by Randall Hill
My friend "G" helped her daughter purchase a used vehicle from Pappas Toyota in St. Peters, MO, but now suspects the dealer committed fraud. Although "G" gave me permission to tell her story as a teachable moment; I'm not using "G's" name or her daughter's because "G" is a law enforcement officer.
These teachable moments are offered to provide our readers with real-life case situations that provide facts and analysis and possible remedies for common legal situations.
Facts and Background
On Monday, February 20, 2023, "G" sent her 19-year-old daughter, "T", to Pappas Toyota to test drive a 2013 Nissan Pathfinder that "G" saw online. "G" was unable to go with her daughter because "G" was working an extreme amount of overtime at that point. "G," asked me to accompany her daughter because "T" was nervous to go by herself.
After the test drive, "T" and I sat down with the salesperson to discuss preliminaries, and after several phone calls back and forth to "G", "G" took over negotiations with the salesperson over the phone. "G" was assured over the phone by the salesperson that the Pathfinder had no known issues, had gone through an extensive vehicle inspection process, had been state inspected, was a solid vehicle, and should provide reliable and trouble-free transportation for some time. In fact, the dealer stayed fairly firm on the price because the vehicle was in exceptional condition. The Pathfinder was purchased on February 24th.
On or about March 27th, Pappas was called because the Pathfinder's engine light came on and the vehicle was shaking when driving 40 mph or higher. An appointment was set for April 4th, Pappas performed a diagnostic test and replaced the "Plenum Gasket, Ignition Coil, and spark plugs". Pappas assured "G" and "T" that this would solve the problem and they spent $726 for that service. A few days later, the engine light came back on and when "T" called Pappas to report it, the service department told her there was no problem and that the engine light just needed to be reset. Pappas told "T" to look in the owner's manual for instructions on how to reset the light.
On July 12th, the Pathfinder stalled on Halls Ferry near Lindbergh and had to be towed about two blocks to Ronsick Auto Care. They performed a diagnosis on July 13th and determined that the entire Catalytic Converter System had failed. They further explained that the system includes three Catalytic converters and that it takes a substantial amount of time for the entire system to fail. Since the system includes three catalytic converters, the estimate to replace including labor was over $5,000. When "G" explained that they had just purchased the vehicle in February, Ronsick's professional opinion was that the vehicle was sold with a bad catalytic converter system.
On Thursday, July 13th, "T", phoned the salesperson at Pappas Toyota who sold the vehicle and explained the situation, and asked if Pappas would fix or allow the Pathfinder to be exchanged for another vehicle but was told Pappas couldn't do anything since she hadn't purchased an extended warranty.
On Friday, July 14th, a letter was faxed to Pappas, detailing the information above and that "G" and "T" believed the Pathfinder's conditions were preexisting prior to their purchase. Fraud was suspected because as automotive experts, Pappas knew or should have known the actual condition of the Pathfinder but did not disclose and maybe even illegally reset the engine check light to conceal the defects.
G & T chose to purchase from Pappas because they believe it to be a reputable and honest business and they were trying to avoid running into this sort of situation from a disreputable used car dealer. They demanded that Pappas make them whole and repair the Pathfinder at no cost per the Missouri Merchandizing Practices Act RSMo 407.020 et al. The following was stated in the letter to Pappas:
"This is a good faith attempt to resolve this issue, however, If we do not hear from Pappas by 2 pm today, Friday, July 14th, we will take the following actions.
- My daughter, several of her friends, and family members are preparing an informational picket to take place on the public areas outside of Pappas Toyota.
- Complaints will be filed with the Missouri Attorney General's Office and published on social media and sites such as the Better Business Bureau, Yelp, Consumer Affairs, and others.
- A copy of this letter and a short press release will be sent to local media outlets.
Pappas Toyota Non-Responsive
G received no response from Pappas Toyota, since they didn't attempt to contact her, she filed complaints with the Missouri Attorney General's Office and several consumer complaint sites Friday evening. Because of the weather forecast, T canceled a planned information picket for Saturday, July 15th, however, she may reschedule later.
G is now researching and organizing documents and plans to file a small claims suit against Pappas Toyota. This page will be updated when additional information about the outcome is available.
Fraud and Lawsuit Analysis
In Missouri courts, small claims are limited to $5,000, see Missouri Rules for Small Claims Court and the Missouri Small Claims Court Handbook (PDF). According to the fee schedule for St. Charles Circuit Court, the filing fee will be $20.50. Because their claim is potentially greater than $5,000, G & T are also considering filing a standard civil lawsuit. RSMO 402.025 allows for possible reimbursement of attorney fees and punitive damages. If a civil vs small claims suit is filled, G & T will seek to recover the $729 spent in April for repairs, the cost to replace the catalytic converter system, lost time from work, car rental reimbursement, any other fees and cost associated with the action including attorney fees and punitive damages.
Missouri Revised Statute 400.2-314 provides an implied warranty of merchantability and the Missouri Supreme Court ruled in Herbert v. Harl, 757 SW 2d 585 that the statute applies to car dealers. A “warranty of merchantability” means the dealer promises the car will do what it's supposed to do: it will run. However, there are exclusions under RSMO 400.2-316, if the sales contract contains the term "as-is" the warranty of merchantability does not apply.
Pappas Toyota will most likely deny liability by stating that the vehicle was sold "as-is", however, that argument does not exempt them from liability under Missouri Merchandizing Practices Act RSMo 407.020 et al.
The Federal Trade Commission’s (FTC) Used Car Rule requires dealers to display a Buyers Guide in every used car they offer for sale and to give it to buyers after the sale. Pappas Toyota did not display a Buyers Guide when T and I test-drove the vehicle, however, they did have her sign one at the time of sale. Before and immediately after the test drive, I took several photos of the entire vehicle to record the condition and show to G, after reviewing those photos, I noticed there was no buyer's guide.
In the photo above, there is a sign in the building's window advertising Pappas Premium, which is a peace of mind pledge. The following statement appears on the PappasToyota.com Pappas Premium page, "A pre-owned vehicle from Pappas Toyota isn’t an ordinary used car. After passing a rigorous inspection and reconditioning process, it’s added to our lot with Pappas Premium, a nationwide 2-Year/100,000-Mile Limited Powertrain Warranty, with 24-Hour Roadside Assistance, One Year of Tire Hazard Protection, and more!" There is no disclaimer stating that some vehicles are excluded. Any reasonable person reading this statement would assume that this applies to all used vehicles sold at Pappas.
This assurance is one of the reasons G sent her daughter to Pappas. At the time of publication, T's 2013 Nissan Pathfinder according to CarFax has a retail value of $10,220, a private party value of $7,700, and a trade-in value of $4,400. Let's assume Pappas purchased the Pathfinder for around $4,700. The reason a customer would then respond to Pappas' advertised selling price of $10,700 is that it is expected that Pappas inspected and reconditioned the vehicle as stated in the Pappas Premium pledge. Otherwise, customers could simply purchase the vehicle from a private seller and save thousands of dollars.
Under the Missouri Merchandising Practices Act, false pretense, false promise, misrepresentation, unfair practice, or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce is an unlawful act. Pappas' salesperson mentioned how their used vehicles undergo an extensive inspection which matches with the Pappas Premium statement of a "rigorous inspection and reconditioning". A dealer has an affirmative duty to tell you certain “material facts” about a vehicle, whether or not you ask for them. This includes disclosing if a vehicle was a “lemon law” buyback, a prior rental, a prior salvage, or in an accident requiring major repair work such as frame or suspension damage.
Pappas Toyota is the expert here. It is reasonable to expect that if the vehicle needed to have the "Plenum Gasket, Ignition Coil, and spark plugs replaced, the "rigorous inspection" should have identified those issues prior to the sale. It is also reasonable that Pappas should have known that the catalytic converter system was bad. How many of the three catalytic converters have to fail before the engine light comes on?
According to Automotive Diagnostic Repair Help: "As a rule, when converter efficiency drops below 90 to 95 percent, it will set off a catalyst efficiency code. A vehicle with an illuminated Check Engine Light and ANY trouble codes will NOT pass an emissions check. A fouled converter may or may not cause an increase in backpressure, but eventually, it might if carbon starts to build in the honeycomb restricting the passageways. The important point to remember here is that converters don't just foul or plug up for no good reason. There is always an underlying cause which must be diagnosed and corrected before the problem can be eliminated. Identifying a plugged or fouled catalytic converter is only half the fix. Why? Because replacing a bad converter will only solve the current problem temporarily. If the underlying cause of the converter failure is not also diagnosed and repaired, sooner or later the new converter will likely suffer the same fate."
According to RepairSmith.com and several other sites, a vehicle normally can be driven indefinitely with a bad catalytic converter. A clogged catalytic converter can only prohibit you from driving your automobile in the most severe circumstances. According to PerformanceMuffler.net, "A failing car’s catalytic converter will create a significant backpressure that lowers your car’s engine performance. Whenever this happens, you will notice your car shaking frequently".
On February 15th, the date that Pappas Toyota performed the emissions inspection, the vehicle mileage was 143,287. On April 4th when Pappas performed the repairs, the mileage was 145,283. The mileage recorded by Ronsick on July 12 was 149,069. The Pathfinder was driven less than four thousand miles since Pappas supposedly took care of the vehicle’s issues.
When a small claims lawsuit is filed, the plaintiff (the person suing), bears the burden of proof and must convince a judge. This requires the plaintiff to put forth evidence in the form of witness testimony, documents, or objects. There are four elements that need to be proven to win a Missouri Merchandizing Practices Act suit.
- (1) the plaintiff purchased, or attempted to purchase, merchandise (which includes services) from a defendant in the state of Missouri;
- (2) the plaintiff’s purchase of, or attempt to purchase, merchandise (or services) was for personal, family, or household purposes;
- (3) the plaintiff suffered an ascertainable loss of money or property; and
- (4) the plaintiff’s ascertainable loss was a result of an action by a defendant that has been declared unlawful by § 407.020 RSMo.
In all likelihood, the condition of the plenum gasket, ignition coil, and spark plugs would have resulted in a check engine light prior to the sale. Additionally, since the catalytic converter was so bad that it failed just three months later indicates there were issues for a while even before G& T purchased it. Remember, even the mechanic that the car was towed to agrees that this was a preexisting condition, so why didn't Pappas catch this, was it fraud or negligence? Either way, it's a material fact that Pappas should have known that wasn't disclosed. However, a vehicle with a catalytic converter so bad that it causes the car to stall shouldn't have passed inspection in the first place which increases the likelihood fraud was involved. It's highly probable a judge will agree.
If you are a former or current employee of Pappas Toyota, a customer, or someone who has helpful information concerning this case contact us.