Opinion
No. SC45752–14.
03-10-2015
Charles C. RHODY, Plaintiff, v. Phil EMPSON d/b/a Main Street Auto Augie's Auto, Inc., Defendants.
Opinion
Plaintiff, Charles Rhody, commenced this Small Claim on October 20, 2014 seeking $4,800.00 for a defective used car. At the hearing held on January 22, 2015, Plaintiff appeared and testified and the Defendant, Phil Empson, was represented by John Stevens, Esq. of Ithaca. Plaintiff's Exhibits 1 through 4 were marked and received into evidence as were Defendant's Exhibits A and B. After evaluation of the evidence, the Court finds and concludes as follows.
On August 19, 2014, Plaintiff purchased a 2005 Jeep Liberty 4 door vehicle, vehicle number IJ4GL48KO5W598883 for $4,472.00, plus tax ($357.26) and title registration fee ($170.24) from either Main Street Auto, a D/B/A of Defendant Phil Empson, or Defendant Augie's Auto, Inc. a New York Domestic Corporation, or both. The bill of sale states that the name of the dealer is Main Street Auto (Defendant's Exhibit A). Philip Empson testified that the vehicle was actually one owned by Augie's Auto, and that he displayed it for Augie's at his Main Street Auto lot, 436 Main Street in Newfield. Mr. Empson testified that he then wrote up the bill of sale. Mr. Empson also sold Mr. Rhody a service contract for $249.00, which lists the dealer's name as Main Street Auto and the salesman's name as Phil Empson. Augie Adams was present in the courtroom at the hearing, but he did not testify. None of the paperwork contains any reference to Augie's Auto or Augie Adams (Defendant's Exhibit A and Plaintiff's Exhibits 1 and 4). Mr. Adams did not deny that Mr. Empson sold one of his vehicles on Mr. Empson's lot. This Court is charged with determining the correct name of the Defendant. NY UCCA § 1814. Determining the true name of the seller in this case is just the first unnecessarily complex issue in what should be a relatively simple transaction, the purchase of a serviceable used car. Based on the foregoing, and as a matter of substantial justice, the Court finds that Mr. Rhody had a right to rely upon the actual bill of sale which lists Main Street Auto as the dealer. Further, the Court finds Mr. Empson's testimony that he sold the vehicle for Augie's Auto, Inc. on consignment credible. Mr. Adams did not deny this. There may or may not be a partnership relationship between Mr. Empson and Augie's Auto Inc., and there was no cross claim between the Defendants. Accordingly, and as a matter of substantial justice, the Court finds the proper names of the Defendants to be both Augie's Auto, Inc. and Phil Empson D/B/A Main Street Auto.
Mr. Empson testified that he is a used car dealer who sells approximately 25 to 30 cars per year. Augie's Auto, Inc. is also a used car dealer. The bill of sale for the vehicle indicates that the odometer reading was 163,821 miles on August 19, 2014. The bill of sales states:
ADDITIONAL TERMS AND CONDITIONS
1) As used in this Order the terms (a) “Dealer” shall mean the authorized Dealer to whom this Order is addressed and who shall become a party hereto by its acceptance hereof (b) “Purchaser” shall mean the party executing this Order as such on the face hereof, and (c) “Manufacturer” shall mean the Corporation that manufactured the vehicle or chassis, it being understood by Purchaser and Dealer that Dealer is in no respect the agent of Manufacturer, that Dealer and Purchaser are the sole parties to this order and that reference to manufacturer herein is for the purpose of explaining generally certain contractual relationships existing between Dealer and Manufacturer with respect to new motor vehicle.
NOTICE TO USED VEHICLE BUYER
If this motor vehicle is classified as a used motor vehicle, the above named dealer certifies that the entire vehicle is in condition and repair to render under normal usage satisfactory and adequate service upon the public highway at the time of delivery (Defendant's Exhibit A).
Warranty of Serviceability
As the Jeep had more than 100,000 miles on it. New York's Used Car Lemon Law does not apply. General Business Law § 198–b. The language in the Jeep's printed warranty is taken from Vehicle and Traffic Law § 417, which is known as the Used Car Warranty of Serviceability. Vehicle and Traffic Law § 415 et sec. Unlike New York's Used Car Lemon Law, New York's Warranty of Serviceability applies regardless of the mileage of the used car. NY Vehicle and Traffic Law § 417. Section 417 of the VTL is a non-waivable obligation, and therefore, the attempt to exclude all warranties found on the back of the bill of sale is in effective. Armstrong v. Boyce 135 Misc. 2nd 148 (Jefferson Co Ct 1987). The regulations adopted under the Warranty of Serviceability require the dealer to perform, at a minimum, an 18 point inspection before making the above-quoted certification. 15 NYCRR § 78.13. The check-list covers basic safety features such as directional signals, hazzard switches, approved safety glass, windshield wipers, proper brakes and steering systems, tires, safety belt and an emission control system in good working order. Id. The Warranty of Serviceability was initially adopted in 1954, and, has therefore, been on the books longer than New York's Used Car Lemon Law, which was adopted in 1984. NY General Business Law § 198–b. Armstrong v. Boyce, 135 Misc. 2nd 148 (Jefferson Co Ct 1987).The Third Department has held that used car contracts may be rescinded if the used vehicle is “not in compliance with § 417 of the Vehicle and Traffic Law.” Rayhn v. Martin Nemer Volkswagen Corp. 77 AD 2nd 394, 395 (Third Dept, 1980). In the Rayhn case, the buyers had difficulty operating the used vehicle's transmission, and the vehicle exhibited a number of other problems upon receipt, including major clutch and transmission repair, defective thermostat, defective alternator, bent alternator pulley, defective door lock, trunk out of alignment, defective brake pads, untuned engine, damaged wheel rim, brake fluid needed, emergency brake needing adjustment, and non-working locks. The buyers purchased the vehicle on January 20, 1979, and had returned the vehicle to the dealers for the last repair on February 7th. The Third Department held that a plain reading of Section 417 “supports the conclusion that the legislature intended to impose absolute responsibility upon the used vehicle dealers in this state to sell only motor vehicles in condition to render adequate and satisfactory service upon highways at the time of delivery” Rayhn, at 396.
Further, the Third Department held that “a failure to conduct an appropriate inspection is an express violation of § 417.” Id. The Rayhn Court found that the dealer had offered no direct evidence that an appropriate inspection had been conducted, although the record contained a document that referenced a “16 point inspection.” The Court held that the buyers had provided sufficient proof of a violation of § 417 for the purposes of summary judgment, given the dealer's lack of proof regarding the inspection. The Third Department held that delivery of the vehicle to the buyer without first making an appropriate inspection and bringing the vehicle into compliance with § 417 was “implicitly prohibited” (Id 397 ). The Court stated:
7F'To require the Plaintiffs to accept the performance of the contract by [dealer] would violate the public policy as found in section 417 and would lend judicial encouragement to putting dangerous vehicles upon the highway. The Plaintiffs, upon surrender of the automobile, as has already occurred herein, are entitled to a complete refund of the purchase price. The fact that it is alleged that the vehicle is now in compliance with section 417 is immaterial in the absence of an acceptance of such vehicle by the plaintiffs ... As part of rescission, the Plaintiffs must execute such documents as are necessary to restore title to the motor vehicle to Nemer as may be directed by the court upon remittal. (emphasis added) (Id, at 397 )
The rule in the Third Department, then, is that used car buyers are entitled to a road-worthy vehicle that has passed “an appropriate” inspection. Id. They are not required to return the vehicle for repairs that were needed at the time of sale. The Fourth Department has specifically held that the dealer's certification is not limited to the 18 items listed in the regulations. Carter v. General Motors Corp. 273 AD 2nd 804 (4th Dept., 2000). The Fourth Department reached this conclusion by examining the statutory language and intended protections of the statute as set forth by the drafters. If a defect existing at the time of sale does not “manifest itself” for a period, recovery is not barred if there is sufficient proof of its existence at the time of the sale. Armstrong v. Boyce, at 155.
Warranty of Merchantability
The back of the bill of sale, paragraph 9, seeks to exclude all warranties, “express or implied.” Paragraph 10 seeks to exclude the statutory Warranty of Merchantability set forth in New York's Uniform Commercial Code. N.Y. UCC § 2–314. That warranty requires that goods be “merchantable,” that is, “fit for the ordinary purposes for which such goods are used.” Id. For used cars, the standard is similar to that imposed by the Warranty of Serviceability. In Diaz v. Paragon Motors of Woodside, Inc., 424 FSupp2d 519 (EDNY, 2006), the court held:
Under New York law, at a bare minimum the ordinary purpose for which a used car is to be used should be such as to enable the purchaser to transport herself upon the streets and highways of this state or any other in a reasonably safe manner. Rather than guaranteeing performance without malfunction during the term of the warranty, a warranty anticipates that failures will occur and that they will be corrected.) Whereas the buyer bears the burden of proving a substantial impairment of value under the UCC, the dealer bears the burden of negating substantial impairment as an affirmative defense under the Lemon Law. Diaz, supra at 540–541 (Internal citations omitted). To exclude the Warranty of Merchantability, a seller must use a written contract, and the exclusion must be “conspicuous.” NY UCC § 2–316. “Conspicuous” has been defined as follows by the Third Department:
“Conspicuous” is defined in subdivision (10) of section 1–201 of the Uniform Commercial Code, in pertinent part, as follows:
A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed. * * * Language in the body of a form is “conspicuous” if it is in larger or other contrasting type or color. * * * Whether a term or clause is “conspicuous” or not is for decision by the court.
The test, accordingly, is whether a reasonable person would notice the disclaimer when its type is juxtaposed against the rest of the agreement (1 Anderson, Uniform Commercial Code [3d ed], §§ 1 –201:54–1–201:58, pp 210–212). As the only boldface print in the only four paragraphs on the first page of the agreement, it cannot be said that the disclaimer did not call attention to itself. Further, it is under the broad heading of “TERMS AND CONDITIONS OF LEASE” and appears before the authorizing signatures on the front side of the agreement and not on the back with the boilerplate paragraphs. For these reasons, we find that Special Term erred in ruling the disclaimer not conspicuous (1 Anderson, Uniform Commercial Code [3d ed], § 1 –201:61, p 214). Accordingly, summary judgment on the issue of liability should have been granted to plaintiff. (emphasis added) Commercial Credit Corp. v. CYC Realty, Inc., 102 A.D.2d 970, 971, (3d Dept,1984)
Here, the attempted exclusion of the Warranty of Merchantability fails because instead of being conspicuous, the exclusion is completely inconspicuous. The attempted exclusion, printed in fine print on the back of the bill of sale, has no bold type. There is nothing conspicuous drawing the reader's eye to the exclusion. Although the buyer signs on the front under a line stating that he has “read the matter printed on the back,” nothing in that line draws his attention to the exclusion of important statutory warranties on the back. Furthermore, even if the waiver of Warranty of Merchantability was deemed valid, which it is not, such waiver would have no impact on the non-waivable statutory Warranty of Serviceability. NY VTL § 417 ; See, Datov v. Vatland, 36 Misc.2d 636 (Nass Co Dist Ct, 1962).
Where there is a breach of the Warranty of Merchantability, a buyer is entitled to the difference between the value of accepted goods and the value as if they had been warranted, plus, “in a proper case” incidental and consequential damages. NY UCC § 2–714. For goods that are rejected or where acceptance is rescinded, the buyer may recover the full purchase price, plus incidental and consequential damages. NY UCC § 2–711 & 2–715.
Mr. Rhody testified that the day he purchased the vehicle, the check engine light came on, and there was an unspecified leak. Mr. Rhody testified that Mr. Empson repaired the leak, but he did not clear the check engine light, which he thought was related to functioning of the catalytic converter. In addition to these problems, Mr. Rhody testified that there was an unusual sound. Vanessa DeJesus, the car's main driver, testified that if the vehicle is driven over 40 miles per hour, there is a “whistle” in the back right portion of the vehicle and vehicle exhibits a rotten egg smell. Further, the gas tank or gas line either allows evaporation or leaks because when the tank is filled, it is empty within two days even if the car is not driven. Mr. Rhody testified that there is considerable rust on the vehicle, which may or may not explain the gas leak. Mr. Rhody testified that when he brought the vehicle to Monroe Muffler and Brake the first day, Monroe diagnosed a rack and pinion problem and recommended wheel alignment and a valve flush kit (Plaintiff's Exhibit 2).
Mr. Rhody testified that within the first month he went to Mr. Empson at least six times, notifying him of the problems. According to Mr. Rhody's testimony, Mr. Empson stalled, and on the 31st day sent him to H & H, a repair shop authorized by the service contract Mr. Empson sold Mr. Rhody. Mr. Rhody testified that the shop fixed only one issue, the rack and pinion. He claims that he should not have to pay for the $100.00 deductible (Plaintiff's Exhibit 3). Mr. Rhody testified that after the October 14th repair, the check engine light was still on, and the gas still evaporated. Mr. Rhody specifically recalled taking the vehicle to Augie's Auto or Mr. Empson at least six times to fix the check engine light without resolution. He believes it may be related to operation of the catalatic converter based upon the continuing sounds and the smell coming from that area. Ms. DeJesus testified that at the time of the hearing, 5 months after purchase, the vehicle stalls and shuts off in reverse. Ms. DeJesus testified that she had to rent a vehicle to drive to Brooklyn because she could not trust the Jeep.
Mr. Empson testified that he provided a new gas cap to Mr. Rhody, and that solved the check engine light problem. Further, he testified he sent Mr. Rhody to H & H for a heater repair as described above (Defendant's Exhibit B). On October 1st, Mr. Rhody took the Vehicle to Augie's Auto where Mr. Adams diagnosed a leak in the heater control and a problem with the evaporation system which caused the check engine light to come on. Mr. Adams installed a leak dot pump, heat resister, and a new steering rack (Defendant's Exhibit B). Mr. Rhody testified that despite the repairs, the check engine light remains on and the gas continues to evaporate or leak.At the close of the evidence, Mr. Stevens moved to dismiss under General Business Law § 198–b, and moved to dismiss as against Augie's because the bill of sale lists Mr. Empson's business, Main Street Auto. The Court has set forth the law, above, and denies both motions to dismiss. The Court finds sufficient proof by a preponderance of the evidence that the vehicle was not in condition and repair to render, under normal use, satisfactory and adequate service upon the public highway at the time of delivery. The dealer provided no evidence, whatsoever, that the car underwent any sort of inspection prior to sale. Failure to inspect is indirect contravention of the Warranty of Serviceability. There is a presumption that if the inspection is not done, the car is delivered with problems. Armstrong v. Boyce 135 Misc. 2nd 148 (Jefferson Co Ct 1987). Monro Muffler's inspection on the date of sale revealed a defect with the rack and pinon. The dealer did not fix the problem in a timely manner, but stalled until October, and then directed the buyer to use his own service contract to repair the defect found at the time of sale, all in contravention of the Warranty of Serviceability. Under the Third Department case law, the buyers are not required to accept performance of a repair contract when the defect is apparent on day one. Rayhn v. Martin Nemer Volkswagen Corp. 77 AD 2nd 394 (3d Dept, 1980). Based on the un-controverted testimony regarding the defective condition of the vehicle on the date of sale and the continuing defects rendering the vehicle unfit for satisfactory and adequate service, the Court finds that the Defendants breached both the statutory Warranty of Serviceability (VTL § 417 ) and the Uniform Commercial Code's Warranty of Merchantability.
Choice No.1–Recession, Return and Refund
As set forth above, the breach of VTL § 417 and the Uniform Commercial Code allow rescission of the contract and complete refund of the purchase price, plus incidental and consequential damages. Vernon v. Potamkin Cadillac Dorp, 118 A.D.2d 698 (2nd Dept, 1986) ; Williams v. Planet Motor, Inc., 190 Misc.2d 22 (N.Y.C Civ Ct, 2001). However, because Mr. Rhody has sued for only $4,800.00, an amount less than the total purchase price, the Court is constrained to award him the amount claimed, $4,800.00, plus costs. Payment of this award is contingent upon Mr. Rhody first signing over title of the vehicle to Defendants and returning the vehicle to them. If Mr. Rhody wishes to cancel the contract, he must sign over the vehicle to the Defendants, or one of them, as they shall designate, and return the vehicle and keys to a place designated by counsel for Defendant Empson within 30 days of this Decision. Mongelli v. Cabral, 166 Misc.2d 240 (Yonkers City Ct, 1995). However, if the Defendants or any of them do not pay the judgment of $4,800.00 plus costs to Mr. Rhody at the time of his relinquishment of the vehicle and signing over of the title, Mr. Rhody is obviously not obligated to return the vehicle. Only upon collection of $4,800 .00 plus costs must Plaintiff return the jeep and sign over title to one or more of the Defendants.
Choice # 2–Accept VehicleDifference in Value, plus out of pocket expenses
In the alternative, if Mr. Rhody does not wish to return the vehicle, he is entitled to the difference between the “value of the goods accepted and the value they would have had if they had been as warranted” plus incidental and consequential damages. NY UCC § 2–714. Courts have taken judicial notice that Kelley Blue Book is “a report of a regularly organized stock or commodity market published in a ... periodical of general circulation or in an official publication or trade journal” under N.Y. CPLR 4533. Dobson v. Saal, 31 Misc.3d 1228 (N.Y.C Civ Ct, 2011). The Kelley Blue Book values at the time of this Decision (7 months after sale) for a Jeep Liberty with approximately 164,000 miles are as follows:
Fair condition:$3,143.00
Good condition:$3,558.00
Very good condition: $3,981.00
Excellent condition:$4,429.00
(Http://www.kbb.com/jeep/liberty/2005)
The Court finds that this vehicle was in poor condition, but Kelley Blue Book's lowest valuation is for “fair” condition. This Court finds, as a matter of substantial justice, that the vehicle's value in “poor” condition is $1,572.00, or 50% of its Kelley Blue Book “fair” condition value. As a matter of substantial justice, and based on the evidence, the Court awards Mr. Rhody the difference between the purchase price, $4,472.00, and the value of a “poor” condition vehicle, $1,572.00, which is $2,900.00, plus the difference in sales tax, $232.00 ($358.00–$126.00), plus the cost of the service contract, $249.00, plus the deductible he paid for the rack and pinion repair, $100.00, for a total of $3,481.00, plus costs.
Used car dealers must be on notice that although the Used Car Lemon Law General Business Law § 198.b is inapplicable once a vehicle has more than 100,000 miles, a breach of VTL § 417 still offers buyers protection when they drive away with what they thought was a sweet ride only to find that they are experiencing the bitter sting of a lemon. The Court finds that the Jeep was not worthy of Rhody, nor was it roadworthy at the time of sale.
Mr. Rhody shall notify the Court of his choice (1) to cancel the contract and return the vehicle and receive $4,800.00, plus costs, or (2) to retain the vehicle and obtain a judgment in the amount of $3,481.00, plus costs. Mr. Rhody will so notify the Court within 10 days of this Decision, with notice to Defendant Empson's counsel, Mr. Stevens, whose address is below.
This constitutes the Decision of the Court entered upon notice to both parties. A notice of appeal, if applicable, must be filed within thirty (30) days of the date of this decision.