Matter of Department of Buildings of City of New York, 14 N.Y.2d 293 (1964)
A state’s exercise of its police power to remedy unsafe housing conditions can permissibly impair existing mortgage contracts, provided the measures are reasonable and appropriate to address a legitimate public concern, and due process is afforded to the mortgagee.
Summary
This case concerns the constitutionality of New York’s Receivership Law, which allows the city to appoint a receiver to remedy dangerous conditions in multiple dwellings. The Department of Buildings sought a receiver for a building with numerous violations. The owner and mortgagee challenged the law, arguing it impaired the mortgagee’s contract rights and denied due process. The New York Court of Appeals upheld the law, finding it a valid exercise of police power to address a housing emergency. The court emphasized that the amended statute provided sufficient notice and opportunity for the mortgagee to be heard, distinguishing it from a prior unconstitutional version.
Facts
The Department of Buildings of New York City certified that a nuisance existed at 221 West 21st Street, a five-story rent-controlled building, due to numerous violations of housing codes. The Department issued an order to the owner and mortgagee to remove the nuisance. Re-inspections revealed no changes and the Department applied to the Supreme Court for the appointment of a receiver. The building was also deemed unsafe and tenants were ordered to vacate due to the risk of collapse. The owner had started repairs but hadn’t completed them by the deadline.
Procedural History
The Department of Buildings petitioned the Supreme Court for the appointment of a receiver under Multiple Dwelling Law § 309. The Supreme Court granted the motion but stayed the appointment to allow the owner time to complete repairs. After extensions, the court appointed the receiver when the violations remained uncorrected. The Appellate Division affirmed the Supreme Court’s decision. The owner and mortgagee appealed to the New York Court of Appeals as of right, challenging the constitutionality of the statute and the validity of the receivership order.
Issue(s)
1. Whether the Receivership Law unconstitutionally impairs the mortgagee’s rights under a prior mortgage contract in violation of Article I, Section 10 of the U.S. Constitution.
2. Whether the owner and mortgagee were denied due process during the proceedings.
3. Whether the facts warranted the appointment of a receiver under the statute.
Holding
1. No, because the law is a valid exercise of the state’s police power to address a public emergency, and the impairment of the mortgagee’s contract is reasonable and necessary.
2. No, because the statute provides for notice and an opportunity to be heard, and the appellants were in fact given multiple hearings.
3. Yes, because the record supported the finding of a serious nuisance constituting a fire hazard and threat to life and safety.
Court’s Reasoning
The Court reasoned that the legislation was enacted to eliminate dangerous housing conditions and increase the supply of safe housing, addressing a declared public emergency. The Court stated that “the state may establish regulations reasonably necessary to secure the general welfare of the community by the exercise of its police power although the rights of private property are [thereby] * * * curtailed and freedom of contract is abridged.” The Court distinguished this case from Central Sav. Bank v. City of New York, which invalidated a prior version of the law because it lacked due process protections for mortgagees. The amended statute provides notice and an opportunity for the mortgagee to participate in the proceedings, contest the existence of a nuisance, and seek reimbursement for repairs. The court noted that the statute now gives the receiver only a prior right to the rents, not a superior lien on the property itself. The court emphasized the limited nature of the impairment, stating the mortgagee shall not be entitled “to any of the rents” or “to a discharge of the receiver” until the cost of repairs and alterations has been satisfied. The Court concluded that the measures taken by the Legislature were reasonable and appropriate, stating, “The same public interest which supports the statute when directed against an owner, even though it impinges on his right to deal freely with his property, equally justifies the legislation as a reasonable exercise of the police power insofar as it affects the rights of the mortgagee.” The Court found that the appellants were afforded due process with multiple hearings and opportunities to present evidence. The Court emphasized that the law allows the appellants to terminate the receivership by reimbursing the receiver for the cost of removing the nuisance.