Matter of State of New York v. Wolkowitz, 34 N.Y.2d 712 (1974)
A 1970 amendment to New York General Obligations Law § 7-103 requires landlords to place all tenant rent-security deposits, including those from existing tenancies, in interest-bearing accounts as of September 1, 1970.
Summary
The Attorney General brought this proceeding to compel landlords to pay interest on tenant rent-security funds received before September 1, 1970, and maintained without interest after that date. The landlords resisted, arguing the Attorney General lacked standing and the 1970 amendment applied only to new tenancies. The Court of Appeals held that the Attorney General had standing under General Obligations Law § 7-107 and that the 1970 amendment applied to all rent-security deposits, including those from tenancies existing before the amendment’s effective date. The court emphasized the remedial purpose of the legislation.
Facts
The Attorney General initiated a proceeding to compel the Wolkowitz landlords to pay interest on tenant security deposits. These deposits were received before September 1, 1970, and were held without accruing interest after that date. The Attorney General argued that a 1970 amendment to the General Obligations Law required landlords to place all security deposits in interest-bearing accounts.
Procedural History
The lower court ruled in favor of the Attorney General, compelling the landlords to pay interest. The Appellate Division affirmed this decision. The landlords appealed to the New York Court of Appeals.
Issue(s)
1. Whether the Attorney General has standing to maintain a proceeding to recover rent-security deposit interest for tenants.
2. Whether the 1970 amendment to General Obligations Law § 7-103 applies only to new tenancies created after the effective date of the amendment, or also to tenancies existing before that date.
Holding
1. Yes, because General Obligations Law § 7-107 grants the Attorney General standing to compel compliance with rent-security deposit interest laws, regardless of who benefits or when the violation occurred.
2. No, because the 1970 amendment applies to tenancies and renewals that commenced before its effective date and existed on September 1, 1970, as well as to tenancies created thereafter.
Court’s Reasoning
The Court addressed the standing issue first, noting that the Legislature enacted section 7-107 of the General Obligations Law specifically to address the standing question. This section empowers the Attorney General to institute actions to enforce rent-security deposit interest laws. The Court stated, “Thus, section 7-107 accords the Attorney-General standing to maintain this proceeding regardless of who will benefit thereby and irrespective of when the violation occurs or has occurred.”
Regarding the applicability of the 1970 amendment, the Court emphasized the amendment’s remedial purpose to ensure all security deposits earned interest. The court interpreted the amendment as applying to all tenancies, including those existing before the effective date, to prevent defeating the legislature’s intent. The Court referred to Governor Rockefeller’s message of approval, which stated the bill would require landlords to place “any” security deposits in interest-bearing accounts, reinforcing the broad application intended by the legislature. The court cited the Governor’s memorandum, stating “[t]he bill, effective September 1, 1970, will require the landlord of every apartment house with six or more apartments to place any security deposits made by his tenants in an interest-bearing account”. The Court explicitly rejected the argument that the amendment only applied prospectively to new tenancies, holding that section 7-103 applies not only to deposits made under new tenancies but also to those existing as of September 1, 1970.