Darami Realties, Inc. v. Spencer Arms Hotel Associates

Kupferman, J. P. (concurring).

In this action for a declaratory judgment, plaintiff-respondent, Darami Realties, Inc. (Darami), seeks reformation of its lease for six stores on the ground floor of the Spencer Arms Hotel located at 104 West 69th Street in Manhattan, so as to delete entirely those provisions requiring Darami as tenant to pay real estate taxes for the entire building or, in the alternative, reformation to the extent of requiring the tenant to pay such portion as can be allocated to the store premises. Plaintiff seeks this remedy on the basis of an alleged mutual mistake made when these paragraphs in controversy were included in the lease between Darami and Spencer Enterprises, Inc. (Enterprises) (defendant-appellant’s predecessor in *542interest), which was executed in August, 1970. Initially, and with predecessors in interest, the leased hotel portion of the building paid all real estate taxes, including those that might be attributable to the stores. In 1970, when a new lease was prepared, the principal of the entity that would rent the whole building (hotel and stores) requested that for tax purposes there be separate leases for the hotel entity and the store entity. The language requiring the tenants to pay all the real estate taxes was photocopied and included in both leases. This had no material consequence as the same principal was involved in both lessee entities, and the hotel entity paid all the taxes. Thereafter, the hotel entity passed, by mesne assignment, into other hands with the hotel entity continuing to pay the full real estate taxes. However, a succeeding hotel corporation went into bankruptcy and defaulted, and the situation took a new turn. A succeeding owner of the fee interest demanded that the store tenant pay the real estate taxes for the entire building and commenced a holdover proceeding. There was a sufficient basis for the court sitting as a trier of fact to find mutual mistake in the inclusion of the tax clause in the store lease providing for payment of real estate taxes on the entire building. However, it should have gone further and apportioned the taxes so that each tenant, the hotel and the stores, would pay its aliquot share of taxes, which is obviously what the parties originally intended would apply.