Opinion
Docket No. 55966.
Decided November 18, 1982. Leave to appeal applied for.
Anthony B. Roshak, for plaintiff.
Monash Monash, P.C. (by Richard A. Monash), for defendant.
ON REHEARING
A judgment was entered on January 13, 1981, awarding damages in favor of plaintiff against defendant Clarence R. Miller in the amount of $1,000, together with costs entered in the amount of $342.31. Plaintiff, Colonial Dodge, Inc., appeals as of right.
Plaintiff filed an action against The Home Insurance Company (Home Insurance) and Miller. The action against Home Insurance is not an issue in this appeal. In the action against Miller, plaintiff sought damages for breach of a sales contract to purchase a new automobile. In a nonjury trial, the trial judge determined that plaintiff was entitled to the contract price of the motor vehicle less the amount plaintiff could have received from a resale of the vehicle within a reasonable period of time after the breach.
Only two issues were raised by plaintiff in this appeal. The issues as stated concern whether plaintiff is entitled to the full contract price of the vehicle purchased by Miller and whether the trial court properly awarded damages to plaintiff. Miller did not file a cross-appeal.
On April 19, 1976, Miller executed a purchase order to buy a 1976 Dodge Royal Monaco station wagon from plaintiff for $5,677. The order was submitted to Chrysler Corporation (Chrysler) for special equipment, including a heavy trailer towing package with extra large tires. Plaintiff received an invoice from Chrysler pursuant to Miller's order; the invoice indicated that the spare tire was omitted from the delivery and would be shipped later.
On May 28, 1976, the specially ordered station wagon was picked up by Miller. Miller drove the car to a nearby expressway and exchanged cars with his wife. He drove the old car to work, and she drove the new car home. Upon getting the new vehicle home, Mrs. Miller discovered that the spare tire was missing. Miller called plaintiff the next day and spoke to Donald Diem, a salesman, about the missing spare tire. Both persons were distraught at the time of the call. Diem was under stress due to the serious surgery his wife was about to undergo. Diem offered no explanation for the missing spare tire but offered his own spare tire which turned out to be the wrong size. Miller told Diem that he would stop payment on the money orders unless he received the tire. Miller stopped payment on the two money orders, parked the vehicle in front of his home, and advised Diem to pick up the vehicle.
The tire was not delivered with the vehicle when it was received by plaintiff from the manufacturer because of a national tire shortage due to a labor strike. When the tire arrived, a notice was sent to Miller informing him of the tire's arrival and requesting that he make an appointment for its mounting on the vehicle's spare wheel located in the vehicle. There was no dispute that Miller was entitled to five tires with the purchase of the car.
On the day Miller picked up the car, he executed an application for a Michigan title. Plaintiff made application to the Secretary of State for a new title, license plates and a certificate of registration in the name of the purchaser. After the parties executed the application for Michigan title, a temporary ten-day registration sticker was affixed to the vehicle. After the sticker had expired, the car was towed from in front of Miller's home by the St. Clair police department for storage in the Kuhn Bros. dealership in St. Clair. Defendant refused to accept the license plates when they were sent to him.
According to the trial court's opinion, the parties agreed that defendant Miller had made a valid acceptance of the station wagon under § 2606 of the Uniform Commercial Code (UCC), MCL 440.2606; MSA 19.2606. Their dispute concerned whether Miller's revocation of acceptance was valid under MCL 440.2608; MSA 19.2608, the section providing that a buyer may revoke acceptance of a commercial unit where the nonconformity "substantially impairs its value to him".
The trial court noted, in interpreting this section of the code, that the court in Fargo Machine Tool Co v Kearney Trecker Corp, 428 F. Supp. 364 (ED Mich, 1977), utilized a modified standard in determining substantial impairment by making it a factual question to be determined by objective evidence rather than the buyer's personal position. The trial court ruled that the missing spare tire did not substantially impair the value of a new automobile under either the objective or the subjective test in this case and that the defendant wrongfully revoked acceptance.
Although we note plaintiff's issues on appeal are limited to damages and Miller has not filed a cross-appeal, the trial court's determination is reviewed.
In Zabriskie Chevrolet, Inc v Smith, 99 N.J. Super. 441; 240 A.2d 195 (1968), the automobile became inoperable 7/10 of a mile and minutes after leaving the dealer's showroom. The disposition of Zabriskie was premised on the finding that there was no acceptance. The facts in Zabriskie are clearly distinguishable on the basis that the car was inoperable, whereas here the sale nonconformity was the temporary absence of a spare tire due to a nationwide strike in the tire industry.
A buyer may properly revoke acceptance of a commercial unit where the nonconformity substantially impairs its value. The existence of such nonconformity depends on the facts and circumstances of each case. Jorgensen v Pressnall, 274 Or. 285; 545 P.2d 1382 (1976). The determination of substantial impairment is made from an objective view or from the buyer's subjective view, considering the particular needs and circumstances. See White Summers, Uniform Commercial Code (2d ed), § 8-3, p 308, and MCL 440.2608, comment 2; MSA 19.2608, comment 2. The objective approach was utilized in Fargo Machine Tool Co. In Jorgensen, both the objective and subjective tests were used in the determination.
The trial judge determined that the missing spare tire did not constitute a substantial impairment in value under either the subjective or objective test.
The purpose of the requirement of substantial impairment of value is to preclude revocation for trivial defects or defects which may be easily corrected. Rozmus v Thompson's Lincoln-Mercury Co, 209 Pa. Super. 120; 224 A.2d 782 (1966).
The trial judge's determination that the temporarily missing spare tire did not constitute a substantial impairment in value under either the subjective or objective test was not clearly erroneous. We affirm the trial court's finding in that regard.
Having determined that Miller wrongfully revoked acceptance in this case, the trial court found that the vehicle could have been resold on or about September 1, 1976, for $1,000 less than the sales price to Miller and, therefore, that this is the amount of damages plaintiff is entitled to recover.
The trial court stated in its opinion:
"Since the defendant wrongfully revoked acceptance in this case, it must be determined what the plaintiff's proper measure of damages will be under the commercial code, as seller's remedies are set forth in MCL 440.2703; MSA 19.2703. The applicable remedies to plaintiff where delivery and acceptance has been made where the buyer subsequently revokes acceptance are resale and recovery of damages (provided in MCL 440.2706) or an action for price and damages (MCL 440.2709)."
MCL 440.2703; MSA 19.2703 provides:
"Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole contract (section 2612), then also with respect to the whole undelivered balance, the aggrieved seller may
* * *
"(d) resell and recover damages as hereafter provided (section 2706);
"(e) recover damages for nonacceptance (section 2708) or in a proper case the price (section 2709); * * *"
The trial court further found:
"An implied duty on the part of the seller arose to retain the property and hold it for resale. This would not be an illegal act. The spirit of the Code is that where possible one must mitigate his damages."
Under MCL 257.217(b); MSA 9.1917(2), plaintiff was mandated to transfer title to the vehicle sold to Miller. The transfer was effected, and title and registration to the vehicle was placed in the name of Miller.
The Michigan Vehicle Code governs transfer of ownership of vehicles and thus pre-empts the Uniform Commercial Code. In Messer v Averill, 28 Mich. App. 62; 183 N.W.2d 802 (1970), lv den 384 Mich. 808 (1971), the Court, in dealing with the conflict between the Michigan Vehicle Code and the UCC, held that the Michigan Vehicle Code governs over the UCC. The Messer Court cited Heims v School Dist No 6 of Davison Twp, 253 Mich. 248, 251; 234 N.W. 486 (1931), where it was stated:
"`[T]hat where there are two acts or provisions, one of which is special and particular, and certainly includes the matter in question, and the other general, which, if standing alone, would include the same matter and thus conflict with the special act or provision, the special must be taken as intended to constitute an exception to the general act or provision, especially when such general and special acts or provisions are contemporaneous, as the legislature are not presumed to have intended a conflict.'"
The trial court stated that "an implied duty on the part of the seller arose to retain the property and hold it for resale". Miller stopped payment on the money orders, parked the vehicle in front of his home and advised plaintiff to pick up the vehicle. Plaintiff did not have a security interest or lien on the vehicle. The vehicle was registered and titled in Miller's name. Based on the record, plaintiff could not have transferred good title, contrary to the trial court's opinion.
MCL 440.2709; MSA 19.2709 provides:
"(1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any incidental damages under the next section, the price
"(a) of goods accepted * * *
"(b) of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing."
Clearly under MCL 440.2709(1)(b); MSA 19.2709(1)(b), the circumstances in this case are such that any effort to sell the vehicle would be unavailing.
MCL 440.1106(1); MSA 19.1106(1) states that the "remedies provided by this act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed". See, also, Allen v Michigan Bell Telephone Co, 61 Mich. App. 62; 232 N.W.2d 302 (1975), lv den 395 Mich. 793 (1975).
Under MCL 440.2708(2); MSA 19.2708(2), where the measure of damages is inadequate to put the seller in as good a position as performance would have done, the seller's measure of damages is based upon his lost profits in connection with the particular sale.
Notwithstanding the trial court's finding that plaintiff was entitled to recover damages under §§ 2706 or 2709, the trial court erroneously found that plaintiff's remedies were to be awarded only under § 2706 and proceeded to take further proofs in order to determine the amount of plaintiff's damages.
The evidentiary hearing was held on July 27, 1980, more than four years after the sale and delivery took place. The proofs were limited to evidence of the resale value of the 1976 Dodge in question on or about September 1, 1976.
The trial court in its supplemental opinion ruled:
"The testimony offered indicated that the value was either $1,000.00 less than dealer's cost or $1,000.00 less than the sales price. Dealer's cost is $5,265.43 and the sales price is $5,697.00. It is the finding of the court that the vehicle would have been resold for $1,000.00 less on or about September 1, 1976 than the sales price to defendant Miller and therefore this is the amount of damages the plaintiff is entitled to."
It is not disputed that plaintiff sold Miller a car for $5,697; that Miller paid for the car in full with two money orders; that Miller took delivery of the car; that Miller stopped payment on the money orders which were tendered in payment of the car; that Miller wrongfully revoked acceptance and breached his contract.
Because plaintiff is entitled to the full contract price of $5,697 for the vehicle purchased by Miller, the judgment of the trial court relating to damages is clearly erroneous and set aside, and plaintiff is awarded the contract price.
I respectfully dissent.
The majority opinion centers on two factors: first, it is asserted that the fact that the defendant has filed no cross-appeal is somehow relevant to the plaintiff's right to recover and, second, the assertion that the provisions of the Michigan Vehicle Code regarding title to the automobile in question, MCL 257.217(b); MSA 9.1917(2), controls the outcome here. I do not agree.
To begin with, I do not accept the finding by the trial court that Mr. Miller accepted the vehicle within the meaning of the Uniform Commercial Code. MCL 440.2606; MSA 19.2606. The parties certainly did not agree on this point and there is absolutely nothing in the record which would support such a finding.
The UCC is very plain concerning acceptance:
"Sec. 2606. (1) Acceptance of goods occurs when the buyer
"(a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their nonconformity; or
"(b) fails to make an effective rejection (subsection (1) of section 2602), but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or
"(c) does any act inconsistent with the seller's ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him."
Because acceptance is a term of art as it is used in the UCC, and because acceptance has broad legal ramifications, including the duty to pay for the goods, MCL 440.2607(1); MSA 19.2607(1), the finding of the trial court was clearly erroneous and should be reversed. As one notes, taking delivery is not acceptance because the UCC provides that the buyer has a reasonable time to inspect prior to accepting within the meaning of the code. MCL 440.2606(1), subds (a), (b); MSA 19.2606(1), subds (a), (b).
I disagree with the majority's assertion that the defendant's failure to file a cross-appeal somehow prejudices the defendant. To the contrary, the defense position was, and continues to be, that Miller owes plaintiff nothing because Mr. Miller's rejection of the nonconforming automobile was proper. Consistent with the Court of Appeals duty to do justice, GCR 1963, 820, failure to cross-appeal should have no bearing on this case, where consideration of defendant's position is necessary to a proper determination of the issue raised. See, e.g., Brown v Considine, 108 Mich. App. 504, 507; 310 N.W.2d 441 (1981). Moreover, the plaintiff's right to the relief it seeks, or to any relief, depends not on the filing of a cross-appeal, but on the facts surrounding defendant's rejection of the car.
The right to reject nonconforming goods prior to acceptance is nearly absolute. The UCC plainly and unequivocally rejects the notion of substantial compliance by a seller, insisting on a rule of perfect tender. MCL 440.2601; MSA 19.2601. The UCC limits the perfect tender rule only by express delineation found in § 2-612, MCL 440.2612; MSA 19.2612, pertaining to installment contracts and §§ 2-718, MCL 440.2718; MSA 19.2718, and 2-719, MCL 440.2719; MSA 19.2719, which allow contractual limitations on remedies.
In some cases, the UCC also limits a buyer's right to reject for nonconformity. Section 2-508, MCL 440.2508; MSA 19.2508, gives the seller a right to cure the nonconforming defect. Here the buyer asked for, then demanded a cure, but was met with refusal, then a claim that cure was not possible because of a tire strike. The UCC places the burden of cure on the seller, not the buyer, MCL 440.2508(1); MSA 19.2508(1). Failure to cure within a reasonable time is a risk of the seller, not the risk of the buyer. I conclude that this risk is one the plaintiff chose to take.
Since the majority opinion speaks to the matter of an acceptance, this I will address. If there has been an acceptance, it may be revoked for reasons found in § 2-608, MCL 440.2608; MSA 19.2608. At issue is whether the missing spare tire constituted a substantial impairment to the value of the automobile. The majority cites Rozmus v Thompson's Lincoln-Mercury Co, 209 Pa. Super. 120; 224 A.2d 782 (1966), for the proposition that § 2-608 precludes revocation after acceptance for trivial matters that are easily corrected. I accept that as a valid statement of the law, however, in this case, the missing tire was not trivial or unimportant to defendant Miller. The dealer had specific knowledge of the buyer's requirement of a spare tire, and a specific good was ordered. Therefore, the lack of such tire was not trivial.
Functional tires, including an adequate spare, are an integral part of the safety equipment of every automobile purchased, anywhere. As I pointed out in my original opinion, one would be foolish or suicidal, in light of recent events on Detroit area expressways, to venture forth in an improperly equipped automobile. Since there was no acceptance on the part of this buyer within the UCC meaning of that term, I would hold § 2-608, MCL 440.2608; MSA 19.2608, to be inapplicable to this case.
Also at issue is the propriety of defendant's rejection. MCL 440.2602; MSA 19.2602 requires a nonmerchant buyer who has rightfully rejected goods to inform the seller of the fact of rejection. Thereafter, the buyer has no further obligation to goods rightfully rejected. MCL 440.2602(2)(c); MSA 19.2602(2)(c). The duty of the seller to remove or repossess the nonconforming goods is universally recognized. Presto Mfg Co, Inc v Formetal Engineering Co, 46 Ill. App.3d 7; 360 N.E.2d 510 (1977); Graybar Electric Co v Shook, 283 N.C. 213; 195 S.E.2d 514 (1973); Garfinkel v Lehman Floor Covering Co, 60 Misc.2d 72; 302 N.Y.S.2d 167 (1969). I find that defendant's method of notice, the telephone, was appropriate under these circumstances. There is no dispute concerning the unequivocal nature of Mr. Miller's rejection of the automobile or the reason for the rejection. Moreover, there is no doubt that Mr. Miller did not use the car after he told the plaintiff's agent to come and pick it up. The cases holding that oral notice is not sufficient are not applicable here. See, e.g., Southeastern Steel Co, Inc v Burton Block Concrete Co, Inc, 273 S.C. 634; 258 S.E.2d 888 (1979). Rather, I would opt for the UCC rule that any notice must be "reasonable" — a notice that reasonably tells the seller of the fact of rejection and the reason therefor. G H Land Cattle Co v Heitzman Nelson, Inc, 102 Idaho 204, 209; 628 P.2d 1038 (1981); Jacob Hartz Seed Co, Inc v E R Coleman, 271 Ark. 756, 758-759; 612 S.W.2d 91 (1981).
I would hold that if there was an acceptance, and I think that there was not, then Miller's rejection was both appropriate and timely.
Finally, the majority relies on Messer v Averill, 28 Mich. App. 62; 183 N.W.2d 802 (1970), lv den 384 Mich. 808 (1971), for the proposition that the provisions of the Michigan Vehicle Code, MCL 257.217(b); MSA 9.1917(2), control where issues of title are present. Messer concerns a tort liability problem where title, or more particularly ownership, is important and, in most cases, determinative of the outcome of the issue of tort liability. It is my opinion that the holding of Messer doesn't apply where tort liability is not at issue or a third party is not involved.
The UCC specifically rejects any concept of title in its allocation of loss risks. MCL 440.2510; MSA 19.2510. The party who breaches the contract bears the risk of loss. This is categorically true, even where, as here, the buyer has the goods. MCL 440.2510(2); MSA 19.2510(2). Moreover, the seller bears the risk of damage or loss for its refusal to come to Miller's home to pick up the rejected vehicle. It is undisputed that on the morning after taking delivery of the station wagon, Mr. Miller phoned the dealership, discussed the absence of the spare tire, and, after receiving no satisfactory explanation, orally rejected the automobile as not conforming to the purchase contract. He told the dealer's agent to come and pick up the car because he refused to drive it at all without a spare tire.
While it may be argued that the seller was precluded from prompt resale of the automobile by the impact of the provisions of the Michigan Vehicle Code, there is a procedure for restoration of title in the seller which is available to persons such as this plaintiff.
The majority concludes that the plaintiff-seller is entitled to the full purchase price of the automobile. This result is not only unconscionable on these facts but wrong as a matter of law. It was the seller who breached the contract. It has no right to damages whatsoever on its own breach because the law gives it no such right, absent a wrongful rejection on the part of the buyer.
In summary, I conclude that Mr. Miller never accepted this automobile. More than that, he made a reasonable, timely demand that the nonconformity be cured. When, for whatever reason, the seller could not or would not cure the nonconformity, Miller parked the rejected car and told the seller to come and take it away. The seller did nothing. It should bear the loss.
I would reverse.