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DEFENDANT’S AGREEMENT TO PURCHASE PLAINTIFF’S BUSINESS WAS NOT ENTWINED WITH AN EMPLOYMENT AGREEMENT BETWEEN PLAINTIFF AND DEFENDANT WHICH INCLUDED A COVENANT NOT TO COMPETE; THEREFORE PLAINTIFF’S ALLEGED BREACH OF THE COVENANT NOT TO COMPETE WAS NOT A DEFENSE TO DEFENDANT’S BREACH OF THE PURCHASE AND SALE AGREEMENT (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined an employment contract between plaintiff and defendant, which included a covenant not to compete, was not entwined with the separate sales agreement in which defendant promised to pay $200,000 for plaintiff’s business. Therefore plaintiff was entitled to summary judgment on the sales contract because defendant defaulted after making the first payment:

“Generally, breach of a related contract will not in the ordinary course defeat summary judgment on [a promissory] note[]” … . Nonetheless, that “rule does not apply where the contract and instrument are intertwined” and inseparable … . Whether two agreements are inextricably intertwined is a question of law for the court to decide because it involves a matter of contract interpretation … .

Here, the sales contract and employment agreement are not inextricably intertwined such that plaintiff’s purported breach of the noncompetition covenants in the latter constitute a defense to defendant’s default on the promissory note … . Saulsbury v Durfee, 2022 NY Slip Op 00566, Fourth Dept 1-28-22

 

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