
    Viro Realty Corporation, Appellant-Respondent, v. Daniel Belmont, Doing Business as Daniel the Caterer, Respondent-Appellant.
    First Department,
    May 24, 1949.
    
      
      Harold J. Treanor of counsel (William H. Swan with him on the brief; Cox & Treanor, attorneys), for appellant-respondent.
    
      Harry M. Kroltow for respondent-appellant.
   Cohn, J.

This action was instituted for a judgment declaring that the defendant in his occupancy of plaintiff’s premises is a trespasser or a statutory tenant.

In January, 1947, defendant sought to lease certain space in plaintiff’s building for a term of ten years. The space is subject to the business emergency rent statute. As a result of their negotiations, it was agreed that the parties would submit to a designated arbitrator the determination of a reasonable rent for the space.

A separate written agreement was simultaneously made under which plaintiff acknowledged receipt of $5,000 as security under a lease of the space in its building to be executed in the event that the rent determined by the arbitrator was acceptable to the parties. It was further provided that if the award of the arbitrator was approved by both parties and confirmed by the Supreme Court, then the amount of the award was to be inserted in the lease which was to be executed. There was also expressed the understanding that until the award is confirmed by the Supreme Court, ‘ ‘ the lease between said parties shall be without any effect, and all moneys, said deposit and rent for first month are without prejudice to the parties hereto ”.

On January 30, 1947, the arbitrator rendered his award fixing the reasonable rent in the sum of $10,000 per annum. After the parties signified their approval of the award it was confirmed by an order of the Supreme Court on January 31, 1947. Upon the fulfillment of this last condition of the contracts, the parties signed the lease for ten years at the annual rental of $10,000. Defendant entered into possession of the demised premises on February 2, 1947.

Thereafter, in April, 1947, defendant moved to set aside the order confirming the award and for a new arbitration. The application was ultimately granted (272 App. Div. 1014, affd. 297 N. Y. 871) on the ground that the arbitration was purely pro forma; that the rent in excess of the emergency rent was arrived at by consent of the parties and that the procedure was violative of declared public policy. (Business Rent Law, L. 1945, ck. 314 as amd.) This court, however, did not direct a new arbitration.

Concededly, the rent of the demised premises was $4,500 per annum on June 1, 1944, the freeze date fixed by the Business Rent Law (L. 1945, ch. 314, § 1, as amd.). The emergency rent would, therefore, be $5,175 per annum. This sum, the tenant has been paying without prejudice to the rights of either party. The landlord has offered to return the $5,000 deposited as security but the tenant has refused to accept it because he claims to have a ten-year lease. He also asserts that he expended $30,000 in alterations and improvements, and he alleges that the landlord refused to contribute the sum of $400 for installation of a false ceiling, as he agreed to do. 0

The landlord now contends that there is no lease and that he may summarily evict the tenant. Defendant, however, urges that the vacatur of the award did not void the lease; that all of its provisions are in full force and effect save for the rental provision; that the amount of rental to be paid during the ten-year period is to be the emergency rent until such time as an arbitrator or the court fixes a different rental in a proper proceeding.

From a recital of these facts it would appear that the defendant obtained possession of the premises under a ten-year lease by representing to plaintiff that he had accepted the arbitration award as confirmed by the court. Evidently he had no intention of going into possession upon the terms so fixed. The prompt repudiation by defendant after he had obtained possession of the demised premises suggests that his acceptance thereof in the first instance was sham and no acceptance at all. Consequently, under the terms of his agreements with the landlord the lease between said parties is “ without any effect ”. The landlord was at no time under any obligation to lease the vacant space in his building to a tenant not in possession, and certainly he was not under any duty to give a lease for a ten-year term when quite obviously the present emergency will not last for that period of time.

The contract here was entire. The tenant obtained the long lease on specific agreements. These agreements he chose to repudiate, as was his right. However, he cannot claim that he is entitled to a lease for a ten-year term and cast aside the contracts which provide that if the arbitration award is not confirmed by the courts the lease between the parties shall be without any effect. As the matter now stands, the arbitrator’s award has been rejected by the courts. That leaves the parties in the position they would have been in, had defendant refused to consent to the award. Defendant has destroyed the foundation on which rests the existence of his lease. The tenant, of course, could have disapproved the award at the outset and received a return of his $5,000, thereby releasing the parties from their commitments. After beguiling plaintiff, the tenant seeks to hold the landlord to part of the agreements while he is relieved of part. The agreements here, as they were worded, bound both entirely or relieved both entirely.

The emergency rent laws were designed to secure persons out of possession as well as those in possession to the extent that exorbitant rents should not be exacted for business space and that only rentals permitted by statute should be allowed. In that respect defendant is entitled to such protection. His rent may only be the emergency rent or such rent as accords with the statute. If the parties resort to arbitration, such arbitration must be honestly conducted and must not be employed as a mere subterfuge to afford the landlord a means of exacting an excessive rental. But the statute does not shield a person in a plan to obtain a lease on premises for a long term of years by a scheme that he will agree to pay whatever rent is fixed by a single named arbitrator as confirmed by the court and renounce such agreement after he has gained possession.

Whether under all the circumstances plaintiff should have judgment declaring it to be entitled to possession of the premises is a question we need not pass upon in view of the fact that both by its complaint and in its brief plaintiff prays for alternative relief declaring defendant either a trespasser or a statutory tenant. In view of the expenditure which defendant has made upon the premises since he entered into possession thereof, there is ample justification for granting the alternative relief which does not effect a forfeiture of defendant’s possession but recognizes him as a statutory tenant.

In the circumstances of this case, we hold that the tenant does not have a lease, and that he is to have a return of the $5,000 which he deposited as security. He is privileged to remain in possession as a statutory tenant so long as he pays the emergency rent or such other rent as may be fixed pursuant to law (L. 1945, ch. 314, § 4, as amd.). His possession of the premises is subject to full protection of the Business Rent Law. As such, the tenant for the duration of the public emergency is safeguarded in his possession of the business space and he is protected by the establishment of a maximum rent at a level of fifteen per centum above rents charged on June 1, 1944, or at a level otherwise determined, as provided by statute (L. 1945, ch. 314, § 1, as amd.).

The case of Whiting v. Tower's Stores, Inc. (273 App. Div. 1001, motion for leave to appeal denied, 274 App. Div. 782) is not pertinent to the issues presented here. In that case, a renewal lease was made with a tenant in possession. There were no preliminary agreements such as we have in the present case which provided that in the event that the courts did not approve of the rent fixed by the arbitrator there was to be no lease.

Plaintiff’s alternative prayer for relief, that defendant be adjudged a statutory tenant within chapter 314 of the Laws of 1945, as amended, should be granted and he is entitled to a declaratory judgment to that extent. The order should accordingly be reversed on plaintiff’s appeal and plaintiff is entitled to a declaratory judgment as indicated in this opinion. The order denying defendant’s motion for judgment on the pleadings or in the alternative for summary judgment should be affirmed.

Dore, J.

(dissenting). The business emergency rent control law here applicable (L. 1945, ch. 314, as amd. by L. 1946, ch. 273, effective March 30, 1946) was passed to prevent exaction of unreasonable and oppressive agreements for payment of rent for business space under prevailing conditions that caused, as the act declares, a breakdown in the normal processes of bargaining and freedom of contracts. In enacting the statute, the Legislature obviously intended to protect prospective tenants out of possession as well as tenants in possession on that date. Indeed, tenants in possession were in far less need of statutory protection than persons out of possession seeking business space. To get space, the latter were under greater compulsion to submit to oppressive demands of landlords having the commodity that by governmental prohibition, owing to war, had been made extremely scarce.

This aspect of the public policy of the State is clearly indicated in section 4 of the act effective March 28,1945 (L. 1945, ch. 314). That section as amended by chapter 273 of the Laws of 1946, applicable when the lease in question was made, was divided into four paragraphs. The first begins with the statement that a rent exceeding emergency rent “ may within the limitations specified by this section, be fixed by arbitration or by the supreme court.” That and the second paragraph set forth the authorized methods of determining reasonable rent. The third paragraph, so far as relevant, provided: In lieu of the provisions contained elsewhere in this section for determining and fixing rent, the tenant and the landlord may fix a reasonable rent by written agreement, signed by both * * * provided: (a) that snch tenant used or occupied the same space on the effective date of this act; * * (Italics added.) That permission to fix the reasonable rent by agreement was expressly limited to cases in which the tenant “ used or occupied the same space ” on the effective date of the section. Accordingly when, as here, a tenant was out of possession on January 30, 1947, the date of the lease herein, there was no permission but it was then illegal for a landlord and such proposed tenant to fix the rent in excess of the emergency rent by consent.

Such provisions of the law were kept clearly in mind when this court vacated the arbitrator’s award herein; in our memorandum decision we expressly pointed out that in this case the rent in excess of the emergency rent was by consent of the landlord and a tenant not in possession on the effective date of the statute ” (italics added). We then held that to “ give effect to the declared public policy of the State ”, the order appealed from denying this tenant’s motion to vacate the arbitrator’s award should be reversed, and the award and the order confirming the same should be vacated (Matter of Viro Realty Corp. [Belmont], 272 App. Div. 1014). The Court of Appeals unanimously affirmed without opinion, the State Reporter, however, pointing out that this court had held that the rent was by consent ” as above stated and therefore violative of public policy (297 N. Y. 871).

That order of reversal vacated only the illegal pro forma award as to the amount of rent; it did not vacate or purport to make void the lease. In the rider annexed to the third page of the lease, the parties mutually agreed that the emergency rent was $431.25 a month, that the landlord had given notice to that effect and the parties “ mutually understood and agreed that pursuant to the permissible provisions of the said statute [emergency rent law], a rent exceeding the emergency ’ rent has been determined by arbitration between the parties hereto; that the award * * * fixing the reasonable rent * * * herein * * * in excess of the emergency ’ rent and in the amount specified in this lease has been ratified * * * fixing the reasonable rent * # * in the sum of * * # ($10,-000) ” and that that amount was inserted in the lease after the award and its acceptance by the parties.

The parties herein have, therefore, lawfully agreed upon every term of the lease except the amount of the rent; they have not (as they expressly agreed to) fixed a rent exceeding the emergency rent, under “ the permissible provisions ” of the statute; the lease therefore under the law applicable now survives except as to the amount of rent illegally fixed in excess of emergency rent.

When a lease under the emergency rent laws is in all respects valid except the amount of rent in excess of emergency rent, the lease itself survives but only the emergency rent may be paid until the court otherwise determines a different rent. That rule was applied to sustain, in every term except the amount of rent, a twenty-one-year lease in Whiting v. Tower's Stores, Inc. (273 App. Div. 1001). In that case a twenty-one-year lease was made between the plaintiff landlord and defendant tenant on April 5,1945, for a rent in excess of the emergency rent but without complying with the provisions of section 4 of the Commercial Rent Law, requiring a statement that the landlord advised the tenant of his right to continue payment of the emergency rent until modified by arbitration or the Supreme Court and a statement that within sixty days the tenant could cancel the lease. The landlord sued not for the rent stipulated in the lease, concededly illegal, but for the emergency rent and obtained summary judgment against the tenant. On appeal to this court the tenant, seeking to escape liability under the twenty-one-year lease maintained (1) that the lease was invalid because it failed to contain the statements required by section 4 of the act, and (2) that as the rent was accordingly illegal when the contract was made, the entire instrument must fall as it was indivisible. This court unanimously affirmed the order granting the landlord’s motion for summary judgment against the tenant. In that case we fully considered the argument now made that the lease was entire and indivisible and that if the rent was struck out as illegal, then the entire instrument must fall as it was indivisible, nevertheless, we enforced the landlord’s suit not for the rent stipulated which was concededly illegal under the emergency rent laws but for the emergency rent..

In that case the landlord was suing to recover rent from October 1, 1945 to and including August 1, 1946, during all of which time the emergency rent laws were in effect. Accordingly, there was not presented to us and we did not have to pass upon the question as to what the rental would be after the emergency rent laws terminated. Similarly, in this case the issue is being presented to us during the pendency of the emergency rent laws and we are not called upon to pass upon what the rental may be after the emergency terminates. The original $10,000 rent consented to has been vacated as illegal and that sum may not be reinstated at least during the emergency. If and when the emergency rent laws are repealed, the parties will be free and unimpeded by the provisions of such laws with respect to an agreement as to the rent payable. The emergency rent laws were intended to be remedial, not to destroy contracts otherwise legal but to prevent enforcement of such parts as are illegal in contravention of the laws while they are applicable. We are not now called upon to determine what may happen on future contingencies which under the terms of this lease at least may never arise. Accordingly, it is not necessary and it would be inappropriate for us to pass upon states of facts and of law not presented in this record with regard to supposititious ninety-nine-year leases expiring long after the emergency rent laws have been repealed. We have no such lease before us and the emergency rent laws are still in existence. Indeed, if we made any ruling about such supposititious states of fact and law what we said would be mere dicta. It is never important what a court says, but it is of great importance what a court does. The only thing this court now can do is to pass upon the state of facts presented in this record on the law presently applicable.

In Warfield v. Bellanca Robe Corp. (186 Misc. 910, affd. 187 Misc. 731 [App. Term]), and by this court (271 App. Div. 781), it was also held that the emergency rent laws did not render leases unenforcible because provision is made for rent in excess of the emergency rental, but the landlord is limited to the emergency rent.

On the argument of the present appeal the landlord expressly refused to agree to any further arbitration other than what was vacated as illegal. In the light of all the facts disclosed, this refusal is not surprising. This landlord does not want a bona fide arbitration, the only kind permissible under the act, or a determination by the Supreme Court pursuant to the act fixing a reasonable rent in excess of the emergency rent. The landlord wants the rent procured by the pro forma consent arbitration or it wants the tenant evicted as a trespasser or a squatter without any right of possession in spite of the fact not seriously brought in question that the tenant after entry of possession has spent in excess of $30,000 in improving the landlord’s premises.

The landlord’s complaint, however, seeking to achieve this result by a declaratory judgment of this court is not predicated on fraud and contains none of the allegations essential to a cause of action for fraud. This case was disposed of without trial on motions for judgment on the pleadings and summary-judgment. No facts are alleged to support an inference that the tenant from the outset had no intention of going into possession under the terms agreed on or that his acceptance of such terms was mere sham. On the contrary, the record indicates that the tenant paid the down payment of $5,000, the parties agreed to arbitrate before the named arbitrator, the pro forma arbitration was had and the lease was signed all on the same day, January 30, 1947; the arbitrator’s award was confirmed by order of the Supreme Court the next day; the tenant entered into possession two days thereafter, viz., on February 2, 1947, and thereafter ^improved the premises for the purpose of conducting his business there by expenditure of more than $30,000. That last allegation is denied by the landlord only to the extent of denying knowledge or information sufficient to form a belief. But in an affidavit on the motion for summary judgment, the tenant swears that while he got possession of the premises in February, he did not open for business until March 26, 1947, because of the extensive alterations and alleges that the landlord was present by representative often while the alterations were being made. No denial on the landlord’s part is made of these facts. The tenant avers that difficulties arose between the parties only after the tenant had expended the $30,000 for the alterations, when the landlord (breaching another special agreement between the parties) refused to pay $400, one half the cost of installing a false ceiling in the premises. Not till then did the tenant consult an attorney and seek legal relief. In the landlord’s answering affidavit these allegations are not denied. Accordingly, the landlord’s failure in its complaint to claim or allege fraud on the tenant’s part is perfectly understandable. This case completely differs from 770-8th Ave. Corp. v. Propper (275 App. Div. 819, decided by this court May 24, 1949) which involved a complaint expressly based on fraud and deceit and containing appropriate allegations therefor.

The landlord in this case has deliberately flouted the emergency rent law and the public policy of the State in order to exact a'rent, twice the amount of the emergency rent, procured by an illegal arbitration from a prospective tenant out of possession who obviously needed the space to conduct his business. If the landlord could procure the $10,000 rental through a bona fide arbitration appraising the real rental value of the premises, it is a fair inference it would not have resorted to the type of arbitration used, which this court and the Court of Appeals have declared was in effect not an arbitration at all but an illegal fixation of rent by consent with a tenant out of possession. On such record the court should not strain presently to release the landlord from a lease which it made, and which pursuant to its own terms and the emergency rent laws was in all respects legal and valid except as to the amount of the rent. The landlord accepted the tenant as a responsible person; accepted the $5,000 deposit as surety of such responsibility; the lease expressly provides that the emergency rent is in the sum of $431.25 per month; the landlord may not now complain that after its illegal scheme to evade the Business Rent Law has been exposed by the courts, it should be relieved of all other obligations of the lease and restored to the status qup ante.

The agreement that ‘ ‘ no rights shall accrue to either party ’ ’ was embodied in the receipt for the $5,000 security deposit. That receipt by its terms provided: “ If the award * * * is rejected by either [landlord or tenant] on or before Jan. 30, 1947, said certified check for $5,000.00 shall be returned to [the tenant] and no rights shall accrue to either party hereto.” That same receipt also provided that until the Supreme Court confirmed the award “ the lease between said parties shall be without any effect ”. On this record it is clear that the award was not rejected by either party on or before January 30, 1947, and that the Supreme Court by its original order on consent of both parties confirmed the award. Thereafter when the dispute arose after the tenant in good faith had spent large sums on the premises, this court and the Court of Appeals struck down the award as illegal. In that state of facts to say that the agreement should be enforced according to its terms and that the lease was operative to bind the parties, wholly or not at all, is by inference to say that the tenant may or should waive the protection of the statute. The statute however expressly provides the tenant may not waive its provisions (Business Rent Law, L. 1945, ch. 314, § 12, as amd.). In the absence of proof by trial or affidavit or even of any claim in the pleading, there is no warrant for saying that this tenant seeks to make affirmative use of the statute to aid a preconceived fraudulent intent to breach the contract.

The landlord is not being ousted from its property. Like many other landlords it is receiving from the property the rent the law permits it to receive and no more. The statute provides a legal means whereby the landlord, if it has the necessary proof, may apply to the Supreme Court for a reasonable rent in excess of the emergency rent. All this landlord is being deprived of is the opportunity to receive for ten years a rent illegally exacted or get back its property entirely free from the lease.

Interpretation of the Business Rent Law should be designed to carry out the intent of the law-making body and prevent the exaction of illegal rentals under leases. So-called “ arbitrations ” such as the one herein are the method most frequently used by landlords who seek to evade the emergency rent laws and secure rentals far in excess of either the emergency or the reasonable rents. Judgment in favor of this landlord would be an announcement to all others who engage in similar practices that the worst that can happen to them under the law is to have the fraudulent arbitration set aside and get their properties free from the burden of any lease with the added advantage of any improvements the tenant made to the premises while in possession. This is to give a premium for evasion and, however unintentionally, to thwart rather than to further the chief purpose of the act.

When the parties agreed to a rent fixed by arbitration as an essential term of the lease and that “ no rights shall accrue to either party ” unless the rent fixed by the arbitrator was accepted, such agreement by its terms implied that the arbitration was to be bona fide and not sham. Any other form of promise now enforced against the tenant amounts to enforcement of a waiver by the tenant of the provisions of the statute although waiver by the tenant is' expressly prohibited. In Moncel Realty Corp. v. Whitestone Farms (188 Misc. 431, affd. 272 App. Div. 899 [1st Dept.]), the landlord sued to recover rent for commercial space fixed by a lease; the tenant’s defense was that the rent was unreasonable and in excess of the rent allowed under the emergency rent laws. It was held that the tenant’s agreement in the lease that the rent was reasonable ” did not estop the tenant from setting up the defense, because section 12 of the Commercial Rent Law (L. 1945, ch. 3, as amd.) forbids any waiver of its provisions by the tenant and estoppel could not be based on such waiver. In that case, as in this, the landlord urged that the tenant had obtained advantages based upon the agreement and should not be permitted to claim otherwise. As to that contention the Appellate Term of this Department said (p. 434):

“ The manifest purpose of this enactment is that the provisions of the act shall be available at all times and in consequence the tenant may not be charged with having waived the right to plead that the rent demanded is unjust, unreasonable and oppressive and exceeds the emergency rent as defined in the statute.

‘ ‘ This provision is the public policy of the State with respect to waiver. ‘ Public policy is the interest of others than the parties ’ and that interest may not be set at naught by the acts or conduct of any party alone (Beasley v. Texas & Pacific Railway Co., 191 U. S. 492, 498).” The court further held that such claim of estoppel “ would be, in effect, a circumvention ” of the law. This court unanimously affirmed the judgment in the tenant’s favor (272 App. Div. 899) without prejudice to an action for the reasonable value of the premises under the Commercial Rent Law.

By chapter 535 of the Laws of 1949, effective April 11, 1949, amendments were made to the Emergency Business Space Rent ControlLaw which, inter alia, now permit a tenant out of possession, as well as a tenant in possession, to fix a reasonable rent by consent with the landlord by written agreement, provided the written agreement complies with the three conditions continued without change from the prior law. The 1949 amendments clearly make no change in the law applicable to this case; namely, chapter 314 of the Laws 1945, as amended by chapter 273 of the Laws 1946. In any event, the written agreement herein does not comply with the third condition requisite for any such fixation of rent by consent, namely, that the tenant within sixty days may cancel the agreement by notice to the landlord. Accordingly, even under the 1949 amendments the consent herein to a rent in excess of the emergency rent would be illegal.

Apparently the whole court is in agreement that there are no real issues of fact presented in this record and that on uncontested essential facts judgment may be granted either to plaintiff or defendant. Accordingly, for the reasons stated I dissent and vote: (1) to affirm the order of October 25, 1948, denying plaintiff’s' [landlord’s] motion for judgment on the pleadings; (2) to reverse the order of December 15, 1948, denying defendant’s [tenant’s] motion for judgment on the pleadings, and (3) to grant defendant judgment denying the relief sought by plaintiff and declaring defendant tenant of the leased premises pursuant to the terms of the lease except that the rent is the emergency rent of $5,175 per annum, payable in monthly instalments of $431.25 during the term or until such time as a reasonable rent in excess of the emergency rent shall be fixed pursuant to the provisions of the Business Rent Law, or until termination of the applicable emergency rent law.

Callahan, J.

(dissenting in part). I dissent from the holding of the majority that the defendant may remain in possession of the premises as a statutory tenant for the duration of the emergency on payment of the emergency rent or such other rent as may be fixed pursuant to law though not under any lease. Neither can I agree with the view expressed in the companion dissent that the defendant should be declared the tenant of the leased premises under the lease at the emergency rent until such time as a reasonable rent in excess of the emergency rent may be fixed in an appropriate proceeding for such purpose.

In my opinion the lease fell with the defendant’s repudiation of the arbitration award determining the rent and the plaintiff is entitled to the immediate possession of the premises. The parties had expressly stipulated that ‘ ‘ no rights shall accrue to either party ”, if the arbitrator’s award was rejected. The making of a lease pursuant to the agreement of the parties was conditioned on acceptance of the rent fixed by the arbitrator. This contract was entire and operative to bind the parties wholly or not at all. The defendant should not be permitted to renege on his agreement and still retain some fruits of performance on the plaintiff’s part.

While the emergency rent laws afford protection to a prospective tenant against exorbitant demands for excessive rent, they do not grant such a person any right to obtain possession of property without the consent of the landlord. When such consent and the resulting possession are based on the understanding that “ no rights shall accrue to either party ” unless the rent to be fixed by a named arbitrator is accepted, it seems to me that this agreement should be enforced according to its terms. The emergency rent laws should not be so construed as to favor the defendant’s repudiation of a solemn covenant by reason of which he was able to acquire possession of premises. This is not a case where the defendant is asked to waive the protection of the statute, but presents rather a situation where he seeks to make affirmative use of the statute in aid of his breach of contract.

The result reached by the majority in this case appears somewhat inconsistent. It is recognized that the vacatur of the arbitrator’s award by the court on the defendant’s own motion (See Matter of Viro Realty Corp. [Belmont], 272 App. Div. 1014, affd. 297 N. Y. 871) leaves the parties in statu quo ante and without any lease, as if the defendant had refused to accept the arbitration award in the first place. Nevertheless, the prevailing view holds that the defendant will be protected in Ms possession of the premises during the emergency and allowed to remain as a statutory tenant so long as he pays the emergency rent or such other rent as may be fixed pursuant to law. However, the status quo ante between the parties was such that the defendant had no possession or right to possession without the plaintiff’s consent. It was agreeable to give this consent only under a lease on certain terms. As the majority opinion says, The landlord was at no time under any obligation to lease the vacant space in his building to a tenant not in possession * * (P.285.) This being so, the space should still be available for occupancy by the landlord itself or such other use as the plaintiff may choose for its own advantage.

The majority decision, however, deprives the plaintiff of this right and the free enjoyment of its property by the imposition of a statutory tenancy in this case. The concept of a statutory tenancy has been recognized as a legal anomaly at best and a creature of necessitous origin under the compulsion of law (Stern v. Equitable Trust Co., 238 N. Y. 267). There is no conventional relation of landlord and tenant as to length of term and amount of rent. The statutory tenant originally in lawful possession with the landlord’s consent is permitted to remain in possession against the landlord’s wishes on expiration of the term. In this case we seem to be going much further in holding that a statutory tenancy exists despite the absence of any conventional relation of landlord and tenant between the parties at the start, and where the defendant obtained the plaintiff’s consent to possession of the premises on the basis of a broken promise or condition subsequently repudiated.

The companion dissent suggests that persons out of possession are acting under greater compulsion than tenants in possession to submit to oppressive demands in order to secure needed space. The fact is that the defendant chose to open a new restaurant and was looking for a location. The plaintiff’s premises apparently answered his purpose with the advantage of a long term lease, and the defendant was agreeable to a rent fixed by arbitration with the right to reject the arbitrator’s award if he saw fit. The course actually pursued by the parties was not permissible under the law then in force. The defendant, however,, was presumed to know the law, and in any event by the terms of his bargain had the free choice to accept or reject the arbitration figure before going into possession of the premises. There was an acceptance or purported acceptance of a rent determined by arbitration followed by possession on the defendant’s part. It can hardly be said that the defendant was acting under any compulsion in making such a choice. The agreement between the parties defined the consequence of the defendant’s failure to accept the arbitration award as nonaccrual of any rights in respect to the premises. There is nothing illegal about such a stipulation. The plaintiff is not obliged to show that the defendant has acted fraudulently in order to enforce this covenant according to its terms.

While the declaration of policy behind the emergency rent law recognizes a breakdown in the freedom of contract with respect to business space (L. 1945, ch. 314, § 1, as amd.) nevertheless there remains a freedom not to contract that would entitle the plaintiff to keep its property idle or available for its own use at such time in the future as events might shape the need. Of this right or advantage, however, our present decision would deprive the plaintiff.

Under a recent amendment to the emergency rent statutes (L. 1949, ch. 535) it is possible for a prospective tenant to consent to a rental in excess of the emergency rent, provided certain recitals are contained in the agreement with the landlord and the tenant is given the right to cancel in sixty days. While it is true that this amendment does not affect the present case, it is not difficult to visualize the situation of a prospective tenant obtaining possession under such agreement for a particular rent in conformity with law and thereafter canceling the lease before the expiration of sixty days. I cannot conceive that this court, would hold that under such circumstances he would be entitled to retain possession of the premises for the full term of the lease or even during the emergency at the emergency rent. There is, however, little difference between such a situation and the present case. It seems to me that in either case a rejection of the bargain or one of its essential terms should end the whole agreement, including any right to possession.

The case of Whiting v. Tower's Stores, Inc. (273 App. Div. 1001) is readily distinguishable. It involved leases of vacant land. The tenant had been in possession under a prior lease for many years and had erected improvements on the land. It executed a renewal lease at a rental in excess of the emergency rent. There was a fire about the time that the new term was to commence. The tenant refused to pay the rent reserved in the renewal lease on the ground that the fire terminated the lease, and also claimed that the reserved rent was illegal in any event so as to invalidate the lease. The landlord, however, sued only for the emergency rent of the demised premises. The lease did not provide for termination in the event of destruction of the buildings by fire. The case thus involved no element of newly acquired possession under a covenant or agreement that all rights of the parties would end on the tenant’s repudiation of the increased rent.

It is said that we are not called upon to decide what the rental may be after the emergency terminates or the term of the lease. It seems to me that the pleadings in this action for declaratory judgment require us to adjudge the rights and obligations of the parties under the agreement made by them. A second action should not be necessary after the emergency ends. One of the documents involved is an alleged lease for a term of ten years. Are we to say that the lease is a binding contract, but not decide its duration? The answer to the troublesome problem, it seems to me, is to hold that no rights accrued to either party under the present circumstances, because they expressly stipulated for such a result if the arbitrator’s fixation of rental value was rejected.

Finally, the fact that the defendant in this case may have spent considerable sums for alterations, etc., of the premises gives him, no right to default on his bargain. There is no more equity in his favor by virtue of such expenditures that would permit or entitle him to oust the plaintiff from possession and enjoyment of its property than would exist in the case of a squatter on land.

The plaintiff should be awarded a judgment declaring that it is entitled to possession of the premises and that the defendant shall be liable for payment of the emergency rent as the reasonable value of the use and occupancy during the period of his possession.

Peck, P. J., and Glennon, J., concur with Cohn, J.; Dore, J., dissents in opinion; Callahan, J., dissents in part in opinion.

Order denying plaintiff’s motion for judgment on the pleadings reversed, with $20 costs and disbursements to the plaintiff and the motion granted to the extent of directing entry of declaratory judgment in favor of plaintiff as indicated in opinion. Order denying defendant’s motion for judgment on the pleadings or for summary judgment, affirmed. Settle order on notice.  