The Effect of a Strong Used Car Market — Court of Appeal (Cal.) Says Lemon Law Consumer Who Sold His Lemon Vehicle for $3,000 Profit Gets to Keep the Money

In Figueroa v. Us, No. B306275, 2022 Cal. App. LEXIS 883, at *4-9 (Ct. App. Oct. 25, 2022), the Court of Appeal held that a lemon law plaintiff who sold his lemon vehicle for a $3,000 profit got to keep the money.

Subparagraph (B) establishes the amount of restitution FCA must pay. (§ 1793.2, subd. (d)(2)(B).) “[T]he manufacturer shall make restitution in an amount equal to the actual price paid or payable by the buyer . . . .” (Ibid.) The statute is clear and unequivocal. Nowhere in section 1793.2. subdivision (d)(2)(B), or elsewhere in the Song-Beverly Act, is there a provision allowing cash back to the manufacturer. We cannot add words to a clear and unequivocal statute. (Hudson v. Superior Court (2017) 7 Cal.App.5th 1165, 1172.) FCA argues the word “restitution” in section 1793.2, subdivision (d)(2) requires Figueroa to return the benefit he received from the transaction, in this case, the cash he received from the truck’s sale. We might agree but for express definition of restitution in subparagraph (B) of section 1793.2, subdivision (b)(2).  Undaunted by the lack of statutory authority, FCA argues that public policy requires that it can be credited with the cash Figueroa received from the sale. FCA’s position is that having sold Figueroa a defective vehicle and having willfully violated the Song-Beverly Act by refusing to promptly replace or repurchase the vehicle, it is entitled to be benefitted with the cash Figueroa received. FCA complains that Figueroa received a windfall at FCA’s expense. What FCA refuses to acknowledge is that any such windfall is the direct result of FCA’s willful violation of the Song-Beverly Act. Had FCA fulfilled its duty under the Act to promptly replace or repurchase the truck, there would be no such windfall. We are aware of no public policy that requires FCA be compensated for its own willful violation of the law. FCA argues that if the owner of a defective vehicle is encouraged by a windfall to sell a defective vehicle on the open market, the purchaser of the vehicle will not receive the protections afforded by the Song-Beverly Act. Under the act, where a manufacturer has reacquired a defective vehicle, before it can be resold, the manufacturer must repair the defect (§ 1793.22, subd. (f)(1)); the vehicle must be retitled in the name of the manufacturer, the title must be inscribed with the notation “Lemon Law Buyback,” and a decal must be affixed to the vehicle with the same notation (§ 1793.23, subd. (c), Veh. Code § 11713.12, subd. (a)); the prospective buyer must be given notice that the vehicle is a lemon law buyback (§ 1793.23, subd. (f)); and the buyer must be given a one year manufacturer warranty that the vehicle is free from the defect (§ 1793.22 (f)(1)). FCA’s concern for those who purchase defective vehicles on the open market without the protections afforded by the Song-Beverly Act is admirable. But when confronted with the duty to reacquire Figueroa’s defective vehicle and provide such protections to a subsequent purchaser, it refused to do so. FCA’s reliance on Niedermeier is misplaced. There, plaintiff purchased a new vehicle manufactured by FCA. Plaintiff experienced numerous problems with the vehicle and brought it in for repair multiple times. Plaintiff asked FCA to buy the vehicle back. FCA refused, Plaintiff traded the vehicle in for a new car, and received $19,000 off the purchase price. Plaintiff sued FCA under the Song-Beverly Act and recovered damages. The trial court denied FCA a set-off of $19,000 to reflect the trade-in value of plaintiff’s vehicle. The Court of Appeal reversed. In reversing, the court acknowledged “that section 1793.2, subdivision (d)(2)(B) sets the amount of restitution at ‘the actual purchase price paid or payable.'” (Niedermeier, supra, 56 Cal.App.5th at p. 1071) The appellate court stated that to read the statute literally would disregard the Legislature’s choice of the term “restitution” and provide plaintiff with an “unjustified windfall.” (Ibid.) In addition, the court stated it does not consider the language of section 1793.2, subdivision (d)(2)(B) in isolation. To permit plaintiff to receive the trade-in value of her vehicle and a full refund from FCA would undercut the requirement that the manufacturer label the vehicle as a “lemon” and notify the prospective buyer of that fact. (Id. at pp. 1071-1072.)  We disagree with Niedermeier. First, the Legislature used the term “restitution,” but it defines what it means by restitution in section 1793.2, subdivision (d)(2)(B). The definition does not include a set-off for the cash received by the vehicle owner on sale of the vehicle or the vehicle’s trade-in value. Second, FCA cannot complain that the vehicle’s owner has received an unjustified windfall when it could have avoided such a result by complying with the Song-Beverly Act. Third, it is FCA, and not the vehicle’s owner, who undercuts the act’s labeling and notification requirements by refusing to repurchase the vehicle as required by the act. The labeling and notification requirements only apply where the manufacturer replaces or repurchases the vehicle, something FCA has refused to do. As this case and Niedermeier show, FCA operates in open defiance of the Song-Beverly Act. It considers promptly repurchasing, repairing, labeling as a lemon and selling the vehicle at a deep discount with a one-year warranty, a losing proposition. It would much rather force the owner of a defective vehicle to sell it on the open market, or trade it in without a label or warning, and use the cash back on trade-value as an offset. Niedermeier encourages FCA to do just that. We decline to follow Niedermeier, although in some cases the owner of a vehicle receives a windfall. FCA could have avoided this by complying with the law.