
    Joanette Juniors, Inc., Appellant-Respondent, v. Princeway Realty Corporation, Respondent-Appellant.
    First Department,
    June 24, 1947.
    
      
      Sydney A. Luria of counsel (Carb, Reichman & Luria, attorneys), for respondent-appellant.
    
      Harry Bijur, of counsel (Bijur & Herts, attorneys), for appellant-respondent.
   Per Curiam.

On January 31, 1946, plaintiff, a new tenant, leased from defendant certain loft space at $14,000 per year for a term of three years. The said space formed part of a larger area, all of which had been occupied for commercial purposes under lease to another tenant on March 1, 1943, at $5,000' per annum. Plaintiff and defendant proceeded on the assumption that, inasmuch as the space covered by plaintiff’s lease and that of the former tenant were not the same, plaintiff’s space “ was not used or occupied on such date for commercial purposes,” with the consequence that the reasonable rental *on that date could be determined by agreement under subdivision (e) of section 2 of the Commercial Rent Law (L. 1945, ch. 3, amd. by L. 1945, ch. 315, as amd. by L. 1946, ch. 272; McKinney’s Unconsolidated Laws of N. Y., § .8522, subd. [e]). Accordingly, they entered into a separate agreement three days before the lease was signed purporting to establish what had been the reasonable rent on March 1, 1943. No attempt was made to comply with the second paragraph of section 4, as was done in the case of Roof Health Club, Inc., v. Jamlee Hotel Corp. (271 App. Div. 481, affd. 296 N. Y. 883). That section, by its terms, is inapplicable, in any event, to space not occupied by the same tenant on January 24, 1945. The trial court was correct in determining that the space rented to plaintiff was occupied for commercial purposes on March 1, 1943. Neither is this a case where the parties may stipulate the- reasonable rent upon the expiration of the term of a lease-reserving rental on a graduated scale (§ 14), since the lease to the former tenant had not expired but was terminated by agreement.

In this action, plaintiff repudiates its agreement purporting to fix the reasonable rent and the lease which it signed which enabled it to get into the building, and sixes to recover the excess rent which it has paid over and above the rent in the lease of the larger atea to the former tenant in force March 1, 1943, plus 15%. The trial court has granted a recovery to plaintiff, measuring the emergency rent by the rent in the lease to the previous tenant plus 15%. The court allowed defendant landlord to offset the money which it expended in repairs to the premises and for mailing them available to the plaintiff as a tenant. There is no warrant in the statute for such an offset. Neither was the rent for the area covered by the former lease to the other tenant plus 15% necessarily determinative of the rent to be charged to this plaintiff.

Under all of the circumstances of this case, we think that a new trial should be granted with directions to the trial court on the new trial to disallow claims to defendant for repairing and making available the demised premises, but to determine whether the defendant may be entitled to retain an amount in excess of the emergency rent as the “ reasonable ” rent of the area demised to plaintiff as that term is used in section 4 of the Commercial Bent Law, to be offset in diminution or extinction of the plaintiff’s cause of action for excess rent. If, in the beginning, the tenant had refused to pay more than the emergency rent and the landlord had sued, the latter might have been entitled to an adjudication on whether the “ reasonable rent ” provided for by section 4 was in excess of the emergency rent. The present situation is similar, except that the tenant is suing to be reimbursed for the difference between the emergency rent and the stipulated rent which it has already paid to the landlord. The clause in section 3 that “any rent which' exceeds the emergency rent shall be presumed to be unjust, unreasonable and oppressive ” implies that a tenant who has paid excess rent has a cause of action to be recompensed therefor; but the presumption in favor of the “ emergency ” rent is rebuttable, and the implication mentioned is subject to a proviso, that the extent to which the rent that has been paid is to be deemed excessive, shall be measured by deducting what the court would have permitted the landlord to recover if the tenant had not paid. Although the trial court indicated that it was willing to consider that aspect of the case, the action was' not tried on that theory since the landlord took the position that it was entitled to the full amount of the rent specified in the' lease.

The disallowance by this court of the landlord’s claim to the expenses incurred in repairing and making the demised premises available' to the tenant, as a direct offset, requires that an. opportunity be given for a determination of the amount of the' “ reasonable ” rent, in the calculation of which some of these items may be taken into consideration.

The judgment, and the order entered January 3,1947, so far as appealed from, should be reversed and a new trial ordered in accordance with the foregoing opinion, with costs to plaintiff to abide the event. The order denying defendant’s motion for judgment on the pleadings should be affirmed.

Callahan, J.

(dissenting). I feel constrained to concur in the view of the majority that the Commercial Rent Law (McKinney’s Unconsolidated Laws of N. Y., § 8521 et seq.) makes no provision for an agreement between a landlord and a new tenant fixing a rental in excess of the emergency rent for commercial space, though such agreement is permissible if made by a tenant in occupancy at the expiration of his term. In this case the parties apparently attempted to evade the restrictions of the statute by agreeing that the space demised under the new lease was unoccupied for commercial purposes on the maximum rent date. This space comprised a substantial part of the former loft altered by partitions and provided with new flooring. If the space held by the tenant under the prior lease had lost its identity by reason of material alterations or adaption to new uses, it might be that an agreement of the kind involved in this case would be permissible, if made in good faith and not for the' purpose of evading the statute. On the facts disclosed, however, I think that the trial court was justified in holding that the space in question had been occupied for commercial purposes on March 1, 1943, within the meaning of the statute'.

"While it is my opinion that the plaintiff is entitled to prevail in this case, the question remains as to the proper measure of recovery. Mo application to the court for an increased rent based on a reasonable return from the whole property is involved in the action. In fact, the landlord expressly disavowed any intention to make such application. Under the circumstances I fail to see how the provisions of section 4 of the statute (L. 1945, ch. 3, as amd. by L. 1945, ch. 315, as amd. by L. 1946, ch. 272; McKinney’s Unconsolidated Laws of M. Y., § 8524) can lié applied in determining the fair rental value of the premises. It seems to me that the trial court was correct in holding that the fair rental Value was prima facie the emergency rent based on the former lease plus 15% and that it had the right to make such adjustments with respect thereto as were warranted by the circumstances. On the. basis of the whole record I think that the items considered by the trial court in connection with the expense incurred by the landlord to put the plaintiff in possession were proper and rightly allowed as an offset.

I vote to affirm the judgment and the order.

Martin, P. J., Glennon, Dore and Van Voorhis, JJ., concur in Per Curiam opinion; Callahan, J., dissents in opinion as to judgment, and order entered January 3,1947, so far as appealed from.

Judgment, and order entered January 3, 1947, so far as appealed from, reversed and a new trial ordered, with costs to the plaintiff to abide the event.

Order entered October 31, 1946, unanimously affirmed.  