Court: Idaho Court of Appeals; July 5, 1985; Idaho; State Appellate Court
The case involves an appeal by Massey-Ferguson, Inc. from a judgment favoring MH. H Implement, Inc. regarding damages under Idaho Code § 28-23-102, due to the manufacturer's failure to repurchase parts after the termination of their dealership agreement. The dealer sued for damages, claiming the manufacturer owed for parts returned, resulting in a judgment of $150,830.72. The manufacturer contested the district court's adoption of the dealer's attorney's findings of fact and conclusions of law, and argued the inclusion of interest charges in the damage award and the granting of attorney fees under Idaho Code § 12-120(2).
The court rejected the challenge to the verbatim adoption of findings, citing that the sufficiency of the evidence supporting the findings was not contested. However, it reversed the inclusion of interest in the damage award, which the dealer incurred due to a bank loan taken to resolve its financial issues. This loan was secured against the dealer's right to payment for the returned parts, and the resulting dispute delayed repayment, incurring additional interest. The court affirmed the award of attorney fees, resulting in a decision that affirmed in part, reversed in part, and remanded the case.
The dealer asserts that additional interest incurred due to the manufacturer's breach of payment obligations for parts qualifies as "incidental" damages under I.C. 28-2-710 of the Idaho/Uniform Commercial Code (UCC). The district court implicitly supported this view. The manufacturer disputes this classification, claiming that the repurchase of parts, governed by I.C. 28-23-102, does not constitute a "sale" under the UCC. However, the definition of a "sale" in I.C. 28-2-106(1) encompasses the repurchase, regardless of its mandate by statute.
The inquiry then shifts to whether the interest expense constitutes "incidental" damages. I.C. 28-2-710 defines incidental damages as commercially reasonable charges arising from a buyer’s breach, including those related to the care and custody of goods. Previous cases indicate that interest expenses linked to a seller's acquisition of goods may be compensable; however, they are not applicable in this instance, as the dealer's interest charges stemmed from general business expenses rather than costs directly associated with acquiring parts for resale. Consequently, the dealer's inability to meet a debt due to the buyer's failure to pay does not render the buyer liable for those interest charges.
Alternatively, while interest charges could be viewed as "consequential" damages, recovery requires proof that such losses were direct results of the breach and foreseeable at the contract's inception. The district court did not determine whether the interest charges were within the parties' reasonable contemplation, and without such findings, appellate review is limited. The record lacks evidence supporting the notion that the interest charges were foreseeable to both parties when forming the dealership agreement. Although the manufacturer was aware of the dealer's borrowing and accruing interest, this does not substantiate a claim for recoverable damages. Thus, the judgment may be reversed due to the dealer's failure to prove its claim.
Evidence regarding the dealership contract does not clarify the parties’ intentions at execution. Interest charges are deemed non-recoverable as "consequential" damages, necessitating a modification of the district court's damage award. The manufacturer contests the attorney fee award under I.C. 12-120(2), but the dealer argues that any objection was waived. Idaho Rule of Civil Procedure 54(e)(6) mandates objections to attorney fees within ten days, yet the manufacturer’s failure to comply is excused due to a pre-trial stipulation to address attorney fees at trial. The manufacturer objected at trial, preserving the issue for appeal, where it contests both the statute’s applicability and the awarded amount. The statute relates to contracts for the sale of goods and is intrinsically linked to the contractual relationship between the dealer and the manufacturer. The court determines that the dealer's lawsuit for the return of parts post-termination is indeed an action to recover on a contract under I.C. 12-120(2), entitling the dealer to attorney fees. The awarded fees of $58,747.00 require reevaluation due to the adjusted damage award, with the district court instructed to consider criteria in I.R.C.P. 54(e)(3). The judgment is affirmed regarding verbatim findings but reversed on interest expense damages, remanding for a modified judgment. The entitlement to attorney fees is affirmed, but the amount must be reconsidered. No costs or attorney fees are awarded to either party as neither is the prevailing party on appeal.
