Schechter v. Carter, 83 CIV 4267 (LBS)
| Citation | 580 F. Supp. 1526 |
| Decision Date | 02 March 1984 |
| Docket Number | 83 CIV 4783 (LBS).,No. 83 CIV 4267 (LBS),83 CIV 4267 (LBS) |
| Parties | Al J. SCHECHTER, Plaintiff, v. William J. CARTER, et al., Defendants. Al J. SCHECHTER, Plaintiff, v. William J. CARTER, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Schekter Aber Rishty & Goldstein, P.C., New York City, for plaintiff; Stanley L. Kantor, New York City, of counsel.
Hofheimer Gartlir Gottlieb & Gross, New York City, for defendants; Sylvia D. Garland, New York City, of counsel.
These actions, in which this Court's jurisdiction is based upon the diversity of citizenship of the parties, involve the disputed construction of a provision in two leases executed in June 1962. The complaint in 83 Civ. 4267 relates to the premises at 237-239 East 58th Street, New York, New York. The complaint in 83 Civ. 4783 relates to the premises 343-345 East 51st Street, New York, New York. Both premises are apartment buildings. In all respects relevant to this controversy, the leases are identical. At the time of execution of these leases, two other leases for individual apartments were executed. All four leases contain a provision relating to "Rent increases Based on Consumer Price Index", a copy of which is annexed hereto as Appendix A, except that the individual apartment leases do not deal with renewal terms.
The two premise leases were executed as part of a sale-lease back transaction pursuant to which defendants acquired the premises subject to the leases which had been entered into between the plaintiff-seller and his wife, and plaintiff leased back the premises. The apartment leases were between plaintiff as landlord, and William Carter and John Carter (now deceased), two of the defendants, as tenants.
For twenty years, no dispute arose as to the construction of the consumer price index provision. In 1983, plaintiff negotiated for the sale of his interest in the 58th Street property. The prospective purchaser refused to buy the property because of another provision in the lease to which the premises were subject. The initial term of the lease was from 6/1/61 to 5/31/92. The tenant had three options to renew for terms of 23 years each. The provision which dissuaded the prospective buyer related to the rental payable during the three 23 year renewal terms. It reads:
Plaintiff urges that this provision would enable defendants to "reap a double inflationary benefit — the first time when the net annual rent is adjusted, which, in accordance with the reappraisal of the properties, will undoubtedly reflect the inflationary increase in the value of real property in this City, and the second time, if plaintiff's construction is not accepted, when reappraised price is multiplied by the percentage increase in the Consumer Price Index from May, 1962 to the beginning of each five year period of each renewal term." Affidavit of Stanley L. Kantor, Esq., pp. 8-9.
The frustrated sale of the plaintiff's interest in the 58th Street premises allegedly caused plaintiff to reexamine the leases and caused him to conclude that the uniform and consistent interpretation of the consumer price index over the preceding twenty years had been erroneous. Thus, although the inquiry was precipitated by plaintiff's distress at the impact of the renewal term rental, which commences in 1992, this action is directed not at the renewal rent provision but at the consumer price index provision quoted above. The complaint seeks no relief vis-a-vis the renewal rent provision.
The parties have construed the consumer price index provision to provide for an increment in the annual rent payable in each of the next five years. Plaintiff now asserts that the correct interpretation of the provision is to provide for a single increment equal to the product of the net annual rent for the initial five years multiplied by the percentage of increase in the consumer price index, which single increment is to be paid over the five years. Under plaintiff's interpretation, in each year, the landlord would receive only 1/5 th of the increase reflected by the consumer price index rather than the entire increase annually.
Defendants move for summary judgment and the motion is granted.
Plaintiff's interpretation of the lease borders on the frivolous. Although it cannot be gainsaid that the consumer price rent increase provision is inartfully drafted and that the term "net annual rent" used elsewhere in the lease is not employed in this provision, the Court is not compelled to abandon common sense for the sake of literalism.
The parties to this transaction were experienced real estate entrepreneurs. The purpose of a price escalation provision is, of course, to equate future dollars to the real value, measured in terms of purchasing power, of the dollar at the time of the agreement. Plaintiff's interpretation would be inconsistent with this purpose. If we look solely to the four corners of the lease in the light of the obvious intent of the parties, we would conclude that the motion should be granted. If the clause was intended to provide for only a 1/5 th cost of living increment each year, specific language to that effect, negating the usual construction of such clauses, would be expected. If we look beyond the four corners of the lease this conclusion is significantly reinforced. For twenty years, these experienced real estate parties construed four leases in a uniform fashion. Plaintiff who was defendants' landlord with respect to the apartment leases, utilized the same construction of the provision as was utilized with respect to him as a lessee. When the parties modified the escalation provision in 1977, they explicitly referred to the provision as relating to increases in net annual rent. Plaintiff's claim that he should not be bound by this language because his wife was then extremely ill arouses compassion but is not of legal significance.
Plaintiff's frustration at the decreased marketability of the property because of another provision, unchallenged here, which goes into effect in 1992, cannot serve as the excuse to adopt a strained, economically unrealistic interpretation of a clause the true intent of which has been well known to the parties for over 20 years.
Defendants seek an award of attorneys' fees for their defense of the action. They claim such award pursuant to Article 40, which provides:
Def.Mem. p. 3. Had defendants not contested plaintiff's declaratory judgment proceeding, defendants would have been barred from challenging plaintiff's construction of the lease and consequently, plaintiff's monthly tender of rent thereafter, pursuant to the plaintiff's interpretation, would be neither a "default" in conventional terms nor a "breach" under the terms of the lease.
As a federal court sitting in diversity and pursuant to Article 39(a)1 of the Lease, we are constrained to apply New York law in our interpretation of the disputed clause.
A provision in a lease requiring a tenant to pay his landlord for the legal fees and disbursements incurred in an action to enforce the payment of rent has long been judicially recognized as consistent with the public policy of New York state. 379 Madison Avenue, Inc. v. Stuyvesant Co., 242 A.D. 567, 275 N.Y.S. 953, aff'd 268 N.Y. 576, 198 N.E. 412 (1935); J. Rasch, Landlord and Tenant, Summary Proceedings, § 358 (2d Ed.1971) p. 449. The issue of whether attorneys' fees are recoverable for defense of a declaratory judgment action under a lease provision such as Article 40 appears to be a matter of first impression in the State of New York.
Pursuant to Article 40, the only conditions precedent to the landlord's right of recovery of legal fees and expenses are either an...
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In re Westview 74th Street Drug Corp.
...to enforce the payment of rent has long been judicially recognized as consistent with the public policy of New York. Schechter v. Carter, 580 F.Supp. 1526 (S.D.N.Y.1984); J. Rasch, Landlord and Tenant Summary Proceedings, § 358 at 449 (2d ed. 1971). But the attorney's fee must be reasonable......
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In re 2495 Broadway Supermarket, Inc.
...non-compliance has long been judicially recognized in New York as consistent with public policy and enforceable. See Schechter v. Carter, 580 F.Supp. 1526 (S.D.N.Y.1984); Westview, 59 B.R. at 757; J. Rasch, Landlord and Tenant Summary Proceedings, § 358 at 449 (2d ed. 1971). So, too, if the......
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