Hull v. Daimlerchrysler Corporation ( 2004 )

FILED BY CLERK
OCT 26 2004
COURT OF APPEALS
IN THE COURT OF APPEALS DIVISION TWO
STATE OF ARIZONA
DIVISION TWO
TRAVIS HULL and SHELLY HULL, ) 2 CA-CV 2004-0016
husband and wife, ) DEPARTMENT A
)
Plaintiffs/Appellees, ) OPINION
)
v. )
)
DAIMLERCHRYSLER )
CORPORATION, )
)
Defendant/Appellant. )
)
APPEAL FROM THE SUPERIOR COURT OF GILA COUNTY
Cause No. CV 2001-180
Honorable Robert Duber II, Judge
REVERSED AND REMANDED WITH DIRECTIONS
Krohn & Moss, Ltd.
By Marshall Meyers and Ian Pryor Phoenix
Attorneys for Plaintiffs/Appellees
Bowman and Brooke, LLP
By Negatu Molla and Lori A. Van Daele Phoenix
Attorneys for Defendant/Appellant
H O W A R D, Presiding Judge.
n
¶1 Appellant DaimlerChrysler Corporation appeals from a judgment entered after
a jury verdict in favor of appellees Travis and Shelly Hull in the Hulls’ “Lemon Law” action.
DaimlerChrysler contends the trial court erred in several respects, including denying
DaimlerChrysler’s motion to dismiss the action because the Hulls had sold the vehicle before
trial and were no longer entitled to the relief provided by the statute. Because we agree that
the Hulls were not entitled to relief under the Lemon Law after they sold the vehicle, we
reverse the judgment and direct entry of judgment in favor of DaimlerChrysler.
¶2 The relevant facts concerning the sale of the vehicle are not in dispute. In
April 2000, the Hulls signed a three-year lease agreement for a Dodge Ram truck from Horne
Motor Company. The agreement included a three-year or thirty-six-thousand-mile
manufacturer warranty from DaimlerChrysler. Under the agreement, the Hulls would pay
a total of $19,147.11 in monthly payments if they returned the vehicle after the three-year
period. The lease further stated the Hulls would be charged an excessive use fee of $.15 per
mile if they drove the vehicle more than forty-five thousand miles during the lease term,
unless they decided to purchase the vehicle.
¶3 Several months after the Hulls signed the agreement, the truck experienced
engine trouble. On December 14, 2000, the vehicle was towed to Horne Motor Company
where technicians determined that the vehicle needed a new engine. Although there was an
initial dispute on whether the damage was covered under the warranty, DaimlerChrysler
ultimately authorized the repairs. Horne replaced the engine and returned the truck to the
Hulls on February 14, 2001.
2
n
¶4 In March 2001, the Hulls sued DaimlerChrysler, alleging, inter alia, a
violation of Arizona’s Lemon Law. After the Hulls filed their complaint, they continued to
use the vehicle for the remainder of the lease period, accruing a total of 67,000 miles on the
vehicle. Rather than pay the excess mileage charge, the Hulls chose to purchase the vehicle
as the lease agreement allowed, and they continued to drive the vehicle. Then, three weeks
before trial, the Hulls sold the vehicle. DaimlerChrysler moved to dismiss the action,
arguing that the Lemon Law required the Hulls to return the allegedly defective vehicle. The
trial court denied the motion, and the Hulls were ultimately awarded $18,480.66 in
damages.
¶5 DaimlerChrysler argues the trial court erred by not dismissing the lawsuit after
the Hulls sold the vehicle. It contends the remedies prescribed by the statute specifically
require that a defective vehicle be returned to the manufacturer and, thus, that the statute
did not provide a remedy once the Hulls sold the vehicle. The interpretation of a statute is
a question of law that we review de novo. Phoenix Newspapers, Inc. v. Ariz. Dep’t of Econ.
Sec., 186 Ariz. 446, 448, 924 P.2d 450, 452 (App. 1996).
¶6 Arizona’s Lemon Law requires new motor vehicles to conform to all
applicable express warranties. A.R.S. § 44-1262. If a consumer of a motor vehicle reports
to the manufacturer a defect or nonconformity covered by the manufacturer’s express
warranty, the manufacturer, its agents, or its authorized dealers must make the repairs
necessary to correct the problem. § 44-1262(A)(2). But, if the vehicle cannot be repaired
3
n
after four attempts or is out of service for a cumulative total of thirty or more calender days,
A.R.S. § 44-1264(A),
the manufacturer shall replace the motor vehicle with a new
motor vehicle or accept return of the motor vehicle from the
consumer and refund to the consumer the full purchase price,
including all collateral charges, less a reasonable allowance for
the consumer’s use of the vehicle.
A.R.S. § 44-1263(A). Once a manufacturer has replaced or repurchased a motor vehicle
pursuant to this provision, the manufacturer then must place a notice on the vehicle
informing any prospective purchaser that it was reacquired pursuant to the Lemon Law.
A.R.S. § 44-1266.
¶7 Prior to the enactment of Lemon Laws, the only relief available to consumers
of a defective vehicle was under the common law, the Uniform Commercial Code, or the
Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301-2312. 17 Am. Jur. 2d Consumer
Product Warranty Acts § 49, at 370 (2004). Because these limited remedies did not
adequately protect the consumer’s interests in a typical faulty vehicle claim, many states,
including Arizona, enacted Lemon Laws to provide consumers a remedy directly against the
manufacturer of a defective vehicle. See id.
¶8 Although Arizona’s Lemon Law provides relief to a consumer of a defective
vehicle, this relief is limited to that prescribed by the act. “When a statute creates a right and
also creates a remedy for the right created, the remedy thereby given is exclusive.” Register
v. Coleman, 130 Ariz. 9, 14, 633 P.2d 418, 423 (1981); see also Blankenbaker v. Jonovich,
205 Ariz. 383, ¶ 18, 71 P.3d 910, 914 (2003). In this case, the statute mandates that, if the
4
n
vehicle cannot be timely repaired, the consumer is entitled to either a replacement vehicle
or a refund of the purchase price. § 44-1263(A). Both of these prescribed remedies require
the consumer to return the nonconforming vehicle to the manufacturer. Accordingly, the
trial court erred in not dismissing the Hulls’ Lemon Law claim once the court determined
the Hulls could not return the vehicle.
¶9 Despite the clear language of the statute, the trial court relied on Jennings v.
Lee, 105 Ariz. 167, 461 P.2d 161 (1969), to find that the Hulls were entitled to the statutory
remedies even after they had sold the vehicle. The trial court correctly noted that both
Jennings and this case involve a property dispute in which the plaintiffs no longer possessed
the property in question. See id. at 172, 461 P.2d at 166. But the Jennings case involved
a rescission of a purchase of real property based on common law fraud by the seller; it did
not involve a statutory right or remedy against a manufacturer as here. See id. And, because
it is not the province of the courts to engraft common law remedies onto statutory schemes,
see Blankenbaker, any extension of a statutory remedy is for the legislature. Thus, the court
inappropriately applied Jennings.
¶10 Although the issue of whether a consumer must return a vehicle before the
remedies of the Lemon Law become available is one of first impression in Arizona, we find
the case law of other jurisdictions persuasive. In Mercedes-Benz of North America, Inc. v.
Garten, 618 A.2d 233, 241-42 (Md. Ct. Spec. App. 1993), a Maryland appellate court held
that a plaintiff had waived his available remedy under that state’s Lemon Law when he had
traded the defective vehicle for a new vehicle. Similarly, in Guidry v. Ford Motor Co., 868
5
n
So. 2d 945, 949 (La. Ct. App. 2004), a Louisiana appellate court found that the remedies
available under the Louisiana Lemon Law, which is analogous to our statute, were no longer
available once the vehicle had been returned at the end of the lease period. In Buford v.
General Motors Corp., 451 S.E.2d 293, 299 (N.C. 1994), the North Carolina Supreme
Court held that, when a consumer receives a refund under that state’s Lemon Law, the
consumer may not retain the defective vehicle. And, in Pfeiffer v. Ford Motor Co., 517
N.W.2d 76, 79 (Minn. Ct. App. 1994), a Minnesota appellate court required dismissal of
the plaintiffs’ Lemon Law complaint because they had failed to tender the motor vehicle to
the manufacturer. The Hulls have not directed our attention to any cases holding to the
contrary.
¶11 Moreover, the Pfeiffer court noted that allowing the purchaser to convey the
vehicle to another party without the notice required by the Lemon Law would defeat one
of the primary purposes of the law, stating:
[S]uch a requirement is consistent with the overall purpose of
the statute not only to recompense those actually harmed by the
sale of defective automobiles, but to protect subsequent
consumers as well. . . . We believe it is inconsistent to allow a
Lemon Law recovery, while allowing the same injured party to
pass the defective auto on to another consumer without notice
of the warranty protections provided to the first owner.
Id. at 80. In addition, the Buford court found that allowing a plaintiff to recover damages
without first returning the vehicle would overcompensate successful consumers to the
detriment of the manufacturer, who would likely pass the additional expense to future
consumers. 451 S.E.2d at 300. Thus, in addition to the persuasive case law of other states,
6
n
strong public policy concerns support our conclusion that a consumer is not entitled to relief
under Arizona’s Lemon Law if the consumer no longer possesses the vehicle.
¶12 The Hulls argue, however, that, because this transaction involved a lease, they
were legally required to surrender the vehicle to the lessor when the lease expired.1 They
contend that DaimlerChrysler “seeks to capitalize on [the Hulls’] lease expiration and forced
use” by using this action as a means to nullify its liability. We agree that the statute, as
written, creates a potential dilemma for consumers who wish to assert a Lemon Law action
on their leased vehicles. The duration of a lawsuit may exceed the term of the lease period.
And, because the statute requires that a consumer be able to return the vehicle to be entitled
to the remedies of the Lemon Law, a consumer whose lease expires before a lawsuit is
resolved must either purchase the vehicle or risk having the Lemon Law portion of any
lawsuit dismissed.
¶13 Although we are concerned that such a requirement creates certain hardships
for consumers who lease rather than purchase their vehicles outright, the crafting of such a
statutory remedy is the province of the legislature, not the courts. See Blankenbaker.
Modification of such legislation is often the result of legislative compromises, which we
cannot predict. We also note that these consumers retain any common law or statutory
remedies other than the Lemon Law. Moreover, the Hulls were not faced with the dilemma
1
The Hulls contend that the term “purchase” in A.R.S. § 44-1263(A) must be
interpreted to include a lease. DaimlerChrysler has not argued below or here that the lease
was not a purchase, and we assume, but do not decide, that the Lemon Law applies to leased
vehicles.
7
n
of purchasing the vehicle to retain their lawsuit. Instead, they voluntarily chose to purchase
the vehicle at the end of the lease period to avoid the extra milage fee and then retained
possession and actively used the vehicle until three weeks before trial. Accordingly, our
concerns about the additional hardships for lease consumers are less compelling here.
¶14 The Hulls also argue that they possessed the right to mitigate their damages by
selling the vehicle to stop any further depreciation. “A party’s failure to mitigate damages
may be invoked to negate and reduce damages ‘where the party by its own voluntary activity
has unreasonably exposed itself to damage or increased its injury.’” SDR Assocs. v. ARG
Enters., Inc., 170 Ariz. 1, 4 n.2, 821 P.2d 268, 271 n.2 (App. 1991), quoting McCormick
on Damages § 34, at 131 (1934); see also Life Investors Ins. Co. of Am. v. Horizon Res.
Bethany, Ltd., 182 Ariz. 529, 534, 898 P.2d 478, 483 (App. 1995). But the only “damages”
contemplated by the Lemon Law are either a replacement vehicle or a return of the purchase
price and collateral charges. Because their sale of the vehicle three weeks before trial did
not affect either of these elements, the Hulls’ sale of the vehicle was not a proper mitigation
of their damages.
¶15 Finally, the Hulls argue that DaimlerChrysler was barred by laches from raising
the issue of the vehicle sale because it knew that the vehicle had been leased and that the
Hulls could lose the vehicle. “Laches is a defense when lack of diligence on the part of the
plaintiff results in injury or prejudice to the defendant.” Mobile Disc. Corp. v. Schumacher,
139 Ariz. 15, 18, 676 P.2d 649, 652 (App. 1983). DaimlerChrysler raised the issue of the
vehicle sale as soon as it became aware of it. And the Hulls’ argument ignores the fact that
8
n
they purchased the vehicle after the lease expired and then sold it three weeks before trial.
Furthermore, DaimlerChrysler points to a letter of January 17, 2001, from the Hulls’
attorney stating that the Hulls intended to retain the vehicle and “use it to the extent
necessary to preserve it, to protect its security interest, and to minimize [DaimlerChrysler’s]
damages.” But the critical determination is that, as a matter of law, when they sold the
vehicle, the benefits of the Lemon Law became unavailable to them. Therefore,
DaimlerChrysler was not precluded by laches from asserting its defense.
¶16 Because a consumer is not entitled to relief under Arizona’s Lemon Law if the
consumer cannot return the vehicle to the manufacturer because the consumer no longer
possesses the vehicle, the trial court erred by denying DaimlerChrysler’s motion to dismiss
the complaint based on the Hulls’ sale of the vehicle. Because our holding is dispositive of
DaimlerChrysler’s liability under the Lemon Law, we need not reach its remaining
arguments. We reverse the trial court’s judgment and remand the case with instructions to
enter judgment in favor of DaimlerChrysler.
____________________________________
JOSEPH W. HOWARD, Presiding Judge
CONCURRING:
___________________________________
J. WILLIAM BRAMMER, JR., Judge
____________________________________
PETER J. ECKERSTROM, Judge
9
n
10
n