LEGAL FILE

Trade-in miscue costs Texas dealership

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A Texas appeals court has upheld a jury verdict against a now-defunct dealership group whose "inexperienced" employee miscalculated the payoff on a trade-in as $3,750 rather than $23,223.

Lawrence Marshall Dealerships in Hempstead, which closed in 2009, had sued customer Ian Meltzer in an effort to collect the difference in payoff amounts.

According to court papers, Meltzer traded in his leased 2004 Lexus toward the purchase of a new 2007 GMC Yukon. The deal took place on a Saturday when the lien holder on the Lexus, Hann Financial Service Corp., was closed and couldn't verify the payoff amount.

The $3,750 that the salesman listed on the payoff sheet represented only the amount due for remaining lease payments without taking the balloon payment into account. "The employee, unfamiliar with leased trade-ins, failed to include the purchase-option amount in his calculations," the Texas Court of Appeals said.



The payoff sheet that Meltzer signed provided that he would be responsible for any difference in payoff amounts.

Three weeks later, the store's general manager called Meltzer and suggested either refinancing to reflect the additional amount or rescinding the contract, the court said.

Meltzer rejected both suggestions, "asserting they had a deal and he did not owe Lawrence Marshall any more money," Judge Jeffrey Brown wrote on behalf of the panel. At trial, Meltzer testified that he didn't think rescission was an option because he had already customized the Yukon by bolting on a car seat for his special-needs child. He also told the jury that he didn't know what had happened to the Lexus and whether it had been modified or sold.

The dealership paid Hann the additional $19,818 that was due, got title to the Lexus and wholesaled the car for $20,000.

The dealership sued Meltzer for breach of contract to recoup the $19,818.

A Harris County jury agreed that Meltzer breached the contract but found that a "mutual mistake" by both sides regarding the terms of the agreement excused the breach. Thus he didn't owe anything to the dealership.

At the same time, the jury found that Lawrence Marshall had negligently misrepresented the terms of sale but didn't award any damages to Meltzer. Meltzer did not file a cross-appeal on the issue of damages, according to his lawyer, Ryan Hicks of Houston.

In upholding the verdict, the appeals court said the dealership failed to properly object at trial to letting the jury consider the question of mutual mistake as part of Meltzer's defense. It also said that Meltzer was not obligated to offer to rescind the contract by returning the Yukon.

The lawyer representing Lawrence Marshall did not return calls seeking comment.

You can reach Eric Freedman at freedma5@msu.edu.

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