Opinion
No. 75-057
Decided September 30, 1975.
In action to recover damages under state statute authorizing such recovery by purchaser of automobile who is given false odometer reading affidavit by seller, trial court entered judgment for defendant and plaintiff appealed.
Reversed
1. FRAUD — Odometer Statement Misrepresentations — State and Federal Statutes — Create Presumption — Reasonable Reliance — Receipt of Statement — — Misrepresentations Material. In an action for fraud in a suit alleging misrepresentations in an odometer statement given to automobile buyer by the seller, the applicable state and federal statutes modify the common-law requirement that the plaintiff, to establish a prima facie action, must prove that his reliance on that statement was reasonable; instead, they create a presumption of reasonable reliance from the mere receipt of the statement and make material any misrepresentation appearing therein.
2. Odometer Statement Misrepresentations — Action — State and Federal Statutes — Presumption of Reasonable Reliance — Rebuttable — Burden of Proof — On Defendant. In an action for fraud in a suit alleging misrepresentations in an odometer statement given to automobile buyer by the seller, the presumption of reasonable reliance on the misrepresentation that is accorded to the plaintiff by the applicable state and federal statutes is a presumption that is rebuttable, and it should be deemed to place the burden of proof on this issue upon the defendant rather than the plaintiffs.
Appeal from the District Court of the County of El Paso, Honorable John F. Gallagher, Judge.
Charles J. Haase, for plaintiffs-appellants.
Bennett Wills, Charles F. Bennett, for defendant-appellee.
Division II.
Plaintiffs appeal the dismissal of their action for fraud in the sale of a motor vehicle to plaintiffs. We reverse and remand for a new trial.
On September 24, 1973, Charles and Peggy Lurvey, the plaintiffs, purchased a 1969 Plymouth Valiant from Phil Long Ford, Inc., the defendant. All negotiations were conducted by Charles Lurvey and Millard Clothier, a salesman-employee of the defendant. Lurvey had purchased many cars from Clothier during the prior twelve to fifteen years; these transactions apparently had been satisfactory to both parties.
Plaintiffs visited defendant's used car lot on September 22, 1973, where they sought out Clothier and asked to see a low-mileage car. They were shown a 1969 Valiant which, according to Lurvey, "looked practically like it just came out of the showroom." The odometer indicated that the vehicle had traveled 6,054 miles.
Plaintiffs took the vehicle over the weekend and drove it fairly extensively. During this time Lurvey checked the radiator, engine oil, upholstery, tires and exterior of the vehicle. The car seemed to be in perfect condition and had not, in his opinion, been driven more than the distance indicated on the odometer.
On September 24, 1973, plaintiffs returned to defendant's lot and concluded the purchase. At that time, they were given an odometer disclosure form, partially filled out and signed by Clothier, stating that the vehicle had been driven a total of 6,218 miles. Plaintiffs drove the vehicle until November 1973, during which time they had no complaints concerning its performance. Sometime during that month the vehicle was stolen and was never recovered. Plaintiffs filed a claim with their insurance carrier. An insurance adjuster, while investigating the claim, discovered in the possession of the defendant an odometer disclosure statement executed by the previous owners, declaring that the vehicle had been driven a total of 106,054 miles. The insurance carrier refused to honor the full amount of the claim.
Plaintiffs filed suit against defendant, seeking compensatory and punitive damages, costs, and attorney fees. In their complaint they based the action on common-law fraud and on the alleged violation by defendant of 15 U.S.C. § 1981 et seq. In a trial to the court, plaintiffs asked the court to take judicial notice of § 42-6-201 et seq., C.R.S. 1973, or in the alternative to permit an amendment of the complaint, apparently seeking to include a claim under that statute. At the time of the request, plaintiffs' counsel represented to the court that the state and federal statutes were virtually identical with respect both to matters of proof and the relief that could be obtained. Although the court reserved ruling on plaintiffs' request, it appears from the record that the parties and the court proceeded throughout the trial on the assumption that the prerequisites to recovery under the state and federal statutes were identical.
At the conclusion of the plaintiffs' case-in-chief, defendant moved for dismissal of the action pursuant to C.R.C.P. 41(b)(1). The court concluded that plaintiffs had prima facie established that the disclosure statement was false, that defendant knew or should have known that that statement was false, and that plaintiffs had relied on the statement. It was apparently the court's opinion that under both the federal and state statutes, plaintiffs were also required to prove that the reliance was reasonable and justifiable and held that they had not fulfilled this burden. For this reason, it granted defendant's motion to dismiss.
The principal issue presented on appeal is whether in an action for damages pursuant to 15 U.S.C. § 1981 et seq., and § 42-6-201 et seq., C.R.S. 1973, plaintiffs have a duty to show reasonable and justifiable reliance on the disclosure statement. Since it is our decision that this ruling of the trial court must be reversed, we have no occasion to consider the other questions raised by plaintiffs.
In general, for a plaintiff to recover from the defendant on a claim of fraud he must establish, inter alia, that he relied on the misrepresentation of the defendant to his own detriment and that this reliance was reasonable under the circumstances of the case. Colo. J.I. 19:1; Colorado Springs v. Wight, 44 Colo. 179, 96 P. 820; Sellar v. Clelland, 2 Colo. 532. Although the reporting requirements under the federal and state statutes do in fact differ, and although the relief provided under the federal statute is in addition to any state remedies, the effect of the two statutes on the common-law requirement of reliance is identical. Therefore, as to this issue we need not distinguish one statute from the other.
Both statutes require a used car dealer to furnish to the purchaser a written statement that includes the odometer reading at the time of transfer or, if the odometer reading is known to the dealer to be different from the number of miles the vehicle has actually traveled, a written statement that the actual mileage is unknown. 15 U.S.C. § 1988; § 42-6-205(1)(b), C.R.S. 1973. The Colorado statute further requires that the dealer present to the buyer a sworn affidavit executed by the previous owner of the vehicle including the same information. Section 42-6-205(1)(a), C.R.S. 1973. Violation of these provisions is specifically declared unlawful under the federal statute, 15 U.S.C. § 1988, and penal sanctions follow from violation of the Colorado provisions. Section 42-6-207, C.R.S. 1973. In addition, any dealer who intentionally fails to make the required disclosure or fails to make an accurate statement is liable in a civil action brought by the purchaser for three times the amount of actual damages sustained or fifteen hundred dollars, whichever is greater, plus costs and attorneys fees. 15 U.S.C. § 1989; § 42-6-208, C.R.S. 1973. The federal statute includes a provision that it shall not be deemed to affect any relevant state laws or to exempt any person from complying with those laws, except to the extent that they are inconsistent with the federal requirements. 15 U.S.C. § 1991.
[1] In an action for fraud in a suit alleging misrepresentations in an odometer statement, these statutes modify the common-law requirement that the plaintiff, to establish a prima facie action, must prove that his reliance on that statement was reasonable. They create a presumption of reasonable reliance from the mere receipt of the statement and make material any misrepresentation appearing therein.
What remains is to determine the weight to be accorded this presumption of reasonable reliance. We have found no Colorado cases dealing with this issue, but we have found authority to the effect that it should be deemed conclusive. See Delay v. Hearn Ford, 373 F. Supp. 791 (D.S.C.) In that case the defendant car dealer sold to the plaintiff the same car which the latter had earlier traded to the defendant as part of the consideration for the purchase of a new automobile. While the vehicle was in the possession of the dealer, the odometer was rolled back approximately 23,000 miles. Plaintiff noticed the difference while en route to his home from defendant's lot. On the facts, there was no possibility that plaintiff had relied on any misrepresentation of the dealer. The court held, however, that under the federal statute, plaintiff could recover fifteen hundred dollars from defendant.
We decline to follow the reasoning of Delay. We are reminded by City County of Denver v. Holmes, 156 Colo. 586, 400 P.2d 901, and Burton v. City County of Denver, 99 Colo. 207, 61 P.2d 856, that courts should not adopt interpretations of a statute which produce absurd or unreasonable results, if that interpretation can be avoided. We cannot believe that Congress or the General Assembly intended by their enactments to reward a buyer who purchases with actual knowledge of the falsity of the representation.
[2] It, therefore, is our conclusion that the presumption of reasonable reliance by plaintiff on the misrepresentation is rebuttable and should be deemed to place the burden of proof on this issue upon the defendant rather than the plaintiffs. The status and strength of a rebuttable presumption varies with the strength of the policies motivating a court or legislature to create it. Cline v. City of Boulder, 35 Colo. App. 349, 532 P.2d 770. No set standards define the effect to be given a particular presumption. See, e.g., May Stores Shopping Center, Inc. v. Shoemaker, 151 Colo. 100, 376 P.2d 679 (presumption shifting the burden of going forward with the evidence); Weiss v. Axler, 137 Colo. 544, 328 P.2d 88 (presumption shifting the burden of proof); Shreyer v. Shreyer, 113 Colo. 219, 155 P.2d 990 (presumption overcome only by substantial evidence and not by a showing of facts from which mere inferences may be drawn). In the absence of precedent, each presumption must, therefore, be treated on an ad hoc basis. Cline supra. Compare American Insurance Co. v. Naylor, 101 Colo. 34, 70 P.2d 349, with Ward v. Teller Reservoir Irrigation Co., 60 Colo. 47, 153 P. 219.
Here, the statutory language is sufficiently strong to make clear the intent of both Congress and the Colorado legislature to afford plaintiffs the benefit of the rule we announce. We are particularly impressed by: (1) 15 U.S.C. § 1989(a) and § 42-6-208, C.R.S. 1973, which are punitive provisions allowing a plaintiff to recover, upon proof that the statute has been violated, treble damages or a minimum of fifteen hundred dollars plus costs and attorney fees; and (2) 15 U.S.C. § 1988(a)(2) and § 42-6-205(1)(b)(II), C.R.S. 1973, which impose an affirmative duty upon the dealer to disclose that the odometer reading of a used vehicle is different than the number of miles it has actually been driven when he has knowledge of that fact.
Since the effect of the trial court's dismissal at the conclusion of plaintiffs' case was to deny them the benefit of this presumption and to place the burden of proof on them, the judgment must be reversed and the cause remanded for a new trial. Inasmuch as we have ordered a new trial and because the federal and state statutes do in fact differ in the respects noted above, we direct that the trial court permit plaintiffs to amend their complaint and to assert a claim under § 42-6-201 et seq., C.R.S. 1973, if they so desire.
JUDGE RULAND and JUDGE KELLY concur.