Mayberry v. Volkswagen of America, Inc., 03-1621.

• Decision Date: 16 February 2005
• Docket Number: No. 03-1621.,03-1621.
• Parties: Jessica MAYBERRY, Plaintiff-Appellant, v. VOLKSWAGEN OF AMERICA, INC., Defendant Respondent-Petitioner.
• Court: Wisconsin Supreme Court

278 Wis.2d 39

2005 WI 13

692 N.W.2d 226

Jessica MAYBERRY, Plaintiff-Appellant, v. VOLKSWAGEN OF AMERICA, INC., Defendant Respondent-Petitioner.

No. 03-1621.

Supreme Court of Wisconsin.

Oral argument November 4, 2004.

Decided February 16, 2005.

For the defendant-respondent-petitioner there were briefs by Bruce D. Huibregtse, Drew J. Cochrane, and Stafford Rosenbaum LLP, Madison, and oral argument by Drew J. Cochrane.

For the plaintiff-appellant there was a brief by Matthew J. McClenahan and Krohn & Moss, Ltd., Chicago, IL, and oral argument by Scott Cohen.

¶ 1. JON P. WILCOX, J.

This is an appeal from a published court of appeals decision, Mayberry v. Volkswagen of America Inc., 2004 WI App 64, 271 Wis. 2d 258, 678 N.W.2d 357, that reversed an order of the Outagamie County Circuit Court, Harold V. Froehlich, Judge, which granted summary judgment to Volkswagen and dismissed the plaintiff's claims for breach of warranty.

I. ISSUE

¶ 2. The issue on appeal concerns the proper measure of damages under Wisconsin's Uniform Commercial Code in a breach of warranty action. We must determine what constitutes the appropriate measure of damages where the buyer alleges that the product was defective and not worth what she paid for it at the time of acceptance but nonetheless used the product for a significant period of time and later resold the product for more than its fair market value after the manufacturer made several attempts at repairing the product. Specifically, the issue before us is whether the "special circumstances" clause in Wis. Stat. § 402.714(2) (2001-02)¹ requires damages in a breach of warranty action to be calculated based on the difference between the fair market value of the defective product at resale and the price the consumer actually obtained, such that a consumer's claim may be barred if she receives more than the fair market value for the defective product upon resale. This is an issue of first impression in Wisconsin.

¶ 3. We reject Volkswagen's claim that the "special circumstances" language in § 402.714(2) prevents the plaintiff from maintaining her action by calculating damages based on the difference in market value and actual price at the time of resale. We hold that pursuant to § 402.714(2), the appropriate method for measuring damages in this case is the difference between the warranted value of the vehicle in question and its actual value at the time and place of acceptance. When the plaintiff has established a prima facie case of damages under this standard, the "special circumstances" clause of § 402.714(2) should not be construed so as to completely bar her breach of warranty claim simply because she used the defective product for a period of time and later resold it for more than its fair market value. We have found no authority that stands for the proposition that the proper measure of damages under the Uniform Commercial Code in such circumstances is the difference between the market value and actual price obtained for the defective product at the time and place of resale. However, the price of the defective product upon resale may be relevant insomuch as it constitutes circumstantial evidence of the actual value of the product in its defective condition at the time and place of acceptance.

¶ 4. Because the circuit court applied an incorrect standard for measuring damages, we affirm the decision of the court of appeals reversing the circuit court's order of summary judgment.

II. FACTUAL BACKGROUND

¶ 5. On October 14, 2000, the plaintiff, Jessica Mayberry, purchased a new 2001 galactic blue Volkswagen Jetta GLS from Van Dyn Hoven Imports in Appleton, Wisconsin. The cash price of the vehicle was $17,800. After sales tax, registration, title, and other fees, the price of the vehicle came to $18,526. However, according to Mayberry, the total purchase price of the vehicle came to $22,548 after adding finance charges. As part of the vehicle purchase, the manufacturer, Volkswagen, issued a two-year or 24,000 mile limited warranty for the Jetta. Under the terms of the written warranty, Volkswagen agreed to repair any manufacturer's defect in material or workmanship and replace defective parts free of charge for the warranty period.² However, the warranty did not give Mayberry the right to a refund or replacement of the vehicle if it was defective. ¶ 6. Shortly after taking possession of the Jetta, Mayberry began experiencing problems with the vehicle. Service records from Van Dyn Hoven indicate that Mayberry brought the vehicle in for service on a number of occasions for various problems. The problems consisted of a broken armrest, intermittent illumination of the "check engine" light, and burning and leaking oil. The engine problems culminated in the replacement of a piston ring in the engine on November 29, 2001. On all occasions, the vehicle was inspected or repaired free of charge under the warranty.³ Thereafter, Mayberry attempted to revoke acceptance of the vehicle in writing. Volkswagen refused the revocation.

¶ 7. On June 3, 2002, Mayberry filed suit against Volkswagen under the federal Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et seq. (2000),⁴ asserting three causes of action. First, Mayberry alleged that Volkswagen breached its written warranty for the vehicle. Second, Mayberry contended that Volkswagen breached its implied warranty of merchantability under 15 U.S.C. §§ 2301(7) & 2308. Finally, Mayberry claimed that she revoked her acceptance under 15 U.S.C. § 2310.

¶ 8. Subsequently, Mayberry traded in her Volkswagen for a 2003 Mazda Tribute at Mazda Knoxville. Mayberry received $15,100 as a trade-in allowance for the Jetta. The total purchase price of the Mazda Tribute was $24,149.32. At the time of the trade-in, the mileage on the Jetta was 32,737. On November 8, 2002, Mayberry amended her complaint to reflect the trade-in of the Jetta. As an affirmative defense to the amended complaint, Volkswagen alleged that Mayberry "suffered no damages as she received more than the full fair market value for the vehicle which is the subject of the action at the time of the trade in."

III. PROCEDURAL POSTURE

¶ 9. On February 18, 2003, Volkswagen moved for summary judgment on the ground that Mayberry did not suffer any damages as a result of the allegations set forth in her complaint. Specifically, Volkswagen argued that Mayberry was "unable to prove that she suffered any compensable damages" because "Mayberry traded in the vehicle for more than fair market value." In addition, Volkswagen argued that Mayberry's extended use of the vehicle and subsequent trade-in for more than fair market value invalidated her revocation of acceptance claim because she could not demonstrate that the value of the Jetta was substantially impaired.

¶ 10. In response to the summary judgment motion, Mayberry submitted the affidavit of Joseph Pennachio, her named expert and "retail vehicle finance specialist."⁵ Mr. Pennachio opined that Mayberry did not receive fair market value for her Jetta. He stated, based on the N.A.D.A. Official Used Car Guide, that the fair market value of the vehicle at the time of the trade-in was $15,900 and that "[t]he Fair Market Value indicated given the presumption of a private party transaction would be $17,900." However, in a letter filed with the court on April 21, 2003, Mayberry conceded: "Mr. Joe Pennachio's report appears flawed. While Mr. Pennachio asserts the FMV of the vehicle at the time of sale was $15,900.00 it is true that the N.A.D.A. Official Used Car Guide states that the applicable FMV of this vehicle for trade in is $14,200.00."

¶ 11. In addition, Mayberry herself filed an affidavit, stating:

Based on the problems with the Jetta that I experienced, it is my opinion that I paid too much money for the vehicle. I believe that the Jetta was not worth $18,526.00 I paid at the time I purchased it and at most was worth only $12,526.00 based on the problems I experienced.

¶ 12. The circuit court rendered its decision on May 7, 2003. First, the circuit court dismissed Mayberry's revocation of acceptance claim, reasoning:

Plaintiff used the car for almost two years, put 32,737 miles on it, and expired the warranty. The car was never out of service for a prolonged period of time. Plaintiff received more than FMV on a trade-in. Therefore, there was no substantial impairment of the value of the goods and no effective revocation.⁶

¶ 13. Furthermore, the circuit court ruled, based on Valenti v. Mitsubishi Motor Sales of America, Inc., 773 N.E.2d 1199 (Ill. App. Ct. 2002), that Mayberry failed to establish she suffered any damages for any breach of warranty.⁷ The court reasoned:

Plaintiff argues that the Jetta was defective when she bought it and she suffered damages in having it repaired. However, she is not specific about her damages and she does not offer any evidence to dispute the FMV of the car. In fact, her expert's assessment has the FMV below what she received on trade-in. Furthermore, she was not charged for any repairs covered under the warranty.

. . . . Plaintiff actually received more than FMV for the Jetta. She put 32,737 miles on the car in less than two years. She has no damages.

Thus, on May 28, 2003, the circuit court entered judgment in favor of Volkswagen, dismissing Mayberry's complaint in its entirety.

¶ 14. The court of appeals reversed, concluding that the circuit court utilized an incorrect standard for measuring damages and that genuine issues of material fact concerning damages existed. Mayberry, 271 Wis. 2d 258, ¶ 1. The court of appeals concluded that under § 402.714(2), the proper measure of damages for breach of warranty is the difference between the value of goods as accepted and the value as warranted at the time and place of acceptance. Id., ¶ 10. The court stated that the evidence demonstrated that the warranted value of the vehicle was $18,000 and that Mayberry's own testimony as to the actual value of the car...