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Riverside South Planning Corp. v. CRP/Extell Riverside

December 30, 2008

RIVERSIDE SOUTH PLANNING CORPORATION, PLAINTIFF-RESPONDENT,
v.
CRP/EXTELL RIVERSIDE, L.P., ET AL., DEFENDANTS-APPELLANTS.



Defendants appeal from the order of the Supreme Court, New York County (Richard B. Lowe, III, J.), entered March 25, 2008, which denied its motion to dismiss the complaint.

The opinion of the court was delivered by: Catterson, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Peter Tom, J.P., David B. Saxe, Milton L. Williams, James M. Catterson and Karla Moskowitz, JJ.

Index 115909/07

The instant appeal presents the issue of one party seeking to obtain through litigation and rhetoric what it plainly could not obtain from its adversaries through contract negotiations. Plaintiff claims that it is entitled to the enforcement of certain design guidelines indefinitely and absolutely. We find that it is not entitled to such enforcement because the terms of the underlying contract are plain and unambiguous. Furthermore, the contract expressly negates the possibility that its obligations were to run with the land.

In the early 1990s, Donald J. Trump allied himself with a coalition of civic, environmental and neighborhood groups, in order to gain support for his development of the land that stretches along the Hudson River from 59th to 72nd Street, the old Penn Central railway yard. In exchange for the coalition's pledge to support Trump during the governmental land-review process, Trump agreed to reach a compromise on the plan for development of Riverside South. After extensive negotiation, Trump withdrew his original proposal for development which had generated fierce public opposition and accepted a scaled-back plan for development (hereinafter referred to as the "Development Plan").

The Development Plan focused on environmental sustainability and design criteria for the buildings and called for parks, open spaces and public arts programs. Trump and the coalition of community groups formed the plaintiff, the Riverside South Planning Corporation (hereinafter referred to as the "RSPC"), a not-for-profit corporation, designed to oversee the planning, design and construction of Riverside South pursuant to the Development Plan.

On or about March 31, 1993, Penn Yards Associates (hereinafter referred to as "Penn Yards") by its general partner, Trump, and the RSPC, together with various civic groups, entered into a four-page letter agreement (hereinafter referred to as the "1993 Agreement") setting forth the specific terms upon which the coalition of community groups would support the Development Plan. Annexed to the 1993 Agreement were two pages titled "Legal Requirements."

Under the 1993 Agreement, RSPC was to have an active role in planning Riverside South and ensuring that it was developed pursuant to the environmental sustainability and design principles set forth in the Development Plan. Specifically, Trump agreed that the parties would coordinate their efforts and that if he utilized "Special Permits," he would develop the project in substantial conformity with the Riverside South Design Guidelines (hereinafter referred to as the "Design Guidelines").*fn1

After setting forth certain joint undertakings, the 1993 Agreement binds Trump to certain obligations as follows:

"We agree that RSPC may be dissolved at any time by mutual agreement of the parties, and that I shall have the right to dissolve RSPC if (1) we do not reach agreement on the development of the studio site, (2) Richard Kahan or a successor mutually agreed upon no longer heads RSPC or (3) any member organization withdraws from participation in RSPC. You agree to execute documents, promptly following request, and we shall jointly seek all required approvals, necessary to effect such dissolution. The agreements in this letter relating to design guidelines, park maintenance and operation, and restrictions on major modifications and rezoning shall survive the dissolution of RSPC, in which event approvals and consents of RSPC regarding these matters shall be granted by a majority of a three (3) person panel (including Donald J. Trump) to be acceptable to both me and the other members of the board of RSPC. The agreements contained herein shall continue for ten (10) years, or such lesser period as either of the following conditions shall no longer remain satisfied: (1) the Special Permits shall remain in effect; and (2) I shall own, directly or indirectly, all or any portion of the subject property." (emphasis added). (hereinafter referred to as the "sunset" provision).

The next paragraph of the 1993 Agreement reads:

"I agree that I will require any person who purchases any Parcel of the Subject Property from me so long as the Special Permits remain in effect, to agree to abide by the agreements in this letter insofar as they relate to the development of the project and the park, delegation of park maintenance, and the restrictions on seeking changes in the approved plan. In particular, I will contractually require the purchaser(s) to agree to develop such parcel in accordance with these guidelines and not to apply for any changes or modifications in the approved plan not permitted hereunder so long as the Special Permits remain in effect without approval of a majority of the members of RSPC, which approval is not to be unreasonably withheld or delayed."

Trump then agreed to fund RSPC for three years. After that period Trump had the option but not the obligation to continue the funding.

The Legal Requirements attached to the 1993 Agreement state that the 1993 Agreement was not "intended to, nor shall be interpreted to, nor shall any enforcement of the [1993] Agreement, create an interest in real property ... lien or other encumbrance up on the Subject Property . . ."

In 1994, Trump transferred title to Hudson Waterfront Associates, L.P. (hereinafter referred to as "Hudson Waterfront"), an entity in which he retained an interest, but not control. More than 10 years later, on June 17, 2005, the defendants (Extell) purchased their interest in Riverside South from Hudson Waterfront. The terms under which Extell assumed the obligations of the 1993 Agreement were set forth in an Assignment and Assumption Agreement, dated November 3, 2005, which provided that Extell:

"assume[d] all of the duties, obligations and liabilities of Assignor under [the 1993 Agreement] arising from and after the date hereof, it being understood that this Assignment shall not be deemed to be an admission by either Seller or [Extell] that there are or will be any duties, obligations or liablities in connection with the [1993 Agreement] or that the [1993 Agreement] is in effect."

RSPC maintains that initially after Extell purchased its interest in the project, Extell funded RSPC and its architects corresponded with RSPC and promised to provide plans for a new building (hereinafter referred to as "Building I"). However, when construction on Building I was about to commence, Extell allegedly switched course without RSPC's approval, constructing Building I with more glass than the Design Guidelines permitted and failing to conduct the required environmental sustainability assessments and calculations. Extell then refused to involve RSPC in any aspect of Riverside South's planning or design. As a result, Extell allegedly prevented RSPC from fulfilling its primary function, i.e., to ensure development of Riverside South, in the public interest, in accordance with the principles agreed to by the community when it permitted the project to proceed in the first place.

On November 29, 2007, RSPC filed a complaint, asserting causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing, and demanded specific performance of Extell's assumed obligations. Extell moved to dismiss the complaint pursuant to CPLR 3211(a)(1) and (a)(7) on the ground that the sunset provision barred RSPC's action.

By decision and order dated March 13, 2008, the Supreme Court denied Extell's motion, finding "the 1993 Agreement ambiguous whereby it is unclear whether the sunset provision applies to the entire agreement or only those obligations recited in the paragraph in which the provision is embedded." The motion court explained:

"Both interpretations proffered by the parties are reasonable. Looking at the entire body of the contract it is reasonable to conclude that where the sunset provision' comes at the end of a distinct set of obligations and immediately follows a provision reiterating that distinct set, it is [to] that set that the phrase agreements contained herein' refers. It is arguable that if it was intended by the parties that the provision apply to the entire agreement, it would follow all of the obligations charged to Trump."

Noting that the 1993 Agreement clearly stated that its intent is to "ensure the development of the site in accordance with the approved plan," the motion court found that a reading of the sunset provision that resulted in the 1993 Agreement's expiration at the end of 10 years would be ...


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