## Facts

- Dale and La Vona Carlson bought a double-wide modular home from dealer Donald Rysavy; the home was manufactured by Town & Country Mobile Homes, Inc.
- Before purchase, the Carlsons viewed a model home at the manufacturer’s plant and ordered a similar unit with modifications.
- On delivery and setup near Sturgis, South Dakota, the Carlsons identified defects and recorded them on the delivery receipt returned to the manufacturer, including missing heating ducts, no hot water heater, transport-related wind and water damage, and problems with the center I-beam.
- The Carlsons later reported additional problems, including leaking water and inadequate insulation, causing substantial living difficulties.
- After notice and repair efforts that did not adequately correct persistent defects, the Carlsons sued the dealer and manufacturer for breach of warranty.
- The dealer counterclaimed for $900 allegedly owed for furniture and cross-claimed against the manufacturer under SDCL 34-34A-5 seeking reimbursement for any recovery against him, including attorney’s fees (up to $1,500).
- The jury found for the dealer on the Carlsons’ claim, awarded the Carlsons $9,000 against the manufacturer, and awarded the dealer $1,100 against the manufacturer on the cross-claim.

## Issues

1. Whether evidence of defects first specifically described at trial was inadmissible due to insufficient notice in earlier communications, pleadings, or discovery.
2. Whether damages for accepted but nonconforming goods were properly measured by the difference between value as accepted and value as warranted, rather than limited to repair costs.
3. Whether exclusion of the manufacturer’s expert valuation testimony was reversible error affecting the damages verdict.
4. Whether the evidence supported the dealer’s cross-claim recovery against the manufacturer, including any attorney’s fees under SDCL 34-34A-5.

## Decision

- The court affirmed the judgment for the Carlsons against Town & Country for $9,000.
- The court held that the Carlsons provided sufficient notice of breach; testimony about additional defects was properly admitted.
- The court upheld use of a difference-in-value measure of damages where repairs would not adequately place the buyers in the position promised by the warranties.
- The court ruled the trial court erred in excluding the manufacturer’s expert valuation testimony, but the error was not prejudicial given other supporting valuation evidence.
- The court reversed the judgment for the dealer on his cross-claim against the manufacturer and remanded for further proceedings because the record did not adequately support the attorney’s-fee component under SDCL 34-34A-5.

## Legal Principles

- Under U.C.C. buyer’s remedies for accepted but nonconforming goods, damages for breach of warranty may be measured by the difference between the value of the goods as accepted and the value as warranted.
- Repair costs may be considered in valuing the loss, but they do not control when repairs will not adequately restore the warranted value.
- Notice of breach need not list every specific defect; it is sufficient if it informs the seller that the transaction is troublesome and provides an opportunity to cure.
- Erroneous exclusion of valuation evidence does not require reversal absent a showing of prejudice.
- Statutory or indemnity-style recovery of attorney’s fees requires adequate proof of the amount and basis for the fees claimed and their connection to the statutory entitlement.

## Conclusion

The court sustained the buyers’ warranty recovery against the manufacturer because they gave adequate notice of breach and proved damages using a difference-in-market-value measure appropriate for substantial, quality-related defects that repairs would not fully cure, but it rejected the dealer’s statutory cross-claim award due to insufficient evidentiary support for attorney’s fees and remanded that aspect for further proceedings.


Carlson v. Rysavy, 262 N.W.2d 27 (S.D. 1978)