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Mercedes-Benz Credit Corp. v. Lotito

December 5, 1997

MERCEDES-BENZ CREDIT CORPORATION, PLAINTIFF-RESPONDENT,
v.
CHRISTOPHER LOTITO, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT, -V- RAY CATENA MOTOR CAR CORP., MERCEDES-BENZ CREDIT CORP. MERCEDES-BENZ NORTH AMERICA, INC., AND MERCEDES-BENZ, A.G., THIRD-PARTY DEFENDANTS.



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County.

Approved for Publication December 5, 1997.

Before Judges Dreier, Keefe and P.g. Levy. The opinion of the court was delivered by P.g. Levy, J.A.D.

The opinion of the court was delivered by: Levy

The opinion of the court was delivered by

P.G. LEVY, J.A.D.

This issue presented for decision in this case is whether a leasing company which is closely affiliated with an automobile manufacturer, a distributor and a dealer, yet still a separate entity, is subject to a customer's defense of breach of warranty. The specific question here is whether the leasing company may enforce a vehicle lease over a defense that the vehicle suffers from manufacturing defects in breach of the new car warranty. We hold that enforcement must await determination of the breach of warranty issues.

Defendant selected a luxury car offered for sale by Ray Catena Motor Car Corp. (Catena) and chose to lease the vehicle. Using a form of lease provided by plaintiff, Mercedes-Benz Credit Corporation (MBCC), Catena as lessor and defendant as lessee executed a lease on July 10, 1993, for a new Mercedes Benz model 500SL, at the monthly rate of $1,419 for forty-eight months. The total monthly payments would be $68,112 with a stated residual value of $53,585. The lease provided for simultaneous assignment by Catena to MBCC, "pursuant to the terms of the Dealer Automobile Purchase and Lease Assignment by and between Lessor and ," and the certificate of title was issued to MBCC.

The terms of the lease purported to insulate MBCC from liability for breach of any warranty or any claim by defendant with respect to the car. The pertinent parts of the relevant paragraphs state:

6. VEHICLE WARRANTIES AND DISCLAIMERS.

To the extent they are assignable, you [lessor] agree to assign to me [defendant] all your rights and remedies under the manufacturer's standard written warranties applicable to the vehicle. I acknowledge that you make no express warranties regarding the vehicle as to its condition, merchantability, or fitness for use, that you disclaim any implied warranties and that I am leasing it from you "as is".

19. ABATEMENT

The monthly rent shall be paid for the full term of the lease ... without setoff, counterclaim, reduction, abatement, suspension, deferment, or any other defense because of ... unsatisfactory performance of the vehicle or for any other reason whatever including, but not limited to, mechanical or warranty problems ....

Paragraph nineteen also provided that defendant agreed to use the manufacturer's dispute resolution system before taking any action against MBCC if there was a dispute regarding the manufacturer's warranty.

When defendant leased the car, he received warranties on the vehicle from both the manufacturer and the dealer. The warranty from the manufacturer provided that Mercedes-Benz of North America (MBNA) would "make any repairs or replacements necessary, to correct defects in material or workmanship." Catena, as the authorized Mercedes dealer, was a "co-warrantor." Both the express warranties and any ...


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