Federal Signal Corp. v. Safety Factors, Inc.

This case presents issues of express warranties, implied warranties, mitigation, and damages. Appellant Safety Factors, Inc. (Safety Factors) bought seven Night Warrior light towers from Respondent Federal Signal Corporation (Federal Signal). Safety Factors experienced a number of problems with the equipment and never paid Federal Signal for the towers. Federal Signal sued Safety Factors to recover amounts due and Safety Factors counterclaimed for damages for breach of warranty. The trial court found in Federal Signal’s favor. The case was then certified for appeal to this court. We reverse several of the trial court’s conclusions and remand for additional findings.

Facts

Federal Signal sued Safety Factors to collect amounts owed for items purchased, including the price of the light towers. 1 Safety Factors counterclaimed that Federal Signal breached both express and implied warranties and that it had suffered incidental and consequential damages as well as general damages. Safety Factors alleged no specific efforts to mitigate other than giving Federal Signal notice of the breaches. In its reply, Federal Signal did not plead failure to mitigate, but only raised affirmative defenses of an account stated, limited warranty, excluded damages, and disclaimer. Trial was before the bench.

Safety Factors is in the business of renting, repairing, and selling equipment. The Night Warrior light towers were purchased for rental and sale. Steve Fors, president of Safety *417 Factors, testified that before Safety Factors purchased the light towers he and David Robbins of Federal Signal discussed the capabilities and features of the Night Warrior and compared this newer product to the TPME, an older model with which Safety Factors had good experiences. These statements were made either orally or in an advertising brochure. Safety Factors purchased seven of these newer towers.

Before renting or selling the Night Warriors, Safety Factors tested the towers "through a full field of motion” for approximately 5 minutes without incident. Report of Proceedings (RP), at 182-83, 211-12. However, problems arose as soon as the towers were used in the field, beginning in late February 1989 with the first rental customer, Tucci & Sons. The first night Tucci & Sons used the towers, it experienced what the parties referred to as the "restrike problem”. RP, at 183-84. The lamps would either fail to relight following an interruption of operation or shut down once the lamps reached full intensity. One of the towers would not run because the fuel lines were reversed. Safety Factors replaced these with other towers after it unsuccessfully attempted to repair the defective towers. On the second night, one of the replacement towers failed due to the restrike problem. Tucci & Sons experienced the problem with all of the rental towers over a 4- or 5-day period until it threw the towers off the job.

Within a week, Brian Gillespie, Safety Factors’ service manager at the time, contacted Herbert Moore at Federal Signal regarding the problem. Moore ran some tests but could not simulate the problems. He then came out to Safety Factors in an effort to resolve the problem. Moore testified that he visited twice, but Gillespie could only recall one visit "for sure”. RP, at 188. Moore said that the second time he was met by representatives from Hatz, the manufacturer of the Night Warrior engine, and Lima, the manufacturer of its generator. This time, Moore brought a prototype device that he believed would fix the towers, once installed. The restrike problem was finally traced to the Lima generator, which did *418 not meet the towers’ power requirements. Moore concluded that Lima would have to take care of the problem.

By sometime in May, a local Lima generator service company, Cascade Electric, retrofitted all of Safety Factors’ Night Warriors with Moore’s device, at no cost. "The fix essentially was a voltage regulator device that would go between the generator as the source of power and the lighting unit, which is a ballast in a light bulb,. . . and it was a voltage regulator that compensated for the mismatch between the source of power and the use of power.” RP, at 50. Before renting the towers out again, Safety Factors tested the towers to insure that they would not fail. The towers were ready for rental by the end of May 1989 and Safety Factors resumed renting the towers in June.

Immediately, another major problem arose. Excessive oil leakage from the diesel motor caused the towers to shut down. Thomas Hallett, Safety Factors’ current service manager, described the problem: "The crankcase would separate from the generator mount on a cast iron casting. That was bolted to the engine. Where it bolted to the engine, the bolts would loosen and oil would pour out, and it would stop.” RP, at 402; see also RP, at 191-92. Gillespie opined that this was caused by "[e]xces-sive vibration”. RP, at 216. He attempted to fix this problem by tightening the bolts and using Locktight and silicone "to lock this device down so it wouldn’t vibrate apart again”. RP, at 191. This solved the problem, but only temporarily. Gillespie called Federal Signal and was referred to All Power, the "authorized service agent” for Hatz, the engine manufacturer. RP, at 328-29. Federal Signal said the problem would be fixed "under warranty”. RP, at 215-17. At trial, witnesses testified that they were unsure what warranty applied. According to Fors, Federal Signal referred them to Hatz, stating that the problem was with the engine manufacturer, not with it. Hatz then referred Safety Factors to All Power. Fors admitted that Safety Factors did not contact Federal Signal again because "they said that they wouldn’t . . . accept any of the problems for the engine”. RP, at 333. It was undisputed that Safety Factors *419 had to switch "[q]uite a few” towers for its customers as a result of this leakage problem. RP, at 223.

All Power was backlogged with other work and the first unit was not accepted for repair until October. Ultimately, the repairs were unsuccessful; the repaired units "[c]ontinu-ously” leaked oil within 2 weeks of being rented. RP, at 329, 402. Hallett estimated that the units went back to All Power twice each. All Power attempted to repair the units for 9 to 12 months before refusing to do any more repairs under warranty. Safety Factors itself eventually came up with a solution. Hallett described the problem as a design defect — insufficient motor mounts. He was able to "make the bond between where the oil leak is a more rigid unit so the vibration doesn’t affect it. . .”. RP, at 403. He added a gasket and a different commercial engine sealer, "replaced the Allen head screws with hex headed bolts and a lock washer”, "squashed the threads on the bolts to make them lock and not come out”, and "used a commercial thread locker chemical to hold them in”. RP, at 404. By the end of July 1991, Hallett had made this repair to every tower.

Donald Beck of Robinson Construction, a customer of Safety Factors, testified that the towers had a problem with the low pressure oil lights as well. Beck stated that the light would come on without reason, causing the towers to shut down automatically. Beck testified that his company solved the problem on one tower by clipping the wires to the oil light.

Another problem that arose "from day one” was the failure of the electric winches to raise and lower the lights, unlike the "touch of a finger” representations in the brochure. RP, at 299, 396; Def.’s Ex. 20; see also RP, at 122. Beck stated that his company "had a lot of trouble” with the winches: "They’d go up fine, but half the time you couldn’t get them back down.” RP, at 435. Because of this, his company had to grab the towers and move them by crane "because it was the only way you could move them with the tower standing 30 feet in the air”. RP, at 435-36. This technique caused damage to the mast of one of the light towers. Hallett testified that the winches were "grossly underpow *420 ered”. RP, at 396. He further explained: "The electric motor that dr[o]ve this had a high carbon steel gear that ran against some aluminum or pot metal teeth on the inside of this wheel. The motor was underpowered for this whole system to start with, and with this aluminum, any sort of binding in the mast, it would chew the gear up and the motor would go out.” RP, at 396.

The problem with the winches did not end there. They were not watertight and leaks caused the brushes to stick and the towers to shut down. This problem occurred "[o]f-ten”, contradicting the all-weather durability representations in the brochure. RP, at 397. To solve this problem, Hal-lett dismantled the winches, cleaned all the pieces, and reinstalled them. He had to do this to "[virtually all” of the towers. RP, at 397. Safety Factors "recently” solved all of its winch problems by replacing the pulleys and installing "more robust. . . hand-operated winches, rather than electric”. RP, at 397.

Other problems occurred. Excessive vibration caused the ignitions mounted on the generator to vibrate apart. The switch itself and its contacts would come apart, the wires that connected the ignition switch to other components would break off, and the unit would shut down. This happened every time each of the towers was used. Hallett finally fixed the problem by rewiring the entire system. He installed a "more robust alternator” and replaced the plastic ignition switches — which he described as "of insufficient strength for the vibration” — with "an after market steel switch”. RP, at 400-01.

The exhaust pipes "rusted out and fell off often” because they were too short. RP, at 398. Hallett explained:

This Hatz motor is inside a covered enclosure on a trailer so they want to route the exhaust gases outside the unit. They routed them to a rectangular-shaped tube that ran down to the ground with a short piece of flexible steel exhaust pipe that was just clamped on to the muffler, stuck in the hole in the side there. And they were too short to reach. And, again, with this motor rocking back and forth when it was started up or was shut down would pull it out of the hole and disintegrate.

*421 RP, at 398. To fix this problem, Hallett replaced the original pipes with longer ones on most of the units.

There was testimony that the main power cable was designed poorly as well. The tower used a long loose cable that had to be wound up as it was lowered instead of a pre-coiled cable that kept itself in position. Hallett pointed out: "You had to wind it up as it was lowered . . . these things are used in the dark, that’s their purpose is to light the night. If it’s dark and all this 20 feet of cable is hanging down there, when you lower the tower it’s very easy to pinch it off, and they did that often.” RP, at 399. This problem often resulted in cable wires being cut, requiring splicing or replacement. This occurred with every tower at least once and "probably more”. RP, at 400.

In his oral decision, the trial judge stated that "the only warranties that applied in this case were the implied warranties of merchantability and fitness for a particular purpose”. RP, at 543. He stated that these warranties were breached but said that the restrike problem was the only breach going "to the essence of the contract”. RP, at 543. He concluded that no express warranties were made. Conclusion of law 3, Clerk’s Papers (CP), at 71. The court listed no facts to support this conclusion. Despite the breach, the court denied lost rentals even for the period related to the restrike problem because it believed Safety Factors failed to mitigate by not revoking its acceptance and purchasing different towers. The trial judge did not allow damages for lost sales or for delivery costs of rental replacements following the various breakdowns.

Against the amount owed for the purchase of these towers, the court did allow credit for 109 hours of repair at the shop rate totaling $4,305.50. However, the judge denied a request to double the shop rate for these repairs despite Safety Factors’ argument that its shop could have used that time to repair other customers’ equipment. The court also found that the repairs billed by All Power were reasonable and allowed for another credit in the amount of $1,459.76. The amount left owing, after these credits, was $55,974.92. *422 On that amount, the court awarded prejudgment interest at 1 percent a month for 33 months to total $18,471.72. The court entered judgment for Federal Signal in the amount of $74,446.64. 2

On October 12, 1993, the Court of Appeals certified this case to this court.

Analysis

Safety Factors argues that the trial court made erroneous findings of fact and conclusions of law with regard to issues of breach of warranty, mitigation, and damages. We will address the issues in the order they arose in trial.

I

Express Warranties

The trial court concluded that Federal Signal made no express warranties to Safety Factors concerning the Night Warrior light towers. Conclusion of law 3, CP, at 71. Safety Factors contends that the trial court’s conclusion to this effect is contrary to the evidence presented. The trial judge made no findings of fact in support of his conclusion, stating that it was unnecessary.

Contrary to the judge’s belief, findings must be made on all material issues in order to inform the appellate court as to " ' "what questions were decided by the trial court, and the manner in which they were decided . . .” ’ ”. Daughtry v. Jet Aeration Co., 91 Wn.2d 704, 707, 592 P.2d 631 (1979) (quoting Bowman v. Webster, 42 Wn.2d 129, 134, 253 P.2d 934 (1953) (quoting Kinnear v. Graham, 133 Wash. 132, 133, 233 P. 304 (1925))). This court has recognized that the nature and degree of exactness of required findings depends on the circumstances of the particular case. Groff v. Department of Labor & Indus., 65 Wn.2d 35, 40, 395 P.2d 633 (1964) (citing Kelley v. Everglades Drainage Dist., 319 U.S. 415, 419, 87 L. Ed. 1485, 63 S. Ct. 1141 (1943)).

*423 In this case, significant evidence was presented regarding express warranties. Safety Factors’ purchase of seven Night Warrior towers was made following personal contact between Steve Fors and David Robbins. Robbins said that they discussed "the feature changes” of the Night Warrior (the newer, not-yet-produced model) versus the TPME (an older model originally produced by another company). RP, at 15-16. Fors testified that Robbins told him that the Night Warrior was comparable to and of higher quality than the TPME, a model with which Fors had good experiences and which Robbins knew Fors currently had in stock. Robbins testified that it was possible he told Fors that Night Warriors were sturdier than TPME’s but said he did not "remember exactly what went on in that discussion”. RP, at 34.

Fors also stated that Robbins left literature advertising and explaining the features of the Night Warrior. Fors testified that Robbins gave him the literature at the time Robbins was trying to sell the towers; Fors found the literature in his files of old quotes. Robbins testified that he was unsure whether he had given it to Fors. Among other things, the literature stated that the tower is "built tough for long lasting, reliable performance” and "will stay ready and roadworthy in all kind[s] of weather and work environments”. RP, at 299-300; Def.’s Ex. 20. Fors testified that Robbins’ oral representations for sale "basically spoke to what their brochure says”. RP, at 299. Based on this record, we believe that an adequate review requires a remand for entry of findings of fact which show an understanding of the conflicting contentions and evidence as well as a knowledge of the standards applicable to the determination. See Groff, at 40.

To guide the court in its effort, we will briefly address the questions of law presented in this case which should be considered. State v. Russell, 68 Wn.2d 748, 751, 415 P.2d 503 (1966). This dispute involves a commercial goods transaction; thus, we turn to Article 2 of the Uniform Commercial Code (U.C.C.) as enacted and codified in Title 62A.2 of the RCW. RCW 62A.2-313, which governs the creation of express warranties, states:

*424 (1) Express warranties by the seller are created as follows:

(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.

(2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant” or "guarantee” or that [the seller] have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.

The comments elaborate:" 'Express’ warranties rest on 'dickered’ aspects of the individual bargain, and go so clearly to the essence of that bargain that words of disclaimer in a form are repugnant to the basic dickered terms.” Official cmt. 1, RCWA 62A.2-313.

The trial court therefore must first identify whether any verbal representations were made equating the Night Warriors and the TPME’s, and, if so, whether these representations were of such character as to create an express warranty. The more specific a statement, the more likely it is an affirmation of fact or a promise. 1 James J. White & Robert S. Summers, Uniform Commercial Code § 9-4, at 445-47 (3d ed. 1988). Further, affirmations of fact or promises will generally relate to the quality of a good. Debra L. Goetz et al., Special Project, Article Two Warranties in Commercial Transactions: An Update, 72 Cornell L. Rev. 1159, 1171 (1987). In contrast, more general statements such as "You meet the nicest people on a Honda” and a Honda bike is a good one for children are a seller’s opinion or commendation rather than affirmations of fact. Baughn v. Honda Motor Co., 107 Wn.2d 127, 152, 727 P.2d 655 (1986). Additional factors to consider are whether any hedging occurred, the experimental nature of the good, a buyer’s actual or imputed knowledge of the true condition of the good, and the nature of the defect. Andrew M. Baker et al., Special Project, Article Two Warranties in Commercial Transactions, 64 Cornell L. Rev. 30, 61 (1978); see also White & Summers, at 446-47.

Second, the trial court must determine if and when Federal Signal gave Fors an advertising brochure and if it con *425 tained any affirmations of fact or promises. If the trial court here finds that the brochure was given to Fors during the sales negotiation, it must closely examine the language of that brochure. The analysis then is similar to the verbal instance. This court specifically dealt with the question of when advertisements create express warranties under the U.C.C. in Touchet Vly. Grain Growers, Inc. v. Opp & Seibold Gen. Constr., Inc., 119 Wn.2d 334, 831 P.2d 724 (1992). In that case, a sales brochure contained statements that the advertising company could "design to your specifications’ ”, that fabrication " 'is carefully checked by our quality control department”, that its designs would " 'meet the strictest building codes’ ”, and that" '[y]our particular requirements will determine the most suitable style of construction’ ”. Touehet Vly., at 348. This court found that such statements constituted express representations promising "a building of certain quality” rather than puffing in advertising, i.e., an opinion or commendation about the goods. Touchet Vly., at 348. Moreover, commentators agree that a written statement is less likely to be puffery. White & Summers, at 445-47.

Lastly, if the court finds that at least one affirmation of fact or promise was made either orally or through the brochure, the trial court must determine whether any of the affirmations of fact or promises were "part of the basis of the bargain” under RCW 62A.2-313(l)(a).

n

Implied Warranties

Next, the trial court concluded that both the implied warranties of merchantability and of fitness for a particular purpose were breached with respect to the restrike problem. Conclusion of law 6, CP, at 72. Safety Factors contends that the trial court erred in limiting the breach of the implied warranties and the award of consequential damages to the period of the restrike problem. We agree.

A. Implied Warranty of Merchantability.

The trial judge stated that only the warranty of merchantability was breached by the restrike problem because *426 the other problems "aren’t the kind that go to the essential purpose of the light towers”. RP, at 544. He expanded: "They were still usable. They had to be repaired more often than necessary, and I think that the defendant’s entitled to be compensated for the repairs that they had to make to these light towers for the oil leak and for the other little problems that were showing up . . .”. RP, at 544. He stated that the restrike problem was the only breach going "to the essence of the contract”. RP, at 543. This is not the proper test. Rather, the test is whether the goods are merchantable under RCW 62A.2-314.

RCW 62A.2-314 defines a breach of the warranty of merchantability by looking to the general uses of a product and expectations in the trade. According to RCW 62A.2-314(2):

Goods to be merchantable must be at least such as

(a) pass without objection in the trade under the contract description; and

(b) in the case of fungible goods, are of fair average quality within the description; and

(c) are fit for the ordinary purposes for which such goods are used; and

(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and

(e) are adequately contained, packaged, and labeled as the agreement may require; and

(f) conform to the promises or affirmations of fact made on the container or label if any.

This list "does not purport to exhaust the meaning of 'merchantable’ nor to negate any of its attributes not specifically mentioned in the text of the statute, but arising by usage of trade or through case law”. Official cmt. 6, RCWA 62A.2-314. In the case of fungible goods, a breach of any one of these requirements constitutes a breach of the warranty of merchantability. Baker et al., at 74-75; Goetz et al., at 1206-07. Courts generally use a reasonableness standard to determine whether the requirements of U.C.C. § 2-314(2) have been met. Goetz et al., at 1207.

*427 In Washington, "the question of whether a good is merchantable depends on the particular facts of the case”. Tall-madge v. Aurora Chrysler Plymouth, Inc., 25 Wn. App. 90, 94, 605 P.2d 1275 (1979). Where "a significant segment of the buying public objects to buying ...” a good, it "does not pass without objection in the trade”. Thomas v. Ruddell Lease-Sales, Inc., 43 Wn. App. 208, 214, 716 P.2d 911 (1986). However, " 'merchantable’ is not synonymous with 'perfect.’ ” White & Summers, at 476; see also Baker et al., at 76. A product which conforms to the quality of other brands in the market will normally be merchantable. White & Summers, at 473; see also Baker et al., at 75-76. The requirement most often cited is that of "fit for the ordinary purposes”. RCW 62A.2-314(2)(c). This phrase embodies the concept "that goods be reasonably fit for their usual, intended purpose”, i.e., "reasonably safe when put to their ordinary use and reasonably capable of performing their ordinary functions”. (Footnotes omitted.) Goetz et al., at 1208-09. Factors such as the usage in the trade, the price actually paid as compared to the standard price, the characteristics of similar goods manufactured by others, and government standards and regulations regarding such a good are considerations when evaluating merchantability.

Although the trial judge made no findings of fact comparing the Night Warriors to other light towers on the market, the record contains substantial evidence that considering all the problems, the Night Warriors were far below the quality of other light towers on the market. Fors and several of his customers testified that they have never had as many problems with any other light tower and that these machines had so many problems that it was hard to use them for their ordinary purposes. While we find that substantial evidence supports the trial court’s conclusion that the warranty of merchantability was breached, considering all the problems we conclude that the court erred in limiting the breach to the restrike problem.

We are also concerned that the trial court’s conclusions in this area are contradictory. In its conclusion of law 6, the *428 court stated that "the breach continued through May, 1989” when the restrike problem was solved. CP, at 72. However, it awarded all repair costs (expenses and shop time) incurred until July 1991 as "consequential damages” in its conclusion of law 9. CP, at 72. First, the cost of repairs does not represent consequential damages. Rather, under the facts of this case, these costs describe the difference in value which is a measure of actual damages for breach of contract. Second, neither actual nor consequential damages are merited unless a breach has occurred.

Because substantial evidence exists in the record to support the court’s award of repair costs for difference in value through the end of July 1991, we affirm the trial court’s award of repair costs in conclusion of law 9. However, we reverse its conclusion of law 6 with regard to when the breach ended and remand for new findings of fact and conclusions of law regarding the end date of the breach and repair costs, if any, after July 1991.

B. Implied Warranty of Particular Purpose.

The trial court also stated that the implied warranty of particular purpose, which it variously referred to as "fitness for purpose” or "fitness for use”, was breached as well. Finding of fact 3, CP, at 68; conclusion of law 6, CP, at 72; RP, at 543. Unfortunately, the trial court made no specific findings of fact that would support the existence of an implied warranty of particular purpose nor is there any discussion of the basis for that warranty in the judge’s oral opinion or written conclusions. Although we are concerned that the judge’s conclusion does not comport with the law regarding implied warranties of particular purpose, we will not address this issue further since neither party has directly raised it.

Ill

Mitigation of Consequential Damages

At trial, the judge found as a matter of both fact and law that Safety Factors could have and yet did not mitigate its damages, and on that basis denied any consequential damages for lost rentals and sales. Safety Factors contends that while the extent of damages is an element of proof for the *429 nonbreaching party under RCW 62A.2-715(2), Federal Signal as the breaching seller has the burden of proof to show that damages could have been mitigated and that the buyer did not do so. The issue before us requires that we decide where RCW 62A.2-715(2)(a) places the burden, the exact burden it places on each party, and whether the burden was satisfied in this case.

A. Who Has the Burden Under RCW 62A.2-715?

The source of the confusion over who has the mitigation burden may be the U.C.C. itself. RCW 62A.2-715(2) merely states:

Consequential damages resulting from the seller’s breach include

(a) any 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 . . .[.]

The inclusion of the phrase "which could not reasonably be prevented by cover or otherwise” may define the damages that can be recovered, putting the burden on the buyer, or may simply recognize that the common law duty to mitigate applies, placing the burden upon the seller.

For guidance, we look to the comments following the provision and to the general purposes underlying the U.C.C. The official comments following the provision do not require either result. Official comment 2 states:

Although the older rule at common law which made the seller liable for all consequential damages of which [the seller] had "reason to know” in advance is followed, the liberality of that rule is modified by refusing to permit recovery unless the buyer could not reasonably have prevented the loss by cover or otherwise. Subparagraph (2) carries forward the provisions of the prior uniform statutory provision as to consequential damages resulting from breach of warranty, but modifies the rule by requiring first that the buyer attempt to minimize his damages in good faith, either by cover or otherwise.

RCWA 62A.2-715. Official comment 4 states that "[t]he burden of proving the extent of loss incurred by way of consequential damage is on the buyer”, but does not discuss who has the burden of showing mitigation. RCWA 62A.2-715.

*430 The comments following the Washington provision, however, imply that the U.C.C. did not seek to change the common law regarding mitigation, but only intended to incorporate that law. The comments note that part (a) of this provision "appears to effect no substantive change” and that Washington "decisions have at least recognized the possibility of a limitation similar to that imposed by this part under the doctrine of mitigation of damages”. Washington cmt. (2)(a), RCWA 62A.2-715.

A review of other U.C.C. provisions lends additional weight to this view. The U.C.C. requires that its provisions "be liberally construed and applied to promote its underlying purposes and policies”. RCW 62A.1-102(1). The general purposes of the U C.C. are persuasive in this case. First, the U.C.C. expresses an intent that the common law regarding commercial contracts apply unless "explicitly displaced” by U.C.C. provisions. (Italics ours.) Official cmt. 1, RCWA 62A.1-103. RCW 62A.2-715 does not explicitly displace the common law regarding mitigation. Second, the U.C.C. requires that remedies be "liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special nor penal damages may be had except as specifically provided in this Title or by other rule of law”. RCW 62A.1-106. Official comment 3 explains that "consequential”, "special” or "penal” damages "are not defined in terms in the Code, but are used in the sense given them by the leading cases on the subject”. RCWA 62A.1-106. This implies that common law mitigation principles are incorporated in the definition of "consequential” damages.

A majority of courts considering the question have concluded that U.C.C. § 2-715(2)(a) is a codification of common law mitigation rules. See TCP Indus., Inc. v. Uniroyal, Inc., 661 F.2d 542, 550 (6th Cir. 1981); Plastic Moldings Corp. v. Park Sherman Co., 606 F.2d 117, 120 (6th Cir. 1979); S.J. Groves & Sons Co. v. Warner Co., 576 F.2d 524, 528 (3d Cir. 1978); Larsen v. A.C. Carpenter, Inc., 620 F. Supp. 1084, 1131 (E.D.N.Y. 1985), aff’d, 800 F.2d 1128 (2d Cir. 1986); Kohlen- *431 berger, Inc. v. Tyson’s Foods, Inc., 256 Ark. 584, 594, 510 S.W.2d 555 (1974); Smith-Wolf Constr., Inc. v. Hood, 756 P.2d 1027, 1031-32 (Colo. App. 1988); Clark v. International Harvester Co., 99 Idaho 326, 347, 581 P.2d 784 (1978); Lawrence v. Will Darrah & Assocs., Inc., 445 Mich. 1, 15 n.18, 516 N.W.2d 43 (1994) (citing Lorenz Supply Co. v. American Standard, Inc., 100 Mich. App. 600, 610, 300 N.W.2d 335 (1980), aff’d, 419 Mich. 610, 358 N.W.2d 845 (1984)); Bemidji Sales Barn, Inc. v. Chatfield, 312 Minn. 11, 17, 250 N.W.2d 185 (1977); Whitaker v. Farmhand, Inc., 173 Mont. 345, 356-57, 567 P.2d 916 (1977); Hardwick v. Dravo Equip. Co., 279 Or. 619, 626, 569 P.2d 588 (1977); Hepper v. Triple U Enters., Inc., 388 N.W.2d 525, 530 (S.D. 1986); LTV Aerospace Corp. v. Bateman, 492 S.W.2d 703, 708 (Tex. Civ. App. 1973).

The reasoning of one majority court is particularly persuasive. 3 Most recently, a California Court of Appeal held that U.C.C. § 2-715(2)(a) imposes the burden of proving mitigation on the seller under California’s traditional mitigation law. Carnation Co. v. Olivet Egg Ranch, 189 Cal. App. 3d 809, 229 Cal. Rptr. 261 (1986). The court argued that the U.C.C. provision "did nothing to alter preexisting California law on the right to recover consequential damages and the duty to mitigate such losses”. Carnation Co., at 816. Although the court acknowledged the official comments quoted above, it concluded that the U.C.C. did not change the burdens between the parties regarding mitigation. Instead, official comment 2 only recognized that the liberality of the former rule was "modified” but did not demonstrate that § 2-715(2)(a) "was intended to act as 'a restraint on the liberality of the common law.’ ” Carnation Co., at 815. *432 In the court’s view, official comment 4, regarding the extent of the damages, did not determine the allocation of the burden of proof regarding mitigation. Rather, "[i]t is entirely possible for the injured party to bear the burden of proving the extent of consequential damages while the breaching party has the duty of proving those items which limit the award of consequential damages”. Carnation Co., at 816. Acknowledging support for both positions, the court concluded that placing the burden on the breaching party was more "intuitively attractive, since proof that there has been a failure to mitigate adequately will reduce the damages awarded and, therefore, seems more in the nature of a defense than an element of the plaintiffs affirmative case”. Carnation Co., at 817-18. The court likened mitigation proof to the burden of proving comparative negligence, which lies with the party asserting the comparative negligence of the other party and stated that "it is sensible to require the defendant to prove those items which go to reduce the plaintiffs recovery, as plaintiffs would have little incentive to do so”. Carnation Co., at 818.

This position is generally consistent with Washington law. Washington appellate courts have held that under RCW Title 62A "the burden of proof as to mitigation of damages is on the party asserting the requirement”. Harper & Assocs. v. Printers, Inc., 46 Wn. App. 417, 424, 730 P.2d 733 (1986), review denied, 108 Wn.2d 1002 (1987); Jet Boats, Inc. v. Puget Sound Nat’l Bank, 44 Wn. App. 32, 43-44, 721 P.2d 18, review denied, 106 Wn.2d 1017 (1986). In finding that under RCW 62A.2-715 the seller is "required to prove that damages were not mitigated or insufficiently so”, the Harper & Assocs. court concluded that official comment 2 incorporated the common law regarding mitigation of damages. Harper & Assocs., at 423-24.

Finally, we note that the U.C.C. is an attempt to create uniformity. RCW 62A.l-102(2)(c). Considering this goal, the comments to U.C.C §2-715 cited earlier, as well as the U.C.C. generally and the logical appeal of the majority view, *433 we are persuaded that RCW 62A.2-715(2)(a) codifies common law principles of mitigation.

B. The Burden Imposed.

Because more than one type of "burden” exists, we must next decide exactly what burdens are imposed on the breaching seller under RCW 62A.2-715. The "burden of proof’ as used by courts and commentators may refer to any one of, or a combination of, the burden of pleading, the burden of producing evidence, and the burden of persuasion. The burden of pleading and producing evidence are usually encompassed within the term the "burden of production”. This burden is to "produc[e] evidence, satisfactory to the judge, of a particular fact in issue”. Edward M. Cleary, McCormick on Evidence § 336, at 947 (3d ed. 1984). "The burden of producing evidence on an issue means the liability to an adverse ruling (generally a fin