| Waverly Corp. v City of New York |
| 2008 NY Slip Op 01381 [48 AD3d 261] |
| February 14, 2008 |
| Appellate Division, First Department |
| Waverly Corp., Appellant, v City of New York et al.,Respondents. |
—[*1] Michael A. Cardozo, Corporation Counsel, New York City (John Hogrogian of counsel), forrespondents.
Order, Supreme Court, New York County (Eileen A. Rakower, J.), entered June 20, 2007,which denied plaintiff's motion for summary judgment seeking a declaration of the parties' rightsand obligations as to the payment of real estate taxes under their lease and to dismiss defendants'counterclaims, unanimously reversed, on the law, without costs, the motion granted to issue adeclaration that the lease requires defendant City of New York to pay real estate taxes on theentire block and lot and to remit payment directly to the City Department of Finance anddefendants' counterclaims otherwise dismissed. The Clerk is directed to enter judgmentaccordingly.
Plaintiff owns the building located at 143 Waverly Avenue in Brooklyn and an adjacent yard.The entire property is designated on the tax map as Block 1889, Lot 1. In November 1995,defendant City of New York entered into a 20-year lease with plaintiff. The preamble to the leaseindicated that the lease governed "approximately 29,880 square feet"; however, in the lease thedemised premises were described as "the entire building comprising approximately 22,074rentable square feet of interior space and approximately 7,806 square feet of the roof play arealocated at 143 Waverly Avenue (Block 1889, Lot 1) in the Borough of Brooklyn." DefendantAdministration for Children's Services (ACS) uses the building and the roof area to operate a daycare center. While the City has a key to a fence enclosing the adjacent yard, it contends that itnever used the yard and that the key was for emergency purposes.
The lease required the City to pay, "within thirty (30) days after receipt of a bill therefor, allreal estate taxes, assessments, water rates and sewer rents and vault taxes (if any) (as well asinterest and penalties resulting from [the City]'s delay in the payment thereof)." The lease defined"real estate taxes" as "taxes on or with respect to the Building and the land upon which it islocated." A separate section of the lease specified that the City should send its monthly rentpayments to plaintiff at an address provided in the lease.
From the commencement of the lease in November 1995, through 2006, the City'sDepartment of Finance sent real estate tax bills directly to ACS. The bills were for the taxesassessed on the entire block and lot, and each year the City paid the entire tax bill directly to theDepartment of Finance.[*2]
On or about December 15, 2006, the City sent a letter toplaintiff advising that as of January 1, 2007 it would cease paying real estate taxes directly to theDepartment of Finance. Instead, the letter stated, the City would only reimburse plaintiff afterplaintiff paid the taxes. The letter also acknowledged that the City had been paying real estatetaxes assessed on the entire block and lot but advised that, since the demised premises consistedonly of the approximately 22,074 rentable square feet of interior space in the building and theapproximately 7,806 square feet of the roof play area, the City would seek to recoup fromplaintiff an amount equal to real estate taxes it had paid that were not attributable to thoseportions of the property. The City did not explain in its letter how it intended to compute theamount it intended to recoup from plaintiff. The Department of Finance's final assessment rollfor 2006-2007 for the property demonstrates that the tax assessment was not apportionedbetween the building and the adjacent yard or other portions of the property.
Plaintiff commenced this action for a declaration of its rights and obligations under the leaseand specific performance of the City's obligations. The City counterclaimed for declaratory reliefand for a judgment of $56,164.13, the amount by which it alleges plaintiff was unjustly enricheddue to the City's overpayment of real estate taxes.
Upon joinder of issue, plaintiff moved for summary judgment on its claims and to dismissthe City's counterclaims. Plaintiff argued that the lease clearly and unambiguously required theCity to pay real estate taxes assessed on the entire block and lot and to remit payment directly tothe Department of Finance. The City argued in opposition that the lease provisions relied on byplaintiff were ambiguous regarding the specific obligations at issue. It urged that summaryjudgment was premature without discovery regarding the parties' intentions at the time the leasewas negotiated.
The motion court denied the motion in its entirety. The court noted that there was no explicitrequirement in the lease that the City pay real estate taxes directly to the Department of Finance.It rejected plaintiff's argument that the City's responsibility under the lease for interest andpenalties related to the late payment of taxes compelled the conclusion that the City was theprimary obligor for such payment. Instead, the court concluded that plaintiff merely held the rightto recoup such interest and penalties from the City in the event it was forced to pay the taxes latebecause of the City's own tardiness in making payment to plaintiff. Regarding the extent of theCity's real estate tax obligation, the court recognized that the lease as written required the City topay taxes assessed on the entire lot. However, the court held that summary judgment on the issuewas premature, as discovery might reveal documents evincing a modification of the lease torequire the City to pay real estate taxes attributable to the interior of the building and the roofplay area only.
We reverse. The lease unambiguously provides that the City is the party responsible forpayment of real estate taxes in the first instance. To be sure, the lease would have been moreclear had it specified that the City's 30-day deadline to pay taxes was measured from its receipt ofa bill from the Department of Finance. However, in considering the intention of the parties, acourt should read a contract as a whole and consider its various clauses contextually (seeHSBC Bank USA v National Equity Corp., 279 AD2d 251, 253 [2001]). Here, an entirelyseparate provision in the lease specifically directed the City to send its monthly rent payments toplaintiff. It is thus reasonable to conclude that by not so specifying with respect to real estate taxpayments, the parties intended that the City would send such payments to someone other thanplaintiff. Moreover, the clause requiring that the City pay penalties and interest assessed becauseof the [*3]late payment of taxes confirms that it was required tosend the real estate payments directly to the Department of Finance. We reject the motion court'sinterpretation of this clause, which is based on the unreasonable assumption that plaintiffnegotiated the lease intending to forbear payment of real estate taxes until the City advancedpayment.
We agree with the court that the lease is unambiguous with respect to the extent of the City'sreal estate tax liability. The lease requires payment for taxes assessed against not only thebuilding, but also "the land upon which it is located." Nothing in the lease suggests that theparties considered the property to be divisible. Any significance that the City would attribute tothe reference to the square footage of the building and the roof area is diminished by the fact thatthe adjacent yard was vacant and itself was of no value. As such, it is not reasonable to believethat by specifying the square footage the parties were distinguishing between portions of theproperty that the City was entitled to enjoy and portions that it was not entitled to enjoy.Furthermore, not even the Department of Finance considered the property to be divisible for taxpurposes.
However, we disagree with the court's decision to deny plaintiff summary judgment on thispoint. This was based on the court's sua sponte suggestion that discovery may reveal evidencesuggesting that the parties intended that the City was only responsible for real estate taxesattributable to the portion of the lot it "actually used." Where an agreement is unambiguous,extrinsic evidence may not be considered in order to create an ambiguity (see W.W.W.Assoc. v Giancontieri, 77 NY2d 157, 163 [1990]).
Even were we to find that both provisions at issue are ambiguous, on a search of this record,we would award summary judgment to plaintiff. The best evidence of the intent of parties to acontract is their conduct after the contract is formed (see Barbour v Knecht, 296 AD2d218, 224 [2002]). Here, the record is clear that for the 12 years between the commencement ofthe lease term and the December 15, 2006 letter sent by the City to plaintiff, the City paid realestate taxes assessed on the entire block and lot directly to the Department of Finance. Inopposition to plaintiff's motion, the City states that this was "erroneous." Such a bald conclusoryallegation of mistake is insufficient to defeat summary judgment (see Cohen Tauber Spievak & Wagner, LLPv Alnwick, 33 AD3d 562 [2006], lv dismissed 8 NY3d 840 [2007]). Moreover,the City's claim that summary judgment is premature because discovery "may lead" to evidenceestablishing the parties' true intent is unavailing. Such an argument must be based on somethingother than mere hope or conjecture (Voluto Ventures, LLC v Jenkens & Gilchrist Parker Chapin LLP, 44AD3d 557 [2007]). Concur—Lippman, P.J., Mazzarelli, Gonzalez, Sweeny andMcGuire, JJ. [See 2007 NY Slip Op 31724(U).]