Iandoli (doing business as Blue Ridge Fuel Co.) v. Asiatic Petroleum Corp., App. Div., First Dept., May 26, 1977

Citation context: Order of the Supreme Court, New York County (entered Nov. 15, 1976) reviewed by the Appellate Division; decision dated May 26, 1977. Panel concurrence listed: Murphy, P.J., Kupferman, Lupiano and Lane, JJ.

Factual and Procedural Background

This opinion reviews an order of the Supreme Court, New York County, which had granted defendant's motion to dismiss the amended complaint. The Appellate Division unanimously modified that order on the law by reinstating the second cause of action and, as so modified, affirmed the dismissal, without costs and without disbursements.

The complaint contained at least three causes of action. The first and third causes of action were characterized by the court as sounding in breach of a contract for sale (and thus governed by the four-year statute of limitations contained in Uniform Commercial Code § 2-725). The second cause of action was challenged below on the basis that it was unenforceable under the parol evidence rule and the Statute of Frauds (UCC § 2-201), and the defendant's motion to dismiss the second cause was brought under CPLR 3211(a)(5).

Legal Issues Presented

Whether the first and third causes of action, characterized as breach of a contract for sale, are time-barred under the four-year statute of limitations in UCC § 2-725 or whether plaintiff's attempt to characterize those causes as based on economic duress (a species of fraud) transforms them into claims governed by a six-year statute of limitations.
Whether the second cause of action may be dismissed under CPLR 3211(a)(5) on the grounds that the contract is unenforceable under the parol evidence rule or the Statute of Frauds (UCC § 2-201), and whether the trial court could treat the motion as one for summary judgment without giving the notice required by CPLR 3211(c).

Arguments of the Parties

Appellant's Arguments

The plaintiff (appellant) argued that the first and third causes of action were subject to a six-year statute of limitations because they were based on economic duress, which the plaintiff characterized as a species of fraud and therefore governed by the longer limitations period applicable to actions sounding in fraud.

Respondent's Arguments

The defendant moved to dismiss the amended complaint. As to the second cause of action, the defendant asserted that the agreement was unenforceable due to the parol evidence rule and the Statute of Frauds and brought the motion under CPLR 3211(a)(5) (grounds which challenge the legal sufficiency of the pleading).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Brick v. Cohn-Hall-Marx Co., 276 N.Y. 259	The principle that in applying a statute of limitations courts look to "the reality, and the essence of the action and not its mere name."	The court relied on this principle to determine that recasting a contract claim as economic duress (fraud) does not change the essence of the action when the duress merely accomplished the breach and added nothing substantive to the contract claim.
Morrison v. National Broadcasting Co., 19 N.Y.2d 453	Supporting authority for examining the substance of the action when applying statutes of limitations.	Cited as additional authority for the proposition that the court must look to the essence of the action in determining the applicable limitations period.
Carr v. Lipshie, 8 A.D.2d 330, aff'd 9 N.Y.2d 983	Referenced in the context of limitations and characterization of claims.	Cited as another supporting authority consistent with the Court's analysis that the economic-duress allegation did not transform the contract claims into fraud claims for statute-of-limitations purposes.
Friedman v. Roseth Corp., 270 App. Div. 988, aff'd 297 N.Y. 495	Used as precedent on the relationship between economic duress and contract claims.	Referenced to support the conclusion that asserted economic duress that only facilitated a breach does not change the underlying contract cause of action.

Court's Reasoning and Analysis

The court proceeded in two strands of analysis corresponding to the causes of action at issue.

First, with respect to the first and third causes of action, the court identified them as actions for breach of a contract for sale and therefore governed by the four-year statute of limitations in UCC § 2-725. The plaintiff's attempt to avoid the four-year limitation by characterizing these counts as grounded in economic duress (a variety of fraud) was rejected. The court applied the established principle (as articulated in Brick v. Cohn-Hall-Marx Co. and cited authorities) that a court must look to the reality and essence of the action rather than the label placed upon it. Because the alleged economic duress was merely the means by which the breach was accomplished and "added nothing to the causes of action sounding in contract," the causes remained contract claims subject to the four-year limitations period.

Second, regarding the second cause of action, the court examined the procedural basis for the defendant's dismissal motion. The motion was brought under CPLR 3211(a)(5). The court explained that the parol evidence rule (and attendant contention that an agreement is unenforceable under the Statute of Frauds) is not a proper ground for dismissal under CPLR 3211; such a defense concerns the admissibility and sufficiency of evidence rather than a defect apparent on the face of the pleading. While the motion could have been treated as one for summary judgment, Special Term failed to give the notice required by CPLR 3211(c) when converting a CPLR 3211 motion into one for summary judgment; consequently, consideration of the parol evidence rule was procedurally inappropriate in the context of the dismissal motion.

The court further noted the applicable principle under the Statute of Frauds (UCC § 2-201): a writing need not contain all material terms nor state material terms with precision; it is sufficient if the writing "afford[s] a basis for believing that the offered oral evidence rests on a real transaction." On the record before it and as the second cause of action was pleaded, the court concluded that the second cause could not be held barred by the Statute of Frauds at the dismissal stage.

Holding and Implications

Holding: The Appellate Division modified the Supreme Court order by reinstating the second cause of action and, as so modified, affirmed the dismissal of the remaining challenged portions of the amended complaint. The affirmance was ordered without costs and without disbursements.

Implications:

The court affirmed that the substance of a claim governs the applicable statute of limitations: where an asserted economic duress allegation merely facilitated a breach and did not change the essential nature of the claim, the action remains a contract action governed by the UCC § 2-725 four-year limitation period.
The court held that a party cannot obtain dismissal under CPLR 3211(a)(5) by invoking the parol evidence rule or Statute of Frauds where the challenge pertains to evidentiary sufficiency; consideration of such defenses may require conversion to summary judgment, but conversion requires the notice mandated by CPLR 3211(c), which was not given here.
Direct effect on the parties: the first and third causes of action remained subject to dismissal under the statute of limitations, while the second cause of action was reinstated and may proceed. The opinion does not announce a new controlling rule beyond application of existing precedents and procedural principles.

Concurrence noted: Murphy, P.J., Kupferman, Lupiano and Lane, JJ. concurred.

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LEWIS E. IANDOLI, Doing Business as BLUE RIDGE FUEL COMPANY, Appellant, v. ASIATIC PETROLEUM CORPORATION, Respondent.

Order, Supreme Court, New York County, entered November 15, 1976, which granted defendant's motion to dismiss the amended complaint, unanimously modified, on the law, to the extent of reinstating the second cause of action and, as so modified, affirmed, without costs and without disbursements. Both the first and third causes of action sound in breach of a contract for sale and are governed by a four-year Statute of Limitations (Uniform Commercial Code, § 2-725). Plaintiff's argument in avoidance of this limitation that these causes are based in economic duress which is a species of fraud and, therefore, governed by a six-year limitation period, is without merit. As stated by the Court of Appeals: "In applying a Statute of Limitations * * * `We look for the reality, and the essence of the action and not its mere name.' (Brick v. Cohn-Hall-Marx Co., 276 N.Y. 259, 264.)" (Morrison v National Broadcasting Co., 19 N.Y.2d 453, 459; see, also, Carr v Lipshie, 8 A.D.2d 330, affd 9 N.Y.2d 983.) Here, the alleged economic duress was the means of accomplishing the breach and added nothing to the causes of action sounding in contract (see Brick v Cohn-Hall-Marx Co., 276 N.Y. 259; see, also, Friedman v Roseth Corp., 270 App. Div. 988, affd 297 N.Y. 495). Insofar as the second cause of action is concerned, the motion to dismiss was predicated on CPLR 3211 (subd [a], par 5). The fact that an agreement may be unenforceable as a consequence of application of the parol evidence rule is not set forth as a basis to bring a motion to dismiss under CPLR 3211. While the motion could have been treated as one for summary judgment, Special Term did not give the required notice to the parties that it would be so treated (CPLR 3211, subd [c]). Accordingly, consideration of the parol evidence rule is irrelevant in this procedural context. Under the Statute of Frauds (Uniform Commercial Code, § 2-201), the contract for sale "need not contain all the material terms * * * and such material terms as are stated need not be precisely stated. All that is required is that the writing afford a basis for believing that the offered oral evidence rests on a real transaction" (McKinney's Cons Laws of NY, Book 62 1/2, Uniform Commercial Code, § 2-201, Official Comment, p 117). On this record the second cause of action as pleaded cannot be held barred by the Statute of Frauds.

Concur — Murphy, P.J., Kupferman, Lupiano and Lane, JJ.

IANDOLI v. ASIATIC PETROLEUM CORPORATION