The clients were referred to me by attorney Eric Hunt. The husband was a retired Atlanta Gas Light employee of 35 years. The wife was a retired housekeeper for a large Macon area hospital. They live in a nice middle class area of East Macon.
The husband wanted to buy the wife a new car. On October 31, 2009, they were out driving down a main drag in Macon and passed this dealership with a like-new looking 2009 Kia Amanti. They stopped in and offered to buy the car. The dealer wrote them up at a purchase price of $22,289 plus a service contract $2,467 with a down payment of $6000 at 21.97% interest for 72 months. They would have ended up paying $41,000 for a $20,000 car.
The dealer also had the client sign a large number of documents allegedly including an arbitration agreement. The dealer was apparently unable to sell this obviously upside down contract to any financial institution and called the client to return and pay more money. The client dutifully returned and now paid $12,500 down on the car and received a much more favorable interest rate and shorter term. However, the extended service contract the client’s thought they were getting was not included.
A few weeks later, the clients had problems with uneven tire wear, moisture in the head lights and some electrical issues. They took the car to the local Kia dealer. The Kia dealer told them the car had been wrecked. Turns out it had been wrapped around a light pole in frontal collision with air bag deployment. The rental car company had said “we ain’t fixing this puppy.”
The client took the car back to the dealer who told them it had not been wrecked and to take it to a different Kia dealer. That Kia dealer also told them the car had been wrecked. The clients asked the seller to cancel the deal. The seller refused and then made an offer which would result in a $5000 loss to the clients. The dealer also pulled out a clean Carfax. (Read more about Carfax fraud.)
My expert opined that the car had been wrecked, that any one in the used car business would have known this by looking at it, and that the diminished value was at least $4,000.
I wrote a letter demanding rescission and a separate notice letter making a demand under OCGA 10-1-390 et seq. See Scott v. Team Toyota.
The dealer steadfastly refused to rescind. I also sent a letter to the finance company reciting the FTC Anti Holder contract language mandated by 16 C.F.R. Part 433. It subjects the holder of the contract, as a matter of contract law, to the consumer’s claims and defenses. Bennett v. D. L. Claborn Buick, 202 Ga. App. 308 (1991)(by virtue of FTC Holder Rule, creditor is liable for automobile fraud claims that buyer could have asserted against dealer.)
I also asserted that my clients held a security interest in and to the vehicle to the extent of the new $15,000 they had paid and that they could maintain this security interest even thought they sought to rescind under 11-2-711(3). 11-2-711(3) faces up to the question of what a buyer is to do who, on the one hand, is intent on returning the goods but, on the other, has already paid all or part of the price or has incurred expenses in their regard.
To simply return the goods runs the risk of kissing the down payment and the out-of-pocket expenses goodbye — or, at least, rendering their return that much more difficult. Hanging on to the goods bars that risk, but it also opens the buyer up to the charge that by failing to return the merchandise, he “accepted” it (2-606) and became liable for the full price (2-607(1), 2-709(1)(1)).
Section 2-711(3) neatly solves this dilemma by allowing for a formal rejection (or revocation), with the buyer empowered to retain the goods in fact as a way of assuring prompt repayment of the money due by the seller. In technical terms, the buyer has a “security interest” in the goods which he enforces by retaining possession of the unwanted goods. Quinn, UCC Commentary and Law Digest, ? 2-711(a)(2) at 2-442 (1978).
The finance company response was a text book example of how not to handle this situation. They continued to dun and harass the client. They sent out repo agents who breached the peace in obtaining possession of the car. They told the client that the judge had ordered the repo. The client told them not to touch the car. The client said let me call my lawyer. As he came to door to get the phone from his wife, who now had me on the phone, they hooked up the car in the garage and drug it out the drive and down the street tires squealing. The finance company then placed a repossession on the client’s credit report and the client’s were later turned down for financing on a replacement car.
The dealer asserted that they had an arbitration clause and demanded arbitration under the Georgia Arbitration Code. The arbitration clause prevented the clients from obtaining punitive damages and attorney’s fees and required the use of the AAA Commercial Rules. They attached a copy of the alleged arbitration agreement. It was only purportedly signed by the husband and the signature was significantly different from any other signature he had made on any other document.
I argued that the Georgia Arbitration Code specifically excludes consumer claims O.C.G.A. §9-9-2 (c)(5), (6) and (7), that it would be unconscionable because under Georgia law 10-1-399 the clients would specifically be allowed to claim punitive damages and attorney’s fees, that the AAA would not agree to arbitrate such a case under its Commercial Rules but would mandate its Consumer Protocol, and that only one of the plaintiffs had signed.
I also pointed out that there was a likely forgery of my client’s signature and that the arbitration clause was signed on the same date as the previously redone deal. Since that deal was redone, and there was no new arbitration agreement, there was no agreement.
The clients were embarrassed by the repo event and by the loss of the nice new car. They were worried about the length of limitation, the risk of loss, and by their health. They just wanted their money back. Today, they got it back, got out of the debt on the car, and had their credit cleared.