BUSINESS FINANCE CO v RED BARN

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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: Decided : Filed: H O V E 6 1873 September 1 4 , 1973 fim'28 1813 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 defendants 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 -- 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. the ~ a u b s ' 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 ThirdP a r t y Defendants was evidenced by two w r i t t e n agreements, 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 cont 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 the obligation. The r e c o r d i n d i c a t e s t h e 11 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 sevent 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 circums 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. 216, 298 P.2d 1099; 25 C.J.S. Hogland v. Klein, 49 Wash.2d Damages 5 34. We also find no merit in appellants' third issue that the disposition made of the repossessed property was not cially reasonable under the circumstance^'^. II commer- 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. the secured party to Section 878-9-504, R.C.M. 1947, allo1~7s 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 reasona 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.

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