Watkins v. Ford

• Decision Date: 06 August 2013
• Docket Number: No. 20100802.,20100802.
• Citation: Watkins v. Ford, 304 P.3d 841, 735 Utah Adv. Rep. 6, 740 Utah Adv. Rep. 54 (Utah 2013)
• Parties: Tom WATKINS, Plaintiff and Respondent, v. Henry Day FORD, Defendant and Petitioner.
• Court: Utah Supreme Court

304 P.3d 841

735 Utah Adv. Rep. 6

740 Utah Adv. Rep. 54

Tom WATKINS, Plaintiff and Respondent,

v.Henry Day FORD, Defendant and Petitioner.

No. 20100802.

Supreme Court of Utah.

May 31, 2013.

As Amended Aug. 6, 2013.

P. Bryan Fishburn, Salt Lake City, for respondent.

Robert W. Hughes, Salt Lake City, for petitioner.

Justice PARRISH, opinion of the Court:

INTRODUCTION

¶ 1 On certiorari, we are asked to decide whether Henry Day Ford (Henry Day) and Tom Watkins abandoned Motor Vehicle Sales Contracts (Vehicle Contracts or Contracts) for the sale of two Ford GT40s; whether the Contracts contained a latent ambiguity regarding the identity of the vehicles to be sold; and, in the event that Henry Day breached the Contracts, whether Mr. Watkins adequately mitigated his damages. The district court granted summary judgment in favor of Henry Day, concluding that the Contracts were not even applicable because they referred to different vehicles than the ones in dispute and, alternatively, that both parties abandoned the Contracts when they acted inconsistently with their continued existence. It also held that Mr. Watkins had failed to mitigate his damages.

¶ 2 The court of appeals reversed. While it held that there was a latent ambiguity in the Contracts regarding the identity of the vehicles to be sold, it concluded that the ambiguity was of no moment because both parties intended that the Contracts cover the vehicle that is now known as the Ford GT. It reversed the district court on the abandonment issue, holding as a matter of law that Mr. Watkins did not intend to abandon the Vehicle Contracts. Finally, because the court of appeals determined that the district court had made insufficient factual findings to support the conclusion that Mr. Watkins had failed to mitigate his damages, it remanded the case for a hearing on damages. We accepted Henry Day's Petition for Writ of Certiorari.

¶ 3 We first hold that although the Vehicle Contracts contain a latent ambiguity, the latent ambiguity does not excuse either party's performance under the Contracts because the parties' intent aligned with respect to the vehicles to be bought and sold. We next hold that Henry Day abandoned the Vehicle Contracts by refunding Mr. Watkins's deposit and by conveying its belief that the dealership would not get an allotment of the vehicles. However, because Henry Day's representations regarding the possibility of receiving the vehicles were ambiguous, the issue of whether Mr. Watkins abandoned his rights under the Vehicle Contracts requires a remand for additional factual findings. If the district court concludes that Mr. Watkins did not abandon the Contracts, it must then consider whether Mr. Watkins adequately mitigated his damages.

¶ 4 We accordingly affirm the court of appeals' determination that the latent ambiguity in the Vehicle Contracts did not absolve the parties of their respective obligations and remand for a determination as to whether Mr. Watkins abandoned his rights under the Contracts and, if necessary, for a determination as to whether Mr. Watkins mitigated his damages.

BACKGROUND

¶ 5 Ford Motor Company (Ford) introduced the GT40 concept car at the 2002 North American Auto Show. Watkins v. Henry Day Ford, 2010 UT App 243, ¶ 2, 239 P.3d 526. Because the car received a positive public reception at the auto show, Ford announced it would produce a limited number of street-legal GT40s. Id. The limited number of GT40s were to be allocated to Ford dealers through a lottery or by receipt of either the Ford President's Award or Ford National Car and Truck Share Award (Share of the Nation Award) (collectively, Allocation Awards).

¶ 6 Mr. Watkins, the owner of a Volkswagen dealership, learned of Ford's production plans for the GT40 and decided that he wanted to preorder two GT40s before Ford completed production of the vehicles and delivered them to dealerships. Mr. Watkins contacted numerous Ford dealerships in Utah, including Henry Day, to inquire whether he could preorder GT40s.

¶ 7 On March 4, 2002, Mr. Watkins met with Steve Kersey, fleet manager at Henry Day. At the time of the meeting, Henry Day did not possess any GT40s and did not know whether Ford would allocate any GT40s to the dealership. Nevertheless, Mr. Watkins and Mr. Kersey executed two Vehicle Contracts for the “1st GT40” and “2nd GT40” ordered by Henry Day (Motor Vehicle Sales Contracts 1 and 2). Mr. Watkins secured each contract with a $1,000 deposit. Both parties understood that each Vehicle Contract was subject to the condition precedent that Ford actually allocate GT40s to Henry Day. Mr. Watkins understood that one avenue for Henry Day to receive allocation of GT40s was if the dealership received the President's Award from Ford.

¶ 8 Initially, the parties executed the Contracts without specifying a price for the vehicles. The following day, however, Mr. Watkins contacted Mr. Kersey, and the parties agreed to modify the contracts to specify a purchase price equivalent to Manufacturer's Suggested Retail Price (MSRP).

¶ 9 In December 2002, Henry Day's general manager called the dealership's Ford representative to inquire whether Henry Day would be allocated any GT40s via lottery. The Ford representative informed the general manager that Henry Day, as a smaller dealership, would not be awarded any GT40s unless it won an Allocation Award—either the President's Award or the Share of the Nation Award. At the time of the call, Henry Day had operated for approximately forty years and had never won an Allocation Award.

¶ 10 Based on the general manager's conversation with Ford, Henry Day sent Mr. Watkins a December 31, 2002 letter that stated, “[w]e regret to inform you that our allocation is not going to allow us to receive this vehicle.” The December 31st letter included a $2,000 check refunding Mr. Watkins's deposit for each Vehicle Contract. Mr. Watkins received the check and deposited it on February 19, 2003, without any objection or other communication to Henry Day. Mr. Watkins then reinitiated his search for a Ford dealership that would permit him to preorder GT40s, contacting dealers throughout the western and midwestern United States.

¶ 11 At some point after Henry Day returned Mr. Watkins's deposit, Ford renamed the production version of the “GT40” concept car the “GT.” Id. ¶ 5.

¶ 12 Over one year later, in February 2004, Henry Day learned from Ford that it had won the Share of the Nation Award based on its 2003 vehicle sales. As part of the award, Ford allocated one GT to Henry Day. Then, in April 2004, Ford notified Henry Day that it had won the President's Award based on its 2003 vehicle sales and allocated a second GT to Henry Day. And in February 2005, Henry Day learned that it had won a second President's Award based on its 2004 vehicle sales and that it would receive a third GT.

¶ 13 On June 8, 2005, Mr. Watkins's business manager learned that Henry Day had been allocated GTs, and he informed Mr. Watkins. Despite having had no contact with Henry Day since receipt of the dealership's December 31st letter, Mr. Watkins went to the dealership and demanded that Henry Day sell him two GTs at the MSRP of $156,945. Henry Day instead offered to sell Mr. Watkins one GT for $250,000. Mr. Watkins refused the offer and filed a complaint alleging breach of contract and unjust enrichment.

¶ 14 The district court conducted a bench trial, entered findings of fact and conclusions of law, and ruled in favor of Henry Day. It held that the Vehicle Contracts were “clear and unambiguous,” finding that the Vehicle Contracts specified that Henry Day would sell “GT40s” to Mr. Watkins, not the “GTs” that Ford ultimately delivered to Henry Day. As a result, the district court held that the Vehicle Contracts did not require Henry Day to sell GTs to Mr. Watkins and that Henry Day did not breach the contracts. Alternatively, the district court held that both parties abandoned the Vehicle Contracts by engaging in conduct inconsistent with their continued existence. Specifically, the district court found that Henry Day acted inconsistently with the Vehicle Contracts by refundingMr. Watkins's deposit, and Mr. Watkins acted inconsistently with the contracts by accepting and depositing the refund check without objection. While the district court did not enter a clear conclusion regarding waiver, it implied that Mr. Watkins's conduct also resulted in a waiver of his rights under the Vehicle Contracts. Finally, the district court determined that “[Mr. Watkins's] refusal to purchase the Ford GT constitute[d] a failure ... to mitigate his damages.” Based on these findings and the terms of the Vehicle Contracts, the district court ruled in favor of Henry Day and awarded the dealership its attorney fees and costs.

¶ 15 Mr. Watkins appealed and the Utah Court of Appeals reversed. Id. ¶ 22. The court of appeals held that the Vehicle Contracts contained a latent ambiguity regarding the identity of the vehicles to be sold, but that the parties intended to sell and buy the production model of the GT40—which Ford designated the “GT.” Id. It therefore concluded that Henry Day breached the Contracts by refusing to sell two GTs to Mr. Watkins for MSRP. Id. ¶ 16. Next, the court of appeals treated waiver and abandonment as identical legal theories, reasoning that both involve the “intentional relinquishment of a known right.” Id. ¶ 17. It held that Henry Day's December 31st letter was an unequivocal representation that the condition precedent to the Vehicle Contracts had failed, i.e., that the dealership would not receive any of the contracted-for vehicles. Id. ¶ 18. It then concluded that, at the time of the dealership's December 31st letter, Mr. Watkins did not know he still had rights under the Vehicle Contracts and therefore could not have relinquished a “known” right. Id. ¶¶ 18–19. The court of appeals then determined that the district court's findings of fact were insufficient to...