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A-Leet Leasing Corp. v. Kingshead Corp.

Decided: May 26, 1977.


Matthews, Seidman and Horn. The opinion of the court was delivered by Seidman, J.A.D.


Plaintiff A-Leet Leasing Corporation (A-Leet) brought suit against defendants Kingshead Corporation, an importing concern, and its president, Jere A. Shafir, to recover the balance claimed to be due, together with costs and attorneys fees, on a motor vehicle leasing agreement. Defendants counterclaimed, asserting that they had terminated the lease because of plaintiff's inability to repair the vehicle. They sought the return of their deposit. After a nonjury trial, the judge found in favor of defendants, dismissed the complaint and entered judgment on the counterclaim in the amount of $1023.42, without interest and costs. Plaintiff appealed. We reverse and remand for a new trial on all issues.

A-Leet is engaged in the business of purchasing from dealers vehicles previously selected by individuals and then leasing them back to those individuals at stipulated monthly rental payments over an agreed period of time. In 1972 Shafir, a resident of New Jersey, wished to purchase a Jenson automobile, a motor vehicle manufactured in Great Britain. He went to Grossman Motors in Nyack, New York, the Jenson dealer closest to his place of business and selected a 1972 Interceptor coupe which was priced at approximately $13,500.

Because of the cost, the dealer suggested a leasing arrangement through A-Leet.

Shortly thereafter a representative of A-Leet came to Shafir's place of business in Hackensack, and on May 1, 1972 an agreement was signed by Kingshead Corporation, the terms of which were personally guaranteed by Shafir, whereby A-Leet purchased the automobile from Grossman Motors and leased it to Kingshead Corporation for a term of 36 months at a monthly rental of $487.35. The lease provided, among other things, that the lessee would be responsible for maintenance and repairs. It also contained a "Disclaimer of Warranty" clause in which "LESSEE agrees that LESSOR is not a manufacturer or a dealer in vehicles and shall not be responsible under any warranty whether statutory or by common law for any defects in a vehicle delivered." A supplement to the lease permitted the lessee to terminate the lease at any time without prior notice, provided it exercised the option of purchasing the car for one dollar plus the full amount of all future rentals for the balance of the term. The lessee was also privileged to exercise the option to purchase for one dollar by written notice not less than 30 days before the expiration of the lease; otherwise, the car would be returned to the lessor at the end of the term. The lease further provided that in the event of default the lessor would have the right to terminate the lease without notice and repossess the vehicle.

The lessee made monthly payments until December 1972, at which time the balance due, less the deposit, was $13,010.73. The lessee then informed A-Leet that it no longer desired to keep the automobile because of a repair problem. A-Leet repossessed the vehicle in February 1973, resold it to a wholesaler for $6000 and brought this suit to recover the claimed balance of approximately $7000 plus counsel fees and costs in the sum of $1777.

Shafir testified at the trial that in September or October 1972 the car became inoperable because of a steering problem. He said that Grossman Motors sent a mechanic who,

after examining the car, reported that a part which had "[s]omething to do with power steering" had to be ordered. Shafir said further that although he repeatedly called the dealer, the part was not obtained. On one occasion, he said, he attended an automobile show at the Coliseum in New York where Grossman introduced him to a Jenson representative, who promised to send the part immediately. When the part still did not come, Shafir had the car towed to a gas station in Hackensack, where it remained for seven weeks. He also contacted another Jenson dealer, who was unable to help. Finally, in December 1972 Grossman told Shafir that he was unable to obtain the part and suggested that Shafir lease another car through a different leasing company. Grossman sent a tow truck for the car and took it away. Shafir acknowledged that when he signed the lease he knew that the repairs would be his responsibility and that the number of Jenson dealers in the area was limited. He said, further, that the mileage registered on the odometer in December was approximately 5000.

The Hackensack gas station mechanic testified that when the car was brought in he diagnosed the problem as a "rupture in the high pressure power steering hose" which rendered the vehicle inoperable. He said that only a Jenson hose could be used as a replacement. Although he made inquiry of at least one Jenson dealer and many other foreign car dealers, he was unable to obtain the part.

We gather from the trial judge's oral opinion findings that the car failed to meet an implied warranty of fitness; that the warranty disclaimer was unenforceable; that when Shafir was unable to repair the car "even under the warranty," he was released from his obligations under the lease, since the subject matter of the lease was thereby "frustrated," and that the resale was not "commercially reasonable."

It is no longer open to debate that when a manufacturer puts a new automobile (or, indeed, any consumer product) in the stream of trade and promotes its purchase by the public, an implied warranty that it is reasonably suitable

for use as such accompanies it into the hands of the ultimate purchaser. Scanlon v. General Motors Corp. , 65 N.J. 582, 591 (1974); Henningsen v. Bloomfield Motors, Inc. , 32 N.J. 358, 384 (1960). Furthermore, disclaimers of the obligations that normally attend a sale are not favored and are strictly construed against the seller. 32 N.J. at 373. In fact, Henningsen held that a manufacturer's attempted disclaimer of an implied warranty of merchantability and of the obligations arising therefrom was so inimical to the public good as to compel an adjudication of its invalidity. 32 N.J. at 404. See also Santor v. A & M Karagheusian, Inc. , 44 N.J. 52, 64 (1965). The responsibility of a manufacturer to a consumer for economic losses, as distinguished from personal injury or property damage, may ...

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