Nieto v. Pence, 76-3983

• Decision Date: 21 August 1978
• Docket Number: No. 76-3983,76-3983
• Citation: 578 F.2d 640
• Parties: Jenny NIETO, a/k/a Jenny Nieto Soto, Plaintiff-Appellant, v. Bill PENCE, Individually and d/b/a Import Motor Co., Inc., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 640

578 F.2d 640

Jenny NIETO, a/k/a Jenny Nieto Soto, Plaintiff-Appellant, v. Bill PENCE, Individually and d/b/a Import Motor Co., Inc.,

Defendant-Appellee.

No. 76-3983.

United States Court of Appeals, Fifth Circuit.

Aug. 21, 1978.

Miguel Solis, El Paso, Tex., for plaintiff-appellant.

Bill Pence, pro se.

Appeal from the United States District Court for the Western District of Texas.

Before GODBOLD, SIMPSON and MORGAN, Circuit Judges.

GODBOLD, Circuit Judge:

Plaintiff in this case seeks to invoke civil liability under the Motor Vehicle Information and Cost Savings Act, 15 U.S.C. §§ 1981-1991, against an automobile dealer who sold her a motor vehicle and did not have actual knowledge, but may have had constructive knowledge, that the odometer reading on the vehicle was less than the number of miles it actually had traveled, and who failed to disclose that the mileage was unknown. The district court held that actual knowledge was required for liability. We conclude that constructive knowledge is sufficient, and reverse.

In 1975 plaintiff purchased in Texas from defendant, ¹ used car dealer or dealers, for $600, a 10-year-old pickup truck with an odometer reading of 14,736 miles. Pursuant to the Act, defendant furnished to plaintiff an odometer mileage statement disclosure form. The Act requires that, pursuant to rules promulgated by the Secretary of Transportation, any transferor must give the following written disclosure to the transferee in connection with the transfer of ownership of a motor vehicle:

(1) Disclosure of the cumulative mileage registered on the odometer.

(2) Disclosure that the actual mileage is unknown, if the odometer reading is known to the transferor to be different from the number of miles the vehicle has actually traveled.

15 U.S.C. § 1988(a). The Act also provides,

It shall be a violation of this section for any transferor to violate any rules under this section or to knowingly give a false statement to a transferee in making any disclosure required by such rules.

15 U.S.C. § 1988(b).

Defendant stated on the disclosure form that the odometer reading at the time of sale was 14,736 miles. Defendant did not check the box on the form that says: "I further state that the actual mileage differs from the odometer reading for reasons other than odometer calibration error and that the actual mileage is unknown." Defendant had purchased the truck from another used-car dealer who certified the odometer reading at the time of transfer as 14,290 miles and did not state that the actual mileage was unknown. That dealer had bought the truck from another dealer who had certified the odometer reading at the time of transfer at 14,290 miles and had not stated that the actual mileage was unknown.

Plaintiff sued under 15 U.S.C. § 1989 which provides that:

"Any person who, with intent to defraud, violates any requirement imposed under this chapter shall be liable . . . ."

The district court found that defendant had no actual knowledge that the odometer reading differed from the actual mileage and also that defendant did not intend to defraud plaintiff. The court made no finding whether defendant had constructive knowledge that the odometer reading differed from the actual mileage. There was evidence tending to establish that defendant reasonably should have known that the odometer reading differed from the actual mileage. The odometer reading was very low for a ten-year-old truck, and defendant Pence admitted he would be suspicious of an odometer reading of 14,000 miles on a truck that old. Pence had been in the auto business approximately 12 years.

The legislative history indicates that a transferor who lacks actual knowledge that the odometer reading is incorrect may still have a duty to state that the actual mileage is unknown. The Senate Report addressed the very situation this case presents:

(Section 1988) makes it a violation of the title for any person "knowingly" to give a false statement to a transferee. This section originally allowed a person to rely completely on the representations of the previous owner. This original provision created a potential loophole, however. For example, a person could have purchased a vehicle knowing that the mileage was false but received a statement from the transferor verifying the odometer reading. Suppose an auto dealer bought a car with a 20,000 mile odometer verification but any mechanic employed by that auto dealer could ascertain that the vehicle had at least 60,000 miles on it. The bill as introduced would have permitted the dealer to resell the vehicle with a 20,000 mile verification. In order to eliminate this potential loophole the test of "knowingly" was incorporated so that the auto dealer with expertise now would have an affirmative duty to mark "true mileage unknown" if, in the exercise of reasonable care, he would have reason to know that the mileage was more than that which the odometer had recorded or which the previous owner had certified.

1972 U.S.Code Cong. & Admin.News pp. 3971-72. Thus defendant had a duty to disclose that the actual mileage was unknown if, in the exercise of reasonable care, he would have had reason to know that the mileage was more than that which the odometer had recorded or the previous owner had certified.

The legislative history makes clear that, if defendant had constructive knowledge that the odometer reading was incorrect, he violated § 1989. A separate question is whether defendant can be civilly liable for the violation. Because § 1989 requires intent to defraud, a violation does not automatically lead to civil liability.

Several district courts have considered whether a transferor can be civilly liable for a failure to disclose that a vehicle's actual mileage is unknown when he lacked actual knowledge that the odometer reading was incorrect. One district court has held that a transferor can be found to have had the requisite intent to defraud only if he had actual knowledge that the odometer reading was incorrect. Mataya v. Behm Motors, Inc., 409 F.Supp. 65, 69-70 (E.D.Wis.1976). Other district courts have held that a transferor may have intended to defraud even if he lacked actual knowledge that the odometer reading was incorrect. Pepp v. Superior Pontiac GMC, Inc., 412 F.Supp. 1053, 1055-56 (E.D.La.1976) (intent to defraud may be inferred from gross negligence); Jones v. Fenton Ford, Inc., 427 F.Supp. 1328, 1333-36 (D.Conn.1977) (intent to defraud inferred from recklessness); Kantorczyk v. New Stanton Auto Auction, Inc., 433 F.Supp. 889, 893 (W.D.Pa.1977) (intent to defraud found in reckless disregard); see Stier v. Park Pontiac, Inc., 391 F.Supp. 397 (S.D.W.Va.1975) (court held that...