Court Opinion

ID: 5707556
Source: CourtListenerOpinion
Date Created: 2022-01-12 15:49:19.559474+00
Date Added: 2024-06-11T08:40:27.116578
License: Public Domain

McNally, J.
In an action for a declaratory judgment, this appeal is from an order granting plaintiff’s motion for summary judgment and denying defendant’s cross motion for summary judgment, and from the judgment thereon entered.
Involved is the construction of a formula for the determination of the rent applicable to a renewal term of 21 years contained in the modification of lease dated May 6, 1947 made between the parties. Said formula is as follows: “ a sum equal to six per cent of the fair market value of the land covered by the first renewal lease as then fixed and determined by appraisal as hereinafter provided, but in no event less than the rental for the last year of the preceding term as hereby fixed ”.
The lease is dated August 31, 1937. It provides: “ the said premises are now in the possession of the lessors, free from all restrictions arising from grant that would operate to prevent the erection and operation of the garage hereinafter mentioned.”
However, the lease also provides: “8. Arm it is agreed that the premises hereby demised shall be used and occupied by the Lessee, its successors or assigns, as a place for the construction, operation and maintenance of an Automobile Garage, Salesroom and Repair Shop, or for any other ordinary business, without the consent of the Lessor, provided that said premises may not *400be used for any business in the nature of a nuisance; nor will it permit or suffer them to be so used.” (Emphasis supplied.)
The modified lease enables the plaintiff lessee to alter or demolish existing buildings and erect a new building subject to prior approval of the plans and specifications by the defendant lessor which covenants not to unreasonably withhold approval of the plans and specifications if they provide for a “ building or buildings of a character of construction equal to the building now erected on the premises ”.
The original term commenced April 1, 1937 and terminated March 31, 1958. The modification of May 6, 1947 provides for two renewals at the option of the lessee, the first for a period of 21 years commencing April 1,1958, and the second for a period of 21 years commencing April 1, 1979.
The parties are bound by the provisions of the formula upon which the rental for the first renewal period is to be based. A new contract may not be made for the parties under the guise of construction. (Heller v. Pope, 250 N. Y. 132, 135; Ackman v. Toren, Inc., 6 A D 2d 427, affd. 6 N Y 2d 720.) The parties agreed to base the rental upon “ the fair market value of the land.” Unless there be express provision to the contrary, the provisions of the lease between the parties insofar as they affect the fair market value of the land must be given effect. However, the fair market value of the land should reflect ‘ ‘ the most advantageous use to which it could be put.” (Moore v. Eadie, 245 N. Y. 166, 170.)
This case is unlike Ruth v. S. Z. B. Corp. (2 Misc 2d 631, 634, affd. 2 A D 2d 970) wherein provision was made for basing the rental upon the fair value of the land ‘ ‘ free of lease and unencumbered.” Here, there is no language in the lease or modification thereof which excludes them in the determination of the fair market value of the land. The fair market value of the land is therefore to be determined by reference to the term of and the renewal options contained in the lease and modification thereof, and, in addition, the restrictions, if any, therein affecting the land.
The respondent lessee asserts that the lease restricts the use of the land to the operation and maintenance of an automobile garage. The demise of the premises contained in the original lease dated August 31, 1937 provides that the premises are in the possession of the lessor free from restrictions arising from grant that would prevent the erection and operation of the garage mentioned in the lease. However, paragraph 8 thereof provides that the premises shall be used as an automobile garage *401‘ ‘ or for any other ordinary business, without the consent of the Lessor
We construe the language contained in the demising clause to be in the nature of a guarantee or warranty on the part of the lessor against any restriction arising from grant which would prevent the erection and operation of the garage by the tenant. (Cf. Municipal Metallic Bed Mfg. Corp. v. Dobbs, 253 N. Y. 313.) We construe paragraph 8 of the lease as descriptive of the intended use of the demised premises. A restriction will not be implied and in the absence of provision to the contrary a lessee may occupy and use the demised premises in any lawful way. (Bovin v. Galitzka, 250 N. Y. 228, 231; 57th St. Luce Corp. v. General Motors Corp., 182 Misc. 164, affd. 267 App. Div. 978, affd. 293 N. Y. 717.) Here, the lease expressly provides, in addition to the operation of a garage, for the use of the premises ‘1 for any other ordinary business ’ ’.
The final order herein provides, in part: ‘1 that the value of the land demised therein * * * shall be its value as one parcel at its full and fair worth * * * taking into account and giving effect to its agreed and present use as a garage and any other restrictions or incumbrances contained in said Lease and Supplemental Lease.”
The opinion of Special Term states (16 Misc 2d 996, 1001): “ The conclusion is plain that the appraisers must value the fair market value of the land * * * recognizing that between buyer and seller dealing at arms’ length and under no compulsion the fee is encumbered by this 42-year term of land appropriated to garage use. ’ ’
The final order, in the light of the opinion of Special Term, requires the appraisal of the land to be made as “ encumbered ” by the term of said lease and the said use restriction therein contained. In our view the effect on the appraisal of the term of the lease is an issue in this action and has been passed on by Special Term. In any event, assuming that the effect of the term of the lease was not tendered as an issue, and was not passed on by Special Term, we, nevertheless, are of the opinion that we are not limited to a choice between the opposing constructions urged herein but can give to the lease a meaning conceivably different from that which either party attached to the verbiage. (Rentways v. O’Neill Milk & Cream Co., 308 N. Y. 342, 349.)
While we arrive at the conclusion that the value of the land should be appraised for the best use that it can be put to, and not only for the use as a garage, we hold consideration should *402be given to the term of the lease and the renewal options therein in determining the use to which the land can be put. The rentals reserved in the lease, the advantage or disadvantage of possible improvements, which the minority apprehend will distort the appraisal process, become irrelevant under the formula we enunciate. The only limitation upon value, if any, is the number of years the most advantageous use of the land can be enjoyed under the lease.
The order and judgment appealed from should be modified to provide that the appraisal of the fair market value of the land demised, for the purpose of establishing the annual rental for the renewal period commencing April 1,1958, shall be made on the basis of the best use to which the land can be put and not limited to improvement as a garage, consideration, however, to be given to the term and renewal options affecting the land provided for and contained in said lease and modification thereof. The order and judgment otherwise should be affirmed, without costs.