United Virginia Bank v. Dick Herriman Ford, Inc.
210 S.E.2d 158, 215 Va. 373, 1974 Va. LEXIS 294 (1974)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
When a party's breach of contract consists of failing to perfect a security interest, damages are measured by the value of the collateral at the time of the breach, not at the time of the debtor's subsequent default.
Facts:
- Scott Burdette purchased a new 1971 Ford Country Squire station wagon from Dick Herriman Ford, Inc. (Dealer).
- United Virginia Bank of Fairfax (Bank) provided Burdette a loan for $4,525.92 to finance the purchase.
- The Bank issued a check to Burdette and the Dealer, which stated that by endorsing it, the payees certified that the Bank's first lien had been recorded on the vehicle's title application.
- The Dealer endorsed and deposited the check but failed to record the Bank's lien on the title application.
- Instead of recording the lien, the Dealer submitted the title application showing a different owner and no lienholder.
- Burdette made several payments on the loan and then defaulted, leaving a balance of $3,771.98.
- After defaulting, Burdette and the vehicle left the state and could not be located.
Procedural Posture:
- United Virginia Bank of Fairfax (Bank) sued Dick Herriman Ford, Inc. (Dealer) in a Virginia trial court for breach of contract.
- The case was tried before a judge without a jury (a bench trial).
- At the end of the Bank's case, the Dealer moved to strike the evidence.
- The trial court found that the Dealer had breached the contract and damaged the Bank but granted summary judgment for the Dealer, ruling that the Bank had failed to prove the amount of its damages.
- The Bank (as appellant) appealed the trial court's entry of summary judgment to the Supreme Court of Virginia.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
When a car dealer breaches a contract to record a bank's lien on a vehicle's title, are the bank's damages measured by the value of the vehicle at the time the borrower defaults, or at the time of the dealer's breach?
Opinions:
Majority - Cochran, J.
No. The bank's damages are not measured by the value of the vehicle at the time of the borrower's default, but rather at the time of the dealer's breach of contract. The general rule is that damages are determined at the time of the breach. The Bank is entitled to be placed in the same position it would have been in if the contract had been performed, which would have given it a perfected first lien. To require the Bank to prove the value of the automobile at the time of default, when the Dealer's breach made locating the vehicle impossible, would unfairly reward the Dealer for its own wrongdoing. Therefore, the proper measure of damages is the value of the collateral at the time the Dealer failed to record the lien, which is evidenced by the vehicle's purchase price, less any payments made by the borrower.
Analysis:
This decision establishes a clear rule for calculating damages when a party fails to perfect a security interest as promised. By fixing damages at the time of the breach, the court prevents the breaching party from benefiting from subsequent events, such as the depreciation or disappearance of the collateral, that make proving later value difficult or impossible for the injured party. This precedent provides greater certainty and protection for lenders who rely on third parties, like auto dealers, to properly secure their loans. It reinforces the principle that a contract violator cannot use the consequences of their own breach to reduce their liability.
