ALLEN KIRZHNER, Plaintiff and Appellant, v. MERCEDES-BENZ USA, LLC, Defendant and Respondent.
S246444
Supreme Court of California
July 27, 2020
Fourth Appellate District, Division Three, G052551; Orange County Superior Court, 30-2014-00744604
Groban, J.
Justice Groban authored the opinion of the Court, in which Chief Justice Cantil-Sakauye and Justices Chin, Corrigan, Liu, Cuéllar, and Kruger concurred.
This case involves the Song-Beverly Consumer Warranty Act (the Act),
In this case, plaintiff Allen Kirzhner selected restitution and requested reimbursement for vehicle registration renewal and nonoperation fees he paid after the initial lease of his vehicle. The question before us is whether the Act requires defendant Mercedes-Benz USA, LLC (Mercedes) to reimburse these
I. BACKGROUND
In 2012, Kirzhner leased a new vehicle from Mercedes. Kirzhner alleges that, during the warranty period, the vehicle exhibited a variety of defects that caused the command system, navigation system, and key fob to malfunction; the steering column adjustment mechanism and power seats to be inoperative; the coolant level warning light to illuminate; and smoke to emanate from the cigarette lighter. Kirzhner further alleges that he presented the vehicle to Mercedes for repair, but Mercedes was unable to remedy the defects after a reasonable number of repair attempts.
Nearly six months after filing suit, Kirzhner accepted a settlement offer Mercedes made pursuant to
Because the parties could not agree on the total amount Mercedes was required to pay in restitution pursuant to the section 998 offer, Kirzhner filed a postjudgment motion requesting the trial court to determine the amount owed. The trial court awarded $47,708.06 to Kirzhner. This amount included the initial vehicle registration fee of $101 paid at the time Kirzhner entered into the lease agreement. It excluded, however, vehicle registration renewal fees Kirzhner paid in 2013 and 2014. It also excluded a nonoperation fee—a fee that a vehicle owner may pay in lieu of a registration renewal fee upon
The Court of Appeal affirmed, explaining, “The only registration fee that could be considered a ‘collateral charge’ associated with ‘the actual price paid or payable’ is the one which is paid when the vehicle is purchased or leased (or accounted for in financing). [Citation.] Registration fees for future years cannot be considered a ‘collateral charge’ because they are incurred and paid after the initial purchase or lease.” (Kirzhner v. Mercedes-Benz USA, LLC (2017) 18 Cal.App.5th 453, 458 (Kirzhner).) The Court of Appeal further explained that incidental damages are limited to costs “incurred as a result of a vehicle being defective” and “[s]uch is not the case with vehicle registration renewal fees, which are more accurately characterized as a standard cost of owning any vehicle.” (Ibid., italics omitted.)
We granted review.
II. DISCUSSION
We are asked to determine whether the Act requires a manufacturer to reimburse registration renewal and nonoperation fees, either as collateral charges or as incidental damages. Our resolution of these questions requires us to interpret several interrelated statutory provisions.
To determine the Legislature‘s intent in interpreting these statutory provisions, “[w]e first examine the statutory language, giving it a plain and commonsense meaning.” (Coalition of Concerned Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737.) We do not consider statutory language in isolation; instead, we examine the entire statute to construe the words in context. (West Pico Furniture Co. v. Pacific Finance Loans (1970) 2 Cal.3d 594, 608.) If the language is unambiguous, “then the Legislature is presumed to have meant what it said, and the plain meaning of the language governs.” (Kizer v. Hanna (1989) 48 Cal.3d 1, 8.) “If the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute‘s purpose, legislative history, and public policy.” (Concerned Communities, at p. 737.) We keep in mind that the Act is ” ‘manifestly a remedial measure, intended for the protection of the consumer; it should be given a construction calculated to bring its benefits into action.’ ” (Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 990.)
A. The Fees Are Not Recoverable as Collateral Charges
The Act allows for recovery of restitution “in an amount equal to the actual price paid or payable by the buyer, including any collateral charges such as sales or use tax, license fees, registration fees, and other official fees.” (
The Act makes clear that charges must be “collateral” to the “price paid or payable” to be recoverable. (
Kirzhner points out that
Kirzhner‘s interpretation reads the word “price” out of the statute. As explained above, the word “price” means the cost at which at item is obtained. The word “payable” modifies the word “price” and operates to acknowledge that some buyers do not pay the full cost of the vehicle at the time of the initial purchase or lease. It does not, however, indicate that all charges and expenses that may later be incurred in connection with the ownership or use of the vehicle are recoverable, even if they are not a part of and do not accompany the price of the vehicle. The finance charges at issue in Mitchell are unlike registration renewal and nonoperation fees because a buyer obtains financing at the time of the purchase or lease in order to cover the total cost of the vehicle. Finance charges therefore supplement and are paid auxiliary to the price of the vehicle.
Kirzhner also argues that the statute‘s inclusion of use and sales taxes as recoverable collateral charges supports his interpretation. (
While Kirzhner is correct on the technical point that sales tax is paid to the state by the retailer, the practical reality is that sales tax is “almost invariably
The initial registration fee is a recoverable collateral charge because, like finance charges and sales or use taxes, it is auxiliary to and supplements the price paid for the vehicle. As explained above, the buyer pays the initial registration fee to the dealer as part of the total cost of the vehicle and in exchange for the vehicle. It is thus a charge that is collateral to the price paid. In contrast, registration renewal and nonoperation fees are not auxiliary to and do not supplement the price paid because they are not paid as part of the total cost of the vehicle and in exchange for the vehicle. They are instead paid to the DMV long after the initial purchase or lease transaction in order to continue to legally own or operate the vehicle. For these reasons, Kirzhner‘s interpretation is contrary to the plain meaning of
Turning to statutory context, the replacement remedy in
The Act‘s legislative history, however, indicates the Legislature intended the manufacturer to be responsible for an equivalent amount of registration fees regardless of whether the consumer elects a replacement vehicle or restitution. In analyzing Assembly Bill No. 2057 (1987-1988 Reg. Sess.)—the bill that enacted the replacement and restitution remedies—the Department of Finance stated that the identical remedies proposed verbatim in the related Assembly Bill No. 2050 (1987-1988 Reg. Sess.) would require “the manufacturer to pay sales tax, license and registration fees on the replacement, or an equivalent amount in restitution.” (Dept. of Finance, Enrolled Bill Rep. on Assem. Bill No. 2057 (1987–1988 Reg. Sess.) as amended May 13, 1987, p. 3; italics added.) Other departments, such as the Department of Consumer Affairs, noted that Assembly Bill No. 2057 would require manufacturers “to reimburse sales or use tax, license and registration fees and incidental damages” without differentiating between the replacement and restitution remedies. (Dept. of Consumer Affairs, Enrolled Bill Rep. on Assem. Bill No. 2057 (1987-1988 Reg. Sess.) prepared for Governor Deukmejian (Sept. 25, 1987) p. 4; accord, Dept. of Justice, Analysis of Assem. Bill No. 2057 (1987–1988 Reg. Sess.) as amended June 11, 1987, p. 2.) Kirzhner does not point us to anything in the legislative history indicating an intent to treat the two remedies differently with respect to the amount of registration fees for which the manufacturer would be responsible.
Moreover, there is a straightforward reason for the difference in the precise wording of the replacement and restitution remedies. The replacement remedy specifies that the manufacturer must pay for all official fees, including registration fees, that will be incurred “in connection with the replacement” (
In sum, based on the plain meaning of
B. The Fees May Be Recoverable as Incidental Damages
Although registration renewal and nonoperation fees are not recoverable as collateral charges, we hold that they are recoverable as incidental damages if they were incurred as a result of the manufacturer‘s failure to promptly provide a replacement vehicle or restitution once its obligation to do so under
Since the Act expressly states that a buyer may recover incidental damages under
The parties do not dispute that Kirzhner‘s registration renewal and nonoperation fees were “reasonably incurred.” (
1. Care and Custody Costs
Turning to the first question, we consider whether registration renewal and nonoperation fees are expenses incurred in the “inspection, receipt, transportation and care and custody” of a vehicle. (
As cases applying Uniform Commercial Code section 2-715 make clear, the phrase “care and custody” should not be read broadly to encompass all costs incurred over the course of possessing, owning, operating, or using nonconforming goods.
Though the Court of Appeal was concerned about opening up a ” ‘Pandora‘s box’ ” of potential costs manufacturers would be required to pay if it were to rule that registration renewal fees were recoverable as incidental damages (Kirzhner, supra, 18 Cal.App.5th at p. 458), there are limits on such damages. Indeed, Kirzhner concedes that standard ownership or use costs—like gas, car washes, or oil changes—will normally not qualify as incidental damages. We do not foreclose the possibility that, in an unusual case, a buyer may be able to present particular circumstances that might justify an exception to this general rule. Ordinarily, however, buyers are free to choose whether to put gas or oil in the car and usually opt to expend such costs solely for their own benefit in order to drive the vehicle and keep it operational. We have not found any case in which a court has awarded such standard ownership or use costs incurred solely for the buyer‘s benefit and unconnected to the manufacturer‘s breach—as incidental damages. Registration renewal and nonoperation fees are different, at
In Lanners, for example, the Oregon Supreme Court awarded as incidental damages costs necessary to protect and maintain a defective airplane after revocation, including storage costs, ground insurance charges, the costs of removing the radio and battery, and the costs of installing special storage oil. (Lanners, supra, 428 P.2d at p. 404.) Similarly, in Western Conference Resorts, Inc. v. Pease (Colo.App. 1983) 668 P.2d 973, 976-977, the court awarded service work expenses and tie-down fees—i.e., fees incurred in “tying down” an airplane to minimize the possibility of damage from strong winds—to preserve and protect a defective airplane after revocation. (Id. at pp. 976-977.) The buyers in Lanners and Western Conference did not incur these costs in order to fly the airplanes. Nor did they incur the costs in order to increase the value of their ownership interest in the airplanes, given that they no longer had any ownership interest having revoked acceptance of the airplanes. (
Registration renewal and nonoperation fees serve similar purposes, at least when they are incurred and paid after the manufacturer fails to comply with its duty to promptly repurchase or replace a defective vehicle. To explain, the Act provides that, where a manufacturer is unable to repair the vehicle after a reasonable number of attempts, the manufacturer must “promptly” provide a replacement vehicle or restitution. (
For these reasons, registration renewal and nonoperation fees incurred after the manufacturer‘s duty to promptly repurchase or replace the vehicle arises are unlike the standard costs of ownership or use that buyers freely choose to incur for their own benefit in order to drive the vehicle. They are more akin to post-revocation care and custody costs courts have awarded as reasonably incurred in order maintain and protect the goods for the seller‘s benefit pending the seller‘s retrieval of the vehicle.
goods. The few cases that have analyzed whether registration renewal fees or similar fees are among the types of costs that may be recovered as incidental damages are in accord with our view. (See, e.g., Jacobs v. Rosemount Dodge-Winnebago South (Minn. 1981) 310 N.W.2d 71, 77 [awarding all licensing fees paid from the date of revocation through trial on the ground that the buyers paid these fees in fulfillment of their post-revocation duty to hold the defective motorhome with reasonable care until the seller retrieved it].) We therefore conclude that registration renewal and nonoperation fees paid after the manufacturer‘s duty to promptly repurchase or replace the vehicle arises are recoverable as incidental damages incurred in the care and custody of a defective vehicle.
2. Causation
We next consider whether Kirzhner‘s registration renewal and nonoperation fees “result[ed] from” or were incurred “incident to” Mercedes‘s breach or other violation of the Act. (
By contrast, Kirzhner would have incurred and paid registration renewal or nonoperation fees even if his vehicle had been defect-free and even if Mercedes had been successful in repairing the defects. We therefore cannot conclude that Kirzhner would not have incurred the fees but for the fact that Mercedes provided him with a defective vehicle that never conformed to its warranties. As many courts have held, “[a]n expense will not ordinarily be considered as an item of incidental or consequential damage to a breach of warranty when the buyer would have incurred the claimed expense even if the product or goods had been as warranted.” (Delhomme Industries, Inc. v. Houston Beechcraft, Inc. (5th Cir. 1984) 735 F.2d 177, 185-186; accord, Industrial Graphics, Inc. v. Asahi Corp. (D. Minn. 1980) 485 F.Supp. 793, 808 [overhead expenses were “not recoverable in total” because they “would have been incurred . . . even if the [goods] had been as warranted[,]” but they were recoverable in the amount greater than the buyer would have otherwise expended had the goods been defect-free];
In a different case, there may be unique facts presented under which registration renewal fees could be found to have been caused by a manufacturer‘s breach of express or implied warranties. For example, if the buyer could not use the vehicle due to the defects and was forced to acquire a substitute vehicle as cover, the buyer might be able to recover the additional registration fee incurred and paid on the substitute vehicle. But because registration renewal fees are a standard cost of owning or leasing any vehicle, defective or not, they will normally not be recoverable as incidental damages resulting from a breach of an express or implied warranty. Here, Kirzhner does not allege any facts tending to show that he incurred increased or
Kirzhner is entitled, however, to recover any registration renewal and nonoperation fees he incurred after the date Mercedes failed to promptly provide him with restitution. At this point in time, when the buyer or lessee has a greatly diminished interest in the vehicle and payment of the fees primarily benefits the manufacturer, it is reasonable to conclude that the fees “result[ed] from” and were incurred “incident to” the manufacturer‘s delay. (
We provide the following hypothetical scenario to illustrate: A buyer first presents a defective car to a manufacturer for repair three months after purchase. The manufacturer is unable to repair the car during the first repair attempt or three subsequent repair attempts over the next four months, triggering a presumption under
In short, we conclude that Kirzhner may recover as incidental damages only those registration renewal and nonoperation fees resulting from Mercedes‘s alleged breach of its duty under
Mercedes argues that its duty under
Mercedes is correct that a manufacturer‘s willful failure to promptly provide restitution or a replacement vehicle may result in an award of civil penalties pursuant to
The Act‘s legislative history supports the above interpretation.
D. The Section 998 Offer Does Not Bar Recovery
Mercedes argues that Kirzhner is precluded from showing that his registration renewal and nonoperation fees resulted from any of Mercedes‘s alleged breaches because the
E. Remand is Necessary on the Issue of Causation
Although the
Kirzhner argues that, because he commenced this lawsuit in September 2014 and Mercedes did not provide him with restitution until August 2015, Mercedes failed to promptly provide him with restitution. But, even though we agree that a delay of nearly a year from the date the manufacturer‘s duty to provide restitution arises to the date it actually provides restitution is not prompt, Kirzhner‘s filing of a lawsuit is not evidence that Mercedes‘s duty had already arisen by the date the lawsuit was filed. We note, however, that while Kirzhner must show when the breach arose in order to recover his registration renewal and nonoperation fees as incidental damages, he need not prove that Mercedes‘s failure to promptly provide him with restitution was willful since he is not seeking civil penalties. Thus, Mercedes cannot escape its obligation to pay the fees as incidental damages by, for example, showing that it held a “good faith and reasonable belief” that its repurchase obligation had not yet arisen at the time Kirzhner incurred and paid the fees. (Kwan, supra, 23 Cal.App.4th at p. 185.) Instead, Kirzhner may recover any fees resulting from Mercedes‘s negligent failure to promptly provide him with restitution. We additionally note that if Kirzhner proves that Mercedes‘s repurchase obligation had, in fact, arisen by the time he filed suit, he will likely be able to recover the nonoperation fee he paid in June 2015 since a delay of at least nine months from the time he filed suit to the date he paid the fee is not prompt.
To summarize, although the parties’
III. DISPOSITION
In conclusion, we hold that registration renewal and nonoperation fees are not recoverable as collateral charges under
GROBAN, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CHIN, J.
CORRIGAN, J.
LIU, J.
CUÉLLAR, J.
KRUGER, J.
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion Kirzhner v. Mercedes-Benz USA, LLC
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XX 18 Cal.App.5th 453
Rehearing Granted
Opinion No. S246444
Date Filed: July 27, 2020
Court: Superior
County: Orange
Judge: James Di Cesare
Counsel:
Anderson Law Firm, Martin W. Anderson; Law Office of Jeffrey Kane and Jeffrey Kane for Plaintiff and Appellant.
Universal & Shannon, Jon D. Universal, Marie L. Wrighten-Douglass, Patrea R. Bullock, Jay C. Patterson and James P. Mayo for Defendant and Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
Martin W. Anderson
Anderson Law Firm
2070 North Tustin Avenue
Santa Ana, CA 92705
(714) 516-2700
James P. Mayo
Universal & Shannon, LLP
2240 Douglas Blvd., #290
Roseville, CA 95661
(916) 780-4050