Dealer faces wrongful-death suit
A Memphis, Tenn., used-car dealer must defend a wrongful-death suit that alleges he was negligent in selling a car to a customer whose driver's license had been revoked.
The Tennessee Court of Appeals reinstated the case but said Jeff McAlpin, owner of Pyramid Motors, may be able to demonstrate that he did not know that customer Michael Hughes was not a competent or capable driver.
The appeals court emphasized that state law does not require dealers to verify that their customers have valid licenses.
In 1995, McAlpin sold Hughes a 1986 Cadil-lac Fleetwood. McAlpin financed the deal and retained title to the car as collateral. A few days later, Hughes sped through a red light and hit a car driven by Warren Price. Price was killed.
Hughes fled the scene and was intoxicated when police arrested him a few hours later, according to attorney Thomas McAlexander of Jackson, who represents the Price estate. He said Hughes had no insurance and is now in prison for vehicular assault and a drug charge.
The suit alleged that McAlpin sells cars to people he 'knows or should know are high-risk drivers' and 'knew or should have known' Hughes was 'an unlicensed and incompetent driver.'
McAlpin denied any negligence, and Shelby County Circuit Judge James Swearengen dismissed the case without trial.
The appeals court reinstated the suit. It said the estate may be able to offer evidence that McAlpin knew Hughes was incompetent but still entrusted the car to him.
The fact Hughes had no license did not automatically make him incompetent, and dealers in Tennessee are not legally required to determine whether a prospective buyer is properly licensed, the appeals court said. McAlpin can be liable only if the Price estate proves he was negligent in turning over the Cadillac to Hughes.
The court said McAlpin can again seek summary judgment dismissing the complaint if he provides evidence to refute the allegation that he knew Hughes was an incompetent driver.
McAlpin's lawyer, Phil Zerilla Jr., said his client will file an affidavit stating there was no reason to believe Hughes was not a competent driver.
Maine high court reverses award against Chrysler Credit
The Maine Supreme Court has overturned a $550,000 jury verdict won by a former Lewiston dealer against Chrysler Credit Corp., which is now part of Chrysler Financial Corp.
The decision also reversed an award holding guarantors of the dealer's unpaid floorplan loans personally liable to Chrysler's financial subsidiary for $189,000.
According to the state Supreme Court, Bert Cote established L/A Auto Sales Inc. in 1987, and signed a floorplan credit agreement with Chrysler Credit. By late 1988, the Jeep-Eagle dealership had financial problems and reported monthly operating losses and floorplan borrowings that led to tightened cash flow and a bloated inventory.
By mid-1989, L/A was $189,000 out of trust, meaning it had not paid Chrysler Credit that amount due for cars it had sold. L/A was $308,000 out of trust by October 1990, the court said.
In mid-1989, Cote applied for a Subaru franchise at the same location, hoping a dualed store would improve profitability. Subaru New England approved the application for a franchise to a separate corporation, Bert's Subaru Inc. However, the approval was conditioned on obtaining a $1 million floorplan credit line. Cote received a $600,000 bank commitment, but testified he turned down the bank's offer after Chrysler Credit promised to 'come up with a better finance package.'
However, the state Supreme Court said, 'the already strained relationship between Chrysler Credit and L/A deteriorated further.' Floorplan debt grew as Cote used sales proceeds to cover payroll and operating expenses, and the dealership lost money every month.
Chrysler Credit refused to provide further funding for any purpose.
'The net effect was to drive him out of business,' said Cote's lawyer, Jeffrey Edwards of Portland. L/A closed in October 1990, and the Subaru store never opened.
Chrysler's financial subsidiary liquidated its collateral and sued L/A and the guarantors to collect $1.15 million it claimed was still owed. That amount included interest, said Chrysler Financial lawyer Timothy Norton of Portland.
L/A filed its own suit, accusing Chrysler Credit of breaching an agreement to refinance its out-of-trust amount and to finance the Subaru franchise. L/A also claimed violation of the Maine Dealers Act.
At a combined trial on both suits, an Androscoggin County Circuit Court jury awarded $250,000 to L/A and $300,000 to Bert's Subaru. It also found L/A had breached its loan agreements and held the guarantors liable to Chrysler Credit for $189,000.
Edwards, the dealerships' lawyer, said the $189,000 reflects the amount L/A admits it was out of trust in the summer of 1989.
The state Supreme Court vacated the verdict and ordered a new trial for several reasons.
It said Cote waited too long to add his Subaru-related corporation as a plaintiff. That 'unjustifiable delay resulted in unfair prejudice to Chrysler Credit, which was deprived of the opportunity to prepare a defense to Bert's Subaru's claims.'
It also said Cote should have designated a Subaru New England marketing vice president as an expert witness before trial. That witness offered the only testimony on anticipated Subaru sales and prospective profits if the Lewiston store had opened.
10th Circuit upholds decision for Jaguar Credit in lease case
A Salt Lake City lawyer must pay Jaguar Credit Corp. $29,214 plus interest for breaching his closed-end lease agreements for two new cars, a federal appeals court in Denver has ruled.
The fact that Jaguar Credit's logo appeared on the lease agreements prepared by the dealerships does not make the creditor responsible for alleged misrepresentations made by one dealership's salesman, the court said.
R. Brent Stephens, a Salt Lake City lawyer representing Jaguar Credit, said, 'It reinforces the belief that assignees of leases take the paper free and clear of any misrepresentations by the selling dealer. All they do is buy paper and don't get involved in the sales at all.'
In 1992, Wesley Sine leased two 1991 Jaguar XJ6 Sovereigns on behalf of his company. One car came from Park Place Chevrolet & Import Inc. in Lincoln, Neb., and the other from Ken Garff Jaguar of Salt Lake City. Jaguar Credit's logo and address appeared on the top of the leases, which permitted the dealerships to assign their interests to the creditor.
During long-distance negotiations, a Park Place salesman allegedly represented the price of one car at $38,995, but the agreement listed a figure of $51,174,the court said. Sine signed the agreement, despite the variance in the figures.
After receiving both cars and making the first two payments, Sine contacted Jaguar Credit to express concern that Park Place's salesman had misquoted the purchase price, the court said.
Sine then took the position that Jaguar Credit should offset either or both of his leases for the amount of the alleged misrepresentation. Jaguar Credit denied the request, saying it had paid for the assignment of the leases and refused to recognize any allegedly conflicting oral agreement.
Sine stopped making payments on either lease. Jaguar Credit repossessed the cars and sold them at auction. It then claimed a $17,128 deficiency, plus interest.
In response, Sine sued Jaguar Credit for fraud, misrepresentation, libel and violation of the Uniform Commercial Code. Jaguar Credit counterclaimed for the balance due on the leases.
A judge in U.S. District Court in Salt Lake City awarded Jaguar Credit $29,214 plus interest, and the 10th U.S. Circuit Court of Appeals upheld the judgment in favor of Jaguar Credit.
Even if the Park Place salesman had misrepresented the car's price to Sine, Jaguar Credit had no agency relationship with the dealership simply because the lease agreement displayed the Jaguar logo, Judge Bruce Black said.
In addition, the court found no evidence that Jaguar Credit knew that the price in the Park Place lease agreement differed from the terms allegedly described by the salesman or that Jaguar Credit intended to approve any verbal agreement between Sine and the salesman.
Sine said he will seek U.S. Supreme Court review.
Motor-home maker and seller must pay, says N.D. high court
A motor-home manufacturer and a Bismarck, N.D., dealership must pay a jury award of more than $45,000 in a suit involving a motor home, the North Dakota Supreme Court has ruled.
The court unanimously upheld a verdict against Coachmen Recreational Vehicle Co. of Middlebury, Ind., and Capital RV Center Inc. of Bismarck, N.D.
In January 1992, Albert and Birdie Fode bought the 1991 Sportscoach with a 15,000-mile/one-year warranty. In the months that followed, they said they experienced repeated problems with the electrical system, defective shocks and equalizer bar, and insufficient power to drive faster than 65 mph.
In January 1993, they tried to revoke their acceptance after they could not get the motor home started for several days. Coachmen and Capital RV refused to take it back, so the Fodes sued.
A jury in Burleigh County District Court awarded $45,364 damages for breach of warranty and revocation of acceptance. The trial judge assessed an additional $27,359 in attorney fees.
The state Supreme Court ruled that the Fodes were entitled to revoke their acceptance under the Uniform Commercial Code. The court found sufficient evidence that the defects substantially impaired the motor home's value to the Fodes.
However, the court ordered the trial judge to give Coachmen and Capital RV an opportunity to object to the size of the attorney fee award.
The Fodes' lawyer, Robert Bolinske of Bismarck, said the defendants could simply have replaced the motor home when the series of defects became evident. Instead, 'we went through five years of litigation.'
Defense lawyer J. Philip Johnson of Fargo said there are no more appeals available, and once the attorney fees are recalculated, 'this should be the end' of the case.