Cook Associates, Inc. v. Warnick

• Decision Date: 28 April 1983
• Docket Number: No. 17807,17807
• Citation: 664 P.2d 1161
• Parties: 36 UCC Rep.Serv. 1213 COOK ASSOCIATES, INC., a Utah corporation, Plaintiff and Respondent, v. Darrell WARNICK, dba Warnick Sales & Service, and Chief Industries, Inc., Defendants and Appellants.
• Court: Utah Supreme Court

Page 1161

664 P.2d 1161

36 UCC Rep.Serv. 1213

COOK ASSOCIATES, INC., a Utah corporation, Plaintiff and Respondent, v. Darrell WARNICK, dba Warnick Sales & Service, and Chief

Industries, Inc., Defendants and Appellants.

No. 17807.

Supreme Court of Utah.

April 28, 1983.

Lorin N. Pace, William T. Thurman, David L. Bird, Stephen W. Rupp, Salt Lake City, for defendants and appellants.

David G. Williams, Henry K. Chai II, Salt Lake City, for plaintiff and respondent.

OAKS, Justice:

Cook Associates, Inc. (Cook) was constructing a plant for manufacturing slurry explosives, a gelatin-like blasting agent used in open-pit mining. Cook contracted with a dealer to supply parts manufactured by Chief Industries, Inc. (Chief) for the silo storage complex. When Chief delayed delivery of some of these parts for almost a year, Cook brought this action against Chief and the dealer and recovered $56,908 compensatory damages and $5,000 punitive damages against Chief. On appeal, Chief argues that the compensatory damages were predicated on inadmissible evidence and were not established with sufficient certainty nor shown to be foreseeable. Chief also challenges the punitive damage award as unjustified by the evidence. We affirm the compensatory damages, but set aside the punitives.

Dr. Melvin Cook invented slurry explosives. For 22 years, he devoted his efforts to the manufacture and sale of the product. His son, Merrill Cook, managed slurry companies for about 5 years. With this experience, the Cooks began preparations to establish a new business in early 1978. They organized Cook Associates, Inc. and solicited bids for the construction of plants in Minnesota and Utah.

The Minnesota plant included three silos for the storage of ammonium nitrate pellets, an essential ingredient of slurry. Warnick, an exclusive dealer in Chief products (dealer), submitted the most attractive bid for supplying parts to construct these silos. Before accepting this bid, Cook obtained an assurance from the dealer and from a district manager of Chief's that the parts associated with the dealer's bid would be adequate to construct the silos. With this assurance, Cook signed a purchase contract with the dealer on July 11, and the dealer placed a production order with Chief.

The dealer's bid was particularly acceptable to Cook because Chief would deliver the parts quickly. As evidence of this, the dealer gave Cook a written statement with Chief's logo affixed to it that delivery would be on "8/17 or 8/18." On August 17, 1978, Chief notified the dealer and Cook by telephone that all the parts were loaded and ready for shipment. In reliance on this representation, Cook released a $33,660 check to the dealer as payment for the parts. However, the expected shipment did not arrive at the Minnesota plant until the week of September 8, 1978, and many of the ordered parts were missing or defective. After discovering the shortage, Cook telephoned Chief's sales coordinator, who assured him that efforts were being made to complete the shipment. On November 8, 1978, a second shipment arrived, but it still lacked seven essential parts. The last of the parts did not arrive until the week of August 3, 1979.

During the delay, Cook contacted Chief on numerous occasions regarding the delivery. Cook also modified parts on its own and began assembling the silos, but it was unable to complete them until September of 1979, after the arrival and modification of the final parts. This was 8 months after the date Cook had planned to begin production. The plant experienced its first sales and a net profit of $23,022 in October 1979. Thereafter, its average monthly net profit through the first 13 months of operation was $35,650. ¹

In Cook's action against Chief and its dealer for delays in completing the Minnesota plant, the jury awarded compensatory and punitive damages against Chief, but exonerated the dealer. ² On appeal, Chief contests only the validity of the damage awards, not its fault in delaying delivery of the parts.

I. BASIS OF LIABILITY

The jury was instructed on three theories of liability: breach of contract, breach of warranty, and misrepresentation. The jury's general verdict ³ did not expressly identify which theory was used as the basis for the damages awarded, but a study of the entire record leaves little doubt that the award was for breach of contract or warranty, not misrepresentation.

General verdicts are to be construed with a view to sustaining the verdict and effectuating the intention of the jury if possible. Where that intention is not clearly apparent from the verdict itself, inferences may be drawn from the evidence, the pleadings, the jury instructions, and other relevant portions of the record. Mixon v. Riverview Hospital, 254 Cal.App.2d 364, 62 Cal.Rptr. 379, 387-88 (1967); Hatfield v. Leverenz, 35 Ill.App.2d 222, 225-27, 182 N.E.2d 385, 386-87 (1962); 89 C.J.S. Trial § 521 (1955). In this case, the jury was instructed that it could award lost profits in connection with the contract theories, and its award of compensatory damages exactly equaled Cook's evidence of the Minnesota plant's first two months' net profits. In addition, the $56,908 verdict for compensatory damages was more than the $33,660 sought for misrepresentation, but less than the $100,000 sought for breach of contract. Consistent with our obligation to rely on the theory that will best sustain the verdict, Codekas v. Dyna-Lift Co., 48 Cal.App.3d 20, 25-26, 121 Cal.Rptr. 121, 124 (1975), we consider Chief's arguments in terms of contract law, which is the principal theory the parties have argued on this appeal.

II. SUMMARY OF EARNINGS

Chief argues that the district court erred in admitting into evidence a summary of the sales, costs, and net profits of the Minnesota plant for the first 13 months of its operation. Chief first relies on the hearsay rule. Utah R.Evid. 63. Cook counters that Chief waived this point by failing to object to the evidence at trial. Since the record reveals that there was no objection on the basis of hearsay, that theory cannot now be raised on appeal. Utah R.Evid. 4; Obradovich v. Walker Brothers Bankers, 80 Utah 587, 602-04, 16 P.2d 212, 217-18 (1932); In re Van Alstine's Estate, 26 Utah 193, 203-05, 72 P. 942, 945-46 (1903).

Chief also challenges the admission of the financial summary on the basis of the best evidence rule. Utah R.Evid. 70; U.C.A., 1953, § 78-25-16. That objection was raised at trial, but only by the dealer, who was not joined by Chief. In fact, Chief did not object to the admission of the summary on any ground.

Whether an objection by one party properly preserves an objection on appeal as to another party is apparently a question of first impression in this Court. Virtually every other jurisdiction that has considered the question has concluded that an objection to evidence by one or more parties at trial does not inure to the benefit of other parties who do not join in the objection. E.g., Thomas v. Bank of Springfield, Mo.App., 631 S.W.2d 346, 351 (1982); Wolfe v. East Texas Seed Co., Tex.Civ.App., 583 S.W.2d 481, 482 (1979); 4 C.J.S. Appeal & Error § 251 (1957). We adopt that rule. Since Chief failed to make its complaint known at trial by objecting on some ground itself or by joining in the dealer's objection, its reliance on the best evidence rule to require the exclusion of the financial summary is not properly before us on this appeal.

III. LOST PROFITS

Cook sought $100,000 lost profits incurred during the delay in opening the Minnesota plant. Chief moved for a directed verdict on this claim, arguing (A) that lost profits were not proved with sufficient certainty, and (B) that they were not a foreseeable consequence of breach. The district court denied the motion, which Chief challenges as reversible error because its grounds of objection were sufficient to take the question from the jury. We test that challenge by viewing the evidence and all reasonable inferences that may fairly be drawn therefrom in the light most favorable to the party moved against, and will sustain the denial if reasonable minds could disagree with the ground asserted for directing a verdict. Winsness v. M.J. Conoco Distributors, Inc., Utah, 593 P.2d 1303, 1304 (1979).

A. Certainty

Lost profits must be established with reasonable certainty. Penelko, Inc. v. John Price Associates, Inc., Utah, 642 P.2d 1229, 1235 (1982). At times, we have described this requirement in terms of proof of "sufficient certainty that reasonable minds might believe from a preponderance of the evidence that the damages were actually suffered." First Security Bank of Utah v. J.B.J. Feedyards, Inc., Utah, 653 P.2d 591, 596 (1982). This requirement applies to proof of (1) the fact of lost profits, (2) causation of lost profits, and (3) the amount of lost profits. Id.; Penelko, 642 P.2d at 1235; 5 A. Corbin, Corbin on Contracts § 1022 at 135 (1964). Chief argues that reasonable certainty was lacking in each of these areas.

1. The evidence that net profits could have been made during the delay period was extensive. The Cooks were highly experienced in both the production and sale of slurry. The Minnesota plant was located near the Mesabi Iron Range, one of the largest markets for slurry explosives. Sales at the Utah plant boomed during much of the 8-month delay in opening the Minnesota plant, and Merrill Cook testified that the Minnesota plant could have had sales throughout this time. Moreover, once the plant was in operation, it immediately generated significant sales and profits, which finally resulted in a net profit of $479,080 in the first year of operation. This evidence was ample to put the fact of lost profits to the jury.

2. There was also substantial evidence that the lost profits were caused by Chief's failure to send workable parts in a timely manner. Despite repeated follow-up contacts by Cook, the final shipment of parts for the silos was not received...