Opinion
Index No. 619315/2019
01-17-2023
Ronald GREENSTONE, substituted for Greenstone Marketing, LLC pursuant to order of the Court, Plaintiff, v. GLOBAL COMPUTER CORP., d/b/a Global Computer Systems, Defendant.
This matter came on for a non-jury trial before the undersigned on November 7, 2022 and November 29, 2022. Plaintiff claims that defendant breached a contract for marketing services and is liable for the full amount due under the contract, $24,000.00. Defendant claims that the contract at issue was entered into by an employee who lacked actual or apparent authority to bind the corporate defendant; that the alleged contract lacks a material term and therefore is unenforceable; that the contract was entered into with an entity named Global Computer Systems, Inc., which is unrelated to the corporate entity named as a defendant; that even if there was a valid contract, plaintiff is not entitled to damages as it was canceled within a week or two of being signed.
The undisputed facts establish that plaintiff Ronald Greenstone ("Greenstone") attended a meeting in February of 2019 at the behest of Thomas Halpin ("Halpin"), an employee-manager of IT for defendant corporation. Also in attendance was Adam Paulsen ("Paulsen"), the owner and sole officer of the defendant. The meeting was for the purpose of exploring whether the defendant would enter into an agreement for plaintiff to provide marketing services. Under the contemplated agreement, plaintiff would develop a marketing plan based upon a budget for the expenditure of funds by defendant for advertising in various media outlets as recommended by plaintiff. At the meeting, plaintiff was introduced to Paulsen who attended the meeting. There never was any communication to plaintiff regarding the authority Halpin had to bind the defendant to a personal services contract. There was no affirmative communication that he possessed this authority nor was there any communication that he lacked the authority. Paulsen testified that he was aware that Halpin was meeting with Greenstone for the purpose of determining whether he, Greenstone, should be retained to provide marketing services.
Thereafter, Greenstone and Halpin had numerous communications in person, via telephone and via email which ultimately resulted in an agreement whereby Halpin purported to bind defendant to a contract to retain Greenstone's services for $4,000 per month for a period of six months, commencing on August 1, 2019. Greenstone testified that he believed that Halpin was authorized to bind the corporate defendant based upon his title as a Managing Director as set forth in multiple emails sent to Greenstone by Halpin. He also relied upon the fact that Paulsen attended a meeting organized by Halpin to discuss his retention as a marketing consultant. The agreement plaintiff relies upon was signed by Greenstone in his personal capacity and by Halpin purportedly on behalf of defendant. There was a prior agreement in which a company of Mr. Greenstone's, Greenstone Marketing, LLC, was the contracting party but he requested that the contract be put in his personal name due to a change in business operations. Halpin agreed to sign a new agreement which is the one that plaintiff now seeks to enforce. Greenstone acknowledged that at Halpin's request he agreed to delay the start date of the contract to September 1, 2019. On August 6, 2019, Halpin emailed Greenstone that they were canceling the agreement. No services were performed by Greenstone under this agreement. The agreement states in part that it is "... non-cancellable, by either party for six months ..."
On these facts, plaintiff asserts that he is entitled to his full payment of the six-month contract in the amount of $24,000, as general damages, as the amount due was purely profit, and that defendant is responsible by virtue of the doctrine of anticipatory repudiation. It is not disputed that there were no expenses avoided as a result of the defendant's cancellation of the contract after it was signed but prior to commencement of any work.
The court will first address defendant's defenses. Defendant claims that employee Halpin lacked actual or apparent authority to bind the defendant corporation to the subject contract. Whether an agent has apparent or implied authority to bind the principal, depends on a factual showing that the third party (here, plaintiff) relied upon conduct on the part of the principal, not the agent, and also whether the third party's reliance upon the authority of the agent was reasonable. Hallock v. State, 64 NY2d 224, 231 (1984). The determination of this question is based upon a consideration of the totality of the circumstances. See Kidd v. Thomas A. Edison, Inc., 239 F. 405, 406 (S.D. NY 1917) (Learned Hand, J.) "... a recovery based upon the doctrine of apparent authority does not require that the third party have inquired into the scope of the agent's authority. In the apparent authority context, the duty to inquire only arises when ‘the facts and circumstances are such as to put him on inquiry’ id., the transaction is ‘extraordinary’." Herbert Constr. Co. v. Continental Ins.Co., 931 F.2d 989, 995 (2nd Cir. 1991) quoting Collision Plan Unlimited, Inc. v. Bankers Trust Co., 63 NY2d 827, 831 (1984). See also Graphic Communs. Int'l Union, Rochester Local No. 503 v. Case-Hoyt Corp., 95-CV-1624, 1997 U.S. Dist. Lexis 15342, 1997 WL 610765 (N.D. NY Sept. 25, 1997).
Here, the undisputed facts disclose that Halpin was tasked with securing a marketing consultant. Plaintiff met Halpin at the company offices. The President of the defendant, Paulsen, was present. His mere presence clothed Halpin with apparent authority to negotiate and enter into a contract with defendant. Aside from this meeting attended by Paulsen, plaintiff dealings were exclusively with Halpin. Further, Halpin's office email included his title as "Managing Director", a title that Paulsen acknowledged was conferred upon Halpin. On the one hand Paulsen described Halpin as an employee who worked on the IT desk, but then acknowledged that he was authorized to meet with plaintiff for the purpose of determining whether he should be retained by the company as a marketing consultant. Paulsen claims that he informed Halpin that he was not authorized to bind the company, however, Paulsen failed to call Halpin as a witness or explain why he was unavailable to testify, except to say that he was no longer employed by the company. There also is no proof or allegation that plaintiff was ever informed that Halpin lacked authority. Under all of the circumstances presented, the court finds that Paulsen, as owner and CEO of defendant clothed Halpin with authority to deal with plaintiff and to enter into a contract. The court finds that plaintiff's reliance on Halpin's authority was reasonable under all of the circumstances. There was no evidence or testimony that would give plaintiff any reason to doubt Halpin's authority. Moreover, the court finds that plaintiff did not have a duty to inquire. The only evidence submitted by defendant that Halpin lacked authority was Paulsen's self-serving testimony. Moreover, there was nothing extraordinary about this transaction to alert plaintiff to the need to inquire as to Halpin's authority.
The Court notes that defendant submitted excerpts from the pre-trial deposition of Thomas Halpin in support of its motion for summary judgment filed on the eve of trial. The court denied this motion as untimely based upon the pre-trial order of the Court and advised that all questions of fact would be decided at the trial. In any event, defendant did not offer the deposition testimony into evidence at the trial. Such out-of-court testimony would in any event be inadmissible as hearsay.
Defendant also claims that the contract lacked the budget amount for the cost of marketing pursuant to a marketing plan that plaintiff was retained to develop. However, as testified credibly by plaintiff and described in the contract, the amount budgeted would be decided based upon defendant's decisions after being presented with options. Paragraph 1 of the agreement states: "1. Develop a communication plan and budget estimates based on your marketing objectives and strategies. If possible, we will endeavor to relate these plans to measured objectives to determine effectiveness." Given the variety of marketing options available, the actual budget would relate to the client's choices based upon the recommendations of the marketing consultant and the client's objectives. Upon a consideration of the intention of the parties as expressed in the written agreement and the totality of the circumstances, the court finds no merit to this defense.
Defendant also alleges that because the contract refers to "Global Computer Systems, Inc." instead of "Global Computer Corp." or simply "Global Computer Systems", that the contract is in actuality a contract with an unrelated entity. The undisputed evidence establishes that both of the parties understood that the agreement was between plaintiff and defendant. That the contract contains a scriveners’ error is not a basis to find the contract unenforceable. The actions of both parties during the formation and events following, including the notice to cancel the contract belie the position now urged by defendant. The court finds no merit to this argument.
Defendant argues that recovery of the contract amount where the contract was canceled prior to performance by plaintiff constitutes liquidated damages that bear no relation to the loss incurred by plaintiff and, as such, is unenforceable. However, defendant's reliance on City of Rye v. Public Service Mutual Insurance Company, 34 NY2d 470 (1974) is misplaced. At issue in City of Rye was whether a liquidated damages clause causing daily charges for delays in completion of the contract could be enforced absent statutory authority. Here, there is no liquidated damages clause. Plaintiff is seeking to be paid the amounts contemplated in the agreement. Defendant seeks to avoid fulfilling its contractual obligation because it canceled the contract prior to time plaintiff could perform under the agreement. Similarly, the determination reached in Nu Dimensions Figure Salons v. Becarra, 73 Misc 2d 140 (Civ. Ct. Queens Co. 1973) was based upon the court's finding that the contract contained a liquidated damages clause. Where a party seeks to enforce a liquidated damages clause, the amount sought must bear a reasonable relationship to the anticipated or actual harm. "The parties to a contract may agree that a fixed sum is to be paid in case of breach by one of them as an exclusive remedy in lieu of damages. If the Court finds that the sum agreed upon is a fair price for non performance, it is designated as liquidated damages which upon payment settles all obligations for the breach between the parties." 73 Misc 2d at 142. Defendant also urges that no recovery can be had for breach of contract because plaintiff did not prove that he sustained any actual damage as a result of defendant's breach of contract. In short, plaintiff may not recover because he did not provide and defendant did not accept any services.
Without citation to any law or statute, defendant is urging the court to adopt the blanket rule of law that to recover damages for breach of contract, a party must prove actual damages. Such a ruling, however, would depart from established precedent. See American List Corporation v. U.S. News And World Report, 75 NY2d 38 (1989) ; Long Island Rail Road Company v. Northville Industries Corp., 41 NY2d 455 (1977). In American List, defendant contracted to purchase mailing lists of college students for a ten-year period. After one and a half years, defendant canceled the contract. The court ruled that defendant was obligated to pay the balance due based on the contract price for the remaining years without obligating further performance by the plaintiff. The court applied the doctrine of anticipatory breach: "The doctrine of anticipatory breach is applicable to bilateral contracts which contemplate some future performance by the nonbreaching party ( Long Is. R.R. v. Northville Indus.Corp., 41 NY2d 455, 466-468, 393 N.Y.S.2d 925, 362 N.E.2d 558 ; compare, Kelly v. Security Mut. Life Ins. Co., 186 NY 16, 19, 78 N.E. 584 [doctrine inapplicable to contracts for the payment of money only]). Pursuant to this doctrine, a wrongful repudiation of the contract by one party before the time for performance entitles the nonrepudiating party to immediately claim damages for a total breach ( Long Is.R.R. v. Northville Indus.Corp., 41 NY2d, at 463, 393 N.Y.S.2d 925, 362 N.E.2d 558, supra ). The nonrepudiating party need not, however, tender performance nor prove its ability to perform the contract in the future (citations omitted). Rather, the doctrine relieves the nonrepudiating party of obligation of future performance and entitles that party to recover the present value of its damages from the repudiating party's breach of the total contract ( Long Is.R.R. v. Northville Indus.Corp., 41 NY2d 455, 466-468, 393 N.Y.S.2d 925, 362 N.E.2d 558 supra ; Nichols v. Scranton Steel Co., 137 NY at 487-488, 33 N.E.561, supra ).
In Long Is.R.R. v. Northville Indus.Corp., 41 NY2d 455, 393 N.Y.S.2d 925, 362 N.E.2d 558, the plaintiff was entitled to recover yearly payments due under the contract for the sum of $20,000 which was set as a minimum guarantee for ten years. The minimum guarantee for an additional ten years was subject to renegotiation. As a result, no amount was awarded for that period. This case was based upon the doctrine of anticipatory repudiation and was extensively cited in American List Corp., 75 NY2d 38, supra.
The court finds that the doctrine of anticipatory repudiation applies to the breach of contract by defendant. Accordingly, plaintiff, as the nonbreaching party is entitled to recover the contract amount from defendant in the sum of $24,000, with costs and disbursements. Pursuant to CPLR § 5001(a) plaintiff is entitled to recover pre-judgment interest. The court determines that statutory interest on the amount recovered shall be calculated from February 1, 2020. Plaintiff may submit a proposed judgment on ten (10) days’ notice to defendant.