ALPHONSE HOTEL CORP v. FUSCO (2001)

Final judgment entered on or about July 2, 1999 (Faviola A. Soto, J.) reversed, and new trial ordered, without costs.

The threshold question raised at the trial of this nonpayment summary proceeding was whether tenant's hotel unit is subject to rent stabilization coverage.   In presenting the issue to the jury for resolution, the trial court correctly framed the appropriate inquiry as a monetary one-whether the “rent charged” for the unit was less than $350 per month or $88 per week on May 31, 1968 (New York City Rent Stabilization Law § 26-506(a);  see, Towers Hotel Investors Corp. v. Davis, 54 A.D.2d 730, 387 N.Y.S.2d 676, affd. 42 N.Y.2d 923, 397 N.Y.S.2d 1006, 366 N.E.2d 1360).   The record shows, however, that both the parties and the court misapprehended the burden of proof applicable to the coverage issue, with all concerned proceeding under the view that the evidentiary burden rested with the tenant, not the landlord, to establish the rental value of the hotel unit on the May 31, 1968 statutory base date, a view contrary to prevailing case law (see, Towne Assocs. v. Hood, N.Y.L.J., Dec. 26, 1984, at 10, col 1 [App. Term, 1st Dep.t];  see also, Szer v. Halpern, N.L.J., Dec. 23, 1996, at 33, col. 5 [App. Term, 1st Dept.] ).   This fundamentally flawed approach was reflected in the litigation strategy of respective counsel, as well as the court's jury instructions which squarely and erroneously placed the burden on the tenant to establish the “defense” of rent stabilization coverage by a “preponderance of the evidence.”

It is clear from the record that neither side presented any persuasive proof on the critical rental value issue.   Indeed, the only competent evidence received at trial was documentation tending to show that the subject hotel unit rented for $50 per month in 1949 and $154 per week in 1998, with no showing whatsoever made of the rental value of this or other similarly situated hotel units at any point during the intervening half century.

On this state of the record, the jury's finding of rent stabilization coverage was without a factual basis, and cannot be sustained.   In the particular circumstances of this case, and in the interest of justice, a new trial is warranted to allow the parties a further opportunity to present evidence on the coverage issue and for resolution of the remaining contested rent issues not reached by the jury below.

DISSENTING MEMORANDUM

I respectfully dissent.   The jury verdict should be affirmed on both legal and pragmatic grounds.   This case presented a simple factual issue for the jury which resulted in a verdict for the tenant despite the fact that the charge incorrectly placed the burden of proof on him.

The landlord argues that the verdict was against the weight of the evidence.   A verdict should be set aside only if it is “utterly irrational” or if the evidence so preponderates that “the jury could not have reached its conclusion upon a fair interpretation of the evidence.”   DelValle v. White Castle System, Inc., 277 A.D.2d 13, 715 N.Y.S.2d 57 (1st Dept. 2000).   The majority opinion fails to establish either standard.   Even if the statement in the majority opinion that “neither side presented any persuasive proof on the critical rental value issue” is accepted, this establishes that there was not a preponderance of evidence favoring the landlord as well as the tenant.

Pragmatically, since the landlord was the unsuccessful party when the tenant had the burden of proof, it cannot win on a retrial when it has the burden of proof with the same lack of “persuasive proof.”   There is no legal basis for either an interest of justice argument or a claim that the lack of knowledge by the attorneys as to the controlling law is a basis for any relief.

The Judgment should be affirmed.

PER CURIAM.