Summary
holding that agreement providing plaintiffs with the ability to audit defendant's books and records "is not a substitute for a judicial accounting."
Summary of this case from Soley v. WassermanOpinion
December 6, 1993
Appeal from the Supreme Court, Nassau County (Segal, J.).
Ordered that the judgment is affirmed, with costs.
The defendant entered into an agreement to act as the distributor of a film produced by the plaintiffs. The agreement provided that the defendant would act as the plaintiffs' "sole and exclusive agent" in connection with the marketing of the film to network, cable and syndicated television, and that the defendant would "receive and hold in trust" the plaintiffs' share of income from the film. In return, the defendant was entitled to, inter alia, a distribution fee of 15.29% for sales of the film to network television. The agreement provided that the defendant give the plaintiffs periodic statements setting forth, inter alia, the gross receipts it received from distribution of the film and the amounts due the plaintiffs. Furthermore, the agreement provided that the plaintiffs were entitled to audit the defendant's books and records in order to verify the film's income.
The plaintiffs commenced this action, inter alia, for an accounting and to recover damages for breach of contract. The plaintiffs alleged that the statements the defendant had issued did not properly account for the income from the film.
The defendant counterclaimed for, inter alia, revision of the agreement. The defendant alleged that the parties had originally agreed to a distribution fee of 20% and that it was forced to accept 15.29% under economic duress.
The plaintiffs are entitled to a judicial accounting in view of the fiduciary relationship which existed between the parties (see, Grossman v Laurence Handprints — N.J., 90 A.D.2d 95, 104). Contrary to the defendant's contentions, the statements that it issued did not constitute accounts stated, since the plaintiffs questioned the correctness of the statements within a reasonable time after receiving them (see, Rodkinson v Haecker, 248 N.Y. 480, 484-485). While the plaintiffs were entitled to audit the defendant's records, an audit is not a substitute for a judicial accounting (see, Hotel Prince George Affiliates v Maroulis, 62 N.Y.2d 1005, 1007, revg 98 A.D.2d 652 for reasons stated in dissenting opn of Silverman, J.). Under these circumstances, the Supreme Court properly directed the defendant to render an accounting (see, Novaro v Jomar Real Estate Corp., 163 A.D.2d 69).
The defendant's counterclaim for revision of the agreement on the ground of economic duress was properly dismissed. The defendant never repudiated the agreement and, in fact, ratified its terms by continuing to market the film for the agreed upon fee even after the alleged duress had ceased (see, 1163 Realty Corp. v United Institutional Servicing Corp., 55 A.D.2d 908).
We have reviewed the defendant's remaining contentions and find that they are without merit. Thompson, J.P., Bracken, Balletta and Joy, JJ., concur.