Opinion ID: 2507160
Heading Depth: 2
Heading Rank: 3

Heading: deep creek's remedies depend on resolution of the contractual ambiguity

Text: ¶ 21 Having affirmed the district court's ruling that Armory is liable for breach of contract, we now consider Deep Creek's remedies. We begin by discussing specific performance in light of our ruling that the contractual term surplus property is ambiguous. Because the possibility of specific performance  unlike the issue of liabilityis dependent on the resolution of the meaning of surplus property, we remand to the district court to determine the term's meaning. Further, because specific performance Deep Creek's elected remedymay be possible, it is premature for us to reach the issue on cross-appeal of whether legal damages are too speculative. Finally, Armory did not appeal the district court's award of consequential damages in the event it is liable. Because, as discussed above, Armory is liable for breach of contract, Armory is obligated to pay Deep Creek for these damages plus additional accrued interest, fees, and costs attendant to this appeal and any further proceedings.

¶ 22 Prior to trial, the district court ruled that Deep Creek, by seeking and obtaining a judgment of specific performance, made an election of its remedies and this proceeding henceforth is limited to the claim of specific performance. The district court, however, further ordered that trial should also proceed at the same time on [Deep Creek's] claim for the alternative remedy of legal damages in the event the remedy of specific performance proves impossible. Deep Creek did not challenge this ruling on appeal and is therefore restricted to seeking specific performance unless specific performance proves impossible.
¶ 23 Although the district court noted that specific performance might be impossible, it did not resolve the issue at trial. As to this issue, resolving the meaning of the term surplus property becomes relevant. Specific performance may or may not be possible depending, in part, on whether the contract requires that Armory convey only federal surplus property or that it convey either state or federal surplus property. ¶ 24 If the parties intended the term surplus property to mean only federal property, specific performance is impossible. Both parties have conceded this to be the case. Therefore, if on remand the district court determines that surplus property was intended by the parties to mean only federal surplus property, specific performance is impossible and Deep Creek may seek legal damages. ¶ 25 If, on the other hand, surplus property was intended by the parties to mean both state and federal property, the possibility of specific performance remains an open factual question. While it has been established that it would be impossible for Armory to satisfy its contractual obligation through the provision of federal surplus property, it may be able to do so through the provision of state surplus property. But it has not been determined whether Armory has the authority to transfer state surplus property. Armory argues that state surplus property put up for sale at auction and the proceeds from such sales remain the property of the state agency from which they came. If the district court determines that surplus property was intended by the parties to mean state and federal property, it must determine whether it is possible for Armory to deliver state surplus property to perform the contract. ¶ 26 In short, once the district court has determined, by resolving what the parties intended by the term surplus property, what performance is required of Armory under the contract, it must determine whether such performance is possible. If and only if such specific performance is impossible may Deep Creek seek general legal damages.
¶ 27 In considering the meaning of surplus property the district court on remand must look to extrinsic evidence of the parties' intent. [W]hen a contract provision is ambiguous because it is susceptible to more than one reasonable interpretation due to uncertain meaning of terms, missing terms, or other facial deficiencies, extrinsic evidence is admissible to explain the intent of the parties. [11] Because the district court rested its decision on the holding that, as a matter of law, the contract referred to both state and federal property, we are not convinced that the issue received a full evidentiary airing. Accordingly, on remand, the district court may rely on evidence presented at the first trial but should allow the parties an opportunity to present additional evidence in this regard.
¶ 28 The district court allowed Deep Creek to present evidence of legal damages for lost profits in the event specific performance is impossible. Deep Creek produced evidence of the auction sales of state surplus property vehicles during the actual three years it was entitled to the surplus property credits. The district court found that this evidence did not prove Deep Creek's legal damages to a reasonable certainty. It ruled that legal damages for lost profits were too speculative because Deep Creek had never operated a surplus property business in the past and did not have a track record of similar past sales. Deep Creek challenges this ruling on cross-appeal. ¶ 29 Appellate review of this issue would be premature at this time. If the district court determines that specific performance is possible, it will be unnecessary to resolve the issue of whether legal damages for lost profits are too speculative. In addition, the measure of legal damages may vary depending on whether Deep Creek was promised only federal surplus property or state and federal surplus property. Therefore, the issue of whether Deep Creek has proven legal damages to a reasonable certainty cannot be resolved until the district court determines what the parties intended by the term surplus property. Accordingly, as a predicate to appellate review, the district court must first decide, if necessary and in light of its resolution of the contractual ambiguity, the question of whether Deep Creek has proven legal damages to a reasonable certainty.
¶ 30 Prior to trial, the district court ordered that trial should proceed on any claims of [Deep Creek] with regard to equitable damages, being those damages flowing from the delay in performing the contract . . . including a claim for attorney's fees. The district court awarded Deep Creek damages for loan interest, insurance, taxes, expenses, and attorney fees. Armory has not specifically challenged the award of these damages on appeal, arguing only that it is not liable for breach of contract. Because we hold that Armory is liable for breach of contract, Armory is obligated to pay Deep Creek for these damages plus additional accrued interest, fees, and costs attendant to this appeal and any further proceedings.