New York Law Review

Tag: real estate development

  • Riverside South Planning Corp. v. CRP/Extell Riverside, L.P., 13 N.Y.3d 398 (2009): Interpreting Sunset Clauses in Real Estate Development Agreements

    13 N.Y.3d 398 (2009)

    When interpreting contracts, particularly in real estate transactions, courts must enforce the agreement according to its clear terms, giving paramount concern to commercial certainty and avoiding the addition or excision of terms.

    Summary

    Riverside South Planning Corp. (RSPC) sued CRP/Extell Riverside (Extell) for breach of contract, alleging Extell violated a 1993 Letter Agreement concerning the development of Riverside South. The agreement contained a sunset clause limiting its duration to 10 years. Extell argued the agreement expired before it purchased the property. The court held that the sunset clause unambiguously terminated the agreement 10 years after its execution, precluding Extell’s liability because Extell purchased the property two years after the contract’s expiration. The court emphasized the importance of adhering to the clear terms of agreements in real estate, especially when negotiated by sophisticated parties.

    Facts

    In 1993, Donald Trump, then controlling Penn Yards Associates, entered into a Letter Agreement with RSPC regarding the Riverside South development. The agreement addressed design guidelines, park development, and required Trump to assign the agreement’s obligations to any purchaser of the property. A sunset clause stipulated that “the agreements contained herein” would last 10 years. In 2005, Hudson Waterfront Associates, which had acquired the property from Penn Yards, sold it to Extell. Extell initially complied with the Letter Agreement but later asserted it was not bound by it, claiming the agreement had expired in 2003 based on the sunset clause.

    Procedural History

    RSPC sued Extell for breach of contract. The Supreme Court denied Extell’s motion to dismiss, finding the sunset clause ambiguous. The Appellate Division reversed, granting Extell’s motion, holding the sunset clause unambiguously terminated the agreement. RSPC appealed to the New York Court of Appeals.

    Issue(s)

    Whether the sunset clause in the 1993 Letter Agreement unambiguously terminated the agreement 10 years after its execution, thereby precluding Extell’s liability for breach of contract.

    Holding

    Yes, because the phrase “the agreements contained herein” in the sunset clause unambiguously encompasses all obligations in the contract, and no other language limits its applicability.

    Court’s Reasoning

    The court emphasized that contracts should be enforced according to their clear terms, especially in real estate where commercial certainty is crucial. The court found no ambiguity in the sunset clause, stating that “[w]hether an agreement is ambiguous is a question of law for the courts… Ambiguity is determined by looking within the four corners of the document, not to outside sources” (Kass v Kass, 91 NY2d 554, 566 [1998]). The court rejected RSPC’s argument that the assignment clause created ambiguity, explaining the assignment clause was triggered only if Trump sold a portion, but not all, of the property while retaining an interest in other parcels. The court stated: “[t]he agreements contained herein shall continue for ten (10) years…” The court held that the plain meaning of the sunset clause limited all obligations, including the assignment obligation, to a maximum of 10 years. Since Extell purchased the property after the agreement’s expiration, it had no contractual obligations to RSPC. The court also noted that RSPC negotiated a Development Plan recorded in the chain of title, binding all successors, including Extell, ensuring the long-term sustainability and design criteria of the development.

  • Rector, Church Wardens & Vestrymen of St. Bartholomew’s Church v. Committee to Preserve St. Bartholomew’s Church, 68 N.Y.2d 71 (1986): Permissible Use of Church Funds

    Rector, Church Wardens & Vestrymen of St. Bartholomew’s Church v. Committee to Preserve St. Bartholomew’s Church, 68 N.Y.2d 71 (1986)

    A religious corporation may use its funds for activities incidental to its support and maintenance, including income-producing activities, as long as the proceeds support the corporation’s spiritual objectives.

    Summary

    This case addresses whether St. Bartholomew’s Church’s use of funds to develop a commercial office tower on its property violates Religious Corporations Law § 5, which requires funds to be used for the “support and maintenance” of the church. The Court of Appeals held that the church’s activities did not violate the statute. The Court reasoned that Religious Corporations Law § 5 permits a church to engage in activities incidental to its maintenance, including efforts to improve its financial condition through real estate development, provided the proceeds are used to support the church’s spiritual objectives, and the trustees act honestly and fairly.

    Facts

    St. Bartholomew’s Church, a designated landmark, sought to construct an office tower on its property through a long-term lease arrangement. The New York City Landmark Preservation Commission repeatedly denied the church a certificate of appropriateness. A group of parishioners challenged the church’s expenditure of funds to contest the landmark designation and pursue the office tower development plan, claiming it violated Religious Corporations Law § 5.

    Procedural History

    The parishioners filed suit seeking a declaratory judgment and an injunction to prevent further expenditure of church funds on the office tower project. The lower courts dismissed the claim. The Court of Appeals affirmed the dismissal, holding that the church’s actions did not violate Religious Corporations Law § 5.

    Issue(s)

    Whether the use of St. Bartholomew’s Church funds to pursue the development of a commercial office tower on church property constitutes a violation of Religious Corporations Law § 5, which requires funds to be used for the “support and maintenance” of the church.

    Holding

    No, because the development plan is incidental to the maintenance and upkeep of the religious corporation as it is designed to improve the financial condition of the church and to support its activities.

    Court’s Reasoning

    The Court reasoned that Religious Corporations Law § 5 provides an orderly method for administering church property and ensuring it is used for the benefit of the religious group. An incorporated church is free to engage in enterprises that are incidental to its maintenance. The court emphasized that a church can invest in income-producing property to preserve its funds and ensure its continued viability, stating that trustees are empowered to administer church property in a way that makes assets more productive to assure the continued viability of the corporation’s spiritual objectives. Any profit-making activities are subject to the limitation that the proceeds must support the lawful purpose of the spiritual church. As long as the profit-seeking activity is reasonably incidental to the church’s support and maintenance, and directed towards meeting the needs of the spiritual church, judicial interference is unwarranted. The court stated, “[w]here, as here, the profit-seeking activity undertaken by the trustees of a religious corporation is reasonably incidental to its support and maintenance, and is directed toward assuring that the needs of the ‘spiritual church’ will be met, there is no occasion for a court’s interference in the process.” The Court deferred to the church members’ determination of the prudence of the investment, finding no evidence that the trustees acted dishonestly or unfairly, or abandoned church purposes for commercial gain.