Opinion
August 22, 2000.
Cough White Brenner Howard, Albany (Paul Feigenbaum of counsel), for defendants.
Sadis Goldberg L. L. C., New York City (Douglas R. Hirsch of counsel), for plaintiff.
In June 1999, plaintiff, Mark A. DiCintio, leased a 1999 Jeep Grand Laredo, manufactured by defendant Daimler-Chrysler Corporation ("Chrysler"). from defendant Adzam Auto Sales, Inc. ("Adzam") for a monthly payment of nearly $400. Plaintiff received several written warranties, including a three year or 36,000 mile warranty. Title to the vehicle did not pass to plaintiff. At the conclusion of the three year lease term, plaintiff had the option to purchase the vehicle for its projected residual value.
Plaintiff commenced the instant action against defendants alleging that the car is defective and cannot be utilized for its intended use. In his complaint, plaintiff claims that he brought the vehicle in for repairs approximately six or seven times within the first four months of the lease. He claims numerous violations of the warranties, including a defective transmission and defective steering. He further alleges that Chrysler has failed to honor the warranty in that it has not repaired the vehicle or replaced.
Chrysler rejected plaintiff's letter, dated October 28, 1999, wherein he revoked his acceptance of the car and the lease.
Plaintiff alleges five causes of action: (1) breach of written warranty against Chrysler under the Magnuson-Moss Warranty Act (the "Warranty Act"), 15 U.S.C. § 2301 et. seq., (2) breach of implied warranty against defendants under the Warranty Act and N Y UCC § 2-314 and § 2-318; (3) revocation of acceptance against defendants under the Warranty Act; (4) costs, fees, and expenses against defendants under the Warranty Act; and (5) improper delivery against defendants under N Y UCC § 2-601.
In their instant pre-answer dismissal motion, defendants contend that the first cause of action against Chrysler based on violations of the Warranty Act should be dismissed because it does not apply to the instant auto lease given that the lease contains an option to purchase the car at the conclusion of the lease term. They argue that the plain language of the Warranty Act provides that warranty obligations created under it do not arise unless there has been an initial "sale" of the consumer product (see, 15 U.S.C. § 2301 (6), (7))
The Warranty Act provides that a consumer who is damaged by a warrantor's failure to comply with an implied or written warranty may recover damages and equitable relief (see, 15 U.S.C. § 2301 (3) [The term "consumer" means a buyer (other than for purposes of resale) of any consumer product, any person to whom such product is transferred during the duration of an implied or written warranty (or service contract) applicable to the product, and any other person who is entitled by the terms of such warranty (or service contract) or under applicable State law to enforce against the warrantor (or service contractor) the obligations of the warranty (or service contract)).
Plaintiff, on the other hand, argues that he is an individual to whom a consumer product was transferred, and, as statutes with a remedial purpose are to be construed broadly, the Warranty Act applies to this action. In any event, plaintiff contends that a lease with an option to purchase, as here, is covered by the Warranty Act because it. is analogous to a sale.
The few New York courts that have addressed this issue have reached different conclusions (compare, Stuart Becker Co., P.C. v. Steven Kessler Motor Cars, Inc., 135 Misc.2d 1069, 1074-75 [Sup Ct, N Y County 1987] [the lease is analogous to a sale for the purposes of the Warranty Act because it contains most of the characteristics of a sale, such as a personal guarantee, an option to purchase, and lessee responsibility for insurance and repairs); Business Modeling Techniques, Inc. v. General Motors Corp., 123 Misc.2d 605, 606 [Sup Ct, Monroe County 1984] [plaintiff is a consumer entitled to invoke the protections of the Warranty because its provisions extend to individual's to whom the product is transferred and to the person in possession of the product during the time in which the warranty is in effect], with Brandt Brandt v. Porsche/Audi Manhattan, Inc., NYLJ, at 12 [Sup Ct, N Y County, Oct. 31, 1986) [dismissing causes of action seeking recovery pursuant to the Warranty Act because "the plaintiff was not a buyer but a lessee and the fact that plaintiff later bought the car does not change its status at the time of the alleged breach"), affd 130 A.D.2d 986 (1st Dept 1987];Barco Auto Leasing Corp. v. PSI Cosmetics, Inc., 125 Misc.2d 68, 70, n 1 [Civil Ct, New York County, 1984] ("coverage under the statute is lacking since no "sale' occurred.")). Decisions in other jurisdictions also show divergent results (see, Corral v. Rollins Protective Services Co., 732 P.2d 1260, 1267 [Kan Sup Ct 1987] ["the Act literally covers only warranties on a consumer product "sold' to a consumer"]; Sellers v. Frank Griffin AMC Jeep, Inc., 526 So.2d 147, 156 [Fla Dist Ct of App 1988] [the Warranty Act seeks to provide adequate warranty protection to consumers acquiring goods from broadly defined suppliers, but it speaks in terms of an initial sale to a buyer in which warranties are made by the seller, and as such, it does not apply to a pure lease of automobiles or other consumer goods unless the lease bears a significant relationship to an actual purchase and sale]; Freeman v. Hubco Leasing, Inc., 324 S.E.2d 462, 467 [Ga Sup Ct 1985] [lease of a new automobile is covered by the Act]; Henderson v. Benson-Hartman Motors, Inc., 1983 WL 160532 [Pa Ct of Common Pleas 1983] [Warranty Act applies to a transaction cast in the form of a lease that has most of the characteristics of a sale]).
Plaintiff's reliance on Bever v. DaimlerChrysler Corp., (Sup Ct, Suffolk County, April 10, 2000) to support his argument that auto leases with an option to purchase, as here, are covered by the Warranty Act is misplaced. Contrary to plaintiff's reading, the court in Beyer merely noted the split in authority on the issue and did not directly resolve the issue in denying the dismissal motion.
Given the divergency, this Court turns to the Warranty Acts legislative history to resolve this issue. Numerous sources indicate that the primary purpose of the Warranty Act was to protect the public interest with respect to consumer products. For example, the House of Representative Report stated that the goals of the legislation include making "warranties on consumer products more readily understood and enforceable" and providing "the Federal Trade Commission (FTC) with means of better protecting consumers" (see, H.R. Rep. No. 1107, 93rd Cong., 2nd Sess. reprinted in 1974 US Code Cong. Admin. News 7702). More importantly, there was concern about these issues as it related to the automobile industry (see, id. 7708 ["In mid-1965 the FTC directed its staff to undertake a limited field investigation to determine whether there was sufficient evidence of the failure of American car manufacturers to perform in accordance with their new car warranties to justify additional steps being taken to protect the public interest."]; Motor Vehicle Manufacturers Assoc. of the United States. Inc. v. Abrains, 899 F.2d 1315, 1317 (2d Cir 19903 ["After many years of study, and partially in response to `a rising tide of complaints . . . from irate owners of motor vehicles complaining that automobile manufacturers and dealers were not performing in accordance with the warranties on their automobiles,' Congress passed the Magnuson-Moss Warranty Act in 1975."], quoting H.R. Rep. No. 1107, cert. denied 499 U.S. 912). Thus, the goal of the Act is to protect those who use warranted goods with a broad interpretation of who is included in the definition of "consumer" (see, Stuart Becker Co., P.C., supra, 135 Misc.2d, at 1074 ["Narrow or inclusive interpretation of a "consumer' has been previously rejected"];Business Modeling Techniques, Inc., supra, 123 Misc.2d at 606 ["the broad purpose of the Act [is] to protect the value in the use of warranted goods"]). Indeed, to that end, courts have ruled that the language in such remedial legislation "should be construed liberally to effectuate its purpose" (see, Schiavone v. Pearce, 79 F.3d 248, 256 [2d Cir 1996]).
Against this background, this Court concludes that the Warranty Act is applicable to plaintiff even though the lease at issue provides him with the option to purchase the vehicle at the end of the lease period. It would make little sense to conclude that plaintiff is not entitled to the Warranty Act's benefits during the three year lease term, but that he would be protected by the act if he chose to purchase the car upon the lease's expiration three years later. The Warranty Act's objective is clear — to protect the public interest against manufacturer's abuses by enforcing warranties on consumer products regardless of whether an individual is a lessee or a consumer.
Accordingly, defendants' motion seeking to dismiss the first cause of action against Chrysler is denied.
That branch of defendants' motion to dismiss the second cause of action against defendants for breach of implied warranty under the Warranty Act is granted as to Chrysler and denied as to Adzam. New York does not recognize a breach of implied warranty claim in which economic losses have been sustained absent privity of contract ( see, Gordon v. Ford Motor Co., 239 A.D.2d 156, 156 [1st Dept 1997)). Despite plaintiff's attempts, privity between him and Chrysler cannot be based on the fact that Adzam is Chrysler's sales agent. Here, the language in the Sales and Service Agreement between Chrysler and Adzam clearly provides that there is no principal/agent relationship between them and "under no circumstances is either party to be considered the agent of the other" (see, Goodrich Reply Aff., Ex. A, Sales and Service Agreement, at ¶ 36).
Adzam argues that this claim should be dismissed as against it because the Warranty Act is inapplicable to this action. The argument is unavailing. As noted earlier, this Court found to the contrary.
For the same reasons set forth above, plaintiff's third cause of action against Chrysler for rejecting his revocation of the lease is dismissed. This cause of action is also dismissed as against Adzam because plaintiff has failed to allege that he notified Adzam of his intent to revoke his prior acceptance of the car (see, N Y UCC § 2-608 (2)). Further, given that Adzam is not an agent of Chrysler, plaintiff's revocation notification to Chrysler cannot be imputed to Adzam.
The Court denies defendants' motion to dismiss the fourth cause of action given that the Warranty Act permits a prevailing party to recover costs and expenses, including attorneys' fees (see, 15 U.S.C. § 2310 (d) (2)).
In his fifth cause of action, plaintiff alleges that the car was delivered in violation of N Y UCC § 2-601 (a) given that it failed to conform to the contract for a new vehicle. In moving to dismiss this claim, defendants argue that there is no privity of contract between plaintiff and Chrysler, that plaintiff failed to notify Adzam properly, and that plaintiff's acceptance precludes any rejection. Plaintiff, on the other hand counters, that a consumer may maintain a cause of action for improper delivery regardless of privity and that he properly rejected the automobile.
Pursuant to N Y UCC § 2-711 and § 2-713, the only remedies available for improper delivery are against the seller (see, Curtis v. Fordham Chrysler Plymouth, Inc., 81 Misc.2d 566, 568 [Civil Court, Bronx County 1975] ["Chrysler did not sell the car to plaintiff and it is difficult to see how an action for the purchase price would lie against Chrysler since the underlying cause of action is based upon recission."]). As such, this cause of action cannot be asserted against Chrysler.
As to Adzam, rejection of goods "is ineffective unless the buyer seasonably notifies the seller" (see, N Y UCC § 2-602 (1)). Absent from the complaint is any allegation that plaintiff notified Adzam of his rejection of the car. In fact, plaintiff states in his affidavit that he had a discussion with an individual whom he believes was Adzam's general manager, and that he informed such individual "that I wished to either terminate the Lease or have another equivalent vehicle substituted into the Lease" (DiCintio Opposition Aff., ¶ 23).
Accordingly, defendants' motion to dismiss the fifth cause of action is granted, and it is dismissed.
ORDERED that defendants' motion to dismiss the complaint is granted to the extent of dismissing the second cause of action as against Chrysler, the third and fifth causes of action as against both defendants, and is otherwise denied; and it is further, ordered that defendants are directed to serve an answer to the complaint within 10 days after service of a copy of this order with notice of entry.