An HMY Major Win of Over $680,000

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AN UNAMBIGUOUS LEASE, LIKE ANY CONTRACT, MUST BE INTERPRETED AS A MATTER OF LAW

Recently, Lane T. Maxson, Esq., Managing Partner of HMY, successfully moved for summary judgment on behalf of the Bellmore-Merrick Central High School District (the “District”) against the Board of Cooperative Educational Services of Nassau County (“BOCES”), in a contract interpretation case that resulted in a money judgment in favor of the District of over $680,000.00.

The case involved the interpretation of a 10-year lease between the parties, and a subsequent purchase agreement between the parties, executed about one year prior to the end of the lease term.  BOCES had agreed to purchase the leased property for $12 million.

The closing for the sale of the property occurred five months after the expiration of the lease term.  At the closing, BOCES refused to pay five months’ rent that the District claimed accrued pending closing of title, arguing that the lease had expired five months earlier and BOCES was, therefore, not obligated to pay rent.

The District disagreed, commenced an action for rent, and upon the District’s motion for summary judgment, the Hon. Vito M. DeStefano of the Commercial Division, Nassau County Supreme Court, agreed with the District.

In opposition to the motion, BOCES argued there was an ambiguity in the purchase agreement which expressly provided that the underlying lease could not be extended without a mutual agreement. In answer to this argument, Justice DeStefano reasoned that whether a writing is ambiguous is a question of law to be determined by the court and the determination of the intent of the parties to a contract should be made as a matter of law “whereas here, the intent is discernible from the four corners of an unambiguously-worded agreement.”

Justice DeStefano, “in viewing the Purchase Agreement in its entirely,” concluded that BOCES was obligated to pay the rent for the five month period because that agreement expressly stated the lease “‘shall be terminated at Closing’ (paragraph 4); the closing shall be July 1, 2018 or 30 days after obtaining approval of the lot subdivision, whichever is later (paragraph 5); ‘between the date hereof and the Closing Date… [t]he current lease to remain in effect’ (paragraph 21); and that ‘rent’ is ‘to be apportioned at the closing date’ (paragraph 8).”

In rejecting BOCES’ arguments (1) that the parties “must have contemplated” a closing prior to July 1, 2018, because the purchase agreement “intentionally and expressly did not extend the lease,” and (2) that the contractual apportionment of rent at closing was “intended to address the scenario where the parties closed” before the expiration of the lease term, Justice DeStefano reasoned: “While BOCES argues that the allocation provision only applied in the event the closing occurred prior to the end of the Lease term, ‘courts may not by construction add terms…under the guise of interpreting the writing.’ Moreover, the court declines to interpret the Purchase Agreement, as a matter of law, to include something that the parties have neglected to specifically include.”

Justice DeStefano also granted the District’s motion for summary judgment dismissing BOCES’ two counterclaims sounding in breach of contract and unjust enrichment.

With respect to the breach of contract counterclaim, BOCES claimed damages as a result of an alleged intentional delay on the part of the District to close title, but justice DeStefano concluded that “[h]aving closed on the purchase of the premises, with full knowledge of the District’s purported delay, BOCES’ claim to recover damages for the District’s delay in closing beyond the date contemplated by the Purchase Agreement is without mere merit. In any event, ‘delay, even “substantial delay,” in the closing of a real estate transaction does not constitute a breach of the contract of sale.’”

With respect to the unjust enrichment counterclaim, Justice DeStefano concluded that such recovery is “inappropriate if there exists a valid and enforceable contract between the parties. It is impermissible…to seek damages in an action sounding in quasi contract where the suing party has fully performed on a valid written agreement, the existence of which is undisputed, and the scope of which clearly covers the dispute between the parties.”

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