Court Opinion

ID: 9733490
Source: CourtListenerOpinion
Date Created: 2023-08-26 17:09:15.041658+00
Date Added: 2024-06-11T18:26:42.013199
License: Public Domain

MESCHKE, Justice,
concurring in part and dissenting in part.
I concur fully in Chief Justice Erickstad’s opinion except the analyses of remedy issues. I respectfully dissent as to the reversal and remand for redetermination of damages.
Upon breach of a truly executory contract, the correct measure of damages is the difference between the contract price and the fair market value of the business on the date of the breach, plus any incidental damages. That would be true under the Uniform Commercial Code for goods. (N.D.C.C. § 41-02-87, (U.C.C. 2-708)). It would also be true under basic contract law for sale of any personal property. 11 S. Williston, A Treatise of the Law of Contracts § 1351 (3d ed. 1968); 5 A. Corbin, Corbin on Contracts, § 1053 (1964). Restatement (Second) of Contracts, §§ 347, 350 (1981).
The Uniform Commercial Code on sales is a well-reasoned formulation of contract law as it is applicable to goods. The Uniform Commercial Code should be regarded “less as a novel enactment than as largely a restatement and clarification of existing law which has the approval of American scholars;” Universal C.I.T. Credit Corp. v. Guaranty Bank and Trust Co., 161 F.Supp. 790 (D.Mass.1958). Rather than mechanically distinguishing it, we should look first to its expression of commercial law for guidance. While a distinction between sale of goods subject to the Uniform Commercial Code and sale of other assets may sometimes be necessary or desirable, it should be based upon good reason after analysis, and not serve as the starting point.
Since the remedy is the same, I see no need to make the “essential nature” analysis of this sales contract. We should not complicate commercial law by differentiating where no difference exists. Therefore, I respectfully disagree with the “essential nature” analysis.
The real remedy issue in this case is whether this is a repudiation of an exec-utory contract or of a contract where the seller has fully performed so as to be entitled to the price. If a promisee has fully performed, he is “entitled to the full value of the defendant’s performance.” 11 S. Williston, A Treatise on the Law of Contracts, § 1349 (3d ed. 1968); 5 A. Corbin, Corbin on Contracts, § 1100 (1964); N.D. C.C. § 41-02-88(1) (U.C.C. 2-709). This rule has been essentially recognized in North Dakota in Bryan v. Northwest Beverages, 69 N.D. 274, 285 N.W. 689, 692 (1939) which stated: “... [H]e may bring an action on the contract for the breach thereof, and recover the contract price, less the necessary expense of completing the same.” Where a seller has. fully performed, there is no “necessary expense of completing the same.”
The opinion of the Chief Justice analyzes this as an executory contract and therefore holds the trial court erred in awarding the price remedy. But, Porter had delivered full possession and caused transfer of the important liquor license. The delivery of closing documents and closing adjustments by the seller is simply formal, not substantial. Therefore, I respectfully dissent as to the analysis and holding on the remedy. Since the seller had substantially completed his performance, I believe the trial court correctly applied the price remedy.
I am also troubled by the “security interest” analysis of the Chief Justice’s opinion. The lack of a “security interest” did not appear to be an issue below since it was not identified as one in Fridley’s answer. The issue was certainly not well briefed on this appeal, as it was only passingly mentioned by Fridley that the “security agreement was never executed” by him.
Since Porter repossessed, it is difficult to see why it matters whether he did it pursu*927ant to a security agreement or simply as an unpaid seller protecting his interests when the defaulting buyer abandoned the business. Either way, it was essentially consensual and the result should be the same. (See also N.D.C.C. § 41-02-46(4) (U.C.C. 2-401): “A rejection or other refusal by the buyer to ... retain the goods, whether or not justified, ... revests title to the goods in the seller. Such revesting occurs by operation of law and is not a ‘sale’.”) Whether foreclosed or repossessed, the defaulting buyer is entitled to credit or offset on the judgment for actual proceeds collected on the resale. See Fateh v. Rich, 481 A.2d 464 (D.C.1984) and N.D.C.C. § 41-02-88(2) (U.C.C. 2-709). And, if the contract is executory rather than executed as to the seller, it seems to me that the burden of proving remaining market value upon return should be on the defaulting buyer. (It should be noted that Porter resold the abandoned business, but only after trial.)
For these reasons, I would also avoid addressing the “security interest” issue.
But, if I were to decide the “security interest” issue, I would approach it differently. First, there do not appear to be any affected rights of intervening lien creditors or good faith purchasers which is the customary context in which the existence of a valid security interest is at issue. Second, the chapter on secured transactions says, “ ‘Security agreement’ means an agreement which creates or provides for a security interest.” (emphasis supplied) § 41-09-05(1)(l), N.D.C.C. (U.C.C. 9-105). See also § 41-09-02(1), N.D.C.C. (U.C.C. 9-102): “... this chapter applies to: a. Any transaction (regardless of its form) which is intended to create a security interest in personal property....” It is clear that Fridley and Porter intended to “provide” for a security interest between themselves in paragraph 12 of the sales contract.
It is not at all clear that the use of the phrase, “at the final closing,” evidenced an intent to postpone the effectiveness of the security interest in all events. The “closing” of the seller’s performance was delayed for transfer of the liquor license (Paragraph 9). That had been completed .before Fridley repudiated. In my opinion the contract should not be interpreted, as a matter of law, to wholly defer the security interest where the buyer goes into immediate possession. At least, the contract is ambiguous on this point.
The district court determined that Porter, “pursuant to the contract possesses a security interest in the Esquire Club” (Conclusion of Law 11). A finding of fact, wherever found, should not be set aside on appeal unless clearly erroneous. Rule 52(a), N.D.R.Civ.P. I am not firmly convinced that the trial court was mistaken in so finding.
I also respectfully submit that the “security interest” issue should not be decided on this appeal, or, if it is, should be affirmed.
I would affirm the judgment in all respects.