LeBaron & Associates, Inc. v. Rebel Enterprises, Inc.

Citations: 823 P.2d 479; 176 Utah Adv. Rep. 14; 1991 Utah App. LEXIS 192; 1991 WL 278332Docket: 910120-CA

Court: Court of Appeals of Utah; December 18, 1991; Utah; State Appellate Court

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Rebel Enterprises, Inc. (Rebel) appeals a judgment awarded to NEC Information Systems, Inc. (NEC) for breach of contract, stemming from a counterclaim in a bench trial. Rebel contends the trial court erred by not considering its affirmative defense that NEC failed to mitigate its damages. Rebel seeks either a remand for further findings on mitigation or a reduction of damages based on NEC's alleged breach of this duty. The appellate court affirms the trial court's ruling.

The case involves an authorized dealer agreement between NEC and Rebel, established on May 29, 1987, which allowed Rebel to sell NEC's computer products in Utah. Rebel ordered $63,941 worth of computer equipment, which included fifteen Power Mate II computers intended to qualify for advertising funds. Despite instructions to ship the computers to Rebel’s Salt Lake City location, they were mistakenly sent to Rebel's Orem location and subsequently misdelivered to Main Street Computers in Boise, Idaho. Main Street refused to return the computers, leading to a request from Rebel to NEC for assistance in repossessing the equipment, which NEC declined. Some computers were eventually returned, but after Main Street filed for bankruptcy, Rebel was unable to recover the remaining items or any proceeds from them.

NEC agreed to inventory the returned computers and issue a return authorization to credit Rebel's account. However, the computers were stolen before this process was completed. NEC filed a third-party counterclaim against Rebel, alleging breach of contract for failing to return the computers or pay for them. Rebel countered, claiming NEC breached its duty to mitigate damages by not securing its interest in the computers. Following a bench trial, the judge awarded NEC damages for the computers, indicating that he believed NEC lacked a secured interest due to Rebel's non-compliance with the Agreement, and did not address NEC's duty to mitigate damages.

On appeal, Rebel seeks a remand for findings on its mitigation claim. NEC contends that Rebel did not adequately preserve this issue for appeal, as it failed to raise it sufficiently at trial. Rebel argues it presented the mitigation issue through an affirmative defense in its answer, general trial testimony regarding NEC's inaction, and references in post-trial motions. NEC asserts that Rebel did not specifically cite the legal issue of mitigation or provide supporting legal analysis or evidence at trial, arguing that Rebel has not met the burden to demonstrate the relevance of NEC's damages in light of its alleged failure to mitigate. The appellate court emphasizes that issues not timely raised at trial are waived and cannot be considered on appeal. The mere mention of an issue without supporting evidence or legal authority is insufficient to preserve it for appeal, particularly if it relies on disputed factual questions not addressed at trial.

NEC's argument primarily hinges on the precedent set in the case of James. In that case, the court evaluated whether James adequately raised the claim of equitable mortgage during trial to preserve it for appeal. James only made vague references to equitable mortgage in his complaint and brief mentions during the trial, failing to object to the trial court's inaction on the issue. The court concluded that these efforts were insufficient to bring the issue before the appellate court, as James did not provide any legal authority or relevant facts concerning equitable mortgages during trial. 

Similarly, Rebel's failure to articulate the common law duty to mitigate damages during trial mirrored James's situation. Although Rebel received a judgment on a separate contractual claim against NEC and asserted various defenses, it did not elevate the mitigation issue to a level that would allow the trial judge to consider it. Rebel's vague references in post-trial motions regarding NEC's cooperation and security interest were also deemed inadequate to raise the mitigation issue, as Utah courts require that issues not presented during trial cannot be introduced post-trial. 

Even if mitigation had been raised adequately, Rebel did not provide evidence to demonstrate how NEC's damages could have been mitigated. The burden of proof lies with the defendant to show that the plaintiff failed to mitigate damages and how those damages should be adjusted, as established in John Call Engineering, Inc. v. Manti City Corp. Thus, Rebel's failure to substantiate its claims regarding mitigation rendered the issue unpreserved for appeal.

The court ruled that the jury erred in deciding on mitigation due to insufficient evidence presented by Rebel to justify a reduction in NEC's damages. The doctrine of mitigation mandates that the defendant provide specific evidence showing why the claimed damages should be reduced based on successful or reasonable mitigation efforts. Rebel did not present any evidence to allow the court to accurately calculate NEC's potential damages reduction from recovering computers, relying instead on generalized claims. Consequently, even if mitigation had been properly raised, Rebel's lack of specific evidence failed to meet the necessary burden. The judgment was affirmed, with concurring opinions from Judges Jackson and Orme.

Additionally, the court noted that the Agreement between the parties was not a secured transaction as the relevant provisions were never implemented. Rebel's defenses included a claim that NEC failed to mitigate its damages, and requests for amended findings suggested that a security agreement existed and that NEC bore responsibility for taking steps to perfect any security interest. Rebel also argued that NEC failed to act to recover collateral lost due to Main Street Computers' bankruptcy, asserting that NEC should be accountable for the loss for not acting in a commercially reasonable manner.

Analysis of evidentiary issues for appeal differs from general analysis, governed by specific rules of evidence, as demonstrated in State v. Johnson, 821 P.2d 1150 (Utah 1991), where evidentiary objections may be waived under Utah Rule of Evid. 103(a)(1). In Turtle Management, Inc. v. Haggis Management, Inc., 645 P.2d 667 (Utah 1982), the Utah Supreme Court declined to address a public policy challenge to a non-compete covenant because the issue was not adequately presented in the lower court, despite being raised in the defendant's answer. The absence of argument or evidence in the trial court prevented the Supreme Court from making necessary factual findings or legal conclusions, rendering the issue unreviewable on appeal. Additionally, the trial counsel representing Rebel differs from the one now presenting the mitigation claim on appeal. The resolution of this appeal issue negates the need to address Rebel's other claims, including whether NEC failed to mitigate damages by not repossessing computers from Main Street Computers.