What Could Possibly Go Right?

If you are a lawyer who works in the collector-car field, you get a lot of clients who are disappointed with cars they purchased from Internet ads. They aren’t all stories with unhappy endings, but they are a treasure trove of legal work. A recent victim, “Frank,” purchased a Porsche 930 from a dealer 2,000 miles away. The Turbo looked perfect in the many photos on the website, but Frank knew that little pictures can lie. So he called the dealer and spent a lot of time talking to the salesman about the car. Frank is a very experienced car guy, and he knows Porsches well. He asked all the right questions and got satisfactory answers every time. He was told that there was minor repaint work done on the tail, it was done in-house to a high standard, and the car was in exceptional overall condition.

Instant surprise

When the Porsche rolled off the transporter, Frank noticed right away that the taillight was hanging out. He then noticed some crash damage behind it. He expected the damage to be relatively minor and called the dealer. The dealer was apologetic and agreed to pay for the repairs. So Frank sent the Porsche to his favorite local body shop without any worries. As the body shop got into the repair, they found more and more trouble. Soon, they realized that the damage was quite extensive and had been very poorly repaired. The right rear was bent downward 1.25 inches and shifted to the left by 1.5 inches. That’s a lot of damage.

The story changes

Frank called the dealer several times, and he eventually spoke with the owner. The owner expressed embarrassment about the poor repairs, stating that they had sent the car to their best local repair shop, which had always done exceptional work for them. He agreed to take care of the repairs. Frank remembered, but didn’t mention the pre-purchase explanation that the “minor” bodywork had been done “in-house.” Frank kept the dealer apprised of the repair progress with photos and invoices as the work progressed. All seemed fine until the end — when the final bill of over $30,000 was presented. That was met with complete silence.

Now a Legal File

The lack of responsiveness made clear to Frank that he had become a Legal File. Frank contacted our office for help. The Porsche was misrepresented in two ways: • First, that the repairs had been made to a high standard and the car was in exceptional overall condition. • Second, that the damage was described as minor — when it was actually extensive. SCM readers know that extensive damage, no matter how “perfectly” it may have been repaired, results in a very substantially diminished value for the car. Like any astute SCM reader, Frank would never have purchased this car if he had known it had suffered extensive damage, regardless of its current condition. We consulted a lawyer and threatened legal action if the full repair costs were not reimbursed.

The state can help

At our suggestion, Frank also filed a complaint with the dealer’s state attorney general’s office. Most states have consumer protection statutes that define such misrepresentations as dealer fraud. These statutes usually allow the consumer to recover his attorney fees — and often allow enhanced damages. In many cases, the state’s enforcement agency will assist in pursuit of the claim. In this case, the attorney general’s office sent a second demand letter to the dealer insisting on full reimbursement to avoid fraud charges.

Pressure mounts

Simultaneous legal threats from a private lawyer and the attorney general’s office exert a lot of pressure on a car dealer. This dealer certainly felt the pressure — and succumbed to it in the end. But instead of paying the claim, he ran off in the middle of the night. At this writing, the dealer’s website is still up, but his telephone is disconnected. Now what?

Dealer bonds

Car dealers are required to post a bond to protect the public against this sort of fraud. When a customer has an unsatisfied claim against a car dealer, he can make a claim against the bonding company. The bonding company is required to satisfy the claim — up to the maximum liability amount of the bond. The bonding company then has to chase after the dealer to get back the money it put out on the claim. Unfortunately, there are two problems with this process. First, the required bond amount is often quite small in relation to the amount of money in a collector-car transaction. In this particular case, it was only $20,000. Second, bonds are generally subject to a first-come, first-served rule. The first claim gets paid in full before the second claim gets paid anything. Once the bond is exhausted, subsequent claimants get nothing. It is unusual for a business to go broke over a single claim, especially such a relatively small one. We doubted that we were the only claimant, and we expected to find that other claimants had already exhausted the bond. We were not surprised when that turned out to be correct.

A happier story

At about the same time, a first-time collector-car buyer contacted our office. He had located a Jaguar E-type Series I convertible for sale on the opposite end of the country. He had spoken with the seller at length, felt very comfortable with him, and liked the numerous photographs of the car that had been provided. He had agreed to pay a market-correct price for the car, which was fine if the car was in the condition represented. While our buyer thought this was a fair price, he recognized that it was a lot of money for him, and he didn’t want to get cheated. This is smart thinking. So he called our office for advice on the transaction (even smarter), and actually took our advice (refreshing!). He located a marque-expert inspector close to the seller, who inspected the car and gave him a detailed report that confirmed the condition of the Jaguar as being the same as described. So he bought it.

Straight to the shop

Since I was on a roll, I went for the whole enchilada and told this smart buyer this: “Look, I know you can’t wait to get into this car and drive it, but I strongly suggest that you be extra patient and send the car directly to an experienced Jaguar shop for a good once-over. These are 50-year-old cars, and even when they pass inspection, they may still not be completely right. You want your first drive to be perfect.” I was surprised when he said, “Okay, where should I send it?” I recommended Ed Grayson’s Consolidated Auto Works, my go-to Jaguar shop. Ed went through the car and fixed a few little things. Those little fixes made the car a lot better. The buyer is now thoroughly enjoying his first vintage-car experience. As an aside: Do you think our publisher reads his own magazine?

Eyes make the difference

To reconcile these two stories, we only have to recognize that there is no substitute for laying experienced eyes on a car. Pictures just don’t tell the story. You have to actually look at the car, and it really helps a lot if you know what you’re looking at. By far, the best strategy is to be present when your expert inspects the car before you buy it. That way, you not only see it for yourself and verify that it is, for example, the correct shade of red, but you also get the chance to discuss findings with the expert in real time. Things that look weird to either of you can be pointed out and addressed, and the chance for a surprise is minimized. Further, discussing one thing often leads to identifying other things that merit discussion. Of course, it isn’t always practical for you to be there in person, but at least try to be on the other end of a smart phone if you can. Almost anything is better than relying on photographs on a computer screen. ♦ JOHN DRANEAS is an attorney in Oregon. His comments are general in nature and are not intended to substitute for consultation with an attorney. He can be reached through www.draneaslaw.com.