Gizara v. N.Y. Times Co.

• Decision Date: 20 January 2011
• Citation: 80 A.D.3d 1026,915 N.Y.S.2d 379
• Parties: Paul H. GIZARA et al., Respondents-Appellants, v. The NEW YORK TIMES COMPANY, Appellant-Respondent.
• Court: New York Supreme Court — Appellate Division

915 N.Y.S.2d 379

80 A.D.3d 1026

Paul H. GIZARA et al., Respondents-Appellants,

v.The NEW YORK TIMES COMPANY, Appellant-Respondent.

Supreme Court, Appellate Division, Third Department, New York.

Jan. 20, 2011.

Nixon Peabody, L.L.P., Albany (Daniel J. Hurteau of counsel) and George Freeman, The New York Times Company, New York City, for appellant-respondent.

Kriss, Kriss & Brignola, L.L.P., Albany (Charles T. Kriss of counsel), for respondents-appellants.

Before: MERCURE, J.P., MALONE JR., STEIN, McCARTHY and EGAN JR., JJ.

MERCURE, J.P.

Cross appeals from an order of the Supreme Court (Catena, J.), entered April 1, 2010 in Montgomery County, which partially granted defendant's motion to dismiss the complaint.

Plaintiff Paul H. Gizara is a consultant who, during the relevant time periods, provided sales tax recovery services in his role as president and sole shareholder of plaintiff Gizara Group, Inc. In 1997, Gizara Group entered into a written contract with defendant for the provision of tax recovery services in connection with sales tax that defendant improperly paid on purchases of exempt property. The term of the contract was two years, but it provided that it could be extended upon the agreement of both parties or terminated earlier in writing by either party. Defendant paid plaintiffs approximately $1 million for their services through 2003.

Plaintiffs assert that the parties reached an oral agreement in 2004 wherein plaintiffs agreed to sell their sales tax recovery methodology to defendant for $200,000, and to modify the written contract to provide for additional tax consulting work and compensation. Nevertheless, plaintiffs claim, defendant refused to provide authorization for them to pursue refunds for the 2004 tax year onward, and ultimately notified plaintiffs that their services were no longer needed. Thereafter, plaintiffs commenced this action, alleging causes of action for breach of contract, as well as equitable claims. Supreme Court partially granted defendant's motion to dismiss the complaint, dismissing all claims except the first cause of action for breach of the 1997 written contract and the third cause of action to the extent that it alleged breachof the written contract as modified in the 2004 oral agreement. Defendant appeals,¹ and we now affirm.

Initially, we reject defendant's argument that Supreme Court erred in concluding that the complaint states a cause of action for breach of the 1997 contract. On a CPLR 3211 motion to dismiss, "we liberally construe the complaint, ... accept as true the facts alleged in the complaint and any submissions in opposition to the dismissal motion[,] ... [and] accord plaintiffs the benefit of every possible favorable inference" ( 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 152, 746 N.Y.S.2d 131, 773 N.E.2d 496 [2002] [citations omitted]; see Nonnon v. City of New York, 9 N.Y.3d 825, 827, 842 N.Y.S.2d 756, 874 N.E.2d 720 [2007] ). When the motion is brought under CPLR 3211(a)(7), "the criterion is whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one" ( Leon v. Martinez, 84 N.Y.2d 83, 88, 614 N.Y.S.2d 972, 638 N.E.2d 511 [1994] [internal quotation marks and citations omitted] ). Thus, "[t]he motion must be denied if from the pleadings' four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law" ( 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d at 152, 746 N.Y.S.2d 131, 773 N.E.2d 496 [internal quotation marks and citation omitted] ).

Defendant is correct that courts are "duty-bound to adjudicate the parties' rights according to unambiguous provisions [of a contract] and [to] give words and phrases employed their plain meaning" ( Bauersfeld v. Board of Educ. of Morrisville-Eaton Cent. School Dist., 46 A.D.3d 1003, 1005, 846 N.Y.S.2d 809 [2007], lv. denied 10 N.Y.3d 704, 857 N.Y.S.2d 36, 886 N.E.2d 801 [2008] [internal quotation marks and citation omitted] ). That duty does not, however, negate the rule that "[i]n New York, all contracts imply a covenant of good faith and fair dealing in the course of performance" ( 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d at 153, 746 N.Y.S.2d 131, 773 N.E.2d 496; see Dalton v. Educational Testing Serv., 87 N.Y.2d 384, 389, 639 N.Y.S.2d 977, 663 N.E.2d 289 [1995] ). While the covenant does not nullify other terms of the contract ( see Greene Tech. v. Atoma Intl. of Am., 296 A.D.2d 695, 696, 745 N.Y.S.2d 242 [2002]; Burdett Radiology Consultants v. Samaritan Hosp., 158 A.D.2d 132, 136, 557 N.Y.S.2d 988 [1990] ), it "embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive thefruits of the contract" ( Dalton v. Educational Testing Serv., 87 N.Y.2d at 389, 639 N.Y.S.2d 977, 663 N.E.2d 289 [internal quotation marks and citation omitted]; accord Moran v. Erk, 11 N.Y.3d 452, 456, 872 N.Y.S.2d 696, 901 N.E.2d 187 [2008] ). Here, while the contract provided that refund claims could not be processed "without prior review and FULL authorization, in writing by [defendant]," that provision did not give defendant the right to act arbitrarily or in bad faith when reviewing the refund claims prepared by plaintiffs. As Supreme Court concluded, plaintiffs' complaint adequately stated a cause of action based upon breach of the implied covenant in alleging that defendant directed them to prepare a refund claim for 2005, but submitted its own claim and refused to review or submit the claim prepared by plaintiffs, thereby depriving plaintiffs of the benefits of the contract ( see 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d at 153-154, 746 N.Y.S.2d 131, 773 N.E.2d 496; 1-10 Indus. Assoc. v. Trim Corp. of Am., 297 A.D.2d 630, 631-632, 747 N.Y.S.2d 29 [2002]; see also Just-Irv Sales v. Air-Tite Bus. Ctr., 237 A.D.2d 793, 794-795, 655 N.Y.S.2d 131 [1997] ).

Turning to defendant's argument that the third cause of action for breach of the 2004 oral agreement should have been dismissed under CPLR 3211(a)(5) as violative of the statute of frauds, General Obligations Law § 5-701(a)(1) provides that an agreement that "[b]y its terms is not to be performed within one year from the making thereof" must be memorialized in a signed writing. The statute of frauds is not implicated in the case of oral agreements that are terminable at will because such agreements are capable of completion within one year ( see D & N Boening v. Kirsch Beverages, 63 N.Y.2d 449, 456, 483 N.Y.S.2d 164, 472 N.E.2d 992 [1984]; Romaine v. Colonial Tanning Corp., 301 A.D.2d 732, 733, 753 N.Y.S.2d 552 [2003] ). Moreover, when a "contract has been materially modified, the modification establishes a new...