Court Opinion

ID: 9854142
Source: CourtListenerOpinion
Date Created: 2023-09-24 06:01:56.109852+00
Date Added: 2024-06-11T09:22:57.129857
License: Public Domain

JON E WILCOX, J.
¶ 47. (concurring). I write separately because while I agree that the "special circumstances" clause of Wis. Stat. § 402.714(2)1 may not be used to bar Mayberry's claim by calculating damages based on the difference between the market value and actual price of her vehicle at resale, the "special circumstances" clause of § 402.714(2) is still relevant to this case.
¶ 48. Despite Volkswagen's attempt to sustain the circuit court's order for summary judgment, what the parties are really arguing over is the amount of Mayberry's damages. Volkswagen is concerned that the standard method for calculating damages under § 402.714(2) will allow Mayberry to reap a windfall because her actual damages are less than the difference between the warranted value of the Jetta and actual value of the Jetta at the time and place of acceptance. Volkswagen argues that the standard measure for calculating damages cannot be an inflexible rule because Mayberry has mitigated her damages and thus has actual damages of a different amount. Volkswagen's concerns do not fall on deaf ears.
*67¶ 49. While I wholeheartedly agree with the majority that the "special circumstances" clause of § 402.714(2) should not be construed to completely bar a plaintiff from maintaining a claim, I would further hold, in accordance with the numerous authorities that have addressed the issue, that the "special circumstances" clause of § 402.714(2) may be utilized to adjust a plaintiffs damages — as calculated under the difference in value at acceptance standard — to reflect any damages mitigated by the plaintiff. In other words, I would hold that while the difference between the warranted value and actual value at the time and place of acceptance is the "starting point" for calculating damages, this figure may be adjusted upwards or downwards in appropriate circumstances to reflect the actual amount of plaintiffs damages under the "special circumstances" clause of § 402.714(2).
¶ 50. Wisconsin Stat. § 402.714(2) provides that a court may deviate from the standard method of calculating damages for breach of warranty if "special circumstances show proximate damages of a different amount." Both courts and commentators have recognized that this clause of the Uniform Commercial Code allows damages calculated under the standard time and place of acceptance measure to be adjusted upward or downward if the plaintiffs actual damages are different than the default difference in value calculation. See, e.g., Neilson Bus. Equip. Center, Inc. v. Monteleone, 524 A.2d 1172, 1176 (Del. 1987); Vorthman v. Myers Enters., 296 N.W.2d 772, 777 (Iowa 1980); Ronald A. Anderson, 4A Anderson on the Uniform Commercial Code § 2-714:199 to § 2-714:224 (3d. ed. rev. vol. 4A 1997).
¶ 51. As the court in Vorthman explained, "the present standard [under the U.C.C.] is to allow either more or less than the difference between the value of *68the property as it should have been and as it actually was. This conforms to the basic principle that damages should compensate for the loss actually suffered." Vorthman, 296 N.W.2d at 777 (second emphasis added). See also Roy Anderson, 1 Damages Under UCC § 10:10, at 10-46 (2003) ("The 'special circumstances' exception may justify an award of lesser as well as greater damages than would be allowed by the difference in value formula."). In Vorthman, the court emphasized that the "special circumstances" clause applies where actual damages are of a different — as opposed to a greater — amount than the standard measure. Vorthman, 296 N.W.2d at 777.2
¶ 52. One recognized category of cases in which the plaintiffs damages may be adjusted downward from the standard difference in value formulation is "where the buyer has mitigated damages to less than those provided by the value differential formula." Roy Anderson, 1 Damages Under UCC § 10:10, at 10-47 (2003) (emphasis added). Thus:
Circumstances may exist in which the buyer is fully indemnified although the buyer does not obtain the full recovery authorized by UCC § 2-714. In such case, the *69buyer will not be allowed to recover the damages authorized by the Code but only so much as is required to indemnify the buyer for his or her actual loss.
Ronald A. Anderson, 4A Anderson on the Uniform Commercial Code § 2-714:219, at 487 (3d ed. rev. vol. 4A 1997).
¶ 53. This application of "special circumstances" is consistent with the purpose underlying the remedies in the Uniform Commercial Code, which is to place the aggrieved party "in as good a position as if the other party had fully performed." Wis. Stat. § 401.106(1). As noted by the majority, majority op., ¶¶ 22-24, the remedies under the Uniform Commercial Code for breach of warranty are designed to compensate an injured party for her "direct economic loss." Beyond the Garden Gate, Inc. v. Northstar Freeze-Dry Mfg., Inc., 526 N.W.2d 305, 309 (Iowa 1995) (quoting James J. White & Robert S. Summers, Uniform Commercial Code § 11-5, at 536 (3d ed. 1988)). In other words, under the Uniform Commercial Code" 'an injured party should be fully compensated for losses suffered through the fault of another, but... he should not be allowed a windfall.'" James J. White & Robert S. Summers, 1 Uniform Commercial Code § 10-2, at 555-56 (4th ed. 1995) (quoting Cmty. Television Servs., Inc. v. Dresser Indus., Inc., 435 F. Supp. 214, 217 (D.S.D. 1977)) (emphasis added). The plaintiff is entitled to be compensated for her actual damages, no more, no less. As such, § 1-106 of the Uniform Commercial Code "requires mitigation of damages." Cates v. Morgan Portable Bldg. Corp., 780 F.2d 683, 688 (7th Cir. 1985).
¶ 54. Allowing a deduction for damages that have been mitigated is also consistent with Wis. Stat. § 402.714(1), which states that damages may be "deter*70mined in any manner which is reasonable." In addition, the Official Comments to the Uniform Commercial Code specifically provide: "Subsection (2) .. . is not intended as an exclusive measure" of damages. Official Comment 3, Uniform Commercial Code § 2-714(2) (1962). As one commentator has recognized, "[t]he effect of the [special circumstances] exception is to . . . allow the court the flexibility to fashion a damages award 'in any manner which is reasonable' as provided by subsection (1)." Roy Anderson, 1 Damages Under UCC § 10:10, at 10-45 (2003). It is perfectly reasonable and in accordance with prevailing law to adjust a plaintiffs damages so that she does not recover damages that she avoided pursuant to her duty to mitigate. Indeed, a contrary holding would be patently unreasonable in light of the plaintiffs obligation to mitigate damages.
¶ 55. As the court of appeals has recently explained:
The party alleging breach of the contract has a duty to mitigate damages, that is, "to use reasonable means under the circumstances to avoid or minimize the damages." See Kuhlman, Inc. v. G. Heileman Brew. Co., 83 Wis. 2d 749, 752, 266 N.W2d 382 (1978); Wis JI — Civil 1731. An injured party cannot recover any item of damage that could have been, or was, avoided. See Kuhlman, 83 Wis. 2d at 752 ....
Kramer v. Bd. of Educ. of the Sch. Dist. of the Menomonie Area, 2001 WI App 244, ¶ 13, 248 Wis. 2d 333, 635 N.W.2d 857. This court has held that under general principles of contract law, "[a]n injured party is entitled to the benefit of his agreement, which is the net gain he would have realized from the contract but for the failure of the other party to perform." Thorp Sales Corp. v. Gyuro Grading Co., 111 Wis. 2d 431, 438-39, 331 *71N.W.2d 342 (1983). However, we have specifically stated: "A party is not entitled to be placed in a better position because of a breach than he would have if the contract had been performed." Hanz Trucking, Inc. v. Harris Bros. Co., 29 Wis. 2d 254, 268, 138 N.W.2d 238 (1965) (emphasis added). See also Kramer, 248 Wis. 2d 333, ¶ 13.
¶ 56. One instance in which courts have recognized that a party has mitigated damages for breach of warranty under the Uniform Commercial Code is where the buyer resells the defective goods for a profit: "When the buyer sues the seller for warranty damages, the general rule specified by the Code for the measurement of the damages must be modified by deducting the profits made on resale." Ronald A. Anderson, 4A Anderson on the Uniform Commercial Code § 2-714:223, at 488 (3d ed. rev. vol. 4A 1997). In Vorthman, 296 N.W.2d at 778, the court held that the damage instruction in the case before it constituted reversible error because it did not allow for the damáge award to be adjusted to reflect the profit the plaintiff received upon resale of the defective goods at issue. See also Lackawanna Leather Co. v. Martin & Stewart, Ltd., 730 F.2d 1197, 1203 (8th Cir. 1984) (ruling that a jury properly awarded damages in breach of warranty case under Uniform Commercial Code § 2-714 for defective cattle hides by reducing damages to reflect plaintiffs profit in resale of the goods); Ducheneaux v. Miller, 488 N.W2d 902, 916 (S.D. 1992) (circuit court erred in failing to reduce plaintiffs damages by amount of profit plaintiff received upon resale of defective calves); Schmaltz v. Nissen, 431 N.W.2d 657, 664 (S.D. 1988) (holding it was proper under South Dakota's Uniform Commercial Code to reduce plaintiffs damages to reflect profit plaintiff made upon resale of *72inferior quality seed); Holm v. Hansen, 248 N.W.2d 503, 510-11 (Iowa 1976) (ruling that where damages were to be calculated under "special circumstances" clause of Uniform Commercial Code, circuit court was required on remand to consider profits plaintiff received upon resale of defective livestock).
¶ 57. Here, in an attempt to mitigate her damages, Mayberry resold the vehicle to another dealer for $15,100. However, Mayberry conceded that the fair market value of the vehicle at the time of trade-in was $14,200. Thus, assuming Mayberry is successful in convincing a jury that Volkswagen breached its warranties and that she suffered damages, Mayberry's damages should be reduced to reflect the net profit she obtained as a result of the resale of the vehicle.3 If this amount were not deducted from Mayberry's damages, the duty to mitigate would be meaningless. While Mayberry is entitled to the difference between the warranted value of the vehicle and its actual value at the time and place of acceptance, she mitigated these damages by selling the vehicle for a profit. If she were entitled to keep both the profit from the resale and the total benefit of the bargain damages, she would be placed in a better position than had the Jetta not been defective.
¶ 58. In addition, a consumer's damages may be reduced in a breach of warranty case to reflect any value added to the defective product as a result of successful repairs under the warranty. As one commentator has observed:
*73By definition, repairs made by the seller are not relevant to the claim of the buyer for damages under UCC § 2-714.
The buyer may not recover damages for defects that have been corrected by the seller pursuant to its warranty to repair. This result is achieved by awarding the plaintiff the difference in the fair market value of the goods and their condition at the time and place of acceptance, increased by the value of repairs and replacement made in compliance with the warranty, and the fair market value of the goods had they been as warranted.
Ronald A. Anderson, 4A Anderson on the Uniform Commercial Code § 2-714:131, at 452-53 (3d ed. rev. vol. 4A 1997). See also James J. White & Robert S. Summers, 1 Uniform Commercial Code § 10-2, at 555 (4th ed. 1995) (accord).
¶ 59. Thus, in Stutts v. Green Ford, Inc., 267 S.E.2d 919, 926 (N.C. Ct. App. 1980), the court held that the "special circumstances" clause of the Uniform Commercial Code allowed for the plaintiffs damages to be reduced in light of the fact that the seller made numerous repairs to the vehicle in question under its warranty, and thereby increased the value of the vehicle. The court reasoned:
At the end of the warranty period, the only nonconformity of which plaintiff complains and of which there is evidence of defective parts or workmanship is the oil leakage. Under the special facts of this case, we hold, then that an appropriate measure of damages would be the difference in the fair market value of the truck in its condition at the time and place of acceptance, increased by the value of repairs and replacements made in compliance with the warranty, and its fair market value had it been as warranted. This, in effect, would permit plaintiff to recover damages compensating him for the *74loss in value due to the persistent oil problem, while preventing him from receiving windfall damages for defects which were subsequently successfully repaired.
Id. (citation omitted).
¶ 60. Mayberry attempted to mitigate her damages by having the Jetta serviced under the warranty Volkswagen provided. Volkswagen made several repairs to the vehicle at no charge to Mayberry. While the record is silent as to whether Volkswagen ever successfully remedied the engine problem, it does seem that Volkswagen may have successfully rectified the other problems. Thus, Mayberry's damages should be reduced by any value that was added to the defective vehicle as a result of any successful repairs made by Volkswagen pursuant to the warranty. Mayberry should not be able to recover for repairs that were successfully made free of charge in compliance with the warranty.
¶ 61. As such, I would hold that pursuant to § 402.714(2), the starting point for calculating damages in this case is the difference in value at the time and place of acceptance, but that figure may be adjusted downward to take into account any damages that Mayberry mitigated under the "special circumstances" clause. I agree with the court of appeals that "based on the statutory measure of damages in § 402.714(2), a genuine issue of fact exists on the question of damages. Mayberry has offered evidence of the Jetta's value at the time and place of acceptance. Volkswagen, however, has offered evidence suggesting 'proximate damages of a different amount.'" Mayberry v. Volkswagen of America, 2004 WI App, ¶ 15, 271 Wis. 2d 258, 678 N.W.2d 357.
*75¶ 62. In sum, I would hold, consistent with the numerous cases and authorities that have considered the issue, that once the plaintiff has established a prima facie case of damages under the standard method of calculation in § 402.714(2), her damages may be reduced under the "special circumstances" clause of § 402.714(2) to reflect any damages she may have mitigated. That is, a plaintiffs damages, as calculated under the difference in value at acceptance standard, should be adjusted under the "special circumstances" clause to reflect the actual damages suffered. A plaintiffs damages should be reduced under the "special circumstances" clause of § 402.714(2) in the amount of any net profit the consumer obtained upon the resale of the vehicle. In addition, if the manufacturer made successful repairs to the vehicle under its warranty, the plaintiffs damages should be reduced to reflect the increased value of the vehicle as a result of such repairs. The plaintiff is entitled to the benefit of her bargain, no more, no less. Assuming Mayberry can establish the other prerequisites for liability, her damages, as calculated under § 402.714(2), should be adjusted to reflect any net profit she obtained as a result of the resale and any value added to the defective vehicle as a result of any successful repairs made by Volkswagen.
¶ 63. I am authorized to state that Justices DAVID T. PROSSER, JR. and PATIENCE D. ROGGENSACK join this opinion.

 All references to the Wisconsin Statutes are to the 2001-02 version unless otherwise indicated.

 Relying on City of New York v. Pullman Inc., 662 F.2d 910, 912-13 (2d Cir. 1981), Mayberry asserts that the "special circumstances" clause of Wis. Stat. § 402.714(2) may be utilized only if a plaintiffs damages are greater than the difference between the warranted value of the product and actual value of the product at the time and place of acceptance or if the goods at issue are custom goods with no ready market. However, in Pullman, the court merely concluded that special circumstances existed where custom goods were involved and the plaintiff would not be fully compensated for its loss under the standard measure for calculating damages. Id. at 916-18. Pullman did not conclude that these are the only two situations in which the "special circumstances" clause is applicable.

 Of course, it is left to the jury to decide whether $15,100 accurately reflects the price obtained for the vehicle at trade in, given the entire structure of the trade-in arrangement.