Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-02885/USCOURTS-ca10-88-02885-0/pdf.json

Parties Involved:
University Lincoln-Mercury Sales, Inc.
Appellant
Wells Fargo Credit Corporation
Appellee

Document Text:

IN THE UNITED STATES COURT OF APPEAL 

FOR THE TENTH CIRCUIT 

WELLS FARGO CREDIT CORPORATION, ) 

a California corporation, ) 

) 

Plaintiff/Appellee, ) 

FILED 

United States Court of Appeals 

Tenth Circuit 

SEP 2 9 1989 

OBERT L. HOECKER 

Clerk 

) No. 88-2885 

v. ) 

) 

UNIVERSITY LINCOLN-MERCURY ) 

SALES, INC., a Delaware ) 

corporation, ) 

) 

Defendant/Appellant. ) 

(D. Utah) 

(D.C. No. 87-C-679S) 

ORDER AND JUDGMENT* 

Before MOORE, ANDERSON, and BRORBY, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. The cause is therefore ordered 

submitted without oral argument. 

University Lincoln-Mercury Sales, Inc. ("LMS") appeals from 

an order granting partial summary judgment and from entry of final 

judgment by the United States District Court for the District of 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 88-2885 Document: 01019974033 Date Filed: 09/29/1989 Page: 1 
Utah in favor of the plaintiff-appellee Wells Fargo Credit 

Corporation ("Wells Fargo"). After the court granted Wells 

Fargo's motion for partial summary judgment on its claims for 

breach of contract and negligent misrepresentation, Wells Fargo 

moved to dismiss its remaining fraud and punitive damages claims. 

The court granted this motion and issued its final judgment awarding actual damages of $42,766.40, pre and post-judgment interest, 

and attorneys' fees to Wells Fargo. On appeal, LMS asserts that 

the partial summary judgment order and final judgment were 

improper, specifically contending that genuine issues of material 

fact remain and that, therefore, an award of actual damages was 

improper. LMS also contests the award of interest and attorneys' 

fees. 

The material facts of this case are easily stated. Wells 

Fargo and LMS entered into a Master Dealer Agreement ("MDA"), a 

contractual arrangement under which LMS assigned motor vehicle 

leases, together with residual rights to the vehicles, to Wells 

Fargo. The price paid by Wells Fargo for an assignment under the 

MDA was an amount equal to the dealer's costs, which included the 

cost of equipment options or extra services added to the vehicle 

by the dealer, plus a dealer mark-up as specified by schedules 

submitted by Wells Fargo and minus any prepayments by the customer 

to the dealer. Affidavit of Paul Denton, R. Vol. I, tab 12 at 3. 

The MDA made no provision for vehicle inspection by Wells Fargo, 

which is not surprising since its nearest office was out of state. 

Under the MDA, LMS agreed to accept reassignment of the lease 

if the supporting documentation was defective and to reimburse 

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Wells Fargo for all costs and expenses incurred in enforcing the 

MDA. LMS warranted that, at the time of the lease agreements, the 

descriptions therein of the automobiles were accurate and 

complete. LMS further warranted that the leased automobiles had 

been or would be delivered completely furnished with the equipment 

options, accessories, and services agreed to be furnished. 

In late 1986, Wells Fargo inadvertently discovered through a 

lessee that a number of the leased automobiles for which it had 

accepted lease assignments from LMS did not contain all the added 

options as represented to Wells Fargo by LMS. When Wells Fargo 

sought reassignment on these leases, LMS did not respond. Wells 

Fargo subsequently brought suit for the difference between the 

actual value of the assignments without the options and the value 

represented by LMS, plus costs and attorneys' fees. It asserted 

three theories for relief: breach of contract, fraud, and 

negligent misrepresentation. A fourth claim sought punitive damages, charging LMS with "willful and malicious" conduct committed 

with "reckless disregard for the rights of Wells Fargo." R. Vol. 

I at Tab 1 (Complaint). As noted, the fraud and punitive damage 

claims were dismissed on the motion of Wells Fargo at the time it 

received its final judgment in this case. 

LEGAL ANALYSIS 

The standard of review of the order of partial summary judgment is clear: the judgment shall be rendered "if the pleadings, 

depositions, answers to interrogatories, and admissions on file, 

together with the affidavits, if any, show that there is no 

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Appellate Case: 88-2885 Document: 01019974033 Date Filed: 09/29/1989 Page: 3 
genuine issue as to any material fact and that the moving party is 

entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). 

"The moving party carries the burden of showing beyond a reasonable doubt that it is entitled to summary judgment." Ewing v. 

Amoco Oil Co., 823 F.2d 1432, 1437 (10th Cir. 1987). Furthermore, 

"[i]n determining whether any genuine issues of material fact 

exist, the record must be construed liberally in favor of the 

party opposing the summary judgment. However, conclusory allegations by the party opposing summary judgment are not sufficient to 

establish an issue of fact and defeat the motion." Setliff v. 

Memorial Hospital of Sheridan County, 850 F.2d 1384, 1391-92 (10th 

Cir. 1988) (quoting McKibben v. Chubb, 840 F.2d 1525, 1528 (10th 

Cir. 1988)). Contrary to appellant's assertion, our review of the 

lower court's summary judgment order is not governed by the 

clearly erroneous standard but rather "under the strict standard 

of the summary judgment rule." United States v. Gammache, 713 

F.2d 588, 594 (1983); see Missouri Pac. R.R. v. Kansas Gas and 

Elec. Co., 862 F.2d 796, 798 (10th Cir. 1988); Gray v. Phillips 

Petroleum Co., 858 F.2d 610, 613 (10th Cir. 1988). 

On appeal, LMS identifies three factual issues that should 

have precluded a grant of partial summary judgment on the contract 

and negligent misrepresentation claims: (1) whether Wells Fargo 

received the benefits bargained for under the contract, (2) 

whether Wells Fargo relied on the presence of the missing options, 

and (3) whether Wells Fargo suffered any damage as a result of the 

missing options. Each of these arguments really goes to the issue 

of whether Wells Fargo was damaged by the misrepresentations. 

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Appellate Case: 88-2885 Document: 01019974033 Date Filed: 09/29/1989 Page: 4 
In turn, Wells Fargo insists that LMS did not properly oppose 

the motion for partial summary judgment by disclosing the 

requisite specific facts showing the existence of a genuine issue 

for trial. See, ~-=-9 ... =._1 Lake Hefner Open Space Alliance v. Dole, 

871 F.2d 943, 945 (10th Cir. 1989); Conaway v. Smith, 853 F.2d 

789, 792 (10th Cir. 1988). In particular, Wells Fargo insists 

that the affidavit of James Bartlome, President and principal 

owner of LMS, is not based on the required ''personal knowledge." 

See Fed. R. Civ. P. 56(e). 

We need not take up each of LMS' arguments in turn and decide 

if it met its burden to show a genuine issue for trial on the damages because we conclude that the pleadings and affidavits of 

Wells Fargo met its initial burden of production under Rule 56 

only with respect to LMS' liability. Wells Fargo asserts that 

various vehicle options described on LMS lease worksheets were 

missing from the vehicles, and it establishes the value of those 

missing options, but Wells Fargo does not assert that the value of 

the missing options was the amount of actual economic loss it suffered or would suffer under the MDA after receiving the lease payments on the vehicles and the residual value thereof. In other 

words, while it met its burden with respect to LMS' liability 

under a breach of contract or negligent misrepresentation theory, 

it did not do so with respect to damages. 

Wells Fargo sought and obtained damages based solely upon the 

amount it paid for options that were not included on the 

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vehicles. 1 Had Wells Fargo been purchasing the vehicles outright, 

this amount would appear to accurately reflect the economic loss 

Wells Fargo has suffered. As it acknowledges in its complaint, 

however, what Wells Fargo purchased were vehicles subject to 

leases. The value Wells Fargo received from the deal was the 

right to receive the lease payments from the lessees, plus 

whatever value remained in the vehicles at the natural expiration, 

or unnatural termination, of the leases. If Wells Fargo did suffer any economic harm, one would first look to find it here, 

either in reduced lease payment income, or in diminished residual 

value in the vehicles. 

Wells Fargo asserted no reduced lease payments, and according 

to LMS, the vehicles were offered to lessees at a price that 

included the cost of the missing options. If true, Wells Fargo 

would seem to be getting precisely the lease payments for which it 

bargained. Cf. Miller Pontiac, Inc. v. Osborne, 622 P.2d 800, 804 

(Utah 1981) (plaintiff car dealer which subsequently sold damaged 

car to third party and recouped lost profits cannot recover for 

lost profits on first sales contract). Significantly, the 

response of Wells Fargo to LMS' argument that it had recouped its 

losses through its lease payments was not to quarrel with this 

1 The trial court concluded that most of the Bartlome 

affidavit, including the statement that LMS records disclosed the 

inclusion on the vehicles of the missing options, was insufficient 

to establish a genuine issue for trial on this point. It did, 

however, find that the affidavit precluded summary judgment with 

respect to the presence or absence of scotch guarding, Tektor, and 

underseal options. On appeal, LMS does not dispute the court's 

findings with respect to either the presence or absence of the 

various options in question. Nor did it attempt before the 

district court to dispute the value of the missing options for 

which it was held accountable. 

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contention but merely to suggest that LMS' reasoning on the damages issue "would sanction wrongful conduct and allow defendant an 

ill-gained windfall." Brief of Appellees at 25. Additionally, 

Wells Fargo disclaimed concerns of potential liability to the 

lessees for the missing options, concluding that the automobiles 

were offered to the lessees without any misrepresentations to the 

lessees regarding these options, supporting the inference that 

Wells Fargo suffered no economic detriment. 2 

Coupled with this is the question of whether the missing 

options had any negative effect on the residual value at the end 

of the leases. At the summary judgment hearing, counsel for Wells 

Fargo tersely stated that when the leases were over and the 

vehicles turned in, Wells Fargo would own less than it bargained 

for because of the missing options on the vehicles. R. Supp. Vol. 

I at 21. While that assertion has a common sense appeal, Wells 

Fargo offered no affidavits or other documentation to support the 

proposition that the residual economic value of the vehicles would 

be reduced because of the absence of the options, and, if reduced, 

by how much. 3 In other words, there is nothing in the record on 

2 One cannot determine from the documentation in the record on 

appeal whether the lease payments did or did not reflect the cost 

of the missing options. What is clear is that Wells Fargo never 

asserted that it was receiving inadequate lease payments and that 

LMS asserts that the lease payments covered the costs of the 

options in question, even if they were missing from the vehicles. 

3 Similarly, Bartlome's conflicting statement that the residual 

value would not be affected by the presence or absence of the 

options in question, R. Vol. I, tab 17 at 4, is mere unsupported 

opinion. See Sweats Fashions v. Pannill Knitting Co., 833 F.2d 

1560, 1564 (Fed. Cir. 1987) (Mere conclusory statements and 

denials do not take on dignity by placing them in affidavit form 

by president of company for purposes of opposition to summary 

judgment.). 

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the question of the residual value to support Wells Fargo's claim 

for actual damages. 

Given the failure of Wells Fargo to meet its initial burden 

with respect to the damages question, on which it would bear the 

burden of proof at trial, we hold that its motion for summary 

judgment was not "supported" with respect to the damage claim, as 

i t must be under Rule 56(e). We remand for trial on the issue of 

actual damages. 

At this point, some elaboration on the proper measure of 

actual damages in this case is in order. As previously indicated, 

no damages were awarded on the fraud or punitive damages claims, 

but only actual damages on the contract and negligent misrepresentation claims. Under the contract claim, the measure of 

damages is governed by the benefit of the bargain rule, or what is 

necessary to put the party in as good a position as if the 

contract had been performed or the representations had been true. 

Young Electric Sign Co. v. United Standard West, Inc., 755 P.2d 

162, 164 (Utah 1988) ("In general, contractual damages are 

measured by the lost benefit of the bargain, i.e., by 'the amount 

necessary to place the nonbreaching party in as good a position as 

if the contract had been performed.'"); Alexander v. Brown, 646 

P.2d 692, 695 (Utah 1982); Keller v. Deseret Mortuary Co., 455 

P.2d 197, 198 (Utah 1969). Under the negligent misrepresentation 

claim, the measure of damages is the actual out-of-pocket loss. 

Dugan v. Jones, 615 P.2d 1239, 1247 (Utah 1980) ("The current 

standards of the evolving tort of negligent misrepresentation are 

set forth in Restatement, Torts, 2nd, Sec. 552: 'One who, in the 

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course of his business ... supplies false information for the 

guidance of others in their business transactions, is subject to 

liability for pecuniary loss caused to them by their justifiable 

reliance upon the information ... . . II ) See also Restatement 

(Second) of Torts§ 552B. The actual loss would be the same under 

either claim in this situation, and the focus of the actual damages should be solely on economic detriment to the plaintiff, and 

not on the defendant's conduct. See 5 Corbin on Contracts§ 1077 

(1964) ("It is often said that the rules as to damages for breach 

of contract are applied for the purpose of giving compensation for 

injury done, and not for punishment of a wrongdoer."). 4 

The response of the district court to LMS' argument that 

Wells Fargo had recouped any losses suggests that the court may 

have been governed by its desire to punish wrongdoing even in the 

absence of demonstrated economic harm to Wells Fargo: 

"[C]ounsel, if what you are saying to the Court is to be 

adopted by the Court it seems to me that all types of 

negligent or fraudulent activity could be condoned and 

the person who involves himself in that type of conduct 

[could] reap the benefit of that conduct without any 

type of requirement to answer for that type of conduct. 

And I don't believe this Court will allow that or I will 

not allow that kind of a thing." 

4 Damages in excess of just compensation for harm actually 

suffered are ordinarily termed punitive. Punitive damages do 

focus on the conduct of the defendant, and are designed to punish 

and deter wrongful actions. Id. To award punitive damages 

requires the finder of fact to make certain findings regarding the 

egregiousness of a defendant's behavior. See Clayton v. 

Crossroads Equipment Co., 655 P.2d 1125, 1131 (Utah 1982) 

(defendant's conduct must be wilful or malicious); Palombi v. D & 

C Builders, 22 Utah 2d 297, 452 P.2d 325, 328 (1969). Since 

summary judgment was not given on the claim for punitive damages 

in this case, the propriety of awarding such damages is not before 

us on this appeal. 

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• 

R. Supp. Vol. I at 16-17 (emphasis added}. We are concerned that 

this focus on LMS' conduct rather than on the economic detriment 

to Wells Fargo may have led the court to impose the equivalent of 

punitive damages as a way of punishing and deterring LMS' conduct 

and removing its windfall profits. In any event, these considerations contribute nothing to assessing actual damages and, thus, 

are not valid reasons for granting summary judgment on the 

contract and negligent misrepresentation claims. Wells Fargo has 

not met its burden to demonstrate "beyond a reasonable doubt'' its 

economic detriment in the amount awarded. Whether Wells Fargo 

realized insufficient lease payments and/or a decline in residual 

values of the leased automobiles, and the amount of such insuff i ciency and/or decline, remain open to dispute. We, therefore, 

reverse the partial summary judgment with respect to damages. 

Given our ruling, Wells Fargo should be free to renew its claims 

for fraud and punitive damages, although we imply no view on the 

mer i ts of those claims •. 

Our remand on damages makes it unnecessary at this point to 

address the remaining issues of interest and attorneys' fees. We 

commit these to the district court for further consideration after 

the damage issue is resolved. 

The judgment of the United States District Court is AFFIRMED 

in part, REVERSED in part, and REMANDED for further proceedings 

consistent with this opinion. The mandate shall issue f o r t hwith. 

ENTERED FOR THE COURT 

Stephen H. Anderson 

Circuit Judge 

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