96 N.Y.2d 409 (2001)

Specific performance is an appropriate remedy for breach of contract when the subject matter is unique and has no established market value, especially when an agent breaches their fiduciary duty to the principal.

Summary

Sokoloff contracted with Harriman Estates for architectural plans. After disputes arose and Sokoloff refused to hire Harriman as the builder, Harriman withheld the plans, claiming Sokoloff could not use them without hiring Harriman as the builder due to a contract between Harriman and the architect. The New York Court of Appeals held that Sokoloff adequately stated a claim for specific performance because the architectural plans were unique and because Harriman, as Sokoloff’s agent, may have breached its fiduciary duty by entering into a contract that restricted Sokoloff’s use of the plans. The court emphasized an agent’s duty of loyalty to the principal.

Facts

Sokoloff purchased land to build a home and contracted with Harriman Estates for pre-construction services, including architectural plans. Sokoloff paid $55,000 of the $65,000 fee. Harriman contracted with architect Ercolino. After Sokoloff declined to hire Harriman as the builder for approximately $1.9 million, Harriman refused to release the architectural plans, claiming they were restricted by a contract between Harriman and Ercolino which stated the plans could not be used without Harriman being hired as the builder.

Procedural History

Sokoloff sued Harriman and Ercolino for specific performance and replevin. The Supreme Court dismissed the replevin claim but allowed the specific performance claim to proceed. The Appellate Division reversed, dismissing the specific performance claim, citing a clause in the Harriman-Ercolino contract barring third-party actions. The Court of Appeals granted leave to appeal.

Issue(s)

1. Whether Sokoloff stated a cause of action for specific performance against Harriman for the architectural plans.
2. Whether specific performance is an appropriate remedy given the alleged uniqueness of the architectural plans.
3. Whether Harriman could rely on the Harriman-Ercolino contract to withhold the plans, given Harriman’s alleged agency relationship with Sokoloff.

Holding

1. Yes, because Sokoloff sufficiently alleged a breach of contract and Harriman’s duties as an agent.
2. Yes, because Sokoloff alleged the plans were unique and designed according to their specific requirements.
3. No, because as Sokoloff’s agent, Harriman had a fiduciary duty to act in Sokoloff’s best interest and could not use the Harriman-Ercolino contract to restrict Sokoloff’s access to the plans.

Court’s Reasoning

The Court of Appeals reasoned that Sokoloff’s claim for specific performance was based on a direct contract with Harriman, not a third-party beneficiary theory. The Court stated that Harriman’s March 12th letter sufficiently memorialized a binding, bilateral agreement to provide architectural plans for $65,000. Regarding specific performance, the Court noted that it is typically granted when money damages are inadequate, such as when the subject matter is unique. Here, Sokoloff alleged the plans were unique and based on their specific design, which was sufficient to withstand a motion to dismiss. The court stated that, “The decision whether or not to award specific performance is one that rests in the sound discretion of the trial court.” Crucially, the court found that Harriman, as Sokoloff’s alleged agent, owed a fiduciary duty of loyalty. “Fundamental to the principal-agent relationship ‘is the proposition that an [agent] is to be loyal to his [principal] and is “prohibited from acting in any manner inconsistent with his agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his duties.”’