Kenford Co., Inc. v. Erie County

• Citation: 108 A.D.2d 132,489 N.Y.S.2d 939
• Parties: KENFORD COMPANY, INC. and The Dome Stadium, Inc., Respondents-Appellants v. The COUNTY OF ERIE, et al., Appellants-Respondents.
• Decision Date: 12 April 1985
• Court: New York Supreme Court — Appellate Division

Page 939

489 N.Y.S.2d 939

108 A.D.2d 132

KENFORD COMPANY, INC. and The Dome Stadium, Inc., Respondents-Appellants v. The COUNTY OF ERIE, et al., Appellants-Respondents.

Supreme Court, Appellate Division,

Fourth Department.

April 12, 1985.

Jaeckle, Fleischmann & Mugel, Buffalo (John H. Stenger, Buffalo, of counsel), for appellants-respondents.

Hodgson, Russ, Andrews, Woods & Goodyear, Buffalo, and Olwine, Connelly, Chase, O'Donnell & Weyher, New York City (Victor Fuzak, Buffalo, of counsel), for respondents-appellants.

Before HANCOCK, J.P., and DOERR, BOOMER, O'DONNELL and SCHNEPP, JJ.

DOERR, Justice.

This appeal presents for our review the extent to which plaintiffs may recover damages following defendant's breach of contract.

In the late 1960s the County of Erie obtained enabling legislation permitting it to finance and construct a sports stadium. Edward Cottrell, a local businessman, put together an assemblage of properties in the Town of Lancaster. Cottrell eventually obtained options to purchase in excess of 700 acres of land, some of which he tried to interest the County in purchasing for the purpose of building a domed stadium facility. Cottrell, who formed plaintiff Kenford Co., Inc. in 1968 planned to develop the land surrounding the stadium and he also hoped to acquire a major league baseball franchise to play in the stadium. When Cottrell's efforts to interest the County in buying his land were unsuccessful, he consulted Judge Roy Hofheinz, who had developed the Houston Astrodome. Hofheinz suggested donating the Lancaster property to the County in exchange for the County permitting Hofheinz and Cottrell to lease or manage the stadium, which was to be built by the County. In May of 1969 Cottrell and Hofheinz formed plaintiff Dome Stadium, Inc. which was owned two-thirds by Hofheinz and one-third by Cottrell. The two also agreed to share the peripheral land development scheme.

In June 1969 the Erie County Legislature passed a resolution authorizing the plan suggested by Hofheinz. Cottrell, as agent for Kenford, thereafter exercised his options on the Lancaster property, paying some $2.6 million for the total assemblage. On August 8, 1969 the County, Kenford, and DSI signed a contract by which Kenford agreed to convey 178 acres of land in exchange for the County's promise to construct a domed stadium facility. The contract further provided that the County would either lease the stadium to DSI for 40 years, or permit DSI to manage the stadium for 20 years in accordance with an attached management agreement, if no acceptable lease could be arranged within three months. Title to the property was duly conveyed, but the parties thereafter failed to agree to lease terms, and the management contract came into being automatically.

The County sought bids on the stadium, but they were $20 million over budget. On August 8, 1970 the County Legislature voted to abandon the project. Cottrell unsuccessfully sought to obtain substitute funding. Plaintiffs commenced the instant action alleging breach of contract and seeking specific performance or, alternatively, $90 million in damages. Plaintiffs were granted summary judgment on the issue of liability (Kenford Co. v. County of Erie, 88 A.D.2d 758, 451 N.Y.S.2d 1021) and a trial was ordered on the issue of damages. ¹

The damage trial lasted nine months, consuming over 25,000 pages of transcript. Plaintiffs attempted to prove that the breach caused them to suffer $495 million in damages, including lost profits on a baseball franchise, a theme park, three hotels, an office park, a golf course, and a specialty retail center. Plaintiffs also sought to recover lost profit on the management contract, loss of appreciation in the value of the land surrounding the stadium site, and out-of-pocket expenses incurred in reliance on the contract. The trial court dismissed Kenford's claims of lost profits on the peripheral land development and the baseball franchise as being too speculative, ² but the court submitted the other items of damage to the jury, which awarded DSI lost profits of $25.6 million on the management contract. The jury also awarded Kenford $18 million for its lost appreciation in land value and it granted Kenford over $6 million in out-of-pocket expenses. On appeal, the recoverability of all elements is challenged.

I. Lost Profits on the Peripheral Development

In a breach of contract case, the goal of a damage award is to place plaintiff in the position he would have been in absent the breach, no worse but no better (Western Geophysical Co. of Am. v. Bolt Assocs., 584 F.2d 1164, 1172; Barnes v. Brown, 130 N.Y. 372, 381, 29 N.E. 760; Brown v. Lockwood, 76 A.D.2d 721, 743, 432 N.Y.S.2d 186). Only such damages as are the natural and probable result of the breach may be recovered. Ordinarily, plaintiff may not recover for a collateral enterprise upon which he might have embarked, had defendant not breached the contract (R. Dunn, Recovery of Damages for Lost Profits § 1.16 J. Fuchsberg, 9 Encyclopedia, New York Law, Damages, § 24; 36 N.Y.Jur.2d, Damages, § 41; see Czarnikow-Rionda Co. v. Federal Sugar Refining Co., 255 N.Y. 33, 41, 173 N.E. 913; Chapman v. Fargo, 223 N.Y. 32, 119 N.E. 76). This rule is derived from the doctrine enunciated in Hadley v. Baxendale (156 Eng.Rep. 145, 151). Under this rule, recovery is limited to such damages as may fairly and reasonably have been in the contemplation of the parties when the contract was made (Kerr S.S. Co. v. Radio Corp. of Am., 245 N.Y. 284, 157 N.E. 140). Thus, damages may not be recovered where the consequences of the breach are remote and indirect. "No one is answerable in law for all the remote consequences of his own acts" (36 N.Y.Jur.2d, Damages, § 13, citing Hoffman v. King 160 N.Y. 618, 55 N.E. 401; Coppola v. Kraushaar, 102 App.Div. 306, 92 N.Y.S. 436).

In addition to the foreseeability requirement, to be recoverable " 'damages must be not merely speculative, possible and imaginary, but they must be reasonably certain .... They may be so uncertain, contingent and imaginary as to be incapable of adequate proof, and then they cannot be recovered because they cannot be proved' " (Najjar Inds. v. City of New York, 87 A.D.2d 329, 334, 451 N.Y.S.2d 410, quoting Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205, 209, 4 N.E. 264). Damages may not be awarded on the basis of conjecture and guesswork (Schanbarger v. Edward Dott's Garage, 72 A.D.2d 882, 883, 421 N.Y.S.2d 937; Schneider v. State of New York, 38 A.D.2d 628, 327 N.Y.S.2d 60). Damages that are uncertain contingent, or speculative may not be recovered (Broadway Photoplay Co. v. World Film Corp., 225 N.Y. 104, 121 N.E. 756; Briggs v. New York Cent. & Hudson Riv. R.R. Co., 177 N.Y. 59, 69 N.E. 223; Rochester Lantern Co. v. Stiles & Parker Press Co., 135 N.Y. 209, 31 N.E. 1018; Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205, 4 N.E. 264; Hewlett v. Caplin, 275 App.Div. 797, 88 N.Y.S.2d 428; affd. 301 N.Y. 591, 93 N.E.2d 492; Strough v. Conley, 257 App.Div. 1057, 13 N.Y.S.2d 606, affd. 283 N.Y. 631, 28 N.E.2d 34). It is for the court to determine, in the first instance, whether as a matter of law the damages claimed are too remote to permit recovery (Fifty States Mgt. Corp. v. Niagara Permanent Sav. & Loan Assn., 58 A.D.2d 177, 396 N.Y.S.2d 925; Motif Constr. Corp. v. Buffalo Sav. Bank, 50 A.D.2d 718, 719, 374 N.Y.S.2d 868).

Application of these rules to the instant case leads to the inescapable conclusion that the trial court properly refused to submit to the jury Kenford's claims pertaining to the peripheral land development and the baseball franchise. Although it was known that Kenford would try to buy a baseball franchise and would try to develop the land surrounding the stadium, it was by no means certain that Kenford would have been successful in doing so or that these enterprises would have thrived. Not all business ventures prove to be profitmaking. Moreover, although Cottrell had ideas for developing the peripheral land, these plans were by no means certain as of August 8, 1969. ³ We know of no precedent for holding a defendant liable for profits lost on collateral matters that are as remote and undeveloped as the plans involved herein (cf. Contemporary Mission v. Famous Music Corp., 557 F.2d 918 ). The office buildings, golf course, and theme park for which plaintiff now seeks lost profits were nothing more than visions at the time the parties entered into the contract. No specific plans had been drawn for any of these ventures. The proposed baseball franchise was equally speculative. It was by no means certain that Cottrell would have been able to purchase a baseball franchise since such a purchase would have required approval of a percentage of league owners. Moreover, it is completely speculative to say that the franchise would have been a profitable one.

II. Loss of Appreciation in Peripheral Land Values

There is no dispute that Kenford suffered a monetary loss in land appreciation as a result of defendant's breach of contract. Defendant's own expert admitted that construction of the Dome would have caused the peripheral land to appreciate in value fourfold. Nor can it be doubted that both parties contemplated this appreciation, since the contract itself states that the County expected to receive increased property taxes from the peripheral lands purchased by Cottrell and/or Kenford. ^{4 4} Unlike Kenford's specific development plans, which were remote and uncertain at the time of contracting, the purchase of the land was a completed fact of which the County had full notice. Also, while it was uncertain whether any particular development scheme would prove profitable, there was no possibility of the land depreciating in value. Thus damage was certain. It is well settled in New York that in a breach of contract case a plaintiff may recover not only losses sustained, but also gains prevented (Lieberman v. Templar Motor Co., 236...