Resort Sports Network Inc. v. PH Ventures III, LLC

Saxe, J.P

(dissenting). I would reverse and deny plaintiffs’ motion for summary judgment.

Although there is a heavy presumption that the contract between these sophisticated parties represented by counsel manifests their true intent (see Chimart Assoc. v Paul, 66 NY2d 570, 573-574 [1986]), defendants submitted sufficient evidence to overcome that presumption and raise an issue of fact as to whether reformation is warranted.

As the majority points out, it is often said that in the absence of fraud, the mistake shown “ ‘must be one made by both parties to the agreement so that the intentions of neither are expressed in it’ ” (Amend v Hurley, 293 NY 587, 595 [1944], quoting Salomon v North Br. & Mercantile Ins. Co. of N.Y., 215 NY 214, 219 [1915]; see Strong v Reeves, 280 App Div 301 [1952], affd 306 NY 666 [1953]). However, the Court of Appeals has described a type of circumstance in which one party makes an inadvertent mistake in the nature of a scrivener’s error when preparing the writing, so that in some material respect it does not reflect the terms of the parties’ agreement, and the other party, “with knowledge of the mistake, [tries] to take advantage of the error” (Nash v Kornblum, 12 NY2d 42, 47 [1962]). Although such circumstances technically establish neither mutual mistake nor fraud, “equity will conform the written instrument to the parol agreement which it was intended to embody” (id. at 47, quoting Pitcher v Hennessey, 48 NY 415, 423 [1872]). As the Court in Nash explained, “ ‘Where there is no mistake about the agreement and the only mistake alleged is in the reduction of the agreement to writing, such mistake of the scrivener, or of either party, ho matter how it occurred, may be corrected.’ (Born v. Schrenkeisen, 110 N. Y. 55, 59.)” (12 NY2d at 47, quoting Hart v Blabey, 287 NY 257, 262 [1942].)

Defendants submitted convincing evidence that the merger agreement did not embody the parties’ actual agreement that the adjustment would be computed by comparing the companies’ actual working capital at the end of the month in which all conditions for closing were satisfied with the projected working capital for that same month, not the succeeding month. Defendants presented a detailed history of the parties’ negotiations, a series of draft agreements showing the parties’ clear mutual agreement that the working capital adjustment would be derived from a comparison between actual and target working capital figures for the same month, and the testimony of their attorney that, in attempting to incorporate a negotiated change concerning the timing of the closing, he made the drafting error that resulted in a deviation from the agreement concerning the adjustment. Plaintiffs submitted no evidence controverting defendants’ showing that the parties reached agreement about the method of computing the adjustment and that the change in the method of computation made by defendants’ attorney was not the result of a negotiated change. Plaintiffs’ suggestion that they recognized and accepted the change assuming it was made intentionally by defendants’ attorney—although it was obviously detrimental to defendants— does not defeat defendants’ equitable claim for reformation but merely raises an issue of fact.

Sweeny and Richter, JJ., concur with Moskowitz, J.; Saxe, J.P, and Acosta, J., dissent in a separate opinion by Saxe, J.E

Order, Supreme Court, New York County, entered December 12, 2008, affirmed, without costs.