Court Opinion

ID: 5976686
Source: CourtListenerOpinion
Date Created: 2022-01-13 07:58:17.107176+00
Date Added: 2024-06-11T08:48:44.599635
License: Public Domain

Ellerin, J. (dissenting).
The within proceeding was brought pursuant to CPLR 7601 to stay a real estate appraisal which had been demanded by respondent pursuant to a ground lease as to which respondent is petitioners’ Tenant. Petitioners argue that the Lease does not provide for an appraisal in order to set the prospective rent for a renewal term at this time, i.e., the commencement of the term, but, instead, provides that the appraisal should be performed at the end of the term and the rent set retroactively.
CPLR 7601 provides, inter alia, for a special proceeding to *210specifically enforce an agreement involving questions of valuation or appraisal. A court presented with a petition pursuant to this section must examine the contractual language relating to appraisal and determine the rights of the parties pursuant to that language. As is always the case in contractual interpretation, it is incumbent upon the court to determine whether a given contractual provision is so ambiguous, or its result so absurd, as to warrant going outside the language of the agreement itself to determine the intent of the parties (4 Williston, Contracts § 610B, at 533 [3d ed 1961]). Once it is determined that interpretation is required, the court is permitted, if warranted by a factual finding that a certain provision was the result of a scrivener’s error, to substitute a new term for the term actually provided in the contract (see, Castelli v Burns, 156 App Div 200).
In this case, the contract provides that, until the rent for the renewal term is determined, the Tenant will continue to pay the rent set for the prior term. If the parties are unable to agree to an appropriate rental for the renewal term, which will in no case be less than that for the prior term, they are thereby relegated to determining the rent by appraisal, and "[t]he party desiring such * * * appraisal shall give written notice to that effect to the other party * * * except that in the case of any appraisal * * * with respect to the first renewal term and the second renewal term, neither party shall give such written notice to the other party earlier than twelve (12) months prior to the expiration of any such renewal term” (emphasis supplied).
This contractual provision, if read literally, would result in a number of anomalies. First, it would mean that Tenant was unable to know its annual rent until the expiration of the 33-year term during which it is due and would thereby make the Lease worthless as collateral for mortgage financing. Moreover, this provision leaves Landlord with no security for the lump-sum payment due at the expiration of the Lease for the retroactive rental and provides for no interest payment on the deferred portion of the rent. Furthermore, as written, the Lease leaves undefined the point in time at which the land’s value should be ascertained. The only reference to this is made in a separate provision stating that the yearly rent shall be set according to a percentage of the "then value” of the land as fixed by the appraisal. If the appraisal is to be performed at the end of the term, this could be interpreted to mean either, as the IAS Court assumed, that the land’s value *211must be retroactively appraised separately for each individual year over the course of the term, or to mean that the rent for the entire term should be computed as a percentage of the value of the land at the end of the term.
Additionally, the Tenant’s inability to know its actual rent until years after the year to which the rent is attributable means it is without the information necessary to determine the amounts it must charge to its own tenants, and unable to determine whether it is operating at a profit or a loss.
Since, as a result, this provision is so at odds with normal business practice as to render its meaning unclear (see, McCarthy v Krebs Pigment & Chem. Co., 204 App Div 501), the court should consider parol evidence to determine the intent of the parties and whether the use of the word "expiration” was an error or expressed the parties’ true intent. None of the parol evidence presented by the parties to date sheds sufficient light on the intent of the parties at the time the Lease was entered into to warrant a finding in either party’s favor as a matter of law, and I believe that a trial as to this issue appears necessary. However, the parties should first be given an opportunity to conduct discovery and, should such discovery reveal additional evidence of both parties’ intent, petitioners should be afforded an opportunity to renew this petition.
Ross, J., concurs with Tom, J.; Asch, J., concurs in a. separate opinion; Sullivan, J. P., and Ellerin, J., dissent in a separate opinion by Ellerin, J.
Order and judgment (one paper), Supreme Court, New York County, entered October 7, 1993, affirmed.