Home / Fulltext Opinions / Supreme Court of Virginia / R.K. CHEVROLET, INC. v. BANK OF THE COMMONWEALTH (59753)



June 5, 1998

Record No. 971907






Wilford Taylor, Jr., Judge

Present: All the Justices

In this appeal, we consider whether the trial court properly
awarded damages against an automobile dealership for breaching
its agreement with a lender by incorrectly titling a motor

In July 1995, John H. Kauffman and Janice S. Carter purchased
a 1995 Chevrolet Camaro Z-28 from R.K. Chevrolet, Inc. (RK). To
finance the purchase, Kauffman obtained a loan in the amount of
$24,398.87 from the Bank of the Commonwealth (the Bank). As a
part of the loan transaction, the Bank required that the Camaro
be titled in Kauffman’s name and that a first lien in the Bank’s
favor be recorded on the certificate of title. The Bank issued a
check for the purchase price of the car, showing Kauffman and RK
as payees. The reverse side of the check contained a legend
reciting the obligation of the payees.[1] Kauffman
and RK endorsed the check; however, the car was titled in the
name of Janice Carter, not Kauffman.

Approximately one year later, the Bank discovered the titling
error and contacted RK and Carter. Although both the Bank and RK
tried to convince Carter to re-execute the title to the Camaro
and add Kauffman’s name, she refused.

The Bank filed this action on September 24, 1996, alleging
that RK and Kauffman breached their contractual obligations to
the Bank by failing to properly title and secure the Bank’s lien
on the Camaro.[2] The trial court entered
judgment in favor of the Bank, imposing joint and several
liability on RK and Kauffman in the amount of $19,131.75 plus

RK appeals the trial court’s judgment on three grounds. First,
RK asserts that even though it breached its contractual duties to
the Bank, the Bank sustained no damages as a result of RK’s
breach. Any damages suffered by the Bank, RK claims, were caused
by Kauffman’s failure to make payments on his loan.[3] We

When a motor vehicle dealer breaches its contractual warranty
with a lender by not properly titling a vehicle, the lender is
damaged because it loses its security for the loan. United
Virginia Bank of Fairfax v. Dick Herriman Ford, Inc.
, 215 Va.
373, 375, 210 S.E.2d 158, 161 (1974). The amount of the lender’s
recovery is limited to the lesser of the value of the vehicle at
the time of the breach and the amount of the intended lien. The
lender’s recovery is also diminished by any loan payments
actually received. Id. at 375-76, 210 S.E.2d at 161.

Here, like the dealer in Dick Herriman Ford, RK
breached its contract with the Bank. While the record is not
clear as to the precise calculations made by the trial court in
reaching the damage amount, it does show that the amount of the
intended lien was $23,828.00 and that the value of the collateral
at the time of purchase was $24,289.45.[4] RK
does not dispute the Bank’s representations that the trial court
decreased the award by the loan payments received by the Bank.

RK seeks to distinguish Dick Herriman Ford by asserting
that in that case, the bank suffered "actual damages as a
direct proximate result" of the dealership’s breach because
the borrower stopped making payments on the loan and took the
vehicle out of the state. This factual distinction is not
material to the holding in Dick Herriman Ford. In both
cases, the vehicle was mistitled and the lenders could not
enforce their liens, regardless of the location of the vehicles
or the status of the loan payments. The injury suffered was the
loss of the collateral for the loan, not the failure to make
payments on the loan or the location of the vehicle.

RK next asserts that, even if the Bank were entitled to
damages, the trial court erred in granting the Bank a "full
monetary judgment" because the Bank failed to mitigate its
damages. In support of this claim, RK refers to evidence of the
Bank’s contacts with Carter through its collection manager and
the Bank’s release of its lien on a duplicate title issued for
the Camaro. The Bank responds that the evidence showed that its
collection manager tried to convince Carter to re-execute the
title and add Kauffman’s name, that Carter testified she was not
going to sign any documents changing the title to the Camaro,
that RK requested and handled the paperwork on the duplicate
title, and that even though the original title reflected a lien
in favor of the Bank, the Bank had no legal interest in the

Mitigation of damages is an affirmative defense for which RK
bears the burden of proof. Marefield Meadows, Inc. v. Lorenz,
245 Va. 255, 266, 427 S.E.2d 363, 369 (1993); Foreman v. E.
Caligari & Co., Inc.
, 204 Va. 284, 289-90, 130 S.E.2d
447, 451 (1963). Whether RK has satisfied its burden of showing
that the Bank failed to mitigate its damages is a factual
determination based on the evidence produced. Considering this
record, we cannot say that the trial court erred in failing to
find that the Bank did not mitigate its damages.

Finally, RK argues that the award against it includes amounts
attributable to late fees, interest, and collection costs of
$674.62 which should have been assessed against Kauffman only.[5] Because, as we noted above, the
record does not show how the award was calculated, the record is
insufficient to address this claim.

For the above reasons, we will affirm the judgment of the
trial court.





[1] The legend read as follows:
"The endorsement of this check by the payee constitutes an
obligation to the Bank of the Commonwealth that the payee will
record a first lien in favor of the Bank of the Commonwealth, on
one 1995 Chevrolet Z-28 Camaro Identification No.
2G1FP22PXS2151739 Title in the Name of John H. Kauffman In the
amount of $23,828.00 Secured by a Security Agreement Dated July
25, 1995."

[2] Kauffman filed a cross-claim
against RK, and RK filed an amended third-party motion for
judgment against Carter. Neither of these claims is at issue in
this appeal.

[3] At the time the suit was filed,
the Bank had notified Kauffman that some payments were late, but
had not declared the loan in default. At trial in May 1997, the
Bank’s evidence showed that the loan payments were paid through
February 1997.

[4] The purchase price as shown on
the title application is conclusive evidence of the vehicle’s
value. Dick Herriman Ford, 215 Va. at 376, 21 S.E.2d at

[5] RK apparently bases this amount
on a past due notice sent Kauffman which was introduced as an
exhibit. That notice, however, shows late charges of only $180.63
and the loan amount past due as $493.99, for a total amount due
of $674.62.