In an unpublished decision involving a purportedly defective yacht, the California Court of Appeal held in Andersen v. Pacific Asian Enterprises, Inc., 2012 WL 130473 (Cal.App. 4 Dist. 2012) that the Song-Beverly Act does not afford loss-of-use damages in the absence of actual expenses expended to cover. The facts were as follows. In April 2003, Andersen entered into a contract with Pacific Asian to purchase a yacht. The vessel was built in China and shipped by container ship to New York. From there, it was motored to Newport, Rhode Island, for final commissioning in March 2004. Commissioning involves cleaning a boat, changing its oil and other fluids, making sure all systems are operating properly, and making any additions or changes to the boat not completed at the factory. The contract provided that the “[c]ommissioning work shall proceed in a continuous operation, at least 5 full days per week, without interruptions; i.e. the Vessel shall not sit in its slip with no commissioning activity, while the crew is working on other vessels.” Andersen claimed the commissioning was not continuous.
Andersen took title to the vessel on April 23, 2004. Pacific Asian contended the commissioning was substantially completed in early May 2004. On July 11, 2004, Pacific Asian told Andersen it was done with the vessel and he should go out and use it. In November 2004, Andersen hired someone else to complete the commissioning.
According to Andersen, commissioning was still not completed as of August 18, 2005. In an e-mail dated August 22, 2005, Pacific Asian refused to do any further work on the vessel, contending it had done all it was contractually required to do. Andersen could not use the vessel while it was in the shipyard for commissioning, or while waiting for the repair or replacement of a nonfunctioning davit used to lift a dinghy from the water. He claimed damages for loss of use of the vessel for a total of 218 days during the summer cruising seasons in 2004 and 2005. Andersen’s expert witness on damages testified the price to rent a comparable vessel would be $1,000 per day. Andersen did not, however, rent a substitute vessel. Andersen sued Pacific Asian for breach of contract, breach of express and implied warranties, and fraud. A jury trial was conducted in three phases. First, the jury considered liability on the breach of contract and warranty claims. Second, the jury considered damages on those claims. Third, and finally, the jury considered the fraud claims. Judgment in the amount of $43,770 was entered and Andersen timely appealed. The Court of Appeal affirmed. On the loss-of-use issue, the Court of Appeal explained:
The remainder of the Song–Beverly Act and the provisions of the California Uniform Commercial Code, however, still apply. The Song– Beverly Act provides: “(a) Any buyer of consumer goods who is damaged by a failure to comply with any obligation under this chapter or under an implied or express warranty or service contract may bring an action for the recovery of damages and other legal and equitable relief. [¶] (b) The measure of the buyer’s damages in an action under this section shall include the rights of replacement or reimbursement as set forth in subdivision (d) of Section 1793.2, and the following: [¶] … [¶] … Where the buyer has accepted the goods, Sections 2714 and 2715 of the Commercial Code shall apply, and the measure of damages shall include the cost of repairs necessary to make the goods conform.” (Civ.Code, § 1794, subds.(a), (b)(2).) ¶ The clear language of California Uniform Commercial Code sections 2714 and 2715 precludes Andersen from recovering loss of use damages on his contract and warranty claims because he did not incur any expense nor did he suffer any loss that could not reasonably have been prevented by cover. Section 2714 provides: “(1) Where the buyer has accepted goods and given notification … he or she may recover, as damages for any nonconformity of tender, the loss resulting in the ordinary course of events from the seller’s breach as determined in any manner that is reasonable. [¶] (2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount. [¶] (3) In a proper case any incidental and consequential damages under Section 2715 also may be recovered.” Section 2715 provides: “(1) Incidental damages resulting from the seller’s breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach. [¶] (2) Consequential damages resulting from the seller’s breach include [¶] (a) Any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and [¶] (b) Injury to person or property proximately resulting from any breach of warranty.” ¶ Andersen argues he was not required to incur actual expenses to recover his loss of use damages because it was not reasonable for him to have obtained cover. Andersen cites two cases from other jurisdictions in support of this argument. In Shavers v. Massey–Ferguson, Inc. (11th Cir.1987) 834 F.2d 970, 971, the plaintiffs purchased a tractor and accessories for the tractor from the defendants. The tractor was defective. (Ibid.) On appeal, the defendants challenged the jury’s award of damages for the loss of value of the accessories as consequen-tial damages. (Id. at p. 973.) The appellate court affirmed the damages award, despite the fact the plaintiffs had not incurred any expenses to cover. “We conclude that any error on this second assertion was harmless. MFI sold both the Tractor and the Accessories to the Shavers, and therefore was clearly in a position to know that the Tractor had to function for the Shavers to realize the value of the Accessories. The opportunities for the Shavers to ‘cover’ were extremely limited. It would hardly be reasonable to require the Shavers to have obtained a second large tractor in order to use the Accessories; that would have been very expensive relative to the cost of the Accessories.” (Id. at pp. 973–974.) Shavers does not address whether the plaintiffs were entitled to recover damages for loss of use of the tractor, as opposed to the accessories. Because the accessories were unusable without an operational tractor, and because the cost to obtain a replacement tractor vis-à-vis the cost of the accessories was so high, the appellate court correctly found it was not reasonable to require the plaintiffs to cover in order to recover damages for the loss of use of the accessories. For Shavers to be on point, Andersen’s claims would have to be for damages due to loss of use of some accessory to the vessel, not the loss of use of the vessel itself.