Cornhusker Farms, Inc. v. Hunts Point Cooperative Market, Inc.

• Decision Date: 11 December 2003
• Docket Number: 758.
• Citation: 2003 NY Slip Op 19392,2 A.D.3d 201,769 N.Y.S.2d 228
• Parties: CORNHUSKER FARMS, INC., Respondent-Appellant, v. HUNTS POINT COOPERATIVE MARKET, INC., Appellant-Respondent.
• Court: New York Supreme Court — Appellate Division

2 A.D.3d 201

769 N.Y.S.2d 228

2003 NY Slip Op 19392

CORNHUSKER FARMS, INC., Respondent-Appellant, v. HUNTS POINT COOPERATIVE MARKET, INC., Appellant-Respondent.

758.

Appellate Division of the Supreme Court of the State of New York, First Department.

December 11, 2003.

Order, Supreme Court, Bronx County (Paul Victor, J.), entered April 16, 2002, which granted defendant's motion to dismiss the complaint to the extent of dismissing the tenth and eleventh causes of action, and otherwise denied the motion, unanimously

modified, on the law, to grant the motion to dismiss also with respect to the second, third, fourth, seventh, eighth and ninth causes of action, and with respect to the first cause of action except to the extent such first cause of action alleges that defendant breached the Subscription Agreement, dated July 26, 1999, as amended, by failing to comply fully with the specifications of Exhibit D annexed to such Subscription Agreement, and otherwise affirmed, without costs.

Plaintiff meat wholesaler (Cornhusker) and defendant marketing cooperative (the Co-op) entered into a Subscription Agreement, dated July 26, 1999, under which, inter alia, Cornhusker was to purchase certain shares of the Co-op, and to sublease from the Co-op a refrigerated warehouse (the Unit) to be built by the Co-op pursuant to the agreement. The Subscription Agreement designated as "Landlord's Work" the portion of the construction work for the Unit set forth on annexed "Exhibit D," and provided that, "other than Landlord's Work, [the Co-op] is not obligated to undertake any work or make any improvements to the Unit, it being agreed that all work other than Landlord's Work which is necessary or desirable to prepare the Unit for use or occupancy by [Cornhusker] shall be performed by [Cornhusker] at [Cornhusker's] sole cost and expense...." The Subscription Agreement further provided that Cornhusker was to contribute $2,288,498 to the cost of the construction of the Unit (the Construction Payment), based in part on an estimated construction budget annexed to the agreement as Exhibit C. The Subscription Agreement contained standard merger and no-oral-modification clauses. Finally, a Side Letter reciting that the parties executed it "simultaneously" with the Subscription Agreement (the Side Letter) provided that, of Cornhusker's total Construction Payment of $2,288,498, the amount of $1,260,498 was for "actual hard construction costs," and $1,028,000 was an estimate of the cost of the balance of the work, which estimated amount "shall be adjusted based upon the actual completion costs."

Nearly one year after the execution of the Subscription Agreement and the Side Letter, the parties entered into a letter agreement, dated June 12, 2000, which stated that the parties "desire[d] to modify the Subscription Agreement as hereinafter set forth." In that regard, the June 2000 letter agreement clarified that the amount of Cornhusker's contribution to the Unit's construction costs set forth in the Subscription Agreement "represented the parties' estimate of the construction costs at the time that the Subscription Agreement was executed," and increased that contribution from $1,260,498 to $1,765,688 based on an annexed revised estimated construction budget that was "substituted for the Exhibit C attached to the Subscription Agreement." The final paragraph of the June 2000 letter agreement provided that "[a]ll other terms and conditions of the Subscription Agreement shall remain in full force and effect except as specifically modified herein, and as modified hereby are ratified and confirmed."

In August 2001, Cornhusker commenced this action against the Co-op, in which Cornhusker alleges principally that the Co-op committed various breaches of the Subscription Agreement in building the Unit. In lieu of answering, the Co-op moved to dismiss the complaint pursuant to CPLR 3211 (a) (1) and (7), relying on the contractual documents themselves. The IAS court denied the motion as to all but 2 of the 11 causes of action. On the Co-op's appeal and Cornhusker's cross appeal, we modify to grant the motion as to all causes of action except the fifth, the sixth, and a portion of the first, and remand for further proceedings thereon.

The first cause of action alleges that the Co-op breached the Subscription Agreement by failing to build the Unit in conformity with (1) Exhibit D to the Subscription Agreement and (2) certain plans for the Unit (the Plans) drawn up by architects the Co-op retained pursuant to a December 1998 letter of intent that preceded the Subscription Agreement. This cause of action is legally sufficient insofar as it is based on allegations that the Co-op breached the Subscription Agreement by failing to comply fully with Exhibit D, i.e., by allegedly failing to provide the Unit with certain items expressly identified as part of the Landlord's Work by Exhibit D, namely, electric overhead doors, dock locks and vapor barriers (as alleged in paragraph 33 of the complaint). Accordingly, the IAS court correctly sustained the portion of the first cause of action based on the Co-op's alleged noncompliance with Exhibit D to the Subscription Agreement.

We are constrained, however, to dismiss the remainder of the first cause of action. To the extent the first cause of action is based on the Co-op's alleged noncompliance with the Plans, it is legally insufficient because the Plans are not referenced anywhere in the contractual writings signed by the parties, namely, the Subscription Agreement, the Side Letter and the June 2000 letter agreement. The Subscription Agreement's strict merger clause¹ and no-oral-modification clause² establish that it is an integrated writing, and, as a matter of law, bar any claim based on an alleged agreement to build the Unit according to the Plans that the parties failed to express either in the Subscription Agreement itself or in a signed written amendment (see Jarecki v Shung Moo Louie, 95 NY2d 665, 669 [2001]; W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162-163 [1990]; Unisys Corp. v Hercules Inc., 224 AD2d 365, 368-369 [1996]). Contrary to the view of the IAS court, we may not create an ambiguity in the otherwise unambiguous Subscription Agreement by...