Simon Chevrolet-Buick, Ltd. v. R.I. Dep't of Admin.
| Decision Date | 07 January 2013 |
| Docket Number | C.A. No. PC 2005-5913,c/w C.A. No. PC 2005-6375 |
| Parties | SIMON CHEVROLET-BUICK, LTD. v. RHODE ISLAND DEPARTMENT OF ADMINISTRATION; RHODE ISLAND MOTOR VEHICLE DEALER'S LICENSE AND HEARING BOARD; AND LISA SHMARUK SIMON CHEVROLET-BUICK, LTD. v. RHODE ISLAND DEPARTMENT OF ADMINISTRATION; RHODE ISLAND MOTOR VEHICLE DEALER'S LICENSE AND HEARING BOARD; AND DIANA MONGEON |
| Court | Rhode Island Superior Court |
DECISION
This matter arises before this Court from two consolidated appeals from decisions of the Rhode Island Department of Administration (the Department), in which the Department affirmed two decisions of the Rhode Island Motor Vehicle Dealer's License and Hearing Board (the Board). In those decisions, the Board found that Appellant Simon Chevrolet-Buick, Ltd. (Simon Chevrolet) had engaged in unconscionable business practices by willfully failing to perform written agreements with Lisa Shmaruk (Shmaruk) and Diana Mongeon (Mongeon) in violation of G.L. 1956 §§ 31-5-11(5) and (10). The Board therefore ordered Simon Chevrolet to make all necessary repairs to Shmaruk's vehicle at no cost, and further, to reimburse Mongeon for the repairsto her vehicle. Simon Chevrolet appealed, and the cases were consolidated. Jurisdiction is pursuant to § 31-5-2.1(d) and G.L. 1956 § 42-35-15.
Shmaruk and Mongeon each purchased used vehicles from Simon Chevrolet in 2001. (Appellee's Ex. 2: Decision of the Board, Lisa Shmaruk v. Simon Chevrolet-Buick, Ltd., Case No. 4, Finding of Fact ¶ 1 [hereinafter Shmaruk Board Decision]; Appellee's Ex. 2: Decision of the Board, Diane Mongeon v. Simon Chevrolet-Buick, Ltd., Case No. 3, Finding of Fact ¶ 1 [hereinafter Mongeon Board Decision].) When Shmaruk and Mongeon purchased their vehicles, they each also purchased SmartChoice Extended Service Contracts ("Contracts"). (Shmaruk Board Decision, ¶ 2; Mongeon Board Decision, ¶ 2.)
The Service Contracts1 each provide that "the Agreement holder, apply to the Named Selling Dealer [Simon Chevrolet] for an extended service agreement covering the described vehicle." (Appellant's Ex. A at 1.) Beneath that statement, and in the middle of a block of fine print, the Contract also reads: "Further, I acknowledge and agree that the liabilities of this extended service agreement are with SC&E Administrative Services, Inc. . . . ." In addition, a second statement disclaiming liability, which is buried in aparagraph written in all capitalized fine-print reads: "All obligations and liabilities for repairs covered by this extended service agreement are those of SC&E Administrative Services Inc." Id.
Nonetheless, the Contract placed certain obligations on the Dealer, and made the Dealer the primary contact. Simon Chevrolet's address was listed on the front of the Service Contracts. Id. If the buyer was in need of repairs and within forty miles of Simon Chevrolet, the Service Contract required the buyer to deliver his or her vehicle to the Dealer's repair facility. Id. at 3. Before June 2003, acting under the agreement, Simon Chevrolet performed repairs worth approximately $1402 on Shmaruk's vehicle and approximately $1170 on Mongeon's vehicle. (Shmaruk Board Decision at ¶ 13; Mongeon Board Decision at ¶ 13.)
Simon Chevrolet also executed the Contracts and retained a substantial commission for doing so. A representative of Simon Chevrolet signed the Contracts. (Shmaruk Board Decision, ¶ 18.) Neither Shmaruk's nor Mongeon's contract was signed by a representative of SmartChoice, and the contracts did not denote that the signatory from Simon Chevrolet was acting as an agent of SmartChoice. Further, of the $1595 paid for Shmaruk's Service Contract, Simon Chevrolet retained $624 as commission. Of the $1264 paid for Mongeon's Service Contract, Simon Chevrolet retained more than half— $687—as commission. (Shmaruk Board Decision, ¶ 3; Mongeon Board Decision, ¶ 3.) There is no evidence that Simon Chevrolet disclosed the amount it retained as commission on each contract, or that Mongeon or Shmaruk were aware that the sum paid to Simon Chevrolet was being transmitted to a third party. There is also no evidence that Simon Chevrolet orally disclosed its disclaimer of liability under the service contract.
On June 13, 2003, less than two years after Mongeon or Shmaruk had purchased extended service contracts, SmartChoice's insurer entered into receivership off-shore. (Shmaruk Board Decision, ¶ 5; Mongeon Board Decision, ¶ 5.) As a result of its insurer's insolvency, SmartChoice ceased all operations. (Shmaruk Board Decision, ¶ 5; Mongeon Board Decision, ¶ 5.) Simon Chevrolet made no attempt to individually notify customers who had purchased the SmartChoice Service Contract that their contracts were ineligible as a result of the closure of SmartChoice, as this would entail contacting 300 to 400 individuals. (Shmaruk Board Decision, ¶ 14; Mongeon Board Decision, ¶ 14.)
After SmartChoice's bankruptcy, both Shmaruk and Mongeon brought their vehicles to Simon Chevrolet for repairs. (Shmaruk Board Decision, at ¶ 6; Mongeon Board Decision, ¶ 6.) Simon Chevrolet informed Shmaruk and Mongeon that SmartChoice had ceased operating and their Contracts were invalid, and refused to perform the necessary repairs under the Contracts. (Shmaruk Board Decision, ¶ 7; Mongeon Board Decision, ¶ 8.) Although Simon Chevrolet offered both Shmaruk and Mongeon a small sum to be credited toward the repairs of their vehicles, neither Shmaruk nor Mongeon accepted. (Shmaruk Board Decision, ¶ 8; Mongeon Board Decision, ¶ 9.)
Subsequently, Shmaruk and Mongeon filed complaints with the Board seeking to have the Contracts honored: Shmaruk sought to have the necessary repairs made to her vehicle, and Mongeon sought reimbursement for the expenses incurred in repairing her vehicle. (Shmaruk Board Decision, ¶ 10; Mongeon Board Decision, ¶ 10.) The Board conducted hearings to determine whether Simon Chevrolet violated §§ 31-5-11(3), 31-5-11(5), 31-5-11(10), or 31-5-11(11) by refusing to honor the Service Contracts sold to Shmaruk and Mongeon. (Shmaruk Board Decision at 1; Mongeon Board Decision at 1.)In addition, the Board assessed whether Simon Chevrolet was obligated under the Service Contracts to perform certain repairs on Shmaruk's motor vehicle and to reimburse Mongeon for certain repairs allegedly covered under the Contract. (Shmaruk Board Decision at 1; Mongeon Board Decision at 1.)
The Board found that Mongeon had a valid service contract when repairs were made, and that Shmaruk had a valid service contract when the vehicle failed. Although the Board did not explicitly find that Simon Chevrolet was a party to the Contracts, it nonetheless concluded that Simon Chevrolet had "willfully failed to perform a written agreement with a buyer of a motor vehicle under § 31-5-11(5)." (Shmaruk Board Decision at 3; Mongeon Board Decision at 3.) Because of Simon Chevrolet's willful violation of § 31-5-11(5), the Board found it liable under § 31-5-11(10) for "having indulged in any unconscionable practice relating to business as a motor vehicle dealer." See § 31-5-11(10). The Board further found Simon Chevrolet responsible for the repairs to the vehicles and ordered it to fully reimburse Mongeon $2570.83 for the costs of repairs to her vehicle and to repair the power steering reservoir, automatic temperature control, and oil pressure to Shmaruk's vehicle at no cost. Id. It did so by reasoning that most car buyers reading the agreement, "would have reasonably believed that [Simon Chevrolet] was not just a mere signatory" but also "jointly liable for the delivery of the services" for which they were contracting. Id.
In reaching this conclusion, the Board relied on the overall impression of the circumstances and provisions of the Contract which "led consumers to believe that [Simon Chevrolet] was their primary and initial contact for any questions or problems regarding the service contract." Id. The Board further found that the "terms of the[Contract] create[d] ambiguities and doubts which, by operation of settled local law, must be construed against the party relying on the contractual terms to avoid liability and construed in favor of avoiding injustice or inequity." Id.
On June 24, 2005, Simon Chevrolet appealed the Board's decision to the Department pursuant to § 31-5-2.1(d).2 Following the appeals, Simon Chevrolet sent letters to the Department requesting hearings on both matters. The Department denied Simon Chevrolet's request for subsequent hearings, and affirmed the decisions of the Board. (Appellee's Ex. 3, Decision of the Department, Lisa Shmaruk v. Simon Chevrolet-Buick, Ltd. [hereinafter Shmaruk Department Decision]; Appellee's Ex. 3, Decision of the Department, Diane Mongeon v. Simon Chevrolet-Buick, Ltd. [hereinafter Mongeon Department Decision.])
In those decisions the Department found that the Contracts designated Simon Chevrolet as the primary contact throughout the Contracts and further noted that Simon Chevrolet had executed the Contracts with the customers. (Shmaruk Department Decision at 5; Mongeon Department Decision at 5.) Moreover, the Department found that because Mongeon and Shmaruk had paid Simon Chevrolet, they had reasonably believed that Simon Chevrolet would comply with all the provisions of the Contracts. (Shmaruk Department Decision at 5; Mongeon Department Decision at 5.) In addition, the Department found that Simon Chevrolet was obligated to "act in good faith," and its failure to do so constituted unconscionable practice under § 31-5-11(10). Id. at 5-6. Simon Chevrolet timely filed an appeal to this Court pursuant to §§ 31-5-2.1(d) and 42-35-15, arguing that the decisions of the Board and Department are clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record.
Under § 42-35-15, "[a]ny person, . . . who has exhausted all administrative remedies available...
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