Caseflicks

Supreme Court of Kansas • 1992

Tongish v. Thomas

840 P.2d 471 | 251 Kan. 728 | 1992 Kan. LEXIS 172

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Takeaway

In short, this case holds that a buyer's UCC damages for a seller's nondelivery are ordinarily the market-price/contract-price differential under K.S.A. 84-2-713, even when that amount exceeds the buyer's actual lost profit.

Background

Denis Tongish contracted to grow sunflower seeds for Decatur Coop Association (Coop), which agreed to pay $13 per hundredweight for large seeds and $8 for small seeds. Coop had arranged to resell the seeds to Bambino Bean & Seed, Inc. at the same price it paid Tongish, retaining only a 55-cent-per-hundredweight handling fee. After a short crop and other conditions caused the market price to rise to roughly twice the contract price, Tongish refused to make his remaining deliveries and instead sold 82,820 pounds of seeds to Danny Thomas for about $20 per hundredweight.

Tongish sued Thomas for the unpaid balance of that sale. Coop intervened, seeking damages for Tongish's breach of the Coop contract. After a bench trial, the district court found that Tongish had breached without justification but awarded Coop only $455.51, its lost handling-fee profit. The Court of Appeals reversed, holding that damages must be calculated under K.S.A. 84-2-713 as the difference between the market price and the contract price. The Kansas Supreme Court granted review.

Issues

Issue #1

Whether a buyer's damages for a seller's nondelivery of goods are limited to the buyer's actual lost profits under K.S.A. 84-1-106(1), or instead are measured by the market-price/contract-price formula in K.S.A. 84-2-713.

Holding

The specific formula in K.S.A. 84-2-713 controls. Coop may recover the difference between the market price when it learned of Tongish's breach and the contract price, plus any appropriate incidental or consequential damages and less expenses saved.

Reasoning

K.S.A. 84-1-106(1) supplies a general remedial principle: UCC remedies should place the aggrieved party in as good a position as if the other party had performed. K.S.A. 84-2-713, by contrast, specifically establishes the measure of a buyer's damages when a seller wrongfully fails to deliver goods and the buyer does not cover. Under ordinary rules of statutory construction, the specific provision governs over a conflicting general provision.

The district court's lost-profit award could not be reconciled with the text of K.S.A. 84-2-713. Coop's anticipated profit on its resale arrangement with Bambino was only its 55-cent handling fee, but the statute measures nondelivery damages by the market-contract differential rather than by the buyer's actual resale profit. Kansas precedent likewise applied that formula to sellers' breaches of agricultural-goods contracts.

The court rejected the approach of Allied Canners & Packers, which had limited a buyer with a known resale contract to its actual loss absent a seller's bad-faith breach. That approach was a minority rule, and its facts were materially different: the seller in Allied was unable to perform because its crop was destroyed, whereas Tongish chose to withhold his seeds and sell them into a rising market after the contract price became unfavorable.

Market damages are consistent with the UCC's remedial policy because they measure the value of the bargain and the market risk allocated by the parties when they contracted. Limiting Coop to its handling-fee profit would let Tongish treat the agreed contract price as a floor, disregard the agreement whenever market prices rose, and capture the higher price through a sale to another buyer. Applying K.S.A. 84-2-713 instead promotes contract performance and market stability.

Issue #2

Whether awarding Coop market damages under K.S.A. 84-2-713 would unjustly enrich Coop.

Holding

No. The unjust-enrichment doctrine does not displace the statutory damage measure, and Tongish did not preserve the argument in the trial court.

Reasoning

The argument was not raised below and therefore was not properly before the Supreme Court. In any event, unjust enrichment requires that one party confer a benefit on another that the recipient knowingly retains under circumstances making retention inequitable without payment. This dispute concerned the legislatively prescribed remedy for breach of a sales contract, not the retention of a benefit gratuitously conferred by Tongish on Coop.