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J.C. Penney Corp., Inc. v. Carousel Center Co.

July 8, 2008


The opinion of the court was delivered by: Scullin, Senior Judge



Plaintiff filed this complaint on November 22, 2004, asserting a number of claims against Defendants concerning its lease obligations as a tenant in the Carousel Mall in Syracuse, New York, and the Galleria Mall in Wallkill, New York. See Complaint at ¶¶ 1-2. First, Plaintiff asserts a breach-of-contract claim against Defendant Carousel Center Company, L.P. ("Carousel"), alleging that Defendant Carousel miscalculated the amount of taxes that Plaintiff owed pursuant to their lease agreement. See id. at ¶ 91. Second, Plaintiff asserts an unjust-enrichment claim and a money-had-and-received claim against Defendant Carousel, alleging that, due to these miscalculations, it payed Defendant Carousel "more than $1 million in excess of the actual amount owed under the Lease for Increased Taxes."*fn1 See id. at ¶¶ 96, 105. Third, Plaintiff requests a judgment against Defendant Carousel declaring that Defendant Carousel improperly calculated Plaintiff's tax obligations under their lease agreement and setting off all future rent obligations by the amounts that it has overpaid. See id. at ¶ 122. Fourth, Plaintiff requests a judgment against Defendant Carousel declaring that Plaintiff's future tax payments be calculated in accordance with its interpretation of the lease provisions. See id. at ¶ 132.

Plaintiff asserts the same claims against Defendant Crystal Run Company, L.P. ("Crystal Run"). See id. at ¶¶ 133-175. Plaintiff seeks damages on all of its claims in excess of $75,000 plus costs, interest, and incidental and consequential damages. Additionally, as stated, Plaintiff seeks declaratory judgment and set-off.

Currently before the Court is Defendants' motion for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure in which they seek dismissal of all of Plaintiff's claims on statute-of-limitations grounds. In the alternative, Defendants seek dismissal of Plaintiff's unjust-enrichment and money-had-and-received claims. They also seek dismissal of one of the theories comprising Plaintiff's breach-of-contract claims: whether Defendants incorrectly calculated "Base Taxes" using payments in lieu of taxes ("PILOTs") instead of the taxes that would otherwise have been assessed during the "Base Years."*fn2

In its complaint, Plaintiff alleges that Defendants miscalculated its tax charges in a number of ways. In addition to asserting that Defendants Carousel and Crystal Run incorrectly used PILOTs to calculate "Base Taxes," Plaintiff asserts that Defendant Carousel used the wrong year to calculate the "Base Year," incorrectly used a combined land and improvements value to calculate "Taxes Applicable to the Demised Premises," and erroneously charged it for water and sewer taxes on multiple parcels of land for which it was not responsible. See id. at ¶¶ 31-35, 52-56, 64-68. Furthermore, Plaintiff asserts that Defendant Crystal Run incorrectly calculated its tax bills based on tax lots for which it was not responsible. See id. at ¶¶ 84-85. Since Defendants only seek dismissal of Plaintiff's breach-of-contract claims based on one of these theories, resolution of this motion may influence the determination of Plaintiff's other theories but it does not bear on them directly.


On January 10, 1990, Plaintiff and Defendant Pyramid Company of Onondaga ("Pyramid"), developer of the Carousel Mall, entered into a twenty-five-year lease ("Carousel Lease"). See Complaint at Exhibit "A." Defendant Carousel assumed Defendant Pyramid's obligations under the Carousel Lease on or about October 17, 1995, and is the current landlord and operator of the Carousel Mall. See id. at ¶¶ 7, 14.

On May 15, 1990, Plaintiff and Defendant PCM Development Company ("PCM"), developer of the Galleria Mall, entered into a twenty-year*fn3 lease ("Galleria Lease"). See id. at Exhibit "B." Defendant Crystal Run assumed Defendant PCM's obligations under the Galleria Lease on or about August 22, 1996, and became the landlord and operator of the Galleria Mall. See id. at ¶ 17.

Defendants Pyramid and PCM sought and obtained revenue bond financing to develop the malls. Pursuant to an agreement with the Syracuse Industrial Development Agency, Defendant Pyramid agreed to pay the city PILOTs instead of the taxes that the city would otherwise have assessed on the property. See id. at ¶ 38. Defendant PCM entered into a similar PILOT agreement with the Town of Wallkill Industrial Development Agency. See id. at ¶ 73.

In addition to providing for base rent, both the Carousel Lease and the Galleria Lease ("Leases") contain tax escalation clauses, which state that,

[f]or each Lease Year after the Lease Year for which the Base Taxes shall have been established until the end of the term hereof Tenant shall pay Landlord in accordance with the provisions of paragraph F below, as additional rent, the amount by which the Taxes Applicable to the Demised Premises for such Lease Year exceed the Base Taxes . . . .

See Complaint at Exhibit "A" at 43, Exhibit "B" at 43.

Plaintiff claims that it made all payments as calculated by Defendants under the tax escalation clauses without objection until April 16, 2004, at which time it demanded that Defendant Crystal Run return its overpayments, and until June 11, 2004, at which time it demanded that Defendant Carousel return its overpayments. See id. at ¶¶ 100, 143.


A. Timeliness of Plaintiff's Claims

1. Breach-of-Contract and Unjust-enrichment Claims

Defendants contend that, since Plaintiff did not file its complaint within six years of the initial alleged breaches of contract, all of its claims are time-barred pursuant to the six-year statute of limitations set forth in N.Y. C.P.L.R. § 213(2). Plaintiff concedes that N.Y. C.P.L.R. § 213(2) bars its claims to the extent that they relate to rent overpayments made more than six years before it filed its complaint on November 22, 2004. Plaintiff counters, however, that its claims relating to overpayments made on or after November 22, 1998, are not ...

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