County Asphalt, Inc. v. Lewis Welding & Engineering Corp., 66-Civ. 141.

CourtUnited States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
Writing for the CourtCROAKE
Citation323 F. Supp. 1300
Docket NumberNo. 66-Civ. 141.,66-Civ. 141.
Decision Date30 November 1970

323 F. Supp. 1300


No. 66-Civ. 141.

United States District Court, S. D. New York.

November 30, 1970.

323 F. Supp. 1301

Casey, Lane & Mittendorf, New York City, for plaintiff by William E. Kelly, trial counsel, Alan R. Wentzel, and James Shaughnessy, New York City, Smith, Ranscht, Pollock & Barnes, White Plains, N. Y., of counsel.

Alexander & Green, New York City, for defendant by Edward E. Rigney, trial counsel, Klaus H. Jander, Richard T. McDermott, and Bruce W. Eaken, of Jones, Day, Cockley & Reavis, Cleveland, Ohio, of counsel.


CROAKE, District Judge.

This is a diversity action, having been removed to this court by defendant, from the New York State Supreme Court, Westchester County. The case concerns among other issues, "transactions in goods" within the scope of the Uniform Commercial Code's article on sales,1 which were purchased by plaintiff, a New York corporation, from defendant, an Ohio corporation.

On December 22, 1964, and January 19, 1965, the parties to this action executed in New York, four contracts2 for the purchase and installation of asphalt plants at two locations, and automatic batch control systems for two other asphalt plants, all in New York State. The four contracts, prepared by the seller,

323 F. Supp. 1302
defendant herein, all contained a standardized page entitled "General Terms and Conditions," which purported to limit defendant's warranties and plaintiff's remedies for breaches of warranty or contract. Plaintiff's payments were to be made periodically, according to the progress of defendant's performance, and title was to remain in defendant until the price had been paid in full

Plaintiff made partial payment, and then instituted suit on December 24, 1965, seeking damages for breach of contract, breach of warranty, and negligence, and also specific performance of the contracts. Plaintiff also sought its disbursements under an asserted oral contract in providing labor, equipment, and material to assist defendant in defendant's erection of the plants.

Defendant counterclaimed for the amount due under the contracts, which the parties have stipulated to be $385,229.25, plus interest. Defendant also claimed that the making and filing of a financing agreement pledging the plants and certain other equipment to the Irving Trust Company as security for loans aggregating $600,000 plus interest, amounted to a conversion. Defendant claimed an alternative right to the $385,229.25 as damages under this theory, plus $700,000 punitive damages. Defendant also claimed that the replacement of certain parts of the plants by plaintiff worked a pro tanto conversion. Other counterclaims sought the rental value for plaintiff's use of an old plant that was to have been traded in as part of the purchase price of the new plants, under a theory of quasi-contract, and an accounting by plaintiff of profits from its use of the two plants.

The case was tried to a jury and the undersigned for nineteen days. At trial, it was ruled that the plaintiff could not prove alleged lost profits.3 The action for specific performance of the contract was abandoned. Defendant was granted a directed verdict, with plaintiff's acquiescence, as to the automatic batch control contracts (a minor part of the entire case). Otherwise, all issues survived for jury consideration.

The issues were presented to the jury in the form of a general verdict with written interrogatories, pursuant to Rule 49(b), F.R.Civ.P.4 The proposed interrogatories were submitted to counsel for their comments well in advance of their summations. Each side proposed minor changes and additions, which were made. The jury was then charged on the several issues.

The jury found that the defendant had substantially performed the contracts, and that the plaintiff owed a net amount of $226,000, after deduction of $160,000 for expenses of plaintiff, from the approximately $386,000 unpaid balance owing defendant.

The jury also found that the defendant had failed to provide the remedy of repair and replacement of defective or nonconforming parts, which the contracts stated was to be the exclusive remedy. This finding obviated the necessity for consideration of any "failure of essential purpose" under the Uniform Commercial Code, Section 2-719(2).5

The jury further found that neither party had been negligent. It found that there had been a conversion; it also found, however, that no damages flowed therefrom. And it found that the plaintiff was not liable for any rent.

Both parties have moved to amend the judgment which was entered for the defendant, The Lewis Welding and Engineering Corporation, in the amount of $226,000. Plaintiff has so moved because

323 F. Supp. 1303
of a different interpretation of the jury's findings. The above discussion makes evident the undersigned's conclusion that the general verdict and the replies to the written interrogatories are entirely consistent and harmonious. Any other interpretation of the replies to the interrogatories would render them inconsistent both with the general verdict and with each other

Defendant has moved to have the judgment amended to include an award of pre-judgment interest in its favor. Pre-judgment interest is a part of the entire recovery; along with such limitations of remedy as exclusion of consequential damages, it is one aspect of the general issue of the measure of recovery for breaches of contract. St. Clair v. Eastern Air Lines, Inc., 302 F.2d 477 (2d Cir. 1962); Restatement (second) Conflict of Laws (Proposed Official Draft, 1968) § 207, Comment e; but cf. Kilberg v. Northeast Airlines, 9 N.Y.2d 34, 211 N.Y.S.2d 133, 172 N.E.2d 526 (1961).

Defendant has asserted that New York law governs the interest issue, while plaintiff argues for Ohio law. The appropriate standard for determination of a choice of law issue in a diversity case is the conflicts of law rules of the forum state (New York). The revelant rule, contained within the New York U.C.C., provides:

"§ 1-105 Territorial Application of the Act; Parties' Power to Choose Applicable Law.
"(1) * * * When a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement this Act applies to transactions bearing an appropriate relation to this state emphasis supplied."6

The parties to this suit in each of their contracts here in issue agreed as follows:

"GOVERNING LAW: The validity, interpretation, and performance of this contract shall be governed by the laws of Ohio."7

Therefore, if it be assumed that New York is "appropriately related" to the transactions herein involved, the question becomes whether Ohio is "reasonably related" to the "transaction." The answer is that it is; while most of the performance of the contracts was to occur in New York, significant events were to occur in Ohio. Certain parts for the equipment sold by defendant were to have been fabricated or shipped from defendant's plant located in Ohio. And the contracts provided plaintiff an exclusive remedy of repair or replacement of parts "* * * shipped to the Company * * *"8

It appears quite reasonable for the defendant to have required that its performance be regulated by the legal system with which it was presumably most familiar, in light of the probability of a substantial part of its performance's occurring in Ohio. Therefore, Ohio law will be applied to all issues concerning remedies for contractual breaches.9

Ohio law provides no explicit statutory guidelines10 comparable to New York's C.P.L.R. 500111 for determining situations in which pre-judgment interest should be awarded. The decision appears to be left to the court's discretion, guided only by general equitable principles. Young v. Potts, 161 F.2d 597, 600 (6th Cir. 1947); Crown Industries, Inc. v. Boyertown Burial Casket Company, 300 F.2d 809, 810, dissent at 812 (6th Cir. 1962); cf. Miller v. Robertson, 266 U.S.

323 F. Supp. 1304
243, 257-258, 45 S.Ct. 73, 69 L.Ed. 265.12

There are factors in this case militating both for and against an award of interest. In its favor, there is a policy of commercial situations that "remedies * * * shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed."13 Commercial contexts would normally require inclusion of interest on a payment adjudged unjustifiably withheld.14

The major factor supporting plaintiff's opposition to the imposition of interest is the uncertainty of the debt. That the unpaid purchase price was owing was never questioned, but the merit of plaintiff's asserted offsets15 was incalculable until trial. One offset, a claim for expenses incurred in the performance by plaintiff of an oral contract, was eventually allowed in the amount of $160,000. Another offset, for consequential damages in the nature of lost profits, survived defendant's attempt at pre-trial disposition, to be disallowed at trial.16

On balance, with regard to the contracts for the sale of the asphalt plants, with regard to the nature of this case and to the jury's findings, this...

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