Payne v. Berry's Auto, Inc.

• Decision Date: 11 June 2013
• Docket Number: No. DA 12–0371.,DA 12–0371.
• Citation: 301 P.3d 804,369 Mont. 529
• Parties: Linda PAYNE, Plaintiff and Appellant, v. BERRY'S AUTO, INC., Defendant and Appellee.
• Court: Montana Supreme Court

369 Mont. 529

301 P.3d 804

Linda PAYNE, Plaintiff and Appellant,

v.BERRY'S AUTO, INC., Defendant and Appellee.

No. DA 12–0371.

Supreme Court of Montana.

Submitted on Briefs Dec. 19, 2012.

Decided April 16, 2013.

Rehearing DEnied June 11, 2013.

For Appellant: D. Michael Eakin; Montana Legal Services Association; Billings, Montana.

For Appellee: Peter T. Stanley; Attorney at Law; Billings, Montana.

Justice JIM RICE delivered the Opinion of the Court.

[369 Mont. 530]¶ 1 Appellant Linda Payne (Payne) appeals the judgment of the Thirteenth Judicial DistrictCourt, which affirmed the holding of the Yellowstone County Justice Court, that Berry's Auto, Inc. (Berry's) disclaimed implied warranties for a used vehicle sold to Payne. Although we conclude that Berry's failed to effectively disclaim implied warranties on the vehicle, we nonetheless affirm the District Court on alternate grounds. We address the following issues:

¶ 2 1. Did Berry's effectively disclaim implied warranties of a used vehicle under § 30–2–316, MCA, when the transaction included purchase of a service contract for the vehicle?

¶ 3 2. Did the District Court err by affirming the Justice Court's denial of Payne's implied warranty claim?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 4 Payne, a resident of Dawson County, purchased a used 1997 Ford Explorer from Berry's in Billings on September 4, 2007. Payne also purchased an extended service contract for the vehicle for an additional cost of $1,870.00. Payne signed several transactional documents, including the Buyer's Guide, the Retail Installment Contract, the Retail Purchase Agreement, and the Extended Service Contract.

¶ 5 The Buyer's Guide is a double-sided form designed to be affixed to the window of a used vehicle offered for sale and identifies the subject 1997 Ford Explorer. A section of the Buyer's Guide is labeled “Warranties for this Vehicle” and sets forth various statements about the transaction that are placed beside boxes to be checked if the statement is applicable. The first statement reads: “AS IS—NO WARRANTY. YOU WILL PAY FOR ALL COSTS FOR ANY REPAIRS. The dealer assumes no responsibility for any repairs regardless of any oral statements about the vehicle.” The box next to this statement was checked. Boxes next to statements describing full and limited warranties were not checked. However, the box next to the following statement was checked: “SERVICE CONTRACT: A service contract is available at an extra charge on this vehicle. Ask for details as to coverage, deductible, price, and exclusions. If you buy a service contract within 90 days of the time of sale, state law ‘implied warranties' may give you additional rights.” (Emphasis added.)

¶ 6 The Retail Installment Contract and the Retail Purchase Agreement contain similar statements addressing warranties. The Retail Installment Contract reads:

Warranties Seller Disclaims. You understand that the seller is not offering any warranties and that there are no implied warranties of merchantability, of fitness for a particular purpose, or any other warranties, express or implied by the seller, covering the vehicle unless the seller extends a written warranty or service contract within 90 days from the date of this contract.

The Retail Purchase Agreement warranty clause states:

We are selling this Vehicle to you AS–IS and we expressly disclaim all warranties, express or implied, including any implied warranties of merchantability and fitness for a particular purpose, unless the box beside “Used Vehicle Limited Warranty Applies” is marked below or we enter into a service contract with you at the time of, or within 90 days of, the date of this transaction.

¶ 7 The Extended Service Contract was offered through Wynn's Extended Care, Inc., of Brea, California (Wynn's). The Contract was discussed and sold by the same Berry's salesman who negotiated the sale of the vehicle to Payne. The price of the service contract was included in the amount Payne financed, but was paid to Wynn's. The Extended Service Contract contains a clause stating, “[t]his Contract is not valid unless signed by both You and an authorized representative of the Selling Dealer.” The Extended Service Contract lists Berry's as the selling dealer and was signed by both Payne and the Berry's salesman.

¶ 8 On September 25, 2007, Payne returned the Explorer to Berry's for minor repairs, which Berry's completed. Payne picked up the Explorer the next day and, while driving on Interstate 94 to Glendive, the engine began making an abnormal sound and then stopped entirely. Payne contacted Berry's and, after initially supplying Payne with a loaner vehicle, Berry's told Payne it would not be responsible for repairs and that she should contact Wynn's. On October 19, 2007, Wynn's initially declined to cover the cost of the engine repair.¹

¶ 9 Payne filed a complaint in Justice Court in Yellowstone County in September 2009 seeking damages for Berry's failure to honor implied warranties of the vehicle and for committing an unfair trade practice. A bench trial was held on October 12, 2011. The Justice Court issued Findings of Fact, Conclusions of Law, and a Judgment. It concluded that “[Berry's] did not provide Payne a written warranty. The used vehicle was purchase[d] without a written warranty. The vehicle was purchased ‘as-is' without a warranty. The ‘Buyer's Guide’ affixed to the vehicle and signed by Payne made it clear to Payne assumed (sic) the risk and responsibility for repairs.” The Justice Court further concluded that “Payne had the option to obtain a service contract from Wynn to cover repairs and breakdowns. Implied warranties do not apply unless the service contract is made with the seller of the vehicle. 15 U.S.C. § 2308(a)(2)[.] Payne purchased the service contract from Wynn not Berry. If the breakdown is one covered under the service agreement, Payne should seek redress with Wynn, not Berry.”

¶ 10 Payne appealed the Justice Court Judgment to the Thirteenth Judicial District Court. The District Court, upon a review of the Justice Court record and the parties' briefing, affirmed the Justice Court, reasoning:

The extended service contract is clearly between [Payne] and Wynn's. Berry's did not “make any written warranty to the consumer,” nor did Berry's “enter into a service contract with the consumer.” Wynn's was the supplier referenced in 15 U.S.C. § 2308(a). Just because Berry's offered the contract and sold the contract to [Payne], does not mean Berry's was responsible for that contract.

Payne appeals.²

STANDARD OF REVIEW

¶ 11 “ ‘In an appeal from a justice court established as a court of record, the district court functions as an appellate court and the appeal is confined to a review of the record and questions of law.... [B]oth the District Court and this Court review the Justice Court's factual findings for clear error and its legal conclusions for correctness.’ ” Stanley v. Lemire, 2006 MT 304, ¶ 25, 334 Mont. 489, 148 P.3d 643 (citation omitted). We conduct a de novo review of a court's mixed questions of law and fact. Blackmore v. Dunster, 2012 MT 73, ¶ 6, 364 Mont. 384, 274 P.3d 748;BNSF Ry. v. Cringle, 2012 MT 143, ¶ 16, 365 Mont. 304, 281 P.3d 203.

¶ 12 “We will not reverse a district court when it reaches the right result, even if it reached that result for the wrong reason.” Yellowstone River LLC v. Meriwether Land Fund I, LLC, 2011 MT 263, ¶ 58, 362 Mont. 273, 264 P.3d 1065 (citing Wells Fargo Bank v. Talmage, 2007 MT 45, ¶ 23, 336 Mont. 125, 152 P.3d 1275).

DISCUSSION

¶ 13 1. Did Berry's effectively disclaim implied warranties of a used vehicle under § 30–2–316, MCA, when the transaction included purchase of a service contract for the vehicle?

¶ 14 Payne challenged Berry's asserted disclaimer of implied warranties of the vehicle under federal and state law. She argues that the federal Magnuson–Moss Warranty Act (Act), codified at 15 U.S.C. §§ 2301–2312, “bars a seller from disclaiming implied warranties when it also enters into a service contract with a consumer purchaser” and “[s]ince Berry's sold the service contract to Payne, it cannot disclaim implied warranties.” Payne challenges the District Court's conclusion that “Payne purchased the service contract from Wynn, not Berry.” Berry's argued before the Justice Court and the District Court that it sold the service contract only on behalf of Wynn's and did not itself “enter into” a service contract with Payne.

¶ 15 The Act was implemented to prevent deceptive warranty practices and to improve the adequacy of information available to consumers. 15 U.S.C. § 2302(a) (2006). Under the Act, a dealer's ability to disclaim implied warranties is limited when the dealer “enters into” a service contract covering the consumer product with the consumer.

(a) Restrictions on disclaimers or modifications. No supplier may disclaim or modify (except as provided in subsection (b) of this section) any implied warranty to a consumer with respect to such consumer product if (1) such supplier makes any written warranty to the consumer with respect to such consumer product, or (2) at the time of sale, or within 90 days thereafter, such supplier enters into a service contract with the consumer which applies to such consumer product.

15 U.S.C. § 2308(a). The Act defines a service contract with a consumer as “a contract in writing to perform, over a fixed period of time or for a specified duration, services relating to the maintenance or repair (or both) of a consumer product.” 15 U.S.C. § 2301(8).

¶ 16 The primary legal conclusion upon which the Justice Court and District Court rested their holdings was that the Act did not prohibit Berry's from disclaiming warranties in this transaction because Berry's did not itself “enter into a service contract” with Payne, Wynn's had done so. 15 U.S.C. § 2308(a). Having so concluded, the District Court did not address Payne's alternate argument—that Berry's did not effectively disclaim implied...