American Motors Sales Corp. v. Brown , 152 A.D.2d 343 ( 1989 )

OPINION OF THE COURT

Mollen, P. J.

The primary issue presented by this appeal is whether an automobile purchased by a consumer for personal use from an automobile dealer, which at the time of purchase had an odometer reading of approximately 5,600 miles, was less than two years old, and was covered by a manufacturer’s warranty, is protected by the provisions of the New Car Lemon Law (General Business Law § 198-a). The arbitrator in the case at bar answered this question in the affirmative and rendered an award in favor of the purchaser. We disagree and, accordingly, affirm the Supreme Court’s judgment which vacated the arbitration award.

The underlying facts of this proceeding are essentially undisputed by the parties. On or about December 6, 1985, Leon W. Brown purchased a 1985 Renault Sport Wagon from an authorized dealer of the petitioner American Motors Sales Corporation (hereinafter AMSC) for approximately $9,000. At the time of purchase, the vehicle, which was covered by a manufacturer’s warranty, had been driven for approximately 5,644 miles. Sometime after the purchase, Brown began to experience problems, inter alia, with the vehicle’s transmission, brakes, heater and air conditioner. Despite several repair attempts by AMSC’s dealer, the vehicle’s problems were not corrected.

Thereafter, on or about February 29, 1987, Brown filed a request for compulsory arbitration under the provisions of the New Car Lemon Law (General Business Law § 198-a [k]) which had become effective one month earlier (L 1986, ch 799, § 4, eff Jan. 1, 1987). Brown sought a full refund of the purchase price of the car. At the time Brown requested arbitration, the vehicle had been driven for 17,898 miles. Following a hearing, the arbitrator rendered an award in Brown’s favor in the sum of $8,439. Notably, the arbitrator did not take into account the mileage deduction formula for the mileage over 12,000 miles as required by General Business Law § 198-a (a) (4); (c) (1).

AMSC instituted the instant proceeding pursuant to CPLR article 75 seeking to vacate the arbitration award on the basis that the arbitrator exceeded his authority in rendering the award. AMSC argued, in the first instance, that Brown did not purchase a "new motor vehicle” and, thus, Brown was not entitled to seek compulsory arbitration of his claim under the New Car Lemon Law (General Business Law § 198-a [k]). Rather, AMSC contended that the vehicle in question constituted a "used motor vehicle” within the meaning of General Business Law § 198-b (a) (2), commonly referred to as the Used Car Lemon Law, which, at that time, did not contain a compulsory arbitration provision.^* In any event, even assuming that the car constituted a "new motor vehicle”, AMSC asserted that since Brown purchased the vehicle approximately three years before General Business Law § 198-a (k) became effective, Brown did not qualify for compulsory arbitration. Thus, AMSC took the position that the arbitrator exceeded his authority in rendering the award in Brown’s favor. AMSC also maintained that, regardless of the status of Brown’s vehicle, the arbitrator’s award exceeded the statutory requisites since the defects complained of either developed two years after the date of delivery or they did not "substantially impair the value of the motor vehicle” (General Business Law § 198-a [b], [c] [1]). Furthermore, AMSC asserted that, at the very least, the arbitration award should be modified by taking into account the mileage on Brown’s vehicle in excess of 12,000 miles as required by General Business Law § 198-a (a) (4); (c) (1). Finally, AMSC argued that General Business Law § 198-a was unconstitutional.

Brown opposed the petition and set forth several affirmative defenses and counterclaimed, inter alia, to recover reasonable attorneys fees pursuant to General Business Law § 198-a (l). Thereafter, the parties entered into a stipulation consenting to the intervention of the Attorney-General as a party to the proceeding in view of the fact that AMSC challenged the constitutionality of the New Car Lemon Law.

The Supreme Court granted the petition and vacated the arbitrator’s award on the basis that the arbitrator lacked jurisdiction to proceed in this matter. The court concluded that Brown’s vehicle fell within the description of a "used motor vehicle” under General Business Law § 198-b and, thus, Brown could not avail himself of the compulsory arbitration provision under General Business Law § 198-a. We agree.

A preliminary issue which has been raised by AMSC concerns the Attorney-General’s status in this appeal. AMSC notes, at the outset, that while it challenged the constitutionality of General Business Law § 198-a at the Supreme Court, Westchester County, that court did not reach the issue and it has not been raised on appeal. Thus, AMSC asserts that the Attorney-General is no longer a proper party to this proceeding under Executive Law § 71. Additionally, AMSC asserts that the Attorney-General does not constitute an "aggrieved party” within the meaning of CPLR 5511 and thus does not have standing to prosecute this appeal. Because the Supreme Court determined the matter without the need to reach the constitutional issue, the Attorney-General was not aggrieved by the order from which he has appealed. However, Brown, who clearly qualifies as an aggrieved party under CPLR 5511, filed a timely notice of appeal from the Supreme Court’s judgment and, with the Attorney-General’s consent, has notified this court that he has adopted the Attorney-General’s brief as his own. Thus, Brown’s cross motion for leave to adopt the note of issue, brief and record on appeal which have been filed by the Attorney-General is granted. The Attorney-General has also cross-moved for an order granting it permission to proceed as amicus curiae in this appeal. That motion is also granted herewith.

Turning to the merits of the appeal, CPLR 7511 (b) provides in pertinent part,

"1. [An arbitration] award shall be vacated on the application of a party * * * if the court finds that the rights of that party were prejudiced by * * *

"(iii) an arbitrator, or agency or person making the award exceeded his power”.

It has been recognized that "CPLR 7511 (subd. [b]), in authorizing review of whether the arbitrator has exceeded his power, by necessary logical extension and without distortion of its literal terms includes review in the case of compulsory arbitration (but only in such case) of whether the award is supported by evidence or other basis in reason, as may be appropriate, and appearing in the record” (Mount St. Mary’s Hosp. v Catherwood, 26 NY2d 493, 508; see, Matter of Furstenberg [Aetna Cas. & Sur. Co.—Allstate Ins. Co.], 49 NY2d 757; Rose v Travelers Ins. Co., 96 AD2d 551). Applying this standard of review to the case at bar, we conclude, in accordance with the Supreme Court, that the arbitrator exceeded his authority in rendering the award in Brown’s favor.

The legislative intent of the New Car Lemon Law, which became effective September 1, 1983, is to protect consumers who purchase or lease a "new motor vehicle” for personal or household use and experience difficulties with the operation of the vehicle which substantially impair its value. To this end, the New Car Lemon Law provides, in essence, that if a "new motor vehicle” does not conform to all express warranties during the first 18,000 miles of operation or during the two-year period following the delivery of the vehicle, whichever comes first, the consumer, during that period, shall report the nonconformity, defect or condition to the manufacturer, its agent or its authorized dealer (General Business Law § 198-a [b]). The vehicle shall be replaced with a comparable vehicle or a refund shall be paid to the consumer if the dealer is unable to repair the defect after a reasonable number of attempts (General Business Law § 198-a [c] [1]; [d] [1], [2]). A consumer will not be able to recover under the statute if the defect, nonconformity or condition does not substantially impair the value of the vehicle or if it is the result of abuse, neglect or unauthorized modifications or alterations to the motor vehicle (General Business Law § 198-a [c] [3] [i], [ii]). Subdivision (k) of the statute, which became effective January 1, 1987, provides an aggrieved consumer of a defective new motor vehicle with the option of submitting any dispute arising under the statute to compulsory arbitration. Notably, the New Car Lemon Law does not include a definition of a "new motor vehicle”. The statute, however, defines "consumer” as follows: "the purchaser, other than for purposes of resale, or the lessee of a motor vehicle normally used for personal, family, or household purposes and subject to a manufacturer’s express warranty, any person to whom such motor vehicle is transferred during the duration of an express warranty applicable to such motor vehicle, and any other person entitled by the terms of such warranty to enforce the obligations of the warranty” (General Business Law § 198-a [a] [1]).

Although Brown arguably qualifies as a "consumer” within the definition of the statute, our review requires a more detailed analysis and comparison between the New Car Lemon Law and the Used Car Lemon Law (General Business Law § 198-b) which became effective November 1, 1984 (L 1984, ch 645, § 2) and which provides statutory protection to qualified consumers who purchase or lease used motor vehicles for more than $1,500 which have defects that substantially impair their value. The Used Car Lemon Law, in pertinent part, provides that no dealer shall sell or lease a used motor vehicle to a consumer without providing a written warranty which shall at a minimum cover (1) used motor vehicles with 36,000 miles or less for at least 60 days or 3,000 miles, whichever occurs first, and (2) used motor vehicles with more than 36,000 miles for a period of at least 30 days or 1,000 miles, whichever occurs first (General Business Law § 198-b [b] [1] [a], [b], as amended by L 1989, ch 444). Significantly, the term "used motor vehicle” is defined in the statute as "a motor vehicle, excluding motorcycles, motor homes and off-road vehicles, which has been driven more than the limited use necessary in moving or road testing a new vehicle prior to delivery” (General Business Law § 198-b [a] [2] [emphasis added]). A "consumer” for purposes of the Used Car Lemon Law, inter alia, is a "purchaser, other than for purposes of resale, or the lessee, of a used motor vehicle normally used for personal, family, or household purposes and subject to a warranty” (General Business Law § 198-b [a] [1], as amended by L 1989, ch 444). Of particular significance to the case at bar is the fact that the Used Car Lemon Law does not currently have a provision, similar to the New Car Lemon Law, which provides consumers with the option of compulsory arbitration to settle disputes arising under the statute. As indicated supra, however, the Used Car Lemon Law has been amended effective January 1, 1990, to include a compulsory arbitration provision similar to the New Car Lemon Law (L 1989, ch 609), thus manifesting a legislative intent to extend the right to compulsory arbitration to owners of cars which come within the definition of "used” cars under General Obligations Law § 198-b.

The primary consideration for the courts in interpreting a statute is to ascertain the legislative intent from the literal reading of the statute itself or of all statutes relating to the general subject matter (McKinney’s Cons Laws of NY, Book 1, Statutes § 92; Delaware County Elec. Coop, v Power Auth., 96 AD2d 154, affd 62 NY2d 877). Thus, the courts are required to harmonize statutes with each other as well as with the overall legislative intent in an effort to provide a logical and unstrained interpretation to each (see, People v Newman, 32 NY2d 379, cert denied 414 US 1163; McKinney’s Cons Laws of NY, Book 1, Statutes § 98). A literal reading of the relevant provisions of the New and Used Car Lemon Laws leads to the logical conclusion that while Brown may fit within the term "consumer” as defined by the New Car Lemon Law (General Business Law § 198-a [a] [1]), the vehicle which he purchased was clearly not a "new” car for the purpose of that statute. In fact, the vehicle in question falls squarely within the definition of a "used motor vehicle” since it had been driven, prior to its purchase, for "more than the limited use necessary in moving or road testing a new vehicle prior to delivery” (General Business Law § 198-b [a] [2]). Moreover, as noted by the Supreme Court, the vehicle in question does not qualify as a "new motor vehicle” within the meaning of Vehicle and Traffic Law article 17-A, known as the "Franchised Motor Vehicle Dealer Act”. That statute defines a new motor vehicle as "a vehicle sold or transferred by a manufacturer, distributor or dealer, which has not been placed in consumer use or used as a demonstrator” (Vehicle and Traffic Law § 462 [11] [emphasis added]). Finally, it is significant that the car invoice for Brown’s vehicle stated that the vehicle he was purchasing was "used”.

We acknowledge that several trial courts, in addressing claims similar to that presented herein, have determined that purchasers of dealer demonstrator motor vehicles, which have been driven more than that necessary to road test or deliver the cars, are entitled to coverage under the New Car Lemon Law (see, General Motors Corp. v Cotton, Sup Ct, Westchester County, June 19, 1987, Marbach, J.; Matter of Dente v Worldwide Volkswagen Corp., Sup Ct, Nassau County, July 15, 1988, McCabe, J.). In those cases, the trial courts concluded, at the outset, that the persons purchasing the demonstrator vehicles fit the description of "consumers]” within the meaning of the New Car Lemon Law (General Business Law § 198-a [a] [1]). These courts also found that the New Car Lemon Law is preeminent over the Used Car Lemon Law by reason of the following Used Car Lemon Law provisions:

"If the warranty provided for in section one hundred ninety-eight-a of this chapter is in effect at the time of the sale or lease of the used motor vehicle, then the warranty specified in this section shall be required only for the period of time, if any, between the expiration of such section one hundred ninety-eight-a warranty and the period specified in paragraph one of this subdivision * * *

"Nothing in this section shall in any way limit the rights or remedies which are otherwise available to a consumer under any other law” (General Business Law § 198-b [b] [4]; [d] [2], as amended by L 1989, ch 444).

The courts in General Motors Corp. v Cotton (supra), and Matter of Dente v Worldwide Volkswagen Corp. (supra), found that the above-quoted statutory provisions were intended to provide New Car Lemon Law protection to vehicles covered by a manufacturer’s warranty, which, when purchased, were less than two years old and had mileage less than 18,000 miles but more than that necessary to road test or deliver a new car (see also, Matter of Subaru of Am. [McKelveyJ, 141 Misc 2d 41 [arbitrator did not exceed his authority in finding that the motor vehicle, which when purchased had been driven 5,089 miles, was a "new” motor vehicle]).

The difficulty with this rationale is that it ignores the plain and unequivocal definition of a "used motor vehicle” (General Business Law § 198-b [a] [2]) and is inherently contradictory since it would result in certain "used motor vehicles” being treated as "new motor vehicles”. This approach, which is also urged by Brown and the Attorney-General, would require this court to disregard the precise and explicit language of the statute and apply the provisions of the New Car Lemon Law to vehicles which undeniably fall within the definition of "used motor vehicles” under the Used Car Lemon Law. Notably, a thorough examination of the legislative history reveals that this interpretation of the New and Used Car Lemon Laws is not supported by the legislative bill jackets or the extensive legislative history regarding these statutes. Moreover, by focusing solely on the statutory definition of a "consumer” within the meaning of the New Car Lemon Law (General Business Law § 198-a [a] [1]), to the exclusion of other relevant statutory provisions, this approach fails to comply with the well-established rule of statutory construction which requires courts to harmonize the various provisions of the relevant statutes in order to reach a rational result (see, People v Newman, 32 NY2d 379, supra; McKinney’s Cons Laws of NY, Book 1, Statutes §98). A reading of the two statutes herein clearly indicates that the New Car Lemon Law applies to individuals who fit within the statutory definition of a "consumer” and who purchase a "new motor vehicle”. In fact, the recent amendment to General Obligations Law § 198-b extending the right to compulsory arbitration to owners of "used motor vehicles” reflects a legislative recognition that the New Car Lemon Law does not encompass "used motor vehicles”. Accordingly, in view of the fact that Brown’s vehicle falls squarely within the statutory definition of a "used motor vehicle” under the Used Car Lemon Law (General Business Law § 198-b [a] [2]), it is clear that he does not qualify for protection under the New Car Lemon Law.

Thus, we agree with the Supreme Court’s determination that the arbitrator herein exceeded his authority in rendering an award in Brown’s favor since Brown was not entitled to compulsory arbitration under the New Car Lemon Law (see, General Business Law § 198-a [k]). The arbitrator’s conclusion that Brown’s vehicle was a "new motor vehicle” rather than a "used motor vehicle” was not "supported by the . evidence or other basis in reason” (Mount St. Mary’s Hosp. v Catherwood, 26 NY2d 493, 508, supra).

In view of the foregoing, we do not reach the issue of whether Brown qualified as a "consumer” within the meaning of the New Car Lemon Law (General Business Law § 198-a [a] [1]) notwithstanding the fact that he did not purchase the vehicle directly from the original consumer but rather from a dealer who purchased it for purposes of resale; nor is it necessary to determine whether the compulsory arbitration provision of the New Car Lemon Law (General Business Law § 198-a [k]) applies retroactively to new motor vehicles which were purchased prior to the effective date of that provision.

Accordingly, the judgment under review is affirmed, without costs or disbursements, Renewed Motion No. 3703 by the petitioner AMSC to dismiss the appeal of the Attorney-General is granted, Cross Motion No. 3705 by the Attorney-General for leave to file an amicus curiae brief on the appeal of Leon W. Brown is granted, and Cross Motion No. 3704 by Leon W. Brown to adopt the note of issue, brief, and record on appeal filed by the Attorney-General is granted.

* The Used Car Lemon Law has been amended effective January 1, 1990 (L 1989, ch 609) to provide for compulsory arbitration of disputes thereunder.