Peach, Inc. v RJR Services, Inc.
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Attorneys and Parties
Brief Summary
This was a business-sale and promissory-note dispute arising from the purchase of a window cleaning and power washing business, specifically the amount still owed under a promissory note used as part of the purchase price.
The Supreme Court, Suffolk County, granted summary judgment on liability under CPLR 3213 [procedure permitting a plaintiff to seek summary judgment at the outset when suing on an instrument for the payment of money only], held a damages hearing, credited the plaintiff's evidence of an alleged oral $150,000 purchase price, and entered judgment for $65,197.
The Appellate Division modified the judgment by reducing the recovery from $65,197 to $12,152 in principal, plus contractual interest to be calculated on remittal.
The promissory note and the business purchase agreement, executed at the same time, had to be read together and unambiguously set the purchase price in writing. Because the agreement also contained a merger clause, the trial court should not have relied on extrinsic testimony about an alleged prior oral agreement for a higher purchase price.
Background
RJR Services, Inc. executed a promissory note dated October 9, 2020, in favor of Peach, Inc. in the principal amount of $100,000, with 5% annual interest on the unpaid principal. Jason Reusch personally guaranteed RJR's obligations. The note was executed at the same time as a business purchase agreement for the sale of Peach's business. After default, Peach sued on the note by moving for summary judgment in lieu of complaint under CPLR 3213. Although the defendants conceded liability, they disputed the amount due. At the damages hearing, the plaintiff's president testified that the true purchase price was orally agreed to be $150,000, with $50,000 paid at closing and the $100,000 note covering the balance. Reusch testified instead that the purchase price was $100,000 and that the $50,000 paid at closing was partial payment of that amount. The written business purchase agreement listed the purchase price as $100,000 and referred to the note.
Lower Court Decision
The lower court granted the plaintiff summary judgment on liability and directed a hearing on damages. After the hearing, it credited the plaintiff's testimony about an oral $150,000 purchase price and concluded that the plaintiff had proven damages of $65,197. Judgment was entered in that amount against the defendants.
Appellate Division Reversal
The Appellate Division held that the promissory note and the business purchase agreement were simultaneous writings concerning the same transaction and therefore had to be construed as one integrated agreement. Because those documents clearly and unambiguously expressed the parties' intent regarding the purchase price, and because the business purchase agreement contained a merger clause, parol evidence of a prior oral agreement could not be used to alter the written terms. The appellate court therefore rejected the trial court's reliance on the plaintiff's oral testimony, found that the evidence established only $12,152 in outstanding principal on the note, and remitted the matter for calculation of interest due under the note and entry of an amended judgment.
Legal Significance
The decision reinforces New York contract principles that contemporaneously executed agreements concerning the same subject matter will be read together, and that unambiguous integrated writings cannot be varied by prior oral statements. It also shows that even in an action on a promissory note under CPLR 3213, damages must be limited to what the governing written agreements actually provide, especially where a merger clause bars resort to extrinsic evidence.
When a promissory note is part of a larger written business-sale transaction, courts will enforce the written deal as drafted. A party cannot increase damages by relying on testimony about an earlier oral agreement that contradicts clear contract terms and a merger clause.