Husband v. Colorado Mountain Cellars, Inc.

• Decision Date: 17 June 1993
• Docket Number: 92CA0573,92CA0096
• Citation: 867 P.2d 57
• Parties: Thomas F. HUSBAND, Plaintiff-Appellant and Cross-Appellee, v. COLORADO MOUNTAIN CELLARS, INC., a Colorado corporation, Defendant-Appellee and Cross-Appellant. . III
• Court: Colorado Court of Appeals

Page 57

867 P.2d 57

Thomas F. HUSBAND, Plaintiff-Appellant and Cross-Appellee, v. COLORADO MOUNTAIN CELLARS, INC., a Colorado corporation Defendant-Appellee and Cross-Appellant.

Nos. 92CA0096, 92CA0573.

Colorado Court of Appeals Div. III.

June 17, 1993. *

As Modified on Denial of Rehearing

Sept. 30, 1993.

Certiorari Denied Jan. 31, 1994.

Nelson, Hoskin & Farina, P.C., David A. Younger, John T. Howe, Grand Junction, for plaintiff-appellant and cross-appellee.

Law Office of Gary C. Flynn, Gary C. Flynn, Boulder, for defendant-appellee and cross-appellant.

Opinion by Judge CRISWELL.

Plaintiff, Thomas F. Husband, appeals from the judgment entered on a jury verdict in favor of defendant, Colorado Mountain Cellars, Inc., on its counterclaim for breach of contract in the amount of $160,500, and defendant cross-appeals from the deficiency judgment on promissory notes in the amount of $153,000, including costs and attorney fees, entered in favor of plaintiff. We affirm the judgments, but remand for further proceedings.

Soon after defendant was incorporated, plaintiff loaned it $35,500 to purchase the winery equipment and inventory of a defunct winery. Plaintiff also entered into an oral contract with defendant to provide $100,000 in additional capital for defendant to launch a winery business. Defendant's president testified that plaintiff was to receive in return one-third of defendant's capital stock. However, this stock was never issued because plaintiff did not provide these additional funds.

Plaintiff's $35,500 loan was evidenced by two promissory notes, each secured by a security agreement upon all of defendant's inventory and equipment. When defendant failed to pay the notes on their due dates, plaintiff foreclosed on the secured property which was sold at public auction. A corporation which plaintiff controlled bought that property for $15,000, leaving a principal balance of $20,500 still owing on the two notes. Plaintiff then brought this action to recover that deficiency, and defendant counterclaimed for breach of the contract to provide additional funds.

I.

Plaintiff contends that the evidence of plaintiff's alleged breach of contract was insufficient to support the jury's finding of liability or its award of damages. We disagree.

A.

Plaintiff asserts that defendant did not present sufficient evidence at trial to establish that it was plaintiff's breach of the oral contract to provide $100,000 in capital that was the cause of defendant's inability to repay the $35,500 note held by plaintiff. Hence, he argues that there was no proof that it was plaintiff's breach that caused defendant to lose its assets in the foreclosure proceedings.

The party seeking recovery for a breach of contract has the burden of presenting competent evidence that furnishes a reasonable basis for assessing damages in accordance with the applicable measure of damages. See Colorado National Bank v. Friedman, 846 P.2d 159 (Colo.1993).

Applying this rule to a claim for breach of a business agreement, our supreme court has said that: "[A] claimant must establish that the damages he seeks are traceable to and are the direct result of the wrong sought to be redressed." Runiks v. Peterson, 155 Colo. 44, 45, 392 P.2d 590, 591 (1964).

To show that plaintiff's failure to provide the promised $100,000 was the cause of defendant's loss, defendant was required to present evidence at trial that plaintiff's promised funds were necessary to avoid foreclosure because defendant could not have obtained the $35,500 necessary to pay the note and avoid foreclosure from any source other than plaintiff.

To this purpose, defendant presented evidence that, after plaintiff informed defendant that he would not provide the promised $100,000, defendant made continuing efforts to secure alternative funding from banks and other private investors, but that its efforts were fruitless because of the risky nature of the business venture and defendant's lack of credit. Defendant also presented evidence that the funds that plaintiff did not provide would have permitted it either to commence its business operations or to prepare its existing assets for sale for more than the $35,500 due on the notes and thereby avoid foreclosure. Without this preparation, defendant's assets were not marketable.

This evidence was sufficient to allow the jury to conclude that, but for plaintiff's breach of contract, defendant would not have lost its property through foreclosure. Hence, we need not consider whether defendant's evidence was also sufficient to show that the promised funds would have allowed defendant to operate the business successfully.

B.

We also reject plaintiff's contention that the amount of the damages awarded by the jury is not supported by the evidence presented at trial.

If there is evidence to support a jury's findings as to damages, those findings may not be overturned by an appellate court. Tighe v. Kenyon, 681 P.2d 547 (Colo.App.1984). Thus, if the damages awarded defendant can be supported under any legitimate measure for damages, we may not overturn that award.

Normally, damages for breach of a contract to lend money are measured by the cost of obtaining the use of the money during the agreed period of credit, less interest at the rate provided in the contract, plus compensation for other avoidable harm that the defendant had reason to foresee when the contract was made. See BA Mortgage Co. v. Unisal Development, Inc., 469 F.Supp. 1258 (D.Colo.1979); Restatement of Contracts § 343 (1932).

However, this rule is merely a specific application of the general rule that the measure of damages for breach of contract is that sum which places the nondefaulting party in the position that party would have enjoyed had the breach not occurred. See Smith v. Hoyer, 697 P.2d 761 (Colo.App.1984).

Thus, if a party breaches a contract by withholding promised funds and the nonbreaching party is unable, after reasonable efforts, to obtain replacement funds from any other source, the special damages recoverable are not limited by this general rule:

On a breach of contract to loan money where special circumstances were known to both parties from which it must have been apparent that special damages would be suffered from a failure to fulfill the obligation, such special damages as may appear to have been reasonably contemplated by the parties are recoverable.

Price v. Van Lint, 46 N.M. 58, 68, 120 P.2d 611, 617 (1941). See also Native Alaskan Reclamation & Pest Control, Inc. v. United Bank Alaska, 685 P.2d 1211 (Alaska 1984) (inability of corporation to obtain replacement financing and resulting loss of project were basis for recovering special damages if foreseeable at time of contracting). See also International Technical Instruments, Inc. v. Engineering Measurements Co., 678 P.2d 558 (Colo.App.1983) (recovery of consequential damages is determined by the test of foreseeability of the consequences of breach of contract).

In addition to the evidence that defendant would have been able to avoid foreclosure and continue in possession of its assets had plaintiff provided the promised funds, defendant also presented evidence from which a reasonable person could find that it was impossible for defendant to obtain the promised funds elsewhere.

Further, plaintiff did not contend that it was unforeseeable that his failure to provide the promised funds to defendant would result in foreclosure. In addition, it was plaintiff himself who foreclosed on defendant's assets when defendant was unable to repay the note.

Finally, the amount of damages awarded is consistent with the estimates of the increased value that defendant's assets would have had if plaintiff had provided the funds, as promised, the assets could have been prepared for sale, and the loss of these assets through foreclosure sale would not have resulted.

Under this record, therefore, the jurors had a reasonable basis for assessing the amount of damages contained in their verdict.

II.

Plaintiff next contends that the trial court erred in entering two separate judgments for the parties in this case rather than setting off the judgments and entering a single net judgment. Defendant argues, however, that we have no jurisdiction to pass upon the merits of this assertion. We conclude that we do not lack such jurisdiction, and we agree that a single net judgment should be entered.

Plaintiff filed a timely C.R.C.P. 59 motion directed to the trial court's September 20, 1991, judgment, but this motion did not request setoff. Later, the trial court on its own motion entered an amended judgment, correcting certain mathematical computations. Plaintiff then filed a motion requesting setoff under the court's equitable powers, Rule 60(b), and bankruptcy law. The court never ruled on this motion. Plaintiff then filed a second C.R.C.P. 59 motion requesting setoff.

In denying this second Rule 59 motion, the trial court concluded that it had erred in failing to set-off one judgment against the other, but it also concluded that, under Molitor v. Anderson, 795 P.2d 266 (Colo.1990), it no longer had jurisdiction to rule on the motion because plaintiff had already filed his notice of appeal. Plaintiff thereafter filed a second notice of appeal contesting this ruling.

Relying on In re Marriage of Everhart, 636 P.2d 1321 (Colo.App.1981), defendant argues that our court does not now have subject matter...