New York Law Review

Tag: Riverside South Planning Corp.

  • 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.