| Fucile v L.C.R. Dev., Ltd. |
| 2013 NY Slip Op 00454 [102 AD3d 915] |
| January 30, 2013 |
| Appellate Division, Second Department |
| Leonard Fucile, Respondents, v L.C.R.Development, Ltd., Appellant. |
—[*1] Walsh Markus McDougal & Debellis, Garden City, N.Y. (Kevin M. Walsh ofcounsel), for respondents.
In an action, inter alia, for a judgment declaring that the plaintiffs are in compliancewith the terms of a lease with respect to the payment of rent, the defendant appeals, aslimited by its brief, (1) from so much of an order of the Supreme Court, Nassau County(Bucaria, J.), dated August 11, 2011, as denied those branches of its motion which werepursuant to CPLR 3211 (a) (5) to dismiss so much of the first cause of action as sought ajudgment declaring that paragraph 3.01 (c) of the subject lease, providing the formula fordetermining basic rental adjustments, is ambiguous, and that the proper formula to use isthe formula submitted by the plaintiffs, and pursuant to CPLR 3211 (a) (1), in effect, fora judgment declaring that it was entitled, pursuant to paragraph 6.02 of the lease, toterminate the lease based on the plaintiffs' default with respect to the payment of rent andadditional rent, and (2) from so much of an order of the same court dated January 3,2012, as denied that branch of its motion which was for leave to renew that branch of itsprior motion which was to dismiss, as untimely, those portions of the first cause of actionwhich sought a judgment declaring that paragraph 3.01 (c) of the lease, providing theformula for determining basic rental adjustments, is ambiguous, and that the properformula to use is the formula submitted by the plaintiffs.
Ordered that the order dated August 11, 2011, is reversed insofar as appealed from,on the law, those branches of the defendant's motion which were to dismiss, as untimely,so much of the first cause of action as sought a judgment declaring that paragraph 3.01(c) of the subject lease, providing the formula for determining basic rental adjustments, isambiguous, and that the proper formula to use is the formula submitted by the plaintiffs,and pursuant to CPLR 3211 (a) (1), in effect, for a judgment declaring that the defendantwas entitled, pursuant to paragraph 6.02 of the lease, to terminate the lease based on theplaintiffs' default with respect to the payment of rent and additional rent, are granted, andthe matter is remitted to the Supreme Court, Nassau County, for the entry of a judgmentdeclaring that the defendant is entitled, pursuant to section 6.02 (a) and (b) of the lease,to terminate the lease based on the plaintiffs' default with respect to the payment of rentand additional rent in the event the plaintiffs fail to cure the default in accordance withthe provisions of the lease; and it is further,
Ordered that the appeal from so much of the order dated January 3, 2012, as [*2]denied that branch of the defendant's motion which was forleave to renew that branch of its prior motion which was to dismiss, as untimely, thoseportions of the first cause of action which sought a judgment declaring that paragraph3.01 (c) of the lease, providing the formula for determining basic rental adjustments, isambiguous, and that the proper formula to use is the formula submitted by the plaintiffs,is dismissed as academic in light of our determination on the appeal from the order datedAugust 11, 2011; and it further,
Ordered that one bill of costs is awarded to the defendant.
This is an action for a judgment declaring, inter alia, that the plaintiff tenants are incompliance with the terms of a lease (hereinafter the Lease) with respect to the paymentof rent. The plaintiffs commenced this action after being served with notice that theywere in default with respect to the payment of rent increases and tax and insurancepayments from 2005 through 2010. In the first cause of action, the plaintiffs sought ajudgment declaring, inter alia, that paragraph 3.01 (c) of the Lease, providing the formulafor determining basic rental adjustments, is ambiguous, that the proper formula to use isthe formula submitted by the plaintiffs, and that the defendant was not entitled, pursuantto paragraph 6.02 of the Lease, to terminate the Lease based on the plaintiffs' defaultwith respect to the payment of rent and additional rent. As a second cause of action, theplaintiffs sought to reform the Lease, based upon mistake, to conform to the plaintiffs'method of calculation.
The defendant moved to dismiss the complaint based on a defense founded upondocumentary evidence, the statute of limitations, and failure to state a cause of action.The Supreme Court granted the motion with respect to the second cause of action,determining that it accrued on January 4, 2001, the date that, pursuant to an assignmentand assumption agreement with the original tenant, the plaintiffs assumed the tenant'sobligations under the Lease. The Supreme Court concluded that, since the action wascommenced in January 2011, the cause of action to reform the Lease, based uponmistake, was barred by the applicable six-year statute of limitations. However, the courtdetermined that so much of the first cause of action as sought a judgment declaring thatparagraph 3.01 (c) of the Lease, providing the formula for determining basic rentaladjustments, was ambiguous, and that the proper formula to use is the formula submittedby the plaintiffs, accrued on November 4, 2010, the date that the plaintiffs were servedthe first notice of default and acquired constructive knowledge of the defendant's methodof calculating the rent escalation. Therefore, the court determined that this portion of thefirst cause of action, asserted in January 2011, was not barred by the applicable six-yearstatute of limitations. We agree with the defendant that this was error.
"In order to determine the Statute of Limitations applicable to a particular declaratoryjudgment action, the court must 'examine the substance of that action to identify therelationship out of which the claim arises and the relief sought' " (Matter of Save thePine Bush v City of Albany, 70 NY2d 193, 202 [1987], quoting Solnick vWhalen, 49 NY2d 224, 229 [1980]). "[I]f [an] action for a declaratory judgmentcould have been brought in a different form asserting a particular cause of action, thelimitations period applicable to the particular cause of action will apply" (Akhunov v 771620 EquitiesCorp., 78 AD3d 870, 871 [2010] [internal quotation marks omitted]; seeNew York City Health & Hosps. Corp. v McBarnette, 84 NY2d 194, 201 [1994]; Tornheim v Tornheim, 67AD3d 775, 777 [2009]; Waldman v 853 St. Nicholas Realty Corp., 64 AD3d 585,587 [2009]). Such statute of limitations period will apply " 'not only as to what the basicperiod is, but as to other relevant matters, such as moment of accrual (which starts thestatute running) and the like' " (Solnick v Whalen, 49 NY2d at 230, quotingDavid D. Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B,CPLR C3001:18 at 369-370 [1974 ed]).
Paragraph 3.01 (c) of the Lease provides that, at the commencement of the third yearof the Lease, and for each Lease year thereafter, the basic rental will be adjusted inaccordance with the following formula: "The Basic Rental for the prior year will bemultiplied by a fraction the denominator of which shall be the [Consumer Price] IndexNumber for the month the lease reaches its thirteenth (13th) month anniversary aftercommencement, and the numerator of which shall be the Index Number for themonth preceding the annual renewal date provided that any annual increase [*3]shall be the lesser of the CPI as defined herein or four (4%)percent" (emphasis added).
As part of their first cause of action, the plaintiffs sought a judgment declaring thatthe above section is ambiguous and that the proper formula to use is the formulasubmitted by the plaintiffs, as follows: "The Basic Rental for the prior year will bemultiplied by a fraction the denominator of which shall be the Index Number for thethirteen month [sic] preceding the annual renewal date, and the numerator ofwhich shall be the Index Number for the month preceding the annual renewal dateprovided that any annual increase shall be the lesser of the CPI as defined herein or four(4%) percent" (emphasis added).
Although the complaint frames the issue as a dispute regarding conflictinginterpretations of the Lease, the defendant applied the formula for computing the annualincreases exactly as set forth in the Lease. The Supreme Court erred in finding that thesubstance of the first cause of action was essentially the same as the claim in J.C.Penney Corp., Inc. v Carousel Ctr. Co., L.P. (635 F Supp 2d 126 [ND NY 2008]), inwhich the parties disagreed as to the proper method of computing the rent escalations,and there was no issue of interpretation or reformation of the lease. The plaintiffs hereare not seeking a different interpretation of ambiguous language. Rather, as in the secondcause of action, they are seeking to replace the language of section 3.01 (c) with thelanguage they assert best reflects the parties' intent. Accordingly, as the substance of thispart of the first cause of action was, in effect, a claim to reform the Lease (see Matterof Save the Pine Bush v City of Albany, 70 NY2d 193 [1987]; Solnick vWhalen, 49 NY2d 224 [1980]), the court should have applied the same accrual dateto that part of the first cause of action as it did to the second cause of action, that is,January 4, 2001, the date on which the plaintiffs assumed the tenant's obligations underthe Lease, and should have dismissed that part of the first cause of action as barred by thestatute of limitations.
The Supreme Court also erred in denying that branch of the defendant's motionwhich was pursuant to CPLR 3211 (a) (1), in effect, for a judgment declaring that it wasentitled, pursuant to paragraph 6.02 of the Lease, to terminate the Lease based on theplaintiffs' default with respect to the payment of rent and additional rent. In support ofthis branch of the motion, the defendant submitted the Lease.
"To succeed on a motion to dismiss a complaint pursuant to CPLR 3211 (a) (1), thedocumentary evidence which forms the basis of the defense must be such that it resolvesall factual issues as a matter of law, and conclusively disposes of the plaintiff's claim" (Sato Constr. Co., Inc. v 17 & 24Corp., 92 AD3d 934, 935 [2012]; see Goshen v Mutual Life Ins. Co. ofN.Y., 98 NY2d 314, 326 [2002]; Jesmer v Retail Magic, Inc., 55 AD3d 171, 180 [2008]; Prudential Wykagyl/RittenbergRealty v Calabria-Maher, 1 AD3d 422 [2003]).
"The fundamental, neutral precept of contract interpretation is that agreements areconstrued in accord with the parties' intent" (Greenfield v Philles Records, 98NY2d 562, 569 [2002]; seeDysal, Inc. v Hub Props. Trust, 92 AD3d 826, 827 [2012]; Willsey v Gjuraj, 65 AD3d1228, 1229-1230 [2009]; Franklin Apt. Assoc., Inc. v Westbrook Tenants Corp., 43AD3d 860, 861 [2007]). "When the terms of a written contract are clear andunambiguous, the intent of the parties must be found within the four corners of thecontract, giving practical interpretation to the language employed and the parties'reasonable expectations" (Franklin Apt. Assoc., Inc. v Westbrook Tenants Corp.,43 AD3d at 861; see Greenfield v Philles Records, 98 NY2d at 569; Dysal,Inc. v Hub Props. Trust, 92 AD3d at 827; Willsey v Gjuraj, 65 AD3d at1230).
Here, paragraphs 6.02 (a) and (b) of the Lease provided the defendant's remedies inthe event of the plaintiff's default. While paragraph 6.02 (a) was to apply to "defaults infulfilling any of the covenants of this Lease other than the covenants for the paymentof rent or additional rent" (emphasis added), the same remedies are set forth inparagraph 6.02 (b), which applied "if Tenant shall make default in the payment of rentreserved herein or any item of additional rent herein mentioned." In both cases, the sameprocedure was to be followed: "[U]pon Owner serving a written fifteen (15) day noticeupon Tenant specifying the nature of said default and upon the expiration of said fifteen(15) days, if Tenant shall have failed to comply with or remedy such default. . . then Owner may serve a written five (5) day notice of cancellationof this Lease upon Tenant" (emphasis [*4]added). Inthe case of default in the payment of rent or additional rent, section 6.02 (b) provided that"upon the expiration of said five days . . . Landlord may . . .re-enter the demised premises either by use of law, dispossess Tenant by legalproceedings or otherwise . . . and remove their effects and hold thepremises as if this Lease has not been made, but with Tenant still being responsible forthe rent as defined in this Lease Agreement." Thus, as argued by the defendant,paragraphs 6.02 (a) and (b) of the Lease provide a conditional limitation (see Post v120 E. End Ave. Corp., 62 NY2d 19, 27 [1984]; Lerner v Johnson, 167AD2d 372, 374 [1990]), pursuant to which the plaintiffs' failure to cure the default inpayment within five days after receipt of the second notice of default triggers thedefendant's right to terminate the Lease and take whatever legal steps it must todispossess the plaintiffs of the premises. The construction and interpretation of theseunambiguous paragraphs of the Lease was " 'an issue of law within the province of thecourt' " (Maser Consulting, P.A.v Viola Park Realty, LLC, 91 AD3d 836, 837 [2012], quoting Franklin Apt.Assoc., Inc. v Westbrook Tenants Corp., 43 AD3d at 861; see Katina, Inc. vFamiglietti, 306 AD2d 440, 441 [2003]). Accordingly, based on the Lease, theSupreme Court should have granted that branch of the motion which was pursuant toCPLR 3211 (a) (1), in effect, for a judgment declaring that the defendant was entitled,pursuant to paragraph 6.02 of the Lease, to terminate the Lease based on the plaintiffs'default with respect to the payment of rent and additional rent.
In light of the above, the appeal from so much of the order dated January 3, 2012, asdenied that branch of the defendant's motion which was for leave to renew that branch ofits prior motion which was to dismiss, as untimely, those portions of the first cause ofaction which sought a judgment declaring that paragraph 3.01 (c) of the Lease, providingthe formula for determining basic rental adjustments, is ambiguous, and that the properformula to use is the formula submitted by the plaintiffs, has been rendered academic.
The defendant's remaining contentions are not properly before this Court, as theywere raised for the first time on appeal in the defendant's reply brief (see Boddie-Willis vMarziliano, 78 AD3d 978, 979 [2010]; Gartner v Unified Windows, Doors & Siding, Inc., 68 AD3d815, 816 [2009]).
Since this is, in part, a declaratory judgment action, we remit the matter to theSupreme Court, Nassau County, for the entry of a judgment declaring that, the defendantis entitled, pursuant to section 6.02 (a) and (b) of the Lease, to terminate the Lease basedon the plaintiffs' default with respect to the payment of rent and additional rent in theevent the plaintiffs fail to cure the default in accordance with the provisions of the Lease(see Lanza v Wagner, 11 NY2d 317 [1962], appeal dismissed 371 US 74[1962], cert denied 371 US 901 [1962]). Dillon, J.P., Balkin, Chambers and Hall,JJ., concur. [Prior Case History: 2011 NY Slip Op 32256(U).]