ROBERT DAVIS V LAFONTAINE MOTORS INC
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STATE OF MICHIGAN
COURT OF APPEALS
ROBERT DAVIS and MARIAH COOK-DAVIS,
Plaintiffs-Appellees,
v
LaFONTAINE MOTORS, INC., d/b/a
LaFONTAINE DAEWOO, and FIFTH THIRD
FINANCIAL CORPORATION,
Defendants-Appellants.
FOR PUBLICATION
May 4, 2006
9:00 a.m.
No. 258434
Wayne Circuit Court
LC No. 03-317180-NZ
Official Reported Version
Before: Owens, P.J., and Kelly and Fort Hood, JJ.
PER CURIAM.
Defendants appeal by leave granted the trial court's order denying their motion for
summary disposition. We reverse.
I. Basic Facts
Plaintiffs purchased a new 2001 Daewoo automobile from defendant LaFontaine Motors,
Inc. At the time plaintiffs purchased the vehicle, LaFontaine was an authorized Daewoo dealer,
in addition to being a Daewoo authorized service operation. The vehicle purchase order, signed
by the parties, contained certain warranty disclaimers and expressly stated that LaFontaine was
not an agent of Daewoo, the vehicle manufacturer. Several days after the vehicle purchase order
was signed, the parties executed a retail installment motor vehicle purchase agreement, which
LaFontaine assigned to Old Kent Bank, which in turn assigned it to defendant Fifth Third
Financial Corporation.
After plaintiffs took possession of the vehicle, LaFontaine performed minor repair work
under the manufacturer's warranty. In September 2001, LaFontaine ceased being an authorized
service operation when Daewoo and LaFontaine voluntarily terminated their sales and service
agreement. When plaintiff Mariah Cook-Davis later contacted LaFontaine about potential
warranty repairs, she was advised that LaFontaine was no longer authorized to perform Daewoo
warranty work and was referred to Tamaroff Daewoo (Tamaroff). Thereafter, plaintiffs received
warranty service repair from Tamaroff and had no further contact with LaFontaine. In March
2002, when Cook-Davis again brought the vehicle to Tamaroff for service, she was informed that
Daewoo had declared bankruptcy and, because of the bankruptcy, the dealership was no longer
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doing warranty work. As a result, she was told that she would have to pay for any service and
repairs herself. Cook-Davis contacted other service facilities and was informed by all of them
that she would be responsible for any repairs.
Plaintiffs subsequently filed this action, against LaFontaine and Fifth Third Financial
Corporation, claiming breach of express and implied warranties; revocation; breach of the duty
of good faith under the Uniform Commercial Code (UCC), MCL 440.1101 et seq.; violation of
the Magnuson-Moss Warranty Act (MMWA), 15 USC 2301 et seq.; violation of the Michigan
Consumer Protection Act (MCPA), MCL 445.901 et seq.; and violation of the Motor Vehicle
Service and Repair Act, MCL 257.1301 et seq.
LaFontaine moved for summary disposition pursuant to MCR 2.116(C)(10), arguing that
plaintiffs' various claims were precluded by the disclaimer in the vehicle purchase order and,
additionally, the revocation claimed failed because plaintiffs failed to notify LaFontaine of their
intent to seek revocation within a reasonable time after discovering the defects. LaFontaine
further argued that, because plaintiffs' warranty claims failed, so did their claims under the
MMWA. Defendant Fifth Third concurred in the motion. In response, plaintiffs argued that (1)
defendants could not validly disclaim implied warranties under the MMWA, 15 USC 2308; (2)
the disclaimer was ineffective because it was not conspicuous, as required by MCL 440.1201; (3)
the disclaimer was not part of the contract; (4) defendants could not disclaim express warranties,
and there was an issue of fact regarding whether LaFontaine made express warranties; and (5)
the disclaimer was no defense to plaintiffs' revocation claim.
At the hearing on defendants' motion, the trial court stated:
I would deny all of the motions except one under Consumer Protection
Act. And since its is not well defined in law I'll let you take it to the Court of
Appeals so that this issue—if you choose to do that. And find that LaFontaine is
responsible under the warranty to the purchaser of the vehicle under these
circumstances where it sold the vehicle and subsequently the manufacturer went
out of business, Daewoo, and now the purchaser who purchased it through that
has no recourse. But I say they have a recourse against LaFontaine Motors.
The trial court entered an order denying defendants' motion for summary disposition in
its entirety. Although not specifically articulated, the trial court impliedly adopted each of
plaintiffs' arguments.
II. Standard of Review
We review de novo a trial court's decision on a motion for summary disposition. Dressel
v Ameribank, 468 Mich 557, 561; 664 NW2d 151 (2003). Summary disposition is proper under
MCR 2.116(C)(10) if the documentary evidence submitted by the parties, viewed in the light
most favorable to the nonmoving party, shows that there is no genuine issue regarding any
material fact and the moving party is entitled to judgment as a matter of law. Veenstra v
Washtenaw Country Club, 466 Mich 155, 164; 645 NW2d 643 (2002).
This appeal involves statutory interpretation. We review de novo questions of statutory
interpretation. Echelon Homes, LLC v Carter Lumber Co, 472 Mich 192, 196; 694 NW2d 544
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(2005). "In reviewing questions of statutory interpretation, our purpose is to discern and give
effect to the Legislature's intent." Id. Where the plain language of the statute is unambiguous,
there is a presumption that the Legislature intended the meaning clearly expressed. Id. In that
case, no further judicial construction is required or permitted; the statute must be enforced as
written. Id.
This appeal also involves the interpretation of the parties' contract. The main goal in
interpreting a contract is to honor the parties' intent. Mahnick v Bell Co, 256 Mich App 154,
158-159; 662 NW2d 830 (2003). Courts must discern the parties' intent from the words used in
the contract and must enforce an unambiguous contract according to its plain terms. Id. at 159.
"If the contract language is clear and unambiguous, then its meaning is a question of law for the
court to decide." Conagra, Inc v Farmers State Bank, 237 Mich App 109, 132; 602 NW2d 390
(1999).
III. Warranties
Defendants argue that the trial court erred in denying defendants' motion for summary
disposition on plaintiffs' breach of warranties claim. We agree.
A. Express Warranties
In the trial court, plaintiffs contended because LaFontaine represented that the sale
included a manufacturer's warranty, this representation was an express warranty under MCL
440.2313 that cannot be disclaimed. MCL 440.2313 provides:
(1) Express warranties by the seller are created as follows:
(a) An 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.
(b) A description of the goods which is made part of the basis of the
bargain creates an express warranty that the goods shall conform to the
description.
(c) A sample or model which is made part of the basis of the bargain
creates an express warranty that the whole of the goods shall conform to the
sample or model.
(2) It is not necessary to the creation of an express warranty that the seller
use formal words such as "warrant" or "guarantee" or that he or she have a
specific intention to make a warranty, but an affirmation merely of the value of
the goods or a statement purporting to be merely the seller's opinion or
commendation of the goods does not create a warranty, except as provided in the
art multiples sales act and Act No. 121 of the Public Acts of 1970, being section
442.321 to 442.325 of the Michigan Compiled Laws.
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Here, on the first page of the vehicle purchase order, which both plaintiffs signed, under
the heading "IMPORTANT BUYER INFORMATION," the following notice appears:
1. Any warranties from a Manufacturer or supplier, including warranties
on any Dealer-installed Non-Manufacturer accessories, are theirs, not Dealer's,
and only such Manufacturer or other supplier will be liable for performance under
those warranties. All goods, services and Vehicles sold by Dealer are sold "AS
IS" unless Dealer furnished Buyer with a separate written warranty or service
contract or the used car sticker on the window on the vehicle indicates otherwise.
(SEE PARAGRAPH 10 ON REVERSE SIDE). This disclaimer in no way affects
the Manufacturer's Vehicle warranty.
Paragraph 10, entitled "WARRANTY DISCLAIMER," is printed in all capital letters and
provides:
A. IN THE EVENT THE VEHICLE IS EITHER A NEW VEHICLE OR
A USED VEHICLE STILL SUBJECT TO A MANUFACTURER'S
WARRANTY, DEALER EXPRESSLY DISCLAIMS ALL WARRANTIES,
EXPRESS AND IMPLIED (INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE) ON
THE VEHICLE.
FURTHER, DEALER NEITHER MAKES NOR
AUTHORIZES ANY OTHER PERSON TO MAKE ON DEALER'S BEHALF,
ANY WARRANTY IN CONJUNCTION WITH THE SALE OF THE
VEHICLE. AS TO ANY MANUFACTURER'S WARRANTY EXTENDED TO
BUYER BY MANUFACTURER, DEALER SPECIFICALLY DISCLAIMS
ANY LIABILITY THEREUNDER, SUCH MANUFACTURER'S WARRANTY
BEING BETWEEN BUYER AND MANUFACTURER ONLY.
Paragraph 1 of the purchase order provides, "As used in this Order, the term 'Manufacturer'
means the Company that manufactured the Vehicle or chassis. The Dealer is not the agent of
Manufacturer."
Nowhere in the vehicle purchase order does LaFontaine make any express warranty.
Rather, the vehicle purchase order recognizes the manufacturer's warranty and then clearly
disclaims any such warranty. Because LaFontaine did not make an express warranty of its own,
the trial court erred in denying summary disposition on plaintiffs' claim that defendants breached
an express warranty.
B. Implied Warranties
Plaintiffs' breach of implied warranties claim also fails because of the disclaimer. Every
contract for the sale of goods carries an implied warranty of merchantability unless such
warranty is excluded or modified. MCL 440.2314(1). Such a contract may also carry an implied
warranty of fitness for a particular purpose, but this warranty may also be excluded or modified.
MCL 440.2315. MCL 440. 2316 provides, in part:
(2) Subject to subsection (3), to exclude or modify the implied warranty of
merchantability or any part of it the language must mention merchantability and
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in case of a writing must be conspicuous, and to exclude or modify any implied
warranty of fitness the exclusion must be by a writing and conspicuous.
Language to exclude all implied warranties of fitness is sufficient if it states, for
example, that "There are no warranties which extend beyond the description on
the face hereof."
(3) Notwithstanding subsection (2):
(a) unless the circumstances indicate otherwise, all implied warranties are
excluded by expressions like "as is", "with all faults" or other language which in
common understanding calls the buyer's attention to the exclusion of warranties
and makes plain that there is no implied warranty . . . .
Plaintiffs do not contest that the vehicle purchase order is in writing and merchantability is
mentioned; rather, they argue that the disclaimer of implied warranties is ineffective because it
was not conspicuous under MCL 440.2316(2).
MCL 440.1201(10) provides:
A term or clause is conspicuous when it is so written that a reasonable
person against whom it is to operate ought to have noticed it. A printed heading
in capitals (as: non-negotiable bill of lading) is conspicuous. Language in the
body of a form is "conspicuous" if it is in larger or other contrasting type or color.
But in a telegram any stated term is "conspicuous". Whether a term or clause is
"conspicuous" or not is for decision by the court.
The official comment on MCL 440.1201(10) explains that the test for conspicuousness is
"whether attention can reasonably be expected to be called to it."
We find that the disclaimer is conspicuous. On the first page of the vehicle purchase
order, which both plaintiffs signed, there is a heading entitled "IMPORTANT BUYER
INFORMATION." In capital letters within that paragraph, it states, "SEE PARAGRAPH 10 ON
REVERSE SIDE." Paragraph 10 includes a heading in capital letters stating "WARRANTY
DISCLAIMER." In her deposition, Cook-Davis admitted that she read and understood the
disclaimer language. Therefore, we conclude that there is no genuine issue of fact with regard to
whether the disclaimer of implied warranties was conspicuous.1 For the same reasons, we also
reject plaintiffs' argument that they "did not knowingly waive their rights and remedies." Under
1
Plaintiffs contend that the disclaimer was not actually part of the contract because the retail
installment motor vehicle purchase agreement, which has no disclaimer, governs the sale. We
find this contention to be without merit. The vehicle purchase order clearly and conspicuously
states, "The front and back of this Order comprises [sic] the entire agreement affecting this
purchase and no other agreement or understanding of any nature concerning same has been made
or entered into, or will be recognized." The vehicle purchase agreement clearly governs the sale
of the vehicle.
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these circumstances, the plain terms of the vehicle purchase order operated to exclude all implied
warranties pursuant to both MCL 440.2316(2) and 440.2316(3)(a).
Plaintiffs also contend that, under 15 USC 2308 of the MMWA, LaFontaine cannot
disclaim implied warranties when it made a written express warranty. But, LaFontaine did not
make a written express warranty. The vehicle purchase order merely recognized that the
manufacturer provided a warranty. And, LaFontaine disclaimed any liability under the
manufacturer's warranty. Therefore, LaFontaine was not prohibited from disclaiming the
implied warranties of merchantability under § 2308 of the MMWA.
IV. Validity of Disclaimer
Plaintiffs also contend that the disclaimer is not valid because all terms governing the sale
must be contained in a single document pursuant to the Motor Vehicle Sales Finance Act
(MVSFA), MCL 492.101 et seq. The MVSFA provides that an installment sale contract must be
in writing, signed by both parties, and must "contain all of the agreements between the buyer and
the seller relating to the installment sale of the motor vehicle sold . . . ." MCL 492.112(a).
In support of their argument, plaintiffs rely on Rugumbwa v Betten Motor Sales, 136 F
Supp 2d 729 (WD Mich, 2001), in which the plaintiff alleged that the defendant made false
representations regarding the cost of vehicle service contracts. The parties had entered into five
separate agreements, including a handwritten sales order, a typewritten sales order, and an
installment sales contract. The installment sales contract contained various cost terms not found
in the sales orders. The defendant moved to compel arbitration pursuant to an arbitration clause
in the two sales orders. Id. at 731. The court determined that because the MVSFA and another
relevant act "envision the execution of a single, comprehensive installment contract containing
all of the agreements made by the parties with regard to the subject matter of the retail
installment sale" and the installment sales contract did not include an arbitration clause, the
arbitration clause contained in the sales orders was not enforceable. Id. at 733.
However, in Pack v Damon Corp, 320 F Supp 2d 545 (ED Mich, 2004), the court
declined to invalidate an arbitration clause that was contained in the dealer's sales agreement, but
not in the retail installment contract. The court distinguished Rugumbwa and another case,
Lozada v Dale Baker Oldsmobile, Inc, 197 FRD 321 (WD Mich, 2000), stating:
[Rugumbwa] and [Lozada] stand for the more narrow proposition that
claims alleged with regard to the subject matter of a retail installment contract are
subject only to those agreements expressly set forth in the installment contract.
Unlike the Rugumbwa and Lozada plaintiffs, plaintiff Pack is not challenging the
terms of his retail installment contract, but [the dealer's] warranties and
performance under the terms of the . . . sales agreement. [The dealer] does not
seek arbitration of claims arising under the . . . retail installment agreement;
plaintiff does not allege claims regarding the subject matter of the retail
installment contract. The [Rugumbwa] court itself distinguished between claims
with regard to a retail installment contract, and claims with regard to a sales
contract[.] [Pack, supra at 554-555.]
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We find this reasoning persuasive and apply it here. As in Pack, the dispute in this case does not
relate directly to any provision of the retail installment motor vehicle purchase agreement.
Therefore, the fact that the warranty disclaimer was not part of the latter agreement does not
preclude its enforcement.
V. Unconscionability
Plaintiff next argues that LaFontaine's disclaimer is unconscionable under MCL
440.2302, which provides in pertinent part:
(1) If the court as a matter of law finds the contract or any clause of the
contract to have been unconscionable at the time it was made the court may refuse
to enforce the contract, or it may enforce the reminder of the contract without the
unconscionable clause, or it may so limit the application of any unconscionable
clause as to avoid any unconscionable result. [Emphasis added.]
Specifically, plaintiffs argue that the disclaimer is unconscionable because it deprived plaintiff
"of the substantial benefit of their bargain, in that there would be no remedy under the now
illusory warranty coverage." Pursuant to the plain language of MCL 440.2302, a court may find
that a contract was "unconscionable at the time it was made." Here, plaintiffs' complaints focus
only on events that occurred after the sale. When plaintiffs entered into the vehicle purchase
agreement, there was a remedy under the manufacturer's warranty. The failure of that remedy
arose only when Daewoo filed for bankruptcy; long after the contract was made. There is no
evidence supporting plaintiffs' assertion that the contract was unconscionable under MCL
440.2302.
VI. Revocation
Plaintiffs also argue that revocation of the contract, pursuant to MCL 440.2608, is an
available remedy because LaFontaine refused to perform repairs under the manufacturer's
warranty irrespective of the disclaimer. We disagree.
MCL 440.2608 provides, in relevant part:
(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 the discovery before acceptance or
by the seller's assurances.
On appeal, plaintiffs argue that "the concept of nonconformity" includes not only
breaches of warranties, but "any failure of the seller to perform according to his obligations
under the contract." We disagree that the plain meaning of the statute permits this interpretation.
MCL 440.2608(1) states that a buyer may revoke his acceptance "of a lot or commercial unit
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whose nonconformity substantially impairs its value to him . . . ." Thus, the statute plainly
indicates that the nonconformity relates to the actual lot or unit. The nonconformity does not
relate to a party's actions or inactions. Accordingly, even if LaFontaine failed to perform a
contractual duty to make repairs, MCL 440.2608 does not provide authority for plaintiffs to
revoke the contract.
To the extent that plaintiffs' revocation claim rests on the alleged defects of the vehicle
itself, the question posed is whether the vehicle can be said to be nonconforming under plaintiffs'
contract with LaFontaine. With respect to the Uniform Commercial Code § 2-608, on which
MCL 440.2608 is based, it has been noted that
[a] determination of the existence or non-existence of a nonconformity requires
reference to the terms of the contract, including the law of warranty. . . . [T]he
courts do not look with favor on disclaimers that purport to disclaim responsibility
for what the seller has in essence agreed to sell. But if the only relevant language
in the agreement as to quality has been effectively declaimed, no nonconformity
in the goods sufficient for revocation can exist. If the goods are sold "as is,"
comment 7 of 2-316 states the "buyer takes the entire risk as to the quality of the
goods." [1 White & Summers, Uniform Commercial Code (4th ed), § 8-4, pp
456-457.]
This Court's decision in Henderson v Chrysler Corp, 191 Mich App 337, 341-243; 477 NW2d
505 (1991), implicitly supports this reading of MCL 440.2608. In Henderson, this Court barred
revocation claims against manufacturers that were not in privity with the seller on the basis that
"revocation is inextricably connected to the contractual relationship between a buyer and a
seller." Id. at 341.
Adopting the reasoning from these sources, we hold that, for the purposes of revocation
under MCL 440.2608, nonconformity is a failure of the goods sold to conform to legitimate
expectations arising from the contract. In this contract, it was plainly agreed that "All goods,
services and Vehicles sold by Dealer are sold 'AS IS' unless Dealer furnished Buyer with a
separate written warranty or service contract or the used car sticker on the window on the vehicle
indicates otherwise." Because plaintiffs purchased the vehicle "as is," the vehicle, even with the
alleged defects, conforms to the contract and therefore necessarily conforms to the parties'
legitimate contractual expectations. Plaintiffs got the vehicle for which they bargained; there
was no nonconformity.
VII. Michigan Consumer Protection Act
Finally, we disagree with plaintiffs' argument that a genuine issue of material fact exists
regarding liability under MCL 445.903(1)(n), (r), (t), and (y) of the MCPA. Plaintiffs argue that
§ 3(1)(n) was violated because the disclaimer conflicts with the warranty book they received,
which indicates that the dealer is to perform warranty service. But the disclaimer does not
indicate that LaFontaine would not perform service on Daewoo's warranty; it merely indicates
that it was not offering its own warranty. Therefore, there is no conflict. Moreover, plaintiffs
point to nothing showing that LaFontaine represented that plaintiffs would receive goods or
services "free" or "without charge," thereby precluding liability under § 3(1)(r). Further, there
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was no violation of § 3(1)(t), because plaintiffs signed an agreement that conspicuously
disclaimed any warranties. With regard to § 3(1)(y), plaintiffs claim that LaFontaine failed to
provide a promised benefit because it would not provide warranty service. But LaFontaine never
promised to provide warranty service. Rather, it was Daewoo that represented that "any
authorized Daewoo dealer or Daewoo Authorized Service Operation" would provide warranty
service. Therefore, it was Daewoo that failed to provide a promised benefit, not LaFontaine.
Further, the record shows that LaFontaine did provide warranty service until it was no longer an
authorized dealer. Accordingly, there was no violation of § 3(1)(y).
For all the foregoing reasons, we find that the trial court erred in denying defendants'
motion for summary disposition. Accordingly we reverse and remand for entry of an order of
summary disposition in favor of defendants. We do not retain jurisdiction.
/s/ Donald S. Owens
/s/ Kirsten Frank Kelly
/s/ Karen M. Fort Hood
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