Folio House, Inc. v Barrister Realty Partners
Annotate this CaseDecided on March 21, 2011
Supreme Court, New York County
Folio House Incorporated, Plaintiff,
against
Barrister Realty Partners, Defendant.
118068/2009
ATTORNEY FOR THE PLAINTIFF :
GOLDBERG WEPRIN FINKEL GOLDSTE
1501 BROADWAY - 22ND FLR.
NEW YORK, NEW YORK 10036
ATTORNEY FOR THE DEFENDANT :
BRYAN CAVE LLP
1290 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10104
Judith J. Gische, J.
Plaintiff, Folio House, Incorporated ( "Folio House") moves for summary judgment. Defendant, Barrister Realty Partners ("Barrister") opposes the motion. Issue has been joined and no note of issue has been filed. The motion is, therefore, appropriately before the Court to be considered on its merits. (CPLR 3212[a]; Myung Chun v. North American Mortgage Co., 285 AD2d 42 [1st Dept 2001]).
The underlying complaint, alleges that the parties entered into a lease, in which plaintiff is the landlord and defendant is the tenant. Folio asserts three causes of action. The first two causes of action seek a declaration that the renewal option provision contained in the lease violates the rule against perpetuities, as codified in the New York States Estates Powers and Trust Law (EPTL § 9-1.1- et seq.). The third cause of action seeks a declaration that the lease expired, by its terms, on July 31, 2006 because the renewal options were void ab initio as violative of the rule against perpetuities. The answer denies the material allegations in the complaint, although defendant admits that the parties entered into a lease dated July 24, 1981.
In arguing that the lease violates the rule against perpetuities, plaintiff primarily relies upon an Appellate Division decision in the case of Bleecker Street Tenants Corp., v. Bleeker Jones, LLC, 65 AD3d 240 (1st dept. 2009). While the motion was sub judice, however, the Court of Appeals reversed the Appellate Division decision in the Bleecker Street case ( [*2]NY3d [2011]; 2011 WL 649766, NY Slip Op 01360). This court, thereafter, allowed the parties an opportunity to submit supplementary arguments and authorities, in view of the recent Court of Appeals' decision.
After reviewing the papers submitted on the motion and chief and the additional authorities and arguments submitted on March 10, 2011, the court denies the plaintiff's motion for summary judgment and searches to record to grant defendant reverse summary judgment dismissing the complaint. In view of the Court of Appeals' decision in Bleeker Street, supra, the underlying complaint, based upon a claim that renewal option provisions in this commercial lease violates the rule against perpetuities, simply cannot stand.
The lease provides for an initial term of 25 years, to commence on August 1, 1981 and end on July 31, 2006. It gives the tenant three options to renew the lease for a period of 25 years each, with each renewal term to begin immediately following the expiration of the preceding term.
The lease language at issue in this case expressly states:
"Provided Tenant is not in default hereunder, Tenant shall have the right, option and privilege of renewing this Lease and the term hereof, at the rental and additional rental specified in paragraph B of this Article and otherwise upon the same terms, conditions and agreements herein contained, for three (3) successive renewal terms of twenty-five (25) years each, each such successive renewal term to commence upon the expiration of the initial term or the then expiring renewal term, as the case may be, provided, in each instance, Tenant shall notify Landlord or its exercise of each such renewal option at least 3 months prior to the expiration of the initial term or the then expiring renewal term, as the case may be it being expressly understood, however, that a failure by Tenant to serve any such notice shall not extinguish the renewal option to which same would have related and such renewal option will only be considered extinguished and not exercised after landlord notifies Tenant that Tenant has not so exercised same and Tenant, within 30 days after receipt of such notice, still does not serve a notice exercising such option. Provided Tenant is not in default hereunder, it Tenant serves a renewal notice, the term hereof shall be deemed automatically renewed and extended for the renewal term mentioned in such notice."
Plaintiff reads this clause in the lease as preserving a renewal option until 30 days after the plaintiff provides 30 days written notice of an unexercised right to renew, no matter when, if ever, that 30 day notice is provided. Plaintiff argues that defendant may, theoretically, exercise the option to renew long after the Lease is terminated, because the right of renewal is only triggered if and when plaintiff gives notice. If plaintiff never gives notice, then under plaintiff's reading of the lease, this right of renewal could last forever. Plaintiff claims that this right creates a remote vesting that is otherwise prohibited under the rule against perpetuities.
Defendant disagrees with plaintiff's interpretation of the lease, arguing that under its language, the right of renewal could only be exercised while the tenant is still in possession. The court, however, need not resolve the parties' disagreement on the interpretation of the lease language, because even if the lease was interpreted to theoretically permit a remote vesting, it would not be barred by either the common law or statutory rule against perpetuities.
In Bleecker Street Tenant's Corp. v. Bleeker Jones LLC, supra, the court of appeals expressly held that the rule against perpetuities does not apply to options to renew leases. The [*3]opening salvo of the decision makes this rule of law perfectly clear, as follows:
"The appeal before this Court presents the novel question whether options to renew a commercial lease are subject to EPTL §9-1.1(b), New York's rule against perpetuities. We hold that the rule against perpetuities does not apply to options to renew leases."
The instant lease in the case at bar undeniably concerns an option to renew a commercial lease. Plaintiff argues that the option to renew the commercial lease in this case is substantively different from the lease provision looked at by the Court of Appeals in Bleecker Street. This argument fails for two reasons. First the lease provisions are not substantively distinguishable for analysis under the rule against perpetuities. Second, and more importantly, even if the leases were substantively different, the Court of Appeals ruling in Bleecker Street was not limited to the particular lease clause before it, but a rule of law applicable to all lease renewal options. In so holding, the court was not particularly concerned with the precise lease language in the case before it. It looked at the historical context of the rule and its codification. Finding that there was no common law rule against perpetuities that applies to options to renew leases, it held that the codification of the rule, likewise did not apply. The Court of Appeals concluded:
"Thus, because the rule of perpetuities has not applied to options to renew leases un the American common law and EPTL 9-1.1(b) codifies the American common law, it follows that options to renew leases also fall outside the scope of EPTL 9-1.1(b)."
The Court of Appeals ruling, thus, applies to all options to renew leases, and a fortiori, to the lease in this particular case.
The court further made the observation, that based upon its holding, that the remote vesting of a lease renewal option by a former tenant no longer in possession is not possible. Thus, the interpretation of the lease at bar which concerns the plaintiff, that there is a contingency of remote vesting, is not, as a matter of law, possible. Since this entire action is based upon the application of the rule against perpetuities and this court finds that the rule has no application to the lease renewal option at bar, the court searches the record and grants reverse summary judgment to the defendant, dismissing the action. Merritt Hill Vineyards, Inc. v. Windy Heights Vineyard, Inc., 61 NY2d 106 (1984); Murphy v. RMTS Associates, LLC, 71 AD3d 582 (1st dept. 2010).
In accordance herewith it is hereby:
ORDERED that plaintiff's motion for summary judgment is denied in its entirety and it is further
ORDERED that the court searches the record and grant's defendant summary judgment dismissing the complaint, and it is further
ORDERED that the clerk is directed to enter judgment dismissing the complaint with prejudice and it is further
ORDERED that any requested relief not expressly granted herein is denied and that this shall constitute the decision and order of the court.
Dated: New York, New York
March 21, 2011
SO ORDERED: [*4]
_______________________
J.G. J.S.C.
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