Dobridge v. Coastal Automotive Group

A-358-00T2 (N.J. Super. App. Div. 2001) (Unpublished)

Opinion Date: December 19, 2001
Business Law
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CONSUMER FRAUD ACT; WARRANTIES—An ordinary breach of warranty does not constitute an unconscionable deceptive practice, but it can become one when coupled with substantial aggravating factors.

After have a used car inspected to reveal a leaky axle seal, a worn rear spring, and bald tires, a buyer bought the car from the dealer. At the time of purchase, the buyer agreed to change the tires and fix the spring and axle defects. The dealer issued a ninety day warranty. Within the warranty period, the car began to make a loud knocking sound and the buyer brought the car to the dealer to diagnose the source of the knocking. After agreeing to repair the car “and having determined that the knocking noise came from the transmission, [the dealer’s] mechanics removed the transmission and sent it to [a transmission shop] to analyze the problem.” The transmission company disassembled the unit and found there to be no problem. In the meanwhile, the dealer then advised its customer that its own inspection “revealed he had abused the car and therefore they were disclaiming the warranty and would not repair the transmission.” For about nine months, the car was stored outside, behind the dealership, and the transmission remained disassembled at the transmission shop. The unprotected storage resulted in further damage to the vehicle. Ultimately, the buyer had the car removed from the dealer’s lot and taken to the transmission shop where the transmission shop repaired the car, installed a transmission, and returned the car to good working order. The buyer then sued the selling dealing, alleging that the dealer’s disclaimer of the warranty constituted a violation of the Consumer Fraud Act. The lower court agreed, concluding that the dealer’s “disclaimer of the warranty, after it had removed the transmission and delivered it to [the transmission shop] for repair, was unconscionable conduct and constituted a violation of the consumer fraud law.” Damages were awarded to account for a replacement transmission and various other repairs to put the car in working order. In addition, the lower court awarded damages based on depreciation of the car over the nine months that it had been stored behind the dealer’s building. To that, the lower court added “the reasonable value for the loss of use of the vehicle for the same period.” Then, some of those damages were trebled and the Court added reasonable attorney’s fees. On appeal, the dealer argued that its conduct amounted only to a breach of warranty and, as such, “it did not engage in deceptive or fraudulent practices.” Under the Consumer Fraud Act, “a violation of the Act may occur, even in the absence of fraud or deception, if a plaintiff shows that a defendant engaged in an unconscionable commercial practice.” Such a practice is evidenced by a “lack of good faith, honesty and fact and observance of fair dealing.” More specifically, “in cases of consumer fraud where a breach of warranty is alleged, the plaintiff must show unconscionable conduct plus substantial aggravating factors.” Here, the lower court found that the dealer’s initial agreement to repair the vehicle “and subsequent refusal to repair the transmission, coupled with [its] negligent of the vehicle while it remained in [its] possession were sufficient aggravating factors to constitute an unconscionable business practice in violation of the Act.” The Appellate Division agreed. The dealer had the right to disclaim the warranty if the buyer abused the vehicle. The Appellate Division made special note, however, that the dealer “disclaimed its warranty after it had agreed to repair the vehicle and after it had removed the transmission. Once [the dealer] undertook to repair the car it was obligated to complete the repair or, at the least, to return the vehicle to its original condition. It did not do either. Instead, [the dealer] left the [car] in its rear lot where [the dealer] used the car as a type of storage container and allowed it to deteriorate. The trial court properly found that the chain of events leading to and surrounding [the dealer’s] breach of warranty was sufficient aggravating factors to constitute consumer fraud.”

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