Two Guys from Harrison-N.Y., Inc. v. S.F.R. Realty Associates

• Citation: 63 N.Y.2d 396,482 N.Y.S.2d 465,472 N.E.2d 315
• Decision Date: 20 November 1984
• Docket Number: HARRISON-N,S.F.R
• Parties: , 472 N.E.2d 315 TWO GUYS FROMY., INC., Appellant, v.REALTY ASSOCIATES et al., Respondents. Grace Retail Corporation, Additional Defendant on Counterclaims, and Vornado, Inc., Additional Appellant on Counterclaims.
• Court: New York Court of Appeals

Page 465

482 N.Y.S.2d 465

63 N.Y.2d 396, 472 N.E.2d 315

TWO GUYS FROM HARRISON-N.Y., INC., Appellant, v. S.F.R. REALTY ASSOCIATES et al., Respondents Grace Retail Corporation, Additional Defendant on Counterclaims and Vornado, Inc., Additional Appellant on Counterclaims.

Court of Appeals of New York.

Nov. 20, 1984.

Donald S. Snider and Gerald M. Levine, New York City, for appellants

M. William Scherer, New York City, for respondents.

OPINION OF THE COURT

COOKE, Chief Judge.

The question presented on this appeal is whether a tenant has the right to make substantial changes to the demised premises. Such a right may arise from statute or contract. When, however, the instrument governing the tenancy prohibits such alterations, the tenant may not proceed under either authority.

The individual respondents are the holders of a reversionary interest in property located in New Hyde Park which is under a long-term land lease that was originally executed by the predecessor in interest to respondent S.F.R. Realty Associates. Initially, an "anchor building" of 100,000 square feet in a shopping center was leased to W.T. Grant Company, which subsequently sold its interest to petitioner in 1976.

At the end of 1981, petitioner exercised an option to close its store. It vacated the premises in early 1982 and began looking for a suitable subtenant for all or part of the building. It eventually reached an agreement with Grace Realty Corporation, which was to sublease approximately 51% of the floor area for use as a "Channel Home Center" store. To accommodate the sublessee, petitioner made substantial nonstructural changes inside and proposed four exterior changes: (1) extending an existing sign canopy, which would require piercing the roof's waterproofing membrane; (2) adding decorative brick fascia to the I-beams that would support the canopy extension; (3) installing a new ingress/egress door and a related glass front; and (4) adding a loading door at the rear of the building. It is obvious that these constituted substantial structural modifications. When petitioner gave notice of its intent to make these alterations, however, S.F.R. Realty objected and declared that they would violate the terms of the lease. Petitioner commenced this special proceeding, claiming that it had both a statutory and contractual right to make the proposed changes.

The essence of this controversy has its genesis in the law against waste. At common law, a tenant's only right was to make use of property; a right to alter the property did not arise unless the landlord expressly permitted it (see Agate v. Lowenbein, 57 N.Y. 604, 607-608). This principle was applied even when the tenant could not economically maintain the property without the change and the alteration would have increased the property's value (see Brokaw v. Fairchild, 135 Misc. 70, 237 N.Y.S. 6, affd. no opn. 231 App.Div. 704, 245 N.Y.S. 402, affd. no opn. 256 N.Y. 670, 177 N.E. 186). The Legislature long ago acted to ameliorate the harsh effects of this doctrine (L.1937, ch. 165), which effort is now codified in RPAPL 803. That statute sets forth certain conditions under which a tenant for life or for years may alter the property over the objections of any owner of a future interest. In brief, the tenant must establish that a prudent owner would make the same change, which will not reduce the market value of the future interests and does not violate any contract regulating the tenant's conduct. In addition, the tenancy must be expected to continue for more than five years, and written notice of the intention to make the alteration must be given. Finally, the owner of a future interest may obtain security that the proposed alteration will be completed. ¹

Petitioner asserted two grounds for its right to make the proposed changes to the building. First, it contended that the lease either expressly permitted the changes or was silent on the issue. Paragraph 6(a) authorized petitioner to "make any interior non-structural alterations, additions and improvements * * * which it may deem necessary or desirable provided Tenant does not thereby weaken the structure of the building" and "provided it does not interfere with the quiet enjoyment of other tenants, remove all or any part of any wall of any building * * * to afford entrance to or connection with improvements on adjoining premises * * * ". ² Petitioner secondly argued that, as a concomitant of its contractual right under Paragraph 12 to sublet or subdivide the premises, it was empowered to make exterior, structural changes.

Neither of the lower courts expressly addressed petitioner's second contention. The trial court concluded that petitioner satisfied the conditions of RPAPL 803 (subd. 1) and was entitled to make the proposed exterior alterations. In reaching its determination, the court found the lease to be "silent and nonprohibitive" with respect to the proposed exterior alterations. The Appellate Division, 99 A.D.2d 467, 470 N.Y.S.2d 46, unanimously reversed on the reasoning that the express permission to undertake certain alterations granted in Paragraph 6(a) must be interpreted to implicitly prohibit all other alterations. This court now affirms.

Much of petitioner's argument before this court relies on the breadth that it proposes should be accorded to the Legislature's liberalization of the law of waste. This question would be especially pertinent if the controversy were focused on paragraphs a or b of RPAPL 803 (subd. 1). Inasmuch as this statutory issue can be resolved on the basis that the lease prohibited the proposed alterations so as to preclude satisfying paragraph c, it is unnecessary to decide the scope of the Legislature's amendment of the common law.

RPAPL 803 (subd. 1, par. c) permits a "proposed alteration or replacement is not in violation of the terms of any agreement or other instrument regulating the conduct of the owner of the estate for life or for years or restricting the land in question". Applying this provision obviously calls for an interpretation of petitioner's contract. Under the present circumstances, this presents a question of law which this court may consider free of the lower courts' determinations (see West, Weir & Bartel v. Mary Carter Paint Co., 25 N.Y.2d 535, 307 N.Y.S.2d 449, 255 N.E.2d 709). In construing a contract, one of a court's goals is to avoid an interpretation that would leave contractual clauses meaningless (see Corhill Corp. v. S.D. Plants, Inc., 9 N.Y.2d 595, 599, 217 N.Y.S.2d 1, 176 N.E.2d 37; Muzak Corp. v. Hotel Taft Corp., 1 N.Y.2d 42, 46, 150 N.Y.S.2d 171, 133 N.E.2d 688).

Paragraph 6(a) of the lease was the only provision of that contract discussing alterations to the building. Its title--"alterations, walls, Etc."--indicates that it was intended to be a comprehensive treatment of that subject. Having been prepared by petitioner's predecessor in interest, it is construed against the tenant (see 151 West Assoc. v. Printsiples Fabric Corp., 61 N.Y.2d 732, 734, 472 N.Y.S.2d 909, 460 N.E.2d 1344). Critically, Paragraph 6(a) omitted any reference to exterior structural alterations. The section expressly authorized two types of modifications: interior, nonstructural alterations, and removing walls to permit access to improvements on adjoining premises. In neither case did these authorize making structural changes to afford access between petitioner's premises and the parking lot. The first clearly did not apply to the exterior structural changes at issue here. ³ The latter provision, viewed in context, must be read as concerning alterations to provide direct access from petitioner's building to the portions of the shopping center occupied by other tenants, not to the parking lot.

Thus, it must be determined whether the lease, prepared by the tenant, prohibited the changes proposed by petitioner. In considering this problem, guidance is provided by the doctrine of "inclusio unius est exclusio alterius," an applicable maxim when interpreting contracts (see Woodmere Academy v. Steinberg, 41 N.Y.2d 746, 750, 395 N.Y.S.2d 434, 363 N.E.2d 1169). Under all the circumstances here, the specification of certain permitted activities in Paragraph 6(a) should be read as implicitly prohibiting other alterations.

Petitioner also posits that it was empowered to make external...