Court Opinion

ID: 6758169
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:29:10.495257+00
Date Added: 2024-06-11T16:02:30.849780
License: Public Domain

J. P. Celebrezze, J.
The initial issue in this case is whether the court of appeals was correct in applying New York law, rather than Ohio law, in assessing the damages in this case.
Generally, Ohio follows the rule that where a conflict of law issue arises in a case involving a contract, the law of the state where the contract is to be performed governs. Montana Coal & Coke Co. v. Cincinnati Coal & Coke Co. (1904), 69 Ohio St. 351, paragraph one of the syllabus; Pittsburgh, Cin., C. & St. L. Ry. Co. v. Sheppard (1897), 56 Ohio St. 68, paragraph two of the syllabus. Some courts have noted that the rationale for this rule is that the place of performance bears the most significant relationship to the contract. S&S Chopper Service v. Scripter (1977), 59 Ohio App. 2d 311 [13 O.O.3d 326]; Osborn v. Osborn (1966), 10 Ohio Misc. 171 [39 O.O.2d 275].
In the instant matter, however, we are confronted with a question which we have not heretofore addressed, i.e., where the parties have specifically designated a forum other than the place of performance, should that decision be respected? The court below held, and we agree, that under these circumstances the correct rule to apply is the one set forth in the Restatement of Law 2d (1971) 561, Conflict of Laws, Section 187, which provides in part, as follows:
“(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either
“(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or
*439“(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.”
The trial court did not disagree with the applicability of this rule but held that the forum chosen by the parties had no relationship whatsoever to the parties or their contract. We do not agree with this finding. The record below indicates that at the time the 1975 contract was entered into, Stereo was located in the state of New York. It apparently moved its operations to New Jersey in 1976. In addition, the contract was executed by Schulke on behalf of Stereo in New York. Finally, until Stereo moved to New Jersey, part of its performance of the contract, including the preparation of the duplicate tapes, took place in New York. Under these circumstances, it is our conclusion that New York did bear a substantial relationship to the parties and the contract. Accordingly, there being no issue that the application of New York law would be contrary to the policies of this state, the court of appeals did not err in respecting the agreement of the parties.
The only remaining issue is whether the court of appeals properly assessed the appellee’s damages under New York law. Money damages awarded in a breach of contract action are designed to place the aggrieved party in the same position it would have been in had the contract not been violated. West, Weir & Bartel, Inc. v. Mary Carter Paint Co. (1966), 25 A.D. 2d 81, 87, 267 N.Y. Supp. 2d 29, 35. The nonbreaching party must establish the fact of damage and then sustain its burden of proof as to the amount of damage by proof on any reasonable basis. Id. at 86. The proper measure of damages is the difference between the price the nonbreaching party would have received under the contract less the necessary expense of performance on its part. R & I Electronics, Inc. v. Neuman (1978), 66 A.D. 2d 836, 838, 411 N.Y. Supp. 2d 401, 404. Under this rule, the breaching party is entitled to a credit for the amount saved by the aggrieved party in not having to perform under the contract. However, this amount does not necessarily include overhead, or fixed expenses. The wrongdoer is entitled to a credit for only those business costs as were reasonably saved by its breach. Id. at 838.
In applying these rules, the court of appeals approved of a case having facts strikingly similar to those presented herein. Schubert v. Midwest Broadcasting Co. (1957), 1 Wis. 2d 497, 85 N.W. 2d 449, was an action to recover damages for the defendant’s breach of a contract to telecast a television quiz program produced by the plaintiff’s assignor. The defendant, which operated a television station, had contracted to televise the show for two years but suspended its operations prior to the expiration of that period. At the time of the breach, the defendant owed $4,040 under the contract.
The show’s producer testified that he had an investment of approximately $400,000 in films and materials. At the time his contract with the defendant was signed, approximately fifty stations subscribed to his television quiz *440shows. The bulk of his expenses was spread over these fifty clients. In addition, the plaintiff employed a company to transmit the films and materials to the different stations at a cost of three dollars per week per station. Applying the same rules set forth above, the court held that the plaintiff’s overhead was fixed and that the three dollar per week figure was the only amount actually saved by him owing to the defendant’s breach. Accordingly, the defendant’s deduction was limited to that amount. Id. at 505.
In the case at hand, the appellee’s major investment was in the production of its master tapes. As of 1975, duplicate tapes were being sent to approximately seventy different stations. The tapes were not customized to the various subscribers and the appellee’s costs in producing the tapes and maintaining its basic operations were fixed. The only savings actually experienced due to Midwestern’s breach was the one hundred dollars per month attributable to the direct cost of service to WXEZ.
Applying New York law to these facts, we find that the court of appeals correctly measured appellee’s damages, granting the contract price minus a credit for only those sums actually saved by appellee, plus interest. Appellant is not entitled to any further reduction for a proportional share of appellee’s fixed expenses.
Accordingly, the judgment of the court of appeals is affirmed.

Judgment affirmed.

Celebrezze, C.J., Sweeney, Locher, Holmes and C. Brown, JJ., concur.
W. Brown, J., concurs separately.