SPINDEL v. SHOR ASSOCIATES INC

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Supreme Court, Appellate Division, First Department, New York.

David M. SPINDEL, et al., Plaintiffs-Appellants, v. SHOR & ASSOCIATES, INC., et al., Defendants-Respondents.

Decided: August 22, 2002

TOM, J.P., MAZZARELLI, BUCKLEY, LERNER and GONZALEZ, JJ. Robert A. Scher, for Plaintiffs-Appellants. Jeffrey H. Daichman, for Defendants-Respondents.

Judgment, Supreme Court, New York County (Sheila Abdus-Salaam, J.), entered January 3, 2001, which, after a nonjury trial, dismissed plaintiffs' complaint for breach of contract to pay royalties, and awarded defendants damages on their counterclaims in the principal amounts of $116,366.30 for breach of contract to exclusively sell certain of plaintiffs' photographs, plus interest, costs and disbursements, and $57,902.69 for attorneys' fees, unanimously modified, on the law and the facts, to reduce the principal amount of damages awarded to defendants for breach of contract to $7142, and otherwise affirmed, without costs.

No fair interpretation of the evidence supports the trial court's finding that plaintiffs sold 40 images to third persons during the period that the licensing agreement was in effect at a price of $2500 each, and that defendants were damaged by this breach of the agreement's exclusivity provision in the amount of $100,000.   At most, the record shows only that plaintiffs created images during the life of the agreement that they attempted to sell to third persons, and, if this be sufficient to establish a breach of contract, it is not sufficient to establish the damages, if any, caused thereby (see, Kenford Co. v. County of Erie, 67 N.Y.2d 257, 261, 502 N.Y.S.2d 131, 493 N.E.2d 234).   Accordingly, we vacate the $100,000 awarded as consequential damages.   Nor should defendants be able to recoup their payments of $10,000 made upon signing of the contract and $5000 made six months later.   These payments were in the nature of a guaranteed minimum royalty that plaintiffs are entitled to retain, notwithstanding the provision in the agreement that such payments were to be credited against future royalties and the fact that the royalties actually generated by the sales of plaintiffs' images were substantially lower (see, Carter v. Bradlee, 245 App.Div. 49, 52, 280 N.Y.S. 368, affd. 269 N.Y. 664, 200 N.E. 48;  Scavenger, Inc. v. GT Interactive Software Corp., 289 A.D.2d 58, 734 N.Y.S.2d 141, 142).   In addition, defendants' claim that they are entitled to reduce this guaranteed royalty by the amount they spent for a trip that plaintiffs took months before the agreement was signed lacks support in the agreement, and evidence of any such understanding is barred by the parol evidence rule.   However, defendants are entitled to return of a duplicative $10,000 payment they made prior to the signing of the agreement as an advance against the $10,000 that was to be paid upon signing.   Inasmuch as plaintiffs received $21,142, but are entitled to only $14,000, consisting of the $10,000 and $5000 guaranteed minimum royal payments minus the $1000 indebtedness that plaintiffs acknowledged in the agreement, we modify so as to award defendants $7142.   Concerning attorneys' fees, which, under the agreement, are to be awarded the “prevailing party” in litigation involving the agreement, we find that defendants did prevail on their counterclaims, and that the court properly awarded attorney's fees.