Mago v. Mercedes-Benz, U.S.A., Inc.

• Citation: 142 P.3d 712,213 Ariz. 404
• Decision Date: 07 September 2006
• Docket Number: No. 1 CA-CV 04-0144.,1 CA-CV 04-0144.
• Parties: Ricky MAGO, Plaintiff/Appellant, v. MERCEDES-BENZ, U.S.A., INC., Defendant/Appellee.
• Court: Court of Appeals of Arizona

142 P.3d 712

213 Ariz. 404

Ricky MAGO, Plaintiff/Appellant, v. MERCEDES-BENZ, U.S.A., INC., Defendant/Appellee.

No. 1 CA-CV 04-0144.

Court of Appeals of Arizona, Division 1, Department C.

September 7, 2006.

Krohn & Moss, Ltd. By Marshall Meyers, Ian Pryor, Phoenix, Attorneys for Plaintiff/Appellant.

Bowman and Brooke, LLP By Negatu Molla, Tracy L. Carlson, Phoenix, Attorneys for Defendant/Appellee.

OPINION

TIMMER, Presiding Judge.

¶ 1 In the wake of Parrot v. Daimler-Chrysler Corp., 212 Ariz. 255, 130 P.3d 530 (2006), the supreme court vacated our memorandum decision previously filed in this case and remanded for reconsideration. The issue is whether Ricky Mago, a lessee of a Mercedes-Benz E430, is eligible to recover under the Arizona Motor Vehicle Warranties Act ("Lemon Law"), Arizona Revised Statutes ("A.R.S.") sections 44-1261 to -1267 (2003 & Supp.2005), or the Magnuson Moss Warranty Act ("Warranty Act" or "Act"), 15 U.S.C. §§ 2301-2312 (2000), for vehicle defects that substantially impaired its use, value, and safety. For the reasons that follow, we hold that Mago's lessee status prevents him from seeking remedies under the Lemon Law but does not foreclose his claim under the Warranty Act.

FACTS AND PROCEDURAL HISTORY¹

¶ 2 On May 23, 2001, Mago leased a new Mercedes-Benz E430 ("E430") from Phoenix Motor Company ("Dealer"), which simultaneously sold the vehicle and assigned the lease to Mercedes-Benz Credit Corporation ("Lessor"). The E430 was manufactured by Mercedes-Benz U.S.A. Inc. ("M-B USA").

¶ 3 M-B USA issued Dealer a written warranty that covered the E430 for defects for four years or fifty thousand miles. The warranty rights were assigned to Mago as part of the lease agreement. Shortly after Mago leased the E430, the vehicle experienced numerous problems. Mago took the E430 to an authorized Mercedes-Benz Center for repair at least eight times between May 2001 and July 2002, but the defects remained uncorrected. Subsequently, in early July 2002, Mago revoked his acceptance of the E430, but M-B USA refused the revocation and declined to pay damages.

¶ 4 Later in July, Mago filed a complaint in superior court seeking remedies under the Lemon Law and the Warranty Act, both of which provide remedies to a consumer when a motor vehicle warrantor fails to honor its obligations. Parrot, 212 Ariz. at 257, 261-62, ¶¶ 9-10, 38, 42, 130 P.3d at 532, 536-37. M-B USA moved for summary judgment in March 2003, arguing that the statutes do not apply to leased vehicles.

¶ 5 In September 2003, the trial court granted M-B USA's motion, reasoning that Mago, as a lessee, is not a "consumer" as used in either the Lemon Law or the Warranty Act. The court stated that although neither law extensively defined the term "consumer," the language in the statutes implied that "a consumer is a person who buys a product."

¶ 6 We reversed the trial court's grant of summary judgment, basing our analysis and conclusion on this court's then-recent decision in Parrot v. DaimlerChrysler Corp., 210 Ariz. 143, 108 P.3d 922 (App.2005), which held that a lessee may seek remedies under the Lemon Law and the Warranty Act because a lessee fits the definitions of "consumer" under both statutes. 210 Ariz. at 147-48, 150, ¶¶ 18-19, 33-36, 108 P.3d at 926-27, 929. The supreme court, however, vacated that decision and then remanded the present case to this court for reconsideration in light of its holding in Parrot, "including [determining] . . . whether a lessee has remedies under the [Warranty Act], when there is a claim or allegation that there has been a sale of a vehicle by a supplier to a lessor."

ANALYSIS²

I.

¶ 7 The plaintiff in Parrot v. Daimler-Chrysler Corp. leased a Jeep from a dealer, who then assigned the lease to a lender but retained title to the vehicle. 212 Ariz. at 256, ¶ 2, 130 P.3d at 531. The manufacturer's written warranty accompanied the Jeep. Id. After experiencing numerous problems with the Jeep, the plaintiff filed suit against the manufacturer alleging breach of warranty and seeking remedies under the Lemon Law and the Warranty Act. Id. at ¶¶ 3-4. The trial court granted summary judgment for the manufacturer, the court of appeals reversed, and the supreme court granted the subsequently filed petition for review. Id. at ¶¶ 4-6. The issue before the court was whether the plaintiff was a "consumer" under either the Lemon Law or the Warranty Act. Id. at ¶ 1. Resolution of this issue turned on the interpretation and application of each statutory scheme.

¶ 8 In order to be a "consumer" under the Lemon Law, one must qualify under at least one of the following three categories of consumers: (1) a "purchaser, other than for purposes of resale, of a motor vehicle," (2) "any person to whom the motor vehicle is transferred during the duration of an express warranty applicable to the motor vehicle," or (3) "any other person entitled by the terms of the warranty to enforce the obligations of the warranty." A.R.S. § 44-1261(A)(1). Although the plaintiff clearly could not qualify under category one due to his lessee status, the Parrot court noted that he may qualify under the latter two categories. 212 Ariz. at 261, ¶ 39, 130 P.3d at 536. The court did not decide that issue, however, because it concluded that the remedies afforded by the Lemon Law precluded recovery by a vehicle lessee. Id.

¶ 9 The Lemon Law provides that if a manufacturer or its authorized dealer fails to correct or repair a vehicle, thereby substantially impairing its use, the manufacturer must either replace the vehicle or accept return of the defective vehicle and refund the purchase price plus collateral charges to the consumer, less a reasonable use allowance. Id. at 261-62, ¶ 40, 130 P.3d at 536-37. Because "[b]oth remedies assume that the consumer has the right to transfer title to the vehicle back to the manufacturer," and "[o]nly the owner of the vehicle or holder of title can transfer title," the court held that the plaintiff, as lessee, had no remedies under the Lemon Law, regardless of his status as a category two or three consumer. Id. at 262, ¶ 41, 130 P.3d at 537.

¶ 10 The Warranty Act's remedies are not limited to vehicle replacement or refund. 15 U.S.C. § 2310(d). Thus, the Parrot court examined the plaintiff's status as a consumer under that scheme. The Act's definition of "consumer" is akin to the Lemon Law definition. Id. at 261, ¶ 39, 130 P.3d at 536. To be a "consumer" under the Act, one must qualify under at least one of the following three categories: (1) "`a buyer . . . of any consumer product,' other than for purposes of resale," (2) "`any person to whom [a consumer product] is transferred during the duration of ... [a] written warranty,'" and (3) "`any other person who is entitled by the terms of such warranty . . . or under applicable State law to enforce against the warrantor ... the obligations of the warranty.'" Id. at 257, ¶ 11, 130 P.3d at 532, citing 15 U.S.C. § 2301(3). Unlike the Lemon Law, however, the Act defines "written warranty" in a manner that compelled the supreme court to conclude that each consumer category requires (1) a sale of a consumer product to a buyer for purposes other than resale, and (2) that the written warranty formed part of the basis for the bargain between the supplier and buyer (collectively, a "qualifying sale"). Id. at 257, 258, ¶¶ 12, 14-15, 130 P.3d at 532, 533.

¶ 11 Although the plaintiff in Parrot claimed he was a category two or three consumer, the court concluded that he was neither because no qualifying sale had occurred. Id. at 259, ¶ 21, 130 P.3d at 534. Because the plaintiff conceded that the dealer purchased the Jeep for the purpose of resale, and no other sale had been consummated, no qualifying sale occurred, and plaintiff did not qualify as a consumer under the Act. Id. at ¶¶ 22-24.

¶ 12 The decision in Parrot compels a conclusion that Mago does not possess any remedies under the Lemon Law. As a lessee, he does not hold title to the E430 and therefore cannot transfer title to M-B USA to obtain a replacement vehicle or refund. Consequently, the trial court properly entered summary judgment against Mago on his Lemon Law claim.

¶ 13 Parrot does not dictate resolution of the issues raised under the Warranty Act. Unlike the situation in Parrot, the record here reflects a second sale — one from Dealer to Lessor. Thus, we must decide whether that sale can constitute a qualifying sale under the Warranty Act. If so, we must then decide whether Mago has produced sufficient evidence to otherwise demonstrate that he is a "consumer" as defined by the Act, thereby making summary judgment on this claim inappropriate.

II.

A.

¶ 14 M-B USA argues that the definition of "written warranty" under the Warranty Act makes clear that a qualifying sale occurs only when a consumer product is sold to the consumer seeking remedies under the Act. Because the E430 was never sold to Mago, M-B USA maintains that a qualifying sale never occurred, and Mago has no remedies under the Act. Mago counters that the Act does not require a sale to the consumer as long as another qualifying sale was consummated within the sequence of events that placed the product in the consumer's possession. According to Mago, Dealer's sale of the E430 to Lessor constituted such a sale.

¶ 15 The Act defines a written warranty, in pertinent part, as follows:

(A) any . . . written promise made in connection with the sale of a consumer product by a supplier to a buyer ... or

(B) any undertaking in writing in connection with the sale by a supplier of a consumer product ...,

....

which written affirmation, promise, or undertaking becomes part of the basis of the bargain between a supplier and a buyer for purposes other than resale of such product.

15 U.S.C. § 2301(6). We interpret § 2301(6) to give effect to Congress' intent. Parrot, 212 Ariz. at 257, ¶ 7, 130 P.3d at 532. To do so, we first look to the language of the...