Newmark & Co. Real Estate, Inc. v New Yorker Hotel Mgt. Co., Inc.
Annotate this CaseDecided on October 12, 2005
Supreme Court, New York County
NEWMARK & COMPANY REAL ESTATE, INC., Plaintiff,
against
NEW YORKER HOTEL MANAGEMENT CO., INC., Defendant.
601403/05
Attorneys for Defendant
Penn Proefriedt Schwarzfeld & Schwartz
114 West 47th Street, 19th Floor
New York, New York 10036
By: Neal Schwarzfeld, Esq.
Attorneys for Plaintiff
Law Office of Lionel A. Barasch
425 Park Avenue
New York, New York 10022
By: Lionel A. Barasch, Esq.
Helen E. Freedman, J.
In this action, Newmark & Company Real Estate, Inc., ("Newmark") sues New Yorker Hotel Management Co., Inc. (the "New Yorker") to recover extra commissions allegedly due under the parties' written brokerage agreement dated June 16, 2003. That agreement provides that Newmark as sole broker shall receive commissions in connection with a license between New Yorker and a licensee, Educational Housing Services, Inc. ("EHS"). Newmark claims that New Yorker failed to pay commissions for licensing additional space, as provided for in the agreement, and for an increase in the licensee's annual rent caused by adding months to the license term. In addition, Newmark claims New Yorker's failure to pay triggers a default provision entitling Newmark to accelerated payments.
Newmark moves for summary judgment on its three causes of action. New Yorker claims genuine issues of fact preclude summary judgment for the first cause of action and cross moves for summary judgment on the second and third causes of action contending that Newmark played no role in obtaining the increased rent and, thus, is not entitled to additional commissions.
For reasons set forth below, plaintiff's motion for summary judgment is granted in part and denied in part, and defendant's cross motion is granted in part and denied in part.
Facts:
The following facts are not in dispute. The New Yorker Hotel leases most of the space in the building located at 481 Eighth Avenue, New York, New York (the "Building") from the Building's owner Holy Spirit Association for the Unification of World Christianity ("Holy Spirit"). Since 1997, Newmark has procured subleases in the Building for New Yorker and received compensation pursuant to an exclusive brokerage agreement. In 2003, Newmark brought New Yorker a licensing opportunity with EHS, an organization that provides housing for students in New York City. New Yorker and Newmark signed a written brokerage agreement dated June 16, 2003 (the "Brokerage Agreement"), which compensates Newmark for procuring the New Yorker and EHS license.
The Brokerage Agreement's introductory recitals state that Newmark "is the sole broker who brought about the leasing or licensing ... of the 27th through 29th floors, and any other premises licensed to Licensee [EHS]... at the Building," and that New Yorker is the "net lessee of [*2]the property known as the New Yorker Hotel located at 481 Eighth Avenue, New York, New York." The Brokerage Agreement contains an attached rate schedule that specifies percentage commissions New Yorker shall pay Newmark, based on EHS's annual rent. New Yorker as licensor and EHS's wholly-owned subsidiary EHS-2, Inc. as licensee entered into a license agreement for the 27th through 29th floors, dated June 19, 2003 (the "License"). (The License specifies that the agreement does not constitute a "lease" because neither EHS nor the students occupying the Building's rooms possess rights as tenants.)
The License originally provided for a five-year term commencing August 15, 2003 and concluding on May 31, 2008 with reversions to New Yorker during the intermittent summer months from June 1 until August 14. Although the License required occupants to vacate the rooms each summer, EHS could continue to use three suites for office space. EHS-2 Inc. and New Yorker signed an amended license dated February 6, 2003, (the "Amendment") that added summer months and increased the annual rent. The Amendment provided that the five-year term of the original License, "is hereby extended to August 31, 2008." Moreover, the Amendment states "all references to Licensee [EHS] not using the Licensed Premises from June 1 through August 14 of each year or requirements for either party to perform certain obligations because of the Licensed Premises reverting to Licensor [New Yorker], and then back to Licensee, during said summer period are hereby considered null and void."
After EHS-2, Inc. and New Yorker executed the Amendment, Raymond Mosley ("Mosley"), the New Yorker Director of Commercial Real Estate, commenced discussions with EHS regarding licensing floors 14 and 16. EHS-2, Inc., and Holy Spirit as Licensor signed a license dated May 4, 2004, (the "Second License") for floors 14 and 16. Mosley continued to serve as EHS's single contact with the Building.
The relevant Brokerage Agreement provisions provide that Newmark will receive "one full commission for the licensing of additional space" within three years of the License commencement date. Moreover, if Newmark represents EHS in a renewal or extension, then New Yorker shall pay Newmark an additional commission (the "extension provision"). Upon default, the Brokerage Agreement requires New Yorker to make accelerated payments to Newmark. Miscellaneous Section paragraph 4c. pertains to contract construction and provides that the agreement constitutes the "entire understanding of the parties," and "(v) shall be strictly construed neither against Licensor or Broker both parties agreeing that they have participated fully and equally in the preparation of this Agreement."
New Yorker has not paid commissions for the licensing of floors 14 and 16 or for the added summer months.
Contentions:
Newmark contends summary judgment is appropriate because the unambiguous, plain meaning of the contract is that the licensing of floors 14 and 16 constitutes "tak[ing] additional space," and, thus, New Yorker owes Newmark commissions for the Second License, pursuant to the Brokerage Agreement. Newmark also claims it is entitled to additional commissions referable to the added summer months because it supplied New Yorker with EHS as licensee and, in fact, the original offers provided for full years. Moreover, Newmark contends that the extension provision which provides that Newmark must represent EHS in order to receive commissions does not apply because the Amendment adding the summer months does not [*3]constitute an "extension" of the term.
New Yorker contends summary judgment is inappropriate because factual disputes exist regarding the reasonable interpretation of "additional space." Specifically, New Yorker argues Holy Spirit is the named licensor and Building owner, so that "additional space" should be interpreted narrowly to signify particular New Yorker leased floors in the Building where New Yorker is the named licensor. New Yorker cross moves for summary judgment for the second and third causes of action, contending that Newmark is not entitled to additional commissions because Newmark did not "represent" EHS in the license "extension" which added summer months to the term.
Commission for Licensing Additional Space:
The threshold issue is whether the meaning of "additional space" in the Brokerage Agreement is plain or ambiguous. If the language is unambiguous, then the Brokerage Agreement must be enforced as written, and is not subject to judicial construction. See C. Union Trust Co. v. Trimble, 255 NY 88, 93 (1931). The issue of whether contractual language is plain or ambiguous is a question of law. Kass v. Kass, 91 NY2d 554, 566 (1998).
In this case, the meaning of "additional space" is plain and unambiguous. The Brokerage Agreement recitals define New Yorker as the net lessee of the Building. See Kaminsky v. Gamache, 298 AD2d 361 (2nd Dept. 2002)(finding recitals defined the scope of the release in a landlord and tenant agreement). The recitals define the contract's subject matter as the entire Building, and no language in the Brokerage Agreement limits applicable floors. Thus, "additional space" plainly and unambiguously refers to any space in the Building, and New Yorker may not introduce extraneous evidence to prove parties' probable intent.
New Yorker's contention that it should not be liable for commissions because Holy Spirit is the Building's owner and Second License licensor is untenable. In Kennon v. Poerschke, 148 A.D. 839 (1st Dept. 1912), a non-owner party that employed a broker to find a purchaser was held liable for commissions when the broker supplied the purchaser. See also Kalmon Dolgin Affiliates v. Estate of Nutman, 172 AD2d 917 (1st Dept. 1991). The terms of the Brokerage Agreement provide for extra commissions based on the licensing of additional space. Because EHS licensed additional floors in the Building, New Yorker is liable for additional commissions relating to the Second License.
Amendment to Include Full Years:
The February 6, 2004 Amendment distinguishes the license term extension provision from the provisions nullifying reversions to New Yorker during the summer months. Extensions and renewals refer to time added to the end of the original term. The Amendment provision which renders the summer month reversion null and void does not constitute an "extension" because it does not add time to the term beyond May 31, 2008. Although occupants, under the original License, had to vacate rooms during the summer, EHS could use three rooms for office space and the annual rent reflected the minimal occupancy during the summer. The Amendment increased occupancy in the summer and increased annual rent. Because voiding the summer month reversion does not "extend" the term, New Yorker owes Newmark commissions relating to the summer months added through May 31, 2008.
The Brokerage Agreement's extension provision, which requires Newmark to represent EHS, does apply to the Amendment provision that explicitly states that the term shall be [*4]"extended" to August 31, 2008. To award Newmark commissions for merely supplying New Yorker with a licensee and submitting preliminary offers that originally included full years would render the specific requirement of representing EHS in the extension provision meaningless. New Yorker and EHS alone negotiated the Amendment. Because Newmark did not participate in negotiations culminating in the three-month license extension, Newmark is not entitled to commissions for the extension.
Default by Licensor Provision:
Based on the Brokerage Agreement and the Amendment, New Yorker owes commissions relating to the licensing of additional space and annual rent increase up through the original License term conclusion date of May 31, 2008. Because New Yorker failed to pay the additional commissions, New Yorker is also liable for amounts owed pursuant to the Brokerage Agreement default provision.
Conclusion:
Newmark's motion for summary judgment is granted in the first, second, and third causes of action, except for sums referable to June 1, 2008 through August 31, 2008. New Yorker's cross motion for summary judgment is denied as to the second and third causes of action with respect to commissions due through May 31, 2008, and is granted with respect to the term extension from June 1, 2008 through August 31, 2008.
Settle Order On Notice providing for amounts due on or before November 3, 2005.
Dated: October 12, 2005 ENTER:
________________________
Helen E. Freedman, J.S.C.
Appearances
Attorneys for Plaintiff
Law Office of Lionel A. Barasch
425 Park Avenue
New York, New York 10022
By: Lionel A. Barasch, Esq.
(212) 838-0286
[*5]
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