Banks v. Shark Auto Sales, L.L.C.

2022 Ohio 3489, 197 N.E.3d 50

• Court: Ohio Court of Appeals
• Decided: September 30, 2022
• Docket: 2022-T-0018
• Status: Published

Opinion

[Cite as Banks v. Shark Auto Sales, L.L.C., 2022-Ohio-3489.]

IN THE COURT OF APPEALS OF OHIO ELEVENTH APPELLATE DISTRICT TRUMBULL COUNTY

MARY BANKS, CASE NO. 2022-T-0018

Plaintiff-Appellee, Civil Appeal from the - vs - Warren Municipal Court

SHARK AUTO SALES LLC, Trial Court No. 2021 CVI 001381 Defendant-Appellant.

OPINION

Decided: September 30, 2022 Judgment: Reversed and remanded

Mary Banks, pro se, 90 Kings Drive, S.W., Warren, OH 44481 (Plaintiff-Appellee).

James J. Crisan, Martin F. White Co., LPA, 156 Park Avenue, N.E., P.O. Box 1150, Warren, OH 44482 (For Defendant-Appellant).

MATT LYNCH, J.

{¶1} Defendant-appellant, Shark Auto Sales, LLC, appeals the judgment of the

Warren Municipal Court, awarding damages in the amount of $1,600 in favor of plaintiff-

appellee, Mary Banks. For the following reasons, we reverse the judgment of the court

below and remand for further proceedings consistent with this opinion.

{¶2} On September 1, 2021, Banks filed a Small Claims Complaint against Shark

Auto Sales for a “faulty car.” The matter was tried before a magistrate.

{¶3} On December 14, 2021, the magistrate issued Findings of Fact and

Conclusions of Law. The magistrate made the following relevant findings of fact:

Plaintiff purchased a 2001 Mitsubishi Galant with 140,088 miles from the Defendant on 8/19/21 for the total price of $1470.00. With the additional charges of sales tax and other fees, the total was $1600.24. A copy of the purchase agreement was submitted which included a warranty disclaimer, and a specific “as is- No dealer warranty” document signed by the Plaintiff.

In a separate page is listed the following:

“Here is a list of some major defects that may occur in used vehicles. Frame-cracks, corrective welds, or rusted through”.

Plaintiff admits she did test drive the vehicle and was advised she could take the vehicle anywhere she wanted to be inspected. Plaintiff chose not to have the vehicle inspected.

Plaintiff states she understood she was not paying a great deal of money for the vehicle, and that she might have to put some money into it for repairs, but when she took the vehicle into the repair shop to get struts, she was told by the shop that the vehicle was unsafe, and they would not work on the vehicle as the frame was bad and could not be fixed.

Plaintiff[’s] exhibit 2 is from Champion Auto Center and states: “REAR FRAME IS ROTTED OUT”.

Plaintiff states that when she asked about the vehicle, the salesman stated it was safe and probably needed some new brakes.

Defendant [sic], Nick Minarcik, stated he does work for the Defendant and did sell this vehicle to Plaintiff.

Defendant states he is not a mechanic and did not state he was. The vehicle was purchased from the auction, and neither he nor the dealership did any further inspection of the vehicle except to test drive it (No one looked underneath).

Defendant states he was unaware the frame had any issues, and was not advised of any.

Defendant again re[iterates] that this is an older car, 20 years old,

Case No. 2022-T-0018 with over 140,000 miles on it. It was purchased “AS IS” and Plaintiff was given every opportunity to inspect it.

{¶4} The magistrate found against Shark Auto Sales for the amount of $1,600

plus statutory interest and court costs. The magistrate concluded, under Ohio law, “that

a dealer has a duty to exercise reasonable care in making an examination [of a used

vehicle] to discover defects therein which would make them dangerous to users.

Defendant cannot simply fail to do any examination, and say I was not aware of any major

defects. In the instant matter if an inspection was done, the Defendant would have

discovered the frame was damaged and unsafe. I find that the damage to the frame

substantially impaired the value of the vehicle. I therefore find the Plaintiff may revoke

acceptance of the vehicle.”

{¶5} Shark Auto Sales filed Objections to the Magistrate’s Decision which the

municipal court overruled on February 8, 2022.

{¶6} On March 10, 2022, Shark Auto Sales filed its Notice of Appeal. On appeal,

it raises the following assignment of error: “The trial court abused its discretion by denying

the Defendant-Appellant’s Objections and affirming the Magistrate’s Decision.”

{¶7} The decision to adopt a magistrate’s decision is typically reviewed under an

abuse of discretion standard. However, when questions of law, such as the interpretation

of a contract, are presented, the court of appeals will review the lower court’s judgment

de novo. Lucas v. Lucas, 11th Dist. Lake No. 2007-L-058, 2007-Ohio-5607, ¶ 10;

Southwestern Obstetrics & Gynecology, Inc. v. Mehta, 10th Dist. Franklin No. 13AP-624,

2014-Ohio-2904, ¶ 9; St. Marys v. Auglaize Cty. Bd. of Commrs., 115 Ohio St.3d 387,

2007-Ohio-5026, 875 N.E.2d 561, ¶ 38 (“[c]ontract interpretation is a matter of law, and

questions of law are subject to de novo review on appeal”). 3

Case No. 2022-T-0018 {¶8} On appeal, Shark Auto Sales argues the municipal court erred by holding

that Banks could rescind the sale of the vehicle as a result of its breach of the duty to

inspect the vehicle for defects making it dangerous to users. We agree.

{¶9} A used motor vehicle constitutes “goods” for the purposes of R.C. Chapter

1302 (Ohio’s codification of the Uniform Commercial Code) and, therefore, the sale of a

used motor vehicle is governed by the provisions of that Chapter. R.C. 1302.01(A)(8)

(“‘Goods’ means all things * * * which are movable at the time of identification to the

contract for sale”); Sellers v. Marrow Auto Sales, 124 Ohio App.3d 543, 545-546, 706

N.E.2d 837 (12th Dist.1997).

{¶10} The sale of goods in Ohio may entail both express and implied warranties,

including the implied warranty that the goods “are fit for the ordinary purposes for which

such goods are used.” R.C. 1302.27(B)(3); Raze Internatl., Inc. v. Southeastern Equip.

Co., Inc., 2016-Ohio-5700, 69 N.E.3d 1274, ¶ 26 (7th Dist.). “[U]nless the circumstances

indicate otherwise all implied warranties are excluded by expressions like ‘as is’, ‘with all

faults’, or other language which in common understanding calls the buyer’s attention to

the exclusion of warranties and makes plain that there is no implied warranty.” R.C.

1302.29(C)(1). Additionally, “when the buyer before entering into the contract has

examined the goods * * * as fully as he desired or has refused to examine the goods there

is no implied warranty with regard to defects which an examination ought in the

circumstances to have revealed to him.” R.C. 1302.29(C)(2).

{¶11} “The buyer may revoke his acceptance of a lot or commercial unit whose

non-conformity substantially impairs its value to him if he has accepted it: (1) on the

reasonable assumption that its non-conformity would be cured and it has not been

Case No. 2022-T-0018 seasonably cured; or (2) without discovery of such non-conformity if his acceptance was

reasonably induced either by the difficulty of discovery before acceptance or by the

seller’s assurances.” R.C. 1302.66(A).

{¶12} As its basis for allowing Banks to revoke her acceptance, the municipal

court held that Shark Auto Sales violated a duty to examine the vehicle before sale for

defects rendering its use dangerous. In support of this holding, the magistrate cited the

following cases: Thrash v. U-Drive-It Co., 158 Ohio St. 465, 110 N.E.2d 419 (1953);

Stamper v. Parr-Ruckman Home Town Motor Sales, Inc., 25 Ohio St.2d 1, 265 N.E.2d

785 (1971); and Cannon v. Neal Walker Leasing, Inc., 9th Dist. Summit No. 16846, 1995

WL 404961.

{¶13} Thrash was a negligence action brought on behalf of a minor who was

allegedly injured by a defective vehicle purchased by his father from the defendant, a

dealer in used motor vehicles. The dealer was “charged with negligence in failing to

inspect the truck for defects before resale, in failing to warn plaintiff’s father of the misfitted

and insecure lock ring, in representing to the purchaser that the truck was in good

operating condition, and in placing on the market and selling for use a truck containing a

latent and dangerous defect. Thrash at 468. Judgment was entered for the dealer on

the pleadings. The Ohio Supreme Court held to the contrary that the negligence charge

stated a claim: “Although a dealer in used motor vehicles is not an insurer of the safety of

the vehicles he sells, he is generally under a duty to exercise reasonable care in making

an examination thereof to discover defects therein which would make them dangerous to

users or to those who might come in contact with them, and upon discovery to correct

those defects or at least give warning to the purchaser. Such rule is of particular

Case No. 2022-T-0018 significance where the sale of such a vehicle is accompanied by representations or

warranties as to its fitness for use.” Id. at paragraph four of the syllabus.

{¶14} Stamper was also a negligence action brought by persons injured by a

defective automobile who were not its purchasers. Although the Supreme Court upheld

judgment in favor of the seller of the vehicle, it reaffirmed the holding of Thrash and noted

that the duty to examine for dangerous defects existed even when a vehicle is sold “as

is”: “Where a used car dealer sells a vehicle ‘as is’ he is under a duty to use ordinary care

to warn the purchaser of defects of which he has, or by the exercise of reasonable care

should have, knowledge; but he is not an insurer, and hence is not liable for injuries to a

third party as a result of latent defects in the vehicle.” Stamper at syllabus.

{¶15} We find the reliance on Thrash and Stamper misplaced, inasmuch as these

cases unquestionably involved tort rather than contract law. These cases recognized that

automobile dealers have a duty to exercise reasonable care to examine the used vehicles

they sell for defects rendering them dangerous. This duty exists as a matter of law and

did not derive from the sales contracts. See Mussivand v. David, 45 Ohio St.3d 314, 318,

544 N.E.2d 265 (1989) (“[t]he existence of a duty in a negligence action is a question of

law for the court to determine”). As the Supreme Court emphasized, the dealer is not an

insurer and so the duty imposed should not be treated as some sort of implied warranty.

If it were, then it could be excluded in the manner of other implied warranties as described

above. Moreover, the breach of the duty in Thrash and Stamper resulted in physical

injuries proximately caused by the breach. The breach of the duty by Shark Auto Sales

did not cause such injury.

{¶16} We acknowledge that in at least one case, Watkins v. Alwishah, 7th Dist.

Case No. 2022-T-0018 Columbiana No. 20 CO 0018, 2021-Ohio-3589, the “as is” sale of a used vehicle was

revoked after it was discovered the frame had rusted to the point of rendering it unsafe to

operate. The applicability of Thrash was not challenged in Watkins, however, inasmuch

as the automobile dealer (Alwishah) “acknowledged in his testimony that he was required

to have the vehicle inspected prior to placing it for sale, and that he was required to

perform repairs to correct any and all dangerous conditions found during the inspection.”

Id. at ¶ 181. We find Watkins to be neither controlling nor persuasive. The court

recognized that Thrash was a negligence case requiring evidence “of a duty on the part

of the one sued, failure to perform the duty, and that an injury resulted from this failure.”

Id. at ¶ 23. But the court made no attempt to explain how these elements applied to the

revocation of the retail installment contract at issue. Conversely, there is authority holding

that, “when a buyer contractually agrees to accept property ‘as is,’ the seller is relieved of

any duty to disclose.” Kaye v. Buehrle, 8 Ohio App.3d 381, 383, 457 N.E.2d 373 (9th

Dist.1983).

{¶17} The third case relied on by the magistrate, Cannon v. Neal Walker Leasing,

Inc., 1995 WL 404961, did not involve the dealer’s duty to inspect the vehicle before sale.

Rather, in Cannon, the court of appeals affirmed the revocation of a sales contract for an

automobile on the grounds of non-conformity which substantially impaired the value of

the vehicle to the buyer. Significantly, the vehicle at issue in Cannon was not sold “as is”

but under a thirty-day limited warranty during which time implied warranties were not

disclaimed. The court concluded that, because the limited warranty was inadequate to

1. We note, without comment, that, although Alwishah could acknowledge his duties under the Thrash decision, he was “apparently a native Arabic speaker” who claimed “he is unable to understand the English language and is classified as Limited English Proficient.” Id. at ¶ 9. 7

Case No. 2022-T-0018 cure the defects in the vehicle without cost to the buyer, its value was substantially

impaired: “In a revocation action, once it is established that an item is non-conforming,

the issue becomes whether that non-conformity substantially impaired its value to the

buyer. Warranty remedies can be indirectly relevant to that determination. If, pursuant

to available warranty remedies, the non-conformity can be completely cured and the value

to the buyer restored, revocation would be inappropriate. Available warranty remedies,

along with any offers of cure by the seller beyond available warranty remedies, therefore,

would be relevant to the question of whether the non-conformity substantially impaired

the item’s value to the buyer.” Id. at *3. Since the limited warranty in Cannon effected

less than a complete cure of the non-conformity, the sale could be revoked: “The fact that

the Plaintiffs herein were assured by the seller’s salesperson of the reliability of the

vehicle, a breakdown of the vehicle within two days of purchase, accompanied with the

$400 plus possible cost to repair the vehicle that was initially purchased for $1,500, clearly

indicates to this Court that this buyer may take advantage of R.C. 1302.66.” Id. at *4.

{¶18} In situations like the present one, where there has been a repudiation of

warranties, revocation based on non-conformity has not been allowed. In Schneider v.

Miller, 73 Ohio App.3d 335, 597 N.E.2d 175 (3d Dist.1991), the plaintiff attempted to

revoke his acceptance after discovering that the vehicle he purchased “as is” had an

irreparably rusted frame. The court found in favor of the dealer. The plaintiff’s claims

based on breach of warranty were rejected “because the car was sold ‘as is’ without any

warranty.” Id. at 337. The claim for revocation was rejected because the dealer “made

no assurances or guarantees that the vehicle was in any certain condition.” Id. It was

further noted that “[a]t no time did appellant testify that he could not have had this vehicle

Case No. 2022-T-0018 inspected by a mechanic or other knowledgeable person for defects.” Id. Finally,

revocation was precluded because “[a]ppellant has not shown that he accepted this

vehicle on the reasonable assumption that its alleged nonconformity would be cured, nor

has he shown that such nonconformity was induced by the difficulty of discovery before

acceptance or by appellee’s assurances.” Id. at 338. Also Gallagher v. WMK Inc., 9th

Dist. Summit No. 23564, 2007-Ohio-6615, ¶ 22 (“[a]s this vehicle carried no warranties,

either express or implied, it had no ‘non-conformity’ for purposes of Section 1302.66 of

the Ohio Revised Code”).

{¶19} In sum, we conclude that Banks was not entitled to revoke the sale. The

duty breached by Shark Auto Sales under Thrash and Stamper applied to negligence

claims which were not raised by Banks in the present case. Shark Auto Sales effectively

disclaimed any warranties by selling the vehicle “as is” and Banks was given a full

opportunity to inspect it for defects. Sold “as is,” the vehicle could not be found non-

conforming. Accordingly, there were not valid grounds identified by the trial court that

would justify the revocation of Banks’ acceptance.

{¶20} The sole assignment of error is with merit.

{¶21} For the foregoing reasons, the judgment of the Warren Municipal Court is

reversed and this matter is remanded for further proceedings consistent with this opinion.

Costs to be taxed against the appellee.

CYNTHIA WESTCOTT RICE, J.,

JOHN J. EKLUND, J.,

concur.

Case No. 2022-T-0018