No. 85-320
IN THE SUPREF4E COURT OF THE STATE OF MONTANA
1986
WILLARD NELSON,
Plaintiff and Respondent,
-vs-
DAVIS MODERN MACHINERY,
Defendant and Appellant.
APPEAL FROM: District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Michael Keedy, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Warden, Christiansen, Johnson & Berg; Todd A. Hammer,
Kalispell, Montana
For Respondent:
M. Richard Gebhardt, Ronan, Montana
Submitted on Briefs: Dec. 18, 1385
Decided: March 13, 1986
MAR I 3 1986
Filed:
0
t2&z 7%-
Clerk
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Respondent filed his complaint with the District Court
of the Eleventh Judicial District alleging breach of warranty
and negligence by appellant. Trial was held without a jury
in three disjointed. sessions on December 7, 1983, January 1 9 ,
1984, and May 1 7 , 1 9 8 4 . Ten months later, on March 1 5 , 1 9 8 5 ,
the District Court issued its findings of fact and conclu-
sions of law in favor of respondent. The court entered
judgment in the sum of $ 2 5 , 6 6 4 . 6 8 with no offset for balance
due appellant or mitigation of damages. This appeal ensued.
The findings of fact by the District Court are not
sufficient to support the damages awarded. We therefore
reverse and remand for new trial.
Appellant raises the following issues:
1. Did the District Court err in concluding there was
breach of warranty and dealer negligence after finding that
the machine was taken by respondent on a "tryout" basis?
2. Did the District Court err in not making any find-
ings with regard to mitigation of damages?
3. Did the District Court err in admitting a repair
hill without testimony that could establish that the bill was
admissible hearsay?
4. Did the District Court err in finding the sila.ge
was unsuitable because of inferior protein content?
5. Did the District Court err in failing to offset the
balance due to appellant from the damages awarded to
respondent?
There was conflicting or insufficient testimony at
trial regarding several matters important for the proper
resolution of this case. The following summarizes the
findings of the District Court. Because the scenario is
incomplete, however, certain details are filled in by refer-
ence to the trial transcript where noted.
Respondent, Willard Nelson, runs a dairy farm near
Charlo, Montana. In the summer of 1980, he raised peas,
barley and oats which were to be made into silage. The
silage, in turn, was to feed his forty milk cows in the fall
and winter. Unfortunately, the crops were put up too dry for
the chemical and biological reactions which preserve silage
in a state nutritious for cows. The dryness of the crops
resulted from delays caused by the faulty operation of a
piece of farm equipment known as a silage chopper. The
silage proved unsuitable as food for milk cows, and respon-
dent suffered a loss in milk production. He was also forced
to buy hay in order to feed his cattle through the winter.
In late July 1980, respondent went to appellant's store
to purchase a silage chopper. He needed a unit that was
compatible with the power take-off assembly on his "Super 90"
I4assey Ferguson tractor which rotated at 540 revolutions per
minute (rpm's). In order to work properly, a chopper must be
compatible with the tractor in rpm's and horsepower. Appel-
lant was aware of the type of chopper required by respondent,
and respondent relied on appellant to furnish him with a
compatible chopper. Appellant proposed to sell respondent a
used "880" New Holland chopper which l~e thought would meet
respondent's need.
However, there was uncertainty regarding both the rpm's
requirements of the chopper and whether or not respondent's
tractor possessed enough power to operate the chopper proper-
ly. F.ather than running tests at the store, the parties
agreed that respondent would take the chopper on a "tryout"
basis, to determine compatibility.
Respondent took the chopper to his farm and ordered a
yolk (a part required for coupling the chopper with the power
take-off) from Stedje Brothers, a local dealer in New Holland
farm equipment. When the yolk arrived, respondent attached
the chopper to his tractor and began chopping in his field.
However, the chopper kept plugging up and causing delay. We
note at this time that testimony from Stedje Brothers may
have helped clarify when the chopper was taken by respondent.
Unfortunately, no one from Stedje Brothers was called to
testify.
Respondent complained to appellant in late July or
August, and appellant sent an employee to the farm to adjust
and sharpen the knives on the chopper. When the problems
persisted, appellant told respondent that the tractor was
likely underpowered. Possibly, though the findings by the
District Court do not say, because respondent planned to buy
a larger tractor for the next season, he agreed to purchase
the chopper anyway after appellant deducted $200 from the
purchase price. The findings of fact are unclear as to when
during the harvest this transaction occurred. However, the
respondent testified at trial that it did not occur until
after all of the crops were harvested. He also testified
that he took the chopper "as is" at this time, because he
thought the problem was with his tractor and not the chopper.
The District Court, however, determined that an "as is"
provision written on the purchase order was ineffective as a
disclaimer of implied warranty.
There are additional findings of fact regarding the
purchase order and a financing agreement with dates which do
not fit with the chronology presented in this scenario.
However, these documents were either altered or manipulated
to such a degree during appellant's efforts to obtain financ-
ing for respondent that their evidentiary value is question-
able. The Court notes that appellant's employee, Don
Blasdell, signed the purchase order and handled much of the
dealings with respondent. We a.re puzzled why there was no
testimony by Blasdell to help clear up the chronology and
manipulations during the transaction.
The next spring, respondent discovered that the faulty
operation of the chopper was the result of incompatible rpm's
between the chopper and the tractor rather than the lack of
power in his tractor as represented by appellant. Respondent
brought this action against appellant in District Court for
breach of warranty and negligence. The District Court found
in favor of respondent based on implied warranty of fitness,
negligence and constructive fraud. Appellant appeals that
judgment .
The findings of fact by the District Court do not
support its conclusions of law. Furthermore, because of the
disjointed trial and the long delay before issuance of the
District Court's opinion, we reviewed the transcript careful-
ly. The testimony appearing in the transcript is contradic-
tory and insufficient to properly resolve the dispute. We
therefore find that a new tria.1 is necessary.
I
Appellant's primary claim of error concerns an incon-
sistency between a finding of fact and conclusion of law by
the District Court. The point is well taken.
The District Court made the following finding of fact:
4. However, as there was some uncer-
tainty in the minds of the parties at
the time of Plaintiff's purchase whether
the chopper would require interface with
a 540- or 1000-rpm power take-off, and
because Defendant did not take the time
and trouble to test the chopper mechani-
cally, in accordance with its usual
practice, it. was understood and agreed
between the parties that Plaintiff would
take and use it on a "tryout" basis to
ascertain whether the chopper indeed was
compatible with his tractor and equip-
ment. In fact, but unbeknownst to the
parties at that time, it was not.
On the other hand, the court concluded that appellant was
liable based on breach of implied warranty of fitness, negli-
gent misrepresentation and constructive fraud. We agree with
appellant that the findings and conclusions by the District
Court are inconsj..stentand. contradictory for reasons that
will follow.
The breach of warranty claim is governed by the Uniform
Commercial Code (UCC) as adopted by Montana. The UCC classi-
fies buyer's remedies conceptually on the basis of whether
(1) the buyer has rejected or revoked acceptance of the
goods, S 30-2-711, MCA; or ( 2 ) the buyer has accepted goods
which do not conform to the contract, $ 30-2-714, MCA. As
such, different remedies are available for seller's breach
prior to and subsequent to acceptance. The breach of warran-
ty remedy appears only und.er the provision for "breach in
regard to accepted goods," 5 30-2-714, MCA, and damages for
breach of warranty are mea.sured by reference to the time of
acceptance, 30-2-714 (2), &lCA. Therefore, an action for
breach of warranty cannot arise until after acceptance.
We cannot determine from the District Court's findings
when acceptance occurred. One finding of fact says the
chopper was purchased when respondent took it to his farm,
thereby implying that acceptance occurred that time .
contrast, another finding of fact says that the chopper was
taken to use on a "tryout" basis. Goods taken for a tryout
have not been accepted. See 5 30-2-606, MCA. Because accep-
tance is critical to the outcome of this case, these con-
flicting findings constitute error.
The finding by the District Court that respondent took
the chopper on a "tryout" basis because of uncertainty in the
minds of the parties is likewise inconsistent with the theo-
ries of negligent misrepresentation and constructive fraud.
Both theories require misrepresentation. Because respondent
took the chopper on a tryout basis, there could be no misrep-
resentation at that time. If, however, the misrepresentation
occurred at some later date, we cannot determine from the
findings when that was. Since appellant can only be liable
for damage occurring after the misrepresentation, the Dis-
trict Court erred in calculating damages from the moment
respondent took the chopper.
11
Appellant ' s next allegation of error coiicerns mitiga-
tion of damages. This Court recognizes a duty to take rea-
sonable steps to reduce property damages. See Spackman v.
Ralph M. Parsons Co. (1966), 147 Mont. 500, 414 P.2d 918.
There was testimony that respondent may have reduced his
damages by baling the crops as hay. The District Court
however, made no findings or conclusions on mitigation. This
omission constitutes error.
111
The District Court awarded respondent $619.13 for the
repair of the clutch in his tractor's power take-off unit.
This award was based solely on a bill purporting to be from
Stedje Brothers that was admitted as an exhibit over appel-
lant's hearsay and relevancy objection. There was no testi-
mony from a representative of Stedje Brothers to establish
the authenticity of the bill or what caused the need for the
repair. The District Court admitted the bill as having "such
circumstantial guaranties of reliability as to allow it to
come in under the residual exception of the hearsay rule" but
offered no explanation as to what the guaranties were. See
Rule 8 0 4 (24), M.R..Evid. Appellant alleges error. We agree.
We can see no "circumstantial guaranties of reliabili-
ty" to allow for admission of the bill as a hearsay exception
under Rule 804 ( 2 4 ) , M.R.Evid. The District Court therefore
abused its discretion in admitting the bill. There was
further error in awarding dama.ges based solely on the hearsay
bill and without evidence that the incompatibility between
the tractor and chopper caused the need for the repair.
IV
The next issue we will consider concerns the District
Court's finding that the silage had inferior protein content.
Appellant claims that respondent Nelson was unqualified to
testify on chemical changes in the silage, and that there was
no competent evidence to show protein content of the silage.
We agree, but we consider the finding harmless. The impor-
tant finding, that the silage was unsuitable food for milk
cows, is supported by substantial evidence in the record,
including testimony by respondent and appellant's expert
witness, Dave Kettle. However, additional expert testimony
on silage chemistry would have been beneficial at trial and
may be necessary on r e t r i a l t o p r o p e r l y resolve the other
issues.
Finally, appellant complains that the District Court
f a i l e d t o s e t o f f t h e amount owed a p p e l l a n t by r e s p o n d e n t on
t h e outstanding balance of t h e purchase p r i c e . The r e c o r d
clearly supports this claim. Fa-irness d i c t a t e s that the
o u t s t a n d i n g b a l a n c e on t h e chopper must be d e d u c t e d from any
damages awarded t h e r e s p o n d e n t .
We remand f o r new t r i a l . Fle d i r e c t t h a t any damages
awarded r e s p o n d e n t be reduced by t h e u n p a i d b a l a n c e on t h e
chopper.
Xe c o n c u r :