Madsen v. Murrey & Sons Co., Inc. :: 1987 – Justia US Law
743 p.2d 1212 (1987)
erik h. madsen, plaintiff and defendant, v. murrey & sons company, inc., defendant and appellant.
no. 19977.
utah supreme court.
September 29, 1987.
*1213 john paul kennedy, scott c. pugsley, salt lake city, for plaintiff and defendant.
robert b. hansen, salt lake city, for defendant and appellant.
hello justice:
appellant murrey & sons company, inc. (seller), seeks to vacate the trial court’s judgment ordering you to repay $21,250 to defendant erik h. madsen (buyer) in partial restitution of $42,500 paid by him in a contract between the parties that the buyer subsequently breached. utah code ann. § 70a-2-718(2), (3) (1980).
seller is a corporation located in los angeles, california, and is engaged in the business of manufacturing and selling pool tables. In early 1978, the buyer, a resident of Salt Lake City, Utah, was working on an idea to develop a pool table that, through the use of electronic devices mounted on the rails of the table, would produce lighting and sound effects of in a manner similar to a pinball machine. the buyer was experimenting with his idea on a used pool table in his house. this table had been modified to have ten pockets, instead of six as originally built, and the buyer was attempting to design the electronics that would be used in the table.
In late February 1978, Patrick W. Murrey, the seller’s general manager, traveled to Salt Lake City to learn about the buyer’s idea, look at the pool table the buyer had developed, determine the feasibility of building such a table, and discuss the possibility of manufacturing a large quantity of the table. billiard. unique tables for the buyer. while he was in salt lake city, and through subsequent communications between the parties by telephone and mail, mr. Murrey recommended that the buyer drop the idea of using a custom ten-pocket pool table and encouraged him to use the seller’s standard 4 x 8-inch coin-operated six-pocket pool table with a custom rail. the buyer agreed.
Shortly thereafter, the buyer and seller entered into a written agreement through a sales order signed by both parties. The seller has agreed to manufacture 100 of its M1 4′ x 8′ six-pocket coin-operated pool tables with custom rails capable of incorporating *1214 the buyer’s desired electronic lighting and sound effects. under the agreement, the buyer was required to design the rails and provide the drawings to the seller, who would fabricate them to the buyer’s specifications. the buyer was also required to design, supply and install all electronic components for the tables. the buyer agreed to pay the seller $550 per pool table, or a total of $55,000 for all 100 tables.
on March 13, 1978, the buyer paid $5,550 to the seller, $550 of which was used to purchase a pool table ordered and delivered separately for use as a prototype, leaving $5,000 as a down payment on the purchase price of the pool table of 100 tables. in May and June 1978, the buyer advanced another $25,000 and $12,500, respectively, for a total of $42,500 in advance payments. During this time, the seller began manufacturing the pool tables and the buyer continued his efforts to develop a satisfactory design for the electronics and custom rails. however, he ran into numerous problems with both. By the fall of 1978, the designs were still undeveloped and the buyer informed the seller that he would not be able to take delivery of all 100 pool tables. the buyer then brought this action for restitution of the $42,500 he had paid.
Following the buyer’s repudiation of the contract, the seller dismantled the pool tables and used the salvageable materials to make other pool tables. much of the material was used simply as firewood. as admitted by patrick murrey, the seller made no attempt or effort to market or sell the 100 pool tables at a discount price or any other price to mitigate or minimize your damages.
the trial court, sitting without a jury, found that the buyer did not complete the design of the custom rails or designs of the electronic components. The seller had already made all 100 pool tables to the extent that he was able to do so, and the court found that he “fulfilled all of his obligations under the agreement.” The court also found that if the seller had completed the tables, they would have been worth at least $21,250 and could have been sold by the seller for at least that amount upon termination of the contract. in turn, the court concluded that the seller’s action of dismantling the salvage and firewood tables, rather than attempting to sell or market them at full or discounted price, was not commercially reasonable. the court set the seller’s damages at $21,250 and held that the seller failed to prove that he suffered greater damages. apparently based on utah ann code. § 70a-2-718(2),(3), judgment was entered that buyer recovered from seller the $42,500 paid, less $21,250 for damages suffered as a result of the repudiation, for a net recovery of $21,250.
The seller first contends that the trial court erred in concluding that it failed to mitigate or minimize damages in a commercially reasonable manner by not attempting to sell all 100 pool tables on the open market. It is a well-established rule of tort law that “neither party who suffers a loss as a result of a breach of contract is entitled to damages that could have been avoided if the aggrieved party had acted reasonably diligently in trying to reduce its losses as a result of that default.” 3 williston on sales § 24-5, at 405 (4th ed. 1974). This doctrine is the damage mitigation rule “that a party has an active duty to make reasonable efforts to make the damage as light as possible…and that losses that the injured person could have avoided cannot be recovered.” with reasonable efforts and expense.” fairfield lease corp. v. 717 Pharmacy, Inc., 109 misc.2d 1072, 1077, 441 n.y.s.2d 621, 624 (n.y.city civ.ct. 1981) (citations omitted). we celebrated:
*1215 Utah Agricultural Production Credit Association v. cox, 627 p.2d 62, 64 (utah 1981) (citations omitted).
The seller claims that it sufficiently mitigated the damage by dismantling the pool tables and salvaging various components that could be used to make other pool tables. the salvage value to the seller was claimed to be $7,448. submitted testimony that selling the tables as “seconds” would damage their reputation for quality and that the various holes, notches, and routings placed in the tables to accommodate electrical components to be installed by the buyer weakened the structure of the tables so that as to subject the seller to potential liability if they were sold on the market.
on the other hand, ronald baker, who had been involved in manufacturing and marketing pool tables for 25 years, testified on behalf of the buyer that the notches, holes and routings made in the frame to accommodate electrical wiring will not adversely affect the quality or merchantability of the 100 pool tables. according to the baker, the tables could have been sold at full value or at a discount. In addition to this testimony, the trial court had the opportunity to view the experimental table developed by the purchaser and his associates and note the holes, notches, and routings required for electrical components.
The trial court found that the seller’s action to dismantle the tables and use the materials for salvage and firewood, rather than attempting to sell or trade the tables at full or discount price, was commercially unreasonable. the court then concluded that the seller had a duty to mitigate his damages and failed to do so. the finding is supported by competent evidence. we did not find any clear errors. utah r.civ.p. 52.
the seller then contends that the trial court erred in finding that the 100 pool tables, before the seller took them apart, were worth at least $21,250 and could have been sold by the seller for at least that amount after termination of the contract. . again, we do not re-attempt the facts and will keep findings supported by evidence on record unless clearly erroneous.
at trial, substantial evidence was presented as to the value of the pool tables at the time of the buyer’s repudiation and refusal to take delivery in the offer. this evidence ranged from mr. murrey’s testimony that the tables were worthless because they were not marketable to mr. the baker’s testimony that the tables could have been sold for full value or at a discounted value because the integrity and merchantability of the tables were not affected. Murrey partly disputed his own testimony by admitting that the tables could have been sold at a discount. the evidence presented a wide range from which the trial court was able to determine the value of the 100 pool tables. the trial court’s finding that the tables had a value of at least $21,250 was within the range of the evidence presented at trial. we will not overturn that finding.
The trial court found that the seller suffered damages as a result of the buyer’s repudiation of the agreement in the amount of $21,250 and failed to prove that it suffered greater damages. the court awarded the amount of the seller’s damages against the amount the buyer paid for the contract ($42,500) and awarded the buyer a judgment of $21,250. The seller contends that the trial court erred in assessing his damages at $21,250 by failing to consider the expected loss of profit, along with incidental costs and damages incurred. utah code ann. § 70a-2-708(2) (1980).
buyer’s right to recover any amount of the $42,500 paid in the contract arises from section 70a-2-718(2),(3), which provides in pertinent part:
as a result of the buyer’s default, the seller justifiably withheld delivery of the 100 pool tables. still, the buyer is entitled to recover the $42,500 paid in the contract less the damages suffered by the seller. recently held that “in fixing damages, the trial court has broad discretion, and the award will not be set aside unless it is manifestly unfair or indicates that the trial court omitted pertinent elements, or was unduly influenced by prejudices or other strange circumstances.” Mabey v. Kay Petersen Construction Co., 682 p.2d 287, 291 (utah 1984). our review of the record reveals that the trial court neglected pertinent elements of the utah commercial code in assessing the seller’s damages.
The applicable statute to be used in determining seller’s damages for non-acceptance or repudiation is utah code ann. § 70a-2-708 (1980), which provides:
The seller argues that section 70a-2-708(2) is the proper formula for assessing your damages. that, however, would be inconsistent with the general rule requiring application of section 70a-2-708(1) when the trial court determines that there is a reasonably accessible market in which the aggrieved seller can market the property of he. see detroit power screwdriver co. v. ladney, 25 miles. app 478, 181 nw2d 828 (1970); Anchorage Centennial Development Co. v. van wormer & Rodrigues, Inc., 443 p.2d 596, 599 (Alaska 1968). “By market, we mean a market that, if taken advantage of, would have substantially mitigated [the seller’s] damages.” Timber Access Industries Co. vs. us plywood champion papers, inc., 263 o. 509, 525, 503 p.2d 482, 490 (1972). The trial court found that the seller failed in his duty to mitigate his damages by not trading or attempting to sell the billiard tables on the open market. having found that a market existed, the seller’s damages must be determined under section 70a-2-708(1).
applying the trial court’s finding that the pool tables, had they been completed, could have sold for at least $21,250, the seller’s damages are the difference between the market price ($21,250) and the price of the contract ($55,000), or $33,750. the trial court found that the seller was not entitled to any incidental damages. Buyer is not entitled to any other credit for expenses saved by Seller as a result of Buyer’s default. since the $21,250 the trial court charged the seller was for complete boards, there would have been no savings. under section 70a-2-718(2),(3), the buyer’s right to restitution of advance contract payments ($42,500) is subject to setoff to the extent the seller establishes damages ($33,750), for a total recovery of $8,750.
Buyer contends that seller failed in its burden to prove the amount of compensation as required by section 70a-2-718(3). the findings and conclusions of the trial court, however, show otherwise. the agreement between the parties, as evidenced by the signed sales order *1217, was a valid and enforceable contract. as a result of the buyer’s repudiation, the buyer breached the agreement. The seller performed in full all of its obligations under the agreement and was entitled to damages under section 70a-2-708(1).
The seller then contends that the trial court erred in finding that the buyer made advance payments on the contract totaling $42,500 instead of $41,950. we will not overturn this finding as it is supported by substantial evidence.
buyer is entitled to recover from seller $8,750. the modified sentence is confirmed.
hall, c.j., stewart, associate c.j., and durham and zimmerman, jj., concur.
