Champion Ford Sales, Inc. v. Levine

Thompson, J., delivered the opinion of the Court. This case involves an appeal and a cross-appeal from a judgment entered in favor of Mr. and Mrs. Robert J. Levine, appellees and cross-appellants, (buyers) against Champion Ford Sales, Inc. and Ford Motor Company, appellants and cross-appellees (sellers) in the Circuit Court for Baltimore County. The principal issues presented in the sellers’ appeal are: (1) whether under the circumstances described below, the buyers justifiably revoked their acceptance, under Md. Com. Law Code Ann. § 2-608, of an automobile which had been purchased from Champion and manufactured by Ford; and (2) if revocation was justified, whether the damages ⁵⁴⁹ awarded the buyers were proper.

The only significant question presented in the buyers’ cross-appeal is whether the trial judge erred in ruling that the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et seq., was not applicable in the instant case and that the buyers were therefore not entitled to recover attorneys’ fees under its provisions. For the reasons set forth below, we shall hold that the buyers’ revocation of acceptance was justified, that the judgment entered included damages which were improperly awarded, and that the trial judge erred in holding that the federal statute had no applicability. On December 20, 1977, the buyers took delivery from Champion of a new 1978 Ford Granada. They had selected the Granada, which they intended to use for normal family transportation purposes, after considerable comparison shopping.

With the car came a limited warranty 1 under which the manufacturer promised that "the Selling Dealer will repair, replace, or adjust free any parts, except tires, found to be defective in factory materials or workmanship within the earlier of twelve months or 12,000 miles.” The buyers paid the purchase price of $5,446.35 in cash. Six days after delivery, when the car had been driven 109 miles, the engine became inoperable. After the car was towed to the dealer’s service facility, an inspection revealed that a defective engine valve had broken and had fallen into a cylinder, destroying or damaging the engine block, the cylinder head, two pistons, a connecting rod, rings, and a number of gaskets. The defect had existed when the car was sold but could not have been discovered by any reasonable inspection.

After the cause and extent of the damage was ascertained, the dealer informed the buyers that it would repair the engine and provided them with a "loaner” car. The buyers accepted the loaner vehicle, but after viewing their car while it was dismantled in the dealer’s shop indicated that they did not want the engine repaired but rather desired replacement of either the engine or the car. It was ⁵⁵⁰ their view that a vehicle with a shop-rebuilt engine was not comparable to one with a factory assembled engine. Both the buyers and the dealer’s mechanic testified that certain equipment which Ford used in assembling engines in the factory and which it advertised as contributing to the quality of its engines was not available in the dealer’s shop.

A series of meetings with representatives of the dealer and the manufacturer followed, at which the buyers’ requests for a new engine or car were refused. Following these refusals, on January 13, 1978 the buyers advised the dealer that they were revoking their acceptance of the car and demanded the return of the money they had paid. The dealer refused to refund the purchase price and proceeded to repair the car’s engine. The repairs were performed by qualified mechanics at the dealer’s service facility, at a cost of $889.69.

The repairs were completed on February 10,1978, at which time the car was test-driven by Champion personnel and found to operate satisfactorily. The buyers were then informed that their car was ready to be picked up. The buyers again advised the dealer that they had revoked their acceptance and declined to either inspect or accept the repaired car. On February 13, the buyers returned the loaner vehicle provided by the dealer.

On April 10, 1978, when their money had not been refunded, they filed suit. In August 1978, the buyers purchased a replacement for the Granada, a used 1974 Ford Pinto, for which they paid $1,200.00. On July 10, 1980, the buyers’ action came to trial. Their amended declaration was in four counts: Count I sought return of the purchase price paid for the Granada, on the grounds that the buyers had revoked their acceptance; Count II set forth a claim for breach of the implied warranty or merchantability; Count III claimed violation of the Magnuson-Moss Act and breach of express warranties; and Count IV alleged wrongful breach of a guaranty in violation of Md. Com.

Law Code Ann. § 14-401(k). 2 In each count, the ⁵⁵¹ buyers sought interest, costs, and attorneys’ fees. At the close of the buyers’ case, the trial judge directed a verdict for the sellers as to Counts III and IV. Counts I and II were submitted to the jury, which returned a verdict in favor of the buyers on each. The jury awarded damages in the amount of the purchase price of the Granada plus interest from the date acceptance was revoked; it also awarded an additional $1200, representing the purchase price of the used Pinto bought to replace the Granada.

The judge held that the Magnuson-Moss Act was not applicable and refused to award the buyers attorneys’ fees. Appeals to this Court followed. Md. Com. Law Code Ann. § 2-608 sets forth the circumstances under which a buyer may revoke his acceptance: 3 "(1) The buyer may revoke his acceptance of a lot or commercial unit whose nonconformity substantially impairs its value to him if he has accepted it (a) On the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or (b) Without discovery of such nonconformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances.

(2) Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which ⁵⁵² is not caused by their own defects. It is not effective until the buyer notifies the seller of it. (3) A buyer who so revokes has the same rights and duties with regard to the goods involved as if he had rejected them.” See Lynx, Inc. v. Ordnance Products, 273 Md. 1, 14-17 , 327 A.2d 502 (1974). At trial in the instant case, it was undisputed that the buyers accepted the car without knowledge of its defect, as the result of the practical impossibility of discovering the defect; that they revoked their acceptance within a reasonable time after discovery of the defect and before any substantial change in its condition, not the result of its own defect; and, that they gave adequate notice, within a reasonable time, to sellers: the only issue was whether, at the time they revoked acceptance, there existed a nonconformity which substantially impaired the value of the car to the buyers.

On this appeal, the sellers argue that the evidence was insufficient to permit the jury to find that such a nonconformity existed and that the buyers’ revocation was justified. They contend that, although there was obviously a defect in the Granada when it was delivered, they had a right under § 2-608 to cure that defect and that the only competent evidence adduced showed that they did cure the defect; that the nonconformity which existed was eliminated by the repairs which were carried out and that the repaired vehicle "was like new.” They further contend that, even if a nonconformity existed after the car was repaired, the evidence was insufficient to permit the jury to find that it substantially impaired the value of the car. Under the Uniform Commercial Code, a seller is not expressly granted the right to cure when a buyer revokes acceptance, cf., § 2-508 (conferring the right to cure where a buyer rejects goods as nonconforming), although it may be inferred that such a right exists where the buyer accepts nonconforming goods with the expectation that the nonconformity will be remedied. See § 2-608 (1) (a).

Whether a general right to cure, applicable where a buyer ⁵⁵³ accepts without knowledge of a nonconformity and thus without the expectation that it will be cured, is also to be inferred, has been the subject of considerable dispute and the decisions are in conflict. See e.g., Conte v. Dwan Lincoln-Mercury, Inc., 374 A.2d 144, 149 (Conn. 1976) (a seller has a right to cure, citing § 2-508 as authority); Werner v. Montana, 378 A.2d 1130, 1136 (N.H. 1977) (no right to cure in revocation of acceptance situation). 4 We find it unnecessary to decide the issue. Even if we were to recognize that a seller has a right to cure where the buyer revokes acceptance, in order to be effective to bar revocation in a particular case, the seller plainly would be required to make a full and complete cure. See Asciolla v. Manter Oldsmobile-Pontiac, Inc., 370 A.2d 270, 274 (N.H. 1977); Moulden & Sons, Inc. v. Osaka Landscaping, 584 P.2d 968, 970 (Wash.

App. 1978). In the instant case, the jury was instructed to determine whether the Granada, as repaired, contained a nonconformity which substantially impaired its value to the buyers; the jury in effect found that it did. Thus, the jury made an inferential finding that the sellers’ repairs did not result in a fully conforming tender and did not constitute a cure. The only real issue is whether the evidence was sufficient to support that finding.

A nonconformity exists when the goods are not in accordance with the obligations under the contract. See Md. Com. Law Code Ann. § 2-106 (2). The substantiality requirement bars revocation for defects which are trivial or easily corrected, Rozmus v. Thompson’s Lincoln-Mercury Co., 224 A.2d 782, 784 (Pa.

Super. 1966), or for those which merely make the tender somewhat less than perfect, Rutland Music Service v. Ford Motor Co., 422 A.2d 248, 249 (Vt. ⁵⁵⁴ 1980). Whether a nonconformity substantially impairs the product’s value to the buyer necessarily involves consideration of subjective factors, i. e., the particular needs and circumstances of the individual buyer, yet proof of substantial impairment requires more than the buyer’s subjective assertion that the value of the product to him was impaired; it requires evidence from which the trier of fact, applying objective standards, can infer that the needs of the buyer were not met because of the nonconformity. It is clear that the question of whether there exists a nonconformity which substantially impairs the value to the buyer is one of fact, to be decided by the jury on the facts and circumstances of each individual case. See Tiger Motor Co. v. McMurtry, 224 So. 2d 638, 645-46 (Ala. 1969); Conte v. Dwan Lincoln-Mercury, Inc., 374 A.2d 144 at 148 ; Welch v. Fitzgerald-Hicks Dodge, Inc., 430 A.2d 144, 148 (N.H. 1981); Asciolla v. Manter Oldsmobile-Pontiac, Inc., 370 A.2d at 273 ; Jorgensen v. Pressnal, 545 P.2d 1382, 1384-85 (Or. 1976).

In determining whether the evidence was sufficient to sustain the finding of the jury in the case at bar, we are aided by the decisions of several other courts which have dealt with similar situations. Particularly instructive is the decision of the New Hampshire Supreme Court in Asciolla v. Manter Oldsmobile-Pontiac, Inc., supra. There, a new car purchased by the buyer became inoperable less than one month after delivery. An inspection revealed pieces of ice in the transmission, as well as other evidence that the car had been flooded or submerged prior to sale.

The buyer demanded that the car be replaced. The seller denied that the car had ever been submerged and offered to repair or replace the transmission. The buyer refused the offer and sought to revoke his acceptance. A master held that the buyer had no right to revoke his acceptance, finding that there was no satisfactory evidence that the car had been flooded and that the repairs offered by the seller " 'would in normal circumstances and to a reasonable person adequately serve to correct the defect’ in the transmission.” 370 A.2d at 272 .

The New Hampshire Supreme Court reversed, stating: ⁵⁵⁵ "In determining that the plaintiff was not entitled to revoke his acceptance, the master ... utilized, an objective standard, finding that a 'reasonable person’ would have been satisfied with the repaired car. Without addressing the validity of that conclusion, we find from the record that the value of the subject automobile to Mr. Asciolla was substantially impaired. In purchasing a new car the plaintiff was making a major investment. Few items which are considered necessities occupy such a significant portion of an individual consumer’s income as does a new automobile.

Few purchases are made with more care and deliberation. The record indicates that the plaintiff was a particularly prudent and painstaking car buyer .... Within three weeks of the purchase of the car at issue in this case he found it to be totally inoperable. He was informed by franchised representatives of the manufacturer that the car had been flooded or submerged.

While the master found that the evidence presented at the hearing did not support such a conclusion, no satisfactory reason was ever presented to the plaintiff to otherwise explain the presence of ice in his transmission. Nor was Mr. Asciolla offered any guarantees concerning other deficiencies, caused by the same mysterious condition, which he very reasonably apprehended might arise in the future. "Under these facts, we think it clear that the plaintiffs confidence in the reliability and integrity of his new automobile was severely undermined. He had bargained for a new car, expecting to receive a vehicle upon whose dependability and safety he could comfortably rely.

Instead he received a product which he understandably feared was what is known in popular parlance as 'a lemon.’ The plaintiff is correct in this assertion that a new automobile is more than the sum of its various components. It is the integrity of the vehicle as a whole which is ⁵⁵⁶ the essence of the consumer’s bargain. As the Superior Court of New Jersey said in a markedly similar case concerning a new car with a defective transmission, '[the buyer] assumed what every new car buyer has a right to assume and, indeed, has been led to assume by the high powered advertising techniques of the auto industry — that his new car, with the exception of very minor adjustments, would be mechanically new and factory-furnished, operate perfectly, and be free of substantial defects.’ Zabriskie Chevrolet, Inc. v. Smith, 99 N.J. Super. 441, 452 , 240 A.2d 195, 201-02 (1968). The plaintiffs situation cannot be accurately compared to cases cited by the defendants such as Rozmus v. Thompson’s Lincoln-Mercury Co., 209 Pa.

Super. 120 , 224 A.2d 782 (1966) and Grucella v. General Motors Corporation, 10 Pa. D. & C. 2d 65 (195.6), in which the cars presented defects which were trivial and readily repaired. The new car in the instant case was rendered wholly inoperable by a defective condition which permeated one of its most essential systems. Under such circumstances, his revocation of acceptance is justified. . . .

"The defendants contend that they are entitled to cure the nonconformity in the tendered