936 Second Avenue L.P. v. Second Corporate Development Co., Inc.

In 1966, Second Corporate Development Company, Incorporated (Corporate Development) (defendant) signed a 20-year net lease to rent a New York City mixed-use property from the predecessor-in-interest to 936 Second Avenue L.P. (936 Second) (plaintiff). The rent for each 10-year renewal term was to be calculated at 7 percent of the value of the property. In 2005, the parties renewed the lease for a new, 20-year term, but were unable to agree on the value of the property for purposes of calculating rent due over the next 10-year period. Each party hired an appraiser. The appraiser for Corporate Development valued the property at $7.1 million; the appraiser for 936 Second set the value much lower, at $3.43 million. The appraiser for 936 Second had included the net lease in calculating property value, but the appraiser for Corporate Development had not. Unable to agree on the amount of rent, 936 Second sought a declaratory judgment that the lease and its terms and conditions must be considered when calculating the value of the property to determine the amount of rent. Corporate Development counterclaimed, seeking a declaratory judgment that the lease should not be considered in the property’s appraisal. Both parties moved for summary judgment, and the trial court granted summary judgment in favor of Corporate Development, holding that a lease need not be considered in calculating the value of property. The appellate division affirmed. 936 Second appealed.