R & B Auto Center, Inc. v. Farmers Group

Citation44 Cal.Rptr.3d 426,140 Cal.App.4th 327
Decision Date09 June 2006
Docket NumberNo. G032371.,G032371.
CourtCalifornia Court of Appeals
PartiesR & B AUTO CENTER, INC., Plaintiff and Appellant, v. FARMERS GROUP, INC., et al., Defendants and Respondents.


One might reasonably assume new car dealerships and used car dealerships are apples and oranges. But when a lemon is added to the mix, the lines can become blurred. When the Department of Motor Vehicles classifies a used vehicle with a "title brand," a purchaser of that used vehicle may sometimes bring suit under the lemon law, a procedure usually associated with defective new cars. (See the Song-Beverly Consumer Warranty Act, Civ.Code, § 1790 et seq.). Here, a car dealership licensed to sell only used cars sent out a bid for lemon law insurance, including coverage for liability arising in connection with the sale of "title branded" lemon law buyback vehicles. (See Civ. Code, §§ 1793.23, 1793.24.) It was furnished a policy containing lemon law coverage. To its chagrin, when sued under the lemon law, the dealership discovered the coverage only applied to the sale of new vehicles. The insurance carrier would not agree to either defend or indemnify the dealership in connection with the lemon law suit.

The dealership sued the insurance carrier and related parties on negligent and intentional misrepresentation, breach of contract, reformation, bad faith, breach of fiduciary duty and unfair competition theories. The unfair competition cause of action sought injunctive relief to halt the purportedly deliberate marketing and sale of lemon law coverage to used car dealerships without the disclosure that the coverage being sold to them was inapplicable to their used car operations. Through a series of rulings on dozens of motions in limine and two motions for nonsuit, the trial court largely gutted the dealership's case. The dealership appeals from a judgment in favor of the insurance carrier and related parties.

The trial court made numerous erroneous rulings that essentially deprived the dealership of an opportunity to put on its case. Although the court properly disposed of the causes of action for breach of contract, bad faith and breach of fiduciary duty, it improperly tossed out the causes of action for negligent and intentional misrepresentation, reformation and unfair competition. We reverse and remand.

In so doing, we caution against the wholesale disposition of a case through rulings on motions in limine. (See Fatica v. Superior Court (2002) 99 Cal.App.4th 350, 120 Cal.Rptr.2d 904.) No matter how logical a moving party's motion may sound, a judge generally should not be weighing the evidence on a motion in limine. A judge is in the ticklish situation of needing to be efficient, on the one hand, while needing, on the other hand, to give the parties their day in court and let the jury weigh the evidence. While it may be tempting to look at a case in the macro sense, the devil is in the details. The moving party's concerns that the other party may be trying to use evidence for an improper purpose or in a way that may be unduly prejudicial can be addressed by limiting instructions, without taking away the other party's hallowed right to a jury trial. (See Bahl v. Bank of America (2001) 89 Cal.App.4th 389, 395, 107 Cal. Rptr.2d 270.)

We also express dismay that a court, having eliminated the bulk of a party's evidence through rulings on motions in limine, would then grant motions for nonsuit before a party had the opportunity to make an opening statement or present evidence to the trier of fact.


In 1997, used car dealership R & B Auto Center, Inc. (R & B) was looking for insurance for its business operations. It prepared a bid request in which it itemized the coverage it sought, including products deficiency liability coverage, i.e., coverage for losses suffered on account of the lemon laws. R & B specifically requested that the products deficiency liability coverage include coverage for liability arising in connection with "title branded" lemon law buyback vehicles. Civil Code section 1793.23 requires that the ownership certificate for a vehicle reacquired under the lemon law be "title branded" with the inscription "Lemon Law Buyback" and that a purchaser of the vehicle be notified that it is a lemon law buyback. Civil Code section 1793.24 specifies the form of the notice that must be provided.

William Westenberger, an insurance agent for the Farmers Insurance Group of Companies including Truck Insurance Exchange, and Farmers representative Beth Lopez,1 each advised R & B that Farmers sold an automotive dealers package that included a products deficiency liability endorsement providing lemon law coverage. Westenberger and Lopez discussed the scope of the available lemon law coverage with Otto Joe Dersch, R & B's business manager. At his deposition, Dersch stated that in a discussion with Westenberger on the requested products deficiency liability coverage, he and Westenberger addressed the significance of R & B's request that the policy provide coverage for "title branding." Dersch explained to Westenberger that the term applies to "titles branded by [the] DMV with lemon law buy back, true miles unknown, salvage title." According to Dersch, Westenberger, after having researched whether the automotive dealers package would provide coverage for used car sales, later confirmed that it did. Dersch further stated that Lopez confirmed that the package would provide products deficiency coverage, including branded title coverage, for R & B's business.

At his deposition, Dersch further stated that R & B is licensed by the DMV to sell used vehicles only and that during a discussion on the completion of the insurance application, he specifically stated that R & B sold used cars. Indeed, in a transcript of Westenberger's recorded statement, offered by R & B in opposition to a motion for summary judgment, Westenberger plainly acknowledged that at the time he sold R & B the policy, he was aware that R & B was a used car dealership. At his deposition, Dersch also said that he specifically discussed with Lopez the fact that R & B was a used car dealership. Dersch further indicated that after he disclosed that R & B was a used car dealership, Westenberger and Lopez each assured him that the package would include lemon law coverage for R & B's business. In his declaration, Dersch also said that R & B relied on those representations in purchasing an insurance policy from Farmers.2 Bob Delozier, president of R & B, made essentially the same statement in his declaration.3 The policy R & B purchased was actually issued by Truck Insurance Exchange (Truck Insurance), and the face page of that policy recites that R & B is engaged in the business of "used auto sales." (Capitalization omitted.)

On August 30, 1999, John and Renee Peralta, who had purchased a lemon law buyback vehicle from R & B, sued R & B for violation of the lemon law (the Song-Beverly Consumer Warranty Act, Civ. Code, § 1790 et seq.).4 On July 31, 2000, R & B tendered the defense of the litigation to Truck Insurance and requested indemnity, but Truck Insurance did not agree to provide either a defense or indemnity. According to R & B, it paid $17,500 to settle the Peralta litigation and paid an additional $49,163.61 in attorney fees in connection with that litigation.

On February 6, 2001, R & B filed a lawsuit against Farmers Group, Inc. (FGI), Truck Underwriters Association (Truck Underwriters) and Truck Insurance. R & B asserted causes of action for breach of contract, tortious breach of contract, negligent misrepresentation, intentional misrepresentation, breach of fiduciary duty, violation of Business and Professions Code section 17200, and reformation. On April 3, 2002, Truck Insurance tendered to R & B checks totaling $77,275.98. Truck Insurance stated that the amount was equal to $21,437.90 in defense fees and costs and $55,838.08 with respect to the settlement of claims for damages and attorney fees. It also stated that the amount included interest at the rate of 10 percent. R & B declined to accept the tender.

After ruling on dozens of motions in limine, the trial court dismissed the causes of action for breach of contract, tortious breach of contract and violation of Business and Professions Code section 17200. The court held a bench trial on issues of alter ego and breach of fiduciary duty and ruled against R & B. Before R & B had made an opening statement or had presented any evidence to the trier of fact in the contemplated jury trial on the remaining causes of action, the court granted two motions for nonsuit—one in favor of FGI and Truck Underwriters and another in favor of Truck Insurance. The court entered judgment in favor of FGI, Truck Insurance and Truck Underwriters and R & B appeals.

A. Introduction:

R & B raises many assertions of error. The gist of its grievance, however, is simply that the insurance agents represented that the policy being sold to R & B would provide it with lemon law coverage. When a lemon law claim later arose against R & B and R & B found out that the plain language of the policy only provided lemon law coverage for new car sales, not the used car sales in which R & B engaged, R & B was aggrieved by the lack of promised coverage. R & B raises many theories as to why the defendants should be held liable and how the court erred, and in so...

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