Opinion
SC-338-17/CO
11-17-2017
Robert C. Forman, Plaintiff, v. Katelyn Townsend, Defendant.
APPEARANCES: Robert C Forman, Pro Se for Plaintiff Law Offices of Brian D. Richardson, (Lela M. Grey, Esq. of counsel) for Defendant
APPEARANCES: Robert C Forman, Pro Se for Plaintiff Law Offices of Brian D. Richardson, (Lela M. Grey, Esq. of counsel) for Defendant Thomas Marcelle, J.
Robert C. Forman's ("Forman") and Katelyn Townsend's ("Townsend") cars collided. The accident was all Townsend's fault — there is no question about that, she admits it. Because of Townsend's negligence, Forman's car, a leased Subaru Impreza, was totaled. Townsend paid Subaru for this loss. In turn, Subaru released Forman from the lease. Forman says that making Subaru whole, is not enough; he too suffered.
He says that Townsend's negligence caused him to suffer the loss of his transactional costs to lease the car — $1,566.90. Townsend refused to compensate him. Forman then commenced this action. Compensation for transactional cost involving the purchase (or lease) of a car raises a novel issue. Neither party provided authority on this issue and the court's research failed to identify a case that decides this point of law.
At trial, the evidence established the following facts. Forman leased a Subaru Impreza. The value of the car, new, was $22,460.70. It was anticipated that the lease would run three years. At the end of the lease the car would have a residual value of $13,869.13. Forman agreed to pay monthly installments of $255 for 36 months or $9,180 (which represented the difference between the value of the car new and its value at the end of the lease plus a "rent charge" of $588.00). In addition, Forman paid his first monthly payment of $255 together with transactional costs of $1,566.90 at the lease's signing. Here are how the transactional costs break down: $162.50 (New York registration, inspection and tire waste fees); $670 (dealership fees); and $734.40 in sales tax. He leased the car at the end of December 2016 and the accident occurred in June 2017.
This last item needs a small amplification. The sales tax is calculated by taking the difference between the value of the car as new and the residual value of the car at the completion of the lease. --------
To begin with, Townsend does not dispute that Forman is entitled to receive the full benefit of the bargain he made with Subaru. Including the initial payment at the signing of the lease, Forman made six payments which totaled $1,530. The extremely detailed market valuation report (exhibit A) indicates that the Subaru lost $1,615 of value due to mileage. Thus, Townsend argues that Forman got what he paid for.
However, implicit in this argument is that Forman is not entitled to transactional costs because the market value of cars does not reflect the transaction cost incurred by the purchaser. Transactional costs are considered sunk cost. Basic microeconomic theory holds that only prospective costs are relevant to an investment decision. In other words, the value of a car does not increase because the original purchaser had paid a high transaction cost to acquire the vehicle. Conversely, the value of a car does not diminish because the original purchaser incurred a low transaction cost for its acquisition. The value of the Subaru is independent of the transactional costs to secure the lease.
Since Forman got the benefit of the bargain and since the market discounts his transactional costs to zero, Townsend questions why she should pay more than the fair market value of the property she damaged — a very fair question. Townsend's position has some force. If this were a contract case, then Forman would have no claim for additional damages. Contract damages require an economically driven calculus; i.e., measuring the market value of goods and services. But this is not a contract case, it is a tort case. Tort damages involve a morally driven analysis. Parties in a tort case (like this one) are labeled as wrongdoers and victims, not morally innocuous terms like promisor and promisee. Thus, while a promisor has to pay the value of a promise not kept, a wrongdoer has to make her victim whole.
Consequently "[i]n a tort case, compensatory damages, whether general or special, serve to make good, so far as it is possible to do so in dollars and cents, the harm done by a wrongdoer" (Lopez v. Adams, 69 AD3d 1162, 1167—68 [2010] [internal quotation marks and citations omitted]). As the Supreme Court has noted, "tort damages generally compensate the plaintiff for loss and return him to the position he occupied before the injury" (E. Riv. S.S. Corp. v Transamerica Delaval, Inc., 476 US 858 [1986]). Thus, "the fundamental purpose of damages, is to have the wrongdoer make the victim whole" (Sharapata v. Town of Islip, 56 NY2d 332, 335 [1982] [internal quotation marks and citations omitted]).
Since placing the injured party in the same position as he would have been in if the tort had not occurred is the goal, the injury must be viewed from the eyes of the plaintiff. While a consumer of a used car is indifferent to the initial transactional or sunk costs incurred by the original buyer, the original buyer is not. Thus, the vantage point of what a reasonable consumer would pay for the car (the point of view in a contract case) misses the mark in a tort case. Rather, the appropriate inquiry in tort cases is what the plaintiff would have paid for a leased car if he knew he would become a victim of a negligence act before the expiration of the lease. By this measure, Forman will be made whole.
In this case, that translates to compensation in an amount sufficient so that Forman would still have engaged in the lease agreement knowing that the lease would last only six months. Damages based upon this theory means that Forman should be awarded the value of using the car (which he has already received) plus those transaction costs that he would have paid for a six-month lease agreement (the period for which he had the car). There are three components to Forman's transaction costs: (1) State sales tax; (2) State use fees (the registration, inspection and tire disposal); and (3) the dealership fees.
Starting with the sales tax component. New York taxed Forman based upon the value of a 36-month lease; his lease lasted but six months. Forman would not have agreed to pay taxes based on the value received for a 36-month lease when he was only going to have a six-month lease. It would be irrational. Forman has paid New York State too much in sales tax. However, if Townsend compensated Forman for the excess tax, then New York would retain the excess and receive an unjustified windfall. This is unacceptable. Forman's remedy for over taxation lies with the State and not Townsend.
The usage fees component is not recoverable. Fees like registration and inspection are independent of the number of miles a car is driven. That is, such fees are required to drive a car one mile or 100,000 miles. Forman, to drive the Subaru, would have paid and would have been required to pay the State its fees for a six-month lease or a 36-month lease. Forman consumed the usage fee and Townsend is not required to compensate him for it.
The last component is the dealer transaction fee. This fee directly relates to the duration of the lease. Generally, no one would pay $670 (dealership fees in this case) for a lease of a short duration, but might, as Forman did, pay such a fee for a 36-month lease. The court finds that a rational consumer amortizes this cost over the course of the lease. The court is not saying whether the amount of the dealership fee paid here was reasonable or unreasonable. It makes no difference. Even assuming that Forman made an atrociously awful deal and paid an extremely high dealership fee, the wrongdoer, Townsend, takes her victim as she finds him (see Rozewicz v. New York City Health & Hosps. Corp., 172 Misc 2d 43, 45 [Sup Ct, New York County 1997] (noting that in tort cases damages will vary depending on the condition of the injured party).
The court is deciding that a reasonable person spreads the cost of the dealership fee (whether high or low) over the life of the lease. Thus, Forman is entitled to a prorate share of this cost. He held the car for only 1/6 of the time that he anticipated. Therefore, Townsend must pay Forman for 5/6 of the dealership fee which equals $558.33. Therefore, it is
ORDERED that judgement is entered in favor of the Plaintiff Robert C. Forman in the amount of $558.33 plus costs of $20.00 and that Defendant Katelyn Townsend shall pay the Plaintiff the judgment and costs.
The foregoing constitutes the Decision and Order of the Court. Dated: November 17, 2017 Cohoes, New York __________________________ Thomas Marcelle City Court Judge