ERIC LLOYD KING v. ELLERSLIE CORPORATION, D/B/A FREEDOM DODGE AND CHRYSLER CORPORATION
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RENDERED:
August 3, 2001; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2001-CA-000338-MR
ERIC LLOYD KING
v.
APPELLANT
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE LEWIS G. PAISLEY, JUDGE
ACTION NO. 97-CI-02786
ELLERSLIE CORPORATION, D/B/A
FREEDOM DODGE AND CHRYSLER
CORPORATION
APPELLEES
OPINION
AFFIRMING IN PART AND
REVERSING IN PART AND REMANDING
** ** ** ** **
BEFORE:
BUCKINGHAM, COMBS, AND DYCHE, JUDGES.
BUCKINGHAM, JUDGE:
Eric Lloyd King appeals from a summary
judgment entered by the Fayette Circuit Court in favor of
Ellerslie Corporation, d/b/a Freedom Dodge, and Chrysler
Corporation. We affirm in part and reverse in part and remand.
On June 26, 1996, King purchased a used 1994 Dodge Ram
pickup truck from Freedom Dodge for $22,263.00.
He signed a
“DEALER WARRANTY DISCLAIMER” which stated as follows:
THE SELLING DEALER HEREBY EXPRESSLY DISCLAIMS
ALL WARRANTIES, EITHER EXPRESS OR IMPLIED,
INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, AND NEITHER ASSUMES NOR AUTHORIZES
ANY OTHER PERSON TO ASSUME FOR IT ANY
LIABILITY IN CONNECTION WITH THE SALE OF THIS
VEHICLE. BUYER SHALL NOT BE ENTITLED TO
RECOVER FROM THE SELLING DEALER ANY
CONSEQUENTIAL DAMAGES, DAMAGES TO PROPERTY, DAMAGES FOR LOSS OF
USE, LOSS OF TIME, LOSS OF PROFITS, OR INCOME, OR ANY OTHER
INCIDENTAL DAMAGES.
He also paid $1,500 for a service contract.
Freedom Dodge sold
him the service contract, and the contract was between King and
Chrysler.1
Approximately four months after purchasing the truck,
King returned it to Freedom Dodge claiming he had discovered that
the truck’s frame was cracked and bent.
Freedom Dodge did repair
work on the truck at no cost to King, and it loaned him another
vehicle for his use while the repair work was being performed.
After the truck was returned to King, he continued to be
dissatisfied and thereafter filed suit in the Knott Circuit Court
against Freedom Dodge and Chrysler.
The case was later
transferred to the Fayette Circuit Court on Freedom Dodge’s
motion.
Freedom Dodge successfully moved the court to grant it
summary judgment, and this appeal followed the trial court’s
denial of King’s motion to reconsider.2
King argues on appeal that the trial court erred in
awarding Freedom Dodge summary judgment because fact issues
existed concerning Freedom Dodge’s violation of KRS3 186A.540,
1
We have searched the record and have been unable to locate
the service contract. While it is not in the record, the parties
apparently agree that the contract was for a period of two years
or 24,000 miles, whichever occurs first. The application for the
service contract is in the record.
2
Chrysler has since been dismissed as a party.
3
Kentucky Revised Statutes.
-2-
the Kentucky Consumer Protection Act (KRS 367.110-.360)4, KRS
355.2-314, and the Magnuson-Moss Warranty Act.
In granting
summary judgment to Freedom Dodge, the trial court held in
pertinent part as follows:
The Court finds that when the facts are
taken in a light most favorable to the
Plaintiff, it appears to be impossible that
the Plaintiff could succeed at trial. The
Court finds that there are no genuine issues
of material fact. The Plaintiff signed a
Dealer Warranty Disclaimer at the time of
sale. There is no evidence that the Dealer’s
agents committed fraud or misrepresentation.
In fact, the only representation made by the
Dealer’s agent was that the truck was four
wheel drive. Because the Dealer Warranty
Disclaimer was valid and enforceable, and
because there is no evidence of fraud or
misrepresentation, it is irrelevant whether
or not the truck’s frame was cracked, bent,
and/or broken at the time of sale. The Court
rejects the Plaintiff’s argument concerning
the Magnuson Moss Warranty Act, 15 USC 230112. The Magnuson Moss Act involves
situations in which the “supplier” disclaims
a warranty and also enters into a service
contract with the consumer. The Act is not
applicable to the facts of this case. The
Dealer Warranty Disclaimer was an agreement
between Freedom Dodge (the “supplier”) and
the Plaintiff. The Service Contract was an
agreement between Daimler Chrysler
Corporation and the Plaintiff. Since the
same party did not both disclaim the warranty
and enter into the service contract, the Act
does not apply.
We will examine King’s four separate arguments individually.
King’s first argument is that Freedom Dodge violated
the provisions of KRS 186A.540 which provides:
An individual or a dealer required to be
licensed pursuant to KRS Chapter 190 shall
4
All references in this opinion to the Kentucky Consumer
Protection Act will be to those statutes which were in effect
during the time King’s claim arose and his suit was filed.
-3-
disclose all damages to a motor vehicle which
result in repairs or repair estimates that
exceed three hundred dollars ($300) and that
occur while the motor vehicle is in his
possession and prior to delivery to a
purchaser. Disclosure shall be in writing
and shall require the purchaser's signature
acknowledging the disclosure of damages.[5]
A violation of KRS 186A.540 is a Class A misdemeanor.
186A.990(6).
KRS
The statute does not provide for a civil cause of
action for its violation.
Although King does not so state in his
brief, we assume he maintains that a violation of the statute
constitutes grounds for a civil action in fraud.
King argues that Freedom Dodge did repairs to the truck
in the amount of $784 while it was in its possession prior to
selling it to him.
While he does not allege that these damages
related to any problem with the frame, he nonetheless asserts
that Freedom Dodge violated the statute by failing to disclose
these repairs to him.
On the other hand, Freedom Dodge argues
that the undisputed evidence is that the repair work was
“reconditioning and sales prep work” which need not be disclosed
as damages under the statute.6
5
This statute was amended effective February 22, 2000, to
provide for disclosures when the repairs or repair estimates
exceed $1,000.
6
Daryl Ayers stated in an affidavit that the work done by
Freedom Dodge on the truck “consisted of applying new decals,
touch up paint work, buffing and restoring small dings and paint
scratches.” He also stated in the affidavit that the work done
by Freedom Dodge on the truck “did not consist of repairs to
damage to said pick-up truck which occurred while in the
possession of Freedom Dodge.” The statements in the affidavit
were not refuted by any affirmative evidence on King’s behalf.
See Kentucky Rules of Civil Procedure (CR) 56.03 and Gevedon v.
Grigsby, Ky., 303 S.W.2d 282, 284 (1957).
-4-
We have several problems with King’s argument on this
issue.
First, King made no mention in his complaint that he was
asserting a cause of action for Freedom Dodge’s failure to
disclose the damages in excess of $300 to him.
In paragraph
eleven of his complaint, he alleged as follows:
That on or about June 26, 1996, the date of
purchase, Plaintiff asked the sales agent of
Defendant to provide him information on the
history of the vehicle. The sales agent
stated that the vehicle was a one owner and
had not been wrecked. Defendant’s sales
agent failed to disclose the fact that the
vehicle had been salvaged, in violation of
KRS 186 A 450.
King does not assert a cause of action in the complaint related
to Freedom Dodge’s failure to disclose damages in excess of $300.
Furthermore, in response to Freedom Dodge’s summary judgment
motion, King did not make this argument.
He apparently raised it
for the first time in his motion to the trial court to reconsider
the summary judgment it had entered.7
We also reject King’s argument because the undisputed
evidence was that the $784 spent in repair work on the truck was
for general reconditioning and sales prep work and not for
damages contemplated by the statute.8
More importantly, we note
7
The trial court addressed King’s argument by stating that
“there is no evidence that the truck had been salvaged;
therefore, the sales agent could not have failed to disclose the
fact.”
8
We acknowledge that this court in Smith v. General Motors
Corp., Ky. App., 979 S.W.2d 127 (1998), stated that the statute
“should be broadly interpreted to include any motor vehicle
repairs over $300.00, be they mechanical, body, or otherwise.”
Id. at 130. In that case, the court held that the term
“damages” as used in the statute included problems with the
radiator and engine as well as body damages. Citing KRS
(continued...)
-5-
that since no evidence was presented to show that the $784 in
repairs related to the bent and cracked frame, then King has not
demonstrated how a violation of the statute was the proximate
cause of any damages to him that might have resulted.9
King’s second argument is that there were fact issues
concerning his allegation that Freedom Dodge violated the
Kentucky Consumer Protection Act and that the trial court erred
in granting summary judgment for this reason.
provides as follows:
KRS 367.170
“(1) Unfair, false, misleading, or
deceptive acts or practices in the conduct of any trade or
commerce are hereby declared unlawful.
(2) For the purposes of
this section, unfair shall be construed to mean unconscionable.”
In rejecting King’s argument, the trial court held that “[i]t is
clear from the evidence that the only representation made by the
sales agent was that the truck was four-wheel drive.
statement was in response to the Plaintiff’s question.
This
There is
no evidence in the record that the Defendant did anything that
was unfair, misleading, or deceptive.”
Because Freedom Dodge
sold the truck with a “DEALER WARRANTY DISCLAIMER” which stated
that the truck was being sold “as is” and “with all faults” and
8
(...continued)
186A.500, the court noted that the legislative purpose was to
enable purchasers to know of “prior severe damage.” We do not
believe that general reconditioning and sales prep work are the
sort of damages which the statute contemplates must be disclosed.
9
In Peak v. Barlow Homes, Inc., Ky. App., 765 S.W.2d 577
(1988), this court held that “in an action for damages, the
violation of the statute must be the proximate cause of the
injury to permit recovery.” Id. at 578. Although that case
involved a negligence action, we believe the principle therein is
applicable to this case.
-6-
because there is no proof that Freedom Dodge knew that the frame
was bent and cracked, we agree with the trial court that there is
no evidence that Freedom Dodge engaged in any unfair, false,
misleading, or deceptive acts or practices.
Thus, summary
judgment on King’s claim under the Kentucky Consumer Protection
Act was appropriate.
King’s third argument is that there were fact issues
concerning his allegation that Freedom Dodge breached an implied
warranty of merchantability under KRS 355.2-314 and that the
trial court erred in granting summary judgment for that reason.
However, KRS 355.2-316 allows for the exclusion or modification
of warranties.
The warranty disclaimer given by Freedom Dodge to
King appears on its face to be valid, and we conclude that the
disclaimer would have validly disclaimed all warranties had it
not been for the applicability of the Magnuson-Moss Warranty Act
as we discuss below.
King’s final argument is that there were fact issues
concerning his allegation that Freedom Dodge violated the
Magnuson-Moss Warranty Act and that the trial court erred in
granting summary judgment on this claim.
The applicable portions
of the act state as follows:
Restrictions on disclaimers or modifications.
No supplier may disclaim or modify (except as
provided in subsection (b)) any implied
warranty to a consumer with respect to such
consumer product if (1) such supplier makes
any written warranty to the consumer with
respect to such consumer product, or (2) at
the time of sale, or within 90 days
thereafter, such supplier enters into a
service contract with the consumer which
applies to such consumer product.
-7-
. . . .
Effectiveness of disclaimers, modifications,
or limitations. A disclaimer, modification,
or limitation made in violation of this
section shall be ineffective for purposes of
this title [15 USCS § 2304(a)] and State law.
15 USCS § 2308(a) and (c).
King’s argument is that because
Freedom Dodge sold him a service contract within 90 days of his
purchase of the truck, then the warranty disclaimer is
ineffective under the terms of the statute.
He thus asserts that
the implied warranty of merchantability under KRS 355.2-314 was
not effectively disclaimed by Freedom Dodge and that he is
entitled to damages for Freedom Dodge’s breach of that warranty.
The trial court rejected that argument and held that Freedom
Dodge did not enter into the service contract.
Rather, the court
held that the service contract was between King and Chrysler and
thus the Magnuson-Moss Warranty Act was not applicable.
The service contract application signed by King and by
Freedom Dodge contains a “DEALER INFORMATION” section that
provides:
“(4) YOU WILL PROVIDE SERVICE TO THE PURCHASER IN
ACCORDANCE WITH THE PROVISIONS OF THE SERVICE CONTRACT CHRYSLER
WILL ISSUE TO THE PURCHASER, (5) YOU HAVE REVIEWED THE CHRYSLER
SERVICE CONTRACTS GUIDE AND AGREE TO ABIDE BY THE POLICIES AND
PROCEDURES SPECIFIED THEREIN.”
This section of the application
was signed by a representative of Freedom Dodge.
In other words,
Freedom Dodge agreed to do any service work under the service
contract.
The Tennessee Court of Appeals addressed a similar
situation in Patton v. McHone, 822 S.W.2d 608 (Tenn. 1991).
-8-
In
that case, Patton, the purchaser of a used car, filed suit
against Harpeth Toyota, the car dealership that sold him the car,
after discovering that the car had a cracked engine block and a
bent frame and that the timing chain had broken.
Patton alleged
fraud, breach of implied warranty of merchantability, violations
of the Tennessee Consumer Protection Act, and violations of the
Magnuson-Moss Warranty Act.
The court therein stated as follows:
That Harpeth Toyota was acting as an agent
for an extended warranty company when it sold
the service contract to the Pattons is of no
significance insofar as 15 U.S.C. § 2308(a)
is concerned. The service contract required
the Pattons to obtain their service from
Harpeth Toyota unless they obtained special
permission to go elsewhere. There is no
indication in the language or legislative
history of the Magnuson-Moss Act that the
service contract must originate with or be
the sole responsibility of the dealer.
Id. at 617.
We agree with the reasoning of the Patton case and
hold that the Magnuson-Moss Warranty Act is applicable in that
Freedom Dodge entered into a service contract with King.
Therefore, the warranty disclaimer is ineffective, and King may
pursue his claim against Freedom Dodge for breach of implied
warranty of merchantability.
The judgment of the Fayette Circuit Court is affirmed
in part and reversed in part and remanded.
ALL CONCUR.
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE FREEDOM
DODGE:
Sam H. Whitehead
Lexington, Kentucky
M. Scott Mattmiller
C. Timothy Cone
Lexington, Kentucky
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