Court Opinion

ID: 5157578
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:26:07.054729+00
Date Added: 2024-06-11T08:24:53.669860
License: Public Domain

Justice RICE,
dissenting.
1 22 I would hold that this case is governed by contract law and that damages in this case are limited to lost profits. I would further hold that PurCo cannot demonstrate its lost profits with reasonable certainty. Accordingly, I would reverse the judgment of the court of appeals and grant summary judgment in favor of Koenig. Therefore, I respectfully dissent.
I. Contract Measure of Damages
23 The majority looks to tort law and the Restatement of Torts to determine whether reasonable rental value is the appropriate measure of damages. Under tort principles, it reasons, the plaintiff may elect either lost profits or the reasonable rental value of the vehicle to quantify its damages.
*985T24 This case, however, involves only a claim for breach of contract. PurCo did not assert a tort claim. National and Koenig entered into a contract-the rental agreement. The contract governs their respective rights and obligations in the event of damage to the vehicle while in Koenig's possession. The majority would determine damages in this contract action by interpreting the contract's damages provision according to tort principles. Maj. op. at 17. Because the damages arise out of a breach of contract-the failure to return the car in its original condition-I would look to contract law to determine the appropriate remedies in this case.
{25 Under general principles of contract law, when a breach of contract results in a delay of the use of property, the aggrieved party is entitled to lost profits as its remedy. Acoustic Mktg. Research, Inc. v. Technics, LLC, 198 P.3d 96, 98 (Colo.2008); see also Restatement (Second) of Contracts §§ 348(1), 348 emt. b (1981). Only if lost profits cannot be proved with "reasonable certainty" may a plaintiff seek damages quantified by reasonable rental value of replacement property or interest. See Acoustic Mktg. Research, 198 P.3d at 98 (damages are not recoverable for losses beyond an amount that can be established with reasonable certainty); Pomeranz v. McDonald's Corp., 843 P.2d 1378, 1381 (Colo.1993) (same); Restatement (Second) of Contracts § 348(1) ("If a breach delays the use of property and the loss in value to the injured party is not proved with reasonable certainty, he may recover damages based on the rental value of the property or on interest on the value of the property."). Therefore, I would hold that PurCo is entitled to lost profits as loss of use damages.
26 PurCo argues, however, that lost profits are not the proper measure of damages in its breach of contract claim for two reasons. First, it asserts that it cannot demonstrate lost profits because the records containing that information were destroyed as part of National's routine document destruction policy. Second, it argues that the contract in this case provides for an alternative measure of damages and thus it need not show lost profits. I find both of these arguments without merit.
T27 First, PurCo could demonstrate with reasonable certainty the lost profits suffered as a result of the damage to the vehicle. See Restatement (Second) of Contracts § 852 emt. b (1981) ("If the breach prevents the injured party from carrying on a well-established business, the resulting loss of profits can often be proved with sufficient certainty."). National kept certain records, including rental records, as a part of its normal business operations and therefore could calculate use and lost profits. See id. Koenig requested the rental records and proof of lost profits immediately upon receiving a demand for loss of use payment from PurCo. PurCo nevertheless asserts that it cannot demonstrate lost profits because National destroyed its fleet utilization records for the period that the vehicle was being repaired. National only retains rental records for 120 to 160 days. Koenig requested the records within that timeframe, but PurCo chose not to seek the records from National. The records would have enabled PurCo to establish with reasonable certainty an approximation of lost profits. See Acoustic Mktg. Research, 198 P.3d at 98 ("[Als long as the fact of future loss is certain, the amount of damages awarded may be an approximation.").
28 PurCo's inability to satisfy its burden of proof with respect to lost profits was a result of its imprudent business practices. National's failure to preserve evidence does not render the lost profits speculative and does not entitle PurCo to an alternative remedy. Rather, if PurCo had not mismanaged evidence relevant to its claim, it could have proven lost profits with sufficient certainty. I therefore believe that PurCo is only entitled to lost profits in this case and not an alternative measure of damages.
II. Rental Agreement
129 PurCo also asserts that the parties agreed that the damages would be measured in terms of reasonable rental value rather than lost profits. The agreement provides, in relevant part:
[Koenig] will pay [National] for all damage to or loss of the Vehicle, based on repair cost or estimated repair cost, at [National's] option, diminished value of the Vehicle *986as determined by [National], plus towing and [National's] loss of use (regardless of fleet utilization) and administrative charges, regardless of who is at fault.
In essence, PurCo contends that the parties intended to contract around the usual measure of damages and provide a special damages provision akin to a liquidated damages provision.
1 30 The agreement, however, fails to specify the loss of use remedy such that both parties could have agreed to it at the contract's formation. The meaning of the phrase "loss of use (regardless of fleet utilization)" is not clear from the contract. The contract gives no explanation of the meaning of "loss of use (regardless of fleet utilization)" and no indication of how such damages will be calculated. In fact, the record shows that PurCo actually set the terms of the measure of damages for loss of use after the damage to the vehicle. After receiving the initial demand for payment from PurCo,1 Koenig requested further detail regarding the calculation of the loss of use amount. PurCo provided a one page summary explaining "loss of use." Included in the summary was a detailed formula employed by PurCo in determining the loss of use damages.2 These terms were never referenced in the original rental agreement or incorporated in any way. Because the terms were not clear and specified from the beginning, I would hold that Koenig and National did not agree to alter the measure of damages.
T31 In any event, PurCo would still be entitled to recover its lost profits. The fact that a special or liquidated damages provision is not enforceable does not preclude recovery of actual damages for breach of the
contract. H.M.O. Sys., Inc. v. Choicecare Health Servs., Inc., 665 P.2d 635, 639 (Colo.App.1983); Oldis v. N.W. Grosse-Rhode, 35 Colo.App. 46, 52, 528 P.2d 944, 947 (1974). PurCo's actual damages are lost profits. Because the record reflects, however, that Pur-Co cannot demonstrate its lost profits for the period, I believe that the trial court correctly granted summary judgment in Koenig's favor and I would therefore reverse the judgment of the court of appeals.
I am authorized to state that Justice HOBBS joins in the dissent.

. In its demand, PurCo itemized the loss of use expenses as "$228.76 Loss of Use (6.75 days at $33.89)*." The reference to the asterisk states: "Loss of use calculation is based upon the damage repair valuation. Actual loss of use days may vary." The time to repair the vehicle was calculated based on an estimate provided by a local auto body shop in Durango, Colorado.

. "Our loss of use charge is determined by a three-part formula which calculates the number or days that the vehicle was out of service multiplied by the daily rental rate on the contract. First, for purposes of our formula, one day is equal to four labor hours, representing the average number of hours that a vehicle is worked on per day. Second, two weekend days are added for every five repair days, assuming that every repair begins on a Monday to allow for the fewest weekends possible. Third, three administrative days are allowed to obtain an estimate, take the vehicle to the shop and retrieve the vehicle. (For example, if the estimate requires 26 labor hours, then the formula works thus: 26 hours divided by 4 = 6.5; add 2 weekend days = 8.5; add 3 administrate days = 11.5; multiply 11.5 by a daily rental rate $42.00 = a loss of use charge of $483.00). This is the estimated loss of use charge and is subject to change."