Mago v. Mercedes-Benz, U.S.A., Inc.

142 P.3d 712, 213 Ariz. 404, 486 Ariz. Adv. Rep. 19, 2006 Ariz. App. LEXIS 106
Court of Appeals of Arizona·Decided September 7, 2006·No. No. 1 CA-CV 04-0144·Published·Cited by 7 cases

Opinion

[406] OPINION

TIMMER, Presiding Judge.

¶ 1 In the wake of Parrot v. Daimler-Chrysler Corp., 212 Ariz. 255, 130 P.3d 530 (2006), the supreme court vacated our memorandum decision previously filed in this case and remanded for reconsideration. The issue is whether Ricky Mago, a lessee of a Mercedes-Benz E430, is eligible to recover under the Arizona Motor Vehicle Warranties Act (“Lemon Law”), Arizona Revised Statutes (“A.R.S.”) sections 44-1261 to -1267 (2003 & Supp.2005), or the Magnuson Moss Warranty Act (‘Warranty Act” or “Act”), 15 U.S.C. §§ 2301-2312 (2000), for vehicle defects that substantially impaired its use, value, and safety. For the reasons that follow, we hold that Mago’s lessee status prevents him from seeking remedies under the Lemon Law but does not foreclose his claim under the Warranty Act.

FACTS AND PROCEDURAL HISTORY1

¶ 2 On May 23, 2001, Mago leased a new Mercedes-Benz E430 (“E430”) from Phoenix Motor Company (“Dealer”), which simultaneously sold the vehicle and assigned the lease to Mercedes-Benz Credit Corporation (“Lessor”). The E430 was manufactured by Mercedes-Benz U.S.A. Inc. (“M-B USA”).

¶ 3 M-B USA issued Dealer a written warranty that covered the E430 for defects for four years or fifty thousand miles. The warranty rights were assigned to Mago as part of the lease agreement. Shortly after Mago leased the E430, the vehicle experienced numerous problems. Mago took the E430 to an authorized Mercedes-Benz Center for repair at least eight times between May 2001 and July 2002, but the defects remained uncorrected. Subsequently, in early July 2002, Mago revoked his acceptance of the E430, but M-B USA refused the revocation and declined to pay damages.

¶ 4 Later in July, Mago filed a complaint in superior court seeking remedies under the Lemon Law and the Warranty Act, both of which provide remedies to a consumer when a motor vehicle warrantor fails to honor its obligations. Parrot, 212 Ariz. at 257, 261-62, ¶¶ 9-10, 38, 42, 130 P.3d at 532, 536-37. MB USA moved for summary judgment in March 2003, arguing that the statutes do not apply to leased vehicles.

¶ 5 In September 2003, the trial court granted M-B USA’s motion, reasoning that Mago, as a lessee, is not a “consumer” as used in either the Lemon Law or the Warranty Act. The court stated that although neither law extensively defined the term “consumer,” the language in the statutes implied that “a consumer is a person who buys a product.”

¶ 6 We reversed the trial court’s grant of summary judgment, basing our analysis and conclusion on this court’s then-recent decision in Parrot v. DaimlerChrysler Corp., 210 Ariz. 143, 108 P.3d 922 (App.2005), which held that a lessee may seek remedies under the Lemon Law and the Warranty Act because a lessee fits the definitions of “consumer” under both statutes. 210 Ariz. at 147-48, 150, ¶¶ 18-19, 33-36, 108 P.3d at 926-27, 929. The supreme court, however, vacated that decision and then remanded the present case to this court for reconsideration in light of its holding in Parrot, “including [determining] ... whether a lessee has remedies under the [Warranty Act], when there is a claim or allegation that there has been a sale of a vehicle by a supplier to a lessor.”

ANALYSIS2

I.

¶ 7 The plaintiff in Parrot v. Daimler-Chrysler Corp. leased a Jeep from a dealer, who then assigned the lease to a lender but retained title to the vehicle. 212 Ariz. at 256, ¶ 2, 130 P.3d at 531. The manufacturer’s [407] written warranty accompanied the Jeep. Id. After experiencing numerous problems with the Jeep, the plaintiff filed suit against the manufacturer alleging breach of warranty and seeking remedies under the Lemon Law and the Warranty Act. Id. at ¶¶ 3^4. The trial court granted summary judgment for the manufacturer, the court of appeals reversed, and the supreme court granted the subsequently filed petition for review. Id. at ¶¶ 4-6. The issue before the court was whether the plaintiff was a “consumer” under either the Lemon Law or the Warranty Act. Id. at ¶ 1. Resolution of this issue turned on the interpretation and application of each statutory scheme.

¶ 8 In order to be a “consumer” under the Lemon Law, one must qualify under at least one of the following three categories of consumers: (1) a “purchaser, other than for purposes of resale, of a motor vehicle,” (2) “any person to whom the motor vehicle is transferred during the duration of an express warranty applicable to the motor vehicle,” or (3) “any other person entitled by the terms of the warranty to enforce the obligations of the warranty.” A.R.S. § 44-1261(A)(1). Although the plaintiff clearly could not qualify under category one due to his lessee status, the Parrot court noted that he may qualify under the latter two categories. 212 Ariz. at 261, ¶ 39, 130 P.3d at 536. The court did not decide that issue, however, because it concluded that the remedies afforded by the Lemon Law precluded recovery by a vehicle lessee. Id.

¶ 9 The Lemon Law provides that if a manufacturer or its authorized dealer fails to correct or repair a vehicle, thereby substantially impairing its use, the manufacturer must either replace the vehicle or accept return of the defective vehicle and refund the purchase price plus collateral charges to the consumer, less a reasonable use allowance. Id. at 261-62, ¶ 40, 130 P.3d at 536-37. Because “[b]oth remedies assume that the consumer has the right to transfer title to the vehicle back to the manufacturer,” and “[o]nly the owner of the vehicle or holder of title can transfer title,” the court held that the plaintiff, as lessee, had no remedies under the Lemon Law, regardless of his status as a category two or three consumer. Id. at 262, ¶ 41, 130 P.3d at 537.

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Mago v. Mercedes-Benz, U.S.A., Inc., 142 P.3d 712, 213 Ariz. 404, 486 Ariz. Adv. Rep. 19, 2006 Ariz. App. LEXIS 106 (Ark. Ct. App. 2006).

142 P.3d 712 (Mago v. Mercedes-Benz, U.S.A., Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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