Brubrad Company v. United States Postal Service, 75 C 325.
| Decision Date | 06 November 1975 |
| Docket Number | No. 75 C 325.,75 C 325. |
| Citation | 404 F. Supp. 691 |
| Parties | BRUBRAD COMPANY, Plaintiff, v. UNITED STATES POSTAL SERVICE, Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Bradley B. Davis, New York City, for plaintiff.
David G. Trager, U. S. Atty., Brooklyn, N.Y., for defendant, by Richard L. Huffman, Asst. U. S. Atty., of counsel.
MEMORANDUM AND ORDER
Cross motions have been made for summary judgment by the plaintiff and to dismiss by the defendant.
On November 4, 1964 plaintiff's predecessor, Brubrad Corporation, and the United States of America entered into a lease agreement for a store at 2934-36 Avenue X, Brooklyn, New York, to be used by the then Post Office Department. The lease was for an initial period of ten years at a rate of $510 per month, with four five-year renewals at the option of the defendant-tenant, at the rates of $475, $500, $525, and $550 per month, respectively. Plaintiff is a partnership.
The terms of the lease were reached after a process of public bidding and negotiation. The original bid submitted by Brubrad Corporation was for $545 per month, the lowest of three bids, but was accepted only after further negotiations which reduced the rent to $510.
Plaintiff's complaint asserts that since 1964 "the enormous rates of inflation and consequent declining value of the dollar" have been both unprecedented and uncontemplated by the parties. Plaintiff maintains that these economic developments have caused an "unfair hardship upon plaintiff" while unjustly enriching the defendant.
In affidavits supporting its motion for summary judgment, plaintiff asserts that the inflation and declining value of the dollar have been caused, at least in part, by the affirmative acts of the federal government in pursuing its fiscal and monetary policies.
The complaint asks for judgment reforming the terms of the lease so that the rentals shall "be deemed to read as being in terms of 1964 dollars to be adjusted at the 1974 renewal period and each subsequent renewal period in accordance with the alteration in the value of the dollar from base year 1964. . . ." In its briefs and oral argument, however, plaintiff retreats from the claim of reformation of the lease and asserts instead a right to have the lease interpreted so as to make an adjustment for inflation.
Plaintiff suggests various standards by which the court might make such an adjustment. Plaintiff first points out that the redemption of silver certificates for silver bullion was terminated on June 24, 1968, 31 U.S.C. § 405a-3, and that the value of silver has increased from $1.29 per ounce to $4.58 per ounce since the lease was executed. In its memorandum of law, it includes tables to show that $510 a month is worth only about $120 in terms of gold, and that wholesale prices have risen more than 50% and construction costs more than 90% since 1967. On oral argument, counsel said that plaintiff was asking for damages from the date of the complaint at a rate of not more than $800 per month, but gave no explanation of how the $800 was computed. In its supplemental brief, plaintiff claims the right to damages based on the decrease in buying power of the dollar.
In the motion papers, plaintiff asked simply "that a hearing be conducted to determine the precise method of adjustment."
Defendant's motion to dismiss under F.R.Civ.P. 12(b) may be granted only if the complaint fails to state a claim upon which relief could be granted under any legal theory. Mitchell v. Hart, 41 F.R.D. 138 (S.D.N.Y.1966).
The court concludes that the complaint must be dismissed, whether viewed as an action for reformation of the contract or as a suit for a declaratory judgment construing the contract.
The law of contracts permits the reformation of the express terms of a contract when the agreement between the parties is not accurately reflected in the express language of the contract, either through mutual mistake of the parties or fraud by one and mistake by the other. A.L.I., 2 Restatement, Contracts § 504; 3 Corbin, Contracts §§ 608, 614 (1960); 13 Williston, Contracts, 3d ed. §§ 1547-49. Reformation is intended only to enforce the objectives of the parties "according to their original agreement." Mutual of Omaha Ins. Co. v. Russell, 402 F.2d 339, 344 (10th Cir. 1968), cert. denied, 394 U.S. 973, 89 S. Ct. 1456, 22 L.Ed.2d 753 (1969).
Such is not the case here. Plaintiff has not suggested that the parties intended the words of the contract to be other than what they are. Nor does plaintiff's theory of the case rest on the notion that the parties reached an express agreement other than that reflected in the written contract.
The Supreme Court has held, moreover, that inflation is not a ground for escape from contract terms. Columbus Ry. Power & Light Co. v. City of Columbus, 249 U.S. 399, 414, 39 S.Ct. 349, 354, 63 L.Ed. 669 (1919).
Plaintiff's new theory, changing its complaint from one for reformation to one for change of rent by interpretation of the contract, is equally lacking in merit.
While plaintiff does not contend that the parties entered into an agreement on terms other than those in the lease, it argues that the meaning of those terms is different from the construction urged by the defendant. Plaintiff urges that the meaning of the phrase "annual rental of Six thousand one hundred twenty . . . Dollars" in the 1964 ten-year lease meant that the rent should have a value each year (or at least in each renewal term) equivalent to the value of $6,120 in 1964. On the basis of plaintiff's contention at one point that the value of the dollar has declined by 75 percent or more since 1964, its construction of the lease would mean that the 1974 rental would exceed $24,000, or $2,000 per month, far in excess of the claim it made on the oral argument.
Plaintiff's contention might be disposed of summarily by simply stating that the meaning of the words used in the ten-year lease is so plain as to preclude any other interpretation. Such an approach is often adopted by courts in interpreting statutes as well as contracts. See, e. g., Western Union Tel. Co. v. American Communications Ass'n, 299 N.Y. 177, 86 N.E.2d 162 (1949); Bethlehem Steel Co. v. Turner Construction Co., 2 N.Y.2d 456, 161 N.Y.S.2d 90, 141 N.E.2d 590 (1957); Caminetti v. United States, 242 U.S. 470, 485, 37 S. Ct. 192, 194, 61 L.Ed. 442 (1917).
There are occasions, however, where it is appropriate to go beyond the plain meaning of words in order to determine the underlying purpose of a statute or a contract. 3 Corbin, Contracts § 542 (1960); 9 Wigmore, Evidence § 2461 (3d ed.); Massachusetts Bonding Ins. Co. v. United States, 352 U.S. 128, 138, 77 S.Ct. 186, 191, 1 L.Ed. 2d 189 (1956) (Frankfurter, J., dissenting); Guiseppi v. Walling, 144 F.2d 608, 624 (2d Cir. 1944) (L. Hand, J., concurring).
The court in construing a provision of a contract should look to the contract in its entirety. In this regard, it is significant that the parties varied the rentals for the four five-year option periods following the initial ten-year lease. Presumably, these negotiated rentals looking to the future included the parties' estimation of the value of the lease, and of the dollar at those times. Given the conventional meaning of the term "dollar", as our basic unit of currency, it would seem fair to assume that, had the parties meant to set the rent in terms of "1964 dollars," they would have used words other than those they chose.
When construing a contract, the court may properly consider the circumstances of the parties at the time of negotiation and entering into the contract. Here there is no indication that the predecessors of plaintiff and defendant dealt in any fashion other than the proverbial "arm's length." While subsequent developments both in this country and abroad may have proved plaintiff's contract to be an unwise one, such misjudgment of the future, standing alone, does not justify altering the terms of the contract. This court does not understand plaintiff to contend, nor could it find, that this contract was unconscionable when made. Cf. U.C.C. § 2-302; Jones v....
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