Johnson v. General Motors Corp., Chevrolet Motors Div.

• Citation: 668 P.2d 139,233 Kan. 1044
• Decision Date: 04 August 1983
• Docket Number: No. 54964,54964
• Parties: , 36 UCC Rep.Serv. 1089 John H. JOHNSON and E. Joan Johnson, Appellants, v. GENERAL MOTORS CORPORATION, CHEVROLET MOTOR DIVISION, Appellee.
• Court: United States State Supreme Court of Kansas

Page 139

668 P.2d 139

233 Kan. 1044, 36 UCC Rep.Serv. 1089

John H. JOHNSON and E. Joan Johnson, Appellants, v. GENERAL MOTORS CORPORATION, CHEVROLET MOTOR DIVISION, Appellee.

No. 54964.

Supreme Court of Kansas.

Aug. 4, 1983.

Syllabus by the Court

1. Rejection and revocation are buyer's remedies to return delivered goods. Rejection is the buyer's refusal to keep delivered goods and notification to the seller of the buyer's refusal to keep the goods is required. Revocation of acceptance is a refusal to keep delivered goods that occurs after a buyer has accepted and the time for rejection has expired.

2. The right to reject goods is a remedy that is more available since rejection occurs prior to the buyer's acceptance. One who has held goods for a period of time or has by some action accepted, should have a greater burden to require a seller to accept return of the goods previously delivered to the buyer.

3. Under proper rejection or revocation of acceptance, the buyer is freed from his obligation to pay the purchase price. A buyer has a right to recover that portion of the purchase price already paid when rejection or revocation of acceptance is proper.

4. A buyer who revokes has the same rights and duties with regard to the goods involved as if he had rejected them.

5. Where a buyer is entitled to rescind the sale and elects to do so, the buyer shall thereafter be deemed to hold the goods as a bailee for the seller. Thus, if the buyer uses the goods while he holds them as a bailee, he becomes liable for the value of that use.

6. A party justifiably revoking acceptance pursuant to K.S.A. 84-2-608 is entitled to prejudgment interest from the date revocation is attempted. Any setoff due the seller because of a buyer's continued use of the goods after an attempt to revoke should be deducted from the total judgment which includes prejudgment interest. The setoff arises only after a seller refuses to accept return of the defective goods, and no setoff is due the seller on the revocation date.

Robert E. Keeshan, of Scott, Quinlan & Hecht, Topeka, argued the cause and was on the brief for appellants.

Michael J. Grady, of Cosgrove, Webb & Oman, Topeka, argued the cause, and Otis M. Smith, Gen. Counsel, General Motors Corporation, Detroit, Mich., was with him on the brief for appellee.

LOCKETT, Justice:

This action involves revocation of acceptance pursuant to K.S.A. 84-2-608. The issues raised in this appeal focus on the appropriate measure of damages for a buyer's use of goods after revocation of acceptance.

John and Joan Johnson, the appellants, purchased a new 1981 Chevrolet Silverado half-ton diesel pickup truck from Ed Roberts Chevrolet in Bonner Springs, Kansas, on October 7, 1980. The Johnsons traded in a 1979 Chevrolet pickup and paid $4,202.10 in cash in exchange for the new pickup. The total cost of the new truck was $11,119.65. The Johnsons received a limited warranty for the truck from the General Motors Corporation (GMC).

Problems with the new truck appeared immediately. On the trip home from the dealership, the truck's accelerator stuck in a wide open position while the truck was in traffic. Also, a substantial amount of oil leaked from the truck. The pickup was brought to the dealer for repairs but the problems continued.

In October the Johnsons left for Idaho on a combined hunting and business trip in their new truck. While in Soda Springs, Idaho, on October 14, 1980, the truck's transmission ceased to operate and the truck would not move forward. The truck was towed to a Pocatello, Idaho, Chevrolet dealership for repairs. The Johnsons spent $121.00 for a motel room and $123.53 for a rental car during the several days it took the dealer to repair the truck. Coming back from Idaho, the truck ran rough, had trouble starting and was emitting quite a bit of smoke.

New problems with the truck developed. These included difficulties with the fuel injectors and injector pump, headlights, speedometer, air conditioner vent, hood, tailgate, paint job and glove compartment. Repairs were attempted under GMC's warranty agreement but the Johnsons had lost confidence in the truck. On November 30, 1980, the Johnsons, through their attorney, sought to revoke their acceptance of the truck and to return it for a refund of the purchase price. Their offer to return the truck was refused by GMC and the Johnsons continued to use the truck after a lawsuit was filed. Some repairs were performed under the warranty agreement during the time period after revocation and prior to trial.

On March 2, 1981, the Johnsons filed this action against GMC. The case was tried to the court April 2, 1982, and it was decided that the Johnsons' revocation was justified. GMC does not appeal this ruling. The court held a second hearing on June 18, 1982, to determine what setoff amount should be awarded to GMC because of the appellants' continued use of the truck after revocation. The trial court awarded a setoff of $4,702.94. The Johnsons would be refunded the remainder of the purchase price.

The principal issue is whether the trial court erred in allowing a setoff from the purchase price of the truck for the buyers' continued use of the truck after the buyers' revocation of acceptance. The buyers continued to drive the truck an additional 14,619 miles after notifying GMC of the revocation of acceptance.

The purpose of the Uniform Commercial Code (UCC) is to simplify, clarify and modernize the law governing commercial transactions. The doctrine of "liberal" construction is to be used when construing the UCC. The principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating causes supplement the UCC's provisions except when displaced by a specific provision of the Act. K.S.A. 84-1-103.

Rejection and revocation are buyer's remedies to return delivered goods. Rejection is the buyer's refusal to keep delivered goods and notification to the seller of the buyer's refusal to keep the goods is required. Revocation of acceptance is a refusal to keep delivered goods that occurs after a buyer has accepted and the time for rejection has expired.

The right to reject goods is a remedy that is more available since rejection occurs prior to the buyer's acceptance. One who has held goods for a period of time or has by some action accepted, should have a greater burden to require a seller to accept return of the goods previously delivered to the buyer. The longer the buyer holds the goods, the greater the depreciation and if the buyer uses the goods after revocation of acceptance he will derive some benefit while using the goods.

Under proper rejection or revocation of acceptance, the buyer is freed from his obligation to pay the purchase price. A buyer has a right to recover that portion of the purchase price already paid when rejection or revocation of acceptance is proper.

A buyer that has accepted a truck and sues for breach of warranty will recover only for the injury that resulted from defects in the truck at the time of the sale. A buyer that properly rejects or revokes after acceptance is first made whole from the injuries resulting from the seller's failure to perform his part of the agreement, escapes the bargain, and forces any loss resulting from depreciation of the goods back on the seller.

The basic policy for revocation of acceptance is contained in K.S.A. 84-2-608 which states 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.

....

"(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."

The truck was purchased October 7, 1980. On November 30, 1980, through their attorney, the buyers notified the seller of their revocation of acceptance of the truck and requested a refund of the purchase price. GMC refused to accept the return of the truck but continued its offer to cure the defects under the warranty agreement given by GMC at the time of the sale. At the trial the court determined that the buyers' revocation of acceptance was proper and occurred within a reasonable time after buyers discovered the defects.

Since the buyers had taken possession of the goods, they had a security interest in the goods for the purchase price paid and any expenses reasonably incurred for the care and custody of the truck. Vesting the revoking buyer with a security interest for payments made and expenses incurred is pursuant to K.S.A. 84-2-711, which states in part:

"(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (section 84-2-612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid

"(a) 'cover' ... or

"(b ) recover damages ...

....

"(3) On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in like manner as an...