Title: Riverside South Planning Corporation v. CRP/Extell Riverside, L.P.

State: new-york

Issuer: New York Appellate Court

Document:

- 1 -
=================================================================
This opinion is uncorrected and subject to revision before
publication in the New York Reports.
-----------------------------------------------------------------
No. 171  
Riverside South Planning 
Corporation,
            Appellant,
        v.
CRP/Extell Riverside, L.P., et 
al.,
            Respondents.
Max R. Shulman, for appellant.
Richard H. Dolan, for respondents.
GRAFFEO, J.:
In this breach of contract case, we are asked to
determine the scope of a sunset clause that appears in a 1993
Letter Agreement relating to the development of a parcel of real
property.  Because we agree with the Appellate Division that,
under the provision in question, the obligations in the agreement
- 2 -
No. 171
- 2 -
ceased in 2003 -- two years before defendant purchased the
property -- we affirm the judgment dismissing plaintiff's claim.
In 1984, Penn Yards Associates, a partnership
controlled by Donald Trump, purchased the Penn Central Railroad
Yards -- a 76-acre parcel located on the West Side of Manhattan
known as Riverside South.  Trump floated two proposed development
plans in the late 1980s that were opposed by civic groups. 
Eventually forging an alliance with six of the organizations that
had opposed those plans, in 1991 Trump entered into a Memorandum
of Understanding with these groups regarding a new Development
Plan.  The new plan focused on environmental sustainability and
design criteria, specified the number, size and permissible uses
of the buildings to be erected and reserved space for art
studios, parks and other open spaces.  With Trump's assistance,
plaintiff Riverside South Planning Corporation (RSPC) was formed,
an entity comprised of representatives of each of the six groups,
along with Trump and a named President.  
Thereafter, Trump and the RSPC worked together to
obtain support from government officials for the Development Plan
and, in 1992, formal approval was obtained from the City of New
York.  Penn Yards recorded a 284-page Restrictive Declaration
with the New York City Register memorializing that approval. 
Having been recorded in the chain of title, the declaration
imposed numerous restrictions on the owner that would run with
the land and bind any developer as well as any successors or
- 3 -
No. 171
1 Under the Restrictive Declaration, the developer's
compliance with the plan is monitored by the Riverside South
Implementation Task Force, which consists of a representative of
the Mayor's office of Construction, the Director of the
Department of City Planning, another Mayoral appointee (a
Commissioner of an agency, at the election of the Mayor) and two
appointees of the Speaker of the State Assembly.
2 The Riverside South Design Guidelines were apparently
finalized on May 21, 1993 -- about two months after the Letter
Agreement was executed.  Although the Design Guidelines mirror,
in some respects, provisions in the Development Plan, they also
contain additional details and specifications relating to the
design and construction of buildings, such as the dimensions of
windows and the percentage of glass making up the exterior
facade.  The guidelines themselves are unsigned and are not in
the form of a contract or restrictive declaration.
- 3 -
assignees.1
On March 31, 1993, Donald Trump entered into a four-
page Letter Agreement with the RSPC to "confirm our arrangement
to continue working together."  After identifying some issues
that remained outstanding, Trump agreed that, if he used "Special
Permits," he would develop the property in substantial conformity
to "design guidelines"2 and would not apply for any major
modifications or rezonings (with specified exceptions) without
the approval of a majority of the members of the RSPC.  Trump
further agreed to work with the RSPC to oversee the design and
construction of the parks and open space in conformity with
approved Park Drawings and Park Specifications and to delegate
his future park maintenance obligations to an independent Park
Maintenance Entity (subject to certain conditions).  In exchange,
- 4 -
No. 171
- 4 -
the RSPC consented to continue its support of the project and to
take whatever actions necessary to secure government permits and
facilitate development.  The contract also contained additional
provisions addressing funding for the RSPC and the potential for
future dissolution of the planning corporation.
Most relevant to this case, a sunset provision was
included on the third page of the four-page Letter Agreement
stating that "[t]he agreements contained herein" would continue
for 10 years, unless either of two conditions were no longer
fulfilled, in which case they would cease earlier.  In a
subsequent paragraph, the developer agreed that if he sold "any
Parcel of the Subject Property," he would assign to the purchaser
the obligations in the contract.  Appended to the agreement and
incorporated by reference was a two-page document entitled "Legal
Requirements."   This addendum clarified that "[n]othing
contained in the Letter Agreement is intended to, nor shall be
interpreted to, create an interest in real property, a
constructive trust, easement, lien or other encumbrance upon the
Subject Property," which was consistent with a provision in the
Letter Agreement itself stating that the contract would not be
recorded in the chain of title.
In 1994, Penn Yards sold the Riverside South property
to Hudson Waterfront Assoc. L.P., an entity in which Trump had a
non-controlling interest.  After the transfer, in his capacity as
a partner in Hudson Waterfront, Trump entered into another
- 5 -
No. 171
- 5 -
contract with the RSPC noting that he would continue to be a
partner in the project and accepting, on behalf of Hudson
Waterfront, the obligations imposed in the 1993 Letter Agreement,
with certain caveats.  It is undisputed that Hudson Waterfront
fully complied with the 1993 Letter Agreement while it owned the
property.
According to the allegations in RSPC's complaint, in
2005 Hudson Waterfront sold the Riverside South property (or a
portion of it) to defendant CRP/Extell Riverside LLP ("Extell"),
a company unrelated to Donald Trump.  Upon purchase of the
property, Extell signed a document in which it agreed to assume
any duties and obligations that continued to exist under the 1993
Letter Agreement but stated that it was not admitting that there
were any continuing obligations or that the contract remained in
effect.      
RSPC alleges that, for several months, Extell acted
consistently with the Letter Agreement by funding and consulting
with the RSPC.  However, toward the end of 2005, Extell announced
that it planned to construct a building that contained more glass
on the exterior facade than would be consistent with the Design
Guidelines and it failed either to seek approval from the RSPC or
to conduct an energy efficiency analysis required by the
guidelines.  Extell then rebuffed RSPC's attempts to participate
in the planning process and ultimately declared that it was not
bound by the Letter Agreement because, by virtue of the sunset
- 6 -
No. 171
- 6 -
clause, that contract had expired in March 2003, 10 years after
it was signed.
In November 2007, RSPC commenced this breach of
contract action seeking enforcement of the 1993 Letter Agreement,
arguing that the contract remained in effect.  Extell answered
and moved to dismiss the claim on the basis of documentary
evidence, relying on the plain language of the sunset clause and
contending that, since Extell did not purchase the property until
two years after the agreement expired, it had no obligations
under that contract and therefore could not be sued for its
breach. 
Supreme Court denied the motion to dismiss, reasoning
that the sunset clause was ambiguous because it did not appear at
the end of the agreement and, as a result, could be interpreted
as applying only to the obligations that preceded it in the
document.  Since the clause relating to assignment to successors
-- the provision under which obligations might have been passed
on to Extell -- appeared after the sunset clause, the court
concluded that the assignment clause might still have been in
effect when the property was purchased by Extell.
In a divided decision, the Appellate Division reversed
and granted Extell's motion to dismiss.  The majority held that
the sunset clause plainly established that the Letter Agreement
had expired, at the latest, 10 years after it was executed,
meaning that it was of no force or effect when Extell acquired
- 7 -
No. 171
- 7 -
the property in 2005.  The court was unpersuaded that the
placement of the provision on the third page of the contract --
as opposed to at the end -- permitted the conclusion that the
sunset clause applied only to obligations that appeared in the
text before it rather than the entire agreement.  The two-justice
dissent would have upheld the order denying the motion to dismiss
as it agreed with Supreme Court that the sunset clause was
ambiguous.  The dissent surmised that the parties might have
intended to limit Trump's obligations to 10 years but to bind
successors for a longer period of time if they thought it likely
that Trump would sell the property soon after the letter
agreement was signed.  Plaintiff appeals to this Court as of
right on the two-justice dissent and we now affirm.
Our rules of contract interpretation are well-
established.  "When parties set down their agreement in a clear,
complete document, their writing should be enforced according to
its terms," and this rule is applied with special force "in the
context of real property transactions, where commercial certainty
is a paramount concern, and where the instrument was negotiated
between sophisticated, counseled business people negotiating at
arm's length" (Vermont Teddy Bear Co. v 538 Madison Realty Co., 1
NY3d 470, 475 [2004] [internal quotation marks, ellipses and
citations omitted]).  Courts may not "by construction add or
excise terms, nor distort the meaning of those used and thereby
make a new contract for the parties under the guise of
- 8 -
No. 171
- 8 -
interpreting the writing" (Reiss v Financial Performance Corp.,
97 NY2d 195, 199 [2001][internal quotation marks and citations
omitted]).
In this dispute, the primary issue is whether there is
ambiguity in the language of the sunset clause.  "Whether an
agreement is ambiguous is a question of law for the courts . . .
Ambiguity is determined by looking within the four corners of the
document, not to outside sources" (Kass v Kass, 91 NY2d 554, 566
[1998][citations omitted]).  The entire contract must be reviewed
and "[p]articular words should be considered, not as if isolated
from context, but in the light of the obligation as a whole and
the intention of the parties manifested thereby.  Form should not
prevail over substance and a sensible meaning of words should be
sought" (Atwater & Co. v Panama R.R. Co., 246 NY 519, 524
[1927]).  Where the language chosen by the parties has "a
definite and precise meaning," there is no ambiguity (Greenfield
v Philles Records, 98 NY2d 562, 569 [2002] [citation omitted]).
The sunset clause in the Letter Agreement provides: 
"The agreements contained herein shall
continue for ten (10) years, or such lesser
period as either of the following conditions
shall no longer remain satisfied: (1) the
Special Permits shall remain in effect; and
(2) I shall own, directly or indirectly, all
or any portion of the Subject Property"
(emphasis added).
We concur with the Appellate Division majority's view that the
phrase "the agreements contained herein" unambiguously
encompasses all of the obligations in the contract as it is
- 9 -
No. 171
- 9 -
accompanied by no limiting language suggesting that it refers to
only some of the obligations, such as those in the preceding
paragraphs as the RSPC suggests.  The clause indicates that the
contract will remain in effect for 10 years and contemplates that
it might expire sooner if either of the two listed conditions was
not satisfied, e.g., if the developer no longer owned, directly
or indirectly, any part of the Riverside South property.  
Nor is the clause rendered ambiguous by other language
in the contract, such as the assignment clause.  In that
provision, the developer agreed to "require any person who
purchases any Parcel of the Subject Property from me so long as
the Special Permits remain in effect, to agree to abide by the
agreements in this letter."  Although RSPC acknowledges that
Trump could not have been bound by the obligations in the letter
for longer than 10 years, it asserts that the assignment clause
requires that any successor purchaser of the property comply with
the agreements as long as Special Permits remain in effect, even
if this extended beyond the decade specified in the sunset
provision.  It therefore interprets the assignment clause as
imposing a broader obligation on a successor than Trump had
himself and, based on this interpretation, contends that an
ambiguity is created as to the applicability of the sunset clause
to an assignee such as Extell.
We are unpersuaded by this analysis.  Under the clear
wording of the sunset provision, the obligations in the Letter
- 10 -
No. 171
- 10 -
Agreement immediately ceased if Trump no longer owned, directly
or indirectly, any portion of Riverside South -- if he and his
companies sold the entire property -- and this would be true even
if such a sale occurred within 10 years.  In that circumstance,
there would be no obligations to pass on to a successor because
the contract immediately expired upon Trump's divestiture of
ownership.  Viewed in this light, there is only one reasonable
interpretation of the assignment clause; that provision would
have been triggered only if a Trump company retained an interest
in Riverside South while selling a portion of the property to an
unrelated entity.  
In fact, this is precisely what the assignment clause
says.  If Trump sells "any Parcel of the Subject Property"
(emphasis added) while retaining an interest in other parcels, he
must require the purchaser to abide by the obligations in the
Letter Agreement for so long as they remain in effect (which,
under the sunset clause, would be no more than 10 years).  The
sentence that follows the assignment clause further demonstrates
that Trump is addressing the sale of a parcel and not the entire
"Subject Property" (as Riverside South is referenced elsewhere in
the document) as the developer agrees to "contractually require
the purchaser(s) to agree to develop such parcel" (emphasis
added) in accordance with the guidelines.  As long as he remained
a part of the project and until the Letter Agreement expired,
Trump was required to extend to any entity that purchased a
- 11 -
No. 171
- 11 -
portion of the property the same obligations he carried -- to
work with the RSPC until the contract terminated in 2003 (if not
sooner).  It made sense to include such a provision since, if
Trump (through one of his companies) was simultaneously
developing one part of Riverside South while a different
organization developed another, such coordination would have been
desirable.  But the assignment clause does not negate the 10-year
limitation on the duration of the contract.
Of course, the parties could have drafted an agreement
that restricted the scope of the sunset clause in the manner
asserted by RSPC.  For example, the assignment clause would have
had the meaning RSPC ascribes to it if it read "notwithstanding
the language limiting the duration of this agreement," the
developer will require any subsequent purchaser to abide by the
obligations in this letter for so long as the Special Permits
remain in effect.  But the contract contains no language
indicating a mutual agreement to limit the applicability of the
sunset clause with respect to successors.  
Thus, like the other obligations in the Letter
Agreement, the assignment obligation was restricted by the sunset
provision and ended, at the latest, 10 years after the agreement
was signed.  As the developer, Trump did not agree to assign to
someone else obligations he never had and the presence of the
assignment clause therefore does not create an ambiguity in the
sunset clause.  To the extent that Supreme Court and the
- 12 -
No. 171
- 12 -
Appellate Division dissent relied on the inference that the
parties must have intended to bind successors for a period
greater than 10 years because development of Riverside South
could not have been finished within a decade, not only does this
rationale consider matters outside the four corners of the
agreement but it assumes that the developer agreed to work with
the RSPC until the project was completed -- an obligation that is
not stated in the agreement, although it could easily have been
included if that had been the parties intent.    
Since the Letter Agreement was executed in March 1993,
it expired no later than March 2003, two years before Extell
purchased the property from Hudson Waterfront.  Thus, Extell had
no contractual obligation to RSPC that could give rise to this
breach of contract claim.  RSPC asserts that, even if this is the
case, its lawsuit should nonetheless proceed because any other
result would allow Extell to "undo" decisions made while the
Letter Agreement was in effect.  Assuming such a theory could
afford a basis for relief against Extell, the complaint does not
identify any binding decision made before the Letter Agreement
expired that has been disturbed by Extell; for example, RSPC does
not allege that, before March 2003, any previous owner had
adopted plans and obtained permits for the building that were
different from Extell's proposal and that Extell has modified
those plans or sought to amend those permits.  We further note
that RSPC succeeded in negotiating a Development Plan that
- 13 -
No. 171
- 13 -
incorporated environmental sustainability and design criteria
and, unlike the Letter Agreement, such plan is part of the
Restrictive Declaration that is recorded in the chain of title
and runs with the land, binding all successors for all time --
including Extell.  Nothing we decide today allows Extell to
unravel that significant accomplishment of the RSPC.  
Accordingly, the order of the Appellate Division should
be affirmed, with costs. 
*   *   *   *   *   *   *   *   *   *   *   *   *   *   *   *   *
Order affirmed, with costs.  Opinion by Judge Graffeo.  Chief
Judge Lippman and Judges Ciparick, Read, Smith, Pigott and Jones
concur.
Decided November 24, 2009