Kirzhner v. Mercedes-Benz USA, LLC

IN THE SUPREME COURT OF
CALIFORNIA
ALLEN KIRZHNER,
Plaintiff and Appellant,
v.
MERCEDES-BENZ USA, LLC,
Defendant and Respondent.
S246444
Fourth Appellate District, Division Three
G052551
Orange County Superior Court
30-2014-00744604
July 27, 2020
Justice Groban authored the opinion of the Court, in which
Chief Justice Cantil-Sakauye and Justices Chin, Corrigan, Liu,
Cuéllar, and Kruger concurred.
KIRZHNER v. MERCEDES-BENZ USA, LLC
S246444
Opinion of the Court by Groban, J.
This case involves the Song–Beverly Consumer Warranty
Act (the Act), Civil Code section 1790 et seq.,1 popularly known as
the “lemon law.” The Act allows buyers or lessees of new motor
vehicles that are under warranty and have defects the
manufacturer is unable to repair after a reasonable number of
attempts to elect one of two remedies: Consumers may choose
either a replacement vehicle or restitution “in an amount equal to
the actual price paid or payable by the buyer.” (§ 1793.2, subd.
(d)(2)(B).) The manufacturer must also pay for any “collateral
charges” (ibid.) and “incidental damages” incurred (id., subd.
(d)(2)(A), (B)).
In this case, plaintiff Allen Kirzhner selected restitution and
requested reimbursement for vehicle registration renewal and
nonoperation fees he paid after the initial lease of his vehicle.
The question before us is whether the Act requires defendant
Mercedes-Benz USA, LLC (Mercedes) to reimburse these fees,
either as collateral charges or as incidental damages. We hold
that such fees are not recoverable as collateral charges because
they are not auxiliary to and do not supplement the price paid for
the vehicle, but they are recoverable as incidental damages if they
1
All further statutory references are to the Civil Code
unless otherwise indicated.
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KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
were incurred as a result of the manufacturer’s breach of its duty
to promptly provide a replacement vehicle or restitution under the
Act. Because Kirzhner has not yet had an opportunity to prove
causation in this case, we reverse the judgment of the Court of
Appeal and remand the case for further proceedings consistent
with our opinion.
I. BACKGROUND
In 2012, Kirzhner leased a new vehicle from Mercedes.
Kirzhner alleges that, during the warranty period, the vehicle
exhibited a variety of defects that caused the command system,
navigation system, and key fob to malfunction; the steering
column adjustment mechanism and power seats to be inoperative;
the coolant level warning light to illuminate; and smoke to
emanate from the cigarette lighter. Kirzhner further alleges that
he presented the vehicle to Mercedes for repair, but Mercedes was
unable to remedy the defects after a reasonable number of repair
attempts.
Nearly six months after filing suit, Kirzhner accepted a
settlement offer Mercedes made pursuant to Code of Civil
Procedure section 998 (section 998).2 Mercedes’s section 998 offer
does not specify a monetary amount it offers to pay Kirzhner to
settle the case. Instead, the offer sets forth verbatim the
replacement and restitution remedies provided by the Act and
2
Section 998 “creates an incentive for settlement” by
“authoriz[ing] an award of costs to a party that makes a
pretrial settlement offer when the opponent rejects the offer
and obtains a lesser result at trial.” (Heimlich v. Shivji (2019)
7 Cal. 5th 350, 356, citing Martinez v. Brownco Construction
Co. (2013) 56 Cal. 4th 1014, 1019.)
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Opinion of the Court by Groban, J.
states that Mercedes will furnish one or the other of the remedies
in exchange for the vehicle. The offer further states that the
precise amount of restitution, including any collateral charges
and incidental damages, will “be determined by court motion if
the parties cannot agree.” The trial court entered judgment in
favor of Kirzhner in accordance with the terms of the offer.
Because the parties could not agree on the total amount
Mercedes was required to pay in restitution pursuant to the
section 998 offer, Kirzhner filed a postjudgment motion
requesting the trial court to determine the amount owed. The
trial court awarded $47,708.06 to Kirzhner. This amount
included the initial vehicle registration fee of $101 paid at the
time Kirzhner entered into the lease agreement. It excluded,
however, vehicle registration renewal fees Kirzhner paid in 2013
and 2014. It also excluded a nonoperation fee—a fee that a
vehicle owner may pay in lieu of a registration renewal fee upon
“certification that the vehicle will not be operated, moved, or left
standing upon a highway” (Veh. Code, § 4604, subd. (a))—
Kirzhner paid in 2015. The excluded fees totaled $680. These
fees were excluded based on the trial court’s determination that
the registration fees recoverable under the Act “do not include all
registration fees that a buyer pays over the course of a lease.”
The Court of Appeal affirmed, explaining, “The only
registration fee that could be considered a ‘collateral charge’
associated with ‘the actual price paid or payable’ is the one which
is paid when the vehicle is purchased or leased (or accounted for
in financing). [Citation.] Registration fees for future years
cannot be considered a ‘collateral charge’ because they are
incurred and paid after the initial purchase or lease.” (Kirzhner v.
Mercedes-Benz USA, LLC (2017) 18 Cal. App. 5th 453, 458
(Kirzhner).) The Court of Appeal further explained that
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KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
incidental damages are limited to costs “incurred as a result of a
vehicle being defective” and “[s]uch is not the case with vehicle
registration renewal fees, which are more accurately
characterized as a standard cost of owning any vehicle.” (Ibid.,
italics omitted.)
We granted review.
II. DISCUSSION
We are asked to determine whether the Act requires a
manufacturer to reimburse registration renewal and
nonoperation fees, either as collateral charges or as incidental
damages. Our resolution of these questions requires us to
interpret several interrelated statutory provisions.
Section 1793.2, subdivision (d)(2) sets forth the
manufacturer’s affirmative obligation to “promptly” repurchase or
replace a defective vehicle it is unable to repair, providing that if
a manufacturer is “unable to service or repair a new motor vehicle
. . . 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).” In turn, the restitution
remedy in subdivision (d)(2)(B) states that “the manufacturer
shall make restitution in an amount equal to the actual price paid
or payable by the buyer, . . . including any collateral charges such
as sales or use tax, license fees, registration fees, and other
official fees, plus any incidental damages to which the buyer is
entitled under Section 1794, including, but not limited to,
reasonable repair, towing, and rental car costs actually incurred
by the buyer.” Finally, section 1794 is the Act’s general damages
provision, providing that a buyer may seek damages for a
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KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
manufacturer’s “failure to comply with any obligation under this
chapter or under an implied or express warranty,” the measure of
which includes the restitution and replacement remedies as well
as the remedies allowed by the California Uniform Commercial
Code, including incidental damages. We must interpret the
meaning of “collateral charges” under section 1793.2, subdivision
(d)(2)(B), as well as the meaning of “incidental damages” as meant
by that same section and relevant portions of the California
Uniform Commercial Code.
To determine the Legislature’s intent in interpreting these
statutory provisions, “[w]e first examine the statutory language,
giving it a plain and commonsense meaning.” (Coalition of
Concerned Communities, Inc. v. City of Los Angeles (2004) 34
Cal. 4th 733, 737.) We do not consider statutory language in
isolation; instead, we examine the entire statute to construe the
words in context. (West Pico Furniture Co. v. Pacific Finance
Loans (1970) 2 Cal. 3d 594, 608.) If the language is unambiguous,
“then the Legislature is presumed to have meant what it said,
and the plain meaning of the language governs.” (Kizer v. Hanna
(1989) 48 Cal. 3d 1, 8.) “If the statutory language permits more
than one reasonable interpretation, courts may consider other
aids, such as the statute’s purpose, legislative history, and public
policy.” (Concerned Communities, at p. 737.) We keep in mind
that the Act is “ ‘manifestly a remedial measure, intended for the
protection of the consumer; it should be given a construction
calculated to bring its benefits into action.’ ” (Murillo v.
Fleetwood Enterprises, Inc. (1998) 17 Cal. 4th 985, 990.)
A. The Fees Are Not Recoverable as Collateral
Charges
The Act allows for recovery of restitution “in an amount
equal to the actual price paid or payable by the buyer, . . .
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KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
including any collateral charges such as sales or use tax, license
fees, registration fees, and other official fees.” (§ 1793.2, subd.
(d)(2)(B).) The parties do not dispute that the initial registration
fee paid at the time of the purchase or lease of a vehicle is a
recoverable collateral charge. Their dispute instead centers on
whether subsequent registration renewal or nonoperation fees
that are typically paid on an annual basis after the initial
purchase or lease of the vehicle are recoverable as collateral
charges. Based on the plain language of this section considered in
its statutory context, we conclude that only the initial registration
fee paid at the time of the lease or purchase of the vehicle and not
any subsequent registration renewal or nonoperation fees are
recoverable as collateral charges.
The Act makes clear that charges must be “collateral” to the
“price paid or payable” to be recoverable. (§ 1793.2, subd.
(d)(2)(B).) The word “price” means “[t]he cost at which something
is obtained” or “[t]he consideration given for the purchase of a
thing” (Black’s Law Dict. (5th Ed. 1990) p. 1188, col. 2), and the
word “collateral” means “[a]dditional or auxiliary; supplementary;
co-operating; accompanying as a secondary fact” or “[r]elated to,
complementary, accompanying as a co-ordinate” (id. at p. 261, col.
1). Initial registration fees are typically paid at the time of the
sale or lease and are itemized as part of the total price paid for
the vehicle in the sale or lease agreement. (See Veh. Code,
§ 4456, subd. (a)(2) [dealers are responsible for collecting
registration fees and submitting them to the Department of Motor
Vehicles within 30 days of the sale]; Civ. Code, §§ 2981.9, 2982,
subd. (a)(2)(B) [conditional sales contracts subject to the
Automobile Sales Finance Act must be in writing and must
itemize all charges paid to the dealer, including registration,
transfer, and titling fees].) By contrast, subsequent registration
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KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
renewal and nonoperation fees are not auxiliary to and do not
supplement the price paid to own or lease the vehicle. Buyers do
not pay these fees to the dealer in exchange for the vehicle.
Instead, buyers renew their vehicles’ registration on an annual
basis (or obtain a certificate of nonoperation) and pay the
associated fees to the Department of Motor Vehicles (DMV), but
only so long as they continue to own or lease the vehicle at the
time the fees become due.
Kirzhner points out that section 1793.2, subdivision
(d)(2)(B) uses the plural form of “fees” in providing that
“registration fees” are recoverable as collateral charges, but this
fact offers little guidance as to whether registration renewal and
nonoperation fees incurred after the initial registration fee are
recoverable as collateral charges. The plural and singular forms
of the word “fee” are often used interchangeably. Indeed, the
Vehicle Code uses the plural form of “fees” to refer to the initial
registration fee as well as the annual registration renewal fee,
even though both of these fees require a single, lump-sum
payment. (See, e.g., Veh. Code, §§ 4000, subd. (a)(1) [“A person
shall not drive, move, or leave standing upon a highway, or in an
offstreet public parking facility, any motor vehicle . . . unless it is
registered and the appropriate fees have been paid” (italics
added)], 4601, subd. (a) [“The department may, upon payment of
the proper fees, renew the registration of vehicles” (italics added)],
9553, subd. (b) [where a vehicle is transferred and penalties have
not yet accrued for failure to renew registration, “the transferee
has 20 days from the date of the transfer to pay the registration
fees” (italics added)].) This may be because both the initial
registration fee and the registration renewal fee are, in fact, made
up of multiple fees, including a base registration fee,
transportation improvement fees, service fees, California
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KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
Highway Patrol fees, air pollution fees, and various county and
district fees. (Veh. Code, §§ 9250–9250.19.) We therefore cannot
conclude that the use of the word “fees” indicates a legislative
intent to allow consumers to recover all registration renewal and
nonoperation fees incurred subsequent to the initial registration
fee.
Focusing on the word “payable,” Kirzhner additionally
argues that the phrase “actual price paid or payable” indicates “a
legislative intent to ensure that the manufacturer pays the
consumer what he actually paid in connection with the vehicle as
of the time the repurchase occurs, rather than merely what he
was obliged to pay at the time of contracting.” Kirzhner relies on
Mitchell v. Blue Bird Body Co. (2000) 80 Cal. App. 4th 32, in which
the court interpreted the phrase “ ‘actual price paid or payable’ ”
to include finance charges paid after the date of purchase because
these charges are amounts consumers become “legally obligated
to pay” at the time they buy or lease a new car. (Id. at p. 38.)
Kirzhner contends that registration renewal and nonoperation
fees are akin to finance charges in that the buyer is legally
obligated to pay them; the buyer can avoid the fees by simply
selling the car; and the fees are paid over the course of several
years rather than on the date of the sale or lease.
Kirzhner’s interpretation reads the word “price” out of the
statute. As explained above, the word “price” means the cost at
which at item is obtained. The word “payable” modifies the word
“price” and operates to acknowledge that some buyers do not pay
the full cost of the vehicle at the time of the initial purchase or
lease. It does not, however, indicate that all charges and
expenses that may later be incurred in connection with the
ownership or use of the vehicle are recoverable, even if they are
not a part of and do not accompany the price of the vehicle. The
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KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
finance charges at issue in Mitchell are unlike registration
renewal and nonoperation fees because a buyer obtains financing
at the time of the purchase or lease in order to cover the total cost
of the vehicle. Finance charges therefore supplement and are
paid auxiliary to the price of the vehicle.
Kirzhner also argues that the statute’s inclusion of use and
sales taxes as recoverable collateral charges supports his
interpretation. (§ 1793.2, subd. (d)(2)(B) [“including any collateral
charges such as sales or use tax, license fees, registration fees,
and other official fees”].) A use tax is paid “where a particular
transaction is exempt from sales tax, such as one involving goods
purchased in another state and stored or used in California.”
(Wallace Berrie & Co. v. State Bd. of Equalization (1985) 40
Cal. 3d 60, 67; accord, Cal. Code Regs., tit. 18, § 1620, subd. (b).)
Kirzhner contends that because a buyer typically pays use tax
only after the vehicle is purchased (Rev. & Tax. Code, § 6291) and
sales tax is paid to the state by the retailer after the sale (Rev. &
Tax. Code, § 6051), the Legislature intended for a buyer to recover
charges paid for the vehicle “after its acquisition.”
While Kirzhner is correct on the technical point that sales
tax is paid to the state by the retailer, the practical reality is that
sales tax is “almost invariably passed through in full to
consumers” at the time of purchase. (Weatherford v. City of San
Rafael (2017) 2 Cal. 5th 1241, 1256 (conc. opn. of Kruger, J.).) A
dealer may decline to pass the sales tax to the consumer, but if
the dealer makes payment of sales tax a condition of the sale (as
most do), the consumer must pay the tax in order to obtain the
vehicle. (Loeffler v. Target Corp. (2014) 58 Cal. 4th 1081, 1108–
1109; § 1656.1, subd. (a); Cal. Code Regs., tit. 18, § 1700, subd.
(a).) Use tax is simply a substitute for sales tax when a particular
transaction is exempt from sales tax. Although use tax is “the
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Opinion of the Court by Groban, J.
obligation of the consumer ([Rev. & Tax. Code,] § 6202, subd. (a)),
retailers with a nexus to California must collect use tax from the
purchaser and remit it to [the State Board of Equalization].
([Rev. & Tax. Code,] §§ 6203, 6204; Cal. Code Regs., tit. 18, §
1684, subd. (a).)” (Dell, Inc. v. Superior Court (2008) 159
Cal. App. 4th 911, 922.) Thus, sales and use taxes are auxiliary to
and supplement the price paid for the vehicle.
The initial registration fee is a recoverable collateral charge
because, like finance charges and sales or use taxes, it is auxiliary
to and supplements the price paid for the vehicle. As explained
above, the buyer pays the initial registration fee to the dealer as
part of the total cost of the vehicle and in exchange for the vehicle.
It is thus a charge that is collateral to the price paid. In contrast,
registration renewal and nonoperation fees are not auxiliary to
and do not supplement the price paid because they are not paid as
part of the total cost of the vehicle and in exchange for the vehicle.
They are instead paid to the DMV long after the initial purchase
or lease transaction in order to continue to legally own or operate
the vehicle. For these reasons, Kirzhner’s interpretation is
contrary to the plain meaning of section 1793.2, subdivision
(d)(2)(B).
Turning to statutory context, the replacement remedy in
section 1793.2, subdivision (d)(2)(A)—which applies when the
buyer elects a replacement vehicle rather than restitution—adds
further support for the conclusion that registration renewal and
nonoperation fees are not recoverable as collateral charges. This
section provides that the manufacturer must “replace the buyer’s
vehicle with a new motor vehicle substantially identical to the
vehicle replaced” and also “pay for, or to, the buyer the amount of
any sales or use tax, license fees, registration fees, and other
official fees which the buyer is obligated to pay in connection with
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Opinion of the Court by Groban, J.
the replacement.” (§ 1793.2, subd. (d)(2)(A), italics added.) As
Kirzhner acknowledges, the phrase “in connection with the
replacement” (ibid.) limits the registration fees recoverable under
the replacement remedy to those incurred in registering the
replacement vehicle and does not include reimbursement of any
registration renewal or nonoperation fees the buyer might have
paid over the course of owning or leasing the defective vehicle.
Nevertheless, Kirzhner argues that the Legislature, by inserting
this limiting language in subdivision (d)(2)(A) (governing the
replacement remedy) and omitting it in subdivision (d)(2)(B)
(governing the restitution remedy), intended the restitution
remedy to be more expansive and cover all registration fees paid
over the course of a buyer’s ownership or possession of a defective
vehicle.
The Act’s legislative history, however, indicates the
Legislature intended the manufacturer to be responsible for an
equivalent amount of registration fees regardless of whether the
consumer elects a replacement vehicle or restitution. In
analyzing Assembly Bill No. 2057 (1987-1988 Reg. Sess.)—the bill
that enacted the replacement and restitution remedies—the
Department of Finance stated that the identical remedies
proposed verbatim in the related Assembly Bill No. 2050 (1987-
1988 Reg. Sess.) would require “the manufacturer to pay sales
tax, license and registration fees on the replacement, or an
equivalent amount in restitution.” (Dept. of Finance, Enrolled Bill
Rep. on Assem. Bill No. 2057 (1987–1988 Reg. Sess.) as amended
May 13, 1987, p. 3; italics added.) Other departments, such as
the Department of Consumer Affairs, noted that Assembly Bill
No. 2057 would require manufacturers “to reimburse sales or use
tax, license and registration fees and incidental damages” without
differentiating between the replacement and restitution remedies.
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KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
(Dept. of Consumer Affairs, Enrolled Bill Rep. on Assem. Bill No.
2057 (1987–1988 Reg. Sess.) prepared for Governor Deukmejian
(Sept. 25, 1987) p. 4; accord, Dept. of Justice, Analysis of Assem.
Bill No. 2057 (1987–1988 Reg. Sess.) as amended June 11, 1987,
p. 2.) Kirzhner does not point us to anything in the legislative
history indicating an intent to treat the two remedies differently
with respect to the amount of registration fees for which the
manufacturer would be responsible.
Moreover, there is a straightforward reason for the
difference in the precise wording of the replacement and
restitution remedies. The replacement remedy specifies that the
manufacturer must pay for all official fees, including registration
fees, that will be incurred “in connection with the replacement”
(§ 1793.2, subd. (d)(2)(A)) because a buyer would normally be
responsible for paying such fees upon obtaining a new vehicle.
When a buyer opts for restitution, no new fees will be incurred for
which the buyer would otherwise be obliged to pay.
Consequentially, the restitution remedy need only specify that the
manufacturer must reimburse the “price” the buyer paid for the
original car “including any collateral charges such as . . .
registration fees.” (§ 1793.2, subd. (d)(2)(B).) Thus, the language
used in these two provisions reflects a basic, practical difference
between ensuring that a buyer is reimbursed with a cash
payment for the initial registration fee paid on the defective
vehicle when the buyer selects the restitution remedy and
ensuring that the buyer does not pay the initial registration fee
on the replacement vehicle when the buyer selects the
replacement remedy. The language is not intended to effectuate a
fundamental difference in a buyer’s ability to recover subsequent
registration renewal fees depending on which remedy the buyer
selects. (Cf. Jiagbogu v. Mercedes-Benz USA (2004) 118
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KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
Cal.App.4th 1235, 1243 (Jiagbogu) [similarly concluding that the
offset a manufacturer may claim for the buyer’s use of the vehicle
is the same regardless of whether the buyer selects the
replacement or restitution remedy, despite a difference in the
offset provision’s wording with respect to the two remedies].)
In sum, based on the plain meaning of section 1793.2,
subdivision (d)(2)(B)’s text and considering it in its statutory
context, we hold that while the initial registration fee is
recoverable as a collateral charge, subsequent registration
renewal and nonoperation fees are not auxiliary to and do not
supplement the price paid for a vehicle and are, therefore, not
recoverable as collateral charges.
B. The Fees May Be Recoverable as Incidental
Damages
Although registration renewal and nonoperation fees are
not recoverable as collateral charges, we hold that they are
recoverable as incidental damages if they were incurred as a
result of the manufacturer’s failure to promptly provide a
replacement vehicle or restitution once its obligation to do so
under section 1793.2, subdivision (d)(2) arises.
Section 1793.2, subdivision (d)(2)(B) provides that a buyer
may recover restitution “plus any incidental damages to which
the buyer is entitled under Section 1794, including, but not
limited to, reasonable repair, towing, and rental car costs actually
incurred by the buyer.” Section 1794, in turn, provides that a
consumer “who is damaged by a failure to comply with any
obligation under [the Act] or under an implied or express
warranty or service contract may bring an action for the recovery
of damages,” the measure of which “shall include the rights of
replacement or reimbursement as set forth in subdivision (d) of
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Section 1793.2, and the following: [¶] (1) Where the buyer has
rightfully rejected or justifiably revoked acceptance of the goods
or has exercised any right to cancel the sale, Sections 2711, 2712,
and 2713 of the Commercial Code shall apply. [¶] (2) Where the
buyer has accepted the goods, Sections 2714 and 2715 of the
Commercial Code shall apply . . . .” (Id., subds. (a), (b)(1)-(2).)
California Uniform Commercial Code section 2715,
subdivision (1) defines “[i]ncidental damages resulting from the
seller’s breach” as “includ[ing] expenses reasonably incurred in
inspection, receipt, transportation and care and custody of goods
rightfully rejected, any commercially reasonable charges,
expenses or commissions in connection with effecting cover and
any other reasonable expense incident to the delay or other
breach.” California Uniform Commercial Code section 2711,
subdivision (3) contains nearly identical language, providing that
“[o]n rightful rejection or justifiable revocation of acceptance a
buyer has a security interest in goods in his possession or control
for any payments made on their price and any expenses
reasonably incurred in their inspection, receipt, transportation,
care and custody . . . .” No California court has examined the
meaning of these sections in any detail. But because California’s
Uniform Commercial Code was adopted verbatim from the
Uniform Commercial Code, we may look to the Uniform
Commercial Code’s official comments, as well as to how other
courts have interpreted the Uniform Commercial Code, for
guidance. (Arriaga v. CitiCapital Commercial Corp. (2008) 167
Cal. App. 4th 1527, 1536; Pacific Sunwear of California, Inc. v.
Olaes Enterprises, Inc. (2008) 167 Cal. App. 4th 466, 474–475; see
also Porter v. Gibson (1944) 25 Cal. 2d 506, 512 [courts should
review decisions of other jurisdictions when interpreting uniform
acts to ensure they are applied in a uniform manner].)
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Since the Act expressly states that a buyer may recover
incidental damages under California Uniform Commercial Code
section 2715 where a buyer has “accepted the goods” (Civ. Code, §
1794, subd. (b)(2)) but refers only to California Uniform
Commercial Code sections 2711, 2712, and 2713 where a buyer
has “revoked acceptance of the goods” (Civ. Code, § 1794, subd.
(b)(1)), it may seem as though California Uniform Commercial
Code section 2715 applies only when a buyer accepts the defective
vehicle. The comment to California Uniform Commercial Code
section 2715 makes clear, however, that this section was
“intended to provide reimbursement for the buyer who incurs
reasonable expenses in connection with the handling of rightfully
rejected goods or goods whose acceptance may be justifiably
revoked, or in connection with effecting cover where the breach of
the contract lies in non-conformity or non-delivery of the goods.”
(U. Com. Code com., 23A pt. 2 West’s Ann. Cal. U. Com. Code
(2002 ed.) foll. § 2715, p. 119, italics added.) Courts have
accordingly held that buyers who revoke acceptance of defective
goods are entitled to any incidental damages recoverable under
Uniform Commercial Code section 2-715. (See, e.g., Newmar
Corp. v. McCrary (2013) 129 Nev. 638, 646 [309 P.3d 1021, 1027];
Durfee v. Rod Baxter Imports, Inc. (Minn. 1977) 262 N.W.2d 349,
357.) Courts have also determined that the same types of
expenses are recoverable as incidental damages under either
Uniform Commercial Code section 2-715 or Uniform Commercial
Code section 2-711. (See, e.g., Lanners v. Whitney (1967) 247 Or.
223, 236 [428 P.2d 398, 404] (Lanners); Warren v. Guttanit, Inc.
(1984) 69 N.C. App. 103, 114 [317 S.E.2d 5, 13].) We therefore
need not resolve whether Kirzhner accepted or revoked
acceptance of his vehicle—or whether California Uniform
Commercial Code section 2715 or 2711 applies—in order to
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Opinion of the Court by Groban, J.
evaluate whether he is entitled to recover his registration renewal
and nonoperation fees as incidental damages.
The parties do not dispute that Kirzhner’s registration
renewal and nonoperation fees were “reasonably incurred.” (Cal.
U. Com. Code, § 2715, subd. (1).) We accordingly focus only on
the following two questions in determining whether Kirzhner’s
registration renewal and nonoperation fees are recoverable as
incidental damages: First, are such fees incurred in the
“inspection, receipt, transportation and care and custody” of a
vehicle? (Ibid.) Second, do such fees “result[] from” or are they
incurred “incident to” a manufacturer’s breach of warranty or
other violation of the Act? (Ibid.) In examining these interrelated
questions, we conclude that registration renewal and
nonoperation fees paid after the manufacturer’s duty to promptly
provide a replacement vehicle or restitution arises are expenses
incurred in the “care and custody” of a defective vehicle. (Ibid.)
We further conclude that such fees “result from[]” and are
incurred “incident to” the manufacturer’s breach of its duty to
promptly provide restitution or a replacement vehicle because the
buyer would not have incurred the fees but for the manufacturer’s
delay. (Ibid.)
1. Care and Custody Costs
Turning to the first question, we consider whether
registration renewal and nonoperation fees are expenses incurred
in the “inspection, receipt, transportation and care and custody” of
a vehicle. (Cal. U. Com. Code, § 2715, subd. (1).)
As cases applying Uniform Commercial Code section 2-715
make clear, the phrase “care and custody” should not be read
broadly to encompass all costs incurred over the course of
possessing, owning, operating, or using nonconforming goods.
16
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
Though the Court of Appeal was concerned about opening up a
“ ‘Pandora’s box’ ” of potential costs manufacturers would be
required to pay if it were to rule that registration renewal fees
were recoverable as incidental damages (Kirzhner, supra, 18
Cal.App.5th at p. 458), there are limits on such damages. Indeed,
Kirzhner concedes that standard ownership or use costs—like
gas, car washes, or oil changes—will normally not qualify as
incidental damages. We do not foreclose the possibility that, in an
unusual case, a buyer may be able to present particular
circumstances that might justify an exception to this general rule.
Ordinarily, however, buyers are free to choose whether to put gas
or oil in the car and usually opt to expend such costs solely for
their own benefit in order to drive the vehicle and keep it
operational. We have not found any case in which a court has
awarded such standard ownership or use costs—incurred solely
for the buyer’s benefit and unconnected to the manufacturer’s
breach—as incidental damages. Registration renewal and
nonoperation fees are different, at least where they are incurred
after the manufacturer’s duty to promptly provide a replacement
vehicle or restitution arises. At this point in time, the fees are no
longer simply a standard cost of ownership. They instead closely
resemble the types of post-revocation preservation and
maintenance costs courts have awarded as incidental damages
reasonably incurred in the care and custody of nonconforming
goods pending their return to the seller.
In Lanners, for example, the Oregon Supreme Court
awarded as incidental damages costs necessary to protect and
maintain a defective airplane after revocation, including storage
costs, ground insurance charges, the costs of removing the radio
and battery, and the costs of installing special storage oil.
(Lanners, supra, 428 P.2d at p. 404.) Similarly, in Western
17
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
Conference Resorts, Inc. v. Pease (Colo.App. 1983) 668 P.2d 973,
the court awarded service work expenses and tie-down fees—i.e.,
fees incurred in “tying down” an airplane to minimize the
possibility of damage from strong winds—to preserve and protect
a defective airplane after revocation. (Id. at pp. 976–977.) The
buyers in Lanners and Western Conference did not incur these
costs in order to fly the airplanes. Nor did they incur the costs in
order to increase the value of their ownership interest in the
airplanes, given that they no longer had any ownership interest
having revoked acceptance of the airplanes. (Cal. U. Com. Code,
§ 2401, subd. (4) [rejection or revocation of acceptance of the goods
“revests title to the goods in the seller”].) Instead, the buyers
incurred the costs in order to maintain the nonconforming
airplanes and to protect them from damage or theft for the sellers’
benefit while they were still in the buyers’ care and custody
pending their eventual return to the sellers. (Lanners, at p. 404;
Western Conference, at pp. 976–977.)
Registration renewal and nonoperation fees serve similar
purposes, at least when they are incurred and paid after the
manufacturer fails to comply with its duty to promptly repurchase
or replace a defective vehicle. To explain, the Act provides that,
where a manufacturer is unable to repair the vehicle after a
reasonable number of attempts, the manufacturer must
“promptly” provide a replacement vehicle or restitution.
(§ 1793.2, subd. (d)(2).) Once the manufacturer’s duty to do so
arises, the buyer no longer has the same ownership interest in the
vehicle since the manufacturer can (and should) replace or
repurchase it at any moment. A lessee’s interest in “possession
and use of” the vehicle (Cal. U. Com. Code, § 10103, subd. (a)(10))
for a certain number of years under the lease agreement is
likewise diminished. A lessee never owns the car during the term
18
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
of the lease, and the car typically reverts to the lessor in just two
or three years under the terms of the lease agreement. The lessee
is nonetheless obligated to make ongoing registration payments
as long as the manufacturer fails to comply with its duty to
promptly replace or repurchase the vehicle. Indeed, despite this
lessened interest, buyers and lessees are legally required to pay,
and cannot avoid paying, registration renewal fees incurred prior
to the vehicle’s transfer back to the manufacturer. (Veh. Code,
§§ 4000, subd. (a)(1), 4601, 4604.) Moreover, the buyer’s payment
of such fees inures to the benefit of the manufacturer in two ways:
First, the fees are tied to and transfer with the vehicle and, as a
result, the manufacturer will not need to pay any further
registration fees so long as it retrieves the vehicle more than 30
days prior to the registration’s expiration. (Veh. Code, §§ 5902.5,
9255.) The buyer cannot obtain a refund from the DMV for any
paid fees, even if they were paid only one day prior to the vehicle’s
return to the manufacturer. (See Veh. Code, § 42231.) Second,
payment of the fees safeguards the vehicle against impoundment
(Veh. Code, § 22651, subd. (o)(1)(A)) and hefty delinquency
penalties (Veh. Code, §§ 9553, subd. (a), 9554)—penalties for
which the manufacturer would be responsible upon transfer
unless it could show that it was unaware of the buyer’s failure to
pay the fees (Veh. Code, § 9562, subd. (a)).
For these reasons, registration renewal and nonoperation
fees incurred after the manufacturer’s duty to promptly
repurchase or replace the vehicle arises are unlike the standard
costs of ownership or use that buyers freely choose to incur for
their own benefit in order to drive the vehicle. They are more
akin to post-revocation care and custody costs courts have
awarded as reasonably incurred in order maintain and protect the
goods for the seller’s benefit pending the seller’s retrieval of the
19
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
goods. The few cases that have analyzed whether registration
renewal fees or similar fees are among the types of costs that may
be recovered as incidental damages are in accord with our view.
(See, e.g., Jacobs v. Rosemount Dodge-Winnebago South (Minn.
1981) 310 N.W.2d 71, 77 [awarding all licensing fees paid from
the date of revocation through trial on the ground that the buyers
paid these fees in fulfillment of their post-revocation duty to hold
the defective motorhome with reasonable care until the seller
retrieved it].) We therefore conclude that registration renewal
and nonoperation fees paid after the manufacturer’s duty to
promptly repurchase or replace the vehicle arises are recoverable
as incidental damages incurred in the care and custody of a
defective vehicle.
2. Causation
We next consider whether Kirzhner’s registration renewal
and nonoperation fees “result[ed] from” or were incurred “incident
to” Mercedes’s breach or other violation of the Act. (Cal. U. Com.
Code, § 2715, subd. (1).) Kirzhner argues the he incurred the fees
as a result of several different alleged breaches, including
Mercedes’s alleged (1) breach of the implied warranty of
merchantability; (2) breach of its duty to repair under its express
written warranty; and (3) breach of its duty under the Act to
promptly repurchase the vehicle after a reasonable number of
repair attempts. We conclude that Kirzhner is entitled to recover
only those fees incurred and paid as a result of Mercedes’s failure
to promptly provide him with restitution.
In general, incidental damages incurred as a result of the
seller’s breach of its duties under its express and implied
warranties to deliver a merchantable and defect-free vehicle or to
repair the vehicle are recoverable under the Act. Such damages
20
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
would include the types of exemplar costs listed in the Act—i.e.,
“repair, towing, and rental car costs” (§ 1793.2, subd. (d)(2)(B))—
because such costs “result[] from” and are incurred “incident to”
(Cal. U. Com. Code, § 2715, subd. (1)) the defect itself and the
failure to repair the defect. Stated differently, the causal link is
clear with respect to these types of costs since the buyer would not
have incurred them but for the breach. To provide an example,
where a vehicle’s defective engine breaks down and the vehicle
ceases to function, a buyer may incur costs in towing the vehicle
to a repair facility, additional costs in repairing the vehicle, and
further costs in renting a car while the defective vehicle is being
repaired. All such costs are recoverable as resulting from the
manufacturer’s failure to provide the buyer with a defect-free
vehicle, since the costs would not have been incurred but for the
defect.
By contrast, Kirzhner would have incurred and paid
registration renewal or nonoperation fees even if his vehicle had
been defect-free and even if Mercedes had been successful in
repairing the defects. We therefore cannot conclude that
Kirzhner would not have incurred the fees but for the fact that
Mercedes provided him with a defective vehicle that never
conformed to its warranties. As many courts have held, “[a]n
expense will not ordinarily be considered as an item of incidental
or consequential damage to a breach of warranty when the buyer
would have incurred the claimed expense even if the product or
goods had been as warranted.” (Delhomme Industries, Inc. v.
Houston Beechcraft, Inc. (5th Cir. 1984) 735 F.2d 177, 185–186;
accord, Industrial Graphics, Inc. v. Asahi Corp. (D. Minn. 1980)
485 F. Supp. 793, 808 [overhead expenses were “not recoverable
in total” because they “would have been incurred . . . even if the
[goods] had been as warranted[,]” but they were recoverable in
21
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
the amount greater than the buyer would have otherwise
expended had the goods been defect-free]; Cal. U. Com. Code,
§ 1305, subd. (a) [the goal is to put the “aggrieved party . . . in as
good a position as if the other party had fully performed”].)
In a different case, there may be unique facts presented
under which registration renewal fees could be found to have been
caused by a manufacturer’s breach of express or implied
warranties. For example, if the buyer could not use the vehicle
due to the defects and was forced to acquire a substitute vehicle
as cover, the buyer might be able to recover the additional
registration fee incurred and paid on the substitute vehicle. But
because registration renewal fees are a standard cost of owning or
leasing any vehicle, defective or not, they will normally not be
recoverable as incidental damages resulting from a breach of an
express or implied warranty. Here, Kirzhner does not allege any
facts tending to show that he incurred increased or additional
registration fees that he would not have otherwise paid absent his
vehicle’s defects and Mercedes’s failure to repair. Simply put, the
causal link between Mercedes’s alleged breach of implied or
express warranties and Kirzhner’s payment of registration
renewal and nonoperation fees is missing.
Kirzhner is entitled, however, to recover any registration
renewal and nonoperation fees he incurred after the date
Mercedes failed to promptly provide him with restitution. At this
point in time, when the buyer or lessee has a greatly diminished
interest in the vehicle and payment of the fees primarily benefits
the manufacturer, it is reasonable to conclude that the fees
“result[ed] from” and were incurred “incident to” the
manufacturer’s delay. (Cal. U. Com. Code, § 2715, subd. (1).)
22
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
We provide the following hypothetical scenario to illustrate:
A buyer first presents a defective car to a manufacturer for repair
three months after purchase. The manufacturer is unable to
repair the car during the first repair attempt or three subsequent
repair attempts over the next four months, triggering a
presumption under section 1793.22, subdivision (b)(2) that a
reasonable number of repair attempts have been made. The
manufacturer nevertheless delays providing the buyer with
restitution or a replacement vehicle and, six months later, the
buyer incurs a registration renewal fee. The buyer pays the fee
and the very next day the manufacturer finally repurchases or
replaces the vehicle. The payment of the fee, while legally
required, was not a standard cost of ownership or use of the
vehicle since the buyer had a lessened ownership interest at the
time the fee was paid and was simply waiting for the
manufacturer to comply with its duty to promptly repurchase or
replace the vehicle. The fee covers the vehicle for an entire year
but, now that the vehicle is back in the manufacturer’s ownership
and possession, its payment benefits the manufacturer. Even
under a less extreme hypothetical scenario where the buyer
continues to possess and even use the car for some time after
payment of the registration renewal fee, the fee still benefits the
manufacturer as it might finally comply with its duty to
repurchase or replace the vehicle at any moment. Under either
scenario, a trier of fact may reasonably conclude that the buyer
would not have paid the registration renewal fee but for the
manufacturer’s delay in repurchasing or replacing the vehicle.
In short, we conclude that Kirzhner may recover as
incidental damages only those registration renewal and
nonoperation fees resulting from Mercedes’s alleged breach of its
duty under section 1793.2, subdivision (d)(2) to promptly provide
23
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
him with restitution. He is not entitled to recover any
registration renewal and nonoperation fees he paid prior to
Mercedes’s alleged delay because those fees were not caused by
Mercedes’s breach or other violation of the Act.
C. Incidental Damages May Be Based on Violations of
the Act
Mercedes argues that its duty under section 1793.2,
subdivision (d)(2) to promptly provide restitution or a replacement
vehicle after a reasonable number of repair attempts cannot serve
as a basis for incidental damages because this duty does not
constitute an independent ground for liability under the Act.
Mercedes further asserts that the question of whether a
manufacturer complied with its obligation to promptly provide
restitution or a replacement vehicle is relevant only to the buyer’s
potential recovery of civil penalties for the manufacturer’s willful
failure to comply with the Act. Since its section 998 offer did not
include an offer to pay civil penalties, Mercedes believes the issue
of whether it failed to promptly provide restitution is not
presently before us in this case.
Mercedes is correct that a manufacturer’s willful failure to
promptly provide restitution or a replacement vehicle may result
in an award of civil penalties pursuant to section 1794. (§ 1794,
subds. (c) & (e)(1); Lukather v. General Motors, LLC (2010) 181
Cal. App. 4th 1041, 1051–1052 (Lukather).) But section 1794 also
allows buyers to recover damages for nonwillful violations of the
Act. (Kwan v. Mercedes-Benz of North America, Inc. (1994) 23
Cal. App. 4th 174, 184 (Kwan).) Subdivision (a) of section 1794
allows a buyer “who is damaged by a failure to comply with any
obligation under [the Act] or under an implied or express
warranty or service contract” to “bring an action for the recovery
of damages.” (§ 1794, subd. (a), italics added.) The Act imposes
24
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
several affirmative obligations on manufacturers in addition to
the requirement that they comply with their own warranties.
These obligations include maintaining “sufficient service and
repair facilities” (§ 1793.2, subd. (a)(1)(A)); commencing repairs
“within a reasonable time” (§ 1793.2, subd. (b)); completing
repairs “within 30 days” (ibid.); and “promptly” replacing or
providing restitution for those vehicles the manufacturer cannot
repair after a reasonable number of attempts (§ 1793.2, subd.
(d)(2); accord, Jiagbogu, supra, 118 Cal.App.4th at p. 1244). The
Act does not indicate that a buyer may recover only civil
penalties—and not damages—for certain violations of the Act’s
obligations, as Mercedes contends. In fact, the civil penalty
provision set forth in section 1794, subdivision (c) indicates the
opposite, providing that “[i]f the buyer establishes that the failure
to comply was willful, the judgment may include, in addition to
the amounts recovered under subdivision (a), a civil penalty . . . .”
(§ 1794, subd. (c), italics added.) Thus, the plain language of this
section makes clear that the Act creates a “two-tier system of
damages” for willful and negligent violations of any of the Act’s
affirmative obligations. (Kwan, at p. 184.)
The Act’s legislative history supports the above
interpretation. Section 1794 originally provided that consumers
who were injured by “willful” violations of the Act could bring an
action “to recover 3 times actual damages plus attorney’s fees.”
(Legis. Counsel’s Dig., Assem. Bill No. 3560 (1981–1982 Reg.
Sess.).) It was amended in 1982 to expressly include a remedy for
nonwillful violations of the Act’s statutory obligations, which was
previously only available under the common law doctrine of
negligence per se. (Dept. of Consumer Affairs, Explanation and
Analysis of Assem. Bill No. 3560 (1981–1982 Reg. Sess.) March
1982, pp. 4–5, 10.) The amendment thus “entitle[d] a buyer to
25
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
recover damages . . . for nonwilful [sic] (negligent) Song–Beverly
violations by a warrantor, in addition to the buyer’s present right
to recover [civil penalties] for wilful [sic] (intentional) violations.”
(Dept. of Consumer Affairs, Analysis of Assem. Bill No. 3324
(1979–1980 Reg. Sess.).) Accordingly, buyers may seek incidental
damages resulting from a manufacturer’s alleged failure to
promptly provide restitution or a replacement vehicle.
D. The Section 998 Offer Does Not Bar Recovery
Mercedes argues that Kirzhner is precluded from showing
that his registration renewal and nonoperation fees resulted from
any of Mercedes’s alleged breaches because the section 998 offer
does not constitute an admission that Mercedes’s breached its
warranty or otherwise violated the Act. It is true that a section
998 offer is not an adjudication of liability. (Milicevich v.
Sacramento Medical Center (1984) 155 Cal. App. 3d 997, 1004.) It
does not follow, however, that Kirzhner is precluded from showing
he is entitled to recover the fees as incidental damages, as
Mercedes seems to suggest. The section 998 offer, accepted by
Kirzhner, states that Mercedes will “make restitution in an
amount equal to the actual price paid or payable . . . including
any collateral charges . . . plus incidental damages to which the
buyer is entitled under Section 1794 . . . all to be determined by
court motion if the parties cannot agree.” By offering to pay
incidental damages, the section 998 offer presumes liability with
the precise amount of damages to be later agreed upon by the
parties or ruled upon by a court. In other words, Mercedes “has
already conceded that it would be liable for incidental damages;
the question is only whether the damages alleged are, in fact,
incidental.” (Carrion v. Kirby Oldsmobile, Inc. (C.D.Cal., Nov. 9,
2018, No. SACV 17-00231 JVS(JCGx)) 2018 WL 6137127, p. *2
[rejecting similar argument made in relation to a settlement
26
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
agreement providing for reimbursement of an unspecified amount
of incidental damages].) Thus, the section 998 offer does not
prevent Kirzhner from seeking recovery of the fees as incidental
damages.
E. Remand is Necessary on the Issue of Causation
Although the section 998 offer does not preclude Kirzhner
from seeking incidental damages, and although we conclude that
registration renewal and nonoperation fees incurred as a result of
a manufacturer’s failure to promptly provide restitution or a
replacement vehicle under section 1793.2, subdivision (d)(2) are
recoverable as incidental damages, we are unable to evaluate
whether any of the fees Kirzhner paid resulted from Mercedes’s
failure to promptly provide him with restitution. The duty to
promptly provide restitution arises only after the manufacturer is
unable to repair the vehicle after being afforded the opportunity
to make a reasonable number of repair attempts. (Krotin v.
Porsche Cars North America, Inc. (1995) 38 Cal. App. 4th 294, 303.)
This case comes to us upon an early section 998 settlement offer
and, consequentially, no record has been developed to show the
dates on which Kirzhner presented the vehicle for repair; the total
number of attempted repairs; how long the repairs took; whether
Mercedes attempted to fix the same problem or different
problems; whether any of the repairs were successful; or whether
any of the Act’s presumptions, set forth in section 1793.22,
subdivision (b), that a “reasonable number of attempts have been
made,” apply. We accordingly have no way of knowing when, if
ever, Mercedes’s duty to promptly provide restitution arose and
when its breach of this duty occurred.
Kirzhner argues that, because he commenced this lawsuit in
September 2014 and Mercedes did not provide him with
27
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
restitution until August 2015, Mercedes failed to promptly
provide him with restitution. But, even though we agree that a
delay of nearly a year from the date the manufacturer’s duty to
provide restitution arises to the date it actually provides
restitution is not prompt, Kirzhner’s filing of a lawsuit is not
evidence that Mercedes’s duty had already arisen by the date the
lawsuit was filed. We note, however, that while Kirzhner must
show when the breach arose in order to recover his registration
renewal and nonoperation fees as incidental damages, he need not
prove that Mercedes’s failure to promptly provide him with
restitution was willful since he is not seeking civil penalties.
Thus, Mercedes cannot escape its obligation to pay the fees as
incidental damages by, for example, showing that it held a “good
faith and reasonable belief” that its repurchase obligation had not
yet arisen at the time Kirzhner incurred and paid the fees.
(Kwan, supra, 23 Cal.App.4th at p. 185.) Instead, Kirzhner may
recover any fees resulting from Mercedes’s negligent failure to
promptly provide him with restitution. We additionally note that
if Kirzhner proves that Mercedes’s repurchase obligation had, in
fact, arisen by the time he filed suit, he will likely be able to
recover the nonoperation fee he paid in June 2015 since a delay of
at least nine months from the time he filed suit to the date he
paid the fee is not prompt.
We acknowledge that our holding requires a buyer to prove
not only that the manufacturer’s duty to provide restitution or a
replacement vehicle arose but also that a manufacturer failed to
promptly comply with that duty in order to recover restitution
renewal and nonoperation fees as incidental damages. But we
believe that, in many cases, this added burden will not be difficult
to meet. The question of whether a manufacturer has any
obligation to provide restitution or a replacement vehicle is
28
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
almost always the key issue in dispute in these cases, with
manufacturers arguing that they have not yet been afforded with
the opportunity to make a reasonable number of repair attempts
or denying that the vehicle is defective. (See, e.g., Ibrahim v.
Ford Motor Co. (1989) 214 Cal. App. 3d 878, 888; Lundy v. Ford
Motor Co. (2001) 87 Cal. App. 4th 472, 479–480.) As such, courts
regularly determine whether and when the manufacturer’s duty
to provide restitution or a replacement vehicle arose. (See, e.g.,
Lukather, supra, 181 Cal.App.4th at p. 1052 [determining the
date by which the manufacturer’s duty arose]; Robertson v.
Fleetwood Travel Trailers of California, Inc. (2006) 144
Cal. App. 4th 785, 804 [same].) If the buyer succeeds in proving
that the duty arose well before filing suit, it should not be difficult
for the buyer to also prove that the manufacturer failed to act
promptly since the buyer had to resort to a lawsuit in order to get
the manufacturer to finally comply with its duty.
To summarize, although the parties’ section 998 settlement
presumes liability, it leaves the amount of damages to be awarded
open and requires a court to determine the amount “if the parties
cannot agree.” Here, the parties could not agree on an amount
and dispute whether Mercedes’s alleged delay caused Kirzhner to
incur any of his registration renewal or nonoperation fees as
incidental damages. We accordingly reverse the judgment of the
Court of Appeal with directions to remand the matter for further
proceedings consistent with our opinion.
III. DISPOSITION
In conclusion, we hold that registration renewal and
nonoperation fees are not recoverable as collateral charges under
section 1793.2, subdivision (d)(2)(B) of the Act because they are
not collateral to the price paid for the vehicle, but they are
29
KIRZHNER v. MERCEDES-BENZ USA, LLC
Opinion of the Court by Groban, J.
recoverable as incidental damages under section 1794 of the Act if
they were incurred and paid as a result of a manufacturer’s
failure to promptly provide a replacement vehicle or restitution
under section 1793.2, subdivision (d)(2). Because the disputed
issue of causation has not yet been adjudicated, we reverse the
judgment of the Court of Appeal and remand with directions to
remand the case to the trial court for proceedings consistent with
this opinion.
GROBAN, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CHIN, J.
CORRIGAN, J.
LIU, J.
CUÉLLAR, J.
KRUGER, J.
30
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Kirzhner v. Mercedes-Benz USA, LLC
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XX 18 Cal. App. 5th 453
Rehearing Granted
__________________________________________________________________________________
Opinion No. S246444
Date Filed: July 27, 2020
__________________________________________________________________________________
Court: Superior
County: Orange
Judge: James Di Cesare
__________________________________________________________________________________
Counsel:
Anderson Law Firm, Martin W. Anderson; Law Office of Jeffrey Kane and Jeffrey Kane for Plaintiff and
Appellant.
Universal & Shannon, Jon D. Universal, Marie L. Wrighten-Douglass, Patrea R. Bullock, Jay C. Patterson
and James P. Mayo for Defendant and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Martin W. Anderson
Anderson Law Firm
2070 North Tustin Avenue
Santa Ana, CA 92705
(714) 516-2700
James P. Mayo
Universal & Shannon, LLP
2240 Douglas Blvd., #290
Roseville, CA 95661
(916) 780-4050