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McFarland v. Gregory

decided: April 19, 1967.


Lumbard, Chief Judge, and Friendly and Hays, Circuit Judges. Lumbard, Chief Judge (dissenting).

Author: Hays

HAYS, Circuit Judge:

Plaintiffs (the McFarland Group), purchasers of certain leaseholds formerly held by corporations controlled by defendants (the Gregory Group), appeal from a judgment of the United States District Court for the Southern District of New York denying their application for a judgment declaring that in connection with the sale of the leaseholds the defendants must supply sufficient parking facilities to comply with local zoning ordinances. We affirm the judgment.

The tangled history of the litigation between these parties with respect to the Arlington Towers project and the facts giving rise to it are fully described in the companion opinion of Chief Judge Lumbard, McFarland v. Gregory, 373 F.2d 393 (2d Cir. 1967).

For purposes of the present controversy it is sufficient to say that: Each of the four subsidiary corporations of the Arlington Towers Land Corporation owned an apartment house built on land leased from the Corporation for 99 years. The parent corporation and the subsidiaries were originally controlled by the McFarland Group. Control of the project shifted to the Gregory Group in 1957 after the McFarland Group had experienced financial difficulties. However, under a Memorandum Agreement between plaintiffs and defendants the four Arlington subsidiaries were required to sell their apartment buildings and 99 year leasehold interests to the McFarland Group if that Group made a tender as described in the Memorandum Agreement. After several years of argument and negotiation the parties finally reached agreement concerning the terms of an acceptable tender. The McFarland Group having fulfilled the requirements for such a tender, the buildings and leases were transferred to them late in the summer of 1965.

In June, 1966, the McFarland Group commenced this action seeking a declaration that the defendants are obligated, as lessors, to provide, along with the four apartment houses, sufficient parking facilities to comply with local zoning ordinances.

Plaintiffs' contention is based largely on certain statements made by one of defendants' counsel on October 31, 1962, in the course of the litigation which preceded the sale to the McFarland Group. On that date the parties were presenting to the trial court surveys showing how they proposed to allocate land between one of the Arlington buildings and an adjacent shopping center which was not to be included in the proposed sale. The allocation question was one of many issues that had been argued before the court and had been the subject of extensive briefs submitted by the parties during a protracted series of hearings over a period of several months. Plaintiffs had changed their position during the course of these proceedings as to how the land should be allocated and the parties were unable to agree. Finally the court requested that the parties submit surveys indicating where they believed the boundary lines should be drawn.

At the October 31st hearing plaintiffs' counsel unexpectedly injected a new issue into the case stating that he had just been informed that local zoning laws required that 233 parking spaces be provided for tenants of the building involved in the allocation controversy. In the course of the colloquy which followed, defendants' counsel made a number of statements the effect of which was that "zoning restrictions are applicable to the landlord, which is the parent corporation, and whatever requirements there may be for parking are applicable to the lessor corporation. * * *" Plaintiffs contend that they relied on these statements and therefore did not press their claim with respect to the parking spaces. They claim that defendants are estopped from denying that they must supply sufficient parking to meet the zoning requirements.

Even assuming that the plaintiffs would have been justified in relying on statements made incidentally by counsel in the course of argument -- a doubtful premise in the context of this bitterly contested case -- it is clear that they did not in fact rely on the statements. Such reliance would be shown only if plaintiffs had failed to press for inclusion in the final agreement of a clause granting them the parking privileges they sought. On the contrary, McFarland did later propose such a clause and defendants rejected the proposal. It was thus made quite clear that plaintiffs were aware of the existence of a substantial dispute on the subject and were not relying on counsel's statements.*fn1

Our view that plaintiffs did not in fact rely on counsel's statement finds support also in plaintiffs' attempt at the beginning of the August, 1965 proceedings before Judge Dimock to keep open "the question of [defendants'] obligation on parking."

In addition to their claim of reliance defendants further contend that they reserved the parking question during the August 1965 proceedings and that the 1957 Memorandum Agreement itself requires by implication that defendants supply parking facilities.

That this bitterly contested tender agreement, culminating in an elaborate contract of sale, was intended to leave unresolved a question of such magnitude as the availability of parking space*fn2 is quite unbelievable. Moreover the transcript of the August hearings establishes that the right to seek these parking facilities was not then reserved for later determination. While the McFarland Group's counsel stated that "by making that tender, we do not give up the rights that we have retained under the contract or under the judgments," this remark must be read in the light of the immediately preceding discussion in which counsel reiterated his previously expressed position, that "we are not waiving the rights which the [November 14, 1962] judgment gives to obtain a refund or reduction after closing of title."

At the first of the August hearings, counsel for the McFarland Group requested the court to enter an order reserving jurisdiction with respect to the C Ground rights, the replacement fund and the obligation as to parking. No such order was made. Instead, the transaction was completed on the basis of defendant's stipulation that the tender which had been made would be accepted as one "complying with and having only the consequences of one which complies with Paragraph 9 of the Memorandum Agreement." The stipulation is properly to be read as leaving open the question of price, which had been specifically reserved by the November 14, 1962 supplemental judgment, and the question of the rights to C Ground, an issue which was governed by paragraph 6 of the Memorandum Agreement and was separate from the issues involved in a conveyance of the four leaseholds. But there is nothing in the language of the stipulation which can be read as reserving the parking matter.

Even if we were to assume that the stipulation made by defendants at the time of accepting the tender was effective to reserve plaintiffs' right to litigate its parking claim, we would conclude that the claim lacks substance. The trial judge construed the 1962 supplemental judgment to dispose of the plaintiffs' claim to parking space. His construction of his own decree is certainly entitled to considerable weight. However, we need not rest our affirmance on that basis since we find that plaintiffs' cause is not furthered even if we disregard the supplemental judgment and consider only the 1957 Memorandum Agreement. The McFarland Group recognizes that no obligation of the lessor to supply parking facilities is set forth in the Agreement but contends that such obligation is necessarily implied on the ground that the lessee is dependent on the lessor for parking and that since parking facilities are required by law the leaseholds are worthless unless the lessor is required to provide parking. The plaintiffs' proofs fail to establish the claim that in 1957, when the Memorandum Agreement was entered into, the lessee was thus dependent on the lessor. Moreover, there is no such ...

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