| Barnan Assoc. v 196 Owners Corp. |
| 2008 NY Slip Op 08968 [56 AD3d 309] |
| November 18, 2008 |
| Appellate Division, First Department |
| Barnan Associates, Appellant, v 196 Owners Corp.,Respondent. |
—[*1] Abrams Garfinkel Margolis Bergson, LLP, New York (Barry G. Margolis of counsel), forrespondent.
Order, Supreme Court, New York County (Edward H. Lehner, J.), entered May 15, 2007,which denied plaintiff's motions for summary judgment and to amend its complaint, and granteddefendant's cross motion for summary judgment dismissing the complaint, unanimouslymodified, on the law, to the extent of granting plaintiff's motion for summary relief and denyingdefendant's cross motion, and otherwise affirmed, with costs. The Clerk is directed to enterjudgment in favor of plaintiff against defendant in the sum of $56,675.77 plus costs anddisbursements, with interest from February 1, 2003.
The subject of this litigation is a tax escalation clause set forth at article VI of the parties'commercial lease dated August 31, 1979. Paragraph (a) (i) of that article defines "base assessedvaluation" as "the total fully assessed valuation (made without regard or giving effect to anyexemption or abatement)" (emphasis added) of the parcel of land containing the demisedpremises for the New York City real estate tax year commencing July 1, 1979 and ending June30, 1980, the initial tax year. Subparagraph (ii) defines "base tax rate" as the applicable realestate tax rate for the same initial tax year. Under subparagraph (iii), the "base amount of realestate taxes" is computed by applying the "base tax rate" to the "base assessed valuation."
Paragraph (b) requires the tenant to pay the landlord as additional rent during each lease yearsubsequent to the initial tax year 14½% of the dollar amount of any increase in "such realestate taxes" over and above the " 'base amount of real estate taxes,' whether such increase in realestate taxes shall be occasioned by an increase in assessed valuation or an increase in tax rate, orboth."
The crux of this litigation is whether the language italicized above is intended to refer to eachyear's increase in real estate taxes or only to the "base assessed valuation." Accordingly, plaintiffhas brought this action to recover overcharges resulting from defendant's refusal to give effect toapplicable abatements, exemptions or refunds in the calculation of tax escalations under thelease. In view of the six-year statute of limitations set forth under CPLR 213 (2), plaintiff has[*2]agreed to limit its claim to overcharges occurring afterFebruary 2000.[FN*]Defendant takes the position that the phrase expressly excludes abatements, exemptions andrefunds from each year's calculation of taxes. In denying plaintiff's motion for summary judgmentand granting defendant's cross motion, the IAS court found the tax escalation clause to beambiguous and plaintiff's claims, in any event, precluded under the voluntary payment doctrine.
The court's finding of ambiguity is refuted by the language of the lease. The phrase "madewithout regard or giving effect to any exemption or abatement" is used solely to refine the "baseassessed valuation," one of two components of the "base amount of real estate taxes." Paragraph(e) of article VI sets forth the following as the lease's only description of real estate taxes: "Anyreference in this Article to 'real estate taxes levied by the City of New York' shall be deemed torefer to the aggregate of all taxes levied or assessed against the land and building, of which thedemised premises are a part." It is significant that this language contains no exclusion ofabatements, exemptions or refunds from its description of real estate taxes. It has long been therule that a contract must be read as a whole in order to determine its purpose and intent (BijanDesignor For Men v Fireman's Fund Ins. Co., 264 AD2d 48, 51 [2000], lv denied 96NY2d 707 [2001]). In this regard, defendant's argument that exemptions and abatements "areexpressly excluded from the calculation of the taxes" in article VI (a) (i) erroneouslyconflates "base assessed valuation" and the taxes assessed each year. The conclusion reachedbelow is also at odds with well settled law that tax escalation clauses are "designed to affordrelief to a landlord where an increased assessment required actual payment" (S.B.S. Assoc. vWeissman-Heller, Inc., 190 AD2d 529, 529 [1993]).
The IAS court's application of the voluntary payment doctrine is also erroneous. The doctrinebars the recovery of payments voluntarily made with full knowledge of the facts and in theabsence of fraud or mistake of material fact or law (Dillon v U-A Columbia Cablevision ofWestchester, 100 NY2d 525 [2003]). It is undisputed that the real estate tax statementsissued by defendant to plaintiff made no mention of the abatements and/or refunds in question.Hence, the voluntary payment doctrine does not apply because full knowledge on the part ofplaintiff has not been established. Defendant attempts to salvage its voluntary payment argumentby asserting that plaintiff's representative on the co-op board of directors has been privy to theco-op's financial statements over the years. The argument is unavailing on this appeal, as therecord does not include the relevant portions of said financial statements or any proof of theiraccessibility by plaintiff's representative.
Plaintiff's motion for leave to amend the complaint was properly denied. The binding effectof this Court's order obviates the need for declaratory relief with respect to future tax escalations.Concur—Lippman, P.J., Gonzalez, Sweeny, Catterson and DeGrasse, JJ. [See 15Misc 3d 1133 (A), 2007 NY Slip Op 50962(U).]
Footnote *: Defendant, a cooperativecorporation, received abatements under the school tax relief (STAR) exemption (RPTL 425) andthe co-op/condo abatement (RPTL 467-a).