Summary
holding that "[p]unitive damages are unavailable in suits purely ex contractu, and can be awarded only where an independent, willful tort is alleged and proved."
Summary of this case from Gateway Technologies, Inc. v. MCI Telecommunications Corp.Opinion
44615 Record No. 811315.
March 9, 1984.
Present: All the Justices.
Revocation of acceptance under Code Sec. 8.2-608 of Uniform Commercial Code unavailable to buyer of defective automobile where buyers' continued use after notice of revocation did not meet standard of commercial reasonableness; remote manufacturer not liable in suit for revocation of contract between retailer and buyer; other revocation issues.
(1) Commercial Code — Sales — Breach of Warranty — Statutory Construction — Revocation of Acceptance in Whole or in Part (Code Sec. 8.2-608) — Buyer's Right of Revocation Explained.
(2) Contracts — Breach — Punitive Damages — Burden of Proof — Requires Allegation and Proof of Independent Tort.
(3) Contracts — Breach — Punitive Damages — Recoverable Only On Award of Compensatory Damages Not Claimed Here.
(4) Commercial Code — Sales — Breach of Warranty — Revocation of Acceptance — Pleading and Practice — Evidence — Burden of Proof — Subjective Determination of Impairment of Value in Buyer's Hands Must Be Proved by Preponderance of Evidence.
(5) Commercial Code — Sales — Contracts — Revocation of Acceptance — Pleading and Practice — Evidence — Burden of Proof — Requires Objective Evidence of Impairment, Viewed From Buyer's Own Needs.
(6) Commercial Code — Sales — Contracts — Revocation of Acceptance — Pleading and Practice — Evidence — Buyer Must Show Special Purpose to Overcome Presumption of Use of Goods for Customary Purpose.
(7) Commercial Code — Sales — Contracts — Revocation of Acceptance — Pleading and Practice — Evidence — Substantial Impairment — Standard of "Driveability" Properly Applied.
(8) Commercial Code — Sales — Contracts — Revocation of Acceptance — Pleading and Practice — Evidence — Burden of Proof — Plaintiff Must Show By Preponderance of Evidence that Actions With Respect to Goods Commercially Reasonable.
(9) Commercial Code — Sales — Contracts — Revocation of Acceptance — Must Be Within Reasonable Time After Acceptance Under Circumstances.
(10) Commercial Code Sales — Contracts — Revocation of Acceptance — Notification — Delay Reasonable Where Caused By Seller's Delays in Repairing Goods.
(11) Commercial Code — Sales — Contracts — Revocation of Acceptance — Continued Use — Buyer Acts as Seller's Bailee After Notice of Revocation and Continued Use of Goods Wrongful.
(12) Commercial Code — Sales — Contracts — Revocation of Acceptance — Continued Use — Exceptions — Inapplicable to Automobiles.
(13) Commercial Code — Sales — Contracts — Revocation of Acceptance — Continued Use — Commercially Unreasonable in this Case.
(14) Commercial Code — Sales — Contracts — Revocation of Acceptance — Pleading and Practice — Proper Parties — Evidence Against Manufacturer Not Party to Contract Properly Struck by Trial Court.
(15) Commercial Code — Sales — Contracts — Revocation of Acceptance — Pleading and Practice — Proper Parties — Statutory Construction — When Lack of Privity No Defense in Action Against Manufacturer or Seller of Goods (Code Sec. 8.2-318) — Inapplicable in Suit Seeking Revocation of Contract Between Buyer and Retail Dealer.
Plaintiff buyers purchased a new 1979 Fiat station wagon from defendant Mooers Motor Car Company (Mooers) on 21 February 1979. After delivery, they discovered numerous defects in the car and repeatedly returned the car to Mooers for repairs, without success. On 19 September 1979, buyers demanded rescission of the sale and replacement of the car or return of the purchase price. When Mooers refused to accept revocation of the contract, buyers continued to drive the car until November, 1979.
On 8 January 1980, buyers filed suit in equity against Mooers and Fiat Motors of North America, Inc. (Fiat), seeking cancellation of the sale and replacement or return of the purchase price. Buyers claimed punitive damages but no compensatory damages. The Trial Court struck the evidence against Fiat and held for Mooers, ruling that buyers' evidence had not shown substantial impairment of value and that buyers had failed to revoke acceptance of the car within a reasonable time. Buyers appeal.
1. Code Sec. 8.2-608 allows a buyer of substantially nonconforming goods to revoke acceptance within a reasonable time after discovery of the nonconformity. The buyer is not required to elect between rescission and recovery of damages for breach.
2. In a suit for breach of contract, punitive damages may not be recovered unless an independent tort is alleged and proved.
3. A claim for and award of compensatory damages is an absolute prerequisite to an award of punitive damages except in cases of libel and slander. The Trial Court properly denied punitive damages where plaintiff failed to claim an independent tort and compensatory damages.
4. A buyer's right to revoke acceptance arises only where the value of the goods in the buyer's hands has been substantially impaired, without regard to impairment of value on the open market. The burden of proving, by a preponderance of the evidence, substantial impairment rests upon the buyer.
5. To sustain the burden of proof the buyer must offer objective evidence showing (a) that the goods failed to conform to the terms of the contract of sale and, (b) that the nonconformity substantially impairs the value of the goods to the buyer.
6. Absent a showing by the buyer of special purpose, the fact finder may infer that the goods are needed by the buyer for their customary and ordinary purpose.
7. The Trial Court's standard of "driveability" as the test of substantial impairment of the car's value was proper when supported by evidence and where plaintiff failed to prove any special need.
8. The buyer has the burden of proving by a preponderance of the evidence that all his actions regarding the goods, including giving notice of revocation, changing the condition of the goods and using the goods after revocation, were commercially reasonable.
9. Revocation must be within a reasonable time after acceptance, depending on the facts and circumstances, and may be after the time for giving notice of breach.
10. Delay in notification of revocation is not unreasonable if it is due to delays by the seller in accomplishing repairs.
11. After giving notice of revocation, the buyer holds the goods as bailee and continued use becomes wrongful unless induced by the seller's instructions or promises.
12. The exception to the "continued use" rule for buyers of mobile homes is inapplicable to buyers of automobiles which depreciate rapidly in value.
13. Here the buyers' continued use of the car after giving notice of revocation of acceptance was inconsistent with their position as a bailee and does not meet the standard of commercial reasonableness.
14. The remedy of revocation of acceptance was the sole relief available to the buyers under this bill of complaint and the Trial Court properly struck the evidence against Fiat as the remote manufacturer.
15. A remote manufacturer is liable to a buyer for damages arising from negligence or for breach of warranty and the defense of privity has been absolved as to such cases by Code Sec. 8.2-318; but the remedy of revocation of acceptance is conceptually inapplicable to any persons other than the parties to the contract of sale sought to be rescinded.
Appeal from a judgment of the Circuit Court of the City of Richmond. Hon. Willard I. Walker, judge presiding.
Affirmed.
G. Rodney Sager (Monahan Sager, on briefs), for appellants.
Richard W. Schaffer; Donald E. King (John A. Conrad; Sands, Anderson, Marks Miller; McGuire, Woods Battle, on briefs), for appellees.
This case requires consideration of the rights of a buyer of a defective automobile who seeks the remedy of revocation of acceptance against the seller and the manufacturer under the Uniform Commercial Code (Va. Code Sec. 8.2-608).
On January 8, 1980, Patricia E. Gasque and Earl L. Gasque (buyers) filed a suit in equity against Mooers Motor Car Co., Inc. (Mooers) and Fiat Motors of North America, Inc. (Fiat). They alleged that they had purchased a new 1979 Fiat station wagon, manufactured by Fiat, from Mooers on February 21, 1979; that after delivery they discovered numerous defects in the car; that Mooers had made at least five attempts to correct the defects, without success; that on September 19, 1979, the buyers had demanded rescission of the sale and return of the purchase price or replacement of the car; and that the demand had been refused. The bill of complaint sought only cancellation of the sale and return of the purchase price or, alternatively, replacement of the car with a new one of similar model. There was no claim for compensatory damages, although there was a claim for punitive damages and "loan interest, legal interest, costs of this litigation, and an award of attorney's fees," as well as "other and further relief."
The court heard evidence ore tenus and, in a written opinion, held that the evidence did not show a substantial impairment of value of the car by reason of the defects and that the buyers had failed to revoke their acceptance within a reasonable time. At trial, the court sustained Fiat's motion to strike the evidence as to it, on the ground that the remedy of rescission, or revocation of acceptance, was not available against a party who had no contract with the buyer. A decree was entered in favor of both defendants, from which the buyers appeal. We agree with the trial court's rulings.
In accordance with established standards of appellate review, we must view the evidence in the light most favorable to the parties prevailing below. The buyers took delivery of a new Fiat from Mooers on February 21, 1979. At various subsequent times, they reported to Mooers that they had experienced a water leak, a loose gearshift lever, difficulty shifting into second and third gear, heater malfunction, an inoperative clock and interior light, a loose wire under the dash, blown fuses, a piece missing from a front door, automatic choke problems, difficulty starting, fast idling, difficulty closing the rear door on the driver's side, difficulty opening the rear door on the passenger's side, excessive oil consumption, loud vibrations, and various other noises and rattles. In addition, they claimed that the reclining front seat broke, and that they experienced repeated difficulty with the foot-long plastic extension to the gearshift lever, which pulled loose.
The buyers returned the car to Mooers on March 13, March 23, an unspecified date in May, June 22, June 27, July 20, and August 6, 1979, for service. On each occasion, Mooers repaired the items complained of, without charge, although Mooers could find no evidence of some of the problems described by the buyers. Mooers conceded that the car experienced a recurring problem with the gearshift extension and testified that this defect affected three out of seventy cars of this model which it had recently sold. Mooers' service manager testified that the gearshift extension would come off only if used improperly by pulling it upward and that the car was still operable without the extension. The car was in fact driven for thousands of miles while subject to this defect. Although Mooers thought a permanent repair of this problem could be accomplished, the difficulty continued up to the time of trial.
The buyers consulted counsel, who, on September 19, 1979, wrote to Mooers and to Fiat demanding "a full refund including interests and expenses for the times that the vehicle was in the shop or, in the alternative, the replacement of said automobile."
The buyers continued to drive the Fiat, except when it was left with Mooers for service. When the car was last in Mooers' shop for repairs on August 6, it had 4,543 miles on the odometer. When buyers' counsel wrote to Mooers on September 19, he stated that the car had been driven 5,400 miles. At the time of the trial on May 21, 1980, the car had been driven over 8,000 miles. The buyers testified that they purchased a used Volkswagen in November 1979, and permanently parked the Fiat, which by then had been driven 8,000 miles, in their driveway.
[1-3] Code Sec. 8.2-608 provides:
Revocation of acceptance in whole or in part. —
(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it
(a) on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or
(b) without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances.
(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. It is not effective until the buyer notifies the seller of it.
(3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.
Although the U.C.C. "Official Comment" appended to this section makes clear that the buyer is no longer required to elect between rescission and damages for breach, the buyers in this case did so by their pleading. The prayer of the bill is purely for a restoration of the parties to the status quo ante, including such incidental damages as would accomplish that purpose. The prayer for punitive damages is extraneous and ineffectual. The suit is, as it must be to accomplish its purpose, founded upon the contract between Mooers and the buyers. Punitive damages are unavailable in suits purely ex contractu, and can be awarded only where an independent, wilful tort is alleged and proved. Kamlar Corp. v. Haley, 224 Va. 699, 299 S.E.2d 514 (1983). Even if the buyers' bill alleged a tort, which it fails to do, an award of compensatory damages, which are not claimed here, is an indispensable predicate for an award of punitive damages, except in actions for libel and slander. Newspaper Publishing Corp. v. Burke, 216 Va. 800, 805, 224 S.E.2d 132, 136 (1976). Thus, the trial court properly confined its consideration to the question whether the evidence supported the prerequisites for revocation of acceptance under Code Sec. 8.2-608: (1) substantial impairment of value to the buyer, and (2) action within a reasonable time and before any substantial change in condition of the goods which is not caused by their own defects.
Buyers contend that the condition of the car was in breach of implied warranties. Mooers contends that such warranties were expressly excluded by the language of the parties' contract. Because of the view we take of the case, it is unnecessary to decide this question, and we will assume, without deciding, that the warranties were effective.
A buyer's right to revoke acceptance does not arise from every breach of warranty, notwithstanding the availability of damages for the breach; it arises only where the value of the goods to the buyer is substantially impaired. Tiger Motor Co. v. McMurtry, 284 Ala. 283, 224 So.2d 638 (1969). The test of such impairment is not, however, a diminution in value of the goods on the open market, or to the average buyer, but rather a substantial impairment of value to the particular buyer involved. See Champion Ford Sales, Inc. v. Levine, 49 Md. App. 547, 433 A.2d 1218 (1981). Whether substantial impairment of value to the particular buyer exists is an issue to be determined by the trier of fact. See Asciolla v. Manter Oldsmobile-Pontiac, Inc., 17 N.H. 85, 370 A.2d 270 (1977). The buyer must carry the burden of proof on this issue by a preponderance of the evidence.
The authorities disagree as to the standard of proof which should apply. The buyers urge us to adopt a subjective test, under which the buyers need only persuade the fact-finder that their "faith has been shaken" in the product. See, e.g., Stamm v. Wilder Travel Trailers, 44 Ill. App.3d 530, 358 N.E.2d 382 (1976), and Zabriskie Chevrolet, Inc. v. Smith, 99 N.J. Super. 441, 240 A.2d 195 (1968). We decline this invitation and hold that the buyer must offer objective evidence showing: (1) that the goods fail to conform to the terms of the contract of sale, and (2) that the nonconformity substantially impairs the value of the goods to the buyer. See Asciolla v. Manter, supra; GNP Commodities, Inc. v. Walsh Hetternan Co., 95 Ill. App.3d 966, 420 N.E.2d 659 (1981).
[6-7] How may this be shown? Undoubtedly, there may be a purchaser of an automobile who wants it for an unusual and special purpose, such as display in a collection of antique vehicles. But the burden would be on the buyer to show such a special need. In the absence of such a showing, the fact-finder is entitled to infer that the goods are needed by the buyer for their customary and ordinary purpose — simple transportation in the case of an automobile. In the instant case, there was persuasive evidence that the Fiat in question substantially fulfilled that purpose. It had been driven 5,400 miles by the time the buyers sought to revoke acceptance and an additional 2,600 miles thereafter. The trial court applied a standard of "driveability" as the test of whether the car's value to the buyers was substantially impaired. While such a standard would not be of universal application, we cannot say that it was erroneous where the buyers failed to prove any need for the car beyond ordinary transportation. Accordingly, the trial court's finding in this respect was supported by evidence and will not be disturbed on appeal.
[8-11] In deciding whether the remedy of revocation of acceptance is applicable, the fact-finder must resolve additional issues: whether the buyer unreasonably delayed giving notice of revocation, whether the condition of the goods had substantially changed, and whether the buyer had made unjustified use of the goods after giving notice of revocation. As to all these issues, the buyer has the burden of proving by a preponderance of the evidence that his conduct was reasonable. The Uniform Commercial Code has substituted a standard of commercial reasonableness for the stricter standards which formerly prevailed, but the guiding principles are clear. Revocation of acceptance must be made promptly, or within a reasonable time after acceptance, and the buyer may not use the goods to a material degree and then attempt to revoke. Reece v. Yeager Ford Sales, Inc., 155 W. Va. 453, 184 S.E.2d 722 (1971). What constitutes a reasonable time depends upon the facts and circumstances of each case. The time for revocation will ordinarily extend beyond the time for giving notice of breach. Lanners v. Whitney, 247 Or. 223, 428 P.2d 398 (1967); Pedrini v. Mid-City Trailer Depot, Inc., 1 Wn. App. 56, 459 P.2d 76 (1969). Where the delay in notification of revocation is brought about because the buyer gave the seller repeated opportunities to correct the defects and the seller procrastinated in accomplishing repairs, the delay is not unreasonable. Seekings v. Jimmy GMC of Tucson, Inc., 130 Ariz. 596, 638 P.2d 210 (1981). But after giving notice of revocation, the buyer holds the goods as bailee for the seller. The buyer cannot continue to use them as his own and still have the benefit of rescission; his continued use becomes wrongful against the seller, unless induced by the seller's instructions or promises. Stephens Industries, Inc. v. American Express Co., 471 S.W.2d 501 (Mo. Ct. App. 1971); Sellman Auto, Inc. v. McCowan, 89 Nev. 353, 513 P.2d 1228 (1973).
Exceptions have been made to the rule in mobile home cases, where departure from the home before resolving the litigation would cause undue hardship to the buyer and where the buyer's continued occupancy might be the best means of safeguarding the property for a seller who refuses to take it back. Minsel v. El Rancho Mobile Home Center, Inc., 32 Mich. App. 10, 188 N.W.2d 9 (1971). Cf Twin Lakes Mfg. Co. v. Coffey, 222 Va. 467, 281 S.E.2d 864 (1981). But this reasoning has no application to the continuing use of an automobile, which ordinarily depreciates in value with every mile it is driven.
Applying these principles to the case at bar, the buyers' delay, at least until after August 6, was reasonable in light of the seller's continuing efforts to effect repairs, which were only partially successful. But it is equally clear that the buyers' continued use of the car after giving notice of revocation of acceptance on September 19, during which time they drove it 2,600 miles, was entirely inconsistent with their position as a bailee, maintaining custody only to safeguard the car for the seller. Such personal use of what they contended to be the seller's property does not meet the standard of commercial reasonableness, and the trial court correctly so held.
The trial court correctly struck the evidence against Fiat. The remedy of revocation of acceptance was the sole relief available to the buyers under their bill of complaint, as noted above. This remedy lies only against a seller of goods, not against a remote manufacturer. This is so because the remedy, where successful, cancels a contract of sale, restores both title to and possession of the goods to the seller, restores the purchase price to the buyer, and as fairly as possible, returns the contracting parties to the status quo ante. The remote manufacturer, having no part in the sale transaction, has no role to play in such a restoration of former positions. Seekings v. Jimmy GMC of Tucson, Inc., supra, 130 Ariz. at 600, 638 P.2d at 214; Reece v. Yeager Ford Sales, Inc., 155 W. Va. 461, 468, 184 S.E.2d 727, 731 (1971).
The buyers argue that this limitation on revocation revivifies the "archaic doctrine of privity." We disagree. A remote manufacturer is liable to a buyer for damages arising from negligence or from breach of warranty, and the defense of lack of privity has been abolished as to such cases. Code Sec. 8.2-318. But the remedy of revocation of acceptance under Code Sec. 8.2-608 is conceptually inapplicable to any persons other than the parties to the contract of sale sought to be rescinded.
For these reasons, the decree will be
Affirmed.