Rivers v. BMW of North America, Inc.

449 S.E.2d 337, 214 Ga. App. 880, 94 Fulton County D. Rep. 3362, 1994 Ga. App. LEXIS 1090

• Court: Court of Appeals of Georgia
• Decided: October 6, 1994
• Docket: A94A1859
• Status: Published

Opinion

McMurray, Judge.

Pennelope Rivers (plaintiff) brought this tort action against defendants BMW of North America, Inc. (“BMW-NA”), Charles Evans BMW, Inc. (“Charles Evans”), and others, alleging intentional frauc and deceit, reckless misrepresentation, and suppression of materia facts, 1 for selling her a new car which had been damaged by acid rail and repainted. Specifically, the complaint alleged that in “February 1990, Plaintiff purchased a 1990 BMW 535i automobile . . . from th( Defendant Charles Evans BMW, Inc. . . . [which vehicle was] distrib uted by the Defendant BMW of North America, Inc.[; that at] al times prior to the sale of the vehicle to the Plaintiff, the Defendants represented that the vehicle was a brand new vehicle . . . [but tha such] . . . representations by the Defendants were false and the De fendants knew them to be false at the time of their making.” Alterna tively, defendants made false statements “without knowledge of th< true facts . . . [and] recklessly without regard to ascertaining the trutl or falsity of those representations.” 2 Defendants “failed to disclosi the fact that this vehicle had been damaged [in transit by acid rain and repainted prior to selling it to [her].” As a result of defendants failure to disclose this material fact, plaintiff “financed the purchase price of approximately $30,000. ...” She claimed as damages th “[diminution in value of the car,” as well as punitive damages, attor ney fees, and the costs of litigation. In their respective answers, de fendants admitted only that BMW-NA distributed the vehicle plaintiff purchased from Charles Evans and denied all other allegations. After discovery, defendants jointly moved for summary judgment “on all remaining counts of Plaintiffs complaintf, . . . contending that they were] entitled to judgment as a matter of law both by the merger clause and by the transit and/or storage damage disclosure contained in the Buyer’s Order and Bill of Sale.”

In support of their motion, defendants relied on the following undisputed facts: when the car plaintiff purchased as “new” arrived in the United States its exterior paint and finish had been marred “by exposure to environmental conditions during transit and/or storage[; that, at the direction of BMW-NA,] the affected surfaces were refinished according to factory specifications by BMW trained technicians, using BMW approved and installed equipment [at the BMW-NA Vehicle Preparation Center in Brunswick, Georgia, before shipment to a dealership; and that plaintiff] did not ask anyone at Charles Evans whether any repairs were performed on the Automobile, despite the fact that the possibility of transit and/or storage damage was expressly disclosed in the Buyer’s Order.” Defendants argued that plaintiff had affirmed the contract after knowledge of the alleged fraud by failing to rescind the contract. Plaintiff responded, urging that factual issues existed “as to whether the disclaimer and the buyer’s order negates Defendants’ affirmations that the car was new, whether the Plaintiff failed to exercise due diligence as a matter of law and whether the Plaintiff adopted the disclaimer.”

The trial court granted defendants’ motion for summary judgment, concluding that plaintiff had failed to dispute the factual assertions of the defendants and that due to the disclosure of the possibility of transit damage contained in the Buyer’s sales order “no misrepresentation occurred as a matter of law.” The trial court further concluded that plaintiff “failed to exercise due diligence in ascertaining the alleged falsity . . .” of the description of the car. This appeal followed. Held:

1. In related enumerations, plaintiff contends the trial court erred in “ruling as a matter of law that [her claims] are barred . . . [and that she] failed to exercise due diligence.”

Traditionally, where a buyer is induced to enter into a contract for the sale of goods by the fraud of the seller, upon discovery of the fraud he has an election of remedies. See Bill Spreen Toyota v. Jenquin, 163 Ga. App. 855, 856 (1) (294 SE2d 533). “One of such remedies is to rescind the contract, and another is to affirm the contract and sue for damages for the fraud. [Cits.]” Tuttle v. Stovall, 134 Ga. 325, 326 (1), 328 (67 SE 806). The General Assembly did not intend “to erase the tort remedy for fraud and deceit with the adoption of the Uniform Commercial Code in Georgia.” City Dodge v. Gardner, 232 Ga. 766, 769 (208 SE2d 794). Generally, such “tort cases canno be determined by the provisions of the contract sought to be re scinded but must be determined as a question of fact by the jury. It i¡ inconsistent to apply a disclaimer provision of a contract in a tor action brought to determine whether the entire contract is invalid be cause of alleged prior fraud which induced the execution of the con tract. If the contract is invalid because of the antecedent fraud, ther the disclaimer provision therein is ineffectual since, in legal contem plation, there is no contract between the parties.” City Dodge v Gardner, 232 Ga. 766, 770, supra.

In the case sub judice, BMW-NA and Charles Evans each relief on the following language contained in the sales agreement signed h plaintiff to show that no misrepresentation was made at all becausi no material fact was concealed: “5. Purchaser acknowledges that ther< may have been certain transit and or storage damage to the vehicb sold by the Seller herein [defendant Charles Evans] and Purchase: hereby releases the Seller for any and all claims arising out of sucl transit damage and or storage damage. Exceptions are noted on iron of order under SPECIAL NOTICE.” Applying Gen. Motors Corp. v. Green, 173 Ga. App. 188, 191 (2) (325 SE2d 794) by analogy, the tria court concluded that no fraudulent misrepresentation occurred be cause the possibility of transit-related damage was expressly dis closed. In Green, “the manufacturer-defendant's ‘new’ car warrant; specifically disclosed the possible existence of factory damage am factory repairs.” (Emphasis in original.) Macon Chrysler-Plymouth v. Sentell, 179 Ga. App. 754 (1), 755 (347 SE2d 639). That is, in Green the defendant manufacturer was providing a new car warranty bu limiting the definition of “new” so that a breach of warranty woul< not arise out of the bare circumstance that a manufacturing flaw hal been noticed and corrected before the vehicle entered the stream o commerce. In Green, “uncorrected factory defects and damage, in eluding defective factory-repairs to the damaged parts, would be cov ered by the terms of [the manufacturer’s] express repair war ranty. . . .” 173 Ga. App. 188 (1), 190, supra.

In the case sub judice, however, neither the defendant dealershi Charles Evans nor the defendant distributor BMW-NA sought to disj close the fact that BMW-NA had actually repaired transit damag while at the same time extending a warranty which covered negli gence in those repairs. Instead, this sales agreement sought to dig claim all warranties, express or implied, employing in bold text th language “SOLD AS IS.” Nevertheless, defendants submit as conch sive proof that no material fact was concealed the circumstance the this sales agreement mentions on the reverse side in the least conspic uous print employed the bare possibility that transit or storage dan age might have been sustained. However, unlike the provision in Get Motors Corp. v. Green, 173 Ga. App. 188 (1), supra, this clause does not warrant that if there had been such damage it would have been repaired by authorized entities according to factory standards. This disclaimer does not mention the distinct possibility of damage from acid rain fallout or “exposure to environmental conditions,” although there is evidence of record that such damage was foreseen. According to a 1986 Service Information Bulletin: “Paint spotting as a result of [acid rain] fallout is not related to a defect in paint materials or workmanship. For this reason, claims arising from this condition are not considered to be warranty-related.” As the only warranty extended in the case sub judice is the express warranty created by the description of the car as “new” versus “demo” or “used,” the case of Gen. Motors Corp. v. Green, 173 Ga. App. 188, 191 (2), supra, is distinguishable in material respects. That case does not demand a finding that plaintiff in this case has no actionable claim of fraud for the misrepresentation of her car as “new” when in fact it had undergone repairs to correct acid rain damage to the factory finish. Whether the disclaimer relied on here is sufficient to excite the attention of a buyer of ordinary prudence “must be determined as a question of fact by the jury.” City Dodge v. Gardner, 232 Ga. 766, 770, supra. See also OCGA § 23-1-17; Dollar v. Dollar, 214 Ga. 499 (105 SE2d 736). The trial court erred in concluding that the disclaimer in this sales contract was sufficient disclosure of the acid rain damage actually sustained and actually repaired, as a matter of law.

2. The trial court further erred in concluding that the evidence showing plaintiff was aware of a problem with the paint job shortly after she accepted the vehicle demonstrated as a matter of law that she failed to exercise due diligence on her own behalf. There is evidence of record (from a similar case against BMW-NA in Alabama) where plaintiff testified that when she took the car back to Charles Evans, “[t]hey told me that the car had not been repainted.”

“It may be considered an intrinsic quality of a car sold as new that it has been neither damaged nor used to any significant extent. Accord, Rustin Oldsmobile v. Kendricks, 123 Ga. App. 679 (2) (182 SE2d 178) (1971); Gem City Motors v. Minton, 109 Ga. App. 842 (137 SE2d 522) (1964).” Horne v. Claude Ray Ford Sales, 162 Ga. App. 329 (1) (290 SE2d 497). See also Macon Chrysler-Plymouth v. Sentell, 179 Ga. App. 754 (1), 755, supra. Compare Henderson v. Martin Burks Chevrolet, 183 Ga. App. 868, 869 (1) (360 SE2d 430). In the whole court case of Bill Spreen Toyota v. Jenquin, 163 Ga. App. 855, 861 (5), supra, this court approved the following jury instruction as a correct statement of the law: “ ‘Concealment of material facts may amount to fraud when direct inquiry is made, and the truth evaded, or where the concealment is of intrinsic qualities of the article which the other party by the exercise of ordinary prudence and caution could not discover.’ ” With regard to the falsity of a represen tation of an intrinsic quality of a motor vehicle, it was also held thai to be actionable, “the misrepresentations must be made with the in tention of deceiving another, and the defendant at the time must either know they were false or what the law regards as the equivalem of knowledge. McLendon v. Galloway, 216 Ga. 261 (2) (116 SE2d 208 (1960). What one may not do is to turn his head away and blind him self to the truth or falsity of a condition which he recklessly repre sents to his own advantage. Such refusal to know, like admittec knowledge, involves actual, moral guilt. [Cits.]” (Emphasis in original.) Bill Spreen Toyota v. Jenquin, 163 Ga. App. 855, 858 (3), supra

In the case sub judice, we are shown no evidence of record tha BMW-NA took any steps to alert the dealership that acid rain repair! had actually been performed. Nor is there evidence of any procedan whereby the dealership inquired whether foreseeable transit damag< had actually been sustained. “The acid rain damage to the origina finish had been painted over. [If done properly, the repair would hav< been undetectable to the untrained eye.] ... It cannot be said tha due diligence in buying an automobile would require a prospectivi purchaser to make such an inspection as possibly would have dis closed this latent damage. [Cit.] This would seem to be especially tru< where, as here, the purchaser does inquire about the [subsequent!: observed flaws] in the automobile’s finish and is told that [her car ha< not been repainted].” Macon Chrysler-Plymouth v. Sentell, 179 Ga App. 754 (1), 755, supra. In the case sub judice, there is “ample evi dence to raise a jury question as to whether the defendant [distributor, BMW-NA wilfully concealed what it] knew, or [whether the deal ership, Charles Evans,] recklessly failed to ascertain the truth o falsity, of the representation it made as to the [intrinsic quality] o the merchandise sold.” Bill Spreen Toyota v. Jenquin, 163 Ga. App 855, 858 (3), 860, supra.

3. In order to prevail on summary judgment, the defendant-mo vant is required to pierce the allegations of the complaint or other wise show the absence of a triable issue as to an essential element o the nonmovant’s case and must further establish as a matter of la\ that the plaintiff could not recover under any theory fairly draw from the pleadings and the evidence. See Thompson v. Huckabe Auto Co., 190 Ga. App. 540, 541 (1) (379 SE2d 411); Lau’s Corp. v. Haskins, 261 Ga. 491, 495 (4) (405 SE2d 474). “ ‘A suit for damage by the defrauded party for the fraud committed is not a suit for th violation of the contract, but is one for a tort and involves affirmanc of the contract, and he may keep the fruits of the contract and mair tain an action for the damages suffered by reason of the fraud.’ ” Gem City Motors v. Minton, 109 Ga. App. 842, 845 (1c), 846, supra. Con pare Crews v. Cisco Bros. Ford-Mercury, 201 Ga. App. 589 (1), 590 591 (411 SE2d 518). “Although there is included on the retail sales contract a paragraph which specifically disclaims any express or implied warranties by the seller [Charles Evans], [plaintiff is entitled to rely] on OCGA § 11-2-313 [(1)] (b). It provides that an express warranty is created by the seller upon ‘(a)ny description of the goods which is made part of the basis of the bargain. . . .’ The warranty is that ‘the goods shall conform to the description.’ [In the case sub judice, Charles Evans’] retail sales contract described the car as ‘new.’ The specific disclaimer [of express or implied warranties] will not negate that affirmative statement. Century Dodge v. Mobley, 155 Ga. App. 712, 713 (2) (272 SE2d 502) (1980).” Thompson v. Huckabee Auto Co., 190 Ga. App. 540, 541 (1), 542, supra. The “SOLD AS IS” language also is ineffective to negate the express warranty that the car is “new.” See City Dodge v. Gardner, 232 Ga. 766, 767, supra. “Accordingly, the case [against the defendant seller, Charles Evans, should] also have gone to the jury on the theory of breach of express warranty.” Horne v. Claude Ray Ford Sales, 162 Ga. App. 329, 330 (4), supra.

Decided October 6, 1994 Reconsideration denied October 19, 1994 — Bird, Ballard & Still, William Q. Bird, for appellant. Powell, Goldstein, Frazer & Murphy, E. A. Simpson, Jr., Linda G. Birchall, Christopher P. Galanek, for appellees.

Judgment reversed.

Pope, C. J., and Smith, J., concur.

1 A fourth count alleging a violation of the Georgia Pair Business Practices Act, OCG. § 10-1-390 et seq. was dismissed as time-barred.

2 The parties agree that the duty to disclose known repairs established at OCGA § 40-1 5 is not applicable to this sale.