Grace et al v. MRT Heavy Hauling

1 The Court has jurisdiction over the subject matter and the
parties pursuant to 28 U.S.C. §1334. 	The complaint alleges and
the answer admits that this is a core proceeding under 28 U.S.C.
§ 157. 	This adversary proceeding involves a contest between the
debtor and a creditor to determine the validity of claims against
the Debtors’ exempt property. Therefore in part it is (or started
out as) an action to determine validity, extent, or priority of a
lien under 28 U.S.C. § 157(b)(2)(K). 	See Continental Nat’l Bank
of Miami v. Sanchez (In re Toledo), 170 F.3d 1340, 1347 (11 th
Cir. 1999)(Section 157(b)(2)(K) proceedings entail lien
determinations on the estate’s or the debtor’s property.) 	It is
also in part an action affecting the adjustment of the debtor-
creditor relationship under 28 U.S.C. § 157(b)(2)(O). 	This
memorandum opinion constitutes findings of fact and conclusions
Page 1 of 	26
THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
ELDON W. GRACE
DIANNA J. GRACE
Debtor 	No. 7-04-14547 SA
ELDON W. GRACE
DIANNA J. GRACE,
Plaintiffs,
v. 	Adv. No. 04-1199 S
MRT HEAVY HAULING,
Defendants.
MEMORANDUM OPINION ON ISSUES OF
ECONOMIC WASTE AND INTEREST
This matter is before the Court on specific issues arising
from the damages aspect of Plaintiffs’ Motion for Possession and
to Pay Funds Into Court Registry (doc 72). 	A review of the
proceedings to date (excluding the rich procedural variety that
this adversary proceeding has offered) will help in explaining
the Court’s ruling. 1
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of law as may be required by Rule 7052 F.R.B.P.
Page 2 of 	26
Procedural Background
On June 18, 2004, Plaintiffs Eldon W. Grace and Dianna J.
Grace filed a bankruptcy petition under Chapter 7 of the
Bankruptcy Code. 	Later that month (June 27) Defendant MRT Heavy
Hauling, without knowledge of the filing of the bankruptcy
petition, repossessed the 1998 Peterbilt Model 379. 	On October
4, 2004, Plaintiffs filed a complaint (doc 1) asking that MRT be
ordered to turn over the truck to Plaintiffs, and seeking damages
for lost monthly income and attorney’s fees and costs. 	Following
a trial on the merits, the Court issued its Memorandum Opinion on
Complaint for Damages and to Compel Turnover of Property (doc
30), a Judgment (doc 31) and an Amended Judgment (doc 32), all
docketed October 21, 2005. 	The Amended Judgment ordered that
Plaintiffs pay to MRT $13,261.62 (the remaining balance on the
contract) and that “Defendant shall return the 1998 Peterbilt
Model 379 in substantially the same condition less reasonable
wear and tear within five (5) days of receiving payment....” 	On
November 8, 2005, Plaintiffs tendered payment but MRT refused it.
On December 2, 2005, the Court entered its Order in Aid of
Enforcing Judgment (doc 45), which required among other things
that
MRT shall deliver the Peterbilt free and clear of liens
and in the condition it was when MRT repossessed the
Peterbilt in June 2004, reasonable wear and tear
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Page 3 of 	26
excepted, together with the title, on Friday, December
8, 2005 at 9:00 am (MT), at the MRT yard, at which time
and place Mr. Grace or Ms. Grace shall deliver to MRT
the credit union check (in the amount of $13,261.62)
endorsed over to MRT.
On December 7, 2005, the Court entered its Order on Plaintiffs’
Motion to Park Vehicle And on Defendant’s Motion for
Determination Of Supersedeas Bond (doc 49), which provided in
part that
If the truck remains in the MRT yard after 9.00 am on
Friday, December 9, MRT will park it, store it, not
drive or otherwise use it, protect it, insure it, and
make sure it remains in the same condition it was when
payment was tendered on November 8.
MRT took an appeal which was denied. 	District Court Order
Affirming Recommendation of Magistrate Court (doc 70). 	On
February 28, 2007, Plaintiffs filed their Motion for Possession
and to Pay Funds into Court Registry (doc 72). 	On May 3, 2007,
the Court ordered that Plaintiffs deposit the $13,261.62 into the
registry of the Court and that, upon the deposit timely
happening, MRT deliver title to Plaintiffs (doc 78). 	Plaintiffs
complied on May 4, 2007 (doc 79), and MRT transferred the title
in the Animas Courtroom that morning. 	See Stipulated Order
Granting Title to Vehicle (doc 80, docketed May 11, 2007). 	The
Court then conducted a trial on the merits concerning the damages
aspect of the Motion for Possession on May 4, 11 and 18, 2007,
and announced oral findings of fact and conclusions of law at a
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2 For ease of reference, the exhibit to the September 7,
2007 minutes is attached. 	The exhibit consists of the notes that
the Court used in orally announcing its findings of fact and
conclusions of law, and constitutes an almost verbatim record of
the Court’s oral ruling. 	An audio recording of the Court’s
ruling available from the Clerk’s office.
Page 4 of 	26
hearing conducted on September 7, 2007 (doc 85). 2 	The Court
found that the damages owed to Plaintiffs by MRT totaled
$34,073.54, without regard to any funds in the registry of the
Court, costs and interest (if any should be awarded), and without
regard to any limitation on the award of damages based on grounds
of “economic waste” or any similar doctrine. 	The Court
incorporated that ruling in its Preliminary Order on Damages in
Connection with Motion for Possession and to Pay Funds into Court
Registry (doc 86). 	The Court also set a briefing schedule to
address the issues of economic waste, the status of the rulings
on “wear and tear”, and post-judgment interest. 	Id. 	The parties
have now briefed the issues, and the matter is ready for a
ruling.
Analysis
As noted above, the Court has already found that to put the
Peterbilt into the condition required by this Court’s order will
require $34,073.54 of parts and labor, at least as of September
7, 2007. 	Additional relevant facts are that the truck was not in
“showpiece” condition, and that, contrary to the Court’s and
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3 The Court found that Plaintiff Eldon Grace maintained the
truck as a “showpiece vehicle”. 	Doc 85, Exhibit 1, at 2. 	At
least part of the basis for this finding was that Mr. Grace
testified that he wanted to show the truck at “show and shines”.
Plaintiffs subsequently made clear that the finding about the
“showpiece vehicle” was erroneous, since Mr. Grace intended in
the future to prepare the truck for “show and shines”.
Plaintiff’s [sic] Brief Following Preliminary Order on Damages,
at 2 (doc 89); [Plaintiffs’] Responsive Brief on Measure of
Damages, at 5 (doc 90). 	The misunderstanding does not materially
impact the decisions already made, nor require any further
proceedings, since the testimony presented by the witnesses went
to the vehicle as it actually existed at the time of the hearing
and at the time MRT repossessed it in June 2004. 	There was also
ample evidence that the truck was in excellent condition; e.g.,
Mr. Grace had replaced the engine, transmission, tires, etc. in
early 2004, and the truck was kept in such immaculate condition
that Ms. Grace and her daughter were not allowed in the truck
unless they took their shoes off.
Page 5 of 	26
MRT’s previous impression, Plaintiffs did not contend otherwise. 3
Rather, Plaintiffs contended that the truck was (merely) in
excellent or peak condition, and was maintained that way by Mr.
Grace. 	The Court accepts that testimony, and also Mr. Grace’s
testimony that on the day the truck was repossessed by MRT, it
was a little dusty but otherwise in excellent condition.
Wear and Tear
In the October 21, 2005 Amended Judgment, the Court ordered
that Plaintiffs pay to MRT the remaining balance on the contract
and that “Defendant shall return the 1998 Peterbilt Model 379 in
substantially the same condition less reasonable wear and tear
within five (5) days of receiving payment....” 	Doc 32.
Plaintiffs timely tendered the payment on November 8, triggering
MRT’s obligation to return the truck. 	The “same condition”
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Page 6 of 	26
referred to the condition it was in in June 2004 when MRT
repossessed the vehicle.
MRT argues that “the phrase ‘reasonable wear and tear’ of
the truck is the law of the case. 	What is open is what
constitutes reasonable wear and tear.” 	Defendant’s Brief
Following Preliminary Order on Damages at 5 (doc 87). 	MRT also
argues that its testimony about the current value of the truck
takes into account wear and tear and therefore Plaintiff should
not be awarded any damages beyond the approximately $22,000 which
MRT says is the value of the truck. 	Id. at 5-6. 	This latter
argument is addressed in notes 20 and 23 in the next subsection
which deals with economic waste.
“[W]hen a court decides upon a rule of law, that decision
should continue to govern the same issues in subsequent stages in
the same case.” 	Arizona v. California, 460 U.S. 605, 618 (1983),
reh. denied, 462 U.S. 1146. 	The rule is not inflexible; “it is
not improper for a court to depart from a prior holding if
convinced that it is clearly erroneous and would work a manifest
injustice.” 	Id. at 618 n. 8. 	(Citation omitted.) 	However, “it
requires a final judgment to sustain the application of the rule
of the law of the case just as it does for the kindred rule of
res judicata.” 	U. S. v. U. S. Smelting Refining & Min. Co.,
339 U.S. 186, 198 (1950).
Whether technically this is an instance of the doctrine of
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4 To be fair, the Court itself used that terminology in the
earlier stages of this adversary proceeding.
5 In effect the cost of repairs has been the “damages” for
this adversary proceeding. 	The complaint sought damages for the
loss of the use of the semi-tractor but because Plaintiffs put on
no evidence in support of that claim, the Court awarded none.
Page 7 of 	26
law of the case is questionable since there has been no final
judgment on damages. 4 	However, it does not make a difference,
since the Court is not inclined to change its decision. 	The
Court finds that neither argument that MRT makes on the wear and
tear issue is persuasive.
The Court has not only ruled that the notion of wear and
tear should be applied, but has also applied the notion to the
facts of the adversary proceeding. 	The Court ruled that the
additional mileage that MRT put on the truck – approximately
200,000 miles in about seventeen months – resulted in a far
“older” and more used truck than when MRT took it. 	The Court
also ruled that the tires that were on the truck when MRT took it
are long gone and MRT need not replace the tires. 	MRT has
received all the benefit of the “wear and tear” provision that it
is entitled to. 	In this instance, there is no reason to set
aside that ruling. 	If anything, given the surprisingly high
mileage that MRT put on the truck and the testimony that the
truck had been abused, the ruling is overly generous to MRT.
Economic Waste
The Court’s ruling on the cost of repairs or damages 5
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Memorandum Opinion on Complaint for Damages and for Turnover of
Property at 22 (doc 30); Amended Judgment at 2 (doc 32).
6 MRT continues to argue that the Court should in effect
discount any award of damages for the new parts that would go
into repairing the truck. 	Defendant’s Brief Following
Preliminary Order on Damages at 6 (doc 87). 	How to calculate
such a discount with any precision is not clear. 	And at any
rate, requiring Plaintiffs or anyone else to hunt around for used
parts that are not too new and not too used instead of simply
using new parts would seem to be a perfect example of “economic
waste”.
Page 8 of 	26
specifically reserved for MRT the right to argue that any damages
award should be limited by the economic waste doctrine.
Plaintiffs’ evidence and argument is that full compensation
requires the payment of $34,073.54; MRT’s evidence and argument
is that $22,000 is the maximum that should be paid. 6 	(These
figures are without regard to the $13,000+ in the registry of the
Court.)
Plaintiffs put on evidence only of the cost of repairs. 	MRT
contested that proof but also presented evidence of replacement
value. 	This was the appropriate allocation of the respective
burdens of coming forward with evidence and of persuasion, 3 Dan
B. Dobbs, Dobbs Law of Remedies §12.19(1) at 438 (2d ed. 1993)
(“Dobbs”) (addressing real property cases) (footnote omitted).
Compare Rust & Martin, Inc. v. Ashby, 671 S.W.2d 4, 8 (Ct. App.
Mo. 1984) (in a building construction case, “any reasonable doubt
whether curing defects would cause economic waste should be
resolved against the contractor guilty of the breach and that
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Page 9 of 	26
upon it should be put the burden of proof to show economic
waste.”) with General GMC Trucks, Inc. v. Crockett, 145 Ga. App.
503, 504, 244 S.E.2d 78, 79-80 (1978) (in a vehicle repair case,
“[i]f the plaintiff relies on the cost of repairs as a measure of
damages, he must prove the cost of repairs does not exceed the
value of the vehicle before the injury.”). 	It makes sense to
assign the burden of proof generally to the party with the most
incentive to prove the point at issue. 	In this adversary
proceeding, establishing the replacement value is similar to
proving an affirmative defense that lowers the amount of damages.
“The remedy that is most commonly obtained for breach of a
contract is a judgment for money damages.” 	11 Joseph M. Perillo,
Corbin on Contracts (Rev. ed. 2005) § 55.4 at 12 (“Corbin”).
“The measure of damages should be that which fully and fairly
compensates for the injuries received.” 	Fredenburgh v. Allied
Van Lines, Inc., 79 N.M. 593, 596, 446 P.2d 868, 871 (1968)
(damages for furniture and clothing damaged while in care of
carrier) (Citations omitted.); 	Camino Real Mobile Home Park
Partnership v. Wolfe, 119 N.M. 436, 444, 891 P.2d 1190, 1198
(1995) (“The objective is to place the plaintiffs in the same
financial position, with regard to the property, as they would
have been had the property not been damaged....”); McNeill v.
Burlington Resource Oil & Gas Co., 141 N.M. 212, 221, 153 P.3d
46, 55 (Ct. App. 2006), cert. granted 141 N.M. 339, 154 P.3d 1239
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7 The doctrine has also been described as “relative economic
benefit”. 	Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109,
113 (Okl. 1962), cert. denied 375 U.S. 906 (1963).
Page 10 of 	26
(2007).
But what “full compensation” means in given circumstances
may not be simple.
Even when an award of damages could be purely
compensatory, principle and practicality may call for
an award either larger or smaller than compensation.
First, damages must always reflect the substantive
policy or goal, which may require something more or
less than compensation.
1 Dobbs §3.1, at 283. 	See, for example, Fredenburgh, 79 N.M. at
596-97, 446 P.2d at 871-72 (measure of damages is either lesser
of difference between “before” and “after” value of damaged
property or cost of repairs); UJI-13-1816.
One of the substantive policies that drives compensation
awards is the doctrine of economic waste. 7 	A well tailored
working definition of the term is in Hubbard v. Albuquerque Truck
Center, Ltd., 125 N.M. 153, 958 P.2d 111 (Ct. App. 1998), in
which the court ruled that plaintiff’s damages were limited to
the lower cost of substituting another engine rather than
repairing the damaged engine of a tractor-trailer:
ATC’s argument boils down to an assertion that paying
Hubbard his substitution cost is economically wasteful
because requiring it to pay more than the tractor is
worth would impose a cost on ATC which would not
produce a corresponding benefit to Hubbard.
Id., 125 N.M. at 156, 958 P.2d at 114. 	The Hubbard court then
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8 Although the rules applicable to damage to real property
are not directly applicable to personal property cases, the
general principles are close enough to provide useful guidance.
Hubbard, 125 N.M. at 158, 958 P.2d at 116.
Page 11 of 	26
elaborated on the principle:
Very difficult remedial decisions must be made when two
or more remedies will each provide appropriate redress
of the plaintiff’s entitlement but one of them will
entail onerous costs to the defendant or economic
waste. 	In general we wish to fully redress the
plaintiff’s rights, but at the same time we wish to
count the costs. 	Remedies that cost more than the
benefits they produce are suspect.
Id., citing 1 Dobbs § 1.7, at 33. 	Similarly, in a real property
damage case, the New Mexico Court of Appeals stated that
if the cost of repair is greater than the diminution in
value, the plaintiff will only receive the latter.
This rule makes sense given the purpose of awarding
damages, which is to fully compensate a plaintiff, or
restore plaintiff to his rightful position. 	Allowing a
recovery that is greater than the value of a
plaintiff’s loss would put the plaintiff in a better
position than he or she had been in before the injury,
which is never the purpose of compensatory damages.
McNeill, 141 N.M. at 220-21, 153 P.3d at 54-55, citing Camino
Real Mobile Home Park Partnership, 119 N.M. at 444, 891 P.2d at
1198. 8
But the requirement to apply the economic waste doctrine “is
not rigid or inflexible”. 	McNeill, 141 N.M. at 221, 153 P.3d at
55. 	“Where subordinate rules for the measure of damages run
counter to the paramount rule of fair and just compensation, the
former must yield to the principle underlying all such rules.”
Rutherford v. James, 33 N.M. 440, 443, 270 P. 794, 796 (1928),
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9 “Black and white” is this Court’s characterization of the
factual predicate of the case. 	To be clear, all three national
cases cited in this part were split decisions decided by one vote
margins.
10 “Some of the exposed sections might perhaps have been
replaced at moderate expense. The defendant did not limit his
demand to them, but treated the plumbing as a unit to be
corrected from cellar to roof.” 	Id., 230 N.Y. at 244, 129 N.E.
at 891.
Page 12 of 	26
overruled on other grounds by Reed v. Styron, 69 N.M. 262, 365
P.2d 912 (1961) (household furnishings and clothing damaged in
apartment fire valued at cost rather than second-hand value).
(Citation omitted.) 	A further brief review of the leading
national and New Mexico case law on economic waste provides
guidance in making the decision in this adversary proceeding.
A factually black and white case 9 of economic waste appears
in Jacob & Youngs v. Kent, 230 N.Y. 239, 129 N.E. 889 (1921). 	In
Kent, the builder had contracted to build a country house for
upwards of $77,000 and, as part of the contract, to install pipe
manufactured by Reading. 	Inadvertently the builder installed
pipe manufactured by Cohoes and others instead. 	Other than the
specific manufacturer, the pipe was identical in all aspects to
the Reading pipe. 	The mistake was discovered only when the
construction was largely complete, so that the cost of
substituting the pipe was considerable. 10 	The value of the house
as constructed was the same as if Reading pipe had been
installed. 	In these circumstances the New York Court of Appeals
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11 “We therefore hold that where, in a coal mining lease,
lessee agrees to perform certain remedial work on the premises
concerned at the end of the lease period, and thereafter the
contract is fully performed by both parties except that the
remedial work is not done, the measure of damages in an action by
lessor against lessee for damages for breach of contract is
ordinarily the reasonable cost of performance of the work;
however, where the contract provision breached was merely
incidental to the main purpose in view, and where the economic
benefit which would result to lessor by full performance of the
work is grossly disproportionate to the cost of performance, the
damages which lessor may recover are limited to the diminution in
value resulting to the premises because of the non-performance.”
Id. at 114.
12 New Mexico cases (purport to) align with Kent and
Peevyhouse. 	E.g., 	Montgomery v. Karavas, 45 N.M. 287, 114 P.2d
776 (1941) (no economic waste to require floor and stairway of
hotel to be reconstructed, citing Kent); Camino Real Mobile Home
Park, 119 N.M. at 444, 891 P.2d at 1198 (“the measure of damages
Page 13 of 	26
ruled that the owner was entitled only to nominal damages.
In the circumstances of this case, we think the measure
of the allowance is not the cost of replacement, which
would be great, but the difference in value, which
would be either nominal or nothing.
Id., 230 N.Y. at 244, 129 N.E. at 891. 	See also Peevyhouse
(strip miner contracted to mine farmland and restore it; after
mining, miner refused to restore land at a cost of $29,000;
owner’s recovery limited to $300 as depreciated value of
unrestored land) 11 ; compare Groves v. John Wunder Co., 205 Minn.
163, 286 N.W. 235 (1939) (gravel lease required lessee to return
land at substantially the same grade; lessee deliberately
breached that obligation which would have cost $60,000 versus the
depreciated value of the land at $12,000; judgment awarded for
full cost of restoring land to substantially the same grade). 12
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where the plaintiff seeks to enforce a warranty as to the
condition or quality of construction of real property is the cost
of repairs required to bring the property into compliance with
the warranty or, if the cost of repairs or replacement involves
economic waste, the measure is the difference between the
reasonable market value of the subject property as warranted and
its reasonable market value in its actual condition”, citing
Kent); McNeill 141 N.M. at 221, 153 P.3d at 55 (measure of
damages for temporary injury to real property for failure to
remediate contamination is lesser of diminution of value or cost
of remediation).
Page 14 of 	26
While the seminal national cases all deal with real
property, in New Mexico the economic waste doctrine (or at least
some variant of the different ways to measure damages) is also
applied to personal property. 	E.g., UJI 13-1813 to 13-1816;
Rutherford v. James; Curtis v. Schwartzman Packing Co., 61 N.M.
305, 299 P.2d 776 (1956) (compensation for damaged car to be
diminution in value unless car was repairable and repair value
was less); Fredenburgh v. Allied Van Lines, Inc.; Hale v. Basin
Motor Co., 110 N.M. 314, 319, 795 P.2d 1006, 1011 (1990) (proper
measure of damages was repair cost of vehicle rather than higher
figure of difference between before and after values); Hubbard.
Several principles applicable to the circumstances of this
adversary proceeding stand out from these decisions and the
UJI’s. 	First, the general rubric is that the damaged party is to
be fully and fairly compensated for the loss or injury received,
e.g., Fredenburgh, 79 N.M. at 596, 446 P.2d at 871, but it is
never the purpose of compensatory damages to put the plaintiff in
a better position than he or she had been in before the injury.
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Page 15 of 	26
McNeill, 141 N.M. at 221, 153 P.3d at 55.
Second, what constitutes “full and fair” compensation is
about as bright line a test as the injunction to “do no evil”.
In consequence, each case devolves into a discussion (or at least
evidence presented at trial) about differing ways of valuing the
losses. 	Compare Fredenburgh (clothing and household furnishings
valued at more than secondhand market) with Hubbard (semi-tractor
engine valued at cost of replacing it with another used engine).
Third, “full and fair” compensation usually means plaintiff
gets the smaller amount of damages. 	E.g., Rutherford; Curtis;
Fredenburgh; Hale; Hubbard; see also Camino Real Mobile Homes
Park; McNeill; UJI 13-1816, which summarizes New Mexico case law
and provides as follows:
In determining property damages, you may award only the
smaller of two figures which are calculated as follows:
One figure is the reasonable expense of necessary
repairs to the property; and
The other figure is the difference between the fair
market value of the property immediately before
the occurrence and the fair market value of the
unrepaired property immediately after the
occurrence.
Fourth, as the UJI makes clear, ordinarily the issue is the
difference between the before and after value of the property
versus the cost of repairing the property. 	In Hubbard, for
example, the court, instead of awarding the higher figure of what
it would take to repair the engine, awarded a figure comprised of
the market value of the truck less its salvage value. 	Id., 125
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13 There was a further deduction from a damages contribution
from a third party, but that is irrelevant for purposes of this
analysis.
14 “Unreasonableness” is hardly a bright line test either.
But that determination can be made easily enough if the facts of
the case fall on either end of the spectrum as is the situation
here.
Page 16 of 	26
N.M at 155, 958 P.2d at 113. 13 	Here MRT has tendered a single
figure of $22,000 as an alternative to the cost of repairs.
Fifth, economic waste becomes an issue when it is
“unreasonable”. 14 	E.g., Kent (no difference in value of house as
completed versus the cost of replacing the pipe from cellar to
roof); Peevyhouse ($300 versus $29,000); Groves ($12,000 versus
$60,000); Hubbard ($7,500 versus $10,000 - $12,000); see 11
Corbin §60.2 (“Unreasonable Economic Waste to be Avoided”).
Sixth, even aside from considerations of unreasonable
economic waste, there are other instances in which the lower
figure is not the appropriate award. 	E.g., Rutherford (value to
owner of clothing and household goods damaged by fire cannot be
fairly measured by their value as secondhand goods on the
market); Fredenburgh, 79 N.M at 598, 446 P.2d at 873 (“household
goods are often more valuable as a matter of fact to the owner of
them than their market value as secondhand goods would show”,
citing Rutherford); Hubbard, 125 N.M. at 157, 958 P.2d at 115
(smaller figure to be awarded “unless there are circumstances
making this measure so inadequate as to make it unreasonable.”);
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15 The same argument might be made concerning vehicles and
title loan companies, given the enormous importance of individual
vehicles for conducting life and the resources – time,
opportunity, liquidity – needed to obtain a replacement vehicle.
But see Curtis, 61 N.M at 308-09, 299 P.2d at 778-780 (“Blue
Book” held to be exception to hearsay rule and plaintiff properly
relied on it for his measure of property damages).
Page 17 of 	26
McNeill, 141 N.M. at 221, 153 P.3d at 55 (“unusual or exceptional
circumstances” may justify award of cost of repairs which exceeds
amount of diminution of value of property but not so ruling in
this case).
Several bases may justify the award of the higher amount of
damages. 	For example, Rutherford and Fredenburgh appear to
recognize that clothing and furniture are in a practical sense
much more valuable to their owner than any “fair market value”
test might show, a fact long recognized by small loan companies
who take liens on furniture and electronic goods not because
those items have a high resale value but because their loss will
be keenly felt by a defaulting consumer. 15 	Similarly, the
particular property in question may have somewhat different
characteristics from other such properties. 	“Substitution of
equivalents may not have the same significance in fields of art
on the one side and in those of mere utility on the other.”
Kent, 230 N.Y. at 243, 129 N.E. at 891.
Another basis for the higher award lies beyond property
values as such, going to the parties’ behavior and notions of
wrongdoing and deterrence and upholding a policy of requiring
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16 After exposing the simplistic assumptions of the
efficient breach theory, id. at 79, the author goes on to say,
Healthy business relationships help the market function
efficiently and encourage market activity. 	Such
relationships are almost always disrupted by a breach,
whether it is efficient or otherwise. 	Of course, if a
party can get a better deal elsewhere, there is no harm
in asking the other party to accept a sum of money in
substitution for performance; to talk is not to breach.
However, if efficient breaches are encouraged, what
effect does such encouragement have on trust among
actors in the market? 	Efficient breach theory
Page 18 of 	26
parties to abide by their promises.
Defendant's breach of contract was wilful. There was
nothing of good faith about it. Hence, that the
decision below handsomely rewards bad faith and
deliberate breach of contract is obvious. That is not
allowable.
Groves, 205 Minn. at 165, 286 N.W. at 236. 	The Court is not here
suggesting an award of punitive or semi-punitive damages, see
generally 3 Dobbs §12.5(2) (Punitive Damages for Breach of
Contract), especially since Plaintiffs have not asked for such an
award. 	Nor is the Court considering the “efficient breach”
theory of contract law.
The theory of efficient breach holds that if a party
breaches, and is still better off after paying damages
to compensate the victim of the breach, the result is
pareto superior, that is, considered as a unit, the
parties are better off because of the breach and the
breach makes no party worse off. 	Consequently,
according to the theory, the party who will benefit
from the breach should breach.
11 Corbin, §55.15 at 78. 	(Footnotes omitted.) 	At least part of
the reason for not doing so is because MRT has not argued that
theory, and probably wisely so. 16
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encourages “breach first, talk afterwards.” 	How would
the market appraise the negative drag of law-inspired
distrust? 	There are many reasons why contracts are
enforced. 	Economic efficiency is only one of them.
The business community rejects efficient breach theory
as a justification for willful breaches; the courts
should also.
Id. at 79-80. 	(Footnotes omitted.)
17 In the Court’s previous oral ruling on September 7, 2007,
it discounted Mr. Sierra’s testimony because he was too closely
tied to Mr. Tafoya. 	Page 5. 	The Court has subsequently
reconsidered that decision, and reviewed all of Mr. Sierra’s
testimony again. 	It has concluded that his testimony should not
be so quickly discounted. 	This is not to say the Court agrees
with everything Mr. Sierra said; indeed, the Court still believes
that Mr. Gutierrez more correctly estimated the cost of repairing
the truck. 	For example, Mr. Sierra was qualified as an expert on
the cost of parts but not on what the cost of labor would be.
However, the Court does find that, as was the case with Messrs
Waldo, Gutierrez, Armijo, and Garcia, Mr. Sierra answered
questions on direct and cross equally carefully and thoughtfully,
and appeared to be doing his best to be honest and helpful.
Despite the fact that Mr. Sierra has known Mr. Tafoya since the
1970's, has sold Mr. Tafoya about eight trucks, and anticipates
Mr. Tafoya coming back to purchase more trucks from him, Mr.
Sierra was a credible witness who did not appear particularly
biased toward MRT or against Plaintiffs.
Page 19 of 	26
MRT’s valuation evidence centered on the testimony and the
written appraisal of Johnny Sierra of Rush Truck Center. 17 	MRT
exhibit 45 (Rush Truck Center Used Truck Appraisal). 	Mr. Sierra,
using the same software as Mr. Gutierrez (which appears to be an
industry standard), provided testimony in support of the
proposition that the cost of repairs would be the higher number.
He testified that the truck as it was on October 19, 2005 (the
date of the appraisal) had a wholesale value of $22,000. 	He also
testified that recently he had taken in trade a 1999 Peterbilt
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Page 20 of 	26
(the truck at issue is a 1998 model) for $18,000, although the
1999 Peterbilt was a different model and differed from the 1998
Peterbilt in other ways, including a shorter hood. 	On cross
examination Mr. Sierra testified that after service department
inspection and detailing, the retail value of the 1999 Peterbilt
would be about $27,000.
The witness was not asked what the retail value of the 1998
Peterbilt was as of October or November 2005. 	However, from Mr.
Sierra’s testimony it appears clear that the 1999 Peterbilt was a
“cheaper” model than the 1998 Peterbilt, even if Mr. Sierra did
not say this directly. 	The arithmetic of the testimony about the
cheaper model was that it had a “mark up” of 50% in value going
from wholesale to retail. 	Extrapolating from this figure, the
retail value of the 1998 Peterbilt in October or November 2005
would have been about $33,000.
To begin with, there is a fundamental flaw with MRT’s
evidence and the way MRT is using it. 	What MRT showed was the
value of the truck as is, which had been damaged, abused and
subjected to very high usage as shown by the high mileage. 	MRT
did not present evidence of what the value would be of a
reasonably well maintained 1998 Peterbilt 379 with 607,000 miles
as of June 2004 but with seventeen months of reasonable wear and
tear on it. 	Compare Hubbard, 125 N.M. at 158, 958 P.2d at 116
(“other vehicles of similar age and service [worth] $11,000.”).
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Page 21 of 	26
MRT’s evidence of replacement value fails.
But even accepting the evidence for the reason that MRT
presented it, the evidence does not suffice. 	MRT exhibit 45 and
the $33,000 figure are significant in several ways. 	First, the
operative date at which the truck was to be turned over to
Plaintiffs was in October 2005 (the month the appraisal is dated)
or November 2005, not May 2007 (the month of Mr. Sierra’s
testimony). 	So the operative date for any valuation is late 2005
rather than a year and half later.
The conventional “measurement” [of damages for breach
of a contract] is the difference between the contract
price and the market price on the date for performance.
1 Dobbs §3.1 at 285. 	(Emphasis in original.)
Second, given the particular circumstances of this adversary
proceeding, the calculations that were needed were (a) the value,
in October 2005, of a 1998 Peterbilt 379 in excellent condition
with 607,000 miles on it but less seventeen months worth of
reasonable wear and tear (which would be less than 200,000
additional miles) and (b) the value of the truck as it was in
October 2005 (which is what Mr. Sierra’s $22,000 estimate was).
The difference between these two figures would then be compared
to the cost of repair to see which would be higher.
Third, the purpose of a damages award is to fully compensate
the injured party. 	If Plaintiffs were going to obtain another
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18 The determination that the replacement value should be
the retail value means that MRT had the burden of coming forward
with evidence of what the retail value was. 	The Court has worked
out what that value was from the evidence of wholesale value
presented by MRT. 	However, if the Court has inferred too much
from the evidence presented, then the conclusion must be that MRT
has failed to carry its burden to come forward with any evidence
of the retail value, and therefore has presented no evidence for
replacement value.
19 The underlying chapter 7 case was filed prior to the
effective date of any analogous provisions of the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No.
109-08, 119 Stat. 23 (“BAPCPA”), and therefore the changes
enacted by that legislation are not applicable to this adversary
proceeding. 	Nevertheless, using the retail value of the truck is
consistent with Congress’ intent to require debtors to use
“replacement value” of any property which they intend to keep or
use. 	See, e.g., §506(a)(2) (as amended by BAPCPA):
If the debtor is an individual in a case under chapter
7 or 13, such value with respect to personal property
securing an allowed claim shall be determined based on
the replacement value of such property as of the date
of the filing of the petition without deduction for
costs of sale or marketing. With respect to property
acquired for personal, family, or household purposes,
replacement value shall mean the price a retail
merchant would charge for property of that kind
considering the age and condition of the property at
the time value is determined.
Page 22 of 	26
vehicle, they would have to pay retail. 18 	Thus the Court should
use the $33,000 figure. 19
Fourth, and most obvious, the economic waste damages figure
is remarkably close to Plaintiffs’ figure of $34,073.54 	for
repairs. 	That the difference is so small suggests that the
larger figure is not unreasonable, and therefore the Court need
not address the issue of economic waste any further. 	However,
because the parties have argued the issue, the Court will
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20 MRT argued that the fair market value of the vehicle
would reflect reasonable wear and tear. 	Assuming that to be the
case, the fact that the two numbers are so close strongly
suggests that MRT is entitled to no additional deduction for wear
and tear.
21 “The record does not reveal anything unique or
specialized about Hubbard’s tractor. 	Since Hubbard did not
attach the fair market value for similar tractors established by
ATC, we must assume the tractor was essentially fungible; that
is, reasonably subject to replacement by any number of other
vehicles of similar age and service for $11,000.” 	Id. 125 N.M.
at 158, 958 P.2d at 116.
Page 23 of 	26
complete its analysis. 20
To (much less elegantly) restate what Mr. Justice Cardozo
said in Kent (quoted above), items considered for their mere
utility or that are completely fungible are more susceptible to
an economic waste analysis than those with some “art” involved.
In this case there is no question that Plaintiff had customized
or “arted up” (note: not “tarted up”) the truck, so that it was
not completely comparable to just any other 1998 Peterbilt 379.
This truck went beyond the merely utilitarian. 	In Hubbard, on
the other hand, there was no suggestion that the damaged engine
was any different from any other engine of the same make. 21
It is true that some MRT witnesses disapproved of Mr.
Grace’s taste while others did not. 	In one sense that fact is
irrelevant, since in the context of an economic waste argument,
the defendant may not argue that the plaintiff’s taste was so bad
that plaintiff was better off with the defective performance. 	11
Corbin §60.3 at 628-29 and cases cited therein. 	On the other
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22 Without getting too semantic, the Court notes that Mr.
Sierra did not say that Mr. Grace’s additions added no value.
However, even assuming his statement was intended to convey that
in fact Mr. Grace’s additions had added some value, Mr. Sierra
did not quantify that value.
Page 24 of 	26
hand, the testimony of the witnesses who admired the truck
reinforces the notion that a really good looking truck could sell
for a higher price. 	Although Mr. Sierra testified that the
additional items that Mr. Grace added or substituted did not add
“much” value to the truck 22 , Mr. Grace pointed out that a good
looking truck was less likely to be stopped for safety
inspections. 	Thus it is clear that the value to Plaintiffs (and
particularly Mr. Grace) attributable to the good looks of the
truck was not merely sentimental or fanciful, Rutherford, 33 N.M.
at 443, 270 P. at 795, or purely idiosyncratic. 	Hubbard, 125
N.M. at 158, 958 P.2d at 116. 	It was this truck that MRT took
possession of and used, and therefore the “eggshell head” rule –
one takes the plaintiff, or in this instance plaintiff’s truck,
as is – is applicable. 	See UJI 13-1802.
Finally, the Court accepts Mr. Gutierrez’ testimony that the
truck had been abused. 	Witnesses testified that MRT was known
for how well maintained and how good looking its trucks were;
this one, when it was in use by MRT, was not. 	Mr. Gutierrez’
testimony was reinforced by the very high mileage that MRT put on
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23 The high mileage was presumably reflected in Mr. Sierra’s
valuation of the truck, which is a further reason why the truck
valuation probably does not accurately reflect normal wear and
tear.
24 Because of this ruling, Plaintiff’s request to reopen the
trial for further evidence of value, [Plaintiffs’] Responsive
Brief on Measure of Damages, at 6 (doc 90), is denied as moot.
Page 25 of 	26
the truck during the seventeen months it used the truck. 23
The Court therefore finds that the appropriate measure of
damages is the cost of repair, which is $34,073.54. 24
Interest
Throughout this litigation, Plaintiffs have never sought an
award of prejudgment interest. 	Similarly, MRT does not dispute
that postjudgment interest must be awarded, and neither party
disputes that the rate should be that set out in 28 U.S.C.
§1161(a). 	See Wheeler v. John Deere Co., 986 F.2d 413 (10 th Cir.
1993). 	So the only remaining issue is when the interest on the
judgment should begin to run. 	MRT is correct that the judgment
accompanying this memorandum opinion is the one that sufficiently
quantifies and fixes MRT’s obligation. 	Although the figure of
$34,073.54 has been present in this adversary proceeding since
September 7, 2007, that figure was not final until today.
Therefore postjudgment interest begins to run only upon the entry
of the judgment today.
Conclusion
The proper measure of damages is the cost of repairs, which
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Page 26 of 	26
in any event is not unreasonably different from the replacement
cost argued by MRT. 	The figure for cost of repairs is
$34,073.54, together with interest at the federal judgment rate.
MRT is entitled to no further reduction for wear and tear.
Plaintiffs are also entitled to an order releasing back to them
the funds in the registry of the Court, which of course reduces
the total judgment amount owed by MRT once Plaintiffs have
received the registry funds. 	The Court will enter a separate
judgment in accordance with this memorandum opinion.
James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	April 14, 2008
COPY TO:
Dianna J. Grace
03 Sais
Los Lunas, NM 87031
Eldon W. Grace
03 Sais
Los Lunas, NM 87031
Michael K Daniels
PO Box 1640
Albuquerque, NM 87103-1640
Ronald E Holmes
112 Edith Blvd NE
Albuquerque, NM 87102-3524
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