## Facts

- Allied Grape Growers (Allied) was a cooperative corporation of grape growers supplying grapes for wine production.
- Bronco Wine Company (Bronco) crushed grapes and sold bulk wine.
- In 1981, Allied and Bronco entered a contract under which Bronco agreed to buy about 30,000 tons of grapes per year from Allied for use in bulk wine.
- In 1982, Allied claimed Bronco breached the contract by refusing to accept contracted-for grapes and by paying less than the contract price after downgrading grapes under Bronco’s three-tier “quality” system.
- Allied alleged the grading system was arbitrary and used to reduce the price Bronco paid, even when the grapes met the contract’s standards.
- Bronco ultimately paid an average price of about $103 per ton; Allied claimed it was owed about $150 per ton under the contract terms.
- In 1983, Bronco repudiated the contract.
- Allied attempted to find other buyers but could not, and formed a subsidiary corporation, ISC, to purchase the grapes as a resale outlet.
- ISC treated the market value as about $100 per ton, but valued the grapes to ISC at about $70 per ton; the parties structured an $85 per ton price by sharing the $30 per ton gap between ISC and the growers.
- Allied sought damages tied to the $15 per ton loss attributed to ISC (not the full $30 per ton shared loss).
- A jury awarded Allied about $2.65 million for the 1982 breach and $744,658 for the 1983 breach.
- The jury did not reach a verdict on Allied’s fraud claims.
- The trial court also granted injunctive relief to Allied under Business and Professions Code § 17200 based on Bronco’s grading and payment practices.
- Bronco appealed, attacking the damages proof (including the resale to ISC), and raised trial-error arguments (including juror misconduct) and challenges to the § 17200 injunction.
- Allied cross-appealed seeking statutory “late charges” under Food and Agricultural Code § 55881 for Bronco’s late payments on grapes it did take.

## Issues

1. Whether Allied’s resale/mitigation plan—reselling grapes to its wholly owned subsidiary—could qualify as a good-faith, commercially reasonable resale supporting damages under California Uniform Commercial Code § 2706 (UCC § 2-706).
2. Whether substantial evidence supported the jury’s breach-of-contract awards and whether the trial court properly denied Bronco’s posttrial motions (including JNOV/new trial) and claims of juror misconduct.
3. Whether the trial court properly granted injunctive relief under Business and Professions Code § 17200 based on Bronco’s grading and payment practices.
4. Whether Allied was entitled to statutory “late charges” under Food and Agricultural Code § 55881 for Bronco’s late payment for grapes accepted under the contract.

## Decision

- The Court of Appeal upheld Allied’s breach-of-contract recovery, rejecting Bronco’s contention that resale to a wholly owned subsidiary is automatically “commercially impossible” or “commercially unreasonable” under Cal. UCC § 2706.
- The court held that the related-party status of the resale buyer (ISC) did not, by itself, bar reliance on the resale as a damages measure where the evidence supported good faith and commercial reasonableness.
- The court rejected Bronco’s sufficiency-of-the-evidence and trial-error arguments and affirmed the trial court’s denial of Bronco’s posttrial motions.
- The court affirmed the injunctive relief granted under Business and Professions Code § 17200.
- The court ruled against Allied on its cross-appeal for statutory late charges under Food and Agricultural Code § 55881, concluding the statute did not provide Allied that additional recovery on these facts.
- Disposition: affirmed in part and reversed in part consistent with the court’s rulings (with Allied prevailing on the core contract and injunction relief, and Allied not receiving the requested § 55881 late charges).

## Legal Principles

- Under Cal. UCC § 2706 (UCC § 2-706), a seller may recover damages measured by the difference between the contract price and a resale price if the resale is made in good faith and in a commercially reasonable manner.
- A resale to an affiliated entity is not automatically invalid for UCC resale damages; commercial reasonableness turns on the circumstances and the evidentiary showing, not corporate form alone.
- A seller’s mitigation efforts may include creating a practical resale outlet when the market is depressed and other buyers cannot be found, so long as the transaction is structured and supported by evidence consistent with market conditions.
- On appeal from a jury verdict, the reviewing court applies substantial-evidence review and generally will not reweigh conflicts in testimony or competing inferences resolved by the trier of fact.
- Business and Professions Code § 17200 can support injunctive relief against unfair business practices connected to a seller’s grading, pricing, or payment conduct, even when contract damages are also awarded.
- Statutory late-charge remedies under Food and Agricultural Code § 55881 apply only when the statutory conditions are met; absent applicability, the claimant cannot add the statute’s charge to the contract recovery.

## Conclusion

Allied Grape Growers v. Bronco Wine Company, 203 Cal. App. 3d 432 (1988), affirmed substantial breach-of-contract damages and a § 17200 injunction after Bronco refused or downgraded contracted-for grapes and later repudiated the contract; the court held that Allied’s resale to its wholly owned subsidiary could still be a good-faith, commercially reasonable resale under Cal. UCC § 2706, while rejecting Allied’s attempt to obtain additional statutory late charges under Food and Agricultural Code § 55881.
