Case Name: 140 Broadway Company, Respondent-Appellant, v. Dewey, Ballantine, Bushby, Palmer & Wood, Appellant-Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1983-07-21
Citations: 96 A.D.2d 482
Docket Number: 
Parties: 140 Broadway Company, Respondent-Appellant, v Dewey, Ballantine, Bushby, Palmer & Wood, Appellant-Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 96
Pages: 482–485

Head Matter:
(July 21, 1983)
140 Broadway Company, Respondent-Appellant, v Dewey, Ballantine, Bushby, Palmer & Wood, Appellant-Respondent.

Opinion:
— Judgment of the Supreme Court, New York County (Benjamin Altman, J.), entered on January 21,1983, which dismissed petitioner's petition for an order compelling arbitration and dismissed respondent's counterclaim, is modified, on the law, without costs or disbursements, the proceeding deemed to be an action for a declaratory judgment and it is declared that the matter should be submitted to arbitration for the purpose of determining the fair rental value of the premises as of October 1, 1982. On September 28, 1966, petitioner 140 Broadway Company (the Company) and respondent Dewey, Ballantine, Bushby, Palmer & Wood (Dewey) entered into an agreement whereby respondent was to occupy for a 15-year term, expiring on September 30,1982, certain premises at 140 Broadway in Manhattan. The Company and Dewey are also parties to an agreement which provides respondent with options to renew the lease for two successive five-year periods. To exercise its option for the first renewal, respondent was mandated to notify petitioner in writing not less than 26 nor more than 30 months prior to expiration of the lease. On July 10,1980, Dewey complied with this notice requirement and the Company and Dewey began negotiations to determine the amount of the rental and other terms applicable to the new lease. Pursuant to paragraph 2 (a) of the agreement: "If the parties have been unable to agree upon the fixed annual rent during the term of the New Lease, such fixed annual rent shall be the then fair annual rental value of the demised premises as determined by arbitration plus such additional rent and charges as are set forth in the Lease, provided, however, that should the fair annual rental value as determined by arbitration as set forth in this subparagraph (a) be less than the sum of the fixed annual rent and additional rent required to be paid for the last year of the term of the Lease, then such determination shall not be the fixed annual rent of the New Lease, but the fixed annual rent during the term of the New Lease shall be the sum of the fixed annual rent and additional rent required to be paid for the last year of the term of the Lease." After the parties had negotiated unsuccessfully for more than a year, Dewey advised the Company that it would seek arbitration. On October 5,1982, Dewey formally requested arbitration, stating that the matter to be decided under paragraph 2 (a) was the fair annual rental value of the premises as of July 10,1980, the date on which Dewey exercised its option. The Company served its own notice of intention to arbitrate on October 8,1982 but perceived the crucial issue to be the fair annual rental as of October 1, 1982, the commencement of the new lease. Petitioner subsequently instituted the instant proceeding seeking an order compelling arbitration in accordance with its demand and staying the arbitration noticed by Dewey. Respondent counterclaimed for an order directing that the arbitration be conducted pursuant to its interpretation of the disputed question. Special Term, however, dismissed both the petition and the counterclaim, concluding that under the agreement, the arbitrator must ascertain the fair market value and the term of the new lease. We disagree. The arbitration clause involved here is narrowly circumscribed and only permits the arbitrators to determine the fair rental value of the subject premises. Presumably such a function is to be performed by persons possessing the requisite expertise in the area and who, after examining the relevant testimonial and documentary evidence, will make an appropriate finding. Not only does the agreement lack any indication that the arbitrators were authorized to consider any issue other than the one pertaining to the fair rental value, but the parties themselves have chosen the court as the most competent forum to resolve the dispute between them. (See Teplitsky v Douglaston Golf Practice Range, 64 AD2d 578.) Moreover, "unless the agreement to arbitrate expressly and unequivocally encompasses the subject matter of the particular dispute, a party cannot be compelled to forego the right to seek judicial relief and instead submit to arbitration" (Bowmer v Bowmer, 50 NY2d 288, 293-294). Since a reasonable construction of the agreement, as well as the conduct of the parties in submitting the controversy to the court for resolution, requires a judicial determination here, the matter will be treated as an action for a declaratory judgment. In that regard, the most logical construction of the agreement is that it contemplates that the operative fair rental value of the premises is the one applying on October 1,1982, the date of the commencement of the new lease. If one of the parties had, in fact, demanded arbitration prior to October 1,1982, the arbitrators would certainly not have had to await the start of the new lease term but would have been warranted in proceeding to ascertain the anticipated fair rental value on the date that the lease was to commence. However, now that the relevant date has long passed, it is appropriate for the arbitrators to decide the fair market value as it existed on October 1, 1982. To expect or require expert arbitrators to engage in mental gymnastics by transporting their analysis back to a date in the past, to determine the fair market value from that viewpoint for a date which has already passed, is an unrealistic and unnecessary exercise. Since the parties desire to ascertain the fair market value on a given date, it would be unreasonable to expect arbitrators to ignore the actual market value on that date. Concur — Murphy, P. J., Bloom and Milonas, JJ.