Cannon Builders, Inc. v. Rice

• Decision Date: 19 January 1995
• Docket Number: No. 20543,20543
• Citation: 888 P.2d 790,126 Idaho 616
• Parties: CANNON BUILDERS, INC., an Idaho corporation, Plaintiff-Respondent, v. Eugene Leroy RICE, individually and d/b/a Vista Pawn, and Aztec Precast, Inc., an Idaho corporation, Defendants-Appellants. CROOKS INDUSTRIES, INC., Plaintiff-Respondent, v. Eugene Leroy RICE, individually and d/b/a Vista Pawn, and Aztec Precast, Inc., an Idaho corporation, Defendants-Appellants.
• Court: Idaho Court of Appeals

Page 790

888 P.2d 790

126 Idaho 616

CANNON BUILDERS, INC., an Idaho corporation, Plaintiff-Respondent, v. Eugene Leroy RICE, individually and d/b/a Vista Pawn, and Aztec Precast, Inc., an Idaho corporation, Defendants-Appellants.

CROOKS INDUSTRIES, INC., Plaintiff-Respondent, v. Eugene Leroy RICE, individually and d/b/a Vista Pawn, and Aztec Precast, Inc., an Idaho corporation, Defendants-Appellants.

No. 20543.

Court of Appeals of Idaho.

Jan. 19, 1995.

Sallaz, Doolittle & Gordon and Sisson & Sisson, Boise, for appellants. Peter C. Sisson argued.

Schiller & Schiller, Nampa, for respondent Crooks Industries. Edwin G. Schiller argued.

Lojek, Gabbert & Strother, Boise, for respondent Cannon Builders. Jeffrey A. Strother argued.

PERRY, Judge.

In this case, we are asked to review awards to two separate plaintiffs against the same defendants following a consolidated trial. We must decide whether the district court properly admitted evidence of a liquidated damages clause; whether the attorney for defendants should have been allowed to testify; and whether the district court properly denied the defendants' motions for directed verdict. We affirm the judgment entered in favor of Cannon Builders, Inc., but reverse the judgment entered in favor of Crooks Industries, Inc.

FACTS AND PROCEDURE

In May of 1989, Cannon Builders, Inc. (Cannon) was awarded two contracts with the Idaho Department of Transportation for roadwork on State Highway 21. To fulfill these contracts, Cannon entered into a subcontract with McCartan Precast (McCartan) for the supply of concrete guardrails. McCartan Precast was owned and operated by Alex McCartan. Under a separate contract, Crooks Industries, Inc. (Crooks) provided McCartan with 3400 pieces of steel rebar for the production of the guardrails.

McCartan, in need of money to complete the obligation under the contract with Cannon, borrowed $66,000 from Eugene Rice. As part of the loan agreement, McCartan assigned all payments from the Cannon contract to Rice and granted Rice a security interest in all of McCartan's assets as collateral for the loan.

In August of 1989, Alex McCartan was incarcerated on an unrelated matter. Unable to meet his loan obligation, he turned over all of McCartan's assets to Rice in lieu of a foreclosure. Once in possession of McCartan's assets, Rice entered into a written agreement with Cannon in an attempt to fulfill Cannon's need for the concrete guardrails. Using the guardrails that Rice was able to produce, Cannon finished the road project on October 18, 1989, some thirty-five After McCartan was released from custody, he initiated lawsuits against Cannon and Rice. Cannon answered, bringing a third party complaint against Rice, claiming a breach of their contract for an alleged failure to produce the guardrails in a timely fashion. Rice filed a counterclaim against Cannon, alleging that Cannon had failed to pay the full amount due under the contract. In a separate action, Crooks sued Rice, seeking payment for the rebar it had delivered to McCartan that Rice had used in production of the guardrails when Rice took possession of McCartan's assets. McCartan was eventually dismissed from the actions, and the remaining claims, Cannon versus Rice and Crooks versus Rice, were consolidated for trial.

[126 Idaho 619] days beyond its contract deadline. Under the contract with the Idaho Department of Transportation, Cannon was required to pay $700 for each day beyond the deadline the project was unfinished, as liquidated damages.

Following a jury trial, Cannon and Crooks both were awarded judgments against Rice. The jury found against Rice on his counterclaim. Rice appeals from the judgments entered below, claiming: (1) the district court erred in admitting evidence of the liquidated damages clause in Cannon's contract with the Idaho Department of Transportation, and in submitting to the jury Cannon's claim for damages predicated upon the liquidated damages that Cannon had to pay the state; and (2) the district court erred by refusing to grant Rice a continuance and by refusing, in the alternative, to allow Rice's counsel to testify at trial; and (3) the district court erred by denying Rice's motions for directed verdict on Crooks' claims.

ANALYSIS

A. CANNON VERSUS RICE

1. Evidence of Liquidated Damages

Cannon completed the highway project thirty-five days late, and was consequently liable to the state for approximately $24,000 in liquidated damages pursuant to their contract. Cannon claimed that six days of this delay occurred because Rice unjustifiably ceased performance under his contract to provide guardrails. Cannon therefore sought to recover an award equal to six days of those liquidated damages from Rice. Rice argues that the district court erred by allowing the admission of evidence regarding the liquidated damages clause in the contract between Cannon and the state and in denying Rice's motion for a directed verdict on their element of Cannon's damages claim. At trial, Rice, through a motion in limine, sought to have any such evidence excluded. The district court, in denying the motion, stated:

Well, they've got to put on certain types of proof to prove that [claim], but there can be consequential damages which a person has a reason to know of at the time of contracting. I don't know. I assume it's coming in that way. I don't know if those are reasonably foreseeable or not and it assumes there will have to be some proof on that and we'll see where we are.

Following trial, Rice sought an order striking the evidence or in the alternative, a directed verdict with respect to Cannon's claim to recoup from Rice part of the liquidated damages that Cannon was obligated to pay the state. This motion was also denied.

Rice frames his argument regarding the liquidated damages clause in terms of relevance. First, Rice argues that the Rice-Cannon agreement itself does not adopt the liquidated damages clause from Cannon's contract with the Department of Transportation, nor was there any evidence indicating its adoption. Second, Rice claims it was error to admit the liquidated damages clause as proof of Cannon's consequential damages arising from Rice's breach of contract because no evidence was presented showing that Rice was aware of the clause.

With respect to Rice's first argument, we agree. If the evidence of liquidated damages was being presented solely to interpret the meaning of the Rice-Cannon agreement, it clearly would have been irrelevant. We disagree with Rice's second argument, however, and conclude that the evidence was properly admitted to show Cannon's consequential damages.

We first note that our review of questions of relevancy is de novo. Lubcke v. Boise City/Ada County Hous. Auth., 124 Idaho 450, 466, 860 P.2d 653, 669 (1993). Idaho Code § 28-2-715(2)(a), pertaining to a buyer's damages when a seller breached a contract for the sale of goods, provides that:

(2) Consequential damages resulting from the seller's breach include

(a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise....

This Court has previously held that:

Consequential damages need not be precisely and specifically foreseen; but they must have been reasonably foreseeable, and within the contemplation of the parties, when the contract was made. Whether such damages were reasonably foreseeable and within the contemplation of the parties is a question of fact.

Strate v. Cambridge Telephone Co., Inc., 118 Idaho 157, 160-61, 795 P.2d 319, 322-23 (Ct.App.1990) (citations omitted).

The evidence of the liquidated damages clause was relevant to the injury suffered by Cannon. If Rice had reason to know that Cannon faced exposure for liquidated damages in the event of a breach by Rice, then payment of the liquidated damages could properly be considered as proof of Cannon's consequential damages stemming from Rice's breach of contract. We disagree with Rice's contention that the jury was presented insufficient evidence to conclude that Rice had reason to know of the liquidated damages clause in Cannon's contract with the state. Joseph Cannon testified that liquidated damages were discussed at the time the agreement was reached with Rice and that Rice knew Cannon's time for performance on the state contract was quickly running out. It was for the jury to determine whether Rice did foresee or should have foreseen the liquidated damages as an injury to Cannon in the event of a breach by Rice. We conclude that the evidence was relevant, and therefore properly admitted. We further conclude that the district court did not err in denying Rice's motion for a directed verdict on this claim.

2. Testimony of Rice's Counsel

(a) Motion to Vacate.

Rice's trial counsel, William J. Litster, also represented Rice during the contract negotiations with Cannon. As such, he was present during many of the meetings at issue in this case. Prior to an earlier trial date in May of 1992, Litster moved to vacate the trial date because he felt he would be called as a witness and needed to secure different counsel for Rice. The trial was rescheduled for other reasons, however, and no hearing on the motion for continuance was ever held. The trial was eventually held in January of 1993. After opening arguments to the jury, Litster renewed his request for a continuance, again maintaining that Rice would be required to obtain other counsel because of Litster's knowledge of material facts. This second motion to continue the trial date was denied. When Litster again renewed his motion for a continuance following the presentation of evidence by Cannon and Crooks, the district court denied the motion, stating:

In this situation, I can see now that it does present a more serious problem having heard all the evidence in the case up to this point. I think this is a...