| Stevens & Thompson Paper Co., Inc. v Niagara Mohawk PowerCorp. |
| 2008 NY Slip Op 02073 [49 AD3d 1011] |
| March 13, 2008 |
| Appellate Division, Third Department |
| Stevens & Thompson Paper Company, Inc., Appellant, v NiagaraMohawk Power Corporation, Respondent. |
—[*1] Kevin P. Glasheen, Niagara Mohawk Power Corporation, Albany, for respondent.
Mercure, J.P. Appeal from a judgment of the Supreme Court (Krogmann, J.), entered January19, 2007 in Washington County, upon a decision of the court in favor of defendant.
Plaintiff owned and operated a paper mill and hydroelectric power plant located on theBattenkill River in the hamlet of Middle Falls, Washington County, and obtained utility servicefrom defendant. Pursuant to a 1987 agreement between the parties (hereinafter the PPA),defendant agreed to purchase the full energy output generated by plaintiff's hydroelectric powerplant at specified contractual rates. As relevant here, the PPA required plaintiff to "own andmaintain its interconnection with [defendant's] transmission system, including the generatoroutput leads, the generator step-up transformer, and the 34.5 kV tap, together with associatedequipment." This interconnection equipment was located both on the hydroelectric power plantparcel and the mill parcel; specifically, a substation and the 34.5 kV transmission line werelocated on the mill parcel.
By December 1995, plaintiff had incurred a debt to defendant of approximately $900,000 forpower consumed by the paper mill. As a result, the parties entered into a repayment agreementrequiring, among other things, that plaintiff pay defendant 10% of the proceeds received from thesale of certain assets of the paper mill. Plaintiff thereafter entered into an [*2]agreement to sell to American Tissue the assets comprising its"tissue paper production business" and the mill parcel, including "any and all buildings, plantsand other structures and improvements thereon." Although plaintiff retained an easementpermitting access to the interconnection equipment and certain assets were expressly excludedfrom the sale, ownership of the interconnection equipment located on the mill parcel was notaddressed in the asset purchase agreement with American Tissue.
Following the sale to American Tissue in June 1996, defendant advised plaintiff that it wasin material breach of the PPA based upon plaintiff's alleged failure to maintain ownership of theinterconnection equipment. Accordingly, defendant refused to pay plaintiff the agreed-uponcontractual rate for electricity generated by the hydroelectric plant, instead paying only a reducedtariff rate between July 1, 1996 and September 14, 1996. Thereafter, in September 1996, plaintiffand American Tissue entered into an Energy Delivery Agreement (hereinafter the EDA), whichwas deemed effective May 31, 1996, and provided that plaintiff retained ownership of "allequipment utilized in the delivery of electricity from [plaintiff] to [defendant] and located on theMill Parcel." Defendant concluded that although the interconnection equipment had initially beensold, the EDA transferred ownership of that equipment back to plaintiff on September 15, 1996,and recommenced paying the contractual rate as of that date.
Subsequently, plaintiff commenced this breach of contract action alleging that defendant'srefusal to pay the contractual rate for electricity generated by the hydroelectric plant from July 1,1996 to September 14, 1996 constituted a breach of the PPA, entitling plaintiff to damages of$292,165.78 plus interest for a total of approximately $1.6 million as of the commencement oftrial. Following a nonjury trial, Supreme Court entered judgment in defendant's favor. Plaintiffappeals, arguing that Supreme Court erred in determining that the asset purchase agreementbetween plaintiff and American Tissue unambiguously conveyed the interconnection equipmentto American Tissue. We disagree and now affirm.
It is well settled that "[w]hether or not a writing is ambiguous is a question of law to beresolved by the courts" (W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]).Where the contract is unambiguous, "[e]vidence outside the four corners of the document as towhat was really intended but unstated or misstated is generally inadmissible to add to or vary thewriting" (id.; see Bailey v Fish& Neave, 8 NY3d 523, 528 [2007]). That is, " 'extrinsic and parol evidence is notadmissible to create an ambiguity in a written agreement which is complete and clear andunambiguous upon its face' " (W.W.W. Assoc. v Giancontieri, 77 NY2d at 163 [citationomitted]; accord South Rd. Assoc., LLCv International Bus. Machs. Corp., 4 NY3d 272, 278 [2005]). In that regard, "silencedoes not equate to contractual ambiguity" (Greenfield v Philles Records, 98 NY2d562, 573 [2002] [emphasis added]; see Reiss v Financial Performance Corp., 97 NY2d195, 199 [2001]). Thus, "courts 'may not by construction add or excise terms, nor distort themeaning of those used and thereby make a new contract for the parties under the guise ofinterpreting the writing' " (Bailey v Fish & Neave, 8 NY3d at 528, quoting Vermont Teddy Bear Co. v 538 MadisonRealty Co., 1 NY3d 470, 475 [2004]; accord Reiss v Financial PerformanceCorp., 97 NY2d at 199). We note that these principles are "particularly important in thecontext of real property transactions, where commercial certainty is a paramount concern, andwhere . . . the instrument was negotiated between sophisticated, counseled businesspeople negotiating at arm's length" (South Rd. Assoc., LLC v International Bus. Machs.Corp., 4 NY3d at 277 [internal quotation marks and citations omitted]; see W.W.W.Assoc. v Giancontieri, 77 NY2d at 162).[*3]
Here, the asset purchase agreement defines the "AcquiredAssets" as "all right, title, and interest in and to . . . those assets of [plaintiff] locatedon the [p]remises . . . including . . . that certain parcel of land inGreenwich, New York described on Exhibit 'A', together with any and all buildings, plants andother structures and improvements thereon, any and all rights and privileges pertaining thereto orto any of such buildings, plants or other structures or improvements, and any and all fixtures,machinery, installations, equipment and other property attached thereto or located thereon to theextent such are part and parcel of the [p]remises." As Supreme Court concluded, this broad,all-encompassing definition conveying, among other things, "any and all buildings, plants andother structures and improvements" on the premises unambiguously applies to theinterconnection equipment at issue—a substation including a heavy duty steel structureand related electrical equipment, such as transformers, mounted on a concrete slab along with anadjacent concrete block building; the 34.5 kV overhead transmission lines; and 40-foot highwood utility poles set in the ground and supported by guy wires and anchors and designed for theterrain of the site (see generally Lewis-Moors v Contel of N.Y., 78 NY2d 942, 943[1991]; Ackley v New York State Elec.& Gas Corp., 8 AD3d 941, 942 [2004]; 230 Park Ave. Assoc. v Penn Cent.Corp., 178 AD2d 185, 185-186 [1991]).
Nevertheless, plaintiff contends that the asset purchase agreement was ambiguous becausethe interconnection equipment was omitted both from a list of appraised assets and a list ofexcluded office equipment and furniture. The omission of the interconnection equipment fromthese noncomprehensive lists, however, does not create an ambiguity (see Vermont TeddyBear Co. v 538 Madison Realty Co., 1 NY3d at 475; Greenfield v Philles Records,98 NY2d at 573; Reiss v Financial Performance Corp., 97 NY2d at 199). Plaintiff doesnot dispute that the scope of the transaction, which involved the transfer of 16 buildings,manufacturing and office facilities, support infrastructure and certain personal property,precluded delineation and appraisal of all items to be transferred. Indeed, given plaintiff'sadmitted awareness of the requirement in the PPA signed with defendant that it continue to ownthe interconnection equipment, its failure to name the interconnection equipment in the list ofspecifically excluded assets supports a conclusion that the interconnection equipment is includedwithin the definition of "[a]cquired [a]ssets." Nor does the fact that plaintiff retained an easementover the mill parcel preserving access for an interconnection with defendant's transmissionsystem create an ambiguity regarding the transfer of ownership of the interconnection equipment.In reserving an easement, plaintiff retained only a nonpossessory right of access, which is notequivalent to retaining ownership of the interconnection equipment as required by the PPA(see generally Matter of Friends of Shawangunks v Knowlton, 64 NY2d 387, 394 [1985];Di Leo v Pecksto Holding Corp., 304 NY 505, 511 [1952]).
In short, the asset purchase agreement was unambiguous—having "a definite andprecise meaning, unattended by danger of misconception in the purport of the [agreement] itself,and concerning which there is no reasonable basis for a difference of opinion" (CV Holdings, LLC v Artisan Advisors,LLC, 9 AD3d 654, 656 [2004] [internal quotation marks and citations omitted]). Thus,extrinsic evidence of the parties' intent—such as the subsequently executed EDA providingthat plaintiff retained ownership of the interconnection equipment—is not admissible toimply a term, create an ambiguity or vary the terms of the asset purchase agreement (seeVermont Teddy Bear Co. v 538 Madison Realty Co., 1 NY3d at 472; Reiss v Financial[*4]Performance Corp., 97 NY2d at 198-199; W.W.W.Assoc. v Giancontieri, 77 NY2d at 163), particularly given the broad merger clausecontained in the agreement (see Payne v Enable Software, 229 AD2d 880, 882 [1996];Bruni v County of Otsego, 192 AD2d 939, 942 [1993]). Accordingly, inasmuch as theasset purchase agreement unambiguously transferred the interconnection facilities to AmericanTissue and thereby violated the PPA's requirement that plaintiff retain ownership of thatequipment, Supreme Court properly dismissed the complaint and granted judgment indefendant's favor. Plaintiff's remaining arguments have either been rendered academic by ourdecision or, upon consideration, have been found to be lacking in merit.
Peters, Spain, Lahtinen and Malone Jr., JJ., concur. Ordered that the judgment is affirmed,with costs.