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BLOOR v. CHASE MANHATTAN MORTG. & REALTY TRUST

March 13, 1981

James BLOOR, as Reorganization Trustee of Invesco Holding Corporation, Plaintiff,
v.
CHASE MANHATTAN MORTGAGE AND REALTY TRUST, Stevens & Edwards, Inc., W. G. Management Co., Rubin Garfinkel and Albert Wohl, Defendants



The opinion of the court was delivered by: KNAPP

MEMORANDUM and ORDER

Plaintiff James Bloor, Reorganization Trustee of Invesco Holding Corporation (the "trustee"), moves for summary judgment on the First Claim for Relief stated in his complaint against defendant Chase Manhattan Mortgage and Realty Trust ("Chase REIT") for breach of a lease agreement. We grant that motion.

 The Facts

 The trustee was the fee owner of certain improved real property located at 315 West 57th Street and 330 West 58th Street, New York, New York (the "premises"). Commencing in 1961, these premises were subject to a ground lease made between plaintiff's predecessor in interest as landlord, and Hyman and Irving Shapiro as tenants. The ground lease was a complicated document with fifty-two separate provisions, only three of which are relevant here.

 Article Third of the ground lease provided for payment by the tenant to the landlord of all real estate taxes and water and sewer charges assessed against the premises at or after the date of the lease or during any renewal thereof. These payments, denominated "additional rent," were to be made "at least five days before the said payments shall be due without penalty." *fn1"

 Article Seventeenth of the ground lease provided that a default in payment of additional rent for ten days after such rent became due and payable would constitute a default by the tenant and a breach of the lease.

 Article Fiftieth dealt with what would happen in the event of an assignment. Pursuant to this provision, an assigning tenant was relieved of all contractual liability under the lease "except for payment of the net rent and additional rent ... due and payable to the date of the (assignment)." Upon a valid assignment or transfer in whole of a tenant's interest under the ground lease, Article Fiftieth provided, in addition, that "the term "tenant' as used in this lease (would) thereafter mean only the assignee or transferee thereof."

 In 1971, the Shapiros mortgaged their interest under the ground lease to Chase REIT. On July 15, 1976, Chase REIT accepted an assignment of the ground lease from the Shapiros and took possession of the premises. On September 28, 1976 water and sewer charges in the amount of $ 1,900.17 were assessed against the premises by the City of New York, and on October 1, 1976, an installment of real estate taxes in the amount of $ 125,328.75 was assessed against the premises by the City of New York. At this time, New York City provided a 30-day grace period for payment without penalty of water and sewer charges and of real estate tax installments.

 On October 29, 1976, Chase REIT purported to assign all of its interest in the premises to Stevens & Edwards, Inc. ("Stevens & Edwards") and ceased making rental payments. Neither Chase REIT nor Stevens & Edwards paid the September 28, 1976 water and sewer charges or the October 1, 1976 real estate tax installment.

 Thereafter, having been notified by the first mortgagee that it would act to protect its interests unless all real estate taxes were brought current within ten days, plaintiff authorized its agent to pay the October 1, 1976 real estate tax installment, together with interest, from amounts that had been collected by such agent for plaintiff. On December 6, 1977 plaintiff sold the premises. Pursuant to the contract of sale, the purchaser paid the September 28, 1976 water and sewer charges with interest through December 6, 1977 out of the sale proceeds due plaintiff.

 Plaintiff now moves for summary judgment against Chase REIT for the amounts expended in payment of the September 28, 1976 water and sewer charges and the October 1, 1976 real estate tax installment.

 Discussion

 On January 17, 1979 we rendered an opinion in this action deciding a summary judgment motion by defendant Chase REIT. We there held that, because Chase REIT never contracted to assume any of the tenant's liabilities when it entered into possession of the premises, there was no privity of contract between it and the trustee. The trustee could prevail, therefore, only to the extent that it was able to establish liability under the doctrine of privity of estate.

 That doctrine provides that a mortgagee who accepts assignment of a lease and thereafter enters and assumes possession of the premises becomes liable for rent accruing during his possession and for all "covenants in the original lease which run with the land." Century Holding Co. v. Ebling Brewing Co. (App. Term, 1st Dept. 1917), 98 Misc. 226, 162 N.Y.S. 1061, 1064 (App. Term, 1st Dept. 1917) 167 N.Y.S. 52, (1st Dept. 1918) 185 App.Div. 292, 173 N.Y.S. 49, quoting Stewart v. Long Island R.R. Co. (1886) 102 N.Y. 601, 8 N.E. 200. Liability, however, may be terminated by assignment of the lease to any third party "together with the note for which the lease was security." 162 ...


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