Lessee of Vehicle Cannot Recover Compensation for Diminished Value of Car After Accident, According to California Court

FerrariThe California Court of Appeal, Fourth Appellate District recently issued an unpublished opinion in an appeal taken from a personal injury case following a car accident involving a leased vehicle. The issue before the court was whether the individual who had leased the vehicle (a “lessee”) could recover damages for the “diminished value” of the car following an accident.  In this particular situation, the car had been repaired to its original condition, and when the lessee returned the car to the lessor, there were no charges assessed as a result of the accident.

The plaintiff entered into a lease with BMW Financial Services (BFS) for a 2012 model valued at $58,813.34 for 36 months.  He was required to return the car to its “pre-damage condition” in the event of an accident.   Months later, the defendant and he were involved in an accident, and the leased vehicle was damaged. According to the terms set forth in the lease, the vehicle underwent repairs at a certified BMW repair facility. The defendant’s insurer paid approximately $24,000 for repairs, and the plaintiff continued to drive the vehicle.

The plaintiff then filed a complaint against the defendant, alleging personal injury and property damage. The plaintiff was suing for the loss of the diminished value of the vehicle, in an amount of more than $33,000. Before trial, the defendant moved to exclude evidence on diminished value because the plaintiff had no standing to pursue these damages, since he did not own the vehicle, the vehicle had been returned to pre-accident condition, and the plaintiff was not liable to BFS for any damages or diminished value.

The plaintiff returned the vehicle to BFS and was charged only for normal wear and tear and excess mileage.  Eventually, the trial court ruled the plaintiff did not have standing to pursue compensation for the diminished value of the vehicle. He appealed that portion of the judgment.

In their discussion, the Court of Appeal stated that whether the appeal is reviewed as an evidentiary matter or as a legal matter does not determine the outcome, since the plaintiff could not prevail under either theory. According to the Court, the plaintiff’s argument was that due to the diminished value of the vehicle, he suffered damages and was entitled to sue the defendant to recover his costs.  Turning to the Vehicle Code, the Court stated that an owner is defined as someone who has the legal title to the vehicle. Lessees do not own title, and the plaintiff was a lessee. The Court rejected the plaintiff’s arguments that he was more than a lessee, including his contention that a lease is equivalent to a conditional sales contract.

Additionally, the Court stated that BFS took the vehicle back, and the plaintiff had no further liability for any diminished value. He did not have a legal interest in the ownership of the vehicle, and unlike the cases cited in support of his argument, he was not liable to the owner of the property.

The Court also stated that even if they held that the plaintiff legally owned the vehicle, he had not suffered cognizable damages. The plaintiff argued that if he kept the vehicle after its release, he would have suffered diminished value because the car could not be sold as “certified.” But the Court stated the plaintiff had not purchased the vehicle, and he could not make a claim for damages based on what might have happened.  Here, the plaintiff kept the vehicle after it was repaired, then returned it, and was not required to pay anything to BFS as a result of the accident.  The Court stated the plaintiff cannot recover purely speculative damages.

In short, the court stated that since the plaintiff never moved beyond his status as a lessee of the vehicle, and he had no ownership interest in the vehicle, he could not recover for the diminished value of the vehicle.

The Court affirmed the judgment.

At Sharifi Firm, our skilled car accident attorneys help injured individuals throughout Southern California in personal injury claims for compensation. We provide personalized service and a free consultation with a dedicated attorney. Phone us by calling 866-422-7222 or complete our online form.

More Blog Posts:

California Appellate Court Rejected Car Owner’s Claim that Insurance Company Breached Duty By Repairing Vehicle and Not Compensating for Decline in Value After Vehicle Accident, Southern California Injury Lawyer Blog, October 5, 2016

California Court of Appeal Upholds Cancellation of Car Insurance Policy Before Car Accident; Plaintiffs’ Claims for Breach of Contract and Breach of Implied Covenant of Good Faith and Fair Dealing Fail, Southern California Injury Lawyer Blog, September 27, 2016

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