Riverside South Planning Corp. v. CRP/Extell Riverside

OPINION OF THE COURT

Catterson, J.

The instant appeal presents the issue of one party seeking to obtain through litigation and rhetoric what it plainly could not obtain from its adversaries through contract negotiations. Plaintiff claims that it is entitled to the enforcement of certain design guidelines indefinitely and absolutely. We find that it is not entitled to such enforcement because the terms of the underlying contract are plain and unambiguous. Furthermore, the contract expressly negates the possibility that its obligations were to run with the land.

In the early 1990s, Donald J. Trump allied himself with a coalition of civic, environmental and neighborhood groups, in order to gain support for his development of the land that stretches along the Hudson River from 59th to 72nd Street, the old Penn Central railway yard. In exchange for the coalition’s pledge to support Trump during the governmental land-review process, Trump agreed to reach a compromise on the plan for development of Riverside South. After extensive negotiation, Trump withdrew his original proposal for development which had generated fierce public opposition and accepted a scaled-back plan for development (hereinafter referred to as the Development Plan).

The Development Plan focused on environmental sustainability and design criteria for the buildings and called for parks, open spaces and public arts programs. Trump and the coalition of community groups formed the plaintiff, the Riverside South Planning Corporation (hereinafter referred to as the RSPC), a not-for-profit corporation, designed to oversee the planning, design and construction of Riverside South pursuant to the Development Plan.

On or about March 31, 1993, Penn Yards Associates (hereinafter referred to as Penn Yards), by its general partner, Trump, and the RSPC, together with various civic groups, entered into a four-page letter agreement (hereinafter referred to as the 1993 Agreement) setting forth the specific terms upon which the coalition of community groups would support the Development Plan. Annexed to the 1993 Agreement were two pages titled “Legal Requirements.”

Under the 1993 Agreement, RSPC was to have an active role in planning Riverside South and ensuring that it was developed pursuant to the environmental sustainability and design principles set forth in the Development Plan. Specifically, Trump agreed that the parties would coordinate their efforts and that if he utilized “Special Permits,” he would develop the project in substantial conformity with the Riverside South Design Guidelines (hereinafter referred to as the Design Guidelines).^*

After setting forth certain joint undertakings, the 1993 Agreement binds Trump to certain obligations as follows:

“We agree that RSPC may be dissolved at any time by mutual agreement of the parties, and that I shall have the right to dissolve RSPC if (1) we do not reach agreement on the development of the studio site, (2) Richard Kahan or a successor mutually agreed upon no longer heads RSPC or (3) any member organization withdraws from participation in RSPC. You agree to execute documents, promptly following request, and we shall jointly seek all required approvals, necessary to effect such dissolution. The agreements in this letter relating to design guidelines, park maintenance and operation, and restrictions on major modifications and rezoning shall survive the dissolution of RSPC, in which event approvals and consents of RSPC regarding these matters shall be granted by a majority of a three (3) person panel (including Donald J. Trump) to be acceptable to both me and the other members of the board of RSPC. The agreements contained herein shall continue for ten (10) years, or such lesser period as either of the following conditions shall no longer remain satisfied: (1) the Special Permits shall remain in effect; and (2) I shall own, directly or indirectly, all or any portion of the Subject Property.” (Emphasis added [hereinafter referred to as the sunset provision].)

The next paragraph of the 1993 Agreement reads:

“I agree that I will require any person who purchases any Parcel of the Subject Property from me so long as the Special Permits remain in effect, to agree to abide by the agreements in this letter insofar as they relate to the development of the project and the park, delegation of park maintenance, and the restrictions on seeking changes in the approved plan. In particular, I will contractually require the purchaser(s) to agree to develop such parcel in accordance with these guidelines and not to apply for any changes or modifications in the approved plan not permitted hereunder so long as the Special Permits remain in effect without approval of a majority of the members of RSPC, which approval is not to be unreasonably withheld or delayed.”

Trump then agreed to fund RSPC for three years. After that period Trump had the option but not the obligation to continue the funding.

The Legal Requirements attached to the 1993 Agreement state that the 1993 Agreement was not “intended to, nor shall be interpreted to, nor shall any enforcement of the [1993] Agreement, create an interest in real property . . . lien or other encumbrance up on the Subject Property.”

In 1994, Trump transferred title to Hudson Waterfront Associates, L.R (hereinafter referred to as Hudson Waterfront), an entity in which he retained an interest, but not control. More than 10 years later, on June 17, 2005, the defendants (Extell) purchased their interest in Riverside South from Hudson Waterfront. The terms under which Extell assumed the obligations of the 1993 Agreement were set forth in an Assignment and Assumption Agreement, dated November 3, 2005, which provided that Extell:

“assume[d] all of the duties, obligations and liabilities of Assignor under [the 1993 Agreement] arising from and after the date hereof, it being understood that this Assignment shall not be deemed to be an admission by either Seller or [Ex-tell] that there are or will be any duties, obligations or liablities in connection with the [1993 Agreement] or that the [1993 Agreement] is in effect.”

RSPC maintains that initially after Extell purchased its interest in the project, Extell funded RSPC and its architects corresponded with RSPC and promised to provide plans for a new building (hereinafter referred to as Building I). However, when construction on Building I was about to commence, Extell allegedly switched course without RSPC’s approval, constructing Building I with more glass than the Design Guidelines permitted and failing to conduct the required environmental sustainability assessments and calculations. Extell then refused to involve RSPC in any aspect of Riverside South’s planning or design. As a result, Extell allegedly prevented RSPC from fulfilling its primary function, i.e., to ensure development of Riverside South, in the public interest, in accordance with the principles agreed to by the community when it permitted the project to proceed in the first place.

On November 29, 2007, RSPC filed a complaint, asserting causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing, and demanded specific performance of Extell’s assumed obligations. Extell moved to dismiss the complaint pursuant to CPLR 3211 (a) (1) and (7) on the ground that the sunset provision barred RSPC’s action.

By decision and order dated March 13, 2008, the Supreme Court denied Extell’s motion, finding “the 1993 Agreement ambiguous whereby it is unclear whether the ‘sunset provision’ applies to the entire agreement or only to those obligations recited in the paragraph in which the provision is embedded.” (2008 NY Slip Op 30836[U], *8.) The motion court explained:

“Both interpretations proffered by the parties are reasonable. Looking at the entire body of the contract it is reasonable to conclude that where the ‘sunset provision’ comes at the end of a distinct set of obligations and immediately follows a provision reiterating that distinct set, it is [to] that set that the phrase ‘agreements contained herein’ refers. It is arguable that if it was intended by the parties that the provision apply to the entire agreement, it would follow all of the obligations charged to Trump.” (Id.)

Noting that the 1993 Agreement clearly stated that its intent is to “ensure the development of the site in accordance with the approved plan,” the motion court found that a reading of the sunset provision that resulted in the 1993 Agreement’s expiration at the end of 10 years would be inconsistent with the intent of the contract. (Id.) Finally, the motion court added:

“[Extell’s] interpretation which cuts off the obligation of subsequent developers after ten years appears to be inconsistent with the intent of the contract because ten years is an inconceivably short amount of time within which to develop a project as large as Riverside South.” (Id.)

On appeal, Extell contends that the only reasonable interpretation of the sunset provision is that all of the obligations created by the 1993 Agreement expire no later than 10 years after its signing. Extell claims that the clear and unequivocal words used by the “sophisticated parties and their lawyers” who drafted the provision, regardless of its placement on page three of the four-page agreement, in no way reflect an intent to create contractual obligations in perpetuity. For the reasons set forth below, we agree.

The fundamental rule of contract interpretation is that agreements are construed in accord with the parties’ intent (see e.g. Slatt v Slatt, 64 NY2d 966 [1985]), and “[t]he best evidence of what parties to a written agreement intend is what they say in their writing.” (Slamow v Del Col, 79 NY2d 1016, 1018 [1992].) Thus, a written agreement that is clear and unambiguous on its face must be enforced according to the plain meaning of its terms, and extrinsic evidence of the parties’ intent may be considered only if the agreement is ambiguous. (See e.g. W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990].)

A court may not, in the guise of interpreting a contract, add or excise terms or distort the meaning of those used to make a new contract for the parties. (Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 520 [1996]; Morlee Sales Corp. v Manufacturers Trust Co., 9 NY2d 16, 19 [1961].)

A contract is unambiguous if “on its face [it] is reasonably susceptible of only one meaning.” (Greenfield v Philles Records, 98 NY2d 562, 570 [2002].) Parol evidence cannot be used to create an ambiguity where the words of the parties’ agreement are otherwise clear and unambiguous. (Innophos, Inc. v Rhodia, S.A., 38 AD3d 368, 369 [1st Dept 2007], affd 10 NY3d 25 [2008].)

Conversely, “[a] contract is ambiguous if the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings.” (New York City Off-Track Betting Corp. v Safe Factory Outlet, Inc., 28 AD 3d 175, 177 [1st Dept 2006] [internal quotation marks and citation omitted].) The existence of ambiguity is determined by examining the “entire contract and considering] the relation of the parties and the circumstances under which it was executed,” with the wording to be considered “in the light of the obligation as a whole and the intention of the parties as manifested thereby.” (Kass v Kass, 91 NY2d 554, 566 [1998], quoting Atwater & Co. v Panama R.R. Co., 246 NY 519, 524 [1927].) Whether a contract is ambiguous presents a question of law for resolution by the court. (Kass, 91 NY2d at 566.)

The Court of Appeals has made plain that the rule requiring a written agreement to “be enforced according to its terms” has special importance in transactions relating to real property:

“We have . . . emphasized this rule’s special import ‘in the context of real property transactions, where commercial certainty is a paramount concern, and where . . . the instrument was negotiated between sophisticated, counseled business people negotiating at arm’s length.” (Vermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d 470, 475 [2004], quoting Matter of Wallace v 600 Partners Co., 86 NY2d 543, 548 [1995].)

In the instant case, the ordinary and natural meaning of the 1993 Agreement’s words are dispositive: “[t]he agreements contained herein shall continue for ten (10) years, or such lesser period.” A plain reading of these words makes clear that 10 years is the maximum term of the contract at issue, with the possibility that the term may be some “lesser period” if the specified conditions occur. We note that clear contractual language does not become ambiguous simply because the parties to the litigation argue different interpretations. (Bethlehem Steel Co. v Turner Constr. Co., 2 NY2d 456, 460 [1957]; Moore v Kopel, 237 AD2d 124, 125 [1st Dept 1997].)

Contrary to the position of the dissent, there is no legal requirement that contractual provisions fixing the term of a contact must appear at the end of (or at any other particular ■place in) the document, especially in a short, informal letter agreement as is the case here. Instead, all that is required is that a provision fixing an end date be clear. (See Reiss v Financial Performance Corp., 97 NY2d 195, 198 [2001], quoting WWW Assoc., 77 NY2d at 162 [“when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms”].)

It is evident that RSPC’s interpretation of the sunset provision is its after-the-fact attempt to rewrite its plain wording to provide: “[t]he agreements [set forth above but not below] shall continue for ten (10) years, or such lesser period.” No such express statement appears anywhere in the 1993 Agreement to that effect. Because the 1993 Agreement was “[an] instrument . . . negotiated between sophisticated, counseled business people negotiating at arm’s length” (see Vermont Teddy Bear Co., 1 NY3d at 475 [internal quotation marks and citation omitted]), it is untenable that the parties would have intentionally left the meaning of their agreement to such vagaries as placement and punctuation. This is especially true given the obvious need for “commercial certainty” in a huge, multi-billion-dollar real estate deal. (Id. at 475.)

It is also worth mentioning that RSPC could not bind Trump’s successors under the theory that the obligations set forth in the 1993 Agreement were covenants running with the land because the agreement expressly states that it was not to be recorded. (Deepdale Cleaners v Friedman, 16 Misc 2d 716 [1957], affd 7 AD2d 926 [2d Dept 1959].)

Furthermore, contrary to the motion court’s ruling and the view of the dissent, we believe that our reading of the sunset provision is completely consistent with the parties’ intent. It is well settled that in interpreting any contract, “[e]vidence outside the four corners of the document as to what was really intended but unstated or misstated is generally inadmissible to add to or vary the writing.” (See W.W.W. Assoc., 77 NY2d at 162.) Here, rather than pointing to anything in the 1993 Agreement itself to support its position, RSPC merely relies on the self-serving affidavit of its counsel as evidence of the parties’ supposed intent, and what “everyone knew” about Trump’s intentions to sell his interest, and other matters outside of the contract. Such unsupported statements by counsel are not entitled to any weight whatsoever on a CPLR 3211 motion. (See McDermott v Village of Menands, 74 AD2d 661 [3d Dept 1980].) In any event, nothing about the sunset provision’s express language supports the contention that the 1993 Agreement’s-obligations regarding the Design Guidelines and other environmental considerations would expire at the end of 10 years if Trump were the developer, but continue in perpetuity for any other subsequent developer.

The dissent believes that there is a question about the length of time successors to the 1993 Agreement would be bound which cannot be answered on a motion to dismiss. We disagree. The provision stating “[t]he agreements contained herein shall continue for ten (10) years” is unequivocal. The other possibility contemplated is that the agreement might last for a “lesser period.” Nothing in any part of the agreement suggests that the parties contemplated it could last longer; certainly not the paragraph that follows the sunset provision.

The dissent maintains that the paragraph following the sunset provision binds Trump’s successors to the 1993 Agreement “so long as the Special Permits remain in effect.” However, that paragraph, when read in conjunction with the preceding paragraph, makes plain that it is only implicated when the Special Permits are in effect and Trump owns only a part of the “Subject Property” rather than the entire “Subject Property.” In that eventuality, he agreed that he would “require any person who purchases any Parcel of the Subject Property from me so long as the Special Permits remain in effect, to agree to.”

However, in this case, Extell rather than Trump owns all of the “Subject Property.” In fact, had this situation arisen prior to the end of the 10-year period, the agreements would have terminated in that “lesser period.” Thus, the dissent is construing a paragraph that by its terms applies only to a situation where Trump owned a portion of the property and sold the remainder, as extending the sunset provision for the entire agreement in perpetuity.

It may be true that RSPC wanted to obtain an unlimited and absolute commitment from Trump on behalf of his partnership or successors to abide by certain Design Guidelines indefinitely and absolutely; however, what RSPC actually obtained was only a limited and conditional commitment. To ask this Court to ignore those limitations and conditions is merely an attempt to obtain through litigation a result that RSPC was unable to achieve during negotiations.

Accordingly, the order of the Supreme Court, New York County (Richard B. Lowe, III, J.), entered March 25, 2008, which denied defendants’ motion to dismiss the complaint, should be reversed, on the law; with costs, and the motion granted. The Clerk is directed to enter judgment in favor of defendants dismissing the complaint.

* Special Permits were apparently city approvals without which Riverside South could not legally be developed.