Los Angeles Nut House v. Holiday Hardware Corp., s. 85-6039
| Decision Date | 21 August 1987 |
| Docket Number | 85-6089,86-6737,86-6721,Nos. 85-6039,s. 85-6039 |
| Citation | 825 F.2d 1351 |
| Parties | LOS ANGELES NUT HOUSE, Plaintiff, v. HOLIDAY HARDWARE CORP., a Hawaiian corporation, dba Handy Man Stores, Holiday Exotic Sea Foods, Gene Hill and William P. Wrixon, Defendants. HOLIDAY HARDWARE CORP., Third-Party Plaintiff/Appellee/Cross-Appellant, v. THEO H. DAVIES & CO., LTD., dba Theo H. Davis & Co., Ltd., Lloyds Agency Department, Third Party Defendants/Appellants/Cross-Appellees. LOS ANGELES NUT HOUSE, Plaintiff, v. HOLIDAY HARDWARE CORP., Defendant. HOLIDAY HARDWARE CORP. and William P. Wrixon, Defendants/Third-Party Plaintiffs/Appellants, v. THEO H. DAVIES & CO., LTD., dba Theo H. Davis & Co., Ltd., Lloyds Agency Department, Defendants/Third-Party Plaintiffs/Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
R. Gaylord Smith and Barbara A. Maggio, San Diego, Cal., for third party defendants/appellants/cross-appellees.
Boyde S. Lemon and Ramon M. Vipperman, Los Angeles, Cal., for defendant/third party plaintiff/appellee/cross-appellant.
Appeal from the United States District Court for the Central District of California.
Before ANDERSON, SKOPIL, and REINHARDT, Circuit Judges.
This is a diversity action for breach of contract and warranty in the sale of goods. In a jury trial, Holiday Hardware Corporation ("Holiday Hardware") was awarded a $37,500.00 judgment for indemnity against Theo H. Davies & Company, Ltd. ("Davies"). Davies appeals that judgment on the ground that the general verdict was inconsistent with the jury's answer to a written interrogatory. Holiday Hardware appeals the denial of attorney's fees against Davies. Notices of appeal were timely even though the parties' first appeals were dismissed by stipulation. We have jurisdiction under 28 U.S.C. Sec. 1291. We reverse and remand on the grounds of inconsistent verdicts and affirm the denial of attorney's fees.
In 1980, Mauna Loa purchased a large amount of macadamia nuts from J.S. Braun, a New York nut broker. The nuts came from Kenya and were shipped by vessel to Mauna Loa in Hawaii in January 1981. In the course of shipping, the nuts were damaged, causing Mauna Loa to make a claim against its insurance carrier. The claim was adjusted by Davies, the insurance carrier's agent in Hawaii. Mauna Loa agreed to save as much of the shipment as possible while Davies attempted to find a buyer for some or all of the nuts which could be salvaged. Davies, acting as a broker, sought to sell the nuts to Holiday Hardware. In this role, Davies sent Holiday Hardware a sample of the salvaged nuts. When Holiday Hardware, in turn, tried to resell the nuts to Los Angeles Nut House ("Nut House"), it sent the sample on to the Nut House for its inspection. After Holiday Hardware and Nut House negotiated a sale for some of the salvaged nuts, Holiday Hardware offered to purchase from Davies a portion of the salvaged nuts which had been shipped to Mauna Loa. Both transactions took place and 12,500 pounds of the nuts were delivered to Nut House through Holiday Hardware.
Later, in August, 1981, a second shipment of a portion of the salvaged nuts was negotiated between Holiday Hardware and Nut House. This contract called for 25,000 pounds of "Grade A" nuts. When the sale was agreed upon, Holiday Hardware arranged to buy this second shipment from Davies. In September, after Nut House received the second shipment of nuts, it claimed the nuts were rancid (unfit for human consumption) and sought a refund from Holiday Hardware for the rancid nuts it had received and paid for in the second shipment. While this was transpiring, a third shipment of nuts was made to Nut House although, in this instance, sale of the nuts did not go through Davies. When Holiday Hardware refused to compensate Nut House for the rancid nuts, Nut House sued Holiday Hardware, then joined Davies as a third-party defendant. At trial it was established that all the nuts shipped to Nut House were different portions of the damaged shipment to Mauna Loa in January 1981 which was being salvaged. When Nut House discovered the third shipment of nuts was also unfit for consumption, it brought suit against Holiday Hardware for breach of warranty and breach of contract for the second and third shipments of nuts. The warranty claim was based upon the sample provided to Nut House. Holiday Hardware counterclaimed against Nut House for failure to pay for the third shipment. Holiday Hardware implied Davies as a third-party defendant for indemnification based on express and implied warranties in the sale of the second shipment of nuts. Holiday Hardware also sought attorney's fees against Davies.
A jury awarded Nut House $131,842.11 against Holiday Hardware for breach of warranty and contract arising out of the second and third nut shipments. Holiday Hardware was awarded $37,462.50 on its counterclaim for Nut House's failure to pay for the third shipment, and $37,500.00 against Davies on the indemnity claim. Holiday Hardware's claim against Davies for attorney's fees was denied. After the jury verdict, Davies moved the district court for judgment notwithstanding the verdict and for a new trial on the basis of an inconsistent answer to a special interrogatory. The district court denied these motions. Davies appeals the denial of its motions for judgment notwithstanding the verdict and for a new trial. Holiday Hardware cross-appeals denial of its claim against Davies for attorney's fees.
California law governs the substantive issues of state law in this diversity action. See Ledesma v. Jack Stewart Product, Inc., 816 F.2d 482, 484 (9th Cir.1987). Because the contracts and transactions in issue in this case took place in California, we apply the law of that state. We review state law questions without deference to the district court's legal interpretations. Jackson Water Works, Inc. v. Pub. Utilities Comm'n of California, 793 F.2d 1090, 1092 (9th Cir.1986) (citing Matter of McLinn, 739 F.2d 1395, 1397 (9th Cir.1984) (en banc), cert. denied, --- U.S. ----, 107 S.Ct. 1334, 94 L.Ed.2d 184 (1987)).
In the third-party indemnity claim of Holiday Hardware against Davies, the jury returned a $37,500.00 general verdict, finding Davies had sold rancid nuts. Along with the general verdict, the jury was asked to answer a special interrogatory. Special Interrogatory 3 queried: "Did Wrixon [Holiday Hardware's agent] unreasonably delay in notifying Davies of any nonconformity in the nuts?" The jury answered this interrogatory in the affirmative.
After the judgment was entered, Davies moved pursuant to Fed.R.Civ.P. 50(b) for judgment notwithstanding the verdict or for a new trial on the ground that the answer to Special Interrogatory 3 barred recovery on the indemnity claim. The bar to recovery was based upon Cal.Comm.Code Sec. 2607(3)(a) which requires that a buyer "must within a reasonable time after he discovered any breach notify the seller of the breach or be barred from any remedy...." 1 Davies proposed a jury instruction which was consistent with this notice requirement.
When there is an inconsistency between a general verdict and a written interrogatory, if reasonably possible we resolve the inconsistency in favor of sustaining the judgment. United Air Lines v. Weiner, 335 F.2d 379, 407 (9th Cir.1964). Cf. Omar v. Sea-Land Service, Inc., 813 F.2d 986, 991 (9th Cir.1987) (). It is clear the special interrogatory is inconsistent with the general verdict. Under Cal.Comm.Code Sec. 2607(3)(a), untimely notice bars the remedy Holiday Hardware was granted against Davies in the general verdict.
Holiday Hardware presents three arguments to sustain the general verdict. The first is that it is consistent with the special interrogatory. This argument in essence is one of semantics and would require us to torture a fair reading of Special Interrogatory 3. We therefore reject this argument.
The second argument is that the notice of breach given was reasonable as a matter of law. The question of what constitutes a reasonable time for the giving of notice is usually one of fact for the jury, but may become a question of law. See Davidson v. Herring-Hall-Marvin Safe Co., 131 Cal.App.2d Supp. 874, 280 P.2d 549 (1954). On these facts we cannot say the question of timeliness should be resolved as a matter of law. Nut House purportedly notified Holiday Hardware of the rancid nuts on October 9, 1981. Davies received the notice of nonconformity on or about January 19, 1982. The exact date notice was received (if at all) was disputed at trial. 2 Although the period for the entire transaction was relatively short, the commodities being handled were perishable. In light of this, we would be loath to take the question of timeliness out of the hands of the jury and find it reasonable as a matter of law.
Finally, Holiday Hardware argues that when a jury's answers to written interrogatories are inconsistent with its general verdict, under Fed.R.Civ.P. 49(b) a party waives objection to the inconsistency by failing to object immediately and move for resubmission of the inconsistency before the jury is dismissed. As Wright and Miller have pointed out, such a waiver rule is inconsistent with the language and structure of Rule 49(b). 9 C. Wright & A. Miller, Federal Practice & Procedure Sec. 2513 at 527-28 (1971).
In pertinent part, the rule states:
When the answers [to special interrogatories] are consistent with each other but one or more is inconsistent with the general verdict, judgment may be entered pursuant to Rule 58 in accordance with the answers, notwithstanding the general verdict, or the court may return the jury for further...
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