State Ex Rel. Concrete Sales & Equipment Rental Co. v. Kent Nowlin Construction, Inc.

746 P.2d 645, 106 N.M. 539
CourtNew Mexico Supreme Court
DecidedDecember 2, 1987
Docket16223
StatusPublished
Cited by8 cases

This text of 746 P.2d 645 (State Ex Rel. Concrete Sales & Equipment Rental Co. v. Kent Nowlin Construction, Inc.) is published on Counsel Stack Legal Research, covering New Mexico Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State Ex Rel. Concrete Sales & Equipment Rental Co. v. Kent Nowlin Construction, Inc., 746 P.2d 645, 106 N.M. 539 (N.M. 1987).

Opinion

OPINION

SOSA, Senior Justice.

Concrete Sales & Equipment Rental Company (C & E) sued Kent Nowlin Construction, Inc. and Transamerica Insurance Company, the surety, (Nowlin) for failure to pay money due under an agreement in which C & E supplied Nowlin with aggregate materials and chips. Nowlin counterclaimed, alleging C & E had breached its agreement by supplying materials which did not meet project specifications and by failing to provide sufficient materials in a timely fashion. The trial court, sitting without a jury, awarded C & E damages totaling $54,117.18 and awarded Nowlin consequential damages totaling $21,000. Nowlin appeals, contending it was entitled to the remedy of “cover” under the Uniform Commercial Code (UCC) and also entitled to damages for costs incurred in reprocessing fine aggregate materials. C & E cross appeals, contending that the trial court erred in awarding Nowlin consequential damages. We affirm in part and reverse in part.

FACTS

In 1981, the New Mexico State Highway Department awarded Nowlin, a general contractor, the Fort Wingate project, which required the laying of bituminous pavement asphalt concrete on road surfaces. Because this was a state construction project, Nowlin executed a bond under NMSA 1978, Sections 13-4-18 to -20 (Repl. Pamp.1985). The surety was Transamerica Insurance Company.

On June 10, 1981, C & E, a ready-mix company and crushing operation, entered into a purchase order agreement with Nowlin to supply a total of 66,000 tons of coarse, intermediate, and fine aggregate materials for the Wingate project. Walter Meech, owner of C & E, calculated that about 20,000 tons of this material would have to be intermediate aggregate. The contract provided all materials furnished had to meet “project specifications and requirements.”

The undisputed facts reveal Nowlin had problems with C & E’s production and supply of materials. For example, even though 20,000 tons of intermediate aggregate was needed for the job, C & E delivered only 2,099 tons. The last delivery was made in May 1982. Because C & E failed to timely supply an adequate amount of intermediate aggregate, Nowlin, on April 21, 1982, contracted with Gallup Sand & Gravel Company (Gallup) for substitute material. Nowlin notified Walter Jackson, Highway Department Project Supervisor, that it was contracting with Gallup. No letter was sent to C & E. Meech testified he was unaware Nowlin had purchased materials from Gallup until after the lawsuit commenced.

Nowlin also had difficulties with C & E’s supply of fine aggregate. In spring or early summer of 1982, George McClendon, Nowlin’s general superintendent, met with Meech to discuss problems with the fine aggregate. C & E’s fine material had “dirty fines,” an excess amount of minus 200 material. At this meeting, Nowlin agreed to reprocess the fine aggregate through its drum plant because C & E’s materials did not meet the Highway Department’s specifications. The parties did not discuss who would be liable for the cost of reprocessing the material. Meech testified Nowlin had never complained about the quantity or quality of materials being produced. Frank Fegan, Nowlin’s employee hired to handle the Wingate project, testified he never discussed with C & E any costs of reprocessing the fines, or costs associated with the additional purchase of intermediate aggregate. According to Fegan, Nowlin did not want to “agitate” C & E and thus be cut off permanently before it could complete the job.

In October 1982, Nowlin paid C & E $40,000 to receive the final shipment of materials. Nowlin then owed C & E $54,-116.18. 1 In November 1982, the Wingate project was completed. On November 3, 1982, Nowlin wrote C & E a letter, maintaining C & E had failed to perform according to the terms and conditions of the agreement. Nowlin alleged damages totaling $84,639 for reprocessing and replacing aggregate material and delayed costs in completing the project.

The issues on appeal are: (1) whether Nowlin could “cover” under the UCC without notifying C & E; (2) whether Nowlin was entitled to damages for reprocessing the fine aggregate; and (3) whether Nowlin was entitled to consequential damages.

APPLICABILITY OF THE UCC

In the instant case, the contract provided for the sale of goods and for the service and manufacture of those goods (i.e., crushing materials). When the primary purpose of a contract is sale of goods as opposed to the rendition of services, it is considered a contract of sale. Mennonite Deaconess Home & Hosp. v. Gates Eng’g Co., 219 Neb. 303, 363 N.W.2d 155 (1985). Therefore, the purchase order between C & E and Nowlin qualifies as a contract for the sale of goods under NMSA 1978, Sections 55-1-201(11) and 55-2-105(1) and is governed by the provisions of the UCC, NMSA 1978, Sections 55-1-101 to 55-9-507.

BUYER’S REMEDIES

A. Section 55-2-712 “cover”

Nowlin challenges the trial court’s finding of fact No. 13. Under findings Nos. 9, 10, and 11, the trial court stated that the parties’ agreement required C & E to furnish 20,000 tons of intermediate aggregate; that C & E had only supplied 2,099 tons of this material; and that Nowlin obtained substitute intermediate aggregate because C & E had failed to provide the necessary material under the contract. The trial court’s finding No. 13 states Nowlin never notified C & E that the intermediate aggregate was either insufficient or unsatisfactory, and therefore, the trial court concluded Nowlin had no right to the remedy of cover. Although Nowlin challenges the court’s finding that it never notified C & E of its breach, Nowlin primarily contends Section 55-2-711 does not require notice to the seller before a buyer can exercise the remedy of cover. We agree.

Section 55-2-711(l)(a) provides:

Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance, then with respect to any goods involved and with respect to the whole if the breach goes to the whole contract (Section 2-612 [55-2-612 NMSA 1978]), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid: (a) ‘cover’ and have damages under the next section [55-2-712 NMSA 1978]

In the instant case, the parties’ purchase agreement was an “installment contract” requiring the delivery of goods in separate lots to be separately accepted. § 55-2-612(1). In spring of 1982, C & E failed to timely deliver sufficient intermediate aggregate and thus did not fulfill the purchase order. Subsequently, Nowlin contracted with Gallup for the supply of intermediate aggregate. Nowlin accepted C & E’s last shipment of intermediate aggregate in May 1982.

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Bluebook (online)
746 P.2d 645, 106 N.M. 539, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-ex-rel-concrete-sales-equipment-rental-co-v-kent-nowlin-nm-1987.