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Sorchaga v. Ride Auto, LLC

Court of Appeals of Minnesota

March 20, 2017

Esmeralda Sorchaga, Respondent,
v.
Ride Auto, LLC, et al., Appellants.

         Dakota County District Court File No. 19HA-CV-14-3536

          Todd Murray, Friedman Iverson, Minneapolis, Minnesota (for respondent)

          Robert J. Bruno, Robert J. Bruno, Ltd., Burnsville, Minnesota (for appellants)

          Edward Kautzer, Ruvelson & Kautzer, Ltd., St. Paul, Minnesota (for amicus curiae Northland Independent Auto Dealers Association)

          Considered and decided by Hooten, Presiding Judge; Reilly, Judge; and Smith, Tracy M., Judge.

         SYLLABUS

         1. Denial of a motion for summary judgment arguing that a party has not pleaded fraud with sufficient particularity under Minn. R. Civ. P. 9.02 is not within an appellate court's scope of review after a trial has been held and the parties have been given a full and fair opportunity to litigate their claims.

          2. A merchant's fraudulent misrepresentation about the condition, value, quality, or fitness of the goods for any purpose is a "circumstance" under Minn. Stat. § 336.2-316(3)(a) (2016) that may invalidate a warranty disclaimer.

          OPINION

          SMITH, TRACY M., Judge

         This tort and contract case arises out of appellant Esmeralda Sorchaga's purchase of a 2008 Ford F-350 pickup truck from respondent Ride Auto, L.L.C., a used-car dealership. Respondent Western Surety Company is the bond-surety holder for Ride Auto. Sorchaga brought claims of fraud and breach of implied warranty of merchantability, as well as a claim for attorney fees under the Magnuson-Moss Warranty Act (MMWA), against Ride Auto and Western Surety. Following a bench trial, the district court awarded Sorchaga $14, 366.03 in damages and $21, 949.35 in attorney fees, and ordered Sorchaga to provide Ride Auto with an opportunity to retrieve the truck.

         On appeal, Ride Auto and Western Surety argue that (1) the judgment is void because Sorchaga failed to file her amended complaint with the district court; (2) the district court erred in denying Ride Auto's motions for summary judgment; (3) the district court erred in denying Ride Auto's motion for judgment as a matter of law; (4) the district court clearly erred in finding that sufficient evidence supported Sorchaga's fraud claim; (5) the district court erred in concluding that Ride Auto's disclaimer of the implied warranty of merchantability was ineffective; (6) the district court erred in awarding attorney fees under the MMWA; (7) the district court erred in ordering judgment in favor of Sorchaga on both her fraud and breach-of-warranty claims; and (8) the district court's judgment with respect to Western Surety is unsupported as a matter of law. We conclude that the district court did not err with respect to any of these issues and, therefore, affirm.

         FACTS

         In March 2014, Ride Auto purchased a 2008 Ford F-350 pickup truck from Metro Salvage Yard for $6, 770. The original owner had sold the truck to the salvage company because the engine needed repairs. The original owner had taken the truck to a Ford dealer, who diagnosed the truck as having a "blown" motor, causing the truck to lack power and to smoke from the tailpipe. By the time the original owner sold the truck to the salvage yard, the check-engine light had turned on and the truck could no longer start or be driven. Ride Auto had the truck delivered to it on a flatbed truck, had body and cosmetic repairs completed, and ensured that the truck would start and drive short distances.

         Sorchaga and her husband went to Ride Auto on May 20, 2014, to look at trucks for her husband's roofing business. They spoke with Jordy Perez, who was acting as Ride Auto's salesperson, about the truck. The Sorchagas returned to Ride Auto on May 21 and test drove the truck with Perez. During the test drive, the truck smoked from the tailpipe and the check-engine light was illuminated. Sorchaga asked about the check-engine light. Perez told Sorchaga that the truck had a faulty oxygen sensor but represented that the oxygen sensor would be easy to fix and that the truck would last a long time after it was fixed. He also explained that the smoke was a result of the truck being a diesel that smokes when it warms up. Perez also indicated that the truck could be driven with the check-engine light on and, if purchased, could be brought back to Ride Auto to be fixed after a couple of days. After the test drive, Sorchaga asked whether Ride Auto could place the truck on a scanner to determine the cause of the check-engine light. Arash Shakibi, an owner of Ride Auto, informed Sorchaga that Ride Auto's mechanic was uncertified and could not perform the inspection. Perez again told Sorchaga that the check-engine light was caused by a faulty oxygen sensor, and Shakibi did not correct that statement. Ride Auto provided Sorchaga with an ASC Vehicle Protection Plan (ASC agreement) at no cost, and Shakibi told Sorchaga that the ASC agreement would allow her to have the truck inspected and repaired for free.

         Sorchaga worked with Perez and Shakibi to purchase the truck for $12, 950.68. Sorchaga signed a purchase agreement, which stated that the truck had a salvage title and that the check-engine light was on. The purchase agreement also provided a disclaimer of express and implied warranties:

Dealer's disclaimer of warranty and pollution system. "AS IS, NO WARRANTY." You will pay all costs for any repairs. The Seller assumes no responsibility for any repairs regardless of any oral statements about above name[d] vehicle . . . . As between retail seller and buyer the above name[d] vehicle is to be sold "AS IS" and the entire risk as to the quality and performance of the above name[d] vehicle is with the buyer. The Seller expressly disclaims all warranties either expressed or implied. The buyer acknowledges being informed of this statement prior to the sale.

         Sorchaga signed a separate document, which stated that the truck had a salvage title and that Sorchaga was "receiving a discounted price because of the prior bodywork." Sorchaga also signed a buyer's guide, which stated that the truck was sold "AS IS - NO WARRANTY" and listed "some major defects that may occur in used motor vehicles."

         Sorchaga also signed the ASC agreement, which listed Perez as the salesperson. Because the truck had a salvage title, the ASC agreement would cover a maximum of $500 in repair expenses. Sorchaga also signed a document that stated: "I understand that I am purchasing this vehicle from Ride Auto Co. 'AS IS' and the service contract that I have is through a third party . . . ."

         Sorchaga's husband drove the truck to and from work, but the truck lacked power and continued to smoke. Sorchaga sought assistance from Ride Auto within days of purchase, but Ride Auto refused to diagnose or repair the truck. Eight days after purchase, Sorchaga had the truck towed to Inver Grove Ford and inspected for $1, 415.35. Inver Grove Ford concluded that the truck should not be driven and recommended a full engine replacement, which would cost Sorchaga approximately $20, 000.

         Sorchaga served Ride Auto with a complaint, alleging that Ride Auto (1) had breached the implied warranty of merchantability, (2) violated the MMWA, and (3) committed fraud. Before Ride Auto filed its first answer, Sorchaga amended the complaint to include Western Surety. Prior to discovery, Ride Auto and Western Surety moved for summary judgment, arguing that all three counts failed as a matter of law and that Sorchaga had failed to plead fraud with particularity as required by Minn. R. Civ. P. 9.02. The district court denied this motion. After discovery, Ride Auto and Western Surety again moved for summary judgment. The district court also denied this motion. The district court held a two-day bench trial. During trial, after Sorchaga rested her case, Ride Auto and Western Surety moved for judgment as a matter of law, a motion the district court also denied.

          The district court ordered judgment for Sorchaga on all three counts. The district court found that the warranty disclaimer of the purchase agreement was ineffective and concluded that Ride Auto had breached the implied warranty of merchantability. Because it concluded that Ride Auto breached the implied warranty of merchantability, the district court concluded that Sorchaga was entitled to attorney fees under the MMWA. The district court also concluded that Ride Auto committed fraud because Ride Auto had misrepresented the condition of the truck to Sorchaga. The district court ordered Western Surety, as bond-surety holder for Ride Auto, to share liability with Ride Auto. The district court awarded Sorchaga $14, 366.03 in damages and $21, 949.35 in attorney fees and litigation expenses. The district court also ordered Sorchaga to provide Ride Auto with the opportunity to retrieve the truck.

         Ride Auto appeals.

         ISSUES

         I. Is the judgment void because Sorchaga failed to file her amended complaint with the district court?

         II. Did the district court err in denying Ride Auto's summary-judgment motions?

         III. Did the district court err in denying Ride Auto's motion for judgment as a matter of law?

         IV. Did the district court clearly err in finding that sufficient evidence supported Sorchaga's fraud claim?

         V. Did the district court err in concluding that Ride Auto's disclaimer of the implied warranty of merchantability was ineffective?

         VI. Did the district court err in awarding attorney fees under the Magnuson-Moss Warranty Act?

         VII. Did the district court err in ordering judgment in favor of Sorchaga on both her fraud and breach-of-warranty claims?

         VIII. Did the district court clearly err in ordering judgment against Western Surety?

         ANALYSIS

         I. Ride Auto forfeited its argument that the judgment is void.

         Ride Auto argues that the judgment is "void" because Sorchaga never filed her amended complaint with the district court as Ride Auto asserts is required by Minn. R. Civ. P. 5.04(b).[1] Ride Auto admits that it did not raise this issue before the district court. We therefore need not consider this issue. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). Nevertheless, Ride Auto urges that review is necessary in the "interest of justice, " Minn. R. Civ. App. ...


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