SPLIT RAIL HOLDINGS LLC v. 176 GRAND ST CORP (2018)

Order, Supreme Court, New York County (Saliann Scarpulla, J.), entered January 23, 2018, which granted plaintiff Split Rail Holdings LLC's (Split Rail) motion for summary judgment for specific performance, dismissed Split Rail's cause of action for breach of contract as moot, denied 176 Grand's cross motion for summary judgment on its ninth affirmative defense and its first and second counterclaims, and dismissed the counterclaims, unanimously affirmed, with costs.

Construing the lease according to its plain meaning, and harmonizing the contractual provisions (Natixis Real Estate Capital Trust 2007–HE2 v. Natixis Real Estate Holdings, LLC, 149 A.D.3d 127, 133, 50 N.Y.S.3d 13 [1st Dept. 2017] ), Article 43.A of the lease, titled “Option to Purchase Fee Ownership of the Landlord,” which specifically stated that “the Tenant shall have the option to acquire Landlord's fee interest in the Demised Premises” created an option to purchase the subject property.  Nor was the lease void under the statute of frauds, as the lease was signed by the corporate president, pursuant to the executed consent of all shareholders (see General Obligations Law § 5–703).

The purchase price was calculated based on ten times the annual rent during the year Split Rail exercised the purchase option, i.e., “Year 15 times ten,” equating to a purchase price of $6,355,477.40, as Article 2(a) lists base rent as rent per year.  As with any contract, a lease should also be construed in a commercially reasonable manner (see E–Z Eating 41 Corp. v. H.E. Newport L.L.C., 84 A.D.3d 401, 409, 922 N.Y.S.2d 329 [1st Dept. 2011] ).  It would not make economic sense for 176 Grand to delay its opportunity to compel the purchase of the subject property beyond year six, as provided in Article 43.B of the lease, since it would be entitled to a better price at that time.  A single provision should not render the lease ambiguous, when other provisions of the lease support a conclusion that the purchase price is based on annual rent (see Eighth Ave. Coach Corp. v. City of New York, 286 N.Y. 84, 88–89, 35 N.E.2d 907 (1941) ].

Contrary to 176 Grand's contention, specific performance is available on the sale of commercial property (see Bright Stone Corp. v. J & J Assoc. II, LLC, 161 A.D.3d 628, 628–629, 78 N.Y.S.3d 29 [1st Dept. 2018] ) and was appropriate here where, as the trial court noted, Split Rail lost “a bargained-for contractual right to exercise an option to purchase the Property” (see Matter of Lamberti v. Angiolillo, 73 A.D.3d 463, 464, 905 N.Y.S.2d 560 [1st Dept. 2010], lv denied 15 N.Y.3d 711, 2010 WL 4067279 [2010] ).  For these reasons, the grant of summary judgment in favor of plaintiff, and the denial of summary judgment as to defendant's ninth affirmative defense and counterclaims was correct.