Court Opinion

ID: 6854471
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:40:25.515953+00
Date Added: 2024-06-11T16:05:07.991664
License: Public Domain

McInturff, J.
(dissenting) — The majority opinion has fashioned an equitable remedy where none exists, was intended, or is allowable under the law. Accordingly, I dissent.
Steven Wilkinson and Joseph Young contracted to purchase Darrell Sample's cleaning business. The purchase price was $30,000. That price was allocated, presumably for tax purposes, as $5,000 for the existing inventory, fixtures and equipment, $10,000 for a 3-year covenant not to compete, and $15,000 for the business' goodwill. At the time of trial, $1,668.50 had been paid toward the goodwill amount.
Wilkinson and Young commenced this action seeking rescission or, in the alternative, damages. The trial court did not rescind the contract. However, in fashioning its remedy, the trial court relieved Wilkinson and Young of *276their contractual obligation to pay Sample the $13,331.50 still owing for the goodwill and allowed Sample to retain the $1,668.50 already received. The findings of fact, conclusions of law, and the judgment are all silent regarding any rescission award. In fact, the trial judge, in his oral opinion, specifically spoke of allowing damages for Mr. Sample's breach.
Even assuming, as the majority has, that the trial court rescinded the contract, such rescission, whether total or partial, was not an available remedy under these facts. The failure of consideration is a ground for rescission. Krause v. Mariotto, 66 Wn.2d 919, 920, 406 P.2d 16 (1965); Barber v. Rochester, 52 Wn.2d 691, 694, 328 P.2d 711 (1958). However, one who seeks to rescind a contract must restore or offer to restore the other party to as near his former position as possible. J.I. Case Credit Corp. v. Stark, 64 Wn.2d 470, 480, 392 P.2d 215 (1964); Rummer v. Throop, 38 Wn.2d 624, 637, 231 P.2d 313 (1951). Because Wilkinson and Young never offered to restore the status quo, i.e., return the inventory, fixtures, and equipment, rescission was not an available remedy. Also, the trial court's decision to grant rescission, when such a remedy is available, is a discretionary determination. Yount v. Indianola Beach Estates, Inc., 63 Wn.2d 519, 525, 387 P.2d 975 (1964). In the present case, there was no abuse of that discretion.
The majority avoids this obstacle by finding the contract to be severable. The rule for determining whether a contract is entire or severable is stated in Saletic v. Stamnes, 51 Wn.2d 696, 699, 321 P.2d 547 (1958):
"Whether a contract is entire or divisible depends very largely on its terms and on the intention of the parties disclosed by its terms. As a general rule a contract is entire when by its terms, nature and purpose, it contemplates and intends that each and all of its parts are interdependent and common to one another and to the consideration."
Here, the contract provided that the "total purchase price" for the business and the equipment was $30,000. *277There is nothing within the four corners of this contract to indicate the parties intended the various parts or allotments of the contract were to be treated as separate agreements. There is no testimony in the record from any of the parties that they intended the sale to consist of three separate contracts. To engage in this fiction requires one to accept the untenable position that a buyer would have been willing to pay Mr. Sample for the goodwill of his business without purchasing the assets of the business. Wilkinson and Young contracted to purchase a business for a lump sum. The contract was not divisible. Thus, the equitable remedy for partial rescission was not available.
Because the trial court did not rescind the contract, its duty was to determine money damages. Generally, the measure of damages for breach of contract is the sum which will put the injured party in the same position as he would have been had the obligation been fulfilled. Donald W. Lyle, Inc. v. Heidner & Co., 45 Wn.2d 806, 814, 278 P.2d 650 (1954); Dravo Corp. v. L.W. Moses Co., 6 Wn. App. 74, 90, 492 P.2d 1058 (1971). Stated another way, the injured party is entitled (1) to recover all of the damages that accrue naturally from the breach, and (2) to be put in as good a position pecuniarily as he would have been had the contract been performed. Diedrick v. School Dist. 81, 87 Wn.2d 598, 609-10, 555 P.2d 825 (1976). An injured party is entitled to receive the benefit of his bargain, i.e., whatever net gain he would have made under the contract. Platts v. Arney, 50 Wn.2d 42, 46, 309 P.2d 372 (1957).
But, an injured party must prove his damages. Wilkinson and Young had the burden of establishing how Sample's failure to provide the entire 30 days of training and his failure to contact all of his former customers damaged them. In other words, if Sample had done everything he had agreed to do, what benefit would Wilkinson and Young have received? That amount, if and when proven, is their damages.
I recognize the trial court has discretion to award damages within the range of evidence. Cromwell v. Gruber, 7 *278Wn. App. 363, 368, 499 P.2d 1285 (1972); Huzzy v. Culbert Constr. Co., 5 Wn. App. 581, 586, 489 P.2d 749 (1971). However, there must be a reasonable basis in the record for estimating the loss. Prier v. Refrigeration Eng'g Co., 74 Wn.2d 25, 31-32, 442 P.2d 621 (1968). Here, the problem is a total failure of proof as to how Wilkinson and Young were damaged by Sample's breach. There is no evidence they suffered any consequential damages from Mr. Sample's actions or inactions. Wilkinson and Young failed to prove their case.
The trial court, in awarding damages, ruled that an injured party's measure of damages is equal to the consideration paid. This rule confuses and misapplies the remedies available in a damages action. A case in point is Commercial Inv. Co. v. National Bank of Commerce, 36 Wash. 287, 78 P. 910 (1904). In that case, Commercial entered into a settlement with the bank. Commercial claimed the bank breached its covenant not to sue and sought to rescind the contract in part and to recover as damages the consideration given for the violated portion of the agreement. Our Supreme Court held:
But we think the appellant has mistaken its remedy. When a contract is divisible into separate or distinct parts, equity sometimes permits the injured party to rescind, on equitable terms, one such part, while adhering to another independent part; but where the contract is an entirety, or where there is but one entire consideration for a number of conditions, the contract must generally be rescinded as a whole, if rescinded at all. There can be no partial rescission and a refunding of a portion of the consideration, unless it be in an extreme case where there is no possible remedy other than through such a proceeding. The conditions shown in the complaint before us do not call for any such extreme remedy. For the breach of the condition complained of here, the remedy is found in an action to recover the actual damages suffered because of such breach of the condition. These ordinarily would be the expenses incurred in compelling the respondent to perform its covenants, and the losses it suffered because of the failure on the part of the respon*279dent to save it from being sued, but it could not be that part of the whole consideration which the appellant claims to have paid to obtain this particular covenant. The consideration paid is rarely, if ever, the measure of damages for the breach of a covenant. The fundamental idea of damages, in all such cases, is compensation for the injury suffered, and, be this greater or less than the consideration paid to secure the covenant, it is the amount, and the only amount, that can be recovered because of a breach thereof.
(Italics ours.) Commercial Inv. Co. v. National Bank of Commerce, supra at 292-93; see also Bedrosian v. Peoples Mortgage Corp., 182 F.2d 395, 396 (D.C. Cir. 1950); Thompson v. Rector, 170 F.2d 167, 169 (D.C. Cir. 1948); Hoffer Oil Corp. v. Carpenter, 34 F.2d 589, 591 (10th Cir. 1929).
The trial court erroneously relieved Wilkinson and Young of their bargained-for duty of paying the $13,331.50 balance owing for goodwill due to the failure of consideration. The majority has affirmed that action. There is nothing in the record, either in equity or in the law, to support this remedy. Personally, I have no doubt Wilkinson and Young were damaged because of Mr. Sample's breaches. However, they failed to satisfy their burden of establishing what those damages were.
I concur with the result of the majority that the $6,666 award for breach of the covenant not to compete was erroneously entered. However, the judgment which relieves Wilkinson and Young from completing payment for goodwill should be reversed due to their failure to prove their case.