Sale of car rescinded due to severe rust

Rust eroded holes in the bottom of this Toyota 4Runner, and the buyer was reimbursed due to a little-known consumer protection law.

A woman’s recent success in getting a used auto dealer to take back a vehicle with a severely rusted frame is an example of the little-known power of Oregon’s consumer protection laws, her attorney said.

Catherine Smith bought a 2000 Toyota 4Runner last October from The Dalles Auto Sales, Inc. In January, the company agreed to cancel her in-house loan, return the money she’d paid thus far and pay her attorney’s fees of $1,500. In all, it paid $4,158.99.

Tom Brace Jr. does financing and makes auction purchases for The Dalles Auto Sales, which is owned by his wife, Yvonne Walton. He said of their decision to take back the vehicle, “It’s just easier to unwind the deal and move on.”

Brace said when Smith came to buy a vehicle, sales staff tried to steer her to a newer car, but she wanted the 4Runner and was told it was a “mechanic’s special,” although he said it did not state that in the contract.

Smith disputed that, saying when she went to buy the vehicle, which has about 270,000 miles on it, she asked if the car was good and would make it to Seattle and back. “I was told ‘yes.’” She had been happy with previous purchases from The Dalles Auto Sales and was excited to have a four-wheel drive to go off-roading in. She agreed to pay $6,995 for it.

The 4Runner had been on the lot as a trade-in, Brace said.

After the settlement, Smith twice took to social media to post pictures of holes in the rusted frame. She took down her first post after Walton complained to her attorney.

Her second post, which she made recently after she was “flabbergasted” to see her old vehicle being driven in town by a new owner, is still up. She contacted the Chronicle at the same time.

She never did drive the 4Runner to Seattle, but she drove it around town and to her job in Carson. She is from The Dalles, but moved to Carson a few months ago.

Smith said on the social media post that she wasn’t told “the frame was completely rusted through.”

Brace told the Chronicle, “You try to do right and I feel like I’ve been bashed a ton. Maybe that’s appropriate, maybe that’s not. I didn’t sell it like it’s brand new.”

Smith said her boyfriend found multiple holes in the frame after he got stuck in mud in January when the four-wheel drive didn’t work, and looked under the vehicle to see what was going on. He pushed on one weak area in the frame and it gave way, she said.

She asked the company to take the car back. They refused, saying the four-wheel drive worked when she bought it. That day Smith went online and found Salem attorney Young Walgenkim, who specializes in consumer rights cases against car dealers.

Walgenkim said Oregon law provides protections for people who buy vehicles even in “as is” condition. “I don’t care how as-is it is, they can’t sell this car that’s going to crumble,” he said.

He said state law requires dealers to “disclose any material defects they knew or should have known about.”  If they don’t, “The consumer has the right to return the vehicle and get their money back.”

Consumers think “as is” means when the sale is done, “you don’t get to say anything,” Walgenkim said. But the law allows a one-year period to take legal action if consumer rights violations are suspected.

He said people often just let “lemons” sit while they pay them off, or they stop payments and face bankruptcy, and they don’t know they have a remedy under law.

Walgenkim sent a demand letter to The Dalles Auto Sales Jan. 11, alleging misrepresentation of benefits and qualities, failure to disclose material defects with the vehicle and failure to disclose roadworthiness.

The state’s Unlawful Trade Practices Act also calls for the dealer to pay the customer’s attorney’s fees if the customer prevails.

Punitive damages are also available, and this case was “punitive worthy,” Walgenkim said, but the state takes 70 percent of any punitive damages. “Nobody’s going to seek punitive damages if they have to turn over a majority of that to the state.”

The settlement was signed by Walton Jan. 28.

Brace said he can’t recall that The Dalles Auto Sales has ever bought a car back before. The business opened in 2010.

He said they’ve gone to court a couple times before over “as is” vehicles and won. “I’m not trying to take advantage of anybody,” Brace said. “You try to make a happy customer, we strive for that every time.”

Brace said the demand letter from Walgenkim was against the company’s bond, and bond issuers provide pressure to “pay it back, unless it’s a big one.”

“A dealer can fight it, but why? Just give the customer their money back, pay the attorney and try to do better next time,” Brace said.

And when they did re-sell the 4Runner, Brace said in the contract that the vehicle had a “rusty underbody frame,” that the 4x4 wasn’t working and that it was for “parts only.”

Brace said of the new buyer, “He was a return customer, and I made him look underneath it, and I wanted him to understand what was happening.” He said he sees the car driving around town. “It runs great,” he said.

Walgenkim said the settlement did not require that the vehicle be totaled, but he assumed it would be after it was taken back. “It’s pretty bad,” he said.

Walgenkim has tips for buying a car, which include: keeping a copy of the advertisement, which lists features and conditions; taking lots of pictures of the vehicle, inside and out, on the lot; asking lots of questions about the vehicle and writing down the answers; and writing down their promises, such as repairs. “You can write that down on the contract, believe it or not,” he said.

It can go on a part of the contract called a “we owe” form. “The dealer’s gonna freak out,” he said, but it is allowable. “They don’t know you can mess with the form, for them, the form is sacred.”

He advises people get their vehicle inspected by a mechanic after it is purchased, since it is often too difficult to do it before.

“If you find this big problem, even if you didn’t write it down, that the dealer didn’t tell you about, it’s a good idea to contact the dealer and say, ‘Look, give me my money back; this is not what you said this car was going to be, or you didn’t tell me about this huge problem, and this isn’t right.’”

Sometimes, dealers will give a small payment to an unhappy customer, say $50 or $100, and the customer doesn’t read what they sign and don’t realize it was a settlement of their complaint.

“I can’t help people like that,” Walgenkim said.

The National Independent Automobile Dealers Association, the body representing used auto dealers, has as its code of ethics that members act with integrity, honor and fair dealing, employ truth and accuracy in advertising and selling and standing behind guarantees made.

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