author: SHAPIRO, District Judge.

text:
    RELIABLE TIRE DISTRIBUTORS, INC. v. The KELLY SPRINGFIELD TIRE COMPANY and Bobby Unser and The Barnes Tire Company, Inc.
    Civ. A. No. 74-3283.
    United States District Court, E.D. Pennsylvania.
    April 1, 1985.

      Richard D. Adamson and Francis P. Levine, White & Williams, Philadelphia, Pa., for plaintiff.
    Spear, Wilderman, Sigmond, Borish, Endy & Silverstein, Philadelphia, Pa., for Bobby Unser.
    Duane, Morris & Heckscher, Philadelphia, Pa., for Kelly Springfield.
   FINDINGS OF FACT and CONCLUSIONS OF LAW ON DAMAGES

SHAPIRO, District Judge.

This action arises out of an agreement, dated April 20, 1972, between plaintiff Reliable Tire Distributors, Inc. (“Reliable”), a corporation engaged in wholesale tire distribution, and Sports Headliners (“Headliners”), agent of defendant Bobby Unser (“Unser”), internationally-known race car driver, and a second agreement, dated May 23, 1972, between Reliable and defendant Kelly Springfield Tire Company (“Kelly”), a manufacturer and distributor of tires. The court held separate trials on liability and damages. On March 9, 1984, 592 F.Supp. 127, this court’s Findings of Fact and Conclusions of Law determined the following:

The earlier Reliable-Headliners agreement provided for the registration of the “Bobby Unser” trademark and granted plaintiff an exclusive license to make or have made tires bearing this trademark and thereafter to use or sell them. Reliable agreed to pay royalties to Unser for each tire sold and Unser agreed to use his best efforts to promote and sell the tires. Defendants Unser and Kelly ratified the provisions of the agreement regarding their respective duties.

The later agreement, between plaintiff, using its registered trade name “Speedway Products,” and defendant Kelly provided that Kelly would manufacture and supply Reliable with “Bobby Unser” tires and specified certain terms and conditions for delivery, payment, warranties, etc. Kelly was to supply the tire molds used in the manufacture of the tires to be paid for by Reliable over a three-year period. The original term of the agreement extended only to December 31, 1972 but the agreement was renewable from year-to-year if no action to terminate was taken by either party. Each party had the right to terminate by three months’ notice prior to the end of the calendar year. Together the two contracts constituted the “Bobby Un-ser” program; Reliable had the exclusive right to use Unser’s name to market tires manufactured by Kelly in accordance with Reliable’s requirements.

But instead of producing tires to fill orders obtained by Reliable, in accordance with the Kelly-Reliable agreement, Kelly manufactured quantities of “Bobby Unser” tires in varied sizes and held them in inventory for future sale to Reliable. As a result, by 1974 Kelly had acquired a substantial excess inventory of “Bobby Unser” tires, particularly in uncommon or less popular sizes. In February, 1974, Kelly requested Reliable’s permission to dispose of the surplus “Bobby Unser” tires. By letter dated February 6, 1974, Samuel Vill, Reliable’s General Sales Manager, authorized Kelly to dispose of the surplus “Bobby Unser” tires subject to certain restrictions: the parties had to agree mutually which tires were excess; Kelly had to maintain an adequate inventory for estimated future sales and remove the “Bobby Unser” name from the excess tires or pay a fifteen-cent (15<t) per tire royalty; Kelly could sell the tires only in Japan, Kansas City or the West Coast of the United States, excluding San Francisco. Kelly declined to dispose of the excess tires in inventory on those terms. Reliable subsequently signed a letter, dated June 28, 1974, authorizing Kelly to dispose of the excess tires “without strings.”

In September, 1974, Kelly contacted Reliable and offered to sell the excess inventory tires to Reliable at a discounted price if Reliable would accept the entire inventory immediately and make payment in full within thirty (30) days of shipment. But Kelly would not drop ship these tires as it did for the Bobby Unser tires Reliable ordered under its contract with Kelly. Reliable rejected that offer. Kelly then offered to sell the tires to defendant Barnes Tire Company (“Barnes”) for the same price and on the same terms and conditions offered to Reliable. Barnes also rejected the offer but made a counter-offer accepted by Kelly. Without first reoffering the tires to Reliable, Kelly agreed to sell the excess tires to Barnes at a price lower than the Kelly-Reliable contract price and lower than the discounted price originally offered to Reliable. Kelly also agreed to drop ship the tires for Barnes and did not require immediate full payment.

Kelly also agreed to and did manufacture additional “Bobby Unser” tires for sale to Barnes in November and early December, 1974, at the same discounted price and on the same favorable terms as the excess tires. Kelly was then manufacturing and selling tires to Reliable for prices set under the 1972 contract (which permitted Kelly to set the price each half year). Therefore, during November and early December, 1974, Kelly manufactured and sold tires to Reliable and Barnes at different prices and on different terms.

In December, 1974, Reliable sought to purchase 30,000 tires at the Barnes price but Kelly refused to sell them to Reliable at that price. Reliable then contacted other tire manufacturers to determine whether it could have “Bobby Unser” tires produced at lower cost elsewhere. Mohawk Rubber Company (“Mohawk”) agreed to manufacture the tires for a lower price than that charged by Kelly; in the Spring of 1975 Reliable requested Kelly to release the tire molds for transfer to Mohawk. The Kelly-Reliable agreement stated that, “[n]o mold will be removed from [Kelly’s] plant as long as any balance remains unpaid on such mold.” 1117(d). Kelly refused to release the molds because Reliable owed Kelly $46,000 for the molds and Reliable declined to pay the remaining amount in advance of the due date. .

The Reliable-Headliners agreement provided that Unser could terminate that contract if be did not receive at least $7,500 in royalties in any contract year. On April 23, 1975, Unser, claiming he had not received the minimum amount by the last day of the third year, April 21, 1975, sent a notice to Reliable that their agreement was terminated. Reliable received the notice on April 25, 1975. On April 28, 1975, Unser received a check from Reliable in payment of royalties due for the past contract year. Reliable claimed the check was mailed on April 19, 1975, and denied Unser’s right to terminate the agreement. Upon notification of Unser’s assertion that the Reliable-Headliners agreement was terminated, Kelly notified Reliable that consequently the Kelly-Reliable contract was terminated on May 25, 1975.

Reliable’s complaint against defendants alleged that: Kelly and Barnes violated the Robinson-Patman Act, 15 U.S.C. § 13, by Kelly’s manufacture and sale of the “Bobby Unser” tires to Barnes at lower prices than it would sell to Reliable; Kelly, Barnes and Unser conspired to restrain trade and eliminate Reliable as a distributor of tires in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; Barnes and Kelly infringed Reliable’s registered “Bobby Unser” trademark; Kelly breached its contract with Reliable by manufacturing and selling tires to Barnes, refusing to manufacture tires for Reliable, and terminating the agreement; and Barnes tortiously interfered with Reliable’s contract with Kelly by inducing the sale of “Bobby Un-ser” tires that were not in inventory but were specially manufactured for Barnes.

On liability, the court found that Kelly breached its agreement with Reliable by: 1) specially manufacturing additional Bobby Unser tires over and above the excess inventory and selling them to or for Barnes in November and December, 1974; and 2) unilaterally terminating its agreement with Reliable in May, 1975. The court also found that Barnes tortiously interfered with the Reliable-Kelly contract by inducing Kelly to manufacture additional Bobby Unser tires for Barnes’. customers. The court found in favor of all defendants on all other claims. This opinion constitutes the court’s findings of fact and conclusions of law on damages.

I. DAMAGES AGAINST KELLY

The court has determined that Reliable is entitled to damages from Kelly for breach of contract as a result of its sale of specially manufactured tires and its unilateral termination of the Kelly-Reliable agreement. In determining the law to be applied in measuring the damages for breach of contract, a federal district court is required to apply the choice of law doctrine of the state in which it is sitting. Klaxon v. Stentor Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Under the law of Pennsylvania, issues in contract actions are governed by the law of the place with the most significant relationship to the parties and the transaction. See, e.g., Neville Chemical Co. v. Union Carbide Corp., 422 F.2d 1205 (3d Cir.), cert. denied, 400 U.S. 826, 91 S.Ct. 51, 27 L.Ed.2d 55 (1970). Because the contract at issue was negotiated in New Jersey, the tires were manufactured in New Jersey and the parties agreed that the contract should be governed by New Jersey law, Reliable’s claim against Kelly for breach of contract is governed by New Jersey law.

Under New Jersey law, when a party has breached a contract, the non-breaching party has a right to recover the lost profits it reasonably expected to earn under the contract. See, e.g., Bak-A-Lum Corp. v. Alcoa Building Products, 69 N.J. 123, 351 A.2d 349 (1976). The non-breaching party has the burden of proving the amount of damages it sustained. Moreover, it must establish that the damages are the direct and proximate result of the breach. Sandler v. Lawn-A-Mat Chem. & Equip. Corp., 141 N.J.Super. 437, 454, 358 A.2d 805, 814 (App.Div.1976). Lost profits for breach of contract must be related to the consequences of the breach. Donovan v. Bachstadt, 91 N.J. 434, 453 A.2d 160 (1982). Lost profits are recoverable as damages only when they might have been realized and are capable of being estimated with a reasonable degree of accuracy. Van Dusen Aircraft Supplies v. Terminal Const. Corp., 3 N.J. 321, 70 A.2d 65 (1949). In order to prove lost profits, plaintiff must provide the finder of fact with a reasonably fair basis for calculating the loss sustained as a result of the breach. Rempfer v. Deerfield Packing Corp., 4 N.J. 135, 72 A.2d 204 (1950).

II. WRONGFUL TERMINATION

To determine the amount of damages Kelly’s wrongful termination in May, 1975 caused Reliable, two factors must be considered: first, the length of time the contract would have continued but for Kelly’s wrongful termination; and second, the amount of profits lost during that time as a result of Kelly’s wrongful termination.

The agreement entered into between Reliable and Kelly on May 23, 1972 was a requirements contract; Kelly agreed to manufacture all Unser tires ordered by Reliable. The contract was renewable year-to-year until April, 1980 but either party had an option to cancel the agreement by giv-, ing written notice ninety (90) days prior to the end of each calendar year.

This agreement will be effective as of June 1, 1972. It shall be renewed without further action for additional successive periods of one calendar year each, provided, however, that either party may terminate this agreement, or any renewal thereof, at the end of any calendar year upon three (3) months’ prior written notice given and effective upon mailing by registered mail.

Agreement, Paragraph 2.

Reliable contends that it is entitled to damages sustained from May 25, 1975 to April 20, 1980. But in May, 1975, Kelly clearly expressed its intent to terminate its contract with Reliable. Although the court has found that the Kelly termination letter was not immediately effective, the Kelly letter of May 25, 1975 did provide written notice of termination. Under the terms of the contract, termination was effective “at the end of any calendar year upon three (3) months’ prior written notice given.” The letter of May 25, 1975 was a written notice mailed more than ninety (90) days prior to December 31, 1975 and it effectuated termination as of that date.

Reliable has argued that Kelly could not exercise its right to terminate so long as Reliable was fulfilling its obligations under the contract because an implied covenant of good faith and fair dealing is applied to the termination of contracts under New Jersey law. Shell Oil Co. v. Marinello, 63 N.J. 402, 307 A.2d 598 (1973), held that Shell Oil Co.’s termination of a service station franchise breached the contract even though there was a ten-day termination clause; the Court found the bargaining power of the parties grossly disproportionate and the termination provision unfair. Here, Reliable and Kelly were dealing at arms length. Reliable was one of the largest tire wholesalers in the country. The contract’s requirement of ninety (90) days’ notice permitted Reliable to obtain another supplier; Reliable could obtain the molds for manufacturing Unser tires on termination of the Kelly-Reliable contract by paying Kelly the balance due. There was nothing unfair or overreaching in this termination clause. Therefore, this case differs from Shell and there was no legal impediment to Kelly’s termination of the contract in accordance with its terms.

Even if the letter improperly terminating the contract in May were not an effective notice of termination on December 31, 1975, and even if Unser had not cancelled his contract with Reliable, it cannot be doubted that Kelly would have mailed timely notice of termination in December, 1975 in any event. The number of tires sold under the Unser program was never what had been expected. Reliable was not prompt in meeting its obligations under the Kelly contract. Kelly’s attempt to manufacture the tires economically in large runs resulted in substantial surplus inventory. Kelly threatened to terminate the program at the end of 1974 if Reliable did not sign the “without strings” letter authorizing sale of the excess Unser tire inventory.

Reliable’s limited requirements for Unser tires would have continued to make the Unser program an unprofitable one for Kelly. On the evidence as a whole, the court finds this would have been the case notwithstanding Unser’s victory at the Indianapolis 500 in May, 1975. For a number of reasons the testimony was convincing that Unser’s fame as a racer did not do much to promote the sale of tires bearing his name; even after Unser attempted to terminate his contract with Reliable, there is no evidence he was able to profit in any way from anyone’s use of the Unser name in connection with the sale of tires. Therefore, it would have been reasonable and equitable for Kelly to have terminated the Reliable contract at the end of 1974 or 1975 and not a violation of any covenant of good faith or against public policy. Plaintiff has not established by a preponderance of the evidence that Kelly would not have terminated the contract in December, 1975. Therefore, the court finds that the relevant period for measuring damages ends on December 31, 1975, when the contract would have otherwise terminated.

Having determined that Reliable is entitled to lost profits only through December 31, 1975, the remaining issue is the amount of the lost profits for that period of time. To calculate lost profits, the court must project both the number of tires Reliable would have purchased from Kelly during that time period and the amount per tire it would have earned.

Reliable claims it would have sold 30,000 tires in 1975; Reliable’s expert David Carpenter gave an opinion on lost profits based on that assumption. Carpenter projected that sales in 1975 would have increased as a result of Reliable’s developing distribution network and the trade value from Bobby Unser’s increased prestige following his winning first place in the Indianapolis 500 race in May, 1975.

Reliable also contends that if Kelly had provided Reliable with the three months’ written notice required by the contract, Reliable would have ordered sufficient Unser tires during that three-month period to supply its distributors for one year beyond the termination date (which the court finds to be December, 1975). But that is inconsistent with the prior conduct of the parties. The contract required drop shipment and Reliable had in the past purchased only when orders were placed. When originally offered the excess inventory tires at a discounted price but without drop shipment by Kelly, Reliable had refused to stock Unser tires. Although Reliable attempted to purchase 30,000 Unser tires from Kelly in December, 1974, it ordered them at the Barnes price and refused to purchase them at the contract price. When Reliable found that Mohawk would manufacture Bobby Unser tires at lower cost, it would not or could not pay Kelly over $46,000 owed Kelly for the molds in advance of the due date.

Therefore, it is more likely than not that Reliable would not have purchased any tires from Kelly in the year 1975 even if Kelly had cancelled the contract in May, 1975 and provided three months’ written notice of cancellation. Eugene Chambers, the Sales Administrator for Reliable, testified that he felt Reliable could no longer use the Bobby Unser name after it received Unser’s notice of termination on April 23, 1975. But even prior to that time Reliable purchased only 200 Unser tires from Kelly; it had virtually discontinued the Unser program before it was terminated by Kelly. Samuel Vjll, Reliable’s General Sales Manager, told Kelly that it should manufacture tires only on specific order and Kelly should carry no inventory.

Yill and Chambers testified that Kelly’s sale of tires to Barnes had destroyed the Bobby Unser program. Although they did not distinguish sale of excess inventory from sale of specially manufactured tires, Reliable officials responsible for the Unser program believed that all of the activity of Barnes made it impossible for Reliable to sell Unser tires unless it obtained them at Barnes’ price. Since the Unser program was effectively ended before Kelly terminated its contract with Reliable in May, Reliable has not proved any lost profits from lost sales of Unser tires caused by Kelly’s termination of the Reliable-Kelly contract in May, 1975.

Because Reliable has failed to establish that the Kelly-Reliable agreement would have continued beyond December, 1975, it is unnecessary to consider the profit projections through 1980 in detail but the proof of profits for that period was unconvincing and speculative.. Carpenter projected Reliable’s lost profits from the sale of Unser tires from January 1, 1977 through April 20, 1980, by using Reliable’s profits from sales of another high performance line of tires, Spartan-Vanguard, as a model. He assumed that sales of the Unser line would have been at least as large as those of the Spartan-Vanguard line. Such an assumption was inappropriate since the Spartan-Vanguard tire differed from the Bobby Un-ser tire in several respects. The Spartan-Vanguard tire was not a “signature” tire; the line included truck and radial high performance tires not included in the Bobby Unser line. The court cannot conclude that sale's of Spartan-Vanguard tires were of probative value in estimating sales of Bobby Unser tires.

Moreover, although Carpenter conceded that the tire industry was highly competitive, he assumed that Reliable could have commanded a price for the Unser tire that was 125% of that obtained for Reliable’s Spartan-Vanguard tire. This assumption failed to account for the effect of increased competition if there were so substantial a premium. Neither did Reliable’s projection deal with the changes in the relevant market over the time for which damages were claimed. The testimony established that the Unser tire was a nylon bias tire, the popularity of which was decreasing in favor of the newer radial tire. Reliable’s projections assumed that Reliable would have continued to sell increasing amounts of the Unser nylon bias tire at a premium of 25% over the regular market price despite the changes in the marketplace.

Future lost profits projected from Reliable’s actual past experience with the Bobby Unser tires with adjustments to reflect increased sales and decreased costs of sales would have been more probative than a projection of lost profits based on a completely different line of tires. The financial statements presented on the actual operation of Reliable’s Unser program showed that it had operated at a loss. But Reliable claimed it was on the verge of profitable operation. Reliable argued that increased sales would have resulted from a more developed distribution network and Bobby Unser’s increased prestige after winning first place in the 1975 Indianapolis 500 race and that decreased costs were likely because certain fixed costs for molds, fees and advertising already expended were non-recurring. But whatever the adjustment to Unser figures made to calculate damages, it was the Unser figures that would have provided a credible base; the court finds the use. of Spartan-Vanguard figures speculative and unconvincing.

In addition to claiming the profits lost because of Kelly’s wrongful termination of the contract, Reliable claims the unrealized value of capitalized expenditures for Unser’s endorsement fee, advertising and tire molds. Reliable alleges it incurred these extraordinary, long-term expenses with the expectation that Kelly would hon- or its contractual obligations until April, 1980, so that an award of “reliance damages” is required to place it in the position it would have been had the contract not been breached. Reliable contends that to deny the unrealized portion of these expenses would in effect penalize it for adhering to its contractual obligations.

Reliable has failed to prove that it incurred these expenses with the reasonable expectation that the contract would continue until April 20, 1980. The Kelly-Reliable agreement was a year-to-year contract terminable at the end of any calendar year on three months’ written notice. Because either party could terminate at the end of any calendar year, Reliable assumed the risk that some of its long-term, non-recurring costs might not be fully realized.

Reliable is entitled to recover expenditures made in anticipation of the contract’s continuing until the end of calendar year 1975, because Kelly was obligated to it under the contract until then. But Reliable has not proved that portion of the capitalized costs, if any, expended in 1975 in the expectation that the Kelly-Reliable agreement would last until December 31, 1975. Because Reliable has failed to meet its burden of proof, no award may be made for “reliance damages” or lost profits.

III. SPECIALLY MANUFACTURED TIRES

A. Kelly’s Breach of Contract

Reliable’s “without strings” letter permitted Kelly to dispose of certain excess inventory tires without restriction but the manufacture and sale of additional tires for Barnes was unauthorized and in breach of the Reliable-Kelly contract. Therefore, Reliable is entitled to damages caused it by Kelly’s sale of Unser tires specially manufactured for Barnes.

Reliable contends that it is entitled to “restitution” for Kelly’s “unjust enrichment” from the sale of these tires specifically manufactured for Barnes. A party is entitled to restitution to the extent that he has conferred a benefit on the other party by way of part performance or reliance. See Restatement (Second) of Contracts § 370 (1981). Reliable claims that it is entitled to an accounting for the profits Kelly received as a result of the sale of tires to Barnes because Kelly obtained its profit through the improper use of contractual benefits conferred by Reliable such as use of Reliable’s tire molds and the Unser trade name. Reliable argues that if Kelly had not wrongfully used the Reliable tire molds and the Unser name, Kelly could neither have manufactured nor sold any specially manufactured tires and could not have earned any profit.

However, a party is only entitled to the protection of his restitution interest as an alternative to enforcement of the contract. See Restatement (Second) of Contracts § 373 Comment a (1981). In this case, Reliable has sought enforcement of the Kelly-Reliable agreement by an award of damages and is entitled to the protection of its expectation interest rather than its restitution interest. Moreover, the remedy sought by Reliable, an accounting for profits, is

an essentially equitable remedy, the right to which arises generally from the defendant’s possession of money or property which because of some particular relationship between himself and the plaintiff, the defendant is obliged to surrender. ... [A]n accounting has not served as a substitute for legal damages.

American Air Filter Co., Inc. v. MacNichol, 527 F.2d 1297, 1300 (3d Cir.1975). In this case, because an adequate legal remedy exists, the equitable remedy of an accounting is inappropriate.

The correct measure of damages Reliable must prove to protect its expectation interest is the profit it would have realized from the Unser program were it not for the sale of the specially manufactured tires to Barnes. It would need to show the number of tires sales Reliable lost as result of Kelly’s sale of these tires to Barnes at discounted prices. However, it was not the sale of specially manufactured tires alone that destroyed the Bobby Unser program; it was the combination of sale of excess inventory and specially manufactured tires to Barnes at prices below the contract price that hampered Reliable sales. But only the sale of specially manufactured tires was a breach of contract. Therefore, it was Reliable’s burden to separate the profits lost by Reliable as a result of the improper sale of specially manufactured tires from profits lost from the permissible sale of excess inventory tires. Reliable did not do so.

However, Reliable’s failure to establish adequately the profit it lost as a result of the sale of the specially manufactured tires does not prevent it from recovering any damages. The fact that damages cannot be ascertained with mathematical precision does not preclude recovery. See Donovan v. Bachstadt, 91 N.J. 434, 453 A.2d 160 (1982). “Mere difficulty or lack of certainty in the proof or finding of the quantum of damages does not inhibit an award to the successful party.” Sandler v. Lawn-A-Mat Chem. & Equip. Corp., 141 N.J.Super. 437, 454, 358 A.2d 805, 814 (App.Div.1976). Reliable’s claim that it was damaged by sale of the Unser tires specially manufactured to sell to Barnes is uncertain not as to the fact of damage but only as to the amount. Where it is certain that damage has resulted, mere uncertainty as to the amount will not preclude the right to any recovery. See Oliver v. Autographic Register Co., 126 N.J.Eq. 18, 25, 7 A.2d 797 (Ch.1939).

A reasonable measure of damages for Kelly’s breach is the profit Reliable would have made had Kelly specially manufactured tires for Reliable to sell instead of Barnes. Reliable’s expert, David Carpenter, using Kelly inventory lists, determined that Kelly actually sold 13,791 specially manufactured tires to Barnes. In projecting profits lost by' Reliable because Kelly wrongfully terminated the Reliable contract, Carpenter calculated that in 1975, Reliable would have made a profit of approximately $2.08 per tire. These calculations of Carpenter’s are a reasonably fair basis for determining that the profit Reliable would have made had it sold these specially manufactured tires instead of Barnes was $28,685.28.

B. Barnes’ Tortious Interference

Barnes tortiously interfered with the Reliable-Kelly contract by causing Kelly to manufacture additional Unser tires for Barnes. Under Pennsylvania conflicts law, in tort cases, the court considers the place where the conduct causing injury and the injury occurred as well as where the relationship between the parties is centered to determine the jurisdiction with the most significant relationship to the cause of action. See, e.g., Conservation Council of Western Australia, Inc. v. Aluminum Company of America, 518 F.Supp. 270 (W.D.Pa.1981); Griffith v. United Air Lines, Inc., 416 Pa. 1, 203 A.2d 796 (1964). The specially manufactured tires purchased by Barnes were manufactured and distributed in New Jersey and the Kelly-Reliable contract with which Barnes interfered was governed by New Jersey law; therefore, Reliable’s claim against Barnes for tortious interference is governed by New Jersey law.

Under New Jersey law, unjustifiable interference with contractual rights or business relations is an actionable tort. Middlesex Concrete Products & Excavating Corp. v. Carteret Indus. Assoc., 37 N.J. 507, 181 A.2d 774 (1962). The party whose contract has been tortiously breached is entitled to recover the damages that are the direct and proximate result of the tortious interference. So the appropriate measure of damages here is Reliable’s loss from the sale to Barnes of tires in addition to the excess inventory or, in the absence of proof of this, the profits Reliable would have made if Kelly had sold these specially manufactured tires to Reliable instead of Barnes. Reliable did not establish any loss of profit from Barnes’ sale of specially manufactured tires in breach of the contract distinct from its loss of profit from Barnes’ sale of the excess inventory tires which was not actionable. But Reliable did prove it would have earned a profit of approximately $2.08 on each of the 13,791 specially manufactured tires, a total of $28,685.28.

A recovery against an entity breaching a contract does not prevent recovery against the entity inducing or causing the breach nor does it reduce the damages recoverable. Both are wrongdoers and each is liable for the loss in its entirety; see Restatement (Second) of Torts § 774 A, Comment e (1981). Thus, Reliable’s recovery against Kelly for breach of contract does not preclude its recovery against Barnes for tortious interference nor does it reduce the amount of the judgment in its favor. However, because the compensatory damages arising from Kelly’s breach of contract are identical to those arising from Barnes’ tortious interference, any payment made to Reliable by Kelly reduces the amount due from Barnes just as payment made by Barnes inures to the benefit of Kelly in order to avoid the duplication of damages.

IV. PUNITIVE DAMAGES

Reliable seeks punitive damages against Kelly, Barnes and Unser. Punitive damages are awarded to deter outrageous and malicious conduct and to deter a wrongdoer.

Punitive or exemplary damages are sums awarded apart from compensatory damages and are assessed when the wrongdoer’s conduct is especially egregious; they are awarded on a theory of punishment to the offender for aggravated misconduct and to deter such conduct in the future.

Leimgruber v. Claridge Associates, Ltd., 73 N.J. 450, 454, 375 A.2d 652, 654 (1977). In order to award punitive damages there must have been acts done with bad motive or with reckless indifference to the interest of another. See Nappe v. Anschelewitz, 97 N.J. 37, 49, 477 A.2d 1224, 1230 (1984).

The liability of Kelly is for breach of contract in terminating the contract unjustifiably in May, 1975 and in specially manufacturing additional tires to sell to Barnes in December, 1974. Punitive damages may be recovered for an intentional breach of contract in appropriate circumstances; however, the standard for awarding such damages is high. A plaintiff must show wilful, intentional and malicious conduct on the part of defendant. See Sandler v. Lawn-A-Mat Chem. & Equip. Corp., 141 N.J.Super. 437, 358 A.2d 805 (App.Div.1976). In W.A. Wright, Inc. v. KDI Sylvan Pools, 569 F.Supp. 589 (D.N.J.1983), the only reported opinion in New Jersey that has awarded punitive damages in a breach of contract action, the court refused to set aside a jury award of punitive damages for breach of contract entered into by the defendant with the knowledge that its action violated a court order entered with its consent in settlement of prior litigation.

Kelly’s termination of the Reliable contract in May, 1975 was not sufficiently egregious to permit an award of punitive damages. The Bobby Unser program consisted of two contracts — the Reliable-Headliners contract gave Reliable the exclusive right to use the Unser name to market tires and the Kelly-Reliable contract required Kelly to manufacture Unser tires to meet Reliable requirements. The Kelly-Reliable contract permitted Kelly to terminate if the underlying Reliable-Headliners contract were terminated for any reason.

The Reliable-Headliners contract provided that Bobby Unser could terminate it if minimum royalties were not received each year. In April, 1975, Unser, improperly claiming he had not received the minimum amount that year, sent an effective notice of termination. Following Unser’s assertion that the Reliable-Headliners contract was no longer in effect, Kelly used Unser’s purported termination as the reason for its termination of the Reliable-Kelly contract in May, 1975. But Kelly knew or should have known that the number of Unser tires sold entitled Unser to more than the minimum amount of royalties necessary to keep the Headliners contract in full force and effect, even if it did not know the amount actually paid by Reliable to Unser when Unser purported to terminate. However, the fact that Kelly seized upon the Unser notice to further its own economic interest in terminating the Reliable-Kelly contract is insufficient to constitute the actual malice or wilful, intentional conduct requisite to an award' of punitive damages. Buono Sales, Inc. v. Chrysler Motors Corp., 449 F.2d 715 (3d Cir.1971).

Kelly’s conduct in manufacturing tires for Barnes in addition to disposing of its excess inventory, although more egregious, does not warrant an award of punitive damages. Kelly’s contract with Reliable was to manufacture Unser tires to meet Reliable requirements. Instead, in order to achieve economies of scale, it manufactured each size tire required by Reliable in large runs in excess of Reliable’s sales. When Reliable’s sales failed to meet expectations, Kelly developed a large excess inventory of Unser tires. Reliable’s Samuel Vill, faced with the threat of Kelly’s termination of their contract in September, 1974, reluctantly agreed in June, 1974 to the sale of those excess inventory tires in the less popular sizes “without strings.” But no reasonable person could interpret this letter as an authorization to use the Reliable-Unser molds to manufacture Unser tires for others in violation of Reliable’s exclusive license to the use of the “Bobby Unser” trademark on tires.

Kelly originally offered to sell the excess inventory to Reliable but on less favorable terms than ultimately offered to Barnes; the excess tires were never reoffered to Reliable on those terms. Neither was Reliable’s permission sought or obtained for the manufacture of additional tires to sell to Barnes. Kelly was a signatory to the Reliable-Headliners contract Barnes had negotiated for Unser; there was no question it knew Reliable’s rights were exclusive. There is also no question it knew of the devastating effect on Reliable of the sale of popular sized Unser tires to Barnes at prices significantly lower than Reliable’s (the discount was 27%-67%; they had been offered to Reliable only at a 20% discount).

Even though Kelly recklessly disregarded the effect its manufacture of additional tires for Barnes would have on Reliable’s Unser program, an award of punitive damages is not warranted. Where a cause of action is limited to breach of a commercial contract, punitive damages are not appropriate regardless of the nature of the conduct constituting the breach, absent special circumstances dictated by the nature of the relationship between the parties, such as the existence of a fiduciary relationship. Sandler v. Lawn-A-Mat Chem. & Equip. Corp., 141 N.J.Super. at 449, 358 A.2d at 812. No special relationship of trust existed between Kelly and Reliable. They were parties contracting at arms length with mutual rights and obligations arising under the contract. On the record as a whole, Reliable may not recover punitive damages against Kelly for Kelly’s conduct in breaching the contract.

The liability of Barnes is for tortious interference with the Kelly-Reliable contract. In order to recover punitive damages in a tort action, plaintiff has the burden of showing intentional wrongdoing or reckless disregard of the rights of another by the tortfeasor. See, e.g., LaBruno v. Lawrence, 64 N.J.Super. 570, 166 A.2d 822, (App.Div.1960), certif. denied, 34 N.J. 323, 168 A.2d 694 (1961). Barnes was involved in the execution of the original Reliable-Headliners agreement as an employee of Headliners, the agent of Bobby Unser. Unser was later a minority shareholder in the Barnes Tire Company and Barnes represented Unser informally in other matters. There is no question that Barnes knew Reliable had the exclusive right to manufacture Bobby Unser tires; in conditioning its counter-offer to purchase Kelly’s excess inventory on the manufacture of additional Unser tires in the more popular sizes, it was inducing Kelly’s breach of the Reliable contract and the Headliners contract Barnes itself negotiated. Because Barnes had earlier informed Reliable it would lose the Unser program and because it must have known its obtaining additional Unser tires manufactured by Kelly on Reliable molds in addition to the excess inventory violated Reliable’s exclusive rights, punitive damages are appropriate and awarded in the amount of $15,-000.00.

Punitive damages may not be awarded against Unser because punitive damages are not recoverable absent an independent claim for actual or compensatory damages. The right to punitive damages is “a mere incident to a cause of action ... and not the subject of an action itself.” Baram v. Farugia, 606 F.2d 42, 46 (3d Cir.1979). See also O’Connor v. Harms, 111 N.J.Super. 22, 29-30, 266 A.2d 605, 608 (App.Div.1970); Barber v. Hohl, 40 N.J.Super. 526, 534, 123 A.2d 785, 789 (App.Div.1956).

Reliable has asserted no claim against Unser for actual or compensatory damages for breach of contract, so it cannot recover on an independent claim for punitive damages arising from Unser’s unlawful termination of the agreement and it is unnecessary to deal with Unser’s claim that his reliance on the advice of counsel and desire to further his own economic interests negated the showing of actual malice or deliberate motive to injure Reliable necessary for award of punitive damages.

V. REINSTATEMENT OF THE BOBBY UNSER PROGRAM

The equitable relief of reinstatement is theoretically appropriate if a damage award is inadequate to compensate the plaintiff. Here compensatory damages for breach of contract were available to plaintiff if proved but compensatory damage for breach of contract was claimed against Kelly only.

Reliable now seeks to have the contracts between Headliners (Unser)-Reliable and Kelly reinstated. In effect, plaintiff seeks a declaratory judgment that because it was not in default on the Headliners (Unser) contract and there was no just cause for terminating the Kelly contract, these two contracts constituting the Unser program remain in full force and effect. But although the court did find there was no Reliable default justifying Unser’s termination and Kelly’s termination for that reason was unjustified, the contracts would have long since expired by their terms and to declare them in effect for the years remaining on their terms at the time of the breach would be impracticable if not impossible.

Unser attempted to terminate the Headliners-Reliable contract on April 23, 1975; while there was no good cause then, the reduced volume of sales and consequent reduced amount of royalties would have probably permitted Unser to terminate the contract in 1976. Even assuming that absent Barnes’ interference with the Kelly-Reliable contract there would have been sufficient sales and royalties to keep the Headliners contract in effect after 1976, the contract expired by its terms in 1977; even if Reliable exercised its option to renew, the Headliners contract would have expired in 1980. The Kelly-Reliable contract was subject to termination at the end of each calendar year without notice so that it would have been terminated by December, 1975.

The relationship of the parties was strained while these contracts were in effect. Reliable did not think Unser did enough to promote the tires; Unser thought the Reliable people had misrepresented the number of tires that would be sold. Kelly thought Reliable purchased too few Unser tires and sometimes took too long to pay for them. Reliable resented Kelly’s manufacturing more tires than it ordered or needed so that an excess inventory was created, especially in unpopular sized tires. So even without this litigation, it would be difficult to reinstate the Bobby Unser program among the present principals. But in view of this lawsuit, instituted at the end of 1974, it is clear that a contractual relationship among these parties is not appropriate relief. Such relief was sought in this action at the outset and denied by the judge to whom this case was formerly assigned. It is no more appropriate now than then. Equitable relief, discretionary with the court, is denied.

VI. PRE-JUDGMENT INTEREST

In addition to the damages for Kelly’s breach of the contract and Barnes’ tortious interference, Reliable seeks prejudgment interest on compensatory damages. New Jersey law provides pre-judgment interest to compensate a plaintiff because the defendant would have had the use of the funds at the time of the actionable conduct. See Busik v. Levine, 63 N.J. 351, 307 A.2d 571, app. dismissed, Levine v. Busik, 414 U.S. 1106, 94 S.Ct. 831, 38 L.Ed.2d 733 (1973). An award of pre-judgment interest is regarded as compensatory to indemnify the plaintiff for the loss of what the monies due would presumably have earned if payment had not been refused. Rova Farms Resort, Inc. v. Investors Ins. Co. of America, 65 N.J. 474, 323 A.2d 495 (1974). Interest compensates for the value of the sum awarded during the pre-judgment period when the defendant had the benefit of monies to which the plaintiff was entitled.

The measure of pre-judgment interest differs if the claim is in contract or in tort. In contract cases, pre-judgment interest is generally awarded in accordance with equitable principles. See Bak-A-Lum Corp. of America v. Alcoa, 69 N.J. 123, 131, 351 A.2d 349, 353 (1976). The court determines that plaintiff was deprived of $28,685.28 and that had Kelly not breached the contract, Reliable would have earned and been in possession of that amount no later than June, 1975.- Reliable has asserted that it is entitled to an award against Kelly at the rate of 12% but has not offered adequate proof that it would have invested only at that rate. The court at its discretion determines that an interest rate of eight percent (8%) from June, 1975 is appropriate.

In tort cases, there is no statute dealing with interest upon obligations or claims based on tortious conduct; but New Jersey Supreme Court R 4:42 provides 8% per annum interest on the amount of an award from the date of the institution of the action or from a date six months after the date of the tort, whichever is later. In this instance, Barnes’ tortious conduct occurred in November and December, 1974 and the action was commenced on December 23, 1974. Therefore, Reliable is entitled to prejudgment interest from June, 1975 on the award against Barnes for compensatory damages. Prejudgment interest is not imposed on any awards of punitive damages because punitive damages are not intended to compensate for actual loss but to punish for wilful, intentional and malicious conduct.

FINAL JUDGMENT

AND NOW, this 1st day of April, 1985, in accordance with the court’s Findings of Fact and Conclusions of Law on Liability filed on March 9, 1984 and on Damages filed this day, it is ORDERED that JUDGMENT is entered:

1. On the claims of Reliable Tire !bis-tributors, Inc. v. The Kelly Springfield Tire Company and Bobby Unser and The Barnes Tire Company, Inc. as follows:

Count I - in favor of plaintiff Reliable Tire Distributors, Inc. and against defendant The Kelly Springfield Tire Company in the amount of $61,139.80 ($28,-685.28 plus prejudgment interest of $32,454.52).
Count II - in favor of defendants The Kelly Springfield Tire Company and Bobby Unser and The Barnes Tire Co., Inc.
Count III - in favor of defendants The Kelly Springfield Tire Company and Bobby Unser and The Barnes Tire Co., Inc.
Count IV - in favor of defendants The Kelly Springfield Tire Company and Bobby Unser and The Barnes Tire Co., Inc.
Count V - in favor of plaintiff Reliable Tire Distributors, Inc. and against the Barnes Tire Company, Inc. in the amount of $76,139.80 ($28,685.28 plus prejudgment interest of $32,454.52 plus punitive damages of $15,000).
Count VI - in favor of defendants The Kelly Springfield Tire Company and Bobby Unser.
Count VII - in favor of defendants The JCelly Springfield Tire Company and Bobby Unser.

2. On the remaining counterclaims of Bobby Unser, Count III having been withdrawn at trial, as follows:

Count I - in favor of plaintiff Reliable Tire Distributors, Inc.
Count II - in favor of plaintiff Reliable Tire Distributors, Inc.
Count IV - in favor of defendant Bobby Unser and against plaintiff Reliable Tire Distributors, Inc. for royalties in the amount of $2,800.

      . Vista Rubber Corporation ("Vista”), a New Jersey corporation formed by Reliable specifically for purposes of this agreement, was the original party to the Unser contract. Subsequent to the execution of the agreement, Vista assigned all of its rights, title and interest in the agreement to Reliable and Vista was dissolved.

      . Reliable argued that the lower price was necessitated by Kelly’s having sold tires to Barnes at discount or distress prices.

      . Kelly refused to release them only for that reason.

      . Bobby Unser, who had already won many races, including an Indianapolis 500, might not have been very popular or very cooperative in promoting the tires; Reliable might not have advertised them enough or developed a proper distribution network, or signature tires might not have been popular in the marketplace. The restrictive effect of the oil embargo on automobile travel and resultant loss of sales of automotive products might have been significant factors as well.


source: Caselaw Access Project

author: WANGELIN, District Judge.

license: Public Domain

text:
    Edwin C. HAYNES and Barbara Haynes, Plaintiffs, v. HANOVER INSURANCE COMPANY, Defendant.
    No. S 83-248 C(D).
    United States District Court, E.D. Missouri, Southeastern Division.
    April 1, 1985.
    H. Max Hilfiker, Malden, Mo., Robert S. Barney, Bloomfield, Mo., for plaintiffs.
    Russell F. Watters, St. Louis, Mo., for defendant.
   MEMORANDUM AND ORDER

WANGELIN, District Judge.

This matter is before the Court for entry of judgment. This Court’s jurisdiction is invoked pursuant to 28 U.S.C. § 1332.

At trial, this Court granted defendant’s motion for a directed verdict. This suit arose from a fire on plaintiff’s premises on March 31, 1983. In effect at the time of the fire was an insurance policy between plaintiff and defendant. Defendant refused to pay for plaintiff’s casualty loss citing, inter alia, arson, fraud, and misrepresentation.

The policy contained the following provision:

This entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof or the interest of the insured therein, or in the case of any fraud or false swearing by the insured relating thereto, ... neglect of the insured to use all reasonable means to save and preserve the property at and after a loss....

During the trial plaintiff admitted to the following misrepresentations:

I. During his examination under oath on June 16, 1983 plaintiff stated that he had only two mortgages on his house and no other loans. At trial, however, plaintiff admitted that he had a total of ten (10) loans outstanding on the date of the fire amounting to Ninety Nine Thousand Six Hundred Thirteen Dollars and Twenty One Cents ($99,613.21) in debt. Plaintiff admitted to his true financial status only after it had been independently established by depositions of the loan officer and custodian of records at plaintiffs bank.

2. Along with failing to provide the proper amount of indebtedness, plaintiff did not reveal that both the first and second mortgages and three other loans were delinquent at the time of the fire. In fact, plaintiff had previously testified that his loans were current and up-to-date. - Again, this information had to be independently obtained.

3. At his examination under oath plaintiff stated that he had “three or four thousand dollars” in his bank account at the time of the fire. In his interrogatories plaintiff stated that he had Three Thousand Five Hundred Dollars ($3,500.00) in his account at that time. In fact, he had a negative balance of Two Thousand Eight Hundred Ninety Nine Dollars and Ninety Four Cents ($2,899.94) in his account at the time of the fire. Furthermore plaintiff had testified at his examination that he had a balance of Five to Six Thousand Dollars ($5,000.00-$6,000.00) in his business checking account and had testified at his deposition that the balance was “between four and six thousand dollars” when in fact he had a negative balance of Two Thousand Nine Hundred Eighty One Dollars and Twenty Two Cents ($2,981.22).

Plaintiff had previously testified that his accounts had never been below zero, even though he received a phone call and letter from the bank every time his account was overdrawn and he received monthly statements showing his balance on any given day. Plaintiff also testified at trial that he knew that his account being overdrawn meant that he had a negative balance in his account and that it had, in fact, fallen below zero.

In view of plaintiffs repeated omissions and misrepresentation during the course of the insurance investigation, the discovery phase of this suit and even up to his testimony at trial, it is clear that plaintiff cannot recover under the terms of the policy. More importantly, however, the Court cannot countenance such blatant abuse of the judicial process. See Federal Rules of Civil Procedure 37. Either of these reasons is sufficient to warrant entry of a directed verdict for defendant.

Immediately prior to trial Barbara Haynes was admitted as a party plaintiff in order to dispose of all possible interests in the property in one litigation. She was not a named insured under the policy although, as the named insured’s spouse, she was insured under the policy. Regardless of plaintiff Barbara Haynes’ status in this case, however, a directed verdict must be entered against her as well. To do otherwise would allow her to profit from the wrongful acts of her husband.' The policy stated clearly that the entire policy would be void if the insured had willfully concealed or misrepresented any material fact. The Court has found that the named insured did indeed intentionally conceal material facts. Accordingly, the policy must be considered void as to the interests of both husband and wife.

It Is So Ordered.


author: GLEN M. WILLIAMS, District Judge.

text:
    Juanita Tavia Yates PAYNE, Ella Mae Yates Dancy and Elizabeth Jane Yates, Plaintiffs, Chadwick Leroy Murray and Stacy Leonard Murray, Infants, who sue by Veronica Cecelia Stone, Their Mother and Next Friend, Intervenors, v. CONSOLIDATION COAL COMPANY, Defendant.
    Civ. A. No. 81-0056-A.
    United States District Court, D. Virginia, Abingdon Division.
    April 1, 1985.

      Roger W. Mullins, Tazewell, Va., for plaintiffs.
    Howard C. McElroy, Abingdon, Va., for intervenors.
    James P. Jones, Bristol, Va., for defendant.
   MEMORANDUM OPINION AND ORDER

GLEN M. WILLIAMS, District Judge.

This diversity action is before the court on the defendant’s motion in limine, the defendant’s motion for partial summary judgment, the plaintiffs’ motion to compel discovery and the intervenors’ motion for summary judgment. The parties having briefed the issues and argued their positions to the court, their motions are ready for disposition.

The intervenors, Chadwick Leroy Murray and Stacy Leonard Murray, move for summary judgment that the decree entered by the Circuit Court of Tazewell County, Virginia, ratifying, confirming and approving the lease of their lands is null and void. This court entered a Memorandum Opinion and Order on May 4, 1982 declaring the decree null and void. The state court failed to substantially comply with Va.Code § 8-676 which set forth jurisdictional requirements for an action to sell, encumber or lease infants’ land. The lack of substantial compliance made the proceeding void ab initio and in toto because the court lacked jurisdiction. Payne, et al v. Consolidation Coal Co., 538 F.Supp. 950 (1982). The intervenors’ motion for summary judgment is therefore denied as being moot.

The defendant’s motion in limine asks the court to rule as a matter of law that the damages sought as a result of the alleged trespass are limited to the value of the coal in place, which is its royalty value. The defendant mined coal which belonged to the plaintiffs and intervenors under a bona fide claim of right or title, the decree entered by the Circuit Court of Tazewell County on November 7, 1968. Until the decree was declared void by this court, the parties considered their lease to be valid and enforceable. A trespass which is committed under a bona fide claim of right or title is not willful. Mullins v. Clinchfield Coal Corporation, 227 F.2d 881, 884-885 (4th Cir.1955). For this reason, the court finds that the defendants committed no willful trespass by mining coal pursuant to its lease of the plaintiffs’ and intervenors’ mineral rights.

The proper measure of damages where coal is mined innocently and in good faith is its royalty value. Id. at 885. This measure of damages is established law in Virginia; a higher damage may be allowed only where a trespass is willful. Id. For this reason, the defendant’s motion in li-mine is granted.

The defendants have further moved the court for partial summary judgment asking that the defendant be declared a nonwillful trespasser liable only for unpaid royalties, that the intervenors’ claims be dismissed, that claims resulting from the drainway construction be dismissed as barred by the statute of limitations and that damages for the drainway construction and diversion of water be limited to compensatory damages based upon the diminution of value. Having found that the defendant was a nonwillful trespasser, the court finds that its damages due to the mining pursuant to 1968 lease are limited to royalties which shall be determined by the fair market value.

Thé defendant contends that the action by the intervenors is barred by both the doctrine of estoppel and the Federal Rules of Civil Procedure. In the 1968 state court proceeding, Chadwick Leroy and Stacy Leonard Murray, through their Mother as next friend, alleged that they believed the best interests of the owners of the mineral estate would be served by leasing it to Consolidation. The defendant would have the court rule that the allegation was a representation which induced Consolidation to seek court approval of the lease and, subsequently, to mine after the decree was entered. . The intervenors here were born in 1965 and 1968. They were not old enough to make any representation of their own to Consolidation, nor were they represented by a guardian ad litem. The court is not convinced that the defendant could have reasonably relied upon the representation of the next friend to the extent that equitable estoppel against the intervenors would be appropriate. See, generally, 7 Michie’s Juris. Estoppel § 30 (1976 Repl. Vol.). However, the court need not reach the question because damages due to mining pursuant to the 1968 lease have been limited to royalties. Intervention by Chadwick Leroy and Stacy Leonard Murray is not barred by the doctrine of equitable estoppel or by the Federal Rules of Civil Procedure.

Between 1931 and 1936 the defendant constructed a subterranean drainway through the plaintiffs’ property. In building the drainway, the defendant removed coal which apparently belonged to the plaintiffs’ predecessor. The plaintiffs have asserted a claim of trespass for the removal of the coal and the subsequent use of the drainway. The defendant has raised as an affirmative defense the statute of limitations for adverse possession. Va.Code § 8.01-236 (1984 Repl.Vol.). Adverse possession requires that the acts relied upon must have been actual, continuous, exclusive, hostile, open and notorious and accompanied by a claim of right for the statutory period. Leake v. Richardson, 199 Va. 967, 103 S.E.2d 227 (1958). The plaintiffs contend that the defendant’s acts of possession were neither accompanied by a claim of right nor open and notorious.

The terms claim of right, claim of title and claim of ownership mean the intention of an adverse possessor to take the land and use it as his own. Marion Investment Co. v. Virginia Lincoln Furniture Corp., 171 Va. 170, 182, 198 S.E. 508, 513 (1938). The terms do not imply any claim of actual title or right. Id. The defendant has used the drainway as its own since it was built; therefore, its acts of possession have been accompanied by a sufficient claim of right.

The plaintiffs assert that the construction and use of the drainway was not open and notorious because it was hidden underground and was not susceptible to being found by the owner. However, the plaintiffs have produced a discovery document entitled “Drainage Tunnel of Pocahontas Fuel Company, Inc.” with an accompanying map. It is possible that this publication made the location and use of the drainway open and notorious. The document itself bears no publication date and there is no evidence regarding its distribution. For this reason, the issue of whether the drainway was open and notorious is reserved for trial. For the purpose of deciding the remaining issues raised by the motion for partial summary judgment and the motion to compel discovery, the court assumes that the statute of limitations for adverse possession does not bar the action for trespass.

The defendant’s motion for partial summary judgment asks alternatively that damages for the drainway construction and diversion of water be limited to compensatory damages based upon the diminution of value. The plaintiffs here have alleged the tort of trespass. Where a trespasser encroaches on the land of another, mining and removing minerals innocently and in good faith, only compensatory damages may be recovered. Mullins v. Clinchfield Coal Corporation, 227 F.2d 881, 885 (4th Cir.1955). The basis for the damages is the value of the coal in place, its royalty value. Id. Where a trespass is willful a higher measure of damages may be allowed; then, the trespasser shall pay the full value of the ore at the time he sells or uses it. Id. The question of willfulness with respect to the construction and use of the drainway is reserved for the jury.

Every trespass is prima facie willful. Wood v. Weaver, 121 Va. 250, 260, 92 S.E. 1001, 1003 (1917). Once the trespass has been conceded or proved, the burden of proof is on the defendant to show that it was not willful.' Id. If an act of trespass is done accidentally, by inadvertence or by mistake not induced by gross negligence, it is not willful. Id.

In addition to compensatory damages, if the jury finds that the defendant acted with conscious disregard for'the rights of others, punitive damages may be awarded. Baker v. Marcus, 201 Va. 905, 114 S.E.2d 617 (1960). Otherwise, damages for the construction and use of the drainway will be limited to the value of the coal plus the diminution in the market value of the property. Norfolk and Western Railway Co. v. Richmond Cedar Works, 160 Va. 790, 807, 170 S.E. 5, 11 (1933). As indicated in this and the preceding paragraphs, the defendant’s motion for partial summary judgment is granted in part and denied in part.

The plaintiffs have moved the court to compel the discovery of facts and documents relevant to the sales prices and costs of production of the coal removed from their estate. Because the matter sought is relevant to the measure of damages for the removal of plaintiffs’ minerals by the defendant, the motion to compel discovery is granted.

ORDER

This case is before the court on the plaintiffs motion to reconsider that portion of the memorandum opinion dated April 1, 1985 which states that damages “shall be determined by the fair market value at the time of the lease,” which motion is hereby granted. The court will permit evidence of royalty value at any and all times during the taking of the coal.

      . The defendant’s motion for partial summary judgment asserts that recovery by the plaintiffs is barred by the applicable statute of limitations. The defendant has briefed only the statute of limitations for adverse possession. Va.Code § 8.01-236 (1984).. The denial of partial summary judgment is based upon that statute.

      . The plaintiffs have asserted the right to recover damages for the use of the drainway based upon the financial advantage which accrued to the defendant. If the plaintiffs had brought this action to recover on a theory , of implied contract, the measure of damages would have been the value of the benefit received by the defendant. Raven Red Ash Coal Co. v. Ball, 185 Va. 534, 548, 39 S.E.2d 231, 238 (1946). However the plaintiffs have not elected to plead an implied contract and thereby waive the tort action. Instead, they have pleaded the tort and asked for contract damages. In Raven Red Ash Coal Co. v. Ball, the plaintiff brought an action in assumpsit for the unauthorized use of a haul-way. Id. The Supreme Court of Appeals of Virginia reviewed the relevant case law and found that
      [t]hese cases hold that every use of an easement not necessarily included in the grant is a trespass to realty and renders the owner of the dominant tenement liable in a tort action to the owner of the servient-tenement for all damages proven to have resulted therefrom, and, in the absence of proof of special damage, the owner of the servient tenement may recover nominal damages only.

        Id. at 185 Va. 538, 39 S.E.2d 233. The court went on to hold that a plaintiff may bring an action in implied contract to recover from a trespasser who benefits himself by the illegal use of another’s land. Id. at 185 Va. 547, 39 S.E.2d 237.
      The plaintiffs here, having chosen to bring an action for trespass, may recover only trespass damages. They may prove any damages which resulted from the use of the drainway. Absent such proof, they may recover nominal damages only.
      The court would further note that if the suit had been brought in contract the plaintiffs could not recover punitive damages. Punitive damages are not permitted in Virginia for breach of contract unless there is a separate independent tort. Kamlar Corp. v. Haley, 224 Va. 699, 707, 299 S.E.2d 514, 518 (1983). Here there is no separate independent tort. Since this suit is brought in tort the court is permitting the issue of punitive damages to go to the jury.


author: CAHILL, District Judge.

text:
    BEN HUR CONSTRUCTION COMPANY, Successor to Superior Structural Steel Co., Plaintiff, v. A.S. GOODWIN, Samuel Spadea, Dennis R. Toney, John Kerr, Kenneth Stewart, and W.J. Muse, as Trustees of the National Shopmen Pension Fund, Defendants.
    No. 84-2274C(4).
    United States District Court, E.D. Missouri, E.D.
    April 2, 1985.
    David F. Yates, Gerard Hempstead, Mark Weisman, St. Louis, Mo., for plaintiff.
    Thomas J. Hart, Lena S. Zezulin, Thomas Hart & Associates, Washington, D.C., Barry J. Levine, St. Louis, Mo., for defendants.
   MEMORANDUM

CAHILL, District Judge.

This matter comes before the Court on defendants’ motion to dismiss or in the alternative, motion to transfer.

Plaintiff is the successor of Superior Structural Steel Company, a company that was engaged in the business of fabricating iron, steel, metal, and other products. Superior was bound by a series of collective bargaining agreements with Shopmen’s Local Union Np. 518 of the International Association of Bridge, Structural and Ornamental Iron Workers (AFL-CIO). Pursuant to the bargaining agreement, Superior made payments into the National Shopmen Pension Fund. Superior, at a later date, discontinued its business operations, and subsequently ceased making contributions to the Fund. Superior was then notified by the Fund administrator of its withdrawal liability, and the Fund demanded that payment be made. Superior’s withdrawal liability was determined to be $69,800. A schedule for payment of this amount was worked out between Superior and the Fund, requiring Superior to make payments in the amount of $1,514 in 80 equal quarterly installments. To date, Superior has made five of those payments under protest, pursuant to ERISA § 4219(c)(2); 29 U.S.C. § 1399(c)(2).

Plaintiff, as the successor of Superior, seeks a declaration by this Court that, as a matter of law, an employer is not subject to withdrawal liability under Section 4201 or 4211 of ERISA, if at the time the employer’s withdrawal liability is calculated, the multiemployer pension plan has no unfunded vested benefits. See 29 U.S.C. §§ 1381 and 1391. Plaintiff also seeks a declaration by this Court of the proper application of the de minimus reduction rule. Plaintiff has voluntarily dismissed Count III of its complaint dealing with the building and construction industry exception.

Withdrawal Liability.

Pursuant to 29 U.S.C. § 1381(a), if an employer withdraws from a multiemployer plan in what constitutes a complete or partial withdrawal, the employer becomes liable to the plan. Withdrawal liability is assessed against the employer. After the withdrawal liability is calculated, it can be adjusted through application of the de min-imus rule. See 29 U.S.C. § 1389. Plaintiff argues that an employer does not incur withdrawal liability when a plan as a whole has no unvested benefits. But this Court, upon reviewing the statute and its legislative history has to disagree with plaintiff.

Section 1381 states in precise terms that an employer that withdraws from a multiemployer plan shall be subject to withdrawal liability. Once an employer withdraws from a plan, the amount of unfunded benefits allocable to an employer can be determined in a number of ways. The statute leaves it up to the trustees of a plan to determine which method it will use. See 1980 U.S. Code Cong. & Ad.News (96-364) 2918, p. 2935. See also Washington Star Co. v. International Typographical, 582 F.Supp. 301, 302 (D.D.C.1983). The trustees in the present case chose to determine plaintiff’s withdrawal liability by using the attributable rule. See 29 U.S.C. § 1391(c)(4)(B). Under the attributable method of calculating withdrawal liability,

The plan’s unfunded vested benefits which are attributable to participants’ service with the employer is the amount equal to the value of nonforfeitable benefits under the plan which are attributable to participants’ service with such employer (determined under plan rules not inconsistent with regulations of the corporation) decreased by the share of plan assets determined under subparagraph (c) which is allocated to the employer as provided under subparagraph (D).

Thus, in light of the above quoted section, the Court concludes that withdrawal liability can be and was properly assessed against the plaintiff.

Application of the De Minimus Rule.

Pursuant to 29 U.S.C. § 1389, an employer’s withdrawal liability can be reduced by the smaller of

(1) % of 1 percent of the plan’s unfunded vested obligations (determined as of the end of the plan year ending before the date of withdrawal), or
(2) $50,000....

By virtue of the fact that this section requires a percentage to be taken of the plan’s unfunded vested obligation, the Court concludes that the de minimus rule applies to the total amount of unfunded vested benefits within the plan. Since the plan as a whole had no unfunded vested benefits, the de minimus reduction is zero.

The Court need not reach the issue of whether plaintiff was obligated to submit this dispute to arbitration. The Court concludes that dismissal of plaintiffs complaint is warranted.


author: ALLEN, Chief Judge.

text:
    Gregory Arnold MURPHY, Petitioner, v. Dewey SOWDERS, Superintendent, Respondent.
    Civ. A. No. C 84-0945-L(A).
    United States District Court, W.D. Kentucky, Louisville Division.
    April 3, 1985.
    Frank W. Heft, Jr., Daniel T. Goyette, Jefferson Dist. Public Defender, Louisville, Ky., for petitioner.
    Joseph R. Johnson, Asst. Atty. Gen., Barbara W. Jones, Linda Cooper, David A. Sexton, Corrections Cabinet, Frankfort, Ky., for respondent.
   MEMORANDUM OPINION

ALLEN, Chief Judge.

On April 2,1981, petitioner was convicted of murder and sentenced to life by the Jefferson Circuit Court following a jury trial. He appealed the conviction to the Kentucky Supreme Court, which affirmed it on May 11, 1983. See Murphy v. Commonwealth, 652 S.W.2d 69 (Ky.1983). He then petitioned the Supreme Court for a writ of certiorari, which petition was denied by a six to three vote, with Mr. Justice White writing a dissenting opinion, no opinion being written by the majority.

Petitioner has raised four grounds in support of his contention that he is entitled to a new trial and the issuance of a writ of habeas corpus. This Court is of the opinion that one of the four grounds raised is meritorious, and that the writ of habeas corpus should issue for the reasons set out below.

The first ground raised by the petitioner is that his conviction was obtained in violation of the Constitution of the United States, which makes unconstitutional the enactment of ex post facto laws. Petitioner was tried in Jefferson Circuit Court after the repeal of Kentucky Rule of Criminal Procedure 9.62. That Rule provided, in substance, that conviction could not be had upon the testimony of an accomplice unless corroborated by other evidence tending to connect the defendant with the commission of the offense. After the repeal, conviction in Kentucky may be legally based on the uncorroborated testimony of an accomplices.

In the case at bar, the great weight of the testimony against the petitioner came from the mouth of his accomplice and code-fendant, Norman Crittenden. A mistrial was declared as to Norman Crittenden’s case because of a jury deadlock, the jury apparently being divided eleven for acquittal and one for conviction. At the conclusion of the evidence, the trial court rejected petitioner’s request for an instruction to the effect that the jury could not convict on the uncorroborated testimony of an accomplice. The Kentucky Supreme Court affirmed that ruling and held that the application of the new rule did not violate the ex post facto provisions of the Constitution. See Article I, Section 10. In so doing, the Kentucky Supreme Court overruled its previous decision reached in Commonwealth v. Brown, 619 S.W.2d 699 (Ky.1981).

In reaching its decision in the instant case, the Kentucky Court cited Hopt v. Utah, 110 U.S. 574, 4 S.Ct. 202, 28 L.Ed. 262 (1884), which upheld retroactive application of a statute eliminating the ineligibility of convicted felons as witnesses. The court in Hopt stated:

Any statutory alteration of the legal rules of evidence which would authorize conviction upon less proof, in amount or degree, than was required when the offense was committed, might, in respect of that offence, be obnoxious to the constitutional inhibition upon ex post facto laws. But alterations which do not increase the punishment, nor change the ingredients of the offence or the ultimate facts necessary to establish guilt, but— leaving untouched the nature of the crime and the amount or degree of proof essential to conviction — only remove existing restrictions upon the competency of certain classes of persons as witnesses, relate to modes of procedure only, in which no one can be said to have a vested right, and which the State, upon grounds of public policy, may regulate at pleasure.

110 U.S. at 590, 4 S.Ct. at 210.

The Kentucky Supreme Court stated that the Rule was simply a procedural change which made a certain class of witnesses competent without corroboration. See Murphy v. Commonwealth, supra, at 73.

This Court prefers to follow the reasoning of Mr. Justice Leibson, who filed a dissenting opinion in Murphy v. Commonwealth,- supra, and the reasoning of the Third Circuit Court of Appeals in Government of Virgin Islands v. Civil, 591 F.2d 255 (3rd Cir.1979), as well as a prior decision of the Kentucky Supreme Court in Commonwealth v. Brown, supra. In Civ il, supra, a Virgin Island statute, repealed after the trial of the defendant, required that accomplice testimony be corroborated before conviction could be had. Shortly after the trial, the corroboration statute was repealed. At the trial, Civil moved for dismissal on the ground that there was no corroboration of the accomplice’s testimony linking him to the crime. The district judge ruled that the corroboration statute did not apply to conspiracy.

In Civil, supra, Judge Weis not only discussed Hopt v. Utah, supra, but such eases as Beazell v. Ohio, 269 U.S. 167, 170, 46 S.Ct. 68, 69, 70 L.Ed. 216 (1925), Thompson v. Missouri, 171 U.S. 380, 18 S.Ct. 922, 43 L.Ed. 204 (1898) and Kring v. Missouri, 107 U.S. 221, 2 S.Ct. 443, 27 L.Ed. 506 (1883). After this discussion, Judge Weis reached the opinion that the repeal of the corroboration statute reduced the amount of proof necessary for conviction and would deprive the accused of the substantial right that the law gave him at the time of the robbery, citing Hopt. v. Utah, supra, and Kring v. Missouri, supra.

Like Judge Weis and the Third Circuit, we are of the opinion that the repeal of the corroboration rule reduces very substantially the amount of proof necessary for conviction and may not be constitutionally applied to the petitioner.

The second ground asserted by the petitioner relates to testimony which was given by the prosecuting attorney on rebuttal. Petitioner contends that the trial court allowed the prosecuting attorney to testify as to the conversation had between him and petitioner while they were awaiting the arrival of petitioner’s attorney. The respondent contends that the trial judge did not allow this testimony to be heard by the jury. The written record reflects that the trial court sustained an objection by petitioner to the testimony of the prosecuting attorney.

Examination of the record makes it clear that the trial judge sustained an objection to the testimony by petitioner which makes much of the fact that the court reporter did not specifically refer to the testimony as being made on avowal, and found that she ended her page where some of the testimony was entered with a paranthesis. The petitioner contends this is clear evidence, based on her past practice with ending all the avowals with a parenthesis, that the testimony given after the parenthesis appears was actually heard by the jury. While this argument has some merit at first blush, it would seem that the trial judge, having sustained an objection to the testimony, would not have allowed it to reach the ears of the jury.

It is beyond doubt, however, that if the trial judge had allowed the testimony to reach the ears of the jury, it would have violated the constitutional rights of the petitioner under the holdings of the Supreme Court in the cases of Brewer v. Williams, 430 U.S. 387, 97 S.Ct. 1232, 51 L.Ed.2d 424 (1977) and Massiah v. United States, 377 U.S. 201, 84 S.Ct. 1199, 12 L.Ed.2d 246 (1964). We feel certain that the trial court, at the new trial, would not only sustain an objection to the use of such testimony but make certain that the jury does not hear any part of it.

Petitioner also contends that his constitutional rights were violated by the introduction of his codefendant’s statement made out-of-court which implicated petitioner in the murder of Kim Keller. Petitioner candidly stated that the codefendant took the stand late, and that petitioner had ample opportunity to cross-examine the co-defendant concerning the hearsay statement. However, petitioner contends that his constitutional right to remain silent was violated because he had to make a decision as to whether or not to take the stand prior to his codefendant’s taking it, and he, thereupon, took it to repudiate the hearsay statement, not knowing at that time that the codefendant would testify.

Petitioner cites no cases in support of this proposition, and case law is filled with authorities to the effect that even if an error is made in allowing the admission of a statement of a codefendant which implicates the defendant, that error is cured if the codefendant takes the stand and is subject to cross-examination concerning the statement and all aspects of the case. See United States v. Ragano, 476 F.2d 410 (5th Cir.1973); United States v. DeLaMotte, 434 F.2d 289 (2nd Cir.1970), cert. denied, 401 U.S. 921, 91 S.Ct. 910, 27 L.Ed.2d 825 (1971); Mendez v. United States, 429 F.2d 124 (9th Cir.1970).

Finally, the petitioner contends that the trial court allowed evidence of a prior drug conviction which occurred five years before the trial to be introduced into evidence. Again, petitioner cites no habeas corpus case holding that such a ruling, even if erroneous, was a constitutional violation. In the case of Walker v. Engle, 703 F.2d 959 (6th Cir.1983), the court noted that “errors in application of state law, especially with regard to the admissibility of evidence, are usually not cognizable in federal habeas corpus, [citing] Bell v. Arn, 536 F.2d 123 (6th Cir.1976); Reese v. Cardwell, 410 F.2d 1125 (6th Cir.1969).” Id., at 962.

The court went on to state that “errors of state law, including evidentiary rulings, which result in a denial of fundamental fairness will support relief in habeas corpus, [citing] Handley v. Pitts, 491 F.Supp. 597, 599, (E.D.Tenn.) aff'd, 623 F.2d 23 (6th Cir.1980); Maglaya v. Buckhoe, 515 F.2d 265 (6th Cir.), cert. denied, 423 U.S. 931, 96 S.Ct. 282, 46 L.Ed.2d 260 (1975); Gemel v. Buchkoe, 358 F.2d 338 (6th Cir.1966).” Id., at 962.

In Walker v. Engle, supra, the court found that there were six errors in the admission of evidence which resulted in the admission of highly irrelevant and prejudicial testimony. The court then found that “errors that might not be so prejudicial as to amount to a deprivation of due process when considered alone, may cumulatively produce a trial setting that is fundamentally unfair.” Id., 703 F.2d at 963.

In the context of the case at bar, counsel for the codefendant asked petitioner whether he had been convicted of a felony, and then receiving an affirmative answer, proceeded to establish that petitioner had been convicted of possession of heroin. Kentucky authorities hold that evidence that other crimes may have been committed by defendant is not admissible to prove the crime charged, unless it is relevant to show motive, intent, guilty knowledge, common scheme, or plan. See Pankey v. Commonwealth, 485 S.W.2d 513 (Ky.1972); Bell v. Commonwealth, 404 S.W.2d 462 (Ky.1966).

While we are of the belief that error was committed in the admission of this testimony, we are not convinced that the error rises to the dignity of a constitutional violation which fundamentally affected the fairness of the petitioner’s trial.

In conclusion, we will enter the writ of habeas corpus in accordance with this opinion.

JUDGMENT

Petitioner, having moved for a writ of habeas corpus, and the Court, having reviewed the records and papers on file and having filed its memorandum opinion and being fully advised,

IT IS ORDERED AND ADJUDGED that the petition for a writ of habeas corpus shall issue, unless the petitioner be granted the right to a new trial, the assignment of which shall be made within sixty (60) days after entry of this judgment.

This is a final and appealable judgment and there is no just cause for delay.


author: LOWE, District Judge.

text:
    ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Plaintiff, v. PROTECTION MUTUAL INSURANCE COMPANY, Defendant.
    No. 83 Civ. 8554 (MJL).
    United States District Court, S.D. New York.
    April 3, 1985.

      Greenhill, Speyer & Thurm by John M. Speyer, New York City, for plaintiff.
    Rein, Mound & Cotton by Erica Bunin, New York City, for defendant.
   MEMORANDUM OPINION AND ORDER

LOWE, District Judge.

This is an action between two insurance companies which dispute liability for a building fire loss. The parties agree that there are no disputed material issues of fact and cross move for summary judgment. For the reasons stated below we deny summary judgment to plaintiff, we grant summary judgment to defendant and dismiss the action.

BACKGROUND

The dispute centers around commercial real estate on the west side of Manhattan. The premises in question were held by Paul Saurel and The United States Trust Company as trustees under a will (“Trust”). Part of the premises were leased to the Pellón Corporation (“Pellón”) pursuant to a written lease with Trust which inter alia provided that if the premises were damaged by fire the landlord (Trust) would bear the cost of repair. (Lease ¶ 9, annexed to affidavit of Edward Masterson as Exhibit “E”).

Trust entered into a contract of insurance with plaintiff St. Paul Fire and Marine Insurance Company (“St. Paul”) to protect against, inter alia, fire damage to the building.

Pellón also entered into an insurance contract. Pellon’s contract was with defendant Protection Mutual Insurance Company (“Protection”). The Protection policy was a general business insurance policy which covered stock, inventory and other personalty as well as fire damage to the better-ments and improvements. When the building was swept by fire, Pellón suffered $446,000 in stock and equipment losses and the premises received approximately $188,-000 in damages.

Protection paid Pellón $446,000 in personal property loss. Pellón requested that Trust make repairs pursuant to the lease. Trust in turn made a damage claim against St. Paul for the loss. When St. Paul disputed liability, Trust refused to make repairs. Pellón then instituted an action on the lease to enforce Trust’s obligation to repair. Trust brought a third-party action against St. Paul for indemnification.

Settlement of that litigation was reached under which St. Paul paid for the fire damage by a check made out to Pellón and Trust jointly. Trust endorsed the check and Pellón made repairs. The Settlement agreement also provided that St. Paul would be “subrogated to, and the assignee of any and all rights which Pellón has against Protection for said loss...” (Agreement annexed as Exhibit “J” to the affidavit of Edward Masterson).

St. Paul now brings the instant action in an attempt to recover some or all of its payment from Protection. St. Paul alleges two grounds for recovery. First it claims that both insurance policies are so-called “excess” insurance thus under the law the insurers must share the loss pro rata based on the total coverage available. St. Paul’s second claim is that Protection is liable to it for the full loss as Pellon’s subrogee.

DISCUSSION

(a) Excess Insurance

Both policies covered the fire damage to the improvement and betterments of the property and both policies contained so-called “excess” insurance clauses. An excess insurance clause requires that any primary insurance coverage on the same interest be exhausted before a claim may be made on the policy. However in this case both policies proported to be excess to the other. In such a situation, it is well settled law that the insurers must share the loss pro rata. See e.g. Federal Ins. Co. v. Atlantic National Ins. Co., 25 N.Y.2d 71, 302 N.Y.S.2d 769, 250 N.E.2d 193 (1969), IBM World Trade Corp. v. Granite State Ins. Co., 116 Misc.2d 681, 455 N.Y.S.2d 914 (Sup.Ct.N.Y.Co.1982).

Protection argues, however, that the policies were not excess since they covered different insurable interests and different insureds. In support of its argument, Protection cites Oakley v. Firemen’s Ins. Co. of Newark, 70 N.Y.S.2d 458 (Supp.Ct.N.Y.Co.1947) which states in pertinent part:

Double insurance * * * is where two or more insurances are made in favor of the same assured, on the same interest in the same subject against the same risks ... ‘Other Insurance’ must be on the same interest, and insurance obtained by a third person upon another distinct insurable interest does not constitute ‘other insurance’ within the meaning of an apportionment clause.

70 N.Y.S.2d at 460 (emphasis added) (citations omitted). See also Mercantile Credit Corp. v. Glens Falls Insurance Company, 22 A.D.2d 1009, 254 N.Y.S.2d 614 (4th Dept.1964); Eastway Construction Corp. v. New York Property Insurance Underwriting Association, 86 Misc.2d 537, 382 N.Y.S.2d 949 (Civil Ct.N.Y.Co.1976), aff'd, 92 Misc.2d 1075, 402 N.Y.S.2d 782 (App. Term, 1st Dept.1977).

The case of Mercantile Credit Corporation v. Glens Falls Ins. Co., 22 A.D.2d 1009, 254 N.Y.S.2d 614 is very instructive. In that case Mercantile gave a chattel mortgage on certain livestock and entered into an insurance contract to protect its interest as mortgagee. The owners of the livestock also procured insurance on the livestock. When the livestock was destroyed, Mercantile’s insurer claimed its policy was excess to the owners’ insurance policy. The Appellate Division explained that the policies were not excess because Mercantile’s policy protected a mortgage interest and the other policy protected the fee holders “as owners.” Thus the Court concluded that the policies “covered and protected entirely different interests (citations omitted).” 22 A.D.2d at 1010, 254 N.Y.S.2d at 615.

In the instant case it is undisputed that the St. Paul policy named only Trust as the insured and the Protection policy named only Pellón as its insured. Thus the two policies covered different insureds, moreover the insurable interests are clearly different. Pellon’s interest was a leasehold while Trust’s was in fee.

St. Paul’s only response to this argument is the bald statement “Since there was double coverage covering the same property and the same peril, St. Paul is entitled to contribution from Protection for its pro rata share.” Plaintiff’s reply memorandum at 1. Plaintiff does not cite, nor can the Court find a single case contrary to Protection’s argument.

We must agree with Protection that the pro rata loss rule of Federal Insurance does not apply because the interest and insureds differ. Accordingly we grant summary judgment to defendant on plaintiff’s claim for contribution based on the excess insurance clause.

(b) Subrogation

St. Paul’s second ground for relief is a logical quagmire. St. Paul argues that once it payed for the fire damage it gained Pellon’s rights of action against Protection. In support of this argument St. Paul relies on the settlement agreement which specifically provides for the “subrogation” and “assignment” of all rights Pellón held against Protection. The settlement also provided that it did not in any way prejudice those rights. Thus, St. Paul argues, that Pellón has a right of action against Protection, and St. Paul is simply enforcing that right as Pellon’s subrogee. While this argument has some facial appeal, it contains a fatal flaw.

Assuming that the assignment subrogation was valid, the subrogee (St. Paul) stands in the shoes of the subrogor (Pel-Ion). If Pellón had sued Protection, Protection would have received Pellon’s rights against any third party by subrogation. Thus Protection would have Pellon’s rights to sue Trust on the Lease. Trust would have impleaded St. Paul and St. Paul would have been held liable for the full loss. The same result must occur here, where St. Paul, standing in Pellon’s shoes, sues Protection.

Graphically represented the transaction would look like this:

St. Paul

(as Pellon’s subrogee on the settlement agreement)

-v-

Protection on its policy

Protection

(as Pellon’s subrogee on its policy)

-v-

Trust on the lease

Trust

-v-

St. Paul on its policy

Under these circumstances the principles of judical economy dictate dismissal. Moreover equitable considerations for Pel-Ion and Trust must bar this futile circle.

In the final analysis Trust and Pellón contracted in good faith by lease that Trust should bear the risk of fire loss to the premises. St. Paul and Trust in turn contracted to shift the risk to St. Paul by way of their insurance policy. St. Paul received valuable consideration for assuming the risk. It may not now avoid the liability which it willingly contracted to accept.

The plaintiffs motion for summary judgment is denied, the defendant’s motion for summary judgment is granted and the case is dismissed.

It Is So Ordered.

      . Protection argues that the assignment subro-gation under the settlement agreement failed for want of consideration and that even if the assignment was effective St. Paul could not recover. Protection claims that Pellón received nothing for its assignment to St. Paul since Trust (and St. Paul as Trust’s insurer) was unconditionally bound to make repairs under the terms of the lease. Thus, Protection claims the settlement contract was without consideration. While this contention may have some merit we do not believe that it is necessary to reach that question. Protection also argues that the cases of Patent Scaffolding Co. v. William Simpson Construction Co., 256 Cal.App.2d 506, 64 Cal.Rptr. 187 (1967) and California Food Service Corp. v. Great American Insurance Co., 130 Cal.App.3d 892, 182 Cal.Rptr. 67 (Ct.App.1982) dictate dismissal, however factual distinctions make those cases inapplicable.

      . St. Paul may argue that the settlement with prejudice of the dispute between Trust and Pel-Ion ended the chain. Thus St. Paul could recover from Protection but Protection as Pellon’s subrogee (via St. Paul) could not recover from Trust. However, either Pellón breached the policy by signing the settlement without Protection’s approval, thereby extinguishing any rights which St. Paul would have against Protection, or the settlement does not bar recovery of any loss by Protection from Trust and St. Paul. Atlantic Richfield Co. v. Interstate Oil Transport Co., 505 F.Supp. 840 (S.D.N.Y.1981); Governments Employees Insr. Co. v. Halfpenny, 103 Misc.2d 128, 425 N.Y.S.2d 212 (Sup.Ct.N.Y.Co.1980); Aetna Casualty & Surety Co. v. Schulman, 70 A.D.2d 792, 417 N.Y.S.2d 77 (1st Dept.1979); Silinsky v. State-Wide Ins. Co., 30 A.D.2d 1, 289 N.Y.S.2d 541 (2d Dept.1968). In either case we must hold that St. Paul has no right of recovery against Protection. Under the first alternative if Pellón did breach the policy, St. Paul, which stands in Pellon’s shoes, received no rights against Protection. On the other hand, if Pellón did not breach the policy, Protection would have received Pellon’s rights against Trust and St. Paul on the lease. Therefore any recovery St. Paul received from Protection would have to be repayed to Protection.