The court has before it a motion it reserved at the end of a jury trial to enter judgment for plaintiff. R. 4:40-2(a). The jury's verdict was for defendants. The parties waived the ten-day period for decision and submitted briefs.
The facts of the case are virtually identical to those of A-Leet Leasing Corp. v. Kingshead Corp., 150 N.J. Super. 384 (App.Div.1977),
and, indeed, the "interesting issue," id. at 393, delineated in that case but not reached, is now ripe for decision in this case.
Plaintiff is in the business of leasing cars on a long-term basis (in this case three years). Here, defendants picked out a 1979 Alpha Romeo for both business and personal use from a dealer, Z & W, in Princeton. Not desirous of funding the full purchase price of $12,700, defendants decided to lease the vehicle and did so through plaintiff (located in Mount Holly) on the recommendation of Z & W. Plaintiff purchased the vehicle, and the lease, described as a "Finance" lease, was signed at defendant's place of business in New Brunswick. Delivery of the car was then accomplished at Z & W and two periodic service checkups required by the owner's manual were performed there. A new car manufacturer's warranty was issued to defendants through Z & W by Alpha Romeo, the manufacturer. Plaintiff had no duty to repair or maintain the vehicle under the lease and it gave no express warranties of any kind. The rental payments were calculated in such a way that defendants could at the end of the lease term buy the car for its original price less a sum fixed by the lease as depreciation.
Just short of a year after acquisition (and therefore within the manufacturer's warranty period) the car failed to operate. The details of that failure do not concern the present issue,*fn1 but it should be pointed out that they were the subject of hotly disputed testimony which was submitted to the jury under instructions describing the principles of implied warranty of merchantability. The jury obviously concluded the car was subject to a defect arising in the hands of the manufacturer which breached the implied warranty, resulting in a complete failure of consideration. A-Leet, supra at 393; Herbstman v. Eastman Kodak Co., 68 N.J. 1 (1975).
The issue raised is whether plaintiff lessor is subject to a breach of implied warranty of merchantability defense to its claim on the lease. Plaintiff sued entirely on its lease, claiming only those sums expressly allowed it, including repossession and repair expenses, lost rentals and future loss of income (as fixed by the lease) and loss upon resale of the repaired vehicle. Except for one repair item, the contractual propriety of these claims was not disputed, nor were the amounts.
The issue was posed in A-Leet, supra at 392, as follows:
It is to be noted that here Shafir himself selected the automobile from the dealer. The lessor was not involved at all in that process. Its role was simply to finance the transaction through the device of a leasing arrangement, although it is true that the actual purchase of the vehicle from the dealer was accomplished by the lessor. In such instances, a cogent argument might be made that the lessee, unlike situations in which the lessor is a dealer in motor vehicles, does not rely upon the skill and judgment of the lessor, who may be in no better position than he to detect possible defects or flaws in the vehicle leased. Therefore, the implied warranties of merchantability or fitness for use ought not to obtain. This would particularly be so where, as in this case, the dealer himself furnished the lessee a standard express warranty.
Plaintiff's brief now makes the "cogent argument" that, indeed, it is nothing more than a financier of the transaction; that the implied warranties are not given by it and their breach cannot provide defendants with a defense.
While plaintiff's business is that of leasing vehicles, it does not maintain its own inventory of cars for that purpose, such as the typical U-Drive-it operation. Defendants did not rely on the skill and judgment of plaintiff in selecting their car. Indeed, plaintiff purchased the vehicle sight unseen at the behest of Z & W and forthwith leased it to defendants, who picked it up at Z & W. Under these circumstances warranty obligations were given directly by the manufacturer through Z & W to the ultimate consumers. Defendants realized this when they got the warranty book and took steps to comply with the required maintenance schedule. Since possession of the vehicle never came into the hands of plaintiff, it was clearly in no better ...