Kiluk v. Mercedes-Benz USA, LLC ( 2019 )

Filed 12/12/19
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
JUSTIN KILUK,
Plaintiff and Respondent, G056344
v. (Super. Ct. No. 30-2016-00866822)
MERCEDES-BENZ USA, LLC, OPINION
Defendant and Appellant,
Appeal from a judgment of the Superior Court of Orange County, Melissa
R. McCormick, Judge. Affirmed.
Universal & Shannon, Jon D. Universal and James P. Mayo for Defendant
and Appellant.
Rosner Barry & Babbitt, Hallen D. Rosner and Arlyn L. Escalante;
Consumer Law Experts, Jessica Anvar and Michael M. Ouziel for Plaintiff and
Respondent.
* * *
The Song-Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq.; the
Song-Beverly Act) provides enhanced remedies to consumers who buy new consumer
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goods accompanied by a manufacturer’s express warranty. (§ 1793.2.) It also provides
for an implied warranty of merchantability. (§§ 1791.1, subd. (c), 1792.) The same
protections generally apply to sale of used goods accompanied by an express warranty,
except that the distributor or retail seller is bound, as opposed to the manufacturer, and
the duration of the implied warranty of merchantability is much shorter. (§ 1795.5.)
This case involves the sale of a certified preowned Mercedes Benz that still
had a portion of the new vehicle warranty remaining, and which was accompanied by an
additional used vehicle warranty issued by the manufacturer. An uncurable defect
manifested after the expiration of the new vehicle warranty, but during the duration of the
used vehicle warranty. Mercedes Benz refused to repurchase the vehicle, and the
plaintiff sued. A jury found Mercedes Benz liable under the Song-Beverly Act for breach
of both the express warranty and the implied warranty of merchantability, and, pursuant
to the stipulation of the parties as to the amount of damage, awarded the same
compensatory damages on both causes of action. The court entered judgment on the
jury’s special verdict after striking the damages for breach of the implied warranty,
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presumably to avoid a double recovery. Mercedes Benz appealed.
We conclude the jury’s verdict on the breach of express warranty was
sound. Although the Song-Beverly Act generally binds only distributors and retail sellers
in the sale of used goods, we conclude Mercedes Benz stepped into that role by issuing
an express warranty on the sale of a used vehicle. Accordingly, we affirm the judgment.
1
All statutory references are to the Civil Code unless otherwise stated.
2
Because we will affirm the judgment as entered on the verdict for breach of
the express warranty, it becomes unnecessary to discuss the verdict on the alternate
theory of breach of the implied warranty.
2
FACTS
In May 2014 plaintiff Justin Kiluk bought a certified pre-owned Mercedes-
Benz vehicle for an out-the-door price of $121,922.23. The vehicle had 9,568 miles on it.
It was purchased from Fletcher Jones Motorcars (which is not a party to this lawsuit).
The vehicle had originally been sold new in either August 2011 or October
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2011 with a 4-year or 50,000 mile new car warranty. Because plaintiff purchased the
vehicle prior to the expiration of the new car warranty, he was entitled to its benefits until
it expired in either August 2015 or October 2015. Additionally, defendant Mercedes-
Benz USA, LLC (Mercedes Benz) issued a certified pre-owned warranty that would last
for one year from the end of the new car warranty (either August 2015 or October 2015
through either August 2016 or October 2016).
Starting in December 2015, which was during the period of the certified
pre-owned warranty, the vehicle began making a loud screeching noise every time
plaintiff turned the steering wheel. Plaintiff brought the vehicle in for repairs multiple
times, but the problem was never fixed, and ultimately Mercedes Benz took the position
that the noise was “normal.” Mercedes Benz refused to repurchase the car.
In August 2016 plaintiff filed the present lawsuit for breach of warranty and
a violation of the Song-Beverly Act. This appeal principally concerns four motions in
limine, one by plaintiff and three by Mercedes Benz. The court accurately described the
three Mercedes Benz motions as essentially “untimely motions for summary
adjudication.” The one by plaintiff is entitled “Plaintiff’s Motion in Limine No. 10 to
Exclude Any Statement, Argument, or Testimony that The Mercedes-Benz Certified Pre-
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Mercedes Benz states in its briefs on appeal that the original sale date of the
new vehicle was both August 2011 and October 2011. Plaintiff’s brief on appeal does
not state the original sale date. The record on appeal does not otherwise clarify the date.
Fortunately, the difference in dates is not dispositive.
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Owned Warranty is Not an ‘Applicable Express Warranty.’” Mercedes Benz filed a
reciprocal motion entitled, “Motion in Limine No. 10 By Defendant Mercedes-Benz
USA, LLC to Exclude Repairs or Customer Concerns After the Expiration of the Express
Warranty” (by which it meant the express new vehicle warranty). In a similar vein,
Mercedes Benz filed a motion targeting evidence of damages: “Motion in Limine No. 7
By Defendant to Restrict Plaintiff’s Damages to the Remedies Available Under
Commercial Code § 2-714” (the gist of which was that plaintiff’s only remedy was for
breach of contract, not the remedies available under the Song-Beverly Act). These
motions all turned on Mercedes Benz’s legal position that the Song-Beverly Act does not
apply to an express warranty issued by a manufacturer with respect to a used vehicle.
Mercedes Benz also filed a motion in limine targeting plaintiff’s claim for breach of
implied warranty based on Mercedes Benz’s claim that the implied warranty expired over
a year before plaintiff started experiencing the steering wheel defect. We need not
address the court’s ruling on the implied warranty motion in light of our resolution of the
express warranty issue. (See fn. 2, ante.)
The court found in plaintiff’s favor on the express warranty issue, finding
that the Song-Beverly Act applied to the used car warranty issued by Mercedes Benz and
thus granted plaintiff’s motion, and denied Mercedes Benz’s two motions. The court also
found in favor of plaintiff on the implied warranty motion.
A jury found in favor of plaintiff on his causes of action for breach of
express warranty and breach of the implied warranty of merchantability. It awarded
$112,149.86 in stipulated damages, plus a penalty of $25,000 on the breach of express
warranty. It awarded the same damages (without the penalty) on the breach of implied
warranty claim. The court entered judgment on the jury’s special verdict after striking
the damages for breach of the implied warranty, presumably to avoid a double recovery.
Mercedes Benz appealed from the ensuing judgment.
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DISCUSSION
Mercedes Benz contends the judgment must be reversed. On the express
warranty claim, Mercedes Benz contends the Song-Beverly Act does not apply to an
express warranty issued by a manufacturer on a used vehicle. We disagree.
The Song-Beverly Act requires that where a manufacturer sells “consumer
goods” accompanied by an express warranty, it must maintain local repair facilities “to
carry out the terms of those warranties.” (§ 1793.2, subd. (a)(1).) “‘Consumer goods’
means any new product or part thereof that is used, bought, or leased for use primarily for
personal, family, or household purposes, except for clothing and consumables.” (§ 1791,
italics added.)
“Except as provided in paragraph (2),” where a manufacturer does not
“repair the goods to conform to the applicable express warranties after a reasonable
number of attempts, the manufacturer shall either replace the goods or reimburse the
buyer in an amount equal to the purchase price paid by the buyer, less that amount
directly attributable to use by the buyer prior to the discovery of the nonconformity.”
(§ 1793.2, subd. (d)(1).) Paragraph 2 provides a more specific process for new motor
vehicles: “If the manufacturer or its representative in this state is unable to service or
repair a new motor vehicle, as that term is defined in paragraph (2) of subdivision (e) of
Section 1793.22, to conform to the applicable express warranties after a reasonable
number of attempts, the manufacturer shall either promptly replace the new motor vehicle
in accordance with subparagraph (A) or promptly make restitution to the buyer in
accordance with subparagraph (B). However, the buyer shall be free to elect restitution in
lieu of replacement, and in no event shall the buyer be required by the manufacturer to
accept a replacement vehicle.” (Id., subd (d)(2).) It then goes on to provide more specific
procedures for replacement and restitution. (Id., subds. (d)(2)(B)-(C).)
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The Song-Beverly Act provides similar remedies in the context of the sale
of used goods, except that the manufacturer is generally off the hook: “Notwithstanding
the provisions of subdivision (a) of Section 1791 defining consumer goods to mean ‘new’
goods, the obligation of a distributor or retail seller of used consumer goods in a sale in
which an express warranty is given shall be the same as that imposed on manufacturers
under this chapter except: [¶] (a) It shall be the obligation of the distributor or retail
seller making express warranties with respect to used consumer goods (and not the
original manufacturer, distributor, or retail seller making express warranties with respect
to such goods when new) to maintain sufficient service and repair facilities within this
state to carry out the terms of such express warranties.” (§ 1795.5, subd. (a).)
Here, the parties dispute whether the subject vehicle was a “new motor
vehicle” or a used good under the Song-Beverly Act. In Jensen v. BMW of North
America, Inc. (1995) 35 Cal. App. 4th 112 (Jensen) the court held that a used vehicle sold
during the period of a transferrable new vehicle warranty is a “new motor vehicle” for
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purposes of the Song-Beverly Act. While we have some reservations about that holding,
4
Would a car accompanied by a 20-year warranty still be a “new motor
vehicle” under the Song-Beverly Act on year 18? That would seem to follow from the
holding in Jensen. The Jensen court relied on the definition of “new motor vehicle” in
section 1793.22 (Jensen, supra, 35 Cal.App.4th at pp. 121-122), which includes “a
dealer-owned vehicle and a ‘demonstrator’ or other motor vehicle sold with a
manufacturer’s new car warranty,” and concluded that every car sold with any portion of
a new-vehicle warranty remaining is a new motor vehicle. (§ 1793.22, subd. (e)(2).) But
arguably that language refers to cars originally sold with a new motor vehicle warranty,
not subsequent sales. (See Veh. Code, § 430 [“A ‘new vehicle’ is a vehicle constructed
entirely from new parts that has never been the subject of a retail sale”].) The Jensen
court’s approach creates a potential problem with the implied warranty of
merchantability, in that a one-year implied warranty automatically attaches to any new
consumer good sold in this state. (§ 1792.) Arguably, if a used vehicle is a “new motor
vehicle,” then the one-year implied warranty attaches to every subsequent sale during the
warranty period, even if the manufacturer has no knowledge of the sale, and even though
the Song-Beverly Act provides that “in no event shall such implied warranty have a
duration of . . . more than one year following the sale of new consumer goods to a retail
buyer.” (§ 1791.1, subd. (c).) An alternative approach would be to hold that purchasers
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ultimately we need not decide whether Jensen was correctly decided because, even if the
vehicle was not a “new motor vehicle” under Song-Beverly Act, Mercedes Benz was still
liable under the used goods provisions of section 1795.5.
Mercedes Benz argues section 1795.5 does not apply here because that
section specifically exempts manufacturers, instead imposing obligations only on the
retailer or distributor. But the assumption baked into section 1795.5 is that the
manufacturer and the distributor/retailer are distinct entities. Where the manufacturer
sells directly to the public, however, it takes on the role of a retailer. (See § 1791, subd.
(l ) [“‘Retail seller,’ ‘seller,’ or ‘retailer’ means any individual, partnership, corporation,
association, or other legal relationship that engages in the business of selling or leasing
consumer goods to retail buyers”].) Nothing about the text of section 1795.5 suggests
that where a manufacturer acts in the capacity of a retailer, it is exempt from the Song-
Beverly Act. Here, Mercedes Benz partnered with a dealership to sell used vehicles
directly to the public by offering an express warranty as part of the sales package, which
is a crucial incentive for buyers like plaintiff. By partnering with the dealership,
Mercedes Benz stepped into the role of a retailer and was subject to the obligations of a
retailer under section 1795.5. That section provides that a retailer’s obligations are the
“same” as a manufacturer under section 1793.2. Accordingly, it was entirely proper to
permit the jury to analyze Mercedes Benz’s liability under section 1793.2.
of used vehicles during the period of a transferable new motor vehicle warranty have
standing under the Song-Beverly Act because the original sale was of a new motor
vehicle, and manufacturers have an ongoing duty under the Song-Beverly Act to “carry
out the terms of those warranties.” (§ 1793.2, subd. (a)(1).) If a term of the warranty is
that it is transferrable, then the manufacturer’s duties under the Song-Beverly Act
continue post-transfer. This approach enforces the warranty while avoiding the problem
of serial implied warranties.
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DISPOSITION
The judgment is affirmed. Plaintiff shall recover his costs incurred on
appeal.
IKOLA, J.
WE CONCUR:
BEDSWORTH, ACTING P. J.
MOORE, J.
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