EDC action withstands motion to dismiss

Court allows EDC lawsuit seeking to reclaim Harlem landmark from developer. In 2003, the New York City Economic Development Corporation sold a run-down landmark, known as the Corn Exchange Bank, to Corn Exchange LLC. The deed required Corn Exchange to rehabilitate the building, restore the exterior to its original state, and to establish a non-profit culinary institute in a portion of the renovated space. Corn Exchange had 36 months to complete the renovations and obtain a new certificate of occupancy. The deed also included a provision that if Corn Exchange failed to perform, commence, or complete construction, or if it failed to use the premises in five years as a culinary school, EDC could reacquire the premises.

After the time to restore and rehabilitate passed, EDC commenced an action to establish its right of re-entry and to eject Corn Exchange, claiming that the Exchange had breached a restrictive condition in the deed and that EDC was entitled to obtain title to the premises. Corn Exchange moved to dismiss, arguing that the provision in the deed was not a condition that it failed to meet, but rather a covenant or promise that the Exchange breached, and therefore, the EDC would, at most, be entitled to money damages.

Justice Judith J. Gische agreed with EDC and dismissed the motion, ruling that the cited provision in the deed was a restrictive condition that allowed the EDC to reacquire title to the premises if Corn Exchange failed to perform. Justice Gische ruled that the parties’ intent determined whether the cited provision was a condition or a covenant and in this case, it was clear from the deed that the EDC and Corn Exchange intended to create a condition. The provision’s express language created a condition that required Corn Exchange to perform and gave the EDC the right to re-enter and re-acquire the premises if Corn Exchange failed to meet the requirement.

New York Economic Development Corp. v. Corn Exchange LLC, Index No. 405031/07 (N.Y.Cty.Sup.Ct. July 16, 2008) (Gische, J.) (Tina Isselbacher, for EDC; Alan J. Stone, Joseph S. Genova, John K. White Jr., David W. Wechsler, for Corn Exchange).

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