Opinion ID: 171820
Heading Depth: 3
Heading Rank: 1

Heading: Roof Warranties

Text: Metric contends the district court erred as a matter of law in its rulings regarding the roof warranties. It appears that Metric agrees with the district court’s findings of fact on this issue. Because Metric’s challenge involves only the application of legal principles to undisputed facts, our review is de novo. See Hollern v. Wachovia Sec., Inc., 458 F.3d 1169, 1175 n.4 (10th Cir. 2006) (applying this standard in the context of attorney fees). After the bench trial, the district court addressed the roof warranties issue in its Findings of Fact and Conclusions of Law. The court found that GSA requested roof warranties from Metric, who in turn in its contract with Belt Con required Belt Con to provide them. Belt Con did not provide the roof warranties to Metric. In its later Memorandum Opinion and Order, the court noted that Belt Con stated “it was not going to provide the warranties until Metric paid Belt Con all the money to which Belt Con felt it was entitled.” Aplt. App’x Vol. I at 231. Metric asked other roofing contractors to provide warranties, but they declined to warrant another contractor’s work. Id. 149–50; 154–55. The district court later clarified that “Metric was able to obtain only one quotation for a roof warranty [from another roofer] in the amount of $118,000.” Id. at 231. Although the 5 district court acknowledged that “Metric remains liable to the GSA for any warranty items that may arise relating to the roof,” the district court found that “[t]he GSA has not called on Metric to honor the warranty, and Metric has not performed any warranty work.” Id. at 154–55; 232. “[T]he GSA called Belt Con directly several times to repair the roof . . . Belt Con responded to each call and performed work on the roof even when Belt Con felt that the warranties did not cover the repairs.” Id. at 232. In the Memorandum and Opinion addressing Metric’s motion to amend, the district court considered Metric’s damages regarding roof warranties to be the difference between Metric’s settlement amount with the GSA, and the hypothetical amount that Metric would have requested if the warranties were provided. Id. The district court found that “Metric does not know how much less it took in settlement because of the warranty issue.” Id. The district court concluded the testimony regarding the value of the warranties that was based upon another roofer’s offer was “speculative and conjecture.” Id. at 155; 256. After trial and after considering Metric’s motion to amend, the district court concluded that “Metric has not . . . proved that it has been damaged.” Id. at 155; 256–57 (“Metric failed to demonstrate that it suffered any damages.”). The district court denied Metric’s motion to amend judgment based upon Belt Con’s failure to provide the roof warranties. Metric agrees with the district court’s factual findings, but contends that the district court misapplied the law regarding contractual damages. First, Metric 6 argues that the district court “misapplied the ‘reasonable certainty’ rule and confused the distinction between uncertainty as to amount with uncertainty of existence.” Aplt. Br. at 21. To support this argument, Metric relies on the facts that it contracted with Belt Con for the roof warranties, did not receive them, and remains liable to the GSA for “roof warranty issues.” Id. Metric also argues its failure to receive the roof warranties was the present loss of a contractual right, and not “future damages” as characterized by the district court. Second, Metric argues that if the amount of damages—the value of the roof warranties—is difficult to calculate, any disadvantage arising from that difficulty should be borne by Belt Con and not Metric. Similarly, Metric argues that because of the nature of Belt Con’s breach, the evidence Metric presented was the best available evidence and provides a sufficient basis for the court to approximate Metric’s damages. Metric concludes “[c]ertainly there is no evidence in the record to suggest that the value of the roof warranties was zero[; i]t is illogical to presume the warranty has no value where warranties are present protection against unknowns and uncertain future liabilities.” Aplt. Br. at 29. 1 1 Metric also argues that the district court could have created an equitable remedy forcing Belt Con to deliver the roof warranties. Belt Con responds that this argument was not presented to the district court. In its reply, Metric does not dispute this assertion or reference where in the record this argument was previously made. Absent extraordinary circumstances, we will not consider arguments raised for the first time on appeal. Governor of Kan. v. Kempthorne, 516 F.3d 833, 841 (10th Cir. 2008) (citation omitted.) 7 We agree with the district court that California law governs this contract. We look to the conflict of law rules of New Mexico, the forum state, to determine which state’s laws control. Mountain Fuel Supply v. Reliance Ins. Co., 933 F.2d 882, 887–88 (10th Cir. 1991). Unless it would result in a violation of “fundamental principles of justice,” New Mexico courts apply the law of the state where the parties executed the contract. Demir v. Farmers Tex. County Mut. Ins. Co., 140 P.3d 1111, 1113–14 (N.M. Ct. App. 2006) (“When differences between the law of the forum state and the law of the state where the contract was executed concern only contract interpretation, we will apply the law of the state where the parties entered the contract.”). Belt Con and Metric executed the contract at issue in California. Aplt. App’x Vol. I at 151. Neither party disputes that California law applies. Under California law, every contract action requires the establishment of “a causal connection between the breach and the damages sought.” Thompson Pac. Const., Inc. v. City of Sunnyvale, 66 Cal. Rptr. 3d 175, 188 (Cal. Ct. App. 2007). In the context of building construction, the amount of damages is the difference between the contract price and the price of completing the contract work. Fairlane Estates, Inc. v. Carrico Const. Co., 39 Cal. Rptr. 35, 40 (Cal. Ct. App. 1964). Damages that are not causally connected with the breach of a contract are not recoverable. Patent Scaffolding Co. v. William Simpson Const. Co., 64 Cal. Rptr. 187, 191–92 (Cal. Ct. App. 1967). Damages that result from a liability to a 8 third party are not recoverable unless the party seeking the damages “proves to a reasonable certainty that the liability could and would be enforced by the third party” or that the party seeking the damages “could and would satisfy the obligation.” Green Wood Indus. Co. v. Forceman Int’l Dev. Group Inc., 67 Cal. Rptr. 3d 624, 632 (Cal. Ct. App. 2007). Accordingly, the existence of a mere liability is not necessarily the equivalent of actual damage. This is because the fact of damage is inherently uncertain in such circumstances. The facts that a third party has demanded payment by the plaintiff of a particular liability and plaintiff has admitted such liability are not, by themselves, sufficient to support an award of damages for that liability, because that third party may never attempt to force the plaintiff to satisfy the alleged obligation, and plaintiff may never pay the obligation. Id. at 633 (stating that such reasoning applies whether the claim sounds in contract or tort). Metric attempts to base its alleged damages on the district court’s finding that Metric remains liable to the GSA for roof warranty issues. Metric argues that its damages should be the present value of the protection from future liability. Aplt. Br. at 23 (“[As] a direct result of Belt[]Con’s refusal to furnish the roof warranties, Metric has lost the protection against possible liability that it contracted for.”). To support this argument, Metric cites the California Supreme Court’s opinion in Caminetti v. Manierre, 142 P.2d 741, 745 (Cal. 1943), for the statement: “The courts are not so impotent that they will permit a total loss of such a right merely because of a claimed uncertainty or difficulty in determining 9 the extent to which the insured may be damaged by the breach of the promise.” The California Supreme Court, however, went on to state, “Of course, the proof must establish with reasonable certainty and probability that damages will result in the future to the person wronged. And the nature of the damages should be ascertainable.” Caminetti, 142 P.2d at 745 (citations omitted). The requirement of proof of damages with “reasonable certainty and probability that damages will result in the future” is where Metric’s claim falls short. Id. Metric has not provided any evidence related to the probability that GSA will hold it liable for the roof warranties. Metric’s only evidence related to the value of the roof warranties consists of hearsay testimony that one roofer would provide substitute roof warranties for the amount of $118,000, which Metric’s president was unsure he would accept, and that if Metric had the warranties, it may have tried to settle with the GSA for a greater amount. The district court questioned the credibility and reliability of this evidence. On the other hand, there was evidence that the GSA called Belt Con for roof repairs and that Belt Con responded in each instance and provided the work requested. Because there is no evidence indicating a probability that GSA would hold Metric liable, and there is evidence that GSA has not held Metric liable, the existence of Metric’s liability to the GSA is insufficient to establish actual damages. We conclude that the district court did not err in denying Metric’s motion to reduce Belt Con’s award by the value of the roof warranties. 10