Case Name: Gateway Towers, Inc., et al., Respondents-Appellants, v. Tishman Realty & Construction Co., Inc., Appellant-Respondent
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1976-04-27
Citations: 39 N.Y.2d 424
Docket Number: 
Parties: Gateway Towers, Inc., et al., Respondents-Appellants, v Tishman Realty & Construction Co., Inc., Appellant-Respondent.
Judges: 
Reporter: New York Reports
Volume: 39
Pages: 424–428

Head Matter:
Gateway Towers, Inc., et al., Respondents-Appellants, v Tishman Realty & Construction Co., Inc., Appellant-Respondent.
Argued March 23, 1976;
decided April 27., 1976
Morris Pottish and Sol Pottish for appellant-respondent.
I. Simple justice mandates judgment for defendant. II. As a matter of law, Tishman’s payments (a) were made by mistake and involuntarily and (b) under established principles of equity should be refunded to Tishman. (Adrico Realty Corp. v City of New York, 250 NY 29; One Fifty-Seven Prince St. Corp. v Michelini, 271 App Div 777; Rosenblum v Manufacturers Trust Co., 270 NY 79.) III. The net cash-flow statements accepted by Tishman under mistake of fact and law are not conclusive against Tishman under the circumstances at bar. In any event, the statements do not bar recovery by Tishman. (Sea Modes v Cohen, 309 NY 1; Corr v Hoffman, 256 NY 254; Hart v Heilman Co., 17 AD2d 438; Gordon v Mazur, 284 App Div 289, 308 NY 861; Hennessy v King, 225 App Div 152, 252 NY 570.) IV. Proper construction of the contract calls for judgment in favor of Tishman. (Rosenthal Jewelry Corp. v St. Paul Fire & Mar. Ins. Co., 21 AD2d 160, 17 NY2d 857.) V. There was a failure of consideration for the deficiency payments. Hence, Tishman is entitled to recover them. (Allied Chem. Corp. v Ruskin, 39 AD2d 881.) VI. In no event should summary judgment be granted against defendant Tishman. The court below made erroneous factual assumptions and also erred on the law. (Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395; Sea Modes v Cohen, 309 NY 1; Ewing Co. v New York State Teachers’ Retirement System, 14 AD2d 113, 11 NY2d 749; Cameron-Hawn Realty Co. v City of Albany, 207 NY 377; Standard Oil Co. of N. Y. v Central Dredging Co., 225 App Div 407, 252 NY 545; Dexter v Norton, 47 NY 62; Harmony v Bingham, 12 NY 99.)
Matthew H. Ross and Paul M. Frank for respondents-appellants.
I. All of the tax refunds except as reserved in the purchase agreement were the property of Tracco. Plaintiffs, as stockholders of Tracco, after liquidation, became the owners of the refunds. II. Absent fraud equity will not interfere with rights and obligations governed by contract. (Skyway Container Corp. v Castagna, 27 AD2d 542; Mizrahi v Cohen, 1 Misc 2d 174; Schneidman v Steckler, 12 Misc 2d 946, 5 AD2d 990.) III. The statements of "net cash flow” rendered by plaintiffs to Tishman for the years 1968, 1969, 1970 and 1971, and accepted by Tishman, constitute accounts stated and are conclusive and binding on Tishman. (Sea Modes v Cohen, 309 NY 1; Corr v Hoffman, 256 NY 254; Hart v Heilman Co., 17 AD2d 438; Steingart Assoc, v Sandler, 28 AD2d 801; Rodkinson v Haecker, 248 NY 480.) IV. The purchase agreement required that "net cash flow” be calculated on a cash basis. (Commissioner of Internal Revenue v Boston El. Ry. Co., 196 F2d 923.) V. Even if the term "net cash flow” were ambiguous, the practical construction by the parties for a period of four years that it was to be determined on a cash receipts and disbursements basis governs its construction. (Brooklyn Public Lib. v City of New York, 250 NY 495.) VI. There are no evidentiary facts to support a finding of mutual mistake or of fraud. Reformation of the purchase agreement is therefore inappropriate. (Eastern Air Lines v Trans Caribbean Airways, 29 AD2d 379, 23 NY2d 709; Ross v Food Specialties, 6 NY2d 336; City of New York v Pennsylvania R. R. Co., 281 App Div 27, 305 NY 788; Gindel v Long Is. Nat. Bank, 36 AD2d 968, 31 NY2d 859; Dorkin v American Express Co., 43 AD2d 877; Newman v Muney, 28 AD2d 561.) VII. Neither the payment of the 1968-1971 taxes nor Tishman’s payments under its guarantee were made by mistake or involuntary. (Adrico Realty Corp. v City of New York, 250 NY 29; Mercury Mach. Importing Corp. v City of New York, 3 NY2d 418; One Fifty-Seven Prince St. Corp. v Michelini, 271 App Div 777; Ball v Shepard, 202 NY 247; Payne v Witherbee, Sherman & Co., 200 NY 572; Flynn v Hurd, 118 NY 19; Wood v Amory, 105 NY 278.) VIII. Tishman would have a windfall if it obtained the tax refunds. IX. As used in the purchase agreement, "proceeds” means the total refunds for 1966 and 1967 less the attorneys’ fees incurred in obtaining such refunds. (Laba v Carey, 29 NY2d 302; Fleischman v Furgueson, 223 NY 235.)

Opinion:
Memorandum. The order of the Appellate Division should be modified.
The agreement between the parties for the sale by Tishman of all the stock of its subsidiary Tracco included explicit provision that the proceeds of pending claims for refunds of real property taxes for any period prior to December 31, 1967 were to go to Tishman. No provision was made with respect to tax refund proceedings for subsequent years, although at the time the agreement was signed proceedings were pending as to the 1968 assessment and it may be inferred that challenges to assessments in the years following were then in prospect. We agree with the Appellate Division that in the undisputed circumstances disclosed in this record, the parties must be deemed to have intended, by their failure to include any provision to the contrary, that the proceeds of tax refunds with respect to years subsequent to December 31, 1967 would go in natural course to the legal owner of such claims, Tracco, and thus inure to the benefit of Tracco's stockholders. This disposition would have no material bearing, or indeed relevance, to the obligations of Tishman under its cash-flow guarantee with respect to the years 1968 through 1971. Indeed it would appear that the receipt of the proceeds of refund claims for 1968 and subsequent years in normal expectation would not have been received until after the expiration of the cash-flow guarantee. Thus, we conclude that under the agreement of the partieá\Tishman is not entitled to receive the proceeds of the tax refunds for the years 1968, 1969, 1970 and 1971.
On the issue as to which the purchasers appeal, we conclude that on the undisputed facts, the Appellate Division was in error. As already noted the parties agreed that "Tishman shall have the right to control and receive the proceeds from all real estate and personal property tax, claims for refunds pending or which shall be pending for any period prior to December 31, 1967." We conclude that the entitlement of Tishman under this provision was to the net proceeds of such refund claims after the deduction of attorney's fees. Tishman had retained the attorney to prosecute the refund claims in question and had agreed that he should receive 25% of the amount of the refund as compensation for his professional services. As between sophisticated real estate operators we can only interpret the agreement that Tishman was to "have the right to control" the refund proceedings, and thus to determine the extent of legal services to be rendered, and to "receive the proceeds from all real estate and personal property tax, claims for refunds", rather than to receive the refunds, as intended to give Tishman the right which the legal owner of tax refund claims would normally have, namely, the right to the net benefit of the prosecution of the refund claims. We find nothing to suggest that it was intended that the purchasers assume responsibility for payment of the legal fees to be charged the seller.
Chief Judge Breitel and Judges Jasen, Gabrielli, Jones, Wachtler, Fuchsberg and Cooke concur.
Order modified, with costs to plaintiffs, in accordance with the memorandum herein and, as so modified, affirmed.