RENDERED: JULY 31, 2026; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2025-CA-0870-DG
STEVE ELLIOTT APPELLANT
ON REVIEW FROM JEFFERSON CIRCUIT COURT
v. HONORABLE SARAH E. CLAY, JUDGE
ACTION NO. 24-XX-000087
KRISTINA MILES AND LISA PEAK APPELLEES
OPINION REVERSING,
VACATING, AND
REMANDING
** ** ** ** **
BEFORE: ACREE, EASTON, AND KAREM, JUDGES.
EASTON, JUDGE: This is an appeal involving a small claims dispute over the
sale of a used vehicle. We granted Appellant (Elliot)’s Motion for Discretionary
Review because this case presents important issues about the small claims process,
which is not often the subject of our review, and the law applicable to a frequent
subject of small claims disputes. Elliot challenges the circuit court’s determination
that the evidence did not support the district court’s finding that he sold the used vehicle “as is” and thus with no warranties. Upon review of the record and
applicable law, we reverse the circuit court, vacate the district court judgment, and
direct remand of the case to the district court for further proceedings.
BRIEF COMPLIANCE
Elliot timely filed his Appellant Brief. Neither Appellee Lisa Peak
(Peak) nor Appellee Kristina Miles (Miles) filed an Appellee Brief. RAP1
31(H)(3) provides:
If the appellee’s brief has not been filed within the time
allowed, the court may: (a) accept the appellant’s
statement of the facts and issues as correct; (b) reverse
the judgment if appellant’s brief reasonably appears to
sustain such action; or (c) regard the appellee’s failure as
a confession of error and reverse the judgment without
considering the merits of the case.
We should not be surprised when small claims parties do not file
briefs, if for no other reason than the expense involved. But “rules are rules,” and
we should not shy away from exercising our discretion in such cases. In the
circumstances presented by this case and pursuant to RAP 31(H)(3)(a), we accept
Elliot’s statement of the facts and issues as correct in part because we have
independently reviewed the record and find Elliot’s statement of facts and issues is
correct. And, pursuant to RAP 31(H)(3)(b), we reverse the circuit court, vacate the
1
Kentucky Rules of Appellate Procedure.
-2-district court judgment, and direct remand of the case because Appellant’s Brief
reasonably appears to sustain such action.
FACTUAL AND PROCEDURAL HISTORY
Elliot is a mechanic whose primary business is operating an auto
repair garage. He occasionally sells used vehicles. Most of the vehicles he sells
come from customers who come in for repairs but, upon learning of the extent of
the work needed, do not want to spend funds to repair their vehicles. So, Elliot
purchases those vehicles, makes the needed repairs (if economically feasible for
him to do so), and then sells the vehicles to others.
In July 2024, Peak purchased a 2008 Mazda vehicle from Elliot for
her daughter, Miles. The odometer registered over 157,000 miles at the time of the
sale. The purchase price was $3,500.00. Peak paid a $1,500.00 down payment,
and Miles agreed to pay the remaining $2,000.00 balance at $200.00 per month for
ten months.
The parties testified that they entered into a written agreement
(Agreement) for the sale of the vehicle. The Agreement was originally drafted by
Peak but was modified by Elliot’s wife. The Agreement supposedly contained no
express warranties. It may have contained an “as is” provision. But this written
agreement is not included in the record.
-3-We recognize that we are addressing a judgment resulting from the
informal small claims process where the Kentucky Rules of Evidence do not apply.
KRE2 1101(d)(3). The informality allowed does not eliminate the importance of
making a sufficient record for review. We do not expect that the district courts
will clutter the record of small claims cases with unnecessary documents, but the
governing one-page written contract, which was clearly reviewed by the trial court,
should have been part of the record here. We will discuss the impact of the state of
the record in this case shortly.
Approximately two weeks after the purchase, Miles contacted Elliot
about a transmission hose leak. Elliot performed this simple repair at no cost.
Miles paid the first $200.00 installment under the Agreement. But then, weeks
after the hose repair, Miles contacted Elliot to report other problems with the
engine, including a ticking noise and a coolant leak.
Elliot confirmed that at this point the engine was “bad” and needed to
be replaced, but he refused to replace it for free. Miles took the vehicle to another
mechanic, who agreed the engine would have to be replaced at an estimated cost of
up to $3,000.00. Miles and Peak demanded that Elliot either return the deposit or
pay for the engine replacement. Elliot again refused.
2
Kentucky Rules of Evidence.
-4-Elliot testified that the vehicle was in good condition when it was sold
and he believed that someone “rode it too hard and trashed it.” Miles and Peak
insisted that Elliot sold them an inoperable vehicle, which is obviously inaccurate
as they operated the vehicle for over a month before the engine problem arose.
Miles admitted that she and her 20-year-old son had driven the vehicle for five
weeks.
Peak and Miles filed a small claims action against Elliot in district
court. They again demanded either reimbursement of the deposit or funds to
replace the engine. Elliot filed a counterclaim for breach of contract demanding
the remaining $1,800.00 balance owed under the parties’ Agreement.
In October 2024, the district court held a hearing. Elliot was present
with counsel and Peak and Miles appeared pro se. The district court heard
testimony from the parties. The video recording indicates Peak presented a
document purporting to be the parties’ Agreement. This document was handed to
the bailiff, who then handed the document to the judge. The judge examined it.
The Agreement was not attached to the Small Claims Complaint or the
Counterclaim. The Agreement was not admitted as an exhibit by any of the
parties.
After hearing testimony and reviewing the Agreement, the district
court ultimately decided that the vehicle was sold “as is” with no warranties. The
-5-district court asked Elliot if he was willing to take the vehicle back in lieu of
pursuing his breach of contract counterclaim, but Elliot declined this compromise.
The judge clearly struggled with reaching a fair result in the circumstances. It
seems harsh, although not contrary to the law, for Miles and Peak to have to pay
$1,800 for a vehicle that only worked for five weeks. Ultimately, although finding
that an “as is” sale occurred, the district court then entered judgment for Miles and
Peak, in effect rescinding the Agreement. The district court ordered Elliot to return
the $1,500.00 down payment. The district court dismissed Elliot’s counterclaim.
There was no provision for a return of the vehicle to Elliot.
Elliot appealed this decision to the circuit court with an appropriate
Statement of Appeal. Neither Peak nor Miles filed a Counterstatement. The
circuit court affirmed the district court but on grounds other than those relied upon
by the district court. The circuit court found that, even though the district court
believed the sale was “as is,” there was no proof in the record that notice of that
limitation was in writing. The circuit court noted the absence of the Agreement in
the record and determined that, other than Elliot’s testimony, there was no proof in
the record that Miles and Peak were given notice that the sale of the vehicle was
“as is.”
-6-The circuit court, relying on the language of KRS3 355.2-316 that an
“as is” contract provision must be in writing to exclude or modify an implied
warranty of fitness for a particular purpose, determined there was no such proof in
the record. Since such a warranty was not excluded in writing, the record
supported the ultimate judgment ordering rescission. The circuit court thus
affirmed the district court. The circuit court also determined that Elliot waived his
right to a return of the vehicle by seeking damages rather than repossession.
STANDARD OF REVIEW
Because this is an appeal from a bench trial without a jury, the district
court’s findings of fact were not to be set aside unless clearly erroneous with due
regard being given to the opportunity of the trial judge to consider the credibility of
the witnesses. Factual findings are not considered clearly erroneous if they are
supported by substantial evidence. Goshorn v. Wilson, 372 S.W.3d 436, 439 (Ky.
App. 2012) (internal quotation marks and citations omitted).
If the trial judge’s findings are supported by substantial evidence, then
the appellate court’s role is confined to determining whether those facts support the
trial judge’s legal conclusions. In reviewing legal conclusions, an appellate court
conducts a de novo review. Ellington v. Becraft, 534 S.W.3d 785, 790 (Ky. 2017)
(internal quotation marks and citations omitted).
3
Kentucky Revised Statutes.
-7-ANALYSIS
On appeal, Elliot argues the circuit court erred in rejecting the district
court’s finding that the vehicle was sold “as is” with no warranties. He also argues
it was error to allow rescission of an “as is” contract for the sale of a used vehicle.
Alternatively, Elliot challenges the denial of his right to a return of the vehicle if
rescission was ordered and upheld on appeal.
There are a few things to unpack here. First, we believe the circuit
court erred in failing to conclude that substantial evidence supported the district
court’s finding that the sale of the used vehicle was “as is.” But we also conclude
that rescission was an improper remedy in these circumstances. Ultimately, we
have decided that the circuit court decision should be reversed, the district court
decision should be vacated, and the matter should be remanded to the district court
for further proceedings consistent with the following analysis.
SUBSTANTIAL EVIDENCE SUPPORTS THE
DISTRICT COURT’S FINDING THAT
THE USED CAR WAS SOLD “AS IS.”
Elliot argues the circuit court erred in finding insufficient proof to
support the district court’s finding that the sale of the vehicle was “as is.” We
agree, but we also recognize that this result arises partly from a failure to make a
record rather than application of the law to the Agreement which clearly exists, but
which is not in the record for any appellate court to consider.
-8-First, we should review the law about warranties. There is an implied
warranty of merchantability, even with the sale of used vehicles. See, e.g., Moore
v. Mack Trucks, Inc., 40 S.W.3d 888 (Ky. App. 2001). But that simply means that
the used vehicle was “fit for the ordinary purposes for which” it is used. KRS
355.2-314(2)(c). The question is whether this used car with 157,000 miles on it
was fit for ordinary purposes when Elliot sold it as a used car. Any used vehicle
may run for years or not. Again, there was no express warranty, such as one for
ninety days, which is sometimes seen with used vehicle sales.
Another implied warranty may arise. This is the warranty of fitness
for a particular purpose. KRS 355.2-315. But for such a warranty to apply the
evidence must show that the buyer relied upon the seller to select a product
suitable for some particular purpose. Here, the vehicle was sold to operate as a
vehicle generally, not for some particular purpose which called upon the seller to
advise on what type of vehicle to buy.
KRS 355.2-315 did not expand the general proposition that the sale of
used vehicles does not involve an implied warranty of fitness for a particular
purpose. See Moss v. Yount, 177 S.W.2d 372, 375 (Ky. 1944). See also Royal
Lincoln-Mercury Sales, Inc. v. Wallace, 415 So.2d 1024, 1027 (Miss. 1982)
(example of a more modern case under the Uniform Commercial Code holding that
-9-no warranty of fitness for a particular purpose arises from the typical sale of a used
vehicle).
The district court made no finding about an implied warranty of
fitness for a particular purpose. It simply held that any implied warranty had been
waived by the “as is” sale. If the evidence had supported the existence of a fitness
for a particular purpose warranty, it was for the district court to first decide, but
there was no such evidence. While the waiver of the implied warranty of
merchantability does not require a written document, the waiver of any warranty of
fitness for particular purpose would have. KRS 355.2-316(2).
So now we arrive at the next problem – the incompleteness of the
record. The evidence presented supported a finding that Elliot sold the vehicle “as
is” and without any warranties. Both parties testified that no written warranties
were included in the Agreement, and no verbal warranties were discussed or
offered. When the district court asked Elliot whether the transaction was “as is,”
he confirmed that it was. Elliot said he never offered warranties for any of the
used vehicles he sold.
Peak stated there was no “as is” language in the Agreement. The
exclusion of warranties does not require the phrase “as is” but may be found based
on other language used. We are unable to confirm whether this disputed fact was
conclusively determined by the parties’ Agreement because it is not in the record.
-10-Yet the district court had the opportunity to review the Agreement and resolved
this factual issue in favor of Elliot. The district court expressly stated, on two
separate occasions, “I think they bought the car as is.” Even so, the district court
basically ordered a rescission or awarded damages to Peak and Miles.
The circuit court affirmed the judgment for Miles and Peak but
rejected the “as is” finding by the district court because there was no written proof
in the record that the sale of the vehicle was “as is” at least with respect to any
warranty of fitness for a particular purpose. The circuit court correctly noted (on p.
2 of its decision in footnote 1) that the video record showed Peak giving a single
page document to the judge for review, and based on the context, the circuit court
concluded it was a copy of the Agreement. The circuit court surmised that the
Agreement was not part of the record because it was not made an exhibit by any of
the parties. Since there was no written proof of an “as is” sale in the record, the
circuit court reasoned that Elliot’s testimony alone was insufficient to support this
claim.
The Agreement did not have to be marked and admitted as an exhibit
to be considered as evidence by the small claims division of the district court. As
we pointed out in Campbell v. Crager, 167 S.W.3d 669, 672 (Ky. App. 2005),
there are minimal rules that must be followed in small claims court. The record is
often small and unsophisticated compared to heavily litigated cases. “The
-11-procedural requirements are relaxed in order to provide parties a simple forum in
which to litigate their claims.” Id. In a small claims case, the court “simply
considers the complaint and sundry information provided by the parties and
renders a decision based upon equity and fair dealing.” N. Tool & Equip., Inc. v.
Durbin, 392 S.W.3d 424, 426 (Ky. App. 2013) (internal quotation marks and
citations omitted).
Here, no one asked to enter the parties’ Agreement as an exhibit, and
this document was a key piece of evidence in determining whether there was notice
that the sale of the vehicle was “as is” leaving the entire assumption of risk as to
the vehicle’s condition with the purchasers. But the video record does make clear
that the Agreement exists and was provided to the district court for its
consideration. The video record also makes clear the district court reviewed the
Agreement.
When the parties do not make sure that evidence becomes part of the
record, a court considering an appeal must assume the missing evidence supports
the trial court’s decision – in this case that the vehicle was sold “as is.” See
Commonwealth v. Thompson, 697 S.W.2d 143, 145 (Ky. 1985) (citing
Commonwealth, Dep’t of Highways v. Richardson, 424 S.W.2d 601, 604 (Ky.
1968)) (“when the complete record is not before the appellate court, that court
-12-must assume that the omitted record supports the decision of the trial court”). See
also RAP 25(B).
CR4 52.01 further limits appellate review to whether the “as
is” finding is clearly erroneous. CR 52.01 admonishes us to give due regard to the
opportunity of the trial court to judge the credibility of the witnesses. Based on the
district court’s sole review of the Agreement, and its discretion as the trier of fact
to weigh the credibility of the testimony, we cannot say that the “as is” finding was
clearly erroneous, and it was error for the circuit court to disturb this finding in
these unusual circumstances.
KRS 355.2-316 seeks to provide a structure for construing both oral
representations and written disclaimers within an agreement for the sale of goods.
To carry out that purpose, the statute provides that, “unless the circumstances
indicate otherwise, all implied warranties are excluded by expressions like ‘as is,’
‘with all faults’ or other language which in common understanding calls the
buyer’s attention to the exclusion of warranties[.]” KRS 355.2-316(3)(a).
An official comment to the statute provides that an “as is” clause in a
sales contract is “understood to mean that the buyer takes the entire risk as to the
quality of the goods involved.” KRS 355.2-316 official cmt. 7 (2008). The
rationale was further explained:
4
Kentucky Rules of Civil Procedure.
-13-A valid “as is” agreement prevents a buyer from holding
a seller liable if the thing sold turns out to be worth less
than the price paid, because it is impossible for the
buyer’s injury on account of this disparity to have been
caused by the seller and the sole cause of the buyer’s
injury is the buyer himself or herself. Thus, by agreeing
to purchase something “as is,” a buyer agrees to make his
or her own appraisal of the bargain and to accept the risk
that he or she may be wrong, and the seller gives no
assurances, express or implied, concerning the value or
condition of the thing sold. 67 Am. Jur. 2d Sales § 772
(2012) (emphasis added). Such a position parallels
Kentucky case law, as well as the law in other
jurisdictions.
Roberts v. Lanigan Auto Sales, 406 S.W.3d 882, 884 (Ky. App. 2013).
The district court did not err in finding that the vehicle was sold “as
is.” This foreclosed any remedy for breach of the implied warranty of
merchantability. There was no evidence of any warranty of fitness for a particular
purpose (e.g., the buyer told the seller that the vehicle must be able to operate to
pull a certain heavy trailer) which called for the seller to advise on which vehicle to
purchase. Thus, the lack of a writing in the record to disclaim any warranty of
fitness for a particular purpose was irrelevant.
THE “AS IS” FINDING DOES NOT SUPPORT
RESCISSION OF THE CONTRACT AS A PROPER REMEDY.
Having determined there was substantial evidence to support the
finding that the vehicle was sold “as is,” we conclude the facts do not support
judgment in favor of Peak and Miles. They are not entitled to rescission of the
-14-contract or reimbursement of the deposit paid because they assumed the risk that
the vehicle was in good and operable condition, which it initially was. The “as is”
nature of the sale bars their claim, absent fraud, which was not argued nor proven.
Under Kentucky law, rescission is an extraordinary remedy that is
available only when fraud has occurred or a warranty has been breached. Beattie
v. Friddle, 17 S.W.2d 246, 248 (Ky. 1929). Here, there was neither fraud nor
breach of warranty proven. Fraud was not alleged, and the parties agreed there
were no express warranties. And because the district court determined the sale was
“as is,” there were also no implied warranties. As a result, rescission of the
parties’ contract was not a proper remedy.
Elliot’s argument that the circuit court erred in failing to return the
vehicle to him upon judgment for Peak and Miles is rendered moot by our
decision. While rescission of an executed contract is not ordinarily allowed for a
breach unless the former status of the parties can be restored, id., no such order
was entered in this case. The circuit court found a waiver by Elliot because he
sought damages. This was not a waiver in the event the court orders rescission
which Elliot did not seek.
We are aware that nearly two years have passed since judgment was
entered in favor of Miles and Peak, who may or may not still possess the vehicle.
It may have been junked by now. We do not decide on the proper remedy on
-15-remand. We should not tie the hands of the district court on remand because
intervening circumstances may affect a just result. We will outline the directions
on remand to leave no confusion left by the too oft-used expression of “for
proceedings not inconsistent with this opinion.”
In the circumstances presented, we reverse the circuit court and
vacate the district court decision as to damages. There is no need to revisit the “as
is” finding because no writing was needed to disclaim a merchantability warranty
and the circumstances do not support a fitness for a particular purpose warranty.
Because the vehicle was sold “as is,” the district court cannot award
damages against Elliot and must consider his contractual counterclaim. Whether
Elliot can get the vehicle back or even wants it to somehow reduce his loss remains
an open question.
CONCLUSION
The Jefferson Circuit Court is REVERSED, the Judgment of the
Jefferson District Court is VACATED, and this case shall be REMANDED to the
Jefferson District Court to dismiss the Complaint and to adjudicate the
Counterclaim. As is the common practice in small claims court, nothing prohibits
the district court from directing these parties to try to resolve the case before
another hearing. With all that has occurred here, such a compromise may lead to
the best resolution now possible for the parties and a fair result.
-16-ALL CONCUR.
BRIEF FOR APPELLANT: NO BRIEF FOR APPELLEES.
Tyler J. Rucker
Louisville, Kentucky
-17-