1009 SECOND AVENUE ASSOCIATES v. NEW YORK CITY OFF TRACK BETTING CORPORATION (1998)

Order, Supreme Court, New York County (Louis York, J.), entered October 31, 1996, which, inter alia, denied defendant's cross-motion for summary judgment dismissing plaintiff's claims for damages other than use and occupation for the holdover period, unanimously reversed, to the extent appealed from as limited by the briefs, on the law, without costs, and the motion granted.

Pursuant to an agreement dated November 16, 1984, the parties entered into a ten-year lease commencing February 1, 1985 and ending January 31, 1995.   Allegedly because of pending litigation involving its new location, defendant Off-Track Betting Corporation (OTB) held over beyond the expiration of the lease term.   In a letter dated March 3, 1995, landlord's attorney informed the Corporation Counsel of his client's need to perform renovation work prior to reletting the space and stated that a summary proceeding to recover possession of the premises had been commenced.   A second letter dated March 13, 1995 states that “a prospective tenant * * * wants to open for business on September 1, 1995.   In order for this tenant to open for business, the tenant will require approximately six months of reconstruction of the building to accommodate its use.   This will require my client to have possession of the demised premises immediately.”   The letter goes on to state, “If your client remains in possession until June 30, 1995, this means that my client could potentially lose a tenant who will be paying my client approximately $500,000 in annual rent.”   The record contains no further correspondence concerning the prospective tenant, identified in the complaint as Michel Mosallem, and there is no indication that OTB was ever notified that Mosallem had signed a lease for the premises.

The record does not disclose the outcome of the summary proceeding.   However, counsel for plaintiff informed Supreme Court at oral argument of the motion that defendant had “moved to remove it to this court after we started this action.”   In any event, it does not appear that a judgment of possession had been obtained at the time OTB formally surrendered possession of the premises, by hand-delivered letter to plaintiff, on the aforementioned June 30, 1995.

Insofar as pertinent to this appeal, the amended verified complaint alleges, as a first cause of action, that because OTB failed to vacate the premises in a timely manner, plaintiff was prevented from delivering possession of the premises to Michel Mosallem, with the result that plaintiff lost $400,000 in annual rent.   In its answer verified August 10, 1995, OTB contends, by way of counterclaim, that sums paid to plaintiff without prejudice on account of the agency's continued possession of the premises exceed the fair market rental value.   By notice of motion dated April 1, 1996, plaintiff sought summary judgment and immediate trial on the issue of damages pursuant to CPLR 3212(c).   No proof of the asserted tenancy was submitted with plaintiff's summary judgment motion.   Defendant cross-moved for partial summary judgment dismissing the first cause of action for breach of contract, which seeks damages in the amount of $3.5 million, and for an order compelling discovery.   In support of its cross motion, defendant's papers state that “OTB sought discovery in November 1995 on, among other matters, the alleged Mosallem transaction”.   In response, plaintiff submitted a copy of the Mosallem lease with its reply papers.   Dated March 15, 1995, the lease provides that plaintiff will deliver possession of the premises by April 1, 1995 for a ten-year term ending March 31, 2005.

It is plaintiff's theory that OTB knew of its immediate need for possession of the demised premises and, therefore, should be held liable for damages resulting from the loss of its lease with Michel Mosallem.   Defendant responds that the lease imposes no such liability and, in any event, the consequential damages sought by plaintiff were not within the contemplation of the parties at the time they entered into the lease agreement (November 16, 1984).   In the order subject to appeal, Supreme Court denied OTB's cross motion, holding that “even if consequential damages are not foreseeable at the time of the contract, they are recoverable if foreseeable at the time of the holdover.”

“Lease interpretation is subject to the same rules of construction as are applicable to other agreements (Backer Mgt. Corp. v. Acme Quilting Co., 46 N.Y.2d 211, 217, 413 N.Y.S.2d 135, 385 N.E.2d 1062).   The parties' intention should be determined from the language employed, and where the language is clear and unambiguous, interpretation is a matter of law to be determined solely by the court (Hartford Acc. & Indem. Co. v. Wesolowski, 33 N.Y.2d 169, 171-172, 350 N.Y.S.2d 895, 305 N.E.2d 907;  Bethlehem Steel Corp. v. Turner Constr. Co., 2 N.Y.2d 456, 161 N.Y.S.2d 90, 141 N.E.2d 590).   In such circumstances resort cannot be had to extrinsic evidence to contradict the express terms of the writing (Brainard v. New York Cent. R.R. Co., 242 N.Y. 125, 151 N.E. 152)” (Matter of Cale Dev. Co. v. Conciliation and Appeals Bd., 94 A.D.2d 229, 234, 463 N.Y.S.2d 814, affd. 61 N.Y.2d 976, 475 N.Y.S.2d 278, 463 N.E.2d 619).   This approach has been consistently applied by this Court to disputes involving the interpretation of lease provisions (Wallace v. 600 Partners Co., 205 A.D.2d 202, 205, 618 N.Y.S.2d 298, affd. 86 N.Y.2d 543, 634 N.Y.S.2d 669, 658 N.E.2d 715;  Louis R. Morandi, P.C. v. Charter Mgt. Co., 159 A.D.2d 422, 423, 553 N.Y.S.2d 663).

 The action before us seeks to impose liability upon OTB for consequential damages incurred by plaintiff because defendant held over beyond the lease term.   Significantly, the lease contains an express provision imposing such liability, but only under circumstances in which plaintiff seeks to demolish the building and only upon three months' notice to OTB to remove from the premises.   Two conclusions logically follow from the insertion of this provision into the lease agreement.   First, as a rule of construction, the inclusion of consequential damages for holding over under the stated circumstances operates to preclude such damages under circumstances that are not expressly stated.  “Inclusio unius est exclusio alterius” (Two Guys from Harrison-N.Y. v. S.F.R. Realty Assoc., 63 N.Y.2d 396, 403-404, 482 N.Y.S.2d 465, 472 N.E.2d 315;  see also, Woodmere Academy v. Steinberg, 41 N.Y.2d 746, 750, 395 N.Y.S.2d 434, 363 N.E.2d 1169).   Second, the inclusion of a provision for consequential damages reflects their “unusual and extraordinary” nature, requiring them to be “brought within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting” (Chapman v. Fargo, 223 N.Y. 32, 36, 119 N.E. 76).   The provision reflects the parties' expectation that the “usual and customary damages”-removal of the tenant, recovery of use and occupation and incidental damages-is the measure of landlord's recovery (437 Madison Ave. Assocs. v. Kearney, Inc., 127 Misc.2d 37, 39, 488 N.Y.S.2d 950, citing Matter of Jaroslow v. Lehigh Val. R.R. Co., 23 N.Y.2d 991, 993, 298 N.Y.S.2d 999, 246 N.E.2d 757;  see, Real Property Law §§ 220, 232-c;  see also, RPAPL 741[5] ), except under the specified circumstances (see, Tuttle v. Grant Co., 5 A.D.2d 370, 171 N.Y.S.2d 954 [Court should not supply terms that disappointed party might, in retrospect, have inserted into agreement], revd. on other grounds 6 N.Y.2d 754, 186 N.Y.S.2d 655, 159 N.E.2d 202).

 Plaintiff urges this Court to ignore settled law and conclude, as did Supreme Court, that notice of landlord's immediate need for the premises on March 13, 1995 is sufficient to hold defendant liable for loss of the Mosallem lease, signed two days later.   For the same reason stated by the Court of Appeals in Holy Props. v. Cole Prods., 87 N.Y.2d 130, 134, 637 N.Y.S.2d 964, 661 N.E.2d 694, we must decline:

Parties who engage in transactions based on prevailing law must be able to rely on the stability of such precedents.   In business transactions, particularly, the certainty of settled rules is often more important than whether the established rule is better than another or even whether it is the “correct” rule (see, Maxton Bldrs. v. Lo Galbo, 68 N.Y.2d 373, 381, 509 N.Y.S.2d 507, 502 N.E.2d 184).   This is perhaps true in real property more than any other area of the law, where established precedents are not lightly to be set aside (Heyert v. Orange & Rockland Utils., 17 N.Y.2d 352, 360, 271 N.Y.S.2d 201, 218 N.E.2d 263).

 Even if contract law were to be applied to the facts of this case, recovery would nevertheless be unavailable under the rule of Hadley v. Baxendale, 9 Exch. 341, 156 Eng.Rep. 145.   As noted in Kenford Co. v. County of Erie, 73 N.Y.2d 312, 319, 540 N.Y.S.2d 1, 537 N.E.2d 176, recoverable damages are limited to “ ‘liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made ’ ” (quoting Globe Ref. Co. v. Landa Cotton Oil Co., 190 U.S. 540, 544, 23 S.Ct. 754, 755, 47 L.Ed. 1171 [Holmes, J.], emphasis added).   The terms of the subject lease clearly refute plaintiff's assertion that OTB should have expected to be held liable for damages occasioned by holding over, except as specified.

MEMORANDUM DECISION.