309 N.Y. 426 (1956)

The People of the State of New York, Appellant, v. Henry Horowitz and Transbrook Theatres, Inc., Respondents.

Court of Appeals of the State of New York.

Decided January 12, 1956

Attorney(s) appearing for the Case

Edward S. Silver, District Attorney (David Diamond of counsel), for appellant.

Harold Dublirer for respondents.

CONWAY, Ch. J., DESMOND, FULD, FROESSEL and BURKE, JJ., concur; DYE, J., taking no part.


Defendants were indicted for grand larceny, first degree, for misappropriating funds deposited by a concessionaire "as advance rental and security for the full and faithful performance" of a five-year agreement whereby the concessionaire contracted to install and maintain stands and vending machinery in two moving picture theatres for the sale of cigarettes, nonalcoholic beverages, ice cream and other confections. These theatres were operated by defendant Transbrook Theatres, Inc., of which defendant Horowitz was president. Both theatres closed their doors at the end of August, 1953, when the agreement was only three months old. These defendants failed to repay to the concessionaire a balance of $5,206.01 due on account of this deposit.

Prior to the adoption of section 233 of the Real Property Law (L. 1935, ch. 581), if a landlord spent money deposited by a tenant as security for the performance of covenants under a lease, the relationship was held to be simply that of debtor and creditor, and the ill-starred tenant could only insist upon a personal obligation of the landlord which usually proved to be of little value if the landlord became insolvent (Mallory Associates v. Barving Realty Co., 300 N.Y. 297, 299-300; Mendelson-Silverman v. Malco Trading Corp., 262 N.Y. 621; Malco Trading Corp. v. Mendelson-Silverman, 240 App. Div. 322, affd. 264 N.Y. 651; Rambach v. Heights Theatres, 239 App. Div. 203; Jahmes Co. v. Propper, 238 App. Div. 326; Levinson v. Shapiro, 238 App. Div. 158). This section of the Real Property Law, unless otherwise provided in the lease, causes such a deposit to become a trust fund, remaining the property of the tenant although in the custody of the landlord, until applied against defaulted covenants in the lease, which has the double consequence of enabling the tenant to repossess himself of the deposit in spite of the insolvency of the landlord, if the moneys are on hand, and, likewise, of rendering the landlord subject to criminal prosecution if meanwhile he has appropriated the fund to his own use.

There may be no essential reason on account of which the Legislature might not similarly have protected a deposit of security by a licensee. Section 233 of the Real Property Law, however, creates this fiduciary status only in the case of contracts "for the use or rental of real property". That expression is well understood, and imports the ordinary landlord and tenant relationship involving transfer of possession of designated space in real estate. In the present instance, exclusive possession of no defined portions of these theatres is demised to the concessionaire, nor does the contract so much as specify where these stands and automatic dispensers are to be located in the theatres, and the concessionaire is allowed to hawk and peddle its wares anywhere in these motion picture houses. As in the case of washing machines in an apartment house, the concessionaire "has no ownership of the space allotted to its equipment in the sense that usually obtains in the relationship of landlord and tenant." (Kaypar Corp. v. Fosterport Realty Corp., 1 Misc.2d 469, 471, affd. without opinion 272 App. Div. 878, motion for leave to appeal denied 297 N.Y. 1036.) It was said in Reynolds v. Van Beuren (155 N.Y. 120, 123): "While this paper is called a lease it is manifestly nothing more than a mere license by the tenant in possession to the defendants to go upon the roof of the building and place advertisements upon the sign." The same principle applies to this vending concession in these theatres.

This kind of concession, regardless of whether the contract describes the parties as landlord and tenant, does not create that relationship in law in the absence of a demise of space in a building. It has been held not to be a license of a "rentable area" within the scope of the emergency rent laws (Layton v. Namm & Sons, 275 App. Div. 246, affd. without opinion 302 N.Y. 720).

It has been held frequently at Special Term that concessions such as this do not partake of the nature of the conventional type of lease (Planetary Recreations v. Kerns, 184 Misc. 340; Halpern v. Silver, 187 Misc. 1023; Wash-O-Matic Laundry Co. v. 621 Lefferts Ave. Corp., 191 Misc. 884; Muller v. Concourse Investors, 201 Misc. 340; Greenbro Coin Meter Corp. v. Basch, 205 Misc. 853).

The order appealed from should be affirmed.

Order affirmed.


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