CREATIVE v. SHEILA

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE CREATIVE INTERNATIONAL, L.L.C., an Arizona limited liability company, ) ) ) ) Plaintiff/Counterdefendant/ ) Appellee, ) ) v. ) ) SHEILA PAPER CORP. dba NEWBROOK ) PAPER, a New Jersey corporation, ) ) Defendant/Counterclaimant/ ) Appellant. ) __________________________________) DIVISION ONE FILED: 6/4/2013 RUTH A. WILLINGHAM, CLERK BY: mjt 1 CA-CV 12-0192 DEPARTMENT A MEMORANDUM DECISION (Not for Publication Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV2008-000172 The Honorable Eileen S. Willett, Judge REVERSED AND REMANDED Law Offices of Donald W. Hudspeth, P.C. By Brian K Stanley Rita J. Bustos Attorneys for Appellant Phoenix T H O M P S O N, Judge ¶1 from Appellant the Sheila trial court s Paper Corporation judgment in (Sheila) favor of appeals Creative International (Creative) on all claims and awarding damages in the amount of $17,858.40. For the following reasons, we reverse and remand for a new trial. FACTS AND PROCEDURAL HISTORY ¶2 Creative purchase of entered approximately a contract five with truckloads Sheila of # the coated 4 for web gloss enamel paper for $41.90 per 100 weight (/cwt). shipped quantity delivered the was 206,872 paper to pounds Midwest for The exact $86,679.37. Warehouse, a third-party warehouse in Chicago, Illinois, on December 26, 2007. resold the Printing Creative paper to two printing (Transcontinental) sold 144,295 Transcontinental for companies, and Hiney a of paper total price of purchased 43,808 pounds at $47.75/cwt. at Creative Transcontinental Printing pounds Sheila (Hiney). $49.50/cwt $71,426.03. to Hiney The remaining 18,769 pounds remained in the warehouse. ¶3 Sometime after the paper was delivered, Sheila s salesman Martin Minison received notice from other customers who had been sold paper from the same wholesale batch that some of the paper they were receiving was matte and not gloss. Minison called Creative s president, Arthur Desautels, and informed him that the paper might be matte instead of gloss. Desautels contacted Transcontinental and Hiney who confirmed their receipt of matte paper. Transcontinental agreed to keep the matte paper at a discount, paying $41.95/cwt instead of $49.50/cwt, at an 2 ultimate price of $60,531.79, $10,894.28 less than the original price. Hiney rejected the paper, causing Creative additional shipping charges and warehouse fees of $1,801.51. ¶4 remaining On January 10, 2008, Sheila offered to pick up the paper at no charge Creative s current account. and issue a credit against Sheila also offered a discount of $6/cwt for all of the paper. Creative refused all efforts to resolve the issue and did not return the paper or pay Sheila for the delivered and accepted paper. Sheila had potential offers for the paper from other customers at increased rates that it was unable to realize because of Creative s failure to return the paper. ¶5 Creative sold the paper returned from Hiney plus the remaining 18,769 $39.50/cwt for pounds a total of promptly for the paper. reselling the paper. to Semper $24,858.93. Exeter Paper Semper paid Co. for Creative Thus, Creative received $85,390.72 for Both Transcontinental and Hiney sent complaint e-mails to Creative about the mix-up, but Hiney wrote it would not charge you back and am still doing business with you [as] this is the first time there has been any issues with your shipments. indicated that Desautels testified at trial that Hiney never it would stop doing because of the order mix-up. business with Creative At one point, Transcontinental indicated that, due to the non-conforming shipment, it would 3 not be forwarding any new orders to Creative. However, the evidence showed that Transcontinental continued to do business with Creative in 2008 and 2009. ¶6 Creative brought suit against Sheila, alleging breach of contract for failure to provide the correct paper and seeking damages in an amount to be proven at trial. Sheila counterclaimed for breach of contract of the contract price, breach of damages. that the the covenant of good faith and fair dealing, and Sheila filed a motion for summary judgment, arguing company was entitled to the contract price because Creative elected to accept the entire shipment of paper and then refused admitted all that attempts the at matte remedying paper the situation. received by Creative Sheila did not conform to the terms of the parties contract, which called for enamel (glossy) paper. Creative admitted that it accepted the nonconforming paper, but that it was entitled to the difference between the value of the goods accepted and their value had they been as warranted, consequential damages. lost The profits, trial and court incidental denied the and motion, finding that the issue of damages presented a genuine issue of material fact. ¶7 At trial, Creative s claimed damages as a result of Sheila s breach were over $86,000. plus interest at 18% per annum. Sheila sought $86,679.37 The trial court found in favor 4 of Creative on all claims and awarded damages in the amount of $17,858.40, and attorneys fees in the amount of $58,841.00. Sheila filed a motion for new trial, which was denied. ¶8 to Sheila timely appealed. Article 6, Section 9, of We have jurisdiction pursuant the Arizona Constitution, and Arizona Revised Statutes (A.R.S.) section 12-2101(A)(1) (Supp. 2012). DISCUSSION ¶9 On appeal, Sheila argues that: (1) Creative s consequential damages were not recoverable because its special circumstances were not made known to Sheila when the contract was made; (2) Creative must be denied consequential damages because it could have prevented the claimed damage; (3) Creative failed to establish that the claimed lost profits were proximate damages; (4) Creative failed to establish its lost-profits claim; and (5) Creative accepted the paper and was therefore required damages. to pay for the paper at the contract rate minus Sheila seeks a judgment on the counterclaim in the amount of $86,679.37 plus interest, and urges that Creative be awarded only $1,801.50 in incidental damages on its complaint. ¶10 Creative has not filed an answering brief. We have previously held that when a party raises a debatable issue, and the opposing party has not filed a responsive brief, we generally will find a confession of error by the opposing party. 5 Liberty Mut. Ins. Co. v. MacLeod, 17 Ariz. App. 449, 450, 498 P.2d 523, 524 (1972). issue exists, constitutes Thus, if we determine that a debatable Creative s a failure to that the concession reversible error. file an answering trial court brief committed Stover v. Kesmar, 84 Ariz. 387, 388, 329 P.2d 1107, 1108 (1958); Civil Serv. Emp. Ins. Co. v. Sticht, 14 Ariz. App. 36, 37, 480 P.2d 373, 374 (1971). ¶11 On the record before us, we cannot damages it appears Creative was awarded. affirm all the Consequential damages for breach of contract are not recoverable unless the claimant s special circumstances made. See A.R.S. (consequential damages were made §§ from known when 47-2714(C), seller s the contract -2715(B)(1) breach include was (2005) loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise ); McFadden v. Shanley, 16 Ariz. 91, 95, 141 P. 732, 733 (1914) (quoting Hadley v. Baxendale, 9 Exch. 341 (Court of Exchequer 1854)) ( Damages recoverable on a breach of contract are measured by the actual loss sustained, provided such loss is what would naturally result as the ordinary consequence of the breach, or as a consequence which may, under the circumstances, be presumed to have been in the contemplation of the parties as the probable result of a breach. ). 6 Further, [d]amages which the plaintiff might have avoided with reasonable effort without undue risk, expense, or humiliation are either not caused by the defendant s wrong or need not have been, and, therefore, are not to be charged against him. and frequently involves reasonable conduct. The principle has wide application the establishment of a standard of Lewis v. Mobil Oil Corp., 438 F.2d 500, 508 (8th Cir. 1971) (quoting 11 S. Williston, Contracts § 1353 (Jaeger, 3d ed. 1968)); see A.R.S. § 47-2715(B)(1). In addition, a buyer who retains goods sold cannot refuse to carry out his part of the agreement, although he may recover the damages caused him by the breach on the part of the seller. Yancy v. Jeffreys, 39 Ariz. 563, 566, 8 P.2d 774, 776 (1932); see A.R.S. §§ 47-2606(A), -2714(A) (2005) (a buyer that has accepted goods and given notification may recover damages for any non-conformity, but must pay the contract rate for any goods accepted). ¶12 We conclude that a debatable issue exists over the types and amount of damages awarded, and as to any entitlement Sheila might have regarding its delivery of the paper. Therefore, Creative has conceded that the trial court committed reversible error. transcripts and difficult for Sheila s the us to trial failure court s assess the 7 lack proper to provide of findings measure of all makes the it damages. Consequently, we find error justifies retrial, but not the direction of judgment for either party. CONCLUSION ¶13 trial Based on the foregoing, we reverse and remand to the court for a new trial. Sheila attorneys fees and costs on appeal. requests an award of As there is not yet a successful party, we decline Sheila s request. See A.R.S. § 12- 341.01(A) (Supp. 2012). /s/ JON W. THOMPSON, Presiding Judge CONCURRING: /s/ PHILIP HALL, Judge /s/ KENT E. CATTANI, Judge 8

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