Court Opinion

ID: 182092
Source: CourtListenerOpinion
Date Created: 2011-01-04 01:01:07+00
Date Added: 2024-06-11T17:25:58.000186
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                            FOR THE NINTH CIRCUIT                              JAN 03 2011

                                                                          MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

ARIZONA PRECIOUS METALS, INC., a                 No. 08-17203
Nevada Corporation,
                                                 D.C. No. 2:07-CV-00707-
              Plaintiff - Appellant,             MHB(ROS)

  v.
                                                 MEMORANDUM*
ACCEPT ERSTE ROHSTOFF
BETEILIGUNGS KG, a German
Partnership; KARL-HEINZ RAUBALL;
BERNHARD PUTTKE,

              Defendants - Appellees.

                   Appeal from the United States District Court
                            for the District of Arizona
                    Roslyn O. Silver, District Judge, Presiding

                          Submitted December 6, 2010**
                            San Francisco, California

Before: HUG, D.W. NELSON and McKEOWN, Circuit Judges.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      Arizona Precious Metals, Inc. (“APM”) appeals the district court’s decision

that it is not entitled to damages for lost profits in this breach of contract action.

We have jurisdiction pursuant to 28 U.S.C. § 1291, and we review the state law

determinations of the district courts de novo. In re McLinn, 739 F.2d 1395, 1398

(9th Cir. 1984) (en banc).

      APM argues that the district court failed to distinguish between the fact of

lost profits and the amount of lost profits, and it therefore applied the incorrect

legal standard of proof for the amount of lost profits under Arizona law. Because

this is a default case, APM argues that the only question the district court needed to

answer was how much profit it had, in fact, lost. According to APM’s logic, it is

entitled to any and all types of damages.

      This argument is entirely without merit. The relevant inquiry has nothing to

do with the standard of proof that the district court applied. As APM’s brief

acknowledges, the “traditional measure of damages for breach of a contract to loan

money is the additional interest required for a replacement loan.” United

California Bank v. Prudential Ins. Co. of America, 681 P.2d 390, 447 (Ariz. Ct.

App. 1983). As a limited exception to this general rule, however, a party may

recover additional compensatory damages when

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      “the specific purpose for which the loan was made was communicated
      to the lender at the time the contract was entered into, and where it
      further appears that the borrower has suffered special damages by the
      breach, which are pleaded and proved, the damages recoverable are such
      as may fairly and reasonably be supposed to have been in the
      contemplation of the parties at the time of making the contract, as the
      probable result of a breach of it.”

Higgins v. Arizona Sav. & Loan Ass’n, 365 P.2d 476, 482 (Ariz. 1961) (quoting

Shurtleff v. Occidental Bldg. & Loan Ass’n, 181 N.W. 374, 375 (Neb. 1921)). In

this sense, Arizona law comports with general principles of contract which dictate

that “[d]amages are not recoverable for loss that the party in breach did not have

reason to foresee as a probable result of the breach when the contract was made.”

RESTATEMENT (SECOND) OF CONTRACTS § 351 (1981). In the lending context, it is

generally assumed that the “borrower will be []able to make substitute

arrangements in the event of breach,” and therefore the lender’s liability is “limited

to the relatively small additional amount that it would ordinarily cost to get a

similar loan from another lender.” Id. cmt. e.

      Because APM did not offer credible evidence that the defendants had reason

to foresee when the contract was formed that APM would be unable to obtain

alternative financing as a probable result of their breach, the district court properly

held that APM was not entitled to damages for lost profits. The fact that the

district court’s opinion cited to a Texas appellate case as an example of the

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application of these general principles does not alter this result. The reasoning in

Basic Capital Management v. Dynex Commercial, Inc., 254 S.W.3d 508 (Tex.

App. 2008), in no way contradicts existing Arizona precedent or the district court’s

original order. Moreover, the district court did not rely on that case in making its

decision.

      APM’s other claims are also without merit.

      AFFIRMED.

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