Viacom Outdoor, Inc. v Wixon Jewelers, Inc.

[*1] Viacom Outdoor, Inc. v Wixon Jewelers, Inc. 2009 NY Slip Op 52346(U) [25 Misc 3d 1230(A)] Decided on November 18, 2009 Supreme Court, New York County Solomon, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 18, 2009
Supreme Court, New York County

Viacom Outdoor, Inc., Plaintiff,

against

Wixon Jewelers, Inc., Defendant.



111352/05



Plaintiff Viacom Outdoor Inc. was represented by Jonathan Levine, Esq. of Cheifetz Ianitelli Marcolini, PC., 410 Park Avenue, 15th Floor, New York, NY 10022, tel. no. 212-697-9400.

Defendant Wixon Jewelers, Inc. was represented by Steven Moore, Esq., of 7900 Xerxes Avenue, Suite 2000, Minneapolis, MN 55431, tel. no. 952-646-9991, and Jacquelyn Trussel, Esq., of Hodgson Russ LLP, 1540 Broadway, 25th Floor, New York NY 10036, tel. no. 212-751-4300.

Jane S. Solomon, J.

Plaintiff, Viacom Outdoor, Inc., a Delaware corporation ("Viacom") brings this action for breach of contract against Wixon Jewelers, Inc, a Minnesota Corporation ("Wixon"). Wixon subsequently answered and filed a counterclaim against Viacom for anticipatory breach of contract. Both Viacom and Wixon move for summary judgment on the direct claim and counterclaim. Viacom's motion is denied, and Wixon's motion is granted for the reasons set forth below.

FACTSPlaintiff and defendant entered into three one-year contracts for advertising on a billboard in Minnesota. The contracts were independent of one another and ran sequentially, with the first commencing on January 10, 2004 and expiring on January 9, 2005; the second commencing on January 10, 2005 and expiring on January 9, 2006; the third commencing on January 10, 2006 and expiring on January 9, 2007. In each contract, Viacom agreed to supply Wixon with advertising space on a "tri-vision" billboard, a rotating mechanical billboard with three faces, which allowed three separate advertisements to be displayed at intervals of eight seconds. In exchange, Wixon agreed to pay a fee of $1,350 per face; a total of $4,050 per month; for the display of its advertising on each of the faces of the billboard. The advertisements [*2]displayed Rolex brand watches, and the name and address of Wixon's jewelry store, which was located near the billboard. In 2004, Wixon had a cooperative advertising arrangement with Rolex, pursuant to which Wixon received a discount on Rolex watches (Deposition transcript of Daniel Wixon, annexed to plaintiff's opposition as Ex. 22, p 25-26).

During the 2004 contract, the tri-vision billboard repeatedly malfunctioned, requiring service and repair more than twenty-five times (Deposition transcript of Joyce Archuleta [hereinafter Archuleta Dep.], account executive and sales manager for Viacom, annexed to defendant's motion, 21). These malfunctions typically lasted for days at a time. Although Viacom repeatedly performed repairs, the billboard continued to break down. On May 17, 2004, Viacom offered Wixon a 50% reduction for June as compensation for the malfunctions; it also informed Wixon that, due to the mechanical problems, Viacom was contemplating converting the tri-vision to a standard billboard. Wixon accepted the discount and paid under the contract through July. In August, Wixon stopped making payments because of Viacom's failure to supply a functioning tri-vision billboard, though the advertising remained on display and Viacom made repairs as needed.

Then, on November 5, 2004, Viacom communicated to Wixon that it would convert the tri-vision billboard to a standard, non-mechanical billboard (see email message from Viacom sales manager to Wixon, annexed to plaintiff's motion at Ex. 8). On December 7, Viacom sent Wixon a proposed new contract offering a single image billboard at $4,050 per month, which contract would supercede the existing contract (Ex. 9 to plaintiff's motion). It also offered Wixon the option to continue the 2005 and 2006 contracts at $4,050 per month for a single billboard advertisement. Viacom's account executive testified at deposition that the 2005 market value for the tri-vision billboard was $10,000 per month (Archuleta Dep., 23). Wixon refused the proposed changes and counter-offered to pay $1,350 per month for the single billboard. Viacom rejected this, and removed Wixon's advertisement from the billboard in January of 2005.

Viacom seeks compensation for breach of contract stemming from Wixon's refusal to pay under the 2004 contract from August onward. In its counterclaim, Wixon seeks damages for Viacom's alleged anticipatory breach of the 2005 and 2006 contracts. Viacom moves for summary judgment in its favor on the complaint and dismissing the counterclaim. Wixon opposes Viacom's motion and separately moves for summary judgment on its counterclaim on the ground that there is no question of fact that Viacom breached each of the contracts.

DISCUSSION[*3]A. The 2004 Contract

It is uncontested that Wixon did not pay Viacom from August through December 2004. Wixon argues that it is excused from paying because Viacom materially breached the contract prior to August by failing to provide a functioning tri-vision billboard.

A non-breaching party will be discharged from the further performance of its obligations under a contract when the breach is "so substantial that it defeats the object of the parties in making the contract" (Robert Cohn Associates, Inc v. Kosich, 63 AD3d 1388, 1389 [3rd Dept. 2009]). Accordingly, the question the court must address is whether the billboard's malfunction constitutes a material breach "that goes to the root of the contract" (Department of Economic Development v. Arthur Andersen & Co., 924 F.Supp 449, 483 [SDNY 1996]).

"A breach is material if a party fails to perform a substantial part of the contract or one or more of its essential terms or conditions, the breach substantially defeats the contract's purpose, or the breach is such that upon a reasonable interpretation of the contract, the parties considered the breach as vital to the existence of the contract . . . [or] if the promisee receives something substantially less or different from that for which he or she bargained" (23 Lord, Williston on Contracts § 63:3 [4th ed]).

The contract required Viacom to install and maintain three advertisements on the tri-vision billboard. Paragraph 5 of the contract, which seeks to limit the ways in which Viacom can be liable to the customer, reads in pertinent part: "[S]hould any display become obstructed, destroyed or defaced . . . because of any act beyond [Viacom's] control, any resulting loss of advertising shall not be deemed a breach or termination of this agreement."

The submissions show that mechanical malfunctions effectively obstructed some or all of Wixon's display advertising over twenty five times during the term of the 2004 contract, and that each obstruction lasted anywhere from a day to a week. These malfunctions, however, were not because of an act beyond Viacom's control, rather they were well within Viacom's power to control and remedy. Accordingly, chronic mechanical failures and the resulting loss of advertising display are not within the scope of Paragraph 5, and may be the basis for a claim against Viacom.

There are no triable issues of fact with respect to the repeated mechanical failures of the tri-vision billboard. These failures constituted a material breach of Viacom's obligation under the 2004 contract to provide a tri-vision billboard with three functioning faces. Wixon contracted for a three-image billboard, and Viacom provided "something substantially less or different from that for which [Wixon] bargained" (23 Lord, [*4]Williston on Contracts, § 63:3).

Viacom made the decision to make small repeated repairs rather than effect a major overhaul or replacement of the board. That a major repair is expensive or inconvenient does not excuse Viacom from providing that which it contracted to provide. Accordingly, Viacom materially breached the 2004 contract.

B. The 2005 and 2006 Contracts

When, on November 5, 2004, Viacom informed Wixon that it had decided to remove the tri-vision mechanics of the billboard and operate it as a static, single image billboard, the 2005 and 2006 contracts were wholly unperformed. In its counterclaim, Wixon argues that Viacom committed an anticipatory breach of the those contracts when Viacom attempted to modify them, and subsequently refused to perform them as written.

Viacom counters that there was no anticipatory breach because it did not make a definite and final communication to convert the tri-vision billboard into a standard board until November 5, 2004, four months after Wixon stopped paying under the 2004 contract. Wixon responds that the three contracts are independent, and that the anticipatory breach occurred on November 5, 2004.

Generally, an anticipatory breach, also known as repudiation, occurs when a party to a contract declares his intention not to perform his future obligations (Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp., 92 NY2d 458, 462-62 [1998]). Under New York law, an anticipatory breach, like any other breach, gives the non-breaching party two mutually exclusive options. It may elect to treat the contract as terminated and exercise his remedies, or continue to treat the contract as valid (ESPN, Inc. v. Office of the Commissioner of Baseball, 76 FSupp2d 383, 388 [SDNY 1999]). In order for a party to exercise its remedy for damages, "there must be a definite and final communication of the intention to forego performance . . ." (Rachmani Corp. v. 9 East 96th Street Apartment Corp., 211 AD2d 262 [1st dept. 1995]). The nonbreaching party is required to show that it was ready, willing and able to perform its obligations under the contract (Inter-Power of New York Inc. v. Niagara Mohawk Power Corp., 259 AD2d 932, 934 [3rd dept. 1999], cert denied 93 NY2d 812 [1999]).

Viacom related to Wixon that it would convert the tri-vision billboard to a single image billboard in November 2004, and cancelled the 2005 and 2006 contracts when Wixon refused to consent to change them in December 2004. The foregoing establishes that Viacom made a definite and final communication of its intent to forego the 2005 and 2006 contracts.

The parties do not discuss whether Wixon was ready, willing and able to perform under the 2005 and 2006 contracts. Viacom has not supplied any evidence that would show that Wixon was [*5]unable to perform. Furthermore, on December 2, 2004, Wixon stated that it wanted to continue with the contracts, was willing to pay a reduced price if the billboard was converted to a single face billboard, and noted that it would like to utilize new artwork upon the start of the new contract. As a party's obligation "should be no greater than showing it could have been ready and able to perform" (28 New York Contract Law [2006] §14:6), Wixon's actions establish that it was ready and willing to perform.

Accordingly, Viacom anticipatorily breached the 2005 and 2006 contracts by refusing to honor those contracts as written.

C. Damages

Under the 2004 contract, Wixon paid $26,325 for seven months. Wixon claims that it should only be required to pay for a single face of the tri-vision billboard under the contract, for a total of $16,200 for twelve months of advertising, and has requested damages totaling $10,125 for "overpayment."

To award damages, a party must adequately prove that the amount of damages claimed be measurable with a reasonable degree of certainty (Freund v. Washington Sq. Press, 34 NY2d 379, 382 (1974). Neither party has established the precise duration of the malfunctions, nor have they established the effect, if any, upon Wixon's business or reputation.

Wixon paid for six and a half months of advertising. Viacom provided approximately 10 months of service and repairs. The value of the unpaid-for advertising, regardless of whether one, two or three faces of the billboard were working at any given time, and Viacom's attempts to provide repairs and support past the time Wixon ceased payments would all be factors in determining damages pursuant to the 2004 contract. These variables make it impossible for the court to determine what damages Wixon suffered with any reasonable degree of certainty. Accordingly, the counterclaim is dismissed with respect to the 2004 contract.

Wixon has established that it is entitled to damages for the 2005 and 2006 contracts. When a party repudiates contractual duties prior to the time designated for performance and before all of the consideration has been fulfilled, the "repudiation entitles the nonrepudiating party to claim damages for total breach" (Long Is. R.R. Co. v. Northville Indus. Corp., 41 NY2d 455, 463 [1977]). "[D]amages recoverable for a breach of contract are meant to place the nonbreaching party in as good a position as it would have been had the contract been performed" (Manas v. VMS Associates, LLC, 53 AD3d 451, 454 [1 Dept. 2008]). The court should look to the contract to determine what benefits would have been received by the nonbreaching party if the contract had been fully performed (R & I Electronics, Inc v. Neuman, 66 AD2d 836, 837 [2nd Dept. 1978]). [*6]

The method used to determine monetary value of a contract may differ depending on the nature of the performance to be rendered (24 Lord, Williston on Contracts, § 64:4, at 47). If there is a market for the performance, the market price will generally be the standard used to measure damages, either by considering the market price in comparison to the contract price, or by comparing the contract price to the cost of substitute performance actually obtained in the market (id., at 48-49).

In opposing Wixon's motion, Viacom argues that Wixon failed to establish that it lost profits, and in particular, there is no evidence to show that Wixon would not have received a discount from Rolex or any another jewelry manufacturer to offset its advertising expense had Viacom not repudiated the 2005 and 2006 contracts. In fact, there is no basis upon which one could ascertain Wixon's profits derived from the advertising had the contracts been performed. A lost profit claim would be speculative, and for this very reason, lost profits are not a viable measure of damages in this case, and market price is the suitable standard for measuring damages.[FN1]

Viacom's account executive stated that the market value for the billboard in 2005 was $10,000 per month (Archuleta Dep., 23-24). Under the original contract, Wixon agreed to pay $4,050 per month. The benefit of the bargain owed to Wixon is $5,950 per month, since it was to obtain a $10,000 value but avoided the expense of paying for it.[FN2] The duration of the breached contracts totaled twenty four months. Accordingly, Wixon is entitled to damages under the 2005 and 2006 contracts in the amount $142,800,[FN3] with interest from the date of the November 5, 2004 anticipatory breach (Klein v Opert, 218 AD2d 784 [2d Dept 1995]). Accordingly, it hereby is

ORDERED that Viacom's motion for summary judgment (motion sequence 01) is granted to the extent that Wixon's counterclaim is dismissed with respect to the 2004 contract, but otherwise is denied; and it further is

ORDERED that Wixon's motion for summary judgment (motion sequence 02) is granted to the extent that Viacom's complaint is dismissed, and Wixon is entitled to judgment on its anticipatory breach claim, with damages in the amount of $142,800, plus interest at the statutory rate from November 5, 2004, and the [*7]Clerk of the Court is directed to enter judgment accordingly with costs and disbursements as taxed.

Dated: November 18, 2009

Enter:

__________________________

J.S.C. Footnotes

Footnote 1: Indeed, logic dictates that the benefit to an advertiser must equal or exceed the market price of the billboard, or Viacom would be unable to sell the advertising at that price.

Footnote 2: $10,000 - $4,050 = $5,950.

Footnote 3: $5,950 x 24 = $142,800