No. 

### 12476 

### IN THE SUPREME COURT OF THE STATE OF MONTANA 1973

BUSINESS FINANCE CO. 

## , INC.

## , a Washington Corporation, Plaintiff and Respondent,

THE RED BARN, INC., etal., Defendants and Third Party-Plaintiffs

and Appellants,


### -vs

## - CHARLES A. PALMER, JR.

## , eta1

## , Third Party-Defendants and Respondents.
Appeal from: District Court of the Fourth JudicialDistrict, Honorable Emmet Glore, Judge presiding. Counsel of Record: For Appellants: Larsen and Gliko, Great Falls, Montana Dirk Larsen argued, Great Falls, Montana For Respondents: Garlington, Lohn and Robinson, Missoula

## ,Montana Robert E. Sheridan argued, Missoula, Montana Worden, Thane, Haines and Williams, Missoula, Montana SheltonWilliams argued, Missoula, Montana

Submitted: September 14, 1973 Decided: 

# fim'28

# 1813 Filed: 

## HOVE61873Mr. Justice Gene B. Daly delivered the Opinion of the Court. Defendants Arnold, Leo and A1Gaub bring this appeal from
a judgment entered inthe districtcourt, Missoula County, dismissing their third party complaint against third party defendants Charles Palmer, 

### Jr. and Ron Wilkerson, and awarding $2,724.95 toplaintiff Business Finance Co., Inc. The causewas tried tothecourt sittingwithout 

### a jury. From the trialrecord these facts appear: In February 1970 Red Barn, Inc., 

### a Missoula bar and nightclub, leased two cash registers, an adding machine, a filingcabinet and an office chair of the approximate totalvalue of $1,633 from Business Finance Co., Inc. Red Barn, Inc. was then owned by the Gaubs, who signed a guaranty agreement with Business Finance Co., Inc. covering the equipment lease agreement. InOctober 1970 the Gaubs entered intoan agreement with Palmer under which they agreed to tradebusinesses

# -- the ~aubs' Red Barn, Inc. for Palmer's Big Sky Distributing Co. Palmer began operating theRed Barn the same month, but the transaction
was not completed until January 1971. It appears that Business Finance Co., Inc. was informed of the transaction inOctober and, atthe~request of the Gaubs, prepared forms for an assignment of the leaseagreement toPalmer. This assignment of lease agreement
was never signed by Palmer, nor did Palmer make any payments
on the lease agreement. The last payment made toBusiness Finance Co., Inc. on the lease agreement was inOctober 1970. It appears the equipment remained inuse atthe Red Barn untilJune 1971, when Palmer leased the Red Barn toWilkerson and the equipment was placed in storage atthe Red Barn. The equipment was repossessed inFebruary 1972,
some seventeen months after the last payment was made.Business Finance Co., Inc. informed the Gaubs the repossessed equipment would be sold. The Gaubs originallybid $600 but withdrew thebid after seeing the equipment. The equipment was sold ata private sale toWoods Business Ma.chines of Missoula for

Business Finance

### Go,, Inc. sued the Gaubs on the lease guaranty contract for a deficiencyjudgment. Gaubs fileda third party complaint against Palmer and Wilkerson, claiming assumption of contract and/or quasi-contract. The district court dismissed the third party complaint against Palmer and Wilkerson and enteredjudgment inthe amount of 

### $2,724.95, of which $850 constituted attorney fees, infavor of Business Finance Co., Inc. against the Gaubs. Appellants Gaub bring four issues on appeal: 1. Whether Palmer assumed the obligation tomake the lease payments to Business Finance Co., Inc. under either express or implied contract, thus relieving the Gaubs of theirobligation under the lease3 2. Whether Business Finance Co., Inc. failed in

### itsduty tomitigate damages? 

### 3. Whether Business Finance Co., Inc. failed to sellthe equipment ina commercially reasonable manner? 

### 4. Whether the attorney fee awarded Business Finance Co., Inc. was unreasonable? The trialcourt made these findings of factwhich concern the first issue: "I. That the purchase of the RED BARN by ThirdParty Defendants was evidenced by two written agreements, one dated October 12, 1970, and the other dated January 20, 1971. "11. That neither of saidwritten agreements contains any provisions whereby CHARLES A. PALMER, JR. agreed toassume the obligations of the GAUBS and the RED BARN under that certain Lease Agreement between BUSINESS FINANCE CO., INC. and the RED BARN, INC., and guaranteed by the GAUBS, dated February 13, 1970."111. That on or about October 15, 1970, CHARLES A. PALMER, JR. refused toexecute the 'Assignment and Assumption Agreement' brought tohim by ARNOLD A. GAUB, thereby evidencing his intentnot to assume and be bound by the obligations of the Lease with BUSINESS FINANCE CO., INC. "IV. The testimony of ARNOLD A. GAUB when called as an adversewitness clearly established that CHARLES A. PALMER, JR. purchased only the assets of the RED BARN and did not, in fact, purchase the stock of the RED BARN, INC

# .II These findings of fact are supported by written agreements inevidence and by the transcript of testimony talcen attrial. Even assuming, arguendo, that at some point intime itwas the intention of the Gaubs and Palmer toeffect an assignment, they were prohibited from doing soby the express terms of the lease contract, without obtainingwritten consent of the lessor Business Finance Co., Inc. The lessor informed Gaubs that consentwould be given only if the Gaubs remained as guarantors on
11 the obligation. The record indicates the Assignment and Assumption Agreement" was never signed by Palmer, nor was it approved by Business Finance Co., Inc. and that the Gaubs were aware of these facts. The record also indicates the Gaubs were given several notices during the period that theywere indefault of payment. The remedy of quasi-contract is equitable innature and will not-be appliedwhere the party seeking relief has failed to exercisereasonable prudence and diligenceunder the circumstances. Builders Sup. Co. v. City of Helena, 116Mont. 

### 368, 154P.2d 

### 270. Appellants' second issue--that Business Finance Co., Inc. failed tomitigate damages--is based on the fact itwaited seventeen months, duringwhich time the payments were indefault, before rcpsssessing the equipment. Again, we refer to the frequent notices of default provided the Gaubs during this period. This was a reasonable effort toavoid losses under the circumstances and should have served notice upon the Gaubs to take 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. Hogland v. Klein, 

### 49 Wash.2d 216, 298 P.2d 1099; 25 C.J.S. Damages 

### 5 34. We also find nomerit in appellants' third issue that the

II 

### disposition made of the repossessed propertywas not commercially reasonable under the

### circumstance^'^. 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 $300was not a commercially reasonable price is contradictedby the fact they declined to enter a bid in excess of $300. Section 878-9-504,R.C.M. 1947,allo1~7s the secured party to 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
arenot the subject of standard price quotations, nothing appears in the record to substantiate their contention thatWoods Business Machineswas acting as agent for Business Finance Co., Inc. in making the purchase. To prove the salewas not commercially reasonable, appellants rely on the fact that one of the repossessed cash registers purchased by Woods Business Machineswas 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. 29Am JurZd, Evidence 

### 5 389. Appellants' fourth issue questions the reasonableness of the attorney fee awarded Business Finance Co., Inc. We find thatUnderthe terms of the lease, Business Finance Co., Inc. was entitled torecover reasonable attorney fees inthe event of 

### a breach of contract. DisciplinaryRule 2-106, Cannons of ProfessionalEthics adopted by thisCourt, effectiveMay 1, 1973, lists several factors tobe considered indetermining the reasonableness of a fee. We find the attorney feegrantedby the trial courtwas not .unreasonable. The judgment isaffirmed.

Chief JusticeINTHE SUPREME COURT' OF THE S'TA.TE OF MOL\I'TAIJA

No. 12476

BUSINESS FINANCE CO., INC., A Washington Corporation, Plai-ntiff and Respondent,
VS. ARNOLD A. GAUB, LEO W. GAUB, and AL GAUB, Defendants, Third-Party Plaintiffs and Appellants,
VS. CHARLES A. PALMER, JR., and RON WILKERSON, d/b/a THE RED BARN, Third-Party Defendants and Respondents.

ORDER
PER CURIAM: Plaintiff's petition for assessment of attorneys fees having been duly considered and it appearing tothe Court that pursuant to the lease agreement executed by defenda.nt and appellant, The Red Barn, Inc. and guaranteed by defendants and appellants, Arnold A. Gaub, Leo W. Gaub a.nd A1 Gaub, that said defendants and appellants owe toplaintiff and respondent, Business Finance Co., Inc. its reasonable attorneys fees incurred inthe above matter; and it further appearing tothe Court that such attorneys fees incurred prior tothetime of judgment were assessed and awa.rded within the district court judgment and it is hereby ORDERED that plaintiff and respondent Business FinanceCo., Inc. is awarded its reasonable attorneys fees incurred since the time of judgment in the abovematter in the amount of $500.00 against defendants and appellants, The Red Barn, Inc., Arnold A. Gaub, Leo W. Gaub and A1 Gaub and thematter 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 12thday of December, 1973.