HIGGINS CHEVROLET, INC. v. TIMOTHY HELTON; GENERAL MOTORS CORPORATION; AND AVIS RENT-A-CAR

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RENDERED: April 2, 1999; 2:00 p.m. NOT TO BE PUBLISHED C ommonwealth O f K entucky C ourt O f A ppeals NO. 1997-CA-002345-MR (DIRECT) HIGGINS CHEVROLET, INC. v. APPEAL FROM JOHNSON CIRCUIT COURT HONORABLE JAMES KNIGHT, JUDGE ACTION NO. 94-CI-00123 TIMOTHY HELTON; GENERAL MOTORS CORPORATION; AND AVIS RENT-A-CAR TBHW: APPELLEES NO. 1997-CA-002548-MR (DIRECT) AVIS RENT-A-CAR v. APPELLANT APPEAL FROM JOHNSON CIRCUIT COURT HONORABLE JAMES KNIGHT, JUDGE ACTION NO. 94-CI-00123 TIMOTHY HELTON; HIGGINS CHEVROLET; AND AVIS RENT-A-CAR TBHW: APPELLEES NO. 1997-CA-002390-MR (DIRECT) GENERAL MOTORS CORPORATION v. APPELLANT APPELLANT APPEAL FROM JOHNSON CIRCUIT COURT HONORABLE JAMES KNIGHT, JUDGE ACTION NO. 94-CI-00123 TIMOTHY HELTON; HIGGINS CHEVROLET, INC.; AND GENERAL MOTORS CORPORATION AND: APPELLEES NO. 1997-CA-002560-MR (CROSS) TIMOTHY HELTON AND SAM H. WHITEHEAD v. CROSS-APPELLANTS APPEAL FROM JOHNSON CIRCUIT COURT HONORABLE JAMES KNIGHT, JUDGE ACTION NO. 94-CI-00123 HIGGINS CHEVROLET, INC.; GENERAL MOTORS CORPORATION; AND AVIS RENT A CAR SYSTEMS, INC. CROSS-APPELLEES OPINION REVERSING AND REMANDING WITH DIRECTIONS APPEAL NOS. 1997-CA-002345-MR, 1997-CA-002390-MR, AND 1997-CA-002548-MR VACATING CROSS-APPEAL NO. 1997-CA-002560-MR ** ** ** ** ** BEFORE: DYCHE, GUIDUGLI, AND MILLER, JUDGES. MILLER, JUDGE: Higgins Chevrolet, Inc. (Higgins Chevrolet or Higgins), brings Appeal No. 1997-CA-002345-MR; General Motors Corporation (GM) brings Appeal No. 1997-CA-002390-MR; Avis RentA-Car System, Inc. (Avis), brings Appeal No. 1997-CA-002548-MR; and Timothy Helton brings Cross-Appeal No. 1997-CA-002560-MR, all from a December 2, 1996, judgment of the Johnson Circuit Court. -2- We reverse and remand with directions Appeal Nos. 1997-CA-002345MR, 1997-CA-002390-MR, and 1997-CA-002548-MR. We vacate Cross- Appeal No. 1997-CA-002560-MR. The controversy in this case revolves around Higgins Chevrolet's sale of a used GM Chevrolet Corsica automobile to Timothy Helton in March 1990. Resolution of the matter requires a summary of the vehicle's history. GM manufactured the Corsica in 1989. Pursuant to a “sale/buy-back agreement” or a “program agreement,” GM sells vehicles to Avis for use in Avis's rental fleet. Under the agreement, Avis purchases the vehicles, and after a prescribed number of miles or a specified period of time, GM repurchases same provided they meet the agreement's guidelines. The Corsica was delivered to Avis and was placed into rental service in March 1989. damage. While in Avis's possession, the Corsica incurred body Avis's damage appraiser appraised the total cost of repair at $235.67. Avis sent the vehicle to a repair shop, and the necessary repairs were made. Without informing GM of the repaired body damage, Avis delivered the vehicle to GM for inspection and repurchase in October 1989. When GM inspected the vehicle, the inspector noted that the vehicle needed body repairs to the hood and the left front door. at $245.00. He estimated those repairs GM repurchased the vehicle and transported it to Columbus Fair Auto Auction (Columbus Auction) near Columbus, Ohio. It appears that Columbus Auction performed the body work on the vehicle for GM. The work included refinishing the hood, the left front and/or rear door, and the left front fender. repair cost for same was $209.00. -3- In January 1990, Columbus The Auction sold the Corsica to Higgins Chevrolet. The history of the repaired body damage was not disclosed to Higgins. Higgins's purchase was conditioned upon its right to return the vehicle within 15 days if a defect was discovered. No defect was discovered; thus, Higgins placed the vehicle for sale in its used car inventory. In May 1990, Helton bought the Corsica, as used, from Higgins Chevrolet for a total purchase price, including tax and license fees, of $8,553.75. The car had fewer than 12,000 miles and had the balance of a GM Factory Warranty. Helton neither inquired nor was advised of the vehicle's repaired body damage. The Corsica's window sticker, however, warned potential buyers that a used vehicle could have “major defects” in the body or frame. Some four years later, Helton took the vehicle to Kelly Chevrolet in Paintsville, Kentucky, pursuant to a GM recall for paint defects. To cure the defect, Kelly Chevrolet had to remove all the original paint from the car. When the paint was removed, it became evident that the car had been wrecked and repaired. There was evidence that the vehicle had “bondo” over 75% of the body and may have been “rolled.” At this point, Helton demanded that Higgins Chevrolet refund the entire purchase price of the motor vehicle. Higgins refused. Consequently, Helton filed a complaint in the Johnson Circuit Court against Higgins Chevrolet, claiming fraud, violation of our Consumer Protection Act (Ky. -4- Rev. Stat. (KRS) 367.110-.360), and breach of warranty.1 Higgins Chevrolet answered and subsequently filed third-party complaints seeking indemnity against GM and Avis. Thereafter, GM filed a cross-claim for indemnity against Avis. Helton filed no direct claims against GM or Avis. This matter was tried before a jury. At the close of Helton's case in chief, and at the close of all evidence, Higgins Chevrolet, GM, and Avis made motions for directed verdict. motions were denied. The The jury found for Helton and awarded $8,553.75 in compensatory damages and $30,000.00 in punitive damages. The jury instructions and the judgment were such that Higgins Chevrolet, GM, and Avis were held jointly and severally liable.2 These appeals and cross-appeal followed. APPEAL NO. 1997-CA-002345-MR Higgins Chevrolet contends that the circuit court committed reversible error by failing to grant a directed verdict upon Helton's warranty claim.3 A directed verdict is proper when, drawing all inferences in favor of the nonmoving party, reasonable jurors could only conclude that the moving party was entitled to judgment as a matter of law. Ky. R. Civ. Proc. 1 Timothy Helton's complaint is unclear as to whether he is alleging breach of the implied warranty of merchantability or breach of the express General Motors Corporation Warranty. 2 We are puzzled as to how Helton's claims were submitted against GM and Avis, when, in fact, he asserted no claims against them. Our disposition of these appeals, however, renders this conundrum irrelevant. 3 As GM's express Warranty was not included in the record, we will not address any allegations relating thereto. -5- 50.01; see Lee v. Tucker, Ky., 365 S.W.2d 849 (1963). brief, Helton In his maintains that the undisclosed repaired body damage rendered the Corsica unmerchantable, thus offending the implied warranty of merchantability codified in this Commonwealth as KRS 355.2-314. That statute states in relevant part as follows: (1) . . . [A] warranty that the goods shall be merchantable is implied in a contract for their sale . . . (2) Goods to be merchantable must be at least such as (a) pass without objection in the trade under the contract description; Official Comment 3 to the Uniform Commercial Code § 2-314 specfically states that “[a] contract for the sale of second-hand goods, however, involves only such obligation as is appropriate to such goods for that is their contract description.” The precise issue before this court is whether the Corsica was unmerchantable simply because of repaired body damage. Upon this issue, we view the relevant facts as undisputed. Helton never alleged that the vehicle's performance was adversely affected. Indeed, he utilized the vehicle for some four years before serendipitously discovering the repaired damage. The Corsica's decrease in value is the sole basis of Helton's unmerchantability claim. He, however, was expressly warned by the vehicle's window sticker that such a used car could have “major defects” in the body or frame. Based upon these unique facts, we believe as a matter of law the Corsica was not -6- unmerchantable simply because of repaired body damage. In this Commonwealth, it has been observed that [i]t is a matter of common knowledge that [used] automobiles frequently pass through the ownership of several persons, that they are involved in accidents, that they require a replacement of parts, and that they occasionally receive burns in the upholstery. There is no implied warranty in the sale of a used car that none of these things has happened to the car. [Emphasis added.] White v. Hanks, Ky., 255 S.W.2d 602, 603 (1953). As such, we are of the opinion that the circuit court committed reversible error by not granting Higgins Chevrolet's Motion for a Directed Verdict upon the warranty claim. Higgins Chevrolet next asserts that the circuit court committed reversible error by failing to direct a verdict upon Helton's fraud claim. It is undisputed that Higgins Chevrolet never informed Helton that the Corsica had been wrecked and had repaired body damage; it is also undisputed that Helton never expressly inquired of same. As Higgins made no affirmative misrepresentations, any claim of fraud against Higgins must rest upon failure to disclose or omission of a material fact. In Smith v. General Motors Corporation, Ky. App., 979 S.W.2d 127, 129 (1998), the court held that [i]t is, of course, well established that mere silence is not fraudulent absent a duty to disclose. . . . A duty to disclose may arise from a fiduciary relationship, from a partial disclosure of information, or from particular circumstances such as where one party to a contract has superior knowledge and is relied upon to disclose same. [Citations omitted; emphasis added.] -7- We think that Higgins Chevrolet had neither a common law duty nor a statutory duty to disclose the Corsica's repaired body damage. Indeed, Higgins was not even aware of the damage. We believe Helton's fraud claim failed as a matter of law; thus, the circuit court committed reversible error by declining to grant Higgins's Motion for a Directed Verdict upon same. For the reasons set forth above, we likewise perceive Helton's claim based upon the Consumer Protection Act as meritless. Viewing the facts most favorably to Helton, we simply do not believe Higgins Chevrolet engaged in “[u]nfair, false, misleading, or deceptive acts” violative of KRS 367.170. Cf. Dare To Be Great, Inc. v. Commonwealth, Ky., 511 S.W.2d 224 (1974). Hence, we hold that Higgins Chevrolet was entitled to a directed verdict upon the consumer protection claim. We deem Higgins Chevrolet's remaining contentions as moot. In sum, Helton's complaint against Higgins Chevrolet should be dismissed. APPEAL NOS. 1997-CA-002390-MR AND 1997-CA-002548-MR For the reasons enunciated in Appeal No. 1997-CA002345-MR, we believe GM and Avis's appeals should be reversed and remanded. CROSS-APPEAL NO. 1997-CA-002560-MR We deem Helton's cross-appeal as moot. -8- For the foregoing reasons, Appeal Nos. 1997-CA-002345MR, 1997-CA-002390-MR, and 1997-CA-002548-MR are reversed, and these causes are remanded with directions to dismiss the underlying complaint. Cross-Appeal No. 1997-CA-002560-MR is vacated as moot. ALL CONCUR. BRIEFS FOR APPELLANT/HIGGINS CHEVROLET: BRIEF FOR APPELLEE HELTON AND CROSS-APPELLANTS: John Irvine Hanbury Mark S. Dvorak Jonathan R. Grate Ashland, KY Sam H. Whitehead Lexington, KY BRIEF FOR APPELLANT/GENERAL MOTORS: Lizbeth Ann Tully James D. Allen Donald P. Wagner Lexington, KY BRIEF FOR APPELLANT/AVIS: Karen J. Greenwell Lexington, KY -9-

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