PURCO FLEET Serv. INC. v. KOENIG

• Decision Date: 21 January 2010
• Docket Number: No. 08CA1677.,08CA1677.
• Citation: 240 P.3d 435
• Parties: PURCO FLEET SERVICES, INC., a Utah corporation, Plaintiff-Appellant and Cross-Appellee, v. Judith KOENIG, Defendant-Appellee and Cross-Appellant.
• Court: Colorado Court of Appeals

240 P.3d 435

PURCO FLEET SERVICES, INC., a Utah corporation, Plaintiff-Appellant and Cross-Appellee,

v.Judith KOENIG, Defendant-Appellee and Cross-Appellant.

No. 08CA1677.

Colorado Court of Appeals,Div. III.

Jan. 21, 2010.

COPYRIGHT MATERIAL OMITTED.

Van Cott, Bagley, Cornwall & McCarthy, Stephen K. Christiansen, Salt Lake City Utah; Holland & Hart, LLP, Stephen G. Masciocchi, Denver, Colorado, for Plaintiff-Appellant and Cross-Appellee.

Spies, Powers & Robinson, P.C., Matthew M. McQuillan, Brendan O. Powers, Denver, Colorado, for Defendant-Appellee and Cross-Appellant.

Opinion by Judge TERRY.

This appeal gives rise to numerous issues that have not previously been decided in Colorado in the context presented here. We consider the requirements for proof of loss of use damages where the damaged chattel was an automobile, customarily leased out for profit by a car rental company. Next, we construe a contract term granting the rental company the right to collect an administrative charge in connection with the damaged car. Finally, we determine whether the Colorado Fair Debt Collection Practices Act (CFDCPA) applies to the attempt to collect loss of use damages and the administrative charge under the circumstances of this case, and whether attorney fees and costs may be awarded in connection with the claim made under that Act.

PurCo Fleet Services, Inc. (PurCo) appeals the summary judgment dismissing its breach of contract claims against Judith Koenig. Koenig cross-appeals the summary judgment in PurCo's favor on her claims under the CFDCPA. We affirm in part, reverse in part, and remand.

I. Background

Koenig went to the National Car Rental agency located at the Durango Airport, where she rented a car and signed National's standard rental contract. While driving the car, she hit a deer, damaging the vehicle. She then returned the damaged car to National.

PurCo is National's assignee to collect claims on its behalf, including the claim against Koenig here. PurCo's agreement with National allows PurCo to retain fifty percent of the money collected for loss of use of the car and the entire administrative charge collected.

Two weeks after the collision, PurCo demanded payment from Koenig for physical damage to the car, loss of use of the car, and an administrative charge. Koenig's insurer paid on her behalf for the damage to the car, but refused to pay PurCo for loss of use or the administrative charge. PurCo filed suit to collect the unpaid amounts. Koenig counterclaimed, alleging that PurCo's collection activities violated the CFDCPA.

The trial court granted Koenig's motion for summary judgment as to loss of use damages, on the basis that PurCo could not show that, but for the damage to the car, National would have rented it to another customer. The court also granted summary judgment for Koenig on the claim for the administrative charge, reasoning that the administrative charge provision of the rental agreement was an invalid attempt to liquidate damages. However, summary judgment was granted in PurCo's favor on Koenig's counterclaim under the CFDCPA.

II. Loss of Use

PurCo contends the trial court erred in granting summary judgment to Koenig on its claim for loss of use. We agree.

Contract interpretation is a question of law that is reviewed de novo. Vu, Inc. v. Pacific Ocean Marketplace, Inc., 36 P.3d 165, 167 (Colo.App.2001). To establish a claim for breach of contract, a party must prove the existence of a contract, its relevant terms, breach, and damages. Marquardt v. Perry, 200 P.3d 1126, 1129 (Colo.App.2008). Summary judgment rejecting a breach of contract claim is proper where the party claiming breach cannot prove its damages arising therefrom. McCammon & Associates, Inc. v. McGraw-Hill Broadcasting Co., 716 P.2d 490, 492 (Colo.App.1986) (where special damages had to be proved and plaintiff failed to prove such damages, summary judgment was properly entered).

The contract between Koenig and National contains the following provision:

Loss or Damage to the Vehicle: [Koenig] will pay [National] for all damage to or loss of the Vehicle, based on repair cost or estimated repair cost, at [National's] option, diminished value of the Vehicle as determined by [National], plus ... [National's] loss of use (regardless of fleet utilization) and administrative charges, regardless of who is at fault.

(Emphasis added.)

Nowhere in the contract is an explanation given of the meaning of “loss of use (regardless of fleet utilization).” Nor is any explanation given as to the manner in which damages for loss of use are to be calculated. The parties concede, and our research confirms, that although this language appears in vehicle rental contracts, the meaning of the phrase “loss of use (regardless of fleet utilization)” has never been litigated in any reported decision.

Koenig argues that PurCo should not recover any amount of damages, because it cannot prove that National incurred a loss. Under the circumstances presented here, we conclude that the requirement to prove an actual economic loss is altered by the “fleet utilization” language in the contract, but that remand is necessary for additional factual development as to whether National incurred an actual, economic loss.

Our review of decisions from around the United States shows there is no uniformity in the way loss of use damages are awarded. Support can be found for a wide variety of approaches. See C.C. Marvel, Annotation, Recovery for Loss of Use of Motor Vehicle Damaged or Destroyed, 18 A.L.R.3d 497 (1968) (collecting cases).

Many courts that have awarded loss of use damages have done so without discussing their rationale for awarding such damages and the theory underlying the measure of damages. Thus, many loss of use cases give little or no guidance as to which measure of damages is appropriate in a given circumstance. Our own Colorado jurisprudence is less than clear on these points. Compare Hillman v. Bray Lines, Inc., 41 Colo.App. 493, 497, 591 P.2d 1332, 1336 (1978) (awarding reasonable rental rate for damage to semi truck regardless of whether another truck was rented to replace it), aff'd sub nom. Wise v. Hillman, 625 P.2d 364 (Colo.1981), and Francis v. Steve Johnson Pontiac-GMC-Jeep, Inc., 724 P.2d 84, 85-86 (Colo.App.1986) (awarding damages for cost to rent replacement car where none was actually rented), with Airborne, Inc. v. Denver Air Center, Inc., 832 P.2d 1086, 1090 (Colo.App.1992) (net profits awarded for loss of use of commercial chattel).

To determine the appropriate framework for analyzing loss of use damages here, we begin with a brief examination of the history of loss of use theory as it relates to automobiles and commercial chattels. This historical background informs our understanding of the contract language employed here and aids in our determination of the appropriate theory of damages to be applied. We then address Koenig's contention that PurCo may not recover for loss of use unless it shows an actual loss (which we interpret to mean an actual economic loss), and determine the effect of certain contract language on that issue. We further examine the appropriate measure of loss of use damages applicable in this case, assuming that any may be awarded, and the propriety of the trial court's summary judgment against PurCo on its loss of use claim.

A. Loss of Use of Personal Automobiles

Under traditional damages theory, a party may not recover special or consequential damages unless it proves that it has sustained or will sustain a loss resulting from the other party's conduct. Dan B. Dobbs, Law of Remedies § 3.2, at 289 (2d ed.1993); Francis, 724 P.2d at 85-86.

This theory has been applied in an unusual manner in the context of loss of use of personal automobiles. Toward the beginning of the Twentieth Century, as the family auto became less of a luxurious rarity and more of a staple item, needed for transport to the owner's job, courts began to award loss of use damages to automobile owners on the theory that there was intrinsic value in the ability to have a car available for use. Alan E. Brownstein, What's the Use? A Doctrinal and Policy Critique of the Measurement of Loss of Use Damages, 37 Rutgers L.Rev. 433, 492-95 (1985).

Under this intrinsic theory of loss, the existence of a loss of some (unspecified) magnitude is presumed once the vehicle is unavailable because it is being repaired.

Courts latched onto the cost of renting a replacement vehicle (lease-in rental value) as a readily quantifiable damages measure. Thus, in numerous cases, including in Colorado, the owner of a family auto was awarded lease-in rental value as loss of use damages, even if no replacement vehicle was actually rented. See Francis, 724 P.2d at 85-86; see also Brownstein, 37 Rutgers L.Rev. at 493-95 nn. 150-54 (collecting cases). The theory for awarding such damages rested on the so-called “egalitarian view,” a concept that a car owner who might not be able to afford to rent a substitute should not be penalized for that inability by being denied damages for the rental amount, where a more wealthy owner who was able to rent a substitute might be awarded that element of damages. See MCI WorldCom Network Servs., Inc. v. Mastec, Inc., 370 F.3d 1074, 1078 (11th Cir.2004).

In Francis, though the division stated that the plaintiff (a private person) was required to prove an actual loss, it nevertheless awarded the plaintiff loss of use damages for the cost to rent a replacement car, even though none was actually rented. 724 P.2d at 85-86. The holding of Francis appears to reflect the intrinsic loss of use theory based on the egalitarian view.

Over time, the intrinsic loss of use theory gained traction among American courts and commentators. This view is reflected in the comments to Restatement (Second) of Torts sections 928 and 931 (1979), particularly comment b to section 931(a), which states:

The owner of the subject matter is entitled...