Sheridan Drive-In, Inc. v. State

• Decision Date: 18 May 1962
• Docket Number: No. 36384,DRIVE-I,INC,36384
• Citation: 228 N.Y.S.2d 576,16 A.D.2d 400
• Parties: SHERIDAN, Appellant, v. The STATE of New York, Respondent. Claim
• Court: New York Supreme Court — Appellate Division

Page 576

228 N.Y.S.2d 576

16 A.D.2d 400

SHERIDAN DRIVE-IN, INC., Appellant, v. The STATE of New York, Respondent.

Claim No. 36384.

Supreme Court, Appellate Division, Fourth Department.

May 18, 1962.

Borins & Snitzer, for appellant; Leo J. Fallon, Buffalo, of counsel.

Louis J. Lefkowitz, Albany, for respondent; Donald A. MacHarg and Paxton Blair, Albany, of counsel.

Before WILLIAMS, P. J., and BASTOW, GOLDMAN, HALPERN and McCLUSKY, JJ.

HALPERN, Justice.

The State appropriated a substantial part of the site of claimant's drive-in theater in the Town of Tonawanda for use in connection with the construction of the Niagara section of the New York State Thruway. The claimant's premises abutted on Grand Island Boulevard on the west and on Ensminger Road on the north. Grand Island Boulevard was a heavily traveled highway. As a result of the appropriation, the claimant's premises were no longer usable as a drive-in theater.

The claimant's attorney opened negotiations with the representatives of the State Department of Public Works with a view to settling its claim for damages for the appropriation. The initial demand by the claimant was $400,000. Hendricks, the representative of the State, made a counter offer of $250,000. In subsequent negotiations, he indicated that his offer might be increased to $325,000. this was all on the assumption that, as a result of the appropriation, the claimant would no longer be able to operate a drive-in theater in the vicinity of its established and highly successful location. However, upon further investigation, Hendricks ascertained that the claimant could readily acquire the adjoining premises to the east of its original site, abutting on Ensminger Road, and he pointed out to the claimant's attorney that the claimant's loss would be substantially reduced if it moved its drive-in theater to the adjoining premises. He argued that the public would have access to the new site from Grand Island Boulevard, because Ensminger Road, according to the State's plans, was to be carried across the Thruway by a bridge connecting Ensminger Road with Grand Island Boulevard. The parties proceeded to negotiate a settlement on this basis.

During the course of the negotiations, Hendricks died and McCord, the Chief of the Right-of-way and Claims Department in the City of Buffalo, took over the negotiations on behalf of the State. It was agreed that the plan proposed by Hendricks was a feasible one and that, by utilizing the proposed Ensminger bridge as a means of bringing traffic from Grand Island Boulevard to the new site of the theater, the claimant could operate a drive-in theater successfully on the adjoining site and thereby reduce its loss substantially below the figure of $325,000 which had been mentioned by Hendricks. McCord finally offered $215,000 in settlement of the reduced loss. The State's plans exhibited by McCord to the claimant's attorney showed the bridge across the Thruway, connecting Ensminger Road with Grand Island Boulevard. McCord represented that the plans were 'final'. The claimant's attorney asked for further assurance on this point and, after an interval of a few days which he indicated he needed for further investigation and inquiry, McCord advised the claimant's attorney that he was then in a position to give him definite assurance that the plans were 'final' and that the bridge would be built. Upon that basis, the claimant's attorney agreed to accept the State's offer of $215,000. A settlement agreement was accordingly drawn and executed by the parties and the $215,000 was paid by the State on December 16, 1955.

Thereafter, the claimant acquired the adjoining premises and built a new drive-in theater, on Ensminger Road, at a cost of about $315,000. The theater was completed and opened in July, 1956. Thereafter, contracts were duly let by the State for the relocation of Ensminger Road and for the construction of the bridge carrying the relocated road across the Thruway and work was actually commenced on the construction of the bridge in January, 1957. However, in the meantime, the Federal-Aid Highway Act had been passed on June 29, 1956 (70 Stat. 374), and pursuant to that act federal aid became available for the Power Line Expressway, the construction of which had been contemplated for some time. (See former section 340-a, Highway Law, added by Chapter 357 of the Laws of 1956, and new section 340-a, substituted therefor by Chapter 585 of the Laws of 1957.) New plans for an interchange between the Power Line Expressway and the Thruway were ordered to be prepared. In view of the proposed interchange connecting the two expressways, it was found that under Federal regulations, greater sight distances and longer curves would be required and that it would not be permissible, if federal aid was to be obtained, to carry Ensminger Road across the Thruway by a bridge as had been originally planned. Accordingly, on April 22, 1957, the State cancelled the plans for the Ensminger bridge and directed the contractor to suspend work thereon. Ensminger Road was terminated at the Thruway and the bridge was deleted from the plans. As a result, the claimant's new drive-in theater was left without direct access to any principal highway. The nearest principal highway was over two miles away, and the claimant's new theater could be reached from that highway only by a devious route through secondary roads.

The claimant filed a claim for two items of damage it had suffered: (1) the difference between $325,000, the value of its appropriation claim, and the sum of $215,000, which the claimant had accepted therefor upon the erroneous assumption that the Ensminger Road bridge would provide a means of access from Grand Island Boulevard to the new theater sit; (2) the difference between the amount expended by the claimant for this new drive-in theater and the amount of its present value in view of the elimination of the Ensminger Road bridge. Upon the trial, it was established that the claimant would have been entitled to $325,000 of the damages caused by the original appropriation and that it would have received that sum, if it had not been for the settlement made upon the erroneous assumption as to the Ensminger bridge. It was also proved that the new theater built in reliance upon the same erroneous assumption was worth about $100,000 less than it had cost to acquire the new site and to build the theater.

The Court of Claims Judge found that the facts were substantially as claimed by the claimant but he nevertheless dismissed the claim upon the ground that the representations made by the State's agents were true at the time that they were made and that it was in fact the State's intention at that time to build the bridge but that there had been a subsequent change of plans, for which no relief could be given to the claimant.

The Court of Claims' decision seems to us to have been based upon much too narrow a view of the nature of the representations made by the State's agents. They had represented, not only that it was the then existing intention of the State to build the Ensminger Road bridge, but that the plans therefor were 'final'. There was an implied representation that the term 'final', as used in this context, meant that the decision of the State to build the bridge was irrevocable and was not subject to change. At any rate, that was the interpretation reasonably placed upon the term by the claimant's attorney and the State's agents knew that that was his interpretation. That interpretation became the basis upon which subsequent negotiations were conducted. The claimant's attorney insisted upon an assurance that the plans were 'final' in the sense in which he construed the term and this assurance was repeatedly given to him.

Both parties must have understood that the word 'final', as used in the course of the negotiations, meant irrevocable; otherwise, it could not have played any effective part in leading the parties to reach a settlement. The claimant could not have been induced to accept a reduced amount in settlement of its appropriation claim, merely by an assurance that the State had a present intention to build the bridge, subject, however, to a right to change its intention. If the State's agents had put the matter to the claimant in this way, it is clear that the claimant would not have accepted the reduced settlement and would not have undertaken the construction of a new theater. The assurance which was needed and which was given was that there was an irrevocable commitment on the part of the State to build the bridge.

In these circumstances, it plainly follows that when the claimant discovered that the plans were not 'final' at all but that the State had reserved the right to change them and, in fact, had changed them, the claimant had the right to rescind the settlement. Upon such rescission, the claimant became entitled to recover, by way of restitution, full compensation for the appropriation by the State, less the amount theretofore paid by the State. The right of a party to an agreement to rescind it because of mutual mistake or because of mistake on its part induced by misrepresentation by the other party is well settled (Seneca Wire & Mfg. Co. v. A. B. Leach & Co., 247 N.Y. 1, 159 N.E. 700; Restatement of Contracts, § 502; Report of the Law Revision Commission, 1946, Legislative Document No. 65, [B] pp. 33-78).

Even if it is assumed that the mistake was a unilateral mistake on the claimant's part and that it was not caused by any misrepresentation by the State's agents, the fact remains that the mistake was known to the State's agents, and the claimant therefore had the right to rescind the settlement agreement upon discovery of the mistake. Rescission may be allowed even for a unilateral mistake, in order to prevent an unjust enrichment of the other party. 'A mistake not mutual but only on one side may be ground for rescinding but not for...