Mercedes-Benz of North America, Inc. v. Garten

HARRELL, Judge. Appellee, Herbert S. Garten, filed suit against Mercedes-Benz of North America, Inc. (MBNA) and Valley Motors, Inc., appellants, alleging: (1) breach of express warranty; (2) breach of implied warranty; (3) violation of the Unfair or Deceptive Trade Practices provisions of the Consumer Protection Act (CPA), Md.Com.Law II Code Ann. § 13-301 et seq. (1990 & Supp.1992); and, (4) violation of the Automotive Warranty Enforcement Act, Md.Com.Law II Code Ann. § 14-1501 et seq., in connection with his purchase of a new 1990 Mercedes-Benz, Model 300E. A two day bench trial in the Circuit Court for Baltimore County (Murphy, J.) was held in August 1991.

At the close of evidence, the trial court, in an oral opinion, ruled in Mr. Garten’s favor on all four counts. After a hearing on 20 September 1991, the ⁵⁵² trial court also granted Mr. Garten’s petition for attorney’s fees. Judgment was entered on 24 September 1991. This appeal followed.

Facts In April 1990, Mr. Garten sought to purchase a new 1990 Mercedes-Benz, Model 300E from Valley Motors. He spoke to a Valley Motors salesman, Mr. Robert Bell, with whom he had dealt previously, about trading in his present car, a 1986 Mercedes-Benz, Model 300E. 1 Mr. Bell told Mr. Gar-ten that he would have to bring his 1986 Mercedes-Benz in to Valley Motors in order to determine its trade-in value. Mr. Garten testified that during this conversation Mr. Bell represented to him that, except for some cosmetic changes, the 1990 300E was “identical” to the 1986 300E. On 9 April 1990, Mr. Garten brought his 1986 300E into Valley Motors to be appraised.

Mr. Garten testified that during this visit to Valley Motors he asked Mr. Bell to describe the exact differences between the 1986 and 1990 models, and again Mr. Bell replied that they were only cosmetic. After the appraisal was completed Mr. Garten left Valley Motors. Shortly thereafter, Mr. Bell called Mr. Garten on his car phone and they agreed on a purchase price of approximately $42,500 2 with a $17,500 trade-in allowance for the 1986 300E. Mr. Garten took delivery of the 1990 300E on 10 April 1990.

The following morning, upon starting the 1990 300E for the first time that day, Mr. Garten found that the car had difficulty shifting from second to third gear for a short period of time until the car warmed up. Mr. Garten telephoned Mr. Bell to complain about the new car and what he considered to be a possible transmission problem. Mr. ⁵⁵³ Garten agreed to wait until the 1000 mile servicing to see if the problem worked itself out. On 3 May 1990, Mr. Garten brought the 1990 300E to Valley Motors for the 1000 mile checkup and presented a memorandum describing the problems he was having with the car, focusing on the automobile’s delayed upshift from second to third gear.

The report from the service department personnel stated that they were unable to duplicate the problems about which Mr. Garten complained and that the transmission upshift delay, which Mr. Garten considered to be a problem, was its normal operation. In the ensuing few days Mr. Garten spoke to several people from MBNA and Valley Motors, the end result being that there was no remedy to the delayed upshift, which was caused by an emissions control device and was, in fact, the way the 1990 300E was designed to operate. 3 Mr. Garten was not satisfied with this response and on 9 May 1990 he returned the 1990 300E to Valley Motors. On the same day, Mr. Garten delivered two letters 4 to Valley Motors stating that the 1990 300E was defective and that he was revoking his acceptance and rescinding the sale. Mr. Gar-ten left the keys to the 1990 300E, requested the return of his 1986 300E, and asked Valley Motors how they could re-transfer titles to the two cars.

Finally, Mr. Garten informed Valley Motors that he would be renting a car until this matter was resolved. The 1990 300E had approximately 1800 miles on it the day Mr. Garten left it with Valley Motors. ⁵⁵⁴ The 1990 300E sat parked in Valley Motors’ lot for approximately seven months until December 1990 when Mr. Garten retrieved the car. He subsequently traded in the 1990 300E for a new 1991 300E that he purchased from another Mercedes-Benz dealer. The total purchase price of the 1991 300E was $43,123.50.

Mr. Garten also traded in the 1990 300E for $31,500. We will include additional facts as necessary in our discussion of the issues presented. Issues MBNA and Valley Motors each attack the four counts upon which Mr. Garten was able to recover in the trial court. For the sake of clarity, we will address the issues by count as filed in Mr. Garten’s complaint and then turn to the parties’ arguments on damages and attorney’s fees.

Where the appellants’ arguments on the counts are similar or the same, we will address their arguments together. Where their arguments and theories differ, we will discuss their positions separately. MBNA raises the following issues, which we have slightly rephrased: I. Whether the trial court erred in finding MBNA liable for breach of an express warranty under Md.Com.Law I § 2-313 Code Ann. (1992) and for violation of the Unfair or Deceptive Trade Practices provisions of the CPA, Md. Com.Law II § 13-301 et seq. Code Ann. (1990 & Supp. 1992) 5 6 ; A. Whether the trial court erred in finding that the Valley Motors salesman who made the statements to Mr. Garten concerning the 1990 300E was MBNA’s agent; B. Whether the trial court erred in finding that the delayed upshift device installed in the 1990 300E consti ⁵⁵⁵ tuted a material change from the 1986 300E, thereby making Mr. Bell’s representations false; II.

Whether the trial court erred in finding that the 1990 300E was unmerchantable under Md.Com.Law I Code Ann. § 2-314 and substantially impaired under the Automotive Warranty Enforcement Act, Md.Com.Law II Code Ann. 14-501 et seq.; III. Whether the trial court erred in its calculation of damages; A. Under Mr. Garten’s theories of implied and express warranty and unfair or deceptive trade practices, whether there was sufficient evidence to establish that Mr. Garten sustained any injury as a result of the delayed upshift device; B. Whether the trial court erred in allowing Mr. Gar-ten to recover damages under the Automotive Warranty Enforcement Act, § 14-501 et seq., because he disposed of the 1990 300E; and IV. Whether the trial court erred in its award of attorney’s fees because Mr. Garten did not identify the number of hours spent on the Unfair or Deceptive Trade Practices and Automotive Warranty Enforcement Act counts, the only counts that allow recovery of attorney’s fees. Valley Motors presents the following issues for our review, which we have slightly recast: I. Whether the trial court erred in finding a breach of an express warranty; II.

Whether the trial court erred in holding Valley Motors liable under the Unfair and Deceptive Trade Practices provisions; III. Whether the trial court erred in holding Valley Motors, a car dealer, liable under the Automotive Warranty Enforcement Act; IV. Whether the trial court erred in finding that the installation of the delayed upshift device substantially ⁵⁵⁶ impaired the value of the 1990 300E under the Automotive Warranty Enforcement Act; V. Whether the trial court erred in finding that the 1990 300E was unmerchantable under Md.Com.Law I Code Ann. § 2-314; VI. Whether the trial court erred in awarding attorney’s fees or, in the alternative, whether the amount awarded was erroneous; and VII.

Whether the trial court’s award of damages was erroneous. Standard of Review On appeal, we review the case on both the law and the evidence. Md.Rule 8-131(c). We will not set aside the trial court’s judgment on the evidence unless clearly erroneous.

Accordingly, in reviewing the lower court’s findings, our function is not to determine whether we might have reached a different conclusion. Rather, it is to decide only whether there was sufficient evidence to support the trial court’s findings. In making this decision, we must assume the truth of all the evidence, and of all the favorable inferences fairly deducible therefrom, tending to support the factual conclusions of the lower court. Pahanish v. W. Trails, Inc., 69 Md.App. 342, 353-54 , 517 A.2d 1122 (1986).

Discussion Count I: Breach of Express Warranty Was Mr. Bell MBNA’s Agent? MBNA argues that the trial court erred in finding it liable for breach of an express warranty. Specifically, MBNA claims that the trial court was clearly erroneous in finding that Mr. Bell, who made the representations to Mr. Garten, was an agent of MBNA and, therefore, could bind MBNA by his statements. We agree with MBNA’s position and explain.

There are two possible agency relationships that could be found between Mr. Bell and MBNA. The first, actual ⁵⁵⁷ agency, is a fiduciary relationship “which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.” Proctor v. Holden, 75 Md.App. 1, 20 , 540 A.2d 133 , cert. denied, 313 Md. 506 , 545 A.2d 1343 (1988). This Court, in Schear v. Motel Management Corp. of Am., 61 Md.App. 670 , 487 A.2d 1240 (1985), set forth the characteristics of an actual agency relationship: There are three elements that are integral to an agency relationship: (1) The agent is subject to the principal’s right of control; (2) the agent has a duty to act primarily for the benefit of the principal; and (3) the agent holds a power to alter the legal relations of the principal. Id. at 687 , 487 A.2d 1240 .

(Citation omitted). The other possible agency relationship is that of apparent agency. In order to recover under an apparent agency theory, Mr. Garten must show that: (1) appearances created by MBNA misled him into believing that Mr. Bell was an employee of MBNA; (2) this belief was objectively reasonable under all the circumstances; and, (3) he relied upon this relationship in making his decision to purchase the 1990 300E. See Chevron, U.S.A., Inc. v. Lesch, 319 Md. 25, 34-35 , 570 A.2d 840 (1990).

The trial court specifically found Mr. Bell to be an agent of MBNA, stating: Now, [MBNA] contends that this is not its problem, this is between Mr. Garten and Valley Motors____ I find that there was an agency relationship between the Defendants; that the dealer is an agent for purposes of the facts of this case. The Chevron case is, in my judgment, distinguishable---- Chevron doesn’t apply here, that [MBNA] authorized Mr. Bell to make statements about the vehicles that were in that showroom on behalf of [MBNA], and the agency relationship is, in my judgment, resolved against [MBNA]. ⁵⁵⁸ Our review of the record extract reveals the following: (1) Mr. Bell was hired by Valley Motors; (2) only Valley Motors could fire Mr. Bell; (3) MBNA exerted no control over Valley Motors with respect to the sales and promotion of the vehicles; (4) MBNA did not require Valley Motors to resell the vehicles at a particular price; (5) MBNA did not supervise Valley Motors’ daily activities; (6) MBNA did not require Valley Motors employees to discuss certain characteristics of the automobiles with customers nor did it require the employees to withhold certain information; (7) Mr. Bell attended MBNA sponsored training seminars and test drive programs; (8) Mr. Bell read and relied upon MBNA publications for information about MBNA automobiles; (9) there was no evidence showing that Mr. Bell acted primarily for MBNA’s benefit; and, (10) Valley Motors purchases automobiles from MBNA and then sells them for its own account. This evidence shows the clear error committed by the trial court in finding that Mr. Bell was an agent of MBNA. Not one element of an actual agency relationship can be found in the above listed evidence.

Although Mr. Garten refers this Court to the MBNA sponsored seminars and test drive programs and the MBNA publications received by Valley Motors, we do not believe that attending these functions or receiving these materials is anything but the normal incidents of a franchise relationship. In addition, we believe that the trial court erred by not applying Chevron to the present case. Under Chevron, it was not objectively reasonable under all the circumstances for Mr. Garten to believe that MBNA owned or operated Valley Motors, or that it so controlled the employees as to be considered their master and, therefore, responsible for their statements. See Chevron, 319 Md. at 34-44 , 570 A.2d 840 .

We, therefore, hold that the trial court was erroneous in finding that Mr. Bell was an agent of MBNA. As a result, MBNA may not be held liable for breach of an express warranty. ⁵⁵⁹ Did Valley Motors Create and then Breach an Express Warranty? Valley Motors argues that the trial court erred in finding it liable for breach of an express warranty for three reasons: (1) the statement made by Mr. Bell to Mr. Garten was one of opinion and not of fact; (2) the statement made concerning the 1990 300E was true; and, (3) the trial court did not explicitly make a factual finding that the statement made by Mr. Bell was a warranty. We disagree with Valley Motors’ contentions and explain.

Section 2-313 of the Commercial Law Article provides, in pertinent part: (1) Express warranties by the seller are created as follows: (a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. An express warranty is breached “when a product fails to exhibit the properties, characteristics, or qualities specifically attributed to it by its warrantor, and therefore fails to conform to the warrantor’s representations.” McCarty v. E.J. Korvette, Inc., 28 Md.App. 421, 437 , 347 A.2d 253 (1975). The trial court, in its oral opinion, stated: Now, the question that [Mr. Garten] was asking and the question that Mr. Bell understood him to be asking was is this essentially the same automobile, will I get the same kind of performance out of this 1990 as I got out of the 1986 that I’m very satisfied with. Frankly, the answer should have been and the answer that Mr. Bell thereafter gave to his customers is that essentially it is the same vehicle, there is one little override feature here that takes effect for the first ninety seconds or so in the morning, and thereafter there is no problem with it. ⁵⁶⁰ So, Mr. Garten should have been told about that.

He was entitled to that information and he relied upon a false representation of a material fact when he purchased the car. * * # * * * Let’s face it, Mr. Garten asks is this the same car and will it do the same things my 1986 does. The answer was yes and the answer was false because of this emission control device, this up-shift device. Mr. Garten testified that Mr. Bell, Valley Motors’ salesman, represented to him that the 1990 300E was “identical” to the 1986 300E, except for cosmetic changes. In contrast, Mr. Bell testified that he represented the two cars to be essentially the same.

By this he meant that overall they were the same in that the ride, appearance, horsepower rating, and size of the engine had not been changed. He was not, he claimed, speaking in technical terms to Mr. Garten. Valley Motors first claims that the general nature of Mr. Bell’s response conveys that it was an opinion of comparison. We agree that Mr. Garten asked Mr. Bell for a general comparison of the two vehicles, but Mr. Bell’s response conveyed a certain amount of factual information.

Therefore, we are not prepared to hold that the trial court was clearly erroneous in finding that Mr. Bell’s representation was one of fact. Valley Motors’ second contention is that the statement was true. Our review of the record extract, however, focusing on Mr. Bell’s and Mr. Garten’s testimony and viewing the evidence in a light most favorable to Mr. Garten, leads us to conclude that the trial court was not clearly erroneous in finding that the statement was false, i.e., that the 1990 300E did not exhibit the qualities attributed to it by Mr. Bell. Valley Motors’ final argument is that the trial court did not make a factual finding that the statement made by ⁵⁶¹ Mr. Bell was a warranty.

This argument is clearly without merit. The trial judge specifically found for Mr. Garten and stated, “I’m finding against both Defendants under all counts.” Count I, as plead by Mr. Garten, was for breach of an express warranty; therefore, by finding against the defendants under all counts, the trial court was implicitly finding the existence and breach of an express warranty. In addition, absent an indication to the contrary, a judge is presumed to apply the law correctly to the case before him or her. Hebb v. State, 31 Md.App. 493, 499 , 356 A.2d 583 (1976).

Valley Motors, therefore, has not convinced us that the trial court failed to find all