Court Opinion

ID: 2641133
Source: CourtListenerOpinion
Date Created: 2013-11-05 01:07:51.45982+00
Date Added: 2024-06-11T09:00:41.211041
License: Public Domain

ATTORNEY FOR APPELLANT        ATTORNEY FOR APPELLEE        ATTORNEYS FOR AMICUS CURIAE
Robert E. Duff                Julianne Nixon Sheeks        AUTOMOBILE DEALERS ASSOCIATION OF
Lebanon, Indiana              Greenfield, Indiana          INDIANA, INC.
                                                           Ronald C. Smith
                                                           Donn H. Wray
                                                           Marc A. Menkveld
                                                           Indianapolis, Indiana

                                                           ATTORNEYS FOR AMICUS CURIAE
                                                           INDIANA LEGAL FOUNDATION
                                                           Paul L. Jefferson
                                                           T. Joseph Wendt
                                                           Indianapolis, Indiana

__________________________________________________________________________________

                                          In the
                                                                            Oct 29 2013, 2:32 pm
                         Indiana Supreme Court
                            _________________________________

                                    No. 49S02-1302-CT-89

HEATHER N. KESLING,
                                                           Appellant (Plaintiff below),

                                               V.

HUBLER NISSAN, INC.,
                                                      Appellee (Defendant below).
                            _________________________________

                 Appeal from the Marion Superior Court, No. 49D12-0901-CT-2954
                               The Honorable Heather Welch, Judge
                             _________________________________

      On Petition to Transfer from the Indiana Court of Appeals, No. 49A02-1111-CT-1031
                            _________________________________

                                       October 29, 2013

Rush, Justice.

       An auto dealership’s advertisement of an inexpensive used car as a “Sporty Car at a Great
Value Price,” is textbook puffery—not actionable as deception or fraud, because a reasonable
buyer could not take it as a warranty about the car’s performance or safety characteristics. But
when the dealer has inspected the car and should know it has serious problems, answering a
buyer’s question about why it idled roughly by claiming that it “would just need a tune-up” may
be actionable as fraud. We therefore hold that the buyer’s fraud claim survives summary
judgment, even though her deception claims cannot.

                                    Facts and Procedural History

          Viewed in the light most favorable to Plaintiff Heather Kesling as the non-moving party,
the summary judgment record shows that in late 2007, Defendant Hubler Nissan, Inc. placed an ad
on AutoTrader.com for a 1996 Mitsubishi Eclipse. Underneath several photos of the car, the ad
stated:

                            Price              $2,981
                            Body Style         Hatchback
                            Mileage            165,478
                            Exterior Color     Maroon
                            Interior Color     Grey
                            Engine             4 Cylinder Gasoline
                            Transmission       4 Speed Automatic
                            Drive Type         2 wheel drive - front
                            Fuel Type          Gasoline
                            Doors              Two Door
                            ***
          Seller’s Comments: INTERNET SALE…REDUCED PRICE!! Trade-In, Auto-
          matic, Power Roof, CD/Cassette, Power Interior Options, Cruise, Fog lights, Alloy
          Wheels… Sporty Car at a Great Value Price.

Appellant’s App. 105–07 (italic emphasis added).

          Kesling saw the ad, then went to Hubler’s lot on November 3, 2007 to see and test-drive
the car. The salesperson immediately took them to the car but had to jump-start it before it could be
driven. The car idled roughly, and Kesling asked the salesperson why. He answered that the car
“would just need a tune-up” because “it had been sitting for a while.” (In fact, though, the car had
not been sitting for very long, since Hubler had taken it on trade just a couple of weeks earlier.)

          Kesling offered $2,000 “plus tax and tag” for the car, and Hubler counter-offered $2,098
plus tax and document fees, for a total price of $2,322.88. Kesling agreed, and signed a sales
contract memorializing the deal. She also signed an acknowledgement that the car was sold “AS

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IS—NO WARRANTY . . . regardless of any oral statements about the vehicle.” Immediately after
completing the purchase, Kesling immediately went to an auto-parts store across the street from
the dealership to have the car’s computer-diagnostic codes read. But the car’s diagnostic codes
could not be retrieved, so Kesling took the car to another Mitsubishi dealership and an independent
mechanic for detailed diagnoses and estimates. Both inspections showed extensive problems with
the car well beyond needing a tune-up. Ultimately, she only drove the car 44 miles before parking
it in long-term storage as undrivable.

       More than two years later, Kesling obtained an expert inspection for purposes of this
litigation. The expert’s report revealed a loose tie rod and misrouted accessory belt, either of which
the expert stated could cause loss of steering control. Moreover, the engine had a fuel-return line
that had been blocked off, leaked fuel, and could cause the car to catch fire while driving. And
because there was no provision for connecting the blocked-off line to the other systems of the
car—and other signs, including poorly spliced wiring—the original engine had apparently been
replaced with one from a different Mitsubishi model. According to the expert, each of these three
problems made the car unsafe to operate, and would have been obvious to anyone who would have
inspected or serviced the car at a dealership—such as during a routine trade-in inspection of the
type Hubler admitted having performed.

       Kesling sued Hubler, alleging that advertising the car as a “Sporty Car at a Great Value
Price” (1) violated the Indiana Deceptive Consumer Sales Act and (2) entitled her to treble
damages and attorney fees under the Crime Victim’s Relief Act, Ind. Code § 34-24-3-1 (2008
Repl.), because the ad also constituted criminal deception, I.C. § 35-43-5-3(a)(9) (2008 Repl.). She
also alleged (3) that the salesperson’s representation that the car “would just need a tune-up” was
fraudulent, since the defects should have been apparent during the trade-in inspection.

       The trial court granted Hubler’s motion for summary judgment on all counts. So far as rele-
vant on transfer, the trial court reasoned that “Sporty Car at a Great Value Price” was “simply
puffing” and made no substantive representation; that there was no evidence that the defects found
by the expert witness were present when the car was sold; and that signing the “as-is” disclaimer
and immediately having the car inspected after purchase showed Kesling did not rely on Hubler’s
statement that the car “would just need a tune-up.” Kesling appealed.

                                                  3
       By a split decision, the Court of Appeals reversed. The majority agreed with Kesling that
calling the car a “Sporty Car at a Great Value Price” could implicitly represent “that it is a good car
for the price and that, at a minimum, it is safe to operate,” thus precluding summary judgment on
Kesling’s deception claims. Kesling v. Hubler Nissan, Inc., 975 N.E.2d 367, 374 (Ind. Ct. App.
2012). It similarly found a question of fact as to whether the car had the tie rod, accessory belt, and
fuel line defects when it was sold, and of whether Hubler actually knew of those defects when its
salesperson failed to disclose them. Id. at 370, 374–75. In dissent, Judge Friedlander concluded
that as a matter of law, “Sporty Car at a Great Value Price” was “typical used-car-sales puffery”
and “devoid of content relative to the vehicle’s operating status.” Id. at 376 (Friedlander, J.,
dissenting). He did not separately address Kesling’s fraud claim.

       We granted transfer, 982 N.E.2d 298 (Ind. 2013) (table), vacating the Court of Appeals
opinion. Ind. Appellate Rule 58(A). We agree with Judge Friedlander that “Sporty Car at a Great
Value Price” is classic puffery, which is fatal to Kesling’s deception claims. But we agree with the
Court of Appeals majority that Kesling has established an issue of fact as to her fraud claim based
on the salesperson’s statements. Accordingly, we affirm the trial court in part and reverse in part.

                                        Standard of Review

       We review a trial court’s entry of summary judgment under the same standard as the trial
court, and affirm “only where the evidence shows there is no genuine issue of material fact and
the moving party is entitled to a judgment as a matter of law.” Tom-Wat, Inc. v. Fink, 741
N.E.2d 343, 346 (Ind. 2001). We look only to the materials properly designated to the trial court,
and we take all facts and draw all reasonable inferences in favor of the non-moving party. Id.

       Specific findings or conclusions made in the summary-judgment order help our review by
giving insight into the trial court’s rationale, but they do not change our standard of review. Rice
v. Strunk, 670 N.E.2d 1280, 1283 (Ind. 1996). Nor does the trial court’s decision to adopt a party’s
proposed order verbatim affect our review (though we do not encourage that practice). Carpenter v.
Carpenter, 891 N.E.2d 587, 592–93 (Ind. Ct. App. 2008). In either event, our review of summary
judgment is de novo, Kovach v. Caligor Midwest, 913 N.E.2d 193, 196 (Ind. 2009), and we apply
that standard carefully to ensure that a litigant is not improperly denied a day in court, Tom-Wat,
741 N.E.2d at 346.

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                                            Discussion

I. Kesling’s Deception Claims.

       Kesling’s claim alleges two separate forms of deception. One is civil and the other is quasi-
criminal, but both counts allege that it was deceptive to call the car either a “Sporty Car” or a
“Great Value,” since it was unsafe to drive or otherwise use as expected for an ordinary passenger
car. We address her civil claim first, though our analysis of her quasi-criminal claim is similar
because we find the issue of “puffing” dispositive of both.

   A. Indiana Deceptive Consumer Sales Act.

       Kesling’s purely civil claim relies on the Deceptive Consumer Sales Act (DCSA). The
DCSA is a remedial statute and “shall be liberally construed and applied to promote its purposes
and policies” of protecting consumers from deceptive or unconscionable sales practices. I.C. § 24-
5-0.5-1 (2007 Repl.). It is a “deceptive act” for a “supplier” like Hubler to make certain “represen-
tations as to the subject matter of a consumer transaction”—including, so far as relevant here,
that it “has . . . performance, characteristics, . . . uses, or benefits it does not have which the
supplier knows or should reasonably know it does not have.” I.C. § 24-5-0.5-3(a)(1) (emphasis
added). But even when a seller’s failure to disclose known problems is sufficiently deceptive to
be actionable on grounds such as fraud, it is not actionable as a “deceptive act” because a non-
disclosure is not a “representation” of any fact. Lawson v. Hale, 902 N.E.2d 267, 273–74 (Ind.
Ct. App. 2009). Here, Kesling argues, and the Court of Appeals majority agreed, that “Sporty Car
at a Great Value Price” constituted an implied representation of fact—specifically, that the car was
“a good car for the price” and therefore “that, at a minimum, it [was] safe to operate.” Kesling, 975
N.E.2d at 374.

       Kesling argues that the actionability of implied representations of fact under the DCSA is
an issue of first impression, while Hubler claims that Berghausen v. Microsoft Corp. is controlling,
and excludes implied representations from the ambit of the DCSA. 765 N.E.2d 592 (Ind. Ct. App.
2002), trans. denied. We agree with Kesling that the issue is open, because Berghausen did not
address its merits, but essentially found the issue waived for lack of cogent argument. Id. at 598
(stating that the plaintiff “does [not] offer argument explaining why Microsoft’s ‘implicit repre-

                                                 5
sentations’ would fit within the [DCSA] definition of deceptive acts”). Yet this case does not offer
an opportunity to address implied representations of fact, as it might if Kesling’s claim were
based on the ad’s representation that the car had cruise control, but the system did not actually
work. Instead, we find it dispositive that Hubler’s statements were merely “puffing”—statements
of unverifiable opinion—and not representations of fact at all.

           Indeed, by requiring a representation of fact, the DCSA looks to the same criterion that
distinguishes an actionable warranty from non-actionable “puffing,” which makes breach of war-
ranty cases instructive. For example, calling a diesel truck “road ready” is “an express affirmation
of fact,” exposing the seller to liability when the engine block cracks two weeks later and renders
the truck inoperable. Wiseman v. Wolfe’s Terre Haute Auto Auction, Inc., 459 N.E.2d 736, 737–
38 (Ind. Ct. App. 1984). By contrast, “statements of the seller’s opinion, not made as a represen-
tation of fact”—such as claiming a product “is the best”—are “simply puffing which does not
create an express warranty.” Martin Rispens & Son v. Hall Farms, Inc., 621 N.E.2d 1078, 1082
(Ind. 1993) (emphasis added), abrogated on other grounds by Hyundai Motor Am., Inc. v. Goodin,
822 N.E.2d 947, 958–59 (Ind. 2005). Put another way, puffery consists of “empty superlatives on
which no reasonable person would rely,” or “meaningless sales patter,” All-Tech Telecom, Inc.
v. Amway Corp., 174 F.3d 862, 868 (7th Cir. 1999)—what Learned Hand called the “kind[] of talk
which no sensible man takes seriously, and if he does he suffers from his credulity.” Vulcan Metals
Co. v. Simmons Mfg. Co., 248 F. 853, 856 (2d Cir. 1918).

       Rispens involved both puffing and representations of fact, and illustrates the difference
between them. There, watermelon seeds were labeled as “top quality seeds with high vitality, vigor[,]
and germination.” 621 N.E.2d at 1082. But they turned out to be contaminated with bacteria, which
caused a blight that ruined that year’s crop for the farmer who planted them. Id. at 1080–81. The
farmer sued the seed grower, arguing that the label’s statement created a warranty and that the con-
tamination breached that warranty. Id. at 1081–82. We concluded that “top quality seeds” was “a
classic example of puffery” because it “contains no definitive statement as to how the product is
warranted or any assertion of fact concerning the product, but is merely the opinion of” the seller.
Id. at 1082–83. But “high vitality, vigor[,] and germination” could constitute a warranty, because it
was “a promise that the seeds will perform in a certain manner,” not merely the seller’s opinion. Id.
at 1083.

                                                  6
       Here, each part of “Sporty Car at a Great Value Price” can reasonably be taken only as
puffing, akin to “top quality” in Rispens, and not as a representation of any fact. Whether a car is
“sporty” is a subjective assertion of opinion, not fact, commonly applied in advertising to anything
from Porsches to pickup trucks. Moreover, much like Judge Friedlander, we believe the term refers
to a car’s styling or design, not its drivability, Kesling, 975 N.E.2d at 376 (Friedlander, J., dis-
senting)—who would dispute that an old MG roadster or Ford Mustang is a “sporty car,” even if it
is totally un-roadworthy and needs complete restoration? “Sporty” (unlike “road ready,” Wiseman,
459 N.E.2d at 737–38) simply cannot reasonably be ascribed any significance as a representation
of a car’s state of repair or drivability. Similarly, “Great Value Price” cannot reasonably be under-
stood to have any greater significance than the comparable terms “great price” or “priced to sell.”
Reasonable buyers cannot expect a seller to admit their price is “significantly inflated,” and
therefore cannot take seriously an assurance that the price is a “bargain,” “below market,” or
otherwise a “Great Value.” Both terms, whether read together or in isolation from each other, are
mere puffery as a matter of law.

       Since puffing is merely a statement of opinion, Rispens, 621 N.E.2d at 1082–83, it cannot
be a representation of fact—and thus, cannot be “deceptive” under the DCSA. The trial court
correctly entered summary judgment for Hubler on this issue.

   B. Crime Victim’s Relief Act Damages for Criminal Deception.

       Kesling’s other deception claim is quasi-criminal. She argues that Hubler’s ad constitutes
criminal deception—“disseminat[ing] to the public an advertisement that the person knows is
false, misleading, or deceptive,” I.C. § 35-43-5-3(a)(9)—and that she is entitled to treble damages
and other civil remedies under the Crime Victim’s Relief Act, I.C. § 34-24-3-1, because she has
“suffer[ed] a pecuniary loss as a result of a violation of” the criminal deception statute. (An actual
criminal conviction is not required for recovery; a claimant “merely must prove each element of
the underlying crime by a preponderance of the evidence.” Klinker v. First Merchs. Bank, N.A.,
964 N.E.2d 190, 193 (Ind. 2012).)

       But like the DCSA, the criminal deception statute also depends on a “representation” of
some fact, by requiring consideration of “not only representations contained or suggested in the
advertisement . . . , but also the extent to which the advertisement fails to reveal material facts in

                                                  7
the light of the representations.” I.C. § 35-43-5-3(b) (emphases added). Our “puffing” conclusion
therefore carries just as much force here as it does to the DCSA—that because “Sporty Car at a
Great Value Price” expresses Hubler’s puffed opinion, rather than representing any objective fact,
it cannot be a basis for a criminal deception claim. (If anything, that conclusion applies even more
strongly here, because unlike the liberal construction given to the DCSA’s remedial provisions,
criminal statutes are narrowly construed, Meredith v. State, 906 N.E.2d 867, 872 (Ind. 2009)—as
is the Crime Victims’ Relief Act, which is also “a punitive measure,” Klinker, 964 N.E.2d at 195.)
The trial court was correct to grant summary judgment to Hubler on this issue as well.

    C. The Harm of Finding “Puffing” Deceptive.

        While deceptive advertising is certainly detrimental to the public, treating these “puffing”
statements as actionable representations would have undesirable consequences as well. Construing
either “Sporty Car” or “Great Value Price” as a representation of fact is at best a double infer-
ence—first, taking the ad to “impl[y] that the Eclipse was a good car for the price” (as opposed to
simply being inexpensive), and second, inferring from the first inference that the car was “thus, at a
minimum, safe to operate.” Kesling, 975 N.E.2d at 372.

        Allowing a deception claim to be based upon such a double inference is problematic
under both the civil and criminal statutes. First, we recognize that the DCSA must be liberally
construed, but only so far as its purpose of “protect[ing] consumers from suppliers who commit
deceptive and unconscionable sales acts,” I.C. § 24-5-0.5-1(b) (emphasis added). It does not
extend to protecting consumers from themselves. Yet that is essentially what Kesling seeks—not
merely for suppliers to anticipate what consumers might infer from an advertisement itself (which,
again, is the implied-representation question we reserve for another day), but to further anticipate
what consumers might then secondarily infer from their own inferences. Such a requirement would
exceed the stated purpose of the statute, and demand an unrealistic degree of intuition about
consumers’ subjective perceptions.

        The double-inference concern is an even greater problem under the criminal deception
statute. A criminal statute is unconstitutionally vague “if its prohibitions are not clearly defined,” or
“its terms invite arbitrary or discriminatory enforcement.” Klein v. State, 698 N.E.2d 296, 299 (Ind.
1998) (citing Grayned v. City of Rockford, 408 U.S. 104, 108 (1972) and Kolender v. Lawson, 461

                                                   8
U.S. 352, 357 (1983)). It is difficult to imagine how an advertiser could “know” an advertisement
is deceptive as the statute requires, I.C. § 35-43-5-3(a)(9), if that inquiry requires them to “know”
what inference upon inference (and perhaps further inference beyond that, and beyond that again)
any given member of the public might draw.

        Finally, the Court of Appeals’ approach would significantly impede legitimate advertising.
The majority observed that “‘Sporty Car at a Great Value Price’ goes beyond a bare ‘1996 Mitsu-
bishi Eclipse for $2981,” and that if Hubler had “merely listed the vehicle’s specifications and
features, Kesling likely would not have a viable case.” Kesling, 975 N.E.2d at 372, 374. But
advertising need not be limited to a product’s “name, rank, and serial number” in order to have a
safe harbor against civil or criminal liability. Cf. Passmore v. Multi-Mgmt. Servs., Inc., 810 N.E.2d
1022, 1028 (Ind. 2004) (expressing concern that “declaring employers liable for negligence in
providing employment references will lead universally to employer reluctance to provide any
information other than name, rank, and serial number”). While advertisements may not be
deceptive, they need not refrain from any expression of the seller’s opinion, either. Hubler’s
“puffing” simply is not the stuff of a deception claim.

II. Kesling’s Common Law Fraud Claim.

        Kesling’s common-law fraud claim is based on the salesperson’s claim that the car “would
just need a tune-up,” rather than on Hubler’s ad. As a result, her fraud claim fares better than her
deception claims. The elements of common-law fraud are “(1) a material misrepresentation of past
or existing fact which (2) was untrue, (3) was made with knowledge of or in reckless ignorance
of its falsity, (4) was made with the intent to deceive, (5) was rightfully relied upon by the com-
plaining party, and (6) which proximately caused the injury or damage complained of.” Lawyers
Title Ins. Corp. v. Pokraka, 595 N.E.2d 244, 249 (Ind. 1992). And unlike deception, “fraud is not
limited only to affirmative representations; the failure to disclose all material facts can also consti-
tute actionable fraud.” Lawson, 902 N.E.2d at 275. In particular, “[w]hen a buyer makes inquiries
about the condition, qualities, or characteristics of property,” the seller must “fully declare any and
all problems associated with the subject of the inquiry,” or else risk liability for fraud. Id. (internal
quotation marks omitted) (finding “textbook case of fraud” where seller told buyer that a tractor
leaked oil and gas, but claimed to know nothing else about it, when he in fact knew the engine
block had cracked and been welded).

                                                   9
       Those settled principles are enough for Kesling’s fraud claim to survive summary
judgment. It is undisputed that Kesling asked the salesperson why the car’s idle was rough—and
while there is some dispute about the precise response, the evidence most favorable to Kesling is
that the salesperson told her the car “would just need a tune-up” because “it had been sitting for a
while.” Regardless of whether that statement was qualified with the word “probably,” as some of
the evidence suggests, “just need[s] a tune-up” can reasonably be understood as a representation of
past or existing fact—as can the supporting claim that the car “had been sitting for awhile.” And
a jury could reasonably find both claims untrue, because the car needed extensive repair and not
just a tune-up, and because the car had been taken on trade just two weeks before and hadn’t really
“been sitting for awhile.”

       Similarly, there is evidence to support an inference that the salesperson knew his
statements to be false, but made them anyway with intent to deceive Kesling. Hubler admitted
that it inspected the car when it accepted it on trade, so the salesperson as Hubler’s agent may be
inferred to have at least constructive knowledge of the inspection—and of the car’s defects,
which reportedly would have been obvious to anyone who would have inspected or serviced the
car at a dealership. Failing to disclose those defects and instead representing that the car “would
just need a tune-up” not only permits an inference of fraudulent intent, but also runs afoul of the
related duty to “fully declare any and all problems associated with the subject of” a buyer’s inquiry
“about the condition, qualities, or characteristics of property.” Lawson, 902 N.E.2d at 275.

       Finally, the summary judgment record shows a genuine issue of fact as to Kesling’s reliance
on the salesperson’s statements. In her deposition, Kesling stated that she offered less than the
asking price for the car because of the statement that the car needed a tune-up—in other words,
that she relied on that statement in deciding how much she was willing to pay for the car. To be
sure, other evidence implies that she didn’t actually rely on the statement—for example, taking the
car to have its computer-diagnostic codes read immediately after purchase—but on summary judg-
ment, we may only consider the evidence in the light most favorable to Kesling. Nor is she barred
from claiming reliance because of signing an acknowledgement that she was buying the car “AS
IS—NO WARRANTY . . . regardless of any oral statements about the vehicle.” An as-is provision
disclaims implied warranties, but it “provides no insulation from fraudulent misrepresentations.”
Fimbel v. DeClark, 695 N.E.2d 125, 128 (Ind. Ct. App. 1998), trans. denied; see also Lawson, 902

                                                 10
N.E.2d at 274–76 (allowing fraud claim for nondisclosure of cracked engine block to proceed,
even though “as-is” disclaimer barred any claim for breaching implied warranty of merchantability).

                                             Conclusion

       Mere “puffing” is a statement of opinion, not a representation of fact, and thus cannot be
the basis of deception or fraud claims. But stating that a car “would just need a tune-up,” in the
face of actual or constructive knowledge that it had far more serious problems, does represent a
fact—and therefore may be the basis of a fraud claim when a seller gives it as a knowingly incom-
plete answer to a buyer’s specific question. Accordingly, we affirm the trial court’s grant of
summary judgment in favor of Hubler as to Kesling’s Deceptive Consumer Sales Act and Crime
Victim’s Relief Act claims; reverse its grant of summary judgment as to Kesling’s fraud claim; and
remand to the trial court for further proceedings not inconsistent with this opinion.

Dickson, C.J., and Rucker, David, and Massa, JJ., concur.

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