Hervey v. Mercedes-Benz U.S., LLC

HOFFSTADT, P.J.

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Los Angeles County No. 21STCV03490, Richard L. Fruin, Jr., Judge. Affirmed.

Niddrie Addams Fuller Singh, Rupa G. Singh, and John S. Addams; Wirtz Law, Richard M. Wirtz and Amy R. Rotman; Inscore Law Corporation and Daniel Z. Inscore for Plaintiffs and Appellants.

Theta Law Firm, Soheyl Tahsildoost, and Mehgan Gallagher; Bowman and Brooke, Robert A. Brunadge, Richard L. Stuhlbarg, and Amanda Heitz for Defendant and Respondent.

HOFFSTADT, P.J.

The buyer of a used car that was still under the new car warranty sued the car's manufacturer under the Song-Beverly Consumer Warranty Act (the Act) (Civ. Code, § 1790 et seq.) and for fraudulent concealment. The trial court dismissed the fraudulent concealment claim on demurrer, and a jury subsequently rejected the buyer's claims under the Act. On appeal, the buyer argues the erroneous exclusion of expert testimony at trial warrants a new trial of her remaining claims under the Act, and that the court erred in sustaining the demurrer. We need not address the merits of the buyer's evidentiary challenges because any evidentiary error was not prejudicial. The buyer's fraudulent concealment claim was properly dismissed because the allegations, even liberally construed, do not establish that the manufacturer owed any duty to the buyer to disclose the allegedly concealed facts. We accordingly affirm the judgment.

All further statutory references are to the Civil Code unless otherwise indicated.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

A. Purchase of the vehicle and warranties

In May 2017, Carlett Hervey (plaintiff) purchased a used 2016 Mercedes-Benz C300, with just 11,335 on the odometer, from a Mercedes-Benz USA, LLC (Mercedes) dealership in Santa Monica, California for $41,253.05. Mercedes "certified" the vehicle based on the dealer's inspection and reconditioning of the car using Mercedes's "exacting standards."

Plaintiff financed the bulk of the purchase price, with her grandmother co-signing the finance agreement.

When plaintiff purchased the C300, the express new vehicle warranty issued by Mercedes (the original warranty) had not yet expired. In the original warranty, Mercedes promised "the original and each subsequent owner" that a Mercedes service center would "make any repairs or replacements necessary to correct defects in material or workmanship arising during the warranty period." The original warranty expired at the earlier of (1) four years from the date the original owner purchased the car on March 31, 2016, or (2) 50,000 miles.

Plaintiff also purchased a two-year, "Certified Pre-Owned Extended Limited Warranty" from Mercedes for $2,500. The term of the extended warranty was March 31, 2021-commencing "after the expiration" of a certified pre-owned limited warranty- through March 30, 2023.

B. Defects with the vehicle

During the first year she owned the C300, plaintiff brought it into the service station at a Mercedes dealership in Long Beach, California for a variety of defects. Two alleged defects which arose after that first year are pertinent to this case.

Plaintiff brought her C300 to the service station three times with complaints about a rust-colored stain in the headliner that she believed was caused by a leak in the sunroof. She did so in January 2019 (when the car had 34,729 miles), in December 2019 (when the car had 44,011 miles), and in September 2020 2 Plaintiff financed the bulk of the purchase price, with her grandmother co-signing the finance agreement. (when the car had 52,046 miles). On each occasion, the dealer performed various inspections including a water leak inspection, examining the sunroof seal using ultrasonic technology, and running the vehicle through a car wash, but could not reproduce the leak.

Plaintiff brought her C300 to the service station with complaints about a mildew odor inside the passenger cabin, which caused her to suffer headaches. She did so for the first time in September 2020 (when the car had 52,046 miles). The dealership verified the smell, but did not find evidence of water intrusion or the cause of the odor.

In October 2020, plaintiff sent a demand to Mercedes requesting that it repurchase her vehicle. Mercedes denied the demand.

II. Procedural Background

A. Complaint

Plaintiff sued Mercedes in January 2021. In the operative second amended complaint, plaintiff alleged claims for (1) breach of express and implied warranties, each under the Act, and (2) fraudulent concealment of a defective HVAC system, which caused the cabin air to be contaminated with mold and mildew.

Plaintiff's grandmother was also a named plaintiff; for simplicity, we refer to them together as "plaintiff."

Plaintiff also named the dealership in Long Beach as a defendant in a claim for negligent repair, but that claim was dismissed.

B. Demurrer

Mercedes demurred to the fraudulent concealment claim on several grounds. Following briefing and a hearing, the trial court on January 28, 2022 sustained the demurrer without leave to amend. The court listed 10 reasons for its ruling including, as pertinent here, that (1) plaintiff failed to allege sufficient facts showing Mercedes was involved in the sales transaction for the car, (2) plaintiff failed to specifically allege any "affirmative misrepresentations" of material fact by Mercedes on which she relied in purchasing the C300, and (3) the economic loss rule barred the claim.

C. Trial

The parties proceeded to a jury trial on the warranty claims under the Act in February 2022. At plaintiff's behest, the trial court instructed the jury on breach of an express warranty pertaining to a "new motor vehicle" under the Act, and breach of the implied warranty of merchantability.

After six days of trial, the jury returned a verdict (1) rejecting plaintiff's express warranty claim, finding that the vehicle did not have a defect covered by the warranty that substantially impaired the vehicle's use, value, or safety, and (2) rejecting plaintiff's implied warranty claim, finding that Merecedes's breach of the implied warranty of merchantability did not result in any damages.

D. New trial motion, judgment, and appeal

Following the trial court's denial of plaintiff's motion for new trial and entering judgment for Mercedes, plaintiff filed this timely appeal.

DISCUSSION

Plaintiff asserts on appeal that the judgment for Mercedes should be reversed because the trial court erred by (1) excluding the testimony of two of her experts at the trial on her warranty claims under the Act, and (2) dismissing her fraudulent inducement claim on demurrer.

I. Plaintiff's Claims Under the Act Are Barred as a Matter of Law

At the trial on her warranty claims under the Act, the trial court precluded plaintiff from (1) introducing her retained expert's opinion based on an inspection of the vehicle's interior that the expert conducted after his deposition and on the eve of trial, and (2) calling, as a rebuttal witness, a second expert who performed the same inspection the retained expert was barred from presenting to the jury. Plaintiff urges that both rulings were error.

Plaintiff is entitled to relief on these rulings only if she can demonstrate that (1) the court abused its discretion in so ruling, and (2) the rulings prejudiced her because, absent those erroneous rulings, "a different result would have been probable." (Kim v. The True Church Members of Holy Hill Community Church (2015) 236 Cal.App.4th 1435, 1444, 1449; People v. Young (2019) 7 Cal.5th 905, 931; Zhou v. Unisource Worldwide (2007) 157 Cal.App.4th 1471, 1480; Evid. Code, § 354.)

We need not decide whether the trial court abused its discretion in limiting the testimony of plaintiff's first expert and precluding the testimony of her rebuttal expert because these rulings did not prejudice her.

The exclusion of expert testimony did not prejudice plaintiff's claim for breach of the implied warranty of merchantability under the Act because that warranty lasts a maximum of one year for "new consumer goods" (§§ 1791.1, subd. (c), 1792) and three months for used goods (§ 1795.5, subd. (c)). (See generally CACI No. 3212 &Directions for Use.) Because it is undisputed that plaintiff purchased the C300 in May 2017, and did not report any issues with the headliner until January 2019, any breach of the implied warranty regarding the headliner- which is the only issue to which the expert testimony pertained- occurred after the implied warranty lapsed, regardless of whether the C300 is classified as a new or used good at the time it was resold to plaintiff.

The exclusion of the expert testimony also did not prejudice plaintiff's claim for breach of an express warranty under the Act. As pertinent here, the Act obligates the "manufacturer" of a "new motor vehicle"-if the manufacturer is unable to remedy certain nonconformities under an express warranty-to either (1) "replace" that vehicle "with a new motor vehicle substantially identical to the vehicle replaced," or (2) "make restitution" to the buyer "in an amount equal to the actual price paid or payable by the buyer." (§ 1793.2, subd. (d).) At trial, plaintiff advanced the theory that her C300 qualified as a "new motor vehicle" (and hence was subject to the express warranty protections applicable to such vehicles under the Act) because the original warranty on the C300 had not yet expired at the time she purchased the vehicle from the dealer. Rodriguez v. FCA U.S. LLC (2024) 17 Cal.5th 189 (Rodriguez), which was decided while this appeal was pending, explicitly rejects this theory. Specifically, Rodriguez holds that "a [used] motor vehicle purchased with an unexpired manufacturer's new car warranty does not qualify as a . . . 'new motor vehicle' unless the new car warranty was issued with the sale." (Id. at p. 196.) Where, as here, a car issued with a new car warranty is resold, it is not a treated as a "new motor vehicle" under the Act-even if the new car warranty is still in effect at the time the car is purchased. (Id. at p. 202.) Because Rodriguez eliminates the statutory basis for plaintiff's express warranty claim, any evidentiary error pertaining to that claim is necessarily not prejudicial.

In supplemental briefing we solicited from the parties, plaintiff offers what boils down to two arguments.

First, she urges that Mercedes cannot rely on Rodriguez because Mercedes did not invoke Rodriguez before the trial court. We reject this contention. Mercedes's failure to cite controlling authority to the trial court, when that authority did not exist at that time, does not constitute a forfeiture or waiver. There is also no question that Rodriguez applies retroactively to this case pending on appeal. (See Vazquez v. Jan-Pro Franchising Internat., Inc. (2021) 10 Cal.5th 944, 951 [general rule is that judicial decisions, including those interpreting statutes, apply retroactively].)

Second, plaintiff argues that Rodriguez does not preclude her from proceeding on a theory that Mercedes violated the Act's provisions regarding express warranties for "used consumer goods" under section 1795.5. In support, she cites Kiluk v. Mercedes-Benz USA, LLC (2019) 43 Cal.App.5th 334 (Kiluk). To be sure, section 1795.5 authorizes the enforcement of express warranties against the "distributor[s]" and "retail seller[s]" of "used consumer goods," but rarely against the manufacturers of such goods. (Kiluk, at p. 339 ["The . . . Act provides . . . remedies in the context of the sale of used goods, except that the manufacturer is generally off the hook"].) Kiluk recognized a car manufacturer could nevertheless be held liable for breach of an express warranty with respect to a used car when "[a]n uncurable defect manifest[s itself] . . . during the duration" of "an additional used vehicle warranty issued by the manufacturer." (Id. at pp. 336-337, 339-340.) At the time of trial in this case, Kiluk was already on the books and Mercedes had issued plaintiff the extended warranty on her used car-yet plaintiff opted not to proceed on the theory that she was entitled to relief against Mercedes for breach of that warranty under section 1795.5, even if her C300 was a used car. There were good reasons to proceed on this theory given the uncertainty in the law at the time plaintiff sued-before Rodriguez resolved that uncertainty- regarding whether used cars with unexpired new car warranties qualified as "new motor vehicles" under the Act. (Compare Jensen v. BMW of North America, Inc. (1995) 35 Cal.App.4th 112, 121-128 [holding that they qualify], overruled by Rodriguez, supra, 17 Cal.5th at pp. 204-205, with Kiluk, at pp. 339-340 [expressing "reservations" about Jensen's holding].) Our task is to assess prejudice as to the trial that actually happened, not as to a hypothetical trial that might have happened had the appellant made different tactical choices. (See Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2008) 163 Cal.App.4th 550, 564 ["'"'[I]t is fundamental that a reviewing court will ordinarily not consider claims made for the first time on appeal which could have been but were not presented to the trial court'"'"].) Because the theory plaintiff advanced at trial is no longer viable, she was not prejudiced by evidentiary error pertaining solely to that theory.

II. Plaintiff Failed to Allege Sufficient Facts to State a Claim for Fraudulent Concealment, But Is Entitled to Amend

In support of her fraudulent concealment claim, plaintiff alleged that (1) Mercedes's advertising and promotional materials touted the C300's HVAC system as "fresh," "soothing," and "pure"; (2) Mercedes had "superior and exclusive knowledge" that the HVAC system, in fact, had defects and Mercedes made the representations in its materials without "qualify[ing]" those representations with the true facts about the defects; (3) Mercedes "actively concealed" the defects by "fail[ing] to disclose" them "to its selling dealerships, authorized repair facilities, and consumers"; and (4) plaintiff purchased her used C300 on the basis of Mercedes's promotional materials and due to Mercedes's nondisclosure of the HVAC defect.

In reviewing a trial court's dismissal of a claim on demurrer, "we ask two questions: '(1) Was the demurrer properly sustained; and (2) Was leave to amend properly denied?' [Citation.] In answering the first question, 'we ask whether the operative complaint "'states facts sufficient to constitute a cause of action.'"' [Citations.] In undertaking that inquiry, 'we accept as true all "'"'material facts properly pleaded'"'"' in the operative complaint [citations] as well as facts appearing in the exhibits attached to it, giving '"'precedence'"' to the facts in the exhibits if they '"'contradict the allegations'"' [citations]. In answering the second question, we ask '"'whether "'"there is a reasonable possibility that the defect [in the operative complaint] can be cured by amendment."'"'"' [Citation.] We review the trial court's ruling regarding the first question de novo [citations], and review its ruling regarding the second for an abuse of discretion [citation]." (Engel v. Pech (2023) 95 Cal.App.5th 1227, 12341235.)

A. Was the demurrer properly sustained?

To successfully plead a claim for fraudulent concealment, a plaintiff must plead, with specificity, "(1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would have acted differently if the concealed or suppressed fact was known; and (5) the plaintiff sustained damage as a result of the concealment or suppression of the material fact." (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 40, italics added; see also CACI No. 1901.) "A duty to disclose a material fact can arise" under various circumstances, and plaintiff's complaint here alleges three of those circumstances-namely, that (1) "the material facts are known or accessible only to the defendant, and the defendant knows those facts are not known or reasonably discoverable by the plaintiff (i.e., exclusive knowledge)," (2) "the defendant makes representations but fails to disclose other facts that materially qualify the facts disclosed or render the disclosure misleading (i.e., partial concealment)," and (3) "the defendant actively conceals discovery of material fact[s] from the plaintiff (i.e., active concealment)." (Rattagan, at p. 40.) However, the duty to disclose only arises under any of these circumstances if there is a "preexisting relationship between the parties, such as 'between seller and buyer . . . or parties entering into any kind of contractual agreement.'" (Id. at pp. 40-41, quoting LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 337.) Because a duty to disclose based on these circumstances arises only if there is "a 'transaction'" or "direct dealings between the plaintiff and the defendant," a duty to disclose "cannot arise between the defendant and the public at large." (Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 311-312; Gilead Tenofovir Cases (2024) 98 Cal.App.5th 911, 949.)

The demurrer to the fraudulent inducement claim was properly sustained because plaintiff did not adequately allege a duty to disclose. The alleged misrepresentations regarding the HVAC system in her vehicle were made by Merecedes to the "public at large." The operative complaint also does not sufficiently allege any contractual relationship between plaintiff and Mercedes on which plaintiff actually relied in making her purchase of the vehicle.

Plaintiff offers three arguments in support of her position that she adequately alleged a duty to disclose.

First, plaintiff asserts that there was a relationship between herself and Mercedes simply because the dealership with whom she directly dealt in purchasing the vehicle was Mercedes's agent. However, plaintiff's general allegation in the complaint that "[e]ach [d]efendant . . . was the principal, agent (actual or ostensible), or employee of each other [d]efendant" and "act[ed] as such principal or agent within the course and scope of such employment or agency" is insufficient because the dealership from whom she bought the car was never named a defendant. Although plaintiff elsewhere alleges that the dealership was Mercedes's "authorized agent," this bare legal conclusion, unaccompanied by any facts substantiating an agency relationship beyond the mere fact of a dealer-manufacturer relationship, is insufficient to withstand demurrer when viewed against the general rule that there is no presumption of an agency relationship between a car manufacturer and a dealer. (See Ford Motor Warranty Cases (2023) 89 Cal.App.5th 1324, 1341-1342; see also Keegan v. American Honda Motor Co. (C.D.Cal. 2012) 838 F.Supp.2d 929, 953 [allegation that dealerships are manufacturer's "agents" "is essentially a legal conclusion framed as a factual allegation"]; accord, Doe v. Roman Catholic Archbishop of Los Angeles (2016) 247 Cal.App.4th 953, 960 [allegations of "legal conclusions" insufficient to withstand demurrer]; cf. Robertson v. Fleetwood Travel Trailers of California, Inc. (2006) 144 Cal.App.4th 785, 799 [manufacturer and authorized repair facility "treated as a single entity" for purposes of obligations under the Act to attempt to repair defects].)

Second, plaintiff argues that even if she did not adequately allege that the dealership in this case was Mercedes's agent, Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 844, establishes that such an agency relationship exists as a matter of law. We disagree. In Dhital, the court found a bare allegation of a dealership-manufacturer agency relationship to be sufficient to constitute a direct dealing between the buyer and the manufacturer, contrary to the law governing demurrers cited above, where the buyer purchases a new car from a dealer that comes with a manufacturer's new car warranty. (Id. at pp. 843844.) Dhital is inapt because this case involves the sale of a used car with an unexpired new car warranty that had been issued to a previous owner. The unexpired new car warranty was attached as an exhibit to plaintiff's complaint and states that Mercedes "warrants to the original and each subsequent owner" of the vehicle that a Mercedes service station will make repairs "to correct defects" with the vehicle arising during the warranty period, but the transfer of the unexpired new car warranty to plaintiff as a "subsequent owner" does not create a duty to disclose to plaintiff because the transfer, without more, gives Mercedes no opportunity to disclose anything to plaintiff, an unknown buyer of a used vehicle.

Third, plaintiff argues that she adequately pleaded that, at the time she purchased the C300, Mercedes directly issued her a "Certified Pre-Owned Warranty" thereby creating the requisite direct connection between her and Mercedes and making this case analogous to Dhital. Plaintiff made this assertion during oral argument, and while the record on appeal reveals that plaintiff purchased an extended warranty from Mercedes, we are limited to the allegations of the complaint in reviewing a ruling on demurrer (rather than the evidence proffered years later).(Nealy v. County of Orange (2020) 54 Cal.App.5th 594, 596-597 &fn. 1.) Those allegations make several conflicting references to "certified" and "express" warranties:

When we asked during oral argument where in the record the "Certified Pre-Owned Warranty" was located, the cite plaintiff provided was to her application for the extended warranty.

- Plaintiff alleged that she "purchased a [Mercedes] certified pre-owned service contract" for $2,500 lasting two years, but this corresponds to the terms of the extended warranty.

- Plaintiff alleged that she obtained an "express warranty" from Mercedes, but then cited the exhibit to the complaint containing the unexpired new car warranty.

- Plaintiff alleged that the C300 was "so" "reliable" that "it was being sold as a Mercedez-Benz Certified Pre-Owned Vehicle" (after the car was inspected and she was given a "Certified Pre-Owned Inspection and Certification Report"), but this does not refer to any warranty.

- Plaintiff alleged that Mercedes "affixed its Certified PreOwned Warranty to the Vehicle," but this capitalized term is defined nowhere in the complaint and is not distinguished from the "certified pre-owned service contract."

Viewed together, it is not clear whether Mercedes issued a service contract, an extended warranty, or some other warranty-or whether the unexpired new car warranty became applicable to plaintiff once the vehicle was inspected. No amount of liberal construction can convert these jumbled and conflicting allegations into a legally sufficient allegation that Mercedes had a direct contractual dealing with plaintiff giving rise to a duty to disclose. Absent that allegation, the demurrer to the operative complaint was properly sustained. What is more, the complaint is lacking allegations that Mercedes's failure to disclose the HVAC defect induced or otherwise played any role in plaintiff's decision to purchase the jumbled list of contracts or warranties or that such a purchase induced or otherwise played a role in her decision to purchase the C300. (See Aton Center, Inc. v. United Healthcare Ins. Co. (2023) 93 Cal.App.5th 1214, 1246 [materiality element requires plaintiff to plead she "would not have acted as . . . she did if . . . she had known of the concealed or suppressed fact"]; Caro v. Procter &Gamble Co. (1993) 18 Cal.App.4th 644, 668 [same]; cf. Dhital, at p. 844 [plaintiff would not have purchased new car, which manufacturer "backed . . . with an express warranty," "if they had known of the defects"].)

In light of our conclusion, we have no occasion to address plaintiff's further argument that the demurrer was improperly sustained due to a misapplication of the economic loss rule. (Endeavor Operating Co., LLC v. HDI Global Ins. Co. (2023) 96 Cal.App.5th 420, 442.)

B. Did the trial court abuse its discretion in denying leave to amend?

"A plaintiff against whom a demurrer is sustained is entitled to leave to amend the defective complaint if she can 'prov[e] a reasonable possibility that the defect can be cured by amendment.'" (Shaeffer v. Califia Farms, LLC (2020) 44 Cal.App.5th 1125, 1145.) "The onus is on the plaintiff to articulate the 'specifi[c] ways' to cure the identified defect, and absent such an articulation, a trial or appellate court may grant leave to amend 'only if a potentially effective amendment [is] both apparent and consistent with the plaintiff's theory of the case.'" (Ibid.) A plaintiff may articulate a basis for amending her complaint for the first time on appeal. (Code Civ. Proc., § 472c, subd. (a).)

The trial court did not abuse its discretion in denying leave to amend. Before the trial court, plaintiff articulated no specific amendments that would cure the pleading defect as to the duty to disclose. Nor did plaintiff do so in her appellate briefs: In the opening brief, plaintiff merely asserted, without more, that the trial court "should have granted leave to amend"; and in the reply brief, plaintiff merely asserted, without elaboration, that she could "add whatever facts were missing." This is insufficient. Although plaintiff at oral argument asserted for the first time with some clarity that she could plead Mercedes issued a certified pre-owned warranty directly to her, this was too little, too late. (New Plumbing Contractors, Inc. v. Nationwide Mutual Ins. Co. (1992) 7 Cal.App.4th 1088, 1098 [although "the showing as to how the complaint may be amended need not be made to the trial court and can be made for the first time to the reviewing court," an "argument[] raised for the first time at oral argument[] is not adequate to justify [a] finding the trial court abused its discretion"]; Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1185-1186 [same], overruled on other grounds, Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905.)

DISPOSITION

The judgment is affirmed. Mercedes is entitled to its costs on appeal.

We concur: BAKER, J., MOOR, J.