Gutierrez v. Carmax Auto Superstores Cal., F073215

• Decision Date: 30 January 2018
• Docket Number: F073215
• Court: California Court of Appeals Court of Appeals
• Parties: Tammy GUTIERREZ, Plaintiff and Appellant, v. CARMAX AUTO SUPERSTORES CALIFORNIA, Defendant and Respondent.

19 Cal.App.5th 1234

248 Cal.Rptr.3d 61

Tammy GUTIERREZ, Plaintiff and Appellant,

v.CARMAX AUTO SUPERSTORES CALIFORNIA, Defendant and Respondent.

F073215

Court of Appeal, Fifth District, California.

Filed January 30, 2018

As Modified on Denial of Rehearing February 22, 2018

FRANSON, J.

Plaintiff Tammy Gutierrez sued defendant CarMax Auto Superstores California, LLC (CarMax) alleging breaches of express and implied warranties, intentional and negligent misrepresentation, breach of contract, unfair competition under Business and Professions Code section 17200 (UCL), and a violation of the Consumer Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq. ). CarMax demurred to Gutierrez's third amended complaint and the trial court sustained the demurrer without leave to amend. Gutierrez appealed, contending her allegations about an undisclosed safety recall adequately stated causes of action for breach of an implied warranty of merchantability and violations of the UCL and CLRA.

As to the alleged breach of the implied warranty of merchantability, we conclude Gutierrez failed to adequately allege facts showing the existence of the safety recall relating to the vehicle's stop lamp switch rendered the vehicle unfit for ordinary purposes. Gutierrez did not allege the switch in her vehicle was actually defective and did not allege her use of the vehicle was restricted or impaired due to the recall.

In contrast, Gutierrez has alleged sufficient facts to establish CarMax engaged in unfair or deceptive practices in violation of the CLRA. Gutierrez alleged CarMax engaged in deceptive practices by (1) representing the vehicle passed a 125-point quality inspection and (2) failing to disclose the safety recall for the vehicle's stop lamp switch. She alleged the switch was a critical safety-related component of the vehicle's braking system and CarMax did not disclose the recall because it deemed making money more important than protecting its customers from dangers relating to serious safety recalls. As to the elements of reliance and the causation of harm, Gutierrez alleged she would not have purchased the vehicle if she had known its true condition, including recall history. Case law establishes this allegation adequately states Gutierrez suffered "any damage" as that term is used in the CLRA and, therefore, might be entitled to restitution under the statute. Also, the contractual limitations on remedies for a breach of warranty do not control or restrict the availability of restitution or other relief specified in the CLRA.

On the question whether Gutierrez pleaded sufficient facts to establish CarMax had a duty to disclose the safety recall, we conclude her allegations are sufficient. Gutierrez contends the duty to disclose existed because CarMax (1) had actual knowledge of the recall before the sale of the vehicle and (2) made partial representations about the vehicle that were misleading because the existence of the recall, a material fact, had not been disclosed. We conclude her allegations are sufficient to establish for pleading purposes the existence of the safety recall was a material fact and, by reasonable inference, the existence of CarMax's knowledge of the recall before the sale. As the stop lamp switch is related to the vehicle's braking and lighting systems, Gutierrez's allegations about the rigorous inspection of the vehicle's braking and lighting systems, and its misleading character in the absence of a disclosure about the safety recall, are sufficient to plead the remaining factual element of a duty to disclose. Therefore, we conclude she has alleged sufficient facts to state a claim for a deceptive practice actionable under the CLRA.

Gutierrez also has stated a cause of action under the UCL. We conclude the violation of the CLRA serves as the predicate violation of law necessary to establish the unlawful practice variety of unfair competition that is actionable under the UCL.

We therefore reverse the judgment of dismissal.

FACTS

On May 6, 2013, Gutierrez purchased a 2008 Hyundai Elantra from defendant CarMax at its dealership in Bakersfield. The vehicle came with a 30-day limited warranty. The vehicle's purchase agreement stated:

"The CarMax Warranty Brochure contains the details of the Limited Warranty.

"LIMITATION OF WARRANTIES: CARMAX MAKES NO EXPRESS WARRANTIES UNLESS SEPARATELY SET FORTH IN WRITING. ANY AND ALL IMPLIED WARRANTIES APPLICABLE TO THE PRODUCTS SOLD HEREUNDER, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,

ARE LIMITED TO THE DURATION OF THE WRITTEN LIMITED WARRANTY GIVEN BY CARMAX, IF ANY."

The document containing the limited warranty stated the duration of the warranty was 30 days and listed the systems covered. The document also stated: "The dealer will pay 100% of the labor and 100% of the parts for the covered systems that fail during the warranty period."

Before Gutierrez purchased the vehicle, she was advised by CarMax sales staff that the Hyundai was in excellent condition because it had passed a rigorous 125-point quality inspection. Gutierrez also received a document with the heading "CQI CarMax"¹ that stated: "This vehicle has passed the rigorous CarMax 125-Point Quality Inspection" and listed the 125 points. The following sentence appeared at the top of the document: "Your signed CQI certificate can be found in your vehicle's glove compartment."

At the time of the sale, the Hyundai was subject to a national recall relating to the stop lamp switch, which Gutierrez alleges was a critical safety-related component of the vehicle's braking system that materially affects a person's ability to operate the vehicle safely. She further alleges it is unsafe to operate a vehicle with a defective stop lamp switch, but has not alleged the switch on her vehicle malfunctioned or was actually defective.

CarMax did not disclose to Gutierrez that there was an outstanding safety recall relating to the stop lamp switch. The operative complaint does not explicitly address what CarMax knew about the recall at the time of sale. However, the complaint alleges CarMax "should have either disclosed to Gutierrez that the Hyundai was the subject of the recall, or had the safety recall work performed" and the only reason CarMax did not disclose the recall because it placed more importance on money than protecting its customers.² We conclude these allegations can be reasonably interpreted as implying CarMax actually knew the recall had been issued when it sold the Hyundai to Gutierrez. (See Code Civ. Proc., § 452 [construction of pleadings]; Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1401-1402, 45 Cal.Rptr.3d 525 [when construing a complaint, court assumes the truth of facts that (i) can be inferred reasonably from the allegations and exhibits and (ii) are favorable to the plaintiff].)

Shortly after Gutierrez purchased the vehicle, it began having transmission problems, which included making a grinding noise and failing to accelerate in traffic. Gutierrez presented the vehicle to CarMax for repairs on June 7, 2013. The transmission problem was a known defect for which Hyundai had issued a technical service bulletin. The June 7, 2013, repair order stated (1) the stop lamp switch was replaced because of recall campaign 110 and (2) the transmission failed a bulletin's stall test in second gear and the bulletin advised to replace the transmission. As advised in the bulletin, the transmission was replaced.³

PROCEEDINGS

In November 2014, Gutierrez prepared and filed a complaint against CarMax using a form complaint approved by the Judicial Council of California. Demurrers to her first and second amended complaints were filed and sustained with leave to amend.

In October 2015, Gutierrez's attorney prepared and filed the third amended complaint (complaint), which is the operative pleading in this appeal. In November 2015, CarMax filed another demurrer.

At a January 14, 2016, hearing, the trial court sustained the demurrer without leave to amend and directed CarMax to give notice of the order. The order stated the complaint failed to allege sufficient facts to constitute (1) a breach of warranty, (2) a misrepresentation that was not remedied or limited by the terms of the express warranty, or (3) a breach of contract. The order explained these conclusions by stating:

"The warranty was expressly limited to 30 days, and all the alleged misrepresentations [Gutierrez] complains of, were disclaimed by the warranty, or could not be reasonably relied upon due to the time limitations of the warranty. Since [Gutierrez] failed to present the subject vehicle for repair until after the warranty expired, no breach of a duty or contractual obligation, and no misrepresentation or reliance has yet to be sufficiently pleaded, and likely cannot be pleaded from the facts as alleged in the four attempts in this case."

The order also stated Gutierrez had not presented any facts or allegations that would cure the defects apparent on the face of the pleadings and, consequently, leave to amend was denied. In February 2016, Gutierrez filed a notice of appeal.

DISCUSSION

I. STANDARD OF REVIEW FOR DEMURRERS

When a demurrer is sustained, appellate courts conduct a de novo review to determine whether the pleading alleges facts sufficient to state a cause of action under any possible legal theory. ( City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 870, 62 Cal.Rptr.3d 614, 161 P.3d 1168 ( Dinuba ); Villery v. Department of Corrections & Rehabilitation (2016) 246 Cal.App.4th 407, 413, 200 Cal.Rptr.3d 896 ( Villery ).) Appellate courts treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law. ( Ibid. ) The pleader's contentions or conclusions of law are not controlling because appellate courts must independently decide questions of law without deference to the legal conclusions of the pleader or the trial court. ( Ibid...