Revoking Acceptance of that Lemon RV for Nonconformity

In a recent case, the Nevada Supreme Court held that,pursuant to UCC 2-608, the buyers of an RV could revoke acceptance for nonconformity– the RV’s engine had a history of overheating.

Shortly after taking possession of the RV, the purchaserstook a trip from Las Vegas to Hemet, California. On the way back, the entry door popped openand the RV’s engine overheated while ascending a moderate hill. The buyers had to pull over on the side ofthe road and wait for the engine to cool down. This was only the beginning of the buyers’ problems with the RV, whichcontinually overheated. The servicedepartment of the RV dealer spent a lot of time attempting to repair the RV.

The buyers sued the dealershipfor equitable and monetary relief. Thedealership, in turn, sued the RV manufacturer. After a bench trial, the court concluded that the RV’s nonconformitiessubstantially impaired its value to the buyers. The trial court allowed the buyers to revoke their acceptance of the RVand ordered the dealership to return all of the buyers’ out-of-pocketexpenses. (The court further concludedthat the dealership was not entitled to indemnification from the manufacturer).

On appeal, thedealership argued that the trial court erred in allowing the buyers to revoketheir acceptance of the RV because the buyers did not prove that the RVsuffered nonconformities that substantially impaired its value. The Supreme Court of Nevada disagreed withthe dealership, and affirmed the trial court determination.

The Nevada Supreme Courtexplained:

The district court foundthat despite [the dealership’s] good-faith attempts to repair the RV, thenonconformities persisted and rendered the RV unfit for its intendeduse. Some of those nonconformities identified by the district court included:the bedroom air conditioning does not cool, the front air conditioning does notcool, the dash heater does not blow hot air, RV batteries do not stay charged,and chronic engine overheating. The district court concluded that thesenonconformities and others substantially impaired the RV’s value to the [buyers]and that the [buyers] had revoked their acceptance of the RV within areasonable time.

The Nevada Supreme Courtheld that the RV’s infirmities were a substantial impairment of its value underNRS 104.2608 (Nevada’sverbatim enactment of UCC 2-608).  The Nevada court adopted a two-part testestablished by the Supreme Court of Oregon:

The Supreme Court ofOregon has established a two-part test to determinewhether a nonconformity, under the totality of the circumstances, substantiallyimpairs the value of the goods to the buyer. The test has both an objective anda subjective prong:

Since [the statute] provides that the buyer may revoke acceptance of goods”whose nonconformity substantially impairs its value to him,” the value of conforming goodsto the plaintiff must first bedetermined. This is a subjective question in the sense that it calls for aconsideration of the needs and circumstances of the plaintiff who seeks torevoke; not the needs and circumstances of an average buyer. The second inquiryis whether the nonconformity in fact substantially impairs the value of the goodsto the buyer, having in mind his particular needs. This is an objectivequestion in the sense that it calls for evidence of something more thanplaintiff’s assertion that the nonconformity impaired the value to him; itrequires evidence from which it can be inferred that plaintiff’s needs were notmet because of the nonconformity.

As for subjective value,the buyers testified that they purchased the RV “to enjoy the RV lifestyle.” They even testified that they intended tosell their house and spend two to three years traveling around the country. Thus, the court held that the RV’s subjective value to the buyers was based on their abilityto enjoy this lifestyle, which was substantially impaired by the RV’snonconformities.

As for objectiveimpairment, the buyers testified that the RV spent a total of 213 days, or seven months and one day, atthe dealership’s service department during the eighteen months immediatelyfollowing the purchase. Thus, the court held that, the buyers’ testimony was “sufficientto demonstrate an objective, substantial impairment of value.” The court noted that the “chronic engineoverheating shook the [buyers’] faith in the RV and undermined their confidencein the RV’s reliability and integrity. Notonly did this problem make travel in the RV unreliable and stressful to the [buyers],the overheating made travel in the vehicle objectively unsafe.”

Finally, the Nevada court held that thebuyers had notified the dealership of their intent to revoke within areasonable time after purchasing the RV. The court noted that “the seller’s attemptsto cure do not count against the buyer regarding timelyrevocation.” Rather, the seller’sattempts to repair toll the reasonable time for the buyer’s revocation ofacceptance.

Waddell v. R.V., Inc., 122 Nev. Adv. Op. No. 3 (Nev. Jan. 16, 2006).

[Meredith R. Miller]