Business Finance Co. v. Red Barn ( 1973 )

No. 12476
IN THE SUPREME COURT OF THE STATE O M N A A
F OTN
1973
BUSINESS FINANCE CO. , I N C . ,
a Washington C o r p o r a t i o n ,
P l a i n t i f f and Respondent,
THE RED BARN, I N C . , e t al.,
Defendants and T h i r d P a r t y - P l a i n t i f f s
and A p p e l l a n t s ,
-vs -
CHARLES A . PALMER, J R . , e t a1 ,
T h i r d P a r t y - D e f e n d a n t s and Respondents.
Appeal f r o m : D i s t r i c t Court of t h e F o u r t h J u d i c i a l D i s t r i c t ,
Honorable Emmet G l o r e , J u d g e p r e s i d i n g .
Counsel of Record:
For Appellants :
L a r s e n and G l i k o , G r e a t F a l l s , Montana
D i r k Larsen a r g u e d , G r e a t F a l l s , Montana
F o r Respondents :
G a r l i n g t o n , Lohn and Robinson, Missoula , Montana
R o b e r t E. S h e r i d a n a r g u e d , M i s s o u l a , Montana
Worden, Thane, Haines and W i l l i a m s , M i s s o u l a , Montana
S h e l t o n Williams a r g u e d , M i s s o u l a , Montana
Submitted: September 1 4 , 1973
Decided : fim'28 1813
Filed: H O V E 6 1873
M r . J u s t i c e Gene B . Daly d e l i v e r e d t h e Opinion of t h e Court.
Defendants Arnold, Leo and A 1 Gaub b r i n g t h i s a p p e a l from
a judgment e n t e r e d i n t h e d i s t r i c t c o u r t , Missoula County, d i s -
missing t h e i r t h i r d p a r t y complaint a g a i n s t t h i r d p a r t y de-
fendants Charles Palmer, Jr. and Ron Wilkerson, and awarding
$2,724.95 t o p l a i n t i f f Business Finance Co., I n c .
The cause was t r i e d t o t h e c o u r t s i t t i n g without a j u r y .
From t h e t r i a l r e c o r d t h e s e f a c t s appear: I n February 1970
Red Barn, I n c . , a Missoula b a r and n i g h t c l u b , l e a s e d two c a s h
r e g i s t e r s , a n adding machine, a f i l i n g c a b i n e t and an o f f i c e
c h a i r of t h e approximate t o t a l v a l u e of $1,633 from Business
Finance Co., I n c . Red Barn, I n c . was then owned by t h e Gaubs,
who signed a guaranty agreement w i t h Business Finance Co., I n c .
covering t h e equipment l e a s e agreement.
I n October 1970 t h e Gaubs e n t e r e d i n t o an agreement w i t h
Palmer under which they agreed t o t r a d e b u s i n e s s e s -- the ~ a u b s '
Red Barn, I n c . f o r Palmer's Big Sky D i s t r i b u t i n g Co. Palmer
began o p e r a t i n g t h e Red Barn t h e same month, b u t t h e t r a n s a c t i o n
was n o t completed u n t i l January 1971. I t appears t h a t Business
Finance Co., Inc. was informed of t h e t r a n s a c t i o n i n October and,
a t t h e ~ r e q u e s tof t h e Gaubs, prepared forms f o r an assignment of
t h e l e a s e agreement t o Palmer. T h i s assignment of l e a s e agreement
was never signed by Palmer, n o r d i d Palmer make any payments
on t h e l e a s e agreement.
The l a s t payment made t o Business Finance Co., I n c . on t h e
l e a s e agreement was i n October 1970. I t appears t h e equipment
remained i n use a t t h e Red Barn u n t i l June 1971, when Palmer l e a s e d
t h e Red Barn t o Wilkerson and t h e equipment was placed i n s t o r a g e
a t t h e Red Barn. The equipment was r e p o s s e s s e d i n February 1972,
some seventeen months a f t e r t h e l a s t payment was made.
Business Finance Co., I n c . informed t h e Gaubs t h e repossessed
equipment would be s o l d . The Gaubs o r i g i n a l l y b i d $600 b u t with-
drew t h e b i d a f t e r s e e i n g t h e equipment. The equipment was s o l d
a t a p r i v a t e s a l e t o Woods Business Ma.chines of Missoula f o r
Business Finance Go,, I n c . sued t h e Gaubs on t h e l e a s e
guaranty c o n t r a c t f o r a d e f i c i e n c y judgment. Gaubs f i l e d a
t h i r d p a r t y complaint a g a i n s t Palmer and Wilkerson, c l a i m i n g
assumption of c o n t r a c t and/or q u a s i - c o n t r a c t . The d i s t r i c t
c o u r t dismissed t h e t h i r d p a r t y complaint a g a i n s t Palmer and
Wilkerson and e n t e r e d judgment i n t h e amount of $ 2 , 7 2 4 . 9 5 , of
which $850 c o n s t i t u t e d a t t o r n e y f e e s , i n f a v o r of Business
Finance Co., Inc. a g a i n s t t h e Gaubs.
Appellants Gaub b r i n g f o u r i s s u e s on a p p e a l :
1. Whether Palmer assumed t h e o b l i g a t i o n t o make t h e l e a s e
payments t o Business Finance Co., I n c . under e i t h e r e x p r e s s o r
implied c o n t r a c t , t h u s r e l i e v i n g t h e Gaubs of t h e i r o b l i g a t i o n
under t h e l e a s e 3
2. Whether Business Finance Co., Inc. f a i l e d i n i t s duty
t o m i t i g a t e damages?
3. Whether Business Finance Co., Inc. f a i l e d t o s e l l t h e
equipment i n a commercially r e a s o n a b l e manner?
4. Whether t h e a t t o r n e y f e e awarded Business Finance Co.,
I n c . was unreasonable?
The t r i a l c o u r t made t h e s e f i n d i n g s of f a c t which concern
the f i r s t issue:
"I. That t h e purchase of t h e RED BARN by Third-
P a r t y Defendants was evidenced by two w r i t t e n agree-
ments, one dated October 12, 1970, and t h e o t h e r dated
January 2 0 , 1971.
"11. That n e i t h e r of s a i d w r i t t e n agreements con-
t a i n s any p r o v i s i o n s whereby CHARLES A. PALMER, J R .
agreed t o assume t h e o b l i g a t i o n s of t h e GAUBS and t h e
RED BARN under t h a t c e r t a i n Lease Agreement between
BUSINESS FINANCE C O . , I N C . and t h e RED BARN, I N C . , and
guaranteed by t h e GAUBS, dated February 1 3 , 1970.
"111. That on o r about October 1 5 , 1970, CHARLES
A . PALMER, J R . r e f u s e d t o e x e c u t e t h e 'Assignment and
Assumption Agreement' brought t o him by A N L A. GAUB, R OD
thereby evidencing h i s i n t e n t n o t t o assume and b e
bound by t h e o b l i g a t i o n s of t h e Lease w i t h BUSINESS
FINANCE C O . , I N C .
"IV. The testimony of A N L A. GAUB when c a l l e d
R OD
a s an a d v e r s e w i t n e s s c l e a r l y e s t a b l i s h e d t h a t CHARLES
A . PALMER, J R . purchased only t h e a s s e t s of t h e RED BARN
and d i d n o t , i n f a c t , purchase t h e s t o c k of t h e RED BARN,
INC II.
These f i n d i n g s of f a c t a r e supported by w r i t t e n agreements
i n evidence and by t h e t r a n s c r i p t of testimony talcen a t t r i a l .
Even assuming, arguendo, t h a t a t some p o i n t i n time i t was
t h e i n t e n t i o n of t h e Gaubs and Palmer t o e f f e c t an assignment,
they were p r o h i b i t e d from doing s o by t h e e x p r e s s terms of t h e
l e a s e c o n t r a c t , w i t h o u t o b t a i n i n g w r i t t e n c o n s e n t of t h e l e s s o r
Business Finance Co., I n c . The l e s s o r informed Gaubs t h a t con-
s e n t would b e given only i f t h e Gaubs remained a s g u a r a n t o r s on
11
the obligation. The r e c o r d i n d i c a t e s t h e Assignment and Assump-
t i o n Agreement" was never signed by Palmer, n o r was i t approved
by Business Finance Co., I n c . and t h a t t h e Gaubs were aware of
these f a c t s .
The r e c o r d a l s o i n d i c a t e s t h e Gaubs were given s e v e r a l
n o t i c e s d u r i n g t h e p e r i o d t h a t t h e y were i n d e f a u l t of payment.
The remedy of q u a s i - c o n t r a c t i s e q u i t a b l e i n n a t u r e and w i l l
not- be a p p l i e d where t h e p a r t y s e e k i n g r e l i e f h a s f a i l e d t o
e x e r c i s e r e a s o n a b l e prudence and d i l i g e n c e under t h e c i r c u m s t a n c e s .
B u i l d e r s Sup. Co. v. C i t y of Helena, 116 Mont. 368, 154 P.2d 270.
A p p e l l a n t s ' second i s s u e - - t h a t Business Finance Co., Inc.
f a i l e d t o m i t i g a t e damages--is based on t h e f a c t i t w a i t e d seven-
t e e n months, d u r i n g which time t h e payments were i n d e f a u l t ,
b e f o r e r c p s s s e s s i n g t h e equipment. Again, we r e f e r t o t h e f r e -
quent n o t i c e s of d e f a u l t provided t h e Gaubs d u r i n g t h i s p e r i o d .
This was a r e a s o n a b l e e f f o r t t o a v o i d l o s s e s under t h e circum-
s t a n c e s and should have served n o t i c e upon t h e Gaubs t o t a k e some
steps to rectify the situation. Business Finance Co., Inc.,
the nondefaulting party, was only required to act reasonably
under the circumstances, so as to not unnecessarily enlarge
damages caused by the default. Hogland v. Klein, 49 Wash.2d
216, 298 P.2d 1099; 25 C.J.S. Damages 5 34.
We also find no merit in appellants' third issue that the
II
disposition made of the repossessed property was not commer-
cially reasonable under the circumstance^'^. Section 87A-9-504,
R.C.M. 1947, requires reasonable notice be given the debtor
and permits either public or private sale, if commercially
reasonable. Here, the record discloses the Gaubs were notified
in advance of the sale and given an opportunity to bid on the
repossessed items. Appellants' contention that $300 was not a
commercially reasonable price is contradicted by the fact they
declined to enter a bid in excess of $300.
Section 878-9-504, R.C.M. 1947, allo1~7sthe secured party to
buy at a private sale only if the collateral is the subject of
standard price quotations. While it appears appellants are
correct in their contention that these type business machines
are not the subject of standard price quotations, nothing appears
in the record to substantiate their contention that Woods Business
Machines was acting as agent for Business Finance Co., Inc. in
making the purchase.
To prove the sale was not commercially reasonable, appellants
rely on the fact that one of the repossessed cash registers
purchased by Woods Business Machines was later placed on sale to
the public for $295. We find this unconvincing because it fails
to take into account expenses of preparation for commercial sale
or the commercial mark-up common to the particular trade. The
price tag represents only an offer to sell and is not conclusive
as to value. 29 Am JurZd, Evidence 5 389.
Appellants' fourth issue questions the reasonableness of the
attorney fee awarded Business Finance Co., Inc. We find that
Under t h e terms of t h e l e a s e , Business Finance Co., I n c . was
e n t i t l e d t o r e c o v e r r e a s o n a b l e a t t o r n e y f e e s i n t h e e v e n t of a
breach of c o n t r a c t . D i s c i p l i n a r y Rule 2-106, Cannons of P r o f e s -
s i o n a l E t h i c s adopted by t h i s Court, e f f e c t i v e May 1, 1973,
l i s t s s e v e r a l f a c t o r s t o be c o n s i d e r e d i n determining t h e reason-
a b l e n e s s of a f e e . W f i n d t h e a t t o r n e y f e e g r a n t e d by t h e t r i a l
e
c o u r t was n o t .unreasonable.
The judgment i s a f f i r m e d .
Chief J u s t i c e
I N THE SUPREME COURT' OF T E S'TA.TE O F MOL\I'TAIJA
H
No. 12476
BUSINESS FINANCE C O . , I N C . ,
A Washington C o r p o r a t i o n ,
P l a i - n t i f f and R e s p o n d e n t ,
VS.
A N L A. GAUB, LEO W. GAUB,
R OD
and A GAUB,
L
Defendants, Third-Party
P l a i n t i f f s and A p p e l l a n t s ,
VS.
CHARLES A . PALMER, J R . , and
RON WILKERSON, d/b/a THE RED BARN,
Third-Party Defendants
and Respondents.
O R D E R
PER CURIAM:
P l a i n t i f f ' s p e t i t i o n f o r assessment of a t t o r n e y s f e e s
h a v i n g been d u l y c o n s i d e r e d and it a p p e a r i n g t o t h e C o u r t t h a t
p u r s u a n t t o t h e l e a s e agreement e x e c u t e d by defenda.nt and
a p p e l l a n t , The Red Barn, I n c . and g u a r a n t e e d by d e f e n d a n t s and
a p p e l l a n t s , Arnold A. Gaub, Leo W . Gaub a.nd A1 Gaub, t h a t s a i d
d e f e n d a n t s and a p p e l l a n t s owe t o p l a i n t i f f and r e s p o n d e n t ,
B u s i n e s s F i n a n c e Co., Inc. i t s r e a s o n a b l e a t t o r n e y s f e e s i n -
c u r r e d i n t h e above m a t t e r ; and it further a p p e a r i n g t o t h e
C o u r t t h a t s u c h a t t o r n e y s f e e s i n c u r r e d p r i o r t o t h e t i m e of
judgment were a s s e s s e d and awa.rded w i t h i n t h e d i s t r i c t c o u r t
judgment and i t i s h e r e b y
ORDERED t h a t p l a i n t i f f and r e s p o n d e n t B u s i n e s s F i n a n c e
Co., Inc. is awarded its reasonable attorneys fees incurred
since the time of judgment in the above matter in the amount
of $500.00 against defendants and appellants, The Red Barn,
Inc., Arnold A. Gaub, Leo W. Gaub and A1 Gaub and the matter
is remanded to the district court to enter judgment for
Business Finance, Inc. for said additional attorneys fees
together with costs on appeal as are provided by law.
DATED this 12th day of December, 1973.