Johnson v. Earnhardt's Gilbert Dodge, Inc.
132 P.3d 825 (2006)
Rule of Law:
A genuine issue of material fact exists as to whether a dealer 'enters into a service contract' under the Magnuson-Moss Warranty Act when contract documents are ambiguous and parol evidence is presented, thus precluding summary judgment on the dealer's ability to limit an implied warranty. An agreement is a service contract, not a written warranty, if the consumer pays consideration in addition to the product's purchase price.
Facts:
- In May 2000, Brenda Johnson purchased a used 1997 Kia Sportage 'AS IS' from Earnhardt’s Gilbert Dodge, Inc. ('Earnhardt').
- The sales agreement explicitly limited the implied warranty of merchantability to fifteen days or five hundred miles.
- During the same transaction, Johnson paid an additional sum of $1,235 for a DaimlerChrysler service contract.
- Johnson and Earnhardt’s Finance Manager both signed the application for the service contract.
- The application contained an express signed promise from Earnhardt stating it would 'provide service to [Johnson] in accordance with the provisions of the service contract DaimlerChrysler will issue to the purchaser.'
- The service contract was subsequently issued to Johnson by DaimlerChrysler.
- Beginning in June 2000, after the 15-day/500-mile period had passed, Johnson experienced significant mechanical problems with the vehicle.
- After the problems were not resolved, Johnson attempted to revoke her acceptance of the vehicle nearly a year after she had purchased it.
Procedural Posture:
- Brenda Johnson sued Earnhardt's Gilbert Dodge, Inc. in superior court (trial court), alleging breach of the implied warranty of merchantability under the Magnuson-Moss Warranty Act.
- The superior court granted summary judgment in favor of Earnhardt, finding that it had not entered into a service contract with Johnson.
- Johnson, as appellant, appealed to the Arizona Court of Appeals.
- The Court of Appeals reversed the trial court, holding as a matter of law that Earnhardt, as appellee, had entered into a service contract with Johnson.
- Earnhardt's Gilbert Dodge, Inc. sought review from the Supreme Court of Arizona.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a used car dealer 'enter into a service contract' under the Magnuson-Moss Warranty Act as a matter of law, thereby precluding it from limiting an implied warranty of merchantability, when it sells a third-party's service contract and signs an application containing a promise to provide service under that contract?
Opinions:
Majority - Justice Ryan
No. A car dealer does not 'enter into a service contract' as a matter of law under these circumstances; rather, conflicting language in the contractual documents combined with parol evidence creates a genuine issue of material fact for a fact-finder to decide. The Magnuson-Moss Warranty Act prohibits a supplier from disclaiming an implied warranty if it 'enters into a service contract' with the consumer. Because the Act does not define 'enters into,' the court looks to state contract law. Here, the documents contain conflicting language: some clauses suggest only Johnson and DaimlerChrysler are parties, while the application contains a signed promise from Earnhardt to 'provide service.' This ambiguity makes parol evidence, such as Johnson's affidavit stating she believed it was a joint warranty, admissible to determine the parties' intent. This conflicting evidence creates a question of fact, making summary judgment for either party inappropriate. Additionally, the agreement is a service contract, not a 'written warranty,' because Johnson paid separate consideration for it, and a service contract cannot also be a written warranty under the Act.
Analysis:
This decision clarifies that the determination of whether a dealer 'enters into a service contract' under the Magnuson-Moss Warranty Act is a fact-intensive inquiry, not a bright-line rule based on who administers the contract. By allowing parol evidence in cases of ambiguous contract language, the court empowers consumers to challenge warranty limitations based on representations made during the sale. This ruling cautions dealers that they cannot easily disclaim implied warranties when they are involved in selling and promising to service a third-party contract, thereby increasing their potential liability in such transactions.
Gunnerbot
AI-powered case assistant
Loaded: Johnson v. Earnhardt's Gilbert Dodge, Inc. (2006)
Try: "What was the holding?" or "Explain the dissent"