Petition — Starr v. Pring

Office Supreme Court, U.S

FILE D

80-1618 MAR 7% 1981

{. STEVAS,

Xx

ABE $0 btwn owee-

No. ——-

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1980

CHARLES E. STARR and SOPHIE STARR, his wife,

Petitioners,

Vv.

JOHN A. PRING, SR.,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Ray G. Brown

Attorney for Petitioners

430 S.W. Morrison Street

Portland, Oregon 97204

(503) 222-1734

— t ~—~~+ +-—o ————

QUESTIONS PRESENTED

The questions presented by this appeal

are:

1. Whether the court of appeals

failed to give full effect to Department

of Transportation regulations on airworthi-

ness of aircraft, promulgated pursuant to

49 U.S.C. § 1348, in violation of

the Commerce Clause, art. I, § 8, cl. 3,

and the Supremacy Clause, art. VI, cl. 2,

of the United States Constitution?

2. Whether the decision of the court

of appeals that no failure of consideration

occurred under the terms of the airplane

lease contract executed by the parties was

based upon an incorrect interpretation of

Idaho state contract law?

3. Whether the court of appeals

applied Fed. R. Civ. P. 52(a), specifically,

that findings of fact shall not be set aside

unless clearly erroneous, to the ultimate

issue before it for decision, thereby violat-

ing the interpretation given to the "clearly

a tu

erroneous rule" by the federal courts?

-iii-

TABLE OF CONTENTS

Questions Presented . .. ++ + « »

Table of Authorities ..... -»

Opinions Below ... +++ «© © « »

JuriesGicticon («6s s+ « ee oe © 68

Constitutional and Statutory

Provisions Involved gis. cae =. Se 2

Statement of the Case ...+ + « «

Reasons for Granting the Writ...

I. The court of appeals

failed to give full effect

to Department of Transpor-

tation regulations on air-

worthiness of aircraft, pro-

mulgated pursuant to 49 U.S.C.

§ 1348, in violation of the

Commerce Clause, art. I, § 8,

cl. 3, and the Supremacy Clause,

art. VI, cl. 2, of the United

States Constitution: .... -

II. The decision of the

court of appeals that no

failure of consideration

from the respondent to the

petitioner occurred under

their airplane lease contract

was based upon an interpreta-

tion of state law, as required

by this Honorable Court

under the principles of

Erie Railway v. Tompkins,

304 U.S. 64 (1938), which

interpretation was incorrect .

10

20

-iv-

Table of Contents, Cont. Page

III. The court of appeals

applied the portion of Fed.

R. Civ. P. 52, that findings

of fact shall not be set.

aside unless clearly erroneous,

to the ultimate issue it

was to decide and thereby

violated the interpretation

which has been given to

the "clearly erroneous rule"

oy tame federal courts ... s+. 26

SRS! Cran ei Sea 2 fe ig, 2 34

-V-

TABLE OF AUTHORITIES

Cases

Baker v. United States, 417 F. Supp.

471 (W.D. Wash. 1975).

Bandy v. United States, 492 F. Supp.

13 (W.D. Tenn. 1978) ... .

Baumgartner v. United States, 322

U.S. 665 (1944). . « «

Blinzler v. Andrews, 91 Idaho 215,

485 P.2d 957 (1971).

Bogardus v. Commissioner, 302 U.S.

DEORBEeEes 6 « « * «

British Airways v. Port Authority

of New York and New Jersey,

431 F. Supp. 1216 (S.D.N.Y.),

modified on other grounds,

564 F.2d 1002 (2d Cir. 1977)

City of Burbank v. Lockheed Air

Terminal, Inc., ¢ll U.S. 624

ih hi 6 « « 6 © # 6 e

Commissioner v. Duberstein, 363 U.S.

a SEeeee « «¢ @ « «

Cordovan v. Dayton Rubber Co., 290

F.2d 858 (6th Cir. 1961)

Daily v. Bond, 623 F.2d 624 (9th

Car. 2960) . « c es

Downing v. Williams, 624 F.2d 612

(Sth Cir. 1980). ,

Erie Railway v. Tompkins, 304 U.S.

—- Raeeehes © 6 6 © © 0 a

- 16, 17

. 2

» 23

. 29

. 16

» ae

- 28

- 29

- 17

- 20, 21

-vi-

Table of Authorities, Cont.

Cases, Cont. Page

Huggins v. Green Top Dairy Farms,

75 Idaho 436, 273 P.2d 399

Drs 695 gle 6 s 6) 0 « «© » 23

Joseph Lupowitz Sons, Inc. Vv.

Commissioner, 497 F.2d 862

EE ROPES 5 4 5 ste et Shy 52

Securities and Exchange Commission

v. Bausch & Lomb, Inc., 565

MU @) @4 °°) |

Transamerica Leasing Corp. v. Van's

Realty Co., 91 Idaho 510,

427 P.2d 284 (1969). ...... 20, 21, 22

United States v. City of New Haven,

496 F.2d 452 (2d Cir. 1973),

appeal dismissed sub nom.

Town of East Haven v. United

States, 419 U.S. 958 (1974). . . 14,'15

United States v. Haas & Haynie Corp.,

577 F.2d 568 (9th Cir. 1978) .. 33

United States v. United States Gypsum

Co., 333 U.S. 364 (1948) .... 28

United States v. Weingarden, 473

F.24g 454 (6th Cir. 1973) ....- 31, 32

Weisel v. Singapore Joint Venture,

Inc., 602 F.2d 1185 (5th Cir.

1979) 7 7 7 . . + 7 . . © © > + 7 32, 33

Zabala Clemente v. United States,

567 F.2d 1140 (lst Cir. 1977),

cert. denied, 435 U.S. 1066

[awe 6. 2 2° 6 « ae

16

-vii-

Table of Authorities, Cont.

Statutes, Rules and Regulations

U.S. Const. art. I, § 8, cl.

Vemse Conee. art. VI, cl. 2.

28 U.S.C. § 1254(1)

28 U.S.C. § 1332 (a) (1)

#8 U.S.C. § 1652. . ...

28 U.S.C. § 2101 (c)

49 U.S.C. § 1348 (a)

rea. &. Civ. PB. S2(ap)...

14 C.F.R. § 91.3 (a)

14 C.F.R. § 91.29

Other Authority

3

1 Corbin on Contracts § 133 (1963).

H.R. Rep. No. 2360, 85th Cong., 2d

Sess., reprinted in [1958]

U.S. Code Cong. & Ad. News

PIS bs Se Ke 8

Restatement (Second) of Contracts

§ 262 (Tent. Draft No. 8,

SUteEs. %.% 6 Hee 8

6 Williston, Contracts § 814 (Jaeger

OG. L9B8s. 2 6 te

Wright, Law of Federal Courts (3d

ed. 1976).

24

12,

23

10

10

21

10

26, 27

10, 11

10, 1l

13

No.

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1980

CHARLES E. STARR and SOPHIE STARR, his wife,

Petitioners,

Vv.

JOHN A. PRING, SR.,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF IDAHO

December 8, 1978, Judgment

in favor of the Plaintiff

entered.

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

December 12, 1980, Judgment of

district court affirmed.

_—

OPINIONS BELOW

The opinion below by the Circuit

Court of Appeals for the Ninth Circuit is

an unpublished memorandum decision. A copy

of the opinion is set out in full as Appendix

A. The opinion below by the District Court

for the District of Idaho is also an un-

published opinion read in open court.

JURISDICTION

The judgment of the Court of Appeals

for the Ninth Circuit was entered on December

12, 1980. This petition for certiorari

was filed within ninety days of that date.

28 U.S.C. § 210l1(c). This Court's jurisdic-

tion is invoked under 28 U.S.C. § 1254(1).

CONSTITUTIONAL, STATUTORY PROVISIONS

AND RULES INVOLVED

Ueme Comer. art, I, $ 8, el. 3

The Congress shall have

Power .. . [3] To regulate

Commerce with foreign nations,

and among the several States,

and with the Indian tribes

Vee. Consett, art. VE; Gl. 2

This Constitution, and the

Laws of the United States

which shall be made in Pursuance

thereof; and all Treaties

made, or which shall be

made, under the Authority

of the United States, shall

be the supreme Law of the

Land; and the Judges in

every State shall be bound

thereby, any Thing in the

Constitution or Laws of

any State to the Contrary

notwithstanding.

~

28 U.S.C. § 1332(a) (1)

(a) The district courts

shall have original jurisdiction

of all civil actions where

the matter in controversy

exceeds the sum or value

of $10,000, exclusive of

interest and costs, and

is between—

(1) citizens of different

BCGeese « + 2

28 U.S.C. § 1652

The laws of the several

states, except where the

Constitution or treaties

of the United States or

Acts of Congress otherwise

require or provide, shall

be regarded as rules of

decision in civil actions

in the courts of the United

States, in cases where they

apply.

49 U.S.C. § 1348 (a)

The Secretary of Transporta-

tion is authorized and directed

to develop plans for and

formulate policy with respect

to the use of the navigable

airspace; and assign by

rule, regulation, or order

the use of the navigable

airspace under such terms,

conditions, and limitations

as he may deem necessary

in order to insure the safety

of aircraft and the efficient

utilization of such airspace.

He may modify or revoke

such assignment when required

==

in the public interest.

Fed. R. Civ. P. 52(a)

In all actions tried

upon the facts without a

jury or with an advisory

jury, the court shall find

the facts specially and

state separately its conclusions

of law thereon, and judgment

shall be entered pursuant

to Rule 58; and in granting

or refusing interlocutory

injunctions the court shall

similarly set forth the

findings of fact and conclusions

of law which constitute

the grounds of its action.

Requests for findings are

not necessary for purposes

of review. Findings of

fact shall not be set aside

unless clearly erroneous,

and due regard shall be

given to the opportunity

of the trial court to judge

of the credibility of the

witnesses. The findings

of a master, to the extent

that the court adopts them,

shall be considered as the

findings of the court. If

an opinion or memorandum

of decision is filed, it

will be sufficient if the

findings of fact and conclu-

sions of law appear therein.

Findings of fact and conclusions

of law are unnecessary on

decisions of motions under

Rules 12 or 56 or any other

motion except as provided

in Rule 41(b).

14 C.F.R. § 91.3 (a)

The pilot in command

of an aircraft is directly

responsible for, and is

the final authority as to,

the operation of that aircraft.

14 C.F.R. § 91.29

(a) No person may operate

a civil aircraft unless

it is in an airworthy condition.

(b) The pilot in command

of a civil aircraft is responsible

for determining whether

that aircraft is in condition

for safe flight. He shall

discontinue the flight when

unairworthy mechanical or

structural conditions occur.

STATEMENT OF THE CASE

On or about July 24, 1975, the petitioners

and the respondent entered into an agreement

in which the respondent agreed to lease

a 7-place Cessna twin-engine aircraft to

the petitioners in consideration for monthly

rental payments of a minimum of $1,900.00.

No difficulties occurred in this arrange-

ment until late September and early October

of 1975 when the petitioners observed struc-

tural problems with the aircraft. The

respondent had the airplane repaired shortly

thereafter and returned it to the petitioners.

No further problems were encountered until

the spring of 1976 when structural problems

were again discovered. At this time, petitioner-

pilot Charles Starr discovered structural

difficulties of such magnitude that, in

his judgment, the aircraft was not airworthy.

Because of the aircraft's condition, the

petitioners were forced to take it out of

service on June 6, 1976. At this time,

the petitioners refused to make further

payments under the lease. The aircraft

was eventually repossessed by the respondent

and leased to another aircraft operator.

The respondent thereupon brought an

action for damages against the petitioners

for rent due under the lease contract and

for additional expenses incurred. The juris-

diction of the District Court was invoked

pursuant to 28 U.S.C. § 1332(a) (1), as the

petitioners and the respondent are citizens

of different states, and the amount in contro-

versy was over $10,000.00. The District

Court ruled in favor of the respondent.

It made the following findings, produced

in relevant part, which it labelled Findings

of Fact and Conclusions of Law:

FINDINGS OF FACT

xk

9. In January or February

1976, defendants began the

proposed non-scheduled air

service from Coeur d'Alene,

Idaho, to Boise, Idaho,

using the Cessna. After

approximately three weeks

of trial runs and unscheduled

activity it was abandoned

for the reason that it proved

to be economically unfeasible.

10. By about the month

of May 1976, it was evident

to the defendants that they

were unable to obtain sufficient

income from the use of the

Cessna aircraft to meet

the $1,900.00 per month

minimum lease payments.

They ceased making the payments

for this reason.

x k *

12. Defendants claim,

and defendant Charles E.

Starr testified, that the

reason for the termination

of the Lease Contract by

the defendants was the problem

with the rivets which he

claimed was never properly

cured. I find from the

evidence that the alleged

dangerous condition caused

by loose rivets was not

the reason for the termination

of the lease payments by

the defendants.

CONCLUSIONS OF LAW

es

3. That the defendants

without legal cause breached

the said Contract and refused

to pay the lease payments

except that the defendants

paid the sum of $19,000.00.

Rr @

6. That in order to

preserve the Cessna and

carry out his duty to mitigate

damages, plaintiff advanced

the sum of $4,027.46, all

as set out in the Findings

of Fact.

7. That the plaintiff

is entitled to damages against

the defendants for a sum

equal to the unpaid lease

payments, together with

the expenses necessarily

advanced and less rentals

received and to be received

from the second lessee.

The petitioners appealed the judgment

of the district court to the Court of Appeals

for the Ninth Circuit. The petitioners

raised the three grounds which are asserted

aliq

herein in support of their argument for

reversal. On December 12, 1980, the judgment

of the district court was affirmed.

REASONS FOR GRANTING THE WRIT

I

THE COURT OF APPEALS FAILED

TO GIVE FULL EFFECT TO DEPARTMENT

OF TRANSPORTATION REGULATIONS

ON AIRWORTHINESS OF AIRCRAFT,

PROMULGATED PURSUANT TO

49 U.S.C. § 1348, IN VIOLATION

OF THE COMMERCE CLAUSE,

ART. I, § 8, CL. 3, AND

THE SUPREMACY CLAUSE, ART.

VI, CL. 2, OF THE UNITED

STATES CONSTITUTION.

In their brief before the court of

appeals, the petitioners placed emphasis

on the Department of Transportation regulations

(hereinafter referred to as Federal Aviation

Administration regulations) codified at

14 C.F.R. §§ 91.3(a) and 91.29. The relevant

language of these regulations, promulgated

pursuant to 49 U.S.C. § 1348, is as follows:

The pilot in command

of an aircraft is directly

responsible for, and is

the final authority as to,

elie

the operation of that aircraft.

14 C.F.R. § 91.3(a).

(a) No person may operate

a civil aircraft unless

it is in an airworthy condition.

(b) The pilot in command

of a civil aircraft is responsible

for determining whether

that aircraft is in condition

for safe flight. He shall

discontinue the flight when

unairworthy mechanical or

structural conditions occur.

14 C.F.R. § 91.29(a), (b).

The petitioners submitted that according

to the authority of the aircraft pilot under

these sections, the pilot's determination

of lack of airworthiness should have excused

their failure to pay rent under the lease

contract. The court of appeals, however,

completely disregarded these regulations

in its decision to affirm the district court's

judgment in favor of the respondent. No

mention of the regulations is included in

the court of appeals' opinion. The petitioners

respectfully contend that the court of appeals’

failure to give these regulations their

o1%=

full effect requires reversal of its decision.

When Congress passed the Federal

Aviation Act, the statute pursuant to which

the above regulations were promulgated,

the Congress made it clear that the Federal

Aviation Administration was being given

a broad power to adopt much needed air safety

regulations.

The most careful consideration

must be given in the drafting of

these [FAA] regulations. An

understanding of the system

sought to be achieved and

a knowledge of the problems

faced at the operations

level are necessary if the

regulations are to accomplish

their purpose. Once promulgated,

the regulations must be

applied and enforced, and

if need be, modified or

repealed to meet changing

conditions. Rulemaking

processes should not lag

far behind advances in equipment

and techniques.

How to insure the maximum

possible safety and efficiency

under proper regulations,

impartially enforced, is

one of the major problems

in connection with this

legislation.

H.R. Rep. No. 2360, 85th Cong., 2d Sess.,

=} 3<

reprinted in [1958] U.S. Code Cong. & Ad.

News 3741, 3747.

This Honorable Court has recognized

the broad power of the Federal Aviation

Administration. This broad statutory grant

was recognized in City of Burbank v. Lockheed

Air Terminal, Inc., 411 U.S. 624 (1973),

where this Honorable Court held that the

Federal Aviation Administration's broad

power to regulate airspace preempted a city

ordinance on airplane noise. Preemption

was held to have occurred because of Congress'

broad power to legislate in this area pursuant

to the Commerce and Supremacy Clauses of

the United States Constitution. This Court

so held even in light of the traditionally

broad police power of the states in the

area of noise regulation. The federal interest

in controlling air commerce was held to

be so great as to require conflicting state

regulations to yield to federal authority.

Lower: courts have also analyzed the

extensive powers of the Federal Aviation

allée

Administration. The decision in United

States v. City of New Haven, 496 F.2d 452

(2d Cir. 1973), appeal dismissed sub nom.

Town of East Haven v. United States, 419

U.S. 958 (1974), is illustrative. There,

the City of New Haven had extended an airport

runway in violation of state law. The city

was sued in state court, and the court enjoined

New Haven from using the extended runway.

The decision was eventually affirmed by

the Connecticut Supreme Court. The City

of New Haven continued to use the extended

runway despite the adverse state court deter-

mination, and was, as a result, cited for

contempt. The United States then inter-

vened and applied, in federal court, for

an injunction against the enforcement of

the state court orders. The district court

enjoined the enforcement of the state court

orders and the injunction was affirmed on

appeal.

The Second Circuit Court of Appeals

began by noting that the Federal Aviation

==

Administration has been given extensive

power to regulate air commerce. 496 F.2d

at 454. It then observed that the runway

extensions were specifically governed by

Sedaral regulations on "clear zones." The

state court decisions, since they conflicted

with the federal regulations, were held

to be preempted.

The clear zones, as part

of the navigable airspace,

are subject to federal regula-

tion, and the orders of

the Connecticut courts in-

fringed upon the federal

power. Chief Judge Blumenfeld

wrote:

Thus, the order of the

New Haven Superior Court

was directed to and con-

flicted squarely with

the regulation of navigable

airspace which Congress

has reserved for exclusive

federal control. To

the extent that it pre-

vents aircraft from using

navigable airspace it

is unenforceable under

the supremacy clause

and may properly be enjoined

by a federal court, despite

the broad sweep of the

anti-injunction statute,

28 U.S.C. § 2283. 367

F. Supp. 1338 at 1341.

-16-

Id. Even though there had been a violation

of state law, the state court decisions

were of no effect because of the overriding

federal interest in regulating navigable

airspace. See also British Airways v.

Port Authority of New York and New Jersey,

431 F. Supp. 1216 (S.D.N.Y.), modified on

other grounds, 564 F.2d 1002 (2d Cir. 1977).

When the regulations specifically

at issue in the petitioners' case have been

discussed in the lower courts, they have

been given very broad effect. In a number

of decisions, the lower courts have strongly

stressed that the aircraft pilot is the

ultimate arbiter of airworthiness. For

example, despite the negligence of other

persons contributing to the crash of an

airplane, the responsibility of the pilot

to determine that the aircraft is in a safe

condition for flight has barred tort actions

in many cases. See Zabala Clemente v.

United States, 567 F.2d 1140 (lst Cir. 1977),

cert. denied, 435 U.S. 1066 (1978); Bandy

oi Ju

v. United States, 492 F. Supp. 13 (W.D.

Tenn. 1978); and Baker v. United States,

417 F. Supp. 471 (W.D. Wash. 1975). Indeed,

the failure to conduct an appropriate pre-

flight airworthiness inspection is grounds

for suspension of an aircraft pilot certi-

ficate. Daily v. Bond, 623 F.2d 624 (9th

Cir. 1980). The regulations at issue in

the instant case are intended to be strictly

applied and given the fvll and broad effect

necessary to prevent the operation of airplanes

when they are determined by their pilots

to be in an unsafe condition.

It is respectfully submitted that

to let stand the decision of the court of

appeals which disregarded the F.A.A. regula-

tions here at issue would be to drastically

undermine the policy of the F.A.A. calling

for the insurance of the safe operation

of aircraft. If aircraft lessees, such

as the petitioners, are viewed to be required

under a lease contract either to pay for

olG=

an aircraft which is not airworthy? or to

Operate an unsafe aircraft, economic consi-

derations may often require unsafe aircraft

Operation. The important federal require-

ments of safe aircraft operation would be

required to give way to state contract princi-

ples in such cases. This, it is submitted,

is not the intent of the federal regulation

of air commerce. When a lessee has been

provided by the lessor with an aircraft

which is not airworthy, according to the

aircraft pilot, the federal regulations

should be interpreted as establishing that no

consideration has been given to the lessee

because of the airplane's unsafe condition.

1

This is the reasoning of the district

court and the court of appeals. In the

petitioners' second reason supporting the

grant of a writ of certiorari, the petitioners

assert that this is an erroneous interpreta-

tion of state law. It is assumed here

arguendo.

=19=

This, it is submitted, is the only way to

fully effectuate the strict requirements

of aircraft safety mandated by federal statutes

and regulations.

Because the court of appeals gave

greater effect to its interpretation of

state contract principles than to important

Federal Aviation Administration regulations

and the federal policies enunciated therein,

the petitioners respectfully submit that

the court of appeals' decision to affirm

the district court's judgment should be

reversed.

=30=

If

THE DECISION OF THE COURT OF

APPEALS THAT NO FAILURE OF

CONSIDERATION FROM THE RESPONDENT

TO THE PETITIONER OCCURRED UNDER

THEIR AIRPLANE LEASE CONTRACT WAS

BASED UPON AN INTERPRETATION OF

STATE LAW, AS REQUIRED BY THIS

HONORABLE COURT UNDER THE PRIN-

CIPLES OF ERIE RAILWAY V.

TOMPKINS, 304 "J.S. 64 (1938),

WHICH INTERPRETATION WAS

INCORRECT.

The court of appeals, in passing,

rejected the petitioners’ argument that

there had been a failure of consideration

from the respondent which justified the

petitioners’ refusal to continue payment

under the lease contract. It cited one case

in support of this conclusion, Transamerica

Leasing Corp. v. Van's Realty Co., 91 Idaho

510, 427 P.2d 284 (1969). The petitioners

contend that this case is not properly dis-

positive of the petitioners' failure of con-

sideration claim and that the Idaho Supreme

Court would have reasoned differently on the

issue. It is thus respectfully submitted

that the dictates of the Rules of Decision

a 2a

Act, 28 U.S.C. § 1652, as interpreted by this

Honorable Court in Erie Railway v. Tompkins,

304 U.S. 64 (1938), were not correctly ap-

plied by the court of appeals.

The Transamerica case would not be

viewed as authority in Idaho beyond its

limited fact situation. In that case, the

lessor and lessee entered into a transaction

in which the lessor would purchase a machine

which was selected by the lessee, who also

participated in the building of the machine.

The transaction was labelled by the Supreme

Court of Idaho as a speculative venture.

427 P.2d at 287. No technical study had

ever been made of the machine. Id. No one

knew whether the machine would work at all,

even at the beginning of the lease period.

Id. The only role of the lessor in the trans-

action was to furnish money to buy the

machine.

The facts in Transamerica, it is sub-

mitted, are readily distinguishable from

_

~2Be

those in the petitioners' case. When the

petitioners entered into a lease agreement

for an airplane, they were not entering into

a speculative transaction in which the pos-

sible performance capabilities of the bar-

gained-for consideration were in question to

all concerned. The petitioners bargained

for an airworthy airplane which could be

relied upon for use in their business. In

the petitioners' case, it was not, as it was

in Transamerica, the efforts of the respon-

dent to finance the purchase of an airplane

which was the consideration bargained for;

rather, it was the airplane itself that was

the consideration. When the petitioners’

case is so properly viewed, it is contended,

the Transamerica case ceases to be relevant.

The petitioner contends that the Idaho

Supreme Court would apply law on failure of

consideration in a way which would require

a different result to be reached from that

reached by the court of appeals.

o 2 Ben

The Idaho Supreme Court has decided

no case which would control the determina-

tion of the instant case. The two closest

cases decided by that court are Blinzler

v. Andrews, 91 Idaho 215, 485 P.2d 957

(1971), and Huggins v. Green Top Dairy Farms,

75 Idaho 436, 273 P.2d 399 (1954). Both

cases support the notion that rescission is

proper when one party has materially breach-

ed the contract. They thus are consistent

with, although not authority in and of them-

selves, for the proposition that failure of

consideration from one party relieves the

other of his contractual duties. Thus,

other sources should be consulted to deter-

mine the law which Idaho would apply to the

petitioners' failure of consideration claim.

See Wright, Law of Federal Courts 270-71

(1976).

Two highly persuasive authorities

which Idaho would likely follow are the

Restatement (Second) of Contracts, and

o%hea

Corbin on Contracts. Corbin defines failure

of consideration in the following way:

In innumerable cases, however,

a promise has been declared to be

unenforceable because there has

been a "failure of the consider-

ation." This does not mean lack

of consideration; nor does it

often mean that the promise, now

unenforceable, was never a valid

contract. It does méan, on the

other hand, that a performance for

which the promisor bargained has

not been rendered; in many cases,

though not in all, that failure

is a good legal excuse for his

refusal to perform his own

promise, and it may be a good

reason for compelling restitu-

tion if he has already performed.

1 Corbin on Contracts § 133 at 572 (1963).

The on-point Restatement section states:

Except as stated in § 265,

[dealing with corresponding

part performance pairs], it is

a condition of each party's re-

maining duties to render per-

formance to be exchanged under

an exchange of promises that

there be no uncured material

failure by the other party to

render any such performance due

at an earlier time.

Restatement (Second) of Contracts § 262

(Tent. Draft No. 8, 1973); accord, 6 Will-

iston, Contracts § 814.

o25-

The petitioners respectfully submit

that had the court of appeals relied on such

authority that this case would have been de-

cided differently. As stated earlier, the

petitioners bargained with the respondent

for an airplane which was airworthy. When

the condition of the leased airplane deter-

iorated to a non-airworthy state the entirety

of that for which the petitioners had bar-

gained vanished. Since an airworthy air-

plane was not delivered by the respondent,

the duty of the petitioners to continue mak-

ing rent payments should have been viewed to

have been extinguished. It is submitted

that this Honorable Court should reverse the

judgment of the court of appeals because of

its failure to apply the law that the

Supreme Court of Idaho would have applied.

o26—

Iil

THE COURT OF APPEALS APPLIED

THE PORTION OF FED. R. CIV. P.

52, THAT FINDINGS OF FACT

SHALL NOT BE SET ASIDE UNLESS

CLEARLY ERRONEOUS, TO THE

ULTIMATE ISSUE IT WAS TO

DECIDE AND THEREBY VIOLATED

THE INTERPRETATION WHICH

HAS BEEN GIVEN TO THE "CLEARLY

ERRONEOUS RULE" BY THE FEDERAL

COURTS.

The court of appeals essentially

ciueed acide all of the petitioners' defenses

to the alleged breach of the airplane lease

contract when it decided one issue. The

issue was whether the petitioners stopped

making rent payments under the lease because

they could not use the aircraft profitably,

or on the other hand, whether they stopped

payment because the aircraft was not air-

worthy. The court resolved the issue by

refusing to reject the district court's

holding that the petitioners stopped making

payments because they could not use the

aircraft profitably. The court of appeals

deferred to the district court's judgment

-27-

based upon the following language contained

in Fed. R. Civ. P. 52(a): "Findings of fact

shall not be set aside unless clearly errone-

ous... ." It is respectfully submitted

that in so deferring to the district court,

the court of appeals improperly applied

Fed. R. Civ. P. 52(a) and denied the peti-

tioners a meaningful opportunity for appellate

review on their claim that the F.A.A. air-

worthiness regulations had not been properly

considered and applied.

The district court judgment which

was deferred to by the court of appeals

essentially decided the entire case on appeal.

The district court's finding that the peti-

tioners stopped payment under the contract

because they could not use the aircraft

profitably is merely another way of stating

the proposition that the petitioners breached

the contract because they refused, without

justification, to continue to pay according

to its terms. The two propositions are

indistinguishable in their meanings and

=) =

the court of appeals applied the district

court's finding as meaning that the petitioners

breached the contract. The petitioners

contend that when the "finding" in question

of the district court is viewed in light

of its real meaning and effect, it is clear

that it was not a factual finding but was

a holding on the ultimate issue of the case.

As such, the petitioners contend that the

court of appeals should not have deferred

to the district court's judgment under the

"clearly erroneous" rule.

The "clearly erroneous" rule has

never been held to extend beyond findings

of fact or inferences from undisputed facts.

See Commissioner v. Duberstein, 363 U.S.

278 (1960); United States v. United States

Gypsum Co., 333 U.S. 364 (1948). The rule

has never been extended to legal determina-

tions, to determinations involving mixed

questions of fact and law, or to determina-

tions of the ultimate question before the

court.

=29-

When it comes to conclusions

of law and inferences to

be drawn therefrom, the

appellate court is free

to act independently and

draw its own legal conclusions

and inferences. ... If

this were not so, the appellate

court would be stripped

of its power of review.

Moreover, not all findings

labeled as findings of fact

are binding on an appellate

court. Where a finding

designated as a finding

of fact is not in reality

a finding of fact, but is

a conclusion of law or a

mixed finding of fact and

conclusion of law, it is

not binding on the appellate

court... . Where a finding

is of an ultimate fact in

the making of which is involved

the application of legal

principles, it is subject

to review.

Cordovan v. Dayton Rubber Co., 290 F.2d

858, 859-60 (6th Cir. 1961) (citations omitted).

This Honorable Court has recognized these

principles ever since its decisions in

Bogardus v.- Commissioner, 302 U.S. 34 (1937),

and Baumgartner v. United States, 322 U.S.

665 (1944).

A number of lower court decisions

=3Q~

are persuasive examples of why the "clearly

erroneous" test was improperly applied in

the instant case. Downing v. Williams,

624 F.2d 612 (5th Cir. 1980), is one such

example. There, the question was whether

the appellate court should apply the "clearly

erroneous" rule to a jury determination

that an employee had been dismissed from

his job "with good cause." The court held

that the rule would not properly be appliec.

It began by noting that the ultimate question

in the case was whether the employee's dis-

missal had violated his first amendment

rights. Since the determination of the

"good cause" issue would necessarily decide

the constitutional issue, the "clearly errone-

ous" rule was held inapplicable.

[W]e are not bound by the

jury's findings that Dr.

Downing [the employee] was

dismissed "with good cause."

. « - (T]he ultimate question

of whether Dr. Downing was

fired for reasons that imper-

missibly abridged his first

amendment rights is a question

of law for the trial court...

ali

In this inquiry, there are some

factual matters which a

jury could decide, for example,

the extent of a disruption

[the employee was said to

have caused]. But any questions

of fact which a jury could

decide which might relate

to the ultimate questions

of law are nonetheless subject

to careful review by the

Court of Appeals which has

the power to "conduct an

independent review of consti-

tutional claims when necessary."

Id. at 621-22.

The decisions in Joseph Lupowitz Sons,

Inc. v. Commissioner, 497 F.2d 862 (3d Cir.

1974), and United States v. Weingarden,

473 F.2d 454 (6th Cir. 1973), are also instruc-

tive. Joseph Lupowitz Sons, Inc., supra,

was an income tax case in which the issue

was whether the "clearly erroneous" rule

should apply to the determination of whether

a certain money transfer was a loan or a

contribution to capital. The clearly errone-

ous rule was held to be inapplicable. The

court observed that the review of basic

facts in a district court's decision must

= 3 Pe

be distinguished from a review of the ultimate

issue decided. The latter was held to be

the case in Joseph Lupowitz Sons, Inc.,

and so the finding was reversible just as

an issue of law would have been,that is,

through full appellate review.

Weingarden, supra, was a tax case

also, but at issue was the propriety of

a summons issued against the defendant by

the I.R.S. According to the applicable

law, the propriety of the summons would

be determined depending upon the purpose

behind its issuance. The district court

found that it had been issued solely for

the purpose of a criminal investigation

and was thus improper. On appeal, the question

was whether the clearly erroneous rule should

apply to this finding. The court held that

it should not. Again, the finding was held

to be either a mixed question of law and

fact or a determination of ultimate fact

which is fully reviewable. Accord, Weisel

=33-

v. Singapore Joint Venture, Inc., 602 F.2d

1185 n. 11 (5th Cir. 1979); United States

v. Haas & Haynie Corp., 577 F.2d 568 (9th

Cir. 1978); and Securities and Exchange

Commission v. Bausch & Lomb, Inc. 565 F.2d

8 (2d Cir. 1977).

The instant case is very similar

to those cited above. When the district

court found that the petitioners stopped

paying rent installments because they could

not use the aircraft profitably, the issue

of breach, which is the ultimate issue in

the case, had been decided. Merely because

the term breach was not explicitly used

by the court changes nothing. The district

court's determination was entirely disposi-

tive of the case. The petitioners, it is

respectfully submitted, should have heen

afforded full appellate review of the issue

of breach. To allow the "clearly erroneous"

rule to be construed otherwise would be

to allow this exception to vastly diminish

ago

the opportunity for meaningful appellate

review.

CONCLUSION

Based on the foregoing, the petitioners

pray that a writ of certiorari be granted.

Respectfully submitted,

Raymond G. Brown

Attorney for Petitioners

905 Executive Building

811 S.W. Sixth Avenue

Portland, Oregon 97204

APPENDIX A

DO NOT PUBLISH

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JOHN A. PRING, SR., No. 79-4048

Plaintiff-Appellee, D.C. No. CIV. 77

2025

vs. MEMORANDUM

CHARLES E. STARR and

SOPHIE J. STARR, et. al.,

Defendants-Appellants.

Submitted — December 10, 1980

Decided — December 12, 1980

Appeal from the United States

District Court for the

District of Idaho

Ray McNichols, Chief District Judge,

Presiding

Before: WRIGHT and FLETCHER, Circuit Judges,

and

PECKHAM,* District Judge

We affirm the judgment in this diver-

sity case. Idaho law governs the rights and

Obligations of the parties under a contract

formed and carried out in that state.

Pring agreed to purchase and lease an

aircraft to Starr who agreed to pay a min-

imum monthly rental for use of the plane,

and to provide storage, insurance and oper-

ational maintenance.

*Honorable Robert F. Peckham, Chief United

States District Judge of the Northern District

of California, sitting by designation.

ican aman raeeraati el

2 Pring vs. Starr

Starr located a Cessna 414 acceptable

for his purposes and Pring bought it. The

district court found that Starr breached the

contract when he stopped making monthly pay-

ments on the lease.

Star contends the aircraft was not air-

worthy, and that there was a failure of con-

sideration relieving him of his obligation

to pay.

The district court found that he

stopped paying because he could not use the

aircraft profitably. That was a factual

finding, which we will not disturb unless

Clearly erroneous.

In a letter to Pring, Starr explained

he would make no more payments because the

airplane was not profitable and was going to

be sold. In light of that letter the Starr's

testimony on cross-examination, the factual

finding was not clearly erroneous.

Moreover, even if we assume the craft

was not airworthy, there was no failure of

consideration. Pring furnished the consid-

eration required by the contract when he

purchased the airplane selected by Starr.

See Transamerica Leasing Corp. v. Van's

Realty Co., 91 Idaho 510, 427 P.2d 284, 291

(1969).

AFFIRMED.

Recorder-Sunset Press, San Francisco,CA

12-29-80—550

APPENDIX B

UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF IDAHO

JOHN A. PRING, SR., )

)

)

)

Plaintiff,

Civil No. 77-2025

vs. )

)FINDINGS OF FACT

CHARLES E. STARR, and_ ) AND

SOPHIE J. STARR, husband) CONCLUSIONS OF LAW

and wife, and COEUR )

D'ALENE AIRWAYS, INC., )

)

)

Defendants.

This matter came on for a bench trial

on the merits on Septmeber 18, 1978. Each

party was represented by counsel of record.

Evidence, both oral and documentary, was

received. Post-Trial Briefs were filed and

the matter stands submitted for final deter-

mination. The Court, being fully advised,

makes the following Findings of Fact and

Conclusions of Law:

FINDINGS OF FACT

1. The plaintiff is a citizen of the

State of Washington; defendants Charles E.

Starr and Sophie J. Starr are husband and

wife and are citizens of the State of Idaho;

the defendant Coeur d'Alene Airways, Inc.,

is an Idaho corporation with its principal

place of business in the State of Idaho; the

amount in controversy exceeds $10,000 over

and above interest and costs.

2. Defendants at all times pertinent

hereto operated a fixed-base air service oper-

ation at an airport at Coeur d'Alene, Idaho.

Flight training, aircraft maintenance, and

air taxi service was offered to the public.

Defendant Charles E. Starr was an exper-

ienced aircraft pilot.

3. Defendants desired to obtain the

use of a relatively large aircraft for use

in the charter air taxi service and to

utilize in a proposed non-scheduled air

service between Coeur d'Alene and Boise,

Idaho.

4. On or about July 28, 1975, the

parties hereto entered into a Lease Contract.

By the terms of the Contract, plaintiff was

to purchase an acceptable airplane for his

use and that of the defendants. Defendants

agreed to utilize the aircraft for charter

at a rental of $100.00 per hour with a mini-

mum rental of $1,900.00 per month. Defend-

ants were to provide storage, maintenance,

and insurance for the aircraft with a pro

rata arrangement based on the amount of use

of the airplane by the plaintiff.

5. Defendants selected a 7-place

Cessna twin-engine aircraft, equipped with

deicers, hot prop, pressurized cabin, in-

strumentation, and like features necessary

for charter and non-scheduled airline serv-

ice. Plaintiff purchased the plane at a

cost of $185,000.00 in July, 1975.

6. Defendants took charge of the

airplane, and it was utilized by the parties

under the Lease.

7. Defendants, with reasonable regu-

larity, made the monthly minimum payments

of $1,900.00 for the month of August, 1975,

through May, 1976; a total of ten payments

in the total amount of $19,000.00. The last

payment was made on June 6, 1976.

8. In October, 1975, defendants re-

ported to plaintiff that certain rivets in

the fuselage had become loose. The plane

was returned to the manufacturer, or the

agent of the manufacturer, and ultimately

returned to the defendants, reportedly in

safe condition.

9. In January or Feburary, 1976, de-

fendants began the proposed non-scheduled

air service from Coeur d'Alene, Idaho, to

Boise, Idaho, using the Cessna. After ap-

proximately three weeks of trial runs and

unscheduled activity it was abandoned for

the reason that it proved to be economically

unfeasible.

10. By about the month of May, 1976,

it was evident to the defendants that they

were unable to obtain sufficient income

from the use of the Cessna aircraft to meet

the $1,900.00 per month minimum lease pay-

ments. They ceased making the payments for

this reason.

ll. In the fall of 1976, defendants

sold their fixed-base operation. Defendant

Charles E. Starr was found physically dis-

qualified from flying in the fall of 1976.

12. Defendants claim, and defendant

Charles E. Starr testified, that the reason

for termination of the Lease Contract by the

defendants was the problem with the rivets

which he claimed was never properly cured.

I find from the evidence that the alleged

dangerous condition caused by loose rivets

was not the reason for the termination of

the lease payments by the defendants.

13. The aircraft was, at all times

pertinent hereto, certified to be airworthy

by the Federal Aviation Authority.

14. Defendants contended, and offered

some evidence to the effect, that they had

a contemporary oral agreement with the

6

plaintiff to the effect that, if the Lease

Contract plan did not work out, the Contract

would be mutually terminated, the aircraft

sold, and the profits, if any, equally

divided. Plaintiff specifically denies that

any such agreement existed contemporaneously

with the Contract or prior to the breach by

the defendants. I find that no such oral

agreement was entered into by the parties

providing for any termination of the lease

obligation as claimed by the defendants.

15. On October 19, 1976, plaintiff

wrote to the defendants and demanded payment

of the delinquent June, July, August, Septem-

ber and November payments under the lease in

the sum of $9,500.00, computed as five pay-

ments of $1,900.00 each. Defendants raised

no objection to this demand, made no response

to the letter, and did not make any further

payment.

16. On January 6, 1977, plaintiff

again wrote to the defendants, and again

demanded payment of delinquent payments for

June, 1976, through January, 1977, a total

of eight payments of $1,900.00 each for a

total of $15,200.00.

17. On January 12, 1977, defendants

answered the demand made by plaintiff's let-

ter of January 6, 1977. For the first time,

defendants denied owing the delinquent lease

payments.

18. In the January 12, 1977, letter,

defendants raised the defense of an oral

agreement to terminate the lease which the

Court has found was not entered into.

19. In April, 1977, this suit was

filed by the plaintiff demanding payment of

all back lease payments plus the balance of

the lease payments for the entire term of

the Lease Contract.

20. In July, 1977, plaintiff recovered

possession of the Cessna. In order to obtain

possession, he had to pay a six-months' han-

gar storage charge in the sum of $700.00

8

made by the company which had purchased

defendants’ business.

21. The Cessna needed repairs and an

inspection in order to be airworthy. Plain-

tiff paid the sum of $3,177.46 for such re-

pairs and inspection, which sums I find to

be reasonable for the services performed.

22. Plaintiff paid $150.00 as insur-

ance premiums on the plane during the time

defendants had custody and were required to

furnish insurance.

23. Plaintiff made a reasonable at-

tempt to find another lease in order to

mitigate damages. On or about August l,

1977, plaintiff leased the aircraft to Felts

Field Aviation, Inc. (Felts) at the best

terms he could arrange.

24. Plaintiff received $12,084.00

from Felts for such rental through August,

1978. Assuming that future income remains

at this level, which the Court finds to be

a reasonable inference from the evidence,

plaintiff will receive $17,930.00 addition-

al rental from Felts up to the date when the

lease between plaintiff and defendants would

expire by its terms.

25. The total minimum rental called

for by the lease was a sum of $114,000.00

($1,900.00 per month for sixty months).

Defendants paid under the lease the sum of

$19,000.00. Plaintiff has received from

Felts the sum of $12,084.00. Plaintiff will

likely receive from Felts an additional

$17,930.00 over the balance of the five-

year lease. The plaintiff has properly ex-

pended the following sums: Hangar storage,

$700.00; insurance, $150.00; repairs and

inspections, $3,177.46.

CONCLUSIONS OF LAW

Based on the foregoing Findings of

Fact I conclude as a matter of law:

1. That the Court has jurisdiction

over the parties and the subject matter.

2. That on or about July 28, 1975,

10

the parties entered into a binding Lease

Contract whereby the defendants agreed to

pay at the rate of at least $1,900.00 per

month for the lease of a Cessna aircraft

owned by the plaintiff. This was a total of

lease payments over the life of the lease of

$114,000.00.

3. That the defendants without legal

cause breached the said Contract and refused

to pay the lease payments except that the

defendants paid the sum of $19,000.00.

4. That no modification of the Lease

Contract was entered into by the parties.

5. That in accordance with his legal

duty to mitigate damages, plaintiff took

possession of the Cessna and leased the same

to a third party.

6. That in order to preserve the

Cessna and carry out his duty to mitigate

damages, plaintiff advanced the sum of

$4,027.46, all as set out in the Findings

of Fact.

1l

7. That the plaintiff is entitled

to damages against the defendants for a sum

equal to the unpaid lease payments, together

with the expenses necessarily advanced, and

less rentals received and to be received

from the second lessee.

8. That plaintiff is entitled to have

a money judgment against the defendants in

the sum of $69,013.46, together with interest

thereon from the date hereof at the rate of

eight percent (8%) per annum.

Such damages being recapitulated as

follows:

Sixty payments of $1,900.00 each=$114,000.00

Advances = 4,027.46

Total $118,027.46

Less:

Lease payments by the defendant =$ 19.000.00

Payments by Felts = 12,084.00

Future payments by Felts = 17,930.00

Total $ 49,014.00

DAMAGES $ 69,013.46

12

9. Plaintiff is entitled to his

costs necessarily incurred herein.

RAY McNICHOLS, CHIEF JUDGE

UNITED STATES DISTRICT COURT