Case Title: Jackson Hole Traders, Inc. v. Joseph

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1997-01-28T00:00:00Z

Document:
Jackson Hole Traders, Inc. v. Joseph1997 WY 15931 P.2d 244Case Number: 96-58Decided: 01/28/1997Supreme Court of Wyoming

JACKSON HOLE TRADERS, INC., a Wyoming

Corporation; David W. Speaks; and Elizabeth Speaks, 
Appellants (Defendants),

v.

Catherine JOSEPH d/b/a Metro 
Classics, Appellee (Plaintiff).

 

Appeal from District Court, 
Teton County, D. Terry Rogers, J.

 

James K. Lubing of Law Office of James K. Lubing, 
Jackson, for Appellants.

 Kenneth S. Cohen, Jackson, for 
Appellee.

 

Before TAYLOR, C.J., and THOMAS, MACY, GOLDEN and 
LEHMAN, JJ.

 

MACY, 
Justice.

 [¶1]      Appellants 
Jackson Hole Traders, Inc., David Speaks, and Elizabeth Speaks appeal from the 
judgment which was entered in favor of Appellee Catherine Joseph, who was doing 
business as Metro Classics.

 

[¶2]      We affirm in part 
and reverse in part.

 

ISSUES

 

[¶3]      Appellants 
present the following issues for our review:

 

I. Did the trial court violate [Appellants'] due 
process rights by disallowing them an adequate opportunity to defend 
[Appellee's] lawsuit?

 

II. Did the trial court err when it concluded, as a 
matter of law, that the Uniform Commercial Code applied to the contracts between 
the parties when the contracts were for labor and services and not 
goods?

 

III. Did the trial court err when it determined, as a 
matter of law, that [Appellants] David W. Speaks and Elizabeth Speaks were 
individually liable for the debts of their corporation when the trial court made 
no findings to support such a conclusion, and the evidence at trial was to the 
contrary?

 

FACTS

 

[¶4]      The trial court 
summarized the evidence in its findings of fact and conclusions of law. We quote 
from the relevant portions of the judgment:

 

1. [Appellee] does business as Metro-Classics, and 
she is a resident of the state of New York. [Appellee] designs and manufactures 
men's and women's clothing.

 

2. In the manufacturing process [Appellee] makes some 
of the clothing herself, but on large orders subcontracts various steps in the 
manufacturing process, including grading of patterns, cutting, and 
sewing.

 

3. [Appellant] Jackson Hole Traders, Inc., is a 
Wyoming corporation and [Appellants] David W. Speaks and Elizabeth Speaks are 
corporate officers and apparently share holders.

 

4. [Appellants] operate[] a clothing store in 
Jackson, Wyoming known as Jackson Hole Traders, which sells clothing for men and 
women through a retail store and through a mail-order catalogue 
business.

 

. 
. . . 

 

6. [Appellants] from time to time hire clothing 
manufacturers to manufacture clothing to sell in their store and through their 
mail-order catalogue.

 

7. In 1993 [Appellants] contracted with [Appellee] to 
design and/or manufacture clothing to sell in their store, and this was 
accomplished by [Appellee] to the mutual satisfaction of the 
parties.

 

8. In the Spring of 1994, [Appellants] and [Appellee] 
discussed a large order of clothing to be manufactured by 
[Appellee].

 

9. Pursuant to these discussions, [Appellee] had a 
pattern maker work on the patterns and [Appellee] manufactured certain samples 
of about fourteen different styles, which samples were used by models for 
[Appellants] and photographed for a Fall/Winter catalogue on or about May 20, 
1994.

 

10. On or about May 24, 1994, [Appellant] Elizabeth 
Speaks called [Appellee] on the telephone, and during an approximately 
sixty-seven minute phone conversation, tentative quantities of clothing items 
were discussed. [Appellee] was to supply certain fabric for some of the clothing 
and [Appellants] were to order and supply the remaining 
fabric.

 

11. In early March, 1994, [Appellants] placed an 
order for several hundred yards of fabric from Woolrich to be used in the 
manufacture of clothing by [Appellee]. [Appellants] failed and refused to 
provide sufficient financial background information for Woolrich to immediately 
extend to them credit. Several weeks of correspondence and exchange of 
information occurred, delaying the shipping of the Woolrich fabric to [Appellee] by approximately 
six weeks.

 

12. During the telephone conversation of May 24, 
[Appellee] and Elizabeth Speaks discussed fitting of the patterns, changes to 
the patterns and quantities of clothing.

 

13. [Appellee] thereafter initiated a credit check of 
[Appellants] and on or about June 10, 1994, [she] went to her banker to secure a 
$50,000.00 loan to be used to produce the clothing for [Appellants] and other 
customers. At that time [Appellee] had nothing in writing from [Appellants] and 
her bank required her to obtain the same.

 

14. [Appellee] informed [Appellants] that she would 
require their orders to be in writing and on or about June 21, 1994 [Appellants] 
caused written purchase orders to be communicated to [Appellee] for 
approximately nine hundred items of clothing to be manufactured by [Appellee]. 
One purchase order recited a cancellation date of July 30, 1994, and the 
remaining orders specified August 15, 1994. There were five purchase orders in 
all.

 

15. It is customary in the clothing business for 
delivery dates of clothing for the Fall season to be made from July through the 
end of September. Up until the point that the written purchase orders had been 
transmitted to [Appellee], there had been no discussion between [Appellee] and 
[Appellants] with regard to cancellation or delivery 
dates.

 

16. A cancellation date in an order is a date 
specified by the parties, and if the order is not delivered by that date, the 
purchaser has the option of returning the goods and cancelling the order or 
negotiating other terms.

 

17. When [Appellee] received the five purchase orders 
with the cancellation date[s] she spoke on the telephone with [Appellant] 
Elizabeth Speaks and advised her that she could not meet those cancellation 
dates. [Appellant] Elizabeth Speaks agreed to move each of the dates by fifteen 
days. [Appellee] informed her that it would be helpful but she could not get all 
of the items there by August 30, 1994. [Appellant] Elizabeth Speaks by her own 
admission told [Appellee] to "do the best you can." Thereafter the parties 
understood that the cancellation date of August 30, 1994 could not be met by 
[Appellee].

 

18. [Appellee] testified that it takes her 
approximately ten to twelve weeks from the time something is ordered to go 
through the entire process through production.

 

19. During the production of the clothing by 
[Appellee] she experienced some problems with some of the Woolrich fabric known 
as Blue Ombre, which was a plaid pattern, and which during the mass production 
of the cutting process, produced problems in lining up the lines on the plaid 
fabric at the seams. [Appellee] communicated this problem to [Appellant] 
Elizabeth Speaks during the production process and was told to do the best she 
could.

 

20. The first shipment of clothing to [Appellants] 
from [Appellee] went out on July 18, 1994 and shipments continued thereafter 
through the end of October, 1994. Part of these items of clothing delivered were 
a supplemental holiday order which was placed after the initial order by 
[Appellants] with [Appellee].

 

21. [Appellee] submitted her bills to [Appellants] in 
the form of invoices, the terms of which were "Net 30," which meant that the 
goods were to be paid for within thirty days. This is a standard in the clothing 
industry.

 

22. All of the goods shipped through the end of 
August, 1994 by [Appellee] to [Appellants] were paid for on an untimely basis, 
that is at least six weeks late.

 

23. [Appellee's] exhibits 18 through 33[] are for 
invoices for clothing shipped after September 1, 1994, none of which have ever 
been paid for by [Appellants], and which total $33,101.61 for goods shipped to 
[Appellants] from September 7, 1994 through October 31, 
1994.

 

24. Some of the items of clothing were returned by 
[Appellants] to [Appellee], and [Appellants] are entitled to a credit of 
$1,096.00 for the returned merchandise, and after all just credits there still 
remains a sum of $32,005.61 owing to [Appellee] by 
[Appellants].

 

. 
. . .

 

29. [Appellants] notified [Appellee] of certain 
problems on a timely basis, for which [Appellants] should receive credit in the 
amount of $1,096.00.

 

30. After not having been paid for approximately 
$33,000.00 of merchandise well beyond the Net-30-Day period, [Appellee] began 
making contacts with [Appellants] to obtain payments.

 

31. [Appellee] was given the "telephone run-around" 
any time she tried to contact [Appellant] David W. Speaks, who was in charge of 
paying the bills for the . . . corporation. Mr. Speaks was seldom there and the 
people answering the phone always told [Appellee] that he would return her 
calls. He never did.

 

32. On December 9, 1994, [Appellee] hired counsel and 
contacted [Appellants] to seek payment. After that contact, [Appellants] caused 
the remaining merchandise they had in their possession which had been 
manufactured by [Appellee] to be packaged up and shipped to [Appellee]. 
[Appellee] refused to accept the same and they have been returned to 
[Appellants].

 

33. This case in its essence can be summarized as 
follows: Approximately nine hundred articles of clothing were manufactured by 
[Appellee] and shipped to [Appellants]; [Appellants] inventoried these items and 
took them into their possession, placed them on the retail sales floor and sold 
them and also placed them in their warehouse and sold them from their catalogue; 
[Appellants] sold approximately seventy percent of the items manufactured; 
[Appellants] have not paid for a substantial portion of the items; when pressed 
for payment [Appellants] have tried to ship the goods back and have tried to 
assess a two percent per month late penalty against [Appellee] for approximately 
$30,000.00.

 

. 
. . .

 

35. [Appellants] accepted shipment of all of the 
merchandise with the previous mentioned exceptions, kept it in their possession 
for two to three months and never complained about late delivery or defective 
merchandise. They cannot be heard to complain about that 
now.

 

. 
. . .

 

39. [Appellee] has billed [Appellants] the sum of 
$51,171.79 for clothing manufactured by her for [Appellants] at their request. 
The sums billed to [Appellants] were in accord with the per article cost agreed 
to by the parties prior to the manufacture of these items.

 

40. [Appellants] made partial payments to [Appellee] 
from time to time in August, September and October, 1994 totalling $18,070.18. 
[Appellants] also seasonably returned several articles of clothing for which 
they are entitled to a credit in the sum of $1,096.00. After all just credits 
and allowances [Appellants] owe [Appellee] the sum of $32,005.61 and have owed 
that to her since thirty days after the last invoice was sent. Interest has 
accrued on the unpaid invoices per the agreement of the parties at 1.5 percent 
per month, and accrued interest through November 2, 1995, was in the amount of 
$5,958.00.

 

41. The Uniform Commercial Code provides for buyers' 
rights on improper delivery. In such event the buyer may: (1) reject the whole; 
(2) accept the whole; or (3) accept any commercial unit or units and reject the 
rest. § 34.1-2-601 W.S. 1977 (1991 comp). In this case with the exception of the 
rejection of goods for which [Appellants] have received credit, they accepted 
the entire remainder of the goods.

 

42. [Appellants'] attempted rejection of the goods in 
December was not timely as required by § 34.1-2-602 W.S. 1977 (1991 
comp).

 

43. [Appellants] accepted the goods, as that term is 
defined in § 34.1-2-606 W.S. 1977 (1991 comp), in that after reasonable 
opportunity to inspect the goods, they did not notify the seller of any 
non-conformity.

 

44. [Appellee] is entitled to judgment against 
[Appellants] in the principal sum of $32,005.61, accrued interest in the amount 
of $5,958.00, accruing interest and costs of suit.

 

DISCUSSION

 

A. Due Process Claim

 

[¶5]      In their first 
claim of error, Appellants assert that the trial court violated their right to 
be heard when it did not allow them to have an adequate opportunity to present 
their defense. Appellee argues that Appellants were afforded the opportunity to 
be heard in a meaningful manner.

 

[¶6]      "[D]ue process 
must be afforded to litigants in the form of notice and a meaningful opportunity 
to be heard." Lawrence-Allison and Associates West, Inc. v. Archer, 767 P.2d 989, 997 (Wyo. 1989). "A meaningful opportunity to be heard necessarily requires 
a hearing involving elements of formality and procedure dependent upon `the 
importance of the interests involved and the nature of the subsequent 
proceedings.'" Id. (quoting Boddie v. Connecticut, 401 U.S. 371, 378, 91 S. Ct. 780, 786, 28 L. Ed. 2d 113 (1971)).

 

[¶7]      At various times 
throughout the trial, the trial court and the parties discussed how much time 
each side would need for its case.  
Appellants informed the trial court that they did not think that they 
would need more than "two to three hours, maximum" in which to present their 
case. The trial court scheduled its time accordingly. Then, with full knowledge 
of the limitations which the trial court intended to impose, Appellants 
requested a recess late in day two of the trial instead of continuing on as long 
as the trial court would allow on that day. At that time, the trial court 
informed Appellants that only three hours would be allotted to this case on day 
three.

 

[¶8]      We are somewhat 
puzzled about Appellants' complaint because they were given more than the "two 
to three hours, maximum" which they had informed the trial court that they would 
need in order to fully present their case. Equally confusing is the fact that 
Appellants chose to wait until late in day three to call their most important 
witness when they knew that her time would be limited. Furthermore, when 
Appellants realized that their case was taking longer than they had expected, 
they did not request more time.

 

[¶9]      Appellants do not 
point us to any authority which prohibits trial courts from limiting parties to 
the amounts of time that they specified they would need to fully present their 
cases. The trial court in this case did not arbitrarily limit the substance of 
the evidence which Appellants wanted to present; it merely limited the time in 
which they were allowed to present it to the amount of time which they had 
indicated that they thought would be sufficient. Appellants' decisions to recess 
on day two and to put on their most important witness late in day three were 
decisions they made knowing that the trial court would give this case only three 
hours on day three in which to be 
completed. We will not excuse Appellants from those decisions under the guise of 
a due process violation.

 

[¶10]   Even if we were convinced that the 
trial court erred by limiting the time frame in which Appellants had to present 
their case, we would find that the error was harmless because Appellants have 
failed to explain what evidence they would have presented had they been given 
more time and why such evidence was important to their case. See Pure Gas and 
Chemical Company v. Cook, 526 P.2d 986, 992 (Wyo. 1974). Appellants invite us to 
review the record in its entirety in order to get an overall impression of how 
their case was compromised by the time 
limitation. We have reviewed the entire record, and we do not see any reason why 
Appellants needed more time. The witnesses' testimony was surprisingly 
uncontested. We conclude from reviewing the record, without having the benefit 
of an explanation to the contrary, that the trial court had a complete version 
of the facts before it when it made its decision.

 

B. Uniform Commercial Code

 

[¶11]   Appellants claim that the trial 
court improperly concluded that the Uniform Commercial Code governed the 
parties' transaction, arguing that this transaction was principally one for 
labor and services. Appellee counters that the trial court appropriately applied 
the Uniform Commercial Code to this transaction because it was for the sale of 
goods.1

 

[¶12]   For support of their proposition 
that this transaction was one for services rather than for goods, Appellants 
rely on Wells v. 10-X Manufacturing Company, 609 F.2d 248 (6th Cir. 1979). That 
case, however, differs from the case at bar because the buyer in Wells furnished 
the manufacturer with virtually everything but the labor:

 

[¶13]   In this case, 10-X agreed to "cut, 
make, and finish" for Wells 550 dozen hunting shirts. While 10-X was to furnish 
the thread, all other materials involved in the production of the shirt were to 
be provided by Wells. Wells was in all other respects responsible for the design 
and development of the shirt.

 

. 
. . The language used in the contract clearly bespeaks the intention of the 
parties that 10-X's obligation under the contract was essentially to provide the 
manpower and machine capabilities for production of the hunting shirt. That the 
only material supplied by 10-X in the entire production process was thread is a 
factor to be considered in characterizing the contract one for services rather 
than goods.

 

Wells, 609 F.2d  at 255.

 

[¶14]   Although Appellants purchased and 
supplied the outer fabric for some of the garments produced by Appellee, 
Appellee supplied all the other materials which were used to manufacture the 
garments; i.e., buttons, linings, interfacing, special care labels, as well as 
the outer fabric for the remaining garments. Some garments were patterned from 
Appellee's own designs. Even for those styles which utilized a design provided 
by Appellants, Appellee and her pattern maker had to restyle them because of 
various changes which were requested by 
Appellants. Each pattern was then graded into the particular sizes to be used 
for that garment. Under the facts of this case, the trial court correctly 
applied the Uniform Commercial Code as this transaction was one for the sale of 
goods even though labor was involved in producing the 
goods.

 

[¶15]   Even if the Uniform Commercial Code 
did not apply to this transaction, Appellants would still owe Appellee the 
amount which was determined by the trial court. "A breach of contract is a 
failure without legal excuse to perform any promise which forms a whole or a 
part of a contract." Sagebrush Development, Inc. v. Moehrke, 604 P.2d 198, 201 
(Wyo. 1979).

 

"The measure of damages for breach of contract is 
that which would place plaintiff in the same position as he would have been had 
the contract been performed, less proper deductions. In other words, it is that 
which will compensate him for the loss which full performance would have 
prevented or breach of it entailed."

 

Id. (quoting Reynolds v. Tice, 595 P.2d 1318, 1323 
(Wyo. 1979)).

 

[¶16]   Appellee shipped approximately 900 
garments to Appellants between July 18, 1994, and the last week of September 
1994 plus an additional "holiday" order during the last week of October 1994. Of 
the 900 garments, Appellants properly rejected ten vests and four coats, 
returning these garments to Appellee in early October. Appellee gave them a 
credit for these items. Appellants kept all the other goods until mid-December 
1994 when Appellee demanded that Appellants pay the remaining $32,000 which they 
owed to her.  In response to that 
demand, Appellants packed up 350 garments and shipped them back to Appellee. 
David Speaks gave the following testimony with regard to Appellants' response to 
Appellee's demand:

 

[APPELLEE'S ATTORNEY:] Now, I sent you a letter dated 
December 9 asking for thirty-two thousand dollars for [Appellee], did I 
not?

 

A. Yes, you did.

 

Q. And your response was to pack up 350 garments that 
she had manufactured at your request and ship them back in bulk to her, wasn't 
it?

 

A. That's what we did, yes.

 

. 
. . .

 

[Q.] Now, the goods that you shipped back to 
[Appellee], you instructed - either you or Ms. Speaks instructed someone working 
for you to take the goods off of the showroom floor and box them up and send 
them back. Some of the goods that were returned to [Appellee] were pulled off 
the s[h]owroom floor, weren't they?

 

A. Most likely, yes. I'm almost positive, 
yeah.

 

Q. And some of those items were pulled off the 
shelves where they had been stored for several months, weren't 
they?

 

A. You're talking about in the 
warehouse?

 

Q. Yes.

 

A. Yes, they were.

 

. 
. . .

 

Q. If you don't think the goods got there on time and 
you think that you have been put in a bad way as a result of that, you can 
refuse the shipment, can't you?

 

A. You can refuse the shipment, yes, you can. That is 
one option.

 

Q. And you could have done that, couldn't 
you?

 

A. That's an option, yes.

 

Q. But you didn't refuse the shipment, did 
you?

 

A. No, we did not.

 

Q. And you put the goods in your warehouse, didn't 
you?

 

A. Yes, they were in the 
warehouse.

 

Q. And put them on your showroom floor, didn't 
you?

 

A. Yes, we did.

 

Q. And you sold them through your catalog; is that 
right?

 

A. Yes, we did.

 

Q. And you sold many of them in your store, didn't 
you?

 

A. Yes, we did.

 

. 
. . .

 

[Q.] When I sent you the letter on December 9th 
asking for payment of the thirty-two thousand plus dollars owed to [Appellee], 
your response within 72 hours was to take everything and ship it back to 
[Appellee]; is that correct?

 

A. Yes, it was.

 

[¶17]   Appellants breached the contract 
when they failed to pay for the garments which had been sent to them and which 
they had accepted for resale. The trial court properly awarded damages in an 
amount which would place Appellee in the same position that she would have 
occupied had the contract been performed. 

 

C. Corporate Veil

 

[¶18]   Appellants contend that the trial 
court improperly pierced the corporate veil of Jackson Hole Traders, Inc. when 
it entered a judgment against David Speaks and Elizabeth Speaks personally. 
Appellants maintain that the record is completely devoid of any evidence which 
would support this finding. Appellee does not address this issue in her 
brief.

 

[¶19]   Before the corporate veil can be 
pierced, the evidence must demonstrate that

 

the corporation is not only 
influenced and governed by [a particular] person, but that there is such a unity 
of interest and ownership that the individuality, or separateness, of [such] 
person and corporation has ceased; [and] that the facts are such that an 
adherence to the fiction of the separate existence of the corporation would, 
under the particular circumstances, sanction a fraud or promote 
injustice.

 

Minifie v. Rowley, 187 Cal. 481, 202 P. 673, 676 (1921). See also Miles v. CEC Homes, Inc., 753 P.2d 1021, 
1023 (Wyo. 1988); Amfac Mechanical Supply Co. v. Federer, 645 P.2d 73, 77 (Wyo. 
1982).

 

[¶20]   We agree with Appellants that the 
record does not contain any evidence to support the trial court's decision to 
pierce the corporate veil. Additionally, during Appellee's oral argument to this 
Court, she conceded this issue. We, therefore, reverse that portion of the trial 
court's judgment which pierced the corporate veil of Jackson Hole Traders, Inc. 
and found David Speaks and Elizabeth Speaks personally liable for the amount of 
the judgment.

 

CONCLUSION

 

[¶21]   The trial court afforded Appellants 
a meaningful opportunity to be heard and that it properly applied the Uniform 
Commercial Code to the facts of this case. Sufficient evidence, however, did not 
support the trial court's decision to pierce the corporate veil of Jackson Hole 
Traders, Inc.

 

[¶22]   Affirmed in part and reversed in 
part.

   

FOOTNOTES

1The 
relevant statute provides:

 § 
34.1-2-102. Scope; certain security and other transactions excluded from this 
article.

 Unless 
the context otherwise requires, this article applies to transactions in goods; 
it does not apply to any transaction which although 
in the form of an unconditional contract to sell or present sale is intended to 
operate only as security transaction nor does this 
article impair or repeal any statute regulating sales to consumers, farmers or 
other specified classes of buyers.

 WYO. 
STAT. § 34.1-2-102 (1991).