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Reason: I attest to the accuracy and integrity of ARKANSAS COURT OF APPEALS this document Date: 2021-06-17 11:41:34 DIVISION II Foxit PhantomPDF No. CV-19-644 Version: 9.7.5 Opinion Delivered: June 3, 2020

GREENWAY EQUIPMENT, INC., APPEAL FROM THE CRITTENDEN SUCCESSOR IN INTEREST TO COUNTY CIRCUIT COURT BARTON AG CENTER, INC., AN [NO. 18CV-12-55] ARKANSAS CORPORATION APPELLANT/CROSS-APPELLEE HONORABLE RICHARD LUSBY, V. JUDGE

BOYCE JOHNSON AFFIRMED ON DIRECT APPEAL; APPELLEE/CROSS-APPELLANT AFFIRMED ON CROSS-APPEAL

PHILLIP T. WHITEAKER, Judge

The appellant, Greenway Equipment, Inc., is a farm-equipment dealer. The appellee,

Boyce Johnson, is a Crittenden County farmer. Johnson filed suit against Greenway in

Crittenden County Circuit Court over the sale of a used tractor. Following a bench trial,

the circuit court found that Greenway had breached an express warranty and entered a

judgment against Greenway and in favor of Johnson. Both parties filed a notice of appeal

from the judgment. We affirm on both direct and cross-appeal. I. Facts and Procedural History

In December 2008, Johnson and Barton AG Center, Inc., 1 by and through its

employee, Gene Ward, began discussions and negotiations over the purchase of a tractor.2

Johnson expressed an interest in purchasing a used, low-engine-hour3 tractor. Ward advised

Johnson that Barton would be taking delivery of several low-hour tractors in early 2009.

Johnson advised Ward several times during their negotiations that he was only interested in

low-hour tractors, and each time Ward reiterated that the trade-in tractors would have

around 500 hours on them. The exact number of engine hours was unknown at the time

because the tractors were not currently on the dealership lot.4

During the negotiations, Ward advised Johnson that Barton would be receiving a

low-hours 2008 John Deere 8330 tractor that had the ability to operate an air seeder and a

no-till drill. Johnson was particularly interested in the John Deere because of those features

and its low hours. On December 30, Johnson agreed to buy the tractor for $142,500 and

placed a $28,500 deposit on it. Ward created a customer purchase-order form for the John

Deere. The form listed the specifications but did not indicate the number of engine hours.

1 Barton was subsequently purchased by Appellant Greenway Equipment, Inc. 2 These discussions occurred on three separate occasions over the course of a week, and the substance of these interactions are combined unless the timing is relevant to the issues at hand. 3 Instead of an odometer tracking mileage on a motor vehicle, tractors utilize an hour meter to indicate the extent of use. 4 Typically, farmers keep their trade-in tractors until their new tractors arrive; therefore, the trade-in tractors are not generally on the lot for inspection.

2 Johnson once again asked Ward about the hours on the tractor, and Ward specified that the

tractor would have 500–550 hours on it. Johnson then wrote “500–600 hours” on the copy

of the purchase order provided to him by Ward to ensure there was “no misunderstanding.”

Ward did not correct him.

In February 2009, Barton informed Johnson that the tractor had been received at the

dealership. When Johnson inquired as to the actual number of hours on the tractor, he was

informed that the tractor had 886 hours on it. Johnson refused to take possession of the

tractor because the number of hours was significantly more than he expected. Barton and

Johnson endeavored to settle the dispute but were unable to do so.

After settlement negotiations failed, Johnson attempted to find another tractor within

his specifications to either buy or rent for the 2009 crop season. He was unsuccessful in

purchasing another tractor that met his specifications. This forced him to change his intended

method of preparing and planting his land, resulting in approximately 75 acres being left

unplanted. Johnson was eventually able to rent a tractor from a local farmer but had to wait

until this tractor became available. This delayed planting and resulted in a reduced crop yield

for the 230 acres planted during the 2009 crop season.

In February 2012, Johnson filed suit against Greenway, the successor in interest to

Barton, alleging breach of contract and breach of an express warranty. Johnson sought

damages for lost profits on both the 75 unplanted acres and the diminished yield on the

remaining 230 acres. He further sought damages for his expenses in connection with the

tractor rental, for pre-irrigation and chemical expenses, for tractor repair, and for

prejudgment interest. Greenway answered, denying the allegations and alleged that if a breach

3 had occurred, Johnson had failed to properly mitigate his damages. Greenway also responded

that it was entitled to a credit against any damages award that Johnson might receive.5

The parties appeared at a bench trial in February 2019. After hearing all the evidence,

the circuit court found that Ward’s representations to Johnson created an express warranty

and that the tractor delivered did not conform to that warranty. The court then awarded a

judgment to Johnson in the amount of $96,600 representing the lost profits on the 230 acres

of reduced yield. The court denied all other requests for damages from Johnson and denied

Greenway’s request for credit for the income tax savings Johnson received from depreciating

the tractor. From this judgment, both parties appeal.

II. Analysis—Direct Appeal

Greenway raises five points on appeal: (1) the circuit court erred in finding that Ward’s

statements created an express warranty with regard to the hours on the tractor; (2) the circuit

court erred in finding that Johnson mitigated his damages; (3) the circuit court erred in

awarding damages that were based on speculation and conjecture; (4) the circuit court erred

in its refusal to reduce the damages award by Johnson’s tax savings; and (5) the circuit court

erred by refusing to admitting a prior inconsistent statement by Johnson.

Our standard of reviewing a judgment entered by a circuit court after a bench trial is

well established. We do not reverse such a judgment unless we determine that the circuit

court erred as a matter of law or we decide that its findings were clearly against the

5 Johnson depreciated the purchase price of the John Deere tractor on his 2008 tax return, and Greenway contends that the income tax savings Johnson received should be credited to them.

4 preponderance of the evidence. Ark. R. Civ. P. 52(a) (2019); Santifer v. Ark. Pulpwood Co.,

,

(1999).

A. Express Warranties

Greenway first argues that the circuit court erred in finding that Ward’s alleged

representations created an express warranty regarding the number of hours logged on the

tractor. The existence of an express warranty presents a mixed question of law and fact. See

Little Rock Sch. Dist. of Pulaski Cty. v. Celotex Corp.,

,

(1978), on reh’g sub nom. Little Rock Sch. Dist. of Pulaski Cty. v. Matson, Inc.,

,

(1979) (noting that if the parties involved have assumed conflicting postures

regarding the facts and circumstances, the issue or question is generally a question of fact;

however, if there is no conflict in the evidence and only one reasonable inference can be

drawn from the evidence, the issue becomes one of law). Thus, whether certain words were

spoken or written presents a question of fact. Determining what those spoken or written

words mean involves a question of law.

Regarding the express warranty, the circuit court made two substantial findings of

fact. It found that Johnson had made clear to Greenway that he was only interested in tractors

with “low hours” and that the number of hours was of particular importance to him. The

circuit court also found that Ward had knowledge of Johnson’s desire to purchase a low-hour

tractor and had assured Johnson on several occasions that the tractor would have

approximately 500–550 hours on it. We are not persuaded that either of these findings of

fact are clearly erroneous. The court then concluded that these findings constituted an

express warranty. We will now consider this question of law.

5 Arkansas Code Annotated section 4-2-313 is the statutory authority for express

warranties created by a seller. Pursuant to this statute, a seller who makes any affirmation of

fact or promise 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. See

(1)(a) (Repl. 2001); Ciba-Geigy Corp. v. Alter,

,

(1992); Currier v. Spencer,

,

(1989).

Here, the circuit court found that Ward’s repeated statements and assurances that the tractor

would have approximately 500–550 hours on it were sufficient to form an express warranty

and that it was not necessary for the statements regarding hours to be exact to constitute an

affirmation of fact.

Greenway does not appear to dispute that Ward made the representations as alleged;

rather, it claims that because the tractor was not in its possession when the representations

were made, the representations were, at best, estimations or approximations of the number

of hours logged on the tractor—not affirmations of fact. In other words, Greenway takes the

position that the statements from Ward were nothing more than “sales talk.”

In determining whether a statement is to be given effect as an express warranty or is

to be regarded as merely a statement of opinion or sales talk, it is often necessary to read the

statement in the context of the entire discussion or contracting process. 3 Anderson U.C.C.

§ 2-313:76 (3d ed. 2009). Further, in determining whether a contract creates a warranty, the

focus is not on any particular language at a particular point in time but on whether the

seller’s actions or language, when viewed in light of the seller’s relationship with the buyer,

were fairly regarded as part of the contract to purchase the good. 67A Am. Jur. 2d Sales § 628,

6 Westlaw (database updated May 2020). Moreover, whether Ward’s statements and assurances

constituted a part of the contract or just “sales talk” was a matter of the court’s weighing of

the evidence and determination of credibility. Disputed facts and determination of witness

credibility are within the province of the judge, sitting as the trier of fact. Ford Motor Credit

Co. v. Ellison,

,

(1998). We are not persuaded that Ward’s

statements were just “sales talk” or that the circuit court clearly erred in concluding that

these statements were an affirmation of fact sufficient to create an express warranty.

Still, Greenway argues that Johnson fully understood that the exact number of hours

was unknown when he entered into the contract; therefore, he knew or should have known

that the number of hours was not an express guaranty. The circuit court disagreed, placing

the greater weight of the evidence on Ward’s knowledge that Johnson was interested in

purchasing a low-hour tractor and on Ward’s advice that a particular tractor with an expected

number of hours in the low 500 to 550-hour range would be available for sale. On the basis

of Ward’s representations, Johnson placed a deposit on the tractor. Thus, it seems plain enough

that Ward’s statements that the tractor would have “low hours” in the 500 to 550-hour range

was an affirmation of fact having a natural tendency to induce Johnson to purchase it. As

such, the circuit court did not clearly err in finding that an express warranty had been

created.

B. Damages

Greenway next argues that the circuit court erred in its award of damages. It asserts

that Johnson failed to mitigate his damages; that the damages award was based on speculation

7 and conjecture; and that the damages award should have been reduced by Johnson’s tax

savings. We disagree.

1. Mitigation of damages

Greenway first argues that because Johnson failed to mitigate his damages, he was not

entitled to recover consequential damages. Arkansas recognizes the doctrine of avoidable

consequences. Under this doctrine, a party cannot recover damages resulting from

consequences that he or she could have reasonably avoided by reasonable care, effort, or

expenditure. Bill C. Harris Constr. Co. v. Powers,

,

(1977); Taylor v.

George,

,

(2005); Quality Truck Equip. Co. v. Layman,

,

(1995).

Greenway claims that Johnson had several months in which to find a replacement

tractor by purchase, rental, or some other arrangement and did not do so. Greenway further

argues that Johnson could have (1) purchased the subject tractor and sued for any diminished

value based on the additional hours of use; (2) rented the subject tractor for the planting

season and sued for the cost of the rental; or (3) attempted to rent or purchase a tractor from

Barton or a neighboring dealership.

Admittedly, Greenway presented evidence at trial that several tractors were available

at nearby dealerships for purchase and/or rent during that time period, yet Johnson waited

until June to secure a rental tractor. In response, Johnson presented evidence that he

contacted another dealership with five or six stores and contacted multiple farmers in the

area that he knew bought, sold, or rented tractors in his efforts to find a comparable tractor

to allow him to utilize the no-till method of planting. His efforts were unsuccessful, and he

8 determined that the best option available was to rent from another farmer after that farmer

was done with his own planting. Because of the delay, Johnson was unable to utilize the no-

till method of planting and was forced to utilize a more time-consuming process at a

significantly later time in the season.

After reviewing the evidence regarding the parties’ attempts to resolve their dispute,

the circuit court acknowledged that the efforts suggested by Greenway might have further

mitigated the damages but noted that a buyer who rightfully rejects goods need not exhaust

every possibility or succeed in mitigation efforts. Instead, the circuit court noted that all that

is required is that the buyer’s efforts at mitigation be reasonable. The circuit court found

Johnson’s mitigation efforts were reasonable.

We find no error in the circuit court’s analysis. One is required only to take such steps

as may be taken at small expense or with reasonable exertion, and where the expense is so

large as to make the requirement impractical, the doctrine of avoidable consequences has no

application. Enter. Sales Co. v. Barham,

,

(1980). Reasonable

diligence and ordinary care are all that are required.

The burden of proving that a

nonbreaching party could have avoided some or all of the damages by acting prudently rests

on the breaching party, not only on the question of causation of damages for failure to avoid

harmful consequences, but also on the question of the amount of damage that might have

been avoided. See Bill C. Harris Constr. Co., supra. In most cases, whether one acted reasonably

in minimizing, mitigating, or avoiding damages is a question of fact. Id.; Quality Truck Equip.

Co., supra.

9 Here, the circuit court recognized that there may have been other options available

to Johnson if he had broadened his search but concluded that inaction on such options did

not necessarily constitute a failure to mitigate his damages. The circuit court reviewed and

weighed the evidence presented on mitigation and found Johnson’s efforts reasonable. That

finding is an issue of fact for the circuit court to decide, and we cannot say that the circuit

court’s finding was clearly erroneous under these facts.

2. Damages based on speculation and conjecture

Greenway next argues that the circuit court’s award of damages for reduction of yield

was clearly erroneous as the damages were speculative. In support of its argument, Greenway

claims that Johnson’s crop-insurance report and Johnson’s own testimony demonstrate that

crop yields and sales prices are affected by weather, weeds, market price and “a host of other

variables.” Greenway asserts that because the yield and price of soybeans varies greatly from

year to year, any calculation of damages would be the result of speculation and conjecture.

In general, damages recoverable for breach of contract are those damages that would

place the injured party in the same position as if the contract had not been breached. Dawson

v. Temps Plus, Inc.,

,

(1999). Damages must arise from the

wrongful acts of the breaching party.

Moreover, the judgment must have some

relationship to the damages proved.

Consequential damages are defined as “[s]uch damage,

loss or injury as does not flow directly and immediately from the act of the party, but only

from some of the consequences or results of such act.” Smith v. Walt Bennett Ford, Inc.,

, 604–05,

(1993) (quoting First Serv. Corp. v. Schumacher,

,

(1985)).

10 Here, the circuit court awarded damages for lost profits. Lost profits are recognized as

a type of consequential damages, Dawson,

,

, in that they

do not flow directly and immediately from a breach of a contract, but flow from some

consequence or result of the breach. See

A party seeking recovery of anticipated

profits must present a reasonably complete set of figures to the fact-finder and should not

leave it to speculate as to whether there could have been any profits. See Interstate Oil &

Supply Co. v. Troutman Oil Co.,

,

(1998). Instead, lost profits must

be proved by evidence showing that it was reasonably certain the profits would have been

made had the other party carried out its duties under the contract.

Such proof is

speculative when based on projected sales if there are too many variables to make an accurate

projection.

However, if it is reasonably certain that profits would have resulted had the

contract been carried out, then the complaining party is entitled to recover. Id.; Jim Halsey

Co. v. Bonar,

,

(1985). Proof of an established business’s past

profits is sufficient proof of its lost future profits. See Mine Creek Contractors, Inc. v. Grandstaff,

,

(1989). Lost net profits, not lost gross profits, are recoverable.

See Interstate Oil & Supply Co., supra. Although recovery will not be denied merely because

the amount of damages is hard to determine, damages must not be left to speculation and

conjecture.

Utilizing these principles, the circuit court refused to award Johnson lost profits on

the 75 acres that were not planted, finding that there was insufficient evidence as to the likely

cost for obtaining a harvest from those acres. The court did, however, award Johnson lost

profits on the diminished yield on the 230 irrigated acres that were planted.

11 At trial, Johnson testified that he experienced a diminished yield of 37 bushels per

acre on 230 acres. He opined that 2009 would have been a banner year for yield if he had

planted by the June 15 target date. He testified that had the target date been met, the property

would likely have produced 77 bushels per acre. Because he could not obtain use of a rental

tractor until late-June and July, he missed the optimum planting time in the spring. He

calculated his damage at 40 bushels per acre at a price of $14 per bushel. The circuit court,

however, found that Johnson’s potential yield if no breach had occurred would have been 67

bushels per acre based on a crop-insurance report showing Johnson’s crop yields since the

year 2000. The circuit court awarded Johnson $96,600 in lost profits.6 On these facts, we are

satisfied that the circuit court did not clearly err in assessing lost-profit damages.

3. Effect of tax savings on award of damages

Greenway also argues that Johnson’s award should be reduced by $47,955—the tax

savings Johnson received as a result of depreciating the entire price of the tractor in 2008.

Greenway argues that Arkansas Code Annotated section 4-2-713 provides that a buyer’s

damages should be reduced to the extent of any “expenses saved in consequence of the

seller’s breach.” Greenway contends that because Johnson received a significant tax savings as

a result of the sales contract that he ultimately canceled, any damages awarded to him should

have been reduced by the corresponding tax savings.

Admittedly, Johnson elected to take a section 179 tax deduction for the entire

purchase price of the tractor on his 2008 tax returns but then never completed the sale;

6 The damages amount was calculated by multiplying 30 bushels per acre at $14 per bushel by 230 acres.

12 therefore, his 2008 tax return is likely in error and may need to be amended. This seems to

be a tax matter between Johnson and the Internal Revenue Service. Greenway, however,

took the position with the circuit court, and here on appeal, that this tax matter is an issue

of statutory expenses. Despite its argument, Greenway did not provide the circuit court with

any expert testimony on this issue, and the circuit court was correct in refusing to include

the deduction in the calculation of the damages award.

C. Prior Inconsistent Statement/Settlement Letter

Finally, Greenway argues the circuit court erred when it refused to admit into

evidence as a prior inconsistent statement a letter in which Johnson 7 asserted an $11-per-

bushel price as opposed to the $14 per bushel price he testified to at trial. The circuit court

held that the statement was made pursuant to settlement negotiations and therefore was not

admissible pursuant to Rule 408 of the Arkansas Rules of Evidence.

Rule 408 provides:

Evidence of (1) furnishing, offering, or promising to furnish, or (2) accepting, offering, or promising to accept, a valuable consideration in compromising or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for, invalidity of, or amount of the claim or any other claim. Evidence of conduct or statements made in compromise negotiations is likewise not admissible. This rule does not require exclusion if the evidence is offered for another purpose, such as proving bias or prejudice of a witness, negativing a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.

7 It should be noted that there was evidence that the letter was drafted by Johnson’s attorney on his behalf. However, it is on Johnson’s letterhead and Johnson’s name appears on the signature line.

13 Ark. R. Evid. 408. However, Rule 408 is not a blanket prohibition against the admission of

all evidence concerning offers to compromise. McKenzie v. Tom Gibson Ford, Inc.,

,

(1988). Rather, the rule prohibits the introduction of such evidence

when the evidence is offered to prove “liability for, invalidity of, or amount of the claim or

any other claim.”

at 332–33,

(quoting Ark. R. Evid. 408).

Greenway argues that the purpose of Rule 408 is to promote complete candor

between the parties to the settlement negotiations but not to protect false representations.

We agree with this assertion. When a party has made a statement at trial that is inconsistent

with a statement made during settlement negotiations, the inference is that one of the

statements is knowingly false. In such a situation, prior inconsistent statements made in the

course of settlement negotiations should be admitted for impeachment purposes. Mo. Pac.

R.R. Co. v. Ark. Sheriff’s Boys’ Ranch,

,

(1983).

Here, Greenway was attempting to introduce the letter to prove Johnson had at one

time claimed damages in an amount less than that claimed at trial. However, the statement

Greenway sought to introduce was made during Johnson’s attempt to settle a disputed claim.

Thus, it falls directly within the purview of the type of evidence prohibited by Rule 408.

Moreover, a circuit court has wide discretion in evidentiary determinations. Wakefield v. Bell,

, at 3,

. Such evidentiary rulings are within the sound

discretion of the circuit court and will not be set aside by this court absent a manifest abuse

of that discretion.

Neither will we reverse on an evidentiary ruling absent a showing of

prejudice.

at 3–4,

. As a result, the circuit court did not abuse its

discretion in denying the admission of the letter.

14 III. Analysis—Cross-Appeal

In his brief submitted to our court, Johnson contends that his request for additional

damages and prejudgment interest was erroneously denied by the circuit court. We cannot

reach the merits of his cross-appeal, however, because although Johnson did file a notice of

cross-appeal, he did not properly file a cross-appellant’s brief. First, he did not file either a

jurisdictional or an informational statement as required by Arkansas Supreme Court Rule

1-2(c); and instead of separately designating and setting forth his arguments on cross-appeal,

he merely presented his arguments in response to Greenway’s arguments on direct appeal.

Our supreme court has dealt with a similar scenario. In Hall v. Freeman,

,

(1997), appellee Freeman filed a notice of cross-appeal and filed a brief in

response to appellant’s brief on appeal. Freeman did not include separate arguments in

support of his cross-appeal in his brief. The supreme court held that because Freeman did

not include a section in his brief setting forth his arguments on cross-appeal, he had in effect

presented no cross-appeal even though he had advanced similar arguments in his brief in

response to appellant’s argument. In short, the supreme court concluded that when the

appellee is also the cross-appellant, a separate argument must be presented in its brief in order

to present a cross-appeal. In other words, making an argument reflecting the substance of the

cross-appeal in response to appellant’s argument simply is not enough to present the

argument for appellate review.

We subsequently relied on Hall when affirming another similar case—Rheem

Manufacturing, Inc. v. Bark,

,

(2006). In Rheem

Manufacturing, the appellee Bark argued on appeal that the Commission had erred in

15 calculating his average weekly wage. We noted that while Bark had filed a notice of cross-

appeal, he had not filed a brief separately setting forth his arguments in support of his cross-

appeal. Instead, he had made his argument in response to appellant Rheem’s arguments on

direct appeal. Considering the reasoning of the Hall decision, we refused to reach the merits

of Bark’s argument.

The same holds true here. Johnson failed to separately set forth his arguments on

cross-appeal, instead interspersing his arguments within his response to Greenway’s

arguments on direct appeal. He further failed to follow the requirements of Supreme Court

Rule 1-2(c) regarding the filing of jurisdictional and informational statements, and he failed

to formally designate his brief as a cross-appellant’s brief. For these reasons, we decline to

address the merits of Johnson’s arguments.

Affirmed on direct appeal; affirmed on cross-appeal.

KLAPPENBACH and VAUGHT, JJ., agree.

Hardin, Jesson & Terry, PLC, by: Jeffrey W. Hatfield, Kynda Almefty, Carol Ricketts, and

Kirkman T. Dougherty, for appellants.

Gerald A. Coleman, for appellee.

16