In this contract action, plaintiff, The Institute for Eastwest Studies, Inc. ("Eastwest") seeks a preliminary injunction, pursuant to CPLR 6301, enjoining and restraining defendants National Audubon Society ("Audubon"), New York City Industrial Development Agency ("IDA"), and Lincoln Property Company ("LPC") from interfering with plaintiff's use, occupancy, and enjoyment of the premises located on the second floor of 700 Broadway, New York, New York ("Premises") by taking any action to evict, disturb, or harass Eastwest based upon Audubon's Notice of Termination dated November 6, 2006 which sought to terminate Eastwest's interest in the premises.

Plaintiff is an independent, not-for-profit organization founded in 1980 that rented office space from Audubon. Audubon is also a not-for-profit organization that received tax exempt bond financing from the IDA for the acquisition, renovation, and construction of office space at 700 Broadway, New York, New York. In connection with the financing, on December 1, 1989, IDA entered into a twenty five year lease agreement with Audubon as tenant ("The Master Lease"), that is to expire by its terms on December 2, 2014. The Master Lease contains several clauses dealing with the assignment or sublease of the Premises. The clauses in the Master Lease that are germane to this case all arise under Article 9.

Section 9.3(a) which states:

The lessee may not at any time assign or transfer this Agreement, or sublet the whole or any part of the Facility without the prior written consent of the Agency, the Bank, and the Trustee (which consents with respect to any sublet in part shall not be unreasonably withheld); provided further, that..."

(Master Lease Agreement, Art. 9, Ex. A)

Section 9.3 (c) provides that:

"it shall not be unreasonable for the Agency, the Bank, and the Trustee to withhold consent to any sublease in part by the Lessee of the Facility unless the following terms and conditions are included therein: (A) the sublease must be subject and subordinate at all times to the Agency Mortgage and this Agreement..."

Id.

Section 9.3(d) states that:

"the receipt by the Agency, the Trustee, or the Bank of all items required under Section 9.3 (a),(b),(c) above, as applicable, with respect to any proposed subletting in part of the Facility, and the failure of any such party to request any [*2]further documents or information within 30 days of such receipt of the above material, and to approve or reject such subleases, shall be deemed approval by such party to sublet in part."

Id.

On January 15, 1995, Audubon, as landlord, and Eastwest, as tenant, entered into a ten year lease agreement ("Sublease") for the Premises. Six months later, in July 1995, Audubon and Eastwest executed the First Amendment to the Sublease ("First Amendment") because the parties expressed a desire to insert a Right of First Refusal clause ("Right of First Refusal"). The Right of First Refusal granted Eastwest the right to extend the term of the Sublease for one five year period conditioned on Eastwest notifying the landlord "not less than eight months nor more than twelve (12) months prior to the expiration of the term of the lease," which in this case was from June 1, 2004 to September 30, 2004. (First Amendment To Lease, Ex. A). Plaintiff's notice had to be "unconditional and irrevocable" in stating whether plaintiff was going to exercise the right. Id.In a letter dated May 19, 2004, eleven days before the time period to notify Audubon began, Eastwest notified Audubon of its intention to renew its lease for another five years. On August 30, 2004, plaintiff's broker, Equis Corporation, sent a letter to Audubon asking for a lease to be drawn up according to the new terms discussed between Audubon and Eastwest.

On October 12, 2004, prior to the term of the Sublease expiring, both parties entered into the Second Amendment ("Second Amendment") to the Sublease that provided for an extension of the lease to May 31, 2015. This amendment was rejected by the IDA on the grounds that the end date of Sublease term (May 31, 2015) extended beyond the end date of the Master Lease term (December 2, 2014). On or about May 31, 2005, Audubon and Eastwest entered into a Revised Second Amendment ("Revised Second Amendment") of the Sublease providing for a new end date of November 30, 2014, well within the time before the Master Lease expires (December 2, 2014).

On November 6, 2006, Audubon served a notice of termination on Eastwest alleging that as of that date neither the IDA, Bank, or Trustee had consented in writing to either the Second Amendment or the Revised Second Amendment and therefore Eastwest must vacate the property on December 31, 2006 because it was a holdover tenant.

Plaintiff argues that the notice of termination is null and void pursuant to Section 9.3 (a)-(c) of the Master Lease because the Master Lease states that "the failure of any such party [IDA, Trustee, or the Bank] to request any further documents or information within 30 days of receipt of the above material, and to approve or reject such sublease, shall be deemed approval by such party to such sublet in part." (Master Lease Agreement, Art. 9, Sec. 9.3(d), Ex. A). It is plaintiff's contention that the Revised Second Amendment was approved pursuant to the terms of the Master Lease because on October 4, 2005. Counsel for Audubon sent all the interested parties the required informational packet, and since no additional information was requested by the parties within the thirty days thereafter, it was deemed approved by all the parties.

In the alternative, plaintiff argues that even if the Revised Second Amendment was not ratified by the parties, Audubon

waived its right to rely upon paragraph 11 of the Revised Second Amendment because it repeatedly assured Eastwest that the

lease was in full force and accepted rent payment without any objection or reservation of rights for approximately 1.5 years after the lease expiration deadline.

Defendant argues that pursuant to the First Amendment, Eastwest was granted a right to extend the terms of the Sublease for five years. The right had to be exercised within 8 to 12 months prior to the expiration of the Sublease and plaintiff failed to exercise its right.

As for the revised Second Amendment, defendant argues that under the plain clear language of Article 11 of the proposed Revised Second Amendment ("the lease shall not be deemed effective until the date upon which [IDA], the Bank, and the Trustee all shall have consented in writing to this Revised Second Amendment of Lease") (Revised Second [*3]Amendment of Lease, ¶11, Ex. D) written consent of the IDA, Bank, and Trustee was needed in order for the lease to be deemed effective and binding on Audubon and Eastwest.

The Court may grant a preliminary injunction when the

When determining the likelihood of plaintiff's success on the merits, the Court may find in plaintiff's favor even where the facts are in dispute and the evidence is inconclusive. (Four Times Sq. Assoc., L.L.C. v Cigna Investments, 306 AD2d 4, 5 (1st Dep't 2003).

In this case, Eastwest affirms that it followed the procedures outlined in the First Amendment, which stated that "Tenant shall deliver to Landlord an unconditional and irrevocable notice stating whether or not Tenant is exercising the right of first refusal herein granted." (First Amendment to the Sublease, Ex. A). Defendant asserts that plaintiff did not timely exercise its right of first refusal, and therefore, plaintiff has been a hold-over tenant since the Sublease ended on May 31, 2005.

This Court is perplexed by Audubon's assertion that the plaintiff was a holdover tenant because it never exercised its right of first refusal contained in the First Amendment, as Audubon's actions suggest otherwise. In a letter dated May 19, 2004, eleven days before the actual period to notify began to run, Eastwest had notified Audubon that it intended to renew its lease for another five years, thereby putting Audubon on notice that Eastwest was going to renew. In a letter dated August 30, 2004 (the time within which Eastwest was to notify Audubon of its right to extend the lease), plaintiff's broker provided Audubon with an authorization letter to have an amendment drafted for an additional ten year term. On October 5, 2004, Audubon sent plaintiff a letter with a subject heading "Second Amendment of Lease between National Audubon Society and Eastwest Institute." (Second Amendment of Lease Letter, Ex. D). The letter dated October 5, 2004, states "Enclosed is our copy of the lease amendment drawn up by our attorney, Allan Katz. I believe it accurately reflects the terms we've agreed upon during our discussions." Id. As the letter reflects, there were discussions regarding the right to extend the lease, and the Right of First Refusal clause does not state in which form the notice must be given, all it states is that the notice be "unconditional and irrevocable." Audubon was on notice that Eastwest was exercising its right to renew.

Based on the above, it is disingenuous for Audubon to argue that plaintiff never exercised its Right of First Refusal, when it went ahead with the Second Amendment to the lease without ever suggesting that plaintiff was a holdover tenant. The only reason the Second Amendment to the lease was rejected was on the basis that the Sublease term ran longer than the Master Lease term. The Second Amendment to the Sublease was entered into October 2004 and there is no evidence to suggest that Audubon found plaintiff's attempts to exercise its Right of Renewal as improper or lacking. Rather, in the Second Amendment of Lease Letter, Audubon states, "We look forward to continuing the great working relationship we've had between the Institute and Audubon." (Second Amendment of Lease Letter, Ex. D). Therefore, this court does not find Audubon's argument that plaintiff never exercised its right to remain in the premises after May 31, 2005 persuasive.

Instead the Court will focus on the language contained in the Master Lease, the Sublease, and the language contained in the Second Revised Amendment to determine whether or not Eastwest had an interest in the office space.

The crux of this case is the interpretation of the phrase "subject and subordinate to" contained in paragraph 66 of the Sublease. The cardinal rule of contract interpretation is to ascertain the intention of the parties. (Corbin, The Interpretation of Words and the Parol Evidence Rule, 50 Cornell L. Quar. 161, 162 (1965); 4 S. Williston, Contracts 610, at 306 [4th ed.]). Under New York Law this means focusing on the unequivocal language contained in the [*4]contract. (Wallace v 600 Partners Co., 86 NY2d 543, 548) (NY 1995). This rule has even greater force in the context of real property transactions. Id.

When reading the Master Lease, Sublease, and the Revised Second Amendment with their plain meaning it becomes clear that these documents are dependent on each other and cannot be read in isolation. The Master Lease states that "the Sublease must be subject and subordinate at all times to the Agency Mortgage and this Agreement." The Sublease states that "This Lease shall be subject to and subordinate at all times to the Mortgage and to the Master Lease." (Sublease Agreement, ¶66, Ex.B). The Second Revised Amendment to the Sublease relies upon the underlying document, the Sublease, for "All capitalized words and phrases not defined in this Revised Second Amendment." (Second Revised Amendment to the Lease, ¶1, Ex. D).

When all the leases and amendments are read together the plain meaning of the words in the Master Lease, Sublease, and Amendments do not support defendants contention that the Sublease is not dependent on the Master Lease but rather is an independent document modeled on the Master Lease. Rather, the Sublease reiterates in several clauses it is made subject to and subordinate to the underlying lease. (Sublease ¶42, "Landlord and Tenant agree that this Lease [Sublease] be and hereby is made subject to and subordinate at all times to all underlying leases..."; Sublease ¶66, "Landlord [Audubon] and Tenant [Eastwest] agree as follows... This Lease shall be subject and subordinate at all times to the mortgage and to the Master Lease.")(Sublease Agreement, Ex.B).

It is well settled that when the Court is confronted with a disputed contract clause the "mere assertion by a party that the contract language means something other than what is clear when read in conjunction with the whole contract is not enough to create ambiguity". (New York City Off Track Betting Corp v Safe Factory Outlet, 28 AD3d 175, 177) (1st Dep't 2006).

Defendant cites Krasner v. Transcontinental Equities, Inc., for the proposition that a "subject and subordinate to" clause contained in a contract does not automatically incorporate by reference terms contained in the Master Lease. (Krasner v Transcontinental Equities Inc., 70 Ad2d 312 (1st Dep't 1979)). However, that court was actually divided on the issue of whether or not a "subject to and subordinate" clause incorporates by reference terms of an overlease. The Krasner case dealt with the issue of whether the terms of the original sublease between plaintiff and its sublessor would be incorporated into a subsequent sublease, due to the existence of a "subject and subordinate to" clause, between plaintiff and its sublessee who further assigned its sublease to the defendant. The Court was divided on the issue of whether or not the phrase "subject to and subordinate" incorporated by reference the terms of the sublease between sublessee (plaintiff) and its sublessor to the subsequent sublease between plaintiff and its sublessee and subsequently its assignee. (Id. at 316) ("The concurring opinion concludes that since the sublease from Krasner to Selectronic was subject and subordinate to the lease between Liberty and Krasner... Krasner's consent was requisite before an assignment by either Selectronic [Krasner's sublessee] or its assignee, Ben-Ness").

The case law regarding a "subject to and subordinate" clause is sparse, but in the cases that have dealt with the clause, courts have found the terms of the overlease incorporated by reference into the sublease. (Soft-Lite Lens Company, Inc., v E. R. Squibb & Sons Division of Olin Mathieson Chemical Corporation, 23 Misc 2d 777 (New York City Ct. 1960)) (plaintiff had entered into a sublease with the defendant and when sublease expired defendant refused to vacate the property and plaintiff initiated a holdover proceeding. The Court rejected defendants defense which alleged that plaintiff had vacated and surrendered the premises on the basis that when plaintiff entered into the sublease it expressly provided that it was "subject to and subordinate to all the terms and conditions of the lease" proving that sublessee was bound by the promises made by the sublessor to the landlord."); (151 West Associates v Printsiples Fabric Corp., 92 Ad2d 76, 87) (1st Dep't 1983) (Sullivan, J. dissenting and Kassal J. joining) (Defendant Printsiples executed a lease with plaintiff that contained an insolvency clause. Defendant experienced some financial problems and an agreement was reached whereby a third party [*5]accepted assignment of the creditors claim against defendant. Subsequently, the shareholders of defendant corporation transferred their stock to the third party. Plaintiff then initiated an ejectment action citing the arrangement between the third party and plaintiff's creditors as a bankruptcy proceeding thereby triggering the insolvency clause in the lease allowing plaintiff to terminate the lease with defendant (the third party). One of the defendant's arguments for barring the enforcement of the insolvency clause was the public policy behind §365(e)(1) of the Bankruptcy Act of 1978.

The dissenting judges argued that the Code policy was to rehabilitate distressed debtors. However, because the defendant was no longer in possession of the property and occupying it, and because the sublessee has taken on all the terms of conditions of the sublessor, the sublease was expressly made subject to the terms and conditions of the main lease. "Not even Futterman's [sublessee's] eviction would give rise to liability on Printsiples' part since the sublease was expressly made subject to the terms and conditions of the main, the terms of which were deemed incorporated into the sublease.") (Id. at 87).

Considering the law cited above, this Court concludes that the plain meaning of the words "subject and subordinate to" incorporate by reference the terms of the Master Lease. There is no evidence within the four corners of the leases that would suggest the Master Lease was not to be incorporated by reference into the subsequent subleases or assignments. All the documents refer to the underlying lease and there is no attempt to distinguish the Master Lease from the Sublease.

Plaintiff will suffer an irreparable injury in the absence of an injunction because of the unique situation in which plaintiff was granted the lease. Plaintiff is a not-for profit organization that is leasing its space from Audubon Society, another not-for-profit organization. Plaintiff was granted a valuable leasehold interest in an area where office rents are double the rent that it is paying. Plaintiff provided a report by GVA Williams, a real estate broker company, that highlighted the precarious situation plaintiff would find itself in when finding another office space since the period in which defendant claims plaintiff was a holdover tenant saw office rent prices increase 22% and the availability of office space decline by 2.4%. (GVA Williams Chart, Ex. E).

Finally, in balancing the equities the Court must balance the effect of the injunction of each side. For plaintiff, the grant of preliminary injunction will preserve its office space and more importantly, it will allow Eastwest to remain a tenant where the expectations of both parties was to extend the sublease for as long as possible. From the defendant's point of view, any harm is measured in money damages.

Settle Order on Notice

Dated: September 6, 2007

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J.S.C.