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STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
PROVIDENCE, SC.                                                                              SUPERIOR COURT
(FILED:  JANUARY 7, 2013)
SIMON CHEVROLET-BUICK, LTD.                                                                  :
:
v.                                                                                           :                                          C.A. No. PC 2005-5913
                                                                                             :                                          (consolidated with)
RHODE ISLAND DEPARTMENT OF                                                                   :
ADMINISTRATION; RHODE ISLAND                                                                 :
MOTOR VEHICLE DEALER’S LICENSE   :
AND HEARING BOARD; AND LISA                                                                  :
SHMARUK                                                                                      :
:
SIMON CHEVROLET-BUICK, LTD.                                                                  :
:
v.                                                                                           :                                          C.A. No. PC 2005-6375
:
RHODE ISLAND DEPARTMENT OF                                                                   :
ADMINISTRATION; RHODE ISLAND                                                                 :
MOTOR VEHICLE DEALER’S LICENSE   :
AND HEARING BOARD; AND DIANA                                                                 :
MONGEON                                                                                      :
DECISION
McGUIRL, J.   This matter arises before this Court from two consolidated appeals from
decisions of the Rhode Island Department of Administration (the Department), in which
the Department affirmed two decisions of the Rhode Island Motor Vehicle Dealer‘s
License and Hearing Board  (the Board).    In those decisions, the Board found that
Appellant   Simon   Chevrolet-Buick,   Ltd.                                                  (Simon   Chevrolet)   had   engaged   in
unconscionable business practices by willfully failing to perform written agreements with
Lisa Shmaruk (Shmaruk) and Diana Mongeon (Mongeon) in violation of G.L. 1956 §§
31-5-11(5) and (10).  The Board therefore ordered Simon Chevrolet to make all necessary
repairs to Shmaruk‘s vehicle at no cost, and further, to reimburse Mongeon for the repairs




to her vehicle.   Simon Chevrolet appealed, and the cases were consolidated.   Jurisdiction
is pursuant to § 31-5-2.1(d) and G.L. 1956 § 42-35-15.
I
Facts & Travel
Shmaruk and Mongeon each purchased used vehicles from Simon Chevrolet in
2001.                                                                                         (Appellee‘s Ex. 2:   Decision of the Board, Lisa Shmaruk v. Simon Chevrolet-
Buick, Ltd., Case No. 4, Finding of Fact  ¶  1 [hereinafter Shmaruk Board Decision];
Appellee‘s Ex. 2:   Decision of the Board, Diane Mongeon v. Simon Chevrolet-Buick,
Ltd., Case No. 3, Finding of Fact ¶ 1 [hereinafter Mongeon Board Decision].)   When
Shmaruk and Mongeon purchased their vehicles, they each also purchased SmartChoice
Extended Service Contracts  (―Contracts‖).                                                    (Shmaruk Board Decision,  ¶ 2; Mongeon
Board Decision, ¶ 2.)
The Service Contracts1 each provide that ―the Agreement holder, apply to the
Named Selling Dealer [Simon Chevrolet] for an extended service agreement covering the
described vehicle.‖                                                                           (Appellant‘s Ex. A at 1.)   Beneath that statement, and in the middle
of a block of fine print, the Contract also reads: ―Further, I acknowledge and agree that
the liabilities of this extended service agreement are with SC&E Administrative Services,
Inc. . .                                                                                      .‖   In addition, a second statement disclaiming liability, which is buried in a
1  In the matter of Diane Mongeon v. Simon Chevrolet-Buick, Ltd., Case No. 3, ―the
Board [was] unable to comment upon the exact terms or language of the agreement at
issue‖ because the parties had mistakenly executed a service contract for a ―new car‖
rather than a ―used car.‖ (Appellee‘s Ex. 2:   Decision of the Board, Diane Mongeon v.
Simon Chevrolet-Buick, Ltd., Case No. 3 at 3.)   Nevertheless the Board found—and it
was undisputed—that Mongeon had paid for a SmartChoice Service Contract and no
evidence had been presented to suggest that the repairs that were made would not have
been allowed under it.   Id.   Relying on ―past precedent of th[e] Board‖ and the language
of the contracts previously considered by the Board, the Board upheld the Contract.  Id.
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paragraph written in all capitalized fine-print reads:                                       ―All obligations and liabilities for
repairs covered by this extended service agreement are those of SC&E Administrative
Services Inc.‖  Id.
Nonetheless, the Contract placed certain obligations on the Dealer, and made the
Dealer the primary contact.   Simon Chevrolet‘s address was listed on the front of the
Service Contracts.   Id.   If the buyer was in need of repairs and within forty miles of
Simon Chevrolet, the Service Contract required the buyer to deliver his or her vehicle to
the Dealer‘s repair facility.   Id. at 3.                                                    Before June 2003, acting under the agreement,
Simon Chevrolet performed repairs worth approximately $1402 on Shmaruk‘s vehicle
and approximately $1170 on Mongeon‘s vehicle.                                                (Shmaruk Board Decision at ¶ 13;
Mongeon Board Decision at ¶ 13.)
Simon  Chevrolet  also  executed  the  Contracts  and  retained  a  substantial
commission for doing so.   A representative of Simon Chevrolet signed the Contracts.
(Shmaruk Board Decision, ¶ 18.)  Neither Shmaruk‘s nor Mongeon‘s contract was signed
by a representative of SmartChoice, and the contracts did not denote that the signatory
from Simon Chevrolet was acting as an agent of SmartChoice.  Further, of the $1595 paid
for Shmaruk‘s Service Contract, Simon Chevrolet retained $624 as commission.   Of the
$1264 paid for Mongeon‘s Service Contract, Simon Chevrolet retained more than half—
$687—as commission.                                                                          (Shmaruk Board Decision, ¶ 3; Mongeon Board Decision, ¶ 3.)
There  is  no  evidence  that  Simon  Chevrolet  disclosed  the  amount  it  retained  as
commission on each contract, or that Mongeon or Shmaruk were aware that the sum paid
to Simon Chevrolet was being transmitted to a third party.  There is also no evidence that
Simon Chevrolet orally disclosed its disclaimer of liability under the service contract.
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On June 13, 2003, less than two years after Mongeon or Shmaruk had purchased
extended service contracts, SmartChoice‘s insurer entered into receivership off-shore.
(Shmaruk Board Decision,  ¶  5; Mongeon Board Decision,  ¶  5.)    As a result of its
insurer‘s insolvency, SmartChoice ceased all operations.                                       (Shmaruk Board Decision, ¶ 5;
Mongeon Board Decision, ¶ 5.)   Simon Chevrolet made no attempt to individually notify
customers who had purchased the SmartChoice Service Contract that their contracts were
ineligible as a result of the closure of SmartChoice, as this would entail contacting 300 to
400 individuals.   (Shmaruk Board Decision, ¶ 14; Mongeon Board Decision, ¶ 14.)
After  SmartChoice‘s  bankruptcy,  both  Shmaruk  and  Mongeon  brought  their
vehicles to Simon Chevrolet for repairs.                                                       (Shmaruk Board Decision, at ¶ 6; Mongeon
Board  Decision,                                                                               ¶                                                                           6.)   Simon  Chevrolet  informed  Shmaruk  and  Mongeon  that
SmartChoice had ceased operating and their Contracts were invalid, and refused to
perform the necessary repairs under the Contracts.                                             (Shmaruk Board Decision,  ¶  7;
Mongeon Board Decision, ¶ 8.)   Although Simon Chevrolet offered both Shmaruk and
Mongeon a small sum to be credited toward the repairs of their vehicles, neither Shmaruk
nor Mongeon accepted.   (Shmaruk Board Decision, ¶ 8; Mongeon Board Decision, ¶ 9.)
Subsequently, Shmaruk and Mongeon filed complaints with the Board seeking to
have the Contracts honored:   Shmaruk sought to have the necessary repairs made to her
vehicle, and Mongeon sought reimbursement for the expenses incurred in repairing her
vehicle.                                                                                       (Shmaruk Board Decision, ¶ 10; Mongeon Board Decision, ¶ 10.)   The Board
conducted hearings to determine whether Simon Chevrolet violated §§ 31-5-11(3), 31-5-
11(5), 31-5-11(10), or 31-5-11(11) by refusing to honor the Service Contracts sold to
Shmaruk and Mongeon.   (Shmaruk Board Decision at 1; Mongeon Board Decision at 1.)
4




In addition, the Board assessed whether Simon Chevrolet was obligated under the Service
Contracts  to  perform  certain  repairs  on Shmaruk‘s motor vehicle  and to  reimburse
Mongeon for certain repairs allegedly covered under the Contract.                                (Shmaruk Board
Decision at 1; Mongeon Board Decision at 1.)
The Board found that Mongeon had a valid service contract when repairs were
made, and that Shmaruk had a valid service contract when the vehicle failed.   Although
the Board did not explicitly find that Simon Chevrolet was a party to the Contracts, it
nonetheless concluded that Simon Chevrolet had ―willfully failed to perform a written
agreement with a buyer of a motor vehicle under  §  31-5-11(5).‖                                 (Shmaruk Board
Decision at 3; Mongeon Board Decision at 3.)   Because of Simon Chevrolet‘s willful
violation of § 31-5-11(5), the Board found it liable under  § 31-5-11(10) for ―having
indulged in any unconscionable practice relating to business as a motor vehicle dealer.‖
See § 31-5-11(10).   The Board further found Simon Chevrolet responsible for the repairs
to the vehicles and ordered it to fully reimburse Mongeon $2570.83 for the costs of
repairs to her vehicle and to repair the power steering reservoir, automatic temperature
control, and oil pressure to Shmaruk‘s vehicle at no cost.   Id.   It did so by reasoning that
most car buyers reading the agreement, ―would have reasonably believed that [Simon
Chevrolet] was not just a mere signatory‖ but also ―jointly liable for the delivery of the
services‖ for which they were contracting.  Id.
In reaching this conclusion, the Board relied on the overall impression of the
circumstances and provisions of the Contract which  ―led consumers to believe that
[Simon Chevrolet] was their primary and initial contact for any questions or problems
regarding the service contract.‖   Id.   The Board further found that the ―terms of the
5




[Contract] create[d] ambiguities and doubts which, by operation of settled local law, must
be construed against the party relying on the contractual terms to avoid liability and
construed in favor of avoiding injustice or inequity.‖  Id.
On  June  24,  2005,  Simon  Chevrolet  appealed  the  Board‘s  decision  to  the
Department pursuant to § 31-5-2.1(d).2   Following the appeals, Simon Chevrolet sent
letters to the Department requesting hearings on both matters.   The Department denied
Simon Chevrolet‘s request for subsequent hearings, and affirmed the decisions of the
Board.                                                                                       (Appellee‘s  Ex.                                                 3,  Decision  of  the  Department,  Lisa  Shmaruk  v.  Simon
Chevrolet-Buick, Ltd.  [hereinafter Shmaruk Department Decision]; Appellee‘s Ex.  3,
Decision of the Department, Diane Mongeon v. Simon Chevrolet-Buick, Ltd. [hereinafter
Mongeon Department Decision.])
In those decisions the Department found that the Contracts designated Simon
Chevrolet as the primary contact throughout the Contracts and further noted that Simon
Chevrolet  had  executed  the  Contracts  with  the  customers.                              (Shmaruk  Department
Decision at 5; Mongeon Department Decision at 5.)   Moreover, the Department found
that because Mongeon and Shmaruk had paid Simon Chevrolet, they had reasonably
believed that Simon Chevrolet would comply with all the provisions of the Contracts.
(Shmaruk Department Decision at 5; Mongeon Department Decision at 5.)   In addition,
the Department found that Simon Chevrolet was obligated to ―act in good faith,‖ and its
failure to do so constituted unconscionable practice under § 31-5-11(10).   Id. at 5-6.
Simon Chevrolet timely filed an appeal to this Court pursuant to §§ 31-5-2.1(d) and 42-
2  As set forth infra,                                                                       §  31-5-2.1(d) was amended on July  1,  2008.    The amendment
abolished the two-tiered review, which the Board had used in this case.   Board decisions
are now appealed directly to the Rhode Island Superior Court.  See § 31-5-2.1(d).
6




35-15, arguing that the decisions of the Board and Department are clearly erroneous in
view of the reliable, probative, and substantial evidence on the whole record.
II
Standard of Review
Under  §  42-35-15,  ―[a]ny person,  .  .  . who has exhausted all administrative
remedies available to him or her within [an] agency, and who is aggrieved by a final
order in a contested case is entitled to judicial review‖ by the Superior Court.   Under this
scheme, the Court:
―may affirm the decision of the agency or remand the case
for further proceedings, or it may reverse or modify the
decision if substantial rights of the appellant have been
prejudiced because the administrative findings, inferences,
conclusions, or decisions are:
(1) In violation of the constitutional or statutory provisions;
(2) In excess of the statutory authority of the agency;
(3) Made upon unlawful procedure;
(4) Affected by other error or law;
(5) Clearly erroneous in view of the reliable, probative, and
substantial evidence on the whole record; or
(6) Arbitrary or capricious or characterized by abuse of
discretion   or   clearly   unwarranted   exercise   of
discretion.‖
The  scope  of  Superior  Court‘s  review  of  an  agency  decision  has  been
characterized as  ―an extension of the administrative process.‖   R.I. Pub. Telecomms.
Auth. v. RISLRB, 650 A.2d 479, 484 (R.I. 1994).   As such, ―judicial review is restricted
to questions that the agency itself might properly entertain.‖   Id.                            (citing Envtl. Scientific
Corp. v. Durfee, 621 A.2d 200, 208 (R.I. 1993)).                                                ―In essence, if ‗competent evidence
exists in the record, the Superior Court is required to uphold the agency‘s conclusions.‘‖
Auto Body Ass‘n of R.I. v. State of R.I. Dep‘t of Bus. Regulation, 996 A.2d 91, 95 (R.I.
7




2010) (quoting Envtl. Scientific Corp., 621 A.2d at 208).   Accordingly, this Court defers
to the administrative agency‘s factual determinations provided that those determinations
are supported by legally competent evidence.   Arnold v. R.I. Dep‘t of Labor & Training
Bd. of Review, 822 A.2d 164, 167 (R.I. 2003).   Legally competent evidence is ―some or
any evidence supporting the agency‘s findings.‖   Auto Body Ass‘n of R.I., 996 A.2d at
95 (quoting Envtl. Scientific Corp., 621 A.2d at 208).
―[T]he Superior Court may not, on questions of fact, substitute its judgment for
that of the agency whose action is under review, even in a case in which the court might
be inclined to view the evidence differently and draw inferences different from those of
the agency.‖   Johnston Ambulatory Surgical Assocs., Ltd. v. Nolan, 755 A.2d 799, 805
(R.I. 2000) (internal quotations and citations omitted).                                     ―Questions of law, however, are
not binding on the Court and may be reviewed to determine what the law is and its
applicability to the facts.‖   Narragansett Wire Co. v. Norberg, 118 R.I. 596, 607, 376
A.2d 1, 6 (1977).
Similarly, the Court accords great deference to the Department‘s decision.   See
Envtl. Scientific Corp., 621 A.2d at 207-08.   Under the Board‘s two-tiered standard of
review, the Court must confer this deference because ―the further away from the mouth
of the funnel that an administrative official is when he or she evaluates the adjudicative
process, the more deference should be owed to the fact finder.‖  Id. at 208.
―[M]unicipal councils and boards acting in a quasi-judicial capacity must make
findings of fact and conclusions of law to support their decisions.‖   Cullen v. Town
Council of Lincoln, 850 A.2d 900, 904 (R.I. 2004).  In evaluating an agency decision, the
court may ―imply an ultimate finding from the action taken.‖   Hooper v. Goldstein, 104
8




R.I. 32, 45, 241 A.2d 809, 816 (1968).   That is, a court may rely on a conclusion ―found
fairly and reasonably by implication in the decision.‖   Yellow Cab Co. of Providence v.
Pub. Util. Hearing Bd., 79 R.I. 507, 511, 90 A.2d 726, 728 (1952); see Hooper, 104 R.I.
at 45, 241 A.2d at 816.   When the board‘s ultimate conclusion rests necessarily on an
unstated, but ascertainable conclusion, ―no useful purpose would, of course, be served by
ordering the case remande[d] for clarification and completion of the decision.‖    See
Hooper, 104 R.I. at 46, 241 A.2d at 816; see also, e.g., Higgins v. Quaker Oats Co., 183
S.W.3d 264, 273 (Mo. Ct. App. 2005) (―Furthermore, a clear agency decision ‗impl[ies] a
finding of additional facts  (beyond those expressly found) necessary to support it.‘‖
(quoting Petersen v. Cent. Pattern Co., 562 S.W.2d 153, 156 (Mo. Ct. App. 1978)));
Colorado-Ute Elec. Ass‘n, Inc. v. Pub. Utils. Comm‘n of Colo., 760 P.2d 627, 641 (Colo.
1988) (―Findings by [an agency board] need not be presented in any particular form, and
a necessary finding may be implied from other findings made.‖).
III
Analysis
On appeal, Simon Chevrolet argues that the Department‘s failure to hold a second
hearing amounted to an unconstitutional deprivation of due process.   Further, it argues
that the Board‘s determinations—that Simon Chevrolet failed to perform under a contract
in violation of  §  31-5-11(5) and engaged in unconscionable business practices under
§ 31-5-11(10)—are erroneous and characterized by an abuse of discretion.   Alternatively,
it contends that if held liable under the contract, it should only be obligated to refund a
9




prorated portion of the retained commission.3   The Board responds that Simon Chevrolet
was  not  entitled  to  a  second  hearing  under  the  statute  or  the  Constitution,  and
accordingly, the failure to provide a second hearing did not constitute a deprivation of
due process.   The Board further contends that it did not err in its determinations that
Simon Chevrolet was a party to the contract, and that it engaged in unconscionable
practices.
A
Simon Chevrolet’s Right to a Subsequent Hearing
Simon Chevrolet maintains that following its appeals, the Department had an
obligation to conduct subsequent hearings.   Accordingly, it argues, the Department‘s
refusal to conduct such hearings denied it due process of law and resulted in prejudice
against it.   The Board, in contrast, argues that the statute does not provide for a second
hearing, and because a second hearing is not constitutionally required, the failure to
conduct a subsequent hearing was not an error of law.
3 In its memorandum, Simon Chevrolet argues that if held liable, it should only be held
liable for a pro-rated share, totaling $238.22.   It arrives at that amount by multiplying a
per day pro-rated value of its commission over the contract term by the days remaining
on the contract.   Simon Chevrolet fails, however, to provide any statutory provision or
case law to support its calculations.   The few cases that it does offer to support this
proposition are not persuasive.   In three of the four cases on which Simon Chevrolet
relies, our Supreme Court increased damages awarded in jury trials, concluding that the
damages were inadequate to compensate the victims.  See Wood v. Paolino, 112 R.I. 753,
756, 315 A.2d 744, 745-46 (1974) (increasing damages from $3,000 to $4,896 based on
plaintiff‘s average pre-injury weekly earning capacity); Quince v. State, 94 R.I. 200, 204,
179 A.2d 485, 487 (1962) (concluding that ―$1,250 is far from adequate compensation
for the grievous wrongs suffered by plaintiff at the hands of the state‘s servants‖; Cartier
v.  Liberty  Laundry,                                                                          49  R.I.   12,   139  A.  473,   474  (1927)   (increasing  damages  to
compensate for the extent of the plaintiff's injuries).   In the only other case provided by
Simon Chevrolet, Page v. Avila, is factually inapplicable to this case.  See 55 R.I. 52, 177
A. 541, 543 (1935).  Although in that case our Supreme Court decreased a jury verdict as
―markedly excessive,‖ that case involved a dispute over the correct hourly fee for legal
services.  As such, the holding in that case is not persuasive.
10




At the time of Simon Chevrolet‘s appeal, the statutory framework provided for a
two-tiered process in which the Department reviewed the Board‘s decision following an
appeal.4   At the first tier of this two-tiered process, a hearing officer, ―sitting as if at the
mouth of the funnel, . . . hears testimonial and documentary evidence from all affected
parties.‖   Envtl. Scientific Corp., 621 A.2d at 207.   Then, ―as the funnel narrows,‖ the
officer ―analyzes the evidence, opinions, and concerns of which he or she has been made
aware and issues a decision.‖   Id.   At the second tier of the process—the ―discharge end
of the funnel‖—sits the Department, which ―reviews the [Board‘s] findings and issues a
final decision.‖  Id. at 207-08.  Because the Department ―sits at the narrowest point of the
funnel,                                                                                             [it  is]  not  privileged  personally  to  hear  or  witness  the  broad  spectrum  of
information that entered the widest end of the funnel.‖   Id. at 208.   As a result, the Board
is in the best position to make determinations of credibility of the witnesses that came
before it, and the Department and this Court, therefore, defer to its factual findings.   See
id.
Under the two-tiered process, Simon Chevrolet is not entitled to subsequent
hearings before the Department, as  ―an administrative officer deciding a case upon
recommendations by a hearing officer need not actually hear the witnesses testify or hear
oral argument.‖   See Envtl. Scientific Corp., 621 A.2d at 207.   The Department merely
reviews the record of each matter, giving deference to the Board‘s findings of fact and
credibility.    In addition, under  §  31-5-2.1(d), as amended, Simon Chevrolet‘s appeal
4 Section 31-5-2.1(d) was amended on July 1, 2008 allowing Appellant to appeal the
Board‘s decision directly to the Superior Court.   As a result of this amendment, the
Department no longer plays a role in reviewing the Board‘s decision.    Accordingly,
Appellant‘s argument with respect to his right to a hearing before the Department is
moot.   Nevertheless, this Court will consider this contention since the Department issued
decisions in these matters.
11




would be strictly within the jurisdiction of the Superior Court.   Under that section, the
Superior Court merely reviews the record, granting deference to the Board‘s factual
determinations provided they are supported by legally competent evidence.   Arnold, 822
A.2d at 167.   Similarly, the statute does not require the Superior Court to grant a second
hearing on appeal of a board decision.  See § 31-5-2.1(d).
In addition, due process does not require that an appellant receive subsequent
hearings.   Goldberg v. Kelly, 397 U.S. 254, 267 n.14 (1970); Arnett v. Kennedy, 416
U.S.                                                                                            134,   146  n.12  (1974).    Provided  that   ―one  hearing  will  provide  the  affected
individual with a meaningful opportunity to be heard, due process does not require two
hearings on the same issue.‖   Crum v. Vincent, 493 F.3d 988, 993 (8th Cir. 2007); see,
e.g., Goldberg, 397 U.S. at 267 & n.14; Arnett, 416 U.S. at 146 n.12.   Therefore, in this
case, in which Simon Chevrolet had its ―day in court‖ by presenting evidence before the
Board, due process does not necessitate further hearings.  See State v. DeLomba, 117 R.I.
673, 678, 370 A.2d 1273, 1275 (1977); Goldberg, 397 U.S. at 267 & n.14; Arnett, 416
U.S. at 146 n.12; Kota v. Little, 473 F.2d 1, 4 (4th Cir. 1973).
Accordingly,  because  the  statute  does  not  require  subsequent  hearings,  and
because  such  hearings  are  not  constitutionally  required,  this  Court  finds  that  the
Department‘s refusal to hold additional hearings was not in violation of constitutional or
statutory provisions.  Further, because a second hearing was not required, this Court finds
that  Simon  Chevrolet  was  not  prejudiced  by  the  Department‘s  refusal  to  conduct
subsequent hearings following the appeals.
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B
Grounds for Imposing Liability Under Section 31-5-11
Section 31 of the Rhode Island General Laws imposes regulations on the business
practices of motor vehicle dealers, such as Simon Chevrolet, and vests in the Board ―the
power to promulgate rules and regulations . . . to protect the public interest.‖   See § 31-5-
2.   The Board may suspend or revoke a motor vehicle dealer‘s license if that dealer
willfully fails ―to perform any written agreement with any buyer of a motor vehicle‖ or if
the dealer  ―indulges in any unconscionable practice relating to business as a motor
vehicle dealer.‖   Sec. 31-5-11(5), (10).   In addition, the Board may order full restitution
of any money, motor vehicle repairs, and parts, and may additionally impose a fine.  Sec.
31-5-14(a), (c).
Simon Chevrolet contends that the Board abused its discretion by finding that it
failed to perform a written agreement with the buyers and committed unconscionable
practices.   Specifically, Simon Chevrolet argues that it was not a party to the Contracts
because it successfully disclaimed liability under an unambiguous contract and because
Simon Chevrolet was an agent for a disclosed principal.   Furthermore, Simon Chevrolet
argues that the Board should not have concluded that it committed an unconscionable
practice because it acted appropriately and in good faith at all times.   To support this
contention, Simon Chevrolet notes that although not contractually obligated, it offered
both Shmaruk and Mongeon credit toward repairs to their vehicles.   In response, the
Board maintains that it did not err in concluding that Simon Chevrolet was a party to the
Contract and that there was reliable and substantial evidence that a reasonable consumer
13




would believe that the dealership was a party to the Contract.   The Board further argues
that it did not err in finding that Simon Chevrolet committed unconscionable practices.
1
Section 31-5-11(5) Failure to Perform a Written Agreement
a
Disclaimer of Liability
A disclaimer involves an attempt by a party to a contract to avoid liability under
that contract.   In Rhode Island, these exculpatory provisions are strictly construed, and
any provision that purports to exonerate a party from liability will not be enforced unless
it is the ―specific and unambiguous intent of the parties‖ to do so.   See Di Lonardo v.
Gilbane Bldg. Co.,  114 R.I.  469,  471,  334 A.2d  422,  423  (1975)  (citing Dower v.
Dower‘s, Inc., 100 R.I. 510, 217 A.2d 437 (1966)).
Accordingly,  dealers  can  be  party  to  third-party  extended  service  contracts
notwithstanding disclaimers of liability.   See, e.g., Villanueva v. Toyota Motor Sales,
U.S.A., Inc., 869 N.E.2d 866, 868 (Ill. Ct. App. 2007); Johnson v. Earnhardt‘s Gilbert
Dodge, Inc.,  132 P.3d  825,  829  (Ariz.  2006).    That is, even if a third-party service
contract purportedly disclaims liability in the dealer, if that contract simultaneously
obligates the dealer to perform tasks under the contract, or is signed by the dealer, that
contract  may not  indicate  the  parties‘  specific  and  unambiguous  intent  to  disclaim
liability.   See Villanueva, 869 N.E.2d at 868; Johnson, 132 P.3d at 829; see also Di
Lonardo, 114 R.I. at  471, 334 A.2d at  423  (noting that an indemnity provision in a
contract is not effective to shift liability to the non-negligent party unless it is  ―the
specific and unambiguous intent of the parties‖ to do so).
14




For example in Villanueva, a dealer was found to be ―a party to the [extended
service] agreement because it identified itself as the issuing and selling dealer and the
agreement required plaintiffs to contact [the dealer] for all repair work.‖   Villanueva, 869
N.E.2d at 868.  In that case, the court dismissed the dealer‘s argument that it ―merely sold
the extended service on behalf of a third party.‖   Id.   It concluded that the fact that
plaintiffs were required to contact the dealer for repairs was a sufficient basis on which to
conclude that the dealer was a party.   Id. at 869.   Similarly in Johnson, there was a
genuine issue of material fact whether a dealer was a party to a service contract.              132
P.3d at 829.   Although the contract at issue in that case purported to disclaim liability to
the dealer, ―[t]he service contract application contained an express signed promise from
[the dealer] that it would  ‗provide service to  [the consumer] in accordance with the
provisions of the service contract.‘‖   Id.   Under these circumstances, the court concluded,
―[a] reasonable consumer . . . could interpret [the] language as meaning that [the dealer]
was obligated under the service contract to provide service to [the consumer].‖  Id.
Thus, the Board could reasonably conclude that the provisions requiring Shmaruk
and Mongeon to contact Simon Chevrolet for repairs were sufficient to consider Simon
Chevrolet a party to the Contract.   See Villanueva, 869 N.E.2d at 868-69.   The Board
noted that the ―‗Consumer Guide‘ and other provisions would have led consumers to
believe  that  the  Dealer  Motors                                                              [sic]  was  their  primary and  initial  contact  for  any
questions or problems regarding the service contract.‖                                          (Shmaruk Board Decision at 3.)
There was further evidence in the record to demonstrate that both Shmaruk and Mongeon
did use Simon Chevrolet not only for repairs, but also as a primary and initial contact for
15




questions and problems with their Service Contracts.                                             (Shmaruk Board Decision, ¶ 13;
Mongeon Board Decision, ¶ 13.)
Further, the other findings of fact—that Simon Chevrolet was a signatory to the
Contracts,  that  Simon  Chevrolet  retained  a  substantial  portion  of  the  Contracts  as
commission,  and  that  Simon  Chevrolet‘s  address  was  listed  on  the  front  of  the
Contracts—support the conclusion that Simon Chevrolet was a party to both Contracts.
See, e.g., id.; Johnson, 132 P.3d at 829; see also Bloxom v. Rose, 144 S.E. 642, 644 (Va.
1928) (―The contract between the parties is not alone to determine the question of agency
when the rights of third persons are involved, but that is to be considered along with other
facts and circumstances given in evidence which bear upon the question of agency.‖).
At a minimum, Simon Chevrolet‘s role would have been unclear and perhaps
ambiguous to a consumer.   See Paul v. Paul, 986 A.2d 989, 993 (R.I. 2010).   That is,
whether Simon Chevrolet was a party to the Contract was ―reasonably susceptible of
different constructions.‖   See id.; Andrukiewicz v. Andrukiewicz, 860 A.2d 235, 238
(R.I. 2004); Flynn v. Flynn, 615 A.2d 119, 121 (R.I. 1992).   It is well settled that in these
circumstances ambiguous or conflicting provisions must be construed against the drafter.
Elliott Leases Cars, Inc. v. Quigley, 373 A.2d 810, 813 (R.I. 1977); Zifcak v. Monroe,
105 R.I. 155, 159, 249 A.2d 893, 896 (1969).                                                     ―This rule is especially appropriate with
respect to contracts of insurance, which we have in the past characterized as contracts of
adhesion.‖   Elliott Leases Cars, Inc., 373 A.2d at 813; Pacheco v. Nationwide Mut. Ins.
Co., 144 R.I. 575, 337 A.2d 240 (1975); Pickering v. Am. Emp‘rs Ins. Co., 109 R.I. 143,
282 A.2d 584 (1971).
16




Thus, it was not clearly erroneous or an abuse of discretion for the Board to find
that Simon Chevrolet was a party to the Contract, or to ultimately conclude that Simon
Chevrolet‘s failure to perform under that Contract constituted unconscionable practices.
See § 42-35-15; see also Villanueva, 869 N.E.2d at 868; Auto Body Ass‘n of R.I., 996
A.2d at  95  (quoting Envtl.  Scientific Corp.,                                                  621  A.2d at  208)  (noting that legally
competent evidence is ―‗some or any evidence supporting the agency‘s findings‘‖).
b
Agent for a Disclosed Principal
Simon Chevrolet also seeks to disclaim liability by asserting that it was an agent
for a disclosed principal.   According to Simon Chevrolet, the fact that the name ―SC&E‖
is listed on the Contract suffices to disclose to consumers both the existence of an agency
relationship and that Smartchoice was the principal.   The Board, in response, argues that
listing SC&E in fine print was not sufficient to disclose the identity of the principal or the
fact of a principal-agent relationship.
In Rhode Island,  ―an agent acting on behalf of a disclosed principal  is not
personally liable to a third party for acts performed within the scope of his authority.‖
Kennett v. Marquis, 798 A.2d 416, 418-19 (R.I. 2002) (quoting Cardente v. Maggiacomo
Ins. Agency, Inc., 108 R.I. 71, 73, 272 A.2d 155, 156 (1971)).   Nonetheless, for an agent
to avoid personal liability on a contract negotiated for its principal, it must generally
disclose both the fact of the agency, and the identity of the principal.  Smith v. Pendleton,
53 R.I. 79, 163 A. 738, 740 (1933); Nash v. Towne, 72 U.S. 689 (1866).  The agent‘s un-
communicated intent to serve as a representative is not sufficient to relieve the agent of
17




liability.   Seale v. Nichols, 505 S.W.2d 251 (Tex. 1974); 12 Williston on Contracts §
35:35 (4th ed.).
Concerning disclosure of the fact of an agency relationship, sufficient disclosure
of a principal is a matter of degree.   See Matter of N.V. Stoomvaart Maatschappij "De
Maas"  (Woodward  &  Dickerson,  Inc.),  1977  A.M.C.  1941,  1943  (S.D.N.Y.  1977);
Restatement (Second) of Agency § 4 Comment f.   The agent attempting to avoid liability
under the contract has the burden of proof in demonstrating that the agency relationship
and the identity of the principal were, in fact, disclosed.  See, e.g., Port Ship Serv., Inc. v.
Norton, Lilly & Co., 883 F.2d 23, 24-25 (5th Cir. 1989); Diamond Match Co. v. Crute,
145 Conn. 277, 141 A.2d 247, 249 (1958); Brown v. Owen Litho Serv., Inc., 179 Ind.
App. 198, 384 N.E.2d 1132, 1133 (1979).
Here, this Court finds that the Board did not err in  concluding that Simon
Chevrolet failed in its burden of proof of establishing that Simon Chevrolet sufficiently
disclosed the existence of the agency relationship and the identity of the principal to
avoid liability.    Simon Chevrolet relied on the fact that the Contract, signed by a
representative of Simon Chevrolet and each consumer, states: ―[t]he Agreement will be
between me and SC&E Administrative Services, Inc.‖ and that the ―liabilities of this
extended service agreement are with SC&E Administrative Services, Inc.‖   The Board
could reasonably conclude that this evidence was not sufficient for Simon Chevrolet to
meet its burden of proof, especially in light of the surrounding facts and circumstances:
namely, that no representative of SmartChoice signed the Contract; that the representative
of Simon Chevrolet who signed the Contract was not designated as an agent in the
Contract; that all mentions of SC&E are in fine-print; that there was no oral disclosure of
18




an agency relationship; and that the expectations and reasonably beliefs of the consumers
to the Contracts was that Simon Chevrolet was a party.   Under these circumstances, the
Court will not overturn the Board‘s decision.   The Board‘s finding that Simon Chevrolet
was  a party to  the Contract  was  not  in  violation of the constitutional  or statutory
provisions; in excess of its statutory authority; affected by error or law; clearly erroneous
in view of the reliable, probative, and substantial evidence on the whole record; or
arbitrary or capricious or characterized by abuse of discretion.
2
Section 31-5-11(10) Unconscionable Practices
Additionally, Simon Chevrolet contends that the Board erred in concluding that it
committed an unconscionable practice by failing to perform under the Extended Service
Agreement.   The Board, in contrast, argues that its decision was not erroneous in view of
the reliable, probative, and substantial evidence on the record.
Section 31 of the Rhode Island General Laws authorizes the Board to suspend or
revoke a motor vehicle dealer‘s license or order restitution on that dealer if the dealer
―indulges in any unconscionable practice relating to business as a motor vehicle dealer.‖
Sec. 31-5-11(10).   Although § 31 authorizes the Board to order such action based on a
dealer‘s ―unconscionable practices,‖ the statute does not define the term, and examples of
unconscionable practices in the context of third-party warrantors are not provided in the
statute, regulations, or the case law.   This Court presumes, however, that agencies have
the power to interpret their own regulations as part of their delegated lawmaking powers.
Cohen v. Brown Univ., 101 F.3d 155, 173 (1st Cir. 1991); Martin v. Occupational Safety
& Health Review Comm‘n, 499 U.S. 144, 150 (1991).
19




As a result of the paucity of guidance from the legislature, this Court relies on the
plain and ordinary meaning of ―unconscionable practices,‖ the meaning of analogous
provisions in the Rhode Island General Laws, and the meaning that has been attributed to
the phrase in analogous state and federal provisions.   See Newport Shipyard, Inc. v. R.I.
Comm‘n for Human Rights, 484 A.2d 893, 897-98 (R.I. 1984) (―It is well-recognized that
in construing other statutes, which interpret civil rights guaranteed under both federal and
state law, our Supreme Court has accepted guidance from decisions  of the federal
courts.‖); see also Casey v. Town of Portsmouth, 861 A.2d 1032, 1036 (R.I. 2004) (using
interpretations of Title VII in state discrimination statutes).
Generally, courts and legislatures define ―unconscionable practices‖ as business
conduct which falls short of outright fraud, but which nevertheless shocks the conscience
of ordinary business men and women.   See, e.g., Idaho Code Ann. § 48-603C; 17 Am.
Jur. 2d Consumer Protection § 273 (2006); see also Harrington v. Atl. Sounding Co., 602
F.3d 113 n.7 (2d Cir. 2010), cert. denied, 131 S. Ct. 1054 (2011).   Whether conduct
―shocks the conscience,‖ is a factually intensive determination that requires the fact-
finder to weigh the totality of the circumstances, considering, among other factors,
whether the dealer took advantage of consumer ignorance, whether the supplier knew that
the contract was substantially one-sided, and whether the dealer made a misleading
statement of opinion on which the consumer relied.   See, e.g., Uniform Consumer Sales
Practices Act, § 4; Ohio Rev. Code Ann. § 1345.03 (West 2012).
These  factors  provide  only  guidelines,  however,  and  unconscionability  is  a
standard  that  is  broadly  interpreted  to  eradicate  all  forms  of  unfair  and  deceptive
practices.    See, e.g., Hinchliffe v. Am. Motors Corp.,  440 A.2d  810  (Conn.  1981);
20




Sawyer v. Robson, 915 A.2d 1298 (Vt. 2006).  As the U.S. Court of Appeals for the First
Circuit noted interpreting an analogous Unfair and Deceptive Acts and Practices (UDAP)
statute, the statute                                                                             ―is a statute of broad impact whose basic policy is to ensure an
equitable relationship between consumers and persons engaged in business.‖   Veranda
Beach Club Ltd. P‘ship v. W. Sur. Co., 936 F.2d 1364, 1385 (1st Cir. 1991) (quoting
Heller v. Silverbranch Constr. Corp., 382 N.E.2d 1065, 1069 (Mass. 1978)).   That is,
these UDAP statutes were intended to prevent new forms of deception, and to encompass
all forms of wrongful business conduct.   See Garland v. Mobil Oil Corp., 340 F. Supp.
1095 (N.D. Ill. 1972).
Further  providing  support  for  a  broad  and  inclusive  reading  of  the  term
―unconscionable practices‖ is the broad definition given in a similar provision of the
Rhode Island General Laws, G.L. 1956 § 6-13.1-1, for unfair methods of competition and
unfair  or  deceptive  practices.    Section                                                     6-13.1-1  provides  that  unfair  and  deceptive
practices include ―[c]ausing likelihood of confusion or of misunderstanding as to the
source,  sponsorship,  approval,  or  certification  of  goods  or  services;‖                   ―[c]ausing
likelihood  of  confusion  or  of  misunderstanding  as  to  affiliation,  connection,  or
association with, or certification by, another;‖ or ―[e]ngaging in any act or practice that is
unfair or deceptive to the consumer[.]‖   This Court also presumes that the Board, which
is statutorily authorized to determine unconscionable practices, has the capability of
interpreting that phrase.   See Duffy v. Powell, 18 A.3d 487, 490 (R.I. 2011) (―[I]f a
statute‘s requirements ‗are unclear or subject to more than one reasonable interpretation,
the construction given by the agency charged with its enforcement is entitled to weight
21




and deference as long as that construction is not clearly erroneous or unauthorized.‘‖
(quoting State v. Swindell, 895 A.2d 100, 105 (R.I. 2006))).
In   this   case,   the   Board   concluded   that   Simon   Chevrolet   committed
unconscionable practices when it failed to perform necessary repairs on Shmaruk‘s and
Mongeon‘s vehicles.  It did so by reasoning that the circumstances surrounding formation
of the Contracts and the terms of the Contracts would have created doubts and confusion
in the mind of a reasonable consumer.   See Duffy, 18 A.3d at 490; Swindell, 895 A.2d at
105.    Both purchasers reasonably expected that Simon Chevrolet would honor their
Extended Service Contracts and relied on that reasonable expectation to their detriment.
Both Shmaruk and Mongeon testified before the Board that they believed that Simon
Chevrolet was a reputable company.   They also testified that had Simon Chevrolet not
offered a Service Contract they would have likely purchased new cars to ensure the
protection of manufacturers‘ warranties.    Simon Chevrolet was listed as the primary
contact throughout the agreement and was obligated to perform repairs on the vehicles.
In fact, the consumers were required to bring Simon Chevrolet their vehicles if they
needed repairs and were in a forty mile radius of the dealership.   Simon Chevrolet‘s
representative signed the Contract.   Under these circumstances, reasonable consumers
would likely be confused as to the source of the services or would misunderstand their
committed unconscionable business practices was not in violation of the constitutional or
statutory provisions; in excess of its statutory authority; affected by error or law; clearly
erroneous in view of the reliable, probative, and substantial evidence on the whole
record; or arbitrary or capricious or characterized by abuse of discretion.
22




a
Good Faith
Simon Chevrolet also argues that it could not have committed an unconscionable
practice because it acted appropriately and in good faith at all times.   In support of this
contention, Simon Chevrolet notes that although not contractually obligated, it offered
Shmaruk and Mongeon credit toward repairs to their vehicles.   The Board responds that
the lack of good faith is not essential to a finding of unconscionable practices, and that
even if it were, it did not err in concluding that Simon Chevrolet did not act in good faith.
Good faith is defined as  ―honesty in fact and the observation of reasonable
commercial standards of fair dealing in the trade[.]‖   Sec. 31-5.1-1(7).   Conduct which is
not in good faith, honest in fact, and observant of reasonable commercial standards, is
unconscionable.   Kugler v. Romain, 58 N.J. 522, 544, 279 A.2d 640 (1971).   Although
good faith can sometimes be demonstrated through a bona fide effort to compromise,
good faith is not automatically presumed when any offer to compromise is made.   See
Baxter v. Sav. Bank of Utica, N.Y., 92 F.2d 404, 406 (5th Cir. 1937).   Rather, good faith
can be determined only by examining the facts and the totality of the circumstances.   See
Reiser v. Lombardi, 637 A.2d 780 (R.I. 1994); Sherman v. Carr, 8 R.I. 431, 433 (1867).
The Board could have reasonably found that Simon Chevrolet did act in bad faith.
Specifically,  the  Board  notes  in  its  findings  of  facts  that                            ―Simon  Chevrolet  never
investigated the bona fides or financial stability of the SmartChoice service contract
program[,]‖ and ―[u]pon being advised of the bankruptcy, Simon Chevrolet made no
attempt to individually notify customers who, per its records, purchased a SmartChoice
service contract[.]‖   Mongeon Board Decision, ¶¶ 14-15; see Duffy, 18 A.3d at 490;
23




Swindell, 895 A.2d at 105.   Furthermore, in light of the above findings, the Board might
have reasonably concluded that Simon Chevrolet‘s offer of partial credit toward future
repairs was not sufficient to constitute good faith.    Thus, there is legally competent
evidence on the record to support a finding that Simon Chevrolet acted in bad faith.   See
Auto Body Ass‘n of R.I., 996 A.2d at 95 (citing Environmental Scientific Corp., 621
A.2d at 208).
IV
Conclusion
After review of the entire record, the Court finds that the Board‘s decisions were
not in violation of the constitutional or statutory provisions; in excess of its statutory
authority; affected by error or law; clearly erroneous in view of the reliable, probative,
and substantial evidence on the whole record; or arbitrary or capricious or characterized
by abuse of discretion.   Substantial rights of Simon Chevrolet have not been prejudiced.
Accordingly,  Simon  Chevrolet‘s  appeal  is  denied,  and  the  charged  violations  are
sustained.   Counsel for the prevailing parties shall submit Orders in accordance with this
Decision.
24

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