Kwan v. Mercedes-Benz of North America, Inc.

• Decision Date: 11 March 1994
• Docket Number: No. A059251,MERCEDES-BENZ,A059251
• Citation: 23 Cal.App.4th 174,28 Cal.Rptr.2d 371
• Court: California Court of Appeals Court of Appeals
• Parties: , 23 UCC Rep.Serv.2d 99 Anthony KWAN, Plaintiff and Respondent, v.OF NORTH AMERICA, INC., Defendant and Appellant.

Page 371

28 Cal.Rptr.2d 371

23 Cal.App.4th 174, 23 UCC Rep.Serv.2d 99

Anthony KWAN, Plaintiff and Respondent, v. MERCEDES-BENZ OF NORTH AMERICA, INC., Defendant and Appellant.

No. A059251.

Court of Appeal, First District, Division 3, California.

March 11, 1994.

James E. Ratcliff, Jr., Benjamin H. Ballard III, Thacher, Albrecht & Ratcliff, San Francisco, for defendant and appellant.

Bryan Kemnitzer, Nancy Barron, Kemnitzer, Dickinson, Anderson & Barron, San Francisco, for plaintiff and respondent.

WERDEGAR, Associate Justice.

Anthony Kwan sued Mercedes-Benz of North America, Inc. (MBNA) for violation of the refund-or-replace provision of the Song-Beverly Consumer Warranty Act (the Act) (Civ.Code, §§ 1790, 1793.2, subd. (d)(2)), ¹ arising out of Kwan's purchase of a new Mercedes-Benz. Kwan received a jury award of $186,000. MBNA appeals, claiming the court erred in its instructions defining a "willful" violation of the Act for purposes of its civil penalty provision (§ 1794, subd. (c)) and in allowing the jury to award damages for Kwan's emotional distress. We reverse in part and remand for a limited new trial on damages.

FACTS

Kwan bought a 1989 300E series Mercedes-Benz at European Motors, Ltd. (European Motors or the dealership) on October 30, 1989, for $46,370.24. The car had a four-year, fifty-thousand-mile warranty. Before the car was delivered to the dealership, MBNA's vehicle preparation center had repaired a dent in the door and replaced a damaged radio and surrounding wood console. Before sale, the dealership again replaced the radio, which was malfunctioning.

Kwan first brought the car back to European Motors for repair on November 20, complaining of a gurgling sound coming from the front of the car and a tendency for the windshield to mist up when the car was started. The gurgling (a sound like that produced by pouring water from one glass to another) was a problem other owners of the same model had also reported. At that time, the dealership did not have a specific cure for the problem, but they bled the cooling system in order to eliminate any trapped air bubbles. The windshield misting was deemed normal, and no repair was made.

From December 1989 through May 1990, Kwan took the car to the dealership five times for repair under warranty. He complained on December 11 of the gurgling sound, the windshield misting, a missing seat-control button, and difficulty closing the right rear door; on March 2 of the gurgling, loose molding on a door pillar, difficulty starting the car when cold, and a loose brake pedal; on March 22 of the gurgling (for which on this occasion the dealership ordered a corrective kit that was now available from MBNA), stalling when the car was put into gear while cold, ² continuing difficulty with the hard-to-close door, a gap in the pillar molding that was previously repaired, a harsh shift from first to second gears, and an "SRS" (airbag) light coming on; on April 23 of the check-engine light staying on (for which the mechanic performed a diagnostic test and adjusted the engine), an inoperable electrical seat adjustment, a burnt-out taillight, and the gurgling sound (for which the mechanic installed the kit from MBNA); and on May 14 of the gurgling still occurring intermittently (for which the mechanic drilled clear a passage in the system), engine oil leakage, continuing difficulty closing the right rear door, noise from the brake pedal, and a rough running engine.

On May 17, the car was damaged during a dealership road test. On May 24, David Jung, Kwan's lawyer, wrote to MBNA on Kwan's behalf demanding "replacement of the vehicle or rescission of the transaction and a complete refund of [Kwan's] funds." Reinhold Zimmerman, MBNA's San Francisco zone manager for service and parts, who had authority to offer refund or replacement, offered to have the gurgling sound repaired. Assured by MBNA and European Motors they could repair the car, Jung advised Kwan to allow additional repair efforts.

When Kwan picked the car up from the body shop, he told Jung it was still gurgling. Jung wrote Zimmerman on June 19, informing him the gurgling was still present and Kwan was dissatisfied with the body work done to repair damage from the May 17 accident. Jung enclosed a notice of rescission of contract with this letter. Zimmerman arranged to drive the car, heard no gurgling, and thought the body repairs and paint match looked "excellent." He told Jung this by letter of July 9.

Kwan brought the car to European Motors on July 5, complaining of intermittent cooling system gurgling and of a water leak in the right front door. The dealership ordered a new door seal but made no further repair to the cooling system. Kwan brought the car in again on August 2 because the engine was running rough and the check-engine light was on, and again on August 15 for installation of part of the door seal that had arrived late.

Jung wrote Zimmerman on August 24 enclosing a tape recording of the gurgling noise to show it was still occurring. Jung testified he also told Zimmerman in a telephone conversation on August 27 about the continuing check-engine light problem, but Zimmerman testified they never discussed any problem other than the gurgling. Kwan, through After the September 1990 repairs, Kwan continued to hear the gurgling sound, the check-engine light came on again, the idle continued rough, and the windshield fogged up. Richard Greenspan, an expert mechanic who inspected and drove the car in November 1990, found the check-engine light was on and heard the gurgling noise when the car was started cold. In his notes, he described the sound as "like water sloshing in a pail." Greenspan also drove the car for a longer period in 1991; at that time, he noticed intermittent rough running (shaking and misfire), a malfunctioning alarm, a deeply-scratched sunroof, oil leaking from an air conditioning connection, and windshield fogging even on a hot day. Greenspan opined the check-engine light was a very serious problem even if the car is running fine, because the owner cannot know whether something serious had gone wrong; "as an owner you wouldn't want to keep driving the car with that light on...."

Jung, accepted Zimmerman's offer to put a new heater core in the car to eliminate the gurgling. The car was brought in for installation of the new heater core on September 5. At that time, the dealership also attempted again to fix the check-engine light, which had come on again, and replaced a sending unit that was causing a fuel gauge malfunction.

Kwan and his family stopped using the car sometime after September 1990, believing it unsafe to drive. Kwan retained his present attorney, who wrote to Zimmerman on December 6, again demanding a refund or replacement for the car. Zimmerman forwarded that letter to MBNA's legal department, but took no further action before this lawsuit was filed on December 12, 1990.

Zimmerman testified that although he had the authority to offer refund or replacement, MBNA had given him no written guidelines as to when a reasonable number of attempts had been made to repair a vehicle. Although he drove the car at the dealership and had access there to the service file, he did not examine the file to determine how many times the car had been in for repair; he believed the only problems were with the gurgling and the body work. The check-engine light problem was never brought to his attention. Dieter Stenzhorn, an MBNA expert mechanic who assisted the dealership with the repairs on September 5, did not tell Zimmerman of the other problems Kwan had reported on that date.

Zimmerman never had any of his subordinates investigate or calculate how many times the car had been to the dealership for repair or how many days it had spent in the shop either in general or for specific problems; he knew, however, the car had been in four times for the gurgling problem at the time he became involved.

Zimmerman's general practice when he received a demand letter from an attorney was to contact the attorney and see if he could negotiate a repair of the automobile instead of a replacement or refund. If such negotiations failed, he would consult the legal department and technical staff before making a final decision about buying back or replacing the car. In the course of his interaction with Jung, he never had to make a decision about rescission because "... Mr. Jung was, his interest was like mine, to make sure that we can repair the automobile." After his last conversation with Jung, in August 1990, he did not know of any unresolved problems with the car, and he expected Jung would contact him if there were any further complaints.

The jury awarded Kwan $62,000 in actual damages (to be paid in exchange for return of the vehicle) and $124,000 as a penalty for willful violation. Kwan was also awarded more than $106,000 in attorney's fees.

DISCUSSION

I. Instruction on "Willful" Violation of the Act

Section 1794 sets out the damages available to a buyer for a seller or manufacturer's failure to comply with an obligation under the Act or under a consumer product warranty. Subdivision (c) (hereafter section 1794(c)) provides for a civil penalty of up to twice actual damages "[i]f the buyer establishes that the failure to comply was willful...."

                ...." 3  MBNA contends, and we agree, the trial court here prejudicially erred in its instructions on what constitutes a "willful" violation
                

The court gave the following instruction defining "willful," drawn from Penal Code section 7, subdivision 1: "The word willful when applied to the intent with which an act is done or omitted merely implies simply a purpose or willingness to commit the act or to make the omission in question. [p] The word does not require in its meaning any intent to violate the law or to injure or damage another or to acquire any advantage."

MBNA proposed two instructions on willfulness, neither of which was given: the...