Murphy v. 24th Street Cadillac Corp.

CHASANOW, Judge. This case requires that we address the construction of the remedial provisions of Maryland’s Consumer Motor Vehicle Leasing Contracts Act (the Act) for the first time since it was enacted in 1987. Maryland Code (1990 Repl.Vol., 1998 Supp.), Commercial Law Article, § 14-2001 et seq. 1 The Act extends the warranty provisions of Maryland’s Automotive Warranty Enforcement Act, § 14-501 et seq., better known as the “lemon law,” to automobile leasing arrangements. The petition arises out of an action filed under the Act by Mr. Thomas J. Murphy, III (Mr. Murphy) against 24th Street Cadillac Corporation, t/a Chesapeake Cadillac Jaguar (Chesapeake) and General Motors (GM).

Mr. Murphy seeks to invoke the Act’s remedial provision requiring a manufacturer to accept return of a leased vehicle and refund monies related to the lease agreement. The primary issue concerns whether Mr. Murphy permitted the defendants the statutorily required “reasonable number of attempts” at repairing the alleged defect. § 14-2004(d)(l)(i). After a bench trial, the trial judge ruled that Mr. Murphy acted unreasonably in not permitting an additional repair attempt. The Court of Special Appeals affirmed.

Murphy v. 24th St. Cadillac, 121 Md.App. 454 , 710 A.2d 332 (1998). For the reasons that follow, we shall affirm the judgment of the trial court, albeit on grounds slightly different than the Court of Special Appeals. ⁴⁸⁴ I. A. Mr. Murphy entered into a lease with Chesapeake on February 26, 1996, for use of a brand new Cadillac STS automobile, covered by a standard warranty, for 24 months. The lease required Mr. Murphy to pay a monthly rate of $930.74. A little over a month into the lease agreement, Mr. Murphy noticed that the vehicle occasionally hesitated during acceleration.

In describing the hesitation problem, Mr. Murphy testified that: “The best example I can think of is the fact that backing out of my garage, you come up the driveway and it’s a little bit of an angle that spans coming up, the car would hesitate. * * * Hesitate to me would be when you put your foot on the gas, it’s not smooth going off, it jumped or whatever you want to call it. But you can tell the engine is not performing the way it should.” On April 16, 1996, he returned the car to Chesapeake to have its mechanics check into the hesitation problem. Chesapeake kept the car overnight, but its mechanics were unable to duplicate the hesitation problem after visual inspection and road and computer tests. Chesapeake contacted GM about the condition through a satellite transmission and through its Technical Assistance Center.

GM informed Chesapeake that it was coming out with a new computer recalibration chip that might address the hesitation problem that Mr. Murphy said he was experiencing. An invoice introduced into evidence stated: “Unable to duplicate at this time. Cadillac is coming out with a recalibration for this condition.” Chesapeake advised Mr. Murphy of its efforts and returned the car. According to Mr. Murphy’s trial testimony, after the initial visit the hesitation problem continued, and he began to encounter a new problem—the car stalled on several occasions when he was stopped or nearly stopped.

On three occasions the car stalled at a traffic light, requiring that he put the car’s transmission back into the “park” position to restart the engine. On April 24, 1996, per the instructions in the warran ⁴⁸⁵ ty book, Mr. Murphy called GM to report these incidents because, he testified, “with the car simply stopping in the middle of traffic at a light, it became a lot more serious than the simple hesitation problem.” GM took note of Mr. Murphy’s complaint, but took no immediate action on the problem. Mr. Murphy continued to drive the automobile. On April 28, 1996, while driving Mr. Murphy attempted to turn onto a highway and the car again hesitated.

Mr. Murphy testified that, as a result of the hesitation, his car was nearly struck by another. The following day Mr. Murphy took the automobile back to Chesapeake for repair. Chesapeake kept the car for a few days but again was unable to duplicate the problems complained of by Mr. Murphy. A Chesapeake mechanic testified that he did some rewiring of the ignition “in order to satisfy [the customer],” but not because he found anything wrong with the vehicle.

After Chesapeake returned the car, Mr. Murphy noticed an improvement for about a ten-day period. In early and mid-May, however, the car stalled again; once while stopped at a light and another time while the car was moving very slowly over a speed bump in a parking lot. On May 27, 1996, Mr. Murphy called GM again via its “800 number” to report these latest incidents and to ask to be released from the lease. In the first week of June, Mr. Murphy stopped driving the car altogether.

At the advice of his counsel, on June 11, 1996, Mr. Murphy called Chesapeake and told them that, although he wanted out of the lease, he would give them one last opportunity to fix the problem with the car. Chesapeake told him that the recalibration chip had arrived and that the repairs could be done if he brought the vehicle in six days later, on June 17, 1996. Mr. Murphy responded that he was not willing to wait six days to have the car repaired and refused Chesapeake’s offer. Mr. Murphy then had his attorney inform Chesapeake, via a letter dated June 11,1996, that he wanted the lease terminated and the car taken back.

Mr. Murphy subsequently maintained his refusal to allow another repair attempt, and he refused GM’s offer, on June 27, 1996, to replace the car with another. On July 5, 1996, he ⁴⁸⁶ filed his lawsuit, asking that GM accept his return of the Cadillac and for a refund of the money paid for the lease. As the lawsuit proceeded, Mr. Murphy continued making his monthly lease payments though he did not drive the car, but he had someone turn the engine over on occasion. A GM consultant test drove the vehicle before trial and testified at trial that he was unable to duplicate any hesitation or stalling problem.

At a bench trial in the Circuit Court for Baltimore County, Judge Robert E. Cadigan ruled in favor of Chesapeake and GM, finding that “it was unreasonable on the part of Mr. Murphy to not wait that six days to see if Chesapeake could repair this vehicle.” Judge Cadigan concluded, therefore, “that Chesapeake was not given a reasonable opportunity to perform the repairs which could have cured this particular problem.” The Court of Special Appeals affirmed. Murphy, supra. We shall provide more facts about the case and more detail on the trial court’s and intermediate court’s decisions as they become relevant in the discussion that follows. B. The Consumer Motor Vehicle Leasing Contracts Act comprehensively regulates the leasing of motor vehicles for the protection of lessees.

The statute requires lessors of motor vehicles to make certain disclosures at the time leasing arrangements are made and otherwise regulates the contract between the lessee and lessor. § 14-2002. It also protects lessees from unscrupulous marketing practices. § 14-2003. Section 14-2004 is the provision with which the instant case is most concerned. It provides in pertinent part: “(a) Applicability of Uniform Commercial Code.—To the extent that §§ 2-313 through 2-318, inclusive, of this article apply to the purchase of a motor vehicle, the rights and remedies provided for in those sections shall apply to the lease of a motor vehicle and may be exercised by any lessee. ⁴⁸⁷ * * * (c) Nonconformity, defect or condition—Report.—(l)(i) If a new motor vehicle does not conform to all applicable warranties during the warranty period, the lessee shall, during the warranty period, report the nonconformity, defect, or condition by giving written notice to the manufacturer, factory branch, or lessor by certified mail, return receipt requested. * * * (2) The lessee shall provide an opportunity for the manufacturer or factory branch, its agent or authorized dealer, or the lessor or the lessor’s agent to cure the nonconformity, defect, or condition.

(3) The manufacturer or factory branch, its agent or its authorized dealer, or the lessor or the lessor’s agent shall correct the nonconformity, defect, or condition at no charge to the lessee, even if repairs are made after the expiration of the warranty period. (d) Same—Rights and remedies where manufacturer, factory branch, etc., unable to repair or correct.—(l)(i) If, during the warranty period, the manufacturer or factory branch, its agent or authorized dealer, or the lessor or the lessor’s agent is unable to repair or correct any nonconformity, defect, or condition that substantially impairs the use and market value of the motor vehicle to the lessee after a reasonable number of attempts, the manufacturer or factory branch, at the option of the lessee shall: 1. Replace the motor vehicle with a comparable motor vehicle acceptable to the lessee; or 2. Accept return of the motor vehicle from the lessee and refund to the lessee all moneys paid by the lessee to repair the defect, condition, or nonconformity pursuant to a lease, including all excise tax, license fees, registration fees, and any similar governmental charges, less a reasonable allowance for the lessee’s unimpaired use of the vehicle; and ⁴⁸⁸ (2)(i) In the event a manufacturer accepts return of a motor vehicle, under paragraph (l)(i)2 of this subsection, the lessee shall be compensated by the manufacturer for any moneys paid during the period in which the motor vehicle was not available due to the defect, condition, or nonconformity and the lessor shall be paid by the manufacturer all amounts due to the lessor under the terms of the lease. í ^ ^ (e) When presumption that a reasonable number of attempts to conform vehicle to applicable warranties arises.— It shall be presumed that a reasonable number of attempts have been undertaken to conform a motor vehicle to the applicable warranties if: (1) The same nonconformity, defect, or condition has been subject to repair 4 or more times by the manufacturer or factory branch, or its agents or authorized dealers, within the warranty period but such nonconformity, defect, or condition continues to exist; (2) The motor vehicle is out of service by reason of repair of 1 or more nonconformities, defects, or conditions for a cumulative total of 30 or more days during the warranty period; or (3) A nonconformity, defect, or condition resulting in failure of the braking or steering system has been subject to the same repair at least once within the warranty period, and the manufacturer has been notified and given the opportunity to cure the defect, and the repair does not bring the vehicle into compliance with the motor vehicle safety inspection laws of the State.” Section 14-2004 plays two important consumer protection roles.

First, it expands the warranty provisions of the Uniform Commercial Code, Md.Code (1997 RepLVol.) Commercial Law Art., §§ 2-313 through 2-318, to leases of motor vehicles and provides for remedies if those warranties are violated. Second, it provides to lessees of automobiles the protections ⁴⁸⁹ found in Maryland’s “lemon law,” which applies to sales of automobiles. See § 14-1502. The lemon law remedies for purchases and leases of defective vehicles differentiate between curable defects and those that cannot be repaired.

In the case of curable defects, the lessee is required to allow “an opportunity ... to cure ... at no charge to the lessee.” § 14-2004(c)(2-3). Thus, for defects that can be cured, § 14-2004 simply requires that the defect be cured free of charge by the manufacturer, dealer, or lessor. Subsection 14-2004(d) provides for those situations in which the defect is not subject to correction or remains unrepaired. To take advantage of this subsection, the lessee must demonstrate two elements in addition to the existence of a nonconformity or defect and the notice required under subsection (c).

First, the defect must be one that “the manufacturer or factory branch, its agent or authorized dealer, or the lessor or the lessor’s agent is unable to repair or correct ... after a reasonable number of attempts.” § 14-2004(d)(l)(i). Second, the defect must be one “that substantially impairs the use and market value of the motor vehicle to the lessee.” Id. If these two facts are proven, the lessee is entitled to chose between two remedies—either replacement of the defective vehicle with a comparable vehicle or a return of the vehicle with a refund of various expenses incurred as a result of the lease, less an allowance for the lessee’s unimpaired use of the vehicle. Id.

Finally, subsection (e) provides guidance as to what constitutes “a reasonable number of attempts” to repair or correct a vehicle defect or nonconformity under subsection (d). As discussed in more detail below, the subsection operates by shifting the burden of production to the manufacturer or factory branch that the lessee-has not permitted a “reasonable number of attempts” when the lessee establishes any one of three situations. The situations in which the lessee gains the benefit of this presumption, all of which must occur during the warranty period, include: (1) when repair of the defect has been attempted four or more times; (2) when the vehicle has been out of service a cumulative total of 30 or more days for ⁴⁹⁰ repairs of one or more defects; or (3) when the dbfect “result[s] in failure of the braking or steering system,” repair has previously been attempted, the manufacturer has oeen notified and given the opportunity to cure the problem, “and the repair does not bring the vehicle into compliance with the motor vehicle safety inspection laws of the State.” § 2004(e)(3). 2 14- This case concerns Mr. Murphy’s attempt to utilize § 14-2004(d) remedy of ending the leasing arrangement recovering the costs associated with the lease. As the and oted above, the statute requires Mr. Murphy to establish that he has allowed a “reasonable number of attempts” to cutí the defect.

As described next, Mr. Murphy’s burden may be ameliorated by subsection (e) if he is able to establish one of the three factúal situations giving rise to the presumption.

II

A. We now turn to the primary point of contention between the parties concerning whether GM was given a “reasonable number of attempts” to cure the defect alleged by Mr. Murphy. Before addressing the specifics of the trial court’s ruling, we address Mr. Murphy’s and GM’s construction of the statutory presumption created under § 14-2004(e), the text of which is quoted above. Mr. Murphy contends that he has demonstrated the elements necessary for the presumption under subsection (e)(3) and as a result that his “reasonableness is presumed as a matter of law (and he is, thus, entitled to a remedy).” For its part, GM argues that subsection (e) creates “requirefments]” that lessees must establish in order to claim a remedy under the Act. For example, referring to the subsection (e)(1) presumption, GM asserts that the statute “permit[s] a manufacturer four attempts in making needed repairs.” In addition, GM’s statement of the issue presented to this Court ⁴⁹¹ asks whether the statute “requires the lessee to provide the lessor and manufacturer four attempts to repair a non-conformity or defect in a vehicle in order for the lessee to seek relief.” Both Mr. Murphy and GM misconstrue the operation of the presumption created under subsection (e).

Subsection (e) does not conclusively determine whether a reasonable number of repair attempts has been permitted but only shifts the burden of production between the lessee and the manufacturer, and the question of reasonableness remains a question of fact. The role of the presumption created under subsection (e) is governed by Maryland Rule 5-301: “(a) Effect. Unless otherwise provided by statute or by these rules, in all civil actions a presumption imposes on the party against whom it is directed the burden of producing evidence to rebut the presumption. If that party introduces evidence tending to disprove the presumed fact, the presumption will retain the effect of creating a question to be decided by the trier of fact unless the court concludes that such evidence is legally insufficient or is so conclusive that it rebuts the presumption as a matter of law.” The comments to Md. Rule 5-301 state that the rule was intended to codify Maryland common law on presumptions in civil actions as articulated in this Court’s decision in Grier v. Rosenberg, 213 Md. 248 , 131 A.2d 737 (1957).

See also Alan D. Hornstein, The New Maryland Rules of Evidence: Survey, Analysis and Critique, 54 Md. L. Rev. 1032 , 1048-49 (1995). In Grier, we addressed a trial court’s refusal to instruct the jury of the presumption that, if the jury believed the evidence that the defendant was the owner of the car involved in an accident, there arose a rebuttable presumption that the automobile was being operated by the owner, the owner’s agent, or employee and within the scope of employment. We reversed, holding that the jury should have been told of the presumption. We explained in Grier that there were three possible outcomes when the substantive law creates a presumption and ⁴⁹² the trier of fact finds the presumption applicable.

Grier, 213 Md. at 254-55 , 131 A,2d at 740 . Each scenario depends on the evidence presented by the party against whom the presumption operates (and whom we shall call the “defendant”). Under the first scenario, if the defendant does not present any evidence, or the evidence is so slight that it is insufficient to submit to the jury, then the presumption operates conclusively as to the fact presumed. In such a case, the plaintiff may be entitled to a directed verdict or an instruction that if the fact finder finds the facts that give rise to the presumption, then it must find for the plaintiff on that issue.

If, on the other hand, the defendant presents conclusive evidence rebutting the presumption, the burden of production may shift back to the plaintiff, in which case if the plaintiff fails to produce reply evidence, the defendant may be entitled to a directed verdict. The final and perhaps most likely scenario occurs when the defendant produces some evidence, neither insufficient nor conclusive, rebutting the presumption. In this scenario, the existence of the presumed fact is submitted to the fact finder that is informed of the presumption. See also Lynn McLain, 5 Maryland Evidence § 301.2, at 89-90 (1995 supp.).

We recently applied Md. Rule 5-301 in Carrion v. Linzey, 342 Md. 266 , 675 A.2d 527 (1996), holding that the jury was properly informed of the presumptive correctness of an arbitration panel’s award in a medical malpractice lawsuit. At issue was the presumption created by Md.Code (1974, 1995 Repl.Vol.), Courts & Judicial Proceedings Art., § 3-2A-06(d) of the Health Claims Arbitration Act that a decision of the arbitration panel is presumptively correct. After exploring the reasons behind the presumption, we explained that in litigation subsequent to an arbitration panel ruling “the party challenging the decision of the arbitration panel has the burden of producing evidence tending to disprove the panel’s decision. Once this burden of production is met, the presumption retains enough vitality so that, without any other evidence, the party that prevailed at the panel can get to the jury.” Carrion, 342 Md. at 287 , 675 A.2d at 537 . ⁴⁹³ B. The presumptions created under § 14-2004(e) address the factual question of what constitutes a “reasonable number of attempts” to repair a vehicle defect.

Unlike the presumptive correctness of an arbitration proceeding in Carrion , a party seeking the benefit of a § 14-2004(e) presumption must first establish one of the three factual situations. When any one of these three situations is shown, the remedial purposes of the Act are furthered by shifting the burden to the manufacturer of producing evidence rebutting the presumption that a reasonable number of attempts at repair had been allowed. In proving the existence of the facts necessary to gain the benefit of the presumption (e.g., that there have been four unsuccessful repair attempts), the lessee’s initial burden of production is met, and the fact finder must find that a reasonable number of attempts has occurred unless rebuttal evidence is produced tending to show that a reasonable number of repair attempts has* not been permitted. If-rebuttal evidence is produced, the court must determine which of the three situations discussed in Grier is present: (1) whether the rebuttal evidence is so insufficient as a matter of law as to not allow it to be presented to a jury, (2) whether it is so conclusive as a matter of law as to eliminate the benefit of the presumption, or (3) whether the question is one for the trier of fact taking into account the presumption and hearing the rebuttal evidence.

On the other hand, if the facts do not give rise to one of the three situations in subsection (e), the subsection (e) presumption does not arise and the burden of production remains with the lessee, in which case the trier of fact still must evaluate whether the lessee has produced sufficiently persuasive evidence that there has been a reasonable opportunity to repair the vehicle. Thus, contrary to GM’s contention,"» subsection (e) does not establish minimum requirements that must be met before a lessee may seek a remedy under the Act; nor does subsection (e)(1) “permit” GM four attempts to cure a defect. Rather, if the lessee has not permitted four attempts or met the ⁴⁹⁴ criteria of either of the two other situations described in subsection (e), the burden of producing evidence that GM has had a reasonable number of attempts to cure remains with the lessee. In other words, the subsection (e) presumption serves only to ease the lessee’s burden when the lessee can establish the predicate facts of one of the three situations delineated in the subsection, but the lessee also may show that a reasonable number of repair attempts has been permitted without the benefit of the presumption.

Therefore the factual scenarios evident in the subsection (e) presumptions do not establish minimum requirements that a consumer must establish to invoke the statutory remedies. Indeed, one commentator has warned of the potential “danger that the presumptive reasonable number of attempts, set in the lemon laws will become a minimum that the consumer will have to allow before the consumer will be permitted refund or replacement under a lemon law.” Jean Braucher, An Informal Resolution Model of Consumer Product Warranty Law, 1985 Wis. L.Rev. 1405, 1438 n. 193 (1985). Finally, even if the lessee establishes the requisite facts to gain the benefit of a subsection (e) presumption, the manufacturer may argue that it has not had a reasonable number of attempts to repair the defect, although it bears the burden of producing evidence to support its argument.

As a result, Mr. Murphy’s argument that if one of the three situations in subsection (e) is established, reasonableness is “presumed as a matter of law” and the lessee is “entitled to a remedy” is flawed, even assuming that the other requirements for invoking a remedy under subsection (d) are met. In addition to being consistent with the express language of the statute, our construction of subsection (e) gives proper deference to the fact finder’s task of determining the reasonableness of the number of repair attempts by accounting for the myriad of circumstances that arise when someone has vehicle problems. Questions of reasonableness are ordinarily for the trier of fact because it accounts for the circumstances of the individual case and the credibility of the witnesses and evidence presented at trial. See, e.g., Informed ⁴⁹⁵ Physician v. Blue Cross, 350 Md. 308, 332 , 711 A.2d 1330, 1342 (1998)(observing that “ ‘[w]hat will constitute reasonable efforts ... is largely a question of fact’ ”), quoting Allview Acres v. Howard, 229 Md. 238, 244 , 182 A.2d 793, 796 (1962); Wilson v. Morris, 317 Md. 284, 295 , 563 A.2d 392, 397 (1989)(noting that issue of reasonableness is for the jury); Lynx, Inc. v. Ordnance Products, 273 Md. 1, 13 , 327 A.2d 502, 512 (1974)(what constitutes a “reasonable time” is ordinarily a question of fact).

This interpretation of the interplay between the requirement of a reasonable number of repair attempts and the presumption created by subsection (e) is consistent with the interpretations other states have given similar provisions in their lemon laws. For example, we agree with the view of the California court, which in analyzing the similarly worded California lemon law statute, said that even with the presumptions “[t]he issue of whether the manufacturer has made a reasonable number of attempts to conform the product to the warranty remains to be resolved. Unreasonableness may still be found even if a new vehicle has been out of service for less than 30 days or if there have been fewer than four attempts to repair the same problem. By enacting subdivision (e) the Legislature has not decreed a per se, valid-in-all circumstances, money-back guarantee for every purchaser whose new automobile has spent 30 days at the dealership for repairs, or who has suffered through four attempts to fix a problem; these are only markers on the path of reasonableness that the trier of fact must trod.” Ibrahim v. Ford Motor Co., 214 Cal.App.3d 878 , 263 Cal.Rptr. 64, 68 (1989).

See also Ford Motor Co. v. Texas Dept. of Transp., 936 S.W.2d 427, 432 (Tex.Ct.App.l996)(“[T]he existence of statutory presumptions does not forbid the agency from finding that different circumstances or fewer attempts meet the requisite ‘reasonable number of attempts.’”). In Subaru of America, Inc. v. Peters, 500 S.E.2d 803 (Va.1998), the Supreme Court of Virginia addressed the argument by Subaru—identical to the interpretation of subsection (e) made ⁴⁹⁶ by General Motors in this case—that Virginia’s presumption that three attempts at repair constituted a “reasonable number of attempts” allowed it, as a matter of law, a minimum of three attempts at repair. Va.Code Ann. § 59.1~207.13B (Michie 1998). In rejecting Subaru’s argument and affirming a jury’s finding that a reasonable number of attempts