Newmar Corp. v. McCrary

• Court: Nevada Supreme Court
• Writing for the Court: By the Court
• Citation: Newmar Corp. v. McCrary, 309 P.3d 1021, 129 Nev. Adv. Op. 67 (Nev. 2013)
• Decision Date: 03 October 2013
• Docket Number: Nos. 58174,59045.,s. 58174
• Parties: NEWMAR CORPORATION, a Delaware Corporation, Appellant, v. Allison McCRARY, an Individual, Respondent. Newmar Corporation, a Delaware Corporation, Appellant, v. Allison McCrary, an Individual, Respondent.

309 P.3d 1021

129 Nev. Adv. Op. 67

NEWMAR CORPORATION, a Delaware Corporation, Appellant,

v.Allison McCRARY, an Individual, Respondent.

Newmar Corporation, a Delaware Corporation, Appellant,

v.Allison McCrary, an Individual, Respondent.

Nos. 58174, 59045.

Supreme Court of Nevada.

Oct. 3, 2013.

Morris Law Group and Robert McCoy, Rex D. Garner, and Raleigh C. Thompson, Las Vegas, for Appellant.

Alverson, Taylor, Mortensen & Sanders and Kurt R. Bonds, Alan V. Mulliner, and Eric W. Hinckley, Las Vegas, for Respondent.

Before the Court En Banc.¹

OPINION

By the Court, CHERRY, J.:

In this opinion, we consider whether a purchaser of a motor home may revoke acceptance and recover the purchase price from the motor home's manufacturer under the Uniform Commercial Code (UCC). We hold that a purchaser is entitled to revoke acceptance of the motor home against its manufacturer where, as here, privity exists between the manufacturer and the buyer because the manufacturer interjected itself into the sales process and had direct dealings with the buyer to ensure the completion of the transaction. We also conclude that the district court properly awarded incidental and consequential damages but that it abused its discretion in awarding attorney fees. Thus, we affirm the judgment but reverse the award of attorney fees.

FACTS AND PROCEDURAL HISTORY

Respondent Allison McCrary purchased a luxury motor home manufactured by appellant Newmar Corporation from Wheeler's Las Vegas RV. The purchase included Newmar's two-year express warranty for repair and service. After purchasing the motor home, McCrary let it remain in Wheeler's possession for repairs, due to some issues noticed during the test drives. A week later, McCrary returned to inspect and pick up the motor home. Noticing continued problems with the motor home during the inspection, McCrary met with a Newmar factory representative. She stated that she would not take possession of the motor home until the representative assured her that Newmar would take care of any problems and that there was a full, bumper-to-bumper warranty. After receiving the sought-after reassurances from Newmar, McCrary took possession of the motor home.

Shortly thereafter, the motor home experienced significant electrical problems, making it unsafe to drive and resulting in repeated delays and canceled vacation plans for McCrary. After numerous repairs at the Newmar factory and other repair shops, McCrary attempted to revoke her acceptance of the motor home from Newmar, but Newmar rejected the revocation. McCrary then filed the underlying action asserting, inter alia, causes of action for revocation of acceptance, breach of contract, and breach of warranty against Newmar.²

Prior to trial, both parties made offers of judgment. Neither offer was accepted. Following a bench trial, based on the particular facts of this case, the district court concluded that McCrary did not take possession of the motor home when she signed the contract and would not have completed the purchase and eventually taken possession except for the interactions with and assurances made by Newmar's representative to McCrary. Ultimately, the district court found in favor of McCrary and awarded her $406,500 in damages—the $385,000 purchase price for the motor home based on the revocation of acceptance, but required McCrary to return the motor home as part of the revocation, $12,500 for the cost of insuring the motor home, and $9,000 for storage fees—plus $44,251.40 in prejudgment interest and $107,581.50 in attorney fees. The court entered judgment accordingly, and these appeals followed.

DISCUSSION

We must first determine whether revocation of acceptance is an available cause of action against a manufacturer before we can reach the issues of damages and attorney fees.

Revoking acceptance from Newmar

Newmar argues that, under Nevada's applicable UCC provision, NRS 104.2608, a buyer can only revoke acceptance from a seller, and while it manufactured the motor home, it was not a seller of the motor home. Thus, Newmar contends that Wheeler's is the only entity from whom McCrary can revoke acceptance and that, because McCrary revoked acceptance with the wrong entity, she alone must bear the consequences of that mistake.

McCrary contends that the district court correctly determined that Newmar was a co-seller based on Newmar's exclusive warranty and its employee's participation in the sales process. McCrary asserts that Newmar should be held to its actions.

The UCC provision governing revocation of acceptance was adopted and codified in Nevada as NRS 104.2608. It allows a buyer to revoke her acceptance of a purchased good if the item suffers from a “nonconformity [that] substantially impairs its value to the buyer” and the buyer accepted the item on the understanding that the seller would cure the nonconformity or was induced into accepting a nonconforming item “either by the difficulty of discovery before acceptance or by the seller's assurances.” NRS 104.2608(1)(a), (b); ³see alsoNRS 104.2608(2) (requiring notification to the seller of the defect and timeliness for revocation). Under the UCC, “ ‘[s]eller’ means a person who sells or contracts to sell goods.” NRS 104.2103(1)(c). Here, there is no question as to the motor home's nonconformity, and thus we turn directly to whether the manufacturer can be considered a “seller” under the UCC.

We have previously addressed revocation of acceptance against the immediate seller, but we have not yet determined whether revocation of acceptance is available against a manufacturer. See Waddell v. L.V.R.V., Inc., 122 Nev. 15, 125 P.3d 1160 (2006) (affirming judgment for revocation against the dealer that sold the subject motor home); Havas v. Love, 89 Nev. 458, 459, 514 P.2d 1187, 1188 (1973) (allowing revocation against the defendant who sold a motorbus to the plaintiff). The Legislature has given some guidance, directing our courts to liberally construe and apply the UCC to “make uniform the law among the various jurisdictions.” NRS 104.1103(1)(c). However, the jurisdictions are split as to whether revocation of acceptance is proper against a manufacturer, giving us the opportunity to decide the issue de novo. See Wyeth v. Rowatt, 126 Nev. ––––, ––––, 244 P.3d 765, 775 (2010) ( “[I]ssues involving a purely legal question are reviewed de novo.”).

In revocation of acceptance cases, the term “seller” has been restricted to the immediate seller by a majority of jurisdictions but has been inclusive of the manufacturer by a minority of jurisdictions. A majority of jurisdictions have determined that revocation is not available against a manufacturer because the manufacturer is not a “seller” under the UCC. See, e.g., Seekings v. Jimmy GMC of Tucson, Inc., 130 Ariz. 596, 638 P.2d 210, 214 (1981) (following “the logic as well as the letter of the U.C.C.” to require privity and hold that a motor home “manufacturer who does not sell to the purchaser [directly and for whom the seller was not agent] cannot be liable for revocation and attendant damages”); Griffith v. Latham Motors, Inc., 128 Idaho 356, 913 P.2d 572, 577 (1996) (determining that the manufacturer could not be liable under a revocation claim because it did not sell the vehicle to the plaintiffs); Henderson v. Chrysler Corp., 191 Mich.App. 337, 477 N.W.2d 505, 507–08 (1991) (rejecting revocation against nonselling manufacturer when there was no privity and leaving plaintiff with remedies under a warranty); Neal v. SMC Corp., 99 S.W.3d 813, 816–18 (Tex.App.2003) (noting that because “[t]he nature of a revocation claim logically requires privity of contract[,] ... revocation is available to the buyer only against the immediate seller”; the motor home manufacturer, “in the absence of a contractual relationship with the consumer, is not a seller” by virtue of a manufacturer's express warranty); see generally Fedrick v. Mercedes–Benz USA, L.L.C., 366 F.Supp.2d 1190, 1200 (N.D.Ga.2005); Conte v. Dwan Lincoln–Mercury, Inc., 172 Conn. 112, 374 A.2d 144, 150 (1976); Hardy v. Winnebago Indus., Inc., 120 Md.App. 261, 706 A.2d 1086, 1091 (1998); Ayanru v. Gen. Motors Acceptance Corp., 130 Misc.2d 440, 495 N.Y.S.2d 1018, 1023 (Civ.Ct.1985); Reece v. Yeager Ford Sales, Inc., 155 W.Va. 461, 184 S.E.2d 727, 731 (1971). Accordingto these courts, revocation is not available against the manufacturer unless there is a direct contractual relationship between the manufacturer and the buyer or an agency relationship between the manufacturer and the seller. The rationale behind this position is that revocation is intended to return the buyer and seller to their original positions and that because the manufacturer does not own the goods or receive the purchase price when the goods are sold, it cannot be involved in restoring the parties to their former positions. See, e.g., Seekings, 638 P.2d at 214;Griffith, 913 P.2d at 577;Henderson, 477 N.W.2d at 507–08;Neal, 99 S.W.3d at 817–18;Gasque v. Mooers Motor Car Co., Inc., 227 Va. 154, 313 S.E.2d 384, 390 (1984).

Conversely, a minority of states have held that revocation of acceptance can be had against entities further removed from the transaction than the immediate seller, such as the manufacturer. See, e.g., Ford Motor Credit Co. v. Harper, 671 F.2d 1117, 1126 (8th Cir.1982); Durfee v. Rod Baxter Imps., Inc., 262 N.W.2d 349, 357–58 (Minn.1977); Volkswagen of Am., Inc. v. Novak, 418 So.2d 801, 804 (Miss.1982); Fode v. Capital RV Ctr., Inc., 575 N.W.2d 682, 687–88 (N.D.1998); Gochey v. Bombardier, Inc., 153 Vt. 607, 572 A.2d 921, 924 (1990). As explained in Gochey, this decision is based on the viewpoint that traditional privity is not necessary, but that the relationship established based on a manufacturer's warranty is sufficient:

“Under state law the right to revoke acceptance for defects substantially impairing the value of the product and to receive a refund of the purchase price are rights available to a...