Summary
stating that recovery of damages for breach of warranty requires proof that breach was actual cause of damages
Summary of this case from Camino Real Mob. Home Park Part. v. WolfeOpinion
No. 75-273
Decided July 29, 1976. Rehearing denied August 12, 1976. Certiorari granted October 12, 1976.
Action against livestock company alleging that it misrepresented to buyers that certain cattle had been bred to black Angus bulls. Livestock company sought indemnity from rancher from whom it had purchased the cattle. From jury verdict against the livestock company plus verdict awarding it partial indemnity from the rancher, livestock company and rancher appealed.
Reversed
1. INSTRUCTIONS, CIVIL — Must Express — Party's Theory — Basis for Recovery. A jury must be instructed on a party's theory of the case and on its asserted basis for recovery; thus, the jury was not adequately instructed where defendant's third-party action was characterized and tried in such a manner that the jury could not have known whether it was premised on a breach of warranty theory or on an alleged fraudulent representation.
2. FRAUD — False Representation — Sale of Goods — Recovery Available — Either — Fraud or Breach of Warranty. Where the buyers of Hereford heifers sued seller for damages based on the seller's false representation that the heifers had been bred to black Angus bulls, the buyers were at liberty to seek recovery either for fraud or for breach of express warranty.
3. Proof Required — False Representation Made — With Knowledge of Falsity — Utter Disregard — Truth or Falsity. Where buyers of Hereford heifers sued the seller for damages based on the seller's false representation that the heifers had been bred to black Angus bulls, to recover for fraud it was incumbent upon the buyers to prove that the seller made the false representation with knowledge of its falsity or with utter disregard for its truth of falsity.
4. SALES — Third-party Action — By Defendant Seller — To Effect Recovery — Breach of Warranty — Proof Required — Actual Cause — Damages Suffered. Where seller of Hereford heifers was being sued by buyers for false representation that heifers had been bred to black Angus bulls, in order for seller to recover for breach of warranty on an action over against rancher from whom the seller had purchased the heifers, the seller was required to prove that the breach of warranty was the actual cause of the damages suffered by the seller.
5. TRIAL — Verdicts Awarding Recovery — Fraud and Breach of Warranty — Inherently Inconsistent. Where the buyers of Hereford heifers sued seller on basis of alleged fraudulent representation that the heifers had been bred to black Angus bulls, and seller cross-claimed for breach of warranty against the rancher from whom the seller had purchased the heifers, jury verdicts awarding judgment to the buyers on fraud claim and to seller on cross-claim were inherently inconsistent in that if the seller made fraudulent representation, then the seller's breach of warranty was not the actual cause of seller's damages suffered from subsequent suit for seller's fraud, but if the rancher breached his warranty to the seller, and the seller made his representation to the buyer relying on such warranty, then the seller did not practice fraud upon the buyer.
6. DAMAGES — False Representations — May Recover — Difference in Value — Plus Incidental Damages — Causal Connection Required. Where the buyers of Hereford heifers relied on seller's false representation that heifers had been bred to black Angus bulls, the buyers' damages were not limited to the difference between the actual value of the goods and their value as represented, but may also include incidental and consequential damages, so long as a causal connection is shown between the false representation and the damages claimed.
7. INSTRUCTIONS, CIVIL — Unsupported Damages Estimate — Agreed Incompetent — Failure to Instruct Jury — Reversible Error. Where the parties and the court agreed during a jury trial involving fraud that an unsupported damages estimate testified to as loss of future business profits should not be considered by the jury, failure to so instruct the jury to that effect is itself sufficient to require reversal of the judgment.
Appeal from the District Court of the County of Boulder, Honorable William D. Neighbors, Judge.
Charles L. Sharp, Jr., Daniel T. Goodwin, for plaintiffs-appellees.
Johnson, Doty, Johnson Summers, Stanley F. Johnson, Peter D. Van Soest, for defendants and third-party plaintiffs-appellants.
French Riddle, Joseph M. Riddle, for third-party defendant-appellant.
Martin and Paul Caldwell sued the defendants, individually and doing business as K and R Livestock Commission Company, Inc., for damages based on the defendants' representation that a herd of Hereford heifers purchased by the Caldwells from the defendants' livestock sales barn had been bred to black Angus bulls. The defendants, by third-party complaint, sought indemnification from Dick Hein, a rancher, from whom defendants had purchased the heifers. The individual defendants were dismissed prior to trial. After trial, the jury returned a verdict in favor of the Caldwells against KR for $22,050, and a verdict for $11,025 in favor of KR on its cross-claim against Hein. KR and Hein appeal. We reverse.
The Caldwells' original complaint against KR and the individual defendants asserted two separate claims for relief: fraud and breach of express warranty. KR filed an answer denying the allegations of the complaint and pleading the affirmative defense that the representation to the Caldwells by KR was "that the previous owner of said Heifers, one Dick Hein, had represented that said Heifers were predominantly bred to black bulls." At the same time, KR filed a third-party complaint against Hein, alleging the sale of the heifers by Hein to KR, an oral warranty by Hein that the heifers had been bred to black Angus bulls, and the resale by KR to the Caldwells. The third-party complaint also repeated the allegation that the representation by KR to the Caldwells was "that the previous owner of said Heifers, one Dick Hein, had represented that said Heifers were predominantly bred to black bulls." In his answer to the third-party complaint, Hein admitted the sale by him to KR, but denied the other allegations. Some months later, and prior to trial, the Caldwells filed an amended complaint based on fraud alone.
[1] After the parties had presented their evidence, the case was submitted to the jury under instructions which the parties now concede to have been at best inadequate and quite possibly erroneous and misleading. Although the claim of the Caldwells against KR was delineated as being based on fraud, the third-party action of KR against Hein was characterized and tried in such a manner that the jury could not have known whether it was premised on a breach of warranty theory or on an alleged fraudulent misrepresentation. There were no instructions defining the legal basis, if any, of Hein's possible liability to KR under any theory. A jury must be instructed on a party's theory of the case and on the basis for recovery. Denver City Tramway Co. v. Doyle, 63 Colo. 500, 167 P. 777.
The principal contention of both KR and Hein is that the jury verdicts were inherently inconsistent, and were not supported by the evidence, demonstrating that the jury was confused. Upon considering the verdict in favor of the Caldwells against KR, and the verdict in favor of KR on the cross-claim against Hein, we agree that the judgments based on those verdicts must be reversed.
[2,3] First, from the viewpoint of the Caldwells' recovery we find that under the provisions of the Uniform Commercial Code, the Caldwells were at liberty to seek recovery either for fraud or for breach of express warranty. See §§ 4-1-103, 4-2-721, C.R.S. 1973. See also City Dodge, Inc. v. Gardner, 232 Ga. 766, 208 S.E.2d 794; Bryan Construction Co. v. Thad Ryan Cadillac, Inc., 300 So.2d 444 (Miss.). They chose to frame their action as one based on fraud. When so pled, it was incumbent upon them to prove that KR made the false representation with knowledge of its falsity or with utter disregard for its truth or falsity. Knight v. Cantrell, 154 Colo. 396, 390 P.2d 948; Morrison v. Goodspeed, 100 Colo. 470, 68 P.2d 458; Cf. Colo. J.I. 19:1.
At trial it was uncontradicted that KR represented to the Caldwells that the Hereford heifers had been bred to black Angus bulls when in fact they had been bred to Hereford bulls and that these heifers had been purchased from Hein. One of the plaintiffs testified that they were not informed by KR until after the calves were born and after KR had had an opportunity to contact Hein, that the heifers had been grazed in the mountains. Hein testified, however, that he had told KR at the time of the sale, not just on later inquiry, that while he believed the heifers had been predominantly bred to Angus bulls, they had been grazed in the mountains. Hein also testified that when cattle are mountain grazed, there is no way to control the breeding environment. Thus, there was evidence before the jury from which it could have found that Hein had informed the defendant that there was some doubt as to the breeding of the heifers, and therefore that KR made the critical representation to the Caldwells with knowledge of its falsity or with utter disregard for its truth of falsity. By this analysis the record could support the jury's finding of liability against KR on the theory of fraudulent misrepresentation.
[4] However, in order for KR to recover on the action over against Hein for a breach of warranty, there must be proof that the breach of warranty was the actual cause of the damages suffered by KR. Here, it would appear that the jury found that KR had made the same representations to the Caldwells that KR alleges had been made to it by Hein, but that KR had made such with knowledge of its falsity or utter disregard for its truth or falsity. Therefore, KR could not have relied on the oral warranties made by Hein, and thus, the damages suffered by KR as a result of its fraudulent misrepresentations was not caused by the breach of oral warranty by Hein. Under this analysis the verdict against KR could stand, but the verdict against Hein would have to be set aside with the third-party complaint dismissed.
Looking at the judgments, however, from the viewpoint of KR's recovery, we find that the jury verdict in favor of KR on the cross-claim reveals that the jury apparently believed KR's version of the initial sale, i.e., that Hein had unconditionally represented that the heifers had been cross-bred to Angus bulls. See § 4-2-313, C.R.S. 1973. In this regard KR adduced testimony that at no time did a representative of KR inform the Caldwells of any facts indicating an uncontrolled breeding environment, neither at the time of sale nor later, following the Caldwells' inquiry to KR regarding the lineage of the calves. The only testimony which could possibly support a jury finding that KR made the representation to the Caldwells with knowledge of its falsity or with utter disregard for its truth of falsity was Hein's testimony that he had told KR that there was no way to be certain that the heifers had been bred as represented, due to their mountain sojourn.
The verdict in favor of KR on the third-party action demonstrates, however, that the jury accepted KR's version of the sale and rejected Hein's claim that he had qualified his representation to KR, and yet the jury returned a verdict in favor of the Caldwells on their fraud action against KR. Unless the jurors believed Hein's testimony, which the verdict against him reveals they did not, there was absolutely no evidence before them from which they could make a finding that KR made a false representation to the Caldwells with knowledge of its falsity or with utter disregard for its truth or falsity.
[5] Thus, the only evidence remaining for the jury's consideration was that the heifers had not been bred as represented. Although this might have been enough to justify recovery by the Caldwells from KR under a warranty theory, and thus, subsequent indemnification of KR by Hein, it is insufficient to sustain the jury verdicts returned in this case. See Rudd v. Rogerson, 133 Colo. 506, 297 P.2d 533. It is obvious from the above discussion that regardless of which approach is taken, the two verdicts cannot be reconciled.
[6] KR also contends that there was insufficient evidence of damages to warrant submission of the issues to the jury. While the Caldwells' evidence of the difference between the actual value of the property and its value if it had been as represented was not overwhelming, it might have been sufficient, under the peculiar facts of this case, to establish that they suffered damage. See Greathouse v. Jones, 158 Colo. 516, 408 P.2d 439; Otis Co. v. Grimes, 97 Colo. 219, 48 P.2d 788; Greenleaf, Inc. v. Manco Chemical Co., 30 Colo. App. 367, 492 P.2d 889; Colo. J.I. 19:18. Moreover, the Caldwells' damages were not limited to the difference between the actual value of the goods and their value as represented. See McNeill v. Allen, 35 Colo. App. 317, 534 P.2d 813; Stamp v. Rippe, 29 Colo. App. 185, 483 P.2d 420. They were also entitled to recover their incidental and consequential damages. See Moreland v. Austin, 138 Colo. 78, 330 P.2d 136; §§ 4-2-715, 4-2-721, C.R.S. 1973.
[7] Here, however, as in Moreland, the Caldwells' evidence was wholly inadequate to show a causal connection between the misrepresentations and the veterinarian's bills, drug bills and additional charges for labor to which they testified. These items should have been withdrawn from the jury's consideration. Furthermore, the parties and the court agreed during the course of the trial that the unsupported figure of $10,000 testified to as the loss of future business profits should not be considered by the jury, yet there was no instruction given to that effect. This alone would require reversal of the Caldwells' judgment. Moreover, the damages determination in favor of KR against Hein cannot stand. That judgment was supposedly based on or related to that in favor of the Caldwells, which we have found to unsupported by the evidence.
Thus, the patent inconsistency between the two verdicts, the lack of competent evidence to substantiate the damages awarded, and the incomplete and ineffective instructions compel the conclusion that the verdicts entered were the product of mistake, misunderstanding, or confusion on the part of the jury. The judgments must therefore be reversed. See Beulah Marble Co. v. Mattice, 22 Colo. 547, 45 P. 432; Caldwell v. Willey, 16 Colo. 169, 26 P. 161.
We also consider three other contentions by KR in support of reversal in order to provide guidance to the parties and the court on retrial.
KR contends that the trial court improperly limited the testimony of its expert witness concerning certain tests purportedly conducted by the United States Department of Agriculture. We are unable to determine, either from the record or from the briefs, whether KR was seeking the admission of an official document of the United States Department of Agriculture or wished only to have its expert testify to the test results. In either case, assuming the admissibility of the evidence, there was insufficient foundation laid to warrant its admission. See Liber v. Flor, 160 Colo. 7, 415 P.2d 332; C.R.C.P. 44. Thus, unless on retrial KR establishes a sufficient foundation for the offering of this testimony, its exclusion will be proper.
KR also asserts that the trial court erred in refusing its tendered instructions on mitigation of damages, purportedly in the language of Colo. J.I. 5:2. If there is evidence on retrial to support an instruction on mitigation, an appropriate instruction should be submitted to the jury. Colo. J.I. 5:2; § 4-2-715, C.R.S. 1973.
KR's final allegation of error is that the trial court erred in admitting certain testimony regarding other herds of cattle owned by or known to the various witnesses. Under the facts as disclosed by the record, such testimony was irrelevant since the character of those other cattle and the conditions to which they had been subjected differed from that of the subject heifers. Although it may not have been reversible error to have admitted this testimony, it should be excluded on retrial.
The judgments are reversed and the cause is remanded for a new trial on all issues.
JUDGE PIERCE concurs.
JUDGE KELLY dissents.