Rose v. Spa Realty Associates

• Decision Date: 05 July 1977
• Citation: Rose v. Spa Realty Associates, 42 N.Y.2d 338, 397 N.Y.S.2d 922, 366 N.E.2d 1279 (N.Y. 1977)
• Parties: , 366 N.E.2d 1279 Allen V. ROSE et al., Respondents, v. SPA REALTY ASSOCIATES, a copartnership consisting of Norman M. Schlesinger, et al., Appellants.
• Court: New York Court of Appeals Court of Appeals

Page 922

397 N.Y.S.2d 922

42 N.Y.2d 338, 366 N.E.2d 1279

Allen V. ROSE et al., Respondents, v. SPA REALTY ASSOCIATES, a copartnership consisting of Norman M. Schlesinger, et al., Appellants.

Court of Appeals of New York.

July 5, 1977.

Thomas R. Newman, New York City, Phil A. Rodriguez, Schenectady, Joseph A. Fiore and Aaron E. Rennert, Jamaica, for appellants.

Edward Flower and Lark J. Shlimbaum, Bay Shore, for respondents.

BREITEL, Chief Judge.

Plaintiffs, planners of an extensive housing development on land in Saratoga Springs purchased from defendants, seek specific performance of an oral agreement to modify the written agreement of sale. The modification reduced the quantity of the land to be conveyed as a first stage under the written agreement. Supreme Court, after a nonjury trial, ordered that the lesser quantity be conveyed to plaintiffs upon payment in full in cash. From an order of the Appellate Division modifying the judgment to allow plaintiffs to purchase the lesser quantity on credit terms, defendant sellers appeal.

There are two issues of law arising under subdivision 1 of section 15-301 of the General Obligations Law. The statute provides that written agreements expressly proscribing oral modification cannot be changed by oral executory agreement. The first issue is whether partial performance of an oral modification suffices to take the modification out of the statutory requirement of a writing. The second, and alternative, issue is whether equitable estoppel may be invoked to bar a party from relying on the statute. Also at issue, if the oral modification be effective, is the payment term for the modified transaction.

The order of the Appellate Division, 54 A.D.2d 1028, 388 N.Y.S.2d 184 should be reversed and the judgment of Supreme Court reinstated as provided below Partial performance of an oral agreement to modify a written contract, if unequivocally referable to the modification, avoids the statutory requirement of a writing. Moreover, when a party's conduct induces another's significant and substantial reliance on the agreement to modify, albeit oral, that party may be estopped from disputing the modification notwithstanding the statute. Finally, because defendant sellers conditioned the reduction in the amount of land to be conveyed upon full cash payment, plaintiff purchasers, by proceeding with the project and the sales of sites and houses, necessarily and impliedly accepted the sellers' payment term.

On June 26, 1972, plaintiff partnership Develco Associates, expecting to construct an 800-unit housing development, entered into a many-paged written agreement with numerous attachments to purchase from defendant partnership Spa Realty a maximum of 76 acres of land in Saratoga Springs. Under the agreement, conveyance was to be in stages, with the purchasers having a number of options as to the amount of land that would ultimately be purchased. Both the prices and the payment terms, ranging from all cash to specified credit provisions, varied with the quantity of land to be conveyed. The agreement expressly stated that "it may not be changed or terminated orally".

Had all gone as planned, purchasers would soon have divided the 76 acres into four parcels, delivered to the sellers plans for obtaining the necessary governmental approvals for an initial 48 dwelling units, and taken title for cash to a one-acre subparcel for the construction of at least four model homes. Although neither party was obligated to proceed further unless approvals for at least 150 dwelling units had been obtained, title to parcel number one was to be conveyed by June 1, 1973.

But before title to any of the property had changed hands, and while sellers, through their lawyer, were successfully pursuing their obligation to obtain the necessary first 48 approvals, trouble was encountered. The purchasers became aware that, due to the sewage problem, it was unlikely that construction of 150 dwelling units on parcel number one would be approved. As a result, in late November, 1972, Joseph Baratta, one of the purchasers, informed Norman Schlesinger, one of the sellers, that sellers should apply for approval only of a second 48 units.

The trial court expressly found, and it was not at issue in the Appellate Division, that the sellers had agreed with the suggestion that there be sought, not the additional 102 approvals necessary to reach the 150 minimum of the written agreement, but only a second 48. Although there is some controversy over whether he was acting on behalf of the sellers, the lawyer retained by the sellers to handle the first 48 approvals apparently also acted in connection with the second 48. In fact, on March 9, 1973, Schlesinger wrote the purchasers that, as had been requested, the plans for a second 48 units, and not the originally intended additional 102, had been submitted by the sellers for governmental approvals.

Extensive trial testimony was devoted to the payment term for the 96 unit sites, that precise quantity never having been covered in any of the options in the written agreement. When the manner of payment was first discussed is disputed. But both purchasers and sellers agree: Whenever price was mentioned Schlesinger insisted upon all cash. There was never any writing of any kind fixing the manner of payment.

Despite the understanding of November, 1972 not to proceed with the written plan of conveying 150 units, both parties continued with the "development". On December 21, title to the one-acre subparcel was closed, and by the following June the four model homes had been completed. Final approvals for the initial 48 units were received in February, 1973, and, as noted, the necessary approvals for the second 48 units were being pursued. Purchasers arranged a promotional "grand opening", and approximately 19 agreements to purchase were signed by prospective homeowners. Overall, plaintiff purchasers invested substantial sums, allegedly $284,000.

In July, 1973, purchasers sought to close title on the 96 units. But the parties, over a protracted period, could not agree on manner of payment. Purchasers wanted the transaction financed on credit; sellers insisted on all cash. This action for specific performance or money damages followed.

The trial court, as noted, held that the written agreement had been effectively modified to allow purchase of the lesser quantity of 96 units. This holding was not disturbed by the Appellate Division. It is the payment term of the purchase that is still in dispute. Purchasers argue that the provision in the written agreement governing the sale of 150 units and providing for a one-sixth down payment and a purchase money mortgage is controlling. Sellers, on the other han argue that payment on an all-cash basis inextricably conditioned any modification.

Although the General Obligations Law ( § 5-703, subd. 2) subjects the sale of real property to the Statute of Frauds, it was not pleaded by defendants and is therefore not involved in this case.

From the foregoing summary it is evident that there are no significant disputes on the facts. Reversal of the order of the Appellate Division is required for the reasons to follow.

Parties to a written agreement who include a proscription against oral modification are protected by subdivision 1 of section 15-301 of the General Obligations Law. Any contract containing such a clause "cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement * * * is sought". Put otherwise, if the only proof of an alleged agreement to deviate from a written contract is the oral exchanges between the parties, the writing controls. Thus, the authenticity of any amendment is ensured (DFI Communications v. Greenberg, 41 N.Y.2d 602, 606-607, 394 N.Y.S.2d 586, 589-590, 363 N.E.2d 312, 315-316).

On the other hand, when the oral agreement to modify has in fact been acted upon to completion, the same need to protect the integrity of the written agreement from false claims of modification does not arise. In such case, not only may past oral discussions be relied upon to test the alleged modification, but the actions taken may demonstrate, objectively, the nature and extent of the modification. Moreover, apart from statute, a contract once made can be unmade, and a contractual prohibition against oral modification may itself be waived (Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 387-388, 122 N.E. 378, 380-381). Thus, section 15-301 nullifies only "executory" oral modification. Once executed, the oral modification may be proved. (E. g., Velveray Corp. v. Jolo Plastics Corp., 19 A.D.2d 69, 70-71, 241 N.Y.S.2d 377, 378-379, affd. 13 N.Y.2d 1165, 247 N.Y.S.2d 389, 196 N.E.2d 738; Semerad, Practice Commentary, McKinney's Cons. Laws of N.Y., Book 23A, General Obligations Law, § 15-301, p. 588; see, generally, 10 N.J.Jur., Contracts, § 404.)

Where there is partial performance of the oral modification sought to be enforced, the likelihood that false claims would go undetected is similarly diminished. Here, too, the court may consider not only past oral exchanges, but also the conduct of the parties. But only if the partial performance be unequivocally referable to the oral modification is the requireme of a writing under section 15-301 avoided (see, e. g., Bakhshandeh v. American Cyanamid Co., 8 A.D.2d 35, 38, 185 N.Y.S.2d 635, 638, affd. 8 N.Y.2d 981, 204 N.Y.S.2d 881, 169 N.E.2d 188; Bright Radio Labs. v. Coastal Commercial Corp., 4 A.D.2d 491, 494, 166 N.Y.S.2d 906, 909, affd. 4 N.Y.2d 1021, 177 N.Y.S.2d 526, 152 N.E.2d 543; cf. on the parallel rule governing the Statute of Frauds, Walter v. Hoffman, 267 N.Y. 365, 369, 196 N.E. 291, 292; Burns v. McCormick, 233 N.Y. 230, 232, 234, 135 N.E. 273, 274; McKinely v. Hessen, 202 N.Y. 24, 30, 95 N.E. 32, 34; 56 N.Y. Jur., Statute of Frauds, §§ 245, 246).

There is, however, another qualification to the...