New York Overnight Partners, L.P. v. Gordon

• Decision Date: 15 October 1996
• Citation: 673 N.E.2d 123,88 N.Y.2d 716,649 N.Y.S.2d 928
• Parties: , 673 N.E.2d 123 NEW YORK OVERNIGHT PARTNERS, L.P., Respondent, v. Joan GORDON et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

Page 928

649 N.Y.S.2d 928

88 N.Y.2d 716, 673 N.E.2d 123

NEW YORK OVERNIGHT PARTNERS, L.P., Respondent, v. Joan GORDON et al., Appellants.

Court of Appeals of New York.

Oct. 15, 1996.

Jay Goldberg, P.C., New York City (Jay Goldberg and John A. Kornfeld, of counsel), for appellants.

Sidley & Austin, New York City (John G. Hutchinson, James D. Arden and John J. Kuster, of counsel), for respondent.

OPINION OF THE COURT

CIPARICK, Judge.

Respondent, owner of the Ritz-Carlton Hotel at 112 Central Park South, New York City, leases the land underlying the hotel from appellants, owners of the land. When the parties deadlocked on the meaning of the lease term "appraised value of the land" during negotiations for the lease renewal, they agreed to seek a judicial interpretation of that term to settle their dispute. Appellants now challenge so much of the Appellate Division order which held that the appraiser must determine the value of the land as though vacant, without improvements, and subject to current zoning regulations. They argue that the court improperly directed the appraiser to disregard the effect of the hotel on the value of the land. Because the lease expressly provides that the appraiser value the land as unimproved, without regard to the existence of the hotel, we affirm the order of the Appellate Division.

A.

The impasse over the meaning of "appraised value of the land," a term critical for establishing the rental amount for the first 15-year renewal term, resulted from respondent's interpretation that the lease required an appraiser to value the parcel of land as though vacant and unimproved, whereas under appellants' construction the appraiser would consider the "benefit" any improvement "imparts" to the land, even if that improvement constitutes a legally nonconforming use. ¹ The parties stipulated to resolve their dispute in court. Respondent thus proceeded with this action for declaratory and injunctive relief seeking a judgment declaring the meaning of the term "appraised value of the land," and appellants counterclaimed seeking a declaration of the meaning of the word "land" as used in that phrase. ² Thereafter, respondent moved for summary judgment on the complaint and appellants cross-moved for summary judgment on their counterclaim. Supreme Court denied respondent's motion, granted appellants' cross motion and dismissed the complaint.

Respondent appealed, and the Appellate Division reversed, on the law, granted respondent's motion for summary judgment and denied appellants' cross motion (see, New York Overnight Partners v. Gordon, 217 A.D.2d 20, 633 N.Y.S.2d 288). The Appellate Division ruled that the "clear and unambiguous terms of the Lease [provide] that the 'appraised value of the land' may be determined only by reference to the raw land designated as 112 Central Park South, exclusive of the building and all 'Improvements' " (id., at 29, 633 N.Y.S.2d 288). While recognizing that land should be appraised for the best, most advantageous use, the court opined that in this case the land's fair market value must be determined by the terms of the lease, taking into account any restrictions or encumbrances affecting the land. The court then directed the appraiser to determine the value of the land as if vacant and unimproved, subject to current zoning restrictions and contractual limitations, and to consider the effect of the lease on the value of the land (see, id., at 30, 633 N.Y.S.2d 288). The court further granted appellants' motion for leave to appeal to this Court and certified the question "Was the order of this Court, which reversed the order of the Supreme Court, properly made?" Because the order of the Appellate Division is final, we need not answer the certified question.

B.

In an effort to avoid the consequences of the legal determination that the land must be valued as if vacant and unimproved, appellants argue that the Appellate Division exceeded the scope of the limited review governing arbitration and appraisal proceedings by directing the appraiser to consider the land as "vacant, without improvements, and subject to current zoning restrictions" (217 A.D.2d 20, 30, 633 N.Y.S.2d 288, supra) when the ground lease does not so dictate. While appellants do not challenge the Appellate Division's determination that the term "land" as employed in the phrase "appraised value of the land" does not include improvements on the land, appellants nevertheless maintain that "it is a more advantageous use of the land for it to be valued as a parcel of property permitting usage of a building containing 152,000 square feet of floor space thereon, rather than as a theoretically vacant and unimproved parcel" (emphasis in original). Otherwise, appellants contend, the appraisal will reflect a parcel of land that is "much less valuable than economic reality dictates." They further assert that current zoning regulations, which limit the size of new construction, are inapplicable because the owners of the land are legally entitled to continue the nonconforming use that is alleged to be the best and most advantageous use. Because the Appellate Division decision bars the appraiser from valuing the land at its highest and best use given its directive that the appraiser disregard the hotel, appellants claim that the decision should be reversed. We disagree.

C.

When the language of the lease so dictates, appraisals must take into consideration all restrictions--including current zoning regulations--and encumbrances on the land, as well as the lease term (see, United Equities v. Mardordic Realty Co., 8 A.D.2d 398, 187 N.Y.S.2d 714, affd 7 N.Y.2d 911, 197 N.Y.S.2d 478, 165 N.E.2d 426; Plaza Hotel Assocs. v. Wellington Assocs., 55 Misc.2d 483, 285 N.Y.S.2d 941, affd 28 A.D.2d 1209, 285 N.Y.S.2d 267, affd on opn at Special Term 22 N.Y.2d 846, 293 N.Y.S.2d 108, 239 N.E.2d 736, rearg. denied 22 N.Y.2d 972, 295 N.Y.S.2d 1032, 242 N.E.2d 498). Distilled to its essence, the argument pressed on this appeal amounts to nothing more than an attempt to enjoin appraisal of the "land" as raw and unimproved--the very term submitted for legal interpretation--on the theory that the Appellate Division decision precludes appraisal of land at its highest and best use.

Although there is no question that it is the appraiser who must determine which of the myriad factors are relevant to a particular valuation and how such factors impact the valuation of the parcel of land (see generally, Appraisal Institute, The Appraisal of Real Estate ch 4 ["The Valuation Process"], ch 12 ["Highest and Best Use Analysis"], ch 13 ["Land or Site Valuation"] [10th ed 1992] ), without interference or...