Frank B. Hall and Co. of New York, Inc. v. Orient Overseas Associates
| Decision Date | 14 December 1978 |
| Citation | 411 N.Y.S.2d 233,65 A.D.2d 424 |
| Parties | FRANK B. HALL AND CO. OF NEW YORK, INC., Plaintiff-Respondent-Appellant, v. ORIENT OVERSEAS ASSOCIATES, Defendant-Appellant-Respondent. |
| Court | New York Supreme Court — Appellate Division |
A. David Benjamin, New York City, of counsel (Eugene J. Morris, Mendes Hershman, Eugene Zemp DuBose, New York City, with him on the briefs; Demov, Morris, Levin & Shein, New York City, of counsel to Cox, Treanor & Shaughnessy, New York City), for defendant-appellant-respondent.
Daniel T. Scannell, New York City, of counsel (John P. Hale and Norman Fassler, New York City, with him on the briefs; Hale & Russell, New York City), for the plaintiff-respondent-appellant.
Before MURPHY, P. J., and SILVERMAN, FEIN, MARKEWICH and SANDLER, JJ.
In this action for declaratory judgment, the sole issue raised upon appeal relates to the third cause of action. After extensive negotiations, the parties entered into a lease, dated March 25, 1971, for floors two through seven in a new office building being built at 88 Pine Street in Manhattan. The plaintiff-tenant agreed to pay the defendant landlord a base rent of $1,026,532.55 per year. The lease was to commence on January 1, 1972. However, as a result of delays in construction, the plaintiff did not move into the premises until April 1, 1972. By agreement, the plaintiff began to pay its base rent on March 15, 1972.
On December 23, 1971, the defendant had obtained a Temporary Certificate of Occupancy (TCO) that permitted occupancy of the second floor by 128 persons. The lease and accompanying plans called for a cafeteria and office use for 192 persons. A Permanent Certificate of Occupancy (PCO), issued on November 21, 1972, raised the permitted occupancy of the second floor to 240 persons. Subsequent to the issuance of the PCO, the plaintiff discovered that there was a variance between the number of persons (128) that could occupy the second floor under the TCO and the number of persons (192) who should have been able to occupy that space under the lease and plans. At that juncture, the plaintiff continued to pay its base rent but refused to pay the additional rent allegedly due under Articles 12, 61(b) and 61(g) of the lease. To the extent here relevant, Article 61(b) provides:
"61. (b) 'Real Estate Tax Factor' shall mean an amount determined by applying to the assessed valuation of the Land and Building for the First Tax Year the Real Estate Tax Rate in effect at the time of the issuance of a temporary or permanent Certificate of Occupancy for the Building of which the demised premises are a part and which Certificate permits Tenant to enter into occupancy of the demised premises . . . ".
Article 61(g) contains a similar provision relating to the "Base Labor Rate".
It was the plaintiff's primary contention that the escalation clauses were never triggered because of the following language contained in Article 3, as amplified by Article 36:
" . . . The demised premises shall be deemed sufficiently completed to make the same ready for Tenant's occupancy when . . . (iv) a Certificate of Occupancy (temporary or final) has been issued by the Department of Buildings of the City of New York permitting a Tenant's use of the demised premises For the purposes for which the same has been leased . . . ". (emphasis added)
Specifically, the plaintiff maintained that the TCO and PCO did not permit the plaintiff to use the second floor for its intended use. Therefore, the escalation clauses never became operable.
The parties eventually entered into two agreements while this action was pending. The plaintiff agreed to make escalation payments with charges calculated on 1972 as the base year. The defendant agreed to refrain from pursuing any summary remedy. The escalation payments were made and accepted without prejudice to the claims of either party against the other in this action. The trial Court refused to accept these stipulations into evidence. It did permit an amendment of the complaint to allow the plaintiff to claim that the escalation clauses were never triggered since the defendant never obtained the "Assembly" classification (Adm.Code §§ C26-307.1 et seq.) for the second floor.
The trial Court agreed with the plaintiff's contention that the TCO or PCO must permit occupancy for the intended business use according to the lease. It reasoned that the plaintiff was deprived of full contractual use of the second floor until the PCO was issued permitting occupancy by more than 192 persons. The Court further found that the cafeteria use was an "accessory use" (Adm.Code § C26-201.0) that was permitted under a "Business" classification (Adm.Code § C26-306.1). Therefore, the plaintiff's occupancy had been lawful under the PCO.
At the outset, two rulings of the trial Court must be considered. First of all, as was noted above, the Court refused to accept two stipulations into evidence. These stipulations should have been marked in evidence since they traced the parties' course of conduct before trial. The stipulations are relevant for they indicate that the parties' actions, in paying and accepting the stipulated rent, were not prejudicial to their respective rights.
Secondly, the Court permitted an amendment of the complaint at trial that the TCO and PCO did not allow occupancy for the intended purpose because an "Assembly" classification was never obtained. The Court did not abuse its discretion in permitting this amendment (CPLR § 3025(b)) in light of the fact that there was no resultant prejudice to the defendant. The record indicates that the defendant did, in fact, prevail on this issue at trial.
As a general rule, a contract must be construed according to the expressed intent of the parties. Where the intention of the parties is clearly and unambiguously set forth, effect must be given to the intent as indicated by the language used (10 N.Y.Jur., Contracts § 193). The subject lease is unambiguous and will be given effect according to its terms.
Article 3, as amplified by Article 36, is only concerned with the date on which plaintiff was to...
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