City of New York v. 17 Vista Associates

• Decision Date: 03 December 1991
• Citation: 153 Misc.2d 194,580 N.Y.S.2d 963
• Parties: The CITY OF NEW YORK, Plaintiffs, v. 17 VISTA ASSOCIATES, Defendants.
• Court: New York Supreme Court

Page 963

580 N.Y.S.2d 963

153 Misc.2d 194

The CITY OF NEW YORK, Plaintiffs, v. 17 VISTA ASSOCIATES, Defendants.

Supreme Court, New York County,

IAS Part 23.

Dec. 3, 1991.

O. Peter Sherwood, Corp. Counsel, New York City (Alan H. Kleinman and John Low-Beer of counsel), for plaintiffs.

Shea & Gould, New York City (Milton Gould, Robert Ward and Jonathan Landsman of counsel), for defendants.

MARTIN SCHOENFELD, Justice:

In this action plaintiff the City of New York ("the City") is suing defendant 17 Vista Associates ("Vista"), a real estate developer, to enforce an alleged contractual obligation of Vista to pay $500,000 to a trust for low and moderate income housing. We now grant the City's motion for summary judgment.

BACKGROUND

The Seamen's Church Institute ("the Institute") (not a party to this action) is a not-for-profit religious corporation. In 1968 it moved into a building ("the existing building") that had housing accommodations for seafarers. In succeeding years the occupancy level declined, and the Institute began accepting non-seafarers. By 1983 the occupancy level had fallen below 50%, and in 1984 the Institute contracted to sell the property to Vista. Vista intended to demolish the existing building and replace it with an office tower. Closing was set for March 4, 1985.

Operating under the erroneous assumption that a charitable entity would not be subject to the City's SRO laws (infra ), the Institute assumed that Vista would be able to demolish the building upon closing. However, in or about February of 1985 Vista was denied a demolition permit by the City's Department of Buildings. As a "class B multiple dwelling" the existing building was prima facie a "single room occupancy (a living unit which shares a kitchen and/or bathroom with other units) multiple dwelling" ("SRO") as defined in both Local Laws of the City of New York 19 of 1983 (the "anti-harassment" law) and in the then-pending Local Laws of the City of New York 59 of 1985 (the first "moratorium" law). Local Law 19 of 1983 required that anyone seeking to demolish an SRO apply to the City for a Certificate of No Harassment. The Certificate is granted if no harassment of tenants has occurred within a specified period prior to the application. Local Law 19's definition of SRO provides an exemption for "residences whose occupancy is restricted to an institutional use such as housing intended for use primarily or exclusively by the employees of a single company or institution".

Local Law 59 of 1985, signed into law on August 5, 1985, placed an 18-month moratorium on the alteration or demolition of SROs, beginning on and retroactive to January of 1985, and also contained an "institutional use" exemption.

After Vista's demolition permit application was denied, Vista refused to proceed with the closing unless the City determined that the existing building was not subject to the SRO laws. In March of 1985 the Institute urgently requested the City to grant an "institutional use" exemption. This led to ongoing negotiations, during which the Institute was in dire financial straits. Hoping to prevent the Institute's demise and see the site developed, the City informed the Institute that if the Institute could guarantee the continuation of its housing programs, the City would be willing to accept, without independent investigation, the Institute's factual representations regarding the history of the existing building and determine that the existing building was entitled to an institutional use exemption. Since the Institute could not spend funds to aid non-seafarers, it was decided that the Institute would seek $500,000 from Vista. As Vista represented that it did not have such funds available at that time, the City agreed to accept a promissory note.

Thus on July 24, 1985 (1) the City's Department of Housing Preservation and Development ("HPD") wrote a letter ("the Exemption Letter") to the City's Buildings Department granting an "institutional use" exemption to the existing building; (2) the Institute and Vista entered into "the Contract" (infra); (3) Vista executed "the Note" (infra); and (4) Vista and the Institute closed on the property.

The Exemption Letter states as follows:

Based on representations of the [Institute] ..., [HPD] has determined that [the existing building does] not constitute [an SRO] under Local Law 19 ... because the ... premises have been used for an "institutional use" within the meaning of such law. Consequently, a certificate of no harassment is not required under such law. Furthermore The Contract provides, in relevant part, as follows:

should the Mayor sign [Local Law No. 59 of 1985], the Premises, for the same reason ..., will not be considered [an SRO] thereunder.

In connection with the purchase of [15 State Street] ... [Vista] [intends to erect] upon the Property a new commercial office building.... There have been publicized concerns that portions of the existing structure ... may have been used as [an SRO]. ... However, the City has determined that the Existing Structure has not been so utilized ... and has duly issued a [demolition permit].

[Vista] has expressed its concern that the above-mentioned publicity may cause an impediment to [Vista] in the various City processes involved in obtaining a duly issued [construction permit]. ...

Consequently, the [Institute] has decided to establish a trust ... to assist in the housing of seamen and others of low and moderate income.... [Vista] has agreed to be a contributor to the Trust.... By this manner, the Institute, [and Vista], can ensure that the development of the Property will be without any pejorative stigma.

Accordingly, ... [Vista] agrees to pay to the Trust, the sum of $500,000 upon the earlier of (a) the date a duly issued permit or permits has or have been timely delivered to [Vista] permitting the lawful construction of the New Building,....

The Note provides, in relevant part, as follows:

FOR VALUE RECEIVED, [Vista] promises to pay [the Institute], or its assignee, the sum of $500,000, inclusive of interest, upon the earlier of (a) [Vista's] timely receipt of a duly issued permit or permits permitting the lawful construction of a new commercial office building....

Vista demolished the existing building; received, on October 1, 1986, a "building permit"; and erected an office tower. Solely for purposes of this motion, this court will assume, arguendo, that the approval process was unnecessarily protracted, causing delays, increased costs, and lost revenues. In June of 1987 the Trust demanded payment of the Note. Vista refused, and the City sued.

DISCUSSION

In opposition to the City's motion Vista asserts that none of the contingencies set forth in the Contract and the Note (collectively, "the Agreement") has, or will, occur; that the Agreement is unenforceable for lack of consideration; that the Agreement was executed under duress; that the Agreement was executed to avoid application of a law later declared unconstitutional; and that the Agreement violates public policy.

OCCURRENCE OF CONTRACTUAL CONTINGENCIES

The Contract states that "[Vista] agrees to pay to the Trust, the sum of $500,000 upon ... (a) the date a duly issued [construction] permit ... has ... been timely delivered to [Vista]...." The City claims that Vista thus owed $500,000 to the Trust on October 1, 1986. Vista argues that "timely" should be read as meaning "without unnecessary delay" rather than as meaning "without any delay attributable to the existing building's possible status as an SRO." However, this argument is untenable because it is totally contrary to the undisputed context and purpose of the Agreement.

The sole reason for the negotiations was the Institute's and Vista's need for a prompt and favorable determination of SRO status. Other than the recollections of Mr. Robert Kaufman ("Kaufman"), a principal of Vista, some five years after the events at issue, there is absolutely no evidence in the record that Vista was willing to promise to pay $500,000 for anything other than a prompt and favorable SRO determination. Thus this case falls under the rule enunciated in Matter of Herzog, 301 N.Y. 127, 135-36, 93 N.E.2d 336 (1950):

In resolving [problems of construction] primary attention must be given to the manifest purpose sought to be accomplished. When this is ascertained it will However, even if we assume that Kaufman's recollections are absolutely correct, the Agreement cannot be interpreted as he would like. For example, Kaufman states as follows:

take precedence over all other canons of construction. ... Substance must not be destroyed in deference to the naked word. (citations omitted)

the City now claims that the "timely" issuance of the building permits referred to in the Note meant the issuance of said permits "without further impediment arising from the [SRO question]." [I] never understood it that way, nor, I respectfully submit, could the Note be read that way.

Absent from Kaufman's own version of events is any testimony that he or the City ever mentioned any non-SRO-related meaning of "timely." He simply tells us what he "understood"--which is irrelevant, Peripheral Equipment, Inc. v. Farrington Mfg. Co., 29 A.D.2d 11, 13, 285 N.Y.S.2d 99 (1st Dep't 1967) ("The relevant contractual intent is that expressed in the contract, even though it may not accord with the subjective intent of the parties.")--and opines that the Note could not "be read" any other way, an opinion that this court rejects as a matter of law. An example of the clear meaning of "timely" is Vista's own statement that the Contract and Note "are void as against public policy, since they require ... Vista to pay $500,000 to avoid the requirements of an unconstitutional statute." Indeed, Kaufman himself has said that "[i]t certainly should leap out as very obvious to the Court that the [Contract] and Note were in consideration for the HPD letter." Thus whatever Kaufman "under...