READ, J.
This appeal calls upon us to interpret a lease's payment terms. We conclude that the pertinent lease obligated defendant tenant
Eujoy owns a building in Maspeth, Queens, with a steel frame structure for advertisements atop the roof. Van Wagner is in the outdoor advertising business in the New York City region and other major metropolitan areas in the United States. On October 18, 2000, Van Wagner leased Eujoy's billboard for a period of 15 years, commencing December 1, 2000 and ending September 30, 2015. Schedule A of the lease,
Van Wagner considered Eujoy's billboard desirable for advertising because of its visibility to passing traffic on the nearby Long Island Expressway (LIE). The parties therefore executed article 53, a second rider to the agreement, to give Van Wagner the right to terminate the lease if this view was ever "substantially obstruct[ed]" by "the erection of a new building or the increase in height of a building between the location of [the billboard] and the [LIE]."
In early January 2007, Van Wagner forwarded Eujoy a check for $96,243, the annual basic rent for the year; the check was dated January 2, 2007. Van Wagner quickly stopped payment, however, later claiming that "due to an internal oversight," this check was "accidentally" and "erroneously" issued. Then on January 16, 2007, Van Wagner's executive vice-president wrote a letter to Eujoy's co-owner to confirm his conversation with her brother, another co-owner, of January 10, 2007 advising him that Van Wagner had terminated the lease, effective January 8, 2007, pursuant to article 53. A check for $2,109.43, representing rent for the period of January 1 through January 8, 2007, was enclosed with this letter.
By complaint dated October 17, 2007, Eujoy sought, in a first cause of action, the balance of the basic rent for 2007 ($96,243.00-$2,109.43 = $94,133.57); and, in a second cause of action, asked for reasonable legal fees and costs incurred because of Van Wagner's default on its alleged payment obligation under the lease. Eujoy asserted that schedule A required Van Wagner to pay the basic rent for 2007 in advance on January 1, 2007. In its answer dated November 16, 2007, Van Wagner advanced several affirmative defenses. These included assertions that the lease, and therefore Van Wagner's obligation to pay rent, terminated as of January 8, 2007; and that it properly stopped payment, and the lease did not entitle Eujoy to rent not already received for a period after a valid termination.
On December 19, 2007, Eujoy moved for summary judgment for the balance of the basic rent for 2007, and a hearing to assess attorneys' fees. Eujoy relied on the lease, arguing that "[t]he parties did not stipulate to apportion rent paid in advance and for the period following termination of [the lease] pursuant
In sum, Van Wagner suggested that Eujoy agreed to prorate rent in exchange for Van Wagner's commitment not to invoke article 53 to terminate the lease in late 2006, as it was entitled to do. In response, Eujoy's co-owner submitted an affidavit
But Van Wagner's motion papers focused on the stop payment order in relation to paragraph C of schedule A. That is, Van Wagner maintained that although this provision "means that rent paid in advance may not be recovered upon termination of the lease unless the termination is on a ground specified in that clause," here no rent was, in fact, paid in advance because Van Wagner's stop payment order prevented this from happening. Van Wagner also rejected what it characterized as Eujoy's "due date theory," a "fallback argument" that the stop payment order was "irrelevant" because "by virtue of [Van Wagner's] continued occupancy on January 1, 2007, [Eujoy] became entitled to rent for the entire year." According to Van Wagner, Eujoy's reasoning was flawed since, in light of the stop payment order, Van Wagner did not pay any post-termination rent for Eujoy to retain and, in any event, the parties agreed to and acted upon the alternative payment arrangements described by Van Wagner's executive vice-president.
In an opinion dated July 31, 2008, Supreme Court denied Eujoy's motion and granted Van Wagner's cross motion to dismiss the complaint. The court accepted Van Wagner's interpretation of the lease in toto, concluding that although "[p]aragraph C of schedule A gave [Eujoy] the right to keep any basic rent that was paid in advance pursuant to paragraph A for the subject lease year 7," Van Wagner "did not pay any such rent because [it] stopped payment on the rent check before [Eujoy] cashed it" (2008 NY Slip Op 33675[U], *1 [Sup Ct, NY County 2008] [emphasis added]). Eujoy appealed.
In May 2010, the Appellate Division, with two Justices dissenting, reversed Supreme Court's order; granted Eujoy's motion for summary judgment; denied Van Wagner's cross motion in its entirety; and remanded the matter for determination of attorneys' fees (73 A.D.3d 546 [1st Dept 2010]). The court read schedule A of the lease to require Van Wagner to pay Eujoy the basic rent for 2007 in advance, on January 1st of that year, and did not credit Van Wagner's claim that this contractual obligation was altered by an oral agreement. In the latter regard, the court observed that
Further, Van Wagner did "not demonstrate that principles of equitable estoppel are applicable ..., since [Eujoy] engaged in no conduct that was `otherwise ... [in]compatible with the agreement as written'" (id., quoting Rose v Spa Realty Assoc., 42 N.Y.2d 338, 344 [1977]).
The dissenters took the position that Eujoy had only argued to the motion court that Van Wagner's check for the basic rent for 2007 was "improperly stopped," and did not rely "upon the terms of the lease itself" (id. at 551 [Tom, J.P., and Freedman, J., dissenting]). Putting aside considerations of preservation, the dissenters concluded on the merits that General Obligations Law § 7-103, which prohibits the commingling by a landlord of funds deposited by a tenant as security or prepaid rent, would prevent Eujoy's recovery, and that Eujoy violated the lease's default provisions by failing to give Van Wagner notice that it was in breach.
On September 14, 2010, we dismissed Van Wagner's motion for leave to appeal on the ground of nonfinality (see 15 N.Y.3d 819 [2010]). Judgment was entered in Supreme Court on October 9, 2012 upon the parties' stipulation to an award of attorneys' fees. As a result, the appeal comes to us as of right because of the two-Justice dissent (see CPLR 5601 [a]), bringing the Appellate Division's order up for our review. We now affirm.
Van Wagner contends (and the dissenters in the Appellate Division agreed) that Eujoy's
But Eujoy never relied exclusively on this theory of recovery. Notably, paragraph five of its complaint alleges as follows: "5. The annual basic rent under the Lease for the period January 1, 2007 through December 31, 2007 was $96,243.00 which [Van Wagner] was obligated to pay in advance on January 1, 2007" (emphases added). Eujoy fleshed out this allegation in its sole memorandum of law at Supreme Court, which both replied to Van Wagner's opposition to its motion for summary judgment, and opposed Van Wagner's cross motion for summary judgment. Indeed, Point II of Eujoy's brief is captioned "The Lease Obligated [Van Wagner] to Pay the Annual Basic Rent for 2007 in Advance on January 1, 2007." Van Wagner countered in a reply memorandum of law in further support of its cross motion.
In short, while Van Wagner insists that Eujoy's "due date theory" of the lease was not pleaded, this is simply not the case. And even if Eujoy had, in fact, presented a new legal argument about the lease to Supreme Court in a reply brief, neither that court nor the Appellate Division would have been prohibited from considering it. In the cases relied upon by Van Wagner to say otherwise, the First Department, in effect, declined to endorse sloppy and potentially prejudicial motion practice by entertaining facts presented for the first time in a reply affidavit "to which the [nonmoving party] had no right to reply without court permission" (Lazar v Nico Indus., 128 A.D.2d 408, 410 [1st Dept 1987]; see also Ritt v Lenox Hill Hosp., 182 A.D.2d 560, 562 [1st Dept 1992] [it does not "avail (the moving party) to shift to (the nonmoving party), by way of reply affidavit, the burden to demonstrate a material issue of fact at a time when
The principal issues of law decided by the Appellate Division (in addition to the question of preservation itself) — i.e., whether Van Wagner is indebted to Eujoy for the annual basic rent for 2007 under the terms of the lease and, relatedly, whether the lease's payment terms were modified by an oral agreement — are preserved for appellate review. This is critical because, as we have elsewhere explained, when an issue is not preserved in Supreme Court, the Appellate Division's consideration of it "must be deemed an exercise of its interest[] of justice jurisdiction," and "[w]e have no power to review either the Appellate Division's exercise of its discretion to reach [an unpreserved] issue, or the issue itself" (Hecker v State of New York, 20 N.Y.3d 1087, 1087 [2013]).
Under the common law, rent is consideration for the right of use and possession of the leased property that a landlord does not earn until the end of the rental period (In re Roth & Appel, 181 F 667, 669 [2d Cir 1910]; 1 Friedman & Randolph, Friedman on Leases § 5:1.1 [5th ed 2013]). This presumption may be altered, however, by the express terms of the parties' lease such that rent is to be paid at the beginning of the rental period rather than the end (see Giles v Comstock, 4 N.Y. 270, 272 [1850]; Chemical Bank v Evans & Hughes Realty, 205 A.D.2d 573, 574 [2d Dept 1994]; 1 Robert E. Dolan, Rasch's Landlord and Tenant — Summary Proceedings § 12:23 [4th ed 1998]; 1 Friedman
These rules reflect the strong preference for freedom of contract in the creation of leases, and although it may seem harsh for tenants, the courts assume that the parties have knowingly bargained for the provisions of their agreement. This is especially true in the case of arm's length commercial contracts negotiated by sophisticated and counseled entities (see Oppenheimer & Co. v Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685, 695 [1995]). Courts will give effect to the contract's language and the parties must live with the consequences of their agreement. "If they are dissatisfied ..., `the time to say so [is] at the bargaining table'" (id., quoting Maxton Bldrs. v Lo Galbo, 68 N.Y.2d 373, 382 [1986]).
Here, the terms of schedule A of the lease spell out that the full annual rent for each rental period is to be paid "in advance" on January 1 of each of the 15 years of the lease's term, excluding the first year. The rent is described as "annual basic rent," which reinforces that the parties intended for rent to be paid in annual installments. The only other reference in the lease to the amount and periodicity of the rent appears in the preamble, which directs that "the annual rental rate" is "set forth in Schedule A" to the lease.
Next, paragraph C of schedule A explicitly states that Van Wagner is not entitled to "the return" of any basic rent "paid in advance," even if the lease is terminated prior to expiration of a rental period. This language embodies the general rules discussed earlier. It is true that Van Wagner never fully paid the rent due on January 1 because it stopped payment of its first check. But that does not change the fact that the basic rent for 2007 became due on the date assigned in the lease, January 1st of that year. Paragraph C envisages apportionment of rent, but only where the lease is prematurely ended for specified
Van Wagner urges in the alternative that, however the lease may be interpreted, the parties orally agreed in late 2006 to modify payment terms, as described by its executive vice-president. The lease includes a standard merger and "no oral modification" clause.
As we explained in Rose, a party can overcome such a clause and enforce an oral modification to a written agreement by demonstrating either that the oral modification "has in fact been acted upon to completion"; or, where there is only partial performance, that "the partial performance [is] unequivocally referable" to the alleged oral modification (42 NY2d at 343; see also Walter v Hoffman, 267 N.Y. 365, 368 [1935]; 1 Robert F.
Additionally, there is "another qualification to the mandates of section 15-301 [which is] [a]nalytically distinct from the doctrine of partial performance"; namely,
When the parties dispute whether an oral agreement has been formed, it is the conduct of the party advocating for the oral agreement that is "determinative," although the conduct of both parties may be relevant (see Messner, 93 NY2d at 237-238; see also Imperator Realty Co. v Tull, 228 N.Y. 447, 456-457 [1920, Cardozo, J., concurring]). This is because the equity doctrine is designed to prevent a party from inducing full or partial performance from another and then claiming the sanctuary of the statute of frauds or section 15-301 when suit is brought (see Messner, 93 NY2d at 237-238).
In this case, Van Wagner depicts the facts as consistent with its claim of a fully performed oral modification because "no sensible businessperson" would have terminated the lease on January 8, 2007 "if liable for a full year's rent as a result of a week's occupancy," and Eujoy "accepted" the termination along with a check for the prorated rent. As for Eujoy's conduct, article 53 of the lease clearly gave Van Wagner the right to terminate the lease in the event new construction substantially obstructed the view of the billboard from the LIE. Eujoy's acquiescence to termination on this ground was, therefore, compatible with the lease. So, too, Eujoy's acceptance of Van Wagner's check for $2,109.43 since the lease includes a standard
We have examined Van Wagner's other arguments and consider them, to the extent preserved, to be unavailing. Accordingly, the judgment appealed from and the order of the Appellate Division brought up for review should be affirmed, with costs.
SMITH, J. (concurring).
I join the majority opinion except for its unnecessary restatement of an erroneous preservation rule.
The majority says that if Eujoy's argument were, as Van Wagner argues, unpreserved, that might benefit not Van Wagner but Eujoy (majority op at 423 n 4). This oddity would result from following a very odd rule — one that, as I have explained elsewhere, is without justification (see Hecker v State of New York, 20 N.Y.3d 1087, 1088-1089 [2013, Smith, J., concurring]). I continue to hope that the day will come when the rule is abandoned.
Chief Judge LIPPMAN and Judges GRAFFEO, SMITH, PIGOTT and RIVERA concur with Judge READ; Judge SMITH in a separate
Judgment appealed from and order of the Appellate Division brought up for review affirmed, with costs.
Van Wagner makes much of the fact that this provision says "monthly" rent. But the preamble defines rent for purposes of the lease only in terms of the categories of rent set out in schedule A; i.e., annual basic rent and "additional rent" totaling $200,000, to be paid to Eujoy in equal installments of $100,000 upon execution of the lease and on October 1, 2001.
