Article

The Car Dealer Won?

A Hawaii dealer — and common sense — prevailed in a case brought by an unhappy used-car buyer.

June 2014, Auto Dealer Today - Feature

by Tom Hudson

Hawaii's Intermediate Court of Appeals upheld a lower-court ruling that a Honolulu dealer had not made false statements regarding a used car that stopped working eight months after it was sold. 
Hawaii's Intermediate Court of Appeals upheld a lower-court ruling that a Honolulu dealer had not made false statements regarding a used car that stopped working eight months after it was sold. 
Just when it seems that some courts will bend over backward to figure out a way to find in favor of a consumer in a suit against a car dealer, we’ll run across a refreshing court opinion that comes out the other way just because the court imposes a bit of common sense. Here’s an example.

Alyssa Bailey bought a used car from John Siracusa, a co-owner of Metro Motors in Honolulu. At the time of purchase, Siracusa told Bailey that the vehicle “was in good working order,” but also that “there is no such thing as a perfect used car” and “used means used.” In addition, the buyer’s guide provided to Bailey stated that the car was being purchased “as is — no warranty.”

The purchase order and invoice contained a printed term allowing a three-day right to rescind the purchase: “This (IS) (IS NOT) a door-to-door sale. There (IS A) (IS NO) 3-DAY RIGHT TO CANCEL on this purchase.” This term was crossed out, with the exception of the words “IS A” in the middle of the term. When the car stopped working properly eight months after the purchase, Bailey sued. 

The trial court found that the statements regarding the car by Siracusa were not proven to be false, nor were the statements misleading as a deceptive act or practice under Hawaii law. In addition, the trial court found that Bailey failed to prove she incurred economic damage as a result of Siracusa’s statements, and that crossing out of only a portion of the three-day right to rescind did not give rise to an actionable claim for a deceptive trade practice. Unhappy with this result, Bailey appealed.

The Intermediate Court of Appeals of Hawaii found Bailey’s appeal to be without merit. The appellate court explained that undisputed evidence that the car was driven for 6,657 miles over eight months and required no service except for an oil change was sufficient for a finding that Siracusa’s statement about the car being in “good working order” was not false.

The appellate court also found that the “good working order” claim was not deceptive under Hawaii law because, under a “clearly erroneous” standard of review, whether the statement “was likely to mislead consumers acting reasonably under the circumstances” presents a mixed question of law and fact. In this case, Siracusa explained the contract terms and made statements that a used car may have problems, making the trial court’s finding that a reasonable consumer would not be misled not clearly erroneous.

In addition, Bailey did not suffer economic loss because not only did she not offer any evidence of economic damages, but also the record showed that she received a $4,818 insurance payment after paying only $3,300 for the car.

Lastly, the appellate court addressed the partially crossed-out three-day right to rescind term. Although the words “IS A” were not crossed out, as found in error by the trial court, the appellate court found that this error was harmless because there was testimonial evidence to support the finding that Bailey was verbally informed that there was no three-day right to rescind the deal. Therefore, the removal of the term was not deceptive.

So, the dealer here did everything but adopt this buyer, explaining in very straightforward terms that the buyer was buying a used car, and not a new car, that the car was being sold “as-is,” and that the buyer might actually have a problem with the car in the future. The dealer appears to have charged a fair price for the car, and the buyer appears to have gotten a significant amount of use out of the car before she collected more in insurance proceeds than she’d paid for the car.

Still, the dealer was sued, and had to fight the case through a trial and an appeal, incurring legal expenses and business disruption along the way. You can put this one into the “no good deed goes unpunished” file.

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