| CNR Healthcare Network, Inc. v 86 Lefferts Corp. |
| 2009 NY Slip Op 01078 [59 AD3d 486] |
| February 10, 2009 |
| Appellate Division, Second Department |
| CNR Healthcare Network, Inc., et al., Appellants, v 86Lefferts Corp., Respondent. |
—[*1] Goldberg & Rimberg, Counselors at Law, PLLC, New York, N.Y. (Israel Goldberg and BradCoven of counsel), for respondent.
In an action, inter alia, for specific performance of an option to lease certain real propertyand for a judgment declaring that the plaintiffs are entitled to a 50-year lease for the subjectproperty pursuant to the option, the plaintiffs appeal from a judgment of the Supreme Court,Kings County (F. Rivera, J.), dated August 10, 2007, which, upon a decision of the same courtdated July 19, 2007, made after a nonjury trial, is in favor of the defendant and against themdismissing the complaint, and awarded the defendant judgment on its counterclaim for anattorney's fee pursuant to the option agreement for changes or additions made to any documentannexed to the option agreement subsequent to November 22, 1995 to the extent of setting thematter down for a hearing to determine the amount of the attorney's fee.
Ordered that the judgment is modified, on the law and the facts, by deleting the first decretalparagraph thereof dismissing the complaint, and substituting therefor provisions awardingjudgment in favor of the plaintiffs on the complaint, declaring that the plaintiffs are entitled to a50-year lease for the subject property pursuant to the option, and directing the defendant tospecifically perform the option for the lease of the subject property and execute a 50-year leasefor the subject property in favor of the plaintiffs; as so modified, the judgment is affirmed, withcosts to the plaintiffs.
The defendant, during the course of several years between 1995 and 2002, granted theplaintiffs an option to lease certain real property it owned for a period of 50 years. The plaintiffs,[*2]a not-for-profit corporation which operates various facilitiesfor low-income senior citizens and a subsidiary corporation, respectively, planned to erect a70-bed facility for low-income and infirm senior citizens on the subject property, theconstruction of which would be funded by the United States Department of Housing and UrbanDevelopment (hereinafter HUD).
Paragraph 14 of the rider to the option agreement, dated September 30, 2005, as amendedNovember 22, 2005, which was incorporated into the final version of the option agreement,contained a "Further Assurances Clause," which required the defendant to "make suchmodifications to the annexed Lease as may be necessary to comply with [HUD] regulations,requirements or funding requests, provided, however, that the Owner shall not be required toagree to any modification which materially increases his obligations or reduces the rents orOwner's other entitlement or benefits, or any other sums payable to the Owner pursuant to theLease."
The plaintiffs contend that HUD required a clause in the proposed lease which subordinatedany mortgage on the fee interest in the subject property to the lease, and that, pursuant to thefurther assurances clause, the defendant was compelled to agree to that provision. The defendantcontends that the proposed clause materially reduced its entitlements or benefits—itsability to obtain mortgage financing—and it thus acted properly in refusing to accept theclause and rejecting the plaintiffs' attempt to exercise the option, in accordance with theexception in the further assurances clause. The defendant further contends that the proposedHUD subordination clause conflicted with a subordination clause agreed to by the parties, whichprovided that the lease be subordinated to any mortgage on the fee interest in the property, andrequired that the defendant and any mortgagee enter into a "non-disturbance agreement," whichwould permit the plaintiffs to remain as tenants in the facility to be constructed in the event of aforeclosure. The plaintiffs commenced the instant action, inter alia, for specific performance ofthe option.
After a nonjury trial, the Supreme Court determined that the subordination clauses were inconflict, and that the proposed HUD subordination clause materially reduced the defendant'sentitlements and benefits to the subject premises—its ability to obtain a mortgage on thefee interest in the subject property. The court noted that while "there is no evidence that theconflict between HUD's modification and the option agreement actually affected the defendant'sability to acquire financing, it certainly could have." Accordingly, the Supreme Court awardedjudgment in favor of the defendant, and dismissed the complaint. The court also awarded thedefendant judgment on its counterclaim for an attorney's fee, and set the matter down for ahearing on the amount of the fee to be awarded. We modify.
As this case was tried without a jury, this Court has broad authority to render a judgment itfinds warranted by the facts, taking due account of the opportunity the trial judge had to see andhear the witnesses (see Northern Westchester Professional Park Assoc. v Town of Bedford,60 NY2d 492, 499 [1983]; StateFarm Mut. Auto. Ins. Co. v Stack, 55 AD3d 594 [2008]).
The plaintiffs established their entitlement to specific performance of the option, as theydemonstrated that they were ready, willing, and able to perform under the contract (seeBuoninfante v Legacy Dev. USA Corp., 306 AD2d 511 [2003]; Lamanna v Wing YuenRealty, 283 AD2d 165, 166 [2001]), and that they timely exercised the option in accordancewith its terms and in the manner specified in the option (see Kaplan v Lippman, 75NY2d 320, 325 [1990]; Singh vAtakhanian, 31 AD3d 425, 426 [2006]).
A contract should be read as a whole to ensure that undue emphasis is not placed upon [*3]particular words and phrases (see Bailey v Fish & Neave, 8 NY3d 523, 528 [2007]; South Rd. Assoc., LLC v InternationalBus. Machs. Corp., 4 NY3d 272, 277 [2005]; Matter of Westmoreland Coal Co. vEntech, Inc., 100 NY2d 352, 358 [2003]). A court should construe a contractual agreementso as to give full meaning and effect to its material provisions. A reading of the contract shouldnot render any portion meaningless, and the contract should be read as a whole, with every partinterpreted with reference to the whole; if possible, the contract will be interpreted as to giveeffect to its general purpose (see BealSav. Bank v Sommer, 8 NY3d 318, 324 [2007]; Excess Ins. Co. Ltd. v Factory Mut. Ins. Co., 3 NY3d 577, 582[2004]; Matter of Westmoreland Coal Co. v Entech, Inc., 100 NY2d at 358). If acontractual provision is to be enforced, "it must be sufficiently certain and specific so that whatwas promised can be ascertained. Otherwise, a court, in intervening, would be imposing its ownconception of what the parties should or might have undertaken, rather than confining itself tothe implementation of a bargain to which" the parties have committed themselves (JosephMartin, Jr., Delicatessen v Schumacher, 52 NY2d 105, 109 [1981]).
Reading the various documents comprising the option as a whole, the trial court erred in itsdetermination that the two subordination clauses conflicted without applying the furtherassurances clause. The trial court's determination, standing alone, would render the furtherassurances clause meaningless, as that clause requires the defendant to accept all changesrequired by HUD to the proposed lease. Thus, under the option, unless the proposed HUDchanges materially reduced an entitlement or benefit of the defendant, it was compelled to acceptthe proposed changes.
The only evidence in the record regarding such a material reduction was the testimony of thepresident of the defendant that an unnamed bank informed him that he could not obtain amortgage on the property, but in the event that the property was leased, he would be granted amortgage. The defendant produced no evidence from any bank or financial institutioncorroborating the testimony. No evidence was presented as to whether the defendant was eligibleto obtain a mortgage, or that it attempted to obtain a mortgage. Thus, other than theuncorroborated testimony of the defendant's president, there is no evidence in the record that theproposed HUD changes "could have" resulted in a material reduction of an entitlement or benefitof the defendant pursuant to the further assurances clause. The Supreme Court noted that therewas no evidence that the defendant's ability to acquire financing was affected, and that itsdetermination was based on the possibility that at some future time, if the defendant attempted toobtain a mortgage, it might be rejected. In addition, contrary to the defendant's contention, theevidence established that the changes to the proposed lease were required by HUD. Accordingly,the Supreme Court erred in dismissing the complaint, and should have awarded judgment infavor of the plaintiffs. Because this is, in part, a declaratory judgment action, the judgmentshould have contained a declaration that the plaintiffs are entitled to a 50-year lease for thesubject premises pursuant to the option, and the defendant is directed to specifically perform theoption and enter into a 50-year lease with the plaintiffs for the subject property (see Lanza vWagner, 11 NY2d 317, 334 [1962], appeal dismissed 371 US 74 [1962], certdenied 371 US 901 [1962]).
However, we find that the trial court correctly awarded judgment in favor of the defendanton its counterclaim for an attorney's fee pursuant to the option agreement for changes oradditions made to any document annexed to the option agreement subsequent to November 22,1995 (see Singh v Atakhanian, 31AD3d 425, 426 [2006]).
The parties' remaining contentions either need not be addressed in light of our determinationor are without merit. Florio, J.P., Covello, Balkin and Leventhal, JJ., concur. [See 16Misc 3d 1141(A), 2007 NY Slip Op 51780(U).]