Fourth Branch Associates Mechanicville v. Niagara Mohawk Power Corp.

• Decision Date: 30 January 1997
• Citation: 235 A.D.2d 962,653 N.Y.S.2d 412
• Parties: FOURTH BRANCH ASSOCIATES MECHANICVILLE, Appellant, v. NIAGARA MOHAWK POWER CORPORATION, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 412

653 N.Y.S.2d 412

235 A.D.2d 962

FOURTH BRANCH ASSOCIATES MECHANICVILLE, Appellant, v. NIAGARA MOHAWK POWER CORPORATION, Respondent.

Supreme Court, Appellate Division,

Third Department.

Jan. 30, 1997.

Donohue, Sabo, Varley & Armstrong P.C. (Kathleen L. Werther, of counsel), Albany, for appellant.

Kevin P. Glasheen, Niagara Mohawk Power Corporation (William J. Mertens of Swidler & Berlin, Chartered, Washington, DC, of counsel), Albany, for respondent.

Before CARDONA, P.J., and MERCURE, WHITE, CASEY and CARPINELLO, JJ.

CARPINELLO, Justice.

Appeal from an order of the Supreme Court (Harris, J.), entered November 9, 1995 in Albany County, which granted defendant's motion to dismiss the complaint for, inter alia, failure to state a cause of action.

Defendant owns a hydroelectric site (hereinafter the site) adjacent to New York State Lock C-2 on the Hudson River, near the Town of Halfmoon in Saratoga County. In 1987, defendant entered into a licensing agreement with plaintiff, a corporation active in hydroelectric development. The intent of this agreement was to redevelop the site to increase its energy generation and capacity and to facilitate the relicensing of the site by the Federal Energy Regulatory Commission (hereinafter FERC). Defendant would retain ownership of the site but plaintiff would develop the site, with the goal of realizing a long-term gain from the profitable sale of power.

The parties applied to FERC for a joint license that would supersede defendant's existing license. In 1989, the parties signed an operation and management agreement (hereinafter O & M agreement), an energy sales agreement (hereinafter ESA) and a lease agreement. The O & M agreement provided for interim management of the site until the revocation of the existing license, at which time the lease agreement would take effect. The O & M agreement and the ESA both specified that defendant was required to submit them to the State Public Service Commission (hereinafter PSC) for approval. The PSC approved the O & M agreement but disapproved the ESA and the lease agreement, stating that the latter two agreements were premature since FERC had not yet issued a license for the upgraded site and another company had submitted a competing license application.

FERC awarded the new license in June 1993. In September 1993, defendant gave 90-day notice of termination of the O & M agreement. Defendant also refused to reinstate the provisions of the ESA or the lease agreement, contending that these contracts were ineffective as they had been abrogated by the PSC. Plaintiff filed the instant action, containing causes of action for, inter alia, breach of contract, fraud, prima facie tort, promissory estoppel and quasi-contract. Supreme Court granted defendant's motion to dismiss the complaint in its entirety pursuant to CPLR 3211(a)(1) and (7). Plaintiff appeals.

Supreme Court properly dismissed the first and second causes of action, which allege fraud and aiding and abetting common-law fraud. It is well settled that a cause of action for fraud does not arise where, as here, the fraud alleged relates to a breach of contract (see, Brumbach v. Rensselaer Polytechnic Institute, 126 A.D.2d 841, 843, 510 N.Y.S.2d 762; Trusthouse Forte [Garden City] Mgt. v. Garden City Hotel, 106 A.D.2d 271, 272, 483 N.Y.S.2d 216).

Plaintiff's third cause of action, for negligent misrepresentation, was also legally insufficient. Despite plaintiff's argument that the parties' alleged joint venture created a fiduciary relationship, it is clear from the record in this case that the parties' relationship grew out of the several contracts that they executed with regard to this project, including the 1987 licensing agreement and the 1989 O & M agreement, both of which were approved by the PSC and effective as of the commencement of this action. It is well settled that a simple breach of contract is not a tort unless a legal duty independent of the contract has been violated (see, Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 389, 521 N.Y.S.2d 653, 516 N.E.2d 190). "This legal duty must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract" (id., at 389, 521 N.Y.S.2d 653, 516 N.E.2d 190 [citation omitted] ). As plaintiff itself alleged in its complaint that its claim rested in part upon the agreements between the parties, the third and tenth causes of action were properly dismissed.

For similar reasons, plaintiff's sixth cause of action, sounding in quasi-contract, is also legally insufficient. "The existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter" (id., at 388, 521 N.Y.S.2d 653, 516 N.E.2d 190). Here, the O & M agreement and the licensing agreement were both effective and enforceable as of the commencement of this action. As written contracts governed the obligations of the parties at the time this action was filed, Supreme Court correctly dismissed this cause of action.

Supreme Court properly dismissed plaintiff's seventh and eighth causes of action, based upon a claim of promissory estoppel, as plaintiff has failed to identify a clear and unambiguous promise from defendant upon which it reasonably relied to its detriment (see, R. Freedman & Son v. A.I. Credit Corp., 226 A.D.2d 1002, 1003, 641 N.Y.S.2d 429, 430; Silver v. Mohasco Corp., 94 A.D.2d 820, 822, 462 N.Y.S.2d 917, affd 62 N.Y.2d 741, 476 N.Y.S.2d 822, 465 N.E.2d 361). ¹

Supreme Court erred, however, in dismissing that portion of the fourth cause of action as alleged a breach of the licensing agreement, the ESA and the lease agreement and the fifth cause of action, insofar as it alleged a breach of the duty of good faith and fair dealing with regard to those agreements. A motion to dismiss pursuant to CPLR 3211(a)(7) should be denied where the pleading states a cause of action and where "from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law" (Guggenheimer v. Ginzburg, 43...