Judge: Michael Small, Case: 24STCV08362, Date: 2024-06-03 Tentative Ruling

Case Number: 24STCV08362    Hearing Date: June 3, 2024    Dept: 57

On April 3, 2024, Edwin and Gerardo Perez (collectively, “the Plaintiffs”) sued Ford Motor Company ("Ford") for breaches of express and implied warranties under the Song-Beverly Consumer Warranty Act ("Song-Beverly Act") and for fraudulent inducement through concealment arising from the Plaintiffs’ purchase of a 2018 Ford F150 ("the Subject Vehicle"), which Plaintiffs allege was manufactured and distributed by Ford.  Plaintiffs also sued Ford of Montebello for negligent repair of the Subject Vehicle. 

Pending before the Court is the demurrer of Ford and Ford of Montebello to all of the causes of action in the Plaintiffs’ complaint.  The Court is overruling Ford’s demurrer as to Plaintiffs' claims for breach of express warranty (the first, second, and third causes of action).  Contrary to Ford's contention, these claims are not barred on the face of the Plaintiffs’ complaint by the applicable four-year statute of limitations.  The Court is sustaining Ford’s demurrer with leave to amend as to the claim for breach of implied warranty (the fourth cause of action) and the claim for fraudulent inducement-concealment (the sixth cause of action) on the ground that these claims are barred on the face of the complaint by the applicable statutes of limitations.  The Court is overruling Ford of Montebello’s demurrer to the clam for negligent repair (the fifth cause of action).  Ford of Montebello’s demurrer is based on the economic loss rule.  The Court cannot, however, determine from the face of the Plaintiffs’ complaint whether the economic loss rule, or the exception to the rule in cases of negligent provision of professional services, applies here.

Express Warranty Claims (First Through Third Causes of Action) 

The statute of limitation on a claim for breach of an express warranty is four years.  (Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 213-215 ["Krieger"].)  The complaint alleges that Plaintiffs entered into a warranty contract with Ford related to the Subject Vehicle on April 25, 2018.  Plaintiffs sued Ford almost six years later on April 3, 2024.  Hence, says Ford, Plaintiffs' claims for breach of the express warranty related to the Subject Vehicle are time-barred.   

Ford is incorrect.  The Song-Beverly Act states that a manufacturer must commence repairs within a reasonable time after a vehicle with defects is presented to the manufacturer’s authorized representative for repair and that the representative must have those repairs completed to conform to the manufacturer's warranty within 30 days of presentation.  (Civil Code Section 1793.2(b).)  The Song-Beverly Act also requires the manufacturer to replace a buyer's vehicle or reimburse the buyer when the manufacturer’s authorized representative is unable to repair the vehicle after a reasonable number of attempts.  (Id. Section 1793.2 (d).)  Both of these provisions render the buyer's discovery of the manufacturer's failure to carry out its obligation to perform the specified tasks related to the warranty (that is, making repairs and taking steps if the repairs cannot be made after attempts to repair) as the date that claims for breach of the express warranty accrue.  (Krieger, supra, 234 Cal.App.3d at p. 215; Galvez v. Ford Motor Co., No. 2:17-cv-02250-KJM-KNV (E.D. Cal. Sept. 30, 2018) 2018 WL 4700001, at *4.)  The Court cannot conclude on the face of the allegations in the complaint that Plaintiffs discovered Ford's failure to carry out its warranty obligations more than four years before Plaintiffs brought suit.  Accordingly, Ford’s demurrer to Plaintiffs’ claims for breach of express warranty is overruled. 

Implied Warranty Claim (Fourth Cause of Action)  

The statute of limitations on a claim for breach of an implied warranty of merchantability is four years.  (Montoya v. Ford Motor Co. (2020) 46 Cal.App.5th 493, 495.)  The claim “accrues when the breach occurs, regardless of the aggrieved party’s lack of knowledge of the breach.  A breach of warranty occurs when tender of delivery is made. . . . .”  (Commercial Code § 2725(2).)  In short, Section 2725 of the Commercial Code is clear: there is no delayed-discovery rule with respect to accrual of a claim for breach of an implied warranty.  (Cardinal Health 301, Inc. v. Tyco Electronics Corp. (2008) 169 Cal. App. 4th 116, 129, 134.)  If the contract expressly extends the warranty to “future performance” of the goods, then the claim accrues when the breach is discovered or should have been discovered.  But absent such an explicit extension, accrual occurs at the time of the breach, which is the time of delivery of the goods in question.  (Id. at p. 129.)   

Here, the complaint does not allege that the sales agreement for the Subject Vehicle extends the implied warranty to a future performance date by Ford.  Plaintiffs’ claim for breach of the implied warranty of merchantability thus accrued when the Subject Vehicle was delivered to them.  According to the Plaintiffs’ complaint, that occurred on or about April 25, 2018.  Plaintiffs did not sue Ford until almost six years later.  Thus, the Plaintiffs’ claim for breach of the implied warranty related to the Subject Vehicle is time-barred on the face of the complaint. 

 Plaintiffs contend that Mexia v. Rinker Boat Co. (2009) 174 Cal.App.4th 1297, stands for the proposition that the statute of limitations on a claim for breach of the implied warranty of merchantability of a consumer good is tolled for the duration of the period of the express warranty on the good when the good’s defect is latent.   That is not so.  The Court in Mexia said flat out that “[i]n the case of a latent defect, a product is rendered unmerchantable, and the warranty of merchantability is breached, by the existence of the unseen defect, not by its subsequent discovery.” (Id. at 1304-1305.) 

For the foregoing reasons, Ford’s demurrer to Plaintiffs’ claim for breach of the implied warranty of merchantability is sustained with leave to amend. 

Fraudulent Inducement-Concealment (Sixth Cause of Action) 

The statute of limitations on claims for fraudulent inducement through concealment is three years.  (Code of Civil Procedure Section 338(d).)  Ford argues that, on the face of the complaint, Plaintiffs’ fraud claim accrued more than years before Plaintiffs sued Ford for fraud and therefore the claim is time-barred.  Ford is correct. 

In their opposition to Ford’s demurrer, Plaintiffs invoke the “discovery rule” to avoid the three-year statute of limitations on the fraud claim.  The discovery rule “postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.”  (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807.)  Put another way, “[t]he discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action.”  (Ibid.)  This means that plaintiffs “are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.”  (Id. at p. 808.)  “The limitations period begins once the plaintiff has notice or information of circumstances to put a reasonable person on inquiry.”  (Alexander v. Exxon Mobil (2013) 219 Cal.App.4th 1236, 1251, citation omitted).  The discovery rule imposes a pleading requirement on a party seeking the protection of the rule in the face of a demurrer.  Specifically, “[i]n order to rely on the discovery rule for delayed accrual of a cause of action, ‘a plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery, and (2) the inability to have made earlier discovery despite reasonable diligence.’”  (Fox, supra 35 Cal.4th at p. 809, citation omitted.)   

Plaintiffs have failed in the complaint to plead within the ambit of the discovery rule.  The complaint alleges that (1) Plaintiffs did not discover Ford’s fraud until shortly before Plaintiffs sued Ford, and (2) within the time period of any applicable statute of limitation, Plaintiffs could not have discovered through the exercise of reasonable diligence that Defendant was concealing the default.  Missing from the complaint, however, are facts regarding the time and manner of discovery and facts establishing why Plaintiffs were unable to have made this discovery earlier through the exercise of reasonable diligence.  Plaintiffs merely recite the pleading standard without any alleging any facts to back up their assertion that the discovery rule applies.   Thus, the Court is sustaining Ford’s demurrer to Plaintiffs’ claim for fraud on statute of limitations grounds with leave to amend. 

Ford also argued in its demurrer as to the fraud claim that Plaintiffs failed to plead the defect that Ford allegedly concealed, that Ford had a duty to disclose the alleged defect, and that Plaintiffs’ fraud claim is foreclosed by the economic loss rule.  Because the Court has determined that the fraud claim is barred by the statute of limitations, the Court declines to address Ford’s other arguments at this time. 

           Negligent Repair (Fifth Cause of Action)

Ford of Montebello argues that the Plaintiffs’ claim against it for negligent repair of the Subject Vehicle is barred by the economic loss rule.  The Court disagrees.

 The economic loss rule provides that, “[i]n general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922.)  In cases where the parties to the litigation have a contract, the rule “defer[s] to [the] contract,” and thereby preserves the distinction between contract law and tort law.  (Ibid.)  However, there is a “recognized exception to the economic loss rule for consumers who contract for certain kinds of professional services.”  (Id., at 933.)   The exception is intended to “ensure[] that the consumer receives the services the professional agreed to provide.  In such settings, professionals generally agree to provide ‘careful efforts’ in rendering contracted for services, but ‘most clients do not know enough to protect themselves by inspecting the professional’s work or by other independent means.’”  (Id. (citations omitted).)  “Given this disparity, a claim for professional negligence can serve the important purpose of ensuring that professionals render the ‘careful efforts’ they have contracted to provide.”  (Id. (citations omitted).) 

There are several factors that must be considered in determining whether the professional services exception to the economic loss rule applies.  These factors are: “(1) the extent to which the transaction was intended to affect the plaintiff, (2) the foreseeability of harm to the plaintiff, (3) the degree of certainty that the plaintiff suffered injury, (4) the closeness of the connection between the defendant’s conduct and the injury suffered, (5) the moral blame attached to the defendant’s conduct, and (6) the policy of preventing future harm.” (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 782.)

Here, through their warranty with Ford, Plaintiffs contracted with Ford of Montebello for the performance of the professional service of repairing the Subject Vehicle to conform to the Song-Beverly Act warranties.  At the pleading state, the Court cannot exclude the possibility that the professional services exception to the economic loss rule may apply.  Accordingly, Ford of Montebello’s demurrer to the Plaintiffs’ negligent repair claim is overruled.