In Durocher v. Westborn Chrysler Jeep Inc., 2014 WL 5162384 (Mich.App. 2014), the Michigan Court of Appeal found in an unpublished case that a Plaintiff could state a case through trial for violation of state law by concealing negative equity in the purchase price of a vehicle notwithstanding representations to the contrary.

Durocher testified that Westborn represented that he would receive $16,513 for the Dodge, and that Westborn would pay off the balance of the loan on that vehicle. He further asserts Westborn agreed that it would absorb any negative equity from the Dodge. Durocher claims that because of the above representations, he decided to purchase the Jeep. Durocher argues that he suffered damages because if the purchase had been conducted as Westborn represented, then he would have paid less for the Jeep. Westborn claims, however, that Durocher was informed of the $7,287.53 in negative equity from the Dodge, so the negative equity was appropriately included in the price of the vehicle. Thus, there are triable issues of fact regarding whether Westborn made a false misrepresentation regarding the terms of the purchase of the Jeep, Westborn knew the statements were false, the statements were made with the intention that Durocher purchase a Jeep, and that, as a result, Westborn benefitted and Durocher suffered damage. Based on the above, whether summary disposition of the misrepresentation claims was appropriate turns on the reliance element. Contrary to Durocher’s assertion, to succeed on either a fraudulent or innocent misrepresentation claim, a plaintiff’s reliance must be demonstrated to be reasonable. Westborn claims that Durocher’s reliance on the alleged verbal statement of a salesman named “Joe” regarding the trade-in of the Dodge was unreasonable because Durocher signed both documents that disclosed the Dodge’s negative equity, as well as the retail installment sales contract, which provided the total price of the Jeep including the negative equity. Durocher testified, however, that because the A Plan price of the Jeep was nonnegotiable, he never specifically asked Westborn what the A Plan price was. Additionally, the record evidence demonstrates that the negative equity was not specifically disclosed on either the retail installment sales contract or the application for Michigan title and registration/statement of vehicle sale. Rather, only the total vehicle price, which included the negative equity, was noted. Moreover, Durocher’s expert concluded that Durocher did not initial either the Chrysler LLC—Employee Advance (EP) Purchase/Lease Pricing & Acknowledgment Form or the Buyer’s Order, purportedly acknowledging the presence of negative equity from the Dodge in the vehicle price. Westborn’s expert, who was not requested to render an opinion on Durocher’s purported initials on either document, does not dispute this contention. This Court has held that “[t]here can be no fraud where a person has the means to determine that a representation is not true.” Durocher, however, completed the purchase of the Jeep sight-unseen. Thus, he did not have the benefit of reviewing the window sticker for that specific vehicle, which contained the price of the Jeep with the options that he was requesting before the A Plan pricing was applied. Accordingly, this Court concludes that it cannot be found as a matter of law that Durocher’s reliance on the alleged statements of Westborn regarding his trade-in and the purchase of the Jeep was unreasonable. Therefore, the trial court’s grant of summary disposition of the fraudulent and innocent misrepresentation claims was improper.

The Court found Michigan state law violated.

A review of these provisions of the Retail Installment Sales Act reveals that the definition of “cash sale price” of a good (i.e. the Jeep) does not include any negative equity from a different good (i.e. the Dodge) that was traded in. Rather, the Retail Installment Sales Act states that a buyer’s down payment must be listed, “ identifying the amounts … allowed for goods traded in.”  Therefore, the cash sale price and the amounts “allowed for good traded in” must be listed separately in the retail installment sales contract. In the instant case, Westborn included the amount allowed for the Dodge that Durocher traded in, which this Court would note was a negative amount, with the cash sale price (also referred to as the “vehicle price”) of the Jeep. Therefore, Westborn violated the Retail Installment Sales Act by failing to list the cash price and the amounts allowed for the Dodge traded in separately.Westborn argues that pursuant to the Truth in Lending Act, a down payment may not be a negative number, which purportedly would prevent it from including the negative equity with the down payment. Assuming arguendo that assertion is correct, a review of the retail installment sales contract reveals that separately identifying the amount allowed for the Dodge trade-in on the retail installment sales contract would not have required Westborn to list a negative down payment. The retail installment sales contract has various categories under which to itemize the amount financed, once such category being related to the trade-in vehicle. The retail installment sales contract allows entries to be made for the “trade-in allowance,” the “amount owing” on the trade-in, and the “net trade-in.” The contract explains that the net trade-in is the trade-in allowance less the amount owing. Here, instead of noting that the trade-in allowance for the Dodge was less than the amount owing (resulting in the amount financed for the Jeep being more than the cash sales price), Westborn indicated that both the trade-in allowance and amount owing on the Dodge were $16,513.53. Since the negative equity from the Dodge trade-in should have been listed separately from the vehicle price in the retail installment sales contract based on the Retail Installment Sales Act, we find that the trial court erred when it dismissed Durocher’s claim that Westborn violated the Retail Installment Sales Act. Rather, summary disposition of this claim should have been granted as a matter of law in favor of Durocher. A determination of damages, however, must be made by the trial court.

The Court of Appeal found no violation of TILA, however, since the amount financed exceeded $25,000.

Durocher argued below that Westborn violated the Truth in Lending Act because without the alleged fraud of Westborn, the amount financed for the Jeep would have been below $25,000. At the time of the transaction at issue, the Truth in Lending Act provided that transactions exempted from its purview included, “[c]redit transactions … in which the total amount financed exceeds $25,000.”  Here, even accepting Durocher’s argument as true that the negative equity from the Dodge and finance charges should not be included in the amount financed, the trial court appropriately granted summary disposition of this claim. Based on the record evidence, beginning with the A Plan price of the vehicle of $24,338, less $350 (as noted on the Chrysler LLC—Employee Advantage (EP) Purchase/Lease Pricing & Acknowledgment Form), adding sales tax (6%) of $1,439.28, deducting the manufacturer’s rebate of $500, and adding the documentary preparation fee of $75, filing fees of $23, and the optional ERT fee of $24, the total amount financed for the Jeep would have been $25,049.28, in excess of $25,000. Thus, his argument must fail.