Amusement Business Underwriters, a Div. of Bingham & Bingham, Inc. v. American Intern. Group, Inc.

• Decision Date: 21 November 1985
• Citation: 66 N.Y.2d 878,498 N.Y.S.2d 760
• Court: New York Court of Appeals Court of Appeals
• Parties: , 489 N.E.2d 729 AMUSEMENT BUSINESS UNDERWRITERS, a DIVISION OF BINGHAM & BINGHAM, INC., Respondent, v. AMERICAN INTERNATIONAL GROUP, INC., et al., Appellants.

Page 760

498 N.Y.S.2d 760

66 N.Y.2d 878, 489 N.E.2d 729

AMUSEMENT BUSINESS UNDERWRITERS, a DIVISION OF BINGHAM &amp BINGHAM, INC., Respondent, v. AMERICAN INTERNATIONAL GROUP, INC., et al., Appellants.

Court of Appeals of New York.

Nov. 21, 1985.

Robert E. Kushner, New York City, for appellants

Lester E. Fetell, Brooklyn, for respondent.

OPINION OF THE COURT MEMORANDUM.

The order of the Appellate Division, 490 N.Y.S.2d 948, 111 A.D.2d 1077, should be modified, with costs, by remitting the case to Supreme Court for a new trial on the issue of damages only, and, as so modified, affirmed.

In December 1981 plaintiff, an insurance brokerage firm, commenced an action for an accounting claiming that defendants had not made full payment under the parties' contingent commission agreement. In their answer, defendants counterclaimed for premiums that plaintiff was obligated to remit to them under a separate general agency agreement. Shortly thereafter, defendants canceled approximately 364 policies issued on their behalf by plaintiff. On February 1, 1982 plaintiff instituted a separate action for tortious interference with its business relations, alleging that the termination of these policies had destroyed its business. The parties terminated their relationship two days later and plaintiff served as general agent for another underwriter, INA, from April 1982 to October 1982. On the later date it went out of business.

After the actions were consolidated, Special Term struck defendants' answers and counterclaims for willful failure to answer interrogatories and ordered an inquest on damages only. The Appellate Division affirmed this determination and denied defendants' motion for reargument. The damages inquest was tried before a jury and both parties presented evidence on both the accounting and tortious interference claims. Prior to summations, the court withdrew the accounting claim from the jury and reserved it for the court's determination. The jury returned a verdict for plaintiff on the tortious interference claim that was later reduced by the court to $1,250,000 and the court awarded plaintiff damages of $156,250 on the accounting claim. Judgment was entered on both claims and the Appellate Division affirmed, without opinion.

We conclude that the trial court erred in unduly restricting defendants' presentation of evidence in mitigation of damages in the form of a setoff and ignored credits in defendants' favor in the accounting action. Thus, there should be a reversal and a new trial on the issue of damages.

Evidence of plaintiff's failure to remit over $689,000 in premiums to defendants prior to commission of the tort in February 1982 should have been admitted as evidence of a proper setoff. Although a defaulting defendant admits all traversable allegations in the complaint, including the basic issue of liability, an allegation of damage is not a traversable allegation and, therefore, a defaulting defendant does not admit the plaintiff's conclusion of damages but may, at an inquest, offer proof in mitigation of damages if it involves "circumstances intrinsic to the transactions at issue" in the plaintiff's complaint (Rokina Opt. Co. v. Camera King, 63 N.Y.2d 728, 731, 480 N.Y.S.2d 197, 469 N.E.2d 518; McClelland v. Climax Hosiery Mills, 252 N.Y. 347, 351, 169 N.E. 605; see also, Reynolds Sec. v. Underwriters Bank & Trust Co., 44 N.Y.2d 568, 406 N.Y.S.2d 743, 378 N.E.2d 106). Evidence of setoffs or claims "arising or existing separate and distinct from the transactions out of which the plaintiff's cause of action arises", however, is inadmissible (Rokina Opt. Co. v. Camera King, supra, 63 N.Y.2d at p. 730, 480 N.Y.S.2d 197, 469 N.E.2d 518).

Although the complaint in the accounting action involved only the contingent commission agreement and the claimed setoff arises out of the general agency agreement, we conclude that the setoff arises out of the same basic transactions put...