Cadwalader, Wickersham & Taft LLP, New York City (Cathy H. Chin and Jared L. Facher of counsel), for appellant.
Kasowitz, Benson, Torres & Friedman LLP, New York City (Jennifer S. Recine and Michael J. Bowe of counsel), for respondents.
Plaintiffs leased a building to The Salvation Army, which operated it as a homeless shelter under an agreement with the
City of New York. The lease was terminated, and plaintiffs now seek damages from The Salvation Army, claiming that the leased premises were returned in bad condition. We hold that plaintiffs' claim is barred by the plain language of the Lease.
The two plaintiffs are related entities; to simplify discussion, we ignore the distinctions between them. They own a building in Queens formerly known as the Carlton House Hotel. They allege that in 2002, the City entered into discussions with them about using the building as a homeless shelter. Plaintiffs also allege that " for political reasons" the City preferred not to rent the building itself, but to make The Salvation Army, which would operate the homeless shelter, the tenant. Later in 2002, a deal was struck in which plaintiffs and The Salvation Army entered into a Lease, and The Salvation Army entered into a Services Agreement with the City. The Services Agreement required the City to make payments to The Salvation Army that would be at least enough to cover The Salvation Army's obligations to plaintiffs under the Lease.
The Lease reflected the understanding of the parties that The Salvation Army [999 N.E.2d 1162] [977 N.Y.S.2d 717] was essentially an intermediary between plaintiffs and the City. For purposes of this case, the key provision of the Lease is Paragraph 31, captioned " Services Agreement," which says in relevant part:
" Notwithstanding anything to the contrary set forth in this Lease, (i) the parties acknowledge that Tenant [The Salvation Army] is entering into this Lease solely in order to enable Tenant to fulfill its obligations to the [City] under the Services Agreement and (ii) Landlord agrees that ... Tenant shall only be liable for Base Rent ... or other payments under this Lease, including without limitation ... damages for breaches of any covenant under this Lease ... solely to the extent of the amounts paid to Tenant from time to time under the Services Agreement or otherwise in connection with the use of the Leased Premises."
In short, The Salvation Army was not obligated to pay plaintiffs any more than the City paid to The Salvation Army. However, Paragraph 31 requires The Salvation Army to " use commercially reasonable efforts to enforce its rights ...