609 Corp. v Park Towers S. Co., LLC

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609 Corp. v Park Towers S. Co., LLC 2004 NY Slip Op 30341(U) December 1, 2004 Sup Ct, NY County Docket Number: 121510/03 Judge: Herman Cahn Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] SCANNEDON 121712004 J SUPREME COURT OF THE STATE OF NEW YORK PRESENT: edHd - NEW YORK COUNTY PART Justice v5 fi 6~7' d & ' INDEX NO, MOTION DATE -vMOTION SEQ. NO. MOTION CAL. NO. ~ The following papers, numbered 1 to were read on thls motion to/for PAPERS NUMBERED Notice of Motion/ Order to Show Cause Answerlng Affidavlts - Affldavits - Exhibits ... - Exhibits Replying Affidavlts Cross-Motion: 0 Yes No Upon the foregoing papers, it is ordered that this motion Check one: FINAL DISPOSITION 0 NON-FINAL DISPOSITION [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 4 9 _ - _ _ _ _ _ - - _ _ _ - - - _ _ _ - - -X 609 CORPORATION, Index N o . 121510/03 Plaintiff, -againstPARK TOWERS SOUTH COMPANY, LLC, Defendant. - _ _ _ - _ - _ _ _ _ - _ _ _ _ _ _ - CAHN, J.: This is an action by a tenant unconscionable tax escalation clause in a commercial lease. The defendant landlord, Park Towers S o u t h Company, LLC moves for summary judgment ( C P L R 3212). For the reasons set f o r t h below, the motion is granted. E& ¬E Defendant Park Towers is the owner of the building located at 3 3 0 West 58th S t r e e t in Manhattan. Pursuant to a written lease dated March 2, 2001, plaintiff 609 Corporation, a medical p r a c t i c e , became the tenant of suite 609 ( t h e "Premises") in t h e Building. A s is relevant here, p a r a g r a p h 41 of the Lease contains a tax escalation clause. Paragraph 41(e) provides, in pertinent p a r t : If t h e Taxes for any Tax Year shall be g r e a t e r than the Taxes for the Base Year, then Tenant shall pay to [* 3] Landlord, as additional rent hereunder, an amount equal to Tenant's Proportionate Share of the increase over the taxes for the Base Year. Paragraph 41(c) defines the Base Year as "the N.Y.C. fiscal Tax Year, July lSt 2000 through June 3 0 t h , 2001. Paragraph 41(d) further provides: For the purposes of this Article only, "Tenant's Proportionate S h a r e " shall be deemed to be (4.5%). The foregoing shall not be deemed to constitute a representation as to any relationship between precise amount of space in the Demised Premises and the space contained in the building in which the Demised Premises a r e located. In July 2001, Park Towers billed 609 Corp. the amount of $7,129.82, for real estate taxes based upon calculations reflecting a $158,400.40 increase in real estate taxes o v e r the base year. 609 C o r p . paid the said amount without objection. In November 2001, the parties agreed that 609 Corp. would lease additional space in suite 610 of the Building. Accordingly, the Lease was modified by a Lease Modification Agreement dated November 1, 2001 (the "Modification Agreement") * the Modification Agreement provides as follows: The "Tenant's Proportionate Share" of the Real E s t a t e Taxes, as outlined in Article 41(D), shall be increased from 4.5% to 6%. The Paragraph 3 of [* 4] remainder of the Real Estate Tax clause as outlined in Article 41, shall remain unchanged and in full force and effect. In J u l y 2002, Park Towers billed 609 C o r p . the sum of $20,373.36, representing 6% of the real estate tax increase over the b a s e year. By agreement dated July 8, 2002 (the "Extension Agreement"), the parties agreed t 0 . a schedule by which 609 Corp. would pay t h a t amount in installments over a period of six months. In July 2003, the City of New York increased real property taxes by 18.5%. $53,416.92. 609 C o r p . ' ~resulting t a x bill, was A f t e r unsuccessfully negotiating f o r a reduction in its "Proportionate Share" under paragraph 41, 609 Corp. paid the b i l l under protest and commenced the instant action. The complaint sets forth four causes of action, for breach of contract, f r a u d , unjust enrichment and unconscionability. Plaintiff seeks a judgment limiting the application of the tax escalation c l a u s e , granting it recovery of past increases paid, and punitive damages. DISCUSSLON The motion to dismiss is granted. Tax and related escalation clauses are common in commercial leases and are generally enforced according to their terms (s, Georqe Racker Mut . Corp. v Acme Quiltins Co., 46 N Y 2 d [* 5] 211 [ 1 9 7 8 ] ; CBS, Inc. v P . A , Bldq Co., 2 0 0 AD2d 5 2 7 [ l g t Dept 19941; Mevers P a r k i n a S v s t em, Inc. v 475 Park Avenue So. CQ,, A D 2 d 92 [ l g t Dept 19921). 186 Paragraph 41 of the Lease sets forth a simple, unambiguous formula for determining the tax increase, which plaintiff agreed to. The court may not rewrite the lease merely "for the purpose of alleviating a hard or oppressive bargain" (Backer, supra at 219; B, p r a su at 527 ["[although the result'of this construction of the escalation clause is economically harsh, parties are free to make their own contracts, and courts do not serve as business arbiters between parties in approximately equal stances"] ) . In opposing the motion, plaintiff asserts that the tax escalation clause is unconscionable pursuant to Section c(2) of the R e a l Property Law. § 235- Specifically, the tenant asserts that upon being confronted with the dramatic tax increase in the third year of its occupancy, it retained an architect who determined that the Premises' size represented significantly less than 6 8 of the "Proportionate Share" of the Building's total area. However, the architect's conclusion is irrelevant here. T h e parties to a lease may mutually agree, for the purpose of an escalation clause, that the building shall be "deemed" to be a certain number of s q u a r e feet o r a specific percentage, at variance with its t r u e size or percentage (s,R . Leon Co., S. 4 [* 6] Inc. v The TQWerS, 194 AD2d 600 [2d Dept 19931). Here, paragraph 41 not only deemed the tenant s share to be 6%, but specifically disclaimed that the figure bore any relationship between [the] precise amount of space in the Demised Premises and the space contained in the building. Plaintiff further asserts that the disclaimer is misleading because the use of the word precise suggests that the percentage might nevertheless be roughly proportional to the size of the Building. denial of More relevant, however, is the express relationship (emphasis supplied). Apart from \ = this representation, plaintiff cannot complain of its ignorance of the a c t u a l size of t h e Building insofar as it was not a matter peculiarly within the landlord s knowledge b u t readily ascertainable (and ultimately ascertained) by the tenant by the exercise of inquiry and due diligence 2d 2 8 2 , 286 [Civ (m,Wohl v Owen, 153 Misc Ct Kings Co. 19921, [Thus t h e onus for the . tenant s dilemma of being required to pay wage escalations based on 660 square feet when he may have had use of only 414 square feet lies in his failure to exercise reasonable vigilance ]). Similarly, plaintiff cannot assert that its negotiating representative was misled by the landlord s managing agent regarding the minimal impact of the escalator clause. The precise impact of any future tax increase could be [* 7] instantaneously gauged by multiplying the hypothetical increase by 6%. Finally, plaintiff can sustain no challenge based on the claimed unequal bargaining power of the parties. T h e Lease was negotiated at arm s l e n g t h by experienced parties ( s e e , Henxv St reet Garaqe, Inc. v Whitman Owner Corp., 79 AD2d 1001 [2d Dept 19811). Defendant concedes that it was represented by an attorney who, although no longer practicing, had been licensed to practice in New York for many years and was retained specifically as a business advisor with experience in real e s t a t e . Accordingly, it is ORDERED that t h e motion to dismiss the complaint is granted, and the complaint is dismissed, with costs and disbursements to defendants as taxed by the C l e r k of the Court, and it is f u r t h e r

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