455 N.Y.S.2d 157, 160, 116 Misc. 2d 40, 44 (Sup. Ct. 1982). Here, plaintiff assented to the May 16, 1994 letter agreement. As a result, the letter agreement supersedes any rights plaintiff may have had under the prior oral agreement. Barnum, 850 F. Supp. at 1236.
As we understand plaintiff's claim, the alleged oral agreement obligated plaintiff to assist defendant in negotiating the power purchase agreement in exchange for which defendant promised to reimburse defendant's expenses when the power purchase agreement was signed. By contrast, under the letter agreement, plaintiff assigned all of its rights in the Salvadoran project to defendant in exchange for defendant's promise to reimburse its expenses. Thus, it would appear that the agreements are inconsistent in that under the letter agreement defendant agreed to pay plaintiff's expenses in exchange for plaintiff's assignment of its rights in the project, rather than in exchange for plaintiff's assistance in finalizing the power purchase agreement.
Under New York law, a contract that appears complete on its face is an integrated agreement as a matter of law. Adler & Shaykin v. Wachner, 721 F. Supp. 472, 476-77 (S.D.N.Y. 1988). However, in the absence of a merger clause, "the court must determine whether or not there is an integration 'by reading the writing in the light of surrounding circumstances, and by determining whether or not the agreement was one which the parties would ordinarily be expected to embody in writing." Id. at 476 (quoting Braten v. Bankers Trust Co., 60 N.Y.2d 155, 468 N.Y.S.2d 861, 864, 456 N.E.2d 802, 805 (N.Y. 1983). When two parties have made a contract and have expressed it in a writing to which they have both assented as the complete integration of that contract, the parol evidence rule effectively bars any action to enforce a prior inconsistent oral agreement. See Garza v. Marine Trans. Lines, Inc., 861 F.2d 23, 26 (2d Cir. 1988); Doherty v. New York Telephone Co., 609 N.Y.S.2d 306, 307, 202 A.D.2d 627 (2d Dept. 1994).
Having examined the letter agreement and the circumstances surrounding it, we conclude that the parties intended the letter agreement to address fully the issue of defendant's reimbursement of plaintiff's development expenses. Although the document contains no merger clause, it contains the words: "In consideration for the assignment by Independent Energy Corporation (IEC) of all its interests in and to the electrical generating plant . . . and other good and lawful consideration, the receipt and sufficiency whereof is hereby acknowledged . . . ." These words indicate an intention to treat comprehensively the issue of reimbursement and to be bound only by the terms of the written agreement. See Adler & Shaykin, 721 F. Supp. at 476-77 (enumerating the factors New York courts consider in determining whether there is an integration). Moreover, the document, which the parties negotiated with aid of counsel, makes no reference to any prior oral agreement. Id.
Thus, plaintiff's claim for breach of the alleged oral agreement runs afoul of the parol evidence rule because the oral agreement's terms differ significantly from those of the integrated letter agreement. As discussed above, plaintiff may offer parol evidence only to explain the ambiguity in the letter agreement. "Then, the evidence is not considered to vary or contradict the terms of [the] integrated agreement; rather, the parol is used to determine what the terms of the agreement are." Garza, 861 F.2d at 27 (citation omitted). However, plaintiff may not bring a separate claim to enforce the antecedent oral agreement. Plaintiff's breach of contract claim must succeed or fail on the basis of the written instrument.
Based upon the above analysis, defendant's motion for summary judgment dismissing this claim is granted.
In the third count of its complaint, plaintiff alleges that in May 1994 defendant knowingly made false material representations to plaintiff, "including but not limited to, representations that Trigen's Board of Directors would consider the full implementation of the Project at its next scheduled Board Meeting in June, 1994." Complaint at P 70. Plaintiff's complaint further alleges that defendant made these false representations to induce plaintiff to execute the May 16, 1994 letter agreement and that, in reasonable reliance on defendant's representations, plaintiff did so. As a result, according to plaintiff, it suffered damages of at least $ 228,100.
In its response papers, plaintiff has fleshed out the basis of its claim. According to plaintiff, there is evidence, in the form of a May 13, 1994 Trigen memorandum, that reveals defendant's intent to assign its rights "in whole or in part to Tenneco" following execution of the power purchase agreement. Plaintiff's Memorandum at 43 (quoting Trigen memorandum). Plaintiff thus contends that defendant committed fraud by "intentionally misleading IEC into believing that Trigen intended, as of May 16, 1994, not to assign all of its rights and interest in the project to Tenneco." Plaintiff's Memorandum at 42 (emphasis in original).
In plaintiff's view, defendant's conduct must be deemed fraudulent if, as defendant has asserted in responding to plaintiff's breach-of-contract claims, reimbursement under the letter agreement depended upon defendant's board of directors permitting defendant to participate in the Salvadoran project until its completion.
In substance, plaintiff claims that it was fraudulent for defendant's representatives to induce plaintiff to enter into the letter agreement, which predicated payment of plaintiff's expenses on defendant receiving its board's permission to participate in the project, because defendant's management had, during the negotiation period, already resolved to assign defendant's rights to Tenneco.
Defendant counters that plaintiff has failed to adduce any evidence to support the allegations that prior to May 17, 1994, defendant's management had reason to know that its board of directors would not fully consider allowing defendant to continue as a participant in the project or that defendant's management intended to assign defendant's rights in the project to Tenneco. Defendant maintains that its officers did not decide to assign defendant's rights to Tenneco until after its board of directors unexpectedly ordered that the project be abandoned. Defendant thus asserts that there is no basis on which a reasonable jury could conclude that defendant's representatives knowingly misstated defendant's intentions regarding the project. Defendant seeks summary judgment dismissing plaintiff's cause of action for fraud. In the alternative, defendant urges that the fraud claim be dismissed because plaintiff has failed to plead fraud with particularity as required by Fed. R. Civ. P. 9(b).
Plaintiff's complaint alleges that defendant made false representations "with an intention to deceive IEC and induce IEC to execute" the letter agreement. Thus, although plaintiff did not expressly denominate it as such, plaintiff has, in substance, alleged the tort of fraudulent inducement. Under New York law, acts that give rise to a breach of contract claim may also support a distinct claim for fraud if the defendant misrepresents a presently existing fact. PI, Inc. v. Quality Products, Inc, 907 F. Supp. 752, 760-61 (S.D.N.Y. 1995) (citing cases). Accordingly, "a contracting party can be held liable for fraud if, at the time of contracting, the party made a false statement of intention that 'relates to an agreement between the parties.'" Id. (quoting Graubard Mollen Dannett & Horowitz v. Moskovitz, 86 N.Y.2d 112, 629 N.Y.S.2d 1009, 1014, 653 N.E.2d 1179, 1184 (N.Y. 1995)).
To recover under a theory of fraudulent inducement, plaintiff must prove the following elements: (1) misrepresentation of a material fact; (2) falsity of the representation; (3) scienter; (4) reasonable reliance; and (5) damages. May Dep't Stores Co. v. International Leasing Corp., Inc., 1 F.3d 138, 141 (2d Cir. 1993); Mallis v. Bankers Trust Co., 615 F.2d 68, 80 (2d Cir. 1980). In its motion for summary judgment, defendant does not challenge plaintiff's assertions that the representations at issue were material, that plaintiff reasonably relied on them, or that plaintiff suffered a loss. Nor does defendant expressly deny in its Memorandum of Law that its representatives may have made the representations alleged by plaintiff. Rather, defendant bottoms its motion on the contention that the representations at issue were, in fact, not false at the time defendant's representatives were alleged to have made them. According to defendant, its representatives entered into the letter agreement on May 16, 1994 fully intending that defendant would remain a participant in the project and without knowledge that the board of directors would reject the Salvadoran project at an unscheduled meeting the following day.
Plaintiff, however, has offered proof upon which a trier of fact could reasonably conclude that in the days preceding May 16, 1994, members of defendant's management had, at the least, seriously entertained the possibility of assigning defendant's rights to Tenneco after defendant executed the power purchase agreement with CEL. A May 13, 1994 memorandum from James Abromitis, former president of UTC and currently president of Trigen Baltimore, to three of defendants executives,
as well as to representatives of Tenneco and La Casa Castro, proposes that defendant seek to add the following language to the power purchase agreement then under negotiation:
It is Trigen's intention to which CEL is in agreement to assign this Agreement in whole or in part to Tenneco Gas International (?) or to another permitted assignee subject to CEL's prior approval of Tenneco's scope of work and level of participation.
Memorandum from J. Abromitis dated May 13, 1994 attached as Exhibit 30 to Keenan Declaration.
It is true that Mr. Abromitis' memorandum suggests language giving defendant the right to assign its interest "in whole or in part" to Tenneco, while the clause agreed upon by defendant and CEL on May 18, 1994, unequivocally states that defendant intends "to assign all of its rights and obligations under the Agreement to an affiliate of Tenneco Gas International, Inc." Power Purchase Agreement between Trigen and CEL, Art. 21(d) attached as Exhibit 19 to Kehoe Affirmation. Nevertheless, as plaintiff contends, the memorandum does suggest that defendant's representatives may have intended, prior to May 17, 1994, to assign defendant's entire interest in the project to Tenneco. Drawing all inferences in favor of plaintiff, as we must in evaluating defendant's motion, plaintiff has adduced circumstantial evidence that raises a genuine issue as to whether defendant's representatives knowingly gave plaintiff false assurances that defendant would not assign its interests to Tenneco and that defendant's board of directors would fully consider granting defendant approval to participate in the project.
Having found that plaintiff's fraud claim is potentially viable, we next consider defendant's motion to dismiss under Rule 9(b). Rule 9(b) mandates that, "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed. R. Civ. P. 9(b). In order to plead fraud with particularity, a plaintiff must "state precisely what material misstatements were made, the time and place of each misstatement, the speaker, the content, the manner in which the statement was misleading, and what the defendants 'obtained' as a result of the fraud." Joseph Victori Wines, Inc. v. Vina Santa Carolina S.A., 933 F. Supp. 347, 356 (S.D.N.Y. 1996) (quoting Morin v. Trupin, 823 F. Supp. 201, 205 (S.D.N.Y. 1993)).
Plaintiff's complaint states that "on or about" May 16, 1994, "defendant" made material representations "including but not limited to," representations that defendant's board of directors would consider the Salvadoran project at the board's June 1994 meeting. The complaint thus fails to satisfy the requirements that it indicate precisely what all of the alleged misstatements were, the time and place of such misstatements, and the speaker. Nevertheless, to grant defendant's motion in this case would be to reward defendant for not bringing its Rule 9(b) motion in a more timely manner. See Ramapo Land Co., Inc. v. Consolidated Rail Corp., 918 F. Supp. 123, 127-28 (S.D.N.Y. 1996). Ordinarily, we would grant leave to amend a claim that is dismissed for failure to satisfy Rule 9(b). However, if we were to grant defendant's motion, plaintiff would be denied its opportunity to amend its claim because of the imminent trial. In addition, defendant is not confronted with the type of conclusory or speculative allegations against which Rule 9(b) seeks to guard. See Segal v. Gordon, 467 F.2d 602, 607 (2d Cir. 1972). Defendant has filed a responsive pleading in this matter and has had ample opportunity through discovery to ascertain the full factual basis of plaintiff's fraud claim. Accordingly, defendant's motion to dismiss under Rule 9(b) is denied.
D. Failure of consideration and Unjust Enrichment
In the instant case, plaintiff has not responded to defendant's motion for summary judgment on the claims of failure of consideration and unjust enrichment. Federal Rule 56(e) requires plaintiff to go beyond its pleadings in order to defend against a motion for summary judgment:
When a motion for summary judgment is made and supported as provided in the rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleadings, but the adverse party's response, by affidavits or otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.
See also Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986) ("Rule 56(e) . . . requires the nonmoving party to go beyond the pleadings and . . . designate 'specific facts showing that there is a genuine issue for trial.'") However, entry of summary judgment is inappropriate, "where the evidentiary matter in support of the motion does not establish the absence of a genuine issue, . . . even if no opposing evidentiary matter is presented." Fed. R. Civ. P. 56(e) advisory committee's notes (1963 amendment).
1. Failure of Consideration
"Failure of consideration exists wherever one who has promised to give some performance fails without his or her fault to receive in some material respect the agreed quid pro quo for that performance. Failure of consideration gives the disappointed party the right to rescind the contract." Fugelsang v. Fugelsang, 517 N.Y.S.2d 176, 177, 131 A.D.2d 810 (2d Dept. 1987) (citation omitted). Where a plaintiff has received little or nothing of value, recision based upon failure of consideration is warranted. See Yochim v. Mount Hope Cemetery Ass'n, 623 N.Y.S.2d 80, 82, 163 Misc. 2d 1054 (N.Y. City Ct. 1994). However, a partial failure of consideration may not be sufficient to justify recision. 22 N.Y.Jur.2d, Contracts, § 500.
In the instant matter, defendant asserts that plaintiff's claim must fail because plaintiff received adequate consideration. We agree with plaintiff that defendant bargained for and obtained a conditional promise from defendant to reimburse plaintiff's development expenses. It is well settled that, "when a man acts in consideration of a conditional promise, if he gets the promise he gets all that he is entitled to by his act, and if, as events turn out, the condition is not satisfied, and the promise calls for no performance, there is no failure of consideration." R.A. Lord, Williston on Contracts, Vol. 3 § 7:18 at 346-47 (14th ed. 1992) (quoting Gutlon v. Marcus, 165 Mass. 335, 43 N.E. 125 (Mass. 1896); See Madison Square Garden v. Carnera, 52 F.2d 47, 49 (2d Cir. 1931) (citing Gutlon). In addition, plaintiff does not dispute that it received general liability releases from defendant, La Casa Castro, and DELASA in exchange for assigning its project rights to defendant. Thus, because plaintiff has failed to raise any genuine issues of material fact, and defendant is entitled to judgment as a matter of law, defendant's motion for summary judgment dismissing this claim is granted.
2. Unjust Enrichment
Under New York law, an unjust enrichment claim will lie if the plaintiff can show that (1) defendant was enriched; (2) the enrichment was at plaintiff's expense; (3) the circumstances were such that equity and good conscience require defendant to make restitution. Dolmetta v. Uintah Nat'l Corp., 712 F.2d 15, 20 (2d Cir. 1983) . Moreover, unjust enrichment is a quasi-contract claim that can ordinarily be invoked only in the absence of a valid, enforceable contract. Chrysler Capital Corp. v. Century Power Corp., 778 F. Supp. 1260, 1272 (S.D.N.Y. 1991); Clark-Fitzpatrick, Inc. v. Long Island R.R., 70 N.Y.2d 382, 521 N.Y.S.2d 653, 656, 516 N.E.2d 190, 193 (N.Y. 1987).
Relying on Clark-Fitzpatrick, defendant asserts that the existence of the letter agreement between plaintiff and defendant precludes plaintiff from recovering on its claim for unjust enrichment. According to defendant, plaintiff's claim must be dismissed because, as the New York Court of Appeals declared in Clark-Fitzpatrick, "it is impermissible . . . to seek damages in an action sounding in quasi contract where the suing party has fully performed on a valid written agreement, the existence of which is undisputed . . . ." Clark-Fitzpatrick, 521 N.Y.S.2d at 656.
We are not persuaded by defendant's argument. Here, although plaintiff seeks relief for breach of contract and fraud, it has not yet been determined with finality that there was a valid contract between the parties or that it has been breached. If it is determined that the letter agreement is not enforceable, then recovery under a theory of unjust enrichment may be proper. Chrysler Capital Corp., 778 F. Supp. at 1272; see Taylor & Jennings, Inc. v. Bellino Bros. Constr. Co., 106 A.D.2d 779, 483 N.Y.S.2d 813 (3d Dept. 1984). Because defendant has neither adduce evidence that it was not unjustly enriched, nor established that it is entitled to judgment as a matter of law, dismissal of plaintiff's claim is inappropriate.
E. Breach of Fiduciary Duty
In its complaint, plaintiff alleges that it and defendant were participants in a limited partnership. According to plaintiff, defendant thus owed it a fiduciary duty that defendant breached by pressuring plaintiff to accept the letter agreement, failing to reimburse plaintiff's expenses, and entering into an agreement with La Casa Castro and DELASA to plaintiff's exclusion. However, in its Memorandum of Law, plaintiff concedes that it never finalized or executed a limited partnership agreement with defendant. Plaintiff now contends that because it and defendant's predecessor, UTC, filed a certificate of limited partnership, "at the very least, IEC and UTC/Trigen were joint venturers in the Project." Plaintiff's Memorandum at 44. Thus, plaintiff maintains that defendant's actions constituted a breach of its fiduciary duty as a joint venturer.
Under New York law, a joint venture "is in a sense a partnership for a limited purpose, and it has long been recognized that the legal consequences of a joint venture are equivalent to those of a partnership."
Gramercy Equities Corp. v. Dumont, 72 N.Y.2d 560, 534 N.Y.S.2d 908, 911, 531 N.E.2d 629 (N.Y. 1988). A joint venture exists where
the parties have so joined their property, interests, skills and risks that for the purpose of the particular adventure their respective contributions have become as one and the commingled property and interests of the parties have thereby been made subject to each of the associates on the trust and inducement that each would act for their benefit . . . .
Steinbeck v. Gerosa, 4 N.Y.2d 302, 175 N.Y.S.2d 1, 13, 151 N.E.2d 170, 178 (1958) (quoting Hasday v. Barocas, 10 Misc. 2d 22, 28, 115 N.Y.S.2d 209, 215 (Sup. Ct. N.Y. Co. 1952). Specifically, in order to form a joint venture (1) two or more persons must enter into an agreement to carry on an enterprise for profit; (2) their agreement must evidence their intent to be joint venturers; (3) each must make a contribution of property, financing, skill, knowledge, or effort; (4) each must have some degree of joint control over the venture; and (5) there must be a provision for the sharing of both profits and losses. Itel Containers Int'l Corp. v. Atlanttrafik Express Serv. Ltd., 909 F.2d 698, 701 (2d Cir. 1990). All of these elements must be present before joint venture liability may be imposed. Id.
Here, plaintiff has failed to raise a triable issue of fact as to the existence of a joint venture. While it is true that the parties filed a certificate of limited partnership and submitted their bid to CEL on behalf of the IEC/UTC limited partnership, plaintiff acknowledges that the parties never finalized the proposed written partnership agreement. Plaintiff's assertion to the contrary notwithstanding, these facts, without more, do not give rise to a reasonable inference that the parties entered into a joint venture.
While the failure to execute a written agreement is not dispositive of the fact that such an agreement was not formed orally, plaintiff must proffer some additional evidence to demonstrate that the parties did, in fact, agree to enter into a joint venture. See Blank v. Nadler, 143 A.D.2d 966, 967, 533 N.Y.S.2d 891, 892 (2d Dept. 1988). We note that Mr. McVay, who attended the sessions at which the parties unsuccessfully negotiated the proposed written agreement, acknowledges that, as of the time of those sessions, the parties had not reached a consensus on the terms of a joint venture. McVay Deposition at 194 attached as Exhibit 1 to Keenan Declaration. Moreover, plaintiff has cited no deposition testimony or other evidence suggesting that after CEL awarded the bid to the parties as independent entities, the parties continued to negotiate and eventually finalized the terms of the purported joint venture. Nor does plaintiff offer evidence demonstrating that the parties' conduct was consistent with that of participants in a joint venture. Rather, it appears that the parties dealt with each other at arms length and pursued their independent objectives with regard to the project.
Accordingly, defendant is entitled to summary judgment dismissing plaintiff's claim for breach of fiduciary duty.
III. Defendant's Motion for Partial Summary Judgment
Defendant seeks partial summary judgment reducing plaintiff's claim from $ 228,100 to $ 114,050 for those counts, excluding Count I, of the complaint that this court declines to dismiss. According to defendant, although plaintiff alleges that it is entitled to $ 228,100 in damages for the expenses it incurred, plaintiff, in fact, only incurred $ 114,050 in expenses.
Defendant asserts, and plaintiff does not dispute, that half of the expenses claimed by plaintiff were amassed by Robert McVay, plaintiff's former vice president, after he resigned his position in January 1994.
The parties agree that subsequent to his resignation, Mr. McVay acted as an independent contractor on plaintiff's behalf and that on May 15, 1994, Mr. McVay, in writing, released plaintiff from "all debts, obligations, reckonings, promises, covenants, agreements, contracts . . . both written and oral . . . arising out of, or related in any way to . . . the Project." Release dated May 15th attached as Exhibit 11 to Kehoe affirmation. Thus, defendant concludes that the quantum of plaintiff's alleged damages should be reduced by the amount of the expenses attributable to Mr. McVay.
Plaintiff responds that "notwithstanding any written releases . . . IEC is obligated, based on a verbal commitment and its long standing relationship with Mr. McVay to pay his development expenses out of the proceeds of Trigen's reimbursement." Plaintiff's Memorandum at 45. Plaintiff also argues that defendant lacks standing to invoke the release between plaintiff and Mr. McVay.
The release executed by Mr. McVay is comprehensive and clearly manifests his intent to "release and forever discharge" plaintiff from all its debts and obligations arising out of the Salvadoran project. Moreover, the release expressly includes oral agreements within its ambit. Thus, we find incredible plaintiff's assertion that an oral agreement exists that provides for Mr. McVay's reimbursement and supersedes his May 15, 1994 release.
Because plaintiff concedes in its Local Rule 3(g) Statement that $ 114,050 of the $ 228,100 it claims as damages relates to Mr. McVay's expenses, and because, given the release signed by Mr. McVay, no reasonable jury could conclude that plaintiff is obligated to reimburse Mr. McVay, plaintiff is precluded from relying on Mr. McVay's expenses as a component of its damage claim. In addition, we reject plaintiff's contention that defendant has "no standing to assert" the release. It is true that defendant is not in a position to enforce the terms of the release. See generally, Calamari & Perillo, Contracts (3d ed. 1987) §§ 17-1 to 17-14. However, defendant does not rely on the agreement between plaintiff and Mr. McVay for the proposition that it releases defendant from its alleged reimbursement obligation. Rather, defendant offers the release as evidence that plaintiff, in fact, is not liable to Mr. McVay for his expenses and, therefore, that plaintiff may not claim them as damages. Accordingly, defendant's motion for partial summary judgment is granted.
For the foregoing reasons, we grant defendant's motion for summary judgment dismissing plaintiff's claims for breach of oral contract, failure of consideration, and breach of fiduciary duty. We deny defendant's motion for summary judgment dismissing plaintiff's claims for breach of written contract, fraud, and unjust enrichment. As to the fraud claim, we deny defendant's motion to dismiss for failure to plead with particularity. Last, we grant defendant's motion for partial summary judgment on the issue of damages claimed by plaintiff in its fraud and unjust enrichment causes of action.
Date: November 4, 1996
White Plains, New York
William C. Conner
Senior United States District Judge