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Hagerty v. Luxury Asset Capital, LLC.

2023 COA 57. No. 22CA0916. Uniform Commercial Code—Construction of Contracts—Warranty of Title—Goods Sold “As Is” and Without Express or Implied Warranties.

June 22, 2023

Luxury Asset Capital, LLC (Luxury Asset), a pawnbroker, gave a loan to Thompson that she secured with a 2015 Rolls Royce (the car). Thompson failed to make the required payments, so Luxury Asset sold the car to Mortenson and transferred the car title to him. The Nevada Department of Motor Vehicles subsequently informed Mortenson that the vehicle identification number on the car was forged and the car was stolen. The car was impounded and never returned to Mortenson. The car had been insured under a policy issued by Hagerty Insurance Agency, LLC (Hagerty), which paid Mortenson the $50,000 policy limit. Mortenson sued Luxury Asset for breach of contract (breach of the warranty of good title), promissory estoppel, negligence, negligent misrepresentation, and negligence per se. Hagerty brought a claim for equitable subrogation against Luxury Asset. On cross-motions for partial summary judgment, the district court decided as matters of law that (1) Luxury Asset had not disclaimed the statutorily imposed warranty of title by specific language and (2) the warranty had not been disclaimed by the circumstances of the transaction. The court granted summary judgment for Mortenson on his breach of contract claim and for Hagerty on its equitable subrogation claim.

On appeal, Luxury Asset argued that the grant of summary judgment for plaintiffs was improper because the “as is” language in the bill of sale between Luxury Asset and Mortenson excluded the warranty of title imposed by law. Section 4-2-312 of the Colorado Uniform Commercial Code governs the warranty of title for the sale of goods and provides that a contract for sale includes a warranty by the seller. The seller need not be a merchant, and even if the seller acted innocently in selling a car that turned out to be stolen, the seller may be liable to the buyer for breach of warranty of title. The court of appeals held, as a matter of first impression, that contractual language stating that a good is sold “as is” and without express or implied warranties is insufficient to exclude the CRS § 4-2-312 warranty of title. Here, the bill of sale stated that the sale and transfer of the car was “AS IS” and “without any express or implied warranties.” Accordingly, the district court properly construed the “as is” language.

Luxury Asset also contended that the disclaimer of “any express or implied warranties” in the bill of sale excluded the statutory warranty of title. However, CRS § 4-2-312(2) states that a warranty of title will be excluded or modified only by using specific language. The bill of sale in this case did not mention the car’s title or address whether Luxury Asset did or did not warrant good title. Accordingly, the general disclaimer of warranties in the bill of sale was insufficient to exclude the warranty of title, and the district court correctly granted summary judgment to plaintiffs on this issue.

Luxury Asset further contended that the district court erred by granting plaintiffs summary judgment based on CRS § 4-2-312(2), which provides that the warranty of title may also be excluded by circumstances that give a buyer reason to know that a seller does not claim title in itself or purports to sell only such title as the seller or a third party may have. This is typically a question of fact to be decided by the trier of fact. Here, disputed issues of material fact remain because there is ambiguity about what Mortenson was told and what he knew about the car’s title. Accordingly, the district court erred by granting summary judgment on this issue.

The judgment was affirmed in part and reversed in part, and the case was remanded for further proceedings.

Official Colorado Court of Appeals proceedings can be found at the Colorado Court of Appeals website.

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