CARLSON v. MILBRAD

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Docket Number

No. 37813.

Attorney(S)

Benn R. Agor, for appellants. Riddell, Williams, Voorhees, Ivie Bullitt, for respondents.

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Smart Summary

Factual and Procedural Background

Marion and Wilma Carlson (plaintiffs-respondents) sold the "Eastlake Zesto Drive-In" business to Fred and Mildred Milbrad (defendants-appellants) on April 23, 1962, by means of a conditional sale contract and an assignment of the lease. After approximately four months the Milbrads resold the business to Frank and Joyce Bell, who assumed the balance due under the conditional sale contract. The Bells later became delinquent on payments, and the Carlsons accelerated the balance and sought enforcement of the contract and recovery of the unpaid balance.

The Carlsons sued the Milbrads and the Bells. The Bells did not appear at trial and are not parties to the appeal. The Milbrads answered, asserting as an affirmative defense that the Carlsons had released them from obligations under the conditional sale and asserting a counterclaim for $1,200 allegedly spent to make the ice-cream equipment fit for use.

The Carlsons moved for summary judgment. The trial court granted summary judgment in part, reserving for trial two issues: (1) whether the Carlsons had released the Milbrads from obligations under the conditional sale contract and (2) whether the Milbrads were entitled to a setoff or counterclaim for repairs/improvements to the ice-cream equipment. At trial, the Carlsons moved at the close of the Milbrads' case challenging the sufficiency of the evidence on those reserved issues; that motion was granted, judgment was entered for the Carlsons for the remaining balance under the conditional sale with interest, and the Milbrads appealed.

Legal Issues Presented

Whether the trial court properly treated the memorialized conditional sale (incorporated into the plaintiffs' affidavit) as established for purposes of summary judgment in the absence of a counter-affidavit from the defendants.
Whether a vendor's consent to the purchaser's resale of business premises operates as a release of the original purchaser from obligations under the original contract.
Whether the defendants presented sufficient evidence to establish a right to a setoff or counterclaim for repair or improvement expenses for allegedly defective ice-cream equipment (including satisfaction of the Sales Act's measure of damages).
Whether the trial court properly granted the plaintiffs' motion challenging the sufficiency of the defendants' evidence at the close of their case.

Arguments of the Parties

Appellants' (Milbrads') Arguments

The Carlsons had released the Milbrads from any obligation under the conditional sale contract (affirmative defense).
The Milbrads were entitled to a counterclaim/setoff of $1,200 for amounts spent to make the ice-cream equipment fit for use.
The summary judgment and the refusal to vacate it were improper because of alleged discrepancies between the Carlsons' affidavit supporting summary judgment and their deposition testimony (specifically the affidavit statement that prior to service of the answer the Milbrads had made no claim or complaint about defects, versus deposition testimony admitting complaints had been heard).
On appeal, for the first time, the Milbrads questioned whether a valid conditional sale contract had ever been executed between the parties.

Respondents' (Carlsons') Arguments

The memorandum of conditional sale, signed by both parties and incorporated into Marion Carlson's affidavit, established the existence and validity of the contract for summary judgment purposes.
Because the defendants did not file a counter-affidavit controverting the plaintiffs' affidavit or the incorporated memorandum, the trial court properly excluded those matters from being issues at trial.
The Carlsons reserved for trial the factual questions of release and setoff, but at trial the evidence proffered by the Milbrads was insufficient to establish either a release or an entitlement to a setoff under the Sales Act; accordingly, the plaintiffs properly moved to dismiss those defenses and recover the balance due.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Stringfellow v. Stringfellow, 53 Wn.2d 639, 335 P.2d 825 (1959)	An answer verified only by the party's attorney, without a showing the attorney had personal knowledge, is insufficient to raise an issue controverting facts established by affidavit for summary judgment purposes.	The court applied this rule to hold that the Milbrads' attorney-verified answer did not controvert the plaintiffs' affidavit incorporating the memorandum of conditional sale, so the existence/validity of the contract was properly treated as established for summary judgment.
Peninsula Truck Lines, Inc. v. Tooker, 63 Wn.2d 724, 388 P.2d 958 (1964)	Summary judgment standard: grant where there is no genuine issue as to any material fact.	Used to support the proposition that, absent genuine issues of material fact (other than those reserved), summary judgment was proper.
Preston v. Duncan, 55 Wn.2d 678, 349 P.2d 605 (1960)	Authority on summary judgment practice and standards.	Relied upon for the governing standard that pleadings alone do not entitle litigants to trial when affidavits establish facts and are uncontroverted.
Messina v. Rhodes Co., 67 Wn.2d 19, 406 P.2d 312 (1965)	When ruling on a challenge to sufficiency of evidence, the trial judge must view evidence and inferences in the light most favorable to the nonmoving party.	Quoted as authority for the standard to be applied on a sufficiency challenge; the court nevertheless concluded the defendants' evidence was insufficient even under that favorable view.
Miller v. Payless Drug Stores, 61 Wn.2d 651, 379 P.2d 932 (1963)	Same rule regarding viewing evidence most favorably to the nonmoving party in sufficiency challenges.	Applied along with other authority to frame the standard for assessing whether the trial court properly granted the plaintiffs' motion at the close of the defendants' case.
Lambert v. Smith, 54 Wn.2d 348, 340 P.2d 774 (1959)	Same rule regarding sufficiency challenge and viewing evidence favorably to nonmoving party.	Used with other cases to articulate the standard for the trial court's ruling on sufficiency of evidence.
Auve v. Wenzlaff, 162 Wn. 368, 298 P. 686 (1931)	Authority addressing failure of proof to establish release or similar relinquishment of obligations.	Cited as an example of a similar failure of proof where a document alone did not suffice to establish a release.
Mills v. Meyer, 40 Wn.2d 369, 243 P.2d 491 (1952)	Purchaser bears burden of proof to establish damages under the Sales Act measure when recovering for breach of warranty.	Applied to find the defendants failed to prove the Sales Act's prescribed measure of damages and thus could not recover on an implied warranty claim.

Court's Reasoning and Analysis

The court's analysis proceeded in a sequence tied closely to the summary judgment standard and the sufficiency-of-evidence standard at trial:

On the summary judgment motion, the plaintiffs submitted an affidavit by Marion Carlson incorporating a signed memorandum of conditional sale. Because the defendants did not file a counter-affidavit disputing the memorandum, the trial court properly treated the memorandum as establishing the existence and validity of the contract for summary judgment purposes. The court relied on Stringfellow to explain that an answer verified only by the defendants' attorney, absent proof the attorney had personal knowledge, cannot controvert facts established by affidavit.
The court acknowledged a discrepancy between the Carlsons' affidavit (stating the Milbrads had made no pre-answer complaints) and their deposition testimony (admitting they had heard complaints). It concluded that any factual dispute on that topic related to the reserved issue of entitlement to a setoff for breach of implied warranty; the summary judgment order had expressly reserved that issue for trial, so the existence of the contract remained properly established.
At trial, when the plaintiffs challenged the sufficiency of the Milbrads' evidence on the reserved issues (release and setoff), the court applied the standard that a sufficiency challenge must be judged by viewing the evidence and all reasonable inferences most favorably to the nonmoving party (citing Messina, Miller, Lambert). Even under that favorable view, the court concluded the Milbrads' evidence was insufficient.
Regarding release: the Carlsons had signed a document consenting to the resale to the Bells, "subject to the encumbrance held by the undersigned." The court reasoned that consent to resale is not tantamount to a release of the original purchaser from obligations under the original contract; the Milbrads introduced no additional evidence to show the Carlsons intended a full release, and the consent document did not, by itself, establish such a release (citing Auve v. Wenzlaff as a similar instance of failure of proof).
Regarding the setoff for breach of implied warranty of fitness: the court noted the Milbrads had been warned the machine was "touchy" and, more critically, had failed to introduce evidence showing the required measure of damages under the Sales Act (RCW 63.04.700). The purchaser bears the burden of proving the difference in value between the equipment as sold and as warranted; lacking that proof, recovery was precluded (citing Mills v. Meyer).

Holding and Implications

AFFIRMED.

Holding (core ruling): The trial court's judgment in favor of the plaintiffs (Carlsons) for the unpaid balance under the conditional sale contract, with interest, was affirmed. The trial court properly (1) treated the signed memorandum of conditional sale as established for summary judgment purposes because it was incorporated into the plaintiffs' affidavit and uncontroverted by a defendants' counter-affidavit, (2) reserved and later properly dismissed the defendants' asserted release and setoff defenses for failure of proof, and (3) dismissed the Milbrads' counterclaim.

Implications: The direct effect is that the Carlsons recovered the balance due under the conditional sale (with interest) and the Milbrads' counterclaim/setoff was rejected. The opinion applies and reinforces existing rules concerning the summary judgment procedure (including the limited effect of attorney-verified pleadings without personal-knowledge showing), the distinction between consent to resale and release of obligations, and the purchaser's burden to prove Sales Act damages; the opinion does not announce a novel legal principle beyond these applications.

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MARION L. CARLSON et al., Respondents, v. FRED MILBRAD et al., Appellants. Reported in 415 P.2d 1020.

[1] Judgment — Summary Judgment — Factual Dispute — Counter-affidavits — Necessity. A general denial contained in a pleading verified only by the party's attorney, is insufficient to raise into issue facts established by the affidavit of the other party, in the absence of any showing that the attorney had personal knowledge of the facts denied, since, under the summary judgment procedure, the mere raising of an issue in a pleading does not entitle a litigant to a trial, and in the absence of a counter-affidavit which controverts facts established by the affidavit of the other party, the trial court may properly enter an order excluding that issue from trial.

Same — Summary Judgment — Partial Disposition — Validity.

[3] Trial — Taking Case From Jury — Sufficiency of Evidence. In ruling on a challenge to the sufficiency of the evidence in a matter tried to a jury, the trial judge must view the evidence, and all reasonable inferences arising therefrom, from the viewpoint most favorable to the nonmoving party.

[4] Vendor and Purchaser — Contracts — Consent to Resale — Release of Vendee. A vendors consent to the resale of business premises by the contract vendee does not, by itself, constitute a release of such vendee from any and all obligations under the original contract.

[5] Sales — Warranties — Damages — Burden of Proof. In order to recover for the breach of an implied warranty of fitness for use, a purchaser must meet the burden of proving damages in accordance with the method prescribed by the Sales Act (RCW 63.04.700(7)).

See Am. Jur., Vendor and Purchaser (1st ed. § 426).

FINLEY, J.

The plaintiff-respondents, Marion Carlson and his wife, Wilma, sold to the defendant-appellants, Fred Milbrad and his wife, Mildred, the business known as the "Eastlake Zesto Drive-In," on April 23, 1962. The legal means utilized to effectuate the sale were a conditional sale contract and an assignment of the lease for the realty on which the business is situated. After the Milbrads had operated the business for approximately 4 months, they resold to the defendants, Frank Bell and his wife, Joyce. The Bells assumed the balance due to the Carlsons under the previously mentioned conditional sale contract. Shortly thereafter, the Bells became delinquent in their installment payments to the Carlsons, and the Carlsons elected to declare the balance remaining to be payable immediately under the acceleration clause of the conditional sales contract.

This suit was subsequently initiated against the Milbrads and the Bells for enforcement of the contract and recovery of the balance due. The Bells made no appearance at the trial, and are not parties to this appeal. The defendant Milbrads' answer alleged, by way of affirmative defense, that the Carlsons had released the Milbrads from any obligation under the conditional sales contract, if any existed. In addition, the Milbrads entered a counterclaim for $1,200, the amount they allegedly spent in making ice-cream equipment involved in the sale fit for use in the operation of the "Eastlake Zesto Drive-In."

The plaintiff Carlsons made a motion for summary judgment. This was granted in part, but the trial court reserved for trial two issues raised by the pleadings: i.e., the question (1) of whether or not the Carlsons released the Milbrads from any obligation under the conditional sale contract, and (2) whether or not the Milbrads were entitled to a setoff or counterclaim for repairs and improvements made to the ice-cream equipment.

At the time of trial, a motion made by the Carlsons at the close of the Milbrads' case challenged the sufficiency of the Milbrads' evidence to prove or establish (1) the alleged release and/or (2) the alleged setoff. The motion was granted, and judgment was subsequently rendered in favor of the Carlsons in the amount of the balance remaining unpaid under the terms of the conditional sale contract, with interest.

[1] The Milbrads thereupon appealed. Perhaps it should be noted that the Milbrads raise for the first time on appeal the question of whether or not a valid conditional sale contract was ever executed between themselves, as purchasers, and the Carlsons, as vendors. Their answer did deny each and every portion of the complaint other than the residency and marital status of the parties involved. However, a memorandum of conditional sale, dated April 23, 1962, and signed by both the Carlsons and the Milbrads, was incorporated into the affidavit submitted by Marion Carlson in support of the motion for summary judgment. The trial court's order on motion for summary judgment inferentially establishes the existence and validity of that contract by stating that all of the allegations of the plaintiffs' complaint were thereby established as facts with the exception of the questions as to (1) whether there had been a release, and (2) whether the defendants were entitled to a setoff. We think the trial court's order entering the summary judgment was proper in this respect, since the memorandum of conditional sale, made a part of the plaintiffs' affidavit in support of a motion for summary judgment, was uncontroverted by the defendants' answering affidavit. It is true that the defendants' answer denied each and every allegation of the complaint, but that answer was verified only by the defendants' attorney; and it cannot be relied on to raise into issue facts established by affidavit in the absence of any showing that the attorney had personal knowledge of the facts alleged or denied. Stringfellow v. Stringfellow, 53 Wn.2d 639, 335 P.2d 825 (1959). The summary judgment procedure has sounded the death knell for the proposition that issues raised by pleadings alone entitle litigants to a trial. The whole object of the summary judgment procedure is to avoid a useless trial. In the absence of a counter-affidavit from the Milbrads as to the existence or validity of the memorandum of conditional sale, the trial court properly entered an order excluding that "fact" from being an issue at trial.

[2] The defendant Milbrads' principal contention on appeal is that certain discrepancies between the Carlsons' affidavit in support of their motion for summary judgment and their testimony on oral deposition demonstrate that it was improper for the trial court to grant that motion and to refuse to vacate the summary judgment order on motion by the defendants. The affidavit contains the statement, "That prior to February 6, 1963, the date of service of `Answer of Defendants Milbrad; Affirmative Defenses and Cross-Complaint of Defendants Milbrad' the defendants Milbrad had never made any claim or complaint to plaintiffs by reason of any alleged defects or poor or faulty condition of any of the personal property which was the subject matter of the transaction between the plaintiffs and defendants Milbrad; . . . ." Marion and Wilma Carlson's subsequent testimony on oral deposition is directly contrary, and they both readily admit to hearing certain complaints by the Milbrads about the ice-cream machine. However, it would seem that any factual dispute in this respect would go to the question of whether the defendants were entitled to recover for breach of an implied warranty as to the quality or fitness for a particular purpose of the ice-cream equipment. RCW 63.04.160(5). The trial court's order on motion for summary judgment expressly reserves for trial the question of whether the defendants were entitled to a setoff for the amount expended by reason of an alleged breach of an implied warranty of fitness for use. There being no "genuine issue as to any material fact" (other than the alleged release and/or setoff), summary judgment was properly rendered. Peninsula Truck Lines, Inc. v. Tooker, 63 Wn.2d 724, 388 P.2d 958 (1964); Preston v. Duncan, 55 Wn.2d 678, 349 P.2d 605 (1960); Rule of Pleading, Practice and Procedure 56(c), RCW Vol. o.

[3, 4] Appellants' remaining contentions are also without merit. In ruling on a challenge to the sufficiency of the evidence in a matter tried to a jury, the trial judge must view the evidence, and all reasonable inferences arising therefrom, from the viewpoint most favorable to the nonmoving party. Messina v. Rhodes Co., 67 Wn.2d 19, 406 P.2d 312 (1965); Miller v. Payless Drug Stores, 61 Wn.2d 651, 379 P.2d 932 (1963); Lambert v. Smith, 54 Wn.2d 348, 340 P.2d 774 (1959). But even viewing the defendants' evidence as to a release or right to a setoff from the prescribed "favorable" perspective, we think that the trial court properly granted the plaintiffs' motion challenging the sufficiency of the defendants' case in both respects. The Carlsons did sign a document whereby they stated that it was their intention to "hereby consent to the sale of said business to the above named purchasers [the Bells], subject to the encumbrance held by the undersigned [the Carlsons]." But there is a wide chasm between a consent to the resale of a certain business premises by a previously obligated purchaser and a release of the initial purchaser from any and all obligations under the original contract. The defendants failed to introduce any evidence other than the consent document itself, which even tended to prove that the Carlsons intended to release them from all of their obligations under the original memorandum of conditional sale. For a similar failure of proof, see Auve v. Wenzlaff, 162 Wn. 368, 298 P. 686 (1931).

[5] The defendants also failed to introduce evidence sufficient to show that they were entitled to a setoff by way of damages for breach of implied warranty of fitness for use of the ice-cream equipment. By the Milbrads' own admission, they were apprised by the Carlsons that the machine was "touchy." Furthermore, even presuming the breach of an implied warranty of fitness for use by the Carlsons, the Milbrads did not introduce any evidence as to the difference in value between the equipment as it was at the time of the sale as opposed to the value of the equipment as it would have been if the ice-cream machine had worked as warranted. RCW 63.04.700(6). The burden of proof is clearly on the purchaser in this respect, and his failure to introduce evidence in accordance with the Sales Act's prescribed measure of damages precludes his recovery. Mills v. Meyer, 40 Wn.2d 369, 243 P.2d 491 (1952).

The judgment of the trial court is in all respects affirmed.

ROSELLINI, C.J., DONWORTH, WEAVER, and HAMILTON, JJ., concur.