Maehal Enters., Inc. v. Thunder Mountain Custom Cycles, Inc.

Decision Date07 July 2011
Docket NumberNo. 09CA0806.,09CA0806.
Citation313 P.3d 584
PartiesMAEHAL ENTERPRISES, INC., d/b/a Pikes Peak Harley–Davidson, a Colorado corporation, Plaintiff–Appellee and Cross–Appellant v. THUNDER MOUNTAIN CUSTOM CYCLES, INC., a Colorado corporation, Defendant–Appellant and Cross–Appellee.
CourtColorado Court of Appeals

OPINION TEXT STARTS HERE

Garth J. Nicholls, P.C., Garth J. Nicholls, Colorado Springs, Colorado, for PlaintiffAppellee and Cross–Appellant.

Hanes Hrbacek & Bartels, LLC, Patrick Hrbacek, Colorado Springs, Colorado, for DefendantAppellant and Cross–Appellee.

Opinion by Judge LICHTENSTEIN.

This case arises from the parties' agreement allowing plaintiff, Maehal Enterprises, Inc., doing business as Pikes Peak Harley–Davidson (PPHD), to act as a dealer of motorcycles manufactured by defendant, Thunder Mountain Custom Cycles, Inc. (TMCC). After the State Department of Revenue Auto Industry Division informed PPHD that it was not authorized to sell TMCC's motorcycles, PPHD brought suit, and the case ultimately proceeded to a bench trial.

TMCC appeals and PPHD cross-appeals various aspects of the trial court's judgment on PPHD's claims of (1) violation of statutes regulating automobile dealers, see§§ 12–6–101 to –128, C.R.S.2010, (2) breach of contract, and (3) negligent misrepresentation.1

We reverse the trial court's judgment on the claims for statutory violations and breach of contract, and remand for further proceedings on those claims, including findings on PPHD's claim for reimbursement of its parts costs. We affirm the trial court's judgment in all other respects.

I. Background

PPHD is a motor vehicle dealer licensed in Colorado. TMCC is a licensed manufacturer of motor vehicles in Colorado, and between 2001 and November 2007, it was also a licensed motor vehicle dealer in Colorado.

In December 2005, PPHD approached TMCC to discuss the possibility of PPHD becoming a dealer of TMCC's motorcycles. The parties reached an agreement (sales contract), and on or about December 15, 2005, TMCC delivered seven motorcycles, together with bills of sale, to PPHD with the understanding that the Manufacturer's Statements of Origin (MSOs) would be provided to PPHD upon full payment. According to the trial court's finding of fact, the parties agreed that PPHD could immediately display and resell the motorcycles.

The parties executed a written dealer contract on January 18, 2006 (dealer contract). The contract provided that PPHD would act as a dealer of TMCC's motorcycles from January 18, 2006, until January 18, 2007, and that the contract would “be renewed on an annual basis only on the joint concurrence of [PPHD] and TMCC.” The contract specified that TMCC “was under no obligation to renew [it] at any time.”

In May 2006, PPHD paid in full for the motorcycles through the proceeds of a financing “floor plan,” and TMCC sent PPHD the MSOs. PPHD sold one of the motorcycles a couple of months later, and provided the purchaser with a bill of sale and an MSO.

The parties' dealer contract expired by its own terms on January 18, 2007.

In February 2007, the Auto Industry Division reviewed TMCC's manufacturer license renewal application and noticed that TMCC was licensed as both a manufacturer and a dealer, in violation of section 12–6–120.5(1), C.R.S.2010, the independent control of dealer provision. Section 12–6–120.5(1) provides that [e]xcept as otherwise provided in this section, no manufacturer shall own, operate, or control any motor vehicle dealer or used motor vehicle dealer in Colorado.”

One way that the Division enforces compliance with that statute is to refuse to issue titles to any motorcycle sold by a manufacturer that violates that provision. Thus, the Division informed PPHD and TMCC that, as a result of TMCC's statutory violation, PPHD was no longer authorized to sell TMCC's motorcycles. The Division advised TMCC that, as another result of the violation, it would have to buy the motorcycles back from PPHD. TMCC did not do so.

PPHD filed a complaint against TMCC asserting the claims identified above, and ultimately filed an amended complaint adding a fourth claim for damages caused by Todd Erdmann's violation of section 12–6–120(1) in his role as TMCC's manufacturer representative.

PPHD alleged at trial that TMCC's violation of section 12–6–102.5 constituted a breach of the dealer contract because PPHD could not act as a dealer for TMCC's motorcycles, and that TMCC knew or should have known that its representations that PPHD could act as a lawful motor vehicle dealer were false. It also contended that TMCC violated section 12–6–120(1)( l )(I), C.R.S.2010, which provides that it is unlawful for a manufacturer to fail to pay the dealer, within ninety days after the termination or nonrenewal of a franchise, the cost of unsold motor vehicles in the dealer's inventory that were acquired from the manufacturer within the previous twelve months.

The trial court found in favor of PPHD on its breach of contract claim (under a Uniform Commercial Code (UCC) implied warranty theory), but found in TMCC's favor on PPHD's claims for statutory violations and negligent misrepresentation.

II. TMCC's Appeal
A. Breach of Contract and Amended Complaint

Following PPHD's case-in-chief, TMCC moved to dismiss the breach of contract claim, contending that even though there may have been a technical breach of section 12–6–120.5, the evidence was undisputed that PPHD suffered no interference in its ability, as a dealer, to sell TMCC's motorcycles during the term of the dealer contract.

The court denied TMCC's motion, concluding that there “has been at least a threshold case for a[UCC] breach of warranties under the contract.” After TMCC presented its defense case, it asserted it had no notice of the UCC theory and was in an “unfair position” because PPHD had not previously raised the issue. The court permitted the parties, at TMCC's request, to file written closing arguments to address whether the UCC applied.

PPHD, both in its written closing argument and its reply to TMCC's written closing argument, clarified that it asserted two separate claims for breach of contract. The first was a breach of the implied warranties flowing from the December 2005 sales contract, which is governed by the UCC. The second was an express breach of the January 2006 dealer contract, based on TMCC's statutory violations. In its reply, it requested the court to amend its pleadings to conform to the evidence on the breach of warranty claim, pursuant to C.R.C.P. 15.

TMCC, in its written closing argument, objected to the court's sua sponte injection and consideration of a UCC theory of breach of implied warranties, because PPHD never brought a claim for breach of the December 2005 sales contract, much less a breach of implied warranties flowing from that contract. It argued that PPHD did not present evidence to support the breach of implied warranties flowing from the sales contract, and noted that PPHD implicitly acknowledged in its closing argument brief that the dealer contract did not provide the basis for the UCC claim.

The court granted PPHD's request to amend the pleadings to conform to the evidence and entered a judgment in favor of PPHD on the UCC claim. It ruled that even if TMCC was surprised by the court's injection of a UCC issue, the court could not “ignore the UCC[ ] any more than [it] could ignore the standards set forth in the Colorado Jury Instructions in a jury trial.” It concluded that TMCC was not prejudiced by amending the breach of contract claim to include a UCC claim because [b]oth sides presented all the facts that were relevant” and had the opportunity to address the UCC in written closing arguments. The court relied on a provision in the dealer contract as the basis for a UCC claim, and ruled that TMCC breached implied warranties of merchantability, fitness for a particular purpose, and title flowing from that provision, and it imposed UCC remedies for TMCC's failure to cure following PPHD's revocation of acceptance of the motorcycles.

1. Standard of Review and Applicable Law

The determination whether to allow a party to amend a pleading is committed to the district court's sound discretion. Lyons v. Teamsters Local Union No. 961, 903 P.2d 1214, 1222 (Colo.App.1995). Accordingly, we will not reverse a district court's decision to permit such an amendment absent a showing of an abuse of that discretion. Id.

C.R.C.P. 15(b) governs and allows for amendment of the pleadings to conform to the evidence. This rule provides, in pertinent part:

When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues.

A trial court has a duty to consider an issue raised by the evidence even though the matter was not pled and no formal application was made to amend. Padilla v. Ghuman, 183 P.3d 653, 658 (Colo.App.2007). But before the court may consider an unpled issue, it must appear that the issue was deliberately presented at trial. Cady v. Fraser, 122 Colo. 252, 222 P.2d 422, 424 (1950); see Command Commc'ns, Inc. v. Fritz Cos., 36 P.3d 182, 187 (Colo.App.2001). The court may allow such an amendment only where there is no reasonable doubt that the issue raised by the proposed amendment has been intentionally and actually tried by the parties. Buena Vista Bank & Trust Co. v. Lee, 191 Colo. 551, 553, 554 P.2d 1109, 1110 (1976); Real Equity Diversification, Inc. v. Coville, 744 P.2d 756, 759 (Colo.App.1987). It is not sufficient that some evidence has been received germane to the issue sought to be raised. Bill Dreiling Motor Co. v. Shultz, 168 Colo. 59, 65, 450 P.2d 70, 73 (1969); Lyons, 903...

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    ...whether the similar phrase "including, but not limited to" is expansive or restrictive. Compare Maehal Enters., Inc. v. Thunder Mountain Custom Cycles, Inc. , 313 P.3d 584, 590 (Colo. App. 2011) (declining to treat the phrase as restrictive and citing Bryan A. Garner, A Dictionary of Modern......

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