Arizona Precious Metals, Inc. v. Accept Erste Rohstoff Beteiligungs Kg , 407 F. App'x 216 ( 2011 )

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT JAN 03 2011
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
ARIZONA PRECIOUS METALS, INC., a No. 08-17203
Nevada Corporation,
D.C. No. 2:07-CV-00707-
Plaintiff - Appellant, MHB(ROS)
v.
MEMORANDUM*
ACCEPT ERSTE ROHSTOFF
BETEILIGUNGS KG, a German
Partnership; KARL-HEINZ RAUBALL;
BERNHARD PUTTKE,
Defendants - Appellees.
Appeal from the United States District Court
for the District of Arizona
Roslyn O. Silver, District Judge, Presiding
Submitted December 6, 2010**
San Francisco, California
Before: HUG, D.W. NELSON and McKEOWN, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Arizona Precious Metals, Inc. (“APM”) appeals the district court’s decision
that it is not entitled to damages for lost profits in this breach of contract action.
We have jurisdiction pursuant to 28 U.S.C. § 1291, and we review the state law
determinations of the district courts de novo. In re McLinn, 739 F.2d 1395, 1398
(9th Cir. 1984) (en banc).
APM argues that the district court failed to distinguish between the fact of
lost profits and the amount of lost profits, and it therefore applied the incorrect
legal standard of proof for the amount of lost profits under Arizona law. Because
this is a default case, APM argues that the only question the district court needed to
answer was how much profit it had, in fact, lost. According to APM’s logic, it is
entitled to any and all types of damages.
This argument is entirely without merit. The relevant inquiry has nothing to
do with the standard of proof that the district court applied. As APM’s brief
acknowledges, the “traditional measure of damages for breach of a contract to loan
money is the additional interest required for a replacement loan.” United
California Bank v. Prudential Ins. Co. of America, 681 P.2d 390, 447 (Ariz. Ct.
App. 1983). As a limited exception to this general rule, however, a party may
recover additional compensatory damages when
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“the specific purpose for which the loan was made was communicated
to the lender at the time the contract was entered into, and where it
further appears that the borrower has suffered special damages by the
breach, which are pleaded and proved, the damages recoverable are such
as may fairly and reasonably be supposed to have been in the
contemplation of the parties at the time of making the contract, as the
probable result of a breach of it.”
Higgins v. Arizona Sav. & Loan Ass’n, 365 P.2d 476, 482 (Ariz. 1961) (quoting
Shurtleff v. Occidental Bldg. & Loan Ass’n, 181 N.W. 374, 375 (Neb. 1921)). In
this sense, Arizona law comports with general principles of contract which dictate
that “[d]amages are not recoverable for loss that the party in breach did not have
reason to foresee as a probable result of the breach when the contract was made.”
RESTATEMENT (SECOND) OF CONTRACTS § 351 (1981). In the lending context, it is
generally assumed that the “borrower will be []able to make substitute
arrangements in the event of breach,” and therefore the lender’s liability is “limited
to the relatively small additional amount that it would ordinarily cost to get a
similar loan from another lender.” Id. cmt. e.
Because APM did not offer credible evidence that the defendants had reason
to foresee when the contract was formed that APM would be unable to obtain
alternative financing as a probable result of their breach, the district court properly
held that APM was not entitled to damages for lost profits. The fact that the
district court’s opinion cited to a Texas appellate case as an example of the
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application of these general principles does not alter this result. The reasoning in
Basic Capital Management v. Dynex Commercial, Inc., 254 S.W.3d 508 (Tex.
App. 2008), in no way contradicts existing Arizona precedent or the district court’s
original order. Moreover, the district court did not rely on that case in making its
decision.
APM’s other claims are also without merit.
AFFIRMED.
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