Citicorp N. Am., Inc. v Fifth Ave. 58/59 Acquisition Co., LLC

[*1] Citicorp N. Am., Inc. v Fifth Ave. 58/59 Acquisition Co., LLC 2009 NY Slip Op 52747(U) [26 Misc 3d 1225(A)] Decided on January 12, 2009 Supreme Court, New York County Feinman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 12, 2009
Supreme Court, New York County

Citicorp North America, Inc., CITIBANK N.A., AND BANCO NACIONAL DE MEXICO, S.A., Plaintiffs,

against

Fifth Avenue 58/59 Acquisition Co., LLC, FIFTH AVENUE 58/59 ACQUISITION CO., LP, 767 FIFTH AVENUE LLC, F/K/A TRUMP 767 FIFTH AVENUE LLC, and LONGSTREET ASSOCIATES, L.P., Defendants.



117846/2006



For the Plaintiffs:

Moses & Singer LLP

By: David Rabinowitz, Esq.

Henry Bergman, Esq.

Christopher Gresh, Esq.

The Chrysler Building

405 Lexington Ave.

New York NY 10174-1299

(212) 554-7800

For Fifth Avenue 58/59 Defendants:

Stempel Benett Claman & Hochberg PC

By: Richard Claman, Esq.

675 Third Ave.

New York NY 10017-5704

(212) 681-6500

For 767 Fifth Avenue LLC:

Mazur, Carp & Rubin, PC

By: Sayward Mazur, Esq.

1250 Broadway

New York NY 10001

(212) 686-7700

Paul G. Feinman, J.

Plaintiffs' motion for partial summary judgment pursuant to CPLR 3212, and the cross-motion by the "Fifth Avenue" defendant [FN1] for dismissal pursuant to CPLR 3211, are consolidated for purposes of decision. For the [*2]reasons which follow, the motion is denied, the cross-motion is granted, and after searching the record pursuant to CPLR 3212 (b), summary judgment and dismissal of the complaint in its entirety is directed as against all the defendants.

In this commercial landlord-tenant action, the current and former tenants of certain leased space in defendants' building allege breach of contract and unjust enrichment based on what they claim are miscalculations by the current and former landlords of certain additional rent described in Article 5 of the lease which have resulted in ongoing overcharges. The lease originally was signed between the tenant Banco Nacional de Mexico and the owner Longstreet Associates in March 1991 (Mot. Ex. 1).[FN2] 767 Fifth acquired the building in about July 1998, and ownership was transferred to the Fifth Avenue defendant in September 2003 (Cross-Mot. Ex. E). In October 2003, Banco Nacional de Mexico assigned its interest in the lease to Citibank which in turn assigned the interest to Citicorp in December 2004 (Am. Compl. ¶ 5).

By letter dated April 11, 2005, to the building's managing agent, Citicorp sought to question the formula for calculating the porter-wage escalation clause as set forth in Article 5 of the lease, arguing that there was a duplication in the application of the sub-sections of the lease concerning calculation of additional rent, and of the wage rate and the fringe benefits, resulting in an overcharge (Cross-Mot. Ex. D). Not satisfied with the explanation and reasoning offered by counsel for the Fifth Avenue defendant (Cross-Mot. Ex. D), plaintiffs commenced litigation in 2006. Issue was joined thereafter by the Fifth Avenue defendant and 767 Fifth Avenue. Plaintiffs' amended verified complaint is dated February 21, 2007, and contains four causes of action based on the claim that defendants twice calculate for the paid leave in their billing of plaintiffs for the annual wage escalation (Mot., Am. Ver. Compl.). Specifically, the complaint avers: that defendants have failed to return the overcharge although demand has been made; that plaintiffs are entitled to the return of the monies; that defendants have been unjustly enriched; and that if defendants continue to over-bill, they are entitled to the return of the overcharges.

Plaintiffs, the current and prior leaseholders, move for partial summary judgment as to liability. They argue that the landlords, past and present, wrongly calculated the amount owed for additional rent, resulting in an annual windfall to the landlord, and representing a double charge for the wages paid to porters. They argue, but only in their reply papers, that defendants' manner of interpreting the lease terms to calculate the wage increases was consistent over the years and done secretly, without plaintiffs' knowledge. In support of their motion, they submit an affidavit by a certified public accountant, Michael Pappas, whose firm was retained to review the charges, and who sets forth his reasoning as to how and why the lease terms have been misinterpreted and resulted in an overcharge (Mot. Pappas Aff.). Pappas avers that the manner of calculation allows the landlord to add 467 hours of paid time off to the Wage Rate, even though paid time off is separately included in the calculations as part of the fringe benefits, meaning that the 467 hours of paid time off are being calculated twice and charged to plaintiffs twice (Mot. Pappas Aff. ¶ 9). Plaintiffs point to section 5.04 of the lease and note that the calculation of Additional Rent is the difference between the Wage Rate and the Base Rate, not the Wage Rate plus paid time off (Pl. Memo in Supp. p. 4). According to plaintiffs, defendants' manner of calculating has resulted in a windfall which should not be allowed. They cite, among other cases, Wellington Tower Assocs., L.P. v New York First Ave. CVS, Inc., 3 AD3d 460, 461 (1st Dept. 2004), lv dismissed 3 NY3d 690 (2004) (where lease did not evince unequivocal intent that tenant's additional rent obligation for real estate taxes was to include refunded or unpaid real estate taxes, landlord would reap unwarranted windfall if it were allowed to recover additional rent for taxes it did not actually pay). They further argue that the court should not construe the lease so as to require them to pay twice for the same thing, citing River View Assoc. v Sheraton Corp. of Amer., 33 AD2d 187 (1st Dept. 1969).

The Fifth Avenue defendant argues that the same methodology has been used since the first year of escalation in 1993, that it was the methodology set forth in the lease and is proper, and was used without protest from 1993 to 2005, thus barring litigation because of the running of the statute of limitations (Claman Aff. In Opp. ¶ 4, 5, citing to a document from June 1993 [ex. B]). The defendant argues alternatively that discovery has not been completed and that the motion should be denied on that ground. Separately, co-defendant 767 Fifth Avenue cross-moves to dismiss the complaint as against it on the same grounds argued by the Fifth Avenue defendant, as well as on the ground that plaintiffs previously waived any claims of rent overcharges based on their signatures on estoppel certificates signed in 2003 and 2005 (Cross-Mot. Ex. J, K).

[*3]To prevail on a summary judgment motion, the moving party must produce evidentiary proof in admissible form sufficient to warrant the direction of summary judgment in its favor. (GTF Mtkg, Inc. v Colonial Aluminum Sales, Inc., 66 NY2d 965, 967 [1985]). A motion for summary judgment must be supported by an affidavit from someone with actual knowledge of the facts (Stainless, Inc. v Employers' Fire Ins. Co., 69 AD2d 27 [1st Dept 1979], aff'd, 49 NY2d 924 [1980]; CPLR 3212 [b]). Plaintiffs rely on their attorney's affirmation and the affidavit of the certified public accountant hired to review the lease payments, and otherwise on the documents themselves. They do not produce an affidavit by anyone with actual knowledge concerning either the drafting of the agreement or the intent of the parties concerning its drafting or implementation,[FN3] nor do they include an affidavit from someone with knowledge that could attest to what was received from the owners, over the years, concerning the escalation clause.[FN4] Notably their argument that the manner of the annual calculations for the wage escalation were done in secret, is proffered only in their reply papers and not by a party with knowledge. They do not establish their right to partial summary judgment.

CPLR 3212 (b) allows the court to search the record and grant summary judgment to a non-moving party. Here, the totality of the papers and the documentary evidence sufficiently warrants a dismissal of the complaint in its entirety as against all the defendants. The parties are sophisticated entities, and plaintiffs' late attempt to suggest that they were kept in the dark for approximately ten years as to how the wage escalation clause was calculated, lacks support in either documents or affidavits before the court in admissible form. Neither set of answering litigants has produced copies of the annual notices that should have been sent to plaintiffs pursuant to the lease concerning the wage escalation, however, defendants produce an uncertified copy of what appears to be the notice for 1993 to plaintiff Banco Nacional de Mexico, which sets forth the calculations for the annual wage increase and resulting rent increase (Claman Aff. in Opp. Ex. B). The content of the 1993 document, including the nature of the calculations, appears to be very similar to the notices received by plaintiffs beginning in 2002 (cf., Mot. Ex. 3). Plaintiffs do not address the existence of this 1993 document, or whether it was in fact received by the Mexican bank, but they concede that the methodology employed in 1993 is the same as that used in 2002 and currently.[FN5] Accordingly, the Fifth Avenue defendant sufficiently establishes that plaintiffs had notice of the methodology. Indeed, it is the failure of plaintiffs to provide an affidavit from someone with actual knowledge of what was and was not received annually from the owner concerning additional rents owed, that undermines their claim, and suggests that they now regret a bargain made long ago. "[C]ourts do not serve as business arbiters between parties in approximately equal stances" (CBS Inc. v P.A. Bldg. Co., 200 AD2d 527, 527 [1st Dept. 1994]).

The Fifth Avenue defendant's attorney proffers an explanation for how the escalation wages are calculated, and contends that there is not, in fact, an actual duplication in the charge (Claman Aff. in Opp. ¶¶ 51-57). Moreover, although plaintiffs argue that the courts should not allow the lease to be construed so as to require them to pay twice for the same item, citing Barrow v Lawrence United Corp., 146 AD2d 15, 20 (3d Dept. 1989), it has been held that amongst sophisticated commercial entities, an overlap between lease clauses may reflect different although similar concerns, and can be understood to have been freely bargained for (see, City of Hope, Inc. v Fisk Bldg. Assoc., 63 AD2d 946 [1st Dept. 1978]; see also CBS Inc. v P.A. Bldg. Co., 200 AD2d 527, supra).

Even if the defendants improperly charged twice for the wages of the porters throughout all the years of the lease, the failure by plaintiffs to pursue a remedy earlier is now fatal to their claim. This is because the common law doctrine of voluntary payment bars recovery of payments voluntarily made with full knowledge of the facts, in the [*4]absence of fraud (see, Dillon v U-A Columbia Cablevision of Westchester, Inc., 100 NY2d 525, 526 [2003]).[FN6] Thus, in Eighty Eight Bleecker Co., LLC v 88 Bleecker St. Owners, Inc., 34 AD3d 244 (1st Dept. 2006), the Court held that the voluntary payment doctrine was applicable where the plaintiff, a sophisticated entity, apparently never checked the amount of the base rent in the lease and made no inquiry for approximately 20 years regarding the amount of rent it was paying, showing a lack of diligence in determining its contractual rights. Eighty Eight Bleecker held that the burden was on the tenant to examine the invoices and the lease, and the failure to so do for 20 years raised the applicability of the voluntary payment doctrine despite the windfall nature of the overcharge (34 AD3d at 247).

Contrary to plaintiffs' argument that the statute of limitations commenced running in 2005, when the current tenant "discovered" the alleged error in methodology, the statute of limitations commenced running in 1993, and bars plaintiffs' claims as against any of the defendants. In Goldman-Copeland Assocs. P.C. v Goodstein Bros. & Co., Inc., 268 AD2d 370 (1st Dept. 2000), for example, it was held that where the landlord gave the tenant detailed yearly porter wage escalation statements in which the same methodology was used consistently, and the tenant paid the amounts due without protest, then the claim of an overcharge accrued upon the receipt by the tenant of the first statement which, in that case, was 12 years before it commenced the action and thus barred by the statute of limitations. Here, there is no dispute that payments were made to defendants, and no proof that plaintiffs did not have notice of the calculations used to determine the wage escalation.

Accordingly, summary judgment is granted to both the Fifth Avenue defendant and 767 Fifth Avenue and, in addition, to Longstreet Associates which has never appeared in the action, as the claims are time-barred. To the extent the defendant 767 Fifth Avenue, LLC's cross-motion to dismiss pursuant to CPLR 3211 is premised on grounds other than the statute of limitations, the court need not reach those issues. It is

ORDERED that the plaintiff's motion for partial summary judgment on liability is denied; and it is further

ORDERED that upon searching of the record in its entirety pursuant to CPLR 3212(b), summary judgment and dismissal of the complaint is granted in all defendants' favor in its entirety as the claims are time-barred; and it is further

ORDERED that the defendant 767 Fifth Avenue, LLC's cross-motion to dismiss the complaint pursuant to CPLR 3211 is granted to the extent indicated; and it is further

ORDERED that the Clerk of the Court shall enter judgment dismissing the complaint it its entirety.

This constitutes the decision and order of the court.

Dated: January 12, 2009____________________________________

New York, New YorkJ.S.C. Footnotes

Footnote 1:According to the attorney representing the defendant identified in the caption by two appellations, "Fifth Avenue 58/59 Acquisition Company LLC," and "Fifth Avenue 58/59 Acquisition Company LP," there is only one defendant, the proper name of which is "Fifth Avenue 58/59 Acquisition Co. LP." For purposes of the decision, this defendant shall be referred to specifically as the Fifth Avenue defendant.

Footnote 2:Longstreet has apparently not appeared in the action.

Footnote 3:Notably, even the amended verified complaint is verified not by a party but by plaintiffs' attorney.

Footnote 4:Plaintiffs provide an affidavit from the now Vice President of Citicorp North America, Inc., and Citibank, N.A., who states that "any and all documents in their possession or control that concern porter wage escalations" have been produced, including "all documents" received from the defendants, as well as documents produced internally by plaintiffs (Thornton Aff. ¶¶ 3, 4).

Footnote 5:Plaintiffs concede that the same methodology has been used consistently (Claman Aff. in Opp., Ex. P, Pl. Resp. to 2d Set of Interrog., p. 3, Response to Interrogatory No. 1).

Footnote 6:The doctrine is not applicable in an absence of full disclosure (see, Samuel v Time Warner, Inc., 10 Misc 3d 537, 549 [Sup. Ct., NY County 2005]).