801 F.2d 451 | D.C. Cir. | 1986
Opinion for the Court filed by Circuit Judge SCALIA.
Gatoil (U.S.A.), Inc. and W.A. Benson, appellants in these consolidated cases, appeal from a decision by the United States District Court for the District of Columbia denying their motions for summary judgment and granting the summary judgment motion of appellee Washington Metropolitan Area Transit Authority (“WMATA”). The District Court granted summary judgment to WMATA on the ground that Benson and Associates (“B & A”), a joint venture formed by appellants, broke its contract to supply WMATA with diesel fuel by failing to make a good-faith effort to secure a performance bond that was a condition precedent to the contract. The principal issues presented are whether the District Court measured B & A’s duty of good faith by the proper standard; whether WMATA is entitled to summary judgment on that issue when the proper standard is applied; and whether the District Court erroneously denied Benson’s motion for summary judgment.
I
Briefly summarized, the undisputed facts relevant to this appeal are as follows.
It has come to the Authority’s attention that Special Condition No. 5 on the above referenced contract requiring a performance bond prior to June 30, 1983, is hereby revised, [sic] In the interest of satisfactorily proceeding with this contract, the date of the Bond submittal is extended to July 15, 1983. Delivery of fuel will not commence until the performance bond is received by the Authority.
Defendant’s Request for Admission, Exh. C. Four days later, WMATA sent another letter, which purported to be a limited contractual authorization of delivery between July 1 and the earlier of July 15 and the date upon which WMATA received an acceptable bond. The letter concluded:
No performance bond had been provided by June 30, and on that day B & A indicated to WMATA that it was trying to find another supplier of fuel and hoped to do so by July 5. On July 1, WMATA sent a final letter to B & A, which read in relevant part as follows:
Please refer to [the contract] and my letters dated June 24, 1983 and June 28, 1983. In reviewing those documents, we noted an element of confusion generated by the inadvertent inclusion in [the contract] of [paragraph five, which established the performance bond as a condition precedent].
My letter dated June 24, 1983, extended the date for bond submittal to July 15, 1983. In my June 28,1983 letter I authorized delivery to commence on July 1, 1983. Please be advised that [paragraph five] contains an error. Therefore, paragraph 5 is revised to read as follows:
5. This contract shall become, and is, effective as of June 9, 1983. Performance shall commence on July 1, 1983 and shall continue through June 30, 1984. Benson and Associates shall furnish a performance bond in the amount of 15% of the entire bid ... on or before July 15, 1983, in default of which WMATA shall have the right at its sole option to terminate the contract and pursue the remedies provided under the contract and/or under applicable law.
My June 24, 1983 and June 28, 1983 letters are revised accordingly.
In view of the confusion generated by the above, I am establishing July 11, 1983 as the date for commencement of deliveries under the contract. Please advise no later than July 5, 1983 if you are unable to begin delivery on July 11, 1983 and, if you are unable to commence delivery on that date, the date on which delivery can begin. We expect to receive your bond on or before July 15, 1983 absent advice from you to the contrary.
Id., Exh. E. On July 5, B & A replied by mailgram: “Please accept this letter as our formal notice that, we cannot accept your unilateral attempt to change the contract as agreed to and executed by both parties on June 24, 1983. If I can be of any further service to you in this regard I remain at your disposal.” Id., Exh. F.
No further communications took place between the parties and WMATA arranged to obtain diesel fuel elsewhere. On October 22, 1984, WMATA filed this breach of contract action in the District Court, pursuant to § 81 of Pub.L. No. 89-774, 80 Stat. 1324, 1350 (1966), seeking to recover the difference between the price it finally paid for its diesel-fuel requirements and what it would have paid under the contract with B & A.
The parties filed cross-motions for summary judgment, and the District Court granted WMATA’s motion, holding that B & A had failed in its duty to make a good-faith effort to secure a performance bond. WMATA v. Gatoil (U.S.A.), Inc., 607 F.Supp. 1422 (D.D.C.1985). Benson and Gatoil filed motions to amend the judgment and, after those motions were denied in relevant part, filed separate appeals, which have been consolidated.
II
We begin by considering Benson’s challenges to the District Court's denial of his motion for summary judgment.
Nor, under these facts, does it appear possible to treat WMATA’s announcement of an extension as an offer to amend the contract that was implicitly accepted by B & A’s course of conduct. Before any significant conduct by B & A occurred, the “offer” had been twice revised and in its final form (which no longer extended the time limit but rather converted the condition precedent into a contractual obligation) was categorically rejected by B & A’s mail-gram of July 5. Since B & A never accepted these proposed modifications, the period within which the condition precedent was required to occur was not extended. Thus, as of June 30, 1983, B & A’s failure to secure a performance bond rendered its contract with WMATA ineffective. The only remaining questions are whether B & A failed to make a good-faith effort to secure the bond, and, if not, whether it can be held liable for that failure.
Benson also argues that the contract between B & A and WMATA was a requirements contract under which B & A could not be liable for a failure to deliver fuel until WMATA issued purchase orders requesting delivery, wheréupon its liability would be limited to the particular orders not filled (citing Sparhawk v. United States, 134 F. 720 (3d Cir.1905); Tennessee Soap Co. v. United States, 126 F.Supp. 439 (Ct.Cl.1954)). Since no such orders were ever issued, Benson asserts that B & A is not liable even if it did not make a good-faith effort to secure a performance bond. We agree with the District Court that this argument lacks merit. Whatever the rule may have been in the days when courts viewed requirements contracts askance because of their perceived lack of mutuality, it seems clear that, under the Uniform Commercial Code as adopted in the District of Columbia,
Finally, Benson appears to argue in his brief that WMATA is precluded from recovering damages from B & A because it failed to abide by various contractual provisions requiring it to give B & A written notice before terminating the contract or contracting for an alternative supply of fuel. Counsel for Benson conceded at oral argument, however, that if the contract never came into effect because the condition precedent did not occur, then these contractual notice provisions never became operative. Until the condition precedent was fulfilled, neither B & A nor WMATA had any duties under the of course, B & A’s duty to seek, and WMA-TA’s duty not to impede, fulfillment of the condition precedent (which may analytically be regarded as duties under a separate, “precontract” contract, cf. Heyer Products Co. v. United States, 140 F.Supp. 409 (Ct.Cl.1956)). We therefore conclude that the District Court properly denied Benson’s motion for summary judgment.
Ill
Appellants also contend that the District Court erred in holding, on summary judgment, that B & A had broken its obligation to make a good-faith effort to obtain a performance bond. It is undisputed that submission of a performance bond was a condition precedent to. the contract; that, since the occurrence of that condition precedent was in B & A’s power, B & A had a duty to exercise good faith in trying to obtain the bond; and that the contract was governed by District of Columbia law. Gatoil contended before the District Court that B & A’s good faith should be measured against the standard imposed by the U.C.C., as adopted in the District of Columbia, D.C.CODE ANN. § 28:1-203 (1981), which, in the case of a merchant,
Gatoil argues that the District Court’s reliance upon the Maryland standard was erroneous and that, when the U.C.C. standard is applied to the record before the District Court, summary judgment is inappropriate. We agree on both counts. As we have already noted, the present contract is governed by the U.C.C. See note 3 supra. And in its current state, the record simply does not require the finding (as summary judgment demands) that B & A failed to act with “honesty in fact” or to observe “standards of fair dealing in the trade.” As to B & A’s honesty in fact, disputes as to parties’ subjective mental states are notoriously difficult to resolve on motion for summary judgment, see, e.g., Mazaleski v. Treusdell, 562 F.2d 701, 717 (D.C.Cir.1977). This case is no exception. Viewing the record in the light most favorable to B & A and making all inferences in
WMATA also appears to contend that B & A’s communications to WMATA detailing its difficulties in obtaining a supplier of fuel must be regarded as an anticipatory breach of the contract. Assuming that this argument has been properly preserved (it was not advanced as an independent basis for summary judgment in the District Court), it must be rejected. Viewed in a light favorable to B & A, the record of events up to June 30 (the date on which the contract became a nullity because of the failure of the condition precedent) establishes only that on June 29 B & A informed WMATA that it was having trouble obtaining fuel, that it would be unable to begin deliveries on July 1 as had previously been agreed, and that it was seeking alternative sources of supply and hoped to secure one by July 5. These facts simply do not require, or indeed even permit, as D.C. law .requires, the conclusion that B & A “unequivocally and positively” repudiated its obligation to perform under the contract. Order of AHEPA v. Travel Consultants, Inc., 367 A.2d 119, 125 (D.C.1976); see generally D.C.CODE ANN. § 28:2-610 (1981).
We therefore conclude that the District Court’s grant of summary judgment to WMATA was erroneous.
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The judgment of the District Court is affirmed in part and reversed in part, and the cases are remanded for further proceedings consistent with this opinion.
. On appeal, WMATA and Gatoil each contends that certain of the facts found by the District Court to be undisputed rest upon affidavits or answers to interrogatories that were improperly sworn in violation of Fed.R.Civ.P. 56. WMATA made its argument for the first time on appeal, and Gatoil made its argument for the first time in a postjudgment motion before the District Court. Because no exceptional circumstances exist to justify the parties’ failure to assert these arguments in a timely fashion, we do not consider them here. See, e.g., District of Columbia v. Air Florida, Inc., 750 F.2d 1077, 1084-85 (D.C.Cir.1984).
. Although Gatoil apparently does not seek reversal of the denial of its motion for summary judgment, it renews one argument that it made for the first time in support of its postjudgment motion that the District Court reconsider that denial, ¿a, that it cannot be held liable for any
. We think it apparent that the present contract is governed by the provisions of the U.C.C. as adopted in the District of Columbia, since it clearly involved a "transaction[ ] in goods,” D.C. Code Ann. §§ 28:2-102, 28:2-105(1) (1981), ‘bearing an appropriate relation to the District [of Columbia]," id. § 28:1-105(1).
. We think it clear, and the parties do not dispute, that this was a transaction between merchants within the meaning of D.C.Code Ann. § 28:2-104(1), (3) (1981).
