Construct Tech Corp. v. City of Coeur D'Alene

Decision Date02 November 1995
Docket NumberNos. 94-35666,94-35708,s. 94-35666
Citation67 F.3d 306
PartiesNOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel. CONSTRUCT TECH CORPORATION, Plaintiff-Appellee-Cross-Appellant, v. CITY OF COEUR D'ALENE, Defendant-Appellant-Cross-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Before: BEEZER and HAWKINS, Circuit Judges, and TEVRIZIAN, * District Judge.

MEMORANDUM **

This action involves a dispute between the City of Coeur d'Alene ("City") and Construct Tech Corporation ("Construct") regarding the City's termination for default of the Contract between itself and Construct for the construction of Phase 3C of the City's waste water treatment plant ("Plant"). As a result of this termination, Construct filed a complaint seeking (a) reimbursement for services rendered, costs advanced, commitments settled, and profits earned on contract prior to the termination; (b) profits which would have been earned on the remainder of the project had the contract not been terminated; and (c) destruction of the value of its business related to impairment of bonding capacity caused by termination for default and resulting inability to obtain future public works contracts. The City counter-sued Construct for (i) reimbursement for costs to correct defective work; (ii) its increased costs to complete construction of Phase 3C with another contractor; and (iii) damages for delays in putting Phase 3C into service.

After a two-week trial, the jury returned a special verdict, (i) finding that the City did not have the right to terminate Construct for default; (ii) awarding Construct $352,992 in damages for pre-termination costs and profits, as well as settlement costs; (iii) finding that the City's termination for default was in breach of the covenant of good faith and fair dealing; (iv) awarding lost profits in the amount of $459,041; and (v) awarding destruction of business damages in the amount of $1,632,283. A judgment was entered on this verdict on May 17, 1994.

Both City and Construct subsequently filed motions regarding this judgment. On June 21, 1994, the district court denied the City's motion for judgment as a matter of law, or in the alternative, for a new trial, or to alter and amend judgment. The district court also denied Construct's motion to amend judgment, to the extent it sought prejudgment interest, and granted the motion to the extent it sought reasonable attorney's fees and costs. As a result, the district court filed a judgment on June 21, 1994 awarding Construct a total of $2,865,373.68 ("Judgment"). Both parties timely filed notices of appeal from the district court's ruling and subsequently entered Judgment. We have jurisdiction under 28 U.S.C. Sec. 1291.

I. The district court did not abuse its discretion in denying the City's motion for new trial based on its contention that the district court should not have permitted Construct to present a claim to the jury for destruction of business damages.

A district court's decision to deny a party's motion for a new trial is reviewed for abuse of discretion. Hard v. Burlington N.R.R., 812 F.2d 482, 483 (9th Cir.1987). A trial court abuses its discretion if its decision is based on an erroneous interpretation of the law. Northern Alaska Envt'l Ctr v. Lujan, 961 F.2d 886, 889 (9th Cir.1991). "We review a district court's determination of state law de novo." Brooks v. Hilton Casinos Inc., 959 F.2d 757, 759 (9th Cir.), cert. denied, 113 S.Ct. 300 (1992).

A. The district court properly set forth the standard for consequential damages under Idaho Law. 1

The City contends that it is entitled to a new trial because consequential damages were not recoverable in the instant case as a matter of law. The City argues that a party may only recover consequential damages when the evidence shows that such damages were actually within the contemplation of the parties at the time of contracting.

The Idaho Supreme Court has most recently set forth the Idaho rule of law for consequential damages in Suitts v. First Security Bank of Idaho, N.A., 713 P.2d 1374 (Idaho 1985). In Suitts, the Idaho Supreme Court stated that consequential damages are available if such damages

"may reasonably be supposed to have been within the contemplation of the parties at the time of making the contract as a probable result of a breach thereof, or, as sometimes stated, such as were reasonably foreseeable and within the contemplation of the parties at the time they made the contract."

Suitts, 713 P.2d at 1381 (quoting C.J.S., Damages, Sec. 24, pp. 662-66).

The City contends that the correct standard for consequential damages is a subjective one. In other words, Construct cannot recover damages for the destruction of its bonding capacity unless it can prove, among other things, that the City actually foresaw this consequence at the time of contracting. In support of its argument, the City notes that consequential damages are not available if the special circumstances giving rise to the damages were wholly unknown to the party breaching the contract. See Traylor v. Henkels & McCoy, Inc., 585 P.2d 970 (Idaho 1978).

In contrast, Construct maintains that the consequential damages standard is objective. Therefore, a district court may properly submit a consequential damages claim to the jury if the aggrieved party sets forth evidence indicating that the breaching party either did foresee or should have foreseen that the consequential damages would reasonably result from the breach. In support of this contention, Construct notes that "[t]he damages for which compensation is sought need not have been precisely and specifically foreseeable." Suitts, 713 P.2d at 1381, Strate v. Cambridge Tel. Co., 795 P.2d 319 (Idaho Ct.App.1990).

In Traylor v. Henkels & McCoy, Inc., 585 P.2d 970 (Idaho 1978), the Idaho Supreme Court affirmed a decision not to award consequential damages for business destruction because

Traylor does not seriously contend that those damages were in contemplation of the parties at the time they made the basic contract and we deem it to be a somewhat remote possibility that Henkels & McCoy would enter a contract conditioned upon its acceptance of liability for the liquidation of Traylor's business in the event of breach by Henkels & McCoy.

Id. at 972. The Traylor court further noted that

[i]f the jury were to allow Traylor's claim for damages to his business, the jury had to find that at the time Traylor agreed with Henkels & McCoy for the performance of extra work it was in the contemplation of both parties that if Henkels & McCoy breached its obligation to pay, it was foreseeable that Traylor would lose his business and have to sell his equipment.

Id. at 972-73.

The consequential damages rule contained in the Idaho Commercial Code 2 was similarly applied in Cannon Builders, Inc. v. Rice, 888 P.2d 790 (Idaho 1995). In Cannon Builders, a plaintiff highway contractor was unable to finish a project in a timely fashion, as required by the main construction contract, because the defendant subcontractor failed to provide concrete guardrails to the plaintiff contractor. As a result of the subcontractor's breach, the contractor completed the highway project 35 days late and was therefore obligated to pay $24,000 in liquidated damages pursuant to the main construction contract. The contractor sued the subcontractor for breach of contract and the jury awarded damages for, among other things, the $24,000 in liquidated damages incurred as a result of the subcontractor's failure to timely deliver the concrete guardrails.

The Idaho court of appeals upheld this award, finding that the jury was presented with sufficient evidence to conclude that the defendant subcontractor had reason to know of the liquidated damages clause in the main construction contract. Id. at 794. At trial, the contractor presented testimony showing that the parties discussed the liquidated damages clause at the time the agreement was reached. Id. Additionally, the defendant was aware that plaintiff's time for performance was quickly running out. Id.

In Strate v. Cambridge Tel. Co., 795 P.2d 319 (Idaho Ct.App.1990), the Idaho court of appeals upheld a trial court's decision not to award consequential damages flowing from a real estate contract with a third party because there was little in the record to indicate that the real estate transaction was contemplated by either the defendants or the plaintiffs at the time of contracting. Id. at 323. Similarly, in Brown's Tie & Lumber Co. v. Chicago Title Co., 764 P.2d 423, 428 (Idaho 1988), the Idaho Supreme Court upheld a trial court's decision to exclude evidence of business losses allegedly incurred because of a party's breach of a title insurance contract. The court found that there was nothing in the contract to suggest that such damages were within the contemplation of the parties at the time of contracting. In fact, the court noted that, to the contrary, the contract included a provision whereby the defendant only agreed to compensate for certain losses at a certain amount.

In the instant case, the district court issued the following jury instruction in connection with Construct's request for consequential damages:

If you decide for one party on the question of liability with respect to its claim, you must then fix the amount of money that will reasonably and fairly compensate it for any of the following elements of damage proven by the evidence to have resulted as a consequence of the other party's breach and to have been reasonably within the contemplation of the parties, at the time the contract was made, as being the probable result of the breach of the contract.

1. ... those losses and expenses...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT