Harmon v. Concord Volkswagen, Inc.

• Decision Date: 15 February 1991
• Parties: Joyce A. HARMON and Ronald W. Harmon, h/w, Plaintiffs, v. CONCORD VOLKSWAGEN, INC., d/b/a Concord Motors and its successor Union Park Pontiac and GMC Trucks, Inc. a/k/a Union Park Automotive Group d/b/a Union Park Chrysler Plymouth, and Chrysler Corporation, Defendants. . Submitted:
• Court: Delaware Superior Court

Page 696

598 A.2d 696

Joyce A. HARMON and Ronald W. Harmon, h/w, Plaintiffs, v. CONCORD VOLKSWAGEN, INC., d/b/a Concord Motors and its successor Union Park Pontiac and GMC Trucks, Inc. a/k/a Union Park Automotive Group d/b/a Union Park Chrysler Plymouth, and Chrysler Corporation, Defendants.

Superior Court of Delaware New Castle County.

Submitted: Feb. 15, 1991.

Decided: April 8, 1991.

Revised: June 19, 1991.

On Motion of Defendants for Partial Summary Judgment--GRANTED in part; DENIED in part.

Muriel L.D. Testa, of Sidney Balick & Associates, Wilmington, for plaintiffs.

David G. Culley, of Tybout, Redfearn & Pell, Wilmington, for defendant Concord Volkswagen, Inc.

Roger D. Landon, of Heckler & Cattie, Wilmington, and Michael J. Goggins, of Liebert, Short & Hirshland, Philadelphia, Pa., for defendant Chrysler Corp.

OPINION

TAYLOR, Judge.

Plaintiff Joyce A. Harmon [J. Harmon, or plaintiff] seeks compensatory damages, punitive and treble damages and attorney's fees for losses resulting from the purchase of a 1985 new Plymouth Horizon automobile [car] on September 5, 1985. Although the plaintiff returned the car to the manufacturer's dealer for repair many times, the problems were not corrected. On one occasion plaintiff Ronald Harmon [R. Harmon] was injured in an accident which resulted from the car stalling. The complaint invokes various statutes enacted for the protection of consumers. This motion focuses on the claims based on the Delaware Automobile Lemon Law, 6 Del.C. § 5002, et seq., [Lemon Law] and the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301, et seq. [Magnuson-Moss Act].

FACTS

Plaintiff alleges that immediately after receiving the car she began having trouble with the car stalling and by November, 1985 she had returned the car 5 times to correct that problem. On January 10, 1986 she asked Chrysler to accept return of the car and to refund the price. She also requested arbitration. In March, 1986 the Arbitration Board ordered corrective repair. In May, 1986 plaintiff reported the condition had not been corrected. A further arbitration in July, 1986 again ordered repairs. In September, 1986 plaintiff's attorney demanded refund and Chrysler refused to refund or replace the car. In October, 1986 the car was returned for repairs and remained in repair for 38 days. On November 24, 1986 the car was towed for repair and was not returned until December 24, 1986. On that day the car stalled causing brakes to fail which resulted in an accident injuring R. Harmon. Thereafter, the car was towed to a Chrysler dealer in Delaware where it remained until it was repossessed by Chrysler Credit Corporation and was thereafter sold by that company.

I. LEMON LAW

A.

The first issue is whether the Delaware Lemon Law applies to this car. Defendants contend that since the car was purchased in Pennsylvania, the Delaware Lemon Law does not apply. The affidavit of plaintiff J. Harmon dated August 16, 1990 states that Concord Motors' [Concord] salesman who handled the sale of the car knew that she was a Delaware resident, that the car was to be titled in her name in Delaware, to be used for her personal and family use and that Concord processed the paperwork for registering the car in Delaware. This is not denied.

The Lemon Law applies to "any passenger motor vehicle, except motorcycles, which is leased or bought in Delaware or registered by the Division of Motor Vehicles in the Department of Safety except the living facilities of motor homes." 6 Del.C. § 5001(5). Accepting the affidavit of J. Harmon as true, for purposes of this motion, this car is subject to the Lemon Law since, according to the affidavit of J. Harmon, the sale contemplated registration of the car in Delaware. Therefore, this new car which was registered in Delaware under the circumstances described above is within the protection of the Delaware Lemon Law. 6 Del.C. § 5002.

B.

Next, defendants contend that to permit the Lemon Law to extend to sales of cars which take place outside Delaware but are intended to be registered in Delaware would violate the Commerce Clause of the United States Constitution.

Chrysler contends that to apply the Delaware Lemon Law to the warranty with this car would violate the United States Supreme Court holding that the application of a state statute to commerce wholly outside of the state's borders violates the Commerce Clause of the United States Constitution, citing, Edgar v. Mite Corp., 457 U.S. 624, 642-43, 102 S.Ct. 2629, 2641, 73 L.Ed.2d 269, 283 (1982). This contention is based on Chrysler's view that the only pertinent considerations are where the car was purchased and the state of incorporation of the dealer. That position overlooks the nature of this claim, which centers upon a warranty given by the manufacturer, which does business in most, if not all, states, the manufacturer's efforts to repair the defect, and the fact that the car was sold with knowledge that it was purchased by a Delaware resident to be registered in Delaware and which probably would be serviced and repaired in Delaware.

Chrysler's arguments proceed on the assumption that the rights of the parties became fixed as of the sale and that since the sale occurred in Pennsylvania the rights under the manufacturer's warranty must be governed by Pennsylvania law. This is an oversimplification of principles of conflicts of law. Important factors which must be considered in determining the applicable law are the residence or place of incorporation of the parties and the place of performance of the contractual obligations. Restatement (Second) of Conflicts of Law § 188 (1971). Cf. 2 J. Beale, A Treatise on the Conflict of Laws § 355.1 (1935); H. Goodrich, Handbook of the Conflict of Laws § 110 at 324-25 (1949).

Here, the manufacturer which issued the warranty was a Delaware corporation and the purchaser was a Delaware resident. Moreover, since the purchaser's residence and the place of registration of the car was Delaware, the probable place where the warranty would be implemented by repairs to the car was Delaware. The situs of the subject matter of the contract also was Delaware. Restatement (Second) of Conflict of Laws § 188 comment e. The principles of conflicts of law require that the enforcement of Chrysler's warranty for this car should be determined by Delaware law, which is the Delaware Lemon Law.

The state statute application which Edgar bars is "application of a state statute to commerce that takes place wholly outside of the State's borders". (Emphasis added). The "commerce" to which the Delaware Lemon Law is being applied in this case did not take place wholly outside Delaware. While the sale took place outside Delaware, the manufacturer's warranty which is involved in this case was given by a manufacturer which sells its cars nationwide and repairs contemplated by the warranty take place wherever the car is located when repairs are needed. Therefore, the performance of the warranty obligations takes place where the car is located. Therefore, it cannot be said that the "commerce" involving this case was intended to be wholly outside Delaware. It has been discussed above that the probable situs of the performance of the warranty contract was Delaware. Restatement comment e.

Defendants' reliance on Edgar v. Mite, 457 U.S. 624, 102 S.Ct. 2629, 73 L.Ed.2d 269 (1982) does not support its position here. Edgar involved an Illinois statute which imposed requirements for takeover offers for any corporation where Illinois shareholders owned 10 percent or more of the shares of the target company. The issue was whether the Williams Act, a federal statute which required various information to be filed with the SEC in the event of a contemplated corporate control contests and imposed certain restraints, preempted the Illinois statute. The Supreme Court found the statute unconstitutional for a number of reasons. It did note that application of a state statute to "commerce that takes place wholly outside of the State's borders" is prohibited. However, following the quoted language, it noted "the limits on a State's power to enact substantive legislation are similar to the limits on the jurisdiction of state courts." The following quotation demonstrates the absence of rigidity in applying the Commerce Clause:

Not every exercise of state power with some impact on interstate commerce is invalid. A state statute must be upheld if it "regulates even-handedly to effectuate a legitimate local interest, and its effects on interstate commerce are only incidental ... unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 847, 25 L.Ed.2d 174 (1970), citing Huron Cement Co. v. Detroit, 362 U.S. 440, 80 S.Ct. 813, 4 L.Ed.2d 852, 78 A.L.R.2d 1294 (1960).

Edgar, 457 U.S. at 640, 102 S.Ct. at 2639, 73 L.Ed.2d at 282.

If, as Edgar indicates, the State's power in this area is similar to that which determines the jurisdiction of this Court, since it has been determined above that this Court does have jurisdiction over Chrysler for purposes of this case, the application of the Lemon Law to Chrysler in this case is permissible. Chrysler is incorporated in this State, maintains an automobile plant in this State and in this particular matter participated in proceedings held by the Customer Arbitration Board in Delaware. Therefore, its relationship to this State and in this transaction far exceeds any "minimum contacts test".

An alternate test accepted in Edgar is whether this application of the Lemon Law "regulates even-handedly to effectuate a legitimate local interest, and its effects on interstate commerce are only incidental...."

The first consideration is whether the subject is a legitimate state interest.

The Delaware Lemon Law provides for safer cars on the highways by eliminating lemon cars from the highway and it protects its residents...