805 Third Ave. Co. v. M.W. Realty Associates

• Decision Date: 31 March 1983
• Parties: , 448 N.E.2d 445 805 THIRD AVE. CO., Appellant, v. M.W. REALTY ASSOCIATES, Respondent, et al., Defendant.
• Court: New York Court of Appeals Court of Appeals

Page 778

461 N.Y.S.2d 778

58 N.Y.2d 447, 448 N.E.2d 445

805 THIRD AVE. CO., Appellant, v. M.W. REALTY ASSOCIATES, Respondent, et al., Defendant.

Court of Appeals of New York.

March 31, 1983.

Richard E. Hershenson and Samuel Kirschenbaum, New York City, for appellant.

Jay A. Kranis, Thomas J. Malmud and Barbara L. Levine, New York City, for respondent.

OPINION OF THE COURT

SIMONS, Judge.

In September, 1979 plaintiff, 805 Third Avenue Co., and defendant, M.W. Realty Associates, ^* two limited partnerships, entered into a contract for the sale by defendant of a portion of its air rights to plaintiff. In July, 1980 the parties modified the contract and in May, 1981 plaintiff instituted this action charging defendant with economic duress in compelling execution of the 1980 modification. It seeks to rescind the modified contract, to recover compensatory and punitive damages, and to obtain other related relief. After the action was commenced, plaintiff obtained preliminary injunctive relief from Special Term which maintained the status quo prior to trial. At the same time defendant moved to dismiss the complaint for failure to state a cause of action (CPLR 3211, subd. [a], par. 7). Special Term denied defendant's cross motion. On appeal, the Appellate Division modified Special Term's order by vacating the preliminary injunction and granting the cross motion to dismiss (87 A.D.2d 544). Plaintiff appeals from that order. It contends that its complaint states a cause of action, that in effect the Appellate Division has held that it must plead performance of conditions precedent in the September contract contrary to CPLR 3015 and that the Appellate Division has improperly dismissed the complai and granted judgment against it without prior notice (see CPLR 3015; Rovello v. Orofino Realty Co., 40 N.Y.2d 633, 389 N.Y.S.2d 314, 357 N.E.2d 970). Defendant contends that the complaint must be judged by considering the terms of the 1979 contract annexed to it and that when that is done plaintiff's complaint fails as a matter of law. We agree with defendant.

Briefly, it appears from the complaint that plaintiff is the ground lessee of the entire blockfront on Third Avenue between 49th and 50th Streets in New York City except for a two-story building on the northeast corner of 49th Street and Third Avenue which is owned by defendant. Plaintiff desired to construct an office building on the site and in order to increase to 31 stories the lawful floor area permitted under the city's zoning laws, it agreed to purchase the air rights necessary for the additional stories from defendant for $1,900,000. The details of the purchase were set forth in a contract dated September 18, 1979. By its terms plaintiff agreed to deliver in escrow a cash down payment and a promissory note for the balance of the purchase price which was to be paid over eight years. In turn defendant agreed to deliver in escrow a declaration of zoning lot restrictions and a single lot and easement agreement which would complete the transfer of the air rights. The escrow deposits were to be exchanged on the "Sales Closing Date" set forth in the contract or earlier at plaintiff's election. After the deliveries to the escrow agents were made, and relying on the agreement, plaintiff obtained from the city a permit authorizing it to commence construction of the building foundation only. It thereafter commenced excavation and construction and let contracts for erection of the superstructure. Plaintiff then alleges in its complaint that in May, 1980 it demanded that defendant deliver the documents "as required" by the contract of September 18, 1979; that defendant refused to do so unless plaintiff agreed to a modification of the September contract on terms more favorable to defendant; that defendant's refusal was "unconscionable" and "oppressive" and was done "maliciously" to apply economic duress to plaintiff because defendant knew that pursuant to the terms of the ground lease any delay in construction would cause serious and irreparable injury to plaintiff and its general partner that compelled by such wrongful acts of defendant and the economic duress resulting from its wrongful refusal to deliver the documents, plaintiff executed the modified contract of 1980 to its damage and defendant's benefit.

The theory on which plaintiff seeks recovery permits a complaining party to void a contract and recover damages when it establishes that it was compelled to agree to the contract terms because of a wrongful threat by the other party which precluded the exercise of its free will (Muller Constr. Co. v. New York Tel. Co., 40 N.Y.2d 955, 956, 390 N.Y.S.2d 817, 359 N.E.2d 328; Austin Instrument v. Loral Corp., 29 N.Y.2d 124, 130, 324 N.Y.S.2d 22, 272 N.E.2d 533; Oleet v. Pennsylvania Exch. Bank, 285 App.Div. 411, 137 N.Y.S.2d 779). The existence of economic duress is demonstrated by proof that one party to a contract has threatened to breach the agreement by withholding performance unless the other party agrees to some further demand (Austin Instrument v. Loral Corp., supra ). Thus, if all we had before us was plaintiff's complaint we would reverse and deny defendant's motion to dismiss, for accepting the allegations of the complaint as true, as we must, it alleges a cause of action upon which plaintiff may recover.

But that is not all there is before us. Plaintiff has annexed to its complaint the contract of September 18, 1979 and by doing so it has made the contract a part of its pleading for all purposes (CPLR 3014; see, also, Wernham v. Moore, 77 A.D.2d 262, 432 N.Y.S.2d 711). Interpretation of the contract is a legal matter for the court (West, Weir & Bartel v. Carter Paint Co., 25 N.Y.2d 535, 540, 307 N.Y.S.2d 449, 255 N.E.2d 709; Bethlehem Steel Co. v. Turner Constr. Co., 2 N.Y.2d 456, 459, 161 N.Y.S.2d 90, 141 N.E.2d 590), and its provisions establish the rights of the parties and prevail over conclusory allegations of the complaint (see Miglietta v. Kennecott...