67 Wall Street Co. v. Franklin National Bank, 37 N.Y.2d 245 (1975)
When interpreting ambiguous contract language, a court should consider the surrounding circumstances and construe the language against the party who drafted the agreement.
Summary
67 Wall Street Co. (plaintiff) sued Franklin National Bank (defendant) seeking a declaratory judgment that a lease remained in effect despite the defendant’s cancellation. The lease contained a clause allowing either party to cancel if the previous tenant hadn’t vacated by a certain date. The defendant canceled, but the plaintiff argued the cancellation was improper. The trial court found the cancellation effective and denied reformation of the lease. The Appellate Division affirmed. The Court of Appeals found the lease ambiguous, affirmed the lower court’s order, and held that the lease should be construed against the plaintiff, who drafted it.
Facts
Plaintiff, a limited partnership, owned the office building at 67 Wall Street. Defendant needed office space and negotiated a lease for six floors. Article 41 of the lease stated that the current tenant, International Nickel Company (INCO), was expected to vacate by January 1, 1970. The landlord couldn’t guarantee when INCO would leave. The clause allowed either party to cancel the lease if INCO hadn’t vacated by August 31, 1970, with 60 days’ notice. On August 31, 1970, the premises were not available, and the defendant notified the plaintiff of its intent to cancel the lease effective immediately.
Procedural History
Plaintiff sued seeking a declaration that the lease remained in effect. The trial court held the defendant’s cancellation notice legally sufficient and denied reformation of the lease. The Appellate Division affirmed, finding insufficient evidence to support the plaintiff’s interpretation of Article 41. The New York Court of Appeals granted review.
Issue(s)
Whether the cancellation clause (Article 41) in the lease agreement was ambiguous, and if so, how should it be interpreted?
Holding
Yes, the cancellation clause was ambiguous. Because the plaintiff drafted the lease, the ambiguous clause must be construed against the plaintiff and in favor of the defendant.
Court’s Reasoning
The Court of Appeals found that Article 41 was ambiguous and susceptible to different interpretations. While words should not be construed as meaningless if a reasonable construction can be found, the court can look to the surrounding facts and circumstances to determine the parties’ intent when several constructions are possible. “Thus, while the parol evidence rule requires the exclusion of evidence of conversations, negotiations and agreements made prior to or contemporaneous with the execution of a written lease which may tend to vary or contradict its terms, such proof is generally admissible to explain ambiguities therein.” The court noted the trial court properly considered that a contract must be construed most strongly against the party who prepared it, especially when the other party had no say in the language used. The record showed the lease, including the disputed clause, was drafted by the plaintiff’s experienced real estate lawyer. The court cited the rule that