Frеderick A. SIMEONE, Appellee/Cross Appellant, v. FIRST BANK NATIONAL ASSOCIATION, formerly known as First Natl. Bank of St. Paul, Appellant/Cross Appellee, Antje Angela Quante, Executrix of the Estate of Herman Quante; Leland Gohlike, Defendants, Peter Garretson, Appellant.
Nos. 94-3666, 94-3787
United States Court of Appeals, Eighth Circuit
Submitted June 16, 1995. Decided Jan. 3, 1996.
73 F.3d 184
ROSS, Circuit Judge.
MTD‘s reliance on Rients v. International Harvester Co., 346 N.W.2d 359, 362 (Minn.Ct.App.1984), review denied (Minn. Oct. 30, 1984), is not persuasive. The plaintiff in Rients was involved in a tractor accident and alleged that the front axle attachment was defectively designed. Id. Summary judgment in favor of the defendant was affirmed since the plaintiff could not prove a causal link between the design and the accident; there were many other possible causes. Although one alternate cause was that the attachment had been significantly altered by the plaintiff, it was not the only possibility. The tractor‘s brakes were worn, the steering gear was broken, and other parts were not functional or were bent. Id. In contrast, there is no dispute here that the frayed cable caused the accident, and there are only two theories about how the cable became frayed. Based on the evidence in the record, it would not be “sheer speculation” for a jury in this case to find that the design, rather than the alteration, caused the fraying and the accident. See id.
MTD also argues that the design defect claim cannot proceed under a strict liability theory because the plaintiffs cannot prove that the product reached them “without substantial change in the condition in which it was originally sold by the manufacturer.” Rients v. Int‘l Harvester Co., 346 N.W.2d at 362 (citing McCormack v. Hankscraft Co., 278 Minn. 322, 154 N.W.2d 488, 499 (1967)). It asserts that the Moes cannot meet this burden because the mower was substantially altered when the handle was lengthened, but that repair took place after the product reached the Moes. MTD does not suggest that the mower was altered in аny way before it reached them, but cites Rients in support. The plaintiff there failed to prove his strict liability theory, but he had bought the front axle attachment as a used part at least twenty years after it was manufactured. Here, Thomas Moe purchased the mower new.
For the reasons stated, we affirm the dismissal of the preempted claims, but reverse the dismissal of the design defect claim and remand for further proceedings consistent with this opinion.
Brian Pаlmer, Minneapolis, MN, argued (Peter W. Carter, on the brief), for appellant.
James Beasley, Philadelphia, PA, argued (Paul A. Lauricella, on the brief), for appellee.
Before BEAM, ROSS and MURPHY, Circuit Judges.
ROSS, Circuit Judge.
Appellant, Frederick Simeone, sought damages against appellee First Bank National Association (First Bank) and others for breach of contract and fraud stemming from an agreement by First Bank to sell Simeone 1920-1930 era vintage Mercedes-Benz automobiles and parts which had been repos-
I.
The vehicles in question included a one-of-a-kind 1929 Mercedes Benz SS Roadster, two 1930 era Mercedes Benz Roadsters (of which a total of 114 were ever manufactured), and a 1928 Mercedes Benz SSK (one of only 39 ever manufactured), which had been owned by the son of Sir Arthur Conan Doyle, the creator of Sherlock Holmes. Additionally, there were thousands of loose parts, including shock absorbers, fenders, seat cushions and wheels, which were no longer manufactured and which were themselves extraordinarily rare. One of the automobiles and some of the parts repossessed from Gohlike were allegedly owned by the Estate of Herman Quante (Quante Estate). While First Bank never acknowledged the Estate‘s claim of ownership, it nonetheless agreed to pay the Estate $50,000 for its interest, if any.
On October 26, 1985, after receiving inquiries from several other potential purchasers, First Bank entered into an agreement to sell the repossessed automobiles and parts for $400,000 to Simeone, a self-described collector of vintage automobiles. In the same agreement, Simeone agreed to purchase the Quante Estate car and parts for $50,000. Simeone paid 10% of the contract price as a downpayment.
On November 4, 1985, the date set for the conveyance of title to Simeone, Leland Gohlike, the debtor, obtained a temporary restraining order (TRO) to prevent the sale of the collateral. Thereafter, First Bank refused Simeone‘s proffered tender of the balance of the purchase price. Prior to obtaining the TRO, Gohlike instituted a civil action against First Bank and its officers claiming a violation of due process and seeking $13,000,000 in damages.
Sometime on or bеfore November 4, 1985, First Bank entered into negotiations with Gohlike and James Torseth, Gohlike‘s neighbor, to sell the automobiles and parts to Torseth in exchange for Gohlike‘s dismissal of his suit against the bank and a purchase
First Bank returned Simeone‘s downpayment with interest and Simeone filed suit alleging breach of contract and fraud. The district court granted summary judgment in favor of First Bank, finding that because a condition precedent was not satisfied, the sellers were not obligated by the contract. The Eighth Circuit subsequently vacated the summary judgment ruling, concluding that First Bank and the Estate had breached the contract by failing to convey the property to Simeone. Simeone v. First Bank Nat‘l Ass‘n, 971 F.2d 103, 106-07 (8th Cir.1992). This court remanded the case to the district court for rulings on the other claims raisеd by Simeone, as well as an assessment of damages. Id. at 108.
Prior to trial on remand, Simeone agreed to dismiss the Quante Estate from the case with prejudice. The trial was conducted from February 28, 1994, through March 8, 1994. At the close of the breach of contract phase of the trial, the district court ruled as a matter of law that the Bank‘s conduct did not constitute fraud. However, the court permitted the fraud claim to be tried to the jury to forestall the necessity for a later trial in the event the fraud dismissal was reversed on appeal. The jury awarded Simeone $2,405,000 for breach of contract, including $585,000 in compensatory damages, $225,000 in incidental damages, and $1,595,000 in consequential damages, plus prejudgment interest.1
The jury also awarded $1.00 on the court-dismissed fraud claim. The district court denied First Bank‘s motion for a new trial or, in the alternative, amendment of the judgment or remittitur pursuant to
II.
In its challenge to the compensatory damages award, First Bank argues the district court erroneously allowed Simeone‘s experts to rely on the collector automobile market as the relevant market in appraising the fair market value of the vehicles and parts at the time of the breach. Instead, First Bank contends the relevant market was the market of “repossessed goods in bank foreclosure sales.”
[T]he difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages....
“Market price” “is the price for goods of the same kind and in the same branch of trade.”
Where the unavailability of a market price is caused by a scarcity of goods of the type involved ... [s]uch scarcity conditions indicate that the price has risen and under the section providing for liberal administration of remedies, opinion evidence as to the value of the gоods would be admissible in the absence of a market price and a liberal construction of allowable consequential damages should also result.
The district court did not abuse its discretion in permitting the valuation of the automobiles and parts based on a collector‘s market. The evidence clearly supports the jury‘s determination and the award of compensatory damages is affirmed.
III.
First Bank next raises several challenges to the consequential damages assessed against it. The jury awarded $1,595,000 in consequential damages, which was derived from expert testimony as to what the automobiles and parts were worth in late 1987, two years after the breach of contract, minus the market price of the property at the time of the breach. First Bank now argues the evidence is insufficient to establish the foreseeability requirement to support the $1,595,000 consequential damages award.
Under Minnesota law, recoverable consequential damages include:
[A]ny loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise.
According to First Bank, Simeone repeatedly statеd prior to contract formation that he was not in the business of selling automobiles and parts and therefore First Bank neither knew nor had reason to know that Simeone intended to trade or resell the automobiles and parts at any profit, let alone a profit of $1,595,000. First Bank contends the award of consequential damages erroneously treats the agreement as one for the purchase of goods for resale when that was clearly nоt the case.
The question of whether the buyer‘s consequential damages were foreseeable by the seller is one of fact to be determined by the trier of fact. Franklin Mfg. Co. v. Union Pacific R.R., 311 Minn. 296, 248 N.W.2d 324, 326 (1976). First Bank asks that this court conclude as a matter of law that the consequential damages were not foreseeable. We decline to so hold. Mr. Garretson, commercial banking officer of First Bank and acting on behalf of the Bank during the relevant negotiations with Simeone, testified that he was aware that collectors may trade vehicles in order to enhance their collection. Further, Simeone testified he told First Bank‘s broker that he intended to use the cars and parts for trading or possible resale to obtain additional cars. Finally, Simeone contracted to purchase hundreds of automotive parts that the jury would reasonably presume would have to be either resold or assembled into something of increаsed value. The jury‘s determination that it was foreseeable that Simeone would seek to further his collection by engaging in sale or trade was not clearly erroneous.
Also with respect to consequential damages, First Bank argues the court erred in failing to adequately apply the doctrine of cover or mitigation of damages. First Bank claims that even if sufficient evidence existed to support an award of consequential damages undеr
“The test of proper cover is whether at the time and place the buyer acted in good faith and in a reasonable manner, and it is immaterial that hindsight may later prove that the method of cover used was not the cheapest or most effective.”
SMB, Inc. ultimately sold the automobiles and parts for $1,114,960. First Bank now contends that Simeone‘s consequential damages should be limited because he could have mitigated his damages by purchasing the vehicles and parts from SMB, Inc. at the increased price. The jury, however, rejected this argument. Although the evidence at trial showed that the automobiles and parts were for sale to the general public as soon as SMB, Inc. purchasеd them from First Bank, it is unreasonable to require that Simeone expend over $1,000,000, almost $700,000 more than the contract obligated him to pay, to purchase the cars and parts in order to effect cover and mitigate his loss. Indeed, First Bank made no showing at trial that Simeone even had such resources available to him or that it would be reasonable to require such cover. It is noteworthy that Simeone did, in fact, undertake efforts to effect cover when he ultimately purchased the 1929 SS Roadster from SMB, Inc. The purchase price of the Roadster exceeded that which Simeone had initially contracted to pay for all of the vehicles and parts. The suggestion that Simeone should have purchased the entire lot of automobiles and parts as a matter of law is not supported by the evidence.
Finally, First Bank contends the consequential damages award is too speculative as a matter of law to be the basis for recovery. Under Minnesota law, “[t]he controlling principle governing actions for damages is that damages which are speculative, remote, or conjectural are not recoverable.” Leoni v. Bemis Co., Inc., 255 N.W.2d 824, 826 (Minn.1977) (quotation omitted). However, a plaintiff‘s losses need not be proven with mathematical precision. “Once the fact of loss has been shown, the difficulty of proving its amount will not preclude recovery sо long as there is proof of a reasonable basis upon which to approximate the amount.” Id.
Here, two experts in antique and classic cars testified as to the value of the vehicles and parts at the time of the breach as well as their appreciated value two years after the breach. This testimony was based on the expert‘s knowledge of the available market, the rate at which such unique cars appreciаte in value because of their scarcity and desirability among collectors, as well as the prices commanded by comparable vehicles. This testimony provides a reasonable basis upon which to support the jury‘s determination of consequential damages.
IV.
First Bank next claims the district court erred in refusing to grant its motion for a new trial or in the alternative a remittitur because the evidence does not support the jury‘s award of incidеntal damages. Because we are reviewing state court claims, the appropriate standard for review is that applied by Minnesota appellate courts. Piekarski v. Home Owners Savings Bank, 956 F.2d 1484, 1488 (8th Cir.1992) cert. denied, 506 U.S. 872, 113 S.Ct. 206, 121 L.Ed.2d 147 (1992). Thus, this court should uphold the trial court‘s denial of First Bank‘s new trial motion or motion for remittitur unless there has been a clear abuse of discretion. Johnson v. Washington County, 518 N.W.2d 594, 601 (Minn.1994).
Under Minnesota law, incidental damages resulting from a seller‘s breach are defined as:
[E]xpenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.
Here, the jury awarded Simeone $225,000 in incidental damages. Simeone speculates that this amount represents his cost of cover in purchasing the 1929 SS Roadster ($470,000 purchаse price minus $250,000 contract price, plus $5,000 for dismissal of SMB, Inc. from a civil action). Appellee‘s Brief at 31. However, the difference between the cost of cover and the contract price is not properly characterized as incidental damages. Rather, incidental damages are, among other things, the “charges,” “expenses” and “commissions” incurred in effecting cover.
V.
First Bank argues it should not be held accountable for the failure to convey the vehicle that had been claimed by the Quante Estate, the Conan-Doyle car. We do not agree. The contract, drafted by First Bank, specifically provides that “this Agreement shall constitute a binding contract for the disposition of the Conveyed Assets enforceable as between the Bank and the Purchaser upon execution of this Agreement by the Bank and the Purchaser....” (Emphasis added). Under the express terms of the contract, the phrase “Conveyed Assets” includes the assets claimed by the Quante Estate. The contract, therefore, provides that the agreed upon disposition of the Conan-Doyle car is enforceable as between the Bank and Simeone. Thus, under the express terms of the contract, Simeone can enforce his claim with respect to all the vehicles against First Bank.
Moreover, the contract provides that the automobiles and parts, including the Conan-Doyle car, would be conveyed to Simeone “unless ... the Bank determines that it is precluded from performing.” Under the express terms of the contract, the Estate could play no role in the decision to refrain from conveying the automobiles to Simeone.
It was First Bank that made the decision not to accept Simeone‘s wire transfer of the balance due under the contract on November 4, 1985. Further, it was First Bank that entered into negotiations with Gohlike and Torseth and ultimately agreed to sell the automobiles and parts to Torseth rather than Simeone in exchange for Gohlike‘s agreement to dismiss his suit against First Bank.
The district court properly held First Bank accountable for the breach of contract with respect to the Conan-Doyle car.
VI.
A trial court‘s authority to award prejudgment interest is governed by statute. See
We conclude that Simeone is entitled to prejudgment interest on the revised damages award.
VII.
Based on the foregoing, the judgment of the district court is affirmed in part and reversed in part and remanded for further proceedings consistent with the views expressed in this opinion.
ROSS
Circuit Judge