Court Opinion

ID: 9534250
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:37:53.812644+00
Date Added: 2024-06-11T13:29:53.259145
License: Public Domain

Neill, J.
(concurring in part and dissenting in part)—I concur in the majority opinion as to the cross-appeal by Enders and agree that the trial court should be affirmed on the issues thus raised by the defendant Enders. I dissent as to the appeal of plaintiff.
The majority apparently holds that Enders abandoned the tractor and repudiated the contract, giving rise to a duty on the part of plaintiff to mitigate damages. The trial court made no finding of fact as to abandonment and repudiation, and since it is not the province of this court to make factual findings, I disagree with the majority in advising plaintiff that holding the tractor for Enders’ benefit was a “useless act,” and that “A more reasonable procedure would have been to attempt to mitigate damages by leasing it [the tractor] or selling it.”
A nonbreaching party must attempt to mitigate losses once the breaching party’s acts have become so flagrant as to, in effect, give notice that he repudiates the contract. See e.g., Sunset Shingle Co. v. Northwest Elec. & Water Works, 118 Wash. 416, 203 Pac. 978 (1922). But there must be a repudiation of the contract before the mitigation rule becomes operative. See 5 Corbin, Contracts § 1039 (1964) at 249.
During the. period of the repair of the machine by the plaintiff and its storage thereof for the benefit of Enders and his assignees, Enders’ assignees were attempting to secure another assignee for the contract who would take *596over the obligation to plaintiff—a fact which negatives a repudiation of the contract. In this connection, Corbin, supra, states at 249:
It is not necessary for the plaintiff to take steps to avoid losses, even though the defendant has actually committed a breach, so long as he has not definitely repudiated the contract and continues to assure the plaintiff that performance will take place.
I also disagree with the majority in its view that the acceleration provision constitutes a penalty.
We are here concerned with a normal business contract entéred into openly and advisedly—a type of contract which is rapidly becoming commonplace in the industrial and business world. The result of the majority opinion may be to unduly restrict Washington operators in the use of this beneficial economic device whereby businessmen who do not have the capital to make the initial investment for equipment and machines which their businesses may require can, under rental arrangements, acquire the use of such chattels with a payment schedule stretching over an earning period. It is certain that leasing companies and financial institutions are going to be reluctant to risk the sizeable investments usually involved without the protective provisions of an acceleration clause.
The majority distinguishes our holding in Heath Northwest, Inc. v. Peterson, 67 Wn.2d 582, 408 P.2d 896 (1965), on the ground that in Heath the chattel involved was a sign built for special purposes and not capable of being used by others, whereas here the chattel is a tractor of a type in common use by many types of businesses. The distinction is important as to the extent to which the bailor may be able to mitigate potential loss, but in legal principle Heath is indistinguishable. Does the penalty which the majority finds result because of the nature of the property involved, or because of the nature of the acceleration clause? Since a substantially similar clause was upheld in Heath, I must conclude that the majority relies upon the nature of the property. Indeed, in setting out the reasons for declaring the clause a penalty, the majority hypothesizes that Guth*597rie could have held the tractor for 3 years before bringing suit, recovered the full rental amount from Enders, and then proceeded to re-lease the tractor to realize further income. Since a tractor in storage depreciates more slowly than one in use, Guthrie could have made a handsome profit under this hypothesis. It was this possible windfall which bothered this court in Sunset Shingle Co. v. Northwest Elec. & Water Works, supra, when it stated at 433:
Now we think there arrived a time when the breach of the contract by respondent became so flagrant as to, in effect, give notice to appellant that it would no longer be bound by the terms thereof .... When appellant became so advised, we think it was then obliged to proceed, in the further protection of its rights, upon the theory that the contract, in those respects at least, was completely breached; and that thereafter appellant’s damage, if any, suffered because of such breach, was measurable not by loss of profits, but by the expense of putting its plant in such condition, as to machinery and appliances, as would enable it to proceed in its manufacturing business as advantageously as it could have proceeded had respondent not so breached the contract.
Plaintiff did not delay the bringing of the suit until the lease period had nearly terminated. Instead, in good faith, plaintiff elected to affirm the contract by suing for rentals, all the while holding the tractor for Enders’ benefit. Indeed, had the lessor sold or leased the tractor it would have thereby deprived Enders of his contract right to pay the rental and obtain possession of the machine. It is obvious, therefore, that the majority view is based on an absolute repudiation and abandonment of the contract, a forfeiture —a fact not established herein.
In effect, the majority has rewritten this contract for the parties, telling plaintiff that it had no right to elect to affirm the contract under the acceleration clause.
Plaintiff is not seeking damages in the usual sense of the word.1 Rather, he seeks the benefit of his bargain. Conversely, defendant Enders suffers no penalty or deprivation *598of property. Pay the rent and obtain full use of the tractor —that is the contract, which is neither unlawful nor contrary to public policy.
In a case involving forfeiture of property rights after default and true repossession in the sense that the lessor was terminating the contract and denying the lessee of any right of possession, I would have no difficulty in rejecting the distinction between rents and damages. See Selts Inv. Co. v. Promoters of the Federated Nations of the World, Inc., 197 Wis. 476, 482, 220 N.W. 222, 222 N.W. 812 (1928-29), 99 A.L.R. 42, 48. But in the instant matter, it is apparent to me that plaintiff is seeking the benefit of his bargain, the very consideration as it were, rather than damages in the compensatory sense.
Professor Corbin, in discussing the nature of penalties, refers to forfeitures of money or property in case of failure to perform a contract. 5 Corbin, Contracts § 1057 (1964). Where there is no forfeiture can there be a penalty?
Even if we were to assume, arguendo, that defendant had fully repudiated the contract and abandoned the tractor so that the rule of mitigation of damages would be appropriate, we are faced with a total lack of proof as to the extent of such mitigation. This burden lies with the defendant, not with the plaintiff who seeks the full contract consideration. Burr v. Clark, 30 Wn.2d 149, 190 P.2d 769 (1948); 5 Corbin, Contracts § 1039 (1964); Restatement, Contracts § 336, comments (1932). The trial court, in effect, made a finding as to the dollar value of the mitigation without any evidence thereon. Certainly the depreciation approach used is not relevant to the question of the amount plaintiff might have recovered by leasing the machine to others for the balance of the term of the lease agreement. As pointed out by Professor Corbin, supra, at 241:
Since the purpose of the rule concerning damages is to put the injured party in as good a position as he would have been put by full performance of the contract at the least necessary cost to the defendant, the plaintiff is never given judgment for damages for losses that he could have avoided by reasonable effort without.risk of *599other substantial loss or injury. Likewise, gains that he could have made by reasonable effort and without risk of substantial loss or injury by reason of opportunities that he would not have had but for the other party’s breach are deducted from the amount that he could otherwise recover.
It is not infrequently said that it is the “duty” of the injured party to mitigate his damages so far as that can be done by reasonable effort on his part. Since there is no judicial penalty, however, for his failure to make this effort, it is not desirable to say that he is under a “duty”. His recovery against the defendant will be exactly the same whether he makes the effort and mitigates his loss, or not; but if he fails to make the reasonable effort, with the result that his injury is greater than it would otherwise have been, he cannot recover judgment for the amount of this avoidable and unnecessary increase. The law does not penalize his inaction; it merely does nothing to compensate him for the loss that he helped to cause by not avoiding it. (Footnotes omitted.)
The proper rule, if mitigation were applicable, is stated in Exeter Co. v. Samuel Martin, Ltd., 5 Wn.2d 244, 105 P.2d 83 (1940), wherein it was held error to instruct the jury it should allow as damages “ ‘the difference between the rent reserved in the lease and the reasonable rental value for the unexpired term.’ ” We therein stated the correct rule is that “[T]he lessor is entitled to recover the rent reserved to the end of the term less the amount actually received from subsequent tenants during the remainder of the term, provided it makes an honest and reasonable attempt to relet. (Citations omitted.)”
For the reasons set forth, I would reverse the trial court as to the matter of damages, and award judgment to plaintiff in the amount of the accelerated rent.

See 5 Corbin Contracts § 995 (1964) for discussion of difference between debt and damages.