defendant an apartment in No. 1125 Park Avenue at a monthly rent of $268.34 for a term that ended on September 30, 1949. Upon the expiration of that lease, the defendant stayed on as a statutory tenant.
In 1943, the plaintiff landlord had registered No. 1125 Park Avenue with the Federal Office of Price Administration pursuant to the Federal Emergency Price Control Act of 1942 (U. S. Code, tit. 50, Appendix, § 901 et seq.), a statute which made the then existing rents the maximum that landlords could charge for housing accommodations. Federal rent control was continued by subsequent housing and rent acts. The 1949 act re-enacted a provision which had authorized the Federal Housing Expediter to make such adjustments of maximum rents as should be necessary "to remove hardships or to correct other inequities". The 1949 act also provided: "In making and recommending individual and general adjustments to remove hardships or to correct other inequities, the Housing Expediter and the local boards shall observe the principle of maintaining maximum rents for controlled housing accommodations, so far as is practicable, at levels which will yield to landlords a fair net operating income from such housing accommodations." (Housing and Rent Act of 1947, § 204, subd. [b], par. , as amd.; U. S. Code, tit. 50, Appendix, § 1894, subd. [b], par. .)
Pursuant to the powers so conferred, the Federal housing regulations applicable to the city of New York were amended so as to enable a landlord to obtain leave to increase the rent when his "net operating income" from a building was less than "a fair net operating income". The amended regulations were in part as follows:
The above-amended regulations were promulgated by the Federal Housing Expediter on May 3, 1949, and were made retroactive to April 1st of that year. On May 17, 1949, the plaintiff landlord filed a petition with the Office of the Housing Expediter for a "fair net operating income" rent increase.
Upon a certificate of the Housing Expediter stating his determination in respect of the plaintiff landlord's total annual income, total operating expenses and annual net operating income, the plaintiff landlord was granted an annual rent increase of $31,496.20 which was apportioned among its tenants. Accordingly, on September 27, 1949, notice was given to the defendant tenant that at the expiration of his lease on September 30, 1949, the monthly rent theretofore paid by him would be raised from $268.34 to $300.26, an increase of $31.92 each month.
The defendant tenant has refused to make payment of the increased rent and each month has paid only the original rent of $268.34. Having accepted these smaller rent payments "without prejudice" to its asserted right to collect the increased amounts, the plaintiff landlord demands in this action (1) payment of $31.92 for each of the months of October,
The Sharkey Law was enacted by the City Council of the City of New York. It became effective October 7, 1949. Thereby rents in the city of New York were frozen at the rates that were payable on March 1, 1949, and collection of any greater rent by demand, action or summary proceeding was forbidden unless the temporary city housing rent commission had certified a higher rent to be just and reasonable. On December 29, 1949, this court held the Sharkey Law to be an unconstitutional violation of the Home Rule Amendment of the State Constitution (F. T. B. Realty Corp. v. Goodman, 300 N.Y. 140, supra). On January 10, 1950, the State Legislature undertook by chapter 1 of the Laws of 1950 to validate the Sharkey Law as of October 7, 1949, the date of the enactment of that local law by the City Council of the City of New York. Then in March, 1950, the State Legislature passed and sent to the Governor three rent control bills, one of which was signed by him on March 29, 1950, and is the State rent control statute here in question. The other two bills were vetoed by the Governor.
The State rent control statute (1) terminated as of May 1, 1950, Federal rent control in this State; (2) froze at the March 1, 1949, levels residential rents in the city of New York that had theretofore been controlled either by the Federal acts or by the Sharkey Law; and (3) froze as of March 1, 1950, residential rents that elsewhere in the State had theretofore been controlled by the Federal acts.
The defendant tenant moved for an order dismissing the complaint of the plaintiff landlord for insufficiency in law. This motion was granted by the Municipal Court of the City of New York on the ground that both the Sharkey Law and the State rent control statute were constitutional. Accordingly a judgment dismissing the complaint was entered. A direct appeal to this court was then taken by the plaintiff landlord.
The rent demanded for the month of May, 1950, as we have said, was $300.26, the amount to which the monthly rent had been increased by the Federal Housing Expediter. But the State rent control statute, as we have also said, forbids as of May 1, 1950, the collection in the city of New York of a rent higher than that which was there payable on March 1, 1949, viz., $268.34. Thus we are brought to this issue: Is the State rent control statute invalid because thereby rents payable on and after May 1, 1950, in the city of New York are rolled back to the March 1, 1949, levels?
Of course, such a statutory rollback of rents is nothing new. Similar New York statutes that were enacted a generation ago were then upheld. (See Brown Holding Co. v. Feldman, 256 U.S. 170; People ex rel. Durham Realty Corp. v. La Fetra, 230 N.Y. 429); and recently our State commercial rent control statute was held to be valid in the face of an attack upon its constitutionality. (Twentieth Century Associates v. Waldman, 294 N.Y. 571, supra, appeal dismissed 326 U.S. 697.) Indeed the plaintiff landlord concedes the existence of a housing emergency in this State and the consequent necessity for some degree of State control of rents and evictions. The principal complaint here is this: The State Legislature acted arbitrarily when, five years after the end of the "shooting war", it enacted a statute which is more severe toward landlords than were the prior Federal acts.
But the 1949 Federal Housing Act contemplated freedom of a State to supplant Federal control of rents with regulations of
By the foregoing declaration Congress expressed its willingness to withdraw from the field of rent control in the States and to permit them to occupy that field. On the strength of that declaration, the Legislature of this State passed the State rent control statute here in question in the exercise of the inherent police power reserved to the State itself by the Tenth Amendment of the Federal Constitution (see People ex rel. Durham Realty Corp. v. La Fetra, 230 N.Y. 429, 442-443, supra).
The State rent control statute reveals the dissatisfaction of the Legislature with some of the results of the former Federal process of rent control (L. 1950, ch. 250, § 1). The Legislature, then, had reasons of its own for not following more closely than it did the pattern of the Federal system of rent control and, this being so, it is not for this court to say that the Legislature was bound to take a different course (see Lapchak v. Baker, 298 N.Y. 89, 95, and cases there cited).
The freezing of rents in the city of New York as of one date (March 1, 1949) and elsewhere in the State as of another date (March 1, 1950) is denounced by the plaintiff landlord as a wholly arbitrary classification. But this point need not detain us, for the challenged classification is too obviously justified to need explanation (Brown Holding Co. v. Feldman, 256 U.S. 170, 199, supra).
In the view of the plaintiff landlord, the State rent control statute will deprive it of a "fair return" on its investment. If that point can be considered at all on this direct appeal (see Lapchak v. Baker, 298 N.Y. 89, supra), the answer is plain. The State rent control statute was enacted to meet a passing emergency. It does not contemplate a taking of the property of any landlord. Even though it may, now and then, compel an owner to operate his real property at a loss, the statute is not for that reason to be condemned as an arbitrary use of the police power (Bowles v. Willingham, 321 U.S. 503, 516-519).
Hence, as we conclude, the State rent control statute is valid insofar as thereby rents payable on and after May 1, 1950, in the city of New York are rolled back to the March 1, 1949, levels. Hence, too, the insistence of the plaintiff landlord on the full increased rent for the month of May, 1950, prevents recovery by it of any rent for that month.
We turn now to a different aspect of the controversy. Whether the plaintiff landlord is entitled to collect the arrears of rent for the period from October 1, 1949, to April 30, 1950 — a period prior to the effective date of the State rent control statute — is the question now to be determined. During all that period the Federal Housing and Rent Act was in effect in this State.
The defendant tenant takes his stand upon the validated Sharkey Law. The text thereof is in part as follows:
The Sharkey Law was recommended to the City Council by the Council's Committee on General Welfare in a report which said: "This bill was introduced by the Vice-Chairman Mr. Sharkey, to correct a condition which was caused by the passage by Congress of the 1949 [Federal] Rent Control Act. Pursuant to such act the Rent Director, Tighe Wood, created a `fair rent formula' which in the metropolitan area of New York, has caused rent increases up to 50 per cent. * * * The bill [i.e., the Sharkey Law] would bar any evictions for a rental greater than that in existence on March 1, 1949, unless a certificate were procured from the City Temporary Rent Commission which would only be issued after a hearing in which both sides were represented and a finding that such increase was reasonable and fair."
In Matter of Tartaglia v. McLaughlin (297 N.Y. 419), this court said (p. 425): "Emergency control of rents and evictions would seem to be an affair for concurrent Federal and State action, at least until the field is pre-empted by Congress and so long as local legislation in that field does not conflict with the letter or policy of any Federal enactment". (See, also, Loab Estates, Inc., v. Druhe, 300 N.Y. 176.) The city has attempted to justify the validated Sharkey Law as such concurrent legislation
We go back now to the State rent control statute. Section 13-a thereof makes these provisions:
The above provisions of the State rent control statute are said by the Attorney-General to have been drafted after the pattern of the Federal Portal-to-Portal Act of 1947 (U. S. Code, tit. 29, §§ 251, 252) and are here defended by him upon the authority of cases which sustained that Federal statute. The United States Supreme Court held in Anderson v. Mt. Clemens Pottery Co. (328 U.S. 680) that employees were entitled under the Fair Labor Standards Act of 1938 (U. S. Code, tit. 29, § 201 et seq.) to receive compensation for preliminary activities incidental to their work. That construction of the Fair Labor Standards Act resulted in numerous lawsuits against employers for large sums of money. To meet that situation, Congress enacted the Portal-to-Portal Act which retroactively wiped out employers' liability for such preliminary activities by their employees unless such activities had been made compensable by contract, custom or practice in effect at the time of the activity. This statute has been uniformly held constitutional (see, e.g., Battaglia v. General Motors Corp., 169 F.2d 254, certiorari denied 335 U.S. 887). The claim here is that the last-quoted provisions of our State rent control statute can be upheld on the analogy of cases like that just cited.
But there is an essential difference between abolition by Congress of rights created by it and an attempt by a State to abolish such rights. Under our system of government, Federal laws are supreme and cannot be repealed, abrogated or made unenforceable by State action (see Testa v. Katt, 330 U.S. 386, and cases there cited).
The Municipal Court of the City of New York has jurisdiction to adjudicate a claim for arrears of rent (N. Y. City Mun. Ct. Code, § 6, subd. 1). Section 13-a of the State rent control statute attempts to abolish or at least to suspend that jurisdiction solely in respect of claims for arrears of rent that have accrued by operation of an act of the Congress of the United States. The question so raised is not one of degree. Nor is it one of the reasonableness of the State statute. The power which the Legislature assumed to exercise in enacting section 13-a of the State rent control statute does not exist. The provisions of section 13-a are therefore wholly void.
The complaint of the plaintiff landlord is, in consequence, a good claim for arrears of rent accruing from October 1, 1949, to April 30, 1950. But there can be no recovery here, as we have already said, of rent for the month of May, 1950.
The judgment in Teeval Co., Inc., v. Stern should be reversed, without costs, and the action remitted to the Municipal Court of the City of New York for further proceedings not inconsistent with this opinion.
The five remaining cases may be more shortly disposed of.
F. T. B. Realty Corporation v. Goodman is a summary proceeding brought in the Municipal Court of the City of New York for the recovery of possession of residential property in that city. The appellant is the petitioner-landlord; the respondent is the tenant. On August 23, 1949, the Federal Housing Expediter, pursuant to the "fair net operating income" formula of the Federal act, granted to the landlord a rent increase of $12.04 a month. Taking his stand upon the validated Sharkey Law, the tenant has refused to pay that increase for the period from October 1, 1949, to and including February, 1950. He has been upheld in that position by the Municipal Court which dismissed the proceeding. From the order of dismissal, the landlord appealed directly to this court. For reasons already stated, the order of the Municipal Court must be reversed, with costs, and the matter remitted to that court for further proceedings not inconsistent with this opinion.
Leighton v. Jawrower No. 1 is a summary proceeding brought in the Municipal Court of the City of New York for the recovery of possession of residential property in that city. The appellants are the landlord-petitioners. The respondent is the tenant. On July 8, 1949, the landlords obtained an order from the Federal Housing Expediter increasing the tenant's monthly rent from $39 to $40.32. When the tenant refused to pay,
Leighton v. Jawrower No. 2 is an action brought by the plaintiff landlords in the Municipal Court of the City of New York to recover from the defendant tenant rent for residential property in the city of New York for the month of May, 1950 and for balances of rent, representing increases granted by the Federal Housing Expediter, for March and April, 1950. Upon motion by the defendant tenant the complaint was dismissed for insufficiency on its face. From the judgment of dismissal the landlords appealed directly to this court. For reasons already stated, the judgment must be reversed, without costs, and the action remitted to the Municipal Court of the City of New York for further proceedings not inconsistent with this opinion.
Bordo Corporation v. Witty is a summary proceeding brought by the petitioner landlord in the Municipal Court of the City of New York. On October 17, 1949, the landlord had obtained a certificate from the Federal Housing Expediter decontrolling the apartment occupied by the respondent tenant in order that the apartment might be subdivided into a number of smaller residential units. The landlord thereupon brought this proceeding to evict the tenant, but was dismissed for failure to obtain a certificate of eviction from the temporary city housing rent commission pursuant to the validated Sharkey Law (see Administrative Code of City of New York, § U41-7.0, subd. g). From that dismissal the landlord appealed directly to this court, asserting that the validated Sharkey Law requirement of an additional certificate of eviction was an unconstitutional interference with the Federal statute. Prior to the reargument of this appeal, Federal rent control had been terminated in this State. In Matter of Tartaglia v. McLaughlin (297 N.Y. 419, supra) we held that in a situation like this the law in
Iscovitz v. Paletta is an action for a declaratory judgment that was brought in the Supreme Court, Bronx County. The plaintiffs, owners of residential property in the city of New York, obtained a certificate of eviction from the Federal Housing Expediter by establishing to his satisfaction, pursuant to the Federal Housing and Rent Act of 1947, as amended, that they sought in good faith to recover possession of an apartment occupied by the defendant as a tenant for the immediate purpose of permanently withdrawing that apartment from the rental market. The validated Sharkey Law, however, prevented the eviction of the defendant tenant for that purpose (see Loab Estates, Inc., v. Druhe, 300 N.Y. 176, supra). In this action, the plaintiff landlords sought a judgment declaring the validated Sharkey Law to be in conflict with the Federal Housing and Rent Act and hence invalid. Their complaint was dismissed and they appealed directly to this court from the judgment of dismissal. As in the last case, this appeal presents only a question that is now academic and must be dismissed, but without costs.
In the first and fourth above-entitled actions: Judgment reversed, etc.
In the second and third above-entitled actions: Orders reversed, etc.
In the fifth and sixth above-entitled actions: Appeals dismissed, etc.