Court Opinion

ID: 9489584
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:19:20.17342+00
Date Added: 2024-06-11T17:53:36.718262
License: Public Domain

WELLFORD, Circuit Judge,
concurring in part and dissenting in part.
I concur with Judge Kennedy’s decision on the issue of General Tire’s liability for breach of contract. I write separately, however, on the question of interest.
I read the case relied upon by Judge Kennedy, Afram Export Corp. v. Metallurgiki Halyps, 772 F.2d 1358 (7th Cir.1985), in a somewhat different fashion than does she. Afram states, among other things, in dealing with a claim for interest by a seller claiming beach and loss of the bargain or profit:
The next issue relates to incidental damages, which the Uniform Commercial Code allows a seller who is the victim of a breach of contract to recover in addition to the difference between sale price and cover price. U.C.C. § 2-706(1), Wis.Stat. § 402-706(1). [Afram] can recover [ ] interest, if at all, only as incidental damages, and not as consequential damages, for under the Uniform Commercial Code consequential damages are a buyer’s, not a seller’s, remedy.
The line between incidental and consequential damages is rather unclear.
The actual case is somewhere in the middle, but if we had to decide exactly where, we probably would disagree with the district judge, who regarded this as a ease of consequential rather than incidental damages. Although knowledge of the details of the seller’s financial arrangements is not chargeable to the buyer, it is obvious to the buyer and unavoidable by the seller that the seller will incur an interest cost (explicit or implicit, as we shall see) in the interval between the breach of the contract and the cover sale; and the party who is better able to avoid this expense and who therefore should bear the risk of its occurrence isthe contract-breaking buyer, not the seller. The cases therefore allow the seller to recover the additional interest expense as incidental damages. See, e.g., Bulk Oil (U.S.A.), Inc. v. Sun Oil Trading Co., 697 F.2d 481, 482-84 (2d Cir.1983); Hofmann v. Stoller, 320 N.W.2d 786, 792-93 (N.D.1982); Gray v. West, 608 S.W.2d 771, 781 (Tex.Civ.App.1980).
Id. at 1368, 1369 (emphasis added). The Afram court would, therefore, allow “additional interest expense,” as incidental damages.1 Id. at 1369. Afram was “not really complaining about an extra interest expense, it is complaining about losing the use of part of the money it borrowed from the bank.” Id. The “extra” claimed by Afram was interest it had to pay “on a general business loan not tied to the subject matter of the sale.” Id. at 1370. Afram concludes that “[a]ll the seller is entitled to is an out-of-pocket interest expense that would not have been incurred but for the breach.” Id.
Afram was entitled, in any event, under Wisconsin law, to statutory interest “from the date of breach to the date of judgment,” since the damages were “ascertainable by reference to an objective standard of value.” Id. at 1371: The case was remanded for a determination of prejudgment interest at the statutory rate. Id. at 1372. In reality, the statutory prejudgment interest allowance *174subsumed the “extra” or “out-of-pocket interest expense” which Afram may have claimed.
In my view, Afram is not inconsistent with the holding in Commonwealth Edison Co. v. Decker Coal Co., 653 F.Supp. 841 (N.D.Ill.1987), that a seller might recover “some level of prejudgment interest as incidental damages resulting from the breach.” Id. at 845. Commonwealth Edison cited with approval Bulk Oil (U.S.A.), Inc. v. Sun Oil Trading Co., 697 F.2d 481 (2d Cir.1983), which supports that proposition.
Bulk Oil held that New York statutory interest was allowable (“compensation for the use of money”) to make the aggrieved seller “whole.” 697 F.2d at 485. Interest incurred to the bank directly attributable to the contract breached by the buyer was permissible under the U.C.C. just as “any other expense cognizable as incidental damages.” Id. Bulk Oil noted Petroleo Brasileiro v. Ameropan Oil Corp., 372 F.Supp. 503 (E.D.N.Y.1974), as relevant to its holding. Id. at 484. See Ernst Steel Corp. v. Horn Construction Div., 104 A.D.2d 55, 481 N.Y.S.2d 833, 839 (1984) (“in an appropriate case a seller is entitled to recover commercially reasonable finance and interest charges incurred as a result of buyer’s breach as a proper item of incidental damages”); see also Intermeat, Inc. v. American Poultry, Inc., 575 F.2d 1017, 1024 (2d Cir.1978) (“ ‘incidental expenses’ in the U.C.C. [to the seller under New York law] include financing charges incurred incidental to the breach, as distinguished from consequential damages”).
Turning to Michigan law, Judge Kennedy discusses two Michigan Court of Appeals decisions, Sullivan Industries, Inc. v. Double Seal Glass Co., Inc., 192 Mich.App. 333, 480 N.W.2d 623 (1991), appeal denied, 441 Mich. 931, 498 N.W.2d 737 (1993), and S.C. Gray, Inc. v. Ford Motor Co., 92 Mich.App. 789, 286 N.W.2d 34 (1979). The latter case held that interest paid on borrowed capital constituted consequential damages, citing Petróleo Brasileiro, which was decided under New York law and within the Second Circuit. That court did not consider statutory interest. Sullivan Industries held that “generally interest incurred and paid by a plaintiff as a result of additional borrowings made necessary by a defendant’s breach of a contract is recoverable in Michigan, in addition to prejudgment interest.” 480 N.W.2d at 633 (emphasis added). In light of that language, this writer is not convinced that some element of “incurred” or additional interest may not be allowable.
I agree with the majority, however, that, in any event, statutory interest may be allowable and should be calculated for Firwood’s benefit. In addition, however, I would REMAND the additional interest question for the district court to determine whether plaintiff has demonstrated a right to any interest “incurred and paid” by it, or any incidental interest or finance charge which might be allowable under the U.C.C. in Michigan. Plaintiff would not, of course, be entitled during the same period to both incidental interest and statutory interest. I would add that such a question is essentially a matter of law and may not be a jury determination.

. Afram cited Bulk Oil (U.S.A.), Inc. v. Sun Oil Trading Co., 697 F.2d 481 (2d Cir.1983), with approval for the proposition that the seller might recover "additional interest expense as incidental damages.” Id. at 1369.