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Bank of New York v. Hirschfeld

37 N.Y.2d 501 Court N.Y. Decision date 1975-09-23 English

Delivered by Jasen, J.

Contents

Majority

p. 501
Bank of New York, Albany (Formerly Known as Mechanics and Farmers’ Bank of Albany), Respondent, v Abraham Hirschfeld et al., Defendants, and New York State Teachers’ Retirement System, Appellant. Bank of New York, Albany (Formerly Known as Mechanics and Farmers’ Bank of Albany), Plaintiff, v Abraham Hirschfeld et al., Respondents, and New York State Teachers’ Retirement System, Appellant.
Argued June 9, 1975;
decided September 23, 1975
p. 502
Francis H Trombly for appellant in the first above-entitled matter.
I. Covenant 42 of the bank lease does not run with title to the land at 112 State Street. (Nye v Hoyle, 120 NY 195 ; Mott v Oppenheimer, 135 NY 312 ; Rodolitz v Neptune Paper Prods., 22 NY2d 383 ; Laba v Carey, 29 NY2d 302 ; Nicholson v 300 Broadway Corp., 7 NY2d 240 ; Miller v Clary, 210 NY 127 ; Neponsit Prop. Owners’ Assn. v. Emigrant Ind. Sav. Bank, 278 NY 248 .) II. Judgment of specific performance against teachers is contrary to legal principles. (Pratt v Clark, 49 Misc 146 , 118 App Div 633 ; Newman v Resnick, 38 Misc 2d 94 ; Grossman v Schenker, 206 NY 466 ; Moran v Standard Oil Co., 211 NY 187 ; Matter of Hirschfeld v Burke, 20 AD2d 130 , 14 NY2d 889 ; Hirschfeld v Borchard Affiliations, 20 Misc 2d 680 ; S & L Paving Corp. v MacMurray Tractor, 61 Misc 2d 90 .) III. Judgment of specific performance against teachers would be contrary to long-standing equitable principles. (Prospect Park & Coney Is. R. R. Co. v Coney Is. & Brooklyn R. R. Co., 144 NY 152 ; Matter of Grayson-Robinson Stores [Iris Constr. Corp.], 8 NY2d 133 .) IV. The order denying teachers’ motion for dismissal of the complaint against it and the judgment granting specific performance to plaintiff insofar as it is against teachers should be reversed and summary judgment in teachers’ favor should be granted. (Rentways, Inc. v O’Neill Milk & Cream Co., 308 NY 342 ; Mallad v County Fed. Sav. & Loan Assn., 32 NY2d 285 .)
Victor A. Lord for respondent in the first above-entitled matter.
I. Covenant 42 of the lease "runs with the land” and constitutes a binding obligation to provide parking spaces on the part of New York State Teachers’ Retirement System. (Matter of Monument Garage Corp. v Levy, 266 NY 339 ; Nicholson v 300 Broadway Realty Corp., 7 NY2d 240 ; Rhine-lander Real Estate Co. v Cammeyer, 117 Misc 67 , 216 App Div
p. 503
299 ; Hart v Socony-Vacuum Oil Co., 291 NY 13 .) II. The "Saperstein ” principle of "vain judgment” is not applicable to the decree of specific performance sought herein. (Saperstein v Mechanics & Farmers Sav. Bank, 228 NY 257 ; Pratt v Clark, 49 Misc 146 ; Newman v Resnick, 38 Misc 2d 94 .) III. Appellant’s claim that execution of the supplemental agreement extinguished the obligation of Covenant 42, begs the question and flies in the face of reality. (North Shore Mart v Grand Union Co., 58 Misc 2d 640 ; McLoughlin v Bieber, 41 App Div 561 ; Nicholson v 300 Broadway Realty Corp., 7 NY2d 240 ; I. H. P. Corp. v 210 Cent. Park South Corp., 16 AD2d 461 ; Sciaballa v Illinois Sur. Co., 166 App Div 677 , 215 NY 692 .) IV. The judgment of specific performance against appellant is not inequitable. (Hodge v Sloan, 107 NY 244 .)
Francis H. Trombly for appellant in the second above-entitled matter.
I. The supplemental agreement (garage lease) constitutes a complete defense, under CPLR 3211 (subd [a], par 1), against the cross claim of defendants Hirschfeld and "112”. (Rentways, Inc. v O’Neill Milk & Cream Co., 308 NY 342 ; Grossman v Schenker, 206 NY 466 ; Moran v Standard Oil Co., 211 NY 187 ; Rodolitz v Neptune Paper Prods., 22 NY2d 383 .) II. Neither section 223 of the Real Property Law nor the nonconsensual suretyship doctrine imposes liability on teachers of performance of the garage lease. (Murray v Marshall, 94 NY 611 .) III. Covenant 42 does not override respondents’ liability under the garage lease. IV. The garage lease and Covenant 42 of the bank lease created an easement in favor of bank lease in premises 104-110 State Street. (Bank of N. Y., Albany v Hirschfeld, 45 AD2d 391 ; Tarantelli v Tripp Lake Estates, 23 AD2d 905 ; Nye v Hoyle, 120 NY 195 ; Miller v Clary, 210 NY 127 ; Morehouse v Woodruff, 218 NY 494 .) V. The equities here weigh heavily in favor of teachers. (Black v General Wiper Supply Co., 305 NY 386 ; Equity Corp. v Groves, 294 NY 8 ; Latham v Father Divine, 299 NY 22 .) VI. The courts below were in error in granting summary judgment to respondents. (Terranova v Emil, 20 NY2d 493 ; Procter & Gamble Distr. Co. v Lawrence Amer. Field Warehousing Corp., 16 NY2d 344 ; Jered Contr. Corp. v New York City Tr. Auth., 22 NY2d 187 ; Janos v Peck, 21 AD2d 529 , 15 NY2d 509 ; Manufacturers & Traders Trust Co. v Bell, 270 App Div 796 , 296 NY 844 ; Glick & Dolleck v Tri-Pac Export Corp., 22 NY2d 439 ; Millerton Agway Coop. v Briarcliff Farms, 17 NY2d 57 .)
p. 504
Jerome Frost for respondents in the second above-entitled matter.
I. Both lower courts’ decisions that the parking space covenant runs with the land are right and should be affirmed. (Neponsit Prop. Owners’ Assn. v Emigrant Ind. Sav. Bank, 278 NY 248 ; Nicholson v 300 Broadway Realty Corp., 7 NY2d 240 ; Tarantelli v Tripp Lake Estates, 23 AD2d 905 , 63 Misc 2d 913 ; Greenfarb v R. S. K. Realty Corp., 256 NY 130 ; Mott v Oppenheimer, 135 NY 312 ; Nye v Hoyle, 120 NY 195 .) II. The liability of Mr. Hirschfeld and 112 State Street Operating Co., Inc. to furnish the 10 parking spaces is that of a surety only. As between them and defendant teachers, defendant teachers, the owner of the premises and the recipient of the rents under the lease, is the principal obligor, and owes them as sureties the duties of exoneration and reimbursement, and therefore has the primary duty of furnishing the 10 parking spaces under the lease. (Paris v Lawyers Tit. Ins. & Trust Co., 206 NY 637 ; Murray v Marshall, 94 NY 611 .) III. If equitable considerations are germane on this appeal, the equities lie with Mr. Hirschfeld and 112, not teachers.

On May 18, 1971, plaintiff Bank of New York, Albany, entered into a lease with defendant Abraham Hirschfeld through his agent, defendant 112 State Street Operating Co., Inc. The lease involves a portion of an office building located on premises known as 112 State Street, Albany, then owned by Hirschfeld. Covenant 42[1] of the lease requires the landlord to provide the bank, free of charge, 10 parking spaces in a garage scheduled for construction on adjoining premises. Simultaneously with the execution of this bank lease, a supplemental garage lease for these 10 parking spaces was entered into. Memoranda of both the bank lease and the garage lease were subsequently recorded. On January 2, 1972, Hirschfeld conveyed the 112 State Street premises, subject to the bank lease, to his agent 112 State Street Operating Co., Inc., which on January 19, 1973, in lieu of foreclosure, conveyed the premises, subject to the bank lease, to appellant Teachers’ Retirement System. Thereafter, Hirschfeld, who still owned

* Covenant 42 of the lease provides in relevant part: "Landlord will provide ten (10) free parking spaces in the adjoining garage building to be erected at 104-110 State Street free of charge to Tenant during the term of lease, or of any renewal periods. * * * A supplemental lease between Abraham Hirschfeld and the Tenant is being entered into today providing ten (10) free spaces to Tenant as part of the consideration of this lease. Said spaces are to be available throughout the term of this lease and any and all renewal periods.”

p. 505
the garage building, refused to provide the 10 parking spaces to the bank free of charge.

The bank initiated this suit against Hirschfeld, the Operating Company and the Teachers’ Retirement System to enforce the parking arrangement. In the same action, Hirschfeld and his Operating Company cross-claimed against Teachers’ Retirement System, seeking a determination that Teachers’ Retirement System is the primary obligor with respect to providing the parking spaces to the bank.

Special Term ordered Hirschfeld and his agent, the Operating Company, to specifically perform under the terms of the garage lease and the Teachers’ Retirement System to perform pursuant to the bank lease. Special Term also granted Hirschfeld and his agent summary judgment on their cross claim against Teachers’ Retirement System. By divided courts, the Appellate Division affirmed both judgments. Teachers’ Retirement System appeals to our court.

While we agree with the Appellate Division that the bank has recourse against Teachers’ Retirement System, under the bank lease, as well as against Hirschfeld and his Operating Company, under the garage lease, we do not agree that the remedy of specific performance imposed against Teachers’ Retirement System was proper. We also agree with the Appellate Division that as between Teachers’ Retirement System and Hirschfeld, the former has the primary duty to provide the tenant with the parking spaces.

Although we would affirm both orders in all other respects, we do so on grounds different from those articulated below. We hold that the basis of Teachers’ Retirement System’s liability is that, by taking title to the 112 State Street premises, even though stated to be only "subject to” the existing bank lease, it assumed all of the obligations of the landlord under the lease, including the requirement to furnish the bank with 10 free parking spaces, as provided for in Covenant 42.

This covenant places various obligations upon the landlord at 112 State Street. Some of these obligations, such as building a parking ramp on the adjoining property with connecting passageway, have been fulfilled. However, a continuing responsibility exists to provide the bank with 10 free parking

p. 506
spaces "during the term of lease, or of any renewal periods.” This continuing obligation is binding upon successor landlords who take title with notice, actual or constructive, of this obligation. Covenant 33 of the lease provides, in part, that "in the event of any sale * * * of said land and building * * * it shall be deemed and construed without further agreement between the parties or their successors in interest * * * that the purchaser * * * of the building has assumed and agreed to carry out any and all covenants and obligations of the Landlord hereunder.” A memorandum of this lease was duly recorded, giving any subsequent purchaser notice of each of the covenants of the lease. (Real Property Law, § 291-c.) Thus, Teachers’ Retirement System is charged with notice of said covenants and the obligations thereunder. It is true that, in the absence of an affirmative assumption, a grantee is not liable on any covenants or agreements by which the grantor may have bound himself, unless, of course, the covenant runs with the land. (See Spivak v Madison — 54th Realty Co., 60 Misc 2d 483 , 487; 51C CJS, Landlord and Tenant, § 44 [3], pp 126-127.) Here, however, Teachers’ Retirement System, by taking title to the premises "subject to” the existing bank lease, without taking exception to the terms of Covenants 33 and 42, affirmatively assumed the contractual liability of the original landlord to carry out the covenants and terms of the lease. (See Hart v Socony-Vacuum Oil Co., 291 NY 13 , 17.)

In assuming the obligation to carry out the covenants of the bank lease, Teachers’ Retirement System not only obligated itself to furnish the bank 10 free parking spaces, but, pursuant to Covenant 33, it also "entirely freed and relieved [Hirschfeld] of all covenants and obligations” under the lease. Nevertheless, since Teachers’ Retirement System has neither title to nor any contract rights with respect to the garage property, it may be beyond its power to provide 10 parking spaces in this garage. In that situation the order directing specific performance by Teachers’ Retirement System would become a "vain judgment”. This much of the order was therefore inappropriate. (Cf. Saperstein v Mechanics & Farmers Sav. Bank, 228 NY 257 , 260; 55 NY Jur, Specific Performance, § 37, p 510; 5 Carmody-Wait 2d, NY Practice, § 29:978, p 525.) In imposing ultimate liability upon Teachers’ Retirement System under the bank lease, both the bank and Hirschfeld must be relegated to their remedy in money damages, either by abatement or apportionment of rent under the bank lease, or reimbursement for the normal and reasonable rental value

p. 507
of the parking spaces, or otherwise. Should these remedies become appropriate, the parties may, if they be so advised, apply to Special Term for relief at the foot of the judgment.

Accordingly, the orders appealed from should be modified to the extent of deleting the direction of specific performance by Teachers’ Retirement System, and, as modified, affirmed.

Chief Judge Breitel and Judges Gabrielli, Jones, Wachtler and Cooke concur; Judge Fuchsberg taking no part.

In each case: Order modified, without costs, in accordance with the opinion herein and, as so modified, affirmed.

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