Upon the foregoing cited papers, and after conference, it is ordered that respondent's motion for an order, pursuant to CPLR 3404, restoring this proceeding to the calendar and for entry of a money judgment in its favor, is denied.

On October 24, 2005, the date scheduled for trial, the parties entered into a stipulation, so ordered by the court, settling this commercial nonpayment proceeding. The stipulation provides, inter alia, that petitioner was awarded a final judgment of possession and issuance of a warrant, with the warrant stayed until January 31, 2006, at which time respondent would vacate the premises. The stipulation next itemizes in clear terms, the consideration that petitioner is to give respondent. It is undisputed that the parties complied with the above terms.

The stipulation further provides, in pertinent part:

11) Upon receipt of the keys and there being no damage to the premises, respondent shall also receive his security deposit + interest, if any. [emphasis supplied.] [*2]

Respondent now moves for an order granting a judgment in the amount of the security deposit, to wit, $21,000 with interest from June 11, 1990. In addition, respondent is seeking attorney's fees in having to make this motion to enforce this provision of the stipulation.

According to the lease agreement dated June 11, 1990, paragraphs 31 and 92, and the modification of the lease agreement dated October 24, 1994, paragraph 4, the parties or their respective predecessors in interest, agreed that the security deposit for the premises was set at $21,000, would remain fixed at that amount for the remainder of the lease term, and would be returned to the tenant upon the expiration of the lease, provided the tenant fully complied with all of the lease's terms. Paragraph 31 further states that in the event of a sale of the building of which the leased premises forms a part, the owner/lessor has the right to transfer the security to the vendee and thereafter shall be released from liability to the tenant/lessee for the return of the security.

Additionally, the lease provides:

Successors and Assigns

39. The covenants, conditions and agreements contained in this lease shall bind and inure to the benefit of Owner and Tenant and their respective heirs, distributees, executors, administrators, successors, and except as otherwise provided in this lease, their assigns.

It is respondent's contention that petitioner, as a successor in interest to the original owner/lessor, is bound by the lease terms to return respondent's security deposit. Respondent does not, however, make any claim that petitioner ever received the security deposit from its predecessor(s) in interest.

Respondent also argues that the language in the stipulation entitles it to a judgment for the amount of the security deposit. Specifically, according to respondent, the wording "the security deposit + interest, if any," should be read to mean that the security deposit is to be returned unconditionally, and interest is to be returned conditionally, "if any" exists. Respondent's attorney argues that the stipulation was handwritten by petitioner's attorney in court on October 24, 2005, that he too was present, that he made the agreement and he affirms that the "if any" language applied only to interest. Respondent contends that as petitioner's attorney drafted the stipulation, this ambiguity in its language is to be liberally construed in favor of respondent, the non-drafter.

Petitioner opposes the motion, averring that the stipulation, not the lease, controls, that the "if any" language clearly refers to the security deposit, not the interest, and that as petitioner never received a security deposit at the time of the acquisition of the premises, there is no security deposit to tender to respondent.

In support of the claim that no security deposit was tendered to petitioner, petitioner submits two affidavits by Sam Suzuki, the managing member of petitioner limited liability company, in which he states that at the time petitioner purchased the premises, no security deposits were [*3]transferred to it. Mr. Suzuki states that the lease and its modification are dated 1990 and 1994, respectively, but that in 1997, there was a foreclosure action wherein a receiver was appointed for the foreclosed property. Petitioner also annexes an affidavit from Mark Platnick, the controller for University Village Properties, LLC., the foreclosure sale purchaser, in which he states that no security deposits were turned over to the purchaser as there were none on deposit. Petitioner submits a copy of the certificate of receiver dated September 29, 1997, indicating that the receiver is not in possession of any security deposits for the leases affecting the premises and that no security deposits were being transferred to the purchaser. Petitioner also submits a copy of the rent roll schedule which indicates that no security deposit was transferred at the time of sale between University Village Properties, LLC and petitioner.

It is well settled that the transferee of real property takes the premises subject to the conditions as to tenancy that his or her predecessor has established if the transferee has notice of the existence of the leasehold. (Bank of NY v Hirschfeld, 37 NY2d 501 [1975]; 52 Riverside Realty Co. v Ebenhart, 119 AD2d 452 [1st Dept 1986].) Absent an affirmative assumption, however, a grantee is only liable for those covenants or agreements that run with the land. (Longley-Jones Associates, Inc v Ircon Realty Co, 67 NY2d 346 [1986]; Bank of NY v Hirschfeld, 37 NY2d 501, supra; Hudson Engineering Assocs, PC v Ames Dev Corp, 228 AD2d 477 [2d Dept 1996].)

On the issue of security deposits, General Obligations Law § 7-103 provides that money advanced by a tenant for such purpose "shall be held in trust by the person with whom such deposit or advance shall be made." (Glass v Janbach Properties, Inc, 73 AD2d 106 [2d Dept 1990].) New York State law further mandates, as relevant to this proceeding, that anyone who receives a security deposit from a tenant must, upon appointment and qualification of a receiver in a foreclosure action, turn over the security deposited simultaneously with the delivery of the deed or within five days of the receiver's qualification, and further provides that the failure to comply with the statute is a misdemeanor. (GOL § 7-105; RPAPL 1325[2-a]; People v Elliott, 65 NY2d 446 [1985]; Tischler v Key One Corp, 67 AD2d 886 [1st Dept 1979]; 1-10 Bergman on New York Mortgage Foreclosures §§ 10.13 & 31.06.) Once the security is conveyed, the former owner is free from liability to the tenant for the repayment of the security. (GOL § 7-105[2].)

If a predecessor landlord fails to transfer the security deposit to a successor landlord, in contravention of the statutory provisions, liability for its return to the tenant differs according to the type of property involved. Generally, subject to certain exceptions, if a property conveyed contains dwelling units, especially those with rent regulatory status, a grantee of that property is liable for security deposits for those units whether or not the security deposit was transferred to the grantee. (GOL §§ 7-107 & 7-108.)

Under New York common law, however, the return of a security deposit is viewed as a collateral agreement that does not run with the land and transferees of the land would not be liable for the security deposit unless they actually received the money or otherwise covenanted to pay it. (Longley-Jones Associates, Inc v Ircon Realty Co, 67 NY2d 346, supra; Fallert Brewing Co. v Blass, 119 App Div 53 [2d Dept 1907]; Donnelly v Rosoff, 164 Misc 384 [App Term 1st Dept 1937]; [*4]Coyne v Hermitage Co 165 Misc 624 [Sup Ct NY County [1937]. ) Thus, if the security deposit is not transferred to the receiver or to the foreclosure sale purchaser, neither they nor any subsequent owner/lessor has liability to the tenant for its return. (Central Sav Bank v Fashoda, Inc, 94 AD2d 927 [3rd Dept 1983] aff'd 62 NY2d 721 [1984].)

In contrast to New York common law, other jurisdictions, as well as the Restatement of Property, take the view that the promise to repay the security deposit does in fact obligate the transferee of the landlord to repay the tenant regardless of whether or not he has been compensated for this amount by the landlord. (Restatement [Second] of Property: Landlord & Tenant, § 16.1)

It is also worth noting that there is a significant distinction at common law between the return of a security deposit, which is a covenant that does not run with the land, and the benefit of a security deposit, which is a covenant that does run with the land. (Halsted v Globe Indem Co, 258 NY 176 [1932][Pound, J.]; Donnelly v Rosoff, 164 Misc 384, supra; Stellar Holding Corp v Berns, 143 Misc 781 [App Term 1st Dept 1932].)

Respondent's argument, that petitioner is liable to return the security deposit pursuant to the parties' lease agreement, lacks merit. Paragraph 31, the relevant provision of the lease, closely mirrors the language in General Obligations Law § 7-105[2] which states that once the predecessor owner/lessor transfers or otherwise conveys the security deposit to its successor, the former owner is free from liability to the tenant for the repayment of the security. By implication, then, if the predecessor does not transfer the security to its successor, the predecessor remains liable for its return. Here, had respondent provided any proof that the security deposit was, in fact, so conveyed to petitioner, under this analysis and not addressing the existence of the stipulation, petitioner would have been liable. As there is no allegation from respondent that such conveyance ever took place, and there is ample documentation from petitioner that it did not, petitioner has no liability to respondent under the lease terms.

Respondent next avers that the parties' stipulation, drafted by petitioner's attorney, is ambiguous and the ambiguity should be construed in its favor. Respondent asserts that the "if any" wording referred only to the return of interest and that the security deposit was to be returned without condition.

It is axiomatic that "when parties set down their agreement in a clear, complete document, their writing should . . . be enforced according to its terms." (Vermont Teddy Bear Co. v 538 Madison Realty Co, 1 NY3d 470, 475 [2004]; WWW Assocs v Giancontieri, 77 NY2d 157, 162 [1990].) The question of whether a writing is ambiguous is one of law to be resolved by the courts. (Van Wagner Adv Corp v S & M Enters, 67 NY2d 186 [1986].) A contract is unambiguous if the language it uses has "a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion." (Breed v Ins Co of North America, 46 NY2d 351, 355 [1995]; Norma Reynolds Realty Inc v Edelman, 2006 NY Slip Op 4261 [2d Dept 2006].) The rules governing the construction of ambiguous contracts are not triggered unless the court first finds an ambiguity. (R/S Assoc v New [*5]York Job Development Authority, 98 NY2d 29 [2002]; Breed v Ins Co of North America, 46 NY2d 351 [1995].)

One doctrine governing the construction of ambiguous contracts is contra proferentum, which holds that ambiguities in a contractual instrument will be resolved against the party who prepared it and in favor of the party who had no voice in the selection of its language. (Jacobson v Sassower, 66 NY2d 991 [1985]; 151 West Associates v Printsiples Fabric Corp, 61 NY2d 732 [1984].) This doctrine is inapplicable where both parties participated in negotiating the contract's terms. (Coliseum Towers Assocs v County of Nassau, 2 AD3d 562 [2d Dept 2003].)

With regard to the language of the parties' stipulation, the Court finds that the terms are clear and unambiguous. The stipulation unambiguously provides for the return of the security deposit with its attendant interest only "if any" security deposit exists. Nor can this scant language be read to be an affirmative covenant to pay the security deposit to respondent when petitioner did not receive it from its predecessor and is not otherwise obligated to do so. (See Fallert Brewing Co. v Blass, 119 App Div 53, supra.) Moreover, in further support of this reading, it is noted that the security deposit language of the stipulation was not included as part of the itemized breakdown of the consideration given to respondent.

Accordingly, respondent's motion to restore and for a judgment in its favor is denied.

This constitutes the decision and order of the court.

Dated: January 8, 2007___________________________

DICCIA T. PINEDA-KIRWANJudge, Civil Court